made by some countries such as the philippines and eastern european countries to involve governments in retail payment development by diverting revenue receipts from income tax, custom duties and other income sources through modern retail payment instruments. iv. establish confidence in payments media : either the service providers, the regulators or consumer protection authorities, or all of them jointly, should ensure that new products are safe and efficient and that they have public confidence in them. pushing efficiency too far could adversely affect public confidence in payment instruments. for example, moving aggressively into credit cards, which are considered to be efficient and safe payment instruments, has also resulted in numerous frauds and risks, and this has begun to scare people. new technologies break physical distance barriers enabling efficient real time transactions, but the critical factor is network security, which should ensure access only to a person ’ s own funds. new delivery channels for retail payments such as the internet, on - line personal payments, electronic bill presentments, telephone, e - cheques or e - invoices are becoming popular, although they do not always assure the same level of security as some of the other products. tamperproof cards are generally considered to be safeguard against credit card frauds, but the relevant software appears to be expensive. financial intermediaries are not keen to invest in such safeguards. even if they do, they will pass on the costs to customers, which will defeat the affordability purpose. vendors and service providers need to be flexible to pass on the benefits of technological advances to a larger group of users. demand driven innovations should also be promoted and vendors should look for volumes and turnover, rather than high - priced software sales. 5. agenda for saarc region payment systems development 5. 1 the banking community in india as well as in other saarc countries need not reinvent the wheel. there is good news. following a request made by the saarc country governors, a saarc payments initiative has been set up to take forward the payment reforms in the region. within this initiative, a saarc payments council ( spc ) has been set up, consisting of high level officials from saarc central banks who are also the chairpersons or senior members of their national payment councils. spc will be the policy making authority for both high value and retail payments. the organisational structure is considered a very practical one, because of the involvement of all national stakeholders in the national payments councils, which will provide a good forum for the banking

is 5 ), the seed or reserve money produced by central banks is also called “ high powered money ”. thus, the total money in an economy would be much more than what a central bank would issue to the economy. when that money which is known as money supply chases after the limited availability of goods and services, the general price level would elevate to a higher level. if it happens continuously, inflation sets in an economy imposing an inflation tax on the society. why is there a preference for inflation tax? there is a general preference for inflation tax for several reasons. first, it is easy, quick and convenient to borrow from the central bank, compared to conventional forms of taxes available to a government. such conventional taxes need to be backed by legislation, take time to generate the tax revenue and have to be enforced by an elaborate tax administration. it also runs the risk of failing to generate the required revenue due to tax evasion and avoidance. but, borrowing from the central bank is just a single transaction and the treasury could use it immediately for making payments. second, because of the limitations of the tax bases in developing countries, there is resource paucity for governments to undertake much needed infrastructure projects. hence, it has been argued that the governments in developing countries could initiate the development efforts by mobilizing resources through inflation. the initial inflation so created would get reversed once the new economic development increases the production of goods and services and raises the market supply. so, inflation would become a self - destroying process and, therefore, it is argued that there is no danger of using inflation for economic development. third, taxes are mandatory payments and therefore, there is resistance on the part of tax payers to pay the taxes. because of the pressure coming from the lobbying groups, political authorities too sometimes are unwilling to raise the tax rates to generate higher tax revenue. however, the resistance of the citizens to inflation tax is virtually nonexistent. this is because no one realizes that they are paying a tax to the government, when the prices move up. any resistance by them is not against the inflation tax per se, but against the inflation. that again takes place after sometime when they have been very badly hit by inflation. fourth, inflation is said to be bringing about some salutary effects to an economy from the point of view of its long term growth. it re - distributes income in favor of the rich people who normally save a greater proportion of their income than the poor people.