innovators must be responsible for the way they use their innovations. regulators must be responsible for ensuring that financial stability and consumer interest are not compromised by the innovations. this sort of responsibility demands competence, foresight and wisdom on both sides. payment and settlement systems 7. responsible innovation and regulation is the topic i want to address today. “ responsibility ” should be the thrust of innovation in all segments of financial markets and responsibility should be the credo governing regulation across all dimensions of financial regulation. today, though, i will focus on a narrower segment – responsible innovation and regulation in payment and settlement systems. 8. this choice of payment and settlement systems is informed by three motivations. first, payment and settlement systems have witnessed by far the most game changing bis central bankers ’ speeches innovations, especially in the matter of furthering financial inclusion. second, innovations in payment and settlement systems have been both market based and technology based, and illustrate how technology based innovations can be mainstreamed. mainstreaming technology based innovation is particularly relevant at this platform because that is the mandate of idrbt. 9. third, and most remarkably, during the depth of the financial crisis in 2008 / 09, when virtually all financial systems and all financial markets went into near collapse, the payment and settlement systems worldwide remained stable. what would have happened if the payment and settlement systems too had seized up? even to imagine that is frightening. rbi as a responsible regulator 10. the reserve bank is deeply conscious of being a responsible regulator. we interpret this responsibility as follows. we must encourage financial innovation but only such innovation that improves the efficiency of financial intermediation and therefore contributes to the real sector. we must ensure that as innovations are rolled out into actual financial transactions, they do not erode financial stability. we must be especially sensitive to consumer protection. and uniquely, because of our developmental role, we must ensure that financial innovation furthers financial inclusion. 11. responsible regulation here means providing a stable, predictable and contestable regulatory framework that encourages innovation, emphasizes safety, security, efficiency and accessibility, and aids the orderly growth of the payment and settlement systems. as you are aware, the payment and settlement system ( pss ) act, 2007 designates the reserve bank as the statutory regulator of the payment and settlement systems in the country. but even before becoming the statutory regulator, the reserve bank has been engaged in modernizing the payment and settlement systems ; and even as we are the statutory regulator today, we continue to take the lead

##ing this transfer of money in bank accounts, a payment instrument was needed to instruct the bank to effect that transfer. this instrument was the cheque for a very long period. thus a system consisting of the cheque as the payment instruments and an infrastructure around the cheques consisting of the drawee bank, the drawer bank and the cheque clearing houses came on the scene and were known as the payment systems. 7. with the developments in the information and communication technology, world over, different kinds of payment instruments and innovations in the instruments and the payment systems evolved. it happened in india too and that ’ s the story i will be narrating now. 8. today we can boast of a strong retail payments framework in the country comparable to that of any advanced country, and perhaps even better than some of them in terms of the variety and efficiency. various types of payment instruments exist to meet the requirements of different users in different circumstances – bank accounts, cheques, debit and credit cards, prepaid payment instruments, etc. there are various systems to meet the remittance requirements of 1 / 7 bis central bankers'speeches users depending upon their time criticality and cost sensitivity – national electronic funds transfer ( neft ), immediate payment service ( imps ), aadhaar enabled payment system ( aeps ) and recently unified payments interface. the need for making bulk and repetitive payments is met by systems such as electronic clearing service ( ecs ), national automated clearing house ( nach ) and aadhaar payment bridge system ( apbs ). 9. let us take a look at the path of “ evolution ” of payment and settlement systems in the country : 10. the reserve bank took a studied stance with reference to ushering in changes to and in the payment systems. periodically, it constituted various committees like the rangarajan committee i & ii, saraf committee, patil committee, burwan working group, etc. to guide use of ict for the benefit of banking in general and particularly the payment systems. further, from 1998 onwards, the reserve bank has been continuously bringing out a payment system vision document for every three years, enlisting the road map for implementation. the latest one is for the period 2015 – 18. 11. for a long time the main payment instrument and payment system that existed in the country was cheque and cheque clearing systems. even the cheque clearing systems have evolved from manual clearing system to micr ( magnetic ink character