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Central Bank inaugurates RTGS and SSS system:

Hassle free banking ensures market efficiency

by Irangika Range

The efficiency of the market will be increased as market participants and investors are relieved of the hassle of handling the paper-based certificates involving safekeeping, endorsement and physical delivery, said former Finance Minister K.N. Choksy.

He was speaking at the inauguration of the Real Time Gross Settlement (RTGS) System, Scripless Securities Settlement (SSS) System and Central Depository System at the CB Head Quarters Colombo Friday.

Chosky said that there are benefits to corporate customers and the public, among them a payment system constitutes a link between money and economic activities because they involve transferring value between payer and payee.

Therefore, this system is a key part of the infrastructure, which facilitates economic activities. The bank gets the funds immediately, it will facilitate the bank to pass the credit to the beneficiary customer as soon as it gets funds, and if a payment is done by cheque, the settlement of payment has to be routed through the cheque clearing system, he said.

RTGS system will settle high value and time of critical inter bank payments and SSS system facilitate the issue, transfer and settlement of government securities in scripless or book entry form.

Both SSS and the CDC - Lanka Secure - would also promote a dynamic and efficient secondary market for Government securities In a major move to enhance financial sector efficiency through modernized payments and settlements, Central Bank of Sri Lanka has introduced RTGS and SSS Systems and Central Depository System.

This has marked another milestone in the banking reform system bringing about major changes in the national payment and securities settlement systems.

The integrated RTGS and SSS systems have been operated last week and this involves the instant settlement of all large value payments and payments of money market and Government securities transactions, said Governor of Central bank A. S Jayawardena.

He said that the RTGS system will facilitate large value fund transfers and settlement on an electronic basis in real-time rather than settling at the end of the day and it will expedite fund transfers among banks, primary dealers, financial institutions, investors, customers, the government and the public.

"This system will also bring about financial discipline in the banking sector since banks will have to maintain adequate cash and reserves in their accounts to meet their payments obligations, as the system will instantaneously update their settlement accounts after each transaction," the Governor said.

This will improve the liquidity management of banks as treasurers and fund managers will have to produce accurate estimates of their liquidity requirements.

The SSS system would facilitate the issue of scrippless securities and their transfer among investors with a simultaneous settlement of funds through the RTGS on a delivery versus payment basis (DVP settlement).

Since the system operates electronically, on-line dealing in government securities will be convenient to all market participants such as primary dealers, banks and investors.

The Central Depository System (CDS) will be the title registry as well as the custodian for government securities and the ownership of securities will be recorded electronically in the CDS.

The holders of scripless securities in the CDS will be issued confirmation of transactions as well as periodic account statements of their holdings.

"All payments and settlement instructions to the RTGS and SSS system will be sent through the SWIFT communication network which is considered to be the world's most safe and secure communication systems, thereby ensuring the security and reliability of the transactions routed through this system.

"Implementation of the integrated RTGS and SSS systems coupled with a fully automated and real time General Ledger system and a Treasury management system is the major component of the Central Bank Modernization Program which is jointly funded by the World Bank", he said.

Assistant to the Governor Dr. R. Jayamaha, World Bank Representative Peter Harold, Superintendent of Public Debt, K. G. D. D. Dheerasinghe and Director of Information Technology P. D. J. Fernando are also spoke.

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