EFT system to take off in 2000

By the time EFT system goes on stream an ammendment to the Negotiable Instruments Act recognising digital signatures is also expected. EFT will give a boost to the economy and activate the process of growth by increasing circulation of money locked up in numerous remittances, said the official.

The most obvious advantages ofEFT are mammoth savings in time and cost. For instance, overseas payments which normally take a month to be credited into an account can be done almost instantaneously by way of EFT. There is no actual flow of cash involved in the transaction. The payee’s bank simply debits the sender’s account and dispatches a coded message to the receiver’s bank crediting his account. The bank balance of the receiver is updated automatically.

According to a study, a company issuing dividend warrants saves nearly Rs 14 on each warrant if EFT is used. Instead of printing dividend warrants and posting them to each shareholder, the company simply informs the bank to credit the dividend to the accounts of its shareholders. The bank sends a tape with the relevant data to the clearing house where bulk transfers to banks are effected. This ELectronic Clearance Scheme (ECS) is already being used by the RBI and the number of corporates availing the facility has climbed up rapidly from 1 lakh to 7.5 lakh in a year’s time. The RBI istargetting a figure of 1 crore for the scheme by March 98.

ECS not only means prompt dividend payments at lesser costs but also limits scope for fraud, said RBI spokesperson, Alpana Killawala, citing a case where UTI’s US 64 warrants were siphoned off into third party accounts with the connivance of unscrupulous post-office and bank officials.

Industry observers also cite lack of transparency in dealings and unwillingness to reveal account details as roadblocks to the success of EFT in India. "There is a tendency to avoid payment of taxes because of the high taxation structure that existed until recently. Unless there is more openness, EFT will take time to catch on here," said a source.