Financial Times

Central Bank implements real time settlement system
The Central Bank of Sri Lanka (CBSL) last week launched the Real Time Gross Settlement System (RTGS) together with the Automated General Ledger system of the Bank. These systems will effect a major change in the national payment system of the country.

Prior to implementation of the RTGS system, the high-value payments were settled through the Central Bank Current Account system in the case of banks and primary dealers or through cheques or the Sri-Lanka Inter-bank Payment System (SLIPS) which is an off-line payment system on a differed net settlement basis.

The introduction of the RTGS would eliminate many of the risks associated with such deferred net settlement systems. The RTGS system will facilitate large value fund transfers and settlements on an electronic basis in real-time rather than settling at the end of the day. 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 payment obligations, as the system will instantaneously update their bank accounts for each transaction.

This will improve the liquidity management of banks as treasures and fund managers will have to produce accurate estimates of their payment obligations. The bank, said in a statement, that it also intends to implement the Scripless Securities Settlement System (SSSS) in the last quarter of 2003. Until such time, the new system will enable the operation of the real time settlement of large-value payments combined with semi-automated settlement of government securities with scrips.

The proposed SSSS, which deals with securities settlements, would facilitate the transfer of securities from one investor to another, together with a simultaneous transfer and settlement of funds through the RTGS on a delivery versus payment basis (DvP settlement). Sri Lanka's integrated RTGS/SSSS will be known as "LankaSettle". This project is a major component of the Central Bank Modernisation Programme which is jointly funded by the World Bank and the bank.

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