EPFO EO/AO 2023 General Ability Test · Question 112 of 120

Correct — D, (d) Statement I is incorrect but statement II is correct. This is the second of the paper's four Statement I and Statement II items, and the option set is the same on all four: (a) both correct with the second explaining the first; (b) both correct but the second not the correct explanation of the first, the word not being printed in bold italics because it is the only thing separating (b) from (a); (c) the first correct and the second not; (d) the first not correct and the second correct. Score each statement for truth first. Statement I is incorrect. RTGS and NEFT are owned and operated by the Reserve Bank of India, not by the payments corporation named in the statement. The Reserve Bank's own description of NEFT is that it is a nation-wide centralised payment system owned and operated by the Reserve Bank of India. RTGS, which stands for Real Time Gross Settlement, is a system in which fund transfers are settled continuously and individually on a transaction-by-transaction basis without netting, on the Reserve Bank's own books, which is what makes those settlements final and irrevocable. RTGS is meant for large-value transfers, with a minimum of ₹ 2,00,000 and no upper limit, and it has been available on a 24x7x365 basis with effect from 14 December 2020; NEFT settles in batches at half-hourly intervals, has no amount limit set by the Reserve Bank, and is also available round the clock. Both are the central bank's systems. Statement II is correct. The National Payments Corporation of India is an umbrella organisation for retail payments in the country, promoted by the Reserve Bank of India and the Indian Banks' Association under the provisions of the Payment and Settlement Systems Act, 2007. It was incorporated in December 2008 as a not-for-profit company under section 25 of the Companies Act, 1956, corresponding to section 8 of the Companies Act, 2013, and it began with ten core promoter banks: State Bank of India, Punjab National Bank, Canara Bank, Bank of Baroda, Union Bank of India, Bank of India, ICICI Bank, HDFC Bank, Citibank and HSBC. Its shareholding was later broadened to a wider set of banks. Describing it as an entity promoted by banks is therefore accurate. One statement false and the other true gives option (d), and the explanation limb never arises. A note on the printing: the booklet writes the body's name as National Payment Corporation of India. Its actual name is the National Payments Corporation of India, with the plural. The stem is reproduced here exactly as the Commission printed it.

• (a)Both statement I and statement II are correct and statement II is the correct explanation for statement I — This requires both statements to be true, and statement I is not. RTGS and NEFT belong to the Reserve Bank, which owns and operates them, so the ownership claim fails before the explanation limb is reached. The option is nonetheless instructive, because the pairing it proposes is superficially attractive: if the payments corporation did own the two systems, the fact that banks promoted it would look like a reason. That is the shape of a well-built Assertion-Reason distractor, an explanation that would work if the assertion were true, and it is why truth must be tested before explanation on every item of this kind.
• (b)Both statement I and statement II are correct and statement II is not the correct explanation for statement I — The word not is printed in bold italics in this option, and it is the whole difference between this option and (a): both accept that the two statements are true, and they part company only on whether the second explains the first. Since statement I is false, the pair never reaches that question, so (b) fails for the same reason as (a). A candidate who is confident that the payments corporation was promoted by banks, and who therefore treats statement II as the anchor, may work outward from it to one of these two options; the safer order is to test the statement that makes the stronger factual claim, which here is statement I, since it names an owner for two specific systems.
• (c)Statement I is correct but statement II is incorrect — This reverses both judgments. It accepts that the payments corporation owns RTGS and NEFT, which it does not, and rejects the claim that the corporation was promoted by banks, which is exactly how it was set up: the Reserve Bank of India and the Indian Banks' Association promoted it, and ten banks were its core promoters. A candidate may arrive here by knowing that the corporation is behind the retail payment systems that people actually use every day, and by generalising that to the two large interbank systems as well. The distinction to hold is between the central bank's own systems, RTGS and NEFT, and the corporation's systems, which include UPI, IMPS, RuPay, the National Automated Clearing House, the Aadhaar Enabled Payment System, the Bharat Bill Payment System, the National Electronic Toll Collection FASTag system and the Cheque Truncation System.

India's payment infrastructure is owned in two layers, and almost every question on the subject turns on telling them apart. The Reserve Bank of India owns and operates the two large centralised funds-transfer systems. RTGS, Real Time Gross Settlement, settles transfers continuously and individually without netting, on the central bank's books, which makes each settlement final and irrevocable; it is intended for large values, with a minimum of ₹ 2,00,000 and no ceiling, and it has run on a 24x7x365 basis since 14 December 2020. NEFT, National Electronic Funds Transfer, is a nation-wide centralised system owned and operated by the Reserve Bank that settles in half-hourly batches, carries no amount limit set by the Reserve Bank, and is likewise available round the clock. Alongside them sits the National Payments Corporation of India, the umbrella organisation for retail payments, promoted by the Reserve Bank and the Indian Banks' Association under the Payment and Settlement Systems Act, 2007 and incorporated in December 2008 as a not-for-profit company under what is now section 8 of the Companies Act, 2013, with ten core promoter banks and a shareholding later widened. It runs the systems most people touch directly: the Unified Payments Interface, the Immediate Payment Service, RuPay cards, the National Automated Clearing House, the Aadhaar Enabled Payment System, the Bharat Bill Payment System, National Electronic Toll Collection under the FASTag brand, and the Cheque Truncation System. The Payment and Settlement Systems Act, 2007 is the statute under which the Reserve Bank authorises and regulates every payment system in the country, including the corporation's.

Payment systems are a standing current-affairs and economy theme in the EO/AO General Ability Test, sharpened by the fact that the enforcement and accounts work the recruits will do runs on electronic transfers. The examiner's favourite discrimination is ownership, because the two layers are easy to blur: the retail systems carry the corporation's branding while the interbank rails carry none. The habit rewarded is to keep a two-column list, the central bank's systems in one column and the corporation's in the other, and to attach to each the one or two operational facts most often asked, namely the settlement mode and the amount limits.

• RTGS and NEFT are owned and operated by the Reserve Bank of India.
• RTGS settles transfers in real time, gross and transaction by transaction without netting, on the Reserve Bank's books, so settlements are final and irrevocable.
• RTGS has a minimum transaction value of ₹ 2,00,000 and no upper limit, and has been available 24x7x365 since 14 December 2020.
• NEFT settles in batches at half-hourly intervals, is available on a 24x7x365 basis, and carries no amount limit set by the Reserve Bank.
• The National Payments Corporation of India was promoted by the Reserve Bank of India and the Indian Banks' Association under the Payment and Settlement Systems Act, 2007.
• It was incorporated in December 2008 as a not-for-profit company under section 25 of the Companies Act, 1956, now section 8 of the Companies Act, 2013, with ten core promoter banks.
• It operates UPI, IMPS, RuPay, NACH, the Aadhaar Enabled Payment System, the Bharat Bill Payment System, FASTag toll collection and the Cheque Truncation System.
• The booklet prints the body's name as National Payment Corporation of India; the correct form is National Payments Corporation of India.

• Attributing RTGS or NEFT to the payments corporation because it runs the retail systems people see.
• Confusing gross settlement, which is transaction by transaction, with net settlement in batches.
• Assuming the payments corporation is a Government body; it is a not-for-profit company promoted by the Reserve Bank and the banks.
• Treating the ₹ 2,00,000 figure as a maximum for RTGS rather than the minimum it is.
• On these items, judging the explanation limb before both statements have been scored for truth.

Payment systems appear in EO/AO papers as Statement I and Statement II items on ownership, as two-statement code items on the features of a named system, and as single-line questions on limits and settlement modes. The recurring device is a swap of operator, either the central bank for the corporation or the corporation for a bank consortium. Keeping the two-column list in mind answers most of them in a few seconds, and the operational details of limits and settlement modes cover the rest.

No directly related past PYQ was found.

• practice — not a real PYQ

  Which one of the following payment systems in India is owned and operated by the Reserve Bank of India ?

  • (a)Unified Payments Interface
  • (b)Real Time Gross Settlement
  • (c)RuPay card network
  • (d)Bharat Bill Payment System

  Answer(b) Real Time Gross Settlement

• practice — not a real PYQ

  The National Payments Corporation of India was promoted by :

  • (a)The Securities and Exchange Board of India and the stock exchanges
  • (b)The Reserve Bank of India and the Indian Banks' Association
  • (c)The Ministry of Finance and the public sector banks alone
  • (d)The Insurance Regulatory and Development Authority of India

  Answer(b) The Reserve Bank of India and the Indian Banks' Association