(R)Evolution Of Payment And Settlement System In India

Introduction: Payment and settlement systems employed in an economy play a vital role in economic development. These systems basically consist of the various and diverse arrangements that we use to systematically transfer money i.e, currency, paper instruments (such as cheques, drafts) and various electronic channels. When any person or entity enter into economic transactions, i.e. to purchase and sell goods or services, the value thereof needs to be settled by money or currency.

- Kamal Singh

During the developmental stage of human beings living as a society, the settlement happened through exchange of goods and / or services and it was called the barter system. After the concept of money rooted in the economy, the sale and purchase of goods and services are being effected or settled by payment of money.

Since then various forms and styles of payment and settlement system have evolved in course of time. India has also been an active participant in this evolution or rather revolution. Through this article we are trying to chronologically trace the evolution of payment and settlement system in India.

The Past:

Payment instruments and mechanisms are long established in India. The earliest payment instruments that are known to have been used in India were coins, which were either punch-marked or cast in gold silver and copper. While coins were representing a physical equivalent, credit systems involving bills of exchange were also existing in medieval India.

In ancient India a kind of loan deed forms which were called as 'rnapatra' or 'rnalekhya' were in use. These instruments contained details of the amount of loan, the rate of interest, the condition of repayment, the time of repayment and information such as the name of the debtor and the creditor. These Loan deeds were witnessed by a person of respectable means and endorsed by the loan-deed writer. Execution of such kind of loan deeds were found continued during the Buddhist period also, when they were called as 'inapanna'.