Chapter – 11 Modern Aspects of Banking


IT BASED BANKING SERVICES

REAL TIME GROSS SETTLEMENT (RTGS)

The system of Real Time Gross Settlement started on 26 March 2004. The advantages of RTGS are:

• It is faster, real time on line settlement system of fund transfer.

• Helps all scheduled banks to settle inter-bank on-line fund transfer transactions of any amount.

• Banks can provide additional product / service to its customers for faster fund transfer.

• It is safe and secure electronic fund transfer.

• Money transfer takes place from one Bank to another on a real time and on gross basis

• Real time payment transaction is not subjected to any waiting period

• There is no bunching with any other transaction.

• Minimum value of transaction should be Rs. 2,00,000/=

• Customer can access the RTGS facility between 9 am to 4:00 pm on week days and 9 am to 12 noon on Saturday.

• Charges may vary with banks. However, commonly charged fee is:

Inward (Local/Outstation) Remittance Charges : NIL
Local Outward : NIL
Outstation Outward Remittance Charges
2 lakh to 5 lakh: = 25/- per transaction
Above 5 lakh : ` = 50/- per transaction
• RTGS system requires participating banks to hold a specific ‘settlement’ with RBI. All transaction movements have to be done electronically using fund in special account with RBI. Settlement of transaction is final and irrevocable.

• Banks which participate in RTGS guarantee the same day settlement, positions in clearing system will increase viability of payment movement and funds ownership.

NATIONAL ELECTRONIC FUND TRANSFER (NEFT): IMPORTANT FEATURES

This scheme was launched in 2005, October. NEFT is the nationwide electronic fund transfer system.

• NEFT is a system of funds transfer to enable account to account funds transfer without involving physical movement of paper instruments, like cheques etc.

• This system was first recommended by Shere Committee set-up by RBI.

• National Electronic Funds Transfer (NEFT) is electronic funds transfer system, which facilitates transfer of funds to other bank accounts in over 63000 bank branches across the country. This is a simple, secure, safe, fastest and cost effective way to transfer funds especially for Retail remittances.

• The objective of RBI’s NEFT system are (i) to facilitate an efficient, secure and economical system of fund transfer, (ii) to make system reliable and expeditious for funds transfer in banking sector, and (iii) to relieve the stress on existing paper based fund transfer and cheque clearing system.

• NEFT is useful to banks in following ways:

Funds are transferred on the same day across presently 4 metro cities and latest transferred on next day in other cities.
Helps transfer funds rather than only information.
In all metros, settlement is thrice in a day.
Banks can help customers to get inter-bank TT services.
PROCESSING INFORMATION BY RBI: SOME STEPS

• RBI centers process the files received from all centers and upload to respective branches of destination banks.

• Service branches process the file and print branch level report containing beneficiary details.

• Destination branches credit the amounts to the beneficiary’s account.’

NEFT FEE CHARGED BY BANKS

Normally banks vary in their charges. Following charges are a sample charges which some banks charge.

(a) Inter Bank Fund Transfer on deferred net settlement which settles transactions in batches.

(b) Inward Remittance Charges : NIL

(c) Outward Remittance Charges

(i) Up to 1 Lac : NIL

(ii) Above 1 Lac to 2 Lac : 15/- per Transaction

(iii) Above 2 Lac : 25/- per Transaction

E- BANKING

Common services available to customers in e-banking are:

1. Automated Teller Machine (ATM)

2. Debit Cards 3. Net Banking

4. Mobile Banking

5. Phone Banking

6. Inter bank Mobile Payment Service (IMPS)

7. Bill Payment

8. ECS Service

9. NEFT / RTGS

10. Indo Nepal Remittance System

11. e Payment of Taxes

12. Merchant Acquiring Business (POS)

13. Cash Management Service

AUTOMATED TELLER MACHINES (ATMS)

• ATMs are virtual banking system without human interaction.

• ATM machines can be installed at any suitable location for deposited and withdrawing money.

• ATMs operate by a system of checking account holder authenticity and run on menu. ATMs use Iris or other advanced scan system. PIN numbers (confidential) given to customers are fed in ATMs. Advanced ATMs have finger print analysis system also.

• ATM use is customer-friendly and is very simple. Customer inserts the ATM card in the ATM machine. ATM asks for customers PIN which he feeds, then he feeds the amount needed and then presses the button for either deposit or withdrawal.

• Customers can get their balance in the account through ATM also any time of the day, all 7 days, 24 hours. Besides customer can get a brief account statement from the ATM system. For customers, this is convenient, anywhere any time banking facility, without additional cost.

• ATM card holders of say ‘A’ bank can also withdraw cash up to a certain limit from other banks’ ATMs provided ‘A’ bank has that arrangement with other banks including the specific amount that can be withdrawn.

• Further advancements have been seen for banking usability for disabilities like the low vision, illiterate and aged people. Such system came up for use in some banks from 2012 (June).

Limitations of ATMs

1. Security: Unlike bank tellers, ATMs do not require the person performing the transaction to present their picture identification. Rather, the person must only insert a bank card and enter a personal identification number. If the bank card is stolen and the number ascertained, an unauthorized person can easily access the account.

2. Inability to Perform Complex Transactions: ATMs can only perform relatively basic transactions. This means that people who need to complete these longer transactions will be forced to use the teller.

3.Fees: Not only do banks of which you are not a member charge fees for the use of their ATMs, but users are often charged surreptitious fees by their own banks for using other banks’ ATMs.

4.Privacy: Unlike banks, in which security guards and tellers are present to ensure the person performing a transaction receives privacy, there is no such guarantee when using an ATM.

5. There is also limited withdrawal of cash.

Biometric ATMs

The Biometric ATM has been introduced to safeguard customers from all the frauds and unauthorized access to bank account.The introduction of Biometric ATMs is latest entrant in the banking services. We all have seen and used traditional ATMs which accept our debit or credit cards and we enter our PIN code and use banking services to deposit money, withdraw cash, check balance, request for check books etc.

As the technology evolves, it also brings some sort of risk with it. You might have read or know about ATM frauds, duplication of ATM cards, ATM skimming, unauthorized withdrawal of money. You also might have seen people and groups of thieves involved in such crimes. Banks and Bank regulator always try to bring and adopt technology which brings safety and security to the customers.

How a Biometric ATM works

It works similar to traditional banks ATMs but it does not ask for a numeric password. Biometrics ATMs have attached scanner or sensor where you put your finger or palm. Your finger print acts like a password. Your finger print is then matched with the finger print stored in the bank centralized database. If it matches you are authorized to get access to ATM and your account.

ALTERNATIVE CHANNELS OF BANKING

Internet Banking

• Customers can carry out banking activities from the comfort of their home /office with only click of a mouse.

• Using Internet Banking ID and password, customers can access their Bank accounts /do transactions on-line 24×7 without any hassle.

• Access your Bank Account from anywhere i.e. home, office or on the move through PC/Laptop/I Pad with Internet connection.

• For Individual Savings & Current Account holders. For Corporate Cash Credit /Over Draft /Current Account holders.

• Easy and secure way of Banking and banking can be done 24 × 7 days.

MOBILE BANKING

• A milestone in banking field- provides the customers a secure and convenient means of banking and commerce from anywhere anytime.

• Banks wishing to provide mobile banking services shall seek prior one time approval from Reserve Bank of India by furnishing full details of the proposal.

• Customer can do following banking business on mobile phones:

Give instructions to debit his account to issue demand draft.
Enquire balance in the account and transaction details (history of last few transactions).
Can issue stop payment instructions and enquire for bills and outward clearing. Ask for on demand account statement, and
Request for a cheque book etc.
Balance Enquiry.
Revoke Cheque
Funds Transfer
Loan account information
ATM locator.
Use of mobile phone is simple: customer applies for mobile phone banking facility. After approval data is fed in the system; customer is given a PIN; customer connects to telephone number, system will play a voice menu and the list of number of services offered are voiced; customer to only follow voice menu to avail the required services.

SMS BANKING

• Provides instant notification about the transactions as and when it happens. It helps to keep a watch on account round the clock.

• Every debit or credit in your account over a limit desired by you is intimated by SMS.

• Helps to detect unauthorized access to the account.

CORE BANKING SOLUTIONS (CBS)

• Core banking Solution is the centralized banking platform where total bank’s operations are controlled and run from a centralized hub. CBS means application of computer technology to various banking functions.

• CBS introduction has proved advantageous to banks in various ways, viz. (i) banking has become single window in nearly all banks having CBS system, (ii) it is an answer to many MIS problems of banks from audits and controls., (iii) whole operations of bank can be run from centralized hub, and (iv) new products and services can be formed quickly, etc.

• CBS system works through centralized customer database; proper business plan and customer information all over the country can be kept in one server.

• Through CBS system customers are equally benefitted in different ways. Customer is no more bound at one place where account exists. He/she can bank with CBS to access his/her account from any station/city. Customer has simple and hassel free, accurate and quick banking in place. Biggest advantage to customer is that he/she can do banking 24 hours by any e-banking services available with the bank.

CREDIT CARDS- SALIENT FEATURES

• It is a plastic card with microprocessor chip embedded on one side and magnetic stripe on the other.

• In simple words it is a plastic which contains the name of account holder along with validity and account number.

• Credit cards are normally made valid for 5 to 10 years, varying from bank to bank.

• Basic features of credit card are: credit card offers lot of information, along with many built-in security features; normal credit card is made of three distinct layers of PVC core stock (white plastic) sandwiched between two clear laminate layers; modern credit card also carries photograph of the holder; and on the front of the card is the optical character recognition line (OCR), valid date line and name of the bank. On the backside, features contain service and lost/stolen directions as well as magnetic stripe and signature panel for card holder.

DIFFERENCE BETWEEN DEBIT CARD AND CREDIT CARD

• Debit of personal account in debit card is instantaneous, the moment card holder enters into transaction.

• Debit card is introduced for Electronic Fund Transfer at Point of Sale (EFTPOS) system.

• In credit card, a delay between the time of purchase and the time that funds are debited to the account is large and varies.

• Credit cards are being used by people by paying the whole balance at the end of the month either through internet banking transfer, mobile banking transfer or through cheque payment.

What's Plastic money ?

Plastic money is a term that is used predominantly in reference to the hard plastic cards we use everyday in place of actual bank notes. They can come in many different forms such as cash cards, credit cards, debit cards, pre-paid cash cards and store cards.

RBINET

• RBINET helps commercial banks in following ways:

Commercial banks can have access to format messaging and file transfers available on BANK NET network.
Information sharing among banks and within different offices of banks is possible through it.
Communication of important instructions / directions contained in RBI circulars, policy guidelines etc. can be simultaneously made available to all banks.
BANKNET

• Banknet is a sophisticated packet (switching systems handling) where electronic authorization of national and international transactions are handled.

• Clearing and settlement between cardholders, merchants, and their respective issuers and acquirers is handled.

• Local currency settlements in India, Indonesia, Malaysia, USA etc. could be handled easily.

• Telecommunication network is carried out over BANKNET to clear and settle all international and local Master Card transactions that are not on us.

• Transfer of information at any given destination.

• BANKNET has advantage of speed, flexibility, member-to-member processing capability in electronic imaging system, and enabling members to transmit electronically images of sales slips for retrieval requests, thus avoiding exchange of papers.

Automated interactive voice response system (AIVR)

Automated Interactive voice response system is a technology that allows a computer to interact with humans through the use of voice and DTMF tones input via keypad. In telecommunications, IVR allows customers to interact with a company’s host system via a telephone keypad or by speech recognition, after which they can service their own inquiries by following the IVR dialogue. IVR systems can respond with pre-recorded or dynamically generated audio to further direct users on how to proceed. IVR applications can be used to control almost any function where the interface can be broken down into a series of simple interactions. IVR systems deployed in the network are sized to handle large call volumes.

What is SWIFT ?

SWIFT the Society for Worldwide Inter bank Financial Telecommunication is a member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the Society for Worldwide Inter bank Financial Telecommunication (SWIFT) uses a standardized proprietary communications platform to facilitate the transmission of information about financial transactions. This information, including payment instructions, is securely exchanged between financial institutions.