Ch. 4 Banking - Latest trends Flashcards
Real time gross settlement (RTGS) meaning
It is the funds transfer system under which transfer of funds takes place from one bank to another on a ‘Real Time’ and ‘Gross’ basis. Settlement on ‘Real Time’ means there is no waiting period. The transaction is settled as soon as it is processed. ‘Gross’ settlement means the transaction is made on a one to one basis without bunching with any other transaction.
The RTGS service is available to customers from 9am to 3pm on weekdays and from 9am to 12pm on Saturdays.
This is the fastest possible system for money transfer through the banking system.
Features of RTGS
i) RTGS is only provided by CBS-enabled bank branches
ii) RTGS transactions are processed individually and continuously throughout banking hours rather in batches
iii) The minimum amount in a RTGS transaction is ₹ two lacs. There is no upper limit.
iv) The receiving bank must credit the customer’s account within 30 minutes of receiving the funds transfer message
v) The transfer is final and irreversible
National electronic funds transfer (NEFT) meaning
NEFT is a countrywide system by which an individual, firm or company can electronically transfer funds from any bank branch to another individual, firm or company having an account with any other bank branch in the country. The funds transfer take place at a particular period of time. NEFT transactions are settled in branches.
During weekdays NEFT transactions take place 7 times a day (between 8 am and 7 pm). On Saturdays NEFT transactions take place 6 times a day (between 8 am and 1pm).
Features of NEFT
i) A bank branch must be NEFT enabled
ii) An individual, firm or company can make use of NEFT even without having a bank account by depositing cash at a NEFT-enabled bank branch
iii) In order to receive funds through the NEFT system, an individual, firm or company must have an account with a NEFT-enabled bank
iv) In case one does not have a bank account, the maximum amount that can be transferred through the NEFT system is ₹49999
v) There is no minimum or maximum amount that can be transferred through NEFT when one has a bank account.
Difference between NEFT and RTGS
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Immediate Payment Service (IMPS)
Immediate payment service is an instant money transfer service facilitated by NPCI (National Payment Corporation of India). It allows people to send and receive funds in real time. The service facilitates inter-bank transactions through mobile Internet banking. IMPS is available 24/7 and is highly flexible.
Features of IMPS
i) Flexible - IMPS is highly flexible in nature
ii) Multi-Platform Support - IMPS is typically designed for mobile banking, but it also supports other platform such as the web.
iii)Versatile - IMPS is versatile as it can be used for several other purposes such as for making payments for online shopping, insurance premium payment and so on
iv) Easy to use - To transfer funds through IMPS on mobile platform, one has to download the mobile banking application of respective bank and generate the 7-digit MMID (Mobile Money Identifier).
v) Fast Money Transfer - IMPS usually does not take more than an hour to transfer money in the bank account of the receiver.
Electronic Banking (E-banking) meaning
Electronic banking refers to banking transactions being carried out with the help of computer systems. Any use having a PC and a browser can access the bank website and banking services.
E-banking features
i) There is no face-to-face contact in person between the bank and the client
ii) Both the bank and the client need computer/mobile
iii) The client has to give e-banking option to the bank
iv) The bank staff and the client must understand e-banking technology
E-banking advantages - customers POV
i) Customers get 24/7 services
ii) Customers do not need to go to the bank
iii) Recording of each transaction creates a sense of financial discipline
iv) Customers do not face the risk of carrying cash
v) Unlimited access to the bank increases customer satisfaction
E-banking advantages - banks POV
a) The bank gains competitive advantage
b) Network of the bank expands far and wide
c) Centralised database reduces load on branches
E-banking disadvantages
i) The bank and its clients have to invest money in e-banking technology
ii) Training in technology is needed for both
iii) Clients may not be able to transact due to a defect or virus in the technology
iv) Any error made could be very harmful
The main forms of e-banking are:
- Electronic Funds Transfer System (EFTS) - Under this system, money can be transferred from one account to another account. For example, a bank transfers wages and salaries directly from the company’s account to the accounts of employees of the company.
Examples:
(a) Direct credits - Salary, pension, interest on debentures, commission, royalty etc.
(b) Direct debits - School fees, insurance premium, telephone bills etc,
Advantages: i) Payments are made on due dates ii) There is no loss in transit iii) No expenses are to be made on correspondence iv) There is no mishandling of cash v) Transactions are effortless
- Automated Teller Machine (ATM) - ATM is an automatic machine. A customer can withdraw or deposit money with the help of this machine by inserting his/her ATM card and typing his/her personal identity number (PIN). The ATM operates 24/7. This is must less costly and less time consuming than a human teller (bank employee).
- Debit card - A person can get a debit card by depositing money in the bank. When the customer presents his debit card the terminal automatically transfers money from the buyer’s account to the seller’s account. Debit card can also be used to withdraw money from the ATM.
Main features debit card: i) The cardholder has to deposit money with the issuer of the debit card ii) The card contains name, address, phone no. etc. of the cardholder and the issuer of the card iii) The card can be used to spend money depending upon the deposit made by the cardholder iv) The cardholder does not get credit facility v) The cardholder has to pay some charge for the card
- Credit card - Anybody having good reputation can obtain credit card from a bank. A person need not have money in his bank to get a credit card. Rather it is a type of overdraft facility.
Main features credit card: i) The cardholder must enjoy good reputation ii) There is no need to deposit advance money with the issuer of the card iii) The card contains personal details of the cardholder iv) Credit card allows credit facility to the cardholder v) The cardholder makes payment after using the card
- Tele Banking - Under this system, the personal computer (PC) of a customer is linked by telephone to the bank’s computer. The customer can get information about the balance in his account and latest transactions on the telephone. This facility is available 24/7.
- Core Banking Solution (CBS) - Under this system, a customer becomes ‘customer of the bank’ rather than ‘customer of the branch’. By opening a bank account in one branch (which has CBS facility), the customer can operate the same account in all the CBS branches of the same bank anywhere across the country.
It offers the following facilities: (a) instant transfer of funds between the accounts in CBS branches across the country (b) Cash withdrawal facility from any of the CBS branches (c) Updating of pass book at all CBS branches (d) The facility of centralised corporate limits in all the CBS branches
- Mobile banking - Mobile banking means banking transactions through mobile phones. Mobile banking is taking off in India.
- SMS Alerts - Under this service, a customer gives his/her mobile number. The bank records the mobile number in its computer system in the customer’s account. Whenever there is a transaction (debit or credit) there is automatically a SMS on the customer’s mobile. The SMS states the nature and amount of transaction, date of the transaction and the balance in the account on that date.
Difference between debit card and credit card
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Bank draft meaning
A bank draft is a type of cheque drawn by a bank either on its own branch or another bank in favour of third party. It is payable to the person named on it or his order. It is always payable on demand and is, therefore. also known as ‘demand draft’.
A bank draft is the most convenient and safe means of sending money from one place to another.
The form is duly filled in along with the amount of draft plus commission is paid to the bank, who issues the draft. He then sends the draft to the receiver by post or courier.
The receiver can get the amount of the draft from the concerned bank.
