Bank Management

CIA 1
COMPONENT 2

Submitted To- Parvathy V K

Submitted By- Divyansh Khanduja (1720112)

INNOVATIVE BANKING PRODUCTS

The term “INNOVATION” means to make something new. Banks now no longer restricted to
traditional banking activities but explored newer avenues to increase business and capture new
market.

1. Automated Teller Machine (ATM)

An automated teller machine (ATM) is an electronic banking outlet that allows customers to
complete basic transactions without the aid of a branch representative or teller. Anyone with
a credit card or debit card can access most ATMs.
The first ATM appeared in London in 1967, and in less than 50 years, ATMs spread around
the globe, securing a presence in every major country and even tiny little island nations such
as Kiribati and the Federated States of Micronesia.

ATMs are convenient, allowing consumers to perform quick, self-serve transactions from
everyday banking like deposits and withdrawals to more complex transactions like bill
payments and transfers.

2. Phone and Mobile Banking

Mobile banking is the act of making financial transactions on a mobile device (cell phone,
tablet, etc.). This activity can be as simple as a bank sending fraud or usage activity to a
client’s cell phone or as complex as a client paying bills or sending money abroad.
Advantages to mobile banking include the ability to bank anywhere and at any time.
Disadvantages include security concerns and a limited range of capabilities when compared
to banking in person or on a computer.

3. Internet Banking
Online banking allows a user to conduct financial transactions via the Internet. Online
banking is also known as internet banking or web banking.

Online banking offers customers almost every service traditionally available through a local
branch including deposits, transfers, and online bill payments. Virtually every banking
institution has some form of online banking, available both on desktop versions and through
mobile apps.

4. RTGS

RTGS Real Time Gross Settlement (RTGS) is an electronic form of fund transfer where the
transmission takes place on a real time basis. 'Real Time' refers to the process of instructions
that are executed at the time they are received, rather than at some later time. On the other hand
"Gross Settlement" means the settlement of funds transfer instructions occurs individually (on
an instruction by instruction basis). The settlement of funds actually takes place in the books
of RBI and thus the payments are considered as final and irrevocable. The attraction of RTGS
is that the payee banks and their customers receive funds with certainty and finality during the
same day enabling them to use the funds immediately without exposing themselves to risk.
RTGS system, do not create credit risk for the receiving participant because they settle the each
payment individually, as soon as it is accepted, liquidity risks remains, as well as the possibility
of the risks being shifted outside the system.

5. NEFT

NEFT National Electronic Funds Transfer (NEFT) is an Indian system of electronic transfer of
money from one bank or bank branch to another. Under NEFT, individuals, firms and
corporates can electronically transfer funds from any bank branch to any individual, firm or
corporate having an account with any other bank branch in the country participating in the
Scheme. The funds under NEFT can be transferred by individuals, firms or corporates
maintaining accounts with a bank branch. Even individuals not having a bank account can
deposit cash at the NEFT-enabled branches with instructions to transfer funds using NEFT.
However, such cash remittances will be restricted to a maximum of Rs.50, 000/- per
transaction. Such walk-in-customers have to furnish full details including complete address,
telephone number, etc. NEFT, thus, also help in transfer of funds even without having a bank
account. This is a simple, secure, safe, fastest and cost effective way to transfer funds especially
for Retail remittances.

6. Electronic Clearing Service(ECS)

Electronic Clearing Service is a retail payment system that can be used to make bulk
payments/receipts of a similar nature especially where each individual payment is of a
repetitive nature and of relatively smaller amount. This facility is meant for companies and
government departments to make/receive large volumes of payments rather than for funds
transfers by individuals.

7. Open Banking

Open banking is a system that provides a user with a network of financial institutions’ data
through the use of application programming interfaces (APIs). The Open Banking Standard
defines how financial data should be created, shared and accessed. By relying on networks
instead of centralization, open banking helps financial services customers to securely share
their financial data with other financial institutions. Benefits include more easily transferring
funds and comparing product offerings to create a banking experience that best meets each
user’s needs in the most cost effective way. Open banking is also known as "open bank data."

UPI (Unified Payment Interface) and BHIM (Bharat Interface for Money), a mobile app based
on UPI Interface by the National Payments Corporation of India (NPCI) provides opportunity
for innovation in the open banking space. UPI will allow payment service providers to create
state-of-the-art products/offerings without being limited by the underlying account relationship

8. Smart Card

A smart card is a physical card that has an embedded integrated chip that acts as a security
token. Smart cards are typically the same size as a driver's license or credit card and can be
made out of metal or plastic. They connect to a reader either by direct physical contact (also
known as chip and dip) or through a short-range wireless connectivity standard such as radio-
frequency identification (RFID) or near-field communication (NFC). The chip on a smart card
can be either a microcontroller or an embedded memory chip. Smart cards are designed to be
tamper-resistant and use encryption to provide protection for in-memory information. Those
cards with microcontroller chips can perform on-card processing functions and can manipulate
information in the chip's memory.

ANALYSIS

A total of 85.7 percent of the banks reviewed offer the facility of transferring funds between
accounts while 83.7 percent of the banks offer the facility of transferring funds between third
parties accounts. A total of 59 percent of the banks reviewed provided the opportunity of paying
bills to third parties. All the banks irrespective of category have shown a high performance in
offering the services of funds transfer and bill payments over the survey period. A look at
Internet banking services beyond balance enquiry, funds transfer and bill payment reveals the
pattern of what is offered by banks of different categories. As far as the services of providing
customer correspondence and change of passwords are concerned there is no difference among
the banks during the period of second survey. A total of 96 percent allow the creation or
amendment of standing orders and request handlings (cheque book requests etc). A total of 100
percent of foreign and public and 88 percent of banks in private sector offer this service. A
total of 51 percent of the banks allow alerts through e-mails or on mobiles. A total of 65 percent
of private banks, 67 percent of foreign banks and 38.5 percent of public sector offer this service.
Among the public sector banks, poor performance of nationalised banks in offering this service
may be attributed to this lower percentage. A total of 88 percent of the banks allow enquiry
about status of cheque. Banks have shown a poor performance in the provision of online TDS
enquiry.
In general, a stiff competition from private and foreign banks has forced the public sector banks
to offer more control functions of Internet banking.

Corporate Internet banking

Online corporate Internet banking (where businesses use the Internet to manage their bank
balances) has been a growth area. This may reflect recognition by banks that business
customers can be particularly active users of online banking services and may be among the
banks’ more profitable customers. The service is available on 77.6 percent of the transactional
websites of banks. A total of 100 percent of new private sector banks and banks in SBI group
offer this service. Only old private sector Internet banks lag behind in offering this service.
Website privacy statements
Both banks and their customers stand to benefit substantially from the increased ability to
collect and analyse information obtained over the Internet. In particular, both can benefit
from the collection and integration of large amounts of personal information that enhance the
ability of banks to offer a wide range of products tailored to individual demands. But the
collection, analysis, and distribution of information raise questions related to protecting
personal privacy. A fundamental step many banks are taking to address online privacy is to
post a statement of their policies about the collection and use of customer information. The
database includes information on the number of transactional banks that had such a statement
on their websites.

CONCLUSION

The Banking sector in India is becoming competitive and aiming at higher productivity and
efficiency. Exposure to international competition and deregulation in Indian financial sector
has led to the advent of better quality products and services. The banking sector has improved
manifolds in terms of technology, infrastructure, Deregulation, product & services, information
systems, etc. The choice before the customer today is far wider both in the selection of banks
as well as products than ever before. The pre and post liberalization era has witnessed various
environmental changes which directly affects the aforesaid phenomena. It is evident that post
liberalization era has spread new colours of growth in India, but simultaneously it has also
posed some challenges. Banks have to adopt a holistic approach to fulfil the ever changing
needs of customers and to grab a better market share. Development of sophisticated products
with low cost technology is the key. This calls for in- depth analysis of customer needs the
market and competitor trends. This analysis plays a very important role in devising new
strategies, products and services. The better the banks understands their customers, the more
successful they will be meeting their needs. The future growth will largely be in corporate
finance and retail banking, with innovative products backed by superior service providing the
cutting edge. Banking will be better for the customer in future: more convenient, more personal,
more productive and less effort.