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Banking – latest trends

Real time gross settlement (rtgs)
MEANING
It is a 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 one-to-one basis without bunching with any other
transaction. It is a more instant settlement system used mainly for high volume payment.
FEATURES
(i) RTGS is not available at all the bank branches in India. This facility is provided only by CBS-enabled bank
branches.
(ii) RTGS transactions are processed individually and continuously throughout banking hours rather than in
batches.
(iii) The minimum amount in a RTGS transaction is Rs 2 lacs. There is no upper ceiling for a RTGS transaction.
(iv) The receiving or beneficiary bank must credit the customer’s account within thirty minutes of receiving
the funds transfer message.
(v) The transfer is final and irrevocable.

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. All transfers are held till that time. In other words, NEFT
transactions are settled in batches.
Any NEFT transaction initiated after a designated settlement time has to wait till the next designated settlement
time.
FEATURES
i. A bank branch must be NEFT enabled to become a part of the NEFT funds transfer network.
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 branch.
iv. In case one does not have a bank account, the maximum amount that can be transferred through NEFT
system is 49,999.
v. There is no minimum or maximum amount that can be transferred through NEFT when one has a bank
account.
vi. NEFT transactions take place in batches.
vii. NEFT cannot be used to receive foreign remittances.
viii. The sender of funds has to pay charges for NEFT
ix. The receiver of funds has to pay no charges.

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IMMEDIATE PAYMENT SERVICE (IMPS)
MEANING
Immediate Payment Service (IMPS) 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 and Internet banking. The major reason behind popularity is that IMPS is available
24/7, 365 days which makes it highly flexible and dependable.
FEATURES
(i) Flexible: IMPS is highly flexible in nature, it can be used anytime and from anywhere.
(ii) Multi-Platform Support: IMPS is typically designed for mobile banking, but it also supports other platforms
such as web. Fund transfer through IMPS can also be done through online banking, which will require bank
account details of the beneficiary such as account number, IFSC code, etc.
(iii) Versatile: IMPS is versatile as it can be used for several other purposes such as for making payments for
online shopping, online merchant payments, insurance premium payment, OTC payments, fees payment to
schools and colleges, utility bill payments, and travel and ticketing.
(iv) Fast Money Transfer: IMPS usually does not take more than an hour to transfer money in the bank account
of the receiver.
(v) Mobile Alerts: As soon as the fund is transferred to the receiver, both sender and receiver receive text
messages from the bank as alerts from the app.
(vi) Inexpensive: IMPS charges for fund transfer goes from a minimum of Rs 2.50 to a maximum of Rs 25. Though
the charges for NEFT are similar but it does not transfer funds in real-time, giving IMPS a definite advantage.

ELECTRONIC BANKING (E-BANKING)

MEANING
Electronic banking means banking transactions carried out with the help of computer systems. Any user having a
PC and a browser can access the bank website and avail of banking services. Electronic banking is banking over the
internet. It is a part of virtual 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.
Advantages Disadvantages
Benefits to customers: (i) The bank and its clients have to invest
(i) Customers get 24 hours and 365 days-a-year services. money in e-banking technology.
(ii) Customers can make the permitted transactions from (ii) Training in technology is needed for both.
residence or office and even while travelling. They (iii) Clients may not be able to transact due to
need not go to the bank. defect or virus in technology.
(iii) Recording of each and every transaction inculcates a (iv) Any oversight or error on the part of bank
sense of financial discipline. or client can be very harmful.
(iv) Customers feel a sense of security. They do not face the
risk of carrying cash.
(v) Unlimited access to the bank increases customer
satisfaction.

Benefits to banks:
(a) The bank gains a competitive advantage.
(b) Network of the bank is not limited to the number of
branches. Rather it expands far and wide.
(c) Centralised database reduces load on branches.

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The main forms of electronic banking:
1. Electronic Funds Transfer System (EFTS): Under this system, money can be transferred from one account to another
account.
The main examples of EFT are as follows:
(A) DIRECT CREDITS: Salary, pension, dividend on shares, interest on debentures, commission, royalty, etc. are directly
credited (added) to the bank account of a person.
(B) DIRECT DEBITS: Loan instalment, school fees, insurance premium, telephone bills, electricity bills, water bills, club
membership fee, credit card dues, etc. are directly debited (debited) to the bank account of the account holder.
Electronic funds transfer offers the following advantages:
(i) Payments are made on due dates.
(ii) There is no loss in transit.
(iii) There is no mishandling of cash.
(iv) Transactions are effortless.

2. 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 for all the 24 hours. This is much less costly and less time consuming than a human teller (bank employee).

3. Debit Card: A person can get a debit card by depositing money in the bank. The card holder can make immediate
payment for the goods purchased or services availed with the help of debit card availed provided the seller has the
terminal facility. 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.
The main features of a Debit Card are as follows:
(i) The cardholder has to deposit money with the issuer of 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.
(vi) The cardholder can buy things from time to time with the help of debit card. He need not carry cash.

4. Credit Card: Anybody having good reputation can obtain a 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. The name, photo, signatures of the customer,
the name of the issuing bank and the date of validity are inscribed on the credit card. The card holder can buy goods
and services with the help of credit card. He keeps on depositing the money used as per the agreement with the bank.
The main features of a Credit Card are as follows:
(i) The cardholder must enjoy good reputation.
(ii) There is no need to deposit advance money with the issuer of the card. However, he/she may be asked to open
an account.
(iii) The card contains personal details of the cardholder, and name and address of the bank.
(iv) Credit card allows credit facility to the cardholder.
(v) The cardholder makes payment after using the card.
(vi) The cardholder pays some charge for the credit card.
(vii) Some incentives/gifts may be available to the cardholder.

Difference between Debit Card and Credit Card

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5.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.
Thus, the customer receives all the information about his/her accounts without visiting the bank.

6. Core Banking Solution (CBS): Under this system a customer becomes ‘customer of the bank’ rather than customer
of a 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. The bank gives a unique ID to a CBS
customer which gives him the privilege of opening an account with any of the CBS branches without any formalities.
CBS also known as ‘Centralised Banking Solution’ offers the following facilities:
(a) Instant transfer of funds between the accounts in CBS branches across the country.
(b) Cash withrawal 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.
Thus, CBS is speed banking anywhere and at anytime.

7. Mobile Banking: Mobile banking means banking transactions through mobile phone. Mobile banking is taking off in
India.

BANK DRAFT
A bank draft is a type of cheque drawn by a bank either on its own branch or on another bank in favour of a third party.
It is payable to the person named in it or to 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 person who
wants to purchase a draft fills in the prescribed form available with the bank. The form duly filled in along with the
amount of the 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. There is no risk of dishonour.
Main Features of any Bank Draft is:
(i) Money can be remitted easily and safely from one place to another through a bank draft.
(ii) The issuing bank charges some commission for a bank draft
(iii) There is no danger of dishonour of a bank draft.

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NEWLY ADDED PORTION FOR 2024 EXAMS

Digital Banking

• The Digital Banking definition is banking done through the digital platform, doing away with all the paperwork
like cheques, pay-in slips, Demand Drafts, and so on. It means availability of all banking activities online.
• Digital Banking gives you the luxury of freely accessing and performing all traditional banking activities 24*7
without having to personally go to a bank branch to get your work done.
• Digital Banking can be done either through a laptop, tablet or your mobile phone.

Unified payment interface (UPI)

Unified Payments Interface (UPI) is an instant real-time payment system developed by National Payments
Corporation of India (NPCI). The interface facilitates inter-bank peer-to-peer (P2P) and person-to-merchant (P2M)
transactions. It is used on Mobile devices to instantly transfer funds between two bank accounts.
It is regulated by the Reserve Bank of India (RBI)

What are the benefits of using it?

• It is simpler to pay bills online.
• Use UPI payments to pay for ride-hailing services, websites that sell things right away, and food delivery
services.
• You can pay for online purchases at nearby restaurants, grocery stores, and department stores.
• Rent, cell phone top-ups, and utility bills can all be paid quickly online.
UPI can be used to pay with more and more apps, like Google Pay, PhonePe, FreeCharge, and Mobikwik. Before you
can start making transactions, you must verify your bank account information to set up a UPI ID on the app.

e- wallet

E-wallet is a type of electronic card which is used for transactions made online through a computer or a smartphone.
Its utility is same as a credit or debit card. An E-wallet needs to be linked with the individual’s bank account to make
payments.
• E-wallet is a type of pre-paid account in which a user can store his/her money for any future online transaction.
• An E-wallet is protected with a password.

E-wallet has mainly two components, software and information.

I. The software component stores personal information and provides security and encryption of the data.
II. The information component is a database of details provided by the user which includes their name, shipping
address, payment method, amount to be paid, credit or debit card details, etc.

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