Bank Management

Prepared By
Devi S.Nair
 MODULE 3
• Technology in bank operation: Bank computerization,
Banking Software, Core Banking –

• Opportunities and Challenges.

• Any Where Banking, ATM, Cashless Banking – Tele

Banking, SMS

• Banking, Internet Banking and Mobile Banking, ECS,

CTS Cheque , Plastic Money, Remittance

• Facilities & Clearing System,

• Fund Transfer – NEFT/RTGS/SWIFT

 BANK COMPUTERIZATION
• Computer Application in Banking :
Back office application- Data entry and database of
customer’s details.

Total Branch automation- 80% of total bank activities

including single customer ID

Core Banking solutions- Consolidated database and

centralized processing system with 24 X 7 availability.
 BANK COMPUTERIZATION

• It can be summarized as under :

Deposit figures & account balances available at any point
of time.

Detailed report of customer’s accounts.

Banks clubbed its services like ATM, Internet banking,

Mobile banking etc.
 E- Banking

• It refers to the provision of information or services by a

bank to its customers via internet with the help of
computer and related devices.

• It involves offering, supplying and delivering banking

products & services through electronic channels &
devices.
 CHALLENGES OF E-BANKING
• Security
• Authentication
• Digital signature
• Digital Certificate
• Heavy investment cost
• Social challenges
• Legislative & regulative issues
• Privacy & security issues
 MOBILE BANKING
• Mobile banking refers to the banking activities that are carried
out on mobile (cell) phone. That is, banking is enabled, even
while a person is on the move.

• The following services are available in mobile banking services:

• Account information

• Transaction

• Investments

• Support
 SMS Banking Services

• ‘SMS’ stands for ‘Short Messaging Services’. The services

enable the mobile banking customers to access SMS server
through their mobile phone.
• The customer can avail the following services under the
SMS banking; (a) Making balance inquiry (b) Making query
of the last five transactions (c) Sending mail to the bank’s
Relationship Officer (d) Changing SMS password (e) Opting
out of SMS
 WAP Banking Services

• Banking done through Wireless Application Protocol enabled

phone is called ‘WAP Banking’. It enabled mobile phone is a
miniature computer monitor. In order to use WAP banking,
one need to connect to Internet on the WAP enables mobile
phone.
• The customer can avail following services under the WAP
banking: (a)Viewing details of account (b) Making balance
inquiry (c) Making query of the last five transactions.
 TELEPHONE BANKING

• Banking financial services are delivered to the customer of a bank

through the medium of telephone, it is called ‘telephone banking’.

• Telephone banking service makes use of an automated voice

response system. It enables customers to transact their banking
business from their homes rather than in the bank’s physical
branches.
 Telephone Banking Facilities

i. Balance enquiry
ii. Statement ordering
iii. Cheque book request facility
iv. Funds transfer between different accounts held by the customer at the
bank; (for security reasons these accounts are usually ‘linked’ by the
customer in advance by a visit to the branch)
v. Funds transfer (payment) to third parties (e.g. payment of utility bills)
vi. General account queries and advice; usually done by a human operator
even if the system used automated voice response technology
vii. Ordering traveler’s cheques from the bank; these typically being available
for collection from a physical branch or else supplied to the customer by
registered post
viii. Loan payments and Loan applications
ix. Obtaining product information
x. Placing stopped payments (on cheques)
xi. Requesting copies of cleared cheques
xii. Reordering cheques
 Mobile Vs. Telebanking

• Tele banking enables customers of the financial institution to

perform financial transactions over the telephone, without the
need to visit a bank branch or automated teller machine.

• Mobile banking is a term used for performing balance checks,

account transactions, payments, credit applications and other
banking transactions through a mobile device.
 Mobile Banking Vs Internet
Banking
BASIS FOR COMPARISON MOBILE BANKING INTERNET BANKING

Meaning Mobile banking refers to Internet banking implies a

an internet based facility service that allows the
provided by banks that customers to conduct the
enables the customers to financial transactions
execute bank transactions, electronically, with the use
via cellular devices. of internet.
Device Mobiles or Tablets Computers or Laptops
Uses Short message service, Bank's website
mobile application or
website
Functions Limited Comparatively more
 ATM – The Cash Machine

• Electronic equipment that allows cardholding customers to

perform routine banking transactions without interacting with
a human teller is called an ‘Automated Teller Machine’ (cash
machine).

• The machine is used to render certain essential banking

functions such as deposits taking, cash withdrawal, account
balance verification, etc. with the help of a Personal
Identification Number system.
 Electronic Funds Transfer System

• A method of fund transfer mechanism, which facilitates transfer of

funds between banks and users, either within a single financial
institution or across multiple institutions, via computer-based systems,
without the direct intervention of bank staff is called ‘Electronic Funds
Transfer’ (EFT).

• Electronic transfers are processed immediately with the transferred

amount being deducted from one account and credited to the other in
real time, thus saving time and effort involved in physically transferring
a sum of money
 Electronic Funds Transfer System

Transferring funds via electronic gateway is much simpler than the

conventional methods. You can choose to:-

• Transfer funds into your own linked accounts of the same bank
network.

• Transfer funds into different account of the same bank.

• Transfer funds into different bank’s accounts using NEFT.

• Transfer funds into other bank accounts using RTGS.

• Transfer funds into various accounts using IMPS.

 Types(Modes) of EFT

• NEFT or National Electronics Funds Transfer

• RTGS or Real Time Gross Settlement

• IMPS or Immediate Payment Service.

 NEFT or National Electronics Funds
Transfer
• It is an electronic funds transfer system which was introduced by
RBI in November 2005 & maintained by the Reserve Bank of
India (RBI).

• Main objective is to establish an Electronic Funds Transfer

System to facilitate an efficient, secure, economical, reliable and
expeditious system of funds transfer and clearing in the banking
sector throughout India.
• Beneficiary

• Beneficiary bank

• NEFT Clearing Centre

• Structured Financial Messaging System (SFMS)

• NEFT Service Centre

• Participating Bank
 Real Time Gross Settlement

• It is a system where the processing of funds transfer instructions

takes place at the time they are received (real time). Also the
settlement of funds transfer instructions occurs individually on an
instruction by instruction basis (gross settlement).

• RTGS is the fastest possible interbank money transfer facility

available through secure banking channels in India.
 Online transactions
(through net banking or mobile banking

RTGS charges
Charges per Transaction for Outward
Amount
Transactions
Rs. 2 lakh to Rs. 5 lakh Rs. 5 plus GST
Above Rs. 5 lakh Rs. 10 plus GST
NEFT charges
Upto Rs.10,000 Rs. 1 plus GST
From Rs.10,000 to Rs.1 lakh Rs. 2 plus GST
From Rs. 1 lakh to Rs. 2 lakh Rs. 3 plus GST
Above Rs. 2 lakh Rs. 5 plus GST
(Source: onlinesbi.com)
 Transactions carried out at bank
branches

NEFT transactions
Up to Rs. 10,000 Rs. 2.50 plus GST
Above Rs. 10,000 and up to Rs. 1 lakh Rs. 5 plus GST
Above Rs. 1 lakh and up to Rs. 2 lakh Rs. 15 plus GST
Above Rs. 2 lakh Rs. 25 plus GST
RTGS transactions
Rs. 2.00 lakh to Rs. 5.00 lakh Rs. 25 plus GST
Above Rs. 5.00 lakh Rs. 50 plus GST
(Source: sbi.co.in)
Immediate Payment Service
 Society for Worldwide Interbank Financial
Telecommunication
• It is a messaging network that financial institutions
use to securely transmit information and instructions
through a standardized system of codes.
• SWIFT assigns each financial organization a unique code that has either
eight characters or 11 characters. The code is called interchangeably the
bank identifier code (BIC), SWIFT code, SWIFT ID, or ISO 9362 code.

• First four characters: the institute code (UNCR for UniCredit Banca)

• Next two characters: the country code (IT for the country Italy)

• Next two characters: the location/city code (MM for Milan)

• Last three characters: optional, but organizations use it to assign codes

to individual branches. (The UniCredit Banca branch in Venice may use
the code UNCRITMMZZZ.)
 Electronic Clearing Service
• ECS is an electronic mode of payment / receipt for transactions
that are repetitive and periodic in nature.

• ECS is used by institutions for making bulk payment of amounts

towards distribution of dividend, interest, salary, pension, etc., or
for bulk collection of amounts towards telephone / electricity /
water dues, cess / tax collections, loan installment repayments,
periodic investments in mutual funds, insurance premium etc.

• Essentially, ECS facilitates bulk transfer of monies from one bank

account to many bank accounts or vice versa.
 CTS
• Image-based Clearing System (ICS) or Cheque Truncation System (CTS) is
a project started by the Reserve Bank of India (RBI) in 2010, to speed up
the processing of cheques in banks.

• Cheque truncation means stopping the flow of the physical cheques

issued by a drawer to the drawee branch.

• The physical instrument is truncated at some point en route to the

drawee branch and an electronic image of the cheque is sent to the
drawee branch along with the relevant information like the MICR fields,
date of presentation, presenting banks etc.
 Features of cheques issued under CTS

• Cheque printer details: This is printed on the extreme left hand side of the
cheque. The printer details along with the words ‘CTS-2010’ is mentioned along the
area where you tear off the leaf from the cheque book.
• Rupee symbol: The new symbol of the Indian rupee is printed beside the area where
the amount in figures needs to be written.
• Details of the bank and its logo: The bank details and its logo are printed on the face
of the cheque. However, it is printed in invisible ink.
• Signature space indicator: The words ‘please sign above’ are mentioned indicating
the space where you will need to sign the cheque.
• VOID pantograph: Pantograph with hidden or embedded “COPY” or “VOID” will
appear in the cheque. This feature will not be visible on the scanned image at the
resolution specified in CTS but will easily visible on photocopies
 Process of Cheque Truncation

The step-by-step process of clearing a CTS 2010 cheque has been listed below:
• The presenting bank captures images and data pertaining to the cheque on a
capturing system.
• The presenting bank will then transmit the captured data duly signed and
encrypted to the clearing housing for further transmission to the paying bank.
For the purpose of providing a secure line of communication the presenting
bank and the paying bank are provided with an interface called the Clearing
House Interface (CHI), this interface allows both banks to transmit data to the
Clearing House in a secure manner.
• To arrive at a settlement figure the Clearing House processes the data it has
received and routes the data and images to the paying bank. This process is
Presentation Clearing.
• Through the CHI the paying bank receives the data from the Clearing House to
initiate the processing of the payment. The paying bank’s CHI also generates the
return file for unpaid instruments.
 CTS 2010 cheque

The various new features present on a CTS 2010 cheque are:

• Boxes present to include date in dd/mm/yyyy format.
• IFSC and bank address is printed on the top of the cheque.
• Name of the printer with CTS-2010 is printed on the left side of the cheque.
• A pantograph showing VOID/COPY while photocopying a cheque under the
account number.
• The bilingual format has been replaced with the rupee symbol.
• Field for signature provided at the bottom right.
• The CTS INDIA watermark is visible under light.
• An ultra violet logo of the bank is printed on the upper left side only visible
under UV light.
 Benefits to Account Holders
• No physical movement of cheques

• No fear of loss of cheque in transit

• Quicker clearance

• Shorter clearing cycle and speedier credit of the

amount

• More secure & less prone to frauds

 Benefits for banks
• Shorter clearing cycle.

• Superior verification and reconciliation process.

• No geographical restrictions as to jurisdiction.

• Operational efficiency for banks and customers.

• Reduction in operational risk and risks associated with

paper clearing.

• standardization of cheques.
 Plastic Money

• It is term used predominantly in reference to the hard plastic

cards in place of actual bank notes and it is an alternative of the
cash.

• The Plastic Money in the form of cards has been actively

introduced by banks in India in 1990's.

• Many different forms such as cash cards, credit cards, debit

cards, pre - paid cash cards and store cards.
 Different types of Plastic money
• Cash Cards- A card that will allow you to withdraw money directly
from your bank via an authorized Automatic Teller Machine (ATM)
but it will not allow the holder to purchase anything directly with
it.
• Credit Cards- this card will permit the card holder to withdraw
cash from an ATM, and a credit card will allow the user to
purchase goods and services directly grants a line of credit to the
cardholder.
• Debit cards- This type of card will directly debit money from your
bank account, and can directly be used to purchase goods and
services.
 ATM infrastructure and services

• Major ATM networks in India are National Financial Switch (NFS),

CashTree, BANCS, Cashnet, and the SBI Group network.

• ATM switches are also linked to VISA or MasterCard gateways.

 REMITTANCE
FACILITIES & CLEARING SYSTEM
PAYMENT SYSTEMS
• Paper-based Payments
• Electronic Payments
» Electronic Clearing Service (ECS) Credit
» Regional ECS (RECS)
» Electronic Clearing Service (ECS) Debit
» Electronic Funds Transfer (EFT)
» National Electronic Funds Transfer (NEFT) System
» Real Time Gross Settlement (RTGS)System
» Clearing Corporation of India Limited (CCIL)
• Other Payment Systems
» Pre-paid Payment Systems
» Mobile Banking System
» ATMs / Point of Sale (POS) Terminals / Online Transactions
 PAPER-BASED PAYMENTS

• Use of paper-based instruments (like cheques, drafts, and the like)

accounts for nearly 60% of the volume of total non-cash transactions in
the country. In value terms, the share is presently around 11%.

• Recent developments in paper-based instruments include launch of

Speed Clearing (for local clearance of outstation cheques drawn on
core-banking enabled branches of banks), introduction of cheque
truncation system (to restrict physical movement of cheques and enable
use of images for payment processing), framing CTS-2010 Standards (for
enhancing the security features on cheque forms).
 Electronic Clearing Service (ECS) Credit

• The Bank introduced the ECS (Credit) scheme during the 1990s
to handle bulk and repetitive payment requirements (like salary,
interest, dividend payments) of corporates and other
institutions.

• ECS (Credit) facilitates customer accounts to be credited on the

specified value date and is presently available at all major cities
in the country.
 REGIONAL ECS (RECS)

• RECS has been launched during the year 2009.

• Under the system, the sponsor bank will upload the validated
data through the Secured Web Server of RBI containing
credit/debit instructions to the customers of CBS enabled bank
branches spread across the Jurisdiction of the Regional office of
RBI.
 Electronic Clearing Service (ECS) Debit

• The ECS (Debit) Scheme was introduced by RBI to provide a faster

method of effecting periodic and repetitive collections of utility
companies. ECS (Debit) facilitates consumers / subscribers of
utility companies to make routine and repetitive payments by
‘mandating’ bank branches to debit their accounts and pass on
the money to the companies.

• There is no limit as to the minimum or maximum amount of

payment.
 Electronic Funds Transfer (EFT)
• This retail funds transfer system introduced in the late 1990s
enabled an account holder of a bank to electronically transfer
funds to another account holder with any other participating
bank.

• Available across 15 major centers in the country, this system is

no longer available for use by the general public, for whose
benefit a feature-rich and more efficient system is now in place,
which is the National Electronic Funds Transfer (NEFT) system.
 Clearing Corporation of India Limited (CCIL)

• CCIL was set up in April 2001 by banks, financial institutions and

primary dealers, to function as an industry service organisation
for clearing and settlement of trades in money market,
government securities and foreign exchange markets.

• CCIL plays the role of a central counterparty whereby, the

contract between buyer and seller gets replaced by two new
contracts - between CCIL and each of the two parties. This
process is known as ‘Novation’
 Pre-paid Payment Systems

• Pre-paid instruments are payment instruments that facilitate

purchase of goods and services against the value stored on these
instruments. The value stored on such instruments represents the
value paid for by the holders by cash, by debit to a bank account,
or by credit card.

• The pre-paid payment instruments can be issued in the form of

smart cards, magnetic stripe cards, internet accounts, internet
wallets, mobile accounts, mobile wallets, paper vouchers, etc.
 Indo-Nepal Remittance Facility Scheme

• Indo-Nepal Remittance Facility is a cross-border remittance scheme to

transfer funds from India to Nepal, enabled under the NEFT Scheme.

• The scheme was launched to provide a safe and cost-efficient avenue to

migrant Nepalese workers in India to remit money back to their families
in Nepal.

• A remitter can transfer funds up to Rs.50,000 (maximum permissible

amount) from any of the NEFT-enabled branches in India.The
beneficiary would receive funds in Nepalese Rupees.