Technological impact in Banking Operations

Technological impact in
Banking Operations

People
Financial
Institutions
Technology
Save for a rainy
day
Advent of micro-computers
Diffusion of Internet
Automation in related functions of
other businesses
Evolution of Smart Card Technology
Mobile technology
Cash on the go
Bank in the wallet
Anywhere anytime banking
Reduce operational costs
High value added services
Product bundling & Cross Selling
Piggy Banks Traditional Banking Modern Banking (online)
Interest
Protection against theft
Transfer large sums of
money
Trade Instruments
Interest
Service Charges
The Needs & Enablers of Modern Banking
2

Superior customer experience
New Customer Acquisition &
Retention
Maximization of Business
Value
Creating new opportunities
for success
Improving employee
satisfaction
Banking & Technology
3600 Customer view
Products tailored to
customer’s financial needs
Reduced time to market
new products
Increased reach of banks
Reduced operational costs
4
Core Banking Solutions
CRM
Electronic Clearing
Services
Cheque Truncation
Systems
Driving further technological innovation
Technology Enables Impact on
Business

Development of Key Payment Systems - India
Non Cash & Paper based
payment system
5
•Settlement in T+1 days
Electronic
Clearing Service
(ECS) and the
Electronic Funds
Transfer
System(EFT)
•Settlement & Payments
on near Real time basis
for large value
transactions
Real Time Gross
Settlement
(RTGS)
Real Time Payment &
Settlement
•Funds transfer on T+0
basis
National
Electronic Funds
Transfer (NEFT)
• Would enable
realization of the
Cheque on the same day
Cheque
Truncation
System (CTS)

The Growth of ATMs
6
22110
25247
34547
44857
20
%
20
%
37
%
30
%
2005-06 2006-07 2007-08 2009-10 2010-11
> 60000

Adoption of CBS & RTGS
• Early adopters of CBSPrivate Banks
• 64,304 PSB branches (90.4% ) under CBS as on 2014-
15
• More than 15 PSBs have 100% branches under CBS
• 95% PSB branches have achieved full
computerization
Public Sector
Banks (PSBs)*
• Keen to migrate to CBS
Small Banks
(including co-
operatives)
• More than 100,000 bank branches covered as on 2015RTGS#
7

Total Branch
Computerization –
concept and
opportunities

Historical Perspective….
• Computerization of branches of banks began in
the late eighties with the introduction of ledger
posting machines (LPMs), advanced ledger
posting machines (ALPMs), followed by Stand
alone computer systems (LANs) which
metamorphosed into network based systems
(WANs), with the latest development being the
installation of Core Banking solutions

Evolution of
Technology…..
ALPMs
TBMs
LANs
CBS
?

Current Scenario
• Distributed Data Base – A tool for acquiring,
servicing and enhancing customer base –
offering wide range of product options and
delivery channels, Internet Banking,
Phone/Mobile Banking, Any where – Any time
Banking.
• Vanilla Solutions vs End to End Single Platform
Solutions across the Globe – Integration with
other applications.

BANK Business Solutions Requirements
Support
Applications
Regulatory
Core
Processing
Employee
Access
Customer
Access
• Oracle GL
• Oracle
Performance
Management
• CRISIL &
Reuters
Credit & Risk
Management
• Data
Warehouse
• RTGS
• Basel II
through
Oracle
OFSA
• Anti Money
Laundering
• Finacle CBS
for domestic
& int.
• Document
Mgmt &
Workflow
• Hire Purch. &
Leasing
• Depository
• Credit Card
• Asset Mgmt
• Chq Clearing
• Oracle HR
& Self
Service
• Payroll
• KM
• Mail & Msg
• Finacle
Internet &
SMS Banking
• Phone
Banking
• Oracle CRM
• Internet
Payment
Gateway
• Online Trading
• ATM Switch
HP
Superdome
XP 1024
Datacenter
Build
RPC Build
Network
Solution overview across 5 pillars
SOA - Technology Offerings
HP OpenBank Architecture BizTalk EAI
Single Sign On HP OV EMS

Technology – A great
Enabler
• Large volume and variety of business, accuracy and
timeliness.
• Large number of Products, Delivery Channels and
Customer-centric Processes.
• CRM – For cross selling and meeting the customer
life cycle needs.
• Redefining of Customer Convenience.
• Decision support System, Supervisory Monitoring
and Control.

ATM
Typically, an ATM can be used
for:
• Withdraw Cash;
• Check an account balance;
• Order a statement or print a
‘mini statement;’
• Order a cheque book…

ATM
What are the parts of an ATM?
Magnetic
Stripe
Reader
Screen to
display
menu
options
Keyboard
Printer
There will also be a slot
somewhere on the
machine to dispense the
cash.

ATM
Using an ATM:
• Insert a debit or credit card into the magnetic stripe
reader.
• It will read an account number from the stripe on the
back.
• ATM will then ask customer to use their PIN
(Personal Identification Number) for security.
• Customer asked to select an option from a menu on
the screen.
• To withdraw cash, the customer selects the relevant
options and the request is sent to the bank’s mainframe
where it is approved and updated.

ATM
Advantages of using an ATM:
• Banks can keep their operating costs down as fewer
employees are needed to work at the branches.
• Customers have 24 hour access to their accounts seven
days a week.
• There’s no need to carry large amounts of cash around
as the large number of ATMs means that it is readily
available.

Branch Automation
• In 80’s, banks started technology investments
for the branches.
• The first step is offline branches.
• Terminals connected to local branch computer
• Second step is online branches connected
centrally. Most of the transactions started to be
performed in the central mainframe.

Internet Banking
Sample Internet Banking Architecture
• More and more banks are coming to realize that internet is a part of banks'
alternative delivery channel strategies activities concentrated in the business-to-
consumer segment, focused on retaining clients
• In Internet banking, security is a primary concern. Security concerns have been
addressed from every angle within the architecture of the Internet banking
application.

SERVICES
Customised Home Page
View Balances & Transactions
Historic Information for up to two years will
be available
Reports, statements and transactions listings
Payments – three day and immediate

23
 The interest over "Mobile Banking" product is becoming increasingly
intense.
 Applications and new technologies are spreading through modern banks
mobilized to embrace this profitable product.
 Banks are clear that they have left "behind" in this technological innovation.
Recent analyzes underscore the need for banks to actively respond to this
new challenge and recent polls show that Mobile Banking will fundamentally
change retail banking in the next five years.
Mobile offers good opportunities to meet consumer preferences, increase
loyalty, strengthen relationships and it will bring a positive impact on bank
profits
Mobile banking – Near Future of Banking

24
Mobile Banking Future
 Money is changing as we become more mobile.
We know that the young of today become banking customers of tomorrow
New brands are emerging that are acting as ‘money vaults’ for consumers.
They are not banks.
A lot of financial services providers are ensure that they are leading the new
way in shaping the Mobile Money
The demand is growing consumer trust and engagement will rise further
beyond mobile banking into payments and commerce
Now is the time for banks to strengthen their hand in the mobile space and
cement their position in the growing ecosystems in and beyond.

25
New Opportunities for Retail Banking
Banks have start thinking about how best to respond to the opportunities of mobile
banking. It is worth if retail management understand the nature of what they are
dealing with.
Bank customers can ‘meet’ their bank every day, albeit remotely.
The mobile is :
-portable and accessible 24/7,
-simple and even exciting to use with its increasingly user-friendly interfaces
-has a unique ID which means its use and identification is specific to each customer
-Allows geographical positioning which in turn permits products and services to be tailored to
different territories and in the panoply of electronic devices
-the one that consumers most frequently use.
Mobile Banking – convenient and innovative
Banks are already seeing a step-change in the number and frequency of interactions they have with their
customers via mobile; something that was once a monthly experience is now happening daily with a mobile
device.
Virtual commerce
Banks acting as the engine that drives digital commerce from the pre-purchase phase, to purchase
financing, to transaction processing, and finally through to consumer post-purchase activities.
Low cost- win market
To access under-banked and under-served customers in developed and developing
markets and develop market the banks can use the low-cost mobile channel and
innovative partnerships.

26
A Successful Mobile Banking Strategy
 Mobile banking has moved quickly and become a point of differentiation
and a potential source of revenue for progressive banks.
Online banking is not simply using a Smartphone but it is at the hub of the
customer relationship.

27
Increase enrollment and usage of Mobile Banking
 One of the biggest impediments to enrollment today is that many banks
still require mobile banking customers to have an online banking
relationship.
 Smartphone providers’ have found a way to sign up for mobile banking
and use the service.
 It is recommended a consistent sign-in process be used for both the online
and mobile banking relationships if the bank is going to require multifactor
authentication.
 It is very important to have a customer service team familiar with the
mobile banking platform and well trained to answer every question from
customers.

28
More touch points apps and support SMS banking
 Banks have be able to provide support across all touch points also they
have to across alternative delivery methods, dedicated mobile website,
downloadable phone apps and tablet apps.
 The offering of dedicated tablet mobile banking capabilities has
definitely lagged behind Smartphone applications but provides greater
promise in many ways due to the added functionality and preferable
demographics of tablet users.

29
Integration of Cross-Channel
 There are other ways for customer's interactions with a bank to be
integrated. While being able to access customer support directly from the
mobile app a great example of cross-channel support.
 It is very important the integration of social media within a bank's
mobile banking application, not only to show live tweets in real time on
their mobile banking platform, but their integration with Facebook and
YouTube content is one of the strongest in the industry.

30
Marketing and Cross-Selling Through Mobile
 Banks are doing very poorly virtual marketing through.
Mobile Banking channels have a bog marketing potential.
We think that the market is on stage of acceptance of mobile banking
by the mass market. As a result, banks must begin to promote mobile
banking to a wider audience using messaging those appeals to those
consumers who don't understand the benefits of the channel.

31
Retail Banking in the next ……….years
Mobile banking is the next big thing in the retail banking industry. Over
the next five to 10 years, expect it to become as routine as using ATMs.
Successful customer experiences will require large technology investments,
tricky collaborations with competitors and a clear "own-the-customer"
strategy.
The rewards for banks could be great if they will be open minded, willing
to learn marketing and security lessons drawn from trailblazing developing
markets.
Mobile banking opportunities may have looming on the horizon but these
opportunities can create worth value if banks consider three separate
prospective:
1. Bank profits.
2. Banking industry.
3. The wider ‘mobile’ industry.

32
With the growth in tablet use, consumers are able to access highly graphic
and sophisticated financial planning tools on the road or while multi-tasking
in their home.
As more innovative Smartphone applications are developed within and
outside the financial services sector, the ability for banks to keep pace
becomes both more difficult and more important.
By building an agile the impact can be realized through increased
differentiation, lower cost customer acquisition, improved channel efficiency,
enhanced customer retention, and greater revenues through cross-selling
and up-selling of products and services and through merchant-funded
rewards.
By executing and optimizing a successful mobile banking strategy that is
integrated with a wider multi-channel strategy, banks will be better
positioned for the future mobile banking.

INTRODUCTION
• Traditional Banking System
• CASH COUNTER
• ACCOUNTANT
• MANAGER
• RECEIPTS
• WITHDRAWALS
• LOANS

NEED FOR CBS
• Tremendous increase in the Customer Volume
• Huge no. of day to day Transaction
• Need for 24/7 Service
• Influence of Internet and Mobile
• Branch free Transaction
• Enhanced service in less time
• Rapid increase in competition among banks

CORE BANKING SOLUTION
• CBS is a Three Tire Architecture
• Data Base
• Application
• Presentation

VARIOUS CBS PLATFORMS
COMPANY PRODUCT
INFOSYS FINACLE 10
IFLEX FLEXCUBE
TCS BANCS

CBS CONNECTION
• A Central Data base Centre
• All Circle Office are Connected to the Central Data Base
Centre which acts as an application Tier
• All end users connected in the Presentation Layer
Branches
ATM
Internet Interface

DATA BASE TIER
• SAN Storage (Storage Area network)
Data Base of Core Banking
• Two Servers with Oracle RDBMS
• CENTRAL SERVER will be installed at the DATA
CENTER
• Central Server is Connected with Circle Offices
• All Branch Servers are Connected with Circle Office

APPLICATION TIER
• NETWORK COMPONENT WITH THE CIRCLE
OFFICES
• INDIVIDUAL SERVERS WITH THE
BRANCHES
• PROCESS AND APPLICATION ARE
MADE IN THE CIRCLE OFFICE

CORE BANKING
• Sum total of all the information technology components that
enable a bank to manage its core business activities in a
centralized model
• Round the clock processing of all the products, services and
information of a bank
• 24/7/365 Model

BASIC COMPONENTS
• Banking Application Software
• Hardware Components
• Network Infrastructure
• Centralized Data Processing

APPLICATION AREAS
• Balance of payments and withdrawal are done.
• Mobile banking
• Internet banking
• ATM’s
• Recording of transactions
• Passbook maintenance
• Interest calculations on loans and deposits
• Customer records

TECHNICAL TERMS
• Data Centre (DC) – The place where the central server / servers are
housed.
• Disaster Recovery Site (DRS) – An alternate data centre which will act
as a backup resource and ensure business continuity in case of a DC
failure.
• Data Mirroring – Storage devices attached to Servers located in DC
and DRS are updated on a real time basis, so that data integrity as well
as availability are ensured even in case of a hardware failure. Bank’s
real time data is stored in multiple devices and locations.
• Backup – Data stored in the fixed storage devices are copied on to
removable storage devices / tapes and preserved for any future
contingency. These backups are stored in some off-site location to
avoid the damages on account of a disaster like earth quake, fire, flood
etc.
• Leased Lines – These are the primary data links used for CBS
networking. These are analog links on fixed yearly rentals and there are
no additional usage charges.

• ISDN Lines – These are the secondary data links put to use in case of a Leased
line failure. These are integrated services digital network lines which can carry
various forms of information packets (data, voice and images and video) as
digital signals.
• Modem – This is networking equipment used to modulate and demodulate the
data signals. Computers work on digital data signals where as the leased lines
can carry only the analog signals. Modems modulate (convert the digital signals
to analog signals) at the transmitting end and then demodulate (Convert the
analog signals to digital signals) at the receiving end.
• Switch – In a branch there can be more than one computer and these
computers are networked to form a local area network (LAN) using a device
called switch.
• Router – Router is another network device that connects different LANs and
facilitates intelligent data transfer. Router also functions as an intelligent
switching device between various connectivity channels, viz., leased line, ISDN,
PSTN etc. When the primary link (LL) is down, it automatically dials the ISDN
and re-establishes the network connectivity.

Cont…
• Regional Cluster Centre (RCC) - Instead of taking
separate links between individual branches and the data
centre, branches in a geographical region are first
connected to a location in that region and this location is
then connected to the data centre using links of higher
band width. This location is termed as a regional
cluster centre. Some banks also house their regional
data servers in RCC, so that in case of a total network
failure between RCC and DC, branches in that region
can continue to operate and also provide Any Branch
Banking (ABB) facilities within the cluster

NEED OF CBS
• To meet the intense competition and changing market
dynamics in an over banked environment.
• To meet the regulations and compliance requirements
(example in order to meet the Basel ll norms banks must
enhance there IT infrastructure).
• To meet the demands of customers who are better
informed, more demanding and less loyal than ever.
• To enhance efficiency and effectiveness.

• Increasing customer satisfaction and convenience
• Freeing up time for branch staff to focus on sales and
marketing
• Simplifying process for employees
• Enhancing bank’s competitiveness in the market
• Improved process efficiency Shrinking margins.

BENEFITS 2 BANKS
• Replace old technology seamlessly with a state-of-the-art n-
tier application.
• Replace multiple disparate and older generation systems with a
single integrated multi-product processing application across
various countries.
• Streamline operations by integrating the enterprise, to existing
in house applications and to offer a single customer view.
• Create a virtual banking operation from ground-up and offer a
host of banking products.
• Enable multiple new delivery channels (Internet Banking, 7 X
24 ATM, Mobile Banking, Tele-banking and Point of Sale
Terminals) allowing the bank to reach out to new customers
and segments.

Cont….
• Move to centralized processing and handle much higher
volumes without a proportionate increase in resources or
infrastructure costs.
• Use business intelligence tools to analyze customer needs and
create new products and offerings.
• Build and retain customer relationships based on the strength
of customer service capability.
• Enable and modify product offerings quickly and efficiently
based on customer’s market needs.
• Reduce costs, improve bottom-line and stakeholder rewards.
• Quick and easy introduction of new products and services

BENEFITS 2 CUSTOMER
• Customer can enjoy the Online and real time banking
facilities through ATMs
• Point of sale terminals (POS) Internet
• Mobile phones and Kiosks
• Quick realization of instruments lodged for collection
• on-line and easy fund transfer (intra-bank as well as
inter-bank) etc

Advantages of Core Banking
1. Limited Professional Manpower to be utilized more
effectively
2. Customer can have anywhere, more convenient and
easier banking
3. ATM, Internet Banking, Mobile Banking, Payment
Gateways, Referral Business
4. More Strong and economical way for MIS
5. Reduction in Branch Manpower by 15-20%

6. Quick and Accurate Implementation of Policies
7. Electronic Transactions with Other Financial Institutions.
8. Increased Speed in working resulting in more business
opportunities and reduction in penalties, legal expenses
etc
9. Additional Manpower available for Marketing, Recovery
and Personalized banking.
10. Instant Information availability for decision support

Types of Cards
There are 2 types of card you will need to
be familiar with:
• A Debit Card;
• A Credit Card;

Types of Cards
A Debit Card:
• This card allows the user to transfer money
from their bank account to the vendor’s bank
account.
• The money for the purchase of the item is
taken from the customer’s bank account after 1
or 2 days.
• The customer MUST have money in the
account to cover the cost of the item.

Types of Cards
A Credit Card:
• This card allows the customer to purchase an item
even if they do not have enough funds in their
account.
• The customer is then sent a bill each month
totalling the cost of the items bought in that period.
• The bill will contain an amount added for ‘interest.’
• The ‘interest rate’ will be determined by the Credit
Card provider.

Chip and PIN
What is Chip and PIN?
• Found on debit and credit cards.
• Customer places chip into a card reader and is
asked to input their PIN (Personal Identity
Number).
• The PIN is the same one that is used in the
ATM.
• It is a security measure to stop people forging
signatures and using a card fraudulently.

Credit cards and other
revolving credit
• Credit cards and over-lines tied to checking accounts are
the two most popular forms of revolving credit
agreements.
• In 2001 consumers charged almost $650 billion on credit
cards.
• Most operate as franchises of MasterCard and/or Visa.
o bank must pay a one-time membership fee plus an annual charge determined by
the number of its customers actively using the cards.

Credit cards are attractive because they provide higher
risk-adjusted returns than do other types of loans.
• Card issuers earn income from three sources:
o card holders annual fees,
o interest on outstanding loan balances, and
o discounting the charges that merchants accept on purchases.

Credit card transaction
process
Individual
Card-Issuing
Bank
Clearing
Network
Local Merchant
Bank
Retail Outlet1
4
2
3 3
2
Steps Fees
1. Individual uses a credit card to purchase
merchandise from a retail outlet.
1. None
2. Retail outlet deposits the sales slip or
electronically transmits the purchase data
at its local bank.
2. The merchant bank discounts the sales receipt. A 3
percent discount indicates the bank gives the retailer
$97 in credit for each $100 receipt.
3. Local merchant bank forwards the
transaction information to a clearing
network, which routes the data to the bank
that issued the credit card to the individual.
3. The card-issuing bank charges the merchant bank an
interchange fee equal to 1 to 1.5 percent of the
transaction amount for each item handled.
4. The card-issuing bank sends the individual
an itemized bill for all purchases.
4. The card-issuing bank charges the customer interest
and an annual fee for the privilege of using the card.
A card-issuing bank also serves as a merchant bank.

Debit cards, smart cards, and prepaid cards
• Debit cards are widely available
o when an individual uses the card, their balance is immediately debited.
o they have lower processing costs to the bank
• A smart card is an extension of debit and credit cards
o contains a memory chip which can manipulate information
o it is programmable such that users can store information and recall this
information when effecting transactions.
o only modest usage in the U.S.

The future of smart cards
• Smart card usage will likely
increase dramatically in
the U.S.:
o firms can offer a much
wider range of services
o smart cards represent a
link between the internet
and real economic activity
o suppliers of smart cards are standardizing the formats so that all cards work on
the same systems

Prepaid cards
• Prepaid cards such as phone cards, prepaid cellular, toll
tags, subway, etc. are growing rapidly.
• Prepaid cards are a hybrid of debit cards in which
customers prepay for services to be rendered and
receive a card against which purchases are charged.

Overdraft protection and open credit
lines
• Revolving credit also takes the form of overdraft
protection against checking accounts.
• One relatively recent innovation is to offer open credit
lines to affluent individuals whether or not they have an
existing account relationship.
• In most instances, the bank provides customers with
special checks that activate a loan when presented for
payment.

Home equity loans and
credit cards
• Home equity loans grew from virtually nothing in the mid-
1980s to over $220 billion in 2001
o Home equity loans meet the tax deductibility requirements of the Tax Reform Act
of 1986, which limits deductions for consumer loan interest paid by individuals,
because they are secured by equity in an individual's home.
o These credit arrangements combine the risks of a second mortgage with the
temptation of a credit card, a potentially dangerous combination.

Overview of Payment & Settlement Systems
66

Payment System
“A set of instruments, procedures and rules
for the transfer of funds
 between or among participants, as well
as the entity operating the arrangement
 typically based on an agreement
between or among participants and the
Financial Market Infrastructure
 transfer of funds is effected using an
agreed-upon technical infrastructure”
67

68
Legal Basis
 Payment and Settlement Systems Act, 2007
 No payment system to operate without authorisation
 RBI as the regulator and supervisor
 Legal basis for Netting
 Dishonor of electronic debit instruction on par with
Cheque
Directives Issued
 Settlement and Default Handling Procedures
 Dispute Resolution framework

Mission
69
“To ensure that all the payment
and settlement systems operating
in the country are Safe, Secure,
Sound,
Efficient, Accessible and
Authorised".

Payment Systems –
Major Milestones
1986
2005
1994
2002
2008
MICR
EFT /
IDRBT
IT ACT
RTGS
ECS
INFINET
CCIL
DPSS /
NEFT /
NFS
CTS / NECS /
Mobile / NPCI /
Act
Notification
HV Close /
Directives on
Settlement,
Defaults and
Disputes
70
INFINET : - Indian
Financial Network
IDRBT : -Institute for
Development and
research in Banking
Technology
PSS :- Payment and
settlement system act
DPSS: - Dept Of PSS
RECS : -
Regional ECS
NPCI : - National
Payment corpn

Introduction to Electronic Payment Systems
73

Electronic Payment Systems (EPS)
• Simpler
• Safer
• Faster
• Cost Effective
• Enhanced Reach
• Eco-friendly
74

Why EPS
Cash / Paper Electronic
Physical Movement of cash / paper
instruments
Electronic Message movement
Fraud prone as paper moves outside
the banking system
Message moves inside the banking system
hence less prone to frauds
Geographical restrictions No such restrictions. Payment anywhere in
India possible
Time required to move paper makes
the system slow
Electronic movement of messages makes
the system real time
Operational cost of running the
system very high
Operational cost is very low
As volume increases, logistics to be
increased
No such requirement
75

EPS – Benefits
• Individuals Beneficiaries –
o Funds in on the due date
o Bills / EMIs paid automatically
o No frequent writing of cheques / standing in the
queue
• Govt. Departments / Corporates
o Instruction based
o Direct payment / receipt on due date / time
o Easy Reconciliation
o Cost effective
o No interaction between payer and payee
76

EPS - Variants
• Electronic Clearing Service (ECS)
o ECS – Credit and Debit
o National ECS
o Regional ECS – Credit and Debit
• National Electronic Funds Transfer (NEFT)
• Real Time Gross Settlement (RTGS)
• Alternate Payment Channels
o Internet Banking
o ATMs
o Mobile Banking
o Pre-paid Payment Instruments
77

Electronic Clearing Service (ECS)
• Used for bulk transfers – repetitive payments or
receipts
• Disbursement of funds – from one source to
many beneficiaries – called Credit
• Collection of funds – to one beneficiary from
many customer s – called Debit
• Operates on a T+1 basis
• Available at 90 major locations
• Geographical restriction – confined to cover local
Clearing House only
78

ECS – Users
• All prominent listed companies on exchanges
• Used for
o Salaries
o Vendor Payments
o Dividends
o IPO / FPO refunds
o Bill Collections (Telephone, Electricity, Water), EMIs, School
/ Exam fee collection etc.
• Handled 16.7 mn transactions for value Rs 253.51 bn
during October 2010
79

80
National ECS
• Credit Clearing introduced in September 2008
• Centralised processing at Mumbai
• Covers about 52,000 branches
• File acceptance timings extended till 6.30 pm
• Processes around 75% of total ECS Credit
volumes
• Handled 2.6 mn. transactions in a single day

81
Regional ECS (RECS)
• Credit and Debit Variants at Ahmedabad, Bangalore,
Bhubaneshwar, Chennai, Kolkata – Since launched
• Guwahati, Hyderabad and Jaipur – Ready for
implementation
• Bhopal, Kanpur, New Delhi, Nagpur and Patna – Being
planned

National Electronic Funds Transfer (NEFT)
• NEFT facilitates one-to-one funds transfers between banks,
irrespective of location
• Eleven Hourly Settlements from 9 am to 7 pm
• Covers 101 banks and about 75,000 branches
• Operates on a Batch+2 basis
• Same day availability of funds
• Returns within two hours of the settlement
• Highly Secured – smart card based access – PKI security
• Positive confirmation of credits to the originator
• Highly popular – Number of transactions went up from 3.17 mn.
during December 2008 to 13.46 mn. during December 2010
• Processed 13.46 mn. transactions worth Rs. 936.64 bn. during
December 2010
• Processed a record 1.07 mn. transactions on a single day –
January 31, 2010
82

Real Time Gross Settlement (RTGS)
• For remitting large value payments
• Credit on real time basis
• Minimum amount limit – Rs. 2 lakh
• Centralised processing at Mumbai
• Covers 74,000 branches
83

Alternate Payment Channels
84
 68,000+ ATMs
 Avg. daily turnover – 11 mn transactions of ` 30 bn
 National Infrastructure – NFS operated by
NPCI – Largest network, covers 98% of
ATMs
 Customer Service Issues –
 Withdrawal from any bank ATM made free up
to 5 times a month
 Timely resolution of complaints / penalty
 Standardised template for complaints
ATMs

Alternate Payment Channels…
85
 0.55 mn terminals
 Avg. Daily Volume : 1.5 mn.
Value : Rs. 3.20 bn.
 Cash withdrawal permitted
up to Rs. 1,000 using Debit
cards
Forward Looking
 Possibility of IndiaCard by NPCI
Points of Sale
0
50
100
150
200
250
300
350
400
450
500
550
Sep, 08 Sep, 09 Sep, 10
Numberin'000s
Growth in POS Terminals

Alternate Payment Channels
86
 Enables money transfer and m-
commerce transactions through Mobile
phones
 Implemented the bank-led model in
October 2008 subject to certain limits
 Fund transfer for maximum Rs. 50,000
 Beneficiary can receive funds up to
Rs. 5,000 even without having a bank
account with max. of Rs. 25,000 in a
month
 Approval granted to 40 banks
 Monthly Volume : 0.50 mn
 Monthly Value : Rs. 0.44 bn
Mobile Banking

Alternate Payment Channels…
87
Pay before (Pre-paid Cards)
 Guidelines issued in April 2009
 Broadly classified into –
(i) Open (cash withdrawal permitted);
(ii) Semi-closed (no cash withdrawal)
 Non-banks – Only semi-closed;
funds need to be placed in Escrow
Account; Maximum cap – Rs. 50,000
 28 banks and 16 non-banks given approval
Gives better Audit Trail

RTGS/NEFT
Fund remittance facilities

RTGS(Real Time Gross Settlement)
• The acronym 'RTGS' stands for Real Time Gross Settlement
• RTGS system is a funds transfer mechanism where transfer of money takes
place from one bank to another on a 'real time' and on 'gross' basis
• This is the fastest possible money transfer system through the banking channel
• Settlement in 'real time' means payment transaction is not subjected to any
waiting period. The transactions are settled as soon as they are processed
• 'Gross settlement' means the transaction is settled on one to one basis without
bunching with any other transaction
• Considering that money transfer takes place in the books of the Reserve Bank
of India, the payment is taken as final and irrevocable

National Electronics Funds Transfer System (NEFT)
• The acronym “NEFT” stands for National Electronic Funds Transfer.
• Funds are transferred to the credit account with the other participating Bank
using RBI's NEFT service.
• RBI acts as the service provider and transfers the credit to the other bank's
account.
• NEFT operate on a deferred net settlement (DNS) basis which settles
transactions in batches.
• In DNS, the settlement takes place at a particular point of time. All
transactions are held up till that time

Why RTGS / NEFT
• Lower cost of transaction of RTGS/NEFT as compared to cost of
transaction and remmitance through draft
• Draft Issue to Payment – long process, cancellation, duplicate draft issue,
revalidation, IOR issues, frauds, Staff accountability
• Customer Benefit – Immediate credit
• Low transaction time, no printing, shorten the queues
• Drafts will be phased out in the coming years

RTGS & NEFT service availability durations
RTGS transactions will be sent to RBI based on the following schedule:
Day Start Time End Time
Monday to Friday 9:00 hrs 16:00 hrs
Saturday 9:00 hrs 13:30 hrs
NEFT transactions will be sent to RBI based on the following schedule:
Day Start Time End Time
Monday to Friday 8:00 hrs 18:30 hrs
Saturday 8:00 hrs 11:30 hrs

RTGS/NEFT
• For a funds transfer to go through RTGS/NEFT, both the sending bank
branch and the receiving bank branch would have to be RTGS/NEFT
enabled
• In rare cases of system failure at RBI/Banks respective softwares, manual
intervention is required to clear the Blocked funds
• NEFT transactions are settled in batches based on the following timings:
o 11 settlements on weekdays - at 09:00, 11:00, 12:00, 13:00, 15:00 and
17:00 hrs.
o 5 settlements on Saturdays - at 09:00, 11:00 and 12:00 hrs.

Minimum / Maximum amount for RTGS /NEFT
transactions
Type Minimum Maximum
RTGS Rs. 2 Lakh No Limit
NEFT
No Limit
No Limit
* HOWEVER MAXIMUM AMOUNT PER TRANSACTION IS LIMITED
TO RS 2,00,000

Processing Charges/Service Charges for
RTGS/NEFT transactions
Amount Service Charge
RTGS From Rs.2 lakh upto Rs.5
lakh
Not exceeding Rs 30/-
Rs. 5 lakh & above Not exceeding Rs 55/-
NEFT Upto Rs.1 lakh Rs.5/-
Rs.1 lakh & 2 lakh and
above 2 lakh
Rs.15/- maximum
Rs 25/- maximum
Inward transactions charges for RTGS/NEFT– Free, no charge to be levied

Essential Information needed
• The essential information that the remitting customer would have to
furnish to a bank for the remittance to be effected
 Amount to be remitted
 Account number which is to be debited
 Name of the beneficiary bank
 Name of the beneficiary customer
 Account number of the beneficiary customer
 Sender to receiver information, if any
 The IFSC Number of the receiving branch

Transaction Flow : RTGS ( usually it should be
done in financle )
No special characters like *, /, @ to be used in
any of the fields

Transaction Flow : RTGS contd..
(Outgoing Message (Cheque)
Dimmed fields
Cheque No
Chq Date

Transaction Flow : RTGS contd..
(Outgoing Message (Cash)
Remittance Amount excl Comm.
Comm. Amount

STATUS ENQUIRY OF RTGS MESSAGES
for Inward and Outward.

STATUS ENQUIRY OF RTGS MESSAGES
for Inward and Outward.contd…

Track the remittance transaction
• It depends on the arrangement between the remitting customer and the
remitting bank.
• Some banks with internet banking facility provide this service.
• Once the funds are credited to the account of the beneficiary bank, the
remitting customer gets a confirmation from his bank either by an e-mail or
by a short message on the mobile

Volume of RTGS
• On a typical day, RTGS handles about 60,000 transactions a day for an
approximate value of Rs.2,700 billion
• RTGS/NEFT facility is available in more than 53000 different bank branches
throughout country
Delay/Non credit
• Contact bank / branch.
• If the issue is not resolved satisfactorily, the Customer Service Department
of RBI may be contacted

Technological impact in Banking Operations

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