Electronic Payment System

UNIT 1
Introduction

The driving force in the development of national payment systems of any country is
usually the central bank of that country. The Reserve Bank of India as the central bank of India
has been playing this developmental role and has taken several sufficient steps for Safe,
Efficient, Accessible, Secure, Sound, and Authorized payment systems in the country.

The Board for Regulation and Supervision of Payment and Settlement Systems (BPSS), a
sub-committee of the Central Board of the Reserve Bank of India is the highest policy making
body on payment systems in the country. The BPSS is empowered for authorizing, prescribing
policies and setting standards for regulating and supervising all the payment and settlement
systems in the country. In India, the payment and settlement systems are regulated by the
Payment and Settlement Systems Act, 2007 (PSS Act) which was legislated in December 2007.
The initiatives taken by RBI in the mid-eighties and early-nineties focused on technology-based
solutions for the improvement of the payment and settlement system infrastructure, coupled with
the introduction of new payment products by taking advantage of the technological
advancements in banks. The continued increase in the volume of cheques added pressure on the
existing set-up, thus necessitating a cost-effective alternative system.

Financial System in India:

At present, there are 27 Public Sector Banks in India including
SBI and its 5 associates and 19 nationalized banks. Moreover, there are two banks, which have
been categorized by RBI as Other Public Sector Banks IDBI and Bhartiya Mahila Bank. As on
September 2015 there are 46 foreign banks from 26 countries operating as branches in India and
39 banks from 21 countries operating as representative offices in India.

Electronic Payment System In India:

The RBI plays a pivotal role in the

development of Indias payment and settlement systems for both large-value and retail payments.
The central bank played a pioneering role in automating the paper-based clearing system in the
1980s. It introduced an electronic funds transfer system and electronic clearing services (ECS
Credit and Debit) in the 1990s. Thespecial electronic fund transfer (SEFT) system was
introduced in April 2003 (subsequently discontinued in March 2006, after the implementation of
the National Electronic Fund Transfer (NEFT) system in November 2005) and the real-time
gross settlement (RTGS) system in March 2004. The RBI operates the RTGS, which has
replaced the paper-based inter-bank clearing system and settles a sizeable volume of large-value
and time-critical customer transactions. RBI also manages the clearinghouses (for paper-based
and electronic clearing) in 17 large cities while operating the clearinghouses at four major

Locations. It is the settlement banker in these cities. The RBI introduced the NEFT
system in November 2005. Together with ECS, this forms the electronic retail payment
infrastructure.

The National Electronic Clearing Services (NECS) system, which aims to centralize the
Electronic Clearing Service (ECS) operation and bring uniformity and efficiency to thesystem,
was implemented in September 2008. At present, the NECS settles only credit transfers.

Modern Payment System in India

The Reserve Bank of India (RBI) has played a significant role in developing the payment and
settlement systems in the nation from its establishment. The emergence of e-commerce has
created new financial requirements that in many cases cannot be effectively fulfilled by the
traditional payment systems. To recognizing these needs the RBI has implemented bank
computerisation project in India and providing ICT based networking facilities to the banks and
financial institutions in India. Since 1991 the RBI has started'BANKNET' it is network for
banking institutes other than Banknet The 'INFINET' - Indian Financial Network is a satellite
based wide area network using VSAT (Very Small Aperture Terminal) technology set up in June
1999. The Centralised Funds Management System (CFMS) facilitates centralised balance
viewing of and funds transfer between own accounts of a member bank maintained with the
Bank at different locations. In Indian banking system ATM also providing better alternative to
traditional payment system it can be used for payment of utility bills, funds transfer between
accounts, deposit of cheques and cash into accounts, balance enquiry and several other banking
transactions. Apart from these facilities RBI has enhancing the payment system by introducing
MICR technology, ECS, EFT, NEFT, Card Based Clearing and RTGS etc.

RBI vision 2012-2015:

To proactively encourage electronic payment systems for
ushering in a less-cash society in India and to ensure payment and settlement systems in the
country are safe, efficient, interoperable, authorized, accessible, inclusive and compliant with
international standards.
The Vision Statement indicates RBIs renewed commitment towards providing a safe,
efficient, accessible, inclusive, interoperable and authorized payment and settlement systems for
the country. Payment systems will be driven by customer demands of convenience ease of use
and access that will impel the necessary convergence in innovative e-payment products and
capabilities. Integration of various systems through unified solution architecture and current
technology would lead to adoption and usage of resilient payment systems. Regulation will
channelize innovation and competition to meet these demands consistent with international
standards and best practices. The overall regulatory policy stance is oriented towards promoting
a less cash/less paper society, the green initiative, and hence the increased emphasis on the use
of electronic payment products and services that can be accessed anywhere and anytime by all at
affordable prices. Embracing new technology and innovation to unveil a bouquet of simple, low
cost, easy to use modern payment products and services would be the corner stone of this
endeavor. The Reserve Bank recognizes that building dexterity of payment systems through
standardization and a broad consultative process is a continuing agenda

Role of the RBI in Encouraging E-Payments

As the apex financial and regulatory institution in the country it is compulsory for the RBI to
ensure that the payments system in the country is as technologically advanced as possible and in
view of this aim, the RBI has taken several initiatives to strengthen the e-payments system in
India and encourage people to adopt it.

The Payment and Settlement Systems Act, 2007 was a major step in this direction. It enables the
RBI to regulate, supervise and lay down policies involving payment and settlement space in
India. Apart from some basic instructions to banks as to the personal and confidential nature of
customer payments, supervising the timely payment and settlement of all transactions, the RBI
has actively encouraged all banks and consumers to embrace e-payments.
In pursuit of the above-mentioned goal the RBI has granted NBFCs (Non-Banking Financial
Companies) the permission to issue co branded credit cards forming partnerships with
commercial banks.

The Kisan Credit Card Scheme was launched by NABARD in order to meet the credit needs of
farmers, so that they can be free of paper money hassles and use only plastic money.

A domestic card scheme known as Rupay has recently been started by the National Payments
Corporation of India (NPCI),promoted by RBI and Indian Banks Association (IBA), inspired by
Union pay in China, which will be promoting the use of cards i.e. plastic money. Initially
functioning as an NPO, Rupay will focus on potential customers from rural and semi-urban
areas of India. Rupay will have a much wider coverage than Visa, MasterCard or American
Express cards which have always been used for card-based settlements.

However, the Indian banking system suffers from some defects due to certain socio-cultural
factors which hampers the spread of the e-payments culture even though there are many effective
electronic payment channels and systems in place. Despite the infrastructure being there nearly
63% of all payments are still made in cash. A relatively small percentage of the population pays
their bills electronically and most of that population is from urban India-the metropolitans. Also
in some cases the transaction is done partially online and partially offline. The main reason for
this apathy switch to e-payments comes from lack of awareness of the customer despite various
efforts by the Government.
 Payment and settlement systems in India
payment and settlement systems in India for financial transactions. They
are covered by the Payment and Settlement Systems Act, 2007 (PSS Act),
legislated in December 2007 and regulated by the Reserve Bank of India and
the Board for Regulation and Supervision of Payment and Settlement Systems.

India has multiple payments and settlement systems, both gross and net settlement
systems. For gross settlement India has a Real Time Gross Settlement (RTGS)
system called by the same name and net settlement systems include Electronic
Clearing Services (ECS Credit), Electronic Clearing Services (ECS Debit), credit
cards, debit cards, the National Electronic Fund Transfer (NEFT) system
and Immediate Payment Service.

1Electronic Payment and Settlement Systems in India

2Electronic Clearing Service
2.1ECS Credit
2.2 ECS Debit
3Credit cards and Debit cards
4Real-time gross settlement
4.1Service Charge for RTGS
5National Electronic Funds Transfer (NEFT)
6Indo-Nepal Remittance Facility Scheme
7Immediate Payment Service (IMPS)
8Bharat Bill Payment System
9Comparison
10Channels of e-payments
 11Role of the RBI in encouraging e-payments
1.Electronic Payment and Settlement Systems in India:
The Reserve Bank of India is doing its best to encourage alternative methods of
payments which will bring security and efficiency to the payments system and
make the whole process easier for banks.
The Indian banking sector has been growing successfully, innovating and trying to
adopt and implement electronic payments to enhance the banking system. Though
the Indian payment systems have always been dominated by paper-based
transactions, e-payments are not far behind. Ever since the introduction of e-
payments in India, the banking sector has witnessed growth like never before.
According to a survey by celent, the ratio of e-payments to paper based
transactions has considerably increased between 2004 and 2008. This has
happened as a result of advances in technology and increasing consumer awareness
of the ease and efficiency of internet and mobile transactions.
In the case of India, the RBI has played a pivotal role in facilitating e-payments by
making it compulsory for banks to route high value transactions through Real Time
Gross Settlement (RTGS) and also by introducing NEFT (National Electronic
Funds Transfer) and NECS (National Electronic Clearing Services) which has
encouraged individuals and businesses to switch to electronic methods of payment.
With the changing times and technology so have changed the methods of payments
in India. E-payments in India have been growing at a fast rate of 60% over the last
3 years.
In India plastics have been fast over-taking papers. With 130 million cards in
circulation currently, both credit and debit, and an increasing consumer base with
disposable income, India is clearly one of the fastest growing countries for
payment cards in the Asia-Pacific region. Behavioral patterns of Indian customers
are also likely to be influenced by their internet accessibility and usage, which
currently is about 32 million PC users, 68% of whom have access to the net.
However these statistical indications are far from the reality where customers still
prefer to pay "in line" rather than online, with 63% payments still being made in
cash. E-payments have to be continuously promoted showing consumers the
various routes through which they can make these payments like ATMs, the
internet, mobile phones and drop boxes.
Due to the efforts of the RBI and the (BPSS) now over 75% of all transaction
volume are in the electronic mode, including both large-value and retail payments.
Out of this 75%, 98% come from the RTGS (large-value payments) whereas a
meager 2% come from retail payments. This means consumers have not yet
accepted this as a regular means of paying their bills and still prefer conventional
methods. Retail payments if made via electronic modes are done by ECS (debit
and credit), EFT and card payments.
2.Electronic Clearing System:

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. ECS includes
transactions processed under National Automated Clearing House (NACH)
operated by National Payments Corporation of India (NPCI).

Primarily, there are two variants of ECS - ECS Credit and ECS Debit.

ECS Credit is used by an institution for affording credit to a large number of

beneficiaries (for instance, employees, investors etc.) having accounts with bank
branches at various locations within the jurisdiction of an ECS Centre by raising a
single debit to the bank account of the user institution. ECS Credit enables
payment of amounts towards distribution of dividend, interest, salary, pension,
etc., of the user institution.

ECS Debit is used by an institution for raising debits to a large number of

accounts (for instance, consumers of utility services, borrowers, investors in
mutual funds etc.) maintained with bank branches at various locations within the
jurisdiction of a ECS Centre for single credit to the bank account of the user
institution. ECS Debit is useful for payment of telephone / electricity / water bills,
cess / tax collections, loan installment repayments, periodic investments in mutual
funds, insurance premium etc., that are periodic or repetitive in nature and payable
to the user institution by large number of customers etc.

2.1Electronic Clearing Service (ECS Credit):

Known as "Credit-push" facility or one-to-many facility this method is used mainly
for large-value or bulk payments where the receivers account is credited with the
payment from the institution making the payment. Such payments are made on a
timely-basis like a year, half a year, etc. and used to pay salaries, dividends or
commissions. Over time it has become one of the most convenient methods of
making large payments.
ECS Credit payments can be initiated by any institution (called ECS Credit User) which needs to
make bulk or repetitive payments to a number of beneficiaries. The institutional User has to first
register with an ECS Centre. The User has to also obtain the consent of beneficiaries (i.e., the
recipients of salary, pension, dividend, interest etc.) and get their bank account particulars prior
to participation in the ECS Credit scheme. The beneficiary account holders are required to give
mandates to the user institutions to enable them to afford credit to their bank accounts through
the ECS Credit mechanism. ECS can be used to transfer funds to NRE and NRO accounts in the
country subject to FEMA and Wire Transfer guidelines.

Benefits

Beneficiary

The beneficiary need not visit his / her bank for depositing the paper
instruments which he
would have otherwise received had he not opted for ECS Credit.
The beneficiary need not be apprehensive of loss / theft of physical
instruments or the likelihood of fraudulent encashment thereof. Cost
effective.
The beneficiary receives the funds right on the due date.
User Institutions

Savings on administrative machinery and costs of printing, dispatch and

reconciliation of paper/ instruments that would have been used had
beneficiaries not opted for ECS Credit.
Avoid chances of loss / theft of instruments in transit, likelihood of
fraudulent encashment of paper instruments, etc. and subsequent
correspondence / litigation.
 Efficient payment mode ensuring that the beneficiaries get credit on a
designated date. Cost effective.

Banking system -

Freedom from paper handling and the resultant disadvantages of handling,

presenting and monitoring paper instruments presented in clearing. Ease of
processing and return for the destination bank branches.
Smooth process of reconciliation for the
sponsor banks. Cost effective.

2.2Electronic Clearing Service (ECS DEBIT):

ECS Debit transaction can be initiated by any institution (called ECS Debit User)
which has to receive / collect amounts towards telephone / electricity / water dues,
cess / tax collections, loan installment repayments, periodic investments in mutual
funds, insurance premium etc. It is a Scheme under which an account holder with a
bank branch can authorise an ECS User to recover an amount at a prescribed
frequency by raising a debit to his / her bank account.

The User institution has to first register with an ECS Centre. The User institution
has to also obtain the authorization (mandate) from its customers for debiting their
account along with their bank account particulars prior to participation in the ECS
Debit scheme. The mandate has to be duly verified by the beneficiarys bank.

Benefits
Customers -
ECS Debit mandates will take care of automatic debit to customer accounts on
the due dates without visiting bank branches / collection centres of utility
service providers, etc.
Customers need not keep track of due date for payments.
The debits to customer accounts would be monitored by the ECS
Users, and the customers alerted accordingly.
Cost effective.
User institutions -

Savings on administrative machinery and costs of collecting the cheques

from customers, presenting in clearing, monitoring their realisation and
reconciliation.
Better cash management because of realisation / recovery of dues on due
dates promptly and efficiently.
Avoids chances of loss / theft of instruments in transit, likelihood of
fraudulent access to the paper instruments and encashment thereof.
Realisation of payments on a uniform date instead of fragmented receipts
spread over many days.
Cost effective.

Banking system

Freedom from paper handling and the resultant disadvantages of handling,

receiving and monitoring paper instruments presented in clearing.
Ease of processing and return for the destination bank
branches.
Smooth process of reconciliation for the sponsor
banks.
 Cost effective.

MICR code

MICR is an acronym for Magnetic Ink Character Recognition. The MICR Code is
a numeric code that uniquely identifies a bank-branch participating in the ECS
Credit scheme. This is a 9 digit code to identify the location of the bank branch;
the first 3 characters represent the city, the next 3 the bank and the last 3 the
branch. The MICR Code allotted to a bank branch is printed on the MICR band of
cheques issued by bank branches.

3.Credit cards and Debit cards:

As mentioned above India is one of the fastest growing countries in the plastic
money segment. Already there are 130 million cards in circulation, which is likely
to increase at a very fast pace due to rampant consumerism. Indias card market
has been recording a growth rate of 30% in the last 5 years. Card payments form an
integral part of e-payments in India because customers make many payments on
their card-paying their bills, transferring funds and shopping.
Ever since Debit cards entered India, in 1998 they have been growing in number
and today they consist of nearly 3/4th of the total number of cards in circulation.
Credit cards have shown a relatively slower growth even though they entered the
market one decade before debit cards. Only in the last 5 years has there been an
impressive growth in the number of credit cards- by 74.3% between 2004 and
2008. It is expected to grow at a rate of about 60% considering levels of
employment and disposable income. Majority of credit card purchases come from
expenses on jewellery, dining and shopping.
Another recent innovation in the field of plastic money is co branded credit cards,
which combine many services into one card-where banks and other retail stores,
airlines, telecom companies enter into business partnerships. This increases the
utility of these cards and hence they are used not only in ATMs but also at Point
of sale (POS) terminals and while making payments on the net.
4.Real-time gross settlement:
The acronym 'RTGS' stands for real time gross settlement. The Reserve Bank of
India (India's Central Bank) maintains this payment network. Real Time Gross
Settlement 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.
Fees for RTGS vary from bank to bank. RBI has prescribed upper limit for the fees
which can be charged by all banks both for NEFT and RTGS. Both the remitting
and receiving must have core banking in place to enter into RTGS transactions.
Core Banking enabled banks and branches are assigned an Indian Financial System
Code (IFSC) for RTGS and NEFT purposes. This is an eleven digit alphanumeric
code and unique to each branch of bank. The first four letters indicate the identity
of the bank and remaining seven numerals indicate a single branch. This code is
provided on the cheque books, which are required for transactions along with
recipient's account number.
RTGS is a large value (minimum value of transaction should be 2,00,000) funds
transfer system whereby financial intermediaries can settle interbank transfers for
their own account as well as for their customers. The system effects final
settlement of interbank funds transfers on a continuous, transaction-by-transaction
basis throughout the processing day. Customers can access the RTGS facility
between 9 am to 4:30 pm (Interbank up to 6:30 pm) on weekdays and 9 am to 2:00
pm (Interbank up to 3:00 pm) on Saturdays. However, the timings that the banks
follow may vary depending on the bank branch. Time Varying Charges has been
introduced w.e.f. 1 October 2011 by RBI. The basic purpose of RTGS is to
facilitate the transactions which need immediate access for the completion of the
transaction.
Banks could use balances maintained under the cash reserve ratio (CRR) and the
intra-day liquidity (IDL) to be supplied by the central bank, for meeting any
eventuality arising out of the real time gross settlement (RTGS). The RBI fixed the
IDL limit for banks to three times their net owned fund (NOF).
The IDL will be charged at 25 per transaction entered into by the bank on the
RTGS platform. The marketable securities and treasury bills will have to be placed
as collateral with a margin of five per cent. However, the apex bank will also
impose severe penalties if the IDL is not paid back at the end of the day.
The RTGS service window for customer's transactions is available from 8:00 hours
to 19:00 hours on week days and from 8:00 hours to 13:00 hours on Saturdays.
No Transaction on weekly holidays and public holidays.
 4.5Service Charge for RTGS
a) Inward transactions no charge to be levied.
b) Outward transactions
- For transactions of 2 lakhs to 5 lakhs -up to 25 per transaction plus applicable
Time Varying Charges (1/- to 5/-); total not exceeding 30 per transaction, (+
Service Tax).
- Above 5 lakhs - 50 per transaction plus applicable Time Varying Charges (1/-
to 5/-); total charges not exceeding 55 per transaction, (+ Service Tax).
No time varying charges are applicable for RTGS transactions settled up to 1300
hrs.
5.National Electronic Funds Transfer (NEFT):
Started in Nov.-2005, the National Electronic Fund Transfer (NEFT) system is a
nationwide system that facilitates individuals, firms and corporates to
electronically transfer funds from any bank branch to any individual, firm or
corporate having an account with any other bank branch in the country.It is done
via electronic messages. Even though it is not on real time basis like RTGS (Real
Time Gross Settlement), hourly batches are run in order to speed up the
transactions.
For being part of the NEFT funds transfer network, a bank branch has to be NEFT-
enabled. NEFT has gained popularity due to it saving on time and the ease with
which the transactions can be concluded. As at end-January 2011, 74,680 branches
/ offices of 101 banks in the country (out of around 82,400 bank branches) are
NEFT-enabled. Steps are being taken to further widen the coverage both in terms
of banks and branches offices. The following details of NEFT is discussed below,
They are

Process
Settlement Timings
Service Charges for NEFT Transactions
Statistics
Process
Detailed process NEFT is as follows:
Step-1 : Customer fills an application form providing details of the beneficiary
(like name, bank, branch name, IFSC, account type and account number) and the
amount to be remitted. The remitter authorizes his/her bank branch to debit his
account and remit the specified amount to the beneficiary. This facility is also
available through online banking and some banks offer the NEFT facility even
through the ATMs.
Step-2 : The originating bank branch prepares a message and sends the message to
its pooling centre (also called the NEFT Service Centre).
Step-3 : The pooling centre forwards the message to the NEFT Clearing Centre
(operated by National Clearing Cell, Reserve Bank of India, Mumbai) to be
included for the next available batch.
Step-4 : The Clearing Centre sorts the funds transfer transactions destination bank-
wise and prepares accounting entries to receive funds from the originating banks
(debit) and give the funds to the destination banks(credit). Thereafter, bank-wise
remittance messages are forwarded to the destination banks through their pooling
centre (NEFT Service Centre).
Step-5 : The destination banks receive the inward remittance messages from the
Clearing Centre and pass on the credit to the beneficiary customers accounts.

Settlement Timings

NEFT originally settled fund transfers in hourly batches with twelve settlements
between 8:00 AM and 7:00 PM on week days. Settlements are closed on the
second and fourth Saturday of the month. In April 2016, the RBI announced that
clearance times would be reduced to half-hourly batches raising the number of
settlements per day to 23.
Any transaction initiated after a designated settlement time would have to wait till
the next designated settlement time. As of 2013, all transactions initiated before 5
PM will be settled on same day. No transactions are settled on weekly holidays and
public holidays.
Transaction Timings for NEFT, Monday to Saturday (Except 2nd and 4th
Saturday) is 8:00 AM to 6:30 PM. RTGS / NEFT is not allowed on Sundays,
second and fourth Saturday of the month and the declared bank holidays for the
calendar year National Electronic Funds Transfer (NEFT) is one of the most
prominent electronic funds transfer system of India. Started in November 2005,[1]
NEFT is a facility provided to bank customers to enable them to transfer funds
easily and securely on a one-to-one basis. It is done via electronic messages. This
is not on real-time basis like RTGS (Real Time Gross Settlement). This is a "net"
transfer facility which is executed in hourly batches resulting in a time lag. NEFT
facilities are available in 30,000 bank branches all over the country and work on a
batch mode.
RBI explains this scheme as "National Electronic Funds Transfer (NEFT) is a
nation-wide payment system facilitating one-to-one funds transfer. Under this
Scheme, individuals, firms and corporate 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."
NEFT has gained popularity due to its saving on time and the ease with which the
transactions can be concluded, This reflects from the fact that 42% of all electronic
transactions in the 2008 financial year were NEFT transactions.

Service Charges for NEFT Transactions

The structure of charges that can be
a) Inward transactions at destination bank branches (for credit to beneficiary
accounts):
Free, no charges to be collected from beneficiaries
b) Outward transactions at originating bank branches (charges for the remitter):
For transactions up to 10,000 (not exceeding) : 2.50 (+ Service Tax)
For transactions above 10,000 up to 1 lakh (not exceeding) : 5 (+ Service Tax)
For transactions above 1 lakh and up to 2 lakhs (not exceeding): 15 (+ Service
Tax)
 For transactions above 2 lakhs : 25 (+ Service Tax)

Statistics
928 million National Electronic Funds Transfers (NEFT) transactions worth 60
trillion (US$930 billion) were made in 2014-15 as against 661 million transactions
worth 44 trillion (US$680 billion) the previous year.
Benefits

The remitter need not send the physical cheque or Demand Draft to the
beneficiary. The beneficiary need not visit his / her bank for depositing
the paper instruments.

The beneficiary need not be apprehensive of loss / theft of physical

instruments or the likelihood of fraudulent encashment thereof.
Cost effective.
Credit confirmation of the remittances sent by SMS or email.
Remitter can initiate the remittances from his home / place of work
using the internet banking also.
Near real time transfer of the funds to the beneficiary account in a secure manner.

6.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 50,000 (maximum permissible amount) from any of the NEFT-
enabled branches in India.The beneficiary would receive funds in Nepalese
Rupees.

7.Immediate Payment Service (IMPS):

Immediate Payment Service (IMPS) is an initiative of National Payments

Corporation of India (NPCI). It is a service through which money can be
transferred immediately from one account to the other account, within the same
bank or accounts across other banks. Upon registration, both the individuals are
issued an MMID(Mobile Money Identifier) Code from their respective banks. This
is a 7 digit numeric code. To initiate the transaction, the sender in his mobile
banking application need to enter the registered mobile number of the receiver,
MMID of the receiver and amount to be transferred. Upon successful transaction,
the money gets credited in the account of the receiver instantly. This facility is
available 24X7 and can be used through mobile banking application. Some banks
have also started providing this service through internet banking profile of their
customers. Though most banks offer this facility free of cost to encourage
paperless payment system, ICICI bank and Axis bank charge for it as per their
respective NEFT charges.
Nowadays, money through this service can be transferred directly also by using the
receiver's bank account number and IFS code. In such case, neither the receiver of
the money need to be registered for mobile banking service of his bank, nor does
he need MMID code. IMPS facility differs from NEFT and RTGS as there is no
time limit to carry out the transaction. This facility can be availed 24X7 and on all
public and bank holidays including RBI holidays.
8.Bharat Bill Payment System:

Bharat Bill Payment System(BBPS) is an integrated bill payment system in India

offering interoperable and accessible bill payment service to customers through a
network of agents, enabling multiple payment modes, and providing instant
confirmation of payment.[5] This is still in implementation stage. Guidelines for
implementation of this system were issued on November 28, 2014.
9.Comparison:
The key difference between RTGS and NEFT is that while RTGS is on gross
settlement basis, NEFT is on net settlement basis. Besides, RTGS facilitates real-
time ("push") transfer, while NEFT involves twelve settlements from 8 am to 7 pm
on week days and six settlements from 8 am to 1 pm on Saturdays. Customers can
access the RTGS facility between 9 am to 4:30 pm on weekdays and 9 am to 1:30
pm on Saturday. Thus if a customer has given instruction to its bank to transfer
money through NEFT to another bank in the morning hours, money would be
transferred the same day, but if the instruction is given much later during the day,
money may be transferred next day.
RTGS facility is available in over 1,13,000 branches across India, while NEFT is
available in little over 1,15,000 branches of a 100 banks.
10.Channels of e-payments:
In their effort to enable customers to make payments the electronic way banks have
developed many channels of payments viz. the internet, mobiles, ATMs
(Automated Teller Machines) and drop boxes.
The internet as a channel of payment is one of the most popular especially among
the youth. Debit and credit payments are made by customers on various banks
websites for small purchases,(retail payments) and retail transfers( ATM transfers).
ATMs serve many other purposes, apart from functioning as terminals for
withdrawals and balance inquiries, such as payment of bills through ATMs,
applications for cheques books and loans can also be made via ATMs.
Banks also provide telephone and mobile banking facilities. Through call agents
payments can be made and as the number of telephone and mobile subscribers are
expected to rise, so is this channel of payment expected to gain popularity.
Drop boxes provide a solution to those who have no access to the internet or to a
telephone or mobile. These drop-boxes are kept in the premises of banks and the
customers can drop their bills along with the bill payment slips in these boxes to be
collected by third party agents.

11.Role of the RBI in encouraging e-payments:

As the apex financial and regulatory institution in the country it is compulsory for
the RBI to ensure that the payments system in the country is as technologically
advanced as possible and in view of this aim, the RBI has taken several initiatives
to strengthen the e-payments system in India and encourage people to adopt it.
Raghuram Rajan, Ex-Governor, RBI, and Nandan Nilekani, Ex-Chairman, UIDAI
and Advisor, NPCI, and at the launch of Unified Payments Interface (UPI) in
Mumbai.
Imagine paying for everyday purchases directly from your bank, without the need
for carrying cash. The RBI's new interface helps you do just that. Reserve Bank of
India Governor Raghuram Rajan launched the Unified Payments Interface (UPI)
system, as its latest offering in boosting digital money transfers.
The interface has been developed by National Payments Corporation of India
(NPCI), the umbrella organisation for all retail payments in the country. The UPI
seeks to make money transfers easy, quick and hassle free.
The Payment and Settlement Systems Act, 2007 was a major step in this
direction. It enables the RBI to "regulate, supervise and lay down policies
involving payment and settlement space in India." Apart from some basic
instructions to banks as to the personal and confidential nature of customer
payments, supervising the timely payment and settlement of all transactions, the
RBI has actively encouraged all banks and consumers to embrace e-payments.
In pursuit of the above-mentioned goal the RBI has granted NBFCs (Non-
Banking Financial Companies) the permission to issue co branded credit cards
forming partnerships with commercial banks.
The Kisan Credit Card Scheme was launched by NABARD in order to meet the
credit needs of farmers, so that they can be free of paper money hassles and use
only plastic money.
A domestic card scheme known as RuPay has recently been started by the
National Payments Corporation of India (NPCI),promoted by RBI and Indian
Banks Association (IBA), inspired by Unionpay in China, which will be
promoting the use of cards ie. "plastic money". Initially functioning as an NPO,
Rupay will focus on potential customers from rural and semi-urban areas of
India. Rupay will have a much wider coverage than Visa, MasterCard or
American Express cards which have always been used for card-based
settlements.
The NREGA (National Rural Employment Guarantee Scheme) introduced by
the Government will ensure rural employment in turn ensuring that the
employees get wages. Each employee will have a smart card functioning as his
 personal identification card, drivers license, credit card which will also
function as an electronic pass book, thus familiarising the rural populations
with e-payments.
However, the Indian banking system suffers from some defects due to certain
socio-cultural factors which hampers the spread of the e-payments culture even
though there are many effective electronic payment channels and systems in place.
Despite the infrastructure being there nearly 63% of all payments are still made in
cash. A relatively small percentage of the population pays their bills electronically
and most of that population is from urban India-the metropolitans. Also in some
cases the transaction is done partially online and partially "offline". The main
reason for this apathy to switch to e-payments comes from lack of awareness of the
customer despite various efforts by the Government.

RTGS vs NEFT

RTGS vs NEFT

NEFT RTGS RESEARCH BACKGROUND:

NEFT refers to National Electronic Funds Transfer. It is an online system for

transferring funds from one financial institution to another within india

(usually banks). The system was launched in November 2005, and was set to

inherit every bank that was assigned to the SEFT clearing system. It was

made mandatory by the RBI for all banks on the SEFT system to migrate to

NEFT by mid December 2005. As such, SEFT was discontinued as of

January 2006. The RBI welcomed banks that were full members of the RTGS

to join the NEFT system.

RTGS is an acronym that stands for Real Time Gross Settlement. RTGS is a

funds transfer system where money is moved from one bank to another in

real-time, and on gross basis. When using the banking method, RTGS is the

fastest possible way to transfer money. Real-time means that the payment

transaction isnt subject to any waiting period. The transaction will be

completed as soon as the processing is done, and gross settlement means that

the money transfer is completed on a one to one basis without clustering with

another transaction. The transaction is treated as final and irrevocable as the

money transfer occurs in the books of the RBI (Reserve Bank of India). This

system is maintained by the RBI, and is available during working days for a
given number of hours. Banks using RTGS needs to have Core banking to be

able to initiate RTGS transactions.

Differences

The fundamental difference between RTGS and NEFT, is that while RTGS is

based on gross settlement, NEFT is based on net-settlement. Gross settlement

is where a transaction is completed on a one-to-one basis without bunching

with other transactions. As for a Deferred Net Basis (DNS), or net-settlement,

this is where transactions are completed in batches at specific times. Here, all

transfers will be held up until a specific time. RTGS transactions are

processed throughout the working hours of the system.

RTGS transactions involve large amounts of cash, basically only funds above

Rs 100,000 may be transferred using this system. For NEFT, any amount

below Rs 100,000 may be transferred, and this system is generally for smaller

value transactions involving smaller amounts of money.

RTGS processes in real-time (push transfer), while NEFT processes in

cycles during the given working day. This causes a NEFT transaction that is

initiated later than the last cycle to be completed the next day.
 Difference Between NEFT and RTGS
With the advancement of technology, digital money transfer system is gaining
popularity because of its speed, simplicity, safety, and convenience. Funds can be
transferred electronically from one bank/account/place/branch to another through
this system. Moreover, the system enables instant account update and gives quick
information about the foreign exchange rates. In India, NEFT and RTGS are the
two electronic media which effects fund transfer. While the former is used to
handle smaller size transaction, the latter gives effect to big ticket transactions.
The two electronic payment system provide intra and inter-bank transfer of funds,
within and accross the city. NEFT stands for National Electronic Fund Transfer,
wherein, the transfer of funds is based on near real time. On the other
hand, RTGS or otherwise called as Real Time Gross Settlement, there is
continuous or immediate transfer of funds.
Check out the article given below to understand the differences between NEFT and
RTGS.
Content: NEFT Vs RTGS
Definition
Key Differences
Conclusion
Definition OF NEFT:
National Electronic Fund Transfer or NEFT is defined as a countrywide fund
transfer mechanism through which an individual or a company can easily transfer
money from one account/bank/branch to another. The system is based on the
Deferred Net Settlement, where the transactions are processed in hourly batches. In
this system, the transactions are held up for a specific time.
The system was first introduced in the year Nov 2005 to replace Special Electronic
Fund Transfer (SEFT). As per Reserve Bank of India (RBI) diktat, it was
mandatory for all banks to switch to the NEFT system from SEFT system. Since
then, the SEFT system is not in vogue.
Only the NEFT-enabled bank branches are authorized to proceed the NEFT
transactions. All the persons who are having a bank account with an NEFT-enabled
bank branch are eligible to transfer money with the help of this system. However,
having a bank account is not necessary, an individual/company can also deposit
cash with the bank instructing the transfer of funds through NEFT. Such customers
are known as Walk in customers.
The bank charges a nominal amount for providing such facility known as
processing or service charges.

Definition of RTGS:
The electronic system in which the transfer of funds is made on the online real-
time basis is known as RTGS or Real Time Gross Settlement. Real time refers to
the processing of transactions that is made at the same time when the order is
received. In this way, there is no further delay in settling transactions. Gross means
every single transaction is settled individually or one to one basis.
RTGS system is maintained by the Central Bank of India, and hence the
transactions appear in the books of RBI. It applies to amounts equal to or higher
than Rs. 2,00,000. Only the RTGS-enabled branches are allowed to take part in the
RTGS transaction. There are more than 1,00,000 branches all over the country
which are a part of this scheme.
These transactions are processed continuously during the business hours. The bank
charges a nominal amount for providing such facility, but it is levied only to the
outward transaction and not to inward transaction.
Key Differences Between NEFT and RTGS:
The basic differences between NEFT and RTGS are indicated below:
NEFT stands for National Electronic Fund Transfer; it is an online payment
mechanism through which funds are transferred from one place or branch or
account to another. Real Time Gross Settlement or RTGS is an online
money transfer tool, in which funds are transferred on an instruction by
instruction basis.
NEFT was introduced in 2005 as a replacement of Special Electronic Fund
Transfer (SEFT). Conversely, RTGS was introduced in 2004.
NEFT is based on the Deferred Net Settlement (DNS) system, whereas
RTGS function on one to one basis.
Normal operating hours on the working days, leaving 2nd and 4th Saturdays
for NEFT and RTGS is 8:00 am to 7:00 pm and 9:00 am to 4:30 pm.
There are total 12 settlements in a working day in case of NEFT. But if we
talk about RTGS, the settlement occurs continuously.
NEFT operates in hourly batches while RTGS operates on a real time basis.
 There is no minimum or maximum ceiling limit in NEFT. However, the
amount per transaction should not exceed Rs. 50000 for the remittances
based on cash within the country and payments to Nepal. On the other hand,
RTGS has a minimum limit of 2 lakhs, and there is no bar on the ceiling.
NEFT is best for small value transactions. Unlike RTGS which is
appropriate for large amount transactions.
RTGS is an instant fund transfer mechanism, but NEFT takes the time to
transfer funds.

Neft & Rtgs Transfers:

National Electronic Funds Transfer:

(NEFT) is a nation-wide payment system
facilitating one-to-one funds transfer. Under this Scheme, 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.

It is an electronic fund transfer system that operates on a Deferred Net Settlement

(DNS) basis which settles transactions in batches. By the word batches it mean
that instructions received for transferring the money will not be done as soon the
request is received. So, the settlement takes place with all transactions received till
the particular cut-off time.

In NEFT system, presently there are hourly batches there are twelve settlements
from 8 am to 7 pm on week days and six settlements from 8 am to 1 pm on
Saturdays. This can be explained by an example: If you submit your request of
transfer of payment at say, 1: 10 PM on any of the week day, the settlement will
get started at next batch i.e. 2 PM to 3 PM batch along with all the requests which
were submitted in the 1 PM to 2 PM batch.
Not every bank can transfer or receive money through NEFT system. For this the
bank should be NEFT enabled. A list of NEFT enabled bank branches is available
on RBI website, and also you can obtain this information from your bank.

There is no minimum or maximum limit for opting for a NEFT payment system.
However, if you do not have an account in a bank, then you can only transfer up to
Rs 50,000 per transaction.

NEFT payment system is also available to transfer funds to Nepal under Indo-
Nepal Remittance Facility scheme . While transferring funds to Nepal, there is a
maximum limit of Indian Rupees 50,000 and the beneficiary in Nepal will get them
in Nepalese Rupees. Any customer of bank or walk-in-customer can do a transfer
of up to Rs 50,000 to Nepal.

Banks charge Processing Charges / Service Charges for NEFT transaction.

Details you need to give while requesting for NEFT transfer:

Your bank account number with bank, so that bank can debit amount from that
account.

The amount to be remitted.

Beneficiarys name.

Beneficiarys banks and branchs name (Bank branch should be NEFT enabled).

Beneficiarys account number.

IFS code of bank branch of beneficiary. (IFS Code of all bank branches is available
on RBI website)

RTGS fund Transfer:

Real Time Gross Settlement . Real Time means that the
processing of instructions start at same time when they are received and not at
some later time. Gross settlement means that the settlement of funds transfer
instructions occurs individually (on an instruction by instruction basis).
Not every bank can transfer or receive money through RTGS system. For this the
bank should be RTGS enabled. A list of RTGS enabled bank branches is available
on RBI website, and also you can obtain this information from your bank.

So this is in contrast with the NEFT system in which settlements take place in
batches.

In contrast with NEFT system, there is a minimum limit of Rs 2,00,000 to be

transferred through RTGS. Though there is no maximum limit .

Banks charge Processing Charges / Service Charges for RTGS transaction.

Details you need to give while requesting for RTGS transfer:

Your bank account number with bank, so that bank can debit amount from that
account.

The amount to be remitted.

Beneficiarys name.

Beneficiarys banks and branchs name (Bank branch should be NEFT enabled).

Beneficiarys account number.

IFS code of bank branch of beneficiary. (IFS Code of all bank branches is available
on RBI website)

NEFT Process Flow Chart

 RTGS Process
Flow chart

Data flows through to the RBIs RTGS server.

Customer fills up the RTGS funds transfer request form.
Data transmitted to the Office maintained at Belapur

Recipient Bank gets confirmation and credits Customer a/c.

Remittance Amount and Charges are paid as per the desired mode

Data entry and its authorization

Data transmitted to Intra- day Liquiduty Management
 UNIT 2
INDUSTRY PROFILE AND COMPANY PROFILE
BANKING INTRODUCTION:
Now a days, banking sector acts as the back bone of modern business.
Development of any country mainly depends upon the banking system.

The term bank is either derived from old Italian word Banca or from a French
word Banque both mean a bench or money exchange table. In olden days,
European money lenders or money changers used to display(show) coins of
different countries in big heaps(quantity) on benches or tables for the purpose of
lending or exchanging.

A bank is a financial institution which deal with deposits and advances and other
related services. It receives money from those who want to save in the form of
deposits and it lends money to those who need it.
BANKING IN INDIA:
 In the modern sense, originated in the last decades of the 18thcentury. Among
the first were the Banks of Hindustan, which was established in 1770 and
liquidated in 1829-32; and the General Bank of India, established in 1786 but
failed in 1791.

The largest bank and the oldest still in existence, is the State Bank of
India(SBI). It originated as the Bank of Calcutta in June 1806. In 1809 it was
renamed as the Bank of Bengal. This was one of the three banks founded by the
presidency government, the two were Bank of Bombay and the Bank of Madras.
The three banks were merged in 1921 to form the imperial Bank of India, which
upon Indias independence, became State Bank of India in 1955. For many years
the presidency banks had acted as quasi-central banks, as did their successors until
the Reserve Bank of India was established in 1935, under the Reserve Bank of
India Act,1934.
 In 1969 the Indian government nationalized 14 major private banks. In 1980, 6
more private banks were nationalized. This nationalized bank are the majority of
lenders in the Indian economy. They dominate the banking sector because of their
large size and wide spread networks.

CLASSIFICATION OF INDIAN BANKING SECTOR

The Indian banking sector is broadly classified into scheduled banks and non-
scheduled banks. The scheduled banks are those included under the 2 nd scheduled
of the Reserve Bank of India Act, 1934. The scheduled banks are further classified
into : Nationalized banks; State Bank of India and its associates; Regional Rural
Banks(RRBs); foreign banks and other Indian private sector banks. The term
commercial bank refers to both scheduled and non-scheduled commercial banks
regulated under the Banking Regulation Act, 1949.

HISTORY:

ANCIENT INDIA:
The Vedas (20001400 BCE) are earliest Indian texts to mention the concept
of usury. The word kusidin is translated as usurer. The Sutras (700100 BCE) and
the Jatakas (600400 BCE) also mention usury. Also, during this period, texts
began to condemn usury. Vasishtha forbade Brahmin and Kshatriya varnas from
participating in usury. By the 2nd century CE, usury seems to have become more
acceptable.The Manusmriti considers usury an acceptable means of acquiring
wealth or leading a livelihood. It also considers money lending above a certain rate,
different ceiling rates for different caste, a grave sin.
The Jatakas also mention the existence of loan deeds. These were
called rnapatra or rnapanna. The Dharmashastras also supported the use of loan
deeds. Kautilya has also mentioned the usage of loan deeds.[14] Loans deeds were
also called rnalekhaya.
Later during the Mauryan period (321185 BCE), an instrument
called adesha was in use, which was an order on a banker directing him to pay the
sum on the note to a third person, which corresponds to the definition of a
modern bill of exchange. The considerable use of these instruments has been
recorded.. In large towns, merchants also gave letters of credit to one another.

MEDIEVAL ERA:
The use of loan deeds continued into the Mughal era and were called diastases.
Two types of loans deeds have been recorded. The diastases-e-indult lab was
payable on demand and diastases-e-miadi was payable after a stipulated time. The
use of payment orders by royal treasuries, called barattes, have been also recorded.
There are also records of Indian bankers using issuing bills of exchange on foreign
countries. The evolution of hundis, a type of credit instrument, also occurred
during this period and remain in use.

COLONIAL ERA:
During the period of British rule merchants established the Union Bank of
Calcutta in 1829, first as a private joint stock association, then partnership. Its
proprietors were the owners of the earlier Commercial Bank and the Calcutta
Bank, who by mutual consent created Union Bank to replace these two banks. In
1840 it established an agency at Singapore, and closed the one at Mirzapore that it
had opened in the previous year. Also in 1840 the Bank revealed that it had been
the subject of a fraud by the bank's accountant. Union Bank was incorporated in
1845 but failed in 1848, having been insolvent for some time and having used new
money from depositors to pay its dividends.
The Allahabad Bank, established in 1865 and still functioning today, is the
oldest Joint Stock bank in India, it was not the first though. That honour belongs to
the Bank of Upper India, which was established in 1863 and survived until 1913,
when it failed, with some of its assets and liabilities being transferred to
the Alliance Bank of Simla.
Foreign banks too started to appear, particularly in Calcutta, in the 1860s.
The Comptoir d'Escompte de Paris opened a branch in Calcutta in 1860, and
another in Bombay in 1862; branches followed in Madras and Pondicherry, then a
French possession. HSBC established itself in Bengal in 1869. Calcutta was the
most active trading port in India, mainly due to the trade of the British Empire, and
so became a banking centre.
The first entirely Indian joint stock bank was the Oudh Commercial Bank,
established in 1881 in Faizabad. It failed in 1958. The next was the Punjab
National Bank, established in Lahore in 1894, which has survived to the present
and is now one of the largest banks in India.
Around the turn of the 20th Century, the Indian economy was passing through
a relative period of stability. Around five decades had elapsed since the Indian
rebellion, and the social, industrial and other infrastructure had improved. Indians
had established small banks, most of which served particular ethnic and religious
communities.
The presidency banks dominated banking in India but there were also some
exchange banks and a number of Indian joint stock banks. All these banks operated
in different segments of the economy. The exchange banks, mostly owned by
Europeans, concentrated on financing foreign trade. Indian joint stock banks were
generally under capitalised and lacked the experience and maturity to compete with
the presidency and exchange banks. This segmentation let Lord Curzon to observe,
"In respect of banking it seems we are behind the times. We are like some old
fashioned sailing ship, divided by solid wooden bulkheads into separate and
cumbersome compartments."
The period between 1906 and 1911 saw the establishment of banks inspired by
the Swadeshi movement. The Swadeshi movement inspired local businessmen and
political figures to found banks of and for the Indian community. A number of
banks established then have survived to the present such as Catholic Syrian
Bank, 1The South Indian Bank, Bank of India, Corporation Bank, Indian
Bank, Bank of Baroda, Canara Bank and Central Bank of India.
The fervour of Swadeshi movement led to the establishment of many private
banks in Dakshina Kannada and Udupi district, which were unified earlier and
known by the name South Canara (South Kanara) district. Four nationalized banks
started in this district and also a leading private sector bank. Hence undivided
Dakshina Kannada district is known as "Cradle of Indian Banking". The
inaugural officeholder was the Britisher Sir Osborne Smith(1 April 1935), while C.
D. Deshmukh(11 August 1943) was the first Indian governor.On September 4,
2016, Urjit R Patel begins his journey as the new RBI Governor, taking charge
from Raghuram Rajan.
During the First World War (19141918) through the end of the Second World
War (19391945), and two years thereafter until the independence of India were
challenging for Indian banking. The years of the First World War were turbulent,
and it took its toll with banks simply collapsing despite the Indian
economy gaining indirect boost due to war-related economic activities. At least 94
banks in India failed between 1913 and 1918 as indicated in the following table:

Number of banks Authorized Capital Paid-up Capital

Years
that failed ( Lakhs) ( Lakhs)

1913 12 274 35

1914 42 710 109

1915 11 56 5

1916 13 231 4

1917 9 76 25

1918 7 209 1

POST-INDEPENDENCE:
The partition of India in 1947 adversely impacted the economies
of Punjab and West Bengal, paralyzing banking activities for months.
India's independence marked the end of a regime of the Laissez-faire for the Indian
banking. The Government of India initiated measures to play an active role in the
economic life of the nation, and the Industrial Policy Resolution adopted by the
government in 1948 envisaged a mixed economy. This resulted in greater
involvement of the state in different segments of the economy including banking
and finance. The major steps to regulate banking included:
The Reserve Bank of India, India's central banking authority, was established in
April 1935, but was nationalized on 1 January 1949 under the terms of the
Reserve Bank of India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b).
In 1949, the Banking Regulation Act was enacted, which empowered
the Reserve Bank of India (RBI) "...to regulate, control, and inspect the banks
in India."
The Banking Regulation Act also provided that no new bank or branch of an
existing bank could be opened without a license from the RBI, and no two
banks could have common directors.

NATIONALISATION IN THE 1960S:

Despite the provisions, control and regulations of the Reserve Bank of India,
banks in India except the State Bank of India (SBI), remain owned and operated by
private persons. By the 1960s, the Indian banking industry had become an
important tool to facilitate the development of the Indian economy. At the same
time, it had emerged as a large employer, and a debate had ensued about the
nationalization of the banking industry. Indira Gandhi, the then Prime Minister of
India, expressed the intention of the Government of India in the annual conference
of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank
Nationalization." The meeting received the paper with enthusiasm.
Thereafter, her move was swift and sudden. The Government of India issued an
ordinance ('Banking Companies (Acquisition and Transfer of Undertakings)
Ordinance, 1969') and nationalized the 14 largest commercial banks with effect
from the midnight of 19 July 1969. These banks contained 85 percent of bank
deposits in the country. Jayaprakash Narayan, a national leader of India, described
the step as a "masterstroke of political sagacity." Within two weeks of the issue of
the ordinance, the Parliament passed the Banking Companies (Acquisition and
Transfer of Undertaking) Bill, and it received the presidential approval on 9
August 1969.
A second dose of nationalisation of 6 more commercial banks followed in
1980. The stated reason for the nationalization was to give the government more
control of credit delivery. With the second dose of nationalization, the Government
of India controlled around 91% of the banking business of India. Later on, in the
year 1993, the government merged New Bank of India with Punjab National
Bank. It was the only merger between nationalized banks and resulted in the
reduction of the number of nationalized banks from 20 to 19. Until the 1990s, the
nationalized banks grew at a pace of around 4%, closer to the average growth rate
of the Indian economy.

LIBERALISATION IN THE 1990S

In the early 1990s, the then government embarked on a policy of liberalization,
licensing a small number of private banks. These came to be known as New
Generation tech-savvy banks, and included Global Trust Bank (the first of such
new generation banks to be set up), which later amalgamated with Oriental Bank
of Commerce, UTI Bank (since renamed Axis Bank), ICICI Bank and HDFC
Bank. This move, along with the rapid growth in the economy of India, revitalized
the banking sector in India, which has seen rapid growth with strong contribution
from all the three sectors of banks, namely, government banks, private banks and
foreign banks.
The next stage for the Indian banking has been set up, with proposed relaxation
of norms for foreign direct investment. All foreign investors in banks may be given
voting rights that could exceed the present cap of 10% at present. It has gone up to
74% with some restrictions.
The new policy shook the Banking sector in India completely. Bankers, till this
time, were used to the 464 method (borrow at 4%; lend at 6%; go home at 4) of
functioning. The new wave ushered in a modern outlook and tech-savvy methods
of working for traditional banks. All this led to the retail boom in India. People
demanded more from their banks and received more.
CURRENT PERIOD:
The Indian banking sector is broadly classified into scheduled banks and non-
scheduled banks. All banks included in the Second Schedule to the Reserve Bank
of India Act, 1934 are Scheduled Banks. These banks comprise Scheduled
Commercial Banks and Scheduled Co-operative Banks. Scheduled Co-operative
Banks consist of Scheduled State Co-operative Banks and Scheduled Urban
Cooperative Banks. Scheduled Commercial Banks in India are categorized into
five different groups according to their ownership and/or nature of operation:

State Bank of India and its Associates

 Nationalized Banks
Private Sector Banks
Foreign Banks
Regional Rural Banks.
In the bank group-wise classification, IDBI Bank Ltd. is included in Nationalized
Banks.
By 2010, banking in India was generally fairly mature in terms of supply,
product range and reach-even though reach in rural India still remains a challenge
for the private sector and foreign banks. In terms of quality of assets and capital
adequacy, Indian banks are considered to have clean, strong and transparent
balance sheets relative to other banks in comparable economies in its region. The
Reserve Bank of India is an autonomous body, with minimal pressure from the
government.
With the growth in the Indian economy expected to be strong for quite some
time-especially in its services sector-the demand for banking services,
especially retail banking, mortgages and investment services are expected to be
strong. One may also expect M&As, takeovers, and asset sales.
In March 2006, the Reserve Bank of India allowed Warburg Pinups to increase
its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first
time an investor has been allowed to hold more than 5% in a private sector bank
since the RBI announced norms in 2005 that any stake exceeding 5% in the private
sector banks would need to be vetted by them.
In recent years critics have charged that the non-government owned banks are
too aggressive in their loan recovery efforts in connexion with housing, vehicle and
personal loans. There are press reports that the banks' loan recovery efforts have
driven defaulting borrowers to suicide.
By 2013 the Indian Banking Industry employed 1,175,149 employees and had a
total of 109,811 branches in India and 171 branches abroad and manages an
aggregate deposit of 67,504.54 billion (US$1.0 trillion or 960 billion) and bank
credit of 52,604.59 billion (US$820 billion or 750 billion). The net profit of the
banks operating in India was 1,027.51 billion (US$16 billion or 15 billion)
against a turnover of 9,148.59 billion (US$140 billion or 130 billion) for
the financial year 201213.
Pradhan Mantri Jan Dhan Yojana (Hindi:
, English: Prime Minister's People Money Scheme) is a scheme for
comprehensive financial inclusion launched by the Prime Minister of
India, Narendra Modi, in 2014. Run by Department of Financial Services, Ministry
of Finance, on the inauguration day, 1.5 Craore (15 million) bank accounts were
opened under this scheme. By 15 July 2015, 16.92 crore accounts were opened,
with around 20,288.37 crore (US$3.2 billion) were deposited under the scheme,
which also has an option for opening new bank accounts with zero balance.

BANKING CODES AND STANDARDS

The Banking Codes and standards Board of India is an independent and
autonomous banking industry body that monitors banks in India.To improve the
quality of banking services in India S S Tarapore (former deputy governor of RBI)
had the idea to form this committee.

ADOPTION OF BANKING TECHNOLOGY

The IT revolution has had a great impact on the Indian banking system. The use
of computers has led to the introduction of online banking in India. The use of
computers in the banking sector in India has increased many fold after the
economic liberalisation of 1991 as the country's banking sector has been exposed
to the world's market. Indian banks were finding it difficult to compete with the
international banks in terms of customer service, without the use of information
technology.
The RBI set up a number of committees to define and co-ordinate banking
technology. These have included:
In 1984 was formed the Committee on Mechanisation in the Banking Industry
(1984) whose chairman was Dr. C Rangarajan, Deputy Governor, Reserve
Bank of India. The major recommendations of this committee were
introducing MICR technology in all the banks in the metropolises in India. This
provided for the use of standardised cheque forms and encoders.
In 1988, the RBI set up the Committee on Computerisation in Banks (1988)
headed by Dr. C Rangarajan. It emphasised that settlement operation must be
computerised in the clearing houses of RBI
in Bhubaneshwar, Guwahati, Jaipur, Patna and Thiruvananthapuram. It further
stated that there should be National Clearing of inter-
city cheques at Kolkata, Mumbai, Delhi, Chennai and MICR should be made
operational. It also focused on computerisation of branches and increasing
connectivity among branches through computers. It also suggested modalities
for implementing on-line banking. The committee submitted its reports in 1989
 and computerisation began from 1993 with the settlement between IBA and
bank employees' associations.
In 1994, the Committee on Technology Issues relating to Payment
systems, Cheque Clearing and Securities Settlement in the Banking Industry
(1994) was set up under Chairman W S Saraf. It emphasised Electronic Funds
Transfer (EFT) system, with the BANKNET communications network as its
carrier. It also said that MICR clearing should be set up in all branches of all
those banks with more than 100 branches.
In 1995, the Committee for proposing Legislation on Electronic Funds Transfer
and other Electronic Payments (1995) again emphasised EFT system. In July
2016, Deputy Governor 1Rama Gandhi of the Central Bank of India "urged
banks to work to develop applications for digital currencies and distributed
ledgers."
AUTOMATED TELLER MACHINE GROWTH
The total number of automated teller machines (ATMs) installed in India by
various banks as of end June 2012 was 99,218. The new private sector banks in
India have the most ATMs, followed by off-site ATMs belonging to SBI and its
subsidiaries and then by nationalised banks and foreign banks, while on-site is
highest for the nationalised banks of India.

CHEQUE TRUNCATION INITIATIVE

In 2008 the Reserve Bank of India introduced a system to allow cheque
truncationthe conversion of checks from physical form to electronic form when
sending to the paying bankin India, the cheque truncation system as it was
known was first rolled out in the National Capital Region and then rolled out
nationally.

EXPANSION OF BANKING INFRASTRUCTURE

Physical as well as virtual expansion of banking through mobile banking,
internet banking, tele banking, bio-metric and mobile ATMs is taking place since
last decade and has gained momentum in last few years.
NEED OF THE BANK:
Before the establishment of banks, the financial activities were handled by
money lenders and individuals. At that time the interest rates were very high.
Again there were no security of public savings and no uniformity regarding loans.
So as to overcome such problems the organized banking sector was established,
which was fully regulated by the government. The organized banking sector works
within the financial system to provide loans, accept deposits and provide other
services to their customers. The following functions of the bank explain the need
of the bank and its importance:

To provide the security to the savings of customers.

To control the supply of money and credit
To encourage public confidence in the working of the financial system,
increase savings speedily and efficiently.
To avoid focus of financial powers in the hands of a few individuals and
institutions.
To set equal norms and conditions (i.e. rate of interest, period of lending etc)
to all types of customers

Reserve Bank of India (RBI)

The Reserve Bank of India (RBI) is India's central banking institution, which
controls the monetary policy of the Indian rupee. It commenced its operations on 1
April 1935 during the British Rule in accordance with the provisions of the
Reserve Bank of India Act, 1934.[6] The original share capital was divided into
shares of 100 each fully paid, which were initially owned entirely by private
shareholders.[7] Following India's independence on 15 August 1947, the RBI was
nationalised on 1 January 1949.

The RBI plays an important part in the Development Strategy of the Government
of India. It is a member bank of the Asian Clearing Union. The general
superintendence and direction of the RBI is entrusted with the 21-member Central
Board of Directors: the Governor, 4 Deputy Governors, 2 Finance Ministry
representatives, 10 government-nominated directors to represent important
elements of India's economy, and 4 directors to represent local boards
headquartered at Mumbai, Kolkata, Chennai and New Delhi. Each of these local
boards consists of 5 members who represent regional interests, the interests of co-
operative and indigenous banks.
A Central Bank is an independent apex monetary authority which regulates banks
and provides important financial services like storing of foreign exchange reserves,
control of inflation, monetary policy report. A Central Bank is known by different
names in different countries. The functions of a Central Bank vary from country to
country and are autonomous or quasi-autonomous body and perform or through
another agency vital monetary functions in the country. A central bank is a vital
financial apex institution of an economy and the key objects of central banks may
differ from country to country still they perform activities and functions with the
goal of maintaining economic stability and growth of an economy.

The bank is also active in promoting financial inclusion policy and is a leading
member of the Alliance for Financial Inclusion (AFI).

The bank is often referred to by the name Mint Street.

Reserve Bank of India

Seal of RBI
Headquarters Mumbai, Maharashtra, India

Coordinates Coordinates: ..18.932679N 72.836933E

Established 1 April 1935; 82 years ago

 Governor Urjit Patel[1]
Central bank of Republic of India
Currency Indian Rupee ()
Reserves US$ 363.00 billion[2][3]
Bank rate 6.75%[4]
Interest on reserves 4.00%(market determined)[5]
Website rbi.org.in
RBI runs a monetary museum in Mumbai

The Central Board of Directors is the main committee of the Central Bank. The
Government of India appoints the directors for a 4-year term. The Board consists
of a Governor, and not more than 4 Deputy Governors, 4[33] Directors to represent
the regional boards, 2 from the Ministry of Finance and 10 other directors from
various fields. RBI wants to create a post of Chief Operating Officer (COO) and
re-allocate work between the five of them(4 Deputy Governor and COO

The bank is headed by the Governor and the post is currently held by economist
Urjit Patel. There are 4 Deputy Governors BP Kanungo, S S Mundra, N S
Vishwanathan and Viral Acharya. Two of the four Deputy Governors are
traditionally from RBI ranks and are selected from the Bank's Executive Directors.
One is nominated from among the Chairpersons of public sector banks and the
other is an economist. An Indian Administrative Service officer can also be
appointed as Deputy Governor of RBI and later as the Governor of RBI as with the
case of Y. Venugopal Reddy. Other persons forming part of the central board of
directors of the RBI are Dr. Nachiket Mor, Y C Deveshwar, Prof Damodar
Acharya, Ajay Tyagi and Anjuly Duggal.

Branches and support bodies

RBI Headquarters in Mumbai

The RBI has four zonal offices at Chennai, Delhi, Kolkata and Mumbai. It has 19
regional offices and 11 sub-offices. Regional offices are located in Ahmedabad,
Bangalore, Bhopal, Bhubaneswar, Chandigarh, Chennai, Delhi, Guwahati,
Hyderabad, Jaipur, Jammu, Kanpur, Kochi, Kolkata, Lucknow, Mumbai, Nagpur,
Patna and Thiruvananthapuram and sub-offices are located in Agartala, Aizawal,
Dehradun, Gangtok, Imphal, Panaji, Raipur, Ranchi, Shillong, Shimla and
Srinagar.

The RBI has four regional representations: North in New Delhi, South in Chennai,
East in Kolkata and West in Mumbai. The representations are formed by five
members, appointed for four years by the central government and with the advice
of the Central Board of Directors serve as a forum for regional banks and to deal
with delegated tasks from the Central Board.

It has two training colleges for its officers, viz. Reserve Bank Staff College,
Chennai and College of Agricultural Banking, Pune. There are three autonomous
institutions run by RBI namely National Institute of Bank Management (NIBM),
Indira Gandhi Institute of Development Research (IGIDR), Institute for
Development and Research in Banking Technology (IDRBT). There are also four
Zonal Training Centres at Mumbai, Chennai, Kolkata and New Delhi.

The Board of Financial Supervision (BFS), formed in November 1994, serves as a

CCBD committee to control the financial institutions. It has four members,
appointed for two years, and takes measures to strength the role of statutory
auditors in the financial sector, external monitoring and internal controlling
systems. The Tarapore committee was set up by the Reserve Bank of India under
the chairmanship of former RBI deputy governor S.S.Tarapore to "lay the road
map" to capital account convertibility. The five-member committee recommended
a three-year time frame for complete convertibility by 19992000.
Main functions

Financial Supervision
Regulator and supervisor of the financial system
Managing of exchange control
Issue of currency
Detection of fake currency

Developmental role:
The central bank has to perform a wide range of promotional functions to
support national objectives and industries. The RBI faces a lot of inter-
sectoral and local inflation-related problems. Some of these problems are
results of the dominant part of the public sector.
Related functions:
The RBI is also a banker to the government and performs merchant banking
function for the central and the state governments. It also acts as their
banker. The National Housing Bank (NHB) was established in 1988 to
promote private real estate acquisition. The institution maintains banking
accounts of all scheduled banks, too. RBI on 7 August 2012 said that Indian
banking system is resilient enough to face the stress caused by the drought
like situation because of poor monsoon this year.

Demonetisation:
On 8 November 2016, the Government of India announced
the demonetisation of all 500 (US$7.80) and 1,000 (US$16) banknotes of
the Mahatma Gandhi Series on the recommendation of the Reserve Bank of
India (RBI). The government claimed that the action would curtail the
shadow economy and crack down on the use of illicit and counterfeit cash to
fund illegal activity and terrorism.

Policy rates and reserve ratios

Policy Rates, Reserve Ratios, Lending and Deposit Rates as of 06 April 2017
 Bank Rate 6.50%
Repo Rate 6.25%
Reverse Repo Rate 6.00%
Cash Reserve Ratio (CRR) 4%
Statutory Liquidity Ratio (SLR) 20.5%
Base Rate 9.25%9.65%
Savings Deposit Rate 4%
Term Deposit Rate
6.50%7.00%
for > 1 year

Repo rate
Repo (Repurchase) rate also known as the benchmark interest rate is the rate at
which the RBI lends money to the banks for a short-term. When the repo rate
increases, borrowing from RBI becomes more expensive. If RBI wants to make it
more expensive for the banks to borrow money, it increases the repo rate similarly,
if it wants to make it cheaper for banks to borrow money it reduces the repo rate.If
the repo rate is increased, banks can't carry out their business at a profit whereas
the very opposite happens when the repo rate is cut down. Generally, repo rates are
cut down whenever the country needs to progress in banking and economy.
Currently, the new RBI Governor Sri Urjit Patel has cut the previous Repo rate to
6.25% for facilitation of India's economy.

Reverse Repo Rate (RRR)

Reverse Repo rate is the short term borrowing rate at which RBI borrows money
from banks. The Reserve bank uses this tool when it feels there is too much money
floating in the banking system. An increase in the reverse repo rate means that the
banks will get a higher rate of interest from RBI. As a result, banks prefer to lend
their money to RBI which is always safe instead of lending it others (people,
companies etc.) which is always risky.
Repo Rate signifies the rate at which liquidity is injected into the banking system
by RBI, whereas Reverse Repo rate signifies the rate at which the central bank
absorbs liquidity from the banks. Reverse Repo Rate is linked to Repo Rate with a
difference of 0.5% between them.
Statutory liquidity ratio (SLR)
Apart from the CRR, banks are required to maintain liquid assets in the form of
gold, cash and approved securities. Higher liquidity ratio forces commercial banks
to maintain a larger proportion of their resources in liquid form and thus reduces
their capacity to grant loans and advances, thus it is an anti-inflationary impact. A
higher liquidity ratio diverts thebank funds from loans and advances to investment
in government and approved securities. In well-developed economies, central
banks use open market operationsbuying and selling of eligible securities by the
central bank in the money marketto influence the volume of cash reserves with
commercial banks and thus influence the volume of loans and advances they can
make to the commercial and industrial sectors. In the open money market,
government securities are traded at market-related rates of interest. The RBI is
resorting more to open market operations in the more recent years. Generally, RBI
uses
Minimum margins for lending against specific securities.
Ceiling on the amounts of credit for certain purposes.
The discriminatory rate of interest charged on certain types of advances.
Direct credit controls in India are of three types:
Part of the interest rate structure, i.e., on small savings and provident funds,
are administratively set.
Banks are mandatory required to keep 21.50% of their deposits in the form
of government securities.
Banks are required to lend to the priority sectors to the extent of 40% of their
advances.

UCO BANK
 UCO Bank, formerly United Commercial Bank, established in 1943 in Kolkata
is a major government owned commercial bank of India. Its Board of Directors
consists of government representatives from the government of India and Reserve
Bank of India as well as eminent professionals like accountants, management
experts, economists, businessmen etc.

Shri Ravi Krishan Takkar Shri Charan Singh Mr. G. Subramania Iyer
MD&CEO Executive Director Executive Director

HISTORY:
The idea of a truly Indian Bank was first conceived of by Mr. G. D. Birla, the
doyen of Indian Industrial renaissance, after the historic Quit India movement in
1942. Soon this nascent idea came into reality and, on the 6 th of January 1943, the
United Commercial Bank Ltd was born with its registered and head office at
Kolkata. The very first Board of Directors was represented by eminent
personalities of the country drawn from all walks of life, and this all India
character of the bank has been assiduously maintained till date not only in the
composition of its Board but also in the geographical spread of its more than 3000
in the country as well as in its overseas centres in Singapore and Hong Kong.

Having traversed periods of expansion and consolidation, the bank was

nationalized by the Government of India on the 19 th July 1969 whereupon 100
percent ownership was taken over by the government in UNITED COMMERCIAL
BANK. This historic event brought about a sea-charge in the entire fabric of the
banks thinking and activities, commensurate with the governments socio-political
approach of mass banking as against class banking hitherto practiced. The Bank
had gone for Rs.200 crore of IPO during the e the Bank was 65.19 per cent. Branch
expansion started at a fast pace, particularly in rural areas, and the bank achieved
several unique distinctions in priority Sector lending and other social uplift
activities. To keep pace with the developing scenario and expansion of business,
the bank undertook an exercise in organizational restructuring in the year
1972.This resulted into more functional specialization, decentralization of
administration and emphasis on development of personnel skill and attitude. Side
by side, whole hearted commitment into the governments poverty alleviation
programmes continued and the convenorship of State Level Bankers
Committee(SLBC) was entrusted on the Bank for Odisha and Himachal Pradesh in
1983.

The year 1985 opened a new chapter for the bank as the name of the Bank
changed to UCO BANK by an Act of Parliament .The customer friendly and
socially committed character, however, remained even with this change in name
which has , over the years , been regarded as one of the well-known and vibrant
banks in the country. Today, with all its inner strengths, UCO Bank has come a
long way to symbolize friendliness for customers and efficiency in its banking
business. Truly, UCO Bank HONOURS YOUR TRUST.

OUR VISION STATEMENT:

To emerge as the most trusted, admired and sought- after world class financial
institution and to be the most preferred destination for every customer and investor
and a place of pride for its employees.

OUR MISSION STATEMENT:

To be a Top-class Bank to achieve sustained growth of business and
profitability, fulfilling socio-economic obligations, excellence in customer service;
through upgradation of skills of staff and their effective participation making use
of state of-the-art technology.
 Globing banking has changed rapidly and UCO Bank has worked hard to adapt
to these changes. The Bank looks forward to the feature with excitement and
commitment to bring grater benefits to you.

UCO Bank, with years of dedicated services to the nation through active
financial participation in all segments of the economy-Agriculture, industry, Trade
& Commerce, Service Sector, Infrastructure Sector etc., is keeping pace with the
changing environment. With a countrywide network of more than 3000 service
units which includes specialized and computerized branches in India and overseas,
UCO Bank has marched into the 21st century matched with dynamism and growth.

OUR STRENGTHS:
Country-wide presence Overseas presence with profitable overseas operations,
Strong capital base, High proportion of long term liabilities, A Well Diversified
Asset Portfolio, A Large and Diversified Client Base, All branches under core
banking solution(CBS) branch representation in top 100 centres ( as per deposits )
in the country.

ORGANISATION STRUCTURE:
Headquartered in Kolkata, the Bank has 42 Zonal offices spread all over India.
Branches located in a geographical area report to the zonal office having
jurisdiction over that area. These zonal offices are headed by senior executives
ranging up to the rank of Deputy General Manager, depending on size of business
and importance of location. The zonal offices report to 8 circles offices headed by
General Manager/Senior Deputy General Managers.

CSR OF UCO BANK:

The bank believes that carrying out Corporate Social Responsibility (CSR)
helps in tangible value-creation. Moreover, CSR, creates a positive image in
the society and inculcates essence of loyalty for the bank among a cross-
section of countrymen.
 An amount of Rs. 4.90 lakh to shivaji university, Kolhapur, Maharashtra
under environment protection category for installation of solar plant device.

Rs. 2 lakhs to Ramakrishna Math, Nattarampalli, Vellore, Tamilnadu for

construction of building for an orphanage.

Rs. 10 lakh to Mahaveer Viklang Samity, Jaipur for helping the physically
challenged.

OUR COMMITMENT TO CUSTOMERS:

In all over promotional activities we will be fair and reasonable in highlighting
the salient features of the schemes marketed by us. Misleading or unfair
highlighting of any aspect of any scheme/service marketed by the bank leading to
unfair practice shall not be resorted to by the bank.

In commemorating the 50th year of Independence of India, the Bank released a

booklet entitled Our Commitment to Customers incorporating the citizens
charter on services provided by the bank.

In our continuing endeavour to serve our customers better, we have considerably

extended the business hours for public transaction at the branches on all week
days.

PRODUCT AND SERVICES:

The international banking service in India is provided for the benefit of Indian
customers, corporate, NRIs, overseas corporate bodies, foreign
companies/individuals as well as foreign banks etc. By our Authorized Forex
Branches and Integrated Treasury Branch. Our other branches in India also provide
international banking facilities through the aforesaid network of our branches.

The following are products & services provided by our bank, they are

NRI Banking
 Foreign currency loans

Finance/Services to exporters

Finance/Services to impoters

Remittances

Forex and Treasury services

Resident Foreign currency(domestic) deposits

Correspondent banking services

SWOT ANALYSIS OF UCO BANK:

SWOT ANALYSIS

STRENGTH Foreign exchange operations

Diverse assest portfolio
High proportional of long term
liabilities.
UCO Bank has over 2000 service
units spread all over India, with
two overeas branches in
 Singapore and HongKong
One of the oldest and major
commercial bank of india.
WEAKNESS Lack international presence
Retail banking is lesser as
compared to other banks
Weak internet banking when
compared to big banks
OPPORTUNITY Small enterprise banking
More penetration through rural
banking
THREATS Economic slowdown
High competitive environment
Stringent banking norms

SKILLS & COMPETENCIES:

Key management skills required in banking industry are

Communication skills

Analytical skills

Decision making skills

Teamwork skills

It skills

They help bank manager to have a cordial atmosphere in bank so that customer is
satisfied with services and financial product information provided by bank.

RECRUITMENT CRITERIA FOR UCO BANK:

As UCO Bank is public undertaking bank its all recruitments are done through
IBPS exam. The candidate should qualify the mentioned exam for get chance in
UCO Bank. For the MBA graduates bank has some own quota, but candidate
should go through the exam. Some time the bank hires MBA graduate from the
college campus.
CAREER OPPORTUNITY IN UCO BANK:
Finance professional is key element of banking industry. A commerce
graduate can enter the industry but top nokh management jobs goes to person
having MBA specialization in finance. Today there is banking industry a lot of
investment products have been launched by various banks MBA finance and
marketing professionals are in great demand by banking industry to market the
products.

Business development manager in financial services

Branch manager in retail banking

Business development manager in corporate sales

Business development manager broking

Portfolio manager

Banking business analyst

Banking customer service manager

Bank loan manager

Assistant bank manager

OVERVIEW:
We are in the service of community since 1943. We have more than 3000
service units spread all over India. We also operate in two major international
financial centers, namely Hong Kong and Singapore. We have our
correspondents/Agency arrangements all over the world. We undertake
foreign exchange business in more than 50 centers in India. We have foreign
exchange dealing operations at one center.

NAMES OF THE DEPARTMENTS OF HEAD OFFICE

These are following Names of the Departments of head office:

MDs secretariat

EDs secretariat(1)

EDs secretariat(2)

Audit & Inspection

Flagship corporate

Agriculture & Rural Business and Financial inclusion

Small enterprises

Priority sector

Regional Rural Banks (RRB)

Financial inclusion

Retail

Insurance Marketing Wing

 Risk Management

Human Resources Management

Training

Finance

General administration

Security

Printing & Stationery

Credit Monitoring

Law

Vigilance

Personal services

Management Audit & HR Audit

Treasury & International wing (T & IW)

Treasury & Investment Management

International Wing

IPO Cell

Strategic Planning

MIS Task Force

Raj Basha

Corporate Communication

Information Technology

ATM Cell

Recovery
 BPR & BTD
NAMES OF ZONAL OFFICES
These are the following names of Zonal office:

AGARTALA

AHMEDABAD

AJMER

BANGALORE

BALASORE

BEGUSARAI

BHAGALPUR

BHOPAL

BHUBANSWAR

BURDWAN

CHANDIGARH
 CHENNAI

COIMBATORE

DEHRADUN

DHARAMSHALA

ERNAKULAM

GUWAHATI

HARYANA

HOOGHLY

HYDERABAD

INDORE

JAIPUR

JALANDHAR

JODHPUR

JORHAT

KOLKATA

LUCKNOW

MEERUT

MUMBAI

NAGPUR

NEW DELHI

PATNA

PUNE

RAIPUR
 RANCHI

SALTLAKE

SAMBALPUR

SHIMLA

SURAT

SURI

VARANASI

VIJAYAWADA
 UNIT 3

UCO BANK PAYMENT SYSTEM

RTGS/NEFT Facilities
RTGS Timings
Days Customer Transactions Interbank Transactions
Monday - Friday 9.00 hours to 16.30 hours 9.00 hours to 18.30 hours
Saturday 9.00 hours to 14.00 hours 9.00 hours to 15.00 hours

NEFT Batch Settlement Timings

Days NEFT Batches
Monday 8:00,9:00,10:00,11:00,12:00,13:00,14:00,15:00,16:00,17:00,18:00,19:
 - Friday 00 hours
Saturda 8:00,9:00,10:00,11:00,12:00,13:00 hours
y

Payment Systems
1.NEFT
National Electronic Funds Transfer (NEFT) is a nation-wide payment system
facilitating one-to-one funds transfer. Under this Scheme, 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.For being part of the NEFT funds transfer
network, a bank branch has to be NEFT- enabled. The list of bank-wise branches
which are participating in NEFT(Including UCO Bank) is provided in the website
of Reserve Bank of India
Individuals, firms or corporates maintaining accounts with a bank branch can
transfer funds using NEFT. Even such individuals who do not have a bank account
(walk-in customers) can also 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 customers have to
furnish full details including complete address, telephone number, etc.NEFT, thus,
facilitates originators or remitters to initiate funds transfer transactions even
without having a bank account.
Individuals, firms or corporates maintaining accounts with a bank branch can
receive funds through the NEFT system. It is, therefore, necessary for the
beneficiary to have an account with the NEFT enabled destination bank branch in
the country.

The NEFT system also facilitates one-waycross-border transfer of funds from India
to Nepal. This is known as the Indo-Nepal Remittance Facility Scheme. A remitter
can transfer funds from any of the NEFT-enabled branches in to Nepal,
irrespective of whether the beneficiary in Nepal maintains an account with a bank
branch in Nepal or not. The beneficiary would receive funds in Nepalese Rupees.
Further details on the Indo-Nepal Remittance Facility Scheme are available on the
website of Reserve Bank of India
There is no limit either minimum or maximum on the amount of funds that
could be transferred using NEFT. However, maximum amount per transaction is
limited to Rs.50,000/- for cash-based remittances and remittances to Nepal.
There is no restriction of centres or of any geographical area within the country.
The NEFT system takes advantage of the core banking system in banks.
Accordingly, the settlement of funds between originating and receiving banks takes
places centrally at Mumbai, whereas the branches participating in NEFT can be
located anywhere across the length and breadth of the country.
Presently, NEFT operates in hourly batches - there are twelve settlements from 8
am to 7 pm on week days (Monday through Friday) and six settlements from 8 am
to 1 pm on Saturdays.
The NEFT system operate stages
Step-1 : An individual / firm / corporate intending to originate transfer of funds
through NEFT has to fill an application form providing details of the beneficiary
(like name of the beneficiary, name of the bank branch where the beneficiary has
an account, IFSC of the beneficiary bank branch, account type and account
number) and the amount to be remitted. The application form will be available at
the originating bank branch. The remitter authorizes his/her bank branch to debit
his account and remit the specified amount to the beneficiary. Customers enjoying
net banking facility offered by their bankers can also initiate the funds transfer
request online. Some banks offer the NEFT facility even through the ATMs. Walk-
in customers will, however, have to give their contact details (complete address
and telephone number, etc.) to the branch. This will help the branch to refund the
money to the customer in case credit could not be afforded to the beneficiarys
bank account or the transaction is rejected / returned for any reason.
Step-2 : The originating bank branch prepares a message and sends the message to
its pooling centre (also called the NEFT Service Centre).
Step-3 : The pooling centre forwards the message to the NEFT Clearing Centre
(operated by National Clearing Cell, Reserve Bank of India, Mumbai) to be
included for the next available batch.
Step-4 : The Clearing Centre sorts the funds transfer transactions destination bank-
wise and prepares accounting entries to receive funds from the originating banks
(debit) and give the funds to the destination banks(credit). Thereafter, bank-wise
remittance messages are forwarded to the destination banks through their pooling
centre (NEFT Service Centre).
Step-5 : The destination banks receive the inward remittance messages from the
Clearing Centre and pass on the credit to the beneficiary customers accounts .
IFSC
IFSC or Indian Financial System Code is an alpha-numeric code that uniquely
identifies a bank-branch participating in the NEFT system. This is an 11 digit code
with the first 4 alpha characters representing the bank, and the last 6 characters
representing the branch. The 5th character is 0 (zero). IFSC is used by the NEFT
system to identify the originating / destination banks / branches and also to route
the messages appropriately to the concerned banks / branches.
Bank-wise list of IFSCs is available with all the bank-branches participating in
NEFT.List of bank-wise branches participating in NEFT and their IFSCs is
available on the website of Reserve Bank of India . All the banks have also been
advised to print the IFSC of the branch on cheques issued to their customers. For
net banking customers many banks have enabled online search / pop-up of the
IFSC of the destination bank branch.
Further, banks have also been advised to ensure that their branch staff provide
necessary assistance to customers in filling out the required details, including IFSC
details, in the NEFT application form, and also help in ensuring that there is no
mismatch between the IFSC code and branch details of beneficiary branch as
provided by the customer.

The processing or service charges for NEFT

transactions
The structure of charges that can be levied on the customer for NEFT is given
below:
a) Inward transactions at destination bank branches (for credit to beneficiary
accounts)
Free, no charges to be levied from beneficiaries.
b) Outward transactions at originating bank branches (Please refer to Service
Charges link).
c) Charges applicable for transferring funds from India to Nepal using the NEFT
system (under the Indo-Nepal Remittance Facility Scheme) is available on the
website of RBI at http://rbi.org.in
With effect from 1st July 2011, originating banks are required to pay a nominal
charge of 25 paise each per transaction to the clearing house as well as destination
bank as service charge. However, these charges cannot be passed on to the
customers by the banks.
Beneficiary account transactions on NEFT
The beneficiary can expect to get credit for the first ten batches on week days (i.e.,
transactions from 8 am to 5 pm) and the first five batches on Saturdays (i.e.,
transactions from 8 am to 12 noon) on the same day. For transactions settled in the
last two batches on week days (i.e., transactions settled in the 6 and 7 pm batches)
and the last batch on Saturdays (i.e., transactions handled in the 1 pm batch)
beneficiaries can expect to get credit either on the same day or on the next working
day morning (depending on the type of facility enjoyed by the beneficiary with his
bank).
In case of non-credit or delay in credit to the beneficiary account, the NEFT
Customer Facilitation Centre (CFC) of the respective bank can be contacted (the
remitter can contact his banks CFC; the beneficiary may contact the CFC of his
bank). Details of NEFT Customer Facilitation Centres of banks are available on the
websites of the respective banks. The details(including the details of UCO Bank)
If it is not possible to afford credit to the account of the beneficiary for whatever
reason, destination banks are required to return the transaction (to the originating
branch) within two hours of completion of the batch in which the transaction was
processed.
For example, if a customer submits a fund transfer request at 12.05 p.m. to a
NEFT-enabled branch, the branch in turn forwards the message through its pooling
centre to the NEFT Clearing Centre for processing in the immediately available
batch which (say) is the 1.00 pm batch. If the destination bank is unable to afford
the credit to the beneficiary for any reason, it has to return the transaction to the
originating bank, not later than in the 3.00 pm batch. On receiving such a returned
transaction, the originating bank has to credit the amount back to account of the
originating customer. To conclude, for all uncredited transactions, customers can
reasonably expect the funds to be received back by them in around 3 to 4 hours
time.
NEFT can be used to transfer funds from or to NRE and NRO accounts in the
country. This, however, is subject to the adherence of the provisions of the Foreign
Exchange Management Act, 2000 (FEMA) and Wire Transfer Guidelines.
No. However, a facility is available to send outward remittances to Nepal under the
Indo-Nepal Remittance Facility Scheme.
Besides personal funds transfer, the NEFT system can also be used for a variety of
transaction including payment of credit card dues to the card issuing banks. It is
necessary to quote the IFSC of the beneficiary card issuing bank to initiate the bill
payment transactions using NEFT.
NEFT is a credit-push system i.e., transactions can be originated only to transfer /
remit funds to a beneficiary.
In case of successful credit to the beneficiary's account, the bank which had
originated the transaction is expected to send a confirmation to the originating
customer (through SMS or e-mail) advising of the credit as also mentioning the
date and time of credit. For the purpose, remitters need to provide their mobile
number / e-mail-id to the branch.
The remitter can track the NEFT transaction through the originating bank branch
or its CFC using the unique transaction reference number provided at the time of
initiating the funds transfer. It is possible for the originating bank branch to keep
track and be aware of the status of the NEFT transaction at all times.
Pre-requisites for originating a NEFT transaction
Following are the pre-requisites for putting through a funds transfer transaction
using NEFT
Originating and destination bank branches should be part of the NEFT
network
Beneficiary details such as beneficiary name, account number and account
type, name and IFSC of the beneficiary bank branch should be available
with the remitter
For net banking customers, some banks provide the facility to automatically
pop-up the IFSC once name of the destination bank and branch is
highlighted / chosen / indicated / keyed in.

The benefits of using NEFT

NEFT offers many advantages over the other modes of funds transfer:
The remitter need not send the physical cheque or Demand Draft to the
beneficiary.
The beneficiary need not visit his / her bank for depositing the paper
instruments.
The beneficiary need not be apprehensive of loss / theft of physical
instruments or the likelihood of fraudulent encashment thereof.
Cost effective.
 Credit confirmation of the remittances sent by SMS or email.
Remitter can initiate the remittances from his home / place of work using the
internet banking also.
Near real time transfer of the funds to the beneficiary account in a secure
manner.

2.RTGS
The acronym 'RTGS' stands for Real Time Gross Settlement, which can be defined
as the continuous (real-time) settlement of funds transfers individually on an order
by order basis (without netting). 'Real Time' means the processing of instructions
at the time they are received rather than at some later time. Gross Settlement'
means the settlement of funds transfer instructions occurs individually (on an
instruction by instruction basis). Considering that the funds settlement takes place
in the books of the Reserve Bank of India, the payments are final and irrevocable.
RTGS is different from National Electronics Funds
Transfer System (NEFT)
NEFT is an electronic fund transfer system that operates on a Deferred Net
Settlement (DNS) basis which settles transactions in batches. In DNS, the
settlement takes place with all transactions received till the particular cut-off time.
These transactions are netted (payable and receivables) in NEFT whereas in RTGS
the transactions are settled individually. For example, currently, NEFT operates in
hourly batches - there are twelve settlements from 8 am to 7 pm on week days and
six settlements from 8 am to 1 pm on Saturdays. Any transaction initiated after a
designated settlement time would have to wait till the next designated settlement
time Contrary to this, in the RTGS transactions are processed continuously
throughout the RTGS business hours.

RTGS transactions
The RTGS system is primarily meant for large value transactions. The minimum
amount to be remitted through RTGS is ` 2 lakh. There is no upper ceiling for
RTGS transactions.
Under normal circumstances the beneficiary branches are expected to receive the
funds in real time as soon as funds are transferred by the remitting bank. The
beneficiary bank has to credit the beneficiary's account within two hours of
receiving the funds transfer message.
The remitting bank receives a message from the Reserve Bank that money has
been credited to the receiving bank. Based on this the remitting bank can advise the
remitting customer that money has been delivered to the receiving bank.
It is expected that the receiving bank will credit the account of the beneficiary
instantly. If the money cannot be credited for any reason, the receiving bank would
have to return the money to the remitting bank within 2 hours. Once the money is
received back by the remitting bank, the original debit entry in the customer's
account is reversed.
Till time RTGS service window is available
The RTGS service window for customer's transactions is available from 9.00 hours
to 16.30 hours on week days and from 9.00 hours to 13.30 hours on Saturdays for
settlement at the RBI end. However, the timings that the banks follow may vary
depending on the customer timings of the bank branches.
Processing Charges / Service Charges for RTGS
transactions
With a view to rationalize the service charges levied by banks for offering funds
transfer through RTGS system, a broad framework has been mandated as under:
a) Inward transactions Free, no charge to be levied.
b) Outward transactions (Please refer Service Charges link).
The essential information that the remitting customer
would have to furnish to a bank for the remittance to
be effected
The remitting customer has to furnish the following information to a bank for
effecting a RTGS remittance:
Amount to be remitted
Remitting customers 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

The IFSC code of the receiving branch

The beneficiary customer can obtain the IFSC code from his bank branch. The
IFSC code is also available on the cheque leaf. The IFSC code is also available on
the RBI website This code number and bank branch details can be communicated
by the beneficiary to the remitting customer.

India provide RTGS service

All the bank branches in India are not RTGS enabled. There are more than 78,000
RTGS enabled bank branches. The list of such branches is available on RBI
There any way that a remitting customer can track the
remittance transaction
It would depend 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 sms.
The beneficiary accepts remittance through RTGS
A funds transfer to go through RTGS, both the sending bank branch and the
receiving bank branch would have to be RTGS enabled. The lists are readily
available at all RTGS enabled branches. Besides, the information is available at
RBI.
3. Electronics Clearing Service (ECS) system
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.
Primarily, there are two variants of ECS - ECS Credit and ECS Debit. ECS Credit
is used by an institution for affording credit to a large number of beneficiaries (for
instance, employees, investors etc.) having accounts with bank branches at various
locations within the jurisdiction of a ECS Centre by raising a single debit to the
bank account of the user institution. ECS Credit enables payment of amounts
towards distribution of dividend, interest, salary, pension, etc., of the user
institution. ECS Debit is used by an institution for raising debits to a large number
of accounts (for instance, consumers of utility services, borrowers, investors in
mutual funds etc.) maintained with bank branches at various locations within the
jurisdiction of a ECS Centre for single credit to the bank account of the user
institution. ECS Debit is useful for payment of telephone / electricity / water bills,
cess / tax collections, loan installment repayments, periodic investments in mutual
funds, insurance premium etc., that are periodic or repetitive in nature and payable
to the user institution by large number of customers etc.

Based on the geographical location of branches covered, there are three broad
categories of ECS Schemes Local ECS, Regional ECS and National ECS. Local
ECS this is operating at 81 centres / locations across the country. At each of these
ECS centres, the branch coverage is restricted to the geographical coverage of the
clearing house, generally covering one city and/or satellite towns and suburbs
adjoining the city. Regional ECS this is operating at 9 centres / locations at
various parts of the country. RECS facilitates the coverage all core-banking-
enabled branches in a State or group of States and can be used by institutions
desirous of reaching beneficiaries within the State / group of States. The system
takes advantage of the core banking system in banks. Accordingly, even though the
inter-bank settlement takes place centrally at one location in the State, the actual
customers under the Scheme may have their accounts at various bank branches
across the length and breadth of the State / group of States. National ECS this is
the centralized version of ECS Credit which was launched in October 2008. The
Scheme is operated at Mumbai and facilitates the coverage of all core-banking
enabled branches located anywhere in the country. This system too takes
advantage of the core banking system in banks. Accordingly, even though the
inter-bank settlement takes place centrally at one location at Mumbai, the actual
customers under the Scheme may have their accounts at various bank branches
across the length and breadth of the country. Banks are free to add any of their
core-banking-enabled branches in NECS irrespective of their location. Details of
NECS Scheme are available on the website of Reserve Bank of India

The list of centres where the ECS facility is available has been placed on the
website of Reserve Bank of India. the centre-wise list of bank branches
participating at each location is available on the website of Reserve Bank of India

ECS (CREDIT)
ECS Credit payments can be initiated by any institution (called ECS Credit User)
which needs to make bulk or repetitive payments to a number of beneficiaries. The
institutional User has to first register with an ECS Centre. The User has to also
obtain the consent of beneficiaries (i.e., the recipients of salary, pension, dividend,
interest etc.) and get their bank account particulars prior to participation in the ECS
Credit scheme. ECS Credit payments can be put through by the ECS User only
through his / her bank (known as the Sponsor bank). ECS Credits are afforded to
the beneficiary account holders (known as destination account holders) through the
beneficiary account holders bank (known as the destination bank). The beneficiary
account holders are required to give mandates to the user institutions to enable
them to afford credit to their bank accounts through the ECS Credit mechanism.

The User intending to effect payments through ECS Credit has to submit details of
the beneficiaries (like name, bank / branch / account number of the beneficiary,
MICR code of the destination bank branch, etc.), date on which credit is to be
afforded to the beneficiaries, etc., in a specified format (called the input file)
through its sponsor bank to one of the ECS Centres where it is registered as a User.
The bank managing the ECS Centre then debits the account of the sponsor bank on
the scheduled settlement day and credits the accounts of the destination banks, for
onward credit to the accounts of the ultimate beneficiaries with the destination
bank branches. Further details about the ECS Credit scheme are contained in the
Procedural Guidelines and available on the website of Reserve Bank of India

MICR is an acronym for Magnetic Ink Character Recognition. The MICR Code is
a numeric code that uniquely identifies a bank-branch participating in the ECS
Credit scheme. This is a 9 digit code to identify the location of the bank branch; the
first 3 characters represent the city, the next 3 the bank and the last 3 the branch.
The MICR Code allotted to a bank branch is printed on the MICR band of cheques
issued by bank branches.

The beneficiary has to furnish a mandate to the user institution giving consent to
avail the ECS Credit facility. The mandate contains details of his / her bank
branch, account particulars and authorises the user institution to afford credit to his
/ her account with the destination bank branch.

addition to the consent of the beneficiaries, the mandate also provides important
information related to bank account details etc. which are useful for the user
institution to transfer funds to the right accounts . A model mandate form has been
prescribed for the purpose and is available in the ECS Credit Procedural
Guidelines

In case the information / account particulars contained in the mandate undergo any
change, the beneficiary has to notify the changes to the User Institution so that the
correct information can be incorporated in its records. This will ensure that
transactions do not get rejected at the beneficiarys bank branch due to
inconsistencies/ mismatch in the data sent by the user institution.

ECS can be used to transfer funds to NRE and NRO accounts in the country. This,
however, is subject to the adherence to the provisions of the Foreign Exchange
Management Act, 2000 (FEMA) and Wire Transfer Guidelines.

It is the responsibility of the user institution to communicate to the beneficiary the

details of credit that is being afforded to his / her account, indicating the proposed
date of credit, amount and related particulars of the payment. Destination banks
have been advised to ensure that the pass books / statements given to the
beneficiary account holders reflect particulars of the transaction / credit provided
by the ECS user institutions. The beneficiaries can match the entries in the
passbook / account statement with the advice received by them from the User
Institutions. Many banks also give mobile alerts / messages to customers after
credit of such funds to accounts.

If a Destination Bank is not in a position to credit the beneficiary account due to

any reason, the same would be returned to the ECS Centre to enable the ECS
Centre to pass on the uncredited items to the User Institution through the Sponsor
Bank. The User Institution can then initiate payment through alternate modes to the
beneficiary. In case of delayed credit by the destination bank, the destination bank
would be liable to pay penal interest (at the prevailing RBI LAF Repo rate plus two
percent) from the due date of credit till the date of actual credit. Such penal interest
should be credited to the Destination Account Holders account even if no claim is
lodged to the effect by the Destination Account Holder.

ECS Credit offers many advantages to the beneficiary

The beneficiary need not visit his / her bank for depositing the paper instruments
which he would have otherwise received had he not opted for ECS Credit.

The beneficiary need not be apprehensive of loss / theft of physical instruments

or the likelihood of fraudulent encashment thereof.

Cost effective.

The beneficiary receives the funds right on the due date.

r institutions enjoy many advantages as well. For instance

Savings on administrative machinery and costs of printing, dispatch and

reconciliation of paper instruments that would have been used had beneficiaries not
opted for ECS Credit.

Avoid chances of loss / theft of instruments in transit, likelihood of fraudulent

encashment of paper instruments, etc. and subsequent correspondence / litigation.

Efficient payment mode ensuring that the beneficiaries get credit on a designated
date.

Cost effective.

The banking system too benefits from ECS Credit Scheme such as
 Freedom from paper handling and the resultant disadvantages of handling,
presenting and monitoring paper instruments presented in clearing. Ease of
processing and return for the destination bank branches.

Smooth process of reconciliation for the sponsor banks.

Cost effective.

There is no value limit on the amount of individual transactions.

The Reserve Bank of India has deregulated the charges to be levied by sponsor
banks from user institutions. The sponsor banks are, however, required to disclose
the charges in a transparent manner. With effect from 1st July 2011, originating
banks are required to pay a nominal charge of 25 paise per transaction to the
Clearing house and destination bank respectively. Destination bank branches have
been directed to afford ECS Credit free of charge to the beneficiary account
holders.

ECS (DEBIT)
: ECS Debit transaction can be initiated by any institution (called ECS Debit User)
which has to receive / collect amounts towards telephone / electricity / water dues,
cess / tax collections, loan installment repayments, periodic investments in mutual
funds, insurance premium etc. It is a Scheme under which an account holder with a
bank branch can authorise an ECS User to recover an amount at a prescribed
frequency by raising a debit to his / her bank account. The User institution has to
first register with an ECS Centre. The User institution has to also obtain the
authorization (mandate) from its customers for debiting their account along with
their bank account particulars prior to participation in the ECS Debit scheme. The
mandate has to be duly verified by the beneficiarys bank. A copy of the mandate
should be available on record with the destination bank where the customer has a
bank account.

The ECS Debit User intending to collect receivables through ECS Debit has to
submit details of the customers (like name, bank / branch / account number of the
customer, MICR code of the destination bank branch, etc.), date on which the
customers account is to be debited, etc., in a specified format (called the input file)
through its sponsor bank to the ECS Centre. The bank managing the ECS Centre
then passes on the debits to the destination banks for onward debit to the
customers account with the destination bank branch and credits the sponsor bank's
account for onward credit to the User institution. Destination bank branches will
treat the electronic instructions received from the ECS Centre on par with the
physical cheques and accordingly debit the customer accounts maintained with
them. All the unsuccessful debits are returned to the sponsor bank through the ECS
Centre (for onward return to the User Institution) within the specified time frame.
For further details about the ECS Debit scheme, the ECS Debit Procedural
Guidelines available on the website of Reserve Bank of India

The advantages of ECS Debit to customers are many and include,

ECS Debit mandates will take care of automatic debit to customer accounts on
the due dates without customers having to visit bank branches / collection centres
of utility service providers etc.

Customers need not keep track of due date for payments.

The debits to customer accounts would be monitored by the ECS Users, and the
customers alerted accordingly.

Cost effective

User institutions enjoy many benefits from the ECS Debit Scheme like,

Savings on administrative machinery and costs of collecting the cheques from

customers, presenting in clearing, monitoring their realisation and reconciliation.

Better cash management because of realisation / recovery of dues on due dates

promptly and efficiently

. Avoids chances of loss / theft of instruments in transit, likelihood of fraudulent

access to the paper instruments and encashment thereof.
 Realisation of payments on a uniform date instead of fragmented receipts spread
over many days.

Cost effective.

The banking system has many benefits from ECS Debit

Freedom from paper handling and the resultant disadvantages of handling,

receiving and monitoring paper instruments presented in clearing.

Ease of processing and return for the destination bank branches. Destination
bank branches can debit the customers accounts after matching the account
number of the customer in their database and due verification of existence of valid
mandate and its particulars. With core banking systems in place and straight-
through-processing, this process can be completed with minimal manual
intervention.

Smooth process of reconciliation for the sponsor banks.

Cost effective.

Yes. Any mandate in ECS Debit is on par with a cheque issued by a customer. The
customer has to maintain adequate funds in his / her account with the destination
bank branch to ensure the ECS Debit instructions are honoured when presented. In
case of any need to withdraw or stop a mandate, the customer has to give prior
notice to the ECS user institution well in time, so as to ensure that the input files
submitted by the user do not continue to include the ECS Debit details in respect of
the mandates withdrawn or stopped by customers. The process flow to be followed
for withdrawing / stopping mandates is detailed in ECS Debit Procedural
Guidelines.

It is left to the choice of the individual customer and the ECS user to decide these
aspects. The mandate can contain a ceiling on the maximum amount of debit,
specify the purpose of debit and validity period of the mandate.

There is no value limit on the amount of individual transactions that can be

collected by ECS Debit.
The Reserve Bank of India has deregulated the charges to be levied by sponsor
banks from user institutions. The sponsor banks are, however, required to disclose
the charges in a transparent manner. With effect from 1st July 2011, originating
banks are required to pay a nominal charge of 25 paise and 50 paise per transaction
to the Clearing house and destination bank respectively. Bank branches do not
generally levy processing / service charges for debiting the accounts of customers

UNIT 4
ANALYSIS OF E PAYMENT SYSTEM
RTGS & NEFT LIMITS:
RTGS LIMITS: Minimum amount of transfer required for RTGS is Rs. 2 lakh. There
is no upper limit, though. The beneficiary bank has to credit the beneficiary's
account within two hours of receiving the funds transfer message. RTGS
transaction timings for Monday Friday is 9 A.M to 4.30 P.M and for Saturday it is
9 A.M to 2 P.M.

NEFT LIMITS: No. There is no limit either minimum or maximum on the

amount of funds that could be transferred using NEFT. However, maximum
amount per transaction is limited to Rs.50,000 /- for cash-based remittances
within India and also for remittances to Nepal under the Indo-Nepal Remittance
Facility Scheme.

NEFT/RTGS working days:

Banks Closed on 2nd and 4th Saturdays,

No NEFT/RTGS; But Full Days on Other Saturdays

In a body blow to the political parties that either wanted to work all Saturdays or to

party with bankers on all weekends, the RBI has in a sober note pronounced that

counting of Saturdays will go in the following manner:

 First Saturday, FULL working day, banking system to operate till 6:30
pm or such time as a normal weekday

Second Saturday, Holiday!

Third Saturday, FULL working day, like the First.

Fourth Saturday, Holiday!

Fifth Saturday, Sorry bankers, this round goes to FULL working day.

What FULL Working Day means is that there will be all banking functionality:

Cheque clearance

NEFT and RTGS

Go to the bank and get sold insurance disguised as a fixed deposit

Operate your lockers (if you had got one)

Banks can borrow from RBI (Repo or MSF) or park excess cash with it

Which means that on the Second and Fourth Saturdays of a month, none of the

above will happen. (Except your banker can attempt to call you to sell you

insurance, of course)

But on all Saturdays, no markets are open (G-Sec, Forex, Derivatives etc.)

In general the keeping of banks open only half a day didnt make sense, I suppose.

But it follows a government notification.

This is good for bankers. A full holiday or a full working day is what makes sense

anyhow. Whats a half day? Its neither here nor there.

(FWIW, I vote for full time markets all days. Have them running all day if you

like. It will actually reduce volatility in the longer term. )

Growth in NEFT and its Pricing

RTGS system, as the name suggests, is real time and is primarily envisaged for
processing
and settling large value payment orders. For this reason, even before the recent
policy change, RBI allowed RTGS transfers only for amounts above ` 1 lakh 2.
Over the last few years, RBI has made its NEFT system more robust with near
real-time settlement finality through its 11 settlement cycles in a day.

There are more than 77287 (76089) bank branches participating in NEFT (RTGS).
The RBI data on average amount per transaction suggests that NEFT is primarily
being used for small value transactions although systems are in place for its use for
large value transaction. With NEFTs current 11 batch-settlement cycles in a day,
the effective time taken to see an NEFT or RTGS materializing (beneficiary
getting the credit) remains very close. For NEFT, the beneficiary can expect to get
credit for the first nine batches on week days (i.e., transactions from 9 am to 5 pm)
and the first four batches on Saturdays (i.e., transactions from 9 am to 12 noon) on
the same day. For transactions settled in the last two batches on
week days (i.e., transactions settled in the 6 and 7 pm batches) and the last batch on
Saturdays (i.e., transactions handled in the 1 pm batch) beneficiaries can expect to
get credit on the next working day morning. The net settlement of the NEFT batch
run is routed through the RTGS system. On week days, the RTGS closes at 4.30
pm for customers and at 6 pm for interbank transactions.

The Indian RTGS and NEFT systems have displayed significant growth in both
transaction volumes and values. A glimpse of the 6-monthly data, as below,
highlights the same.
 6 Month
Periods NEFT / EFT RTGS System (Customer Remittance)

% Amount % Avg. Number % % Avg.

Number increase increase amount increase Amount increase amount

in (` in per trans. in in per trans.

(Lakh) Number crore) Amount (` ) (Lakh) Number (` crore) Amount (` )

Apr07-Sep07 48.7 57911 118865 15.1 6801452 44923724

Oct07-Mar08 84.4 73 82415 42 97626 26.3 74 9298721 37 35329487

Apr08-Sep08 125.7 49 106983 30 85123 39.0 48 9702231 4 24903058

Oct08-Mar09 195.9 56 144974 36 73993 73.4 88 10301876 6 14039079

Apr09-Sep09 276.1 41 182960 26 66271 118.6 62 13754954 34 11600703

Oct09-Mar10 387.3 40 226548 24 58493 185.8 57 15761824 15 8481851

Apr10-Sep10 527.5 36 355507 57 67395 225.1 21 16446909 4 7305841

Oct10-Mar11 795.9 51 433261 22 54437 232.2 3 19739384 20 8501027

. Effective November 15, 2010, RBI increased the threshold floor value for RTGS
transactions from ` 1 lakh to ` 2 lakhs. Earlier, for the transactions in the range of `
1-2 lakhs, it made more sense for the banks and remitters to prefer RTGS over
NEFT because it was faster with no additional cost (it used to uniformly cost ` 25
for remittance of above ` 1 lakh to ` 5 lakhs). A snapshot of the RTGS and NEFT
charges pre- and post- November 2010 is given below

Pre- Post-
RTGS (Charges `) Nov10 Nov10

` 1 lakh to ` 2 lakhs 25 -
 above ` 2 lakhs to `
5 lakhs 25 25

above ` 5 lakhs 50 50

Pre- Post-
NEFT (Charges `) Nov10 Nov10

up to ` 1 lakh 5 5

above ` 1 lakh to ` 2
lakhs 25 15

above ` 2 lakhs 25 25

For the users of the system to move their transactions from RTGS to NEFT, a new
value band in the ` 1 lakh to ` 2 lakh segment has been created for NEFT, with
customers having to pay ` 15 per transaction. This effectively provides a saving of
` 10 per transaction to the customer. Thus, the special niche value band created in
NEFT is a value proposition for customers providing funds transfer in a timely
manner with wider geographical coverage at a lesser cost.

Another point to note is that for the individual users, NEFT is cheaper than RTGS
for the above ` 5 lakhs band. Thus, given the current NEFT efficiency levels the
system prompts and induces use of NEFT more in this high band. However, since
for the banks the cost to initiate a very high value NEFT or RTGS is same, it is not
very clear whether there is a tendency on the part of the banks to route a high value
transfer request through the RTGS system even if the remitter applies for a NEFT.
If there is no such tendency, the question remains why not? The only possible
benefit for banks to prefer NEFTs net settlement in batches, even for a high value
remittance, is the advantage of the netting effect. Will it be more meaningful to
direct all transfers to RTGS if the transfer amount is more than ` 10 lakhs just like
one directs transfers upto ` 2 lakhs to NEFT? Keeping the full objectives of the
payment system, RBI may consider taking necessary steps for encouraging RTGS
over NEFT for high value transactions, say beyond ` 10 lakhs. Irrespective of this
move, RBI may relook into extending the operation window for RTGS. Looking
ahead, National Payment Corporation of India (NPCI) has plans to develop the
one-to-one funds transfer system, 24 7 MoneyLine, which when operational, would
replace NEFT.

All banks (or at least banks with more than 2 lakh NEFT transactions per annum)
need to put in place a common standard, enabling straight through processing
(STP) for all its NEFT / RTGS transactions. Such a processing removes avenues
for human delays in parking funds at beneficiary account after every batch run and
ensures timely onward transition from remitter bank.

Finally, with more than 1300 lakh transactions through NEFT and more than 450
lakh transactions through RTGS (customer remittance) during 2010-11, the
banking sector, based on prevailing NEFT/RTGS charges, generated revenue of
the order of ` 270 crore (13 10 + 4.5 30 = 265) from bank customers.
Moreover, with the number of transactions (from among the 1750 lakh customer
transactions) attributed to 1-2 lakh band being of the order of

lakh, this (until revision) generated a revenue of Rs 75 crore alone. On the

other hand for handling 14000 lakh cheques, during 2010-11, that passes through
the clearing houses, the banking sector would spent about ` 280 crore just to pay
off the clearing house charges (` 2 per cheque). Considering the elaborate and
tedious processes involving printing/distribution of MICR cheque books and
handing of cheques at payee/drawee banks, the banking sector engages lots of its
resources leading to considerable additional expenses for the cheque based
remittance system of the country.

Rationalization in NEFT Pricing

The flip side of pricing ` 15 per NEFT transaction is in its potential of inducing
forced inefficiency in the system. Users of the ` 1-2 lakhs NEFT band are being
prompted to do two NEFT transactions (each of amounts within ` 1 lakh) for ` 5
per transaction, rather than one transaction of an amount in the band ` 1-2 lakhs.
This desirably calls for financial education on how to manage ones remittances in a
most cost effective way. However this leads to forced inefficiency and cost to the
payment system in terms of twice the paper work to handle NEFT requests, twice
the data inputs/outputs and twice the use of the NEFT network

The two main types of vertical equity are proportional and progressive taxation. In
proportional taxation, the amount of taxes paid increases directly with income. For
example, a 5% increase in earnings will cause a 5% increase in taxes. Progressive
taxation includes tax brackets, where people pay taxes based on the tax bracket
into which their income places them. Each tax bracket will have a different tax
rate, with higher income brackets paying the higher percentages. The question that
arises then is whether progressive taxation has been the principle behind RBI's
fixing of ` 15 fee and if so how well can this justify RBIs existing and declared
principle of levy of service charge based on reasonableness and as per cost.

Though RBI advocates banks to ensure that service charges are reasonable and are
not out of line with the average cost of providing these services, it could not make
the costing analysis transparent with respect to what component of service fees
attributed to true cost and what attributed to profit margin. Thus, unreasonableness
in fixing the service charges persists with RBIs fixing ` 15 for NEFT lacking
rationale.

In case the banking sector is very particular in their claim of ad valorem increase
in actual cost in carrying out such NEFT transactions, RBI, at best, should consider
pricing the NEFT value band in the ` 1 lakh to ` 2 lakhs segment at ` 10 per
transaction. With majority of NEFT transactions being in the sub-2 lakhs
segments, such a move by RBI would remove the existing confusion and lacuna in
the NEFT payment system in the sub-2 lakhs segments.

In order to disincentivize the use of NEFT for high value remittances, RBI may
consider keeping the charges same on NEFT and RTGS above ` 10 lakhs.

Remittance Facility for Migrants

Indias migrant population is more than 100 million people and with an average of
4 persons being dependents, back home, a proper remittance system in place
affects about half of Indias population. A proper remittance system is one which is
formal, efficient and easy to use. One would on a regular basis see long queues
outside bank branches. Such a queue, with waiting time averaging 1 to 2 hours,
consists of regular remitters (mostly from poor or lower middle class) in a formal
system. The pain of standing in long queues is well experienced by the elite while
trying to apply/service a Passport or Visa. However, if the elites are asked to stand
in such queues on a monthly basis one would surely see quick reforms. Such long
queues acts as a deterrent for use of the formal banking system.

It is well acknowledged that Know Your Customer (KYC) norms are important for
the banking system. However, this acts as a deterrent for most of the migrant
population to open bank accounts. With the Indian economy being predominantly
cash-based, majority of the migrant population remit cash through the Core
Banking Network of the bank by standing in long queues. Post-offices allow such a
remittance in form of money-orders. However, it usually takes a minimum of 7
days for the money to reach the beneficiary. Moreover, it costs the remitter ` 250 to
remit ` 5000. Due to such drawbacks, migrants get encouraged to use the informal
channels of remittance. The use of India Post or the informal means for money
transfer do not require any KYC documentation and can be used by remitter and
beneficiary even if they do not have bank accounts. The money being remitted
through such systems remains outside the banking system.
When one sees long queues outside banks it usually involves cash being remitted
into some bank branch account at a different location. Here the remitter need
not have a bank account and transacts in cash to remit money into the
beneficiarys bank account. A simple cash deposit form is filled by the remitter
providing his own details (name, address, phone number) and the account name
and number of the beneficiary. This is most welcome since it at least allows cash
entering the banking system. Keeping this in mind, the RBI has allowed cash
transactions in a bank, for an amount less than ` 50000, without any KYC
documentation
Almost all banks in India facilitate NEFT. Individuals, firms or corporates
maintaining accounts with a bank branch can transfer funds using NEFT. Even
such individuals, firms or corporate who do not have a bank account (walk-in
customers) can also deposit cash (less than ` 50000) at the NEFT-enabled branch
with instructions to transfer funds using NEFT. A separate Transaction Code has
been allotted by RBI, in the NEFT system, to facilitate walk-in customers to
deposit cash and transfer funds to a beneficiary. Walk-in customers will, however,
have to give their contact details (complete address and telephone number, etc.) to
the branch. This will help the branch to refund the money to the customer in case
credit could not be afforded to the beneficiarys bank account or the transaction is
rejected / returned for any reason. NEFT, thus, facilitates originators or remitters to
initiate funds transfer transactions even without the need for having a bank account
(opening of which requires KYC documents which one may not have readily).

Remittance Reforms for Migrants and Others

In order to clearly understand the need for any reforms, we have to address few
unanswered questions. The issues that one needs to focus on are:

For an individual / firm / corporate intending to originate cash transfer of funds

(less than ` 50000) through NEFT in person, does the bank branch need
anything more than just a filled-in application form providing details of the
beneficiary (like, name of the beneficiary, name of the bank branch where the
beneficiary has an account, IFSC of the beneficiary bank branch, account type
and account number) and contact details (complete address and telephone
number, etc.) of the remitter?
 Many banks appear to discourage such small amount electronic remittances
through their demanding KYC documents which neither RBI nor Government
of India is insisting upon. If this is true, it is important to understand why some
banks would like to take such a step without their appreciating the potential of
NEFT for the unbanked population to carry out small amount electronic
remittances?

It is well acknowledged that KYC documents are not being sought for an
unbanked walk-in customer when a request is made for a Demand Draft of say,
` 1000 (against cash of ` 1000 + commission charges).

How does the bank's present policy help in providing remittance service to one
who is in real need of the banking service rather than pushing the person towards
informal or less efficient means of money transfer? The following points have
been highlighted by RBI and Government of India in context with KYC and Anti-
Money Laundering (AML) norms.

It is important to bear in mind that the adoption of customer acceptance policy

(related to the KYC norms) and its implementation should not become too
restrictive and must not

result in denial of banking services to general public, especially to those, who

are financially or socially disadvantaged.

...banks should keep in mind the spirit of instructions (on KYC norms) issued
by the Reserve Bank and avoid undue hardships to individuals who are,
otherwise, classified as low risk customers.
 In case of transactions carried out by a non-account based customer, that is a
walk-in customer, where the amount of transaction is equal to or exceeds
rupees fifty thousand, whether conducted as a single transaction or several
transactions that appear to be connected, the customer's identity and address
should be verified. However, if a bank has reason to believe that a customer is
intentionally structuring a transaction into a series of transactions below the
threshold of ` 50000 the bank should verify identity and address of the
customer and also consider filing a suspicious transaction report to Financial
Intelligence Unit-India.

Information accompanying all domestic wire transfers of ` 50000 and above

must include complete originator information i.e. name, address and account
number etc., unless full

originator information can be made available to the beneficiary bank by other

means.

If a bank has reason to believe that a customer is intentionally structuring wire

transfer to below ` 50000 to several beneficiaries in order to avoid reporting or
monitoring, the bank must insist on complete customer identification before
effecting the transfer.

While filing Cash Transaction Report, details of individual transactions below `

50000 need not be furnished.

Customer Education: Implementation of KYC procedures requires banks to

demand certain information from customers which may be of personal nature or
which have hitherto never been called for. This can sometimes lead to a lot of
questioning by the customer as to the motive and purpose of collecting such
information. There is, therefore, a need for banks to prepare specific literature/
pamphlets etc. so as to educate the customer of the objectives of the KYC
programme. The front desk staff needs to be
 specially trained to handle such situations while dealing with customers.

Employee's Training: Banks must have an ongoing employee training

programme so that the members of the staff are adequately trained in KYC
procedures. Training requirements should have different focuses for frontline
staff, compliance staff and staff dealing with new customers. It is crucial that
all those concerned fully understand the rationale behind the KYC policies and
implement them consistently.

All the points above give sufficient direction towards Bank's requiring not to refuse
small amount remittances on the pretext of KYC. A bank requiring a copy of the
photo ID is different from bank desiring a copy of photo ID. If an unbanked (or
even banked) person is desiring to do a ` 2000 cash NEFT and is also providing his
complete address, telephone number, signature/thumb impression, and does not
have a photo ID, how best could the bank facilitate in absorbing this cash into the
banking system? There is an acknowledgement slip provided by the bank for every
across the counter NEFT request. This acknowledgement slip should suffice, in
case of a return, for the person to claim. Let us relook into all the questions with
respect to small amount (upto ` 10000) remittances carried out by the migrant
population base of the country.

The NEFT initiator is already required to give his name, address and phone
number. The only way one can associate transactions as "several transactions
that appear to be connected" is if the remitter's name/address/phone number
and the beneficiary details match. If it does not match, there could be no grounds
for transactions appearing connected. Thus, banks should not have any serious
concern- more so since the RBI and the Government of India are not insisting on
any need of identity verification for small amount remittances.

Majority of the banks, the cost to users to deposit cash (i.e., remit cash) into a
bank account, from a non-home branch location, is more than what it costs to do
cash NEFT. With RBI mandating a low ` 5 for even cash NEFT, it may not be
sustainable for the banks to handle cash NEFT. This invariably leads to banks
resorting to varied tactics to avoid accepting cash under NEFT. To harness the
potential of the NEFT for cash deposits using the full resources of the banking
infrastructure and also keeping the issue of currency management difficulties in the
forefront, RBI in the interest of the payment system and in the interest of the
banking policy should consider rationalizing the present rate of ` 5 for cash NEFT.
RBI should establish suitable benchmarks on charges for cash remittances through
NEFT. One option could be to price the cash NEFT at ` 15 (instead of the current `
5). RBI should also disseminate knowledge among the public (more specifically,
unbanked migrant population) to exercise their right to enter any bank branch
(preferably any less crowded bank branch) to harness the facility of cash NEFT.

This would reduce the considerable time taken to stand in long queues of non-
home branches of specific banks by the remitter- the one end of the remittance
system. Unless the bank can establish potential fraud beforehand, the information
filled in the application form (for cash NEFT) by the remitter should not call for
any documentary evidence if the amount is within ` 10000.

Banks (or RBI) usually do not allow NEFT between two of its own bank branches.
However, if allowed, such a facility (under the present service charge structures)
could have an added incentive for the remitter in terms of lower service charge.
Many banks have higher charges (than NEFT charges) for within-bank between-
accounts fund transfer. RBI should consider relooking into the service charges for
within-bank and between-banks electronic fund transfers and establish sensible
parity.

Currently National Financial Switch (NFS) of the NPCI facilitates off-us ATM
withdrawals (say positive entries) with the exception being for transaction
reversals. Thus, with standards for interoperable micro-ATM already in place, a
proactive role by NPCI is solicited for efficient use of these micro-ATMs in bank
branch counters for on-us and off-us transactions. For this to take shape NPCI
needs to facilitate negative entries (i.e., facilitate deposits) in their existing NSF
platform. With a clear process in mind, technologically this can be executed
quickly. Once operational, this would be very helpful in improving the existing
remittance system where one invariably sees long queues of migrant population
trying to deposit cash. With no involvement of paperwork, it would also enhance
efficiency through increased speed for deposit transactions. The use of micro-ATM
for on-us deposit transactions would be restricted to the banks core banking
network.

Cash receiving outlets should be popularized and automation should be ensured to

the extent possible. In particular, each bank branch should have standardized
micro-ATM terminals at the manned counters along with cash counting machines.
This would increase the efficiency of depositing (and withdrawing) funds to (from)
any bank account by use of the full banking system. Let Bank A issue a debit card
to person X. The processes that one needs to put in place are,

Debit card of person X should be usable in Bank B micro-ATM to deposit cash

(by a person authorized by X) in the account of X.

Debit card of person X should be usable in Bank B ATM and micro-ATM to

remit funds to an account of person Y in Bank C.

Debit card of person X should be usable in Bank B micro-ATM to withdraw

cash.

The cost of providing such service is to be correctly identified and paid by Bank
A to Bank B.

Effect of Cheque Policy Measures on Transition to Electronic

Modes:
A view to hasten migration of payment transactions to electronic modes (especially
for high-value payments), RBI took some prudent measures that was expected to
facilitate overall transition from cheque based payments to electronic payments. In
November 2009, RBI completely withdrew the high-value clearing service
keeping in mind the risk mitigation measures and migration of such high-value
transactions to more efficient electronic modes like RTGS and NEFT.
Even after RBIs withdrawal of high-value clearing facility for cheques, a
significant quantum of high-value cheques still remains in the system. This follows
from the fact that during 2008-09 the total value of cheques was ` 1,24,61,135
crore and out of this, the total value under high-value clearing was ` 45,50,667
crore. Thus, the percentage of total value of cheques cleared under high-value
clearing was 36.5%. Now, when one looks at the cheque data for the one year (post
high-value cheque service) period December 2009 November 2010, the total
value of cheques was ` 1,02,00,163 crore. This is a decrease of only 18.2%. Thus
one could confidently conclude that about 50% of high-value cheques remained in
the system even after RBIs withdrawal of the high-value clearing service. In other
words only about 50% of high-value payments got migrated to electronic modes.

A more detailed analysis of the cheque clearing data (as below) suggests that there
has been no significant change in the Non-MICR cheque usage since April 2007.
Regarding cheques other than non-MICR cheques, 2007-08 and 2008-09 saw high-
value cheques contributing to 47.7% and 43.7% respectively in value terms
(though in volume terms this contribution had been only 1.8% and 1.9%
respectively). For the one year period December 2009 through November 2010 (by
when high-value clearing service had been withdrawn) one would like to monitor
the real impact of the measures taken. It is seen that in 2008-09 there had been a
9.7% and 4.8% decrease in MICR (including high-value) cheque in value and
volume terms respectively, over previous year. However, when comparing for the
one year period December 2009 - November 2010 with the pre- high-value
withdrawal period 2008

it is seen that there had been only 20.4% and 0.4% decrease in MICR cheque value
and volume respectively. Adjusting for the annual rate at which MICR cheques
and high-value cheques, in value terms, had been decreasing during 2007-09, it is
easy to workout (from table on cheque clearing data) that withdrawal of high-value
clearing service has seen no significant effect on cheque volumes and that about
70% of high-value payments, in value terms, did not migrate to electronic modes.
Similar results follow when one looks at the data corresponding to period 2010-11
instead of December 2009 - November 2010.
 Total Non-MICR MICR High Value
1 Year
Period Number Amount Number Amount Number Value Number Amount

Apr07-Mar08 14605.6 13396066 2376.0 1867376 12010.5 6028672 219.2 5500018

Apr08-Mar09 13973.9 12469135 2335.7 2060893 11419.7 5857575 218.5 4550667

Dec09-Nov10 13893.9 10200163 2304.0 1914367 11589.9 8285795 0.0 0

Apr10-Mar11 13862.7 10133734 2312.1 1832516 11550.6 8301218 0.0 0

(Number in lakh and Amount in ` crore)

You not use cheques and instead do electronic transfers? For individual users (or
even business establishments), other than the convenience of issuing cheques and
the inherent deferment of being out of funds, the incentives of issuing cheques and
the disincentives for doing an electronic transfer in terms of the attached fee on
electronic modes (which does not exist in case of cheques) is very prominent. The
advantage of deferment of being out of funds through use of cheques is only
systems creation and more of a mindset that would fade with time provided proper
measures are taken in the existing design of the payment system. For recipient of a
cheque, the inconvenience of depositing it in bank, sort of balances the
convenience gained by the issuer of the cheque. Thus, there has to be more
convenient ways, harnessing technology like ATM, internet and mobile (not
requiring branch visits), to switch money transfers from use of cheques to use of
electronic modes.

NEFT has not been created or was aimed at generating additional revenue for the
banks. It has been created as a replacement of inefficient and expensive paper
based payments. The savings for the banks come as the cost for this electronic
funds transfer technology is far less than the corresponding inefficient and cost
intensive cheque system. Thus, every transaction which can be done through
cheque, if instead is routed through NEFT, the banking system gain even when
NEFT charges for the users are kept at par with cheque charges.
Finally, RBI should devise more focused means to incentivize electronic transfers
and disincentivize use of cheques. RBI, through its review of service charges for
cheque collections, has signalled discouragement of cheques. Effective April 1,
2011, RBI has mandated increase in Drawee Bank charges by 50 paisa for clearing
and settlement of cheques (there being 1150 clearing houses). The intent of the
directive is clear - banks have to pass on the clearing house fee and possibly other
expenses attached to handling cheques to account holders. Thus one could say that
RBI has signalled the banks to discourage excessive use of cheques by imposing
fees, to account holders, beyond certain number of free cheque leaves and free
cheque deposits per month. The mandate can also be efficiently translated by
charging a fee for high denomination cheques (say above ` 50,000). Though RBI
has implicitly indicated disincentivizing cheques through pricing them high, as a
means to incentivize electronic transfers (facilitating migration of cheques to
electronic transfers), and to bring in a sense of balance, RBI should be explicit and
consider allowing 5 free electronic transfers (including deposits and withdrawals)
per month for each of the interoperable systems like NEFT, Direct Debit, Interbank
Mobile Payment Service (IMPS) and debit card enabled payment transactions at
net-banking sites, ATM and Micro-ATM for the low interest bearing basic
account- the savings bank account. In conjunction with the benefits derived by the
users of the payment system through its 5 free payment transactions, RBI should
revise the NEFT charges to (i) ` 15 for remittances upto ` 2 lakhs and (ii) ` 25 for
remittances above ` 2 lakhs.

Recommendations on payment system

RBIs pricing structure on electronic and modern payment systems should be based
on well laid principles. This note highlights that there is a scope for rationalization
of overall costs/pricing in the payment system keeping broader objectives of
acceptance and financial inclusion in mind. We have the classic example of ATM
pricing in India which revolutionized its use. The same is expected from US
Federal Reserves pricing structure on debit card use at merchant establishments.
Thus, with pricing being based more on well laid out fundamental principles rather
than on arbitrary policy, RBI should consider revising its current pricing structure.

Recommendations:

RBI may consider taking necessary steps for encouraging RTGS over NEFT
for high value transactions, say beyond ` 10 lakhs. Irrespective of this move,
RBI may relook into extending the operation window for RTGS.
 RBI should consider pricing the NEFT value band in the ` 1 lakh to ` 2 lakhs
segment at ` 10 per transaction.

RBI may consider keeping the charges same on NEFT and RTGS above ` 10
lakhs.

RBI should establish suitable benchmarks on charges for cash remittances

through NEFT. One option could be to price the cash NEFT at ` 15 (instead
of the current ` 5).

RBI should disseminate knowledge among the public (more specifically,

unbanked migrant population) to exercise their right to enter any bank
branch (preferably any less crowded bank branch) to harness the facility of
cash NEFT.

Unless the bank can establish potential fraud beforehand, the information
filled in the application form (for cash NEFT) by the remitter should not call
for any documentary evidence if the amount is within ` 10000.

RBI should consider relooking into the service charges for within bank and
between banks electronic fund transfers and establish sensible parity.
 Each bank branch should have standardized micro-ATM terminals at the
manned counters along with cash counting machines.

RBI should devise more focused means to incentivize electronic transfers

and disincentivize use of cheques.

RBI should consider allowing 5 free electronic transfers (including deposits

and withdrawals) per month for each of the interoperable systems like
NEFT, Direct Debit, IMPS and debit card enabled payment transactions at
net-banking sites, ATM and Micro-ATM for the low interest bearing basic
account.

In conjunction with the benefits derived by the users of the payment system
through its 5 free payment transactions, RBI should revise the NEFT charges
to (i) ` 15 for remittances upto ` 2 lakhs and (ii) ` 25 for remittances above `
2 lakhs.
 UNIT 5

DATA ANALYSIS
1 Electronic Clearing System

Table no: 1 Electronic clearing system

ECS Dr ECS Cr
 Years Value (Bn) Value (Bn)

2012-13 700 1800

2013-14 800 1800

2014-15 1083.1 1771.3

2015-16 1268.3 2492.2

2016-17 1739.8 2019.1

Electronic clearing system

2 National Electronic Funds Transfer System (NEFT)

Table:2 National Electronic Fund Transfer System(NEFT)

 Years Value (Bn)

2012-13 4000

2013-14 17900

2014-15 29022.4

2015-16 43785.5

2016-17 59803.8

National Electronic Fund Transfer System(NEFT)

3 Card based clearing (CBC)

Table: 3 Card based clearing (CBC)

CREDIT CARDS DEBIT CARDS

Years Value (Bn) Value (Bn)

2012-13 800 400

2013-14 1000 500

2014-15 1229.5 743.4

2015-16 1539.9 954.5

2016-17 1899.2 1213.4

Card based clearing (CBC)

4 Real-time gross settlement (RTGS)

Table: 4 Real-time gross settlement (RTGS)

Years Value (Bn)

2012-13 394500

2013-14 484900

2014-15 676841

2015-16 734252.4

2016-17 754032.4

Real-time gross settlement (RTGS)

Comparative Analysis Of Different Payment Methods In Terms Of

Value(Billion) (2012-2017):

1 2012-13

In 2012-13 Ecs Cr was1800 billion whereas Ecs Dr was 700 billion, NEFT
was 4000 billion, Card based Clearing was 800 billion in Credit cards and 400
billion in Debit cards and RTGS transactions in value was 394500 billion which
was the highest contributor to the different e-payments modes.
2 2013-2014

In 2013-14 Ecs Cr was 1800 billion and Ecs Dr was 800 billion, NEFT was
17900(increased of 13900 billion), Card based Clearing was 1000 billion in
Credit cards and 500 billion n Debit cards and RTGS transactions accounted to
484900 billion again being the highest contributor.

3 2014-15

In 2014-15 Ecs Cr was 1771.3 billion and Ecs Dr was 1083.1 billion,
NEFT was 29022.4 billion, Card based Clearing was 1229.5 billion in Credit
Cards and 743.4 billion and RTGS was 676841 billion being the highest amon
four.

4 2015-16

In 2015-16 Ecs Cr rose to 2492.2 billion and Ecs Dr was 1268.3 billion,
NEFT increased to 43785.5 billion, Credit cards clearing was 1539.9 billion and
Debit cards clearing was 954.5 billion and RTGS value jumped to 734252.4
billion.

5 2016-17

In 2016-17 Ecs Cr was 2019.1 billion and Ecs Dr was 1739.8 billion,
NEFT was 59803.8 billion, Card based clearing was 1899.2 billionin Credit cards
and 1213.4 billion in Debit cards and RTGS transaction accounted for 754032
billion.
Finding of Studies:

In Indian banking system we have evident that, the payment and settlement system
has changing according to market need. ICT revolution has availed new means to
financial transaction and settlement process than traditional payment system. Some
of the major findings are-

MICR technology has providing faster cheque collection and clearing

facilities to customers in India, but there are only 64 MICR clearing centres
working in India than 1103 Non-MICR clearing centres. Till now transaction
of Rs. 80.2 million has been managed by Non-MICR clearing centre, these
centres are clearing cheques only once in per week. Hence there is essence
need to increase MICR clearing houses and modify the Non-MICR clearing
centres in MICR clearing centres to enhance payment system.

ECS has available only mostly in city and semi urban area in India it is not
available in rural branches. So, the RBI should provide such facilities in rural
branches to provide facilities to rural peoples.

EFT and NEFT is network based service now it covers only urban areas so;
there is an urgent need to ramp up technology based delivery channels
particularly in the rural areas. It should extend the benefit of the financial
 system even to remote areas. All NEFT centres are working in Indian office
hours but they should provide 24 hours services to provide more facility the
bankers and customers'.

Credit and Debit cards are being extensively used in the nation as they provide
a convenient form of making payments for goods and services without the use
of cheques and cash. Issue of credit cards is exhibiting a phenomenal growth
in recent years. Card based transactions are increasing continuously in India
but is not to assured service according to Indian customers experiences.
Because there are so many complaints are registered in RBI's banking
ombudsman offices. It clears that, it is not so good and secure facility in India.
Hence, RBI should enhance the quality and security of card based
transactions.

In Indian banking system, there are competition of provide modern banking

facilities to their customers, but some banks are ignoring security in
transaction and convenience of the customers.

In India all branches of commercial banks has not under core banking solution
hence they have not extending RTGS facilities , therefore remaining banks
should adopt core banking to use the RTGS and other efficient services. RBI
has installed capacity of 150000 transactions per day but their server has only
processes 38000 transactions per day, the speed should enhance to more
transactions will take place.
 The electronic clearing and settlement system is useful to bankers and
customers but there is need of controlling non-secure transaction, EFT fraud,
mistakes in settlement etc.

Other than 6 principles (Safety, Security, Soundness, Efficiency,

Authorisation and Accessibility) used to develop payment system of the vision
document 2012-2017 there is need of international standard, transference,
user-friendly techniques, assurance and convenience also.

In the financial transaction having transactional risk it affects assurance about

the services. For this reason there is need to minimise the transactional risks in
the electronic payment system.

Our Objectives

In present work we aim to study how the different categories of banks (public,

private, co- operative and foreign) area effectively using the NEFT and RTGS

payment systems. The scope to increase participation can be deduced.

The main approach was with the following objectives -

 Performing Study on NEFT and RTGS payment systems under different

bank categories namely (Public, Private, Co-operative and Foreign banks)

to find their behavior.

Compare the volumes of transactions for the NEFT and RTGS for the Year
2012-17

Performing the Study on the overall Volumes of Transaction of the two

payment system RTGS and NEFT to check the impact of their growth.

Analysis of growth in volumes of transactions in NEFT and RTGS as

compared to other payment systems.

Methodology

There are 21 public, 19 private, 32 foreign and many cooperative banks in India.

To conduct our study we took a sample size of 20 banks having 4 categories and

each category have 5 banks in it. These banks were selected randomly to avoid
any kind of bias. Table 1 shows our sample. The data sourced by us includes

monthly volume of transactions for both NEFT and RTGS (including both

inward and outward) which was summed up to get annual values for the last two

years 2012- 13 and 2013-14. The data was sourced from the Reserve Bank of

Indias official website. We have used the notation 1, 2, 3 and 4 to denote the

bank categories for the public, private, co-operative and foreign banks

respectively. Table 2 shows the data collected for the year 2012-14 for these

banks.
Table 1: Sample containing 4 bank-categories and each having 5 banks in
it.
Table 2: Volume of transactions for NEFT and RTGS for the last two years (2012-
14) for the banks considered in the sample
Summary
The RBI plays a pivotal role in the development of Indias payment and settlement
systems for both large-value and retail payments. The central bank played a
pioneering role in automating the paper-based clearing system in the 1980s. It
introduced an electronic funds transfer system and electronic clearing services
(ECS Credit and Debit) in the 1990s. Thespecial electronic fund transfer (SEFT)
system was introduced in April 2003 (subsequently discontinued in March 2006,
after the implementation of the National Electronic Fund Transfer (NEFT) system
in November 2005) and the real-time gross settlement (RTGS) system in March
2004. The RBI operates the RTGS, which has replaced the paper-based inter-bank
clearing system and settles a sizeable volume of large-value and time-critical
customer transactions. RBI also manages the clearinghouses (for paper-based and
electronic clearing) in 17 large cities while operating the clearinghouses at four
major

Locations. It is the settlement banker in these cities. The RBI introduced the
NEFT system in November 2005. Together with ECS, this forms the electronic
retail payment infrastructure.

The National Electronic Clearing Services (NECS) system, which aims to

centralize the Electronic Clearing Service (ECS) operation and bring uniformity
and efficiency to thesystem, was implemented in September 2008. At present, the
NECS settles only credit transfers.

NEFT, RTGS & IMPS:

National Electronic Fund Transfer (NEFT):

Meaning

It is way in which you can transfer fund from any bank account to any
other bank account holder in India. NEFT is based on batch processing system.

Minimum amount Rs. 1

Maximum amount There is no upper ceiling for transferring money through
NEFT, but generally RTGS is used for transfer of Rs 2,00,000 or above

Time limit

The transactions are processed in hourly batches. There are twelve

settlements from 8 A.M. to 7 P.M. on the weekdays (Monday Friday) and six
settlements from 8 A.M. to 1 P.M. on Saturday. The maximum time consumed is 2
hours from the submitting of the transaction in a batch.

Availability

NEFT is not available on the bank holidays, RBI holiday and

Sunday.

Note

For transferring funds to Nepal, the limit is of Rs. 50, 000.

Real Time Gross Settlement (RTGS):

Meaning

It is way in which you can transfer fund from any bank account to any
other bank account holder in India in real time.

Minimum amount Rs 2,00,000

Maximum amount No limit

Time limit

The transactions are processed on order basis i.e. Real time. The RTGS
service is available from 8 A.M to 8 P.M. on the weekdays (Monday Friday) and
from 8 A.M. to 3:30 P.M. on Saturday. The transfer is instant but the bank is
allowed to take up to 2 hours for crediting the amount to the depositor account.

Availability

RTGS is not available on the bank holidays, RBI holiday and Sunday.

Immediate Payment Service (IMPS):

Meaning

It is way in which you can transfer fund from any bank account to any
other bank account holder in India anytime.

Minimum amount Rs 1

Maximum amount Banks are allowed to set their own limit for IMPS.

Time limit

It is real time. The depositor account is credited in less than 1 minute

from the submission of transaction.

Availability IMPS can be done 24X7 even on bank holidays, RBI holiday and
Sunday
Questionaries

1. Which of the following is one-to-many electronic fund settlement system?

a. NEFT
 b. RTGS

c. ECS Credit

d. ECS Debit

2. What is the full form of NEFT?

a. National Electronic Funds Transfer

b. National Electric Funds Transfer

c. National Electronic Funds Transmission

d. National Electric Funds Transmission

3. What is the significance of 'Real-time' in RTGS?

a. Funds will eventually be transmitted to beneficiary account

b. Funds will be settled in batches

c. Funds will be settled as soon as initiated

d. None of the above

4. NEFT settlement is done in -

a. hourly batches

b. real time

c. daily batches

d. none of the above

5. What is the maximum limit of funds transfer through NEFT?

 a. Rs. 50,000

b. Rs. 1 lakh

c. Rs. 2 lakh

d. There is no upper limit for NEFT

6. Which of the following is must for NEFT funds transfer?

a. Person who is transferring money has an account

b. Beneficiary / recipient has an account

c. Both (a) and (b)

d. None of the above

7. Walk-in customers can transfer money through NEFT, with a maximum limit of
-

a. Rs. 50,000

b. Rs. 1 lakh

c. Rs. 2 lakh

d. There is no such limit

8. If you transfer Rs. 2 lakh through NEFT, then how many transactions will
occur?

a. 1 transaction

b. 2 transactions

c. 4 transactions
 d. 8 transactions

9. Which of the following funds transfer systems is the fastest?

a. NEFT

b. RTGS

c. IMPS

d. AEPS

10. What is the minimum and maximum transaction limit for RTGS?

a. Rs. 1 lakh, Rs. 1 crore

b. Rs. 2 lakh, no max. limit

c. no min. limit, Rs. 2 lakh

d. no min. limit, no max. limit

11. What is the current RTGS transaction charge for funds transfer above Rs. 5
lakh (as of April 23, 2015)?

a. Rs. 30

b. Rs. 35

c. Rs. 50

d. Rs. 55
12. Which of the following is true regarding ECS Credit?

a. Single debit on payers account and Single credit in beneficiary account

b. Multiple debit on payers accounts and Single credit in beneficiary account

c. Single debit on payers account and Multiple credit in beneficiaries accounts

d. Multiple debit on payers account and Multiple credit in beneficiary account

13. Which of the following is the best example of ECS Debit?

a. Salary payment by employer

b. Pension

c. Periodic investments in Mutual Funds

d. Dividend to shareholders

14. What is the full form of IMPS?

a. Immediate Mobile Payment System

b. Instant Mobile Payment System

c. Instant Medium Payment System

d. Immediate Medium Payment System

15. Which of the following must be linked with Aadhar-card?

a. NEFT

b. RTGS

c. IMPS
 d. AEPS

Findings:

Consumers

Usually the businessman & organizations know about the RBIs new
product of NEFT/RTGS.

 Consumers usually prefer this product because it takes less time to transfer
from one account to another account in particular branch.

Another reason is that it is less costly as compare to the traditional product

& the transaction is too easy.

As per our study our non potential customer does not know about the
product because of less banking transaction & awareness also responsible
for that.

Consumers usually doing this type of transaction for transferring the funds
to another party behind that the main reason is trading of goods &
services.

Students which are our non potential customers as well as professional

also are not using these products for fees transferring & other activities.
They are using traditional products like BC/DD etc.

In NEFT/RTGS the transaction cost is low as compare to traditional products

so thats why customers choose this types of products & also it is taking
less timing & easy to transfer.

Our non potential customer not choosing these types of transaction

because of cheque book because in NEFT/RTGS transaction the basic
requirement of customer is cheque book. In student saving account
sometime they have not take cheque book from bank & also they are
 access their account through 0rs. Balance. So they are not aware as well as
they are not doing in such type of transaction.

SUGGESTIONS

Bank provides all facilities related to NEFT/RTGS so use it maximum for

fund transferring.

Any bank branches are available in any state in any city because RBI is a
nationalized bank & their products are also nationalized so that the
transaction of NEFT/RTGS is done at any place.

The procedure of transaction is simple, it requires one bank account either

it is saving or it is current account & one cheque book thats it. one
NEFT/RTGS form which requires both parties name & address with phone
number or email-id with the amount which will transfer from 1 place to
another & also a balance available in bank account & also requires a
senders PAN card number.

I suggest the bank reduce the traditional product transaction rate for
students who are using DD/BCs transactions.

I also suggest the bank that aware the customer about the new product of
the RBI through give proper guidance.

 Prepare 1 extra team for helping the customer who provides whole
knowledge about the transaction with the help of cost effectiveness.

Conclusion:
Although the old cheque clearing system still exists, but, as the people are getting
technologically advanced, they are preferring new methods of transferring funds
that save their time. NEFT and RTGS are very convenient ways of transferring
funds even in remote places in very less time. The network of both the systems is
very strong. Both the systems are linked to more than 1,00,000 bank branches.
All electronic payment options in India are growing there is good support from
all the participants.
Adoption of electronic payments brings about all around benefit to all participants
and the economy itself. It brings
cash into the banking system. Innovation, convenience, cost, awareness, legal
supports are the factors that will accelerate the enhanced usage of
electronic payments. Anticipating customer needs and be ready is more important
today... rather than just understanding the needs...
Our payment system vision should be Where ever a Physical Cheque can get
processed, electronic funds transfer
should also reach. We have the opportunity to provide the Best in the World E
payment system for our customers if we can make
NEFT run true 24*7.
 Bibliography

Bibliography

Banking industry analysis. (2016, February 3). Retrieved July 2017, from
www.b1dcity.com: http://www.b1dcity.com

Wikipedia RTGS&NEFT .Retrieved 7 2016, from wikipedia:

http://www.wikipedia.org.in

Reserve bank of India. Retrieved 7 2012, from rbi.org.in:

http://www.rbi.org.in

UCO BANK Retrieved 7 2017, from UCO BANK

http://www.UCOBANK.com

SCHINDLER, C. &. (2016). RESEARCH METHODOLOGY. In C. &. SCHINDLER,

BUSINESS RESERCH METHODS (p. 757). NEW DELHI: McGraw Hill Education
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