G.F.G.C.

BANGARU TIRUPATHI LPB

Module:4- RECENT DEVELOPMENTS IN BANKING

Introduction - New technology in Banking – E-services – Debit and Credit cards. Internet Banking,
ATM, Electronic Fund Transfer, MICR, RTGS, NEFT, ECS – Small banks – Payment Banks – Digital
Wallet – Crypto currency – KYC norms – Basel Norms – Mobile Banking – E – Payments – E – Money.
Any other recent development in the banking sector.

Information technology is one of the most important facilitators for the transformation of the Indian
banking industry in terms of its transactions processing as well as for various other internal systems and
processes. The various technological platforms used by banks for the conduct of their day to day
operations, their manner of reporting and the way in which interbank transactions and clearing is affected
has evolved substantially over the years.
Innovations in Banking in India
Over the years, the banking sector in India has seen a number of changes. Most of the banks have begun
to take an innovative approach towards banking with the objective of creating more value for customers,
and consequently, the banks. Some of the significant changes in the Indian banking sector are discussed
below:

1. Technology for Value Creation

The use of information technology in the Indian banking sector was a corollary of the liberalization
process initiated in the country in the early 1990s...

2. Rural India Catching Up

With a majority of the Indian population living in rural areas, rural banking forms a vital component of
the Indian banking system. Besides, rural banking operations in India are rather different from urban
operations, due to the strong disparity that exists between urban and rural life, and the needs of these two
sections of people.

3. Banking Beyond Banking

While traditionally, banking meant 'borrowing and lending', in the latter part of the 20th century, the word
took on a different meaning altogether. Banks no longer restricted themselves to traditional banking
activities, but explored newer avenues to increase business and capture new markets. 4. The Changing
Face of Banking
Many analysts predict still more revolutionary changes in the banking sector in India. The chief of these
are likely to be the concept of Universal Banks and the introduction of Smart Card technology.
5. The Other Side
Although the Indian banking sector has made rapid progress particularly in the number of innovations
introduced, some analysts are skeptical about the efficacy and practical use of many of these services.

E-Banking or Internet Banking

Internet Banking refers to the banking services provided by the banks over the internet. Some of these
services include paying of bills, funds transfer, viewing account statement, etc. Banks also deliver their
latest products and services over the internet. Internet banking is performed through a computer system or
similar devices that can connect to the banking site via the internet. Nowadays, you can also use internet
banking on your mobile phones using a Wi-Fi or 3G connection. With the ease of availability of cyber
cafes in the cities, it has become quite popular.

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Banking is now no more limited in going and visiting the bank in person for various purposes like
depositing and withdrawing money, requesting for account statement, stop a payment, etc. You can do all
these tasks and many more using the online services offered by the banks. You can also keep a track of
your account transactions and balance all the time. Now getting passbooks updated to know the total
account balance is a matter of past.
E-banking is also called online banking and internet banking. E-banking is a result of the growing
expectations of bank's customers.
The activities clients are able to carry out are can be classified to as transactional and no transactional.
Non transactional activities
 Account balance viewing
 Viewing of previous bank transactions
 Bank statement downloading
 Check book ordering
 Viewing of images of paid cheques
 M banking and E banking applications downloading
 Provision of account/ bank statements

Transactional activities
 Electronic funds transfer
 Bill payments and wire transfers
 Loan application and repayments
 Buying investment products

Advantages of Internet Banking

Internet Banking has several advantages over traditional one which makes operating an account simple
and convenient. It allows you to conduct various transactions using the bank's website and offers several
advantages. Some of the advantages of internet banking are:

1. Online account is simple to open and easy to operate.

2. It is quite convenient as you can easily pay your bills, can transfer funds between accounts, etc.
Now you do not have to stand in a queue to pay off your bills; also you do not have to keep
receipts of all the bills as you can now easily view your transactions.
3. It is available all the time, i.e. 24x7. You can perform your tasks from anywhere and at any time;
even in night when the bank is closed or on holidays. The only thing you need to have is an active
internet connection.

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4. It is fast and efficient. Funds get transferred from one account to the other very fast. You can
also manage several accounts easily through internet banking.
5. Through Internet banking, you can keep an eye on your transactions and account balance all the
time. This facility also keeps your account safe. This means that by the ease of monitoring your
account at any time, you can get to know about any fraudulent activity or threat to your account
before it can pose your account to severe damage.
6. It also acts as a great medium for the banks to endorse their products and services.
The services include loans, investment options, and many others.

Disadvantages of Internet Banking

Though there are many advantages of internet banking, but nothing comes without disadvantages and
everything has its pros and cons; same is with internet banking. It also has some disadvantages which
must be taken care of. The disadvantages of online banking include the following:

1. Understanding the usage of internet banking might be difficult for a beginner at the first go.
Though there are some sites which offer a demo on how to access online accounts, but not all
banks offer this facility. So, a person who is new, might face some difficulty.
2. You cannot have access to online banking if you don’t have an internet connection; thus without
the availability of internet access, it may not be useful.
3. Security of transactions is a big issue. Your account information might get hacked by
unauthorized people over the internet.
4. Password security is a must. After receiving your password, do change it and memorize it
otherwise your account may be misused by someone who gets to know your password
inadvertently.
5. You cannot use it, in case; the bank’s server is down.
6. Another issue is that sometimes it becomes difficult to note whether your transaction was
successful or not. It may be due to the loss of net connectivity in between, or due to a slow
connection, or the bank’s server is down.
Popular services covered under E-Banking
The popular services covered under E-banking include:-
1. Automated Teller Machines,
2. Credit Cards,
3. Debit Cards,
4. Electronic Funds Transfer (EFT)

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5. National Electronic Funds Transfer (NEFT)

6. Real Time Gross Settlement(RTGS)
7. Mobile Banking,

Automated Teller Machine (ATM)

ATMs are electronic machines, which are operated by a customer himself to deposit or to withdraw cash
from bank. For using an ATM, a customer has to obtain an ATM card from his bank. The ATM card is a
plastic card, which is magnetically coded. It can be easily read by the machine.
To operate an ATM card, the customer has to inset the card in the machine. He has to enter the pass word
(number). If the authentication or pass word (number) is correct, the ATM permits a customer to make
entries for withdrawal or for deposit. On completion of the transaction, the customer's card is ejected from
the ATM.
Advantages of Automated Teller Machines (ATMs)
1. ATM provides 24 hours service
ATMs provide service round the clock. The customer can withdraw cash upto a certain a limit during any
time of the day or night.

2. ATM gives convenience to bank's customers

ATMs provide convenience to the customers. Now-a-days, ATMs are located at convenient places, such
as at the air ports, railway stations, etc. and not necessarily at the Bank's premises. It is to be noted that
ATMs are installed off-site. (away from bank premises) as well as on site (installed within bank's
premises). ATMs provide mobility in banking services for withdrawal.

3. ATM reduces the workload of bank's staff.

ATMs reduce the work pressure on bank’s staff and avoid queues in bank premises.
4. ATM provide service without any error
ATMs provide service without error. The customer can obtain exact amount. There is no human error as
far as ATMs are concerned.

5. ATM is very beneficial for travellers

ATMs are of great help to travellers. They need not carry large amount of cash with them. They can
withdraw cash from any city or state, across the country and even from outside the country with the help
of ATM.

6. ATM may give customers new currency notes

The customer also gets brand new currency notes from ATMs. In other words, customers do not get
soiled notes from ATMs.

7. ATM provides privacy in banking transactions

Most of all, ATMs provide privacy in banking transactions of the customer.

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Disadvantages of ATMs
1. ATMs may be unreliable especially when they are down. In case of system failure, there is nothing you
can do until they are restored.
2. What happens if you forget your PIN? You will have to engage in hassles with the management before
a new one is issued usually after some days.
3. In case of serious theft, you may lose the ATM card. The thieves can further hack the ATM card and be
able to withdraw cash from your account.
4. The ATM machine does not guarantee a 100% availability of cash. In some cases, it may run low of
cash and you will have to wait until it is restored by the management.
5. The cost of levied to an individual using an ATM could be higher although this vary with the banks.

DEBIT CARDS
A debit card is a plastic card that resembles credit card. Debit cards are directly linked to a
cardholder’s bank account. Whenever a card holder withdraws money from an ATM or uses the debit
card for making payments, his/her account balance is automatically reduced.

Advantages of debit cards

Consumers are increasingly using their debit cards for everyday purchases instead of cash and checks,
because they’re convenient, easy to use, can be an effective budgeting tool, and provide benefits that cash
and checks don’t offer:
1. Prepaid card
Debit card acts as a type of prepaid card. It is so, since it already has a sufficient amount of cash balance
in its holder’s bank account. It permits to carry on the value of the transaction
(i.e. purchases) to the extent of available balance in its holder’s bank account.
2. Nominal fee
Bank issuing a debit card charges an annual fee for the issuance and maintenance of card. This fee
charged is very nominal in nature. Generally, bank charges the fee on a per annum or yearly basis. Such a
fee gets automatically debited (deducted) from the debit-cardholder’s bank account. 3.Alternative to
cash
Debit card acts as an alternative mode of payment for executing various cash-related financial
transactions. It can be used for the purchases of goods and receipt of services. In its presence, there is no
need to carry a large amount of cash. Thus, it helps to avoid carrying huge amount of cash while traveling
and minimize risk of loss due to theft, damage, etc.

4. Immediate transfer of funds

Debit card ensures immediate transfer of funds in the merchant’s or dealer’s bank account. Such a transfer
of funds takes place almost instantly at the moment of purchases of goods and receipts of services. With

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its use, there is no need to visit bank’s office premise and do a manual transfer of cash in the merchant’s
or dealer’s bank account.
Thus, it saves precious time and gives ease, safety, and comfort to its holder in his or her’s finance-related
activities.
5. Instant withdrawal of cash
The debit card facilitates instant withdrawal of cash from any nearest ATM. This helps its holder to avoid
a personal visit to bank’s office premise and wait in a long time-consuming queue.
In short, it also acts as an ATM card to meet its holder’s cash-related needs, anytime and anywhere.
6. Easy to manage

Debit card is very easy to carry, handle and manage while traveling to outstations or overseas. Being
small, thin, and flat and having a negligible weight it easily fits in any pocket. It can be handled very
freely even with just two fingers. Managing it is also not a big problem.

 A cardholder must just take enough care to see to it that:

 Debit card is always covered with a thick plastic cover to avoid scratching of its sensitive surface.
 It doesn’t come in contact with contaminated water and heat.
 It doesn’t get folded accidentally; this helps to prevent its breakage.
 It is placed safely in a convenient location which one remembers. This helps to avoid it getting
misplaced and lost due to negligence.

Disadvantages of debit cards:

1. One needs to have enough money in his or her bank account to cover for the amount of purchase done.
2. One has less protection if the debit card is lost or stolen as compare to credit card.
3. Since money is debited instantly at the time of purchase, one has less protection if something goes wrong
with the purchase because bank won’t put money back into account if purchased items are not delivered,
or don’t work.

CREDIT CARDS
Credit cards are considered a boon for the ready convenience they confer on the user- you don't have to
worry about carrying enough cash when you go shopping or to a restaurant. Just flash your card, sign and
walk out. Thus the age of plastic money has finally come to India. The credit card has become a matter of
status.
A credit card in simple words is a plastic card which can be used as substitute for cash. It is widely used
by people for make payment whether it is a small sum involving buying a movie ticket or big sum like
purchasing some furniture or payment at hospitals. Banks issue it to their customers to enable them to
purchase on credit. These cards store the information relating to customers account.

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Types of credit card

1. Credit card: It is a normal card whereby a holder is able to purchase without having to pay cash
immediately. Generally a limit is set with the amount of money a cardholder can spend. Interest is
charged on the outstanding amount.
2. Charge card: Charge card is intended to serve as a convenient means of payment for goods purchased
at member establishments rather than a credit facility. There is no interest charged. Eg: Andhra bank
card.
3. Instore cards: Retailers / Companies issue the instore card. These cards have currency only at the
issuers outlet for purchasing products of the issuers companies. Eg: 5 Star Hotels, Resorts.
4. Corporate Credit card: These are issued to private and public limited companies. The transactions
made by add-on card holders are build to the main card and debits are made to the company's account.
5. Smart card: A smart card technology is also widely used by bankers to market their products.
Smartcard is a chip based card. It is a microchip which will store a monetary value. The transaction is
made using a card the value is debited the balance comes down automatically. Once the monetary value
comes down to nil, the balance is to be restored allover again. It provides communication security as it
verifies whether the signature is genuine or not. The card also recognizes different voices and compares
with the recorded original voice.

Parties to credit card holders:

1. Issuer: The banks are other card issuing institutions.
2. Card Holder: Individuals, corporate bodies etc.
3. Member establishments: Shops and service Organizations. Eg, Departmental stores, Petrol bunks.
4. Member affiliates: In case of tie-up arrangements with master card international, visa international,
these organizations allow card holders of one bank to use their cards in member establishments of
another bank.

Characteristics or features of credit card

1. Alternative to cash
Credit card is a better alternative to cash. It removes the worry of carrying various currency
denominations to pay at the trade counters. It is quite easy and way fast to use a credit card rather than
waiting for completion of cash transactions.

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As an alternative, credit card helps a cardholder to travel anywhere in the world without a need to carry an
ample amount of cash. It also reduces the possible risk of money theft and gives its user a complete peace
of mind.

2. Credit limit
The credit cardholder enjoys the facility of a credit limit set on his card. This limit of credit is determined
by the credit card issuing entity (bank or NBFC) only after analyzing the credit worthiness of the
cardholder.
 The credit limit is of two types, viz.,
 Normal credit limit, and Revolving credit limit.
Normal credit limit is usual credit given by the bank or NBFC at the time of issuing a credit card.
Revolving credit limit varies with the financial exposure of the credit cardholder.
3. Aids payment in domestic and foreign currency
Credit card aids its cardholder to make payments in any currency of choice. In other words, it gives its
holder a unique facility to make payments either in domestic (native) currency or if necessary, also in
foreign (non-native) currency, that too as and when required.
Credit card reduces the cumbersome process of currency conversion. That is, it removes the financial
complexities often encountered in converting a domestic currency into a foreign currency. It is because of
this feature, a credit cardholder can possibly make payments to merchants present in any corner of the
world.

4. Record keeping of all transactions

Credit card issuing entities like banks or NBFCs keeps a complete record of all transactions made by their
credit cardholders. Such a record helps these entities to raise appropriate billing amounts payable by their
cardholders, either on a monthly or some periodic basis.

5. Regular charges
Regular charges are basic routine charges charged by the credit card issuing entity on the usage of credit
card by its cardholder. These charges are nominal in nature.
The regular charges are primarily classified into two types, viz.,
a. Annual charges, and
b. Additional charges.
Annual charges are collected on per annum or yearly basis.
Additional charges are collected for other supplementary services provided by the credit card issuing
entity. Such services include, add-on-card (an additional credit card), issue of a new credit card, etc.

6. Grace period
The grace period is referred to those minimum numbers of additional days within which a credit
cardholder has to pay his credit card bill without any incurring interest or financial charges.

7. Higher fees on cash withdrawals

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Credit-card issuer makes charges on cash withdrawals made through credit card at the ATM outlets and
other desks. Generally, cash withdrawal fees are quite higher than fees charged by the bank or NBFC for
the other regular credit transactions. On cash withdrawn done through a credit card, interest is charged
from the same day. That is, interest is charged since the day on which cash is withdrawn. Usually, no
grace period is provided for cash transactions.

8. Additional charges for delay in payment

The credit card payment is supposed to be made within a due date as mentioned on the bill of a credit
card. If payment is not paid on time, then a credit-card issuer charges some additional costs, which are
resulted due to delay in payment. These charges are charged to compensate (recover) the interest cost,
administration cost and any other related costs bared by the credit card issuing entity.

9. Service tax
Service tax is included in the total amount charged to the credit cardholder. This mandatory service tax
imposed by the government also increases the final end cost bared by a credit cardholder. Many credit
card providers (issuing entities) have policies of reversing the service tax charged on the purchase of gas,
fuel and other similar goods.

10. Bonus points

The competition among the credit card providers is unbending (adamant). Offering various incentives is
usually a trendy (fashionable) way to improve the sale of the products in the ordinary course of business.
Following this trend, credit card providers also give bonus points on the financial value of the transactions
compiled by their customers.

11. Gifts and other offers

At a later stage (i.e. after crossing pre-determined number of bonus points) accumulated bonus points are
redeemed either by converting them into gifts, cash back offers, or any other similar compelling offers.
To collect many bonus points, the credit cardholder has to carry out a considerable number of transactions
through his credit card.
Advantages of Credit Cards
A credit card allows you to borrow money to pay for things. There will be a limit to how much you can
borrow called your credit limit. At the end of each month you can either pay off the full amount you owe
or pay defined minimum proportion of the bill by a due date. The future credit card user should carefully
study every credit card deal and revise his or her payment possibilities to suit. There are a lot of
advantages.

1. Credit card reduces need to carry cash or checks. A credit card means you don't need to carry huge
amounts of cash around and risk losing it.
2. If you make an unforeseen, large purchase, credit allows you to buy it at once and settle up later.
Besides it gives you the opportunity to spread the cost of a large payment over several months.
3. As well as convenient, accessible credit, credit companies offer consumers flexible rewards
schemes in which points earned by purchasing goods with the card can be redeemed for further
goods and services.

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4. A credit card means you can make purchases abroad without having to worry about local currency.
They have now spread worldwide.
5. Using credit cards can help you build a positive credit history. Having a good credit history is also
very important, when the credit card owner is applying for loans, rental or even jobs.
6. Many credit cards offer some type of insurance if your purchase is stolen. Some credit companies
provide extended warrantees on certain types of purchases.
7. In general, credit cards enhance our personal responsibility and independence.
8. Many of these advantages are found in the fine print of your statement that came with the credit
card. Make sure you understand how everything works because the benefits differ from card to
card.
9. Of course this only works because many people do not pay their balance at the end of the month.
If nobody carried a balance, the banks would be out of money and they unquestionably would not
offer any of those reward schemes that give you free miles or hotel rewards.
Disadvantages of credit cards:
1. The biggest disadvantage is that they are inviting cardholders to spend more money that they don’t
yet have. It is far too easy to spend more than you can afford using a credit card. Most credit cards
do not ask you to pay off your balance each month.
While this may feel like “free money” at the time, you will absolutely must to pay it off. The
longer you wait, the more money you will lose with interest which accrues every day until you
pay the balance.

2. Credit cards can be stolen, as can cash. They may be physically stolen or someone may steal your
credit card number from a website, over the phone etc. The good news
is that, unlike cash, if you find your card has been stolen and you inform your credit company
instantly, you will not pay for purchases that somebody else has made.

3. Credit cards issue a monthly spending limit. While they are mostly high, if you exceed it, you may
face even bigger charges.
4. So if a credit card is not used wisely Free Articles, people can get into debt or even bankruptcy
Difference between Debit Card and Credit cards
We all in our daily lives make use of both debit and credit cards, though both Debit and Credit Cards are
electronic plastic cards that are used as a substitute for cash. But there are many differences between the
two of them.
Credit Card Debit Card

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Credit cards are lines of credit. When

Any time you use a debit card to buy
you use a credit card, the issuer puts
something, money is deducted from your
money toward the transaction. This is a
About account. With a debit card, you can really
loan you are expected to pay back in full
only spend the money you have available
(usually within 30 days), unless you
to you.
want to be charged interest.

Not required to be connected to a

Connected To checking account. Checking or Savings Account

Monthly Bills Yes No

Application Somewhat difficult, depending on one's Easy, with basically no barrier to

Process credit score and other details. receiving a debit card.

The credit limit set by the credit issuer.

Limits increase or stay the same over However much is in the bank account
Spending Limit
time as a borrower's creditworthiness connected to the card.
changes.

If a credit card bill is not paid in full,

interest is charged on outstanding No interest is charged because no money
Interest Charged
balance. The interest rate is usually very is borrowed.
high.
Credit cards in the U.S. are not very A PIN makes them secure so long as no
secure in and of themselves because one steals the card number and PIN, and
Security many still use dated card security as long as you don't lose the card itself. If
technology. However, consumers are not the card/info is stolen, debit cards are
held liable for this poor security. very insecure.
High. If someone steals your card and
makes purchases, that money is removed
Low. Rarely held liable for fraudulent from your bank account. Investigating
Fraud this damage takes time. The longer you
activity. If you are, you are only held
Liability wait to report the fraud, the more likely
liable for a maximum of $50.
you will be held liable for your own
losses.

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Responsible credit card usage and

payment can improve one's credit rating.
Credit History Credit cards typically report account Does not affect credit history.
activity to at least one of the three major
credit bureaus on a monthly basis.

Low. Some credit card companies allow

Overdraw High "overdraft" fees. Possible to
overdrawing amount over the maximum
Fees overdraw amount over the account limit.
credit line with a fee.

In the U.S., this is uncommon, but PINs

PIN are being phased in. Usually

Electronic Funds Transfer (EFT)

Electronic funds transfer, often abbreviated as EFT, is a system of transferring money from one bank
account directly to another without any banknotes/coins changing hands. EFT refers to the computer
based systems used to perform financial transactions electronically initiated through the exchange or
transfer of money either within the same financial institution or across multiple institutions using an
electronic terminal (ATM, Point-of-Sale, Credit Card, etc), the telephone or the computer. It is also used
for both credit transfers (such as payroll payments) and debit transfers (such as mortgage payments).
Transactions are processed by the bank for payments where funds are transferred electronically from one
bank account to the billing company's bank and usually takes less than a day after the scheduled payment
date. The cost for an EFT may vary among the commercial banks.

The growing popularity of the EFT for online bill payment is paving the way for a paperless environment
where cheques, stamps, envelopes and paper bills are obsolete. The benefits of the EFT include reduced
administrative costs, increased efficiency, simplified bookkeeping and greater security.
Advantages of using the Electronic Fund Transfer:
 It is easy and convenient.
 It is fast and secure.
 It is efficient and less expensive than paper cheque payments and collections.
Disadvantages of using the Electronic Fund Transfer:
 If you enter the target account number incorrectly, there is no way to reverse the transaction since
the bank would process the transaction under the belief that the information you provided is
accurate.
 Once an amount is transferred, the bank cannot reverse a transaction.

RTGS (Real Time Gross Settlement):

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It is a system to transfer funds from one bank to another bank on a 'real time' and 'gross basis'. The
settlement in 'real time' means payment transaction is not subjected to any waiting period. The transaction
is settled as soon as processed. 'Gross settlement' means the transaction is settled on one to one basis,
without bunching or netting with any other transaction.
Once processed, the payment is final and irrevocable. This system of electronic transfer takes place with
the help of Central Bank of the country. The electronic payment system is maintained or controlled by the
Central Bank of the Country.

In India, Reserve Bank of India (RBI, Central Bank of the Country) maintains this payment network.
RTGS is the fastest possible money transfer system. 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 alphabets
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 transaction alongwith recipient's account number.
Customers can access RTGS facility between 9 a.m. to 4.30 p.m. on week days and 9.30 a.m. to 1.30 p.m.
on Saturday. This timing may also vary from bank to bank, depending upon the timings of the branches.

NEFT (National Electronic Funds Transfer):

NEFT refers to an online system for transferring funds from one financial institution to another within
India. The system was launched in November 2005 and was to inherit every bank that was assigned to the
SEFT clearing system. There is no minimum or maximum limit for fund transfer in NEFT system. The
persons or parties which have bank accounts, generally use this facility.
This facility is open even to those, who do not have bank account. The persons without bank accounts can
deposit cash at the NEFT-enabled branch with instructions to transfer funds using NEFT. A separate
Transaction Code (No. 50) has been allotted in the NEFT system to facilitate walk-in-customers to
deposit cash and transfer funds to the beneficiary.
Comparison between RTGS and NEFT:
(i) The main difference between the two is that RTGS is on gross settlement basis, NEFT is on net
settlement basis.
(ii) RTGS completes transactions in real-time while NEFT completes transactions in cycles. (iii)The
transfer in RTGS is completed on a one to one basis, while NEFT is on a deferred net basis, where
transfers are bundled and deferred for a specific time.
(iv) RTGS is a high value transfer system, handling funds worth Rs, 1, 00,000 and above, while NEFT
transfers smaller amounts below Rs. 10,000.

Mobile banking
Mobile banking is a way for the customer to perform banking actions on his or her cell phone or other
mobile device. It is a quite popular method of banking that fits in well with a busy, technologically
oriented lifestyle. It might also be referred to as M-banking or SMS banking. Mobile Banking can be

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described as a mechanism which allows customer of a financial institution to carry out various financial
transaction with the help of their mobile phones.
The amount of banking you are able to do on your cell phone varies depending on the banking institution
you use. Some banks offer only the option of text alerts, which are messages sent to your cell phone that
alert you to activity on your account such as deposits, withdrawals, and ATM or credit card use. This is
the most basic type of mobile banking.

A more involved type of mobile banking allows the user to log into his or her account from a cell phone,
and then use the phone to make payments, check balances, transfer money between accounts, notify the
bank of a lost or stolen credit card, stop payment on a check, receive a new PIN, or view a monthly
statement, among other transactions. This type of banking is meant to be more convenient for the
consumer than having to physically go into a bank, log on from their home computer, or make a phone
call. While all of this is true, some are concerned about the security of mobile banking.
Most experts advise against performing any large transactions over mobile banking, which is good advice.
However, it is equally important to use an alphanumeric password and to keep your PIN safe. Change
your password often, and do not use your pets' names, your child's name, or any birthdays. This advice
applies to all passwords, not just those used for mobile banking. Though you are logging on to a secure
server at the bank through your cell phone, you need to do your part to protect your information. For this
reason, many banks are now sending one-time use passwords for an extra step in security.

A one-time use password might be sent to a cell phone or other device when you wish to log into your
account. You will then usually need to enter both the password you have already set, along with the one-
time use password, within a certain period of time. The one-time use password expires, naturally, after it
is used once or after a time limit has passed. Using two passwords increases the security of the account,
an important concern with mobile banking.
Mobile Banking Service include:-
1. Account Balance Enquiry 2. Account
Statement Enquiries.

3. Cheque Status Enquiry.

4. Cheque Book Requests.
5. Fund Transfer between Accounts.
6. Credit/Debit Alerts.
7. Minimum Balance Alerts.
8. Bill Payment Alerts.
9. Bill Payment.
10. Recent Transaction History Requests.
11. Information Requests like Interest Rates/Exchange Rates.
Advantages of Mobile banking

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Mobile banking through cell phone offers many advantages for customers as well as banks.
Some of them are as follows: -
1. Mobile banking has an edge over internet banking. In case of online banking, you must have an
internet connection and a computer. This is a problem in developing countries. However, with
mobile banking, connectivity is not a problem. You can find mobile connectivity in the remotest of
places also where having an internet connection is a problem.
2. You can make transactions or pay bills anytime. It saves a lot of time.
3. Mobile banking thorough cell phone is user friendly. The interface is also very simple. You just
need to follow the instructions to make the transaction. It also saves the record of any transactions
made.
4. Cell phone banking is cost effective. Various banks provide this facility at a lower cost as compared
to banking by self.
5. Banking through mobile reduces the risk of fraud. You will get an SMS whenever there is an
activity in your account. This includes deposits, cash withdrawals, funds transfer etc. You will get
a notice as soon as any amount is deducted or deposited in your account.
6. Banking through cell phone benefits the banks too. It cuts down on the cost of tele- banking and is
more economical.
7. Mobile banking through cell phone is very advantageous to the banks as it serves as a guide in
order to help the banks improve their customer care services.
8. Banks can be in touch with their clients with mobile banking.
9. Banks can also promote and sell their products and services like credit cards, loans etc. to a specific
group of customers.
10. Various banking services like Account Balance Enquiry, Credit/Debit Alerts, Bill Payment Alerts,
Transaction History, Fund Transfer Facilities, Minimum Balance Alerts etc. can be accessed from
your mobile.
11. You can transfer money instantly to another account in the same bank using mobile banking.
12. It offers to banks is that it drastically cuts down the costs of providing service to the customers.
13. This new channel gives the bank ability to cross-sell up-sell their other complex banking products
and services such as vehicle loans, credit cards etc.
14. For service providers, Mobile banking offers the next surest way to achieve growth. Service
providers are increasingly using the complexity of their supported mobile banking services to
attract new customers and retain old ones.

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Limitations of Mobile Banking

Following are the various limitations of mobile banking which have kept it from being happily welcomed
by the customers as an alternate form of banking.

1. May prove costly for normal mobile holders – The customers who have no android phones or
cannot afford iPhones/BlackBerry cannot dream of complete reliance on mobile banking. Besides,
internet connection on phones may be costly depending on the phone features and network
providers.
2. Restricted scope – Mobile Banking has not been fully adopted by people as of yet because
according to the data, only 14% of Indian customers are familiar with mobile banking concepts like
P2P or person to person transactions and m-commerce transactions.
3. Non-uniformity of services – It is very important to understand that not all banks provide same
services through Mobile Banking. While 69 banks have as of May 31, 2012, been allowed to
provide mobile banking services to customers by Reserve Bank of India, there are still many in line
who are being kept out of the purview.
4. One account managed through only one number – The Telecom Regulation Authority of India
allows a person to own as many as 9 numbers but if the person has just one bank account he can
access it through only one number for mobile banking. This is very inconvenient for a user of
multiple mobile numbers.
5. Threat of virus and spams – Mobile Banking comes with a huge risk to the customer of being
under attack by a virus or even by a spam message. The customer must be very careful to analyze
whether the message sent to him seeking his password or bank information is authentic and actually
from the bank or not. Similarly, virus can attach the mobile device and cause limitations of mobile
banking errors in the software causing disturbances in transactions. Mostly, the amount of required
antivirus or firewall protection available for computers, is absent in mobile phones.
6. Risk of Unofficial mobile applications – For people who own a blackberry, android phones or
iPhones, they have another option of downloading various applications that enable mobile banking
but the customers must be careful to download only authentic apps from the official bank websites
only.
7. Theft of mobile – This is one of the major disadvantages of mobile banking. In case the mobile
gets stolen, the person is almost bound to lose money if the bank account information gets leaked
and the criminals gain access to the bank account through mobile web or mobile apps.
8. Loss of Personal Banking Experience – The mobile web helps people open up the banking
website on their mobiles and conduct simple transactions online. Working in the virtual world

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proves to be a loss of personal banking experience especially for those who find mobile banking
more complicated. A two-way communication becomes almost impossible between the customers
and the bank.
9. Discomfort due to Small Screen – Accept it or not, but mobile phones have a very small screen
compared to a laptop or a computer and this proves to be a disadvantage when doing banking
through mobiles. While, new web designs aim to take care of it, but still it is nowhere near desktops.
Even the bank websites may show up distorted on the small screen of mobile and the user may find
the whole mobile banking process very tedious.
10. Not considered for bulky or large volume of transactions – Mobile banking is not considered
an option for a very large transaction or even for a big volume of transactions due to mobile banking
rules. The total upper limit of the worth of such transactions has been limited to Rs.50, 000. This
can be a hindrance for those who need to transact for more.
It is for sure that in near future mobile banking is expected to become very popular and change the way
we do banking but currently it suffers with certain limitations and drawbacks. It is important to look into
the matter and rectify the various demerits of Mobile Banking to make it popular enough to be used
conveniently and securely by customers and bring it into rapid use from its nascent stage.

Magnetic Ink Character Recognition Code (MICR Code)

The MICR encoding called the MICR line, is at the bottom of cheques and other vouchers and typically
includes the document-type indicator, bank code, bank account number, cheque number, cheque amount,
and a control indicator. The technology allows MICR readers to scan and read the information directly
into a data-collection device. Unlike barcodes and similar technologies, MICR characters can be read
easily by humans.
Magnetic Ink Character Recognition Code (MICR Code) is a character-recognition technology used
mainly by the banking industry to ease the processing and clearance of cheques and other documents.

MICR (magnetic ink character recognition) is a technology used to verify the legitimacy or originality of
paper documents, especially checks. Special ink, which is sensitive to magnetic fields, is used in the
printing of certain characters on the original documents. Information can be encoded in the magnetic
characters.
The use of MICR can enhance security and minimize the losses caused by some types of crime. If a
document has been forged - for example, a counterfeit check produced using a color photocopying
machine, the magnetic-ink line will either not respond to magnetic fields, or will produce an incorrect
code when scanned using a device designed to recover the information in the magnetic characters. Even a
legitimate check can be rejected if the MICR reader indicates that the owner of the account has a history
of writing bad checks.

Retailers commonly use MICR readers to minimize their exposure to check fraud. Corporations and
government agencies also use the technology to speed up the sorting of documents.

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Importance of Magnetic Ink Character Recognition in Banking

Magnetic Ink Character Recognition or MICR is a character recognition technology that is mainly used in
the banking industry. This system facilitates the processing of checks and offers excellent security when
performing financial transactions. MICR uses magnetically chargeable printer ink and toner containing
iron oxide to print numbers and a special character font family. These characters are printed in special
typefaces across the bottom of all checks which includes the bank's routing number, the customer's
account number, and the check number.

The technology behind the Magnetic Ink Character Recognition is not only used in banking but is also
applicable for ticket verification in airline companies. An advantage of this system over other
computerreadable information such as bar codes is that humans are able to read MICR. The two MICR fonts
that are used worldwide are E-13B and CMC-7. Since these characters are printed with a magnetic printer ink
and toner made of iron oxide, a device known as a MICR read head translates the magnetic characters and
allows the computer to read the information even if they have been covered with signatures, cancellation
marks or other marks.

Reasons why Magnetic Ink Character Recognition is deemed important in Banking:

 Magnetic readers easily process checks because they can quickly identify the banks that issued
them. It also eliminates the need to manually verify or validate the checks. Thus, this technology
saves valuable time because it facilitates document processing more efficiently.

 Even if the MIRC line has been covered with signatures or cancellation marks, the magnetic quality
of the characters still allows the MICR read head to read the information accurately. And since the
special character font ensures reliable character recognition, it greatly limits the incidence of check
fraud.

 Before the Magnetic Ink Character Recognition system was used, it took weeks for banks to clear
checks. But now, this technology rapidly processes high volume of checks per day making bank
transactions done within minutes. The system truly makes banking a pleasant experience
for everyone.

The Magnetic Ink Character Recognition is definitely important in the banking world. It has greatly
transformed the industry into an efficient network system to serve everyone as quickly as possible. That is
why business personnel need to make sure that an ample amount of printer ink and toner containing iron
oxide is available to ensure that the MIRC system runs smoothly.

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ECS: The full form of ECS is Electronic Clearing Service. ECS is an electronic mode scheme that transfers funds from
one bank account to another, allowing for electronic credit or debit transactions linked to the account of the client.
Small banks: Small Finance Banks is a specific segment of banking created by RBI under the guidance
of Government of India with an objective of furthering financial inclusion by primarily undertaking basic
banking activities to un-served and underserved sections including small business units, small and
marginal farmers, micro and small industries and unorganized entities. Like other commercial banks,
these banks can undertake all basic banking activities including lending and taking deposits.

Payment Banks : A payments bank is like any other bank, but operating on a smaller scale without
involving any credit risk. In simple words, it can carry out most banking operations but can't
advance loans or issue credit cards.

Digital Wallet : Apple Pay, Google Pay, Phone Pay, Paytm, BHIM and Samsung Pay are probably three of
the most popular digital wallets, but there are quite a few others. Some other popular digital wallets
include PayPal and Venmo, both of which are uniquely social by allowing you to easily send money to
retailers and friends.

Crypto currency : Cryptocurrency, sometimes called crypto-currency or crypto, is any form of

currency that exists digitally or virtually and uses cryptography to secure transactions. Cryptocurrencies
don't have a central issuing or regulating authority, instead using a decentralized system to
record transactions and issue new units.

KYC norms : As part of 'Know Your Customer' (KYC) principle, RBI has issued several guidelines
relating to identification of depositors and advised the banks to put in place systems and procedures to
help control financial frauds, identify money laundering and suspicious activities, and for
scrutiny/monitoring of large value cash.
Basel Norms: The Basel norms is an effort to coordinate banking regulations across the globe, with
the goal of strengthening the international banking system. It is the set of the agreement by the
Basel committee of Banking Supervision which focuses on the risks to banks and the financial system.
E – Money :Electronic money (e-money) is broadly defined as an electronic store of monetary value on a
technical device that may be widely used for making payments to entities other than the e-money
issuer. The device acts as a prepaid bearer instrument which does not necessarily involve bank accounts in
transactions.

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