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Banking In 21st Century*

(*Ashish Kumar Chaurasia, Lecturer, Faculty of Commerce, Sunbeam College ForWomen,Varanasi U.P.)

The banking industry is undergoing a rapid transformation world wide propelled by twomajor factors: global convergence and information technology. The power of information

technology is driving the banking industry as never before, leading to faster, better and

cheaper banking services. The banking sector considers no boundary in the presenteconomic scenario. Universal Banking has become a common phenomenon in the

present economic environment.

In the wake of the liberalization policies, the traditional and conservative face of Indian

banking has undergone a significant change. The Indian banking industry is undergoing a

paradigm shift in scope, context, structure, functions and governance. The information

and communication technology revolution is radically changing the operational

environment of the banks. Technology driven products have now become verycommon in the present banking arena.

Modern Age Banking Services

1. Automated Teller Machine (ATM)

It is an electronic machine, which allows the user to withdraw and lodge cash, pay bills,

request statements and other banking transactions. The customer requires ATM card and

ID No. to gain access to the machine. Some ATM cards are also debit cards, which can be

used in shops and other markets. The banking transactions such as withdrawal of cash upto the daily limits, cash deposit, transfer of funds between accounts, check balances and

request for statements etc. can be done through the ATM. As per RBI directions, acustomer can use services of any other banks ATM without paying extra service chargefrom 1st April2009.

2. Tele Banking

Tele banking facility is made available with the help of a voice response system (VRS). It

is one of the most popular products. Tele banking, i.e. the round the clock, Bank on

phone service allows the customer to enter phase via telephone. Customers can performa number of transactions from their home or office. Facilities offered by tele banking are

Information on balance, cheque book requisition, money transfer, queries on new

schemes, etc.

3. Electronic Funds Transfer (EFT)

The EFT automatically transfers money from one account to another. In this system, the

sender and the receiver of funds, may be located in different cities and may even bankwith different banks. This system also makes possible payments for credit cards, private

level cards, charge cards, etc. Payments of insurance premium, mortgage instalments are

also electronically transferred from the bank to the respective accounts periodically.

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4. ATM Card

It is issued to the customer by the bank in order to make cash withdrawals at cash

machines. It provides exchange services. This service helps the customer to withdraw

money even when the banks are closed.

5. Credit Card

The credit card is a small card containing a means of identification, such as a signatureand a small photo. These cards enable the holder to buy goods and services on credit from

different outlets. The bank receives the bills from the merchants and pays on behalf of the

cardholders. The bank charges from the customers for the services. The cardholder had

not to carry money with him when he travels or goes for purchasing.

6. Debit Card

A debit card is a plastic card which provides an alternative payment method to cash when

making purchases. Every time a person uses the debit card, the merchant, can get themoney transferred to his account from the bank of the buyer, by debiting an exact amount

of purchase from the card. To get a debit card, an individual has to open an account withthe issuing bank.

7. Point of Sale (POS) Terminal

The point of sale is initiated by using a payment card at a retail location. The POS systemidentifies the cardholders and checks whether his account has sufficient funds to cover

the purchase. This is done through the debit card. To get these cards, the customer has to

deposit money in the bank. But there is a risk in this debit card system. If the customerlosses the card, there is the danger of emptying the account with no resources for him.

8. Demat Accounts

Demat accounts have been introduced by the Securities and Exchange Board of India to

regulate and to improve stock investing. The investor opens an account called demat

account with the depository participants (DP). These DP transact business throughelectronic media. They get the shares in an electronic form. Then, they send the actual

shares to the investor. The investor has to pay charges for opening of account maintaining

and for collection. One of the major benefits is that, it requires less paper work, no loss of

share certificate, no bad deliveries, lower transaction cost, etc.

9. Online Banking

Online banking is doing banking business through home PC. The customer demandsnecessary application form through the net and the bank sends a UPP (Unique Personal

Password) for accession. The complete database that the bank has about the customers

account is available to the customer at his terminal. It also provides current balances inthe customers account on real time basis, days transaction in the account, details of cash

credit limit, drawing power, amount utilized, etc.

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10. Clearing House Automated Payment System (CHAPS)

CHAPS is an electronic messaging system in which all transactions are transmitted in

code to help reduce the risk of fraud. Under this system, customers could be assured that

local transfers of funds world be cleared on the same day, and this allows customers totreat amounts so transferred to them as cash available.

11. Electronic Data Interchange

Electronic data interchange (EDI) is an automated system of business-to-business data

exchange. Two primary areas of EDI are data interchange and electronic funds transfer

used among banks. The transfer of information related to commercial trade through the

banking system, sometimes called financial EDI, includes payment orders, remittanceinformation, statements of account and message linked to documentary payments. It will

be beneficial in areas such as inventory management, transport and distribution,

administration and cash management.

12. Society for World Wide Inter-banking Fast Transfers (SWIFT)

Swift is a computerized message system which links banks around the world. They areaiming to improve the speed and service in order to present the individual banks setting

up their own computerized messaging system in operation.

13. Digital Payment System (DPS)

Digital payment systems focus on getting a payment form a customer to a merchant. It

requires a higher level of activity and commitment from consumers and merchants. The

reward for providing such systems is very attractive. Digital payment system servicesprovider can earn profit on each sell. Main components of DPS are cyber cash, virtual

payments system and digicash.

14. Cyber Cash

Cyber cash offers a secure conduit to deliver payments between customers, merchants

and banks. Since it offers safe, efficient and inexpensive delivery of payments across theInternet practically instantaneously, it has been described as the Federal Express of the

Internet payment business. The main goal of cyber cash is to work with financial

institutions and merchants to provide an accessible and acceptable payment system on the

internet.

15. Shared Payment Network System (SPNS)

SPNS has been established at the behest of the Indian Banks Association (IBA) by IndianSwitch Company Pvt. Ltd. The participation banks issue universal cards to the customers

for transacting on this network. SPNS is offering the services like cash transactions,

across the bank payments, extended hours services, utility payments, balance inquiry,cheque deposit, point of sale facilities, etc.

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16. E-cheques

The e-cheque system uses the network services to issue and process payments that

emulate real world queuing. The payer issues a digital cheque to the payee and all the

transaction are done through the Internet. It consists of five primary facts, i.e. customers,the merchant, consumers bank, the merchants bank and the clearing process. The

consumer accesses the merchant server and the merchant server presents its goods to the

customer. The consumer selects the goods and purchases them by sending an e-cheque tothe merchant. The merchant electronically forwards the cheque to its bank. The merchant

bank forwards the e-cheque to the clearing house for en-cash. The merchants bank

updates his account. The consumers bank updates the consumers account with the

withdrawal information.

17. Real Time Gross Settlement (RTGS)

RTGS is a centralized system in which inter-bank payment instructions are settled. Real

time what this means is that banks can settle their payments to one another immediatelyand irrevocably. In this method, an electronic image of the cheque is transmitted and

based on this digitally encrypted image, the payment advice is made and the settlementdone. In addition to quicker realization of cheques for the banks customers; it is also

beneficial for banks since it lessens intra- settlement risks and volatility. It also cuts down

handling costs of cheques.

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