Banking OperationsTopic:Alternative Delivery Channels

Base rate as per RBISubmitted to

-Prof Abhinav JogSubmitted by-

Sneha Nayak(D2F1)

Alternative Delivery ChannelsInternet BankingMobile BankingPhone BankingATM Banking

Benefits of Internet BankingConvenience:Keeping a track of accounts

through the internet is much faster and convenient as compared to going to the bank for the same.

Better Rates:To encourage internet banking most banks offer minimum or no deposit accounts for online banking and lower penalties on early withdrawal of Fixed Deposits.

Services:Most banks provide the facility of online tax forms and tax preparation.

Mobility:Handling transactions on the move.

Challenges/IssuesBank RelationshipTransaction IssuesService IssuesSecurity

Mobile Banking Mobile banking allows customers to conduct a financial

transactions through a mobile device such as a mobile phone or tablet.

The earliest mobile banking services were offered over SMS, a service known as SMS banking. 

The Mobile Banking was introduced in 1999.

Benefits:Banking through mobile reduces the risk of

fraud. You will get an SMS whenever there is an activity in your account. 

Banking through cell phone benefits the banks too. It cuts down on the cost of tele- banking and is more economical.

Mobile banking is available round the clock 24/7/365, it is easy and convenient and an ideal choice for accessing financial services for most mobile phone owners in the rural areas.

Challenges/IssuesMobile banking users are at risk of receiving

fake SMS messages and scams.The loss of a person’s mobile device often

means that criminals can gain access to your mobile banking PIN and other sensitive information.

Modern mobile devices like Smartphone and tablets are better suited for mobile banking than old models of mobile phones and devices.

ATM Banking Invented in 1960’S by JOHN SHEPHERD-

BARRON.

FIRST USED BY BARCLAYS BANK IN 1967.

First ATM in India was set-up in 1987 by HSBC in Mumbai.

The No. Of ATM’S In India

Phone BankingAn affordable link between your bank and their touch-

tone phone24-hour accessThe ability to leave voice mail messagesThe ability to perform banking tasks you choose to

offer, including:Transferring money between accountsMaking loan paymentsIssuing stop-payment instructions

Customized messages from your financial institution promoting new products and services, current interest rates and branch information

Challenges/IssuesNot Active on Bank HolidaysAll banks do not offer 24hour service.Security IssuesFake calls

Base Rate It was introduced in the Indian banking

system on 1 July after a directive by the Reserve Bank of India.

The base rate was designed to replace the flawed benchmark prime lending rate (BPLR), which was introduced in 2003 to price bank loans on the actual cost of funds.

 Under this system, banks were subsidising corporate loans by charging high interest rates from retail and small and medium enterprise customers.

As per R.B.I Banks may determine their actual lending rates on loans

and advances with reference to the Base Rate and by including such other customer specific charges as considered appropriate. The actual lending rates charged should be transparent and consistent and be made available for supervisory review/scrutiny, as and when required.

 Banks are required to review the Base Rate at least once in a quarter with the approval of the Board or the Asset Liability Management Committees (ALCOs) as per the bank’s practice.

Most public sector banks kept their rates at 8%, while most private banks, a few government-owned banks (such as SBI) and foreign banks kept their base rates at 7.5%.

A handful of private sector and foreign banks announced a 7% base rate.

ApplicabilityWith effect from July 1, 2010, all categories of

domestic rupee loans should be priced only with reference to the Base Rate. Accordingly, the Base Rate system would be applicable for all new loans and for those old loans that come up for renewal.

Existing loans based on the BPLR system may run till their maturity. In case existing borrowers want to switch to the new system, before expiry of the existing contracts, an option may be given to them, on mutually agreed terms. Banks, however, should not charge any fee for such switch-over.

Exception:Following categories of loans could be

priced without reference to the Base Rate:(a) DRI advances(b) loans to banks’ own employees including

retired employees(c) loans to banks’ depositors against their

own deposits