Banking Innovation in India
Category : Banking
Banking Innovation in India
The term "Innovation" means to make something new- The innovations in the banking field mainly depends upon rapid growth in the technology. The banking industry has became one of the developed service sector industries in India. In the last decade, India has seen a shift from traditional payment methods, i.e. cash/paper-based payments to modern electronic payment systems. On one hand innovation has increased the working efficiency of banks whereas on the other hand customers are also at an ease.
Automated Teller Machine
Automated Teller Machine (ATM) is a computerised machine that provides the customers of banks the facility of accessing their account for dispensing cash and to carry out other financial and non-financial transactions without the need to actually visit their bank branch.
The benefit of ATMs for customers
The benefits of ATM for banks
History of ATM in India
Types of ATM
Different types of ATM are us follows
(i) White Label ATM The ATMs setup, owned and operated by non-banks are called White Label ATM's. Non-banking entities have entered the business of owning ATMs where customers of different banks can withdraw or deposit cash from their respective bank accounts.
Traditionally, Bank ATMs had their respective Bank logo, like SBI ATM and all. But White Label ATM's do not have this logo, as they are setup by non-banking entities. Tata Communication Payment Solutions (TCPS), launched first white label ATM of the country at Chandrapada (Mumbai).
(ii) Brown Label ATM Brown label A.TM are those Automated Teller Machines where hardware and the lease of the ATM machine is owned by a service provider, but cash management and connectivity to banking networks is provided by a sponsor bank whose brand is used on the ATM. The 'brown label5 has come up as an alternative between bank-owned ATMs and 'white label' ATMs.
(iii) Online ATMs These ATMs are connected to the bank's database at all times and provide real time transactions online. The withdrawal limits and account balances are constantly monitored by the bank.
(iv) Offline ATMs These ATMs are not connected to bank's database- hence they have a predefined withdrawal limit fixed and customer can withdraw that amount irrespective of the balance in his account. Later on banks may charge some penalty for exceeding balance.
(v) Stand Alone ATM Stand Alone ATMs are not connected with any ATM network, hence their transactions are restricted to the ATM's branch and link branches only. The Networked ATMs, which are connected on the ATM Network,
(vi) Onsite ATMs These are ATM machines a bank branch so that: both tile physical. known as being onsite and this can be used. for several purposes.
(vii) Offsite ATMs These are the machines that are setup on a stand alone basis. This means that the bank has a place where there is only an ATM machine, then this becomes an offsite ATM. This is done to ensure that the bank reaches out to more geographical areas and that people are able to use its services even when there is no bank branch in the area.
Other Types of ATMs
New Banking Services through ATMs
The Reserve Bank of India allowed banks to extend all their banking products and services on 14th Jan. 2016 through their ATM, provided their technology allows the same. Until now banks could only extend services that were 'approved by the RBI.
These included deposits and withdrawals, PIN change, cheque book requisition, statement of account, balance enquiry, fund transfer, bill payments and railway tickets, financial products such as loans, insurance and credit cards. SBI has the largest ATM network of approx 48000 machines followed by ICICI Bank (13000), Axis Bank (12500) and HDFC Bank (12000).
ATM Insurance Policy
Automated teller machine (ATM) card holders of both public and private sector banks are eligible for accidental hospitalisation cover and accidental death cover by the card issuing bank. It ranges between Rs. 50000 to Rs. 10 Lakh.
The insurance cannot be availed for inoperative account. It is being claimed that if a person has a bank account and uses an ATM card, he is entitled to accidental insurance extended by the bank without any fee.
It is being also claimed that if someone dies within 45 days of using the ATM card, his family can claim the insurance amount.
Allocation of Insurance Amount Depending on Cards Type
Cardless Cash Facility at ATM
Bank offers this new cardless cash facility called "Cash-on-Mobile" which one can get through newly launched mobile banking application. The facility enables to withdraw cash from an ATM without using your ATM/debit card.
The service is free of cost. Customers will be able to make intra bank, mobile-to-mobile, mobile-to-account fund transfers and even Net Electronic Funds Transfer (NEFT).
Interbank Mobile Payment Service (IMPS) is a part of this mobile application. Customers can withdraw up to Rs. 5000 per day through cash-on-mobile.
National Financial Switch
The National Financial Switch facilitates routing of ATM transactions through interconnectivity between the Bank's Switches, thereby enabling the citizens of the country to utilise any ATM of a connected bank. The National Financial Switch was dedicated to the Nation on 27th Aug, 2004. The NFS helps a bank plug in its ATM network to networks of other banks.
Innovation in Fund Transfer Services
Fund transfer services allow customers to make money transfer at their comfort using integrated banking tools. Following are the innovations in fund transfer services
Cash Deposit Machines
The Cash Deposit Machine, better known as CDM is an ATM like machine that allows you to deposit cash directly into your account using the ATM cum debit card. You can use this machine to instantly credit your account without visiting the branch. The transaction receipt also gives you your updated account balance.
Some of the salient features of this product are
(i) Instant credit of cash deposit into your own account.
(ii) Quick and convenient way to deposit cash.
(iii) Paperless transaction
(iv) The per transaction limit is Rs. 49900.
(v) Upto 200 currency notes can be deposited in a single transaction.
(vi) The CDM only accepts denominations Rs. 100, Rs. 500 and Rs. 2000.
Other Services Available on the CDM
Instant Money Transfer Facility
IMT facility is a unique payment system launched in India by Empays Payment Systems, which is authorised by the Reserve Bank to enable a payment to be made to a mobile phone from a bank account. There is no requirement for the beneficiary to have a bank account. The receiver can obtain the funds immediately from any IMT enabled ATM.
The country's largest lender, State Bank of India (SBI), will allow customers to withdraw funds from its ATM without a debit card and transfer up to Rs. 10000 using a mobile phone. By launching the instant money transfer (IMT) payment system on its ATMs, the state-owned lender has enabled customers a payment up to Rs. 10000 to be made from any SBI bank account to a person using just his/her mobile number as the identifier.
Immediate Payment Service
Immediate Payment Service (IMPS) is an instant interbank electronic fund transfer service through mobile phones available 24 x 7, throughout the year including Sundays and any bank holiday.
Customers can transfer and receive funds via IMPS using their registered mobile number and Mobile Money Identifier (MMID) or Account number and IFSC code.
This facility is provided by NPCI through its existing NFS switch. The participants for IMPS will be as follows: Remitter (Sender), Beneficiary (Receiver), Banks and National Financial Switch —NPCI.
Objectives of IMPS
Mobile Money Identifier Digit
Mobile Money Identifier Digit (MMID) is a seven-digit number, issued by banks for effecting financial transactions through the user's mobile phone. The user's mobile number MMID are uniquely linked with his bank account number, and is one of the key inputs to facilitate fund transfer. Both the remitter and the beneficiary are required to have their MMIDs to effect a fund transfer through the mobile phone. A unique MMID and mobile number combination help in identifying the beneficiary's details. Multiple MMIDs can be linked to same mobile number.
Bank Card
A Bank Card is typically a plastic card issued by a bank to its clients that performs one or more of a number of services that relate to giving the client access to funds, either from the client's own bank account, or through a credit account. Cards can be classified on the basis of their issuance, usage and payment by the card holder.
Types of Card
There are several different types of cards issued by the banks which allows you to access your money. Current accounts usually include the option of an ATM card and often a debit card. Most banks offer both ATM and debit facilities on the one card. The debit card has been around since 1966, which means banks have had a lot of time to figure out new ways to charge you for using your own money.
Below are the different Payment cards and their features of each type of card for better understanding
Credit Card
A feature of a credit card is that the issuer of the card creates a line of credits (usually called a credit limit) for the cardholder on which the cardholder can draw (i.e. borrow) for payment to a merchant in making a purchase or as a cash advance to the cardholder. Most credit cards are issued by or through local banks or credit unions, but some non-bank financial institutions also offer cards directly to the public.
The credit cards are used for purchase of goods and services at Point of Sale (POS) and E-commerce (online purchase)/ through Interactive Voice Response (IVR)/Recurring transactions/ Mail Order Telephone Order (MOTO). These cards can be used domestically and internationally (provided it is enabled for international use). The credit cards can be used to withdraw cash from an ATM and for transferring funds to bank accounts, debit cards, credit cards and prepaid cards within the country.
Tit-Bits
Debit Cards
A feature of a debit card (also known as a bank card, check card or some other description) is that when a cardholder makes a purchase funds are withdrawn directly from either the cardholder's bank account or from the remaining balance on the card. In some cases, the 'cards' are designed exclusively for use on the Internet, and so there is no physical card.
The debit cards are used to withdraw cash from an ATM, purchase of goods and services at Point of Sale (POS)/E-commerce (online purchase) both domestically and internationally (provided it is enabled for international use). However, it can be used only for domestic fund transfer from one person to another.
Charge Card
A feature of a debit card (also known as a bank card, check card or some other description) is that when a cardholder makes a purchase funds are withdrawn directly from either the cardholder's bank account, or from the remaining balance on the card. In some cases, the 'cards' are designed exclusively for use on the Internet, and so there is no physical card.
ATM Card
An ATM card is any card that can be used in automated teller machines (ATMs) for transactions such as deposits, cash withdrawals, obtaining account information, and other types of transactions, often through interbank networks.
Stored Value Card
A feature of a stored value card is that a monetary value is stored on the card, and not in an externally recorded account and differs from prepaid cards where money is on deposit with the issuer similar to a debit card.
Smart Card
A smart card is a plastic card about the size of a credit card, with an embedded microchip that can be loaded with data, used for telephone calling, electronic cash payments and other applications and then it can be periodically refreshed for additional use.
RuPay Card
RuPay is an Indian domestic card scheme conceived and launched by the National Payments Corporation of India (NPCI). It was created to fulfill the Reserve Bank of India's desire to have a domestic, open loop, and multilateral system of payments in India. The Rupay card, a prepaid debit card, was launched as the Dhan Aadhaar card in December, 2011. The Unique Identification Authority of India (UIDAI) is a central government agency of India which issues a 12-digit unique identity number called Aadhaar to each resident.
Aadhaar Enabled Bank Accounts
The AEPS system leverages Aadhaar online authentication and enables Aadhaar Enabled Bank Accounts (AEBA) to be operated in anytime-anywhere banking mode through Micro ATMs. This system is controlled by the National Payments Corporation of India (NPCI). The 5 Aadhaar enabled basic types of banking transactions are: Cash Withdrawal, Cash Deposit, Aadhaar to Aadhaar Funds Transfer, Balance Enquiry and Gateway Authentication Service.
Master Card
Worldwide credit card corporation works with financial institutions to issue credit cards. The credit cards distributed by the company are done so under the MasterCard brand, which is one of the three major credit cards accepted at vendors across the world. Master Card was converted from a privately held company to a public company on 25th May, 2006.
Its principal business is to process payment between banks of merchants. All financial institutions in banks are the member of this Master Card providing international service except bank of America.
Visa Card
Visa Card is a type of debit card on Visa network. It has VISA logo and can be accepted to pay for the things and money can also be drawn directly from your account.
These are the debit cards, which are subject to a daily limit, and/or a maximum limit equal to the current/checking account balance from which it draws funds.
Kisan Gold Card
This is a hassle free term loan card that enables to avail loan for agricultural implements, land development, repair of farm machinery and consumption needs. Farmers have the choice in regard to amount, time and purpose.
The amount of loan is 5 times the annual farm income with the maximum limit of Rs. 5 lakhs. For the consumption purpose it should not exceed 20% of the limit.
Value Added Services
Value added services provided by Commercial Bank are as follows
List of Facilities Launched by Banks
|
Airtel money |
AXIS Bank +Airtel |
|
Chillr |
HDFC Bank |
|
Digital Banking ‘Pocket' |
ICICI |
|
eforex |
SBI |
|
e-KYC |
SBI |
|
EMI on Debit Card |
ICICI Bank |
|
eWallet |
IRCTC |
|
First home grown Index 'Composite Index |
SBI |
|
Kisan card |
AXIS Bank |
|
M-Pesa |
ICICI+Vodafone |
|
M-Wallet |
Canara Bank |
|
State Bank Freedom App |
State Bank of India |
|
Student Travel Card |
ICICI |
|
TAB Banking Facility |
SBI |
|
DigiLocker |
Government of India |
Indian Gold Scheme
Prime Minister Narendra Modi launched three gold related scheme viz Gold Monetisation. Scheme (GMS), Sovereign Gold Bond Scheme (SGBS) and Indian Gold Coins (IGC). These ambitious schemes were launched to reduce the physical demand for gold and fish out 20000 tonnes of the precious metal lying idle with households and institutions.
Sovereign Gold Bond Scheme (SGBS)
The purpose of the scheme is to reduce the demand for physical gold. Seeks to shift part of physical gold in form of bars and coins for investment into Demat (Dematerialised) gold bonds in order to reduce the demand for physical gold.
These gold bonds are interest bearing and will be payable in terms of grams of gold. RBI on behalf of Union Government will issue the Gold bonds in the denominations of one gram and its multiples.
These bonds are available in Demat and paper form. It can be tradable in stock exchange and can be used as collateral for loans.
Scheme tagline Invest wisely. Earn Safely.
Minimum investment 2 g of physical gold;
Maximum investment 500 g
Tenure of Gold bonds 8 yrs is maximum tenure. But there is exit option from 5th year can be exercised on interest payments dates.
Gold Monetisation Scheme (GMS)
GMS 2015 will offer option to resident Indians to deposit their precious metal and earn an interest on it and will replace the existing Gold Deposit Scheme (CDS) 1999.
All residents can invest in this scheme but are subjected to Know Your Customer (KYC) Scheme. As per Reserve Bank of India (RBI) directives all Scheduled Commercial Banks (excluding Regional Rural Banks) will implement GMS 2015. Banks are free to fix the interest rates and it will be denominated in gold.
Scheme tagline Earn, while you secure.
Deposit limit Minimum deposit at any one time of raw gold in the forms of bars, coins, jewellery excluding stones and other metals is 30 g with 995 fineness.
There is no maximum limit for the deposit.
Tenure Banks will accept gold deposits under the Short Term of Bank Deposit (STBD) of 1-3 yrs, Medium (5-7 yrs) and Long (12-15 yrs).
Indian Gold Coin
It is Indian's first ever Indian gold coin and bullion to be officially issue by Union Government. The gold coins will bear national emblem Ashok Chakra on one side and Mahatma Gandhi's engraved image on the other side.
Denominations The coins will be available in denominations of 5 g and 10 g and a 20 g bullion.
Available at 125 Metals and Minerals Trading Corporation (MMTC) of India outlets across the country. These coins and bullion are easily liquidated.
Important Bank Terms Personal Identification Number
A personal identification number (PIN number) is a numeric password used to authenticate a user to a system, in particular in associated with an ATM card.
The PIN is not printed or embedded on the card but is manually entered by the cardholder during automated teller machine (ATM) and point of sale (PoS) transactions (such as those that comply with EMV), and in card not present transactions, such as over the Internet or for phone banking.
One Time Password
It is a unique 6-character code that can only be used once and is sent only to your registered mobile number in BDO Online Banking. After encoding your user ID and password, you will also be required to enter the correct OTP to complete the login process. It serves as your second password that's unique with every login and expires 5 min after you receive it.
Card Verification Value (CVV)
Card verification value (CW) is a combination of features used in credit, debit and automated teller machine (ATM) cards for the purpose of establishing the owner's identity and minimizing the risk of fraud. The CVV is also known as the card verification code (CVC) or card security code (CSC).
On a typical credit card, there are two components to the CW. The first code is recorded by the card issuer in a magnetic stripe that runs lengthwise along the back of the card. The second code is a multidigit numeral printed flat on the card, separate from the longer, embossed account numeral. On a VISA, Master Card or Discover Card, the printed CW contains three digits and is located on the back near the signature area.
Green PIN
The Green PIN is the One Time Password (OTP) sent to the customer's mobile number with which the customer can set the debit card PIN at the bank's ATM. Apart from being convenient and time saving in both interfaces of the transaction, the system is also environment friendly. Customers will get the OTP within 48 h of application.
The facility is available in all states except Jammu and Kashmir owing to restrictions in the state on bulk SMS deliver. PNB started this facility in January, 2016.
Green Remit Card
State bank of India (SBI) launched new 'green channel' service. This facility offer paperless green banking for deposit, withdraw and remittance transactions. No need to fill up any pay in slip and cheques or sign for depositing or withdrawing money from account. Did not remember account number, only carry green remit card.
Features SBI h Green Card' is a simple magnetic stripe based card transaction through green channel counter (GCC) or cash deposit machine (CDM).
All customers are eligible for getting this card visit any GCC or CDM branch and submit simple application along with copy of one ID proof document. Bank will issue printed Green Remit Card instantly to the applicant.
Deposit Limit Transaction Limit Rs. 5000 per transaction (Monthly limit Rs. 25000). Deposit only through cash.
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