Title LG-DBAC INSB 2024 M4.pdf ✅

Nitte Education International Post Graduate Diploma (Banking & Finance) Digital Banking & Alternate Channels Module 4
P a g e | 1 Post Graduate Diploma (Banking & Finance) Introduction This module on Digital Banking & Alternate Channels carries three credits and has eight units. It is very important for the present-day banker to be aware of technological advancements in the banking industry and be comfortable with the use of digital banking. This module deals extensively with Digital banking and Alternate Channels. The module has been designed keeping in mind learner requirements and from the learners’ perspective. This reading material is part of the courseware provided by Nitte Education International Private Limited (hereinafter referred to as “NEIPL”) to students of the PGD(B&F) course. The proprietary rights to the material rest with “NEIPL”. No part of the reading material may be reproduced, photocopied or transmitted in any form without prior written permission of “NEIPL”. All efforts have been made to ensure the correctness of information in the reading material and to provide the latest information. However, there are bound to be changes in the industry, and NEIPL reserves the right to change and update information from time to time. NEIPL is not liable for any loss or damage arising from the use of the information provided. Reference: NEI/PGD(B&F)/2024/DBAC/INSB2.1V1
P a g e | 2 Post Graduate Diploma (Banking & Finance) Module 4 This module deals with: Payment Systems • Overview of Global and Domestic payment systems. • Changing Trends and Innovations in Payment Systems, Digital Currency. • Role of RBI & NPCI. • Cheque Deposit Machines - Features & Advantages. • POS machines & QR codes – Features and Advantages. Introduction With globalisation and competitive trade, payment and settlement systems have attained critical value. Payments and settlements can be global as well as domestic. With global payments and settlement systems, systems and methods used in the US and UK are very relevant to the Indian context. However, in this Unit, the learner will be introduced to the payment and settlement systems in India and different products and initiatives in this respect. Overview of Global and Domestic payment systems The Board for Payment and Settlement Systems (BPSS) was set up in the year 2005 by the RBI. In the year 2007 the Payments and Settlement Act was passed. A working group of IBA formulated details for setting up an apex body to oversee the payments systems in the country. Accordingly in December 2008 NPCI - National Payments Corporation of India was established as a non-profit company and later changed to a Section 8 company. India being a cash intensive country, the primary mode of payment has always been cash. The most widely used paper-based payment instrument was the cheque. Over the years there has been a concerted effort by the RBI and banks to improve and modernise the payment systems so as to make it more efficient. An increase in the volume of electronic transactions necessitated the establishment of well laid out and managed payments and settlements system. NPCI is a new entity initiative for retail payments. NFS/ RTGS/ NEFT National Financial Switch (NFS) ATMs of a bank are connected to the ATM switch. An ATM network is formed when such ATM switch of one bank is connected to the ATM switch of another bank through a central switch. In India the National Financial Switch (NFS) is the central switch connecting all switches. This service was being provided by IDBRT (Institute of Development and Research in Banking Technology, Hyderabad). The same has now been taken over by NPCI (National
P a g e | 3 Post Graduate Diploma (Banking & Finance) Payments Corporation of India). The NFS system has been diagrammatically represented below- Customer of any bank can use any of the ATMs operated by any bank provided they are a part of the common ATM network. This gives rise to two distinct types of transactions- 1. On-Us: Transaction in which customer uses same bank ATM and ATM card. 2. Off-Us: Transaction in which a customer is making use of different bank’s card and ATM e.g Bank A customer using card in Bank B’s ATM. Since all banks ATM switches are connected to each other through the NFS switch, settlement of such inter-bank transactions becomes possible. Hence inter-operability is achieved. All On-Us transactions are handled by respective banks ATM switch while NFS handles only the Off-Us transactions. Real Time Gross Settlement (RTGS) Real-time Gross Settlement System (RTGS), is a real time settlement of funds transfer individually, on an order-by-order basis. The transfer is done without netting at the point of receiving the transfer request. Since funds settlement is done in RBI’s books the same is considered final and irrevocable. Funds are credited real time and banks are expected to credit the respective beneficiary accounts instantaneously. Presently there are about one lakh plus bank-branches in around 30,000 cities/ towns which are RTGS enabled. The minimum amount that can be remitted through the RTGS mechanism has been set at ₹ 2 lakhs by the RBI. With RTGS becoming a popular and preferred medium of transaction settlement between individuals and firms, the RBI has launched the NG-RTGS - New generation RTGS which provides future date functionality, liquidity management capabilities and real time transaction monitoring and control systems. ISO 20022 messaging standards have been adopted for NG-RTGS.