what is banking-1

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WHAT IS BANKING

The banking industry is a dynamic and significant component to individuals,corporates, small and medium businesses, national and global, economic,

socio and financial well-being. This industry cultivates financial

relationships with customers of all sizes to supply financial products and

services that stimulate economic growth, and act as a catalyst to national

and global economics. The industry players produce a variety of services

from savings accounts to home and business loans and mortgages, and

from fund mobilization to handling global mergers and acquisitions. This

industry is sensitive to regulatory, technological, and economic factors and

has its own share of challenges largely attributable to these factors. New

developing economies are changing the global landscape of economic

wealth and economic instruments and banking industry is adapting very

fast to provide new generation of innovative banking products and services.

Banking industry is adopting unique strategies to overcome these

challenges and move forward to deliver financial objectives to people and

organizations- Learn more at www.technofunc.com. Your online source for

free professional tutorials.


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INTRODUCTION OF RETAIL BANKING

Retail banking is when a bank executes transactions directly withconsumers, rather than corporations or other banks. Services offeredinclude savings and transactional accounts,mortgages, personalloans, debit cards, and credit cards. The term is generally used todistinguish these banking services from investment banking, commercialbanking orwholesale banking. It may also be used to refer to a division of abank dealing with retail customers and can also be termed as PersonalBanking services.

In the US the term Commercial bank is used for a normalbank todistinguish it from an investment bank. After the great depression, throughthe GlassSteagall Act, the U.S. Congress required that banks only engagein banking activities, whereas investment banks were limited to capitalmarkets activities. This separation was repealed in the 1990s. Commercialbank can also refer to a bank or a division of a bank that mostly deals withdeposits and loans from corporations or large businesses, as opposed toindividual members of the public (retail banking)

Definition of 'Retail Banking'

Typical mass-market banking in which individual customers use localbranches of larger commercial banks. Services offered include savings and

checking accounts, mortgages, personal loans, debit/credit cards and

certificates of deposit (CDs).
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HISTORY OF RETAIL BANKING

Basic banking services such as deposits for safe keeping, saving, orborrowing for personal or business use is as old as human civilisation.Organised banking services started in 15thand 16 century Europe, whenbanks began opening branches in commercial areas of large cities. By thelast quarter of the 19th century, banks were consolidating their branchnetworks so that they could operate in a more integrated manner(Consoli,2003). Mergers and acquisitions allowed banks to grow quickly but, in theabsence initially of information and communication technologies, theirservices remained largely local.

The policy of opening new branches continued throughout the twentiethcentury as a means of business expansion, but services were limited to theprovision of routine operations such as deposits, withdrawals and basicloan services. To cope with the increasing volume of work, and to achieveconsistency across branch networks, banks started to standardise theirrecord keeping and accounting practices. This also helped them to

effectively connect branches. Standard record keeping also resulted in theappearance of new professions such as bank clerks. The arrival of thetypewriter in the late nineteenth century helped to standardiseinternal/external communications, and other tools such as the telegraphmade communications between branches and headquarters a daily routine.
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Retail Banking-indian Scenario

Retail banking is the innovation of the 21st Century. India has experienceda rapid growth in retail banking is a banking service that is geared primarilytoward individual customer It focuses strictly on consumer markets. Retailbanking is a mass-market banking where individual customers use localbranches of larger commercial banks. The services offered by retailbanking includes saving and checking accounts, mortgages, personalloans, debit cards, credit cards etc. It takes care of the diverse bankingneeds of an individual customer. It provides banking products andservices to individuals. Retail banking contains feature like multipleproducts, channels and customer groups. Most of the I Indian banks have

been retail banks in their business composition. Retail banking in India isgrowing and the same expected in the future. The various reasons for thegrowth of retail banking in India are: * Technology. * Introduction Privateand foreign banks. * Increased competition. * Innovation in bankingproducts and services. * Economic growth. * Deregulation of interest rates.* Consumerism. * Changes in life style of working/middle class. * Focus onproductivity and profitability. * Drive towards low NPAs. * Changingconsumer demographics. Retail banking segment in the banking industry iscontinuously undergoing innovations, product reengineering, adjustments

and alignments. Indian retail banking segment includes: * Cards- credit,debit and ATM. * Housing loans. * Personal loans * Consumption loans *Education loans * Vehicle loans. * Insurance. * Demat services. * Onlineservices. Retail lending is the buzzword in India. Most banks has retail asof around 20% of their total lending portfolio and these \ are growing at anunnatural rate of 30 to 35% per annum, Retail lending has been the keyprofit driver and spectacular innovation in the banking sector in recenttimes. Retail banking used to be synonymous with savings account andfixed deposits with cheque based/deposit slip based transactions. Retailloans were usually restricted to housing loans. This has changed

considerably in the last decade, especially in India. The RBI's report onTrend and Progress of India (2003-04) has shown that the retail lendingranges between Rs.20000 to Rs. 100 Lakh, which are generally for theduration of 5-7 years with housing loans granted for H5 years. It revealssome new trends in growth of credit. There 'is upsurge in retail credit asagainst corporate advances, which may reveal itself in accumulating NPAsin * banking sector and may accentuate theindebtedness of households in


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the medium term. How- ever, with several counter-cyclical measures inplace and a vigilant central bank, there is little need for alarm, as per MinnaKumar of Sify Finance in his study titled "retail lending takes the lead' inNovember 2004. Eco- nomic growth, which is cited as one of the importantpropellers of the growth of retail banking in India, is reflected in the incomeof the households. Income can be mainly divided into consumption andsavings. Both provide fuel to the engine of retail banking. It is nowundeniable that the face of the Indian consumer is changing. This isreflected ad- equately in a change in the urban household income pattern.The direct fallout of such a change will be the consumption patterns -andhence the banking habits of Indians, which will now be skewed towardsretail products. The promise of lower transaction costs increased salesproductivity and more convenient service has lured banks into setting upnew delivery channels. The banking organizations are seeking ways to

increased automated access to a wider range of products. Thetechnological advancement has led to increase in off-site and on-sitedelivery channels, which brings new product development speed oftransaction processing and reduction in transaction cost like ATM,Telephone banking \ and Internet banking.

Features of retail banking

Consumer Banking Focus

Most retail banks focus on the needs of consumers versus commercial account holders. Teller cages

are most often dedicated to walk-in consumer patrons. Retail bank tellers are trained to focus on

consumer checking and savings needs. Branch managers are trained to offer customer-service

issues in regards to those accounts. Commercial account transactions are typically limited to on to

two separate stations dedicated to merchant accounts.Internal Promotions to Cross-Sell Services

Retail banks utilize their internal and external space to promote and cross-sell services. Inside of the

bank, customers will see standing floor signs to promote interest rates on mortgages and savings

accounts. Desks that house deposit slips are typically topped with brochures about various checking

and savings instruments. Tellers might even wear a badge or button that states "ask me about " to

promote new services.


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CRM Practices

Customer Relationship Management (CRM) techniques are growing in application among most

major retail banks. Websites assist and guide current and prospective customers to branch

locations. Site visitors are offered the opportunity to provide feedback about their online banking

experiences as well as their on-site banking experiences. Retail banks use this information to track

and monitor customer satisfaction, gauge the feasibility for new products and services, and to

identify areas for improvement of the customer service experience inside of branches.

Extended Hours, Services, Locations

Retail banks are often governed by state banking regulations in terms of hours of operation. Banks

deploy savvy strategies to make sure that no opportunity is missed to service customers. Most

understand that customer's hours may not match bank hours. As a result, most retail banks have

ATM machines that can accommodate every banking need from making a deposit and inquiring

about account balances, to transferring funds between checking and savings accounts. Banks are

now also offering their services inside of major grocery stores, retail super stores, gas stations and

convenience stores, to make their services accessible on a 24-hour basis so customers have "touch

point" access to retail banking services near where they work, live and shop.

New Customer Incentives

Retail banks have a major marketing mission to increase new customers. They utilize many

advertising tactics and strategies to achieve their new customer goals. This often includes broadcast

television and radio advertising, print and magazine advertising, and public relations efforts to

sponsor national and local events. Some retail banks will provide a cash reward up to several

hundred dollars to open a new account. The overall goal is to increase new accounts, among both

prospective and existing customers. Banks capture information to rate and rank new customers viainformation furnished on credit applications to assess credit worthiness and approve new account

applications.


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Challenges And Opportunities

Retail banking in India has vast opportunities and challenges. The rise ofthe middle class is an important contributory factor in this regard. Improvingcon- sumer purchasing power, coupled with more liberal attitudes towardpersonal debt is contributing to India's retail banking segment. Increase inpurchasing power of the younger population would give an immense op-portunity. It has been found that younger generation is more comfortable in

acquiring debt than the previous generation, thereby improving-purchasingpower and liberal attitude towards personal debt, and contributing to India'sretail segment. The SEZs will also provide growth opportunity for retailbanking. The combination of these factors promises growth in the retailsector, which at present is in the nascent stage. As retail banking offersphenomenal opportunities for growth, the challenges are equally daunting.The retail banks have to market their products aggressively. The challengeis to design and innovate the financial products which cater to the targetsegment needs. In future, retail banking scenario will see a hugeproliferation of products. This will in turn require devising product which is

easy to understand and at the same time meet the financial goals of thecustomers. The entry of new generation private sector banks has changedthe entire scenario. The retail segment, which was earlier ignored, is nowthe the most important of the lot, with the banks jumping over one anotherto give out retail loans. With supply far exceeding demand it has been arace to the bottom, with the banks undercutting one another. The nimblefooted new generation private sector banks have been losing business tothe private sector banks in this segment. PSBs need to figure out themeans to generate profitable business from this segment. Another major

challenge in retail banking is attraction as well as retention of customers. Infact, the retention is more difficult in this competitive environment.Customer retention favor- ably affects the profitability. According to aresearch by Reich held and Sasser in the Harvard Business Review, 5%increase in customer retention can increase profitability by 35% inbanking business, 50% in insurance and brokerage, and 125% in theconsumer credit card market. Thus, banks need to focus on customer


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retention. Sustainability is another issue, which is becoming increasinglyvital with respect to the growth of retail banking in India, due to excessiveconcentration on the top-line without regard to the quality of growth of thetop-line, increasing market share by increasing risk appetite and enteringthe markets where a bank may not have a competitive advantage.

Technology has made it possible to deliver services throughout the branchbank network, providing instant updates to checking accounts and rapidmovement of money. However this dependency on the network hasbrought IT departments additional respon- sibilities and challenges inmanaging, maintaining and optimizing the performance of retail bankingnetworks. The network challenges includes proper functioning of distributednetworks in support of business objectives. Specific challenges includeensuring that account transaction applications run efficiently between the

branch offices and data centers. Another issue of concern is the risingindebtness, which could affect the future growth of retail banking. Thebanks will also have to shore up the image of their brand. A bank has tobuild its brand by clearly communicating what it stands for and ensure thatthe brand image is consistently conveyed to its customers. This would callfor seamless integration of all channels to ensure optimum customersatisfaction, regardless of the channel being used. Most of the retail banksare witnessing a tremendous expansion in their customer base.

However, on the other hand there is increasing menace of hacking,

phasing and farming through which scamsters are creating havoc indulgingin cyber crimes on a large scale. In a service industry the value can bedeliv- ered at the moment of interaction with the customers. Banks, in adrive to carry on with tremendous expansion in terms of customer base,need to have requirements of the employees who are well informed aboutthe products as well as have the necessary soft skills to deal and satisfythe customers. It challenges for the bank to upgrade their existingmanpower and retention or lock in the best talents for having competitiveadvantage in terms of human resources.


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SERVICES PROVIDED TO CUSTOMER

1. DEMAT ACCOUNT :

In India, shares and securities are held

electronically in a Dematerialized (or "Demat") (/dimt/;) account, insteadof the investor taking physical possession of certificates. A Dematerializedaccount is opened by the investor while registering with an investmentbroker(or sub-broker). The Dematerialized account number is quoted forall transactions to enable electronic settlements of trades to take place.Every shareholder will have a Dematerialized account for the purpose oftransacting shares.

Access to the Dematerialized account requires an internet password and atransaction password. Transfers or purchases ofsecuritiescan then be

initiated. Purchases and sales of securities on the Dematerialized accountare automatically made once transactions are confirmed and completed
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BENEFITS OF DEMAT ACCOUNT

The benefits of demat are enumerated[by whom?] as follows:

Easy and convenient way to hold securities

Immediate transfer of securities

No stamp duty on transfer of securities Safer than paper-shares (earlier risks associated with physical

certificates such as bad delivery, fake securities, delays, thefts etc. aremostly eliminated)

Reduced paperwork for transfer of securities Reduced transaction cost No "odd lot" problem: even one share can be sold

Change in address recorded with a DP gets registered with allcompanies in which investor holds securities eliminating the need tocorrespond with each of them separately.

Transmission of securities is done by DP, eliminating the need fornotifying companies.

Automatic credit into demat account for shares arising out of bonus/split,consolidation/merger, etc.

A single demat account can hold investments inboth equity and debt instruments.

Traders can work from anywhere (e.g. even from home).

Benefit to the company

The depository system helps in reducing the cost of new issues due to

lower printing and distribution costs. It increases the efficiency of theregistrars and transfer agents and the secretarial department of acompany. It provides better facilities for communication and timely serviceto shareholders and investors.
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Benefit to the investor

The depository system reduces risks involved in holding physicalcertificates, e.g., loss, theft, mutilation, forgery, etc. It ensures transfer

settlements and reduces delay in registration of shares. It ensures fastercommunication to investors. It helps avoid bad delivery problems due tosignature differences, etc. It ensures faster payment on sale of shares. Nostamp duty is paid on transfer of shares. It provides more acceptability andliquidity of securities.

Benefits to brokers

It reduces risks of delayed settlement. It ensures greater profit due toincrease in volume of trading. It eliminates chances of forgery or baddelivery. It increases overall trading and profitability. It increasesconfidence in their investors.
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DEMERITS OF DEMAT ACCOUNT

Trading in securities may become uncontrolled in case of dematerializedsecurities.

It is incumbent upon the capital market regulator to keep a close watchon the trading in dematerialized securities and see to it that trading doesnot act as a detriment to investors.

For dematerialized securities, the role of key market players such asstock-brokers needs to be supervised as they have the capability ofmanipulating the market.

Multiple regulatory frameworks have to be conformed to, including theDepositories Act, Regulations and the various Bye-Laws of variousdepositories.

Agreements are entered at various levels in the process ofdematerialization. These may cause worries to the investor desirous ofsimplicity.

There is no provision to close a demat account, which is having illiquidshares. The investor cannot close the account and he and hissuccessors have to go on paying the charges to the participant, likeannual folio charges etc.

Most of the Indian investors are laymen and do not know theseriousness of not closing the dp account, after liquidating the holdings.Many DPs are going on charging dp charges to such dp accounts withnil holdings.


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2. CREDIT CARD:

A credit card is a payment card issued to users as asystem ofpayment. It allows the cardholder to pay for goods and servicesbased on the holder's promise to pay for them.[1]The issuer of the cardcreates a revolving account and grants a line of credit to the consumer(orthe user) from which the user can borrow money for payment toamerchant or as a cash advance to the user.

A credit card is different from a charge card: a charge card requires thebalance to be paid in full each month.[2]In contrast, credit cards allow theconsumers a continuing balance of debt, subject to interest being charged.

A credit card also differs from acash card, which can be used like currencyby the owner of the card. A credit card differs from a charge card also inthat a credit card typically involves a third-party entity that pays the sellerand is reimbursed by the buyer, whereas a charge card simply deferspayment by the buyer until a later date.

The size of most credit cards is 3 2 in (85.60 53.98 mm),[3]conforming to theISO/IEC 7810 ID-1 standard. Credit cardshave an embossed bank card numbercomplying with theISO/IEC7812 numbering standard.
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PROCESS OF CREDIT CARD

Credit cards are issued by a credit card issuer, such as a bank or creditunion, after an account has been approved by the credit provider, afterwhich cardholders can use it to make purchases at merchants acceptingthat card. Merchants often advertise which cards they accept bydisplaying acceptance marks generally derived from logos or maycommunicate this orally, as in "We take (brands X, Y, and Z)" or "We don'ttake credit cards".

When a purchase is made, the credit card user agrees to pay the card

issuer. The cardholder indicates consent to pay by signing areceipt with arecord of the card details and indicating the amount to be paid or byentering a personal identification number(PIN). Also, many merchants nowaccept verbal authorizations via telephone and electronic authorizationusing the Internet, known as a card not present transaction (CNP).

Electronic verification systems allow merchants to verify in a few secondsthat the card is valid and the credit card customer has sufficient credit tocover the purchase, allowing the verification to happen at time of purchase.The verification is performed using a credit card payment terminal orpoint-

of-sale (POS) system with a communications link to the merchant'sacquiring bank. Data from the card is obtained from a magneticstripe orchip on the card; the latter system is called Chip and PIN inthe United Kingdom and Ireland, and is implemented as an EMV card.

Forcard not present transactions where the card is not shown (e.g., e-commerce, mail order, and telephone sales), merchants additionally verifythat the customer is in physical possession of the card and is theauthorized user by asking for additional information such as the securitycode printed on the back of the card, date of expiry, and billing address.

Each month, the credit card user is sent a statement indicating thepurchases undertaken with the card, any outstanding fees, and the totalamount owed. In the US, after receiving the statement, the cardholder maydispute any charges that he or she thinks are incorrect (see 15U.S.C. 1643, which limits cardholder liability for unauthorized use of acredit card to $50). The Fair Credit Billing Act gives details of the USregulations. The cardholder must pay a defined minimum portion of the
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amount owed by a due date, or may choose to pay a higher amount up tothe entire amount owed which may be greater than the amount billed. Thecredit issuer charges interest on the unpaid balance if the billed amount isnot paid in full (typically at a much higher rate than most other forms ofdebt). In addition, if the credit card user fails to make at least the minimumpayment by the due date, the issuer may impose a "late fee" and/or otherpenalties on the user. To help mitigate this, some financial institutions canarrange for automatic payments to be deducted from the user's bankaccounts, thus avoiding such penalties altogether as long as the cardholderhas sufficient funds.

Many banks now also offer the option of electronic statements, either in lieuof or in addition to physical statements, which can be viewed at any time bythe cardholder via the issuer's online banking website. Notification of theavailability of a new statement is generally sent to the cardholder's emailaddress. If the card issuer has chosen to allow it, the cardholder may haveother options for payment besides a physical check, such as an electronictransfer of funds from a checking account. Depending on the issuer, thecardholder may also be able to make multiple payments during a singlestatement period, possibly enabling him or her to utilize the credit limit onthe card several times over.
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PARTIES INVOLVED

Cardholder: The holder of the card used to make a purchase;the consumer.

Card-issuing bank: The financial institution or other organization thatissued the credit card to the cardholder. This bank bills the consumer forrepayment and bears the risk that the card is used fraudulently.

American Express and Discover were previously the only card-issuingbanks for their respective brands, but as of 2007, this is no longer the

case. Cards issued by banks to cardholders in a different country areknown as offshore credit cards.

Merchant: The individual or business accepting credit card payments forproducts or services sold to the cardholder.

Acquiring bank: The financial institution accepting payment for theproducts or services on behalf of the merchant.
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Independent sales organization: Resellers (to merchants) of theservices of the acquiring bank.

Merchant account: This could refer to the acquiring bank or theindependent sales organization, but in general is the organization that

the merchant deals with. Credit Card association: An association of card-issuing banks such

as Discover, Visa, MasterCard, American Express, etc. that settransaction terms for merchants, card-issuing banks, and acquiringbanks.

Transaction network: The system that implements the mechanics of theelectronic transactions. May be operated by an independent company,and one company may operate multiple networks.

Affinity partner: Some institutions lend their names to an issuer to attractcustomers that have a strong relationship with that institution, and get

paid a fee or a percentage of the balance for each card issued usingtheir name. Examples of typical affinity partners are sports teams,universities, charities, professional organizations, and major retailers.

Insurance providers: Insurers underwriting various insurance protectionsoffered as credit card perks, for example, Car Rental Insurance,3. DEBIT CARD:

A debit card (also known as a bank card orcheck

card) is a plastic payment card that provides the cardholder electronicaccess to his or herbank account(s) at a financial institution. Some cardshave astored value with which a payment is made, while most relay amessage to the cardholder's bank to withdraw funds from a payee'sdesignated bank account. The card, where accepted, can be used insteadofcash when making purchases. In some cases, the primary accountnumberis assigned exclusively for use on the Internet and there is nophysical card.[1][2]

In many countries, the use of debit cards has become so widespread that

their volume has overtaken or entirely replaced cheques and, in someinstances, cash transactions. The development of debit cards, unlike creditcards and charge cards, has generally been country specific resulting in anumber of different systems around the world, which were oftenincompatible. Since the mid-2000s, a number of initiatives have alloweddebit cards issued in one country to be used in other countries and allowedtheir use for internet and phone purchases.
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Unlike credit and charge cards, payments using a debit card areimmediately transferred from the cardholder's designated bank account,instead of them paying the money back at a later date.

Debit cards usually also allow for instant withdrawal of cash, acting as

the ATM card for withdrawing cash. Merchants may alsooffercashback facilities to customers, where a customer can withdraw cashalong with their purchase.

TYPES OF DEBIT CARD

There are currently three ways that debit card transactions are

processed:EFTPOS(also known as online debitorPIN debit), offlinedebit (also known as signature debit) and theElectronic Purse CardSystem.[3]One physical card can include the functions of all three types, sothat it can be used in a number of different circumstances.

Although many debit cards are of the Visa orMasterCard brand, there aremany other types of debit card, each accepted only within a particularcountry or region, for example Switch(now: Maestro) and Solo in the UnitedKingdom, Interac in Canada, Carte Bleue in France,Laserin Ireland, ECelectronic cash (formerly Eurocheque) in Germany, UnionPay in

China,RuPay in India and EFTPOS cards in Australia and New Zealand.The need forcross-border compatibility and the advent of the euro recentlyled to many of these card networks (such as Switzerland's "EC direkt",

Austria's "Bankomatkasse" and Switch in the United Kingdom) being re-branded with the internationally recognised Maestro logo, which is part ofthe MasterCard brand. Some debit cards are dual branded with the logo ofthe (former) national card as well as Maestro (for example, EC cards in
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Germany, Laser cards in Ireland, Switch and Solo in the UK, Pinpas cardsin the Netherlands, Bancontact cards in Belgium, etc.). The use of a debitcard system allows operators to package their product more effectivelywhile monitoring customer spending.

4. ATM:

"Cash machine" redirects here. For the Hard-Fi song, see CashMachine.
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An NCR Personas 75-Series interior, multi-function ATM in the UnitedStates
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Smaller indoor ATMs dispense money inside convenience stores and otherbusy areas, such as this off-premise Wincor Nixdorfmono-function ATM inSweden

An automated orautomatic teller machine (ATM)(American, Australian and Indian English), also known as an automatedbanking machine (ABM) (Canadian English), cashmachine, cashpoint, cashline orhole in the wall(British and Hiberno-

English), is a computerized telecommunications device that enablesthe clients of a financial institution to perform financial transactions withoutthe need for a cashier, human clerk orbank teller. ATMs are known byvarious other names includingATM machine, automated bankingmachine and various regional variants derived from trademarks on ATMsystems held by particular banks.

On most modern ATMs, the customer is identified by inserting aplastic ATM card with amagnetic stripe or a plastic smart card witha chip that contains a unique card number and some security information

such as an expiration date orCVVC (CVV). Authentication is provided bythe customer entering a personal identification number(PIN). The newestATM at Royal Bank of Scotland operates without a card to withdraw cashup to 100.

Using an ATM, customers can access their bank accounts in order tomake cashwithdrawals, debit card cash advances, and check their accountbalances as well as purchase pre-paid mobile phone credit. If the currency
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being withdrawn from the ATM is different from that which the bank accountis denominated in (e.g.: Withdrawing Japanese Yen from a bank accountcontaining US Dollars), the money will be converted at an officialwholesale exchange rate. Thus, ATMs often provide one of the bestpossible official exchange rates for foreign travellers, and are also widelyused for this purpose
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E-BANKING

Online banking (orInternet banking orE-banking) allows customers ofa financial institution to conduct financial transactions on a secure websiteoperated by the institution, which can be a retail orvirtual bank, creditunion orbuilding society.

To access a financial institution's online banking facility, a customer havingpersonal Internet access must register with the institution for the service,and set up some password (under various names) for customer verification.

The password for online banking is normally not the same as for telephonebanking. Financial institutions now routinely allocate customer numbers(also under various names), whether or not customers intend to accesstheir online banking facility. Customer numbers are normally not the sameas account numbers, because a number of accounts can be linked to theone customer number. The customer will link to the customer number anyof those accounts which the customer controls, which may be cheque,savings, loan, credit card and other accounts. Customer numbers will alsonot be the same as any debit or credit card issued by the financialinstitution to the customer.

To access online banking, the customer would go to the financialinstitution's website, and enter the online banking facility using thecustomer number and password. Some financial institutions have set upadditional security steps for access, but there is no consistency to theapproach adopted.
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Advantages of e-banking

View balances: Checking your balance doesn't require much work. Yousimply select Account balances and take a look at your balance and pasttransactions. If you have more than one account, you can also dotransfers between accounts.

Pay bills: To pay your bills online, you just need to add to your accountthe names of the companies you wish to pay bills to. In the Pay Billssection, select Add payees, search for the name of the company and fillin the account number for each company. You can also sign up for the E-bills service that sends you a bill by e-mail instead of a printed one byregular mail.

Transfer funds: When you select Transfer Funds, you'll be asked whereto transfer the money to and from, when, and the amount.

Set up recurring bill payments or transfers: If you make a regularpayment every month, it might be convenient to set up an automaticwithdrawal from your account.

Monitor CIBC investments: If you have any CIBC investments, you cankeep an eye on those stocks or mutual funds here.

Send and receive an INTERAC e-TransferTM2: This could be the end ofthe birthday cheque! You can receive transfers from other people'saccounts, or set up transfers from your account to someone else's. Therecipient will get an e-mail notifying them of the transaction.

View CIBC VISA* accounts: Always a good place to monitor yourspending. You can make your credit card payments online, right fromyour account.

Order cheques: We don't need them much anymore due to onlinebanking and debit purchases, but if you still use cheques, you can orderthem directly from the CIBC website.


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Take control

Online banking helps you become more of a banker, running your accounts

like a small business that you control every day. Once you get started,you'll be hooked. Soon enough you'll be checking your bank account asoften as your e-mail

SERVICES OF E-BANKING

1. RTGS:

Real time gross settlement systems (RTGS) are funds transfersystems where transfer ofmoney orsecurities[1]takes place fromonebank to another on a "real time" and on "gross" basis. Settlement in"real time" means payment transaction is not subjected to any waitingperiod. The transactions are settled as soon as they are processed. "Grosssettlement" means the transaction is settled on one to one basis withoutbunching or netting with any other transaction. Once processed, paymentsare final and irrevocable.

An efficient national payment system reduces the cost of exchanging goodsand services, and is indispensable to the functioning of the interbank,money, and capital markets. A weak payment system may severely dragon the stability and developmental capacity of a national economy; itsfailures can result in inefficient use of financial resources, inequitable risk-sharing among agents, actual losses for participants, and loss of
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confidence in the financial system and in the very use of money[2]Technicaleffciency of the payment system is important for development of aneconomy.

CENTRAL BANKS AND RTGS

This "electronic" payment system is normally maintained or controlled bythe central bank of a country. There is no physical exchange of money; thecentral bank makes adjustments in the electronic accounts of Bank A andBank B, reducing the amount in Bank A's account by $100,000 andincreasing the amount of Bank B's account by the same. The RTGSsystem is suited for low-volume, high-value transactions. It lowers

settlement risk, besides giving an accurate picture of an institution'saccount at any point of time. Such systems are an alternative to systems ofsettling transactions at the end of the day, also known as the net settlementsystem such as BACS. In the net settlement system, all the inter-institutiontransactions during the day are accumulated. At the end of the day, theaccounts of the institutions are adjusted. The implementation of RTGSsystems by central banks throughout the world is driven by the goal tominimize risk in high-value electronic payment settlement systems. In anRTGS system, transactions are settled across accounts held at a central

bank on a continuous gross basis. Settlement is immediate, final andirrevocable. Credit risks due to settlement lags are eliminated. The bestRTGS national payment system cover up to 95% of high-value transactionswithin the national monetary market.

The World Bank has been paying increasing attention to payment systemdevelopment as a key component of the financial infrastructure of acountry, and has provided various form of assistance to over 100 counrites.
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Most of the RTGS systems in place are secure and have been designedaround international standards and best practices.[3]Several reasons existfor central banks for RTGS adoption decisions to include counterparts inthe system. First, decision to adopt is influenced by competitive pressurefrom the global financial markets. Second, it is more beneficial to adopt anRTGS system for central bank when this allows access to a broad systemof other countries' RTGS systems. Third, it is very likely that the knowledgeacquired through experiences with RTGS systems spills over to othercentral banks and helps them make their adoption decision. Fourth, centralbanks do not necessarly have to install and develop RTGS themselves. By1985 only 3 central banks had implemented RTGS system. At the end of2005, the use of RTGS systems had diffused to 90 central banks.

2. NEFT:

National Electronic Funds Transfer (NEFT) is a nation-widepayment system facilitating one-to-one funds transfer. Under this Scheme,individuals, firms and corporates can electronically transfer funds from anybank branch to any individual, firm or corporate having an account with anyother bank branch in the country participating in the Scheme.

Are all bank branches in the country part of the NEFT funds transfernetwork?

For being part of the NEFT funds transfer network, a bank branch has tobe NEFT- enabled. The list of bank-wise branches which are participatingin NEFT is provided in the website of Reserve Bank of India.

Who can transfer funds using NEFT?
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Individuals, firms or corporates maintaining accounts with a bank branchcan transfer funds using NEFT. Even such individuals who do not have abank account (walk-in customers) can also deposit cash at the NEFT-enabled branches with instructions to transfer funds using NEFT. However,such cash remittances will be restricted to a maximum of Rs.50,000/- pertransaction. Such customers have to furnish full details including completeaddress, telephone number, etc.NEFT, thus, facilitates originators orremitters to initiate funds transfer transactions even without having a bankaccount.

Who can receive funds through the NEFT system?

Individuals, firms or corporates maintaining accounts with a bank branchcan receive funds through the NEFT system. It is, therefore, necessary forthe beneficiary to have an account with the NEFT enabled destination bankbranch in the country.

The NEFT system also facilitates one-waycross-border transfer of fundsfrom India to Nepal. This is known as the Indo-Nepal Remittance FacilityScheme. A remitter can transfer funds from any of the NEFT-enabledbranches in to Nepal, irrespective of whether the beneficiary in Nepalmaintains an account with a bank branch in Nepal or not. The beneficiarywould receive funds in Nepalese Rupees. Further details on the Indo-NepalRemittance Facility Scheme are available on the website of Reserve Bankof India..

Is there any limit on the amount that could be transferred usingNEFT?


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No. There is no limit either minimum or maximum on the amount offunds that could be transferred using NEFT. However, maximum amountper transaction is limited to Rs.50,000/- for cash-based remittances andremittances to Nepal.

How does the NEFT system operate?

Step-1 : An individual / firm / corporate intending to originate transfer of

funds through NEFT has to fill an application form providing details of thebeneficiary (like name of the beneficiary, name of the bank branch wherethe beneficiary has an account, IFSC of the beneficiary bank branch,account type and account number) and the amount to be remitted. Theapplication form will be available at the originating bank branch. Theremitter authorizes his/her bank branch to debit his account and remit thespecified amount to the beneficiary. Customers enjoying net banking facilityoffered by their bankers can also initiate the funds transfer request online.Some banks offer the NEFT facility even through the ATMs. Walk-incustomers will, however, have to give their contact details (complete

address and telephone number, etc.) to the branch. This will help thebranch to refund the money to the customer in case credit could not beafforded to the beneficiarys bank account or the transaction is rejected /returned for any reason.

Step-2 : The originating bank branch prepares a message and sends themessage to its pooling centre (also called the NEFT Service Centre).


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Step-3 : The pooling centre forwards the message to the NEFT ClearingCentre (operated by National Clearing Cell, Reserve Bank of India,Mumbai) to be included for the next available batch.

Step-4 : The Clearing Centre sorts the funds transfer transactionsdestination bank-wise and prepares accounting entries to receive fundsfrom the originating banks (debit) and give the funds to the destinationbanks(credit). Thereafter, bank-wise remittance messages are forwarded tothe destination banks through their pooling centre (NEFT Service Centre).

Step-5 : The destination banks receive the inward remittance messagesfrom the Clearing Centre and pass on the credit to the beneficiarycustomers accounts.

3.ECS:

Electronic Clearance Service (ECS)The Electronic Clearance Service (ECS) scheme provides an alternativemethod of effecting bulk payment transactions like periodic (monthly/quarterly/ half-yearly/ yearly) payments of interest/ salary/ pension/

commission/ dividend/ refund by Banks/Companies /Corporations/Government Departments. The transactions under this scheme move froma single User source (i.e. Banks/Companies /Corporations /GovernmentDepartments) to a large number of Destination Account Holders(Customers/Investors). This scheme obviates the need for issuing andhandling paper instruments and thereby facilitates improved customerservice by the Banks and Companies/Corporations/GovernmentDepartments effecting bulk payments.The Scheme is in operation at 15 centres where Reserve Bank of Indiamanages Clearing Houses, 21 centres where SBI is managing ECS on

behalf of RBI and 29 other centres where PNB and other banks aremanaging ECS on behalf of RBI.The ECS is being offered in the Department of Posts in connection withpayment of monthly interest under Monthly Income Scheme (MIS). TheDepartment of Posts introduced ECS scheme on a pilot basis in MumbaiCity on 9th August 2003. Under ECS, the depositors have the facility ofgetting MIS interest automatically transferred and credited into their SB


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account on the due dates at the designated Bank of their choice. Currently,the service is available in the Department of Posts at 15 RBI locations and21 SBI locations as given below.

TYPES OF ECS

ECS (Credit)

ECS Credit is used for affording credit to a large number of beneficiarieshaving accounts with bank branches at various locations within the

jurisdiction of a ECS Centre by raising a single debit to an account of abank (that maintains the account of the user institution). ECS Creditenables payment of amounts towards distribution of dividend, interest,salary, pension, etc., of the user institution

ECS (Debit)

ECS Debit is used for raising debits to a large number of accountsmaintained with bank branches at various locations within the jurisdiction of


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a ECS Centre for single credit to an account of a bank (that maintains theaccount of the user institution). ECS Debit is useful for payment oftelephone / electricity / water bills, cess / tax collections, loan instalmentrepayments, periodic investments in mutual funds, etc., that are periodic orrepetitive in nature and payable to the user institution.

Precautions taken while fill up ECS mandate form

Please fill up 15 digit account number excluding the fifth digit whilesubmitting the ECS (debit) mandate form, in case of you are maintainingaccount with our CBS branch..

For example :If account number as appearing on the cheque book is 1234 0120 89899991 (16 digits) the account number for ECS purpose will be as under :


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3. SWIFT:

SWIFT (Society for Worldwide Interbank FinancialTelecommunication)provides a network that enables financial institutionsworldwide to send and receive information about financial transactions in asecure, standardized and reliable environment. Swift also sellssoftware andservices to financial institutions, much of it for use on the SWIFTNet

Network, and ISO 9362. Business Identifier Codes (BICs) are popularlyknown as "SWIFT codes".

The chairman of SWIFT is Yawar Shah, who is from Pakistan. The CEO isGottfried Leibbrandt, who is from the Netherlands.[1]

The majority of international interbank messages use the SWIFT network.As of September 2010, SWIFT linked more than 9,000 financial institutionsin 209 countries and territories, who were exchanging an average of over15 million messages per day (compared to an average of 2.4 million dailymessages in 1995).[2]SWIFT transports financial messages in a highlysecure way[how?] but does not hold accounts for its members and does notperform any form ofclearing orsettlement.

SWIFT does not facilitate funds transfer; rather, it sends payment orders,which must be settled by correspondent accounts that the institutions havewith each other. Each financial institution, to exchange bankingtransactions, must have a banking relationship by either being a bank or
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affiliating itself with one (or more) so as to enjoy those particular businessfeatures.

SWIFT hosts an annual conference every year called SIBOS which isspecifically aimed at the financial services industry.

SWIFT is a cooperative society underBelgian law and it is owned by itsmember financial institutions. It has offices around the world. SWIFTheadquarters, designed by Ricardo Bofill Taller de Arquitectura are in LaHulpe, Belgium, nearBrussels.

History of swift

SWIFT was founded in Brussels in 1973 under the leadership of itsinaugural CEO Carl Reuterskild (19731983) and was supported by 239banks in 15 countries. It started to establish common standards for financialtransactions and a shared data processing system and worldwidecommunications network designed by Logica.[3]Fundamental operatingprocedures, rules forliability, etc., were established in 1975 and the firstmessage was sent in 1977. SWIFT's first United States operating centerwas inaugurated by GovernorJohn N. Dalton of Virginia in 1979.

Operations centres

The SWIFT secure messaging network is run from two redundant datacenters, one in the United States and one in the Netherlands. These
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centers share information in near real-time. In case of a failure in one of thedata centers, the other is able to handle the traffic of the complete network.

SWIFT opened a third data center in Switzerland, which started operatingin 2009.[7]Since then, data from European SWIFT members will no longer

be mirrored to the U.S. data center. The distributed architecture willpartition messaging into two messaging zones: European and Trans-

Atlantic.[8]European zone messages are stored in the Netherlands and in apart of the Switzerland operating center; Trans-Atlantic zone messages arestored in the United States and in a part of the Switzerland operating centerthat is segregated from the European zone messages. Countries outside ofEurope were by default allocated to the Trans-Atlantic zone but couldchoose to have their messages stored in the European zone.

STANDARDS

SWIFT has become the industry standard for syntax in financial messages.Messages formatted to SWIFT standards can be read by, and processedby, many well-known financial processing systems, whether or not the

message traveled over the SWIFT network. SWIFT cooperates withinternational organizations for defining standards for message format andcontent. SWIFT is also registration authority(RA) for thefollowing ISO standards:[5]

ISO 9362: 1994 BankingBanking telecommunication messagesBank identifier codes

ISO 10383: 2003 Securities and related financial instrumentsCodesfor exchanges and market identification (MIC)

ISO 13616: 2003 IBAN Registry

ISO 15022: 1999 SecuritiesScheme for messages (Data FieldDictionary) (replaces ISO 7775)

ISO 20022-1: 2004 and ISO 20022-2:2007 Financial servicesUNIversal Financial Industry message scheme

In RFC 3615urn:swift: was defined as Uniform Resource Names (URNs)for SWIFT FIN.[6]
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BANCASSURANCE

Bancassurance, is the partnership or relationship between a bank and an insurance company whereby

the insurance company uses the bank sales channel in order to sell insurance products, an arrangement

in which a bank and an insurance company form a partnership so that the insurance company can sell its

products to the bank's client base.

BIM allows the insurance company to maintain smaller direct sales teams as their products are sold

through the bank to bank customers by bank staff and employees as well.

Bank staff and tellers, rather than an insurance salesperson, become the point of sale and point of

contact for the customer. Bank staff are advised and supported by the insurance company through

product information, marketing campaigns and sales training.

The bank and the insurance company share the commission. Insurance policies are processed and

administered by the insurance company.

This partnership arrangement can be profitable for both companies. Banks can earn additional revenue

by selling the insurance products, while insurance companies are able to expand their customer base

without having to expand their sales forces or pay commissions to insurance agents or brokers.

Bancassurance, the sale of insurance and pensions products through a bank, has proved to be an

effective distribution channel in a number of countries in Europe, Latin America, and Asia.

MODELS IN BANCASSURANCE


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'Integrated models' is insurance activity deeply integrated with bank's processes. Premium is usually

collected by the bank, usually direct debit from customer's account held in that bank. New business data

entry is done in the bank branches and workflows between the bank and the insurance companies are

automated. In most cases, asset management is done by the banks asset manag ement subsidiary.

Insurance products are distributed by branch staff, which is sometimes supported by specialised

insurance advisers for more sophisticated products or for certain types of clients. Life insurance products

are fully integrated in the banks range of savings and investment products and the trend is for branch

staff to sell a growing number of insurance products that are becoming farther removed from its core

business, e.g., protection, health, or non-life products.

Products are mainly medium- and long-term tax-advantaged investment products. They are designed

specifically for bancassurance channels to meet the needs of branch advisers in terms of simplicity and

similarity with banking products. In particular, these products often have a low-risk insurance component.

Bank branches receive commissions for the sale of life insurance products. Part of the commissions can

be paid to branch staff as commissions or bonuses based on the achievement of sales targets.

'Non-integrated models' The sale of life insurance products by branch staff has been limited by

regulatory constraints since most investment-based products can only be sold by authorised financial

advisers who have obtained a minimum qualification.

Banks have therefore set up networks of financial advisers authorised to sell regulated insurance

products.They usually operate as tied agents and sell exclusively the products manufactured by the

banks in-house insurance company or its third-party provider(s).

A proactive approach is used to generate leads for the financial advisers from the customer base,

including through mailings and telesales. There is increasing focus on developing relationships with the

large number of customers who rarely or never visit a bank branch.Financial planners are typically employed by the bank or building society rather than the life company and

usually receive a basic salary plus a bonus element based on a combination of factors including sales

volumes, persistency, and product mix.

Following the reform of the polarization regime, banks will have the possibility to become multi-tied

distributors offering a range of products from different providers. This has the potential to strengthen the

position of banc assurers by allowing them to meet their customers needs .

ADVANTAGES OF BANCASSURANCE


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TO CUSTOMERS,

TO BANK, AND

TO INSURANCE COMPANY.

Advantages to customers

Ease of access

Customers have a natural and frequent level of contact with their bank. It is equally natural that

when they visit their bank, they should find straightforward over-the-counter responses to all

their financial needs, including precautionary savings, asset building, pensions, mortgage

protection and protection against unforeseen life events. Mutualization within the customer

base favors maximum access to protection (by mutualizing risks) and savings (by mutualizing

costs).

Simplicity

The insurance products sold over-the-counter by banks have been specially developed to be

simple to understand and simple to sell. Their rate structures are also designed for maximum

customer accessibility.

Comprehensive adviceBancassurance dovetails perfectly with the range of retail banking services by offering bank

customers not only savings products (like life insurance and pensions), but also loan protection

products (for home loans, auto loans, etc.) and personal protection products. Customers are

therefore able to buy a range of financial products from a single point of contact capable of

covering all their needs. In the event of claim, they enjoy the further benefit of being looked

after as part of the wider customer care relationship.


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Attractive rates

Selling insurance products via retail banking networks usually has the effect of reducing

distribution costs, because marketing expenses can be offset against more extensive ranges of

banking products and greater volumes of customers. Products can therefore be marketed at

rates that are more attractive to consumers.

Security

The solvency of the insurer selected by the bank and the legal guarantee of the institutional

intermediary are both reassuring factors for end-user customers.

advantages to insurance companies

Source of new businesspreviously unreached clients: the banks client

base

may well be virgin territory for the insurance company and so a new

source

of business. Possible reasons: Geographic: the banks clients are in a territory where the insurer has

only a

limited presence (if any), e.g. because the insurers agency structure

there is

limited.

Demographic: the banks clients may form a very different group (e.g.

by age,

sex, purchasing habits) to the one which the insurer has previouslycourted.

For example, an insurer who previously concentrated on high net worth

individuals (HNWIs) can now gain access to a wider range of

customers who

will not all be HNWIs.


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Source of new business wider range of products (including banking

products):

the insurance company hopes to attract further business, from both

existing

and new policyholders, because of the fact that it can offer a wider

range of

services than before, i.e. it can give its customers access to banking as

well as

to insurance services.

Source of new business products not otherwise feasible: the

economics of the

bancassurance operation may allow the insurer to offer products which

are not

feasible through the insurers existing channels. For example, sales

costs

incurred under existing channels may force premium rates for a

product to be

uncompetitive, so the product is not sold. The costs via the

bancassurance

channel may be low enough to make it feasible. Administration economies of scale: the insurance company can

offer to carry

out the adminstration activities of the bancassurers business, if for

example the

bancassurer is a separate company. Combining the bancassurers

business with

the other business of the insurer can produce economies of scale in

administration costs (including capital expenditure). This in turn allowsthe insurer to

improve profitability and to price future products with narrower

margins, which

helps to make the insurers products more competitive.


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Finally, for both bank and insurer there is a great opportunity to learn

and to

make improvements in their own operation. Each gets exposure to the

others distinctive management styles, its objectives and measures and

the pressures which

it can exert and which it feels. The benefit comes when either company

can

implement changes as a result of the learning process.

advantages to bank

The main reasons why banks have decided to enter the insurance

industry area

are the following:

Intense competition between banks, against a background of

shrinking interest

margins, has led to an increase in the administrative and marketingcosts and

limited the profit margins of the traditional banking products. New

products

could substantially enhance the profitability and increase productivity.

Financial benefits to a banks performance can flow in a number of

ways, as

briefly outlined below:

Increased income generated, in the form of commissions and/orprofits from

the business (depending upon the relationship)

Reduction of the effect of the banks fixed costs, as they are now also

spread


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over the life insurance relationship.

Opportunity to increase the productivity of staff, as they now have

the chance to offer a wider range of services to clients.

what is banking-1

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