Banking Services Learning Outcomes Bx 2.1 Introduction 2.2 Types of Banks in India 2.3 Types of Bank Accounts 2.4. Type of Joint Accounts 2.5 Bank Loans 2.6 Microfinance 2.7 Bank Overdraft 2.8 Mortgage 2.9 Hypothecation 2.10 Cashless Payment Methods 2.11 Types of Cashless Payment Methods 2.12. Internet Banking 2.13 Banking Complaints and Ombudsman — Review Questions — References Ses22 || Finance for Everyone 2.1 INTRODUCTION In today’s changing scenario the banking sector is known as the lifeline of any modem economy, j is one of the most important financial pillars of any economy. Banking sector is very important fo, economic development of any country so as to meet its financing requirements of trade, industry ang agriculture with greater commitment and responsibility. That is why the development of any country ig integrally linked with the development of banking sector of that country. Banks today are considereg as the leaders of development and not as the dealers in money They also play a crucial role in the mobilization of deposits and providing credit facilities to different sectors of the economy. It can be said that banking industry reflects the economic health of a country. The success of any economy depends on the strength and efficiency of the economic system and which in turn successively depends on a sound and solvent banking system. This sound banking sector further helps in efficiently mobilising savings in various productive sectors and hence make sure that the bank meets its obligation to the depositors. Banks are playing a very important role in socio-economic progress of India. Given below are some definitions given by different authors: ‘As said by P.A. Samuelson, “Bank provides service to its clients and in turn receives perquisites in different forms”. In the words of W. Hock, “Bank is such an institution which creates money by money only” Indian Company Law 1936 defines Bank as “A banking company which receives deposits through current account or any other forms and allows withdrawal through cheques or promissory notes.” 2.2 TYPES OF BANKS IN INDIA Following are the different types of banks operating in India which performs almost same functions but have different types of prioritis 1. Central bank/ Reserve bank/ Monetary bank 2. Commercial Banks: (® Public Sector Banks (ii) Private Sector Banks Foreign Banks 3. Cooperative Banks: (Short term agricultural institutions (i) Long term agricultural credit institutions ii) Non-agricultural credit institutions 4, Development Banks: () National Bank for Agriculture and Rural Development (NABARD) (ii) Small Industries Development Bank of India (SIDBI) (iii) EXIM Bank (iv) National Housing BankBanking Services || 23 Reserve Bank ‘Commercial Bank Cooperative Bank Development Sank tora Ban 2 public |} Private 1) eoreign | |Shortterm| | tensterm || non eaeceel en Nason sector |} Sector |] FOrelen | | aerate] | aereuturat| | agteonuat for parearare|| indutes 1) cone sont {ark {| STK Pinas] | eat |] eras | | arstaat |[oniconet|| tiny || Hoare ame | | netewons (NABARO) (sio8i) ry Bank acts as a banker to the government ly responsible for the funding policy of the nation. The nage the consistency of the money flow and to manage ing provisions to all banks on various issues like banking technical standards to be maintained and disclosure of financial position so that these banks can work e ficiently and do not indulge in any fraudulent activities. It is said tobe a supervisory and regulating authority for banking sector. Commercial Bank: The commercial bank provides the facilities such as accepting deposits, crediting loans and other functions. Sometimes they are also called as deposit banks or ealled a, joint stock companies registered under special acts. They generally give short term loans to their custe-nere but sometimes in some special circumstances can provide medium term loans alvo, ity of the Reserve bank is to m; ‘he currency in India, It also provides the guidi operations, governance, customer care, ‘+ In ‘public sector banks’ the major/full stake s held by the Government. There were only 8 Publle Sector Banks (SBI & its 7 assoclate banks) til July1969: In 1963, 14 commercial bank (ttl 20 bank] were natonsiied thor eee Public ownership was held by the Goverment of na. But mith the rege eee and envronment these nainaluedbanis were alowed torasceapeerine Sector Banks IPOs and slowly their share holdi pattern has changed. Now the minimum 51% shareholding is with the Government of India, and so the management control Is. also with the Central Government. In the private sector banks that major stake is held by the individuals and Sector Banks newer services to the customers and give stiff competition to the public sector banks as well as to pvt sector banks aso. reign banks have thelr registered ofces outside indi but they oper rere ough ther branches or trough wholy owned sibidares trey bey i their elients in ralsing External Commercial Borrowings These banks have to Foreign ‘dhere to all local laws as well as guidelines and directives of different Indian, Banks ace to a chias Reserve Bank of nei, Secures Exchange Boardot ine ng Beat and Regulatory Development Authority24 || Finance for Everyone Co-operative Banks: Voluntar social and cultural needs through a jo! These banks cater to the needs of agricul businessmen normally in mutual trust. Co operative banks s below is different types of Cooperati ‘Short Term Agricultural consists of the Primary afflated at the district le Long Term sven to me some state’ the State Cooperative Bank atthe State level, consists of a Primary Cooperative Agriculture & Rural Development Banks (PCARDBs) Loans are account thelr need and repayment capacity. tary association o} ture, retail trade, small and medium industry and self-em, I, semi url “ ‘ranks $ main motto is to work on “ NO PROFIT NO LOSS BASIS”, ive rural Credit Structure in India sion: Toa shorter eed trace mally weed societies at the base level, which are then erate bank and further ito 1 Credit In ‘Agricultural Credit S level into the District Central Coo it nstitutfons: The long term cooperative credit structure tive Agriculture & Rural Development Banks (SCARDBs) Agricultural Credit the State Coopera Timbers on the mortgages of their land usually up to 50% of their value In ior up to 30 times the land revenue payable in other states, duly taking into Urban Cooperative Banks: These banks refers tothe primary cooperative banks mainly located in urban and semi-urban areas. They provide loans to small borrowers and business houses. Today thelr scope of operation has expanded considerably. So these banks can also spread thelr operations to other States and such banks are called as multistate cooperative banks, 3 persons united together to meet their economy nly owned and controlled organisation forms Cooperative ban’ ployed ban and urban areas. Main principle on which they wort Given Development Bank: History of development Banking can be traced back to the establishment of the Industrial Finance Corporation of India in 1948in India. Further with the passing of State Financial Corporation Act,1951, several SFCs (specialised financial institutions) has come up. With the introduction of financial sector reforms, many changes have been witnessed in the development banking sector, There are now more than 60 Development Banks at both Central and as well as at State level and they are essentially intended to carry out multipurpose roles and furthermore assumes significant part in helping various portions including economic development at rural level. Different types of development banks are given below: ‘ational Bank for Apeu ture snd. Rural Development (Asana): the apex nate tion concerned withthe poly, lansing and operators nthe fel of agree and other ual economic aces. NABARD has celved several enane and pre ‘motonal schemes over the years and hasbeen mating cantante forts to Ubersite, bread base and fetne/ rationale the schemes In ‘espanse tthe Fel eel needs, The refnance provided by NA 2AR0 has two basi objectives || (0) Supplementing the resources of the cooperatives banks and Rs formeetng the ced needs of ts Elentele, and (0) Ensuring sie ‘taneous the bulp of sound, fice effete and ible coop. fete cet stuctre and As forpurveyng creat. atonal Housing Bank ‘Small Industrles Develop- (NHB) National Housing Bank iment Bank of Inia (SIDB) Bank of India was setup '5 the principal and exciusve |] | was set up in July, 1988 as the {nancial insituon forthe pro- |} | apex financing Institution for by an Act of Parllament for the ‘mation, nancing and develop- | | the housing sector with the || | purpose of nancing, facinating ment ofthe Mr, Sal and Meum epee seco and fr coordnston of thefncons ofthe nsttons eresed in iar stn tsa cera government under tig The prime ame SOB {esucor H y eg nthe abe ater of ‘duction finance, ie mandate to promote efficient, able and sound Housing Finance Companies (HFCS). Is functions alm at to augment the flow of Instutional cred- It for the housing sector and regulate HFCS. NHB mobiles ‘resources and channelizes them ‘0 various schemes of housing Infrastructure development. It Provides refinance for direct housing loans given by com- ‘mercial banks and non-banking financial institutions. Institution In the cou ‘exports and imports. Export Import Bank of in ia (EXIM Bank) Export impart and promoting India's foreign ‘trade. It isthe pinelpalrandal in 1582 ty for coordinating the working of In- stitutons engaged In financingBanking Services || 25 2.2.1 Functions of Commercial Banks ‘commercial bank has mainly two primary functions: + Acceptance of Deposits + Advancement of Loan There are two types of interest i it it ssi in ivf nner the rate at which loans are advanced is called the “lending rate”. As per section 3 and 6 of Banking Regulation Act ,1949 there are two main categories of functions of commercial banks, 1, Major functions: + Acceptance of deposits * Granting of advances 2. Other functions: + Discounting of cheques and bills * Collection of cheques and bills + Safe custody of articles + Remittances + Issue of letter of credit + Safe deposit lockers + Handling of grievances These banks now a days involves themselves in some other activities also other than mentioned above. They can open separate departments for that or can perform these activities through separately floated independent subsidiaries. 1. Investment counselling Investment Banking Mutual Fund Project Appraisal Merchant Banking Services Taxation Advisory Services Executor Trustee Services Security Trading Credit card/ Debit card services 10. Forex consultancy 11. Gold/ Silver/ Platinum Trading 12, Venture capital financing per araen 13. Factoring,i Everyone 26 || Finance for : Policies sz Selling of life and general insuran surances: jank as: : Vehicle, educational, housing loans ete. oo different types of loans: 15, Providing & a panei deposit slip to be filled at the time of making fe | + Cash/cheque EXHIBIT NO. 1: asyona coma a my esryerena es a Role of Banks in Economic Development 1. Capital Formation, 2. Creation of Credit, 3. Channelizing the Funds to Productive Investment, 4, Fuller Utilization of Resources, & Encouraging Right Type of Industries, 6. Bank Rate Poticy, 7. Bank ‘Monetize Debt.Pr a : Banking Services || 27 Capital Formation: For the economic development of any country capital formation is very important and Banks plays an important role in capital formation. They mobilise small savings of he people living in different areas through their branches scattered all over the country and then make it available for productive uses. As we all know India is a developing county and here rate of savings is very low as compared to the other developed countries, For improving this low rate of interest and for providing capital to the entrepreneurs there is a need for sound capital formation system In this scenario sound banking system with proper provisions and guidelines can prove to be a boon for capital formation. Creation of Credit: Banks provide more funds for various development projects by creating credit. This Credit creation helps in increased production, sales, employment, and income and hence leads to faster economic development. A developing economy is basically considered by the large non monetized sector and this existence of non- monetized sector creates an interruption in the development of the economy. To improve this situation of non-monetization. it is necessary to promote and take risk in providing the credit facilities to the priority areas such as small-scale industries and agriculture. Channelizing the Funds to Productive Investment: Capital formation and creation of credit is not the only function of commercial banks. They also invest the all the savings mobilized by them for various productive purposes. This pooled savings should be properly channelised to various sectors of the economy to increase the productivity of the nation. Fuller Utilization of Resources: Banks mainly utilise the savings for the development purposes of various regions in the country so as to ensure fuller utilization of national resources. Encouraging Right Type of Industries: The banks also help in developing the right type of industries by extending loans to the right type of persons at the right time. In this way they help in the industrialization and economic development of the country. Bank Rate Policy: It is a common belief of economists that by changing the bank rates, changes can be made in a country's money supply and hence in inflation rate. The interest rate is to be paid by banks for the deposits accepted by them and they charge interest on the loans granted by them, Most of the commercial banks use cheap money policy i.e., lending money at low interests to overcome the threat of business recession. Bank Monetize Debt: Commercial banks tries to transform the loan to be repaid after a certain period into cash, which then is used for business activities. It has almost become a necessity for manufacturers and wholesale traders to sell goods on a credit basis so as to have an increase in sales. But this credit sales may lead to locking up of capital. Finance to Government: The government acts as the promoter of industries in underdeveloped countries for which finance is needed, So, Banks helps in providing long-term credit to the government by investing funds in Government securities and short-term finance by purchasing their Treasury Bills. . Bankers as Employers: After nationalization of banks and globalisation of Indian Economy ing i in all villages there are branches the banking industry has grown to a great extent. Almost in a er a of diferent banks which leads to the creation of new employment opportunities. In this way banking sector is trying to improve standard of living of people by providing them more employment opportunities.28 || Finance for Everyone a times, banks have assumed role of develop ‘ountries like India, Developing entrepreneme° formation of new project ideas, iden fe ig lon etc. 10. Banks are Entreprenuers: In rece! entrepreneurs, particularly in developing © very complex process. It basically includes the of specific projects suitable to local conditions, 2.3. TYPES OF BANK ACCOUNTS ifferent types of bank accounts depending upon their requirements, Gi, ‘bank accounts in India. a 1. Current account: A current account is 3 kind of deposit account for traders, entrepreneurs, ang business owners who are required to make and receive payments more often than others. These current accounts hold more liquid deposits and have no limit on the number of transactions per day. Current accounts have overdraft facility, that is withdrawing more amount than what gs accounts, these are not zero-balance is currently available in the account. Also, unlike savin; accounts, A minimum balance has to be maintained to operate current accounts. count: A savings bank account is a regular deposit account, where there is ing a variety of Savings Accounts based on ¢. Today Banks are offer product, age OF purpose of holding the account, and so avings accounts for children, senior citizens or accounts, and many more. These are redit card, debit cards, bill payments there when bank offers on opening a Different people can open di below is the list of some of the types of 2. Savings ac minimum rate of interest the type of depositor, features of the on. There can be regular savings accounts, s women, institutional savings accounts, family savings zero-balance accounts have features like auto sweep, © and cross-product benefits etc. A cross-product benefit is second account such as a demat account. 3, Salary account: Salary account is opened as per the tie-up between employer and the bank, In these accounts salaries of every employee is credited to at the beginning of the pay cycle, Employees can pick their type of salary account based on the features they want or as provided by their employers. 4, Fixed deposit account: ‘There are different types of accot xy and to earn a decent rate of interest on this savings for future. deposits accounts to save mone! A fixed deposit (FD) account allows to eam a fixed rate of interest by keeping a certain sum of money locked in for a given time period that is the time period till that fixed deposit matures. FD maturity period ranges from seven days to 10 years. Also the rate of interest earned on FDs will vary depending on the tenure of that FD. Generally, one cannot withdraw money before maturity period of FD. In special circumstances few banks offer a premature withdrawal facility but in that case rate of interest given is quite low. 5, Recurring deposit account: A recurring deposit (RD) has money is deposited at regular interval of time Say every month or once @ sum invested is smaller as compared to FD. Tenure is also fixed in this case withdrawal is possible only with lower rate of interest. The maturity perio between six months to 10 years. wunts like fixed deposits and recurring a fixed tenure. A fixed sum of quarter. Here, the but for premature .d of an RD lies6. Banking Services || 29 NRI accounts: There are different types of bank accounts for Indians or Indian-origin people living overseas. These types of accounts are called overseas accounts, These overseas accounts can be of two types :NRO or non-resident ordinary and NRE or non-resident external accounts Along with this banks also offer foreign currency non-resident fixed deposit accounts. Following are the various types of bank accounts for NRIs- (@) Non-resident ordinary (NRO) savings accounts or fixed deposit accounts: NRO accounts are normally called as rupee accounts as when money is deposited in these accounts by NRI usually in foreign currency, then itis converted into INR at the prevailing exchange rate in the market. NRIs can save money eared in India or overseas in NRO bank accounts. Payments like rent, maturities, pension, etc can be sent abroad through these NRO accounts. Taxes are imposed on income eamed on these deposit accounts, Non-resident external (NRE) savings accounts or fixed deposit accounts: NRE deposit accounts are almost similar to NRO accounts and the funds in these accounts are also maintained in INR. Any money deposited into these accounts is converted into INR. at prevailing exchange rates. But these accounts are used only for saving money earned from abroad. The funds, both in the form of principal and interest, are transferable. But no tax is imposed on the interest eamed on these deposit accounts in India. Foreign currency non-resident (FCNR) account: Unlike the other two types of bank accounts mentioned above FCNR accounts are always maintained in foreign currency. The principal and interest from these accounts are transferable, but no tax is imposed on ® © the interest earned in India. Difference between NRE, NRO, and FCNR Bank Accounts: Points of Difference NRE Account NRO Account FCNR (Bank) Account Currency Rupee Denominated [Rupee Denominated | US Dollars, British INR) (INR) Pounds, Euro, Japanese Yen, Canadian Dollars, Australian Dollars ete. Who can open such | NRI NRI, Resident before | NRI Account? becoming an NRI Can it be opened ‘Yes, both with ‘Yes, both with Resident’ | Yes, both with . jointly? Resident##/Non-Resident | Non-Resident Resident"/ Non-Resident Type of Account Saving, Current or a Saving, Current or a Fixed/ Term Deposit Fixed/Term Deposit __| Fixed/ Term Deposit Purpose to open NRE Accounts are used | NRO Accounts are used _| FCNR (B) accounts are such Account to hold overseas savings | to hold Indian income _| only in the form of term remitted to India after | like rent, dividend etc. _| deposits of 1 to 5 years. converting to INR Repatriation ‘Yes Only interest onNRO | Yes account balance (after deducting TDS)30 || Finance for Everyone Points of Difference NRE. Accs —E ENRO. Accra ECNR (Bank) Acco Funds can be transfere ‘unds can be transfered | Funds unt Transfer of funds | Fn NREaccountto | fromNRE account to | from oan be transfered from one Account to : NR d existing NRE another NRE/NRO/ Resident ‘O/ Resident Account | FCNR accounts Account ‘Yes Deposit of rupee No No funds generated in India i Taxed as per applicable _| Tax Fi e ax Tax — slab rate mee ‘What is the status Converted to resident Converted to resident Converted to resident of the account when | account account account NRI returns to India Is Power of Yes ‘Yes ‘Yes Attorney** allowed ‘Source: crip Tew suecinetfpcon/comparison-benweer-nre-nro-and: fen bank-accounts/ 2.4 TYPE OF JOINT ACCOUNTS Sometimes instead of single person, two persons open bank account jointly. Different types of joint accounts are stated below: Fither/0r/Survivor itis the most common type of joint account and is applicable between any two individuals. For eg If se toe mand wife have joint account with “cither or survivor” clause, either of them can operate the ane eit and in the case of the death of one of the account holders, the other can continue, ‘Minor’s Account: A savings bank account can also be opened in the name of a minor jointly with a guardian, The guardian here is supposed to operate the account on behalf of the minor. Former/or/Survivor: Here only the first account holder can operate the account. The second depositor gets the right to operate only on the death of the first holder after fulfilling some basic formalities like submission of proof of the death etc. Latter/or/Survivor: This is similar to the former or survivor, but the difference here is that, only the second account holder can operate the account. Important documents required in Banking Services PAN Card — Permanent Account Number (PAN) Meaning Permanent Account Number or PAN is basically used to identify various taxpayers in the country. Permanent Account Number is a 10-digit unique identification alphanumeric number which containsBanking Services || 31 both alphabets and numbers. It is a computer-based system that assigns ‘unique identification number to cach tax payer in our country. By using this method all tax-related information of a person is recorded against a single PAN number and which further acts asthe primary key for storage of information, This information is shared across the country and due to this no two people can have the same PAN, tthe time of allotment of PAN number, a PAN Card too is allotted by the Income Tax Department. While PAN is an alphanumeric number, PAN Card is a physical card that contains al the details ike permanent account number, name, date of birth father’s or Spouse’s name, and photograph of the individual holding that card. Pan card can be used as proof of identity or date of birth and is valid for fifetime because it is unaffected by any change in residential address, Sheps to be followed while applying for a PAN card: . Visit https://www.onlineservices.nsdl.com/paam/endUserRegisterContact html . Select the type of application. . Choose particular category. Enter all the required information like name, date of birth, email ID, and mobile number. Click on agree to the terms and conditions, . Enter the Captcha Code provided there. . Click on “Submit” ‘New page will open showing acknowledgement number. eer anwaene ‘Send all the photocopies of required documents by post or courier to NSDL. 10. After verification of documents, physical copy of your PAN card will be provided. 11. Status of PAN card can be checked by using 15-digit acknowledgement number on the NSDL website. Uses of PAN in conducting of Financial Transactions Some of the transactions requiring PAN card details as proof are stated below: 1. Sale or purchase of property (immovable) which is valued at 85 lakh or above . Sale or purchase of a vehicle except a two-wheeler . Payments above £25,000 made towards hotels and restaurants and travels. Payments of more than £50,000 towards bank deposits . Purchase of bonds worth %50,000 or more . Purchase of shares worth %50,000 or more . Purchase of insurance policy worth 750,000 or more . Purchase of mutual fund schemes |. Payments made for more than %5 Jakh towards purchase of jewellery and bullion weer anwapD 10. To remit money out of India 11. PAN needs to be written while paying taxes also.32 || Finance for Everyone Address Proof Address proof plays a very important part in an individual life. tis required while getting admission schools, colleges ,for opening bank accounts ,purchase and sale of any vehicle, property ete Follow” documents can be used as address proof: m8 (@) Aadhaar Card issued by the Unique Identification Authority of India (b) Elector’s photo identity card (©) Passport (@ Driving License (©) Electricity bill (® Landline telephone or broadband connection bill (g) Water bill (h) Credit card statement (i) Domicile certificate issued by the Government (j) Passport of the spouse (k) Post office passbook having the address of the applicant () Consumer gas connection card or piped gas bill (m) Bank account statement (n) Depository account statement (0) Latest property tax assessment order (p) Property registration document (q) Certificate of identity in original signed by Member of Parliament or Member of Legislative Assembly or Municipal Councillor or a Gazetted Officer. (®) Allotment letter of accommodation issued by the Central Government or State Government of not more than three years old KYC (Know Your Customer) KYC means “Know Your Customer” and is a term used for Customer Identification Process at the time of opening of bank account. It establishes an investor’s identity & address through relevant supporting documents such as photo id, PAN card, Aadhar card, and address proof along with In-Person Verificatio? (IPV). KYC compliance is mandatory for every individual under the Prevention of Money Laundering Act, 2002 and Rules framed there under, read with the SEBI Master Circular on Anti Money Launder (AML) Standards/ Combating the Financing of Terrorism (CFT) /Obligations of Securities Mart Intermediaries. The basic objective of KYC is to safeguard banks from any fraudulent activities 2 protect them from criminal clements indulged in money laundering activities. Process of KYC is normally divided in 2 parts as shown in following diagram:Banking Services || 33 Investor as prescribed by the nancial by the Central Kye Intermediary such a8 ‘9 Mutual Fund, stock broker, depostory partcpant opening ‘the lnvestars account (daltonal Kv). 2.5 BANK LOANS ABank is a primary unit of the any banking system. As we all know that bank isa financial institution which performs the functions of accepting deposits, granting bank loans, and making investments to eam profits. Aloan is the money which is borrowed for a limited period with the guarantee of return at a specific time. The deposits received by the bank are not allowed to remain idle. So, after keeping some cash reserves, the balance of the savings is given to the needy persons and interest is charged from these ‘borrowers which is the main source of income for these banks. ‘Type of bank Loans granted in India are stated below: 1. Unsecured Bank Loans: As the name suggests unsecured loans does not require any collateral for giving loans. The Bank ‘has to take into consideration many factors to discern whether loans must be given of not like review of the previous connection with the borrower, credit score etc. If borrowers” bankruptcies then there is no other way of getting back the amount of loan, as there is no security. So, the rate of interest is kept higher for these types of loans. The various types of unsecured loans are: (@) Personal Loans: An individual can have personal loans for various requirements of his life like education, health, weddings, housing, business, agriculture, repayment of previous loans, payment of EMI etc. There is an increase in several personal loans for Fiferent purposes in recent times. There ae different reasons for this increase in personal Teun like low rates of interes, liquidity, ete. The documents required for personal loans are: | Know Your Customer (KYC) documents like Aadhar card driving license, Salary slip of last three months and proof of income for employed persons, Copy of Statement of income tax, Statement of savings account.34 || Finance for Everyone rp ess Loans: These business loans are taken for various business needs like sri ent of capital, broadening premises, expansion, growth and employing more aera sant oflogn granted willbe deposited in the bank account within 24 hours, jy Sere rpoumentation works less complex to start the operation without any holdup, q decision will be made in advance regarding tenure of repayment which should not exceeq 60 months. : i an: There is an increase in the demand for such educational for higher Mw unatiera foreign countries or in premier institutes in India itself. Full-time OF part. time loan can be taken in any field of their study whether medical, engineering, MBA, hotel management etc. The suspension period is the special feature of this type of loan where students cannot pay EMI till 12 months of their course completion. (@ Vehicle Loan: This loan is taken basically for buying any new vehicles or any used vehicle whether it is a two-wheeler or four-wheeler, The credit score, ratio of debt to income, terms and conditions of loan, repayment period, rate of interest etc are some of the factors that influences vehicle loan. It is also helpful for the people who are running cab services, taxi services as they can take these vehicles on loan from the banks, (b) Small Busin . Secured Bank Loans: As the name suggests secured bank loans requires collateral as a guarantee against borrowing, This collateral help in securing the right of the lender if the borrower fails to return the money lent to him. As it is secured, so it has a low-interest rate. Various types of secured loans are stated below: (a) Home Loans: These loans offer the money needed to buy and build a dream house of any individual. Pradhan Mantri Awas Yojana by PM Narendra Modi gave a major boost to home loans in India. It can be used in order to purchase a new home like flat, apartment, floor, bungalow etc. Also it can be taken for extension and furnishing of the home ete. The sanctioned amount of loan is transferred to the account within 72 hours. Repayment period of loan can be changed as per the circumstances, () Property Loan: Loans against property help the borrower to mortgage the property to use this money for financing requirements of business or any personal requirements. The amount of loan granted here ranges from 60-70 per cent of the market price of commercial Property. (©) Loan Against Securities: Again, loan against securities helps the borrower to mortgage his securities to use this money for financing business requirements ot any persons! requirements, It is very important as various authorized securities such as shares, a cntures, fixed deposits NSC, bonds or some other investment ete can be used fot aining a loan up to 70 percent of its unit value and for ‘obtaining the benefits of options “ of multiple repayments with no charges of, repayment, Gr Fe ‘ . ) Suu Loans : Gi yeas sold is considered to be one of the most preferred ase 8 calltralsecutity A cein percent of he ga re Ba weer oF sanctioned, As compared to ie i ropa Coa rae at fon Property loans, gold loan is short-term in nature.Banking Services || 35 © Toons Sarat tertty and Shares: An individual can use mutual funds and sould write further to a repiot (oan aes paspose, he will inform the financier who umber of units to be promised, ds, so that a lien is put on a particular o SS ee not only gives definite retums but caters to an individual's ee eae varies Term Loans ‘an individual needs funds in his life for various reasons like for starting a new business, expanding ‘current business, or managing daily business expenses. For fulfilling these requirements there are various types of term loans available for him, These term loans are tailor-made to meet the specific fnancial need of a business, It is comparatively the simplest type of business loan. A specific amount ‘an be borrowed from the lender for a specific period of time. Repayments including loan amount and fpterest are usually made at different intervals of time periods like monthly, quarterly or whatever is the tenure of repayment decided by both parties. Before lending the money banks or these specialized financial institutions assess the borrower’s financial condition. Major benefits of term loan are flexibility “in repayment, quick disbursal of funds, with minimal documentation. Features of Term Loan The key features of term loans are stated below: {@) Term loans are also called as secured loans as the asset purchased here will be collateral to the lender. (b) But sometimes term loans can also be unsecured and due to no security, interest rate will be higher. (© The loan must be repaid over the fixed term irrespect borrowing company. (@ The proposal of loan will be evaluated takiny time period for which the loan is taken. (©) Atthe time of loan distribution only rate of interest will be negotiated between both the parties. (®) Term loans can have a tenure of 5 — 10 years, But in case the borrower is in financial distress then this tenure can be re-scheduled also. (@) Repayment of term loan will always be ‘made in instalments (h) The term loan can be converted into equity ‘holding depending on some conditions. (@) Penalty is levied by lender in case of default on ‘behalf of the borrower. @) Commitment fee is also charged on the unutilized loan amount (k) Repayment of principal amount is ‘made after the initial grace period of 1-2 years () The instalment is likely to have higher principal amount and lower interest amount at the end of the tenure. tive of the financial situation of the 1g into consideration credit risk, loan amount and36 || Finance for Everyone Advantages of availing term loan: (@) Term loans are negotiable in nature as the intrest rate, tenure of loan, repayment schedule everything relating to term loan is negotiable in nature, (b) Interest rate is lower than that of personal loan or any other type of business loan (©) From the borrower's end interest paid towards term loan is subject to tax deduction (@) It is nota high-risk loan for the lender as itis secured in nature. (©) The equity for promoters and shareholders does not dilute due to term loan, () It can be converted to equity based on previous agreement, thereby making it an attractive preposition for the lender Disadvantages of availing term loans: In case of default on the part of borrower the collateral will be sold, and loan will be settled in full. (b) Term loan increases the leverage in the Balance Sheet substantially. (©) The net profit of the company reduces due to payment of interest towards loan . (@) The lender is likely to impose restrictive covenants such as not increasing leverage, this potentially affects the firm’s functioning (©) The timely repayment has to be done irrespective of the financial health and status of the company. (f) Negotiated terms and conditions may not necessarily always be in favour of the lender (®) The lender may call for conversion of outstanding debt into equity, hence diluting the holding in case of any default. The factors that affect the eligibility to avail term loan are stated below: (@) Promoters background: The background and credibility of the promoters should be evaluated. If credit score of the promoters is high then there are better chances of favourable negotiation. (b) Business plan: For checking financial viability and the capacity for loan repayment the business plan should be critically evaluated. The amount of loan and interest rate is determined based on this critical evaluation only. (©) Infrastructure: Assessment of the infrastructure is made so as to ensure that in case of default, loan can be closed fully by sale of infrastructure. This factor has to be evaluated even though term loans have collateral equivalent to the amount of loan extended. This is also very important when the term loans are extended for business expansion, and there is no underlying asset. The Joan is only against existing infrastructure, (4) Operational performance: It is important to assess operational efficiency in case loan is applied by existing business, Before sanction of loan only operational profit is evaluated (©) Credit repayment track record: The credit repayment track record of the business entity s also checked, The better the credibility, the terms and conditions will be more favourable.Banking Services || 37 ® Lina and eee financial performance: It is important to assess the existing financial performance, fhe business plan also has financial performance projected over the next 3 to 5 years. The lender assesses the prospects in terms of monetary benefits. @ Cottateral security This is one of the most important factors for eligibility of term loan. Term loans are basically extended for a variety of purposes like purchase of equipment, plant and machinery etc. In these cases, the asset itself is the collateral. But in some cases where the loan is extended for business expansion, growth, diversification, achieving economies of scale etc., the collateral should be evaluated appropriately. Debt repayment history Some ; collateral tke ‘age should be FDs, non-movable between 23-60 property, years Investments Eligibility Criteria for Bank Loans The continuous CIBIL score flow of income Areasonable score of credit "Floating Rate and Fixed Rate of Interest The interest on the term loan can be either floating _ discretion to choose between the two. J rate ot fixed rate. Normally, the borrower has the Floating rate of interest: . interest rate and economi i ini fluctuates with the changes in market interest rate an mic The interest rate pertaining to the loan it changes over the tenure. Typically, banks condi Due to this the instalment amount chat t ‘ Es reece eater ew years or align themselves with market subject to severe or drastic change thereof. Fixed rate of interest: inthis case the interest rate pertaining to the loan, remains fixed over the tenure of the loan. The instalment38 || Finance for Everyone amount remains constant over the tenure. The rate of interest is decided at the time of Sanctioning of loan. The borrower can also choose the type of interest rate based on the market cycle. ‘Normally: When the rate of interest is high, anticipating that the rates may moderate over the next few Years one can choose the floating rate of interest, it’s better to go for fixed rate of interest when the Tate of interest are low. For short-term loans fixed rate of interest is chosen and for long-term loans floating rate of inter is preferred. (4d TYPES OF TERM LOAN Management + Term loan is uncomplicated type of business loan + Borrow a specific amount from lender & in return pay back loan amount plus interest over 2 «2t period + Payments ate usually made every month O Flexibility in O Quick disbursal of Minimal repayment funds documentation TYPES OF TERM LOANS © Usually for I to 2 years © Required to meet day-to-day business needs or business's working capital requirements © Higher interest rate when compared to long- term loans Loan ate for more than five years Secured against property Rate of interest is also lower LONG TERM LOANS It can be unsecured but interest rate are higher Flexibilit in terms of payment options © Usually for petiod of 2 to 5 years ERO © Hybtid of short and long-term loans BUSY EG © Often taken for renovation of fixed asset ONG © Interest rate is comparatively higher ° Documentation is easier compared to long term Source: hitps:/lefinancemanagement.com ‘sources-of,fnance*Banking Services || 39 6 MICROFINANCE term microfinance refers to all financial products and services developed for those excluded from tional banking channels. Microfinance encourages social and banking inclusion, by enabling cially vulnerable people to benefit from productive loans, savings solutions and more. Microfinance o allows people to take on reasonable small business loans safely following thereby ethical lending tices. eatures of Microfinance (@) Mostly the borrowers are from the low-income group. (b) Loans are of small amount mostly micro loans. (©) These are short duration loans. (@ Loans are offered without any collaterals. (©) Frequency of repayment is high. (® Loans are generally taken by low-income group for income generation purpose. ‘The different types of institutions that offer microfinance in India are stated below: (®) Commercial banks. (b) Credit unions. (©) Non-governmental organisations (NGOs) (@) Sectors of government banks. Bank overdraft is a type of financial instrument that is provided by the bank to customers in the form lof an extended credit facility, When the main balance of the account reaches zero, then at that moment customer can avail this facility. It can be said that bank overdraft is an unsecured form of credit that is inly used for covering short term cash requirements. A credit limit is offered by the banks to their ‘customers based on their mutual relationship. A separate interest and fees is charged by the banks for ion-maintenance of account, Different banks can charge different rate of interest for overdraft facility. Features of bank overdraft facility are stated below: (@) Overdraft facilities is offered by banks on a predetermined limit which can be different from borrower to borrower. (b) The withdrawal or deposit of an amount can be done in an overdraft account anytime up to that predetermined limit. (©) An interest on the overdraft amount is charged by the banks It is calculated on a daily basis and is billed monthly to the borrower's account. Higher interest is charged in case of default in payment by the accountholder.40 || Finance for Everyone (@ No prepayment penalty on the borrowers is levied by the banks in the event of loan re; before the tenure, And this feature makes it different from other type of loans. (6) Bank overdraft accounts donot follow EMI system. The amount can be repaid by the borrowers by paying off different values each time. () Anoverdraft loan can be in the name of joint borrowers and both of them are equally responsible for repaying the borrowed amount. 2.7.1 Types of Bank Overdraft ‘Authorised Bank Overdraft: In this type of overdraft account there is an arrangement made in advance between both, the account holder and the bank, Both the parties then mutually agree on a limit which can be used for all the payments and a daily, monthly or yearly service fee which can vary from bank to bank. Unauthorised Bank Overdraft: This type of overdraft occurs when the account holder has spent more than their available balance without prior authorisation or any such arrangement with the bank or if there was an arrangement done before but the limit of overdraft is exceeded. Payment Advantages of Bank Overdraft Disadvantages of Bank Overdraft It helps in managing the availability of cash for a business or an individual. Higher interest rate charged for the loan facility availed Ithelps in fulfilling urgent cash requirements. It is offered only to the bank account holders. Interest needs to be paid only on the amount that is utilised and not the total limit. The limit offered depends upon the financial position of the individual or business. There is less amount of paperwork involved in availing bank overdraft. The interest rate is not fixed and changes frequently There is no requirement of collateral. It is not an ideal option for long term financing 2.8 MORTGAGE Mortgage The process of offering something as a guarantee or collateral against a loan is called as Mortgage. This can also be called as secured loans, All types of home loans are secured loans. The borrower has to offerBanking Services || 41 security to the lender. Th i : Pe pry ity ‘cr. There are two different types of interest rates in Mortgage: fixed and + Incase of fixed-rate loan, the interest rate remains same for the entire loan period. +in es of adjustable-rate loan, the rate of interest varies along with the broader financial market. Sometimes question arises that mortgage is an asset or not. As we all know that an asset provides future economic benefit, while liability is an obligation, Based upon this principle a house should be freated as an asset while mortgage would definitely be a liability. Most of the people who own a house have a mortgage but also have equity built up in that house. Reverse Mortgage erse mortgage is a kind of loan, An individual aged 62 years or more, having a house in his own 1 can be said to have home equity and can borrow against the value of his home so as to receive finds as a lump sum amount, fixed monthly payment, or up to his credit limit, When the borrower dies ‘ot moves out permanently, or sells his home, then his entire loan balance, up to a limit will become due also the loan amount should not exceed the home’s value. Even if it does, through a drop in the market value or if borrower lives longer than expected, the borrower or borrower's estate won't be held responsible for paying to the lender. Prevere morgore 1s 2 loan. A J) womeowner who is 62 years or older and hes considerable home equlty can borrow Cereal at ome funds asl sum, fked month payment t Th of eet Unt forward marten wih \Xi the type used to buy a home; a reverse \\ mortage doesnt require the homeowner \\ to make any loan payments, |) Mortgage refers to the process of ‘offering something 2s @ guarantee or collateral against 3 loan. One may come Seross the term when looking for secured toans, General, ome loans of all sypes are // secured loans. The borrower must offer fp theleproperty asa security tothe lender.42 || Finance for Everyone 2.9 HYPOTHECATION Hypothecation is when an individual agrees to give a certain asset in exchange for a loan. Secured loang including vehicle loans and mortgages, require collateral If they defaults on their oan, a lender can ust that collateral to pay for the outstanding balance. For Example: Ifan individual wishes to purchase a¢at and doesn’t have sufficient funds to buy, he will approach the bank to get the vehicle loan. The bank wil} hypothecate that vehicle which is to be purchased and accordingly approve the loan for that individual, ‘A mortgage is taken for a huge amount, whereas hypothecation is done for a small amount, A mortgage is done for immovable properties like land, building, warehouse, etc. On the other hand, hypothecation is done for movable properties like cars, vehicles, stocks, etc. | ED NTTICIN ties ac acer peal ey wood | whereby the ownership lies with a lender and the possession is enjoyed by the borrower. same is lypothecated to the bank/ finances. If there is any default by the borrower, the bank! [takes possession of the vehicle after giving notice and then sells the same. OSE. Dal Sie SAGER [Possession _WithLender With Borrower With Borrower | | EXAMPLE; In the case of vehicle loans, the vehicle remains with the borrower but the| | Forassets Allassets generally non-movableassetsmovableassets Example Gold loan Home loan Vehicle loan i a nnn | DOCUMENTATION: Hypothecation deed is an agreement which contains std features | & mules; which usually covers the following points: Definitions, Insurance [to ensure good [condition] Inspection rules, rights & remedies of each party, etc parental lsitilte Source: https://efinancemanagement.comBanking Services || 43 10 CASHLESS PAYMENT METHODS these Se times, cashless transactions have revolutionized the financial outlook of India. ilzing mobile Phones tomake instant payments instead of opting for the traditional modes of payment increased tremendously after demonetisation. When the business operations of most SMEs came to standstill during demonetisation, the businesses that had shifted to cashless transactions managed to ’blosses. The case and security associated with these payment modes is definitely an important factor the surge. With the recent introduction of various digital modes of payment in India, business owners slowly adapting to the shift. In cashless transactions, payments are done or accepted without the use fhard cash. This includes payments made via credit/debit cards, cheques, DD, NEFT, IMPS, RTGS or other form of online payment that removes the need forcash. Benefits of Cashless Payment Systems a) for customer: or any business owner, customer satisfaction is the main goal, But processing the customer payments ‘become a time-consuming process Offering a variety of payment options will allow customers to choose their preferred method of payment, which will get the owner’s payment faster. Adding online yments gives the customers the flexibility to pay that is most convenient for them. Both Business ers and consumers can benefit from digital payment modes in various ways. b) for business: (@ Convenience: The key factor for prioritizing digital payments is the feasibility of making and receiving payments. Online payments rule out the necessity to carry cash, and also save time, as people no longer have to queue up for ATM services. Payment apps also help in keeping track of incoming and outgoing funds, which comes in handy while filing tax returns. (i) Security: Digital payment modes are made secured with varying levels of encryption and data authentication. Most payment modes have enabled two-factor authentication (TFA) to add an extra layer of security. Also, it's always easier and safer to carry a smartphone rather than carrying cash. (ii) Discounts: To boost the move towards a cashless economy, the government offers various incentives and discounts for making online payments. The government is now also providing Waivers on cashless transactions Utilised for service tax payments, purchase of fuel, train tickets, fastag recharges, and insurance schemes. 11 TYPES OF CASHLESS PAYMENT METHODS 1. Credit Card and Debit Card online payments, but they aren’t the only cashless f the same places as they both offer convenience44 || Finance for Everyone is where the cards pull the money. A debit card takes it from the bank account, and a credit, ca account is where charges it to ones credit line. Debit Cards Debit cards draw money directly from bank account while making any payment, They do this by placing a hold on the amount of the purchase. Then the merchant sends in the transaction to their bank, and it is transferred to the merchant’s account. It can take a few days for this to happen, and the hold may drop off before the transaction goes through. It’s important to keep a running balance of the account to make sure that one doesn’t accidentally overdraw from account. One can opt in with their bank to have overdrafts paid, but the charge will be rejected otherwise. There is a personal identification number (PIN) to use with debit card at stores or ATMs, For a Purchase done through debit card there is no need of paying interest on the purchases. Also, credit history remains unaffected by debit card spending, Credit Card: One can borrow money using credit card. There is a line of credit known as the card’s 2. Ewallets E-wallets are a popular mode of ontine pa : ent, e.g. Py er prose should register their mobile number with heap ea eee Bay and MabikBanking Services || 45 Mobile Banking Applications ost ofthe larger banks offer banking apps, with which business owners can transfer funds between accounts instantly. They can also view their account balance and transaction history at any time. digital era is all around - from desktops to laptops and iPads, software's to applications, and ile phones to Android gadgets. The use of a mobile banking app is common these days as it offers flexibility, and ease while doing online transactions. Nowadays, many people in India are not fortable with traditional banking anymore and have adopted mobile banking. As a result, almost PSU bank and private sector bank is providing mobile banking apps for online transactions. This juces the requirement for a person to visit the bank physically for performing any banking task. After loading and installing a mobile banking app on mobile device, one can perform all banking tasks. ere, there is a list of the top 10 mobile banking apps in India along with the crucial features a mobile ing app should have. 1, Kotak-811 & Mobile Banking 2. HDFC Bank Mobile Banking 3. YONO Lite SBI 4. Axis Mobile 5. IDBI Bank GO Mobile+ 6. Baroda M-Connect Plus 7. iMobile Pay by ICICI Bank 8, BOI Mobile 9. CANDI — Mobile Banking App 10. PNB ONE UPI (Unified Payments Interface) System: This system enables instant transfers of funds between bank accounts. Users can send and receive funds ‘once bank details like account number, IFSC code, and mobile number are provided. 1. BHIM app: This newly launched app is used to transfer funds between bank accounts. I's reliable and it’s secured with three-factor authentication, The user’s mobile number or Aadhar card number is used to make payments. Though this app works on the UPI platform, customers don't need to download mobile applications of multiple banks. All they have to do is install the BHIM app. Aadhar payment app: In 2016 Aadhar payment app was launched with the basic objective is in the country. It helps users in making offline payments and of boosting online payment cee ere oe tttcen different banks by using their biometrics and Aadhar card details for ts led to decrease in the long queues to pay authentication. But the increase in online payment , .d at showrooms and service centres to pay utility bill and now physical presence is not requires : or recharge DTH and mobile services. All the customers as well as Business owners have opted digital payment methods for all sorts “of transactions. Irrespective of the limited availability of nv46 || Finance for Everyone internet and knowledge of such payment modes to people, the move towards online inevitable. Demonetisation and then corona pandemic gave a much-required transactions. Almost all business owners have adopted digital payment m« business owners are also coming forward for cashless economy. 2.12 INTERNET BANKING Internet banking also known as online banking / E-banking /Net Banking is a facility offered by banks and financial institutions so that the customers can use banking services over the intemet. Customer, are not required to visit their bank for availing each and every small service. One has to register for ths facility at the time of opening the bank account or later on also one can apply for net banking, Even facility of net banking can be applied for through online portal of the bank while sitting at home. For logging into that portal customer ID and password is provided by the banks, Payment ig Push to cashless ‘odes, and otherg Features of Net Banking Features of Net banking are shown in the following diagram: 1, ; 4. 5. 6. ca Make Recharge Order for a merchant prepald acheque statement insurance. \/ payments. \/ mobile/oTH. \/ book. online, Methods of Digital Payments ‘The Reserve Bank of India offers three common methods of digital payments and they are given below: © National Electronic Fund Transfer (NEFT): NEFT is an electronic funds transfer system which is introduced and maintained by RBI. It helps in transfer of money from one bank account to the beneficiary’s bank account. NEFT Itis not necessary that both the accounts are in same bank. Accounts can be in different banks. But both the accounts should be NEFT-enabled. There IMPS are permitted timings for the NEFT clearance. Monday to Friday: NEFT fund transfer can be made from 8 am to 7 pm. RTGS Saturday: It is from 8 am to 12 pm. One can even send Re Ithrough NEFT. To encourage online transfers RBI : has not kept any capping on maximum amount to be transferred except for the per ims limit of Rs $0,000. But some banks have set the upper limit like maximum money transfer lim ‘of Rs 20,00,000 has been set by IDFC Bank .For transferring money through NEFT in case © IDFC bank ,one can either log in to IDFC FIRST Bank web portal or can install IDFC FIRS Bank safe online banking app and conduct NEFT transaction.Banking Services || 47 « Real-Time Gross Settlement (RTGS): One can have the payments settled or funds transferred instantly through RTGS. It is maintained by the RBI and is generally used for high-value money transactions. A minimum amount of Rs 2 lakhs and the maximum Rs 20,00,000 can be transferred through RTGS with no extra charges. However, accounts should be RTGS enabled. ‘The basic purpose here is to safeguard the interests of account holder by clearing the funds almost instantly, and not in batches as done in NEFT, Although the high-level security is offered by the banks but chances of risk are also huge. ‘Immediate Payment Service (IMPS): National Payments Corporation of India (NPCI) has introduced an interbank online fund transfer service called as IMPS. It helps in conducting real-time transactions on different channels like Intemet, ATM, Mobile and SMS. Immediate Payment Service is an economic way of making payments. Through this fund can be transferred safely and instantly within banks. IMPS is simpler than the other two methods, as it requires only the mobile number. One can transfer a minimum amount of Re 1 and the maximum amount of Rs 20,00,000 through IMPS. But again, there is a capping on maximum amount to be transferred per transaction. One can transfer maximum 200000 rupees per transaction through this online mode. Difference Between NEFT, RTGS and IMPS yw Cl NEFT RIGS IMPS Minimum Transfer Value Rel Rs. 2 Lakh Rel Maximum Transfer Value No Limit No Limit Rs. 2 Lakh Payment Mode Both, online and offline | Both, online and offline Online only Settlement Type Both, online and offine | Both, online and offiine | __ Online only Settlement Time 2hours Immediate Immediate ‘Varies from bank to 1 Operational Time 2447 ‘bank 7 Varies from bank to ‘Transaction Charges Nil Nil bank Source: slum cance eetleenes aimee EAE48 || Finance for Everyone Advantages of Internet Banking (9 Availability: Internet banking services are availble to people round the year, There i no ime restriction for aving these online services. Acca checked at any time and similarly funds can be transferred without having to open, (ii) Easy to Operate: Ontine banking services are easy iteasier than visting the branch for the same. lock throughout the runt balances can be to wait forthe bank ‘o operate and simple in nature. People fing (Gil) Convenience: Its very convenient also as one need not leave chores behind and go to bankand stand in a queue atthe branch for doing any transaction. People can complete their transactions from wherever they are e.g., Paying utility bills, recurring deposit account instalments, completing pass book, issue of cheque book and others ete, Gv) Time Saving: Through intemet banking people can complete any transaction in a matter ofa fow minutes Funds can be transferred to any account within the Country or outside the country within no time, Even fixed deposit accounts can be opened with no time boundation, (¥) Activity Tracking: At the time of doing any transaction at bank, an acknowledgement receipt is given to the customer. There are possibilities of losing it. Whereas in case of online account number, the amount paid, th recorded there, E-statements can be Disadvantages of Internet Banking () No acess to technology: people do not have mobiles mobile app. They even do not have any bank accounts, But wi prime minister MODI a large number of but still they cannot ‘Operate them online. Difficult for Beginners: Also, a large no of People in India have been living lives far away from the web ofthe intemet,It seems tobe a whole new deal for these people to understand tow internet banking works. Worse sill, there is no Process of explaining them how internet banking works and the how to go about it It is very difficult for these inexperienced beginners ‘o figure it out for themselves this whole Process of net banking, iii) Requirement of internet connection: An uninterrupted Wi-Fi connection is must to operate ittemet banking services. one does nothave, Access to the internet or there is poor connectivity then online facilities are of no use, Sometimes due to any technical issues the bank servers af down then also one cannot access net banking services, 0) Securing Password: “208 in ID and a password is requiedto be entered in onder to act ese net banking services, Every individual has his own unique log in ID and password: Therefore both log in ID and the Password play a key role in maintaining integrity and securtYofthe account holder, If this password ig to devise some fraud. The password cal beak but itis difficult task for the account holder to o others, then they can use this information anged equnly 80 a8 to avoid password theft remember this changed password. (s) More chances of fraud: Cases of fraud are on a rise in case of Pe on a are increasing day by day. Every time when online transaction is done, portal st for OTP icone time password. Ifthis OTP goes in wrong hands, it means cheating has been done. Itis always advised not to share this one-time password with anyone else to safe guard from online frauds. (vi) Security of transaction: No matter how much precautions banks take to provide a secure network to its customers; still these online banking transactions are susceptible to hackers Inespective ofthe advanced encryption methods used to keep user data sa, there have been so many cases where this transaction data is compromised. This is posing a major threat to users and the banks as this information is used illegally by the hacker for his own benefit. (ase sual of HDFC Bonk [HDFC Bank Limited is an Indian banking and financial services company who has his headquarter in Mumbai I is India’s largest private sector bank by assets and world’s 10th largest bank by market capitalisation as of April 2021. It is also the fifteenth largest employer in India with neatly 150,000 employees. The bank offers a number of products and services including wholesale banking, retail tanking, treasury, auto loans, two-wheeler loans, personal loans, loans against property, consumer arable loan, lifestyle loan and credit cards and much more. 1, Online Registration process of HDFC bank: Step 1: Visit the official website of HDFC net banking portal at https:/www.hdfebank.com/ assets/popuppages/netbanking htm, Step 2: Click on the ‘Register’ option available at the bottom of the page. Step 3: Enter customer ID and click on the ‘Go’ button. Step 4: Enter the registered mobile number for the system to generate OTP. Step 5: Enter the OTP received on registered mobile number. Step 6: Enter the details of the relevant debit card issued by the bank . Step 7: The screen will appear that will allow you to set the IPIN to access internet banking services. Step 8: Log into net banking services using that newly set PIN. Phone banking registration process: Step 1: Call the phone banking number and give customer number), or debit card and PIN. Step 2: Phone banking agent will take net banking request. Step 3: The IPIN willbe couriered to the mailing address of client Id, TIN (telephonic identification within 5 days.50 || Finance for Everyone 3. HDFC Bank Branch ing form. Step 1: Download the net banking Step 2: Fill in the form and submit it at the nearest HDFC branch. Step 3: The IPIN will be couriered to the mailing address of client. ‘Source: haps:ldvwu:hdfebank.com/personalsvays-to-bank/online-banking/net-banking/registerfor-netbanking irce: https: febani Automated Teller Machine (ATM) Automated Teller Machine or commonly called as ATM is a self-service banking outlet. It is very usefu, for public as they can withdraw money, check their balance, pay their bills, complete pass book or transfer funds and much more. Different banks provide these ATM services by installing cash machines in different parts of the country. People can go and can easily withdraw money from any of these machines. Also it is not necessary for an individual to have an account in that particular bank whose ATM he/she is using. Banks provide these services either free or sometimes charges avery nominal fees for doing ATM transactions. Normally no charge is levied for the first 3-5 transactions in a month but once limit is crossed of free transactions, then a nominal charge has to be paid. Few banks levy charges if one withdraws money from another bank’s ATM of which he is not an account holder. Types of Automated Teller Machines (ATMs) * It allows only withdrawal of cash, Simple basic unit check balance, change the PIN, get mini statements and receive account updates etc, * It provides facilities for cash or cheque deposits and line of credit & bill payments etc, Complex unit There can be onsite and offsite Autom: the bank Premises, and the offsite machine SO as to assure that people hav going to bank branch, On the basis of the labels assigned to ATM, these automated teller machines are divided into following categories: ‘ated Teller Machines also. Onsite ATMs are located within es are located in different hooks and corners of the country © access to basic banking facilities and instant cash withdrawals without * Green Label ATMs- Used for agricultural Purposes * Yellow Label ATMs- Used for e- * Orange Label ATMs- * Pink Label ATMs- ‘commerce transactions Used for share transactions Specifically for females to help avoid the long queues and waiting timeBanking Services || 51 « White Label ATMs- Introduced by the 1 : articular bank but by entities ‘other tan ieee white label ATMs are not owned by a «Brown Label Banks- Operated by a third party other than a bank. + There are also a few biometric Autom: ‘ 7 : scanners to be operated. ated Teller Machines that require fingerprints & eye ses of an Automated Teller Machine utomated Teller Machines have brought revolution in the banking sector by providin; to tomers and loading off the burden from bank officials. Some of these ATM remain open round the fock throughout the year. Some of the uses of an ATM stated below: @ Meet Ga ort are used. ne Withdrawing money and checking balance. Account holders can also transfer Money can be transferred by thei i i Shanged also through these machines, yy their respective account holders and Pin can be (i) Newer and advanced ATMs also provide options of applying for a personal loan and for opening/withdrawing a Fixed Deposit (FD). Even one can book railway tickets, pay the insurance premiums, income tax & utility bills, recharge mobile, and deposit cash through these machines. (ii) Today ATM have been installed by banks everywhere in public spaces, highways, malls, educational institutes, petrol pumps marketplaces, railway/airport stations, hospitals, etc. It provided convenience and easy accessibility to common public to do transactions. (iv) Automated Teller Machines provide 24%7 access throughout the year. (©) Ithas also helped in reducing the burden of the bank officials. (i) Ithas also helped common public from the hassle of standing in long queues at the bank even for simpler transactions like withdrawing money, paying utilies bills. Procedure of using Automated Teller Machines ‘Abank account and an ATM card is required to avail the facility of ATM. At the time of opening a bank. account, banks issue a debit card that can be used not only at ATMs but can be used for online payment fnteways or card swipe payments. Every Automated Teller Machine has some common basic pars, even if they may differ in size and design. Input Devices ‘Output Devices a a CO Card Reader (0 Display Screen C7 Keypad (0 Cash Dispenser CO Receipt Printer and Speaker52 || Finance for Everyone 1, Input Devices: / / * Card Reader: There isa space in every ATM to insert the debit or the ATM card. The any card normally bas a magnetic strip onthe back, and in some eards have a chip onthe fan which contains the account details. Card Reader after recognizing these details, passes thn to the user server. + Keypad: There is keypad in every ATM where one can insert numbers, cancel any transaction and clear any number. This pad is used to enter the PIN and the amount to be withdrawn, These keypads can be either in the form of physical butons or virtual keypa on the touchscreen, 2. Output Devices: * Display Screen: Every ATM contains Display screen usually LCD ot CRT to show the transaction information like procedure of doing the transaction or to show the balance afer withdrawal. Display sereen also shows options of PIN change, quick cash withdraval, balance check, etc. Cash Dispenser: Bank officals safely stocks money in these ATM. There is a cash dispenser in every ATM from where one can collect cash. Receipt Printer: The receipt printer in the ATM keeps a record of the type of transaction, amount withdrawn, and the remaining balance after completing a transaction. In an ongoing transaction, ATMs generally display the question if the customers want the receipt or not, So the receipt printer will give a receipt if requested by the individual, Speaker: Mostly all the ATMs have inbuilt speakers which gives the audio instructions for accessing the machine & doing transactions. And it helps the users to perform the transaction smoothly. CIBIL Score: CIBIL Score or credit score is a three-digit score lies between 300 and 900. The score i (also known as CIR i.e. Credit Information Payment history of different types of loans, it numeric summary of an individual credit history. credit s derived from the credit history given in the CIBIL Repot Report). Credit information report is an individual's credit their payments over a period of time. CIBIL Score range: CIBIL Score Creditworthiness Approval Probability 600-649 Doubtful Difficult 650-699 Satisfactory or fair Possible 700-749 Good Good) 750-900 Excellent Very high Electronic Clearing System (ECS) Electronic Clearing System (ECS) asthe name Suggests is an electronic method of fund transfer fromBanking Services || 53 account to another. It is generally used fi ee : one ban xe dividend, interest, salary, for bulk transfers made by institutions for making rents li Ls ry, Pension, etc. It can also be used to pay bills and other charges ms payments to utility companies such as telephone, electricity, water, or for making equated Fsonthly instalments payments on loans as well as SIP investments, ECS can be used for both ECS cedit a0 ECS debit. ECS Credit: ECS credit is used for allowing credit to a large number of beneficiaries by raising a ogle debit to the customer's account, such as dividend, interest or salary payment. ‘The benefits of ECS credit given to the clients are stated follows: () Frequent visits are not required by the end beneficiary to his bank to deposit the physical paper instruments. (ji) Delay in the realisation of proceeds, which mostly happen in the receipt of the paper instrument, is eliminated here. (ii) The ECS user helps in saving administrative work of printing, dispatch and reconciliation. (iv) Here payments are made on a designated date so as to ensure that the beneficiaries account gets credited on that particular date only. ECS Debit: It is used for raising debits to accounts of customers for affording a single credit to a jpafticular institution for utility payments like electricity bills and telephone bills etc. ‘The benefits of ECS debit given to the clients are stated below: () Itmakes paying bills easy for the account holder. As it eliminates the need of going to different collection centres or banks and standing there in ong queues for payment. It saves time and money also. (ii) It makes it easy to track the last date of payment and status of payments also (iil) These users of ECS can save the administrative work of collecting the cheques by monitoring their realisation and reconciliation. (iv) It is possible to have better cash management. Less chances of frauds are there due to no fraudulent access to paper instruments and encashment. (¥) Instead of fractured receipt of payments it is possible to have realisation of payments on a single date. Payment App / Mobile Wallet India has the second-largest internet population with more than 749 million users tll 2020, out of which 14nilion users arc using mobile phones for intemet access It is expected that this number would rose to .Sbillion by 2040. About 54% of the population of India has smart phones and itis expected to reach 96 Payments % in 2040. In recent years there is massive transformation in payment industry. The National Corporation of Indi has implemented the Unified Payment Interface (UPI). This led to introduction of UPI-enabled noble payment apps by several Indian banks and various other third-party companies. It has helped ‘ers in sending and receiving money between UPI-linked bank accounts.