BANKING CHANNELS
The term banking channel refers to the various modes/ways in which we can do banking or the banks can render their services. Traditionally banking was done in only one style i.e. branch based banking. Any transaction done outside the branch premises was not considered valid. This kind of banking is also called as brick and mortar banking, as the branch premises is made up of bricks and mortar. However, with the advancement of the technology, the face of banking has under gone a sea change. The banking has transformed from mono channel banking to multi channel banking, offering the customer a wide choice of options through which he can do bank transactions. Some of the main channels are as under:
INTERNET BANKING: It is also called by names such as – Net Banking, E-banking, Online Banking, Virtual Banking. This is the most emerging channel of banking now a days. It offers fastest and cheapest mode of banking. Here, the customer uses internet facility to access the intranet of the concerned bank. Net Banking makes use of a specific customer ID and Password. Internet Banking has become possible because of implementations of core banking solutions providing 24×7 services.
CORE BANKING: Commonly known as fully computerized banking. In this system all the branches of a bank are linked to a core computer so that the data is accessible anywhere anytime. Even at the branch level, all the working terminals/ counters computers are linked to a core computer, called SERVER. The branch sever in turn is connected with the core server. This type of banking is also known is core banking solution (CBS).
SKIMMING: It is the illegal copying of information/data from the magnetic strip of a credit or debit card It is a more direct version of a phishing scam.
PHISHING: Phishing (pronounced as “fishing”) is a type of online identity theft. It uses fraudulent emails and websites that are designed to steal your personal data or information such as credit card numbers, passwords, account data, or other information.
MOBILE PHONE BANKING: It refers to doing actual banking transactions through mobile phone. A customer logs in to internet to access the intranet of the bank. As per recent RBI guidelines, there is no financial limit for transactions in a day. Further, it is mandatory for banks to use a double password, one for the customer and one for every transaction.
IMMEDIATE PAYMENTS SERVICES – IMPS: Developed by National Payment Corporation of India (NPCI), it offers an instant, 24×7 services to facilitate use of cell phones as a channel for accessing bank accounts and execute interbank fund transfers in a secured manner with immediate confirmation features. Besides, it facilitates coordination of various other retail payment systems in the country.
MOBILE VAN BANKING: With advancement in technology, the whole banking has entered into a laptop, which in turn can be carried anywhere by any means of transport, giving birth to a variety of options in mobile banking. Taking a leaf from this, many a banks have also started mobike/bike banking.
TELE BANKING: It refers to telephone based banking, using any mode of telephone/mobile, where customer’s queries are attended to either by answering machines or Tele-callers. In contrast to mobile banking, no transactions are allowed in Tele-banking. Here only information can be share about various bank products/accounts. Basically, it is call centre based banking.
LOBBY BANKING: Lobby Banking facilities offer the customers an access to an internet banking kiosk, phone banking, cheque drop facility and Automate Teller Machine (ATM), all set up in a tailor-made lobby like premises. Practically it means machine based staff-less banking where all transactions are put through various self operated machines.
Automated Teller Machine (ATM): ATMs facilitate cash withdrawal from one’s account – any time – anywhere. Of late, banks are offering a wide variety of services through ATMs such as feedeposit, online payment of bills, mobile recharge, and fund transfers. Usually, ATMs are operated through Debit Cards, although Credit Cards can also be used. A card user has to enter his confidential PIN (Personal Identification Number) to activate the ATM. Interbank connectivity of ATMs is provided through National Financial Switch, maintained by NPCI.
Customers are allowed maximum five withdrawals in a month from non bank ATMs.
ATM FAILED TRANSACTION: Whenever there is a mismatch between the cash received from ATM and the amount debited to the account, such a transaction is called ATM failed transaction. RBI guidelines stipulate that in all such cases, banks are required to refund the difference amount within 7 working days of receipt of complaint, failing which bank will have to pay a fine of Rs. 100 per day of delay to the customer, with no upper limit, provided the complaint is lodged by the customer within 30 days of the transaction.
BROWN LABEL ATM: These are ATMs license to the banks but serviced and maintained by third parties. Most of the bank ATMs are brown label ATMs.
WHITE LABEL ATM: White label ATMs are ATMs not belonging to a particular bank. They are licensed to, owned and operate by the private non banking companies, who rent out these ATMs to other banks. Customers from any bank can carry out transactions at these ATMs in exchange for a fee.
DEBIT / CREDIT CARDS: Also referred to as Plastic Money, these are one of the most popular means of making payments or withdrawing cash. A debit card is linked to a specific bank account and can be used to operate only that account. In contrast, a credit card is not linked to any account and is like a loan limit granted by the bank. Every credit card will have a specific loan limit amount and can be used to make payment etc. only up to this limit. The credit card holder gets a monthly bill for the transactions done by him and gets free some time to pay the bill, after which interest is payable.
Credit Card: Buy now, pay later. Debit Card: Buy now, pay now.
VISA / MASTER CARD: These are two international card service providers (Global Payment Gateways). All transactions put through various debit / credit cards are coordinated and serviced by these two companies. All card issuing banks in India coordinate with either of these two companies before issuing any card. However, now a third option – RuPay Card is also available.
RUPAY CARD: It is the Indian domestic card payment network set up by National Payment Corporation of India (NPCI) to facilitate debit / credit card transactions. It will challenge the global payments gateways such as Master Card and Visa.
CNP TRANSACTIONS: Refers to Card Not Present transactions i.e. transactions done by using debit / credit cards but not through ATM. Card details are conveyed through internet or phone. A similar transaction is Interactive Voice Response (IVR) transaction where payments are made through debit / credit card and card particulars are conveyed over phone or internet. Recently RBI made it mandatory for all banks to issue SMS alert for all CNP/IVR transactions.
POINT OF SALE BANKING: Usually, cash withdrawal facility using plastic cards is available at ATMs while Pint of Sale terminals offer only payment facility. As a further step towards enhancing the customer convenience in using the plastic money, RBI has allowed cash withdrawals up to Rs.1000/- per day at PoS terminals. Any place where a card swipe machine is installed is known as point of sale terminal.
GREEN CHANNEL BANKING: It is an initiative started by State Bank of India where the focus is on minimizing the use of paper in putting through routine payment and receipt transactions. Here, instead of filing a paper voucher for withdrawal or deposit, the particulars are fed through a small machine placed on the counter, thereby minimizing the use of paper.
TYPES OF BANKING
Depending upon nature of business, banking can be categorized on the following basis:
RETAIL BANKING: Retail banking refers to dealing with individuals for comparatively small amount for both deposits as well as advances. Typical retail banking products in deposits are savings/current accounts, fixed deposits etc. In advances, retail banking products include home loans, vehicle loans, personal loans etc. Now a days, retail banking is most popular with the banks.
WHOLE SALE BANKING: In contrast to retail banking, it refers to large scale banking with corporates, institutions, etc. It covers large loans to corporates, channel financing, institutional accounts.
UNIVERSAL BANKING: With the advancement of technology and computerization, the gap between retail and whole sale banking has narrowed down and same bank doing both types of banking, which is known as Universal Banking. It also means same banks doing both long term and short term financing as traditionally banks were doing only short term financing.
PARA BANKING: Traditionally, banks were into the business of accepting deposits and making loans. However, with the changing times, bank have taken up a variety of other functions also such as selling insurance products, mutual funds, debit / credit card business accepting variety of fees, earnest money etc. All these activities form part of Para Banking.
MERCHANT BANKING: The merchant bankers are those financial intermediaries who arrange for transfer of capital funds to those borrowers who are who are looking for loans. Some common merchant banking activities are:
- Management of the customer’s securities
- Management of investment portfolio
- Appraisal / Management of projects
- Issue management and underwriting of shares
- Syndication of loans
ISLAMIC BANKING: It is banking done as per provisions of Muslim Law (Shariat). As per Shariat, paying or charging of interest is considered sin. Thus, Islamic banking prohibits payment or charging of interest. This type of banking is in practice in Arabian countries but is not allowed in India.
BANCASSURANCE (BANKING + INSURANCE): Bancassurance is the selling of insurance and banking products through the same channel, most commonly through bank branches. The banks cannot sell their own insurance products as they do not have the license for this. Hence, they become the corporate agent of some insurance company and sell that company’s products. It helps banks to increase the range of products to existing customers and also adds new customers. Insurance products offer very good scope for earning fee based income.
SHADOW BANKING: It refers to banking activities carried out by the entities outside the purview of the regular banking system. For example loans made and deposits accepted by various NBFCs.
NARROW BANKING: Whenever bad loans of a bank increase considerably, causing a threat to its stability, RBI directs that bank to restrict its investments in certain selected safe government securities only. Thus narrow banking means ‘narrow’ in the sense of investment of funds and not some activity. The concept was introduced by S.S. Tarapore committee.
GREEN BANKING: It refers to following environmental friendly practices in banking. It includes financing of environment friendly projects, financing of anti pollution plant and machinery, minimizing the use of paper and electricity.
SELF STUDY ZONE 