Modern Technology in

Banking
Modern technology in banking
Information technology is one of the most important facilitators for the transformation of the
Indian banking industry in terms of its transactions processing as well as for various other internal
systems and processes.The various technological platforms used by banks for the conduct of their
day to day operations, their manner of reporting and the way in which interbank transactions and
clea
The process of computerisation marked the beginning of all technological initiatives in the
banking industry. Computerisation of bank branches had started with installation of simple
computers to automate the functioning of branches, especially at high traffic branches.
Thereafter, Total Branch Automation was in use, which did not involve bank level branch
networking, ring is affected has evolved substantially over the years.
Core banking
Networking of branches are now undertaken to ensure better customer service. Core Banking
Solutions (CBS) is the networking of the branches of a bank, so as to enable the customers to
operate their accounts from any bank branch, regardless of which branch he opened the account
with. The networking of branches under CBS enables centralized data management and aids in
the implementation of internet and mobile banking. Besides, CBS helps in bringing the complete
operations of banks under a single technological platform.
CBS implementation in the Indian banking industry is still underway. The vast geographical spread
of the branches in the country is the primary reason for the inability of banks to attain complete
CBS implementation.
 ATM
ATMs were introduced to the Indian banking industry in the early 1990s initiated by foreign
banks. Most foreign banks and some private sector players suffered from a serious handicap at
that time- lack of a strong branch network. ATM technology was used as a means to partially
overcome this handicap by reaching out to the customers at a lower initial and transaction costs
and offering hassle free services. Since then, innovations in ATM technology have come a long
way and customer receptiveness has also increased manifold. Public sector banks have also now
entered the race for expansion of ATM networks. Development of ATM networks is not only
leveraged for lowering the transaction costs, but also as an effective marketing channel resource.
Electronic fund transfer system
There are various types of electronic clearing systems functioning in the retail payments area in
the country. Some of them are ECS, NEFT etc.
Electronic Clearing Service (ECS) is a retail payment system that can be used to make bulk
payments / receipts of a similar nature especially where each individual payment is of a repetitive
nature and of relatively smaller amount. This facility is meant for companies and government
departments to make/receive large volumes of payments rather than for funds transfers by
individuals. The ECS facility is available in 47 centers across India operated by RBI at places where
it manages the clearing houses and by SBI and its associates in other centers. The ECS is further
divided into two types ECS (Credit) to make bulk payments to individuals/vendors and ECS
(Debit) to receive bulk utility payments from individuals
National Electronic Funds Transfer (NEFT) system:- is a nationwide
funds transfer system to facilitate transfer of funds from any bank
branch to any other bank branch. This is typically for individual / single
payments. The system uses the concept of centralized accounting
system and the banks account that is sending or receiving the funds
transfer instructions, gets operated at one center, viz. Mumbai only. The
individual branches participating in NEFT could be located anywhere
across the country. The beneficiary gets the credit on the same Day or
the next Day depending on the time of settlement. NEFT operates on a
deferred net settlement (DNS) basis which settles transactions in
batches. Presently it is settled in six batches the last one being 1600 hrs.
on a weekday and 3 batches with the last one being 1200hrs on a
Saturday. To participate in NEFT the participating banks branch needs to
have IFSC code
Indian Financial System Code (IFSC) is an alpha numeric code designed
to uniquely identify the bank-branches in India. This is 11 digit code with
first 4 characters representing the banks code, the next character
reserved as control character (Presently 0 appears in the fifth position)
and remaining 6 characters to identify the branch. The MICR code has 9
digits to identify the bank-branch.
Real Time Gross Settlement(RTGS)

It is a large value funds transfer system whereby financial intermediaries can settle interbank
transfers for their own account as well as for their customers on a real time and on gross
basis. The system effects final settlement of interbank funds transfers on a continuous,
transaction- by-transaction basis throughout the processing day(RTGS business hours). The RTGS
system is primarily for large value transactions. The minimum amount to be remitted through
RTGS is Rs.1 lakh. There is no upper ceiling for RTGS transactions. On a typical day, RTGS handles
about 14000 transactions a day for an approximate value of Rs.1,50,000 crore
While RTGS remittance would be credited to a beneficiarys account by maximum time lag of two
hours, NEFT transaction depending on the timing of the transfer will be transferred the same day
or the next day and in both the cases when the transfer has not happened the money would be
returned to payers account
Internet Banking
Internet banking in India began taking roots only from the early 2000s.
Internet banking services are offered in three levels. The first level is of a
banks informational website, wherein only queries are handled; the second
level includes Simple Transactional Websites, which enables customers to
give instructions, online applications and balance enquiries. Under Simple
Transactional Websites, no fund based transactions are allowed to be
conducted. Internet banking in India has reached level three, offering Fully
Transactional Websites, which allow for fund transfers and various value
added services.
Internet banking poses high operational, security and legal risks. This has
restrained the development of internet banking in India. The guidelines
governing internet banking operations in India covers a number of
technological, security related and legal issues to be addressed in relation to
internet banking. According to the earlier guidelines, all internet banking
services had to be denominated in local currency, but now, even foreign
exchange services, for the permitted underlying transactions, can be offered
through internet banking.
Phone Banking and Mobile Banking

Phone and mobile banking are a fairly recent phenomenon for the Indian banking industry. There exist
operative guidelines and restrictions on the type and quantum of transactions that can be undertaken via
this route. Phone banking channels function through an Interactive Voice Response System (IVRS) or tele-
banking executives of the banks.

The transactions are limited to balance enquiries, transaction enquiries, stop payment instructions on
cheques and funds transfers of small amounts (per transaction limit of Rs 2500, overall cap of Rs 5000 per
day per customer). According to the draft guidelines on mobile banking, only banks which are licensed and
supervised in India and have a physical presence in India re allowed to offer mobile banking services.
Besides, only rupee based services can be offered. Mobile banking services are to be restricted to bank
account and credit card account holders which are KYC and AMC compliant.