DEPARTMENT OF TECHNICAL EDUCATION

ANDHRA PRADESH
Name : Raja Sekhar Koduru
Designation : Lecturer in ccp
Branch : Commercial & computer practice
Institute : Govt. polytechnic for women,
kakinada, e.g. district
Year/semster : 3rd Year – VI semster
Subject : Subject
Subject code : ccp-604(b)
Topic : Customer services offered by
Bank
Duration : 50 mts.
Sub topic : Electronic fund transfer
Teaching aids : PowerCCP604(B).30
point & pictures 1
OBJECTIVES:
 On completion of this lesson you will be able to

 Define Electronic Funds Transfer.

 Explain the procedure for Electronic Funds
Transfer
 List the Benefits of Electronic Funds Transfer

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RECAP:

In the previous session we have learnt about Internet

Banking.

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Structure:

 Introduction
 EFT
 EFT vs Traditional System
 Steps in net
 Summary
 Quiz
 Assignment

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 Do you know that we can transfer fonds
through Electronic Media ?

 Electronic fund transfer.

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Introduction

 The banks adopt innovative methods of

computerization and communication..

 So as to afford a well-designed,

 Strong and transparent financial infrastructure…

 Backed by efficient payment and settlement systems.

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Introduction

 An efficient payment system play an important role in

the development of financial sector.

 The Electronic Fund Transfer (EFT) and Electronic

Clearing System (ECS) are two new payment
systems.

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Introduction

 DEFINITION:
 A method of transfer mechanism, which facilitates
transfer of funds between banks and users, is called
‘Electronic Funds Transfer’ (EFT)

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Introduction

 This system offer their customers money transfer

service from account-to-account of any bank branch

to any other bank branch, both inter-city (from one
city to another city) and intra-city (transfer between
the branches of the same city).

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Introduction

 These are introduced by banks to expedite payment

system electronically.
 When compared to existing system (Traditional), this
new systems are..
 ..very fast,
 Minimize paper work
 Provides for automatic reconciliation..

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Introduction

 Works towards better customer/investor service and

 Can be used by banks for introducing new
payment/cash management products for their
customers.
 These schemes are beneficial to all the users and the
sponsors banks.

CCP604(B).30 11
EFT - Genesis

 The EFT was launched by the RBI (Reserve Bank of

India) in the year 1995.
 The system allows for the instantaneous transfer of
funds between banks and among banks through the
electronic mode.

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 EFT - Genesis

 The system was introduced with a view to

modernizing the funds transfer mechanism within the
country.

 RBI acts an intermediary between the sending banks

and the receiving bank and effects inter-bank funds
transfer.

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 EFT vs. Traditional System

 The transfer funds under the traditional mode of

funds transfer, the remitter has to obtain instruments

such as demand drafts, mail transfer and telegraphic

transfer from the bank..

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EFT vs. Traditional System

 The instruments are sent to the beneficiary by post

that in turn lodges the instruments for collection,
clearing and payment.
 The process takes a long time, as many as 10 days
in the case of demand draft.

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EFT vs. Traditional System

 In the case of telegraphic transfer, funds reaches the

beneficiary either on the same day or the next day.

 But, it requires that both the remitter and the

beneficiary would have to be account holders of the

same bank.

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EFT vs. Traditional System

 If there are customers of different banks, a good deal

of paper processing is required..

 The EFT system introduced by the RBI, on the other

hand, is an inter-bank oriented system.

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EFT vs. Traditional System

 RBI acts as an intermediary between the remitting

bank and the receiving bank and assist in the
inter-bank funds transfer.

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EFT vs. Traditional System

 The customer of banks can request their respective

branches to remit funds to the designated customers

irrespective of bank affiliation of the beneficiary.

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Steps in EFT
 DATA PREPARATION
 The next step in the process of EFT mechanism is
that the remitting branch makes a schedule and send
the duplicate of the EFT application form to the
service branch.
 This is done for EFT data preparation.
 The branch that is equipped with a computer system
carries out the task of data preparation as per the
specified format.

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Steps in EFT

 DATA TRANSMISSION
 The service branch prepared the EFT data file.
 This is done by using a software package supplied by
RBI.
 The file is then transmitted simultaneously to the local
offices of RBI and the local RBI National Clearing Cell
(NCC) by 3.30 p.m.

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 Steps in EFT
 DEBITING REMITTING BANKS:
 The files of information transmitted by the service
branches are consolidated at the RBI remitting
centre.
 The files of transactions are stored city-wise.
 The center then prepares vouchers for debiting the
remitting banks on Day-1 itself.
 City-wise files are transmitted to the RBI office at the
respective destination centers.
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Steps in EFT

 CREDIT RECEIVING BANKS:

 The designation centers of the RBI receive the files
from the originating centers.
 These are then consolidated and sorted bank-wise.
 Bank-wise remittance data files are transmitted to
bank on Day-1 itself.
 Subsequently, bank-wise vouchers are prepared for
crediting the receiving bank’s accounts, the next
morning.

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Steps in EFT

 CREDITING BENEFICIARY:

 The destination centers of the RBI process the

remittance files transmitted by RBI on the second

day.

 Credit reports are then forwarded to the destination

branches for crediting the beneficiaries’ accounts.

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Steps in EFT

 TASK AT SERVICE BRANCH:

 Following tasks take place at the service branch
where the EFT transaction passes through for inward
remittances.
 Receipt of transaction, messages from RBI-EFT
center through RBI-Net by way of downloading at the
computer system installed in service branch of the
respective branch.

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Steps in EFT

 TASK AT SERVICE BRANCH:

 Provision of information to the concerned branch by
the service branch regarding the receipt of credit
transaction in the beneficiary account specified in the
message.
 Sending of credit advice to both the service branch
and the beneficiary branch.

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Steps in EFT

 TASK AT BENEFICIARY BRANCH:

 Following task take place at the beneficiary branch
where the EFT transmission passes through for
inward remittances.
 Beneficiary branch acting as per the instructions
given by the service branch and affording credit to
beneficiary’s account as per the advice.

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Steps in EFT

 ACKNOWLEDGEMENT:

 Sending acknowledgement copy of the credit advice,

same day to the service branch.

 The receiving branch acknowledges every transaction it

receives after crediting beneficiary’s account.

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Steps in EFT

 The acknowledgement particulars reach the remitting

branch as an inward message on Day-3 of the EFT
processing cycle.
 The remitting branch will, therefore have precise
information as to when the beneficiary’s account was
credited.

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Steps in EFT
 LIMIT:
 Maximum limit on the amount of individual
transaction permitted for fund transfer per transaction
is Rs.5 lakhs.
 SERVICE CHARGES
 According to the Indian Banks Association (IBA), the
service charges, which would Rs.25/- per transaction
..
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Steps in EFT

 ..and to be shared between..

 Remitting bank Rs.10/-

 RBI Rs.5/-

 ..and receiving bank Rs.10/-

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Summary
 The Electronic funds Transfer system was introduced
by the RBI in the year 1995 to make the ..
 Payment system very fast
 Minimize the paper work,
 For automatic reconciliation
 Works towards better customer service
 And introducing new payment/cash management
products for their customers.
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Summary

 The steps involved in EFT are:

1. Making application
2. Data preparation
3. Data transmission
4. Debiting remitting bank
5. Crediting Receiving Banks
6. Crediting Beneficiary
7. Task at Service Branch
8. Task at Beneficiary Branch.

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QUIZ

 Expand the following terms:

 EFT
 Electronic Fund Transfer
 ECS
 Electronic Clearing System
 Who acts as Intermediary among banks for EFT
 Reserve Bank of India

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QUIZ

 What is the maximum limit of individual transaction

under EFT
 Rs.5.00 lakhs
 What is the distribution of service charges among banks
and RBI?
 Remitting Bank Rs.10.00
 Receiving Bank Rs.10.00
 Reserve Bank of India Rs.5.00
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Frequently Asked Questions

 Briefly explain about the EFT.

 List the steps involved in EFT.

 Distinguish between traditional Banking Transfer

System and EFT system

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