unit 5.pdf

RECENT DEVELOPMENT IN BANKING MODULE -5 E-BANKING OR ELECTRONIC BANKING.  INTRODUCTION:  Many developments in tele-communication technology and electronic data processing in recent years have contributed to remarkable changes in the banking sector like availability of ATMs and...

RECENT DEVELOPMENT IN BANKING MODULE -5 E-BANKING OR ELECTRONIC BANKING.  INTRODUCTION:  Many developments in tele-communication technology and electronic data processing in recent years have contributed to remarkable changes in the banking sector like availability of ATMs and plastic money(debit and credit cards),electronic fund transfers etc.  All these developments in banking sector in recent years have given birth to a new concept called e-banking or electronic banking. Meaning Of E-banking Or Electronic Banking: E-banking or electronic banking means conduct of banking operations through electronic means or devices, such as computers, telephones, mobile phones, ATMs etc. In other words, e-banking means provision of banking products and services(i.e., banking facilities) by banks directly to customers through electronic delivery channels, through electronic tools or devices. CHARACTERISTICS OF E-BANKING: It is essentially performance of banking operations through electronic means or tools. Reliance on information technology and absence of physical bank branch to deliver banking services to customers. 24 hours access. E-banking is anywhere banking. SIGNIFICANCE AND BENEFITS OF E-BANKING: ❑ An important benefit of e-banking to banks is better brand image. ❑ Higher rate of retention of existing customers for a bank. ❑ Availability of innovative banking facilities attracts new customers. ❑ More scope for offering differential services under e- banking. ❑ Opportunity for participation in shared network and thereby expanding the bank’s operation base. ❑ Low operational cost for banks and contributes to profitable banking. ❑ Risks of banks can be better monitored and controlled by e-banking by establishing centralized database.  SIGNIFICANCE AND BENEFITS OF E- BANKING: to CUSTOMERS Customers enjoy new and innovative banking products and services and also wide range of banking products and services at reduced cost. Increased comfort and time-saving facilities, 24 hours access and no physical interaction with the bank. Quicker, easier, and continuous access to information. ATMs OR 24-hours Tellers allows and offers round the clock banking. Allows customers to handle many bank transactions through personal computers. A sense of financial discipline by recording each and every transaction. Lowers the risk and generates higher security to the customers. Online payments for purchase of goods and services facility is a boon to the customers.  CONSTRAINTS OR DRAWBACKS OF ELECTRONIC BANKING: Huge initial start up cost. Training and maintenance. Lack of skilled personnel. Security threat. Obsolescence of technology. Adoption of technology. Customer’s acceptance. Legal issues. Security measures for E-banking. FACETS OR DIMENSIONS OF E- BANKING: 1. Customers-to-Bank E- Banking.(C to B) 2. Bank-to- Bank E-Banking.(B to B) 3. Electronic Central Banking. 4. Internet Procurement.  E-BANKING TRANSACTIONS The following transactions are handled through e- banking: 1. Account enquiry 2. Fund transfer 3. Payment of electricity, water, telephone bills, etc. 4. Online payment for transactions actually performed through internet. 5. Request for statement of accounts. 6. Access to latest scheme of the bank. 7. Access to rates of interest and other service charges of the bank. E-SERVICES:  Automated TELLER machines (ATM)  Internet Banking  Tele- Banking  Mobile Banking  Electronic Fund Transfer  Standing Instructions  Online Mutual fund Investment  Smart Cards TELE BANKING  A system which enables banking transactions to be carried out by means of a telecommunications network, most commonly achieved through a view data system or an interactive computer link, or sometimes over an interactive cable TV network, with provision for the user to send signals to the bank. The system will be bi-lingual and has following facilities offered:  i) Automatic balance voice out for the default account.  ii) Balance inquiry and transaction inquiry in all  iii) Inquiry of all term deposit accounts  iv) Statement of account by Fax, e-mail or ordinary mail.  v) Cheque book request  vi) Stop payment which is on-line and instantaneous  vii) Transfer of funds with CBS which is automatic and instantaneous  Viii) Utility Bill Payments  ix) Renewal of term deposit which is automatic and instantaneous  x) Voice out of last five transactions. ONLINE BANKING  Online banking refers to the computerized service that allows a bank's customers to get online with the bank via telephone lines to view the status of their account’s and transaction history. It usually also allows them to transfer funds, pay bills, request cheque books, etc. Features of Online Banking  Viewing account balances  Viewing recent transactions  Downloading bank statements, for example in PDF format  Viewing images of paid cheques  Ordering cheque books  Download periodic account statements  Downloading applications for M-banking, E-banking etc.  Funds transfers between the customer's linked accounts  Paying third parties, including bill payments (see, eg., BPAY) and telegraphic/wire transfers  Investment purchase or sale. MOBILE BANKING MEANING OF MOBILE BANKING: Mobile banking refers to conduct of banking operations on mobile(i.e., cell) phones. In other words, mobile banking means banking operations that are done through mobile phone while a person is on the move. Features of Mobile Banking: ▪ Mobile customers ▪ M-commerce (Mobile commerce) ▪ Technology based ▪ Types of services ▪ Eligibility ▪ Application ▪ Registration AUTOMATED TELLER MACHINES (ATMs) MEANING OF ATM: An Automated Teller Machines or Automatic Teller Machine, popularly called the Cash Machine or Any Time Money is an electronic machine installed by a commercial bank and operated by the customer himself, to withdraw money and to make other financial transactions. FEATURES OF ATMs: 1. Installed at any place and banking anywhere. 2. Round the clock access. 3. ATMs are safe. 4. Use-friendly. TYPES OF ATM: TYPES OF ATMs On-site ATM Off-Site ATM An ATM installed at the bank premises is called On-Site ATM. ATMs installed by a bank at important places, such as supermarkets, petrol bunks, airports, railway stations etc. for the benefit of all the customers of a bank are called Off-Site ATMs ADVATAGES OF ATM: ✓ Permits cash withdrawals. Permits cash deposits ✓ Making enquiry about the bank balance. ✓ Facilitates requests for their statements of accounts. ✓ ATM card holders can have access to cash and service at any location. ✓ There is privacy in transactions. ✓ Permits change of personal identification number (PIN). ✓ Facilitates transfer of funds From/To accounts of same and different branches. ✓ Facilitates bill payments. ✓ Facilities are available at any time, day or night, all the 24 hours, and 7 days a week, 365 days in a year. DISADVATAGES OF ATMs: ✓ Initial cost of installation of ATMs is very high. ✓ If ATMs are on-site, then there will not be anywhere banking ✓ ATM system demands literacy on the part of users. ✓ ATM system requires full computerization of all bank branches. ✓ There are certain restrictions on the ATM facilities. For instance, customers can not withdraw more than a particular amount. ELECTRONIC FUNDS TRANSFER(EFT) MEANING OF ELECTRONIC FUNDS TRANSFER(EFT): Electronic funds transfer(EFT) is a system by which cheques, pay-in-slips and other financial papers are replaced by computer controlled invisible and immediate transfer of funds from one account to another.  OBJECTIVE OF EFT: The main objective of EFT is to help banks to offer to their customers money transfer service from one account of a bank branch to another account of a bank branch both inter-city(that is., from one city to another) and intra-city(that is., within a city) and also- from one account of a bank to an account bank either in the same city or in different cities. FEATURES OF EFT: 1. Offers facility for transfer of funds within 242 hours inter- bank, inter-city across 15 major cities. 2. Money transfer is only among public sector banks. 3. Remitter and receiver of funds can be from different banks. 4. Some services is levied for the transfer of funds. 5. There was a ceiling on the amount of transfer.  MERITS OF EFT: 1. Under EFT, funds can be transferred from one bank to another bank. 2. Funds are credited to the beneficiary’s account instantly, this scheme is fast and timely. 3. Frauds in remittance of funds can be avoided. 4. Economical. 5. Minimizes the loss of interest for customers. RTGS (REAL-TIME GROSS SETTLEMENT )  The term real-time gross settlement (RTGS) refers to a funds transfer system RGTS is the continuous process of settling payments on an individual order basis without netting debits with credits across the books of a central bank.  In most countries, the systems are managed and run by their central banks.  FEATURES  Real-time gross settlement is the continuous process of settling interbank payments on an individual order basis across the books of a central bank.  This system's process is opposed to netting debits with credits at the end of the day.  Real-time gross settlement is generally employed for large- value interbank funds transfers.  RTGS systems are increasingly used by central banks worldwide and can help minimize the risks related to high- value payment settlements among financial institutions.  BENEFITS OF RTGS: ▪ Saves time. ▪ Saves paper. ▪ There is no threat of money being stolen or cheques being forged, since all the process is done online. ▪ Huge sums of money can be transferred easily. ▪ Helps companies manage their business capital in a much better way. ▪ This is in turn also ensures a better supplier- buyer relationship. NEFT (National Electronic Funds Transfer)  NEFT, also known as National Electronic Funds Transfer is an electronic payment system which facilitates one-to-one funds transfer.  It helps in the transfer of money from one bank to another or one branch to another. Customers can only transfer funds electronically to NEFT enabled banks in the country.  FEATURES OF NEFT (i)NEFT is an electronic payment system that uses a secure mode of transferring funds from one bank branch to another bank branch. (ii) There is no minimum or maximum limit of amount of funds that could be transferred using NEFT. (iii) The remitter can track the NEFT transaction through the originating branch.  BENEFITS OF NEFT  Efficient Service : NEFT facilitates an efficient, secure, economical, reliable and expeditious system of funds transfer and clearing in the banking sector throughout India, and  Freedom from Paper Handling : NEFT relieves the stress on the existing paper based funds transfer and clearing system. DISADVANTAGE OF NEFT:  Highly Technical  The Risk involved with Online Payments DIFFERENCE BETWEEN NEFT AND RTGS:  NEFT stands for “National  RTGS stands for “Real Time Electronic Fund Transfer” Gross Settlement”.  The settlement in NEFT is  RTGS is faster. slower  RTGS has minimum transfer  NEFT has no minimum limit of 2 lac transfer limit.  RTGS 9:00 am to 4:30 pm.  Timings for NEFT on Monday  while for RTGS 9:00 am to to Friday are 8:00 am to 6:30 1:30 pm. pm while for  while that RTGS is suitable for  Timings for NEFT on Saturday large money transfer. are 8:00 am to 12:30 pm  NEFT is suitable for small money transfer INTERNET BANKING OR NET BANKING  MEANING OF INTERNET BANKING: Internet banking refers to provision of banking services by a bank to its customers through its website. INTERNET BANKING IN INDIA  Information Only System  Electronic Information Transfer System  Fully Electronic Transactional System  BENEFITS OF INTERNET BANKING: ▪ Enables the customers to have every banking activity which a customer could do from his office or home with comfort. ▪ Banks websites acts as an economical means of advertising their products and services. ▪ Customers can interact with a bank at all hours from home, office and perform any transaction at the cost of a local phone call. ▪ Allows access to the largest number of customers and prospects at the lowest cost. ▪ Additional benefits- easy access to NRI’s who can access their accounts and conduct financial transactions at the click of the mouse. ▪ Customers have a complete view of the services offered by the bank and their financial information at a glance. ▪ Customers can have banking with the bank, and not just with a branch. ▪ It is beneficial to a bank with less number of branches. LIMITATIONS OF INTERNET BANKING: ❑The security of internet baking is one of key issues or problems. This issue is required to be solved successfully. ❑Identity confirmation ❑Accessibility ❑The initial cost of installation of web sites and provision of internet banking is quite high. IMMEDIATE PAYMENT SERVICE (IMPS) ◦ Immediate Payment Service (IMPS) is a real- time electronic fund transfer method through which money is credited immediately to the payee/beneficiary account. IMPS transfers can be done at anytime on a 24/7 basis and on all 365 days in a year, including on Sundays and other bank holidays. Objectives Of IMPS  To enable bank customers to use mobile instruments as a channel for accessing their banks accounts and remit funds  Making payment simpler just with the mobile number of the beneficiary  To sub-serve the goal of Reserve Bank of India (RBI) in electrification of retail payments  To facilitate mobile payment systems already introduced in India with the Reserve Bank of India Mobile Payment Guidelines 2008 to be inter-operable across banks and mobile operators in a safe and secured manner.  To build the foundation for a full range of mobile based Banking services.  FEATURES OF IMPS The money transfer through IMPS is as safe and secure as NEFT and RTGS. It is easy to use this facility on any smart device or phone with an internet connection. Money can be sent to anyone, simply with their cell phone number. The recipient gets the amount credited instantly without any delays. The service is available throughout the year and 24 by 7. There are no charges levied to any parties to avail this service. Currently the transfer limit for IMPS is Rs. 50,000 only. You should have your bank’s ATM cum Debit Card. You should be registered with your bank for SMS alerts. If you have a basic handset, then you can use this service through SMS and texting only. Some banks have their own applications for smart phones were IMPS can be done quickly.  DEMAT Account Demat Account is an account offered by a bank in its capacity as a depository participant. It is a safe and convenient means of holding securities just like a bank sunt for funds. The demat account reduces brokerage charges, makes pledging/ othecation of shares easier, enables quick ownership of securities on settlement alting in increased liquidity, avoids confusion in the ownership title of securities, provides easy receipt of public issue allotments. Advantages of DEMAT Account  DEMAT Account Opening Charges  Demat account opening charges can be divided into four main categories. Demat Account Opening Charges, Maintenance charges, Custodian Charges and transaction harges. Demat account cost may vary from DP to DP.  Demat Account Opening Charges  Demat Account Maintenance Charges  Custodian Charges  Transaction Charges  Advantages of DEMAT Account 1. A demat account helps avoid problems typically associated with physical share certificates 2. It is safe and convenient way of holding securities (equity and debt instruments both). 3. Transactions involving physical securities are costlier than those involving dematerialized securities. Therefore, charges applicable to an investor are lesser for each transaction 4. Securities can be transferred at an instruction immediately. 5. Increased liquidity, as securities can be sold at any time during the trading hours (between 9:55 AM to 3:30 PM on all working days), and payment can be received in a very short period of time. 6. No stamp duty charges 7. Risks like forgery, thefts, bad delivery, delays in transfer etc., associated with physical certificates, are eliminated. 8. Pledging of securities in a short period of time. 9. Reduced paper work and transaction cost. 10. Any change in address or bank account details can be electronically intimated to all companies in which investor holds any securities, without having to inform each of them separately. Disadvantages of DEMAT Account  Trading in securities may become uncontrolled in case of dematerialized securities.  It is incumbent upon the capital market regulator to keep a close watch on the trading in dematerialized securities and see to it that trading does not act as detriment to investors.  For dematerialized securities, the role of key market players such as stock-brokers needs to be supervised as they have the capability of manipulating the market.  Multiple regulatory frameworks have to be conformed to, including the Depositories Act, Regulations and the various By-Laws of various depositories.  Agreements are entered at various levels in the process of dematerialization. These may cause anxiety to the investor desirous of simplicity. Bharat Interface For Money (BHIM)  Bharat Interface for Money (BHIM) is an app that lets you make simple, easy and quick payment transactions using Unified Payments Interface (UPI).You can make instant bank-to-bank payments and Pay and collect money using just Mobile number or Virtual Payment Address (VPA). BHIM (Bharat Interface for Money) INTRODUCTION: After demonetization of Rs. 500 and Rs. 1000 notes, PM Narendra Modi govt has been rooting a cashless and digital economy. With the goal of Digital India in sight, Modi Govt. launched its own digital payment app - BHIM (Bharat Interface for Money) It is currently available on Android Platform, though App store listing should follow soon. In less than a weeks time, BHIM is the number one app on the Google Play Store and has already witnessed more than 3 million downloads and over 500,000 transactions since its debut. This app is secured by a dual layer security protection. This app is minimalist design approach. Its user interface is extremely simple and doesn't require an Oxford certificate to understand. MEANING:  BHIM (Bharat Interface for Money) is an Indian mobile payment App developed by the National Payments Corporation of India (NPCI), based on the Unified Payments Interface (UPI). Named after B. R. Ambedkar and launched on 30 December 2016.  PURPOSE OF BHIM: “The main purpose of BHIM App is to provide uniform experience of UPI and also to support those banks who have not developed any UPI app for their customers as yet”, says NPCI MD & CEO. FEATURES OF BHIM 1) Send Money 2) Request Money 3) Scan and Pay 4) Transactions 5) Profile 6) Bank Account Some of the benefits provided by the Bharat Interface for Money (BHIM) to the users are mentioned below: 1.Allows easy money transfer without the hassle of knowing the recipient’s bank or account number. 2.Allows the use of Unstructured Supplementary Service Data (USSD)to access bank account details, since it is UPI-based. USSD does not require an internet connection. 3.Customers who don’t have UPI accounts can also receive money via the Indian Financial System Code (IFSC) and Mobile Money Identifier (MMID) codes. It is available in English and Hindi, with other language interfaces in the pipeline. 4.A fixed amount can be transferred by generating QR code, in case the receiver does not want to share their phone number. 5.Nearly all commercial banks support BHIM. 6.Aadhaar based payments at the scan of a “thumb” (biometric authentication) are also possible by the app. DISADVANTAGE OF BHIM 1.The app is very new so there are a lot of bugs. 2.The server response is pretty slow. 3.Sometimes it could unable to generate the OTP. 4.Limit of 10000 rupees per transaction. 5.Limit of 20000 rupees per day. 6.ssue generating OTP multiple Times. 7.As of now Maestro cards are not supported in this app. UPI (Unified Payments Interface )  Unified Payments Interface (UPI) is an instant real-time payment system developed by National Payments Corporation of India facilitating inter-bank transactions. The interface is regulated by the Reserve Bank of India and works by instantly transferring funds between two bank accounts on a mobile platform.  FEATURES OF UPI  Instant money transfers with round the clock services via a simple mobile app.  A single app which can manage multiple payments from multiple bank accounts.  “Single Click 2 Factor Authentication ” which ensure safe and secure transactions.  No need for providing card numbers, IFSC codes or account numbers for transactions.  The app helps you split bills with friends, pay utility bills and even set reminders for payments. ADVANTAGES AND DISADVANTAGES OF UPI: ADVANTAGES:  Minimal Charges and Instant  No Need to Fill Details  No need for Registration and always Available DISADVANTAGES:  Transaction Limit  Requirement of Internet and Smartphone  Difficult to Convince the Customers  CLOUD BANKING Cloud banking involves four levels of service provision: 1. Business process as a services 2. Software as a service 3. Platform as a service 4. Infrastructure as a service  ECS (ELECTRONIC CLEARING SYSTEM) Electronic Clearing System (ECS) is an electronic method of fund transfer from one bank account to another. It is generally used for bulk transfers performed by institutions for making payments like dividend, interest, salary, pension, etc.  FEATURES OF ECS:  ECS is used by institutions for making bulk payment of amounts towards distribution of dividend, interest, salary, pension, etc., or for bulk collection of amounts towards telephone / electricity / water dues, cess / tax collections, loan installment repayments, periodic investments in mutual funds, insurance premium etc.  Essentially, ECS facilitates bulk transfer of monies from one bank account to many bank accounts or vice-versa. Advantages under ECS Credit Scheme : A. To the beneficiary  The beneficiary need not visit his bank for depositing the paper instruments.  He is done away with any kind of loss incurred or theft of physical instruments or the likelihood of fraudulent encashment thereof.  Cost effective.  He receives the funds on the due date. B. To the User  Savings on printing costs and administrative machinery, dispatch and reconciliation of paper instruments  Avoid chances of loss/theft of instruments or any chances of fraudulent encashment of paper instruments, etc.  Efficient payment mode that ensures the beneficiaries get credit on the due date.  Cost effective method. C. To the bank  Freedom from paper handling and its associated disadvantages, ease of processing and return to the destination bank branches.  The smooth process of reconciliation for the sponsor banks.  Cost-effective  MICR technology) (Magnetic Ink Character Recognition  MICR code is a code printed on cheques using MICR (Magnetic Ink Character Recognition technology). This enables identification of the cheques and which in turns means faster processing. An MICR code is a 9-digit code that uniquely identifies the bank and branch participating in an Electronic Clearing System (ECS). It comprises of 3 parts:  The first three digits represent the city (City Code). They are aligned with the PIN code we use for postal addresses in India.  The next 3 digits represent the bank (Bank Code)  The last 3 digits represent the branch (Branch Code) MICR INK Character recognition FEATURES OF MICR  Paper Standard: The paper on which MICR cheques are printed must be the CBSI (Clearing Bank Specification 1 Or Clearing Bank standard 1)  Security Standards: As increased security measures, some special features are added to the MICR cheques.  Watermark: Watermark of the bank is seen in the MICR cheques.  Microprint: Microprints are used as increased security measures.  Magnetic Ink: Magnetic ink is used to avoid forgery.  Invisible UV Florescent: Invisible UV Fluorescent is used as an extra step to avoid forgery.  Chemical Sensitivity: Particular chemical sensitivity helps to detect forgery. The benefits or advantages of MICR: ➨In spite of rough handling, one can read the MICR information with high degree of accuracy. ➨The processing of MICR information is fast. ➨It offers greater security compare to OCR technology as printed characters can not be altered. ➨There is no manual input and hence errors are reduced. ➨The characters can be read even if somebody write on them. This is due to the fact that special ink containing iron particles is used to print the characters. ➨The document is not easy to forge. The drawbacks or disadvantages of MICR: ➨It can recognize only 10 digits & 4 special characters. ➨Alphanumeric characters are not used in MICR. Only certain characters can be read. ➨It is more expensive method of data entry. Basel Norms I  Basel norms are also referred to as banking supervision accords. These are simple standards aimed at increasing the capital ratios of various banks. Basel norms also provided a benchmark for analytical comparative assessment.  Why Basel Norms?  Banks around the world lend to different types of borrowers having different creditworthiness. They lend the deposits of the public and money raised from the market. This exposes the banks to a variety of risks of default. As a result, banks have to keep a certain percentage of capital as security in case of risk of non-recovery. The Basel Committee has created various norms to tackle this risk. Basel Norms Types  The Basel Committee has issued the following sets of regulations.  1. Basel I: Basel I was introduced in 1988. This Basel norm focused on credit risk. Credit risk arises when a borrower fails to repay a loan or meet contractual obligations. This norm defined the capital and structure of risk weights for banks. The minimum capital requirement was set as 8% of risk- weighted assets. Risk-weighted assets mean a bank's assets are weighted according to risk. 2. Basel II:  Basel II guidelines were issued in 2004. These norms were refined versions of Basel-I norms. These norms were based on the following three parameters.  Banks should retain a minimum capital adequacy requirement of 8% of risk assets.  Banks were advised to develop and use better risk management techniques.  Banks must disclose their capital adequacy requirement and risk exposure to the central bank. 3. Basel III:  Basel III guidelines were issued in 2010. These norms were introduced in response to the financial crisis of 2008. A need was felt to strengthen the banking system across the globe. It was also felt that the quantity and quality of capital under Basel II were considered insufficient.  Basel Regulations  The following are some regulations followed by banks regarding Basel norms:  Increasing capital requirements ensures that banks are strong enough to combat losses.  Improving the quality of bank regulatory capital in the form of Common Equity Tier 1 capital.  Specifying a minimum leverage ratio requirement to curb excess leverage in the banking system.  Introducing capital buffers that are maintained in good times and can be used in times of crisis.  The Basel Committee also introduced an international framework for mitigating excessive liquidity risk through the Liquidity Coverage Ratio. Basel 3 Guidelines  Basel 3 guidelines promote a strong banking system by focusing on four important banking parameters.  Capital - The capital adequacy ratio should be maintained at 12.9%. The minimum tier 1 capital ratio should be 10.5%, and the tier 2 capital ratio should be 2% of risk-weighted assets. Banks are also required to maintain a capital conservation buffer of 2.5%. Counter-cyclical buffers should also be maintained at 0-2.5%.  Leverage - The leverage rate should be at least 3%. The leverage ratio is a bank's tier 1 capital to average total consolidated assets.  Funding And Liquidity - Basel 3 created two liquidity ratios :  i) Liquidity coverage ratio will require banks to hold a buffer of high-quality liquid assets to deal with the cash outflows. The goal is to ensure banks have enough funds.  ii) Net stable funds rate requires banks to maintain a stable funding profile for their off- balance sheet assets and activities. The minimum net stable fund rate requirement is 100%. Basel 3 Guidelines India on Basel Norms  The deadline for implementing Basel-III norms was March 2019, but it was pushed to March 2020.  Due to the pandemic, the Reserve Bank of India postponed the implementation of Basel norms for another 6 months.  This resulted in a lower capital burden on banks regarding provisioning requirements.  This extension would have an impact on how RBI and Indian banks are perceived by global players. Conclusion  Basel norms are an attempt to harmonise banking regulations around the world. The goal is to strengthen the international banking system and improve the quality of banking worldwide. These norms focus on the risks to banks and the whole financial system. This will allow the banks to grab better financial opportunities and improve their profits. TYPES OF CREDIT CARDS CREDIT CARDS AND DEBIT CARDS  DEBIT CARD MEANING OF DEBIT CARD: A debit card is also a payment card. It is used to obtain cash, goods or services automatically, debiting the payments to the card holder’s bank account instantly up-to the credit balance which exists in the customer’s bank account.  ADVANTAGES OF A DEBIT CARD: 1. No need to carry cash. 2. Less complicated than using a cheque. 3. Used for withdrawal of cash. 4. Holder can have record of transactions in his bank statement, which will enable him to plan and control his expenditure. 5. Can be issued to any individual without assessing his credit-worthiness. 6. Merchant establishment gets the payment before providing the goods or services. DISADVANTAGES OF DEBIT CARD  Limited Transaction  Extra charges  Fine  Security  Misuse  Less Protection DIFFERENCES BETWEEN CREDIT CARDS AND DEBIT CARDS: DEBIT CARD CREDIT CARD 1.Can draw funds from credit 1. The funds can be drawn up-to the balance available in his account. pre-determined credit limit 2.Easy to obtain. 2.Customer has to satisfy the bank before obtaining a credit limit. 3.The purchase amount is 3.A grace period of 30-40 days of automatically and instantly debited making payment is given. to the bank account of the holder. 4.Provided only to an account 4.Provided to even non-account holder. holders. 5.Sophisticated communication 5. No Sophisticated communication network is necessary. network is necessary. 6. No risk of over-funding. 6. Risk of over-funding. 7. No charging of interest. 7. Interest is charged for over due payments.  CREDIT CARDS MEANING OF CREDIT CARDS: A credit cad is an instrument which provides instantaneous credit facilities to its holder to purchase goods and services from business establishments enrolled as members of the credit card system. A credit card is popularly known as plastic money, as it is usually made of plastic. 3 parties to a credit card The member The issuing bank The card holder business establishments  FEATURES OF CREDIT CARD: 1. Credit card is technology dependent. 2. It is a payment device to access a customer’s financial resources. 3. Used for purchase of goods and services and for getting credit facilities. 4. Can be used at home, at automated teller machines or at other places during travel. 5. A credit card has owner-identification. 6. A credit card sets up a credit limit for the card holder, and a floor limit for the merchant establishment to ensure safety of funds.  WORKING OF THE CREDIT CARD SYSTEM: STEP.1: Issue of credit card. STEP.2: Making of credit purchases. STEP.3: Credit card processing. STEP.4: Raising the bill. STEP.5: Payment to merchant establishment by the issuing bank. STEP.6: Sending the bill to the card holder. STEP.7: Making of payment by the credit card holder. ADVANTAGES OF CREDIT CARDS: ADVANTAGES TO CARD HOLDERS: 1. Shopping convenience. 2. Credit facility. 3. Roll-over credit facility. 4. Safety. 5. Easy record keeping. 6. Acceptability. ADVANTAGES TO MERCHANT ESTABLISHMENTS: 1. Enhanced sales. 2. Easy validation. 3. No risk in collection. ADVANTAGES TO BANKS: 1. Source of income. 2. Market expansion. 3. Cross selling. DISADVANTAGES OF CREDIT CARD DISADVANTAGES TO ISSUING BANK: 1. High cost involved. 2. Risk of frauds. 3. Risk of bad debts. DISADVANTAGES TO CARD HOLDER: 1.Burdened with service charge, annual fee, membership fee and high interest for late payment. 3.Waste of money if the card is not used. 4.Drags the user into to financial problems. 5.costly. DISADVANTAGES TO MEMBER ESTABLISHMENTS: 1.Required to pay high commission to issuing banks. 2. Risk of delayed payment. TYPES OR KINDS OF CREDIT CARDS: Revolving credit card Charge card Standard credit card Business cards Gold cards Domestic cards TYPES International card Proprietary cards Master cards Visa cards Domestic tie-up cards ATM cards Smart card or chip card TYPES OR KINDS OF CREDIT CARDS: Silver card Value plus credit card Standard credit card Titanium credit cards TYPES Women’s Gold credit cards Platinum Plus credit cards Corporate Platinum card Business Platinum card  SILVER CARD Silver card for customers who want maximum value from their credit card as well as complete flexibility in repayment convenience. Features and Benefits  HIGH WITHDRAWAL LIMIT.  ONLINE TRANSACTIONS.  ZERO SURCHARGE ON FUEL PURCHASES.  EARN ICICI BANK REWARD POINTS.  INSURANCE.ZERO LIABILITY PROTECTION.  BETTER TRACKING.  VALUE PLUS CARD It is power packed with a host of unmatched features that provides the Customers family with the value & savings. Features & Benefits  Anytime Anywhere & offer 5% Cash back  Cash back Railway, Hospitals, Medical stores 5%  Geocery 1.50% , Dept, stores, Supermarket, Restaurants(GU)  The total amt due in the current statement is & 10000 or above.  Cash advance  Rovowing Credit facility.  Interest free credit period  zero liability on lost card.  PLATINUM PLUS CARD The card offers 2 reward points on all general purchases and 50% more rewards for Every 2150 you spend above Rupees 50000 per statement cycle. Features  24 x 7 online MIS availability  60 MIS reports for better informed business decisions  Substantial savings for the business through better negotiations with airlines, hotel chains and other service providers  Streamlines accounting procedures by consolidating transaction data from around the world.  GOLD CARD Gold credit card It is overloaded with travel benefits like cashback, discount offers etc. Features and benefits  Alternative reward points  Reward point redemption  Revolving credit facilities  Free add on cards  Interest free credit period  Zero liability on lost card TITANIUM CARD Titanium credit card is a simply the most exclusive credit card a customer ask for. Features and benefits  Titanium credit reward  Zero petrol surcharge  Zero liability on lost card  Interest free credit facility  Revolving credit facility  WORLD MASTER CARD Features and Benefits  World Luxury.  World Rewards.  World Benefits.  Zero liability on lost card.  CORPORATE PLATINUM CARD Corporate Platinum Card is a premium offering to provide the customer with truly world beating features on the credit card. It comes with a unique 24x7, Expense management solution. Features & Benefits  Attractive Reward Points  Zero liability on lost card  Interest free credit facility  Revolving Credit facility  Free Add-on card  PLATINUM BUSINESS Platinum Business is a premium business card. Suitable for those who travel for work and send employees on business trips, have an increased level of expenses and got used to special comfort. The card is convenient and allows to receive additional privileges and benefits from Visa. BENEFITS Platinum Credit Cards often include exclusive travel benefits like airport lounge access concierge services, travel insurance, and lost baggage reimbursement. Platinum Credit Cards typically offer purchase protections like extended warranties, returns, refunds, and product guarantees.  WOMENS’S GOLD CARD Another proud offering from certain banks are replete with discounts, cash back ogrammes, rewards and more. FEATURES AND BENEFITS  Wide choice of redemption  Revolving credit facility  Zero liability on lost card  Interest free credit facility