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Unite 8
Recent Trends in the Banking System in India
The Indian banking system has undergone substantial
changes in recent years, driven by technological
advancements and regulatory reforms. on the recent
trends in the banking system in India, covering various
aspects such as net banking, mobile banking,
automation, ATM usage, and card transactions.
1)Net Banking, Mobile Banking, Tele Banking, NEFT,
IMPS, RTGS, ECS
Net Banking (Internet Banking):
Definition: Net banking refers to the use of the internet
for conducting banking transactions. Customers can
perform various banking operations like checking
balances, transferring funds, paying bills, and managing
accounts without visiting a physical branch.
Benefits:
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24/7 availability and convenience.
Access to a wide range of services, such as loan
applications, insurance purchases, and investments.
Secure and encrypted channels for online transactions.
Mobile Banking:
Definition: Mobile banking refers to banking services
provided through a mobile app or SMS-based service. It
allows users to conduct financial transactions using their
smartphones.
Growth: With the increasing use of smartphones and
internet penetration, mobile banking has become one of
the most popular methods of accessing banking services.
Features:
Fund transfers, balance inquiries, bill payments, and
mobile recharges.
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Mobile apps provide user-friendly interfaces and
enhanced security features (e.g., OTPs, biometrics).
Tele Banking:
Definition: Tele banking refers to banking services
provided over the telephone. Customers can access
information related to their accounts, request cheque
book issuance, or perform certain financial transactions
over a phone call.
Services: It includes balance inquiry, mini-statements,
cheque book requests, and fund transfers.
NEFT (National Electronic Funds Transfer):
Definition: NEFT is a real-time gross settlement system
for transferring funds from one bank account to another.
It is widely used for online payments, bill payments, and
business transactions.
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Key Features:
Operates in hourly batches.
Available to individuals, businesses, and government
institutions.
No maximum limit on transaction amounts, though a
minimum amount may be set by banks.
IMPS (Immediate Payment Service):
Definition: IMPS is an instant interbank electronic fund
transfer system that enables customers to send and
receive money at any time of day.
Benefits:
24/7 service, including on holidays.
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Available through mobile phones, ATMs, and bank
branches.
Funds are transferred instantly, providing immediate
settlement.
RTGS (Real-Time Gross Settlement):
Definition: RTGS is a system for high-value transactions
(typically above ₹2 lakh) that are settled in real-time,
meaning transactions are processed individually and
immediately.
Key Features:
Used for urgent and large payments.
High security with no batching involved, and transactions
are settled immediately.
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ECS (Electronic Clearing Service):
Definition: ECS is an electronic payment system used for
bulk transfers, such as salary payments, bill payments, or
EMI collections, without using paper-based instruments.
Benefits:
Reduces paperwork and improves efficiency.
Direct transfer of funds between bank accounts.
Used for recurring payments like electricity bills, loan
installments, etc.
2)Automation and Legal Aspects – Information
Technology Act 2000 (as amended)
Automation in Banking:
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ATM Networks: The banking industry has become more
automated through the introduction of ATMs, which allow
customers to withdraw cash, deposit funds, and perform
other banking services without interacting with bank
personnel.
Core Banking Systems (CBS): Core banking platforms
have automated and streamlined operations such as
customer account management, transactions, and loan
servicing. It enables banks to offer online banking, 24/7
services, and centralized data management.
Robotic Process Automation (RPA): Banks are increasingly
using RPA for automating repetitive tasks like data entry,
account reconciliation, and transaction monitoring.
Information Technology Act, 2000 (as amended):
Objective: The IT Act, 2000 was enacted to provide legal
recognition to electronic commerce and digital
signatures, and to address cybercrimes and related
issues. It governs online transactions, cybersecurity, and
digital signatures in India.
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Key Aspects:
Legal Recognition of Digital Signatures: The Act gives
legal recognition to electronic records and digital
signatures, facilitating online transactions and contracts.
Cybercrime and Cybersecurity: The Act defines
cybercrimes and prescribes penalties for offences like
hacking, identity theft, and data breaches, which are
crucial for protecting online banking transactions.
Regulation of Digital Payment Systems: The act provides
a framework for regulating electronic payment systems,
including net banking, mobile payments, and e-commerce
transactions.
Amendments: The amendments to the IT Act address new
challenges posed by evolving technologies, ensuring
stricter penalties for cybercrimes, and providing more
comprehensive protections for users.
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3)Automatic Teller Machines (ATMs)
Overview:
Definition: ATMs are electronic devices that allow
customers to perform basic banking operations such as
cash withdrawal, balance inquiry, and fund transfers
without the need for human intervention.
Features:
24/7 availability, allowing users to access cash and
banking services at any time.
Security: ATMs are protected with PIN numbers and, in
some cases, biometric authentication to prevent fraud.
Multi-functionality: Modern ATMs support features like bill
payments, mobile top-ups, and passbook printing.
Recent Trends:
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Cashless Transactions: ATMs now offer features that
reduce cash dependency, such as recharge services and
bill payments.
Card-less Transactions: Some ATMs now allow card-less
withdrawals, where customers can authenticate through
their mobile banking app or OTP.
4)Smart Card Transactions
Overview:
Smart Cards are plastic cards embedded with a microchip
that stores encrypted data. These cards are used for
making secure payments and accessing services.
Types of Smart Cards:
Debit and Credit Cards: These are the most common
smart cards used for electronic transactions.
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Prepaid Cards: Used for making purchases, these cards
are loaded with a specific amount of money in advance.
EMV Cards: These cards use EMV (Europay, MasterCard,
and Visa) technology for enhanced security during
transactions.
Benefits:
Enhanced Security: With a built-in chip, smart cards offer
better protection against fraud compared to magnetic
stripe cards.
Ease of Use: Smart cards enable contactless payments,
allowing users to pay by simply tapping the card at
compatible point-of-sale terminals.
Recent Trends:
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Contactless Payments: Increasing adoption of contactless
payments, where customers tap the card near a reader
for transactions without inserting the card.
5)Debit/Credit Card Transactions (Legal Aspects)
Overview:
Debit and credit card transactions are key modes of
electronic payments in India, enabling cashless
transactions in both physical stores and online shopping.
Legal Aspects of Card Transactions:
Security Standards:
RBI Guidelines: The Reserve Bank of India (RBI) has
issued guidelines to ensure secure card transactions,
including guidelines for issuing PINs, security features on
cards, and merchant compliance.
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EMV Compliance: All debit and credit cards must comply
with EMV standards to enhance security.
Liability in Case of Fraud:
Zero Liability: In cases of unauthorized transactions,
customers are usually not liable for losses if they report
the fraud promptly, and the bank investigates the
transaction.
Chargeback: A process where a customer disputes a
transaction, and the merchant’s bank is required to
reverse the payment if found to be fraudulent.
Consumer Protection:
RBI’s Consumer Protection Framework: This includes
guidelines that ensure transparent disclosure of fees,
charges, and terms associated with card usage.
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Dispute Resolution: In case of disputes regarding card
transactions, customers can file complaints with the
Banking Ombudsman.
Recent Trends in Card Transactions:
Digital Wallet Integration: The integration of digital
wallets like Google Pay, Paytm, and PhonePe with
debit/credit cards allows for seamless and secure
payments.
Tokenization: RBI mandates tokenization of debit/credit
card details for secure online transactions to prevent
fraud and card data theft.
Conclusion
Technological Integration: The Indian banking system has
embraced technological advancements such as net
banking, mobile banking, and automation to provide
customers with more accessible, secure, and efficient
banking services.
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Legal Safeguards: The IT Act, 2000 and other RBI
regulations ensure that digital banking, card transactions,
and online services are secure, transparent, and
compliant with legal standards.
Emerging Trends: ATMs, smart cards, and contactless
payments are revolutionizing the way banking services
are delivered, with increased emphasis on security,
convenience, and user experience.
