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Banking Awareness

Remittances (Money Transfer Service Scheme (MTSS) and Rupee Drawing Arrangement (RDA)

by Mr. DJ
written by Mr. DJ

Remittances (Money Transfer Service Scheme (MTSS) and Rupee Drawing Arrangement (RDA)

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Remittances is a channel which act as a source of income for a family  and national income and also are one of the largest sources of external financing. Through banking and postal channels beneficiaries in India can receive cross-border inward remittances. For conducting remittance business banks have general permission to enter into a partnership with other banks. For the postal channel the International Financial System (IFS) platform of Universal Post Union (UPU) is generally used. Rupee drawing arrangement (RDA) and Money Transfer Service Scheme ( MTSS) are two more channels for receiving inward remittances and which are the most common arrangements under which the remittances are received into the country.

What is Money Transfer Service Scheme?

Money Transfer Service Scheme (MTSS) is a channel used by the non-residents of India is a way of transferring personal remittances from abroad to beneficiaries in India. Only inward personal remittances is permitted s towards family maintenance and remittances favoring foreign tourists visiting India are permissible. Generally under this scheme there is a tie-up between reputed money transfer companies abroad which are known as Overseas Principals and agents in India known as Indian Agents who would disburse funds to the beneficiaries in India at the current ongoing exchange rates.

Overseas Principal

The Overseas Principal implies to a registered entity or organization which obtains its license from the central Bank/Government of financial regulatory authority of the  concerned for carrying on Money Transfer Activities. The country which is registered under There is a provision that  overseas Principal should be AML compliant. It is necessary for the the Overseas Principal entities to  obtain necessary authorization from the Department of Payment and Settlement Systems, Reserve Bank of India under the provisions of the Payment and Settlement Systems Act (PSS Act), 2007 to commence/ operate a payment system.

How To Become An Indian Agent?

There is a certain procedure that one must follow to   become an Indian Agent, the applicant should be an Authorised Dealer Category-I bank or the applicant should be an Authorised Dealer Category-II or the applicant should be a Full Fledged Money Changer (FFMC) or the Department of Posts. Further, there is a provision under which  the Indian agents can also be appointed as the  sub-agents which can be retail outlets, commercial entities having a place of business, and whose bonafides are acceptable to the Indian Agent.

Limit On The Amount Of Money Which Can Be Sent Under MTSS

There is a  cap of USD 2,500 along with  thirty remittances can be received by a single individual beneficiary under the scheme during a calendar year.

Also, the amounts up to INR 50,000/- may be paid in cash to a beneficiary in India which can  also be loaded on to a pre-paid card issued by banks. If there is any amount exceeding this limit shall be paid by means of account payee cheque/ demand draft/ payment order, etc., or credited directly to the beneficiary’s bank account.

Rupee Drawing Arrangement (RDA)

Rupee Drawing Arrangement (RDA) is a way through which one can  receive cross-border remittances from overseas jurisdictions. As per this system,  the Authorized Category I banks enter into tie-ups with the non-resident Exchange Houses in the FATF compliant countries to open and maintain their Vostro Account.

Types of Remittances which can be sent under RDA

RDA is primarily on private account the cross- border inward remittances into India under  The remitter and the beneficiary should be individuals barring a few exceptions. Upto a certain limit transaction are also permitted, through Exchange Houses for financing of trade.

What Is The Limit On The Amount Of Money Which Can Be Sent Under RDA?

Currently, there is no limit on the remittance amount as well as on the number of remittances but  there is an upper cap of Rs.15.00 lakh for trade related transactions. and there is no cash payment which can be made to the beneficiary under RDA.

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Banking Awareness

Government of India reviews extant Foreign Direct Investment (FDI) policy: Recent changes & Impacts

by Mr. DJ
written by Mr. DJ

Government of India reviews extant Foreign Direct Investment (FDI) policy: Recent changes & Impacts

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The Government of India has reviewed the extant Foreign Direct Investment (FDI) policy. This amendment in the FDI policy has been made to curb the opportunistic takeovers/acquisitions of Indian companies due to the ongoing COVID-19 pandemic. To achieve this objective, the Government of India has amended the para 3.1.1 of extant FDI policy as contained in “Consolidated FDI Policy, 2017″.

 

The Department for Promotion of Industry and Internal Trade has officially issued a notice regarding the changes in the para 3.1.1 of the “Consolidated FDI Policy, 2017” with “Press Note No. 3(2020 Series)”. Here is the old as well as the new statements under para 3.1.1 of “Consolidated FDI Policy, 2017”.

About the existing rules: Present Position

According to the Chapter:3 of the Consolidated FDI Policy, 2017, under the section titled “Eligible investors”, para 3.1.1 states that:

A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, a citizen of Bangladesh or an entity incorporated in Bangladesh can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.

After the amendement in the Para 3.1.1 of the Consolidated FDI Policy, 2017, para 3.1.1 (2020 Series) states that: Revised Position

  • 3.1.1(a) A non-resident entity can invest in India, subject to the FDI Policy except in those sectors/activities which are prohibited. However, an entity of a country, which shares land border with India or where the beneficial owner of an investment into India is situated in or is a citizen of any such country, can invest only under the Government route. Further, a citizen of Pakistan or an entity incorporated in Pakistan can invest, only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment.

3.1.1(b) In the event of the transfer of ownership of any existing or future FDI in an entity in India, directly or indirectly, resulting in the beneficial ownership falling within the restriction/purview of the para 3.1.1(a), such subsequent change in beneficial ownership will also require Government approval.

Implementation of the above amendements:

The above revision in the para 3.1.1 of the “Consolidated FDI Policy, 2017” is supposed to be implemented from the date of Foreign Exchange Management Act (FEMA) notification.

Impact of the above amendments:

After the implementation of the above amendment, the new rules will prevent those entities of a country, which shares land border with India, from buying large stakes in Indian companies, either directly or through friendly nations and hence the new rules will curb the ‘Opportunistic Takeover or acquisition’ of Indian Companies when the whole nation is battling with the COVID-19 pandemic. The new rules will allow the non-resident entities of countries such as China, Bhutan, Nepal and various other nations, to invest in India only under the Government route, in sectors/activities other than defence, space, atomic energy and sectors/activities prohibited for foreign investment. These rules will support the Indian industry in this situation of pandemic. Therefore, in this manner, the Government of India has restricted the Neighboring Countries Firms from acquiring stake in Indian companies.

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Banking Awareness

[ Best ]Difference Between Banking and Non-Banking Financial Companies (NBFCs)

by Mr. DJ
written by Mr. DJ

Difference Between Banking and Non-Banking Financial Companies (NBFCs)

Banks and financial institutions or NBFCs have been there long enough. They have been the financial intermediaries for depositors, borrowers, and others. The banks will benefit in exchange for the services they provide and also add on commission rates as well. They charge interest to the borrower, and they would be giving a lesser rate of interest to the depositor. The difference is what the bank earns.
Banking and Non-Banking Financial Companies (NBFCs)

Difference Between Banking and Non-Banking Financial Companies (NBFCs)

The banks offer a variety of services such as

  • Savings accounts
  • Provisions for fixed deposits
  • Commercial accounts
  • Personal and business loans
  • Mortgages
  • Credit and debit cards

Read Top 100 Banking Awareness Questions

Other financial institutions or non-banking finance companies popularly known as NBFCs provide similar banking services but don’t come under the legal definitions of being a bank. These are known as non-banking financial institutions. They too play an essential role in the monetary sector and for the economy to run efficiently. They may also operate without a license as well. Few of them are listed below

  • Payday lenders
  • Insurance firms
  • Currency exchanges
  • Check-cashing services
  • Hedge funds
  • Pawnshops

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The non-banking financial institutions have a more comprehensive customer range. Sometimes some customers may not fall into the criteria of their standards. Hence these financial institutions have a better chance of providing solutions for such customers.

Examples being

  • A customer may not have enough funds to maintain a minimum balance hence can’t open an account in a traditional bank
  • People in the low-income category who find it hard to get loans easily opt for non-banking financial institutions
  • People having low credit score also find it difficult to obtain credit from the banks. Hence non-banking institutions provide a great alternative
  • Hedge funds emphasize the potential returns over the risk of the investment. The unregulated manner of the non-banking institution allows the managers to have a boost in chances to get a higher payout than a bank which will not offer such an opportunity in any case, that is if the bet pays off.

Banking and Non-Banking Financial Companies

Banks NBFC
Definition Banks are govt. authorized financial intermediary providing all sorts of banking services to the people. NBFC does not hold a bank license but yet can provide financial service to people.
Demand Deposit Accepeted Does not accept
Foreign Investment Allowed up to 74% for private sector banks up to 100% is allowed
Maintenance of Reserve Ratios Mandatory Not Required
Credit creation Banks create credit NBFC do not create credit

What you can expect from traditional banking ?

The banks are highly regulated, and top banks of the country are nationalized, which means under government control. The regulations put an impediment in the number of risks as well as kind of the risks the banks would be able to take when investing or lending. Their policies will not accommodate the flexibility to bend regulations or work out differently when the opportunity arises in the money market.

Individuals with poor credit find it very difficult to get any bank to lend money even for a higher rate of interest. The banks have fixed rates for lending and the amount to lend, and they can’t go beyond that because of capital requirements.

The banks that do business overseas have a significant impact due to the regulations as there is frequent fluctuation in the currency market, and the dollar being a strong competition for most currencies will put the banks in less than a competitive place. The service charges have increased over time, which makes it expensive to deal with traditional banks. Banking and Non-Banking Financial Companies (NBFCs)

What do non-banking financial institutions provide?

Since the non-banking institutions take up more risks compared to the bank in terms of

  • Lending to people with low or zero credit score
  • May not need security for some types of the loans they lend
  • Provide flexible rates of interest and installments
  • A time period of payback also can be negotiated for each loan

When non-banking institutions have relaxed on so many levels to provide loans and other banking options, there is bound to be a kickback for them as well. They do so by charging a higher rate of interest. Sometimes it may seem excessive, but sometimes the customer may have no choice when no banks are ready to lend, it would be their only resort to check on these non-banking institutions for some kind of relief. You will have to know that the accounts are insured, and even encashing a paycheck would cost you a fee from such institutions. Banking and Non-Banking Financial Companies (NBFCs)

FAQs

[sc_fs_multi_faq headline-0=”h2″ question-0=”What is the difference between banking and non banking financial companies?” answer-0=”While banks tend to offer a set of financial services as part of a clear packaged deal, NBFIs unbundle these offers and tailor their services to meet the needs of the specific client.” image-0=”” headline-1=”h2″ question-1=”What do you mean by non banking financial company?” answer-1=”Nonbank financial companies (NBFCs), also known as nonbank financial institutions (NBFIs) are entities that provide certain bank-like and financial services but do not hold a banking license. NBFCs are not subject to the banking regulations and oversight by federal and state authorities adhered to by traditional banks.” image-1=”” headline-2=”h2″ question-2=”What are the 4 types of financial institutions?” answer-2=”The major categories of financial institutions include central banks, retail and commercial banks, internet banks, credit unions, savings, and loans associations, investment banks, investment companies, brokerage firms, insurance companies, and mortgage companies.” image-2=”” headline-3=”h2″ question-3=”Is a financial institution a bank?” answer-3=”Financial institutions encompass a broad range of business operations within the financial services sector including banks, trust companies, insurance companies, brokerage firms, and investment dealers. Financial institutions can vary by size, scope, and geography.” image-3=”” headline-4=”h2″ question-4=”Why do we need NBFC?” answer-4=”NBFCs are more profitable than the banking sector because of lower costs. This helps them offer cheaper loans to customers. As a result, NBFCs’ credit growth – the increase in the amount of money being lent to customers – is higher than that of the banking sector.” image-4=”” count=”5″ html=”true” css_class=””]

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Banking Awareness

Inflation-Indexed Bonds (IIBs)

by Mr. DJ
written by Mr. DJ

Inflation-Indexed Bonds (IIBs)

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We can understand Inflation Indexed Bond (IIB) as a constant return to the investor irrespective of the level of inflation in an economy. In other words we can say that it is basically an instrument which is used to provide a hedge and to safeguard the investor against macroeconomic risks in an economy.

Issue of IIBs has a lot of significant  in the Emerging Market and Developing Economies during the recent years because during this period the value of money loses rapidly in an environment of high inflation. Basically, Inflation-Indexed bonds are limited on account of low inflation experienced in these economies.

How  IIBs Work?

It is very important to understand the application of this concepy. We can understand it better by comparing it with the instrument of fixed deposits with the bank because fixed deposit also offers a fixed rate of interest for the investment for a given number of years  but the difference is that  it does not protect the investor from the erosion of real value of the deposit due to inflation. On the other hand if somebody invests in IIB then it gives a constant minimum real return irrespective of inflation level in the economy. Capital of the investor will increases with the inflation, so actual interest is better than originally promised. Now, let’s understand what happens in the case of Deflation, in such case,  interest payments decrease with the negative inflation. However, this does not affect the capital as it  does not decline below the face value.

 

History Of IIB

One of the major concern in 2008-2013 was Inflation where real interest rates were consistently negative. This period also also was noted for the high current account deficit (CAD), means that it  saw huge investment in the alternate instrument – gold – by the households, necessitating heavy import of gold. So, the need to  reduce the attractiveness of gold for investment and reduce the CAD was felt and hence the Government of India launched Inflation indexed bonds (IIB) on 4 June 2013.

Wholesale Price Index which was then used as the key measure of inflation by RBI was auctioned linking to its first tranche. IIB bonds were started to issued on monthly basis or on last Tuesday of each month till December 2013. The annual return rate was  1.44% (through half yearly coupon) over and above the headline inflation (WPI). Thorugh Order Matching Negotiated Dealing Systems (NDS-OM), NDS-OM (web-based), Over the Counter (OTC) market, and stock exchanges these 10 year bonds could be traded. In 2013, IIB bonds worth Rs 6500 crore.

After certain period of time, IIB bonds lost its attractiveness, as there has been significant moderation in inflation since 2014-15. Then, later on The IIB bonds turned highly illiquid, as WPI inflation remained negative for consecutive 15 months (as on Feb 2015) since November 2014. In order to  to improve the liquidity in G Secs market, Government then decided to buy back the IIB bonds. The Government of India announced that it will repurchase the IIB of 1.44% Inflation government stocks 2023 in February 2016 through reverse auction for an aggregate amount of Rs. 6500 crore (face value). The repurchase then was undertaken as an adhoc measure to redeem the government stock prematurely by utilizing surplus cash balance.

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Banking Awareness

Financial Regulators In India

by Mr. DJ
written by Mr. DJ

Financial Regulators In IndiaPosted b

There are many financial institutions in India and we have many regulators for regulating them in order to assure the proper functioning of the financial system in our nation. Now, the next questions is what is financial instituiton? Well! any organization which deals in money is a financial institutions. We will be discussing each and every one of them because it is one of the important topic from exam point of view as well as from interview point of view. Make sure you go through them all and make proper notes because it is going to be one intresting lesson for you all.

 

Reserve Bank of India (RBI)

It is one of the financial regulators in India and it regulates everything related to money. It is also known as the Central Bank Of India as well as the lender of last resort because of the impeccable function that it performs.  It was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. It regulates all the commercial banks in India like public sector banks, private sector banks, RRBs, Cooperative banks and all type of non-banking financial companies. It forms monetary policy and control the Inflation in the country with the help of monetary policy.

Securities and Exchange Board of India (SEBI):

SEBI is another financial regulator in India which was established in the year 1988. It basically regulates the security market in Indian territory. Any company which wants to be a part of the security market or wants to invest in the security market has to follow the guidelines laid by SEBI.

Insurance Regulatory and Development Authority of India (IRDAI):

The Insurance Regulatory and Development Authority (IRDA) is a national agency of the Government of India which is a financial regulator of all private sector and public sector insurance companies in India. It regulates the functioning of insurance companies to direct them to work in the public interest. It was established by an act of IRDA Act 1999, which was amended in 2002 to incorporate some emerging requirements. The Head-Quarter is in Hyderabad.

Pension Fund Regulatory and Development Authority (PFRDA):

Pension Fund regulatory is a pension related authority and handles all the matters related to this sector. It   was established in the year 2003 by the Indian Government and authorized by the Finance Ministry. Its main function is to promote income security of old age by regulating and also developing pension funds. PFRDA is also responsible for the appointment of different other intermediate agencies like Pension Fund managers.

Forward Markets Commission:

Forward Markets Commission main objective is to advise the Central government on matters of the Forwards Contract Act, 1952. It is the chief regulator of the commodity (MCX, UCX, NMCE etc) of the Indian future market. It’s headquarter is located in Mumbai Working in collaboration with the Finance Ministry.

 

Factors Affecting Financial System

  • Demand and supply is one of the factor.
  • The lack of right and constructive approach to rule-making
  • Financial and digital literacy among the people of the nation.
  • Monopoly in the market.
  • Launching innovative solutions for Supporting public good investments like the unified payments interface (UPI), etc

Ways to Improve Financial Sector

  • Financial Inclusion among the people of the nation.
  • Revising the existing policies for proper functioning of the system.
  • Enabling the transparency in the process of price discovery by the market determination of interest rates that improves allocate efficiency of resources.
  • Giving the autonomous status to institutions.
  • Preparing the financial system of our nation  for increasing international competition.
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All You Need to Know About BASEL III Norms
Banking Awareness

All You Need to Know About BASEL III Norms [ Best ]

by Mr. DJ
written by Mr. DJ

All You Need to Know About BASEL III Norms

BASEL norms are a set of global norms, which set certain common standards for banks across the different countries of the world. BASEL III or BASEL 3 released in the month of December in the year 2010. It is the third part of the series of BASEL Accords, which deal with the banking sector’s risk management aspects. Simply put, BASEL III is the global regulatory standard on the adequacy of bank capital, in addition to stress testing and the risk of market liquidity. Its precedents, namely BASEL I and BASEL II were similar versions of BASEL III, however, they were quite less stringent. The BASEL III norms started getting implemented from March 31st, 2015 in phases. However, it would be fully implemented from March 31st, 2018 onwards.

All You Need to Know About BASEL III Norms

WHAT IS BASEL III?

According to the BASEL Committee on Banking Supervision, BASEL III is a comprehensive set of reform measures, which have been developed by the committee to strengthen the regulation, supervision as well as the risk management of the banking sector across the world. This will not only help the banking sector to deal with the economic and financial stress but also eventually improve risk management as well as strengthen the transparency of the banks.

OBJECTIVES OF BASEL III:

The measures of BASEL III have the following objectives:

  1. Improve the ability of the banking sector to absorb the changes which arise due to the financial and economic instability of the world market.
  2. Improve the banking sector’s governance as well as risk management capabilities.
  3. To improve and strengthen the disclosures and transparency of the banks.

HOW WILL BASEL III NORMS BE HELPFUL?

The BASEL III norms can be helpful to banks around the world in the following ways:

  1. BASEL III will introduce a much stricter definition of capital. It will introduce a better-quality capital to banks, which will lead to the banks having a higher loss-absorbing capacity. This will not only make the banks stronger but also allow them to withstand and handle periods of stress in a much better way.
  2. With the BASEL III norms, banks will now be required to hold a capital conservation buffer of 2.5%. This will ensure that banks maintain a buffer cushion of capital which they can use to absorb and tackle losses during times of economic and financial stress.
  3. BASEL III also introduces the countercyclical buffer, with an aim to increase capital requirements and decrease the same in good and bad financial times respectively. A countercyclical buffer will slow all banking activities in good times, and will thereby increase lending when times are not good. This buffer will mostly range anywhere between 0 to 2.5 per cent and will include common equities or other reforms of capital which are fully loss-absorbing.
  4. BASEL III has also raised the minimum requirement for common equity from 2 per cent to 4.5 per cent of the total risk-weighted assets. This means that the overall Tier 1 capital requirement, which consists not only of common equities but other qualifying financial instruments as well, will also increase from its minimum of 4 per cent to 6 per cent now. And even though the minimum total capital requirement will most likely remain at 8 per cent, the total required capital will increase to 10.5 per cent when it is combined with the conservation buffer.
  5. Under BASEL III, a set framework for liquidity risk management will also be created. A new Liquidity Coverage Ratio, as well as a Net Stable Funding Ratio, were introduced in 2015 and 2018 respective. Now, as part of the macro-prudential framework, Systemically Important Financial Institutions will be created so that they have a loss-absorbing ability beyond the requirements stated in BASEL III. They will also include implementations for capital surcharges, bail-in-debt as well as contingent capital.
  6. BASEL III norms also include a leverage ratio which will serve as a safety net to banks. This leverage ratio is the relative amount of capital to the total number of assets which are not risk-weighted. This ratio will put a cap on leverage swelling in the banking sector across the globe.

BASEL III NORMS AND INDIAN BANKS:

As per guidelines issued by the Reserve Bank of India, Indian banks need to implement the BASEL III norms as well. In saying so, this implementation will not be challenging only for the banks, but also for the Government of India as well. Studies suggest that Indian banks will be required to raise an amount totalling to INR 6,00,000 Crores in external capital by the end of the 2020 financial year.

However, an expansion of capital to this limit will affect the returns on the equities of the banks in the country, especially those that are public sector. And since banks in India have to meet both the LCR as well as the Statutory Liquidity Ratio and Cash Reserve Ratio set by the RBI, they will have to set aside more money, thereby stressing their balance sheets.

[sc_fs_multi_faq headline-0=”h3″ question-0=”What are the key features of the Basel III norms?” answer-0=”The Basel III accord raised the minimum capital requirements for banks from 2% in Basel II to 4.5% of common equity, as a percentage of the bank’s risk-weighted assets. There is also an additional 2.5% buffer capital requirement that brings the total minimum requirement to 7%” image-0=”” headline-1=”h3″ question-1=”What are the basic pillars of the Basel III accord?” answer-1=”Basel regulation has evolved to comprise three pillars concerned with minimum capital requirements (Pillar 1), supervisory review (Pillar 2), and market discipline (Pillar 3).” image-1=”” headline-2=”h3″ question-2=”What are Basel norms?” answer-2=”Basel norms or Basel accords are the international banking regulations issued by the Basel Committee on Banking Supervision. The Basel norms is an effort to coordinate banking regulations across the globe, with the goal of strengthening the international banking system.” image-2=”” headline-3=”h3″ question-3=”What is LCR and NSFR?” answer-3=”The LCR aims to “promote short-term resilience of a bank’s liquidity risk profile by ensuring that it has sufficient high-quality liquid resources to survive an acute stress scenario lasting for one month.” In contrast, the NSFR takes a longer-term perspective and aims to create “additional incentives for a bank to” image-3=”” headline-4=”h2″ question-4=”Are Basel norms mandatory?” answer-4=”1. Basel norms are mandatory for every member nation.” image-4=”” headline-5=”h3″ question-5=”When did India adopt Basel 3 norms?” answer-5=”The Reserve Bank of India (RBI) introduced the norms in India in 2003. It now aims to get all commercial banks BASEL III-compliant by March 2019. So far, India’s banks are compliant with the capital needs.” image-5=”” count=”6″ html=”true” css_class=””]

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Banking Awareness

[ Best ] Banking Ombudsman Scheme 

by Mr. DJ
written by Mr. DJ

Banking Ombudsman Scheme

Banking Ombudsman Scheme

Banking Ombudsman Scheme

  • Banking Ombudsman Scheme is an expeditious and inexpensive form to bank customer for resolution of complaints relating to certain services offered by banks.
  • Created under section 35 of BR Act,1949.
  • Started in 1995
  • Revamped and amended in 2006
  • Further amendment in 2009
  • A customer can complain against bank if bank provoke fair practice code for lenders or the code of bank’s commitment to customer issued by BCSBI.
  • Banking Ombudsman offices -22 locations (Sate capital)
  • All scheduled commercial banks, RRBs and Scheduled primary co-operative banks are covered under the scheme

 APPOINTMENT & TENURE:

  • Reserve Bank may appoint one or more of its officers in the rank of Chief General Manager or General Manager to be known as Banking Ombudsmen.
  • Appointment of Banking Ombudsman may be made for a period not exceeding 3 years at a time
  • Banking Ombudsman shall send to the Governor, Reserve Bank, a report, as on 30th June every year.

Types of complaints handled by the banking ombudsman:

  • Non-payment or inordinate delay in the payment or collection of cheques, drafts, bills, etc.
  • Non-acceptance, without sufficient cause, of small denomination notes tendered for any purpose, and for charging of commission for this service
  • Non-acceptance, without sufficient cause, of coins tendered and for charging of commission for this service
  • Non-payment or delay in payment of inward remittances
  • Failure to issue or delay in issue, of drafts, pay orders or bankers’ cheques

Types of complaints handled by the banking ombudsman:

  • Refusal to open deposit accounts without any valid reason for refusal;
  • Levying of charges without adequate prior notice to the customer;
  • Refusal to accept or delay in accepting payment towards taxes, as required by Reserve Bank/Government;
  • Forced closure of deposit accounts without due notice or without sufficient reason

Types of complaints handled by the banking ombudsman:

  • Refusal to close or delay in closing the accounts;
  • Deficiency in Internet banking services
  • Any other matter relating to the violation of the directives issued by the Reserve Bank in relation to banking or other services.

Types of complaints handled by the banking ombudsman:

  • Non-adherence to the instructions of Reserve Bank on ATM /Debit Card and Prepaid Card operations in India by the bank
    i. Account debited but cash not dispensed by ATMs
    ii. Account debited more than once for one withdrawal in ATMs or for POS transaction
    iii. Less/Excess amount of cash dispensed by ATMs
    iv. Debit in account without use of the card or details of the card
    v. Use of stolen/cloned cards
    vi. Others

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Types of complaints handled by the banking ombudsman:

  • Bank on credit card operations
  1. Unsolicited calls for Add-on Cards, insurance for cards etc.
  2. Charging of Annual Fees on Cards issued free for life
  3. Wrong Billing/Wrong Debits
  4. Threatening calls/ inappropriate approach of recovery by recovery agents including non-observance of Reserve Bank guidelines on engagement of recovery agents
  5. Wrong reporting of credit information to Credit Information Bureau v
  6. Delay or failure to review and correct the credit status on account of wrongly reported credit information to Credit Information Bureau.

PROCEDURE FOR FILING COMPLAINT:

Any person who has a grievance against a bank himself or through his authorised representative (other than an advocate), make a complaint to the Banking Ombudsman.

No complaint to the Banking Ombudsman shall lie:

  • Complaint is made not later than one year after the complainant has received the reply of the bank to his representation or, where no reply is received, not later than one year and one month after the date of the representation to the bank

SETTLEMENT OF COMPLAINT BY AGREEMENT:

  • Banking Ombudsman shall send a copy of the complaint to the branch or office of the bank named in the complaint
  • Endeavour to promote a settlement of the complaint by agreement between the complainant and the bank through conciliation or mediation.

AWARD BY THE BANKING OMBUDSMAN:

  • If a complaint is not settled by agreement within a period of one month from the date of receipt of the complaint or such further period as the Banking Ombudsman may allow the parties.
  • If bank pay compensation the amount will be Rs. 20 lakhs, which is lower.
  • Banking Ombudsman may award compensation not exceeding Rs. 1 Lakh loss of the complainant’s time, expenses incurred by the complainant, harassment and mental agony suffered by the complainant.
  • A copy of the Award shall be sent to the complainant and the bank
  • An award shall lapse, complainant furnishes to the bank concerned within a period of 30 days from the date of receipt of copy of the Award, a letter of acceptance of the Award in full and final settlement of his claim.

Appeal against the order passed by the banking ombudsman:

  • If any one not satisfied with decision passed by banking ombudsman, one can appeal
  • To appellate authority (Deputy Governor of RBI) within 30 days
  • Appellate Authority may, if he is satisfied that the applicant had sufficient cause for not making the appeal within time, allow a further period not exceeding 30 days
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Banking Awareness

Types of Cards used in Banking System

by Mr. DJ
written by Mr. DJ

Types of Cards used in Banking System

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Payment Cards are essential part of payment system set up by banking institution that offers hassle free and cash free option to make payments and also withdraw money as per the need of the card holder. Some of the most common types of Cards used in Banking System used by customers in banking system are debit cards, credit cards, prepaid cards, and Forex cards. Types of payment cards and the difference among cards used in banking system is a basic topic of banking awareness and general knowledge that you should know about and here we are going to discuss the same in details.

Types of Cards used in Banking System

The following are most common types of cards used in banking system and the difference between them-

Debit Card make payments from linked account
Credit Card used to borrow money and make payments
Forex Card to hold foreign currency during international travels
Prepaid Cards load the money in advance and then make transaction

Debit Cards

They allow the card holder to transfer money electronically from their bank accounts and can also be used as ATM cards to withdraw cash using the Automated Teller Machine. Keep in mind that you’re not borrowing money using debit card, you are using the money deposited in the bank account linked to the card, whereas in credit cards, you borrow money to make payment. The following are some different debit cards used-

1. Visa, Master and Maestro Debit Cards
2. Visa Electron Debit Cards
3. MasterCard Debit Cards
4. Contactless Debit Cards
5. RuPay Debit Cards
6. Deferred Debit Card

Image Credit- visa.co.in

Both Visa and MasterCard debit cards have similar functionality and both of them are foreign payment gateway that provides payment facility to most of the banks in the world. They can also be used to make payments in other countries as well. An important thing to note is that they do not provide any actual credit to any party, they are just payment methods and rely on various banks to issue cards using these payment methods. Maestro is the name given to a brand of MasterCard.

Visa Electron debit cards do not offer the overdraft feature that Visa debit cards do. One of the main advantage of this card is that the card holder will never be allowed to overspend or will not fall into debt and no interest charges are there for cash withdrawal as well.

Contactless debit cards have built-in radio frequency module can facilitate the card holder to make payments by simply waving the card over supported machine.

Have you heard about EMV Chip Card?
Well most of the cards now come with this technology of an integrated chip that adds a layer of security. EMV stands for Europay, MasterCard and Visa and EMV Cards are essential smart payment cards also known as IC cards. They prevent cloning of the card.

RuPay is Indian Domestic Payment system created by the National Payments Corporation of India. As per the official website rupay.in “It was conceived to fulfill RBI’s vision to offer a domestic, open-loop, multilateral system which will allow all Indian banks and financial institutions in India to participate in electronic payments.It is made in India, for every Indian to take them towards a “less cash” society.” Also note that banks are required to pay a quarterly fee for visa, master or foreign payment facilities whereas RuPay network is free of charge and is used only in India.

Deferred Debit Card allows the facility of payment being done a few days later from the date of purchase.

Credit Cards

Credit cards allow the user to borrow money from the bank and make purchases. Bank or companies issuing the credit card creates a revolving account and grants a line of credit to the cardholder,and then the user borrows money for payments or can also withdraw cash at times.Companies issuing credit cards also set a minimum repayment amount for the amount borrowed and also charge interest on delayed payments.

Following are some terms associated with credit cards-

Credit Limit – represents the maximum balance on a credit card
Balance – is the total amount you owe, including purchases, finance charges, and fees
APR or Annual Percentage Rate– is the interest rate applied to the balance carried forward past the grace period of time.
Grace Period – time alloted to pay your balance
Credit Card Fees– annual or maintenance charges, late fee, and over-the-limit fee.

Forex Cards

Forex Cards stands for Foreign Exchange Cards and are used for international travels to hold foreign currency. There are two main variants- single currency cards and mlti-currency forex cards. Forex cards can also be used to withdraw the currency abroad.

Prepaid cards

Image Credit- rupay.co.in

Just as the name sugest in prepaid cards you can load the amount in advance and then use the money to make transactions, they are not linked to any bank accounts. Most common example is prepaid gift cards.

RuPay in India also brought the prepaid cards in 2014 considering the huge opportunity in the untapped, unorganised, corporate gifting and other business space.

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Banking Awareness

[ Best ] Banking Awareness: 10+ Types Of ATM In India

by Mr. DJ
written by Mr. DJ

Banking Awareness: Types Of ATM In India

In our daily life, ATM has become an indispensable part. We don’t prefer to carry a lot of cash as it is difficult and risky. On the other hand, by carrying a debit card you are virtually carrying all your savings as withdrawing cash has been made very simple with the advent of the ATM. Under the initiative of Digital India, physical exchange of currency has become much lesser  because now you can easily transit money from one account to another by just a click. For a banking aspirant, it is very important to know that there are different types of ATM as questions do come from this topic in main examination as well as in Interview and a banking aspirant in general is expected to have the basic knowledge of the banking. So, in this article we will be discussing different types of ATM in India.

An ATM (AUTOMATED TELLER MACHINE) or ABM (AUTOMATED BANKING MACHINE) is an electronic telecommunication device that enables customers to perform various financial functions such as:

  1. Cash withdrawal.
  2. Cash deposit.
  3. Fund transfer.
  4. Account information.
  5. Regular bill payment.
  6. Balance enquiry.
  7. Mini statement. etc. Without the need of any banker or a cashier.

ATM & Important Facts

Before we read some more details about the ATM and its types etc., let’s first look into some of the common facts about the Automated Teller Machine (ATM):

When was the first ATM invented?

Chemical bank installed the first cash machine in the US on September 02,1969 at its branch in Rockville Centre New York.

When was the first ATM installed in India and who installed it?

Hongkong and Shanghai Banking Corporation (HSBC) installed its ATM and India’s First ATM at their Sahar Road Branch, Andheri East in Mumbai in 1987.

NOTE: There are more than 3.5 billion ATM machines all over the world.

Who invented the ATM?

The ATM was invented by John shepherd-Barron (a British) and Donald Wetzel (An American).

Some more facts about ATMs in India:

    • There are 222,318 ATMs in India as per June 2019.
    • Maharashtra has the highest number of ATMs in India.
    • SBI is the bank which have the highest number of ATMs i.e. 59,521 installed in India.
    • Ahmedabad is the city to have India’s first talking ATM.
    • Maximum limit of cash withdrawal in an ATM is Rs. 50,000 a day.

Banking Awareness: Types Of ATM In India

Important Facts Related To ATM’s In India:

ATMs in the country: 2,21,703 till March 2019

Banks having the maximum no of ATM: State Bank Of India

State having highest number of ATM’s: Maharashtra with 25,651 ATM

India’s first talking ATM’s: Ahmedabad, launched by Union Bank Of India

Only country where you can NEFT form India: Nepal

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What Is ATM?

ATM is Automated teller machine which is a computerized machine which provides the customers of banks the facility of accessing their account for dispensing cash and to carry out other financial & non-financial transactions without the need to actually visit their bank branch.

Types Of Cards Used In ATM

The ATM cum debit cards, credit cards and open prepaid cards ( that permit cash withdrawal) issued by banks can be used at ATM for various transactions.

Types of ATM In India

Onsite ATM

These ATMs are inside the bank compound and hence are known as Onsite ATMs.

Offsite ATMs

These  ATMs  are located in various places except inside the bank premises and thus named as Offsite ATMs.

White Label ATM

These ATMs  are set up & owned by Non-Banking Financial Companies and offer all the services are known as White Label ATMs.

Yellow Label ATM

These ATMs are mainly installed to provided for E-Commerce facility.

Brown Label ATM

These ATMs are not owned by the bank instead they are taken on lease to provide the service to the customer.

Orange Label ATM

These ATMs are used in the share transaction.

Pink Label ATM

These ATM are meant only for Women.

Green Label ATM

These ATMs are installed for the transaction related to agriculture.

Types of ATM in India Help you in exams to understand the basic knowledge of the banking awareness about Types Of ATM in India.

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Banking Awareness

Different Types Of Money Transfer In India: IMPS, UPI, NEFT, RTGS and More

by Mr. DJ
written by Mr. DJ

Different Types Of Money Transfer In India: IMPS, UPI, NEFT, RTGS and More

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Banking Awareness is an important topic for banking aspirants as it  will be helpful to all banking aspirants not only in cracking the General awareness section but also in cracking your interview. If you are a  banking aspirant then it is expected to have at least the basic terms related to banking and that is why most of the questions asked in the interview are related to banking awareness terms which most of the candidates failed to answer. We have tried  in this post to cater the best and updated study notes related to Different money transfer system in India to make sure that you only study from the relevant source and not from the outdated source.

About NPCI

National Payments Corporation of India (NPCI) is an umbrella organization in India for all retail payments system in India. With  the guidance and support of the Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) it was set up. Once  the Board for Regulation and Supervision of Payment and Settlement Systems (BPSS) in 2005 was set up, The RBI  released a vision document incorporating a proposal to set up an umbrella institution for all the RETAIL PAYMENT SYSTEMS in the country. The core objective of this organisation was to consolidate and integrate the multiple systems with varying service levels into nation-wide uniform and standard business process for all retail payment systems. The other objective of this organisation was to facilitate an affordable payment mechanism to benefit the common man across the country and help financial inclusion. In this article we will discussing some of the products under NPCI which helps the citizens in money transfer.

Different Money Transfer System In India

Given below are different money transfer system in India:

National Electronic Fund Transfer (NEFT)

  • Purpose – It is pne of the way through which you can transfer fund from any bank account to any other bank account holder in India. NEFT is based on batch processing system.
  • Minimum amount – Rs. 1
  • Maximum amount – No upper limit for transferring money through NEFT.
  • Time limit – The transactions are processed in hourly batches. There are twelve settlements from 8 A.M. to 7 P.M. on the weekdays (Monday – Friday) except 2nd and 4th Saturday.
  • Availability – NEFT is not available on the bank holidays, RBI holiday and Sunday and second and fourth saturday.
  • Mode: Online & Offline Both

Real Time Gross Settlement (RTGS)

  • Purpose – It is another way in which you can transfer fund from any bank account to any other bank account holder in India.
  • Minimum amount – Rs 2,00,000
  • Maximum amount – No limit
  • Time limit – 8:00 A.M to 6:00 P.M for working days
  • Availability – Not available on the bank holidays, RBI holiday and Sunday and second and fourth saturday.

Inter Mobile Payment Service (IMPS)

  • Purpose – This is one of the way to transfer fund from any bank account to any other bank account holder in India anytime.
  • Minimum amount – Rs 1
  • Maximum amount – Banks can set their own limit for IMPS as they seem suitable.
  • Time limit – It is based on real time. The depositor account is credited in less than 1 minute from the submission of transaction.
  • Availability – It can be done 24X7 even on bank holidays, RBI holiday and Sunday

UPI (Unified Payments Interface):

  • Purpose: It is use to transfer the money from one bank account to another bank account in India.
  • Minimum Amount: One Rupee
  • Maximum Amount: One lakh
  • Time Limit: 24*7 hours
  • Availability: 365 days
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