Bank and Banking System of Bangladesh
Bank and Banking System of Bangladesh
Bank and Banking System of Bangladesh
As a financial services provider, banks provide a safe place to store your cash. As
such, they play a vital role in the economy by providing essential services both to
consumers and businesses. The economy relies heavily on banks. Bank definition
goes to a financial institution authorized to accept deposits and provide credits.
Banking plays such a major role in channeling funds to borrowers with productive
investment opportunities, this financial activity is important in ensuring that the
financial system and the economy run smoothly and efficiently. As a result of
different kinds of banks in existence nowadays, it would be difficult, or at least
cumbersome, to formulate a definition of banking which connotes the diverse
activities of all kinds of banks. Some of the definitions can be formulated here.
The Bank Management System (BMS) is a web-based application used for paying
financial institutions for the services they provide to the Bureau of the Fiscal
Service. BMS also provides analytical tools to review, and approve compensation,
budgets, and outflows.
3. what are the major function of bank?
1. Accepting Deposits: Deposits are the amount of money that a customer hands
over to the bank. This is known as making a deposit. The deposits are of a few types
namely: Saving Deposit, Fixed Deposit, Current Deposit, and the Recurrent Deposit.
The various deposit schemes are based on the type of deposit and the frequency of
depositing. For example, in a fixed deposit a definite sum is handed over to the bank
for a few years. The interest is only compounded if the deposit term is complete.
Providing these services of the deposit is one of the primary functions of a bank. So
what happens if you need money? Shouldn’t that also be a primary function of the
bank? Well, let us see further.
In a saving deposit, the amount and the rate of interest are low. Withdrawals are also
allowed but only in a limited number. The account is suitable for people who want to
save on salaries and similar sources of income.
Similarly, the fixed deposit is a fixed sum that one gives to the bank for a certain
agreed time. The withdrawals are not allowed before the completion of the time of
the fixed deposit. On the other hand, the current account or deposit, there is no
interest paid by the bank and the customer can withdraw or deposit any number of
times.
General Utility Functions: The bank also performs several utility functions. Some of
the most important utility functions of the banks may include the issue of drafts,
letter of credits, etc., locker facility, underwriting of shares, dealing in foreign
exchange, project reports, social welfare programs, other utility functions. The
banks also provide several services like the safe deposit locker facilities, safe custody
facilities, and Demat accounts. The opening of Demat accounts allows the account
holder to trade in the stock exchange or the money market directly. The customer
that holds a Demat account can directly buy or sell shares from the capital market
General Utility Functions: The bank also performs several utility functions. Some of
the most important utility functions of the banks may include the issue of drafts,
letter of credits, etc., locker facility, underwriting of shares, dealing in foreign
exchange, project reports, social welfare programs, other utility functions. The
banks also provide several services like the safe deposit locker facilities, safe custody
facilities, and Demat accounts. The opening of Demat accounts allows the account
holder to trade in the stock exchange or the money market directly.
4. What are the bank management process?
The banking and financial industry is one of the leading investors in technology
and automation. A decade ago, banking and financial transactions, especially the
ones performed manually by employees, were considered difficult to automate.
Owing to the rapid rise in digitization and automation technologies, some of the
leading banks across the globe are investing heavily in automating their key
process workflows.
1. Capital Formation.
2. Creation of Credit.
3. Channelizing the Funds to Productive Investment.
4. Fuller Utilization of Resources.
5. Encouraging Right Type of Industries.
6. Bank Rate Policy.
7. Bank Monetize Debt.
8. Finance to Government.
9. Bankers as Emp
10.Banks are Entrepreneurs.
1. Capital Formation
Banks play an important role in capital formation, which is essential for the
economic development of a country. They mobilize the small savings of the
people scattered over a wide area through their network of branches all over the
country and make it available for productive purposes.
2. Creation of Credit
Banks create credit to provide more funds for development projects. Credit
creation leads to increased production, employment, sales, and prices, and
thereby, they cause faster economic development.
Capital formation is not the only function of commercial banks. Banks invest the
savings mobilized by them for productive purposes. Pooled savings should be
distributed to various sectors of the economy to increase the productivity
of the nation.
Savings pooled by banks are utilized to a greater extent for the development
purposes of various regions in the country. It ensures fuller utilization of
resources
The banks help develop the right type of industries by extending loans to the right
type of persons. In this way, they help the country’s industrialization and the
country’s economic development.
Economists believe that by changing the bank rates, changes can be made in a
country’s money supply. Federal or state banks in developing countries; the
interest rate is to be paid by banks for the deposits accepted by them and the rate
of interest to be charged by them on the loans granted by them
Commercial banks transform the loan to be repaid after a certain period into
cash, which can be immediately used for business activities. Manufacturers and
wholesale traders cannot increase their sales without selling goods on a credit
basis. But credit sales may lead to locking up of capital.
8. Finance to Government
9. Bankers as Employers
After the nationalization of big banks, the banking industry has grown to a great
extent. Bank’s branches are opened in almost all the villages, which leads to the
creation of new employment opportunities. Banks are also improving people for
occupying various posts in their office.
Depending on your specific needs, you might choose banks that cater to them.
For example, are you looking for a basic business bank account, or is this for your
personal bank account?
Are you trying to combine the two?
When you’re looking for a bank, don’t be afraid to ask about how they treat each
kind of account and the specific benefits that they offer that relate to these
accounts.
If you have a business in need of a bank, what kind of support does the bank
offer? Are there staff members available that can advise you on business growth?
Can the bank scale with your business?
A great personal bank doesn’t equal a great business bank. While many banks
offer adequate services for both, it doesn’t hurt to check.
2. Bank Perks
Many banks offer great perks to new members, and there’s nothing wrong with
trying to take advantage of them. What is your bank of choice willing to offer
you?
Some banks offer a money bonus (like a gift card) when you join. Others may have
discounts on hotels, transportation, or other necessities that are exclusive to their
members.
Bank perks shouldn’t be your primary decision-makers, but they don’t hurt.
Did you know that some banks filter clients based on their credit scores? While
having a normal credit score is often enough, some banks may favor you if you
have a high credit score.
Credit requirements often only apply to people who are trying to open a business
account. The bank wants to ensure that you’re a secure client, and they have
enough clients that they’re able to pick and choose.
Before you choose a bank, check on credit requirements and work on building or
maintaining your credit score.
Are you used to having a bank that’s in a brick and mortar location? There are a
few things that you want to keep in mind when you’re trying to choose in that
case.
First, how accessible is the bank for you? Are there multiple locations that make it
easy to access your required services on the go?
It’s a good idea to choose a bank that has a location somewhere that you
frequent. For example, many grocery stores have banks nearby or even within the
building for easy access.
Also, keep ATMs in mind. It’s annoying to find yourself needing to withdraw
money only to be hit with ATM fees because your bank’s ATM isn’t available. If
there are insufficient bank or ATM locations and you’re someone that spends a
lot of time travelling around, you might want to consider another bank.
That said, it’s getting more popular for banks to move online and get rid of brick
and mortar options. Consider whether or not you’re comfortable with this.
These online banks are easy to access wherever you are, but when it comes to
withdrawing cash without fees, they’re lacking. While they often offer easy online
support and chat options, they also don’t have the in-person interactions that
many people rely on.
If you value personal connections and the ability to go to a physical location to get
help or withdraw money, in-person bank services might be best for you. If you
value ease of use and accessibility, online banks are also great.
5. Digital Options
Most banks, even if they have a “real” location, also offer digital services. This
combines the in-person features of a brick and mortar bank with some of the
accessibility and perks of an online bank.
When you’re looking into your bank, ask about their digital services.
Some smaller banks have insufficient digital options. Their sites might be clunky,
slow, or difficult to use, and they sometimes don’t have all of the features of
larger bank websites.
This doesn’t make small banks bad, and it doesn’t mean that all small banks have
problematic websites.
A good bank website should allow you to get support, check your bank
statements, move money around for online purchases or transfers, and make it
easy to open up secondary accounts (like savings accounts). If you have a specific
digital service in mind, ask about it before you make your choice.
While safety is the primary concern with a savings account, you should also look
into interest rates. A savings account with a strong interest rate can protect your
money (in a small way, at least) against inflation.
A good savings account works as a slow investment. An account with no interest
(or low interest) should be a red flag.
7. Basic Services
What kinds of common banking services are you looking for from your new bank?
Regardless of whether the bank is for business or personal use, you want to know
that you’ll be able to access the services that you rely on for your banking.
For example, are you someone who likes to have a tax professional on hand?
Good bankers are often able to handle difficult tax questions and concerns. How
does this bank handle loan s?
There are plenty of services that you want to keep in mind when you’re choosing
a bank. Make a list and compare it against the services listed on their website, or
call to confirm.
8. What are the present scenario of banking sector of Bangladesh?
The banking sector of Bangladesh has been struggling to survive in the last couple
of years. Most of the banks are in trouble regarding loan default, high non-
performing loans and other issues. The pandemic situation has made the situation
worse for the whole economy. The banking sector, a vital player in a country’s
monetary and fiscal system, continues to face the wrath of the Covid-19
pandemic.
There is little doubt that the banking sector in Bangladesh is going to face a
difficult period in 2021 due to the continuing impact of the coronavirus outbreak.
To maintain good growth in the upcoming years, Bangladesh Bank along with the
government has taken some steps to stabilize the economy, including the banking
sector, by implementing some monetary and fiscal policies.
A major change in policy in the banking sector was seen last year. The Bangladesh
Bank initiated single-digit borrowing and lending rate back in April 2020. The main
purpose was to attract investors with a single-digit interest rate. It was expected
that investments would go up as the borrowing rate is below ten percent. Along
with this, some banks expected that deposits from individuals would go down
because of the less-than-six percent interest rate in depository money.
But beyond expectations, the banking sector has been facing excess fund
availability in recent days. The main reason for this excess cash is low investment
opportunities in the economy due to the Covid-19 situation along with a huge
cash injection from the Bangladesh Bank. Rather than being low, bank deposits,
excluding inter-bank balance, rose to Tk 13,454.36 billion at the end of September
2020 from Tk 13,054.54 billion nearly three months prior. Also, excess liquidity
increased to almost 105 percent and stood at around Tk 160,979 crore at that
same period of time if we look at year-to-year analysis. Bangladesh Bank has
already injected around Tk 55,000 crore into the financial sector as part of its
effort to implement the stimulus packages.
According to data released by Bangladesh Bank, the call money rate went below
two percent in November after two years due to excess liquidity. It was seen in
the last two months that the bank’s daily borrowings from the call money market
ranged between Tk 3,600 crore and Tk 5,300 crore. But some months ago, in last
July-August, the bank’s daily borrowings from the call money market ranged
between Tk 7,000 crore and Tk 9,200 crore.
At the end of September last year, the banking sector’s total default loans stood
at Tk 94,440.5 crore, which was 8.88 percent of total outstanding loans; it was
around Tk 116,288 crore in the same period in the year prior. The amount
decreased because of the regularization of a big chunk of defaulted loans through
a special rescheduling policy of the central bank.
Since the pandemic emerged, it was expected that the banks would not be able to
make much profit as corporate deals – their major earning source – were closed.
But a report published by Bangladesh Bank after nine months showed that 18 out
of 27 banks posted a year-on-year rise in profits during the period of January to
September. They generated around 3.49 percent higher profits (Tk 4,888 crore) in
the nine months.
In such a dire situation, the banking sector must introspect and make a
turnaround in the coming years. Along with making an initial recovery from the
Covid-19 situation, the banking sector has to prepare for the impact of the second
wave of coronavirus in 2021. It has recently been suggested that bad debt can be
recovered by using banks’ profit. It will strengthen the position of banks in the
coming years.
The investors are preparing to make new investments. New investment requires
more cash and most of them come directly from the financing provided by the
banking sector. Also, banks started to distribute the government’s stimulus
package money to a number of institutions. So, it can be expected that the rise in
excess liquidity might not be same in the next couple of months.
Additionally, the deposit rate of banks is still low which will attract fewer
customers in the future. As the stock market is recovering after a new commission
came into action, people might go for the stock market rather than keep their
money idle in the bank which might create a problem in terms of collecting
deposits in the near future.
One of the main problems faced by banks is recovering money from big
borrowers. If business as usual continues, it will be hard to survive in the long
term. To address the problem of defaulted loans in the future, banks should take
the necessary steps to investigate borrowers’ position.
The government has released a huge budget with a very big deficit amount at
hand. As the economy took a downward spiral for a couple of months, the
government had fewer opportunities to meet expected revenue collection. The
deficit amount will thus be much higher than what was expected. The
government usually takes out loans to cover the deficit amount. But our
experiences in recent years show that the government is taking out loans from
internal sources like banks and financial institutions. As a result, it is expected that
the government might take money from these sources if it cannot meet the
revenue collection target. Banks should keep in mind these issues while
continuing their operations.
It is clear that the banking sector needs to be reformed with increased regulation
and more supervision. Also, steps should be taken to tighten the criteria for loan
rescheduling and restructuring; ensure better corporate governance; modernize
state-owned commercial banks; and create more robust systems to accelerate
loan recovery. The right steps and policies can help minimize the threats to our
financial system.
9. What are the problem of banking sector in Bangladesh?
The banking industry in Bangladesh has flourished over the years, making
double-digit profit percentages, sustaining growth and surviving cut-throat
competition while providing attractive returns to shareholders. However,
the greed for more without befitting platform and fundamentals, brings its
own challenges and questions in people's minds.
News about bank directors and chairmen's involvement in politics and
underhand deals using banks' goodwill raises question about the banks'
independence in running their operations. It also makes you think whether
all the disclosures in the annual reports and other regulatory paperwork are
only the glowing shell over a huge hollow.
I at times question myself whether excessive regulation is the reason behind
the veneer of goodness or whether there are other regulatory malpractices,
disconnects or deficiencies that allow these banks to take advantage of the
situation.
The image of the banking industry has many times been tarnished by several
stories regarding the owners in recent media releases. Despite the
considerable progress made, foreign countries are still somehow treating
our banking industry activities as questionable.
Countering the image issue is not the only block in the road to developing a
respectable and successful institution, there are also the problems of 2 Ps
3Cs and a T-- people, product, compliance and ethics, competition, change
management and technology among others.
Though someone may differ, competition in Bangladesh seems to be the
deadliest of all. It not only brings in positive developments but also
encourages malpractice. There is competition not only from other banks but
also from non-bank financial institutions (NBFI) and micro finance
institutions (MFI).
Not only are the institutions competing, the regulators and customers are
also pitting one against the other, making the situation extremely difficult
giving you the feeling of being stuck between a rock and a hard wall. A
customer will often try to make the best out of the situation by not
complying with the regulatory requirement, referring to the service provided
by another bank or banks.
The requirement of bankers to meet steep targets often results in
succumbing to the demand of these corporates, resulting in bypassing of the
regulation. One bypass result s in another and then another resulting in a
whole network of malpractices, which often becomes the norm.
Competition in the banking industry is also hitting from the capital market
end, with the corporates increasingly going to the equity market to raise
funding. This not only hits the banks in the belly by affecting their core
business but also indirectly affects their contribution to market cap which
dropped from 59% in 2007 to less than 25% in June 2010. More importantly
it forces them to risk their position by over exposing them to volatile capital
market through proprietary trading and position taking in order to maintain
profitability.
All of us feel that the banking industry badly needs skilled human resources
who will not only service old products but will also create and launch new
innovative products. Educating the market remains the first requirement
towards creating new products and developing skilled human resources.
Besides people and product issues, you need to be ever vigilant about the
ever-changing technology and regulatory requirements.
The new offering in the market which has got all banks running are the
requirements of BASEL II & Automated Clearing House. The major challenge
with change of regulation is that often the regulators are in a hurry to
implement a sudden decision, rolling out action plans without proper
research or understanding the broad implications and capabilities of the
banks to comply with it.
The outcome is delay in implementation, confusion among stakeholders and
new techniques to bypass these regulations. This in its turn creates a non -
level playing field for those who comply with the regulation versus those
cleverly "managing" the situation without having to comply. Too much noise
and less action, at times, creates doubt about the sincerity of the purpose.
As a law-abiding citizen you wonder why it is so easy to "manage" non-
compliance? The final question remains -- who is losing out by this?
Ultimately, every citizen of the country, as our country suffers. The banking
sector could be our pride and a major growth engine of the economy.
Regulators are taking appropriate decisions to implement proper regulations
at the right time.
An appropriate example is when several financial institutions shifted
towards the riskier capital market to counter the lower growth in their core
businesses using the depositor ‘s money, the regulators aptly stepped in to
make merchant banks separate subsidiaries. The regulations are there. The
problem is enforcing them in an honest manner.
If the regulators and the legal system were honest then all these recurring
image issues and malpractices could have been avoided. Facing the
challenges head-on in a compliant manner should be our goal towards
creating a sustainable, profitable and forward-looking banking sector. We
need to do more and run faster with clear visibility about the destination.
Perhaps, it also has to do a lot with the overall governance and
accountability situation in the country.
10. How to solve banking problem in Bangladesh?
There are any number of ways to structure your financial literacy program, from
online educational materials made available through your mobile banking
application (more on the subject of mobile banking apps later) to in-house
financial advisors who can walk customers through different scenarios, such as
buying their first home or saving for retirement, at branch locations. Community
banks and credit unions have found great success hosting educational
workshops and fairs, getting involved in community outreach, and partnering
with local schools and colleges to develop financial literacy curriculum for
classrooms. This last item not only empowers younger generations to make
smarter financial decisions but also comes with the added benefit of enabling
banks to engage with prospective future customers. Even in our technology-
driven society, customers still value face-to-face interaction, so it’s imperative to
capitalize on every opportunity to engage with customers through human
channels.
The 2008 economic recession has, perhaps, made some small business
customers more wary of banks — after all, small businesses felt the effects of
the recession more severely than large firms, with as many as 170,000 small
businesses shuttering between 2008 and 2010, alone.
Over 10 years later, those small businesses that were able to survive the
financial crisis are still reeling from employee layoffs, slashed spending, and
stalled plans for expansion. According to figures from the U.S. Small Business
Administration, “The amount of small business loan originations plummeted by
more than half during the crisis and has seen only a very limited recovery post-
crisis, leaving small business loan originations down 40 percent from pre-crisis
levels.”
We mention all of this to acknowledge that the way small businesses interact
with banks has changed substantially. Gone are the days when a small business
owner would confidently walk into their local bank in search of a loan; the small
business owner of today is savvier, knows that they must be discerning, and
expects to be courted by banks rather than the other way around.
In order to earn small business owners’ trust and loyalty, your bank must
transition from lender to financial advisor by offering holistic services designed
to help small businesses grow. For example, you could:
Service Strategy
With fintech firms such as Stripe, So Fi, and Avant edging in on their market
share, legacy financial institutions must evolve or die — and that means
embracing the strategies that made these startups successful in the first place.
One thing that fintech firms do exceptionally well — which should prompt
traditional banks and credit unions to take notice — is leverage contextual data.
Contextual data refers to any information that provides valuable context to a
person or event.
Your most valuable source of contextual data is your customer base. You can use
customer relationship management (CRM) technology to collect information on
just about anything and everything customer-related, including:
• Geographic location
• Major milestones (e.g. graduating from college, getting married)
• Purchasing preferences
• Spending habits
• Customer service history
• Social media activity
• And more
Although it would be easy to assume that, given how attached people are to
their mobile devices, banking is on a trajectory to becoming entirely digital —
but the numbers say otherwise. According to Reuters, 60% of Americans would
still prefer to open a new checking account at a bank branch rather than through
digital channels; perhaps even more encouraging is that Accenture reports that
86% of consumers intend to visit physical branch locations in the future, and
desire face-to-face human interaction.
That isn’t to say, of course, that banks should prioritize improving branch
locations over developing a digital strategy, but rather that it’s vital to blend
traditional and digital components in order to create an omnichannel customer
experience. To get an idea of the touchpoints involved in this type of experience,
and how it improves customer service in banking, here’s how it works:
• Meet Alexis
As you can see, Alexis engaged with at least a dozen different touchpoints —
some traditional, some digital — over the course of her customer journey. And
although her story is fictional, it isn’t outside the realm of possibility: A survey of
nearly 5,000 retail banking customers revealed 22 unique touchpoints. It’s
imperative not only that you capitalize on as many of these touchpoints as
possible to create a truly omnichannel experience, but also that you deliver
exceptional customer experience every step of the way.
The answer to that question lies in your mobile banking app. In a world in which
everyone seems practically glued to their smartphone, the benefits of mobile
banking aren’t lost on banks and credit unions. In fact, you’d be hard-pressed to
find an institution that hasn’t developed its own branded mobile functionality.
But just because mobile banking has become ubiquitous doesn’t mean that all
banks are leveraging their applications as effectively as possible.
There are a few things you can do to take your mobile banking experience to the
next level and turn your app into a one-stop self-service shop:
As prevalent as self-service has become, there will always be a place for live
service representatives and a value for human interaction. Therefore, it’s in your
best interest to ensure that each interaction is as positive as possible and
contributes to an exceptional customer experience by equipping your frontline
staff with the tools they need to succeed.
First and foremost, it’s imperative that you invest in comprehensive training. If
that seems like an obvious piece of advice, that’s because it is — but it’s still
worth mentioning because banking industry training techniques are rapidly
evolving. From virtual simulations to gamification, technology sits at the
forefront of employee training and ongoing education.
From there, the next step is to build an internal knowledge base that employees
can refer to when they encounterquestions they don’t know the answers to.
This knowledge base should serve as a centralized repository for everything
from policies and procedures to relevant industry regulations and should be
well-organized and easy to navigate to prevent customers from waiting on
answers any longer than is necessary. Be sure to regularly update your
knowledge base so that it includes only the most accurate and relevant material.
The final key to empowering your employees (and one of the most valuable
ways to improve customer service in banks) is to invest in the latest front-end
and back-office banking technology. From a CRM solution that uses data-driven
insights to provide a 360-degree view of the customer to security systems that
leverage predictive analytics for fraud prevention and protection, a strong
solutions ecosystem can be a real asset to your staff. Most importantly, be sure
to integrate these systems so they have access to the same data, and so your
service representatives don’t have to jump from one system to another when
they field customer requests.
No one knows your customers better than your customers, themselves. After all,
the information stored inside your bank’s CRM can tell you all about who a
customer is, and predictive analytics can make an educated guess about what
they might do — but technology, no matter how innovative, can’t tell you what’s
going on inside a customer’s head. It only makes sense, then, to tap into the
invaluable resource that is your customer base by asking them for regular
feedback; in doing so, you can gain insight into whether their needs are being
sufficiently met, what products or services they’re interested in, what their goals
for the future are, how their experience can be improved, and more.
There are any number of ways to solicit customer feedback, but the most
practical approach is to establish check-ins across all touchpoints. For example,
if a customer were to contact your bank’s call center with a service request, the
representative responsible for processing that request might close out the call
by asking whether the customer had any additional questions and whether they
were satisfied with the service they received. Or, you might program a pop-up
featuring a brief (think two to three questions) customer service survey to
appear on your website after a customer has completed a transaction. Each
piece of data you’re able to collect adds to the rich tapestry that is your
customer base and can help your organization make more informed decisions
that enhance the customer experience.
The financial services landscape is in a constant state of flux, with new trends
emerging every day. In order to ensure that your organization delivers the best
customer experience possible, you need to keep your finger on the pulse of the
industry and remain flexible to change — that means constantly looking for ways
to improve, keeping your solution ecosystem integrated and current, and
embracing digital transformation. By listening to your customers, keeping an
open mind, and making smart investments, you can guarantee exceptional
customer service at your bank.
Bank
The oxford dictionary defines bank as “an organization offering financial services,
especially loans and safe keeping of customers money”. There must be a central
bank in every country, which is authorized with monitory policy making by the
government of that nation. It acts as a financial intermediary. Other than the
central bank, there are several types of banks like retail banks, investment banks
etc. The commercial banks mostly deal with accepting deposits and providing loan
facilities. Community development banks, community banks, and postal saving
banks are some examples for retail banks. Merchant banks and industrial banks are
good examples for investment banks.
Banking
Banking is the business activity of a bank. Simply, any activity carried out by a bank
for business purposes is called banking. Accepting savings, Lending money, leasing
properties to needy people, paying for cheques, providing mortgage facilities,
acting on to standing orders, statement of instructions, providing safety locker
facilities for valuable things, providing over draft facilities to current account
holders, acting as institutional investors in financial market, issuing ‘letter of credit’
in the business of import and export, act as money changer, issuing travelers’
cheques are some of the activities carried out by modern banks in the banking
industry. Nowadays, banking can be done via the internet, which is called on line
banking.
12. Define E-Banking?
E-banking is an arrangement between a bank or a financial institution and its
customers that enables encrypted transactions over the internet. Short for
electronic banking, E-banking has various types that cater to customers' different
requirements, which can be resolved online.
E-banking is also helpful for non-financial transactions such as changing your ATM
PIN, getting a mini statement, updating your personal details, balance inquiry or
printing an account statement. Essentially, it refers to any transaction that
doesn't involve any movement of funds to or from your account.
Usually, this service is offered by banks which gives their customers the facilities
of online banking through which they can have access to their accounts within a
few seconds and click. Online Banking includes the facilities such as Account
Statements, Fund transfers, Account Opening, Financial Product Information,
etc. There is no need for any human operator to respond to the customers. The
banks have a centralized database and everything is automated. It lowers the
banking cost and strengthens the banking relationship by adding value to the
service. It provides banking services via the internet and it is end-to-end
encrypted, which means it is completely safe and secure. It also promotes
paperless/cashless financial transactions
13. what are the feature of E-Banking?
Faster Transactions
E-banking provides the facility of instant transfer of funds to its customers. It
saves the time of customers as funds get transferred very fast from one account
to another. Whole system of E-banking is automated & works over the internet.
People don’t need to wait in queue to transfer their funds or pay off their bills;
they can easily do it through their device. It saves the time of customers as they
can easily access their account with the help of their device.
Whole transactions are done online over the internet. It has also reduced the
paperwork in organizations as all transactions are recorded digitally. There is no
need to manually enter & store each record.
E-banking provides the facility of instant transfer of funds both nationally &
internationally. All systems are connected to each other online which facilitate
easy transfer of funds.
It reduces the time required for doing transactions & also reduces the workload of
business organizations. Everything is stored digitally & they don’t need to store
anything manually. It increases the overall productivity of the businesses.
It provides a complete digital footprint of all those who can modify your banking
activities & commit fraud. It thereby adds transparency to your accounts which
reduces the overall chances of fraud.
14. What are the importance of E-Banking?
We will look at the importance of electronic banking for banks, individual customers,
and businesses separately.
Banks
Customers
Businesses
• Payment templates
• Regular payments
• Loan applications
To Provide Liquidity
E-banking helps to provide liquidity to the banks, because consumers do online
transactions, which means there are no withdrawal of physical money. So, E-
banking to provide liquidity.
To Boost Economy
E-banking helps to boost the economy, Because online transaction helps to
maintain the cash in the economy, which would be use during recession of the
economy.
5. Debit Cards: 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. There is no need to carry cash, its use is less complicated than using a
cheque.
8. EFT: The electronic funds transfer scheme is scheme of the Reserve Bank of
India. Electronic funds transfer is a system by which cheqes, pay-in-slips and other
financial papers are replaced by computer controlled invisible and immediate
transfer of funds from one account to another.
1. Bill payment – Every bank has a tie-up with different utility companies,
service providers, insurance companies, etc. across the country. The
banks use these tie-ups to offer online payment of bills (electricity,
telephone, mobile phone, etc.). Also, most banks charge a nominal one-
time registration fee for this service. Further, the customer can create a
standing instruction to pay recurring bills automatically every month.
ATM full form is Automated Teller Machine which is a self-service banking outlet.
You can withdraw money, check your balance, or even transfer funds. Different
banks provide their ATM services by installing cash machines in different parts of
the country. You can withdraw money from any of these machines irrespective of
whether or not you are an account holder in the same bank.
Transactions are either free or bear a nominal charge depending upon the banks.
Banks usually do not charge for the first 3-5 transactions in a month. Once you
cross the limit of free transactions, you may have to pay a nominal charge. Also,
some banks levy charges if you withdraw money from another bank’s ATM of
which you are not an account holder.
To avail of the facility of Automated Teller Machines, you need to have a bank
account and an ATM card against the account for the same. Most of the time,
banks issue a debit card that you can use not only at ATMs but also at online
payment gateways or card swipe payments.
Every Automated Teller Machine has some common basic parts, even if they may
differ in size and design. These are:
1. Input Devices
• Card Reader – Every Automated Teller Machine has a space to insert the
debit or the ATM card. The ATM card generally has a magnetic strip on the
back, and in a few cases, a chip on the front, that contains the account
details. Card Reader recognizes these details and passes them on to the user
server
• Keypad – All ATMs have a keypad where you can insert numbers, clear them,
or cancel any transaction. You can use it to enter the PIN and the amount
you wish to withdraw. These keypads can either be physical buttons on the
ATM or virtual keypads on the touchscreen
2. Output Devices
• Display Screen – There is a display screen in every ATM, usually LCD or CRT
that displays the transaction information like steps to do the transaction or
balance after withdrawal. Therefore, it acts as a guide to performing a
transaction. It displays options of PIN change, quick cash withdrawal, balance
check, etc.
• Cash Dispenser – Cash is safely stocked into the Automated Teller Machine
by bank officials. There is a cash dispenser from where you can collect cash
after withdrawing a certain amount from the ATM
• Receipt Printer – After completing a transaction, the receipt printer in the
ATM records the type of transaction, amount withdrawn, and the remaining
balance. In an ongoing transaction, ATMs generally display the question if the
customers want the receipt or not. So, if requested, you get the receipt from
the receipt printer
• Speaker – There is a speaker in most of the ATMs which gives the audio
instructions for accessing the machine & doing transactions. Therefore, it
further enables the users to perform the transaction smoothly
21. How does a customer operate ATM?
Banks place ATMs inside and outside of their branches. Other ATMs are located
in high-traffic areas such as shopping centers, grocery stores, convenience stores,
airports, bus and railway stations, gas stations, casinos, restaurants, and other
locations. Most ATMs that are found in banks are multifunctional, while others
that are off-site tend to be primarily or entirely designed for cash withdrawals.
Many cards come with a chip, which transmits data from the card to the
machine. These work in the same fashion as a bar code that is scanned by a code
reader.
ATM Fees
Account holders can use their bank’s ATMs at no charge, but accessing funds
through a unit owned by a competing bank usually incurs a fee. According to
MoneyRates.com, the average total fees to withdraw cash from an out-of-
network ATM was $4.55 as of 2022.
Some banks will reimburse their customers for the fee, especially if there is no
corresponding ATM available in the area.
So, if you’re one of those people who draws weekly spending money from an
ATM, using the wrong machine could cost you nearly $240 a year.
ATM Ownership
In many cases, banks and credit unions own ATMs. However, individuals and
businesses may also buy or lease ATMs on their own or through an ATM
franchise. When individuals or small businesses such as restaurants or gas
stations own ATMs, the profit model is based on charging fees to the machine’s
users.
Banks also own ATMs with this intent. They use the convenience of an ATM to
attract clients. ATMs also take some of the customer service burdens from bank
tellers, saving banks money in payroll costs.
ATMs make it simple for travelers to access their checking or savings accounts
from almost anywhere in the world.
Travel experts advise consumers to use foreign ATMs as a source of cash abroad,
as they generally receive a more favorable exchange rate than they would at
most currency exchange offices.
Debit Card
A debit card is a great option over a credit card for anyone who wants
to budget or not rein in their spending, a debit card linked to a checking
account may be a better option than a credit card. Although it looks just like a
credit card, the similarities mainly end there. Banks issue their customers debit
cards to provide them with convenience so they can access funds without having
to write a paper check or make a cash withdrawal.
A debit card is linked to a checking (or savings) account and can be used
anywhere credit cards are permitted. They can be used to do routine banking
at financial institutions, make cash withdrawals from an automatic teller
machine (ATM), as well as purchases at retailers in-store and online. When you
use your card, the bank places a hold on the amount spent. Depending on the
purchase amount (and your bank), the money is debited immediately out of your
account or is held by the bank for 24 hours. This can be longer if it's a weekend,
holiday, or if your account has any special flags.
Debit cards require the use of a unique personal identification number (PIN).
When you use the card to make a cash withdrawal or a purchase, you may be
asked for your PIN, or you may be asked to sign for the purchase just like a credit
card. Newer cards with chip technology may not even require any additional
action for purchases depending on the terminal or bank
Credit Card
A credit card is a payment card that is generally used to make purchases online
or in retail stores and can also be used to make cash withdrawals, which are
called cash advances.
Unlike debit cards, which are given to every individual with a bank account,
consumers must apply and qualify for a credit card. Financial institutions review a
person's creditworthiness and, if approved, grant a specific credit limit to the
cardholder. The better someone's credit, the higher their limit. Individuals should
exceed spending beyond that limit. If they do, there's a chance that the
transaction may be denied. If it does go through, cardholders may incur over-
limit fees.
When you use a credit card, the purchase amount is automatically added to your
outstanding balance. Most credit card companies give customers 30 days to pay
the balance in full before any interest is charged. In some cases, such as cash
advances, the interest starts accruing right away. Interest rates are a primary
driver for company revenue, which explains why credit card interest is
notoriously high. Savvy consumers avoid paying interest by paying off their
balance in full before the next due date.
23. What are the difference between Debit Card and Credit Card?
The main difference between the two cards is the question, "Do you want to pay
now or later?" A debit card is tied to your checking or savings account, and when
you use it, funds are removed within 24 hours from your account. A credit card
can be used to immediately pay for goods and services, but you pay for them
when your monthly bill is due.
You can't use your debit card if your bank account is empty (unless you sign up
for overdraft protection), but you can use a credit card. When you use a debit
card, the money is automatically taken out of your checking account. When you
use a credit card, you pay the bill later. Keep in mind, though, that credit cards
can help you build up your credit. Or they can hurt it if you don't use them
responsibly. Debit cards, though, won't impact your credit score.
A debit card is simply a tool to use in place of a check or actual cash. When you
use a debit card, you are using your funds but you are borrowing money from
your card issuer when you use a credit card. But there isn't necessarily a better
card to use. Using credit versus using a debit card, which is essentially cash,
depends on how you want to spend and manage your money.
If someone steals your debit card and takes funds out of your account, it may be
more difficult and take longer to get the funds back than if someone steals your
credit card. In that case, you can report the card stolen, and your liability is
limited. Regardless of whether it's your debit or credit card, it's important that
you report it stolen immediately to your bank or credit card issuer.
24. What are the difference between traditional and E-banking?
Process handling becomes faster. It includes day end process, month end process,
monthly/yearly interest calculation; fixed deposit receipt process, scheme process
and loan process etc. In traditional system, to accomplish audit, government
officials need to go to every bank. After IT implementation they do not need to go
to banks rather they can collect the same information through network and audit
report can be generated within few minutes. In traditional system it is time
dependent to transfer money from city to remote area and also a matter of some
investment. During the transfer time the money is idle so it’s a great loss for the
bank as well as customers. Electronic system can be used to transfer money
within a few seconds (Intra-bank).[4] At present, several private commercial
banks (PCBs) and foreign commercial banks (FCBs) in Bangladesh offer limited
services of Tele banking, internet banking, and online banking facilities working
within the branches of individual bank in a closed network environment. The FCBs
have played the pioneering role with adoption of modern technology in retail
banking during the early 1990s whereas the state-owned commercial banks
(SCBs) and PCBs came forward with such services in a limited scale during the late
1990s (Islam, M. M.2005). Twenty eight banking softwares were in use in
different banks in Bangladesh. The foreign banks used foreign software as per
their central policies, and these were qualitative and have capability for carrying
out e-banking operation (Baten and Kamil, 2010). They were around 50 ATM
booths operating in the country; two foreign banks had several ATMs of their
own, two local ATM booths service providers that offered syndicated or rental
service to several banks (Rahman, 2003). In Bangladesh, credit card and point of
sale services (POS) are already provided by a quarter of local banks, while ATM
and internet banking were expanding rapidly especially in major cities(Ali et
al.,2007). Internet Banking is growing popular day by day in Bangladesh. A
number of private as well as local banks are going online now considering the
demand and necessity of fast banking. Internet banking not only provides banking
facility round the clock but also helps a country to get attached to the
international economy as well as business. People throughout the world are now
getting engaged with more activity and business and hence need the fast and
anytime access to his/her bank account. Internet banking also facilitates buying
and selling various products which varies country to country (Raihan, 2001). HSBC
and BRAC Bank are clearly not satisfied with the transaction in internet banking.
They thought of something more and desiring and customized the service to its
best for their clients and getting better day by day. HSBC has a whole lot of
features in their online banking that includes account access, loan account
information, networth information, transaction amongst accounts, bill pay,
personal information update, demand draft, ATM info or PIN replacement
request, cheque book order and lot more (Mondal, et al.2013). BRAC bank is one
step ahead because for the first time they have introduced online shopping in
Bangladesh. With exclusive features and facility BRAC bank also provides general
online facility like the other banks. BRAC bank’s online shopping facilitates
merchants to buy any product as they need online, they can customize the offers
as well. Those who may have BRAC Bank VISA card or any VISA card can be a part
of this online shopping service. For transferring money from one place to another
BRAC bank starts Brac-cash service popular name is B-cash, which is harmless
system of transferring money. The customers have accepted this service for the
purpose of transferring money though the operating cost of this service is higher
than any other bank’s same kind of service. As the world economy is growing
faster and banking sector is making mark each and every day, online banking is
very important and effective to be a part of it. Bangladesh just started its journey
in internet banking and banks are coming forward to make it a success.
26. What are the prospectus of E- Banking in Bangladesh?
1. Global Aspect The extent and opportunity of E-banking spreading not only in
develop country but also in developing countries, like, Thailand, Malaysia, Nepal
and Singapore and a less significant extent in Philippines. Various e-banking
services used by Nepal's commercial banks i.e. credit card, tele-banking, and
SMS-banking to make the banking system electronics. In Korea e-banking has
increased at a faster way mainly focus on online brokerage and Mobile banking. In
Bangladesh the government’s emphasis on building a digital system, setting up
ICT park, raising allocation for developing ICT infrastructure, waiving taxes on
computer peripherals and other Measures including the automation program of
banking sector led by the Bangladesh Bank.
.4. Plastic Money Boom Plastic money i.e. debit, credit and pre-paid cards, is
increasing through a number of people is using plastic money to avoid long
queues in banks 'counters to withdraw cash or risk of carrying cash. With the
passage of time withdrawal of cash from the ATM increased by around 26
percent in 2015-16. Total ATM transaction stood at Tk. 1.04 trillion or Tk. 1047.64
billion in 8,571 ATM booths across the country at the end of June 2016. In 2014-
15, banks' clients withdrew some Tk. 832.40 billion from 6,800 ATM booths across
the country. Plastic money becomes one of the accepted ways where customers
need not to cash at the time of shopping and payment of bills in hotel and
restaurant.
27. What are the problem of E- Banking in Bangladesh?
2. cost of technology
3. Inadequate security
9. Inadequate infrastructure