Banking Services

Dr Preeti Bedi
DSEU
Dr Preeti Bedi
 Banking Product and Services
In modern times there are many services that are offered by the banks. This is done so that more and
more customers are attracted. There are some basic services which are offered by the banks and are
common for all banks. Overall, banking products/services are designed to meet the financial needs of
customers. Such services also provide easy access and help customers to save, invest and grow their
wealth.

Dr Preeti Bedi
 Banking Product and Services
•Advancements of loans (Auto loan, personal loan, gold loan etc.)
•Investment Products
•Insurance services
•Cheque payments
•Lockers
•Discounting on bills of exchange
•Collecting and paying the credit instruments
•Guarantee by banks
•Consultancy
•Credit cards
•Funds remittance
•Debit cards
•Overdraft
•Currency exchange
•Mobile banking
•Demand Draft
•RTGS, NEFT Dr Preeti Bedi
 Remittances Services

 Remittance means money transfer or fund transfer to

another party.
 It can be done through cheques, draft or electronic
payment system like EFT (Electronic Fund Transfer),
Mobile phones, ATM, internet banking.
 Can be used for any type of payment including invoices
for business purposes or other obligations like personal
transfers made to family and friends. (used personally or
professionally)

Dr Preeti Bedi
 Remittances Services

 Intra-bank (within) transfer of funds: Transfer of funds

from a customer’s account at a branch to his/her account
at another branch or to another customer’s account of
the same bank. Can be done through internet banking or
electronic transfer.
 Inter-bank (between) transfer of funds: Transfer of
funds from Bank A to Bank B. Can be done:
 1. Within same city
 2. Outstation (At different centres)
 3. Cross-border funds transfer (From one country to
another involving foreign exchange, governed by foreign
exchange regulations of both countries involved).Can be
done through SWIFTMs. Preeti Bedi
 Remittances

 Banker’s Draft (Demand Draft):

1. Issued to any person who applies for it, irrespective of whether he
has an account with bank or not.
2. It is a mode of transfer of money from one account to another at
different centers.
3. Amount is specified and certain
4. Bank Charges Fee for it.
Note: Remittance of funds for values more than Rs 50,000 is to be
done through customer account, cheques etc. but not against cash
payment.

Dr Preeti Bedi
 Remittances

 Electronic Fund Transfer (EFT):

1. It is electronic transfer of money or digital money movement
from one bank account to another using electronic means like
computer etc. There is no need for paper documents.
2. SWIFT: (Society for Worldwide Interbank Financial Telecommunication) is a
network used for enabling international electronic fund transfer between member banks
world-wide. SWIFT is the largest and most streamlined method for international payments and
settlements. https://www.investopedia.com/articles/personal-finance/050515/how-swift-
system-works.asp

Ms. Preeti Bedi

 Electronic Fund Transfer:

3. Through RTGS: (Real Time Gross Settlement): Real Time fund is

transferred i.e. as & when the transaction is triggered. Not subject to
waiting period.
The system is available on all days on 24x7x365 basis.

Meant for large value transactions, Min. amount: Rs 2,00,000.

Max Limit: Varies from bank to bank. For example, max transfer
amount is Rs 20 L per day at IDFC First Bank and Rs 10L for ICICI
Bank
No geographical limitations within India

Ms. Preeti Bedi

Ms. Preeti Bedi
 Electronic Fund Transfer:

4. Through NEFT: (National Electronic Fund transfer):

Online fund transfer within India from one NEFT-enabled
bank account to another.
Started in 2005
Suitable for small value payments.
Can be done by customer itself using internet banking
services.
NEFT is made available 24*7 and 365 days from Dec 2019.

Ms. Preeti Bedi

 Remittances

5. Through Mobile Banking: Using IMPS (Immediate

Payment Service). Customers can transfer money through
mobile banking by downloading the official mobile banking
application provided by the bank. Using the mobile banking
application, account holders can avail services like balance
enquiry, mini statement, fund transfer, utility bill payments,
and much more on-the-go.
IMPS provides real time fund transfer which offers an
instant, 24*7, interbank electronic fund transfer service that
could be accessed on multiple channels like Mobile,
Internet, ATM, SMS.
Ms. Preeti Bedi
 Remittances

5. Through Mobile Banking: Using IMPS (Immediate

Payment Service).

Ms. Preeti Bedi

 Remittances

5. (Kiosks are like ATM)

Ms. Preeti Bedi

 Remittances

DBTL: Direct Bank Transfer for LPG, EBT: Electronic Benefits Transfer, DBT: Direct benefit transfer: under
these benefits are directly transferred to beneficiary’s bank account.

Ms. Preeti Bedi

 Remittances

7. Through ATM: Funds can be transferred from one debit

card to another debit card or one account to another
account through ATM.

Ms. Preeti Bedi

Ms. Preeti Bedi
 Remittances
1. Visit an ATM and insert the ATM/debit card

2. Choose the preferred language

3. Enter the debit card PIN and click ‘Yes’ to continue

4. Then choose the “Fund Transfer” option provided at the bottom most corner of the ATM display

5. Enter the beneficiary’s bank and account number

6. Choose the type of account – Savings Bank Account or Current Account

7. Enter the amount to be transferred and click ‘Correct’. Then click ‘Yes’ to confirm the amount entered

8. After providing the fund transfer amount, the fund will be transferred successfully. If a transaction is not
completed within the time limit provided then ‘time out’ message will appear. In such a case, the account
to account transfer from ATM process has to be repeated

Ms. Preeti Bedi

 Payment System
 A payment system is any system used to settle financial
transactions through the transfer of monetary value.
 Traditional payment systems include negotiable instruments such as
drafts (e.g., cheques) and documentary credits such as letters of credit.
With the advent of computers and electronic communications, many
alternative electronic payment systems have emerged.
 The term electronic payment refers to a payment made from one bank
account to another using electronic methods and forgoing the direct
intervention of bank employees. It is done through internet or any type
of EFT (Electronic Fund Transfer).
(A letter of credit is a document sent from a bank or financial institute
that guarantees that a seller will receive a buyer’s payment on time
and for the full amount. Letters of credit are often used within the
international trade industry.)
Ms. Preeti Bedi
 Payment System

 Modern payment systems use cash-substitutes as compared to

traditional payment systems. This includes debit cards, credit
cards, electronic funds transfers, direct credits, direct debits,
internet banking and e-commerce payment systems.
 Payment systems may be physical or electronic and each has its
own procedures and protocols.
 An efficient payment system reduces the cost of exchanging goods and
services

Ms. Preeti Bedi

 Payment System
 Domestically this is accomplished by using Automated clearing house,
real-time gross settlement (RTGS) systems, NEFT, IMPS, UPI, ATM.
An automated clearing house (ACH) system processes transactions in batches
storing, and transmitting them in groups. They are the facilitators of
transactions like NACH (National Automated Clearing House) in India. (Like
auto debit is made from your account when loan is taken or for paying
insurance premium). An automated clearing house (ACH) is an electronic
interbank payments system in which participating banks exchange electronic
transactions, eliminating the need for paper transactions and speeding up the
settlement process.
To encourage its use for low-value payments, the ACH system processes
batches of payments containing multiple transactions and charges low fees.

 Internationally this is accomplished using the SWIFT network.

Ms. Preeti Bedi
 Payment System
 The Reserve Bank has taken many initiatives towards
introducing and upgrading safe and efficient modes of
payment systems in the country to meet the requirements of
the public at large.
1. Paper-based Payments (Traditional): It is done through cheques,
drafts, and the like. Their share has been steadily decreasing over a
period of time and electronic mode gained popularity due to the
concerted efforts of Reserve Bank of India to popularize the electronic
payment products in preference to cash and cheques. Since paper
based payments occupy an important place in the country, Reserve
Bank had introduced Magnetic Ink Character Recognition (MICR)
technology for speeding up and bringing in efficiency in processing of
cheques.
(An MICR code is a 9-digit code that uniquely identifies the bank and
Ms. Preeti Bedi
branch participating in an Electronic Clearing System (ECS).)
 Payment System
(An MICR code is a 9-digit code that uniquely identifies the bank and
branch participating in an Electronic Clearing System (ECS).

It comprises of 3 parts:
• The first three digits represent the city (City Code). They are
aligned with the PIN code we use for postal addresses in India.
•The next 3 digits represent the bank (Bank Code)
• The last 3 digits represent the branch (Branch Code)

The MICR code is located on the bottom of a cheque leaf, next to

the cheque number. You can also find it printed on the first page of
a bank savings account passbook

Ms. Preeti Bedi

Ms. Preeti Bedi
 Payment System
2. Electronic Payments: It is cost-effective alternative system. It
includes: https://www.indiafilings.com/learn/electronic-clearing-
system-ecs/
a) Electronic Clearing Service (ECS) Credit: (used for faster payment)
The Bank introduced the ECS (Credit) scheme during the 1990s to handle
bulk and repetitive payment requirements (like salary, interest, dividend
payments) of corporates and other institutions. ECS (Credit) facilitates
customer accounts to be credited on the specified value date and is presently
available at all major cities in the country.
b)Electronic Clearing Service (ECS) Debit (used for faster collection)
The ECS (Debit) Scheme was introduced by RBI to provide a faster
method of effecting periodic and repetitive collections of utility bills
(electric, gas or water utilities)
Ms. Preeti Bedi
 Payment System
ECS (Debit) facilitates consumers / subscribers of utility
companies to make routine and repetitive payments by
‘mandating’ bank branches to debit their accounts and pass on
the money to the companies. This tremendously minimizes use of
paper instruments apart from improving process efficiency and
customer satisfaction. There is no limit as to the minimum or
maximum amount of payment. This is also available across major
cities in the country.
c) National Electronic Funds Transfer (NEFT) System
d) Real Time Gross Settlement (RTGS)System

Ms. Preeti Bedi

 Other Payment System
e) Pre-paid Payment Systems: Pre-paid instruments are
payment instruments that facilitate purchase of goods and
services against the value stored on these instruments like Mobile
wallets
f) Mobile Banking system
g) ATMs / Point of Sale (POS) Terminals :
POS terminals enables customers to make payments for
purchases of goods and services by means of credit/debit cards.

Ms. Preeti Bedi

Collection Services

Ms. Preeti Bedi

 Drawer and Drawee

https://www.investopedia.com/terms/d/drawee.asp
 Drawer: The maker of bill of exchange or cheque

 Drawee: The entity that pays the owner of the cheque or

draft i.e. one who is directed to pay.

A typical example of a drawee involves cashing a pay cheque.

The bank that cashes your cheque is the drawee, the employer
who wrote the cheque is the drawer, and you are the payee.

Ms. Preeti Bedi

 Collection Services
 Collection of cheques, bills of exchange, promissory
notes and other instruments on behalf of a customer is
an important service rendered by bank to his customer.
 Its an ancillary service and not legal obligation.
 Done to attract the customers.
 Collecting dividend, salary, pension, and similar periodic
collections on the clients’ behalf.
 Like collecting money from the bills of exchanges or the
bank collects the money of the cheques through the
clearing section of its customers.
 It is the agency function. Banks collect and pay different
types of credit instruments as the representative of the
customers.
Ms. Preeti Bedi
 Collection Services

Apart from transferring money from one place to another, banks

are also in the business of collecting the client’s money from
other places. For instance, if you have received a payment by way
of a cheque or DD drawn or payable at any station other than
your own, you can deposit it in your account with your local
banker, and request for collection of the amount.
The bank will send the cheque to its branch at that centre and get
the amount collected for a small fee. The amount of cheque /
draft will be deposited in your account, and the fee will be
deducted separately from the account.

Ms. Preeti Bedi

Ms. Preeti Bedi
 Agency functions

•Collection of cheques, bills and drafts.

•Payment of interest, instalments of loans, insurance
premium etc.
•Purchase and sale of securities
•Collection of interest, dividend etc.
•Transfer of funds through demand drafts etc.
•Purchase and sale of foreign exchange (currency exchange
services).

Ms. Preeti Bedi

 Agency functions

•Collection of Cheques, Dividends, Interests etc.: Collecting

cheques, drafts, bill of exchange, dividends, interests etc. on
behalf of its customers and credit the amount in their
account is one of the most important agency services
rendered by the banks. Banker accepts standing instructions
from the customers and arranges to collect dividend,
interest, pension, salaries, bills etc. on behalf of his
customers.

Ms. Preeti Bedi

 Agency functions

•Payment of Rent, Insurance Premium (Periodic

payments) etc.:
Banks undertake the payment of rent, insurance premium
etc. on behalf of the customers and debit the account with
the amount. It accepts the standing instructions of the
customer and arranges for the payment of such expenses
on their behalf. It charges a small amount by way of
commission for these services.

Ms. Preeti Bedi

 Guarantee Services (Non fund
based business)
•Bank offer Guarantee services to valued customers.
It refers to legal undertaking by bank to pay certain sum of
money to third party or creditor in the event of bank’s
customer fails to fulfil his part of obligation.
•It is called fee-based service.

Ms. Preeti Bedi

 Investment Banking

https://www.investopedia.com/terms/i/investment-banking.asp (Video)
Related to the creation of capital for other companies, governments,
and other entities.
• It helps companies to raise capital by aiding in the sale of securities
• Advice companies on issuing new debt and Equity
• Underwriting of securities: Buy securities issued by company and then
sell those securities in the market for a profit or commission.
• Guide companies in Mergers and Acquisitions, reorganizations (By
calculating Net worth).
• Act as financial advisor for institutional clients.
• Investment bankers help corporations, governments, and other
groups plan and manage the Bedi
Ms. Preeti financial aspects of large projects.
 Investment Banking

• Assist in large, complicated financial transactions.

• Helps in documentation necessary for a company to go public.
• Saving their clients time and money by identifying risks associated
with the project before the client moves forward.
• Essentially, investment banks serve as middlemen between a
company and investors when the company wants to issue stock or
bonds. The investment bank assists with pricing financial
instruments

Ms. Preeti Bedi

 Merchant Banking

Merchant banking is a professional service provided by the

merchant banks to their customers considering their financial
needs, for adequate consideration in the form of fee.
Merchant Bank refers to a banking company engaged in
international financing and offers end number of services to its
clients such as underwriting of new issue, management of
securities, investment banking, portfolio management, project
promotion, advisory services, project promotion, corporate
investing, corporate counselling, loan syndication and so forth.

Ms. Preeti Bedi

 Investment Banking Vs Merchant Banking

Some of the services they provide are the same including

underwriting and investment services.
V Less differences
• investment banks focus on IPOs and large public and private
share offerings. Merchant banks tend to focus on small-scale
companies by offering creative equity financing etc.

Ms. Preeti Bedi

Ms. Preeti Bedi