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The acronym “RTGS” stands for Real Time Gross Settlement. RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a “real time” and on “gross” basis. This is the fastest possible money transfer system through the banking channel.
Settlement in “real time” means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. “Gross settlement” means the transaction is settled on one to one basis without bunching with any other transaction. Considering that money transfer takes place in the books of the Reserve Bank of India, the payment is taken as final and irrevocable.
EFT and NEFT are electronic fund transfer modes that operate on a deferred net settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place at a particular point of time. All transactions are held up till that time. For example, NEFT settlement takes place 6 times a day during the week days (9.30 am, 10.30 am, 12.00 noon. 1.00 pm, 3.00 pm and 4.00 pm) and 3 times during Saturdays (9.30 am, 10.30 am and 12.00 noon).
Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time. Contrary to this, in RTGS, transactions are processed continuously throughout the RTGS business hours.
The RTGS system is primarily for large value transactions. The minimum amount to be remitted through RTGS is Rs.1 lakh. There is no upper ceiling for RTGS transactions. No minimum or maximum stipulation has been fixed for EFT and NEFT transactions.
Under normal circumstances the beneficiary branches are expected to receive the funds in real time as soon as funds are transferred by the remitting bank. The beneficiary bank has to credit the beneficiary’s account within two hours of receiving the funds transfer message.
The remitting bank receives a message from the Reserve Bank that money has been credited to the receiving bank. Based on this the remitting bank can advise the remitting customer that money has been delivered to the receiving bank.
Yes. It is expected that the receiving bank will credit the account of the beneficiary instantly. If the money cannot be credited for any reason, the receiving bank would have to return the money to the remitting bank within 2 hours. Once the money is received back by the remitting bank, the original debit entry in the customer’s account is reversed.
The RTGS service window for customer’s transactions is available from 9.00 hours to 15.00 hours on week days and from 9.00 hours to 12.00 noon on Saturdays i.e. to accept the customer transactions for settlement at the RBI during 9.00 hours to 15.00 hours on week days and between 9.00 hours and 12.00 noon on Saturday.
However, the timings between these hours would vary depending on the customer timings the branches have. For inter-bank transactions, the service window is available from 9.00 hours to 17.00 hours on week days and from 9.00 hours to 14.00 hours on Saturdays.
While RBI has waived its processing charges for all electronic payment products till March 31, 2008, levy of service charges by banks is left to the discretion of the respective banks. The bank-wise details of charges levied are available on the RBI website – www (dot) RBI (dot) org (dot) in.
The remitting customer has to furnish the following information to a bank for effecting a RTGS remittance:
The beneficiary customer can obtain the IFSC code from his branch. The IFSC code is also available in the cheque leaf. This code number and bank branch details can be communicated by the beneficiary to the remitting customer.
No, all the bank branches in India are not RTGS enabled. As on January 31, 2007 more than 26,000 bank branches are RTGS enabled.
It would depend on the arrangement between the remitting customer and the remitting bank. Some banks with internet banking facility provide this service. Once the funds are credited to the account of the beneficiary bank, the remitting customer gets a confirmation from his bank either by an e-mail or by a short message on the mobile.
On a typical day, RTGS handles about 14000 transactions a day for an approximate value of Rs.1, 50,000 crore.
For a funds transfer to go through RTGS, both the sending bank branch and the receiving bank branch would have to be RTGS enabled. The lists are readily available at all RTGS enabled branches. Considering that more than 26,000 branches at more than 3,000 cities/ towns and taluka places are covered under the RTGS system, getting this information would not be difficult.
RTGS stands for real time gross settlement, which means that it enables money to move from one bank to another on a real time and gross basis. Simply put, real time means the beneficiary bank receives the instructions for fund transfer immediately and gross means that it is not bunched with any other transaction and settlements of funds transfer instructions happen individually. Since the funds settlement takes place in the books of the Reserve Bank of India (RBI), keep in mind that the payments are final and irrevocable.
Neft stands for National Electronic Funds Transfer and is a payment system which facilitates one-to-one funds transfer. Like RTGS, Neft also transfers funds from one bank, but unlike RTGS the settlement takes place in batches (that may include transfers from various individuals) rather than individually. The batches are settled in hourly time slots.
Timing: As mentioned above, Neft operates in hourly batches. Currently, it has 11 settlements from 9am to 7pm on weekdays and five settlements from 9am to 1pm on Saturdays. So, in case you initiate a transaction after a settlement time you have no option but to wait till the next settlement time. But that’s not the case with RTGS transactions, since they are processed constantly throughout the RTGS business hours. The service window for RTGS at banks is available from 9am to 4.30pm on week days and from 9am to 1.30pm on Saturdays for settlement at the RBI end. Keep in mind that the timings that each bank follows may vary.
Amount: As far as Neft goes, it does not have a minimum or maximum limit of amount you can transfer. But the maximum amount per transaction is limited to Rs 50,000 for cash-based remittance and remittance to Nepal.
As far as RTGS goes, it is mostly meant for large transactions. The minimum amount that can be remitted through it is Rs 2 lakh. RTGS does not have an upper ceiling for transactions.
Charges: For Neft, inward transactions (when you receive funds via Neft) are free, as no charges are to be levied from the person to who fund are being transferred to. When you use Neft to make an outward transaction (when you send funds via Neft) at a bank branch for amounts up to Rs 1 lakh, the charge is up to Rs 5 plus service tax. For transactions above Rs 1 lakh and up to Rs2 lakh, the charge is up to Rs 15 plus service tax. For transactions above Rs 2 lakh, the charges can’t exceed Rs 25 plus service tax.
For RTGS, inward transactions (when you receive funds through RTGS) are free. For outward transactions (when you send funds via RTGS), if the amount is between Rs 2 lakh and Rs 5 lakh, the charges will be up to Rs 30 per transaction. If the amount transferred is above Rs 5 lakh, the charges can’t exceed Rs 55 per transaction.
A player who wins all four Grand Slam tournaments and the Olympic gold medal during his or her career is said to have achieved a Career Golden Slam. Serena Williams is the only player to have achieved a career golden slam in both singles and doubles.
The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet its short-term obligations with its most liquid assets. For this reason, the ratio excludes inventories from current assets, and is calculated as follows:
Quick ratio = (current assets – inventories) / current liabilities, or
= (cash and equivalents + marketable securities + accounts receivable) / current liabilities
The quick ratio measures the dollar amount of liquid assets available for each dollar of current liabilities. Thus, a quick ratio of 1.5 means that a company has $1.50 of liquid assets available to cover each $1 of current liabilities. The higher the quick ratio, the better the company's liquidity position. Also known as the “acid-test ratio" or "quick assets ratio."
A public sector bank is a bank in which the government holds a major portion of the shares.
Government holdings are more than 50% in public sector banks.
Private Sector Banks:
KYC Stands for “Know Your Customer”. The objective of KYC is to enable banks to know and understand their customers better and help them manage their risks prudently. The process of KYC entails identifying the customer and verifying the identity by using reliable and independent documents or information.
Commercial bank's balance sheet has two main sides i.e. the liabilities and the assets. From the study of the balance sheet of a bank we come to know about a system which a bank has followed for raising funds and allocation of these funds in different asset categories.
Rangarajan committee (2008)1 defined financial inclusion as, "the process of ensuring access to financial services and timely and adequate credit where needed by vulnerable groups such as weaker sections and low income groups at an affordable cost."
Role of banks in Financial Inclusion programme:–
Given the evidence that financial access varies widely around the world, and that expanding access remains an important challenge even in advanced economies, it is clear that there is much for policy to do. The need for coordination on collective action, and concentrations of poor people, mean that banks in India everywhere have an extensive role in supporting, regulating, and sometimes directly intervening in the provision of financial services.
The role of commercial banks to be performed as part of financial inclusion programme:
Financial literacy - Providing financial literacy is the core function of financial inclusion, as the main reason for exclusion is the lack knowledge about formal financial system. Financial literacy refers to knowledge required for managing personal finance. The ultimate goal is empowerment of people to take action by them that are in their self interest.
Credit counseling - There are two types of credit counseling, one is preventive counseling and the other is curative credit counseling.
Preventive counseling will include bringing awareness regarding cost of credit, availability of backward and forward linkages, etc., need to avail of credit on the basis of customer’s repaying capacity.
In case of curative counseling the credit counseling centre will work out individual debt management plans for resolving the unmanageable debt portfolio of the clients by working out effective debt restructuring plan in consultation with branch of the bank, taking into account income level and size of the loans.
BC/BF model - With an effort to focus commercial banks, to reach rural household and farm household, banks were permitted to use infrastructure of civil society organizations, rural kiosks, and adopt Business Facilitator (BF) and Business Correspondent (BC) models for providing financial services.
KYC norms - In order to ensure that persons belonging to the low income group both rural and urban areas do not encounter difficulties in opening bank accounts, the Know Your Customer procedure (KYC) for opening bank account was simplified asking banks to seek only a photograph of the account holder and self certification of addresses (the amount of outstanding balance in these accounts would be limited to 50000 rupees and total transactions would be limited to one lakh rupees in one year
KCC/GCC - Banks were asked to introduce a general credit card (GCC) scheme for issuing GCC to their constituents in rural and semi-urban areas based on the assessment of income and cash flow of the household similar to that prevailing under normal credit card without insisting on security and the purpose or end use of credit (as Point Of Sale-POS and ATM facilities) with similar products are not feasible or available and limited infra structure in rural areas. The limit under GCC is up to 25000 rupees. Banks were advised to utilize the services of Schools, healths, etc.
No-frill accounts financial literacy - In November 2005 RBI advised banks to make available a basic banking “No-frill Account” with low or nil minimum balances as well as charges to expand the outreach of such accounts to vast sections of the population.
Mobile banking - Mobile banking is a term used for performing accounting transactions, balance checks, payments via mobile device such as mobile phone. mobile banking enables:
Plastic money is a term that is used predominantly in reference to the hard plastic cards we use every day in place of actual bank notes. They can come in many different forms such as cash cards, credit cards, debit cards, pre-paid cash cards etc.
The Reserve Bank of India has brought a new methodology of setting lending rate by commercial banks under the name Marginal Cost of Funds based Lending Rate (MCLR). It has modified the existing base rate system from April 2016 onwards.
As per the new guidelines by the RBI, banks have to prepare Marginal Cost of Funds based Lending Rate (MCLR) which will be the internal benchmark lending rates. Banks have to set five benchmark rates for different tenure or time periods ranging from overnight (one day) rates to one year.
At present, the banks are slightly slow to change their interest rate in accordance with repo rate change by the RBI. Commercial banks are significantly depending upon the RBIs LAF repo to get short term funds. But they are reluctant to change their individual lending rates and deposit rates with periodic changes in repo rate.
Whenever the RBI is changing the repo rate, it was verbally compelling banks to make changes in their lending rate. The purpose of changing the repo is realized only if the banks are changing their individual lending and deposit rates.
In economics sense, marginal means the additional or changed situation. While calculating the lending rate, banks have to consider the changed cost conditions or the marginal cost conditions. For banks the cost for obtaining funds is basically the interest rate given to the RBI for getting short term funds.
Following are the main components of MCLR:
“S4A” new scheme has been introduced by the Reserve Bank of India (RBI) for resolution of stressed assets and bad loans of large projects.
The S4A will cover those projects which have started commercial operations and have outstanding loan of over Rs.500 crore. The purpose of the S4A is to strengthen the lenders’ ability to deal with stressed assets and put real assets back on track by providing an avenue for reworking the financial structure of entities facing genuine difficulties. The scheme is an optional framework for resolution of large stressed account.
Finance Minister in its attempt to revamp functioning of public sector banks has launched a seven prolonged plan known as – Indradhanush. The seven elements include appointments, board of bureau, capitalization, de-stressing, and empowerment, framework of accountability and governance reforms.
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