Cashless Economy – NEFT, RTGS, IMPS, UPI, USSD, Mobile Banking. Complete Details for Electronic Fund Transfer, Demonetization in India, Various Types of EFT Like – NEFT, RTGS, IMPS, UPI, USSD, Mobile Banking, Keeping all these in mind, in a country like India, where cash to GDP ratio is 12%, a surgical attack, as the Central Government called demonetization lead to severe crisis. 85% of total money in circulation (in value terms- 14 lakh crores) was demonetized recently in India. In this situation it is important to analyze the situation and find whether it is possible to transform India into a cashless economy and specify the importance of banking innovations. So it is high time of India to be thinking of possibilities of efficient secure payment systems in banking. Payment systems are the backbone of any financial economy. A well-defined payment system is a crucial component of financial infrastructure.
Cashless Economy – NEFT, RTGS, IMPS, UPI, USSD, Mobile Banking
Electronic Fund Transfer is the process by which money is transferred from one place to other electronically on a real time basis. Salary placed into account by Electronic Fund Transfer, Money withdrawn from ATM is the examples of Electronic Fund Transfer. Through this scheme, work from home becomes easier, quick and safe. Currency and Exchange rate are automatically calculated when funds are being transferred from one country to other. In this system, Encryption, Verification and passwords are used for secure payments. Any transactions of sale, refund, withdrawal, deposit, payments and so on can be performed under EFT. Electronic Fund Transfer Point of Sale technology empowers a retailer to directly debit a customer’s bank account by using a debit card. Debit card swiped through a reading machine and the PIN number has to be provided to enhance transaction. Cashless options available in India through banking innovations are.
The Indian Banking regulation act of 1949 defines banking as accepting, for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawable by cheque, draft, and order or otherwise. There is wider acceptance of the concept that finance and economic growth are positively related. There is significant transformation of banking sector of India due to financial sector reforms initiated in 1990s. Apart from financing the needs of major sectors in the economy, banking has a lot to do in the modern economy as the payment systems constitute the backbone of economic activities. Recently announced demonetization scheme of high value denomination currencies in India stresses the importance of digital payments and banking technologies. So this paper intends to make familiarize with the innovations in banking.
NEFT (National Electronic Fund transfer)
National Electronic Fund transfer mechanism assist fund transfer from one bank to other through RBI server and settlement occurs on net basis. Every day, RBI system enables 3 sessions of electronic clearing and after the completion of each session; the net amount will be settled among banks through their current accounts maintained with RBI. NEFT settlement happens within 24 hours and there is no limit for amount transacted. The condition here is that, the two branches of bank must be Core Banking Solution enabled.
More Details – NEFT Charges, NEFT Timing, What is NEFT, NEFT Full Form
RTGS (Real Time Gross Settlement)
Real Time Gross Settlement is a payment mechanism for interbank payments. In this method, one bank makes payment electronically to another bank through RBI. Paying bank sends a message to RBI, based on which it debit current account paying bank and credit current account of receiving bank without a time lag. Banks participating in RTGS have to maintain a current account with RBI and each transaction is settled within 2 hours. Transaction or remittance made through RTGS can never be cancelled or modified. RTGS is done through interfacing Core Banking Solution of 2 banks with computer server of RBI. The transaction limit under RTGS is minimum 100000 rupees.
More Details – RTGS Charges, RTGS Timing, What is RTGS, RTGS Full
IMPS (Immediate Payment Service)
Immediate Payment Service was introduced by National Payments Corporation of India in 2010. It is an instant real time interbank electronic fund transfer system of India through mobile phone. This facility is available on a 24*7* basis.
UPI (Unified Payment Interface)
Unified Payment Interface interconnects banks to help transfer funds. In this mode, both money sender and receiver need a UPI identity. Currently thirty banks in India offer this facility.
USSD (Unstructured Supplementary Service Data)
Unstructured Supplementary Service Data helps customers to link their mobile number and bank accounts and then to make payments. It was developed by National Payments Commission of India which is technology based service for feature phones through which customers needed to dial *99# and enter short messages for basic banking activities such as balance enquiry and generating mini statement.
It refers to conduct of banking operations on mobile. The services under mobile banking involves, making enquiry about bank balance and last few transactions, viewing details of bank account, order demand draft and so on. It is a service provided by a bank or other financial institution that allows customers to conduct financial transactions via mobile device like mobile phone or tablet. Mobile banking uses software called an app for this purpose. This facility is available on a 24 hour basis and some banks impose restrictions on which accounts can be accessed and limits the amount of transaction
Demonetization in India
Demonetization is the act of stripping a currency unit of its status as legal tender. It is a necessary scheme where there is a change in national currency. The old unit of currency becomes retired and replaced with a new currency unit. As part of demonetization, the currency losses its public confidence and further it will not be supported by government. The central government plans to promote a cashless economy and people also preferring it due to difficulties with cash holdings and dealings. The countries like Canada, Norway Denmark, Kenya, South Korea etc. have already adopted cashless economy either by penalizing high value cash transactions or by stopping printing of high value currencies. A cashless economy means an economy with cash free transactions where coins and notes replaced by bits and bytes and spending, earning, investment gets updated in real time through smart phones.
The scope of banking innovation sin a cashless economy in the context of demonetization is relevant but in India even though there is 1 billion mobile phones in usage, there is more amount of less sophisticated phones and lack of knowledge also becomes a constraint for the smooth functioning. Creating a basic infrastructure and increasing banking density is the need of the hour.