2.5 Modern Transactional Banking Products and Services


2.5 Modern Transactional Banking Products and Services

Why do we like instant noodles or any form of fast food? They’re quick and easy to prepare. That’s why! Similarly, there are faster and easier transactional modes in banking than those we elaborated on in the last chapter. Let’s take a look at modern transactional banking products. 

Electronic Funds Transfer

Money can be electronically transferred between accounts in different countries for trade and other purposes through the Societies for Worldwide Interbank Financial Telecommunications (SWIFT) system. SWIFT is an inter-bank communication system that helps send or receive standardized transactional instructions swiftly, accurately and securely.

National Electronic Funds Transfer (NEFT)

NEFT is a payment system hosted by the RBI and available throughout the country. The system uses Indian Financial System Code (IFSC) to identify the participating banks and allows customers to perform bank transfers through physical forms or online modes like internet banking. The transactions are executed in forty-eight half-hourly batches throughout the day. In other words, the money you sent from your account will reach your friend’s account within half an hour. The RBI has not specified the maximum amount that can transfer through NEFT. However, banks can do so at their discretion.

Real-Time Gross Settlement (RTGS)

RTGS is also a funds transfer system primarily intended for large value transactions. Unlike NEFT, in RTGS, the trades are settled immediately. So, there is no delay in the money transfer. The minimum amount required for an RTGS transaction is Rs. 2 lakhs.

Immediate Payment Service (IMPS)

IMPS is an instant electronic bank transfer system operated by the National Payments Corporation of India (NPCI) that uses the combination of account number and IFSC or Mobile Money Identifier (MMID) to transfer money in real-time. The maximum amount that can move through IMPS is Rs. 2 lakhs.

Unified Payment Interface (UPI)

UPI is arguably the quickest and most convenient mode of payment currently available. It’s a mobile-based payment system offered by NPCI that uses a mobile number, UPI Personal Identification Number (UPI PIN), or Mobile Banking Personal Identification Number (MPIN). Currently, UPI is used widely for wallet applications like Paytm and other payment applications like Bharat Interface for Money (BHIM) and Google Pay.

Electronic Clearance Service (ECS) and National Automated Clearing House (NACH)

For repetitive transactions like paying mobile bills, electricity bills and credit card bills, you can opt for automatic payment of the amounts before the due dates. This facility is called Standing Instruction (SI). Earlier, banks used to process these instructions through the ECS system. Now, NACH, an automated system, is used to reduce the processing time to a single day.

How many of these modern transactional banking modes have you used?