MEANING AND TECHNOLGY TERMS IN BANKING

HACKERSANAND TMOHAMMED AFTHAB N KPRABAHARAN KSUJIHEMA PRIYA

BANKING :In general terms, the business activity of accepting and safeguarding money owned by other individuals and entities, and then lending out this money in order to earn a profit.

TERMS : The specific conditions and details of an agreement or contract. Fixed period for which a loan, insurance policy, or bond is issued, a time or fixed deposit is made, or a contract lasts.

MEANING

Technology Terms

MICR code (pronounced my-ker) is a nine-digit number printed on banking instruments such as a cheque or a demand draft using a special type of ink made of magnetic material.

The first three digits denote the city. The fourth to sixth digits denote the bank. while the last three digits denote the branch

number. The code is read by a machine, minimizing the

chances of error in clearing of cheques, thereby making funds transfer faster.

Magnetic ink character recognition (MICR)

This code allows money to drop directly into your bank account for payments such as salaries and dividends.

Your tax refund will come to you faster if you remember to mention this on the refund form. Refunds of unwanted money in initial public offers, too, drop back if you put down your code on the application form.

MICR NEED

It’s a fund transfer mechanism that enables money to move from one bank to another on a real time and gross basis.

Simply put, real time means the transaction is settled instantly without any waiting period and gross means that it is not bunched with any other transaction.

Real Time Gross Settlement(RTGS)

This facility would be handy during an emergency, when you need to transfer funds quickly, imagine an ill child studying in another city or a parent in an emergency situation and needing money at once.

You would be able to use this facility if you use Internet banking as a channel.

RTGS NEED

NEFT enables funds transfer from one bank to another but works a bit differently than RTGS since the settlement takes place in batches rather than individually, making NEFT slower than RTGS.

The transfer is not direct and RBI acts as the service provider to transfer the money from one account to another. You can transfer any amount through NEFT, even a rupee.

National Electronic Funds Transfer (NEFT)

You can use this facility if you want to transfer funds online in a day or two.

NEFT can make life easier for those who need to send money to their parents or children living in another city. It cuts the trouble of issuing a cheque or draft and posting it.

NEFT, too, can be done only through Internet banking. Visit RBI website for a list of branches where you will get this facility.

NEFT NEED

An 11-digit alphanumeric (letters and numbers) code that helps identify bank branches.

The first four numbers represent the bank’s code (alphabetic),

the fifth number is a control character (0), and the next six numbers denote a bank branch. For example, the IFSC for HDFC Bank Ltd’sKozhikode branch in Kerala reads as HDFC0000085. This code is mentioned on your cheque. Different banks mention it at different places on the cheque.

India Financial System Code(IFSC)

When sending money through RTGS or NEFT, you need to know the IFSC of the receiving branch.

IFSC NEED

It is an anti-fraud security feature that helps verify that you are in possession of your credit card and making the transaction.

CVV is usually a three-digit number printed on the signature panel at the back of your credit card

Card Verification Value (CVV)

You need this number when shopping online or over the phone.

You need to be careful with this number as it can make you a victim of fraud.

It’s best to remember this number and blacken it off from your card.

CVV NEED

PAP or MCC cheques can be encashed anywhere in India, irrespective of the city they were issued in.

They are treated as local clearing cheques across the country.

The amount is credited in the account the same day and there are no inter-city collection charges associated with a normal cheques being encashed in another city.

A cheque issued at a branch in Chennai, can be encashed at a branch in coimbatore as if it were a local cheque.

Payable at par(PAP) or Multi-city cheques (MCC)

Issuing a PAP or MCC cheque, you can save demand draft or cheque clearing costs.

Usually, these cheques are issued by companies to disburse dividends or redemption amounts.

ITS NEED

It is the structured transmission of data between organizations by electronic means, which is used to transfer electronic documents or business data from one computer system to another computer system, i.e. from one trading partner to another trading partner without human intervention.

It is more than mere e-mail; for instance, organizations might replace bills of lading and even cheques with appropriate EDI messages.

It also refers specifically to a family of standards.

Electronic data interchange (EDI)

The UN-recommended UN/EDIFACT is the only international standard and is predominant outside of North America.

The US standard ANSI ASC X12 (X12) is predominant in North America.

The TRADACOMS standard developed by the ANA (Article Numbering Association now known as GS1) is predominant in the UK retail industry.

The ODETTE standard used within the European automotive industry

Some major sets of EDI standards

Its scheme provides an alternative method of effecting bulk payment transactions like periodic (monthly/ quarterly/ half-yearly/ yearly) payments of interest/ salary/ pension/ commission/ dividend/ refund by Banks/Companies /Corporations /Government Departments.

The transactions under this scheme move from a single User source (i.e. Banks/Companies /Corporations /Government Departments) to a large number of Destination Account Holders (Customers/Investors).

This scheme obviates the need for issuing and handling paper instruments and thereby facilitates improved customer service by the Banks and Companies/Corporations/Government Departments effecting bulk payments

Electronic Clearance Service (ECS)

The Scheme is in operation at 15 centres where Reserve Bank of India manages Clearing Houses, 21 centres where SBI is managing ECS on behalf of RBI and 29 other centres where

PNB and other banks are managing ECS on behalf of RBI

It is the electronic exchange, transfer of money from one account to another, either within a single financial institution or across multiple institutions, through computer-based systems.

Electronic funds transfer (EFT)

Wire transfer via an international banking network Cardholder-initiated transactions, using a payment

card such as a credit or debit card Direct deposit payment initiated by the payer Direct debit payments, sometimes called electronic

checks, for which a business debits the consumer's bank accounts for payment for goods or services

Electronic bill payment in online banking, which may be delivered by EFT or paper check

Transactions involving stored value of electronic money, possibly in a private currency

EFT covers a number of different concepts

It is the communication backbone for the Indian Banking and Financial Sector.

All banks in the public sector, private sector, cooperative, etc., and the premier financial institutions in the country are eligible to become members of the INFINET.

The INFINET is a Closed User Group Network for the exclusive use of member banks and financial institutions and is the communication backbone for the National Payments System, which caters mainly to inter-bank applications like RTGS, Delivery Vs Payment , Government Transactions, Automatic Clearing House, etc

INdian FInancial NETwork (INFINET)

Its facilitate the exchange of government securities and other money market instruments.

The negotiated dealing system will also be responsible for hosting new issues of government securities.

Negotiated Dealing System (NDS)

The negotiated dealing system helps the RBI enhance the dealings of fixed income investments.

The NDS, when fully implemented, eliminate the physical exchange of forms between its trading members

NDS NEED

Its secure messaging standard developed to serve as a platform for intra-bank and inter-bank applications.

It is an Indian standard similar to SWIFT (Society for World-wide Interbank Financial Telecommunications) which is the international messaging system used for financial messaging globally.

SFMS can be used practically for all purposes of secure communication within the bank and between banks.

The SFMS was launched on December 14, 2001 . it is a modularized and web enabled software, with a

flexible architecture facilitating centralized or distributed deployment.

Structured Financial Messaging System (SFMS)

Its another area of application of the INFINET

The CFMS enables banks to obtain consolidated and account wise, center wise position of current accounts with different Deposit Accounts Department (DADs) of RBI

It is Centralized Funds Enquiry System (CFES) that is based on the current and other accounts maintained at the different DADs

This mechanism allows for the dissemination of information online as regards the bank’s

Centralized Funds Management System (CFMS)

Overall current account balance with the RBI. It makes avilable centralized facility where

banks could obtain the latest consolidated, center-wise and account wise position of their balances with RBI.

This allows for the optimum use of the funds of the bank and to make alternate arrangements to obtain funds at competitive rates.

It also called electronic bill payment and presentment.

It is a form of electronic billing in which a company presents (sends) its bills and customers pay these electronically over the Internet.

Certain electronic billing applications also provide the ability to electronically settle payment for goods or services.

Customers of banks and billing companies can use the internet or the phone to conveniently remit payments as well as access their billing information.

Electronic bill presentment and payment ( EBPP)

The service is also supported by customer service representatives (CSRs) contacted directly by the consumer to facilitate payments or receive general assistance and answer questions.

It can produce substantial savings to traditional print & mail billing and payment remittance, and as an added benefit is a significant reduction in the use of paper

Its form of the Electronic banking that enables the user to communicate interactively with the bank.

For this communication the client uses only GSM mobile phone with WAP service. With its options and the method of controlling WAP banking reminds an easy form of Internet banking.

Wireless Application Protocol(WAP)

It is a computerized telecommunications device that enables the clients of a financial institution to perform financial transactions without the need for a cashier, human clerk or bank teller.

ATMs are known by various other names including ATM machine, automated banking machine, "cash machine" (Geldautomat - Germany) and various regional variants derived from trademarks on ATM systems held by particular banks

Automated Teller Machine (ATM)

On most modern ATMs, the customer is identified by inserting a plastic ATM card with a magnetic stripe or a plastic smart card with a chip that contains a unique card number and some security information such as an expiration date or CVVC (CVV).

Authentication is provided by the customer entering a personal identification number (PIN).

Using an ATM, customers can access their bank accounts in order to make cash withdrawals, debit card cash advances, and check their account balances as well as purchase pre-paid mobile phone credit

PUBLIC DEBT OFFICE, in the U.S., is a part of the Department of Treasury and is responsible for the issuance, control, and payment of government issued securities in compliance to existing regulations.

Public Debt Office (PDO)

This Directive aims to reduce the systemic risk inherent in payment and securities settlement systems and to minimise the disruption caused by the insolvency of a participant in such a system.

The Directive aims to reduce the systemic risk associated with participation in payment and securities settlement systems ("systems"), and in particular the risk linked to the insolvency of a participant in such a system. To this end, it lays down common rules stipulating that:

Securities Settlement System (SSS)

Transfer orders and netting must be legally enforceable;

Transfer orders may not be revoked once they have been entered into the system;

The insolvency of a participant may not have retroactive effects;

The insolvency law applicable is the law of the Member State whose system is involved.

Cont….

AUTOMATED VOICE RESPONSE (AVR ) According to Automated Voice Response

technology, a customer uses the tone-phone to send ‘digitized data messages’ to the system in order to activate a particular service.

The customer is then ‘prompted’ by the service to provide one or more type of instruction.

Sometimes, the technology also requires the customer to say one of a number of particular words down the telephone.