“Cash Management and Fund transfers in Banks with the IT logistics”
Table of Contents
2.0 Objectives, Scope and Methodology3
3.0 BANKING WITH TECHNOLOGY5
4.0 Different aspects of IT based funds transfer in banks9 4.1 Electronic Funds Transfer:9
4.2 National Electronic Fund Transfer (NEFT)11
4.3 Real Time Gross Settlement (RTGS)12
4.4 Cheque Truncation System (CTS)14
4.5 Core banking systems (CBS)14
Payment and settlement systems constitute the backbone of any economy. In India, payment systems are characterised by the presence of a large number of paper based transactions, with cheques constituting more than 80%in terms of volume. Recent initiatives by the Reserve Bank - in the form of providing for electronic payment systems and the Real Time Gross Settlement (RTGS) System - have provided a sound foundation for the migration of more safe, secure and efficient payment systems. While these systems have been registering growth rates which are encouraging, the potential to migrate from paper based cheques to other electronic means of funds movement is high.
Payment systems in India have a chequered history with the earliest system being coin based which dates back to many centuries. Paper based systems entered the fray with the loan deeds (or hundis as commonly referred to), which were complemented in the eighteenth century by paper based currency. With banking becoming a dominant economic facilitator in the mid nineteenth century, cheques also came into the scene. The passage of the Negotiable Instruments (NI) Act, 1881 paved the way for large scale usage of cheques in the country. Today, after the passage of more than twelve decades, the NI Act remains the basic law governing cheques; but the usage of cheques as a significant payment system has grown by leaps and bounds to cover more than 80% of the payment systems in the country in terms of volume.
Technological advancements the world over have had a positive impact on payment and settlement systems. The Reserve Bank has been, since the late eighties, spear heading reforms in the payment and settlement systems of the country using the benefits derived from technological developments. The most important set of initiatives taken by the Reserve Bank from the nineties of the twentieth century was the introduction of electronic funds transfer systems. While the initial set of systems provided facilities for small value and repetitive transactions, the retail sector, the introduction of the Real Time Gross Settlement (RTGS) System in 2004 witnessed the infrastructure for Systemically Important Payment Systems (SIPS), which also ensured that the risks in Deferred Net Settlement (DNS) systems are taken care of.
Usage of electronic payment systems has been showing increasing trends. With general customer awareness on the rise and the implementation of core banking systems by banks, the time is now appropriate to review the progress made in the use of electronic systems. There is a need for customers of banks to switch over to large scale usage of electronic modes of funds transfers. Chapter 2
2.0 Objectives, Scope and Methodology
The objectives of the project are as follows:
• To understand the existing fund transfer systems for intra as well as inter bank transactions. • To assess the information technology (IT) used in these systems. • To judge the difference of the IT based cash management system and the Cheque based fund transfer system. • To foresee the future of IT logistics in Cash Management systems.
• To study the process of IT based fund transfer in banks. o Inter bank fund transfers