Commercial Banking System

1. Commercial Banking System
Prepared By
Harikrishnan N R

2. • EFT - Electronic Fund Transfer
• RTGS - Real Time Gross Settlement
• NEFT - National Electronic Fund Transfer
E- Banking

3. Electronic Fund Transfer
• In 1996, RBI devised an Electronic Funds Transfer System (EFT) to facilitate
fast transfer of funds electronically.
• The fund can be transferred between any two bank accounts even if the sender
and receiver are located in different cities or deal with different banks.
• SWIFT is a classic example of EFT, which ensures speed, reliability, security
and accuracy.
Electronic funds transfer (EFT) is the electronic transfer of money from
one bank account to another, either within a single financial institution or
across multiple institutions, via computer-based systems, without the direct
intervention of bank staff.

4. Advantages
• Funds can get transferred easily and conveniently without delays and paper
work.
• Built-in security measures ensure safety of funds during transfer.
• Losses and frauds are minimized due to easy tracking of
transaction/customers.

5. Disadvantages
• If you enter the target account number incorrectly, there is no way to
reverse the transaction since the bank would process the transaction
under the belief that the information you provided is accurate.
• Once an amount is transferred, the bank cannot reverse a transaction.

6. Various Modes of EFT in India
• RTGS - Real Time Gross Settlement
• NEFT - National Electronic Fund Transfer
• IMPS – Immediate Payment Service

7. Real Time Gross Settlement
This system was introduced in India in March 2004 and is maintained and
operated by Reserve Bank of India. Under this system electronic instructions
are given by banks to transfer fund from their accounts to the account another
bank.
Under this system RTGS facility is extended all over the country by
integrating the Centralised Banking Branch (CBB) network with Structured
Financial Messaging System (SFTMS) enabled branched in RBI and RTGS
facility directly , while customers of other branches in RBI identified centers
will use SFMS network to access the RTGS facility for instant inter-bank
funds transfer.

9. Advantages
• Real Time payment settlement : Payments settled in real time on a
transaction-by-transaction basis, as soon as they are accepted by the
system.
• No credit risk : There is no credit and settlement risk involved in RTGS
system for receiving participant as each payment transaction is settled
instantly.
• Predictability of cash flows : RTGS facilitates predictability of cash
flows as customers know when their accounts will be debited or
credited.
• Benefits to economy : The instant finality of payments ensures fast,
secure and irrevocable settlement of major business and financial
market transactions.

10. National Electronic Funds Transfer (NEFT) is a nation-wide
payment system. Under this Scheme, individuals can electronically
transfer funds from any bank branch to any individual having an
account with any other bank branch in the country participating in
the Scheme. NEFT transactions are settled in batches. Any
transaction initiated after a designated settlement batch would have
to wait till the next designated settlement batch.
National Electronic Funds Transfer

11. Benefits of NEFT
•Ease of payments – No waiting in long queues
•Faster processing – Transaction settled in batches
•Convenient - Transfer of funds from your home or office

12. NEFT transaction limits
•Online NEFT Transfer - the maximum amount of funds that
can be transferred per customer ID per day is Rs. 25 Lakh
•NEFT Transfer from branches - No maximum limit
NEFT Transaction timings
•Online Transaction Timings: Monday to Saturday (Except 2nd
and 4th Saturday and bank holidays) - 8:00 AM to 7:00PM
Note: The Funds transfer request made after 6:30 PM will be
presented to RBI on the next working day.

14. Criteria NEFT RTGS (Retail)
Settlement Done in batches (Slower) Real time (Faster)
Full Form National Electronic Fund
Transfer
Real Time Gross Settlement
Timings on Mon – Fri 8:00 am – 6:30 pm 9:00 am – 4:30 pm
Timings on Saturday 8:00 am – 12:30 pm 9:00 am – 1:30 pm
Minimum amount of money
transfer limit
No Minimum 2 lacs
Maximum amount of money
transfer limit
No Limit No Limit
When does the Credit
Happen in beneficiary
account
Happens in the hourly batch
Between Banks
Real time between Banks
Maximum Charges as per
RBI
Upto 10,000 – Rs. 2.5
from 10,001 – 1 lac – Rs. 5
from 1 – 2 lacs – Rs. 15
Above 2 lacs – Rs. 25
Rs. 25-30 (Upto 2 – 5 lacs)
Rs. 50-55 (Above 5 lacs)
(Lower charges for first half
of day)
Suitable for Small Money Transfer Large Money Transfer