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Concepts in Banking and Accounting of transactions: Accounting in banks, Electronic Banking, RTGS, ATM, MICR,
OCR, OMR, and DATANET, Petty Cash, Electronic Clearing Service (ECS), National Electronic Funds Transfer (NEFT) System,
Real Time Gross Settlement (RTGS) System, IMPS.

Concepts in Banking and Accounting of transactions: Accounting in banks, Electronic Banking, RTGS, ATM, MICR,
OCR, OMR, and DATANET, Petty Cash, Electronic Clearing Service (ECS), National Electronic Funds Transfer (NEFT) System,
Real Time Gross Settlement (RTGS) System, IMPS.

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  1. 1. UNIT-5 Concepts in Banking and Accounting of transactions
  2. 2. Concepts in Banking and Accounting of transactions: Accounting in banks, Electronic Banking, RTGS, ATM, MICR, OCR, OMR, and DATANET, Petty Cash, Electronic Clearing Service (ECS), National Electronic Funds Transfer (NEFT) System, Real Time Gross Settlement (RTGS) System, IMPS.
  3. 3. Accounting in banks Banking activities undertaken by banks include personal banking (non-business customers), commercial Banking (small and medium-sized business customers) and corporate banking (large international and multinational corporations).
  4. 4. According to Charles J. Woelfel: A complete banking service would comprehend a variety of functions, including any of the following: (1) Receive demand deposits and pay customers' cheques drawn against them, and operate automated teller machines (ATM); (2) Receive time and savings deposits, issue negotiable orders of withdrawal, and pay interest thereon, as well as provide automatic transfer service (A TS) for funds from serving accounts to cover cheques; (3) Discount notes, acceptances and bills of exchange; (4) Supply credit to business firms with or without security, issue letters of credit and accept bills drawn there under;
  5. 5. (5) Transfer money at home and abroad; (6) Make collections and facilitate exchanges; (7) Issue drafts, cashier's cheques, money orders, and certify cheques; (8) Furnish safe deposit vault service; (9) Provide custodianship for securities and other valuables; (10) Provide personal loans, credit and services to individuals, and lend or discount customer installment receivables of vendors; (11) Act in a fiduciary capacity for individuals, as well as establish common trust funds;
  6. 6. (12) Provide corporate trust services (stock transfer agent, registrar, paying agent, escrow agent, and indenture trustee); (13) Act as factors and engage in equipment leasing; (14) Deal in Government securities and underwrite general obligations of state and municipal securities; (15) Invest in government and other debt securities; (16) Act as fiscal agent or depository for the Central Government, states and subdivisions of states;
  7. 7. (17) Provide miscellaneous services such as place orders in securities for customers; act as insurance agent of incidental to banking transactions; serve as finder to bring buyers and sellers together; act as travel agent and issue letters of credit and traveler's cheques; provide club accounts and other special purpose accounts; act as agent for accepting service of legal process of incidental I normal banking or fiduciary transactions of the bank; act as pay role issuer; establish charitable foundations, invest in small business investment corporations and bank service corporations; deal in foreign exchange; buy and sell gold bullion under license from the Treasury Department, and foreign coin; provide domestic and international correspondent banking services, etc.
  8. 8. Subsidiary Books: These include the following: (i) Personal Ledger The bank maintains separate ledgers for different types of accounts, such as, (a) Current Accounts Ledger, (b) Savings Bank Accounts Ledger, (c) Fixed Deposit Accounts Ledger, (d) Recurring Deposit Accounts Ledger, etc. Entries are made in these ledgers directly from the vouchers. (ii) Investments Ledger Accounts of all investments are kept in this ledger. (iii) Loan Ledger Accounts of all the parties to whom loans have been granted are kept in this ledger. (iv) Bills Discounted and Purchased Ledger Accounts of all the parties whose bills have been dis. counted and purchase is kept in this ledger.
  9. 9. Memorandum Books In addition to the subsidiary books, a bank maintains various other books to facilitate its works, which do not form a part of double entry system. Some of these are: (i) Receiving Cashier's Counter Cash Book (ii) Paying Cashier's Counter Cash Book (iii) Cash Balance Book.
  10. 10. Principal Books of Account Cash Book and General Ledger are the principal Books of Account of any bank. Cash Book records all cash transactions and General Ledger contains Control Account of all subsidiary ledgers and different Assets am Liabilities Account. In the general ledger, accounts are arranged in such a manner that a Balance Sheet can be easily prepared.
  11. 11. Final Accounts According to Section 29 of the Banking Regulation Act, 1949, every banking company is required to prepare with reference to that year a Balance Sheet and .a Profit and Loss Account as on the last working day of the year in the 'Form A' and 'Form B' respectively set out in the 'Third Schedule' or as near thereto as circumstances admit.
  12. 12. Balance Sheet With effect from 19th March, 1992, the Balance Sheet of a bank is to be prepared as per the new form. In the new form, assets and liabilities are shown vertically along with the figures of year. In the top section capital and liabilities" are shown and in the bottom section, assets are shown.
  13. 13. SCHEDULES: Details of all schedules are in below: A> Capital and Liabilities 1. Capital 2. Reserve and Surplus: It includes Capital Reserve, Security Premium, Revenue and other Reserve and. Profit and Loss Account balance. 3. Deposits: It includes Demand deposits, Savings bank deposits and term deposits. 4. Borrowings: It includes Borrowings from Reserve Bank of India, other banks, institutions and agencies. 5. Other Liabilities and Provisions: It includes Bills payable, inter-office adjustments (net), interest accrued, provision for bad debts, provision for taxation.
  14. 14. B> Assets 6. Cash and Balances with Reserve Bank of India: Cash in hand (including foreign currency notes); and balances with Reserve Bank of India are shown under this item. 7. Balances with Banks and Money at Call and Short Notice: Balances with banks; money at call and short notice are shown under this item. Money at call is refundable at 24 hour's notice and money at short notice is refundable at 7day's notice. 8. Investments: Investment in Government securities, other approved securities, shares, debentures and bonds, subsidiaries, gold etc., are shown under this item.
  15. 15. B> Assets 9. Advances: Bills purchased and discounted, cash credit, overdrafts and loans payable on demand; and term loans are shown under this item. 10. Fixed Assets: Premises, other fixed assets (including furniture and fixtures) are shown under this item. 11. Other Assets: Inter- office adjustments, interest accrued, tax paid in advance, stationery and stamps, non-banking assets acquired in satisfaction of claims are shown under this item 12. Contingent Liabilities: It is shown by way of a footnote. It represents liabilities not provided in the Balance Sheet.
  16. 16. Profit and Loss Account: Profit and Loss Account of a banking company is also prepared in vertical form. 'Form B' of the Third Schedule of the Banking Regulation Act, 1949 is to be used for preparing Profit and Loss Account. It is divided into four sections: I. Income; II. Expenditure; III. Profit/Loss; and IV. Appropriations.
  17. 17. C> Income: The schedules of Income are: 13. Interest Earned: It includes interest/discount on advances/bills, income on investments, interest on balances with RBI etc. It should be noted that according to the new form, bad debts and provision for bad debts, other provisions are not to be deducted from the interest earned. For greater transparency in accounts, these items are shown as separate items in the Profit and Loss Account. 14. Other income: It includes commission, exchange and brokerage, profit on sale of investments, profit on revaluation of investments, profit on sale of land, building and other assets, profit on exchange transaction, and income earned by way of dividends from subsidiaries, etc.
  18. 18. D> Expenditure 15. Interest expended: Interest paid on deposits, interest on RBI borrowings; interest on interbank borrowings, etc., are shown under this item. 16. Operating expenses : Salaries and wages of staff; rent, rates and taxes; printing and stationery; advertisement; depreciation on banks' properties; director's fees; auditor's fees; law charges; postage; repairs; insurance; etc., are shown under this item. Third item of this section is provisions and contingencies. Provision for bad debts, provision for taxation and other provisions are shown under this item.
  19. 19. III. Profit/Loss In this section, profit/loss for the current year (difference between income and expenditure explained above) and brought forward profit/loss are shown. IV. Appropriations In this section, amount transferred to statutory reserve as per Section 17; amount transferred to other reserve; proposed dividend, etc., are shown. The balance is transferred to the Balance Sheet.
  20. 20. Electronic Banking Technology is evolving faster than ever, and as banking and money management becomes increasingly electronic, it's important to understand new capabilities – not only for convenience, but also for security. Electronic banking, which is also known as electronic fund transfer (EFT), refers to the transfer of funds from one account to another through electronic methods.
  21. 21. Electronic banking has many names like e banking, virtual banking, online banking, or internet banking. It is simply the use of electronic and telecommunications network for delivering various banking products and services. Through e-banking, a customer can access his account and conduct many transactions using his computer or mobile phone.
  22. 22. The importance of electronic banking for banks, individual customers, and businesses separately. Customers – Convenience – a customer can access his account and transact from anywhere 24x7x365. – Lower cost per transaction – since the customer does not have to visit the branch for every transaction, it saves him both time and money. – No geographical barriers – In traditional banking systems, geographical distances could hamper certain banking transactions. However, with e- banking, geographical barriers are reduced.
  23. 23. Banks ―Lesser transaction costs – electronic transactions are the cheapest modes of transaction ―A reduced margin for human error – since the information is relayed electronically, there is no room for human error ―Lesser paperwork – digital records reduce paperwork and make the process easier to handle. Also, it is environment-friendly. ―Reduced fixed costs – A lesser need for branches which translates into a lower fixed cost. ―More loyal customers – since e-banking services are customer-friendly, banks experience higher loyalty from its customers.
  24. 24. Businesses – Account reviews – Business owners and designated staff members can access the accounts quickly using an online banking interface. This allows them to review the account activity and also ensure the smooth functioning of the account. – Better productivity – Electronic banking improves productivity. It allows the automation of regular monthly payments and a host of other features to enhance the productivity of the business. – Lower costs – Usually, costs in banking relationships are based on the resources utilized. If a certain business requires more assistance with wire transfers, deposits, etc., then the bank charges it higher fees. With online banking, these expenses are minimized.
  25. 25. Businesses – Lesser errors – Electronic banking helps reduce errors in regular banking transactions. Bad handwriting, mistaken information, etc. can cause errors which can prove costly. Also, easy review of the account activity enhances the accuracy of financial transactions. – Reduced fraud – Electronic banking provides a digital footprint for all employees who have the right to modify banking activities. Therefore, the business has better visibility into its transactions making it difficult for any fraudsters to play mischief.
  26. 26. E-banking in India In India, since 1997, when the ICICI Bank first offered internet banking services, today, most new-generation banks offer the same to their customers. In fact, all major banks provide e- banking services to their customers. Popular services under e-banking in India – ATMs (Automated Teller Machines) – Telephone Banking – Electronic Clearing Cards – Smart Cards – EFT (Electronic Funds Transfer) System – ECS (Electronic Clearing Services) – Mobile Banking – Internet Banking – Telebanking – Door-step Banking
  27. 27. Recently, digital payments in India touched a new high by reaching a billion monthly digital payment transactions on the Universal Payment Interface (UPI). Payment on UPI platform rose from 0.1 million in October 2016 to 1.3 billion in January 2020. Significance of this payment revolution in India lies in the fact that Google has written a letter to the US Federal Reserve, asking them to learn from Indian digital payments.
  28. 28. India was long a financially excluded nation — only 17% of Indians had a bank account in 2011. According to the World Bank, it would have taken 50 more years for 80% of Indians to get a bank account at the pre-2011 speed. Reasons for this Payment Revolution India’s payment revolution comes from: • Political Will: A clear vision for shifting the system from low volume, high value and high cost to high volume, low value and low cost. This can be seen through Jan Dhana Yojana and Aadhaar embedding
  29. 29. A Proactive Central Bank: Reserve Bank of India (RBI) created a non-profit market participant entity and levelling the playing field between non-banks and banks. • A paper by the Bank for International Settlements (‘The Design of Digital Financial Infrastructure: Lessons From India’) suggests that India demonstrates how “a central bank can be proactive and equal partners with private sector counterparts when it comes to fostering technological innovation in finance”. Use of Technology: Aimed at balancing trade- off like ease-of-use vs fraud prevention. This can be seen through UPI.
  30. 30. Elements of Revolution: Launch of Aadhaar. Aadhaar put simply is one of the biggest depositories of biometric data in the world. In 2010, the Indian government decided it would take full digital fingerprints and an iris scan from each citizen to create a digital identity. About 1.2 billion Indians now have a digital identity. Aadhaar has provided a solid foundation for banking the unbanked (financial inclusion). Aadhaar acted as an “identity rail” i.e. giving banks and Fintech companies a secure means to identify would-be customers -- and the government and businesses an easy way to pay them.
  31. 31. Role of National Payments Corporation of India (NPCI) • National Payments Corporation of India (NPCI), an umbrella organisation for operating retail payments and settlement systems in India, is an initiative of Reserve Bank of India (RBI) and Indian Banks’ Association (IBA) under the provisions of the Payment and Settlement Systems Act, 2007, for creating a robust Payment & Settlement Infrastructure in India. • It has been incorporated as a “Not for Profit” Company under the provisions of Section 25 of Companies Act 1956 (now Section 8 of Companies Act 2013). • NPCI together with the RBI and Indian Banks Association (IBA) has established a platform called UPI. • UPI, in turn, acted as a “payments rail”, it gives those players access to infrastructure that enables the transfer of funds. • UPI provides a payment experience that is mobile- based, low-cost, 24/7, instant, convenient, interoperable
  32. 32. What is UPI? India has taken a major step towards achieving a cashless economy with the advent of the Unified Payment Interface (UPI). UPI is a single platform that merges various banking services and features under one umbrella. It also caters to the “Peer to Peer” collect request which can be scheduled and paid as per requirement and convenience. UPI turns smartphones into a virtual debit card. It allows real-time bank-to-bank payments to be made using a mobile number or virtual payment address (UPI ID).
  33. 33. What is UPI? UPI has made the money transfer process a lot easier. as there is no need to remember the receiver’s account number, account type, IFSC, and bank name. Instead, money transfer can be made only by knowing Aadhaar number, mobile phone number registered with the bank account, or UPI ID. A UPI ID is a unique identification for a bank account that can be used to send and receive funds.
  34. 34. RTGS The acronym 'RTGS' stands for Real Time Gross Settlement, which can be explained as a system where there is continuous and real- time settlement of fund-transfers, individually on a transaction by transaction basis (without netting). 'Real Time' means the processing of instructions at the time they are received; 'Gross Settlement' means that the settlement of funds transfer instructions occurs individually.
  35. 35. RTGS offers many advantages over the other modes of funds transfer: – It is a safe and secure system for funds transfer. – RTGS transactions / transfers have no amount cap. – The system is available on all days on 24x7x365 basis. There is real time transfer of funds to the beneficiary account. – The remitter need not use a physical cheque or a demand draft. – The beneficiary need not visit a bank branch for depositing the paper instruments.
  36. 36. – The beneficiary need not be apprehensive about loss / theft of physical instruments or the likelihood of fraudulent encashment thereof. – Remitter can initiate the remittances from his / her home / place of work using internet banking, if his / her bank offers such service. – The transaction charges have been capped by RBI. – The transaction has legal backing.
  37. 37. RTGS is available 24x7x365 with effect from December 14, 2020. The RTGS system is primarily meant for large value transactions. The minimum amount to be remitted through RTGS is Rs. 2,00,000/- with no upper or maximum ceiling. With effect from July 01, 2019, the Reserve Bank has waived the processing charges levied by it for RTGS transactions. Banks may pass on the benefit to its customers.
  38. 38. With a view to rationalise the service charges levied by banks for offering funds transfer through RTGS system, a broad framework of charges has been mandated as under: a) Inward transactions – Free, no charge to be levied. b) Outward transactions – Rs. 2,00,000/- to 5,00,000/- : not exceeding Rs. 24.50/-; (exclusive of tax, if any) Above Rs. 5,00,000/- : not exceeding Rs. 49.50/-. (exclusive of tax, if any) Banks may decide to charge a lower rate but cannot charge more than the rates prescribed by RBI.
  39. 39. The remitting customer has to furnish the following information to a bank for initiating an RTGS remittance: – Amount to be remitted – The account number to be debited – Name of the beneficiary bank and branch – The IFSC number of the receiving branch – Name of the beneficiary customer – Account number of the beneficiary customer – Sender to receiver information, if any
  40. 40. The IFSC number can be obtained by the remitter (customer) from his / her bank branch. Alternatively, it is available on the cheque leaf of the beneficiary. This code number / bank branch information can be communicated by the beneficiary to the remitting customer. The list of IFSCs is also available on the RBI website at the link http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/ RTGEB0815.xlsx In case of any delay in returning the failed payment, the originating customer is eligible to receive compensation at current repo rate plus 2%.
  41. 41. Unique Transaction Reference (UTR) number is a 22 character code used to uniquely identify a transaction in RTGS system. The Legal Entity Identifier (LEI) is a 20-digit number used to uniquely identify parties to financial transactions worldwide. It has been implemented to improve the quality and accuracy of financial data reporting systems for better risk management. It is used to create a global reference data system that uniquely identifies every legal entity in any jurisdiction that is party to a financial transaction. It can be obtained from any of the Local Operating Units (LOUs) accredited by the Global Legal Entity Identifier Foundation (GLEIF), the body tasked to support the implementation and use of LEI. In India, LEI can be obtained from Legal Entity Identifier India Ltd. (LEIL) (https://www.ccilindia-lei.co.in), which is also recognised as an issuer of LEI by the Reserve Bank.
  42. 42. All payment transactions of value Rs. 50 crore and above undertaken by entities (non-individuals) should include remitter and beneficiary LEI information from April 1, 2021. Banks should use the ‘Remittance Information’ field for recording Remitter and Beneficiary LEI.
  43. 43. History of ATM ATMs arose after out-of-hours cash distribution developed from bankers' needs in Japan, Sweden, the United Kingdom, and the United States. Japan invented the Computer Loan Machine which supplied cash. And after a few years, Britain deployed the world’s first cash dispensing machine in London in 1967. The machine was put in use by Barclays Bank in Enfield Town, North London. The machine was invented by John Shepherd-Barron and the firm De La Rue.
  44. 44. History of ATM ATMs were introduced to the Indians in the early 1990s aided by foreign banks. As most of the banks were suffering from a serious handicap at that time due to lack of a strong branch network, ATMs appeared to be the best antidote for the problem. Since then, innovations in ATM technology have come a long way and customer receptiveness has also increased by leaps and bounds.
  45. 45. ATM An ATM, which stands for automated teller machine, is a specialized computer that makes it convenient to manage a bank account holder’s funds. It allows a person to check account balances, withdraw or deposit money, print a statement of account activities or transactions, and even purchase stamps.
  46. 46. ATMs can be on-premise or off-premise. On- premise ATMs are located in financial institutions. Clients enjoy more choice, convenience and availability, while banks can boost their revenue from transactions, lessen operational costs and maximize staff resources. Off-premise ATMs are typically found in places such as airports, grocery and convenience stores and shopping centers where there is a simple need for cash.
  47. 47. ATMs are simple data terminals with four output and two input devices. They have to connect to a host processor and communicate through it. The host processor works like an Internet Service Provider (ISP), a portal through which all the various networks of ATMs become accessible to the bank account holder with either a credit card or debit card.
  48. 48. Different types of ATMs in India are: On-site ATM - ATM Machines which exist within the premises of the bank. Off-site ATM - Off-site ATMs means the machine which operates outside the bank premises. Worksite ATM - Those ATMs which are located within the premises of a company and is usually meant only for that company’s employees. Cash Dispenser - ATM that allow only cash withdrawals, balance enquiry and mini statement.
  49. 49. Different types of ATMs in India are: Mobile ATM - This type of ATM is a machine that moves in different areas for the users. COVID 19 has led to a surge in the number of Mobile ATMs. White Label ATM - White Label ATM means the automated teller machine which Non-Banking Financial Companies provide. Green Label ATM - Green label ATMs are provided for Agricultural Transaction. Orange Label ATM - Orange label ATMs are the machines which are provided for share transactions.
  50. 50. Yellow Label ATM - Yellow label ATM Machine means the ATM which is provided for online purchase. Pink label ATM- These are the ATMs machines that are provided for women. Brown label ATM - Brown label Automated Teller Machines are those ATMs where hardware and the ATM machine’s lease are owned by a service provider. However, cash management and connectivity to banking networks is offered by the sponsor bank
  51. 51. Banks provide ATM cards without any charge at the time of opening of the bank account. However, banks charge for using the ATMs. There is no cost for the initial few transactions but after a cap level cost is charged in every additional transaction. The charges of the top banks are as follow: Bank Per month Free Transactions Cost after free Transactions SBI 5 transactions at SBI ATMs and 3 at Other ATMs Rs. 25 per transaction ICICI Bank Free transaction at all ICICI ATMs Rs. 25 per transaction at all non-ICICI ATMs HDFC Bank First 4 transactions Rs. 150 per transaction
  52. 52. Automated teller machines (ATM) have been changing over time and the machine’s technology is becoming more sophisticated to provide the best experience to the user and make the transactions safer and secure. Some of the vital changes are: – Multipurpose nature of ATM Machine: Unlike in the past, ATM Machines are not merely providing the facility of dispensing cash, but today they provide facilities of depositing the cash, fund transfer, payments of bills and generating PIN and mini statements. These are just a few services, and the banks provide many other sophisticated services.
  53. 53. – Easy to use: The modern ATM Machines are designed so that it becomes easier to use for everyone, including illiterate individuals and specially-abled people. Technology like biometric identification scanners makes it convenient to use for almost everyone. – No language barrier: India is a country with infinite culture and language. The use of one language in ATMs becomes a roadblock for many users. Multilingual or use of many languages in the ATMs acts as an antidote to this problem. Modern ATMs are equipped with multiple languages and the user can choose the language of his choice, which makes it easier for him to use the machine.
  54. 54. The benefits of an ATM card are as follows: – ATM Machines are conveniently located at multiple locations. Customers visit the ATM of any bank to perform any transaction. – It helps in withdrawing the cash in a matter of minutes and thus saves time. – The process of getting an ATM card is hassle-free, and no documentation is required for an ATM card. Almost all banks provide ATM cards at the time of account opening. – It helps in getting the details of the transactions, total balance and mini statement. – Some ATM Machines also provide the facility of depositing cash and fund transfer.
  55. 55. The benefits of an ATM card are as follows: – ATM is also used in paying utility bills and several other bills and payments. – ATM Machine is available 24*7, 365 days a year. – ATM is safe and secure as the use of an ATM is restricted only to the person who knows the PIN. Thus, if the customers keep the PIN confidential, no one other than the customer can use the ATM. – ATM Machines are self-service and thus reduces the workload of the bank staff. – ATM reduces the requirement for carrying cash as individuals can withdraw at any ATMs, which acts as a cashpoint.
  56. 56. Withdraw Cash without touching the ATM In the times of COVID, the MasterCard has now partnered with AGS Transact Technologies to provide contactless cash withdrawal service to the people. To withdraw cash, the user needs to scan the Quick Response Code on the ATM using the mobile application of your bank. Finally, enter the amount to be withdrawn and PIN of your ATM Card. ATM will then process the money. The daily cash withdrawal limits of banks vary from each bank. Currently, SBI offers Rs. 1 Lakh, HDFC Bank offers Rs. 1 Lakh, and PNB offers Rs. 1 Lakh daily cash withdrawal limit.
  57. 57. Personal Identification Number (PIN) is a 4-digit number that allows you to access your account information and perform other activities using an Automated Teller Machine (ATM). You can generate your ATM PIN by any of the below-mentioned ways: – Visiting the nearest ATM – Via Internet Banking. – Calling customer care – Sending an SMS to the customer care
  58. 58. MICR (magnetic ink character recognition) MICR (magnetic ink character recognition) is a technology used to verify the legitimacy or originality of paper documents, especially checks. Special ink, which is sensitive to magnetic fields, is used in the printing of certain characters on the original documents. Information can be encoded in the magnetic characters.
  59. 59. The use of MICR can enhance security and minimize the losses caused by some types of crime. If a document has been forged - for example, a counterfeit check produced using a color photocopying machine, the magnetic-ink line will either not respond to magnetic fields, or will produce an incorrect code when scanned using a device designed to recover the information in the magnetic characters. Even a legitimate check can be rejected if the MICR reader indicates that the owner of the account has a history of writing bad checks. Retailers commonly use MICR readers to minimize their exposure to check fraud. Corporations and government agencies also use the technology to speed up the sorting of documents.
  60. 60. MICR is an acronym for Magnetic Ink Character Recognition. Primarily, this innovative technology authenticates the legality and credibility of paper-based document(s) in the banking database. It can be found on cheques. MICR is at par with IFSC as far as the security of a fund transfer is concerned. MICR code is a product of highly advanced Character Recognition Technology (CRT) used by banks to verify cheques for clearance. MICR technology is used for other bank documents as well. A MICR code is placed at the bottom of a cheque.
  61. 61. It includes details such the bank code, account details, amount, and cheque number, alongside a control indicator. The biggest advantage of MICR technology is that it stands out among similar concepts, such as barcodes, as MICR can be read and distinguished by humans very easily.
  62. 62. It is a 9-digit code that identifies the bank branches that are taking part in an ECS (Electronic Clearing System). MICR code is especially needed if you are filling up different financial forms such as SIP forms, etc. as it helps in faster clearance of cheques. The starting 3 digits of the code signify the city code, the next 3 digits (the middle ones) stand for the bank code and the last 3 digits represent the code of the branch. You can easily find the MICR number at the bottom of your cheque leaf, printed adjacent the cheque number (on the right-hand side).
  63. 63. IFSC Code (Indian Financial System Code) MICR Code (Magnetic Ink Character Recognition) Swift Code It is used to facilitate electronic money transfer between the banks in India. MICR code is initiated to make cheque processing simpler and faster. This code is used to provide the facility of international fund transfer between 2 banks. IFSC is an 11-digit alpha-numeric code MICR is a 9-digit code Swift code has 8 to 11 characters. The first four characters indicate the name of the bank. The first three digits represents the city code where the bank branch is located. The first four characters of this code represent the bank code. Last 6 digits represent the bank location. Last three digits indicate the bank branch code. The last three characters are optional and represent the branch code. This code is developed by the RBI (Reserve Bank of India). This code is also developed by RBI (Reserve Bank of India). This code is approved by ISO (International Organization for Standardization).
  64. 64. OCR Financial institutions like banks are continuously engaged in the process of creating new records for clients or doing new deals, which generate numerous paper records. These ever increasing piles of documents could prove to be a major concern for banks. Converting all this crucial data into digital format with the help of data entry services is a perfect solution for this concern. Digitized documents ensure safety, easy storage, and quick retrieval of data.
  65. 65. OCR In order to reduce the time taken to process payments as well as ensure better customer service, banking institutions need to streamline their organizational processes and organize their work. Optical Character Recognition (OCR) is a unique technology that banks utilize as part of high-volume information extraction. With OCR, banks are able to process, monitor and evaluate data including vast amounts of client data such as personal and security information. This helps to improve overall performance and profitability.
  66. 66. In simple terms, optical character recognition (OCR) is a technology that can extract all the text from images, PDF documents or scanned files. A scanned file is usually stored as an image if not converted into a text-searchable file with the help of OCR technology. With automated and smart document processing, the technology can effortlessly accelerate customer on-boarding and reduce the need for manual input. In addition, OCR allows banks to minimize human errors, save time, and effort while upgrading customer experience.
  67. 67. Some top OCR and machine learning features that can help optimize the banking industry – Hasten Customer On-Boarding – Easy and remote on- boarding is one common challenge that most banks face. Banks need to validate customers’ identities (IDs) properly for routine or large banking transactions, cash withdrawals, account openings and other related functions. Some challenger banks choose to do this using manual remote validation wherein a picture in the passport or a signature gets verified within a timeframe of 24 hours. Though this may seem efficient, it actually has some major downsides. First of all, it is not real-time, so customers don’t get the real experience. It is also relatively expensive and risky due to sensitive data transfers and hence this is not the best solution in terms of privacy.
  68. 68. Hasten Customer On-Boarding However, with OCR and machine learning tools, banks can instantly capture and extract customer data from machine-readable zones on passports or other ID documents and quickly identify customers before money transfers and opening bank accounts. OCR technology provides a fully automated on-boarding “Software development kit (SDK)” that includes identity document scanning, OCR data extraction (for instance, MRZ, dates of birth, gender, pictures, signatures and more), data identification, and data validation. SDK can verify if a signature matches the signature on the identity document and if an image matches the passport photo. The software technology is real-time, safe and cost-effective and gives about ten times accuracy than manual verification.
  69. 69. Integrate Scan-to-Pay Functionality – Manually entering names, amounts, bank account numbers and references for a single bank transfer can be time consuming and error prone. In fact, human or manual process errors account for 20-30 percent of revenue loss. However, the latest mobile OCR and scanners that can be easily integrated with iOS, Android, and web platforms help remove human errors from processes and ensure high accuracy of scans. OCR also provides instant scan results as scanning time is less than half a second and gives banking staff more time to focus on other facets of their work. A scan-to-pay feature uses OCR, which instantly captures invoice data. In order to make payments, a camera on a Smartphone is all that is needed. In addition, the bank card recognition module can scan the cardholder’s name, the card number, and expiry date, in any position and light, which ensures your bank transfer or payment remains error-free.
  70. 70. Data Entry and Invoice Scanning – As mentioned above, banking transactions involve huge amount of data entry related to bank statements and other day-to-day transactions. OCR technology can help maintain workflow efficiently with high text- recognition accuracy. For using the scan- to-pay feature, a camera on a Smartphone is enough to capture invoice data and to make payments.
  71. 71. Speed Up Loan and Mortgage Application Processing – Banks have been moving to challenging areas of activities like – stock trading, smart lending and even mortgage applications – which involve a lot of document processing. Even a single mortgage application requires processing of various documents like – the letter of intent from the employer to an employment contract or multiple salary slips and a passport. On the other hand, if the mortgage is paid by two people, the amount of documents that need to be processed doubles in size. Checking the validity of documents, comparing data between different documents and processing data from the documents into case management systems consumes lot of time. With OCR technology, automating the data extraction, comparison of documents can be done in an efficient manner. OCR and machine learning tools can speed up loan and mortgage application processing by up to 70 percent. This in turn lowers the processing cost, enables the existing teams to process more applications and reduces manual data entry, which leads to happy and loyal customers.
  72. 72. Financial organizations like banks can analyze and streamline large-volume data with the help of OCR technology and draw valuable business insights. Incorporating correct OCR technology can standardize documents by turning scanned documents into searchable PDFs or into any other file type. Partnering with a reliable document scanning company is the best way to ease the documentation burden faced by banks and improve efficiency in the long run.
  73. 73. The most commonly used online fund transfer method has been: – National Electronic Funds Transfer (NEFT) – Real-Time Gross Settlement (RTGS) – Immediate Mobile Payment Service (IMPS) While NEFT and RTGS were introduced by RBI (Reserve Bank of India), IMPS was introduced by National Payments Corporation of India (NPCI).
  74. 74. NEFT National Electronic Funds Transfer (NEFT) is a payment system that facilitates one-to-one funds transfer. Using NEFT, people can electronically transfer money from any bank branch to a person holding an account with any other bank branch, which is participating in the payment system. Fund transfers through the NEFT system do not occur in real-time basis and the fund transfer settles in 23 half-hourly batches.

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