Trend of Internet Banking

Dear readers, here we are presenting an article on Internet Banking. As Internet Banking service is provided by every Banks and has common activity and also plays an important role in our daily life.

Internet Banking: Banking is one of the oldest professions known to mankind. It has undergone many a transition and internet banking is the latest in the list of such transformations.

Internet banking has brought about a 360 degree change in the entire banking industry. Such is the change in scenario that timing is no longer a constraint and you can finish your day-today chores and bank leisurely when you have the time. This method has also made shopping and bill payment very easy and convenient. Long queues for these activities have now become history.

Functions of internet banking:-

1. An access to account data: Internet banking systems help customers in acting as a medium through which data related to their accounts (like transaction details, balance enquiry, status of particular transaction etc) can be accessed from any point where internet facility is available. This can be further extended to gathering of information related to credit card balances, bill payment date etc.

2. A mode of operational interaction: Perhaps one of the popular functions of internet banking is that it can transfer funds. This includes transfer of money from a customer’s account to another person’s account in a different or same bank, payment of utility bills (telephone, gas, electricity etc) or any other transfer where the bank has channels with the point where the money is supposed to reach. These operations require instructions from the account holder and this instruction or request can be made through internet.

Security and operation:-

One of the major concerns of people with respect to internet banking is the safety related to data of bank account, transactional information and also the access path (account number, PIN etc) of their accounts. There are set of regulations laid down by Reserve Bank of India, that guide banks on the security aspects of internet banking.

The banks are bound to maintain certain security policies related to internet banking that are approved by the managing directors of the bank. Further there are specifications related to use of updated technology for banking sites and also the network and data base is to be administered and tested on regular intervals by a separate department of a bank that works on these major aspects.

There will be a unique user ID and password provided to individual accounts of a customer and the web page where these details of an account are to be updated will generally be secured.

Transfer of fund is done through two basic modes:

1. Real Time Gross Settlement is a mode where the transaction to an account takes place more spontaneously (quickly). There are certain minimum limits (Rs 2 lakh) above which this mode of transaction can be used.

2. National Electronic Funds Transfer (NEFT) and this mode of transaction takes place in batches (batch of transactions say 4 or 5) in specified regular intervals of time.

Benefits of Internet banking:

Businesses rely on efficient and rapid access to banking information for cash flow reviews, auditing and daily financial transaction processing. E-banking offers ease of access, secure transactions and 24-hour banking options.

From small start-up companies to more established entities, small businesses rely on e-banking to eliminate runs to the bank and to make financial decisions with updated information. In an information-driven business climate,

Risks Involved in internet banking:-

There are many threats that deter a person from using internet banking. These threats are also being faced by banking channels of developed countries. The names of such threats include Phishing, viruses, theft of user identity and password through other means etc. There are few basic points a customer has to remember when it comes to use of internet banking facility.

·         The net banking facility should be availed from personal computer only and not at cyber centers or any other places.

·         The address of the site of the bank should be noted by the customer and it is good to type the address of site instead of reaching the site through other links.

·         It is good to provide relevant details of the user ID and password only in relevant pages of banking site.

00:28 - By Unknown 0

Banking Awareness: CASA

In continuation to our Banking Awareness series, today we are providing you a brief about CASA.

Casa Ratio: Casa is basically the current and savings account deposits. The CASA ratio shows how much deposit a bank has in the form of current and saving account deposits in the total deposit. 

If the CASA ratio is higher than it means that a higher portion of the deposits have come from current and savings deposit.

This means that the bank is getting money at low cost, since no interest is paid on the current accounts and the interest paid on savings account is usually low.

Current and Saving Accounts are demand deposits and therefore pay lower interest rates compared to term deposits where the rates are higher.

In India, interest rates paid on current and savings account deposits is administered by banking regulator - the Reserve Bank of India.

Why are banks keen on gained a higher share of CASA?

Interest rate paid on Casa is much lower compared to other deposits like term deposits or recurring deposits. While banks do not pay any interest on current account, interest paid on savings account deposit is 4%.

Banks therefore make maximum effort to increase the share of Casa on their books to reduce their overall cost of deposits. HDFC Bank has the highest share of Casa to total deposits at 52%, followed by the State Bank of India at 48% and ICICI Bank at 45%.

What does Casa mean for customers?

Recently interest paid on savings account deposits is 4%. Banks pay interest on savings deposits on a daily basis rather than paying on the minimum balance maintained by them in six months.

As a result, savings account customers earn better returns compared to what they earned a year ago.

Further, interest earned on savings account deposits does not attract TDS (tax deduction at source). Interest income above 10,000 a year attracts TDS of 10% in case of term deposits. However, there is no major benefit for current account deposits, which is mainly maintained by corporates and traders.

What are the disadvantages of high CASA?

These deposits can move out of banks' books anytime, leading to asset-liability mismatches. While in case of term deposits, banks are almost certain that the depositor may not withdraw money before the maturity of the deposit and may also renew the deposit on maturity.

Further, to finance long-term projects, banks need to have long-term liabilities on their books to avoid mismatches. Banks cannot rely on Casa deposits to fund long-term loans.

05:19 - By Unknown 0