In the past week I have heard of two people locally getting "skimmed" at ATM machines and having their accounts cleared, So I said I would post a blog entry on the dangers of this and what you can do to make sure it doesn't happen to you.

What is ATM Skimming
ATM skimming is when someone gets the information about your card, and PIN from some means, such as a skimming tool planted on the ATM machine, and a camera located over the keypad, or simply someone standing behind your shoulder, and with this information they clone your card and they have full access to your bank account to take what they want.

What can I do to stop it?
Follow these few simple tips to make sure your hard earned cash stays where it belongs.

If the ATM looks dodgy or changed in anyway, don't use it!
Most ATM's will show a picture of what the ATM should look like on the screen before you input your PIN, Compare the picture on screen with the ATM.

Always guard your PIN
If there is someone standing too close to you, offer for them to go first, or find a different ATM, if it is just you at the ATM, Still cover your PIN with your hand, Just in case!

Always keep your eye on the ATM
Never look away from the ATM if someone is trying to talk to you, always make sure you can see the ATM while it is in your use.

If it suspicious, Walk Away
If you don't like the look of the ATM, or the person beside you is making you feel uneasy, Cancel your transaction immediately, and walk away. And just to be safe, call your bank to make sure the transaction was properly canceled.

Destroy old cards
Any old ATM cards you might have, Cut them up and bin them, These still hold information about your account, and if you don't bin them, The wrong person could get their hands on this.

Follow these simple steps to make sure your trip to the ATM doesn't end in a hole in our pocket!, And remember most important of all, Keep your PIN exactly that, YOUR Pin

QUES -1 What is a Non-Banking Financial Company (NBFC)?

ANS -1 A Non-Banking Financial Company (NBFC) is a company registered under the Companies Act, 1956 and is engaged in the business of loans and advances, acquisition of shares/stock/bonds/debentures/securities issued by Government or local authority or other securities of like marketable nature, leasing, hire-purchase, insurance business, chit business but does not include any institution whose principal business is that of agriculture activity, industrial activity, sale/purchase/construction of immovable property. A non-banking institution which is a company and which has its principal business of receiving deposits under any scheme or arrangement or any other manner, or lending in any manner is also a non-banking financial company (Residuary non-banking company).

QUES 2. NBFCs are doing functions similar to banks. What is difference between banks & NBFCs ?

ANS 2. NBFCs are doing functions akin to that of banks; however there are a few differences:

(i) an NBFC cannot accept demand deposits;

(ii) an NBFC is not a part of the payment and settlement system and as such an NBFC cannot issue cheques drawn on itself; and

(iii) deposit insurance facility of Deposit Insurance and Credit Guarantee Corporation is not available for NBFC depositors unlike in case of banks.

QUES-3. Is it necessary that every NBFC should be registered with RBI?

ANS 3. In terms of Section 45-IA of the RBI Act, 1934, it is mandatory that every NBFC should be registered with RBI to commence or carry on any business of non-banking financial institution as defined in clause (a) of Section 45 I of the RBI Act, 1934.

However, to obviate dual regulation, certain categories of NBFCs which are regulated by other regulators are exempted from the requirement of registration with RBI viz. Venture Capital Fund/Merchant Banking companies/Stock broking companies registered with SEBI, Insurance Company holding a valid Certificate of Registration issued by IRDA, Nidhi companies as notified under Section 620A of the Companies Act, 1956, Chit companies as defined in clause (b) of Section 2 of the Chit Funds Act, 1982 or Housing Finance Companies regulated by National Housing Bank.

QUES 4. What are the different types of NBFCs registered with RBI?

ANS 4. Originally, NBFCs registered with RBI were classified as:

(i) equipment leasing company;
(ii) hire-purchase company;
(iii) loan company;
(iv) investment company.

However, with effect from December 6, 2006 the above NBFCs registered with RBI have been reclassified as

(i) Asset Finance Company (AFC)
(ii) Investment Company (IC)
(iii) Loan Company (LC)

AFC would be defined as any company which is a financial institution carrying on as its principal business the financing of physical assets supporting productive/economic activity, such as automobiles, tractors, lathe machines, generator sets, earth moving and material handling equipments, moving on own power and general purpose industrial machines. Principal business for this purpose is defined as aggregate of financing real/physical assets supporting economic activity and income arising therefrom is not less than 60% of its total assets and total income respectively.

The above type of companies may be further classified into those accepting deposits or those not accepting deposits.

QUES 5. What are the requirements for registration with RBI?

ANS 5. A company incorporated under the Companies Act, 1956 and desirous of commencing business of non-banking financial institution as defined under Section 45 I(a) of the RBI Act, 1934 should have a minimum net owned fund of Rs 25 lakh (raised to Rs 200 lakh w.e.f April 21, 1999). The company is required to submit its application for registration in the prescribed format alongwith necessary documents for Bank’s consideration. The Bank issues Certificate of Registration after satisfying itself that the conditions as enumerated in Section 45-IA of the RBI Act, 1934 are satisfied.

QUES 6. Where can one find list of Registered NBFCs and instructions issued to NBFCs?

ANS 6. The list of registered NBFCs is available on the web site of Reserve Bank of India and can be viewed at www.rbi.org.in. The instructions issued to NBFCs from time to time are also hosted at the above site. Besides, instructions are also issued through Official Gazette notifications. Press Release is also issued to draw attention of the public/NBFCs.

QUES 7. Can all NBFCs accept deposits and what are the requirements for accepting Public Deposits?

ANS 7. All NBFCs are not entitled to accept public deposits. Only those NBFCs holding a valid Certificate of Registration with authorisation to accept Public Deposits can accept/hold public deposits. NBFCs authorised to accept/hold public deposits besides having minimum stipulated Net Owned Fund (NOF) should also comply with the Directions such as investing part of the funds in liquid assets, maintain reserves, rating etc. issued by the Bank.

QUES 8. Is there any ceiling on acceptance of Public Deposits? What is the rate of interest and period of deposit which NBFCs can accept?

ANS 8. Yes, there is a ceiling on acceptance of Public Deposits. An NBFC maintaining required NOF/Capital to Risk Assets Ratio (CRAR) and complying with the prudential norms can accept public deposits as follows:

Category of NBFC having minimum NOF of Rs 200 lakhs	Ceiling on public deposit
AFC* maintaining CRAR of 15% without credit rating AFC with CRAR of 12% and having minimum investment grade credit rating	1.5 times of NOF or Rs 10 crore whichever is less 4 times of NOF
LC/IC** with CRAR of 15% and having minimum investment grade credit rating	1.5 times of NOF

* AFC = Asset Finance Company

** LC/IC = Loan company/Investment Company

As has been notified on June 17, 2008 the ceiling on level of public deposits for NBFCs accepting deposits but not having minimum Net Owned Fund of Rs 200 lakh is revised as under:

Category of NBFC having NOF more than Rs 25 lakh but less than Rs 200 lakh	Revised Ceiling on public deposits
AFCs maintaining CRAR of 15% without credit rating and	Equal to NOF
AFCs with CRAR of 12% and having minimum investment grade credit rating	1.5 times of NOF
LCs/ICs with CRAR of 15% and having minimum investment grade credit rating	Equal to NOF

Presently, the maximum rate of interest an NBFC can offer is 12.5%. The interest may be paid or compounded at rests not shorter than monthly rests.

The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand.

The RNBCs have different norms for acceptance of deposits which are explained elsewhere in this booklet.

QUES 9. What are the salient features of NBFCs regulations which the depositor may note at the times of investment?

ANS 9. Some of the important regulations relating to acceptance of deposits by NBFCs are as under:

1. The NBFCs are allowed to accept/renew public deposits for a minimum period of 12 months and maximum period of 60 months. They cannot accept deposits repayable on demand.
   
   
2. NBFCs cannot offer interest rates higher than the ceiling rate prescribed by RBI from time to time. The present ceiling is 12.5 per cent per annum. The interest may be paid or compounded at rests not shorter than monthly rests.
   
   
3. NBFCs cannot offer gifts/incentives or any other additional benefit to the depositors.
   
   
4. NBFCs (except certain AFCs) should have minimum investment grade credit rating.
   
   
5. The deposits with NBFCs are not insured.
   
   
6. The repayment of deposits by NBFCs is not guaranteed by RBI.
   
   
7. Certain mandatory disclosures are to be made about the company in the Application Form issued by the company soliciting deposits.

QUES 10. What is ‘deposit’ and ‘public deposit’? Is it defined anywhere?

ANS 10. The term ‘deposit’ is defined under Section 45 I(bb) of the RBI Act, 1934. ‘Deposit’ includes and shall be deemed always to have included any receipt of money by way of deposit or loan or in any other form but does not include:

• amount raised by way of share capital, or contributed as capital by partners of a firm;
  
  
• amount received from scheduled bank, co-operative bank, a banking company, State Financial Corporation, IDBI or any other institution specified by RBI;
  
  
• amount received in ordinary course of business by way of security deposit, dealership deposit, earnest money, advance against orders for goods, properties or services;
  
  
• amount received by a registered money lender other than a body corporate;
  
  
• amount received by way of subscriptions in respect of a ‘Chit’.

Paragraph 2(1)(xii) of the Non-Banking Financial Companies Acceptance of Public Deposits ( Reserve Bank) Directions, 1998 defines a ‘ public deposit’ as a ‘deposit’ as defined under Section 45 I(bb) of the RBI Act, 1934 and further excludes the following:

• amount received from the Central/State Government or any other source where repayment is guaranteed by Central/State Government or any amount received from local authority or foreign government or any foreign citizen/authority/person;
  
  
• any amount received from financial institutions;
  
  
• any amount received from other company as inter-corporate deposit;
  
  
• amount received by way of subscriptions to shares, stock, bonds or debentures pending allotment or by way of calls in advance if such amount is not repayable to the members under the articles of association of the company;
  
  
• amount received from shareholders by private company;
  
  
• amount received from directors or relative of the director of an NBFC;
  
  
• amount raised by issue of bonds or debentures secured by mortgage of any immovable property or other asset of the company subject to conditions;
  
  
• the amount brought in by the promoters by way of unsecured loan;
  
  
• amount received from a mutual fund;
  
  
• any amount received as hybrid debt or subordinated debt;
  
  
• any amount received by issuance of Commercial Paper.

Thus, the directions exclude from the definition of public deposit, amount raised from certain set of informed lenders who can make independent decision.

QUES 11. Are Secured debentures treated as Public Deposit? If not who regulates them?

ANS 11. Debentures secured by the mortgage of any immovable property or other asset of the company, if the amount raised does not exceed the market value of the said immovable property or other asset, are excluded from the definition of ‘Public Deposit’ in terms of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998. Secured debentures are debt instruments and are regulated by Securities & Exchange Board of India.

QUES 12. Whether NBFCs can accept deposits from NRIs?

ANS 12. Effective from April 24, 2004, NBFCs cannot accept deposits from NRIs except deposits by debit to NRO account of NRI provided such amount does not represent inward remittance or transfer from NRE/FCNR (B) account. However, the existing NRI deposits can be renewed.

QUES 13 Is nomination facility available to the Depositors of NBFCs?

ANS 13. Yes, nomination facility is available to the depositors of NBFCs. The Rules for nomination facility are provided for in section 45QB of the Reserve Bank of India Act, 1934. Non-Banking Financial Companies have been advised to adopt the Banking Companies (Nomination) Rules, 1985 made under Section 45ZA of the Banking Regulation Act, 1949. Accordingly, depositor/s of NBFCs are permitted to nominate one person to whom the NBFC can return the deposit in the event of the death of the depositor/s. NBFCs are advised to accept nominations made by the depositors in the form similar to one specified under the said rules, viz Form DA 1 for the purpose of nomination, and Form DA2 and DA3 for cancellation of nomination and change of nomination respectively.

QUES 14. What else should a depositor bear in mind while depositing money with NBFCs?

ANS 14. While making deposits with an NBFC, the following aspects should be borne in mind:

(i) Public deposits are unsecured.

(ii) A proper deposit receipt which should, besides the name of the depositor/s, state the date of deposit, the amount in words and figures, rate of interest payable and the date of maturity. Depositor/s should insist on the above and also ensure that the receipt is duly signed by an officer authorised by the company in that behalf.

(iii) The Reserve Bank of India does not accept any responsibility or guarantee about the present position as to the financial soundness of the company or for the correctness of any of the statements or representations made or opinions expressed by the company and for repayment of deposits/discharge of the liabilities by the company.

QUES 15. It is said that rating of NBFCs is necessary before it accepts deposit? Is it true? Who rates them?

ANS 15. An unrated NBFC, except certain Asset Finance companies (AFC), cannot accept public deposits. An exception is made in case of unrated AFC companies with CRAR of 15% which can accept public deposit without having a credit rating upto a certain ceiling depending upon its Net Owned Funds (c.f Ans to Q 8). AN NBFC may get itself rated by any of the four rating agencies namely, CRISIL, CARE, ICRA and FITCH Ratings India Pvt. Ltd.

QUES 16. What are the symbols of minimum investment grade rating of different companies?

ANS 16. The symbols of minimum investment grade rating of the Credit rating agencies are:

Name of rating agencies	Nomenclature of minimum investment grade credit rating (MIGR)
CRISIL	FA- (FA MINUS)
ICRA	MA- (MA MINUS)
CARE	CARE BBB (FD)
FITCH Ratings India Pvt. Ltd.	tA-(ind)(FD)

It may be added that A- is not equivalent to A, AA- is not equivalent to AA and AAA- is not equivalent to AAA.

QUES 17. Can an NBFC which is yet to be rated accept public deposit?

ANS 17. No, an NBFC cannot accept deposit without rating (except an Asset Finance Company complying with prudential norms and having CRAR of 15%, as explained above at Ans. to Q 8).

QUES 18. When a company’s rating is downgraded, does it have to bring down its level of public deposits immediately or over a period of time?

ANS 18. If rating of an NBFC is downgraded to below minimum investment grade rating, it has to stop accepting public deposit, report the position within fifteen working days to the RBI and reduce within three years from the date of such downgrading of credit rating, the amount of excess public deposit to nil or to the appropriate extent permissible under paragraph 4(4) of Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998.

QUES 19. In case an NBFC defaults in repayment of deposit what course of action can be taken by depositors?

ANS 19. If an NBFC defaults in repayment of deposit, the depositor can approach Company Law Board or Consumer Forum or file a civil suit in a court of law to recover the deposits.

QUES 20. What is the role of Company Law Board in protecting the interest of depositors? How one can approach it?

ANS 20. Where an NBFC fails to repay any deposit or part thereof in accordance with the terms and conditions of such deposit, the Company Law Board (CLB) either on its own motion or on an application from the depositor, directs by order the non-banking financial company to make repayment of such deposit or part thereof forthwith or within such time and subject to such conditions as may be specified in the order.

As explained above, the depositor can approach CLB by mailing an application in prescribed form to the appropriate bench of the Company Law Board according to its territorial jurisdiction alongwith the prescribed fee.

QUES 21. Can you give the addresses of the various benches of the Company Law Board (CLB) indicating their respective jurisdiction?

ANS 21. The details of addresses and territorial jurisdiction of the bench officers of CLB are as under:

Sr.No.	Addresses	Territorial Jurisdiction
1.	Bench Officer, Company Law Board, Northern Region Bench, Shastri Bhavan, ‘A’ Wing, 5th Floor, Dr. Rajendra Prasad Road, New Delhi 110 001.	Uttar Pradesh, Jammu & Kashmir, Punjab, Himachal Pradesh, Rajasthan, Haryana and Union Territories of Chandigarh and Delhi
2.	Bench Officer, Company Law Board, Southern Region Bench, Shastri Bhavan, ‘A’ Wing, 5th Floor, Block 8, No 26, Haddows Road, Chennai 600 006.	Tamil Nadu, Andhra Pradesh, Kerala, Karnataka, Union Territories of Amindivi, Minicoy and Lakshadweep Islands and Pondicherry
3.	Bench Officer, Company Law Board, Western Region Bench, 2nd Floor, N.T.C. House, 15, Narottam Morarjee Marg, Ballard Estate, Mumbai-400 038.	Maharashtra, Gujarat, Madhya Pradesh, Goa and Union Territories of Dadra & Nagar Haveli, Daman and Diu.
4.	Bench Officer, Company Law Board, Eastern Region Bench, 9, Old Post Office Street, 6th Floor, Kolkata 700 001.	West Bengal, Orissa, Bihar, Assam, Tripura, Manipur, Nagaland, Meghalaya, Arunachal Pradesh, Mizoram, Union Territories of Andaman and Nicobar Islands.
5.	Bench Officer, Company Law Board, Principal Bench at New Delhi, Shastri Bhavan, ‘A’ Wing, 5th Floor, Dr. Rajendra Prasad Road, New Delhi 110 001.	All Principal Bench matters all over India.

QUES 22. We hear that in a number of cases official liquidators have been appointed on the defaulting NBFCs. What is their role and how one can approach them?

ANS 22. Official Liquidator is appointed by the court after giving the company reasonable opportunity of being heard in a winding up petition. The liquidator performs duties of winding up and such duties in reference thereto as the court may impose.
Where the court has appointed an official liquidator or provisional liquidator, he becomes custodian of the property of the company and runs the day-to-day affairs of the company. He has to draw up a statement of affairs of the company in prescribed form containing particulars of assets of the company, its debts and liabilities, names/residences/occupations of its creditors, the debts due to the company and such other information as may be prescribed. The scheme is drawn up by the liquidator and same is put up to the court for approval. The liquidator realizes the assets of the company and arranges to repay the creditors according to the scheme approved by the court. The liquidator generally inserts advertisement in the newspaper inviting claims from depositors/investors in compliance with court orders. Therefore, the investors/depositors should file the claims within due time as per such notices of the liquidator. The Reserve Bank also provides assistance to the depositors in furnishing addresses of the official liquidator.

QUES 23. Consumer Court play useful role in attending to depositors problems. Can one approach Consumer Forum, Civil Court, CLB simultaneously?

ANS 23. Yes, a depositor can approach any or all of the redressal authorities i.e consumer forum, court or CLB.

QUES 24. Is there an Ombudsman for hearing complaints against NBFCs?

ANS 24. No, there is no Ombudsman for hearing complaints against NBFCs. However, in respect of credit card operations of an NBFC, if a complainant does not get satisfactory response from the NBFC within a maximum period of thirty (30) days from the date of lodging the complaint, the customer will have the option to approach the Office of the concerned Banking Ombudsman for redressal of his grievance/s.

QUES 25. What are various prudential regulations applicable to NBFCs?

ANS 25. The Bank has issued detailed directions on prudential norms, vide Non-Banking Financial Companies Prudential Norms (Reserve Bank) Directions, 1998. The directions interalia, prescribe guidelines on income recognition, asset classification and provisioning requirements applicable to NBFCs, exposure norms, constitution of audit committee, disclosures in the balance sheet, requirement of capital adequacy, restrictions on investments in land and building and unquoted shares.

QUES 26. Please explain the terms ‘owned fund’ and ‘net owned fund’ in relation to NBFCs?

ANS 26. ‘Owned Fund’ means aggregate of the paid-up equity capital and free reserves as disclosed in the latest balance sheet of the company after deducting therefrom accumulated balance of loss, deferred revenue expenditure and other intangible assets.
'Net Owned Fund' is the amount as arrived at above minus the amount of investments of such company in shares of its subsidiaries, companies in the same group and all other NBFCs and the book value of debentures, bonds, outstanding loans and advances made to and deposits with subsidiaries and companies in the same group, to the extent it exceeds 10% of the owned fund.

QUES 27. What are the responsibilities of the NBFCs accepting/holding public deposits with regard to submission of Returns and other information to RBI?

ANS 27. The NBFCs accepting public deposits should furnish to RBI

1. Audited balance sheet of each financial year and an audited profit and loss account in respect of that year as passed in the annual general meeting together with a copy of the report of the Board of Directors and a copy of the report and the notes on accounts furnished by its Auditors;
   
   
2. Statutory Annual Return on deposits - NBS 1;
   
   
3. Certificate from the Auditors that the company is in a position to repay the deposits as and when the claims arise;
   
   
4. Quarterly Return on liquid assets;
   
   
5. Half-yearly Return on prudential norms;
   
   
6. Half-yearly ALM Returns by companies having public deposits of Rs. 20 crore and above or with assets of Rs. 100 crore and above irrespective of the size of deposits ;
   
   
7. Monthly return on exposure to capital market by companies having public deposits of Rs. 50 crore and above; and
   
   
8. A copy of the Credit Rating obtained once a year along with one of the Half-yearly Returns on prudential norms as at (v) above.

QUES 28. What are the documents or the compliance required to be submitted to the Reserve Bank of India by the NBFCs not accepting/holding public deposits?

ANS 28. The NBFCs having assets of Rs. 100 crore and above but not accepting public deposits are required to submit a Monthly Return on important financial parameters of the company. All companies not accepting public deposits have to pass a board resolution to the effect that they have neither accepted public deposit nor would accept any public deposit during the year.

However, all the NBFCs (other than those exempted) are required to be registered with RBI and also make sure that they continue to be eligible to retain the Registration. Further, all NBFCs (including non-deposit taking) should submit a certificate from their Statutory Auditors every year to the effect that they continue to undertake the business of NBFI requiring holding of CoR under Section 45-IA of the RBI Act, 1934.

RBI has powers to cause Inspection of the books of any company and call for any other information about its business activities. For this purpose, the NBFC is required to furnish the information in respect of any change in the composition of its Board of Directors, address of the company and its Directors and the name/s and official designations of its principal officers and the name and office address of its Auditors. With effect from April 1, 2007, non-deposit taking NBFCs with assets of Rs 100 crore and above were advised to maintain minimum CRAR of 10% and also comply with single/group exposure norms. The companies have to achieve CRAR of 12% by March 31, 2009 and 15% by March 31, 2010.

QUES 29. The NBFCs have been made liable to pay interest on the overdue matured deposits if the company has not been able to repay the matured public deposits on receipt of a claim from the depositor. Please elaborate the provisions.

ANS 29. As per Reserve Bank’s Directions, overdue interest is payable to the depositors in case the company has delayed the repayment of matured deposits, and such interest is payable from the date of receipt of such claim by the company or the date of maturity of the deposit whichever is later, till the date of actual payment. If the depositor has lodged his claim after the date of maturity, the company would be liable to pay interest for the period from the date of claim till the date of repayment. For the period between the date of maturity and the date of claim it is the discretion of the company to pay interest.

QUES 30. Can a company pre-pay its public deposits?

ANS 30. AN NBFC accepts deposits under a mutual contract with its depositors. In case a depositor requests for pre-mature payment, Reserve Bank of India has prescribed Regulations for such an eventuality in the Non-Banking Financial Companies Acceptance of Public Deposits (Reserve Bank) Directions, 1998 wherein it is specified that NBFCs cannot grant any loan against a public deposit or make premature repayment of a public deposit within a period of three months (lock-in period) from the date of its acceptance. However, in the event of death of a depositor, the company may, even within the lock-in period, repay the deposit at the request of the joint holders with survivor clause / nominee / legal heir only against submission of relevant proof, to the satisfaction of the company.

An NBFC subject to above provisions, which is not a problem company, may permit after the lock–in period, premature repayment of a public deposit at its sole discretion, at the rate of interest prescribed by the Bank.

A problem NBFC is prohibited from making premature repayment of any deposits or granting any loan against public deposit/deposits, as the case may be. The prohibition shall not, however, apply in the case of death of depositor or repayment of tiny deposits i.e. up to Rs. 10000/- subject to lock in period of 3 months in the latter case.

QUES 31. What is the liquid asset requirement for the deposit taking companies? Where these assets are kept? Do depositors have any claims on them?

ANS 31. In terms of Section 45-IB of the RBI Act, 1934, the minimum level of liquid asset to be maintained by NBFCs is 15 per cent of public deposits outstanding as on the last working day of the second preceding quarter. Of the 15%, NBFCs are required to invest not less than ten percent in approved securities and the remaining 5% can be in unencumbered term deposits with any scheduled commercial bank. Thus, the liquid assets may consist of Government securities, Government guaranteed bonds and term deposits with any scheduled commercial bank.

The investment in Government securities should be in dematerialised form which can be maintained in Constituents’ Subsidiary General Ledger (CSGL) Account with a scheduled commercial bank (SCB) / Stock Holding Corporation of India Limited (SHICL). In case of Government guaranteed bonds the same may be kept in dematerialised form with SCB/SHCIL or in a dematerialised account with depositories [National Securities Depository Ltd. (NSDL)/Central Depository Services (India) Ltd. (CDSL)] through a depository participant registered with Securities & Exchange Board of India (SEBI). However in case there are Government bonds which are in physical form the same may be kept in safe custody of SCB/SHCIL.

NBFCs have been directed to maintain the mandated liquid asset securities in a dematerialised form with the entities stated above at a place where the registered office of the company is situated. However, if an NBFC intends to entrust the securities at a place other than the place at which its registered office is located, it may do so after obtaining the permission of RBI in writing. It may be noted that liquid assets in approved securities will have to be maintained in dematerialised form only.

The liquid assets maintained as above are to be utilised for payment of claims of depositors. However, deposit being unsecured in nature, depositors do not have direct claim on liquid assets.

QUES 32. Please tell us something about the companies which are NBFCs, but are exempted from registration?

ANS 32. Housing Finance Companies, Merchant Banking Companies, Stock Exchanges, Companies engaged in the business of stock-broking/sub-broking, Venture Capital Fund Companies, Nidhi Companies, Insurance companies and Chit Fund Companies are NBFCs but they have been exempted from the requirement of registration under Section 45-IA of the RBI Act, 1934 subject to certain conditions.

Housing Finance Companies are regulated by National Housing Bank, Merchant Banker/Venture Capital Fund Company/stock-exchanges/stock brokers/sub-brokers are regulated by Securities and Exchange Board of India, and Insurance companies are regulated by Insurance Regulatory and Development Authority. Similarly, Chit Fund Companies are regulated by the respective State Governments and Nidhi Companies are regulated by Ministry of Corporate Affairs, Government of India.

It may also be mentioned that Mortgage Guarantee Companies have been notified as Non-Banking Financial Companies under Section 45 I(f)(iii) of the RBI Act, 1934.

QUES 33. There are some entities (not companies) which carry on activities like that of NBFCs. Are they allowed to take deposits? Who regulates them?

ANS 33. Any person who is an individual or a firm or unincorporated association of individuals cannot accept deposits except by way of loan from relatives, if his/its business wholly or partly includes loan, investment, hire-purchase or leasing activity or principal business is that of receiving of deposits under any scheme or arrangement or in any manner or lending in any manner.

QUES 34. What is a Residuary Non-Banking Company (RNBC)? In what way it is different from other NBFCs?

ANS 34. Residuary Non-Banking Company is a class of NBFC which is a company and has as its principal business the receiving of deposits, under any scheme or arrangement or in any other manner and not being Investment, Asset Financing, Loan Company. These companies are required to maintain investments as per directions of RBI, in addition to liquid assets. The functioning of these companies is different from those of NBFCs in terms of method of mobilisation of deposits and requirement of deployment of depositors' funds as per Directions. Besides, Prudential Norms Directions are applicable to these companies also.

QUES 35. We understand that there is no ceiling on raising of deposits by RNBCs, then how safe is deposit with them?

ANS 35. It is true that there is no ceiling on raising of deposits by RNBCs but every RNBC has to ensure that the amounts deposited and investments made by the company are not less than the aggregate amount of liabilities to the depositors.

To secure the interest of depositor, such companies are required to invest in a portfolio comprising of highly liquid and secure instruments viz. Central/State Government securities, fixed deposits with scheduled commercial banks (SCB), Certificate of deposits of SCB/FIs, units of Mutual Funds, etc.

QUES 36. Can RNBC forfeit deposit if deposit installments are not paid regularly or discontinued?

ANS 36. No Residuary Non-Banking Company shall forfeit any amount deposited by the depositor, or any interest, premium, bonus or other advantage accrued thereon.

QUES 37. Please tell us something on rate of interest payable by RNBCs on deposits and maturity period of deposits?

ANS 37. The amount payable by way of interest, premium, bonus or other advantage, by whatever name called by a RNBC in respect of deposits received shall not be less than the amount calculated at the rate of 5% (to be compounded annually) on the amount deposited in lump sum or at monthly or longer intervals; and at the rate of 3.5% (to be compounded annually) on the amount deposited under daily deposit scheme. Further, a RNBC can accept deposits for a minimum period of 12 months and maximum period of 84 months from the date of receipt of such deposit. They cannot accept deposits repayable on demand.

Q.1. What is RTGS System?

Ans The acronym "RTGS" stands for Real Time Gross Settlement. RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a "real time" and on "gross" basis. This is the fastest possible money transfer system through the banking channel. Settlement in "real time" means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. "Gross settlement" means the transaction is settled on one to one basis without bunching with any other transaction. Considering that money transfer takes place in the books of the Reserve Bank of India, the payment is taken as final and irrevocable.

Q.2. How RTGS is different from National Electronics Funds Transfer System (NEFT)?

Ans NEFT is also an electronic fund transfer system that operate on a deferred net settlement (DNS) basis which settles transactions in batches. In DNS, the settlement takes place at a particular point of time. All transactions are held up till that time. For example, NEFT settlement takes place 6 times a day during the week days (9.30 am, 10.30 am, 12.00 noon. 1.00 pm, 3.00 pm and 4.00 pm) and 3 times during Saturdays (9.30 am, 10.30 am and 12.00 noon). Any transaction initiated after a designated settlement time would have to wait till the next designated settlement time. Contrary to this, in RTGS, transactions are processed continuously throughout the RTGS business hours (9.00 am to 4.30 pm on week days and 9.00am to 12.00 noon on Saturday).

Q.3. Is there any minimum / maximum amount stipulation for RTGS transactions?

Ans The RTGS system is primarily for large value transactions. The minimum amount to be remitted through RTGS is Rs.1 lakh. There is no upper ceiling for RTGS transactions. No minimum or maximum stipulation has been fixed for EFT and NEFT transactions.

Q.4. What is the time taken for effecting funds transfer from one account to another under RTGS?

Ans. Under normal circumstances the beneficiary branches are expected to receive the funds in real time as soon as funds are transferred by the remitting bank. The beneficiary bank has to credit the beneficiary's account within two hours of receiving the funds transfer message.

Q.5. Would the remitting customer receive an acknowledgement of money credited to the beneficiary's account?

Ans The remitting bank receives a message from the Reserve Bank that money has been credited to the receiving bank. Based on this the remitting bank can advise the remitting customer that money has been delivered to the receiving bank.

Q.6. Would the remitting customer get back the money if it is not credited to the beneficiary's account? When?

Ans Yes. It is expected that the receiving bank will credit the account of the beneficiary instantly. If the money cannot be credited for any reason, the receiving bank would have to return the money to the remitting bank within 2 hours. Once the money is received back by the remitting bank, the original debit entry in the customer's account is reversed.

Q.7. Till what time RTGS service window is available?

Ans The RTGS service window for customer's transactions is available from 9.00 hours to 16.30 hours on week days and from 9.00 hours to 12.00 noon on Saturdays i.e. to accept the customer transactions for settlement at the RBI during 9.00 hours to 16.30 hours on week days and between 9.00 hours and 12.00 noon on Saturday. However, the timings between these hours would vary depending on the customer timings the branches have. For inter-bank transactions, the service window is available from 9.00 hours to 18.00 hours on week days and from 9.00 hours to 14.00 hours on Saturdays.

Q.8. What about Processing Charges/Service Charges for RTGS transactions?

Ans While RBI has waived its processing charges for all electronic payment products till March 31, 2009, levy of service charges by banks is left to the discretion of the respective banks
Q.9. What is the essential information that the remitting customer would have to furnish to a bank for the remittance to be effected?

Ans The remitting customer has to furnish the following information to a bank for effecting a RTGS remittance:

1. Amount to be remitted
2. His account number which is to be debited
3. Name of the beneficiary bank
4. Name of the beneficiary customer
5. Account number of the beneficiary customer
6. Sender to receiver information, if any
7. The IFSC code of the receiving branch

Q.10. How would one know the IFSC code of the receiving branch?

Ans The beneficiary customer can obtain the IFSC code from his branch. The IFSC code is also available in the cheque leaf. This code number and bank branch details can be communicated by the beneficiary to the remitting customer.

Q.11. Do all bank branches in India provide RTGS service?

Ans No, all the bank branches in India are not RTGS enabled. As on April 30, 2008 more than 44,000 bank branches are RTGS enabled.
Q.12. Is there any way that a remitting customer can track the remittance transaction?

Ans It would depend on the arrangement between the remitting customer and the remitting bank. Some banks with internet banking facility provide this service. Once the funds are credited to the account of the beneficiary bank, the remitting customer gets a confirmation from his bank either by an e-mail or by a short message on the mobile.

Q.13. How can a remitting customer know whether the bank branch of the beneficiary accepts remittance through RTGS?

Ans For a funds transfer to go through RTGS, both the sending bank branch and the receiving bank branch would have to be RTGS enabled.
Q.14. How much volume and value of transactions are routed through RTGS on a typical day?

Ans On a typical day, RTGS handles about 30,000 transactions a day for an approximate value of Rs.2,00,000 crore.

Q.15. Whom do I can contact, in case of non-credit or delay in credit to the beneficiary account?

Ans Contact your bank / branch. If the issue is not resolved satisfactorily, the Customer Service Department of RBI may be contacted at -
The Chief General Manager,
Reserve Bank of India,
Customer Service Department,
1st Floor, Amar Building, Fort,
Mumbai-400001

Q.1. What is NEFT System?

Ans: National Electronic Funds Transfer (NEFT) system is a nation wide funds transfer system to facilitate transfer of funds from any bank branch to any other bank branch.

Q. 2. Are all bank branches in the system part of the funds transfer network?

Ans: No. As on July 20, 2008, 46363 branches of 87 banks are participating. Steps are being taken to widen the coverage both in terms of banks and branches.

Q.3. Whether the system is centre specific or has any geographical restriction?

Ans: No, there is no restriction of centres or of any geographical area inside the country. The system uses the concept of centralised accounting system and the bank's account, that are sending or receiving the funds transfer instructions, gets operated at one centre, viz, Mumbai only. The individual branches participating in NEFT could be located anywhere across the country, as detailed in the list provided on our website.

Q.4. What is the funds availability schedule for the beneficiary?

Ans: The beneficiary gets the credit on the same Day or the next Day depending on the time of settlement.

Q.5. How does the NEFT system operate?

Step-1: The remitter fills in the NEFT Application form giving the particulars of the beneficiary (bank-branch, beneficiary's name, account type and account number) and authorises the branch to remit the specified amount to the beneficiary by raising a debit to the remitter's account. (This can also be done by using net banking services offered by some of the banks.)

Step-2: The remitting branch prepares a Structured Financial Messaging Solution (SFMS) message and sends it to its Service Centre for NEFT.

Step-3: The Service Centre forwards the same to the local RBI (National Clearing Cell, Mumbai) to be included for the next available settlement. Presently, NEFT is settled in six batches at 0900, 1100, 1200, 1300, 1500 and 1700 hours on weekdays and 0900, 1100 and 1200 hours on Saturdays

Step-4: The RBI at the clearing centre sorts the transactions bank-wise and prepares accounting entries of net debit or credit for passing on to the banks participating in the system. Thereafter, bank-wise remittance messages are transmitted to banks.

Step-5: The receiving banks process the remittance messages received from RBI and effect the credit to the beneficiaries' accounts.

Q.6. How is this NEFT System an improvement over the existing RBI-EFT System?

Ans: The RBI-EFT system is confined to the 15 centres where RBI is providing the facility, where as there is no such restriction in NEFT as it is based on the centralised concept. The detailed list of branches of various banks participating in NEFT system is available on our website. The system also uses the state-of-the-art technology for the communication, security etc, and thereby offers better customer service.

Q.7. How is it different from RTGS and EFT?

Ans: NEFT is an electronic payment system to transfer funds from any part of country to any other part of the country and works on Net settlement, unlike RTGS that works on gross settlement and EFT which is restricted to the fifteen centers only where RBI offices are located.

Q.8. Any limit on the amount of individual transaction?

Ans There is no value limit for individual transactions.

Q.9. What about Processing Charges/Service Charges

Ans While RBI has waived the processing charges till March 31, 2009, levy of service charges by banks is left to the discretion of the respective banks.

Q.10. What is IFS Code (IFSC)? How it is different from MICR code?

Ans: Indian Financial System Code (IFSC) is an alpha numeric code designed to uniquely identify the bank-branches in India. This is 11 digit code with first 4 characters representing the banks code, the next character reserved as control character (Presently 0 appears in the fifth position) and remaining 6 characters to identify the branch. The MICR code has 9 digits to identify the bank-branch.

Q.11. How I will know, what is the IFS Code of my bank-branch?

Ans: RBI had since advised all the banks to print IFSC on cheques leaves issued to their customers. You may also contact your bank-branch and get the IFS Code of that branch.

Q.12. Whom I can contact, in case of non-credit or delay in credit to the beneficiary account?
Ans: Contact your bank / branch. If the issue is not resolved satisfactorily, the Customer Service Department of RBI may be contacted on nefthelpdeskncc@rbi.org.in or write to -

The General Manager,
Reserve Bank of India,
National Clearing Centre
First Floor, Free Press House
Nariman Point
Mumbai – 400 027

Q.14. Is it necessary to have a bank account to originate the NEFT transaction?

Ans: Yes, NEFT is an account to account funds transfer system.

Q.15. Is it necessary that the beneficiary should have an account at the destination bank-branch?

Ans: Yes, NEFT is an account to account funds transfer system.

Q.16. Can I receive foreign remittances through NEFT?

Ans: This system can be used only for remitting Indian Rupee among the participating banks within the country.

Q.17. Can I send remittances abroad using the NEFT?

Ans: No

Q.18. Can I originate a transaction to receive funds from another account?

Ans: No

Q.19. Can I send/receive funds from/to NRI accounts?

Ans: Yes, subject to applicability of provisions of FEMA

Q.20. Would the customer receive an acknowledgement of money credited to the beneficiary?

Ans: No, however electronic acknowledgement is generated for the customer that his money is received by the beneficiary at the sender branch.

Q.21. Would the remitting customer get back the money if it is not credited to the beneficiary’s account?

Ans: Yes, the remitting customer gets back the money if it is not credited to the beneficiary account.

Q.22. Till what time NEFT service window is available?

Ans: There are six settlements at 0900, 1100, 1200, 1300, 1500 and 1700 hours on weekdays and 0900, 1100 and 1200 hours on Saturdays.

Q.23. What is the essential information that the remitting customer would have to furnish for the remittance to be effected?

Ans: The essential information that the remitting customer has to furnish is:

Beneficiary details such as beneficiary name and account number
Name and IFSC of the beneficiary bank branch.
Q.24. Is there any way a remitting customer can track the remittance transaction?

Ans: The remitting customer can track the remitting transaction through the remitting branch only, as the remitting branch is informed about the status of the remitted transactions.

Almost all the Indian Banks provide services to the NRIs. There are different types of accounts for them. They are:
Non-Resident (Ordinary) Account - NRO A/c
Non-Resident (External) Rupee Account - NRE A/c
Non-Resident (Foreign Currency) Account - FCNR A/c
An Indian resident who is earning forign exchange can also maintain Foreign Currency account in the country with an authorised dealer bank but only to the maximum limit of 50% of such foreign exchange earnings under the Exchange Earners Foreign Currency Account (EEFC) Scheme.

Some of the FAQs given below will make it easy to understand the services provided by banks to the NRIs.

FAQ's

What are the special features of each bank account?

The special features are as under:

NRO A/c.: The funds, credited to this account, cannot be repatriated outside India in foreign exchange, without prior permission of the Reserve Bank of India. Interest, earned is eligible for repatriation outside India, net of Indian taxes. The remittance of interest (net of taxes) will be permitted by the authorised dealer who maintains the account, if the account holder makes an application to the authorised dealer, in the prescribed form. No RBI permission is required for remittance of interest.

NRE A/c.: The funds, standing to the credit of this account, as well as interest earned thereon, are remittable outside India in free foreign exchange, without permission of the RBI. The interest income is not subject to Indian Income-tax. Credits to the accounts should be in the form of remittance in foreign exchange from outside India, as well as other funds, which are eligible to be remitted outside India, in free foreign exchange. Funds, emanating from local sources, are not eligible to be credited to these accounts, unless these funds are otherwise remittable outside India, in terms of the existing Exchange Control Regulations.

FCNR A/c.: These accounts can be opened in four foreign currencies:
Pounds Sterling;
US Dollars;
Japanese Yen;
Euro.


For the purpose of opening an account, remittance in foreign exchange, in the same currency, should be received in India. The accounts can be opened only as fixed deposits, with a minimum maturity of one year and, a maximum maturity of three years. The principal, as well as interest, earned on these accounts, is remittable outside India, in the same currency or, in other convertible currency, as desired by the account holder. The interest, earned on these deposits, is exempt from Indian Income-tax.


Can Non Resident accounts be opened/ operated by the Power of Attorney holder in India, on behalf of the non-resident?

The accounts cannot be opened by the Power of Attorney holder in India. However, the latter can operate the accounts for the purpose of local payments to be made on behalf of the non-resident account holder. The Power of Attorney holder is not permitted to make gifts from these accounts and, is not allowed to make remittances outside India.


What happens to the status of these accounts when the non-resident holder becomes a person, resident in India?

The accounts are to be re-designed as resident accounts, when the non-resident account holder becomes a person, resident in India. In the case of fixed deposits opened by the account holder, before becoming resident in India, the contracted rate of interest will be paid till maturity of the deposits. Similarly, FCNR deposits will be eligible to be held in respective currencies till maturity of the deposits, even after the non-resident holder become a resident in India. He will, however, cease to get tax exemption on interest on the erstwhile deposits (NRE/FCNR deposits), after he becomes resident in India. In certain situations, it might be advisable for the account holder to convert the account to a Resident Foreign Currency Account Deposit (RFC)


What are the various facilities available to NRIs/OCBs?

The facilities available to NRIs/OCBs for making investment in India are as follows:
opening and maintenance of bank accounts in India;


investment in shares and securities of Indian companies, government securities, units of domestic mutual funds and ,deposits with Indian companies/firms;


investment in immovable properties in India;


investment in proprietorship/partnership concerns in India.



Are NRIs permitted to send remittances outside India out of the assets in India that are inherited by them?

Yes. RBI will consider application from NRIs for remittance of assets, inherited by them in India. Such remittance may be permitted up to US$ 100,000 per year.


Can a person of Indian origin acquire any immovable property in India by way of inheritance?

A person of Indian origin, resident outside India, may acquire any immovable property in India by way of inheritance from a person, resident outside India, who had acquired such property in accordance with the provisions of foreign exchange law in force at the time of acquisition by him or the provisions of Foreign Exchange Management (Acquisition and Transfer of Immovable Property in India) Regulations, 2000. Immovable property, by way of inheritance, can also be acquired by a person of Indian origin resident outside from a person resident in India.


Can NRIs and Overseas Corporate Bodies (OCBs) invest in India?

The Government of India has adopted a liberal policy, with respect to investments by NRIs and OCBs in India. Such investments are allowed, both, through the RBI route and also through the Government route, i.e., through the Foreign Investment Promotion Board (FIPB) NRIs and OCBs are permitted to invest up to 100% equity in real estate development activity and civil aviation sectors. Investment, made by the NRIs and OCBs, are fully repatriable, except in the case of real estate, which has a 3 year lock-in period on original investment and, 16% cap on dividend repatriation. For those proposals that do not qualify under the automatic route, Government approval is granted through FIPB.


What is the extent and application of Foreign Exchange Management Act (FEMA)?

FEMA extends to the whole of India. It also applies to all branches, offices and agencies outside India, owned or controlled by a person, resident in India. It also applies to any contravention, there under, committed in or, outside India, by any person to whom the Act applies.


What is the penalty for contravention of FEMA?

Any person, contravening FEMA, shall be liable, upon adjudication, to a penalty up to three times the sum involved in such contravention, where such amount is quantifiable, or up to Rupees Two hundred thousand, where the amount is not quantifiable. In addition, where such contravention is a continuing one, the person will be liable to further penalty, which may extend to Rupees Five thousand for every day after the first day, during which the contravention continues.


Can a person of Indian origin resident outside India gift properties acquired earlier in terms of the provisions of FERA/FEMA?

Yes. A person of Indian origin resident outside India may transfer residential or commercial property in India by way of gift to a person resident in India or to a person resident outside India who is a citizen of India or to a person of Indian origin resident outside India. A Person of Indian origin resident outside India may also transfer by way of gift agriculture land/farm house/plantation property in India to a person resident in India who is a citizen of India.


Can an NRI account be opened in the name of crew members of shipping companies?

Yes, if their posting is not based in India and they derive their income from other country in foreign currency.

Net Banking is conducting ones banking or bank account online through a computer and a net connection. The system is updated immediately after every transaction automatically. In other words it is said that it is updated 'on-line, real time'. Through netbanking one can check the status of his/her account, place queries and also can be facilitated with a wide range of transactions simultaneously.

In India, the regulatory body has not yet sanctioned virtual bank, in abroad there are banks like EGG Bank or NET Bank, which only have a virtual presence without any physical branches.

Net Banking has three basic features. They are as follows:


The banks offer only relevant informations about their products and services to the mass.


Few banks provide interaction facility between the banks and its customers.


Banks are coming up with arrangements of utility payments, like telephone bills, electricity bills, etc.


The current statistics show that hardly 10 per cent of Indian customers uses the internet for banking. Among all the facilities provided, the maximum of them uses only for checking balance or requesting for a cheque book. Very few customers uses the advance interactive services provided by the banks.

According to HDFC and ICICI Bank, 17 per cent of ICICI customers use the Internet for banking and 10 per cent of HDFC customers prefer it.

Cost of installation of services

For basic features, the cost for providing such services to the banks come around Rs 40 lakh to Rs 50 lakh. For the third level service or sophisticated services, the investments mount to the tune of Rs 4 crore to Rs 5 crore. These investments is just a fraction if compared to the operations of the bank using physical infrastructure.

Services provided by Net Banking
Queries
Check Balance
See Statement
Inquire about cheque status
Ask for a Statement
Ask for a Cheque Book
Inquire about Fixed Deposit
Inquire about TDS details
See Demat Account
Update profile

Transactions
Stop a Cheque
Pay Bills
Ask for a Demand Draft
Transfer funds between your accounts
Transfer funds to a third party
Request for a new Fixed Deposit
Shop Online
Pay Bank Credit Card Dues

Advantages of Net Banking
It removes the traditional geographical barriers as it could reach out to customers of different countries/legal jurisdiction. This has raised the question of jurisdiction of law/supervisory system to which such transactions should be subjected.
It has added a new dimension to different kinds of risks traditionally associated with banking, heightening some of them and throwing new risk control challenges.
Security of banking transactions, validity of electronic contract, customers' privacy, etc., which have all along been concerns of both bankers and supervisors have assumed different dimensions given that Internet is a public domain, not subject to control by any single authority or group of users.
It poses a strategic risk of loss of business to those banks who do not respond in time to this new technology, being the efficient and cost effective delivery.

Businesses are in move. So is to be your money. You may have to thank the banks which are providing banking at the send-of-your-sms. The technology is at its highest level to move your money while you are on the move. If you are having non-WAP enabled mobile handset, you can use the facility of SMS services. The following operations can be easily used by the service provider:
-Balance enquiry
-Last three transactions
-Cheque payment status
-Cheque book request
-Statement request
-Demat - Free Balance Holding
-Demat - Last two Transactions
-Bill Payment

The SMS facility brings peace of mind to customers and opens doors to many more technological possibilities and innovative services. It is very similar to how an ATM works.

To use ATM, a card is necessary and to use SMS service, a mobile phone is needed. In both the cases, secret number is necessary to access.

SMS banking is also very much safe. First, one authenticates the mobile number with the authentications key. Second, the customer uses secret Mobile Personal Iddentification Number (MPIN).

A new concept has been developed by Bank of Punjab Ltd. They call it "Mobile Wallet". With the support of this technology, a customer can make payment and receive payment of account of buy/sell (merchants) through SMS.

In this system, a buyer sends a message for buying and the bank in return sends a message confirming the purchase both to the merchant as well as to the buyer. Debit card number is the key field which is used for the authenticity of the customer.

The processes of the service are simplified as under:


Customer has to send "REG(one space)(Account Number)(one space)(Debit Card Number)" as an SMS to bank's mobile number 9810999992 for registration. For e.g. "REG 06SB11052122 5047531105000109109" Bank will confirm the registration with the return message.


After that customer will visit nearest branch to collect the service brochure and get it filled.


Registration will be a one time process.Once registered, customer would be able to buy things from any of the registered merchant of the bank.


Customer need to send "PAY(one space)(merchant code)(one space)(amount)(one space)(Debit card number)" as an SMS on bank's mobile number 9810999992. For e.g for making a payment of Rs. 56.16 to merchant BOPSTC from card no. 5047531105000109109, Send the following message "PAY BOPSTC 56.16 5047531105000109109"


The transaction will be validated online and immediately funds will be transferred from customer account to merchant account.


Bank would send transaction confirmation as an message to both merchant and customer(buyer).


An SMS report will be sent to both merchant & buyer everyday stating the total number of transaction & total amount of transaction made during previous one day.
Note :- There is obviously a limit to the volume of transactions now.

Some Useful Tips

Generally with 3 invalid login attempts, SMS Banking services are locked. Immediately contact the branch for unlocking the services. In case one forgets the password, obtain a new password from the branch. To log out, choose the "Log out" option in the handset and SMS Banking session ends.

"The account that travels with you". This is needed in today's fast business environment with unending deadlines for fulfillment and loads of appointments to meed and meetings to attend. With mobile banking facilities, one can bank from anywhere, at anytime and in any condition or anyhow. The system is either through SMS or through WAP. (Check out for SMS Banking under different head)

Mobile Banking is the hottest area of development in the banking sector and is expected to replace the credit/debit card system in future. In past two years, mobile banking users has increased three times if we compare the use of either debit card or credit card. Moveover 85-90% mobile users do not own credit cards.

Mobile banking uses the same infrastructure like the ATM solution. But it is extremely easy and inexpensive to implement. It reduces the cost of operation for bankers in comparison to the use of ATMs.

Using compact HTML and WAP technologies, the following operations can be conducted through advanced mobile phones which can is further viewed on channels such as the Internet via the Channel Manager.


Bill payments
Fund transfers
Check balances
Any many more which is also available in SMS Banking
In countries like Korea, two SIM Card is used in mobile phones. One for the telephonic purpose and the other for banking. Bank account data is encrypted on a smart-card chip. About 3.3 million transactions were reported by Bank of Korea in 2004.

The first bank to introduce the ATM concept in India was the Hongkong and Shanghai Banking Corporation (HSBC). It was in the year 1987. Now, almost every commercial banks gives ATM facilities to its customers.

The first bank to cross 1,000 marks in installing ATMs in India is ICICI. SBI is following the concept of 'ATMs in Quantity'. But Private Sector Banks have taken the lead. ICICI, UTI, HDFC and IDBI counts more than 50% of the total ATMs in India.

Public Sector Banks are also taking the installation of ATMs seriously for Indian market. They are either setting up their own ATM centres or entering into tie-ups with other banks. The Corporation Bank has the second largest network of ATMs amongst the Public Sector Banks in India.

The Indian banks have also come up with a 'Swadhan' scheme. Under this scheme, the banks can use each other's ATM at a cost, usually Rs. 35 extra from their customers. The main feature of 'Swadhan Card' are as follows:


No exchange fee charged to change an old ATM card for a Swadhan card.


Rs. 3,000 fixed as the ceiling on withdrawal.


Exception made for select customers who can withdraw up to Rs10,000. Still, this is lower than the average withdrawal of Rs15,000 by regular ATMs.


IBA gives banks the discretion to decide a higher maximum amount for withdrawal.


Transactions conducted through any of the member banks appear on a bank statement, which is given only by your own bank.


All transactions conducted in any of the member banks appear on the bank statement, but only your own bank will provide this.
Note :- No overdraft facility is available on Swadhan cards.

How 'Swadhan Card' works

All informations and transactions are routed among member institutions through a switch. The switch transmits the information and/or data to bank which has issued the card or to its processor, which on the other hand either approves or declines the transaction request and notifies the switch. The decision of the card-issuing bank's is then routed by the switch to the processor of the ATM, which completes the transaction. The accounts among members are settled and account balances are transmitted at the end of the day to each member institution.

Cost of setting ATM center

Approximately Rs.1mn it takes for the setting of an ATM center. Rs.1.2-1.4mn per annum is needed for its maintenance. To keep the cost in equilibrium position, there should be around 250-300 transactions per day per ATM.

To overcome or to reach the break-even point, the banks are always encouraging its customers to use the ATMs. Banks like HDFC and Citibank even charge penalty if a customer visits the branch.

NCR India and HMA Die bold are the main two players in this market to set up ATMs in India. The market, according to them is whopping 100% and they are very optimistic to see 30,000 ATMs in India very soon.

This section is fully dedicated to the Tech Banking. A decade before, it was tough to belief that banking secctor will be at a finger tip. Now its possible. A mobile hand set with a connection is the only instrument needed to make a gateway to your banking transaction, the latest innovation of technology.

Apart from the Mobile Banking, including of SMS Banking, Net Banking and ATMs are the major steps taken by the banks in India towards modernisation. With all these devises and systems, there is a complete freedom to experience.

Check your account, transfer your fund, make payments and what more, do anything of everything what has been followed in physical banking since ages. But this time no standing for hours in front of cash counter and no time boundation in withdrawing your own money.

The last decade witnessed the maturity of India's financial markets. Since 1991, every governments of India took major steps in reforming the financial sector of the country. The important achievements in the following fields is discussed under serparate heads:


Financial markets
Regulators
The banking system
Non-banking finance companies
The capital market
Mutual funds
Overall approach to reforms
Deregulation of banking system
Capital market developments
Consolidation imperative
Now let us discuss each segment seperately.

Financial Markets

In the last decade, Private Sector Institutions played an important role. They grew rapidly in commercial banking and asset management business. With the openings in the insurance sector for these institutions, they started making debt in the market.

Competition among financial intermediaries gradually helped the interest rates to decline. Deregulation added to it. The real interest rate was maintained. The borrowers did not pay high price while depositors had incentives to save. It was something between the nominal rate of interest and the expected rate of inflation.

Regulators

The Finance Ministry continuously formulated major policies in the field of financial sector of the country. The Government accepted the important role of regulators. The Reserve Bank of India (RBI) has become more independant. Securities and Exchange Board of India (SEBI) and the Insurance Regulatory and Development Authority (IRDA) became important institutions. Opinions are also there that there should be a super-regulator for the financial services sector instead of multiplicity of regulators.

The banking system

Almost 80% of the business are still controlled by Public Sector Banks (PSBs). PSBs are still dominating the commercial banking system. Shares of the leading PSBs are already listed on the stock exchanges.

The RBI has given licences to new private sector banks as part of the liberalisation process. The RBI has also been granting licences to industrial houses. Many banks are successfully running in the retail and consumer segments but are yet to deliver services to industrial finance, retail trade, small business and agricultural finance.

The PSBs will play an important role in the industry due to its number of branches and foreign banks facing the constrait of limited number of branches. Hence, in order to achieve an efficient banking system, the onus is on the Government to encourage the PSBs to be run on professional lines.

Development finance institutions

FIs's access to SLR funds reduced. Now they have to approach the capital market for debt and equity funds.

Convertibility clause no longer obligatory for assistance to corporates sanctioned by term-lending institutions.

Capital adequacy norms extended to financial institutions.

DFIs such as IDBI and ICICI have entered other segments of financial services such as commercial banking, asset management and insurance through separate ventures. The move to universal banking has started.

Non-banking finance companies

In the case of new NBFCs seeking registration with the RBI, the requirement of minimum net owned funds, has been raised to Rs.2 crores.

Until recently, the money market in India was narrow and circumscribed by tight regulations over interest rates and participants. The secondary market was underdeveloped and lacked liquidity. Several measures have been initiated and include new money market instruments, strengthening of existing instruments and setting up of the Discount and Finance House of India (DFHI).

The RBI conducts its sales of dated securities and treasury bills through its open market operations (OMO) window. Primary dealers bid for these securities and also trade in them. The DFHI is the principal agency for developing a secondary market for money market instruments and Government of India treasury bills. The RBI has introduced a liquidity adjustment facility (LAF) in which liquidity is injected through reverse repo auctions and liquidity is sucked out through repo auctions.

On account of the substantial issue of government debt, the gilt- edged market occupies an important position in the financial set- up. The Securities Trading Corporation of India (STCI), which started operations in June 1994 has a mandate to develop the secondary market in government securities.

Long-term debt market: The development of a long-term debt market is crucial to the financing of infrastructure. After bringing some order to the equity market, the SEBI has now decided to concentrate on the development of the debt market. Stamp duty is being withdrawn at the time of dematerialisation of debt instruments in order to encourage paperless trading.

The capital market

The number of shareholders in India is estimated at 25 million. However, only an estimated two lakh persons actively trade in stocks. There has been a dramatic improvement in the country's stock market trading infrastructure during the last few years. Expectations are that India will be an attractive emerging market with tremendous potential. Unfortunately, during recent times the stock markets have been constrained by some unsavoury developments, which has led to retail investors deserting the stock markets.

Mutual funds

The mutual funds industry is now regulated under the SEBI (Mutual Funds) Regulations, 1996 and amendments thereto. With the issuance of SEBI guidelines, the industry had a framework for the establishment of many more players, both Indian and foreign players.

The Unit Trust of India remains easily the biggest mutual fund controlling a corpus of nearly Rs.70,000 crores, but its share is going down. The biggest shock to the mutual fund industry during recent times was the insecurity generated in the minds of investors regarding the US 64 scheme. With the growth in the securities markets and tax advantages granted for investment in mutual fund units, mutual funds started becoming popular.

The foreign owned AMCs are the ones which are now setting the pace for the industry. They are introducing new products, setting new standards of customer service, improving disclosure standards and experimenting with new types of distribution.

The insurance industry is the latest to be thrown open to competition from the private sector including foreign players. Foreign companies can only enter joint ventures with Indian companies, with participation restricted to 26 per cent of equity. It is too early to conclude whether the erstwhile public sector monopolies will successfully be able to face up to the competition posed by the new players, but it can be expected that the customer will gain from improved service.

The new players will need to bring in innovative products as well as fresh ideas on marketing and distribution, in order to improve the low per capita insurance coverage. Good regulation will, of course, be essential.

Overall approach to reforms

The last ten years have seen major improvements in the working of various financial market participants. The government and the regulatory authorities have followed a step-by-step approach, not a big bang one. The entry of foreign players has assisted in the introduction of international practices and systems. Technology developments have improved customer service. Some gaps however remain (for example: lack of an inter-bank interest rate benchmark, an active corporate debt market and a developed derivatives market). On the whole, the cumulative effect of the developments since 1991 has been quite encouraging. An indication of the strength of the reformed Indian financial system can be seen from the way India was not affected by the Southeast Asian crisis.

However, financial liberalisation alone will not ensure stable economic growth. Some tough decisions still need to be taken. Without fiscal control, financial stability cannot be ensured. The fate of the Fiscal Responsibility Bill remains unknown and high fiscal deficits continue. In the case of financial institutions, the political and legal structures hve to ensure that borrowers repay on time the loans they have taken. The phenomenon of rich industrialists and bankrupt companies continues. Further, frauds cannot be totally prevented, even with the best of regulation. However, punishment has to follow crime, which is often not the case in India.

Deregulation of banking system

Prudential norms were introduced for income recognition, asset classification, provisioning for delinquent loans and for capital adequacy. In order to reach the stipulated capital adequacy norms, substantial capital were provided by the Government to PSBs.

Government pre-emption of banks' resources through statutory liquidity ratio (SLR) and cash reserve ratio (CRR) brought down in steps. Interest rates on the deposits and lending sides almost entirely were deregulated.

New private sector banks allowed to promote and encourage competition. PSBs were encouraged to approach the public for raising resources. Recovery of debts due to banks and the Financial Institutions Act, 1993 was passed, and special recovery tribunals set up to facilitate quicker recovery of loan arrears.

Bank lending norms liberalised and a loan system to ensure better control over credit introduced. Banks asked to set up asset liability management (ALM) systems. RBI guidelines issued for risk management systems in banks encompassing credit, market and operational risks.

A credit information bureau being established to identify bad risks. Derivative products such as forward rate agreements (FRAs) and interest rate swaps (IRSs) introduced.

Capital market developments

The Capital Issues (Control) Act, 1947, repealed, office of the Controller of Capital Issues were abolished and the initial share pricing were decontrolled. SEBI, the capital market regulator was established in 1992.

Foreign institutional investors (FIIs) were allowed to invest in Indian capital markets after registration with the SEBI. Indian companies were permitted to access international capital markets through euro issues.

The National Stock Exchange (NSE), with nationwide stock trading and electronic display, clearing and settlement facilities was established. Several local stock exchanges changed over from floor based trading to screen based trading.

Private mutual funds permitted

The Depositories Act had given a legal framework for the establishment of depositories to record ownership deals in book entry form. Dematerialisation of stocks encouraged paperless trading. Companies were required to disclose all material facts and specific risk factors associated with their projects while making public issues.

To reduce the cost of issue, underwriting by the issuer were made optional, subject to conditions. The practice of making preferential allotment of shares at prices unrelated to the prevailing market prices stopped and fresh guidelines were issued by SEBI.

SEBI reconstituted governing boards of the stock exchanges, introduced capital adequacy norms for brokers, and made rules for making client or broker relationship more transparent which included separation of client and broker accounts.

Buy back of shares allowed

The SEBI started insisting on greater corporate disclosures. Steps were taken to improve corporate governance based on the report of a committee.

SEBI issued detailed employee stock option scheme and employee stock purchase scheme for listed companies.

Standard denomination for equity shares of Rs. 10 and Rs. 100 were abolished. Companies given the freedom to issue dematerialised shares in any denomination.

Derivatives trading starts with index options and futures. A system of rolling settlements introduced. SEBI empowered to register and regulate venture capital funds.

The SEBI (Credit Rating Agencies) Regulations, 1999 issued for regulating new credit rating agencies as well as introducing a code of conduct for all credit rating agencies operating in India.

Consolidation imperative

Another aspect of the financial sector reforms in India is the consolidation of existing institutions which is especially applicable to the commercial banks. In India the banks are in huge quantity. First, there is no need for 27 PSBs with branches all over India. A number of them can be merged. The merger of Punjab National Bank and New Bank of India was a difficult one, but the situation is different now. No one expected so many employees to take voluntary retirement from PSBs, which at one time were much sought after jobs. Private sector banks will be self consolidated while co-operative and rural banks will be encouraged for consolidation, and anyway play only a niche role.

In the case of insurance, the Life Insurance Corporation of India is a behemoth, while the four public sector general insurance companies will probably move towards consolidation with a bit of nudging. The UTI is yet again a big institution, even though facing difficult times, and most other public sector players are already exiting the mutual fund business. There are a number of small mutual fund players in the private sector, but the business being comparatively new for the private players, it will take some time.

We finally come to convergence in the financial sector, the new buzzword internationally. Hi-tech and the need to meet increasing consumer needs is encouraging convergence, even though it has not always been a success till date. In India organisations such as IDBI, ICICI, HDFC and SBI are already trying to offer various services to the customer under one umbrella. This phenomenon is expected to grow rapidly in the coming years. Where mergers may not be possible, alliances between organisations may be effective. Various forms of bancassurance are being introduced, with the RBI having already come out with detailed guidelines for entry of banks into insurance. The LIC has bought into Corporation Bank in order to spread its insurance distribution network. Both banks and insurance companies have started entering the asset management business, as there is a great deal of synergy among these businesses. The pensions market is expected to open up fresh opportunities for insurance companies and mutual funds.

It is not possible to play the role of the Oracle of Delphi when a vast nation like India is involved. However, a few trends are evident, and the coming decade should be as interesting as the last one.

Visa has recently introduced the 'Visa Money Transfer' option for its savings and current account holder of any bank with a visa debit card. This facility helps its customer to transfer funds from his bank account to any visa card, either debit or credit within India.

A Visa Money Transfer is of similar kind, in many respects, to the third-party fund transfer option given by some banks to its account holders through e-cheque, but this is restricted to only visa cardholders.

How to transfer money?


Log on to your bank account through your respective bank websites.


Fill the beneficiary details like visa card numbers, name, address and then specify the amount that needs to be transferred. For bank account specify the visa card number and credit card number for paying credit card bill.


Click on to VISA Transfer Payments button.


Transfer immediately or on schedule date. Your account will be debited according to the date mentioned.


Notable points of Visa Money Transfer

The time taken for money transfers could be the same or even more than that of a demand draft i.e. two or three days or even more.


Currently there are no charges but limits has been set by certain banks on the current transfers.


It is available in 150 cities across the country now.


The transferred amount can neither be changed nor stopped once it is initiated

Beside lending and depositing money, banks also carry money from one corner of the globe to another. This act of banks is known as transfer of money. This activity is termed as remittance business. Banks generally issue Demand Drafts, Banker's Cheques, Money Orders or other such instruments for transferring the money. This is a type of Telegraphic Transfer or Tele Cash Orders.

It has been only a couple of years that banks have jumped into the money transfer businessess in India. The international money transfer market grew 9.3% from 2003 to 2004 i.e. from US$213 bn. to US$233 bn. in 2004. Economists say that the market of money transfer will further grow at a cumulative 10.1% average growth rate through 2008.

With the use of high technology and varieties of product it seems that "Free" money transfers will become commonplace. We will see more bundling of tailored money services by banks and non-traditional entrants that will include "free" money transfers. Many banks will even use money transfer services as loss-leaders inorder to generate account openings and cross-sell opportunities. The price evolution of money transfer products for banks will be similar to that of consumer bill pay-the product is worth giving away as an account acquisition tool to win overall market share and establish banking relationships.

ATM money transfer card products have had terrible bank adoption rates since being introduced in the last three to four years. Remittees who are highly educated and have been already been exposed to ATM technology in receiving countries tend to have an interest in this product. Money transfer to India is one of the most important part played by the banks. This service provide peace of mind to either the NRIs or to the visitors to India. Many Indian banks have ATM'S (automatic teller machine), enable to draw foreign currency in India.

By 2007, we will see a good percent of all foreign-born households doing some level of online banking. First-mover banks will start having a window of opportunity to include online transfer functionality within the next couple of years, which currently frequents traditional money transmitters such as Western Union. There is a terrific opportunity for banks and non-banks to offer more robust global inter-institutional funds transfer services online. More than half of Western Union's customers today are already banked, and most do not have an alternative product marketed by their bank that is painless, quick, and cost-effective. That will change as banks offer transfer services through their online channel.