Product Launch-Corporation Bank-Green Money Transfer

  

Product Launch-Corporation Bank-Green Money Transfer

 On 5^th November, 2009, Corporation Bank in partnership with On 5^th November, 2009, Corporation Bank in partnership with Tata Indicom and Paymate   launched an industry first by making person-to-person mobile money transfer a reality(Titlled GREEN MONEY TRANSFER).

This is one step closer to financial inclusion of its  un-banked population. With this service, called Green Money Transfer, any mobile phone user can send or receive money almost instantly via their mobile phone

More details can be obtained at

http://www.paymate.co.in/green/

http://www.tata.com/article.aspx?artid=48AbTWkt4WI=

The Service has launched initially in Kerala. Basing on the responses, the product will be fine-tuned, and rolled nationally.

Kerala is a good choice, as the Rate of Literacy is high, combined with the high Migrant Population.

At present, Tata PCO’s have a presence in 20 circles and more than 200 town. Source- Tata Indicom website.

Rs5,000/- is the limit fixed, this is in accordance with Reserve Bank of India guidelines.

A post on this subject can be accessed @

http://prashantnepayments.blogspot.com/search/label/Mobile%20Banking

The Process Flow is as under

Customers can register for this service at a Green TATA PCO, TVS(True Value Shop (TVS) network) or with Corporation Bank.

Upon registration, they will receive an mPIN to enable them to authorise the transaction.

1. A sender in Mumbai goes to a Green Tata PCO or TVS and places a request of transferring Rs. 5000 to his parents in Pune
2. The sender hands over the cash to the Green Tata PCO or TVS. The PCO or TVS triggers an IVR call to the sender
3. The sender enters his mPIN to authorize the transaction and gets a Transaction code on his mobile to be conveyed to the recipient.
4. The recipient goes to the nearest registered Tata PCO or TVS and shares the transaction code.
5. The PCO or TVS triggers an IVR call to the receiver who enters his/her mPIN to verify the transaction
6. Once the verification is done the cash is handed over to recipient.

The Product seems good, but the following need more clarity:-

01) Charges for the transactions.

02)                       Is this transaction restricted only to TATA Mobile customers, or is it open to anyone with a mobile phone.

03)                       Is the mPin Valid for all transactions or is mPin valid only for single transactions.

04)                       Is the Product available on Public Holidays.

05)                       What happens if the receiver TATA PCO/True Value Shop does not have cash at that moment, when the receiver walks in!
06)         How long will the transaction be valid?

As this is only a Pilot Launch, trust things will be clear in a couple of months.

The success of this product will depend on the marketing and MOW(Mouth of Word) Publicity. However, Tata and Corporation Bank are trustworthy names.

Financial Inclusion: The need for out-of-box thinking.

Financial Inclusion: The need for out-of-box thinking.

What is Financial Inclusion:

Financial Inclusion is the delivery of banking services at affordable costs to vast sections of disadvantaged and low income groups. 

-

Dr. K.C.Chakrabarty, Deputy Governor, Reserve Bank of India, at the  Seminar  20th SKOCH Summit 2009, Mumbai on July 17, 2009, has defined Financial Inclusion as

        “The process of ensuring access to appropriate financial products and services needed by vulnerable groups such as weaker sections and low income groups at an affordable cost in a fair and transparent manner by mainstream Institutional players.”

Towards achieving FI, RBI has taken up numerous steps.

No-frills account, is seen as a major contributor by RBI, in its goal of FI.

The concept of ‘NO-FRILLS’ ACCOUNT, was first mooted by RBI in its Mid-term Review of Annual Policy Statement for the year 2005-06.

The first letter on this subject by RBI, is Lr.No. RBI/2005-06/204
DBOD.No.Leg.BC. 44/09.07.005/2005-06, November 11, 2005, addressed to All Scheduled Commercial Banks(Excluding RRBs).

Subsequently a similar letter was addressed to RRB’s and UCB’s also.

In RBI’s view, ‘NO-FRILLS’ ACCOUNT  is

QUOTE

basic banking 'no-frills' account either with 'nil' or very low minimum balances as well as charges that would make such accounts accessible to vast sections of population. The nature and number of transactions in such accounts could be restricted, but made known to the customer in advance in a transparent manner. All banks are advised to give wide publicity to the facility of such a 'no-frills' account including on their web sites indicating the facilities and charges in a transparent manner.

UNQUOTE.

Wisely RBI has left it to the banks, to decide the minimum balances/fees/facilites to such ‘NO-FRILLS’ ACCOUNT .

However, it has advised Banks to report quarterly, the opening of such ‘NO-FRILLS’ ACCOUNT ’s

Common Points regarding ‘NO-FRILLS’ ACCOUNT ’s

However, while opening such accounts the customer should be made aware that if at any point of time, the balance in all his/her accounts with the bank (taken together) exceeds Rs.50,000/- or total credits in the accounts exceed Rs.1.00 lakh in a year, no further transaction will be permitted in the account until full KYC procedure in regard to verification of identity and address of the customer through the documents as specified are complied with.

IT Software is available to

n     Throw Alerts when the Balance in all the accounts of the customer in the Bank exceed Rs.40000/-. The Software is customizable.

n     Rejects any Credits(Transfer/Clearing/RTGS/NEFT), when the credits exceed Rs1lakh in a year.

The issue is of the cost of the Software.

Universal Observations about ‘NO-FRILLS’ ACCOUNT

01)                      The ‘NO-FRILLS’ ACCOUNT numbers are not impressive.

02)                     Also, in the ‘NO-FRILLS’ ACCOUNT opened so far, only a few accounts are active.

03)                     A decent Average Balance in the ‘NO-FRILLS’ ACCOUNT is due to balances in 20% of the ‘NO-FRILLS’ ACCOUNT. YES, the 80/20 funda, works here also.

Banks have been reluctant to encourage ‘NO-FRILLS’ ACCOUNT, due to the costs involved in Sourcing/Monitoring.

May be it is time, to offer Incentives to Banks to encourage them to open ‘NO-FRILLS’ ACCOUNT.

What could be the incentives and who has to offer them?

Well, the incentives have to be offered by Reserve Bank of India.

What could be the incentives?

1 BRANCH LICENCE SANCTION ANYWHERE IN INDIA, FOR EVERY 1 LAC ‘NO-FRILLS’ ACCOUNT, OPENED EVERY FINANCIAL YEAR.

What are the safeguards, to ensure only quality ‘NO-FRILLS’ ACCOUNT are opened.

n     A minimum of  5 transactions in a 6 month cycle i.e Half year ending 31^st March and 30^th September

n     Accounts closed within 1 year of opening, to be less than 10%.

Few Links to various Bank’s ‘NO-FRILLS’ ACCOUNT ’s offerings.

Please note that I am not canvassing for any bank, I am only interested in ePayments

http://www.icicibank.com/Pfsuser/icicibank/depositproducts/nofrillsaccount/nf_faq.htm

http://www.standardchartered.co.in/personal/accounts/en/no-frills-acc.html

http://www.hdfcbank.com/personal/accounts/savings_accounts/no_frills_account/nofrills_acc.html

http://www.iob.in/No_Frills_Account.aspx

http://www.axisbank.com/personal/accounts/azaadinofrills/Azaadi-No-Frills.asp

http://www.federalbank.co.in/content/DisplayContentDetails.aspx?id=645

http://www.barclays.in/consumer_banking/no_frills_ac.htm

http://www.chinatrustindia.com/frill.html

http://www.yesbank.in/savings_nofrillsaccount.htm

http://www.ucobank.com/deposit.htm

http://www.indorebank.org/nofrills.htm

http://www.online.citibank.co.in/portal/newgen/seo/banking/citigold/no_frills_account.htm

http://www.kotak.com/Kotak_BankSite/personal/deposits/sa_easy.htm

http://www.saraswatbank.com/view_section.jsp?lang=0&id=0,4,6,104

http://www.kvb.co.in/scripts/Common.asp?Page=nofrillcontent.asp

http://www.tmb.in/d_janatha.htm

http://www.lvbank.com/nofrills.aspx

http://www.csb.co.in/asp/0100text.asp?pageId=135&headId=135

http://www.allahabadbank.com/5-banking.asp

http://www.jkbank.net/customerSaveDepositSchemes.php

http://www.bankofindia.com/nofrill.aspx

http://www.abnamro.co.in/India/May-I-Help/Service-Ch/No-Frills/SOB-NOFRILLS.pdf

http://www.corpbank.com/asp/0100text.asp?presentID=392&headID=0

http://www.unitedbankofindia.com/deposit-schemes.asp#UnitedBasicSBAccount

http://www.bankofrajasthan.com/bor/wcms/en/home/personal-banking/deposits/accounts/small.html

http://www.statebankofmysore.co.in/downloads/depacs-bcsbi.pdf

https://www.obcindia.co.in/obcnew/site/inner.aspx?status=2&menu_id=28

http://www.canarabank.com/english/Scripts/DepositAccounts.aspx

http://www.bankofmaharashtra.in/whats_new.asp

‘NO-FRILLS’ Account’s, can improve the ePayments turnover of the Bank, as a Bank Account is mandatory to receive ePayments.

Types of Physical Cheque Clearing

 

What are the Types of Physical Cheque Clearing.

Ans: In India, Physical Cheque Clearing can be divided into 4 types.

01)                      Manual—yes, Manual, in few locations in North East.

02)                     MMBCS

03)                     MICR

04)                     CTS.

As on 30^th September, 2009, there are 1137 Clearing Houses in India.

Reserve Bank of India, conducts the Clearing Operations in the 4 Metros i.e Delhi, Calcutta, Chennai and Mumbai.

In all other locations, a Public Sector Bank(PSB), conducts the same. Private Sector Banks have not entered this arena. Though in few Centrtes, Private Sector Banks, have been trained as a Stand-by. This occasion might arise, when the Local PSB staff conducting the Clearing House, are on strike.

Total Number of Clearing Houses as on 30th September, 2009	1137
Manual	8
MICR	66
MMBCS	1063
CTS          .	Only Delhi at present, MICR also functions here

Very briefly, I will now give an overview of the above. However, MICR, CTS have to be dealt in depth, and hence will cover them in separate Posts.

Manual Clearing: Physical Exchange of instruments across the counter, with manual tallying.

MICR: Magnetic Ink Character Recognition

Magnetic Ink Character Recognition, or MICR, is a character recognition technology used primarily by the banking industry to facilitate the processing of cheques. The technology allows computers to read information (such as account numbers) off of printed documents. Unlike barcodes or similar technologies, however, MICR codes can be easily read by humans.

MICR was introduced to the world in USA in the late 50’s and Reserve Bank of India, introduced it India, in the late 80’s in the 4 Metros. In, the last couple of decades, the MCR Technology has spread to 66 Clearing Houses.

During the Y2K, roll-over, all the Reserve Bank of India top officials/Finance Minstry’s top honchos were praying to GOD, that the MICR Processing at the National Clearing Cell, Mumbai, should not collapse. When it performed perfectly, there was relief all round!!

I had the privilege of being witness to the event.

MMBCS: - Magnetic Media Based Clearing Systems.

This is ideal for low volumes.

Banks provide presentation as well as Returns Data in the MMBCS format, and the Settlement is arrived by the MMBCS Package.

Advantages: - 01) Helps the time required for arriving at Settlement.

02) Eliminates tedious manual calculations.

03) The MMBCS Package is standardized all over India, hence, Banks Automation Packages, can easily be configured to deliver MMBCS compatible Data.

04) MMBCS is a DOS based program, and runs on a 486 PC too!!

Disadvantages: 01) Is not feasible, when the volumes in a particular Clearing House are large

02) As the individual cheques have to be dropped in the respective Banks Receptacle, there are chances of wrong-dropping, i.e Andhra Bank cheque being dropped in Corporation Bank  Receptacle.

CTS: Cheque Truncation System.

At present, CTS has been introduced only in New Delhi, and Chennai too might join the list shortly. Personally, I am not a votary of CTS.

Truncation is the process of stopping the flow of the physical cheque issued by a drawer to the drawee branch. The physical instrument will be truncated at some point en-route to the drawee branch and an electronic image of the cheque would be sent to the drawee branch along with the relevant information like the MICR fields, date of presentation, presenting banks etc.

Thus with the implementation of cheque truncation,

the need to move the physical instruments across branches would not be required, except in exceptional circumstances. This would effectively reduce the time required for payment of cheques, the associated cost of transit and delay in processing, etc., thus

speeding up the process of collection or realization of the cheques.

(Source : RBI)

Physical Clearing Process Cycle

What is Clearing Process:-

 Todays Post deals with the Physical Clearing of Cheques.

All payment instructions made through the medium of cheques are debit transactions. A debit transaction occurs when the intended recipient initiates the payment transaction by depositing the instrument in his bank. During the course of a business day a number of instruments are deposited with a bank for collection by its customers. These instruments may be drawn on different branches of various banks and a collecting bank has to physically present the instruments for collection to each drawee bank/branch. The clearing system provides a convenient and well established institutional mechanism to take care of the problem of physical delivery of instruments as well as funds transfer between different banks.

The use of Physical Instruments for funds movement in the country is coming down, but still the number is significant for us to focus in it.

ePayments was born out of Physical Cheques only!!

If the Clearing House is not present, the whole Banking System would collapse!!

Basically there are two types of Clearing

01) Local Clearing

02)                       Out-Station Clearing

A new clearing has been introduced by Reserve Bank of India, in June 2008 i.e Speed Clearing.

01) Local Clearing: Clearing of cheques situated in the jurisdiction of the respective Clearing House.

02)                       Out-Station Clearing: Clearing of Cheques not situated in the jurisdiction of the respective Clearing House.

At present,  outstation cheques are paid through two channels viz. on Collection basis or through National Clearing (Inter-city Clearing). This requires movement of cheques from the Presentation centre (city where the cheque is presented) to Drawee centre (city where the cheque is payable) which increases  the realization time for cheques.

      In India, the clearing system is local and confined to a defined Jurisdiction covering all the banks and branches situated in the area under a particular zone. The clearing house is a voluntary association of banks under the management of a bank where the settlement accounts are maintained. Wherever Reserve Bank of India has its office (and a banking department), the clearing house is managed by it. In the absence of an office of the Reserve Bank, the clearing house is managed by the State Bank of India, its associate banks and in a few cases by public sector banks.

The complete list of Clearing Houses in India, can be accessed @

http://www.rbi.org.in/Scripts/bs_viewcontent.aspx?Id=1056

As on 30/09/2009, 30^th September, 2009, 1139 Clearing Houses were functioning in India.

Time Frame for Collection of Cheques as laid down by Reserve Bank of India. Overall, each Bank is free to form its own Cheque Collection Policy. However, it should be in tune with the following Reserve Bank of India, guidelines.

QUOTE

For local cheques credit and debit shall be given on the same day or at the most the next day of their presentation in clearing. Ideally, in respect of local clearing, banks shall permit usage of the shadow credit afforded to the customer accounts immediately after closure of relative return clearing and in any case withdrawal shall be allowed on the same day or maximum within an hour of commencement of business on the next working day, subject to usual safeguards.

(iii) Timeframe for collection of cheques drawn on state capitals / major cities / other locations to be 7/10/14 days respectively

UNQUOTE

This is an extract from Lr.No.DPSS.CO. (CHD) No. 873 / 03.09.01/ 2008-09, dt.November 24, 2008, to The Chairman & Managing Director / Chief Executive Officer
All Scheduled Commercial Banks.
The complete letter can be accessed @
http://www.rbi.org.in/scripts/NotificationUser.aspx?Mode=0&Id=5008

What is NECS and why is it required?

What is NECS and why is it required?

Ans; NECS stands for National Electronic Clearing Service. It is an inititative launched by Reserve Bank of India, as an improvement over the ECS –Electronic Clearing Service, currently in vogue.

ECS was launched more than two decades back, and the growth has been extraordinary.

Both the ECS Credits and Debit Products have delivered their mandates.

The major drawback of the ECS is that the Sponsor Institution has to submit the Processing Files to each Clearing House separately and also reconcile the entries Clearing House wise.

Presently, ECS system functions in a decentralized manner requiring users to prepare separate set of ECS data centre-wise. Users are required to have tie-up with local sponsor banks for presenting ECS file to each ECS Centre. 

There is no mechanism for the Sponsor Institution to centrally submit the Processing Files or to receive the Return Files. This was hampering the growth of ECS and the transactions were at a stagnant level.

To overcome the drawbacks associated with ECS, Reserve Bank of India, decided to launch the NECS

NECS was launched on 29th September 2008 by  Shri V.Leeladhar, Deputy Governor, Reserve Bank of India. He inaugurated the National Electronic Clearing Service (NECS) at a function at the Reserve Bank's National Clearing Centre (NCC), Mumbai. 
 

The service aims to centralize the Electronic Clearing Service (ECS) operation and bring in uniformity and efficiency to the system.

NECS (Credit) would facilitate multiple credits to beneficiary accounts destination branch at participating centre against a single debit of the account of a user with the sponsor bank.

NECS (Debit) would facilitate multiple debits to destination account holders against single credit to user account. 

The system has a pan-India characteristic leveraging on Core Banking Solutions (CBS) of member banks. This would facilitate all CBS bank branches to participate in the system, irrespective of their locations. 

In the new set-up, users have to prepare one consolidated NECS file and submit it centrally to the NCC, Nariman Point, Mumbai, through their sponsor banks. The sponsor banks would make use of the web-server provided for the purpose. The web-server also has the facility to get on-line data validation so that error free data could be uploaded for processing. 

The files can be uploaded up to the cut-off time one day prior to the settlement day by sponsor banks thus bringing down further the lead time required for processing. The returns also would get processed on the settlement day itself thus on the third day the users would have the status of the transactions. 

As on date 26,000+ bank branches are participating in NECS operations and other bank branches are expected to join in course of time. 

In the first phase, the NECS (Credit) was introduced. In May 2009, more than 2 million transactions were executed through NECS (Credit). Given the benefits offered by NECS, the need for local-ECS at various locations becomes redundant.  Accordingly, local-ECS-Credit at Mumbai has been merged with NECS-Credit.  

The NECS (Debit) would be introduced subsequently, based on the experience and feedback received from member banks. 

As the process flow for NECS (Debit) is different from NECS (Credit), i.e. Validation of Mandates is required for a NECS (Debit) Transaction, the NECS (Debit), was not launched in the first phase.

As Banks have seen the benefits accruing from a NECS (Credits), they have requested Reserve Bank of India, to introduce NECS (Debit) too.

Accordingly Reserve Bank of India vide its letter RBI/2008-09/509 DPSS (CO) EPPD No.2283 / 04.01.04 / 2008-2009 dated June 25, 2009, addressed to The Chairman and Managing Director / Chief Executive Officer of all banks participating in NECS, advised Banks to prepare themselves and also the respective NECS Participants to prepare themselves for the NECS(Debit) Variant too.

The Reserve Bank of India, letter can be accessed at

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=5052&Mode=0

Consumers- Opt ECS and Save precious Time