Remittance Products: CAIIB Retail banking (Module B),Unit 6
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CAIIB exams are conducted twice in a year. Candidates should have completed JAIIB before appearing for CAIIB Exam. Here, we will provide detailed notes of every unit of the CAIIB Exam on the latest pattern of IIBF.
So, here we are providing “Unit 6: Remittance Products” of “Module B: Retail Products” from “Optional Paper: Retail Banking”.
The Article is CAIIB Unit 6: Remittance Products
The two most traditional forms of making remittances used by the banks for making local payments and for remitting funds outstation are:
- Banker’s Cheque
- Demand Draft
♦Electronic Payment Systems
RBI set in motion necessary regulation and payment for electronic funds transfer. There are two sets of access criteria for Banks:
Centralised Payment Systems (CPC)
- Real Time Gross Settlement (RTGC)
- National Electronic Fund Transfer (NEET)
- National Electronic Clearing Service (NECS)
Decentralised Payment Systems (DPS)
- Clearing House at MICR centres
- Electronic Clearing Service (ECS)
Note: Payment and Settlement Systems Act 2007.
♦Real-Time Gross Settlement (RTGS)
- RTGS stands for Real-Time Gross Settlement system which can be described as a transfer system wherein the transfer of money takes place from one bank to any other bank on a “real-time” and a gross basis.
- ‘Real Time’ means the processing of instructions at the time they are received and ‘Gross Settlement’ means that the settlement of funds transfer instructions occurs on a one-to-one basis.
- In RTGS, the transactions are processed continuously on a one-to-one basis 24×7, 365 days. RGTS is most used for high-value transactions and is managed by the Reserve Bank of India. In India, there are more than 110,000 RTGS enabled bank branches.
- It is a safe mode of money transfer with no amount cap
- It is a real-time fund transfer system
- No additional charges
- Available 24×7 from Monday to Sunday
- Customers can initiate the remittances from his / her home or place of work using internet banking
- Transaction through RTGS has legal backing
- Inward transactions – Free, no charge to be levied
- RBI has directed all the banks to not charge any service fee on transfer of funds through RTGS initiated online via internet banking and/or mobile banking
- Outward transactions – ₹2,00,000/- to 5,00,000/-: not exceeding ₹30/-
- Above ₹5,00,000/- not exceeding ₹55/-
- The minimum amount to be transferred via RTGS is ₹2,00,000/- and there is no maximum RTGS limit as RTGS service is meant for high-value transactions.
♦National Electronic Fund Transfer (NEFT)
- National Electronic Fund Transfer (NEFT) is a nation-wide payments system that allows the transfer of funds from one bank’s account to another. With an increased focus on online banking, NEFT has become one of the most popular ways of transferring funds. Since it can electronically transfer funds from any bank branch to any individual, it has eliminated the need to visit a bank branch for transfer of funds.
- NEFT works on a round-the-clock basis i.e. 24×7, 365 days. Earlier, NEFT transactions were available from 8:00 AM to 6:30 PM from Monday to Friday only. However, RBI has regularised that NEFT transactions will be available 24*7 on all days of the year, including holidays.
- Also, after usual banking hours, NEFT transactions are expected to be automated transactions initiated using ‘Straight Through Processing (STP)’ modes by the banks.
NEFT Transfer Limit
- There is no upper or lower limit on the amount that can be transferred via NEFT. You can begin with an NEFT transfer with Rs. 1. There is only a single limitation on the amount of one-time transaction through cash mode, which is Rs. 50,000.
- Depending on each bank, timings and settlement period for each transaction could be different. Ordinarily, if funds are transferred within the same bank account, one can expect to receive them within a matter of a few seconds. However, when such transfers take place between different banks, the settlement time could be longer.
Charges applicable to NEFT
Fund transfer charges applicable to remitter are: (GST excluded)
- 2.50 on transfers up to Rs. 10,000
- 5 on the transfer of Rs. 10,000 to Rs. 1 Lakh
- 15 on the transfer of Rs. 1 Lakh to Rs. 2 Lakh
- 25 on the transfer of more than Rs. 2 Lakh
NEFT v/s UPI v/s RTGS
Given below is a detailed comparison between NEFT, UPI (Unified Payments Interface) and RTGS:
|Minimum Transfer Value||Rs. 1||Rs. 1||Rs. 2 Lakh|
|Payment Option||Online and Offline||Online||Online and Offline|
|Maximum Transfer Value||No limit||Rs. 1 Lakh||No limit|
|Transfer Time||Min. 2 hours||Immediate||Immediate|
|Service Timing||Available 24*7||Available 24*7||Available 24*7|
|Inward Transaction Charges||No Charges||No Charges||No Charges|
|Details Required||Account No. and IFSC Code||VPA of beneficiary and MPIN||Account No. and IFSC Code|
♦National Electronic Clearing Service (NECS)
- Payment and settlement systems in India are used for financial transactions. They are covered by the Payment and Settlement Systems Act, 2007 (PSS Act), legislated in December 2007 and regulated by the Reserve Bank of India and the Board for Regulation and Supervision of Payment and Settlement Systems.
Electronic Clearing Service (ECS Credit)
- Known as “Credit-push” facility or one-to-many facility this method is used mainly for large-value or bulk payments where the receiver’s account is credited with the payment from the institution making the payment. Such payments are made on a timely-basis like a year, half a year, etc. and used to pay salaries, dividends or commissions. Over time it has become one of the most convenient methods of making large payments.
Electronic Clearing Services (ECS Debit)
- Known as many-to-one or “debit-pull” facility this method is used mainly for small value payments from consumers/ individuals to big organizations or companies. It eliminates the need for paper and instead makes the payment through banks/corporates or government departments. It facilitates individual payments like telephone bills, electricity bills, online and card payments and insurance payments. Though easy, this method lacks popularity because consumer awareness is important.
♦Electronic Clearing Services (ECS)
- ECS is an electronic mode of payment / receipt for transactions that are repetitive and periodic in nature. ECS is used by institutions for making bulk payment of amounts towards distribution of dividend, interest, salary, pension, etc., or for bulk collection of amounts towards telephone / electricity / water dues, cess / tax collections, loan instalment repayments, periodic investments in mutual funds, insurance premium etc. Essentially, ECS facilitates bulk transfer of monies from one bank account to many bank accounts or vice versa. ECS includes transactions processed under National Automated Clearing House (NACH) operated by National Payments Corporation of India (NPCI).
Categories of ECS
- Local ECS – this is operating at 81 centres / locations across the country. At each of these ECS centres, the branch coverage is restricted to the geographical coverage of the clearing house, generally covering one city and/or satellite towns and suburbs adjoining the city.
- Regional ECS – this is operating at 9 centres / locations at various parts of the country. RECS facilitates the coverage all core-banking-enabled branches in a State or group of States and can be used by institutions desirous of reaching beneficiaries within the State / group of States.
- National ECS – this is the centralized version of ECS Credit which was launched in October 2008. The Scheme is operated at Mumbai and facilitates the coverage of all core-banking enabled branches located anywhere in the country. This system too takes advantage of the core banking system in banks.
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