Digital Banking

1. Dr.K.Karthikeyan,
Vice Principal, Associate Professor and Head,
PG and Research Department of Commerce
Vivekananda College,
Tiruvedagam West, Madurai – 625 234
Mobile: +91-9865074994
Email: karthikeyan.madurai@gmail.com

2. ▪ India will contribute 2.2% to the world's digital
payments market by 2023
▪ Indian banking industry will be the world’s third
largest by 2025
▪ Share of Banking in total Banking, Financial
Services and Insurance (BFSI) Employment is
27.5% and is projected to create up to 2 million
new jobs in the next 5-10 years
▪ India is the 5th Largest Life Insurance Market in
the World
▪ Share of Private Life Insurance companies
increased from 2% in 2003 to 36.25% in 2022.
▪ 24 Life Insurance Companies and 33 Non-Life
Insurance Companies in India

3. ▪ First Phase – 1948 to 1968
(Pre-Nationalisation Period)
▪ Second Phase – 1969 to 1991
(Post Nationalisation Period)
▪ Third Phase – Since 1992
(Post Reform Period)

4. ▪ RBI Act, 1934
▪ Banking Regulation Act, 1949
▪ Banking Companies (Acquisition and
Transfer of Undertaking) Acts, 1970 and
1980
▪ Negotiable Instruments Act, 1881
▪ Foreign Exchange Management Act, 1999
▪ SARFAESI Act ,2002
▪ Payment and Settlement Systems Act, 2007
▪ Banking Laws (Amendment) Act, 2012

5. ▪ Social Control of Banks (1969)
▪ Nationalisation of Banks (1969 and 1980)
▪ - 14 Banks on 19th July 1969
▪ - 6 Banks on 15th April 1980
▪ Lead Bank Scheme (1969)
▪ Priority Sector Advances Norms by RBI (1972)
▪ Setting up of Regional Rural Banks (1976)
▪ Setting up of NABARD (1982)
▪ Local Area Banks (1996)
▪ Bharatiya Mahila Bank Ltd (2013)
▪ Payments Banks (2015)
▪ Small Finance Banks (2015)

6. Types of Banks
▪ Central Bank (Reserve Bank of India)
▪ Scheduled Commercial banks (151)
▪ Scheduled Co-operative banks (95,157)
Classification of Commercial Banks:
▪ Scheduled (Second Schedule of RBI Act, 1934) - 157
▪ Non-Scheduled - 4
Classification of Scheduled Commercial Banks (150):
▪ Public Sector Banks (12) – Nationalized Banks, SBI
and IDBI Ltd.
▪ Private Sector Banks (22) (Old - 13 and New- 9)
▪ Foreign Banks (46)
▪ Regional Rural Banks (56)
▪ Local Area Banks (2)
▪ Small Finance Banks (12)

8. ▪ Local Area Bank Scheme was introduced in August 1996
▪ To Set up new private local banks with jurisdiction over
two or three contiguous districts
▪ 6 banks were licensed U/S 22 of the Banking Regulation
Act 1949.
▪ The minimum start-up capital was fixed at Rs.5 Crore.
1. Coastal Local Area Bank Ltd. (27th December 1999) - AP
2. Capital Local Area Bank Ltd. (14th January 2000) - Punjab
3. South Gujarat Local Area Bank Ltd., (3rd October 2000)
merged with BOB in 2004
4. Vinayak Local Area Bank Ltd, (October 2000 - Jan. 2002)
5. Krishna Bhima Samruddhi Local Area Bank Ltd.
(8th February 2001) – AP and Karnataka
6. Subhadra Local Area Bank Ltd. - 2004

11. ▪ Public Sector Banks - 12
▪ Private Sector Banks – 22
▪ Foreign Banks – 46
▪ Regional Rural Banks – 56
▪ Urban Cooperative Banks - 1485
▪ Rural Cooperative Banks – 96,000
▪ Payments Banks – 6
▪ Small Finance Banks – 12
▪ Local Area Banks - 2

12. 1921-34
▪ Closed Economy
▪ State-owned Imperial Bank of India – only bank
1934-35
▪ Establishment of RBI as Central Bank of our
country
1936-55
▪ Imperial Bank expanded its network to 480
branches
▪ Imperial Bank was converted into State Bank of
India
1956-2000
▪ Nationalisation of Banks
▪ Entry of private players
▪ Gradual technology upgradation in PSU banks
2000
onwards
▪ Advent of Mobile and Internet banking
▪ Growing FDI in the Indian banking sector
A Paradigm Shift in Indian Banking

13. 1988-1994
Deposit of Cash
Withdrawal of Cash
1995-1999
Mini-Statement
Balance Enquiry
2001-2004
Coupon Dispensing, Fulfilling request from
customers
Electronic Funds Transfer, Touch Screen Menus
2004-2006 Bill Payment, Mobile Recharging
2007-2012
Cheque Deposit with scanning or Truncation
Customized ATMs, Cash Deposit Machine
2013-2015
White Label ATMs
Mobile Banking
Payment Banks
A Paradigm Shift in Indian Banking

14. ▪ Since Yes Bank in 2004, No new banks has
been formed
▪ On June 17, 2015, RBI issued license valid
for 18 months to
1. IDFC Ltd. – Mumbai
2. Bandhan Financial – Kolkata

15. ▪ New Bank of India with Punjab National Bank in 1993
▪ 20th Century Finance Corporation with Centurion Bank
Limited in 1998
▪ Bareilly Corporation Bank with Bank of Baroda in 1999
▪ Bank of Madura with ICICI Bank 2000
▪ Times Bank with HDFC in 2000
▪ ICICI with ICICI Bank in 2001
▪ Global Trust Bank with OBC 2004
▪ IDBI Bank with IDBI Limited in 2004
▪ Centurion Bank and Bank of Punjab merged to form
Centurion Bank of Punjab in 2005
▪ United Western Bank with IDBI Ltd. in 2006
▪ Centurion Bank of Punjab with HDFC in 2008
▪ SBI Subsidiaries with SBI and BMB with SBI in 2017

16. ▪ Can’t offer loans
▪ Can raise deposits of upto Rs. 1 lakh
▪ Can enable transfers and remittances through
a mobile phone.
▪ Can offer services such as automatic payments
of bills, and purchases in cashless, chequeless
transactions through a phone
▪ Can issue debit cards and ATM cards usable
on ATM networks of all banks
▪ Can provide forex cards to travellers, usable
▪ Can also offer card acceptance mechanisms to
third parties such as the ‘Apple Pay’

17. 1. Aditya Birla Nuvo Ltd
2. Airtel M Commerce Services Ltd
3. Cholamandalam Distribution Services Ltd
4. India Post Payment Bank
5. Fino PayTech Ltd
6. National Securities Depository Ltd
7. Reliance Industries Ltd
8. Sun Pharmaceuticals Ltd.
9. Paytm
10. Tech Mahindra Ltd
11. Vodafone M-Pesa

18. 1. Airtel Payments Bank Ltd,
2. India Post Payments Bank Ltd
3. Paytm Payments Bank Ltd.
4. Fino Payments Bank Ltd
5. Jio Payments Bank
6. NSDL Payments Bank

19. ▪ Ajay Shaw Committee on Financial Inclusion report
“Harnessing the India Post Network for Financial
Inclusion” on 16th June, 2010
▪ Set Up India Post Payment Bank in February 2015
▪ Network of 1,54,000 Post Offices (90% in Rural areas)
▪ First ATM by India Post in Chennai on 27th Feb. 2014
▪ 650 Branches of IPPB to be established by Sep. 2017
▪ Total Corpus of IPPB Rs.800 Crore
▪ Largest Deposits - Rs.6 lakhs crore after SBI

20. ▪
RBI Guidelines issued on July 17, 2014
▪
Minimum Paid Capital: Rs.100 Crore
▪
RBI granted licenses for 10 Small Finance
Banks in September 2015
▪
Capital Local Area Bank, Jalandhar, is first
SFB - set April 13, 2016 as the deadline to
start operations
▪
There 12 SFBs with 5, 677 domestic
branches

21. 1. To further financial inclusion by (a)
provision of savings vehicles, and (b) supply
of credit to small business units; small and
marginal farmers; micro and small industries;
and other unorganized sector entities, through
high technology-low cost operations.
2. Existing Non-Banking Finance Companies
(NBFCs), Micro Finance Institutions (MFIs),
and Local Area Banks (LABs) that are owned
and controlled by residents can also opt for
conversion into small finance banks.

22. 1. Au Small Finance Bank Ltd.
2. Capital Small Finance Bank Ltd.
3. Fincare Small Finance Bank Ltd.
4. Equitas Small Finance Bank Ltd.
5. ESAF Small Finance Bank Ltd.
6. Suryoday Small Finance Bank Ltd.
7. Ujjivan Small Finance Bank Ltd.
8. Utkarsh Small Finance Bank Ltd.
9. North East Small Finance Bank Ltd.
10. Jana Small Finance Bank Ltd.
11. Shivalik Small Finance Bank Ltd.
12. Unity Small Finance Bank Ltd.

23. ▪ Set up by the GOI, Ministry of Finance, on 24
March 2011,
▪ Headed by Justice B.N.Srikrishna (former Judge of
the Supreme Court of India)
▪ To review and rewrite the legal-institutional
architecture of the Indian financial sector.
▪ It submitted its Report on 22nd March 2013.
▪ Proposed an Indian Financial Code Bill to create a
unified financial regulator while limiting the role
of RBI to monetary management
▪ Unified Financial Agency (UFA) will be set up by
merging SEBI, Forward Markets Commission,
IRDA, Pension Fund Regulatory and
Development Authority

24. The Draft Indian Financial Code contains 450 clauses and
6 Schedules
FSLRC suggested Seven Agencies -
▪ Reserve Bank of India
▪ Unified Financial Agency
▪ Financial Sector Appellate Tribunal (FSAT)
▪ Resolution Corporation
▪ Financial Redressal Agency
▪ Public Debt Management Agency
▪ Financial Stability and Development Council (FSDC)
Changes suggested:
Securities Appellate Tribunal will be merged with FSAT
DICGC will be merged with Resolution Corporation

25. ▪ The Act was enacted in Parliament on
October 17, 2000
▪ It was amended in December 2008
Issues addressed by IT Act 2000
1. Legal Recognition of Electronic Documents
2. Legal Recognition of Digital Signatures
3. Offences and Contraventions
4. Justice Dispensation System for Cyber
crimes

26. CBS is networking of branches, which
enables customers to operate their accounts,
and avail banking services from any branch of
the Bank on CBS network, regardless of where
they maintains their accounts.
▪ Branch Automation System
▪ ATM Switch and Connected ATM
▪ Call Center System
▪ Internet Banking System
▪ Anywhere and Anytime Banking
▪ [ 24 x 7 ] 24 hours a day, 7 days a week.

27. Parameters 1969 2022
1 No. of Commercial Banks 89 149
2 No. of Bank Offices in India 8,262 1,22,989
Rural 1,833 36,742
Semi Urban 3,342 35,311
Urban 1,584 24,276
Metro 1,503 26,660
3 Population Per Branch (in thousand) 64 10.2
4 Aggregate Deposits ( Rs. Billion) 4,646 1,11,139
5 Bank Credit (Rs. Billion) 3,599 81,162
Progress of Commercial Banks at a Glance
(31st March)

28. ▪ Branch Banking
▪ Electronic Banking
▪ Internet Banking
▪ Phone Banking
▪ Mobile Banking
▪ Digital Banking
▪ Facebook Banking
▪ Tablet Banking
▪ TV Banking
▪ Green Banking
▪ Touch Banking
▪ Virtual Banking

29. A specialized fixed point business unit / hub
having certain minimum digital infrastructure for
delivering digital banking products & services as well as
servicing existing financial products & services digitally,
in both self-service and assisted mode.

31. “Present and Future electronic banking
services provided by a licensed bank for the
execution of banking and financial
transactions over websites, mobile phones
and other digital channels”
Features:
▪ (Front-end only) Neo Banks
▪ Full-Stack (Licensed) Digital Banks
▪ (Automated) Unit of Traditional Banks

32. ▪ Unified Payment Interface (UPI)
▪ Internet Banking
▪ Mobile Banking
▪ Banking Cards – Debit, Credit,
Prepaid and Virtual
▪ Mobile Wallets
▪ Bharat Interface for Money (BHIM)
▪ Point of Sale (PoS)

34. It is an electronic payment system that
enables customers of a bank to conduct a
range of financial transactions through the
bank's website.

35. It is a service provided by a bank that
allows its customers to conduct a range
of financial transactions remotely using
a mobile phone or tablet and using software,
usually called an app, provided by the bank
for the purpose.

36. ▪ Debit Cards
▪ Credit Cards
▪ Prepaid Cards
▪ Smart Cards/Virtual Cards

37. ▪ Internet based Banking that offers
deposit and withdrawal facilities, and
other banking services, through ATMs
or other devices, without having a
physical (brick and mortar) walk-in
premise.
▪ Provision of banking services via means
other than traditional physical branches.
▪ Currently, virtual banking exists in the
forms of ATM, Phone banking, Home
banking and Internet banking.

38. ▪ Automated Teller Machines (ATMs)
▪ Shared Payment Network System
(SPNS)
▪ Electronic Funds Transfer (EFT)
▪ Point of Sale (PoS)
▪ Smart Cards
▪ Stored-Value Cards
▪ Phone banking
▪ Mobile Banking
▪ Internet and Intranet banking

39. ▪ Debit cards are issued by banks and are linked to a bank
account.
▪ The debit cards are used to withdraw cash from an ATM,
purchase of goods and services at Point of Sale (POS)/E-
commerce (online purchase) both domestically and
internationally (provided it is enabled for international
use). However, it can be used only for domestic fund
transfer from one person to another.

40. ▪ Issued by banks / other entities approved by RBI.
▪ The credit limit is in the form of a revolving line of credit and
may or may not be linked to a bank account.
▪ Used for purchase of goods and services at Point of Sale (POS)
and E-commerce (online purchase)/ through Interactive Voice
Response (IVR)/Recurring transactions/ Mail Order Telephone
Order (MOTO).
▪ Used to withdraw cash from an ATM and for transferring funds
to bank accounts, debit cards, credit cards and prepaid cards
within the country.

41. ▪ Issued by the banks / non-banks against the value paid in
advance by the cardholder and stored in such cards which can
be issued as smart cards or chip cards, magnetic stripe cards,
internet accounts, internet wallets, mobile accounts, mobile
wallets, paper vouchers, etc.
▪ Used to withdraw cash from an ATM, purchase of goods and
services at Point of Sale (POS)/E-commerce (online purchase)
and for domestic fund transfer from one person to another.
[Open system prepaid cards]
▪ Issued by authorized non-bank entities can be used only
domestically for purchase of goods and services at Point of Sale
(POS)/E-commerce (online purchase) and for domestic fund
transfer from one person to another. [semi-closed system
prepaid cards. The maximum value that can be stored in any
prepaid card at any point of time is Rs. 50,000/-

43. ▪ A Smart Card, chip card, or Integrated Circuit
Card (ICC), is any pocket-sized card with
embedded integrated circuits.
▪ A plastic card about the size of a credit card, with
an embedded microchip
▪ Provides identification, authentication, data
storage and application processing.
▪ Loaded with data, used for telephone calling,
electronic cash payments, and other applications,
and then periodically refreshed for additional use
▪ Smart Card was introduced in India in 1990
▪ E.g. Petro Card, SIM cards of mobile phones

44. ▪

45. On May 31, 2022
No. of On Site ATMs 1,19,748
No. of Off Site ATMs 1,29,480
No. of ATMs and CRMs 2,49,228
No. of Credit Cards (Lakhs) 736
No. of Debit Cards (Lakhs) 9,177
ATMs, Credit and Debit Cards in India

46. Mobile Wallet is used to send money to Anyone and
Anywhere and pay bills, recharge mobile/ DTH, book
movie/ flight/bus tickets 24x7 on the move.

47. ▪ Recommended by Narasimham Committee and
Khan Committee
▪ Provision of all financial services like Long term
loans to industries, venture capital, underwriting,
brokerage, corporate advisory services, Insurance
by a bank under one umbrella
▪ It is diametrically opposite to Narrow Banking
▪ Facilitating factors: Deregulation, fall in interest
income and the wider business opportunities
▪ Indian Banks already are moving towards Universal
Banking

48. Delivery of banking services and products through
electronic channels, such as the telephone, the internet, the
cell phone, etc. and thereby enhancing the speed of delivery
E-Banking Services:
▪ ATMs
▪ Smart Cards
▪ Tele Banking
▪ Mobile Banking
▪ Internet Banking
▪ Electronic Fund Transfer
▪ Electronic Cheque/Truncated Cheque

49. It is a service provided by a bank or other financial
institution, that enables customers to perform a range of
financial transactions over the telephone, without the need to
visit a bank branch or automated teller machine.
Banking transactions through telephone banking include
obtaining account balances and list of latest
transactions, electronic bill payments, and funds
transfers between a customer's or another's accounts.

50. Social banking on Facebook using
the Facebook App (ICICI Bank – Pockets app on
Facebook)

51. Convenience of opening a bank account at
home or office using advanced application on
tablets avoiding paper work like physical
photograph and photocopies of KYC documents.

52. Enables your bank customers to access on its
financial services like account balance, movements,
credit cards, etc. from their Television. All the
transactions/operations that are usually in other
channels such as: Internet or Mobile Banking, are
available on TV.
▪ Smart Adviser
▪ Smart Shopping
▪ Interactive Services
▪ Security Access
▪ Transaction Security
▪ Simplicity and Comfort

53. ICICI Bank opened 100 fully-automated 'Touch
Banking' branches in 33 cities across India. open on
all days 24x7, allow customers to deposit cash,
withdraw money, deposit cheques and get instant
receipts, transfer funds, open fixed deposits and
generate bank statements. They also offer account
related information through internet banking and
video conferencing.

54. ATM is an electronic
telecommunications device
that enables the customers of
a Bank to perform financial
transactions, particularly cash
withdrawal, without the need
for a human cashier, clerk
or bank teller.

55. Cash Recycling Machine (CRM) is self-
service terminal that enables you to
deposit cash using the ATM cum debit
card without any manual intervention of
the branch officer
 Instant credit of cash deposit into
your own account
 Quick and convenient way to
deposit cash
 Paperless transaction
 The per transaction limit is
Rs.49,900/-
 Upto 200 currency notes can be
deposited in a single transaction
 The CDMonly accepts
denominations of Rs.1000/-,
Rs.500/- & Rs.100/-

56. ▪ To aid financial inclusion and drive ATM penetration in
Tier III – VI Cities, the RBI has permitted in 2012 private
non-bank companies to set up, own and operate their
own brand of ATMs
▪ Under Payment & Settlement Systems Act, 2007
▪ The logo displayed on ATM machine and in ATM premises
pertain to WLA Operator instead of a bank.
Account Information
Mini/Short Statement
PIN change
Request for Cheque Book
Purchase of Re-load Vouchers for Mobiles, Acceptance of
deposits, Regular Bills Payment are not permitted not permitted

57. ▪ Tata Telecommunications
Payment Solutions Ltd.
▪ Prizm Payments Services Pvt.
Ltd.
▪ Muthoot Finance Limited
▪ Vakrangee Ltd.
▪ RiddiSiddhi Bullions Ltd.
▪ BTI Payments Pvt. Ltd.
▪ Srei Infrastructure Fianance
Ltd.
▪ 31,499 White Label ATMs on
March 2022

58. ▪ It is an innovative step
towards paperless
‘Green Banking’ for
deposit, withdrawal and
funds transfers within
the Bank.
▪ NO Pay-in-slips
▪ NO Withdrawal Forms
▪ NO Cheque Leaves
▪ NO Remittance Forms

59. An electronic device that is
used for verifying and
processing credit card
transactions.
POS terminal includes a
computer, a cash register and
other equipment or software
used to sell goods or services.
It also transmits sales data to
be posted to customer
accounts.

61. ▪ An instant 24 x 7 Interbank Electronic Fund
transfer service through Mobile phones.
▪ To transfer money instantly within banks
across India through mobile, internet and
ATM
▪ It was started on 22nd November 2010
▪ Facility provided by National Payment
Corporation of India (PCI)

63. 1. Real Time Gross Settlement (RTGS) system
▪ Transfer of money takes place from one bank to
another on a “real time” and on “gross” basis.
▪ Facility to transfer funds Minimum: Rs.2,00,000; No
Upper Limit
▪ Transfer of funds between 9 a.m. to 4.30 p.m. on week
days and 9 a.m. to 12 p.m. on Saturdays
▪ First bank to offer RTGS online is Punjab National
Bank
2. National Electronic Fund Transfer (NEFT) system
▪ An online system for transfer of funds of banks
▪ No limit (Minimum/Maximum) on amount to be
transferred . Max. Rs.50,000 per transaction
3. Electronic Clearing Service (ECS)

64. ▪ To create one stop solution for all banking
activities
▪ SBI installs internet banking kiosks at its e-corner
centers to perform many cash related transactions
▪ For cash depositing machine, ATM, coin vending
machine, electronic cheque dispensing machine,
segregation of currency, update pass books under
one roof

65. ▪ Bancassurance is the distribution of insurance
products through a bank's distribution channels.
▪ It is the convergence of banking and insurance
industry.
Models of Bancassurance
✓ Referral Model
✓ Corporate Agency Model
✓ Strategic Stake Model
✓ Joint Venture Model

66. Green Banking refers to practices and
guidelines that make banks sustainable in economic,
environment, and social dimensions. It aims to make
banking processes and the use of IT and physical
infrastructure as efficient and effective as possible,
with zero or minimal impact on the environment. It
is a form of banking taking into account the social
and environmental impacts and its main motive is to
protect and preserve environment.
It involves two components (1) managing
environment risk and (2) identifying opportunities
for innovative environmentally oriented financial
products.

68. THANK YOU