Unit 5 banking law - Easy way of understanding the concept PDF

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Unit 5Electronic banking has many names like e banking, virtual banking, online banking, or internet banking. It is simply the use of electronic and telecommunications network for delivering various banking products and services. Through e-banking, a customer can access his account and conduct many ...

Description

Unit 5 Electronic banking has many names like e banking, virtual banking, online banking, or internet banking. It is simply the use of electronic and telecommunications network for delivering various banking products and services. Through e-banking, a customer can access his account and conduct many transactions using his computer or mobile phone. Types of e banking Banks offer various types of services through electronic banking platforms. These are of three types: Level 1 – This is the basic level of service that banks offer through their websites. Through this service, the bank offers information about its products and services to customers. Further, some banks may receive and reply to queries through e-mail too. Level 2 – In this level, banks allow their customers to submit instructions or applications for different services, check their account balance, etc. However, banks do not permit their customers to do any fund-based transactions on their accounts. Level 3 – In the third level, banks allow their customers to operate their accounts for funds transfer, bill payments, and purchase and redeem securities, etc. Most traditional banks offer e-banking services as an additional method of providing service. Further, many new banks deliver banking services primarily through the internet or other electronic delivery channels. Also, some banks are ‘internet only’ banks without any physical branch anywhere in the country. Therefore, banking websites are of two types: 1. Informational Websites – These websites offer general information about the bank and its products and services to customers. 2. Transactional Websites – These websites allow customers to conduct transactions on the bank’s website. Further, these transactions can range from a simple retail account balance inquiry to a large business-to-business funds transfer. The following table lists some common retail and wholesale e-banking services offered by banks and financial institutions: Importance of e-banking We will look at the importance of electronic banking for banks, individual customers, and businesses separately. Banks 1. Lesser transaction costs – electronic transactions are the cheapest modes of transaction

2. A reduced margin for human error – since the information is relayed electronically, there is no room for human error 3. Lesser paperwork – digital records reduce paperwork and make the process easier to handle. Also, it is environment-friendly. 4. Reduced fixed costs – A lesser need for branches which translates into a lower fixed cost. 5. More loyal customers – since e-banking services are customer-friendly, banks experience higher loyalty from its customers. Customers 1. Convenience – a customer can access his account and transact from anywhere 24x7x365. 2. Lower cost per transaction – since the customer does not have to visit the branch for every transaction, it saves him both time and money. 3. No geographical barriers – In traditional banking systems, geographical distances could hamper certain banking transactions. However, with e-banking, geographical barriers are reduced. Businesses 1. Account reviews – Business owners and designated staff members can access the accounts quickly using an online banking interface. This allows them to review the account activity and also ensure the smooth functioning of the account. 2. Better productivity – Electronic banking improves productivity. It allows the automation of regular monthly payments and a host of other features to enhance the productivity of the business. 3. Lower costs – Usually, costs in banking relationships are based on the resources utilized. If a certain business requires more assistance with wire transfers, deposits, etc., then the bank charges it higher fees. With online banking, these expenses are minimized. 4. Lesser errors – Electronic banking helps reduce errors in regular banking transactions. Bad handwriting, mistaken information, etc. can cause errors which can prove costly. Also, easy review of the account activity enhances the accuracy of financial transactions. 5. Reduced fraud – Electronic banking provides a digital footprint for all employees who have the right to modify banking activities. Therefore, the business has better visibility into its transactions making it difficult for any fraudsters to play mischief.

E-banking in India In India, since 1997, when the ICICI Bank first offered internet banking services, today, most new-generation banks offer the same to their customers. In fact, all major banks provide e-banking services to their customers. Popular services under e-banking in India 

ATMs (Automated Teller Machines)

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Telephone Banking

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Electronic Clearing Cards

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Smart Cards

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EFT (Electronic Funds Transfer) System

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ECS (Electronic Clearing Services)

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Mobile Banking

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Internet Banking

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Telebanking

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Door-step Banking Further, under Internet banking, the following services are available in India:

1. Bill payment – Every bank has a tie-up with different utility companies, service providers, insurance companies, etc. across the country. The banks use these tie-ups to offer online payment of bills (electricity, telephone, mobile phone, etc.). Also, most banks charge a nominal one-time registration fee for this service. Further, the customer can create a standing instruction to pay recurring bills automatically every month. 2. Funds transfer – A customer can transfer funds from his account to another with the same bank or even a different bank, anywhere in India. He needs to log in to his account, specify the payee’s name, account number, his bank, and branch along with the transfer amount. The transfer is effected within a day or so. 3. Investing – Through electronic banking, a customer can open a fixed deposit with the bank online through funds transfer. Further, if a customer has a demat account and a linked bank account and trading account, he can buy or sell shares online too. Additionally, some banks allow customers to purchase and redeem mutual fund units from their online platforms as well. 4. Shopping – With an e-banking service, a customer can purchase goods or services online and also pay for them using his account. Shopping at his fingertips.

Remittance Business Apart from accepting deposits and lending money, Banks also carry out, on behalf of their customers the act of transfer of money - both domestic and foreign.- from one place to another. This activity is known as "remittance business" . Banks issue Demand Drafts, Banker's Cheques, Money Orders etc. for transferring the money. Banks also have the facility of quick transfer of money also know as Telegraphic Transfer or Tele Cash Orders. In Remittance business, Bank 'A' at a place 'a' accepts money from customer 'C' and makes arrangement for payment of the same amount of money to either the customer 'C' or his "order" i.e. a person or entity, designated by 'C' as the recipient, through either a Branch of Bank 'A' or any other entity at place 'b'. In return for having rendered this service, the Banks charge a pre-decided sum known as exchange or commission or service charge. This sum can differ from bank to bank. This also differs depending upon the mode of transfer and the time available for effecting the transfer of money. Faster the mode of transfer, higher the charges. Demand Draft A demand draft or "DD" is an instrument most banks in India use for effecting transfer of money. It is a Negotiable Instrument. To buy a "DD" from a Bank, you are required to fill an application form which asks the following information : Type of instrument needed Name of the recipient Name of the sender Amount to be transferred Place where the transferred money is to be paid Mode in which money is to be paid i.e. in cash or through a Bank Account Mode in which you will pay money to the Bank i.e. in cash or by debit to your account

The application form along with the cheque on your account or cash is deposited with the counter clerk who gives you a Demand Draft (which looks like a cheque) for the amount. Tips: Check the particulars like name of the beneficiary, amount, place where payable etc. filled in the DD, match these with what you had filled in the application form. Spellings of the beneficiary's name should be exactly the same.

Get the DD "crossed" for security. Your PAN number will be necessary if the amount of DD exceeds Rs.10,000/= Charges for issuing drafts differ from Bank to Bank. So if your requirements are large, do shop around for best bargain

Banking ombudsman General Awareness section which is heavily filled with Banking Awareness Questions. Here we will discuss some terms related to Banking Ombudsman Scheme; it will help you prepare well for upcoming Banking or insurance Examinations.

The Banking Ombudsman Scheme enables an expeditious and inexpensive forum to bank customers for resolution of complaints relating to certain services rendered by banks. The Banking Ombudsman Scheme is introduced under Section 35 (A) of the Banking Regulation Act, 1949 by RBI with effect from 1995. The Banking Ombudsman is a senior official appointed by the Reserve Bank of India to redress customer complaints against deficiency in certain banking services. As on date, 20th Banking Ombudsmen have been appointed with their offices located mostly in state capitals. Under the Banking Ombudsman Scheme, all Scheduled Commercial Banks, Regional Rural Banks, and Scheduled Primary Co-operative Banks are covered. The Banking Ombudsman Scheme was first introduced in 1995 and was revised in 2002. The current scheme became operative from January 2006.

The Banking Ombudsman can receive and consider any complaint relating to the following deficiency in banking services (including internet banking): 1. Non-payment or inordinate delay in the payment or collection of cheques, drafts, bills etc. 2. Non-acceptance, without sufficient cause, of small denomination notes tendered for any purpose, and for charging of commission in respect thereof. 3. Non-acceptance, without sufficient cause, of coins, tendered and for charging of commission in respect thereof; 4. Non-payment or delay in payment of inward remittances. 5. Failure to issue or delay in issue of drafts, pay orders or bankers’ cheques. 6. Non-adherence to prescribed working hours. 7. Failure to provide or delay in providing a banking facility (other than loans and advances) promised in writing by a bank or its direct selling agents.

8. Delays, non-credit of proceeds to parties accounts, non-payment of deposit or nonobservance of the Reserve Bank. 9. Directives, if any, applicable to rate of interest on deposits in any savings, current or other account maintained with a bank. 10. Complaints from Non-Resident Indians having accounts in India in relation to their remittances from abroad, deposits and other bank-related matters. 11. Refusal to open deposit accounts without any valid reason for refusal. 12. Levying of charges without adequate prior notice to the customer.

A customer can also lodge a complaint on the following grounds of deficiency in service with respect to loans and advances

1. Non-observance of Reserve Bank Directives on interest rates. 2. Delays in sanction, disbursement or non-observance of prescribed time schedule for disposal of loan applications. 3. Non-observance of any other direction or instruction of the Reserve Bank as may be specified by the Reserve Bank for this purpose from time to time. 4. The Banking Ombudsman may also deal with such other matter as may be specified by the Reserve Bank from time to time.

Points to remember 1. The Banking Ombudsman does not charge any fee for filing and resolving customers’ complaints. 2. The amount, if any, to be paid by the bank to the complainant by way of compensation for any loss suffered by the complainant is limited to the amount arising directly out of the act or omission of the bank or Rs 10 lakhs, whichever is lower. 3. The Banking Ombudsman may award compensation not exceeding Rs 1 lakh to the complainant only in the case of complaints relating to credit card operations for mental agony and harassment. 4. If a complaint is not settled by an agreement within a period of one month, the Banking Ombudsman proceeds further to pass an award. Before passing an award, the Banking Ombudsman provides the reasonable opportunity to the complainant and the bank, to present their case.

5. If one is not satisfied with the decision passed by the Banking Ombudsman, one can approach the appellate authority against the Banking Ombudsmen’s decision. 6. If one is aggrieved by the decision, one may, w ithin 30 days of the date of receipt of the award, appeal against the award before the appellate authority. 7. Appellate Authority is vested with a Deputy Governor of the RBI.

As on date, there are 20 Banking Ombudsman centre located in India.

1. Ahmedabad, Gujarat 2. Bengaluru, Karnataka 3. Bhopal, Madhya Pradesh 4. Bhubaneswar, Odisha 5. Chandigarh 6. Chennai, Tamil Nadu 7. Guwahati, Assam 8. Hyderabad, Andhra Pradesh 9. Jaipur, Rajasthan 10. Kanpur, Uttar Pradesh 11. Kolkata, West Bengal 12. Mumbai, Maharashtra 13. New Delhi (I) 14. New Delhi (II) 15. Patna, Bihar 16. Thiruvananthapuram, Kerala 17. Dehradun, Uttarakhand 18. Ranchi, Jharkhand 19. Jammu, Jammu and Kashmir 20. Raipur, Chhattisgarh

o The Banking Ombudsman Scheme was introduced under Section 35 A of the Banking Regulation Act, 1949 by RBI with effect from 1995. o The Banking Ombudsman Scheme was first introduced in India in 1995 and it was revised in 2002. o Current Banking Ombudsman Scheme introduced in 2006. o From 2002 until 2006, around 36,000 complaints have been dealt by the Banking Ombudsmen. o Banking Ombudsman is appointed by Reserve Bank of India. o Banking Ombudsman is a senior official appointed by RBI. He handle and redress customer complaints against deficiency in certain banking services. o The offices of Banking Ombudsman is mostly situated at State Capitals. o Around 15 Banking Ombudsmen have been appointed. o All Scheduled Commercial Banks, Regional Rural Banks and Scheduled Primary Co-operative Banks are covered under the Banking Ombudsman Scheme. o Grounds of Complaints One can file a complaint on the following grounds of complaints: 1. Any excessive delay or non - payment of collection of cheques, drafts, bills etc. 2. Without any sufficient cause non acceptance of small denomination notes. 3. Charging any commission for acceptance of small denominations notes 4. Any delay in payment of inward remittances or non payment of inward remittances. 5. If any banking organization refuses to accept taxes or any delaying in accepting taxes (as required by RBI or Government of India). 6. Any delay in issuing government securities 7. Refusal to issue or redemption of government securities. 8. Without any sufficient reason, forced close the deposit accounts by bankers. 9. If any banker refuse to close the accounts 10. If any banker deliberately delaying in closing the accounts. 11. Non compliance of the provisions of Banking Codes and Standard Board of India.

12. If any banker commits non - observance of Reserve Bank of India's guidelines or instructions or any violation of the directives issued by the Reserve Bank in relation to banking or other services. 13. Without any sufficient cause, non acceptance of coins tendered or charging of commission in respect thereof. 14. Delay or Failure in issue of drafts, pay orders or banker's cheques. 15. Performance of work is not as per prescribed working hours. 16. Delay or failure in providing any bank facility. 17. Complaints file by Non - resident Indians having accounts in India in relation to their remittance from abroad, deposits and other bank related matters. 18. Without any reason, refusal to open deposit accounts. 19. Without adequate prior notice to the customer, charges levied by the banker. 20. Any violation of guidelines or instructions of RBI on ATM/Debit Card/Credit Card operations. 21. Non - disbursement or delay in disbursement of pension. Other Grounds A customer can also file a complaint on the following grounds of deficiency in service with respect to loans and advances: 1. The Banking Ombudsman may also deal with such other matter as may be specified by the Reserve Bank from time to time. 2. Without any valid reason non - acceptance of application of loans. 3. Any violation of the provisions of the fair practices code for lenders as adopted by the bank or Code of Bank's Commitment to Customers, as the case may be. 4. Any type of violation of the instruction, guidelines, recommendations of the RBI 5. If any non - observance of Reserve Bank Directives on interest rates; 6. Any delays in sanction of loan applications

Reasons, when you can File a Complaint 1. If the reply is not received from the bank within a period of one month after the concerned bank has received complaint representation.

2. If bank rejects the complaint. 3. If the complainant is not satisfied with bank's reply. o Banking Ombudsman does not charge any fee for filing and resolving customer's complaints. o If any loss suffered by the complainant then complainant is limited to the amount arising directly out of the act or omission of the bank or Rs. 20 Lakhs whichever is lower.

Recent Amendments o Reserve Bank of India has widen the scope of its Banking Ombudsman scheme, 2006, to include deficiencies arising out of sale of Insurance/ mutual fund/ other third-party investment products by Banks. For example, if IDBI bank is selling mutual funds of Reliance Mutual Funds. If Reliance Mutual funds did not provide the promised services, then IDBI bank will be made liable for the damages. o Under the amended scheme a customer would also be able to file a complaint against the Bank for its non-adherence to RBI instruction with regards to Mobile Banking/Electronic Banking services in India. o The procedure for complaints settled by agreement under the scheme has also been revised. Appeal has now been award for the complaints closed under 13(C) of the existing scheme related to rejection which was not available earlier. Procedure to register a complaint Filing of the complaint The procedure to register a complaint regarding any of the banks by the customers starts from the process of identifying the sort of deficiency of service from the list above mentioned. Who can file the complaint? The complainant may, himself or through an authorised representative make a complaint to the Banking Ombudsman within whose jurisdiction the bank is located. It should be noted that in cases of credit card complaints the complaint will be filed with the Banking Ombudsman within whose territorial jurisdiction the billing address of the complainant or the customer is located. Details to be provided in the complaint The complaint shall be made in writing or in electronic mode (in this case the print out of such complaint shall be taken as a record by the ombudsman) and shall be duly signed by the complainant or his representative in a specified form which shall state the name and address of the complainant, name and address of the branch or office of the bank against which the

complaint has to be filed, the facts of the complaint including the quantum of loss caused to the complainant and the relief which is sought from the ombudsman through the complaint. The complainant is required to file copies of the documents if there are any, to support his claim of the complaint and for the complaint to be maintainable under subclause (3) of the abovementioned clause. Onus on the complainant to go to the Bank first The complainant has the onus to go to the bank first for the redressal of his complaint, therefore, no complaint to the ombudsman shall lie unless the complainant has approached the bank with his complaint in a written representation and the bank has rejected his complaint or the complainant ha...