Funds Transfer Systems and Recent Developments in India

“Funds transfer” in banking means transactions related to the movement of funds from one account of a customer to another beneficiary’s account either in same bank or in another bank. The term includes any payment order issued by the originator’s bank or an intermediary bank intended to carry out the originator’s payment order. Generally, funds transfers in India are done through electronic media like RTGS, NEFT, UPS, and IMPS. This includes the ability to pay for shop services and banks, receive salaries, withdraw money from a bank card, etc.

CBDC:

The Reserve Bank of India (RBI) is developing a Central Bank Digital Currency (CBDC) called the e-rupee, which is a digital version of the Indian rupee. For CBDC purposes RBI will create tokens, and issue them to financial entities called Token Service Providers (TSPs), which are the banks selected for the Digital Rupee Pilot Program. The TSP will then distribute the tokens to interested parties/customers. The digital Rupee tokens will work in the same way as bank notes/coins, and you can use them instead of cash. Central bank digital currencies (CBDCs) come in two main forms: retail and wholesale. A retail CBDC is used by the general public, while a wholesale CBDC is used for transactions between banks and other financial institutions. To know more, read: WHAT IS E-RUPI DIGITAL CURRENCY?

​​​​​​​ Mobile Banking (IMPS):

Mobile banking or IMPS is a service provided by a bank or other financial institution that allows its customers to conduct different types of financial transactions. To know the details read: WHAT IS IMPS/ MOBILE PHONE BANKING?

UPI:

The RBI has also recently envisaged a digital public tech platform for frictionless credit and conversational payments in UPI in its latest statement on development and regulatory policies. The transaction limit of UPI123 Pay increased to Rs 10,000, UPI Lite Wallet limit hiked to Rs 5,000. The Reserve Bank of India (RBI) has also increased the per transaction limit for UPI Lite to Rs 1,000 from Rs 500. To know more read: WHAT IS UNIFIED PAYMENTS INTERFACE (UPI)?

NEFT and RTGS:

The Reserve Bank made the National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement (RTGS) system available in the banks on a 24×7 basis on all days of the year. To know more read: WHAT ARE RTGS & NEFT TRANSACTIONS?

 “Real-time gross settlement (RTGS), National Electronic Fund Transfer (NEFT), and Unified Payments Interface (UPI) are dependent on complex wired networks backed by advanced IT infrastructure. “However, catastrophic events like natural calamities and war have the potential to render these payment systems temporarily unavailable by disrupting the underlying information and communication infrastructure,” a report from RBI said.

The Lightweight Payment and Settlement System (LPSS):

 Lightweight Payment and Settlement System (LPSS) is a payment system developed by the Reserve Bank of India (RBI) to address potential vulnerabilities in existing payment systems. LPSS payment rail conceptualized by the RBI in its annual report 2022–23 seeks to deal with unforeseen natural calamities or any other form of disruption.

The Lightweight Payment and Settlement System (LPSS) is designed to operate independently of conventional technologies and wired networks and to be activated only when necessary. It’s intended to be a backup option for critical transactions, such as government and market-related transactions, during catastrophic events or volatile situations.

CHATBOT:

A chatbot is a software or computer program that simulates human conversation or chatter through text or voice interactions. Banking chatbots are virtual assistants that use artificial intelligence (AI) to provide customers with immediate responses and help with their banking needs. Chatbots can answer questions about accounts, interest rates, fees, branch locations, and more. They can also help with account setup, transferring funds, bill payments, and reporting lost cards.

Some banks in India that use chatbots include:

YES Bank: Yes Robot

Indus Bank: Indus Assist

Kotak Bank: Keya

Axis Bank: Aha

AR and VR:

Augmented Reality (AR) and Virtual Reality (VR) are both technologies that enhance and replace a real-world environment with a simulated one. The main differences between the two are the devices required, the experience, and how much users can control their presence in the real world.AR can be accessed with a smartphone, while VR requires a headset and computer hardware. Augmented reality (AR) and virtual reality (VR) are used in banking to improve customer experience, streamline operations, and enhance security. AR and VR can help customers explore financial products in an interactive way, such as by providing 3D visualizations of loans, credit cards, and investment plans.

CLOUD
Cloud computing, or the cloud, is a technology that provides computing resources and services over the Internet on demand. The technology allows users to access computing resources like storage, servers, networking, software, and analytics without the need to manage physical resources. By implementing cloud-based solutions, banks can minimize reliance on physical infrastructure, leading to cost savings and quicker rollout of new features to meet growing customer needs. Banking workloads, such as risk modeling, data analytics, mobile banking, payments, cyber security systems, etc., are increasingly shifting to the cloud from on-premises data centers.

Multi-cloud strategies are emerging as banks use different cloud platforms based on costs, capabilities, and avoidance of vendor lock-in. Banks are adopting public, private, and hybrid models, depending on regulatory requirements and workload needs. Cloud facilitates collaboration between banks and external partners like fintech firms through seamless data sharing. Cloud-based software helps minimize upfront capital expenditure and converts costs into bank operating expenditures.

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