Idea Transcript
Internship Report on
Project
Impact of Shifting RTGS messages onto SFMS platform at participating Banks
(Project Guide –Shri G. Raghuraj)
Project by
Neeraj Gangwal Industrial & Management Engineering Department IIT Kanpur (College ID-13114014)
Sankhadeep Saha Electronics & Communications Engineering Department IIEST, Shibpur (College ID-110711038)
Acknowledgment
All our efforts in completing this project would not have been possible without the kind support and help of many individuals and organizations. We would like to extend our sincere gratitude to all of them.
We are highly indebted to Institute for Development and Research in Banking Technology (IDRBT) for its guidance and for providing necessary information regarding the project & also for their support in completing the project.
We also express our profound gratitude and deep regards to our guide Shri G. Raghuraj for his exemplary guidance, monitoring and constant encouragement throughout the internship. The blessing, help and guidance given by him from time to time shall carry us a long way in the journey of life on which we are about to embark.
Our thanks and appreciations also go to the teams working at IDRBT who helped in giving inputs and logistics support.
Neeraj Gangwal
Sankhadeep Saha
Certificate
This is to certify that this project report entitled “...Impact of Shifting RTGS messages onto SFMS platforms at participating Banks….” submitted to IDRBT, is a bonafide record of work done by Mr. Neeraj Gangwal and Mr. SankhadeepSaha…” under my supervision from 1st May, 2014 to 4th July, 2014.
Shri. G. Raghuraj General Manager, IDRBT
Abstract
In today’s scenario, Indian banking system is more technology-savvy when compared to a few decades ago. Technology has enabled banking transactions deliver faster, efficient and in a secure manner and enhanced the overall growth of the Indian banking sector. Reserve Bank of India takes leadership in initiating new products for the banking community including payment systems like NEFT/RTGS, ECS, mobile banking, MICR and CTS cheque clearing technology, etc., that offer a wide variety of services to bank customers. In the present project, we have used the statistical tools to analyse the last two year volume of NEFT and RTGS to find out how they are affected by four major categories of banks namely public, private, co-operative and foreign. We have also compared the NEFT and RTGS with other payment system to find out their growth and impact in the last 10 years.
Introduction The revolution of IT industry in banking sector especially in payment systems has provided opportunities to banks to improve and bring new innovative services to the bank customers including reduction in operating costs. E-payment easily handles large volume of transactions in faster and efficient manner with minimum manual intervention. But still, in India a significantly large number of transactions are cash-based. The e-payment systems have made rapid strides in the last few years and the physical cheque based payments are growing at a lesser space. Introduction of technology in banks improved their functioning which include: 1) Low cost of operations. 2) Lesser burden for customers 3) Improvement in customer services 4) Efficiency in funds management 5) Better administration.
Some important payment and settlement services initiated by the RBI in India are: 1) Introduction of card based (Debit, Credit) payment systems in 1990s 2) ECS (Electronic Clearing Service) in late 1990. 3) EFT (Electronic Fund Transfer) started working in 2000. 4) RTGS (Real Time Gross Settlement) in March 2004. 5) NEFT (National Electronic Fund Transfer) as a extension of EFT in 2006. 6) Cheque Truncation System (CTS) in 2007.
1. ECS Electronic mode of payment which is used for bulk transfers from one bank account to many accounts or vice -versa. This service is generally used by utility services and companies for the transfer of large volume of payments, rather than individual transfer. There are two type of ECS service- ECS-Credit and ECS-Debit.
2. MICR (Magnetic Ink Character Recognition) Code: The MICR Code is a numeric code that uniquely identifies a bank-branch. This was introduced in MICR based cheque clearing process and also the ECS Credit/Debit system. This 9-digit code contains the first 3 characters (postal PIN code representing the city; the next 3 the bank and the last 3 the branch. The MICR Code is printed at the bottom ¾ inch white band of the cheque.
3. EFT: By using this scheme one account holder can transfer money to other account of the same or different bank in shortest time. This service has now been merged with the NEFT (National Electronic Fund Transfer) which extends to the whole of India.
4. ATMs (Automated Teller Machine) It is a computerised banks teller counter using telecommunication system for dispensing cash. ATMs are now enabled to give information such checking balance in account, products apart from financial transactions like withdrawing or depositing cash, transfer of funds, etc. Authentication is done by the PIN of the customer by the ATM itself during inserting the magnetic card in the machine, which holds the account information. Currently, there are over 1.10 lakh ATMs in the country.
5. POS/Online Banking POS terminals are given to the retailer or the shopping centres to provide a convenient payment option after purchase of goods by using the credit or the debit cards. There are more than 5 lakh POS terminals in the country. POS also includes online payment gateways. Online payment system also provides facility of purchase the goods online through the debit /credit card or through simply online-banking enabled account.
6. NEFT This service facilitates online transfer of money from one account to other account holder by an individual or by a company across the nation. The accounts may exist in any other bank. The processing of funds takes place in hourly batches by bunching all transactions accumulated during the hour. Currently, it operates in 12 batches on weekdays and in 6 batches on Saturdays. NEFT is not settled on most Sundays. There is no minimum and maximum limit on the money transfer. SFMS (Structured Financial Messaging Solution) is a platform through which all messages of NEFT are transmitted. Benefits of using NEFT include no physical transfer of cash or cheque, etc., it can be originated is processed through Internet, very cost-effective, without the need to visit your bank in person. If transaction is initiated after the day-end time it is processed in the next settlement.
7. RTGS This service is also used for fund transfer from one account to the other account but, the transfer of money takes place in real time or on gross basis. Since RTGS is processed on one to one basis so there is no waiting time in transfer of money. Once the payment is made it is irrevocable. Currently there is minimum limit of 2 lakh rupees per transaction.
8. Mobile Banking Banks which have physical appearance in India are only allowed to provide this service. Mobile phones are used to carry out the transactions. Money is transferred from one account to another through any of the mobile networks. Any type of transaction can be done through mobile-banking. It is also anytime and anywhere banking.
NEFT Process Flow ORIGINATING
ORIGINATING
CUSTOMERS
BANK BRANCH
(Individuals, Corporates, Governments)
ORIGINATING BANK SERVICE CENTRE
• Remittance Source: from bank account or by cash • Location: bank branch or net banking
• Settlement files/reports • Messages to destination banks for credit to customers
Two hour time window for return
Positive confirmation to sender Account number based credits
IDRBT
SFMS Architecture
Mumbai
Eleven hourly settlements in a day
Penal interest for delays
HUB
NATIONAL CLEARING CENTRE
DESTINATION BANK SERVICE CENTRE
BENEFICIARY Core Banking
CUSTOMER
RTGS Process Flow
Customer fills up the RTGS funds transfer request form.
Data transmitted to the Office maintained at Belapur Data flows through to the RBI’s RTGS server.
Remittance Amount and Charges are paid as per the desired mode
Data entry and its authorization
Recipient Bank gets confirmation and credits Customer a/c. Data transmitted to Intraday Liquiduty Management
Our Objectives In present work we aim to study how the different categories of banks (public, private, cooperative and foreign) area effectively using the NEFT and RTGS payment systems. The scope to increase participation can be deduced. The main approach was with the following objectives 1. Performing Statistical Study on NEFT and RTGS payment systems under different bank categories namely (Public, Private, Co-operative and Foreign banks) to find their behavior. 2. Compare the volumes of transactions for the NEFT and RTGS for the Year 2012-14. 3. Performing the Statistical Study on the overall Volumes of Transaction of the two payment system RTGS and NEFT to check the impact of their growth. 4. Analysis of growth in volumes of transactions in NEFT and RTGS as compared to other payment systems.
Methodology There are 21 public, 19 private, 32 foreign and many cooperative banks in India. To conduct our study we took a sample size of 20 banks having 4 categories and each category have 5 banks in it. These banks were selected randomly to avoid any kind of bias. Table 1 shows our sample. The data sourced by us includes monthly volume of transactions for both NEFT and RTGS (including both inward and outward) which was summed up to get annual values for the last two years 2012- 13 and 2013-14. The data was sourced from the Reserve Bank of India’s official website. We have used the notation 1, 2, 3 and 4 to denote the bank categories for the public, private, co-operative and foreign banks respectively. Table 2 shows the data collected for the year 2012-14 for these banks.
Table 1: Sample containing 4 bank-categories and each having 5 banks in it.
Table 2: Volume of transactions for NEFT and RTGS for the last two years (2012-14) for the banks considered in the sample
I. (1) To study the behaviour of NEFT across the 4 different bank categories we proposed the hypothesis as follows
H : Mean of all bank-groups under NEFT variable are equals. i.e, 0
µpublic = µprivate = µco-operative =µforeign H : At least two of these means are not equals. 1
One –way Analysis of Variance (ANOVA) test was performed on the data. SPSS software was used to carry out all the calculations. Results are shown below-
Conclusions of Analysis part for NEFT -
1. µprivate> µpublic> µforeign > µco-operative 2. Here, we see that the significant value (i.e. p-value) for the NEFT variable is 0.109 > 0.05, so we accept the null hypothesis, i.e. there is No Statistically Significant Difference between the means of various bank categories with confidence interval of 95%. In simpler form there is 10.9% of chance that the relationship presented is due to some random chance, and we can't use this dataset to make future plans for these bank categories, we need more data related to the bank categories to make future plans.
I. (2) To study the behavior of RTGS across different bank groups we perform the same procedure as in the previous case of NEFT. H0: Mean of all bank groups under RTGS variable are equals. i.e.,
µpublic= µprivate = µco-operative = µforeign H1: At least two of these means are not equals. Here, we have also used One –way Analysis of Variance (ANOVA) test. SPSS software was used to carry out all the calculations. Results are shown below-
Conclusions of Analysis part for RTGS -
1. µprivate> µpublic> µforeign > µco-operative 2. Here, we can see that the significant value (i.e. p-value) for the RTGS variable is 0.096 > 0.05, so we accept the null hypothesis, and there is No Statistically Significant Differencebetween the means of various bank categories with confidence interval of 95% (similar results as NEFT).
Since there is no statistical significant difference between the means of various bank categories for NEFT and RTGS. The trend has remained staticfor these two payment systems although there has been good growth in volumes.The nature of business of these categories of banks, i.e., public sector banks, private sector banks, co-operative banks and foreign banks gets reflected in the difference in volumes of transactions.
(II) The overall means of volume of RTGS and NEFT for the sample over the last 2 years i.e. from April, 2012 to March, 2014 was studied to accomplish the 2nd objective.
Conclusion for 2nd objective •
It shows that mean statistics NEFT 2012-14 is 65883025.75 (≈ 6.5 crore) and that of RTGS 2012-14 is 8631370.32 (≈ 86 Lakh).
•
We can clearly see that the volume of transaction for NEFT for the given sample is way too high when compared to volume of transaction in RTGS.
(III) Now, We find the growth of volume of NEFT and RTGS transactions by statistically analyzing our sample and also check whether one has any impact on the other or not. We used Statistical Tool called Paired Sample T Test for measuring sample across two different variables.
H0: There is no significant difference between the two variable NEFT and RTGS i.e.
µNEFT = µRTGS H1: There is significant difference between the two variable NEFT and RTGS i.e.
µNEFT ≠ µRTGS Results are shown below-
Conclusion for 3rd objective: From paired sample test Table, we see that the significant value (i.e. p-value is < 0.05) with the confidence interval of 95% so we reject the null hypothesis. Hence there is a significant difference between the means of NEFT and RTGS. It means we can use these means to draw or make any future plans. From paired sample correlation Table, we see that there is a statistically significant positive correlation between NEFT and RTGS as the significant value is 0.00