Concepts in Banking and Accounting of transactions: Accounting in banks, Electronic Banking, RTGS, ATM, MICR, OCR, OMR, and DATANET, Petty Cash, Electronic Clearing Service (ECS), National Electronic Funds Transfer (NEFT) System, Real Time Gross Settlement (RTGS) System, IMPS.

1. UNIT-5
Concepts in Banking and
Accounting of transactions

2. Concepts in Banking and Accounting of
transactions: Accounting in banks,
Electronic Banking, RTGS, ATM, MICR,
OCR, OMR, and DATANET, Petty Cash,
Electronic Clearing Service (ECS),
National Electronic Funds Transfer
(NEFT) System, Real Time Gross
Settlement (RTGS) System, IMPS.

3. Accounting in banks
Banking activities undertaken by banks
include personal banking (non-business
customers), commercial Banking (small
and medium-sized business customers)
and corporate banking (large international
and multinational corporations).

4. According to Charles J. Woelfel:
A complete banking service would comprehend a variety
of functions, including any of the following:
(1) Receive demand deposits and pay customers'
cheques drawn against them, and operate automated
teller machines (ATM);
(2) Receive time and savings deposits, issue negotiable
orders of withdrawal, and pay interest thereon, as well
as provide automatic transfer service (A TS) for funds
from serving accounts to cover cheques;
(3) Discount notes, acceptances and bills of exchange;
(4) Supply credit to business firms with or without security,
issue letters of credit and accept bills drawn there
under;

5. (5) Transfer money at home and abroad;
(6) Make collections and facilitate exchanges;
(7) Issue drafts, cashier's cheques, money orders,
and certify cheques;
(8) Furnish safe deposit vault service;
(9) Provide custodianship for securities and other
valuables;
(10) Provide personal loans, credit and services to
individuals, and lend or discount customer
installment receivables of vendors;
(11) Act in a fiduciary capacity for individuals, as well
as establish common trust funds;

6. (12) Provide corporate trust services (stock
transfer agent, registrar, paying agent, escrow
agent, and indenture trustee);
(13) Act as factors and engage in equipment
leasing;
(14) Deal in Government securities and
underwrite general obligations of
state and municipal securities;
(15) Invest in government and other debt
securities;
(16) Act as fiscal agent or depository for the
Central Government, states and subdivisions
of states;

7. (17) Provide miscellaneous services such as place
orders in securities for customers; act as insurance
agent of incidental to banking transactions; serve
as finder to bring buyers and sellers together; act
as travel agent and issue letters of credit and
traveler's cheques; provide club accounts and other
special purpose accounts; act as agent for
accepting service of legal process of incidental I
normal banking or fiduciary transactions of the
bank; act as pay role issuer; establish charitable
foundations, invest in small business investment
corporations and bank service corporations; deal in
foreign exchange; buy and sell gold bullion under
license from the Treasury Department, and foreign
coin; provide domestic and international
correspondent banking services, etc.

8. Subsidiary Books:
These include the following:
(i) Personal Ledger The bank maintains separate ledgers
for different types of accounts, such as,
(a) Current Accounts Ledger,
(b) Savings Bank Accounts Ledger,
(c) Fixed Deposit Accounts Ledger,
(d) Recurring Deposit Accounts Ledger, etc.
Entries are made in these ledgers directly from the
vouchers.
(ii) Investments Ledger Accounts of all investments are
kept in this ledger.
(iii) Loan Ledger Accounts of all the parties to whom loans
have been granted are kept in this ledger.
(iv) Bills Discounted and Purchased Ledger Accounts of
all the parties whose bills have been dis. counted and
purchase is kept in this ledger.

9. Memorandum Books
In addition to the subsidiary books, a bank
maintains various other books to facilitate
its works, which do not form a part of
double entry system.
Some of these are:
(i) Receiving Cashier's Counter Cash Book
(ii) Paying Cashier's Counter Cash Book
(iii) Cash Balance Book.

10. Principal Books of Account
Cash Book and General Ledger are the
principal Books of Account of any bank.
Cash Book records all cash transactions and
General Ledger contains Control Account
of all subsidiary ledgers and different
Assets am Liabilities Account.
In the general ledger, accounts are arranged
in such a manner that a Balance Sheet can
be easily prepared.

11. Final Accounts
According to Section 29 of the Banking
Regulation Act, 1949, every banking
company is required to prepare with
reference to that year a Balance Sheet and
.a Profit and Loss Account as on the last
working day of the year in the 'Form A' and
'Form B' respectively set out in the 'Third
Schedule' or as near thereto as
circumstances admit.

12. Balance Sheet
With effect from 19th March, 1992, the
Balance Sheet of a bank is to be prepared
as per the new form. In the new form,
assets and liabilities are shown vertically
along with the figures of year. In the top
section capital and liabilities" are shown
and in the bottom section, assets are
shown.

13. SCHEDULES: Details of all schedules are in
below:
A> Capital and Liabilities
1. Capital
2. Reserve and Surplus: It includes Capital
Reserve, Security Premium, Revenue and other
Reserve and. Profit and Loss Account balance.
3. Deposits: It includes Demand deposits, Savings
bank deposits and term deposits.
4. Borrowings: It includes Borrowings from
Reserve Bank of India, other banks, institutions
and agencies.
5. Other Liabilities and Provisions: It includes
Bills payable, inter-office
adjustments (net), interest accrued, provision for bad
debts, provision for taxation.

14. B> Assets
6. Cash and Balances with Reserve Bank of India: Cash
in hand (including foreign currency notes); and balances
with Reserve Bank of India are shown under this item.
7. Balances with Banks and Money at Call and Short
Notice: Balances with banks; money at call and short
notice are shown under this item. Money at call is
refundable at 24 hour's notice and money at short notice
is refundable at 7day's notice.
8. Investments: Investment in Government securities,
other approved securities, shares, debentures and
bonds, subsidiaries, gold etc., are shown under this item.

15. B> Assets
9. Advances: Bills purchased and discounted, cash
credit, overdrafts and loans payable on demand; and
term loans are shown under this item.
10. Fixed Assets: Premises, other fixed assets
(including furniture and fixtures) are shown under this
item.
11. Other Assets: Inter- office adjustments, interest
accrued, tax paid in advance, stationery and stamps,
non-banking assets acquired in satisfaction of claims are
shown under this item
12. Contingent Liabilities: It is shown by way of a
footnote. It represents liabilities not provided in the
Balance Sheet.

16. Profit and Loss Account:
Profit and Loss Account of a banking
company is also prepared in vertical form.
'Form B' of the Third Schedule of the
Banking Regulation Act, 1949 is to be used
for preparing Profit and Loss Account. It is
divided into four sections:
I. Income;
II. Expenditure;
III. Profit/Loss; and
IV. Appropriations.

17. C> Income:
The schedules of Income are:
13. Interest Earned: It includes interest/discount on
advances/bills, income on investments, interest on
balances with RBI etc. It should be noted that according
to the new form, bad debts and provision for bad debts,
other provisions are not to be deducted from the
interest earned. For greater transparency in accounts,
these items are shown as separate items in the Profit
and Loss Account.
14. Other income: It includes commission, exchange
and brokerage, profit on sale of investments, profit on
revaluation of investments, profit on sale of land,
building and other assets, profit on exchange
transaction, and income earned by way of dividends
from subsidiaries, etc.

18. D> Expenditure
15. Interest expended: Interest paid on deposits,
interest on RBI borrowings; interest on interbank
borrowings, etc., are shown under this item.
16. Operating expenses : Salaries and wages of
staff; rent, rates and taxes; printing and
stationery; advertisement; depreciation on banks'
properties; director's fees; auditor's fees; law
charges; postage; repairs; insurance; etc., are
shown under this item. Third item of this section is
provisions and contingencies. Provision for bad
debts, provision for taxation and other provisions
are shown under this item.

19. III. Profit/Loss
In this section, profit/loss for the current year
(difference between income and
expenditure explained above) and brought
forward profit/loss are shown.
IV. Appropriations
In this section, amount transferred to
statutory reserve as per Section 17;
amount transferred to other reserve;
proposed dividend, etc., are shown. The
balance is transferred to the Balance
Sheet.

21. Electronic Banking
Technology is evolving faster than ever, and
as banking and money management
becomes increasingly electronic, it's
important to understand new capabilities –
not only for convenience, but also for
security.
Electronic banking, which is also known as
electronic fund transfer (EFT), refers to
the transfer of funds from one account to
another through electronic methods.

22. 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.

23. The importance of electronic banking for
banks, individual customers, and
businesses separately.
Customers
– Convenience – a customer can access his account
and transact from anywhere 24x7x365.
– Lower cost per transaction – since the customer
does not have to visit the branch for every
transaction, it saves him both time and money.
– No geographical barriers – In traditional banking
systems, geographical distances could hamper
certain banking transactions. However, with e-
banking, geographical barriers are reduced.

24. Banks
―Lesser transaction costs – electronic transactions
are the cheapest modes of transaction
―A reduced margin for human error – since the
information is relayed electronically, there is no
room for human error
―Lesser paperwork – digital records reduce
paperwork and make the process easier to handle.
Also, it is environment-friendly.
―Reduced fixed costs – A lesser need for branches
which translates into a lower fixed cost.
―More loyal customers – since e-banking services
are customer-friendly, banks experience higher
loyalty from its customers.

25. Businesses
– 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.
– 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.
– 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.

26. Businesses
– 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.
– 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.

27. 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)
– Telephone Banking
– Electronic Clearing Cards
– Smart Cards
– EFT (Electronic Funds Transfer) System
– ECS (Electronic Clearing Services)
– Mobile Banking
– Internet Banking
– Telebanking
– Door-step Banking

28. Recently, digital payments in India touched a
new high by reaching a billion monthly
digital payment transactions on the
Universal Payment Interface (UPI).
Payment on UPI platform rose from 0.1
million in October 2016 to 1.3 billion in
January 2020.
Significance of this payment revolution in
India lies in the fact that Google has written
a letter to the US Federal Reserve, asking
them to learn from Indian digital
payments.

29. India was long a financially excluded nation —
only 17% of Indians had a bank account in
2011.
According to the World Bank, it would have
taken 50 more years for 80% of Indians to get
a bank account at the pre-2011 speed.
Reasons for this Payment Revolution
India’s payment revolution comes from:
• Political Will: A clear vision for shifting the
system from low volume, high value and high
cost to high volume, low value and low cost.
This can be seen through Jan Dhana Yojana
and Aadhaar embedding

30. A Proactive Central Bank: Reserve Bank of
India (RBI) created a non-profit market
participant entity and levelling the playing field
between non-banks and banks.
• A paper by the Bank for International Settlements
(‘The Design of Digital Financial Infrastructure:
Lessons From India’) suggests that India demonstrates
how “a central bank can be proactive and equal partners
with private sector counterparts when it comes to
fostering technological innovation in finance”.
Use of Technology: Aimed at balancing trade-
off like ease-of-use vs fraud prevention. This
can be seen through UPI.

31. Elements of Revolution:
Launch of Aadhaar. Aadhaar put simply is one of
the biggest depositories of biometric data in the
world.
In 2010, the Indian government decided it would take full
digital fingerprints and an iris scan from each citizen to
create a digital identity.
About 1.2 billion Indians now have a digital identity.
Aadhaar has provided a solid foundation for banking the
unbanked (financial inclusion).
Aadhaar acted as an “identity rail” i.e. giving
banks and Fintech companies a secure
means to identify would-be customers -- and
the government and businesses an easy way
to pay them.

32. Role of National Payments Corporation of India
(NPCI)
• National Payments Corporation of India (NPCI), an umbrella
organisation for operating retail payments and settlement
systems in India, is an initiative of Reserve Bank of India (RBI)
and Indian Banks’ Association (IBA) under the provisions of
the Payment and Settlement Systems Act, 2007, for creating
a robust Payment & Settlement Infrastructure in India.
• It has been incorporated as a “Not for Profit” Company
under the provisions of Section 25 of Companies Act 1956
(now Section 8 of Companies Act 2013).
• NPCI together with the RBI and Indian Banks Association
(IBA) has established a platform called UPI.
• UPI, in turn, acted as a “payments rail”, it gives those players
access to infrastructure that enables the transfer of funds.
• UPI provides a payment experience that is mobile-
based, low-cost, 24/7, instant, convenient,
interoperable

33. What is UPI?
India has taken a major step towards achieving a
cashless economy with the advent of the Unified
Payment Interface (UPI).
UPI is a single platform that merges various banking
services and features under one umbrella.
It also caters to the “Peer to Peer” collect request
which can be scheduled and paid as per
requirement and convenience.
UPI turns smartphones into a virtual debit card. It
allows real-time bank-to-bank payments to be
made using a mobile number or virtual payment
address (UPI ID).

34. What is UPI?
UPI has made the money transfer process a lot
easier. as there is no need to remember the
receiver’s account number, account type,
IFSC, and bank name.
Instead, money transfer can be made only by
knowing Aadhaar number, mobile phone number
registered with the bank account, or UPI ID.
A UPI ID is a unique identification for a bank
account that can be used to send and receive
funds.

35. RTGS
The acronym 'RTGS' stands for Real Time
Gross Settlement, which can be explained as
a system where there is continuous and real-
time settlement of fund-transfers, individually
on a transaction by transaction basis (without
netting).
'Real Time' means the processing of
instructions at the time they are received;
'Gross Settlement' means that the settlement
of funds transfer instructions occurs
individually.

36. RTGS offers many advantages over the
other modes of funds transfer:
– It is a safe and secure system for funds
transfer.
– RTGS transactions / transfers have no amount
cap.
– The system is available on all days on
24x7x365 basis. There is real time transfer of
funds to the beneficiary account.
– The remitter need not use a physical cheque or
a demand draft.
– The beneficiary need not visit a bank branch
for depositing the paper instruments.

37. – The beneficiary need not be apprehensive
about loss / theft of physical instruments or the
likelihood of fraudulent encashment thereof.
– Remitter can initiate the remittances from his /
her home / place of work using internet
banking, if his / her bank offers such service.
– The transaction charges have been capped by
RBI.
– The transaction has legal backing.

38. RTGS is available 24x7x365 with effect from
December 14, 2020.
The RTGS system is primarily meant for
large value transactions. The minimum
amount to be remitted through RTGS is Rs.
2,00,000/- with no upper or maximum
ceiling.
With effect from July 01, 2019, the Reserve
Bank has waived the processing charges
levied by it for RTGS transactions. Banks
may pass on the benefit to its customers.

39. With a view to rationalise the service charges
levied by banks for offering funds transfer
through RTGS system, a broad framework of
charges has been mandated as under:
a) Inward transactions – Free, no charge to be
levied.
b) Outward transactions – Rs. 2,00,000/- to
5,00,000/- : not exceeding Rs. 24.50/-;
(exclusive of tax, if any)
Above Rs. 5,00,000/- : not exceeding Rs.
49.50/-. (exclusive of tax, if any)
Banks may decide to charge a lower rate but
cannot charge more than the rates prescribed
by RBI.

40. The remitting customer has to furnish the
following information to a bank for initiating
an RTGS remittance:
– Amount to be remitted
– The account number to be debited
– Name of the beneficiary bank and branch
– The IFSC number of the receiving branch
– Name of the beneficiary customer
– Account number of the beneficiary customer
– Sender to receiver information, if any

41. The IFSC number can be obtained by the
remitter (customer) from his / her bank branch.
Alternatively, it is available on the cheque leaf
of the beneficiary. This code number / bank
branch information can be communicated by
the beneficiary to the remitting customer. The
list of IFSCs is also available on the RBI
website at the link
http://rbidocs.rbi.org.in/rdocs/RTGS/DOCs/
RTGEB0815.xlsx
In case of any delay in returning the failed
payment, the originating customer is eligible to
receive compensation at current repo rate plus
2%.

42. Unique Transaction Reference (UTR) number is a 22 character
code used to uniquely identify a transaction in RTGS system.
The Legal Entity Identifier (LEI) is a 20-digit number used to
uniquely identify parties to financial transactions worldwide. It
has been implemented to improve the quality and accuracy of
financial data reporting systems for better risk management.
It is used to create a global reference data system that uniquely
identifies every legal entity in any jurisdiction that is party to a
financial transaction.
It can be obtained from any of the Local Operating Units (LOUs)
accredited by the Global Legal Entity Identifier Foundation
(GLEIF), the body tasked to support the implementation and
use of LEI. In India, LEI can be obtained from Legal Entity
Identifier India Ltd. (LEIL) (https://www.ccilindia-lei.co.in), which
is also recognised as an issuer of LEI by the Reserve Bank.

43. All payment transactions of value Rs. 50
crore and above undertaken by entities
(non-individuals) should include remitter
and beneficiary LEI information from April
1, 2021. Banks should use the ‘Remittance
Information’ field for recording Remitter and
Beneficiary LEI.

44. History of ATM
ATMs arose after out-of-hours cash distribution
developed from bankers' needs in Japan, Sweden,
the United Kingdom, and the United States. Japan
invented the Computer Loan Machine which
supplied cash. And after a few years, Britain
deployed the world’s first cash dispensing
machine in London in 1967.
The machine was put in use by Barclays Bank in
Enfield Town, North London. The machine was
invented by John Shepherd-Barron and the firm
De La Rue.

45. History of ATM
ATMs were introduced to the Indians in the early
1990s aided by foreign banks.
As most of the banks were suffering from a serious
handicap at that time due to lack of a strong
branch network, ATMs appeared to be the best
antidote for the problem.
Since then, innovations in ATM technology have
come a long way and customer receptiveness has
also increased by leaps and bounds.

46. ATM
An ATM, which stands for automated teller
machine, is a specialized computer that
makes it convenient to manage a bank
account holder’s funds.
It allows a person to check account balances,
withdraw or deposit money, print a
statement of account activities or
transactions, and even purchase stamps.

47. ATMs can be on-premise or off-premise. On-
premise ATMs are located in financial
institutions. Clients enjoy more choice,
convenience and availability, while banks
can boost their revenue from transactions,
lessen operational costs and maximize staff
resources.
Off-premise ATMs are typically found in
places such as airports, grocery and
convenience stores and shopping centers
where there is a simple need for cash.

48. ATMs are simple data terminals with four
output and two input devices. They have to
connect to a host processor and
communicate through it.
The host processor works like an Internet
Service Provider (ISP), a portal through
which all the various networks of ATMs
become accessible to the bank account
holder with either a credit card or debit
card.

49. Different types of ATMs in India are:
On-site ATM - ATM Machines which exist within
the premises of the bank.
Off-site ATM - Off-site ATMs means the
machine which operates outside the bank
premises.
Worksite ATM - Those ATMs which are located
within the premises of a company and is
usually meant only for that company’s
employees.
Cash Dispenser - ATM that allow only cash
withdrawals, balance enquiry and mini
statement.

50. Different types of ATMs in India are:
Mobile ATM - This type of ATM is a machine
that moves in different areas for the users.
COVID 19 has led to a surge in the number of
Mobile ATMs.
White Label ATM - White Label ATM means the
automated teller machine which Non-Banking
Financial Companies provide.
Green Label ATM - Green label ATMs are
provided for Agricultural Transaction.
Orange Label ATM - Orange label ATMs are the
machines which are provided for share
transactions.

51. Yellow Label ATM - Yellow label ATM Machine
means the ATM which is provided for online
purchase.
Pink label ATM- These are the ATMs machines
that are provided for women.
Brown label ATM - Brown label Automated
Teller Machines are those ATMs where
hardware and the ATM machine’s lease are
owned by a service provider. However, cash
management and connectivity to banking
networks is offered by the sponsor bank

52. Banks provide ATM cards without any charge at the time of
opening of the bank account. However, banks charge for
using the ATMs.
There is no cost for the initial few transactions but after a
cap level cost is charged in every additional transaction.
The charges of the top banks are as follow:
Bank Per month Free Transactions
Cost after free
Transactions
SBI
5 transactions at SBI ATMs and
3 at Other ATMs
Rs. 25 per transaction
ICICI Bank
Free transaction at all ICICI
ATMs
Rs. 25 per transaction at
all non-ICICI ATMs
HDFC Bank First 4 transactions Rs. 150 per transaction

53. Automated teller machines (ATM) have been
changing over time and the machine’s
technology is becoming more sophisticated to
provide the best experience to the user and
make the transactions safer and secure.
Some of the vital changes are:
– Multipurpose nature of ATM Machine: Unlike in
the past, ATM Machines are not merely providing
the facility of dispensing cash, but today they
provide facilities of depositing the cash, fund
transfer, payments of bills and generating PIN and
mini statements. These are just a few services,
and the banks provide many other sophisticated
services.

54. – Easy to use: The modern ATM Machines are
designed so that it becomes easier to use for
everyone, including illiterate individuals and
specially-abled people. Technology like biometric
identification scanners makes it convenient to use
for almost everyone.
– No language barrier: India is a country with
infinite culture and language. The use of one
language in ATMs becomes a roadblock for many
users. Multilingual or use of many languages in the
ATMs acts as an antidote to this problem. Modern
ATMs are equipped with multiple languages and
the user can choose the language of his choice,
which makes it easier for him to use the machine.

55. The benefits of an ATM card are as follows:
– ATM Machines are conveniently located at multiple
locations. Customers visit the ATM of any bank to
perform any transaction.
– It helps in withdrawing the cash in a matter of
minutes and thus saves time.
– The process of getting an ATM card is hassle-free,
and no documentation is required for an ATM card.
Almost all banks provide ATM cards at the time of
account opening.
– It helps in getting the details of the transactions,
total balance and mini statement.
– Some ATM Machines also provide the facility of
depositing cash and fund transfer.

56. The benefits of an ATM card are as follows:
– ATM is also used in paying utility bills and several
other bills and payments.
– ATM Machine is available 24*7, 365 days a year.
– ATM is safe and secure as the use of an ATM is
restricted only to the person who knows the PIN.
Thus, if the customers keep the PIN confidential,
no one other than the customer can use the ATM.
– ATM Machines are self-service and thus reduces
the workload of the bank staff.
– ATM reduces the requirement for carrying cash as
individuals can withdraw at any ATMs, which acts
as a cashpoint.

57. Withdraw Cash without touching the ATM
In the times of COVID, the MasterCard has now
partnered with AGS Transact Technologies to provide
contactless cash withdrawal service to the people.
To withdraw cash, the user needs to scan the Quick
Response Code on the ATM using the mobile
application of your bank.
Finally, enter the amount to be withdrawn and PIN of
your ATM Card. ATM will then process the money.
The daily cash withdrawal limits of banks vary from
each bank. Currently, SBI offers Rs. 1 Lakh, HDFC
Bank offers Rs. 1 Lakh, and PNB offers Rs. 1 Lakh
daily cash withdrawal limit.

58. Personal Identification Number (PIN) is a
4-digit number that allows you to access
your account information and perform other
activities using an Automated Teller
Machine (ATM).
You can generate your ATM PIN by any of
the below-mentioned ways:
– Visiting the nearest ATM
– Via Internet Banking.
– Calling customer care
– Sending an SMS to the customer care

59. MICR (magnetic ink character recognition)
MICR (magnetic ink character recognition) is
a technology used to verify the legitimacy
or originality of paper documents,
especially checks.
Special ink, which is sensitive to magnetic
fields, is used in the printing of certain
characters on the original documents.
Information can be encoded in the
magnetic characters.

60. The use of MICR can enhance security and minimize
the losses caused by some types of crime. If a
document has been forged - for example, a
counterfeit check produced using a color
photocopying machine, the magnetic-ink line will
either not respond to magnetic fields, or will
produce an incorrect code when scanned using a
device designed to recover the information in the
magnetic characters. Even a legitimate check can
be rejected if the MICR reader indicates that the
owner of the account has a history of writing bad
checks.
Retailers commonly use MICR readers to minimize
their exposure to check fraud. Corporations and
government agencies also use the technology to
speed up the sorting of documents.

61. MICR is an acronym for Magnetic Ink Character
Recognition. Primarily, this innovative
technology authenticates the legality and
credibility of paper-based document(s) in the
banking database. It can be found on
cheques. MICR is at par with IFSC as far as
the security of a fund transfer is concerned.
MICR code is a product of highly advanced
Character Recognition Technology (CRT)
used by banks to verify cheques for clearance.
MICR technology is used for other bank
documents as well. A MICR code is placed at
the bottom of a cheque.

62. It includes details such the bank code,
account details, amount, and cheque
number, alongside a control indicator. The
biggest advantage of MICR technology is
that it stands out among similar concepts,
such as barcodes, as MICR can be read
and distinguished by humans very easily.

63. It is a 9-digit code that identifies the bank branches
that are taking part in an ECS (Electronic Clearing
System). MICR code is especially needed if you are
filling up different financial forms such as SIP
forms, etc. as it helps in faster clearance of
cheques.
The starting 3 digits of the code signify the city code,
the next 3 digits (the middle ones) stand for the
bank code and the last 3 digits represent the code
of the branch.
You can easily find the MICR number at the bottom of
your cheque leaf, printed adjacent the cheque
number (on the right-hand side).

64. IFSC Code
(Indian Financial System
Code)
MICR Code
(Magnetic Ink Character
Recognition)
Swift Code
It is used to facilitate
electronic money
transfer between the
banks in India.
MICR code is initiated to
make cheque processing
simpler and faster.
This code is used to provide
the facility of international fund
transfer between 2 banks.
IFSC is an 11-digit
alpha-numeric code
MICR is a 9-digit code
Swift code has 8 to 11
characters.
The first four characters
indicate the name of the
bank.
The first three digits
represents the city code
where the bank branch is
located.
The first four characters of this
code represent the bank code.
Last 6 digits represent
the bank location.
Last three digits indicate
the bank branch code.
The last three characters are
optional and represent the
branch code.
This code is developed
by the RBI (Reserve
Bank of India).
This code is also
developed by RBI
(Reserve Bank of India).
This code is approved by ISO
(International Organization for
Standardization).

66. OCR
Financial institutions like banks are continuously
engaged in the process of creating new
records for clients or doing new deals, which
generate numerous paper records. These
ever increasing piles of documents could
prove to be a major concern for banks.
Converting all this crucial data into digital format
with the help of data entry services is a
perfect solution for this concern. Digitized
documents ensure safety, easy storage, and
quick retrieval of data.

67. OCR
In order to reduce the time taken to process
payments as well as ensure better customer
service, banking institutions need to
streamline their organizational processes and
organize their work. Optical Character
Recognition (OCR) is a unique technology that
banks utilize as part of high-volume
information extraction.
With OCR, banks are able to process, monitor
and evaluate data including vast amounts of
client data such as personal and security
information. This helps to improve overall
performance and profitability.

68. In simple terms, optical character recognition
(OCR) is a technology that can extract all the
text from images, PDF documents or scanned
files. A scanned file is usually stored as an
image if not converted into a text-searchable
file with the help of OCR technology.
With automated and smart document
processing, the technology can effortlessly
accelerate customer on-boarding and reduce
the need for manual input. In addition, OCR
allows banks to minimize human errors, save
time, and effort while upgrading customer
experience.

69. Some top OCR and machine learning features that can
help optimize the banking industry –
Hasten Customer On-Boarding – Easy and remote on-
boarding is one common challenge that most banks
face. Banks need to validate customers’ identities (IDs)
properly for routine or large banking transactions, cash
withdrawals, account openings and other related
functions.
Some challenger banks choose to do this using manual
remote validation wherein a picture in the passport or a
signature gets verified within a timeframe of 24 hours.
Though this may seem efficient, it actually has some
major downsides. First of all, it is not real-time, so
customers don’t get the real experience. It is also
relatively expensive and risky due to sensitive data
transfers and hence this is not the best solution in
terms of privacy.

70. Hasten Customer On-Boarding
However, with OCR and machine learning tools, banks
can instantly capture and extract customer data from
machine-readable zones on passports or other ID
documents and quickly identify customers before
money transfers and opening bank accounts.
OCR technology provides a fully automated on-boarding
“Software development kit (SDK)” that includes
identity document scanning, OCR data extraction (for
instance, MRZ, dates of birth, gender, pictures,
signatures and more), data identification, and data
validation. SDK can verify if a signature matches the
signature on the identity document and if an image
matches the passport photo. The software technology
is real-time, safe and cost-effective and gives about ten
times accuracy than manual verification.

71. Integrate Scan-to-Pay Functionality – Manually entering
names, amounts, bank account numbers and references for a
single bank transfer can be time consuming and error prone. In
fact, human or manual process errors account for 20-30
percent of revenue loss. However, the latest mobile OCR and
scanners that can be easily integrated with iOS, Android, and
web platforms help remove human errors from processes and
ensure high accuracy of scans. OCR also provides instant scan
results as scanning time is less than half a second and gives
banking staff more time to focus on other facets of their work. A
scan-to-pay feature uses OCR, which instantly captures invoice
data. In order to make payments, a camera on a Smartphone is
all that is needed. In addition, the bank card recognition module
can scan the cardholder’s name, the card number, and expiry
date, in any position and light, which ensures your bank
transfer or payment remains error-free.

72. Data Entry and Invoice Scanning – As
mentioned above, banking transactions
involve huge amount of data entry related
to bank statements and other day-to-day
transactions. OCR technology can help
maintain workflow efficiently with high text-
recognition accuracy. For using the scan-
to-pay feature, a camera on a Smartphone
is enough to capture invoice data and to
make payments.

73. Speed Up Loan and Mortgage Application Processing –
Banks have been moving to challenging areas of activities like
– stock trading, smart lending and even mortgage applications
– which involve a lot of document processing. Even a single
mortgage application requires processing of various documents
like – the letter of intent from the employer to an employment
contract or multiple salary slips and a passport. On the other
hand, if the mortgage is paid by two people, the amount of
documents that need to be processed doubles in size.
Checking the validity of documents, comparing data between
different documents and processing data from the documents
into case management systems consumes lot of time. With
OCR technology, automating the data extraction, comparison
of documents can be done in an efficient manner. OCR and
machine learning tools can speed up loan and mortgage
application processing by up to 70 percent. This in turn lowers
the processing cost, enables the existing teams to process
more applications and reduces manual data entry, which leads
to happy and loyal customers.

74. Financial organizations like banks can
analyze and streamline large-volume data
with the help of OCR technology and draw
valuable business insights. Incorporating
correct OCR technology can standardize
documents by turning scanned documents
into searchable PDFs or into any other file
type.
Partnering with a reliable document
scanning company is the best way to
ease the documentation burden faced by
banks and improve efficiency in the long
run.

89. The most commonly used online fund
transfer method has been:
– National Electronic Funds Transfer (NEFT)
– Real-Time Gross Settlement (RTGS)
– Immediate Mobile Payment Service (IMPS)
While NEFT and RTGS were introduced by
RBI (Reserve Bank of India),
IMPS was introduced by National Payments
Corporation of India (NPCI).

90. NEFT
National Electronic Funds Transfer (NEFT) is
a payment system that facilitates one-to-one
funds transfer.
Using NEFT, people can electronically transfer
money from any bank branch to a person
holding an account with any other bank
branch, which is participating in the payment
system.
Fund transfers through the NEFT system do not
occur in real-time basis and the fund transfer
settles in 23 half-hourly batches.