Top 6 Facilities Provided by Banks to Customers
1. Bank Draft:
Bank draft is a facility allowed to customers for sending money to other places. Generally, banks allow this facility to the account holders only. When a customer wants to send money to other places then he will have to fill a specific proforma for this purpose. The name of the person/party to whom the amount is to be sent, the amount for which the draft is required, the place for which the draft is required, bank charges are mentioned in the proforma. The bank will issue a draft to the customer after debiting his account with the said amount.
The customer will send the draft to the person/party to whom the money is to be paid. The recipient of the draft will deposit the draft with his bank and the bank will credit the amount to his account. The bank also sends an intimation to the branch where the draft is payable. It is time-consuming process of transferring money and bank charges are also high on the drafts.
2. Banker’s Cheque:
Banker’s cheque means pay order issued by bank itself withdrawing the amount from payer’s account. It will be safe for payee because it cannot bounce. It is also a method of sending money by a bank. It is similar to that of draft. The banker issues a cheque in the name of the party to whom the customer wants to make payment. The bank charges commission for this service as is done for issuing a draft. A banker’s cheque is generally used for making local payments. The banker’s cheque is paid at par.
3. RTGS (Real Time Gross Settlement):
It is a system to transfer funds from one bank to another bank on a ‘real time’ and ‘gross basis’. The settlement in ‘real time’ means payment transaction is not subjected to any waiting period. The transaction is settled as soon as processed. ‘Gross settlement’ means the transaction is settled on one to one basis, without bunching or netting with any other transaction.
Once processed, the payment is final and irrevocable. This system of electronic transfer takes place with the help of Central Bank of the country. The electronic payment system is maintained or controlled by the Central Bank of the Country.
In India, Reserve Bank of India (RBI, Central Bank of the Country) maintains this payment network. RTGS is the fastest possible money transfer system. Core Banking enabled banks and branches are assigned an Indian Financial System Code (IFSC) for RTGS and NEFT purposes.
This is an eleven digit alphanumeric code and unique to each branch of bank. The first four alphabets indicate the identity of the bank and remaining seven numerals indicate a single branch. This code is provided on the cheque books which are required for transaction along-with recipient’s account number. Customers can access RTGS facility between 9 a.m. to 4.30 p.m. on week days and 9.30 a.m. to 1.30 p.m. on Saturday. This timing may also vary from bank to bank, depending upon the timings of the branches.
4. NEFT (National Electronic Funds Transfer):
NEFT refers to an online system for transferring funds from one financial institution to another within India. The system was launched in November 2005 and was to inherit every bank that was assigned to the SEFT clearing system. There is no minimum or maximum limit for fund transfer in NEFT system. The persons or parties which have bank accounts, generally use this facility.
This facility is open even to those, who do not have bank account. The persons without bank accounts can deposit cash at the NEFT-enabled branch with instructions to transfer funds using NEFT. A separate Transaction Code (No. 50) has been allotted in the NEFT system to facilitate walk-in-customers to deposit cash and transfer funds to the beneficiary.
Comparison between RTGS and NEFT:
(i) The main difference between the two is that RTGS is on gross settlement basis, NEFT is on net settlement basis.
(ii) RTGS completes transactions in real-time while NEFT completes transactions in cycles.
(iii)The transfer in RTGS is completed on a one to one basis, while NEFT is on a deferred net basis, where transfers are bundled and deferred for a specific time.
(iv) RTGS is a high value transfer system, handling funds worth Rs, 1, 00,000 and above, while NEFT transfers smaller amounts below Rs. 10,000.
5. Bank Overdraft:
An overdraft is an advance given by the bank allowing a customer to overdraw his current account up to an agreed amount. An overdraft account is operated in the same way as a current account. In overdraft the interest is charged on the credit actually utilised, i.e. to the extent amount is overdrawn.
Overdraft facility is widely used by the businessmen. They can use more money than the credit amount in their account, and secondly, interest is paid only on the amount actually withdrawn from the bank and not to the overdraft limit allowed by the bank.
Under cash-credit a bank advances loans to the customer on the basis of his current assets, receivables or fixed assets by hypothecating them in favour of the banker.
Basically, cash-credit differs from overdraft in two respects:
(i) Security and
Generally, cash-credit is advanced against current assets and receivables, while overdraft is allowed against negotiable security. Further, overdraft is, usually, a temporary facility, while cash credit is relatively a long term facility. The rate of interest charged on overdraft may be lower because of lesser risk and service cost.