Alternate Delivery Channels – Digital Banking | PAPER II – PRINCIPLES & PRACTICES OF BANKING | MODULE C: BANKING TECHNOLOGY
Alternate Delivery Channels – Digital Banking
1. Introduction
Alternate Delivery Channels (ADCs) refer to non-branch banking delivery methods used by banks to provide financial services to customers. With the advent of digital banking, these channels have expanded significantly to include internet banking, mobile banking, ATMs, and point-of-sale (POS) systems, among others.
2. Automated Teller Machines (ATMs)
ATMs are electronic machines that allow customers to perform basic banking transactions like withdrawals, deposits, balance enquiries, and fund transfers without visiting a bank branch.
Example:
Mr. Arjun uses his bank's ATM to withdraw ₹10,000 from his savings account without visiting a branch.
3. Electromagnetic Cards
These include debit, credit, and prepaid cards embedded with magnetic stripes or EMV chips. They are used for ATM transactions, online purchases, and point-of-sale operations.
Mathematical Illustration:
If a customer has a debit card with a limit of ₹50,000 per day and he withdraws ₹20,000, the available limit left is:
Available Limit = ₹50,000 - ₹20,000 = ₹30,000
4. Electronic Banking
Electronic Banking encompasses services like Internet Banking, Mobile Banking, NEFT, RTGS, IMPS, and UPI. These services allow round-the-clock banking and help reduce the load on physical branches.
5. Customer Protection – Limiting Liability
The RBI has established guidelines to protect customers in case of unauthorized electronic banking transactions. Customer liability depends on the nature of the transaction and how promptly the unauthorized transaction is reported.
- If reported within 3 working days: Zero liability
- If reported between 4-7 days: Limited liability (up to ₹25,000 for savings accounts)
- After 7 days: Liability decided by the bank's policy
Example:
If a fraud of ₹15,000 occurs and is reported within 2 days, the customer has zero liability.
6. Harmonization of Turn Around Time (TAT) and Compensation
RBI has harmonized the TAT for resolving failed transactions and mandated automatic compensation. The compensation is ₹100 per day for delay beyond the specified TAT until resolution.
Mathematical Illustration:
Suppose a failed ATM transaction on 1st May is resolved on 5th May. If the prescribed TAT is 2 days:
Delay = 5 - (1 + 2) = 2 days
Compensation = ₹100 × 2 = ₹200
7. Conclusion
Alternate Delivery Channels are crucial for digital financial inclusion. While they offer convenience, they also necessitate robust customer protection mechanisms and accountability in service delivery.
Multiple Choice Questions (MCQs)
-
What is the primary function of an ATM?
a) Deposit insurance
b) Process loan applications
c) Provide basic banking transactions
d) Issue checkbooks -
What type of card typically contains a magnetic stripe or EMV chip?
a) Passbook
b) Checkbook
c) Debit/Credit Card
d) Aadhaar Card -
Which of the following is not an Alternate Delivery Channel?
a) ATMs
b) Internet Banking
c) In-branch teller service
d) Mobile Banking -
What is the liability of a customer who reports a fraudulent transaction within 3 working days?
a) Full liability
b) Zero liability
c) 50% liability
d) Depends on transaction amount -
What is the compensation per day for delay in resolving failed transactions?
a) ₹50
b) ₹75
c) ₹100
d) ₹200 -
The term TAT in banking stands for:
a) Total Amount Transferred
b) Turn Around Time
c) Time Allocation Term
d) Transaction Assessment Timeline -
Which RBI guideline protects customers in unauthorized electronic transactions?
a) Basel Norms
b) Customer Protection – Limiting Liability
c) Digital India Act
d) Ombudsman Scheme -
What happens if a failed NEFT transaction is not resolved within the prescribed TAT?
a) The customer must reinitiate
b) Automatic compensation of ₹100 per day
c) The bank charges penalty
d) The transaction is canceled -
Which payment system is not included under RBI’s harmonized TAT compensation framework?
a) IMPS
b) UPI
c) Manual Cheque Clearance
d) NEFT -
A customer with a daily debit card limit of ₹40,000 withdraws ₹35,000. What is the remaining limit?
a) ₹35,000
b) ₹5,000
c) ₹10,000
d) ₹45,000
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