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. 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.

4. 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.

5. 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.

6. 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.

7. 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.

8. 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.

9. 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.

10. 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

11. 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

12. 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.

13. – 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.

14. 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.

15. 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.

16. 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.

17. 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

18. 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.

19. 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.

20. 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.

21. 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.

22. 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).

23. 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).

25. 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.

26. 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.

27. 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.

28. 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.

29. 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.

30. 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.

31. 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.

32. 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.

33. 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.