PPB Module CChapter Notes4–6 Marks Expected

Data Communication Network & EFT Systems

Principles & Practices of Banking | Module C · Chapter 45

Covers the full landscape of data communication and electronic funds transfer — from modem fundamentals and transmission media (twisted pair, optical fibre, coaxial), to India's major networks (BANKNET, NICNET, INFINET), global systems (SWIFT, CHIPS, CHAPS, Fedwire), and India's payment ecosystem (ECS, NEFT, RTGS, CTS) with all key dates, limits, and regulatory details.

By Bankopedia.co.inUpdated 2026JAIIB PPB · Module C

📌 Why This Chapter Matters in JAIIB

Expect 4–6 questions from this chapter. Key focus areas: Modem (modulates digital→analog; demodulates analog→digital); twisted pair (2 copper wires, 150m, most popular), optical fibre (2 Gbps, EM interference-free), coaxial (inner copper core, 500 Mbps); simplex/half-duplex/full-duplex; INFINET (Hyderabad, VSAT, MPLS, Saraf Committee, managed by IFTAS — wholly owned subsidiary of RBI); SWIFT (1973, 239 banks, 15 countries, Belgium/Brussels, 11,000+ institutions, 215 countries, 22M+ messages/day, Mumbai regional processor); CHIPS (1970, New York, premier international fund transfer, Federal Reserve settlement); NEFT (Nov 2005; 24×7 from 16 Dec 2019; 48 half-hourly batches; first batch 00:30; 2-hour crediting discipline; SFMS via NCC Mumbai); RTGS (2004; min ₹2 lakh; no upper limit; 24×7; NG-RTGS 2013 — ISO 20022; phases: SOD/OFB/ICO/FCO/IDL Reversal; RBI = settlement agent only); CTS (Section 6(b) NI Act; NI Act amended Sept 2002; 66 MICR centres before CTS; MICR data or image processing truncation; digital signature optional).

Key Facts & References — Chapter 45 at a Glance

Modem:Modulator-Demodulator; digital↔analog conversion; installed in pairs at each end of analog communication line

Twisted pair:2 insulated copper wires; minimises cross-talk; up to 150 metres; most popular (low cost, convenient)

Optical fibre:2 gigabits/sec; low error rate; unaffected by electromagnetic interference; glass/plastic fibres; laser/LED light source

Coaxial cable:Inner copper core with circular spacers; 500 megabits/sec; insulated + protected sheath

Simplex:One direction only (e.g. commercial radio broadcast); sender cannot receive, receiver cannot send

Half-duplex:Both directions but only ONE direction at a time (walkie-talkie style)

Full-duplex:Simultaneous two-way communication; faster; example: four-wire full-duplex modems on telephone lines

Network committee 1987:Chaired by T.N. Anantharam Iyer (ED, RBI); recommended cooperative banking communication network

INET / BANKNET:INET: 1991, X.25 PSPD network, Dept of Telephones. BANKNET: INET + INAS combined; 1997; MasterCard; P2P VPN; 2M+ TXs/hour; 1,000+ data centers worldwide

NICNET:Set up 1976 by NIC (National Informatics Centre); India's largest WAN; VPN + secure WiFi; serves G2G, G2B, G2C, G2E

RBINet:Developed in 'C' language (DOS + UNIX); free format messaging + file transfer; TCP/IP over X.25; end-to-end encryption audit trail

INFINET:Indian Financial Network; Hyderabad; per Saraf Committee recommendations; VSAT (initially); closed user group MPLS; now managed by IFTAS (wholly owned subsidiary of RBI); supports SFMS, RTGS, NEFT, govt payments

SWIFT founded:1973 by 239 banks in 15 countries; cooperative non-profit under Belgian law; HQ Brussels; 11,000+ institutions in 215 countries; 22M+ messages/day; India regional processor: Mumbai

SWIFT security:Key authentication (automated telegraphic test key — detects any text change); Encryption (confidentiality); Checksum (uses text + receiver address — prevents auto changes)

SWIFT GPI:Global Payments Innovation; announced October 2018 Payments Controls feature; enables fast, secure, transparent cross-border payments; $81M Bangladesh Bank fraud 2016 led to new safeguards

CHIPS:Clearing House Interbank Payment System; started 1970; New York; premier international fund transfer; 99.9–100% operational; Federal Reserve settlement; dual systems at two sites; direct SWIFT interface

CHAPS:UK; sterling same-day; high-value + time-critical payments; irrevocable on receipt; 30+ direct participants; 5,000+ institutions; PSS network; SWIFT-based format

CHATS:Hong Kong automated clearing; validates all entries before transmission; POS transactions supported; encryption + authentication

Fedwire:USA; since 1956; ~800 banks; X.25 packet-switched; 12 Federal Reserve districts; reserve account balances, government securities, bank-to-bank; 3 access: direct computer, direct terminal, dial-up

Bankwire:Pioneer private sector USA; owned by bank association; standard message formats via telex; CASHWIRE = clearing + settlement facility

NEFT key facts:No min/max limit; 48 half-hourly batches/day; first batch 00:30; last batch 00:00; 24×7 from 16 Dec 2019 (incl. weekends/holidays); credit within 2 hours of batch settlement; NCC of RBI = clearing centre at Mumbai

RTGS key facts:Min ₹2 lakh (customer TXs); no upper limit; 24×7×365; final + irrevocable; NG-RTGS 2013 (ISO 20022); phases: SOD → OFB → ICO (customer TXs stop) → FCO (end normal ops) → IDL Reversal; RBI = settlement agent only

CTS key facts:Physical cheque truncated at presenting bank; image + data travel electronically to drawee bank same day; Section 6(b) NI Act definition; NI Act amended Sept 2002; 66 MICR centres before CTS; truncation via MICR data or image processing; digital signature optional

Data Communication Components & Modes of Transmission

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45.2.1 Components of Data Communication Networks

I. Modem (Modulator-Demodulator)

Installed in pairs at each end of an analogue communication line (telephone line). Digital signals cannot travel long distances reliably over telephone lines — modem converts them to analogue for transmission and back to digital at the receiving end.

Transmitting End

Modulates: digital signals → analogue tones → sent over standard phone lines

Receiving End

Demodulates: incoming analogue signals → back to original digital format

II. Transmission Media

Twisted Pair Cable

Up to 150 metres · Most popular · Low cost

Two insulated copper wires twisted together. Widely used in place of parallel wires to minimise cross-talk (mixing and distortion of signals). Most popular due to low cost and ease of use.

Optical Fibre

2 Gbps · Low error rate · No EM interference

Technological breakthrough. Data rate: 2 gigabits/sec. High quality (low error rate) transmission at very high speeds. NOT affected by electromagnetic interference. Data travels as light through thin glass or plastic fibres — laser beam (or LEDs for security reasons).

Coaxial Cable

500 Mbps · Inner copper core

Inner copper core held in position by circular spacers. Core surrounded by insulation and covered by a protective sheath. Data transmission at very high rates of 500 megabits per second.

Microwave Systems

▸High-frequency radio signals used in telephone/TV transmissions.
▸Radio waves modulated to carry information; antennae mounted on towers.
▸Received data amplified and retransmitted at each relay station (max ~40 km apart).
▸Microwave signals can be passed on to communication satellites.

Communication Satellites

▸Fastest medium; NO limitation of distance.
▸Broadcast independent of distance between earth stations.
▸Applications: e-mail, distributed processing, internet.
▸In India: NIC and private operators offer satellite-based services.

III. Transmission Processors

Message Switch

Stores and forwards data to a large number of terminals over a single communication channel. Receives data from all terminals, stores in a queue, routes one at a time to CPU. Also distributes messages from CPU to appropriate terminals.

Multiplexer (MUX)

Enables more than one signal to be sent simultaneously over one physical channel. Combines inputs from two or more terminals; transmits combined stream over a single high-speed channel. Demultiplexed at receiving end.

Front-end Processor (FEP)

Also called communications processor. Small computer interfacing to host computer and peripheral devices. Off-loads from host: managing peripherals, transmitting/receiving messages, packet assembly/disassembly, error detection/correction.

45.2.2 Modes of Transmission

→

Simplex

Data in ONE direction ONLY. Sender cannot receive; receiver cannot send. Example: commercial radio broadcast. Useful in analogue sampling.

⇆

Half-Duplex

Data movement in BOTH directions but only ONE direction at a time. Each party must wait for the other to stop transmitting before responding (like walkie-talkies). Delay occurs when direction changes.

⇄

Full-Duplex

SIMULTANEOUS two-way communication. Faster than half-duplex — avoids the direction-change delay. Example: four-wire full-duplex modems on telephone lines (phone calls).

Major Networks in India — BANKNET · NICNET · INFINET · Internet

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INAS / INET / BANKNET

▸INAS (Interbank National Authorization System): Master Card's first global telecom network component for electronic card authorization.
▸INET (Interbank Network for Electronic Transfer): 1991; Dept of Telephones; X.25 data network using PSPD (Packet Switched Public Data) technology. Applications: E-mail, Information Retrieval, Remote Login, Electronic Funds Transfers.
▸BANKNET: INET + INAS combined; established 1997; run by MasterCard; virtual private network (P2P VPN); 2 million+ transactions/hour; 1,000+ data centers globally.
▸Unlike Visa (centralized hub-and-spoke), BANKNET is peer-to-peer (P2P) — more flexible, lower risk of failure if one node fails.

NICNET

▸Set up in 1976 by National Informatics Centre (NIC) — a Government of India agency.
▸India's largest Wide Area Network (WAN). Secure through VPN + secure WiFi.
▸Serves: G2G (Government-to-Government), G2B (Government-to-Business), G2C (Government-to-Citizen), G2E (Government-to-Employee).
▸Linkages with all Central Ministries/Departments, State Governments, Districts, and Block level.
▸Applications: Corporate communications, Database services, Credit card verifications.

RBINet

▸Communication software developed in 'C' language; available for both DOS and UNIX machines.
▸Uses BANKNET infrastructure with servers installed at the four metro cities.
▸Each user interacts with local server (X.25 switch); UNIX servers communicate via TCP/IP over X.25.
▸Features: Free format messaging (no length restriction); file transfer of ASCII-text and binary files (spreadsheets, databases, programs); dial-up access; end-to-end encryption audit trail.
▸Used by bank departments for transmission of Section 42(2) RBI Act data, macroeconomic indicators, and daily financial news summaries.

INFINET

▸Indian Financial Network; set up per Saraf Committee recommendations.
▸Located in Hyderabad. Initially VSAT (Very Small Aperture Terminal) satellite-based.
▸Now a closed user group MPLS network for the banking and financial sector.
▸Now managed by IFTAS (Indian Financial Technology and Allied Services) — wholly owned subsidiary of Reserve Bank of India.
▸Supports: SFMS (Structured Financial Messaging System), RTGS, NEFT, Government payments and receipts.

45.4.2 Internet — Global Network of Networks

Precursor: ARPANET (US Dept of Defence + universities). In 1989, replaced by NSFNET (National Science Foundation Network) — made available to the public. In India, protocols available: SLIP (Serial Line Protocol) and PPP (Point to Point Protocol).

4 Categories of Internet Services

(a) Communication Services

E-mail, Telnet, Internet Telephony (VoIP)

(b) Information Retrieval Services

FTP (File Transfer Protocol), Archie (first internet search engine — indexes FTP archives), Gopher (extracts/views web documents from remote servers)

World Wide Web (WWW) — organises internet resources

(d) Video Conferencing

Point-to-point and multi-point

SWIFT, CHIPS, CHAPS, CHATS, Fedwire & Bankwire

Members Only

45.6 SWIFT — Society for Worldwide Interbank Financial Telecommunications

Founded

1973

Founding banks

239 banks

Founding countries

15 countries

Brussels, Belgium

Institutions

11,000+

Countries

215

Daily messages

22M+

India regional processor

Mumbai

▸Cooperative non-profit organisation under Belgian law. Wholly owned by member banks/financial institutions.
▸In India: all nationalised banks are SWIFT members. Bank locations connected to SWIFT Regional Processor at Mumbai.
▸Operational 24 hours/day, 365 days. Transmission to any part of the world is almost immediate.
▸~400 different message types available. Cost-effective transmission. Messages encrypted from entry to exit point on SWIFT network.
▸Message types cover: customer payments/cheques, documentary credits/guarantees, financial trading, securities, collections, cash management, traveller cheques, system messages, and free format messages.

Key Authentication

Automated version of telegraphic test keys. Calculated on entire message text — any change in message text is detected automatically.

Encryption

Security control ensuring data confidentiality. Done on the SWIFT network; available to all users.

Checksum

Prevents automatic changes during transmission. Uses both the message text AND the receiver's address in its mechanism.

SWIFT Developments

▸$81 million SWIFT fraud on Bangladesh Bank in 2016 → new safeguards implemented; RBI advised Indian banks on security measures.
▸Payments Controls feature: announced October 2018 — monitors and protects core payments.
▸SWIFT GPI (Global Payments Innovation): new standard for fast, secure, transparent cross-border fund transfer with full message transparency throughout cycle.

System	Country	Started	Key Features
CHIPS	USA (New York)	1970	Premier international fund transfer; 99.9–100% uptime; settlement through Federal Reserve Bank; dual systems at two sites; direct SWIFT interface. Used for: foreign trade, international loans, forex, Eurodollar placements.
CHAPS	UK	—	Sterling same-day system; high-value wholesale + time-critical payments; guaranteed + irrevocable on receipt; 30+ direct participants; 5,000+ institutions; PSS (packet-switched stream) network; SWIFT-based format; encryption + authentication.
CHATS	Hong Kong	—	Inter-bank payments; all entries validated at entry before transmission; POS transactions supported; alternate routing on route failure; authentication + encryption.
Fedwire	USA	1956	USA's main fund transfer system; ~800 banks; X.25 packet-switched; 12 Federal Reserve districts; for reserve account balances, govt securities, high-value domestic payments; 3 access modes: direct computer, direct terminal, dial-up.
Bankwire	USA	—	Pioneer private-sector telecom network; owned by bank association; reduces inter-bank message costs; standard SWIFT-like message formats via telex; CASHWIRE = clearing + settlement facility.

45.8.3 Point of Sale (POS) Systems

Retailer's terminal directly connected to the bank's network; transaction can be communicated online in real-time. Two scenarios:

Same bank (retailer + customer)

Verify PIN + available balance → process transaction directly.

Different financial institutions

Transaction travels to a switching centre → directed to the right bank → processed. EFTPOS reduces cash handling costs; instant credit to retailer; excellent customer base for banks.

Indian Payment Services Timeline, ECS & NEFT

Members Only

Payment Service	Launch	Operator	Key Feature
EFT (Electronic Funds Transfer)	1997	RBI	One-to-one fund transfer; precursor to NEFT
RTGS	2004	RBI	Real-time gross settlement; min ₹2 lakh; no upper limit; 24×7
NEFT	Nov 2005	RBI	One-to-one; 48 half-hourly batches; no min/max; 24×7 from Dec 16, 2019
NECS	Oct 2008	RBI	Multiple credits to beneficiary accounts against single debit to sponsor bank
CTS	Feb 2008	NPCI	Cheque truncation; physical movement replaced by electronic image
PPIs (Cards & Wallets)	2009	PPI Operators	Purchase of goods/services against stored value
IMPS	2010	NPCI	Immediate money transfer; multiple channels: Mobile, Internet, ATM, SMS, Branch
NACH	2011	NPCI	Web-based; high volume, repetitive, periodic inter-bank transactions
AePS (Aadhaar-enabled)	Jan 2016	NPCI	Basic banking at Micro ATM of Business Correspondent using Aadhaar authentication
UPI	Aug 2016	NPCI	Peer-to-peer; immediate; 24×7×365; BHIM app; upper limit ₹2,00,000
NETC	2016	NPCI	National Electronic Toll Collection; interoperable nationwide toll payment
BBPS	July 2017	NPCI	Bharat Bill Payment System; umbrella system for payment of all bills

45.9.1 Electronic Clearing System (ECS)

RBI introduced ECS in 1995 as an alternative for bulk and repetitive payment transactions — eliminating paper instruments and improving payment efficiency.

Electronic Credit Clearing

Multiple credits to beneficiary accounts across the country against a single debit of the sponsor bank's account. Sponsor bank submits data on magnetic media.

Electronic Debit Clearing

Multiple debits, single credit. Consumers give mandate to debit their account on receipt of debit advice. Subscriber can set a maximum limit for each debit entry.

ECS-RAPID (Feb 1997)

Introduced in Mumbai in February 1997. For payment of service charges to service providers from consumers. MICR reader captures payment details from a specially designed bill; schedules prepared on magnetic media.

45.9.2 NEFT — National Electronic Fund Transfer

Introduced in November 2005. Made 24×7 from December 16, 2019 (including weekends and holidays). No minimum or maximum limit. Based on Saraf Committee (1994) recommendations.

NEFT Settlement — 48 Half-Hourly Batches

▸48 half-hourly batches every day (24×7 basis).
▸First batch settlement commences after 00:30 hours; last batch ends at 00:00 hours.
▸System available on ALL days of the year including holidays.
▸Existing discipline continues: credit beneficiary or return transaction within 2 hours of settlement of the respective batch.
▸NEFT transactions after banking hours are expected to be automated via Straight Through Processing (STP).
▸Member banks must send positive confirmation message (N10) for all NEFT credits.

NEFT Process Flow — Parties

Sending Bank Branch→

Sending Bank NEFT Service Centre→

NEFT Clearing Centre (NCC of RBI, Mumbai)→

Receiving Bank NEFT Service Centre→

Beneficiary Branch

Messages transmitted as SFMS (Structured Financial Messaging System). NCC of RBI = data processing NEFT clearing centre. Settlement account to be opened by each participating bank at NEFT centre, Mumbai. If holiday at beneficiary branch: credit same day or by commencement of business on next working day.

RTGS System & Cheque Truncation System (CTS)

Members Only

45.9.3 RTGS — Real-Time Gross Settlement

RTGS is an electronic payment system where payment instructions are processed on a continuous and REAL-TIME basis and settled on a GROSS (individual) basis without netting debits against credits. Payments are final and irrevocable. Settlement done in books of RBI — the ultimate liquidity depository. RBI acts ONLY as settlement agent (business information between sending and receiving banks is NOT known to RBI as settlement agent).

Launched

2004

Min (customer TXs)

₹2 lakh

Max

No upper limit

Availability

24×7×365

NG-RTGS

2013

Standard

ISO 20022

Participant Interface

Single PI per bank

Settlement

Final & Irrevocable

RTGS Business Day Phases

SOD (Start of Day)First event; advances system business date; loads updated code files; accepts payment instructions from internal systems; payments placed in queue.

OFB (Open for Business)All functionality of RTGS fully available. System starts processing all message types. Intra-day Liquidity (IDL) provided by RBI against eligible collateral.

ICO (Initial Cut-off)CUSTOMER transactions restricted — participants cannot submit new customer transactions for settlement. Inter-institutional/inter-bank, return payments, MNSB, etc. still accepted.

FCO (Final Cut-off)End of ALL normal operations. No further IDL requests accepted. Any pending transactions automatically cancelled; sending participants notified.

IDL Reversal SessionAvailable ONLY to participants with outstanding IDL positions after Final Cut-off. For receiving funds from other banks to repay outstanding IDL loans.

Benefits of RTGS

✓Safe and secure fund transfer system

✓No maximum amount cap

✓24×7×365 — real-time transfer to beneficiary account

✓Remitter need not use physical cheque/demand draft

✓Beneficiary need not visit bank for depositing instruments

✓No risk of loss/theft/fraudulent encashment of physical instrument

✓Remitter can initiate from home/workplace via internet banking

✓Transaction charges capped by RBI

✓Transaction has legal backing

45.9.4 Cheque Truncation System (CTS)

MICR Clearing (Before CTS)

▸66 MICR centres across India.
▸Physical instruments transported to MICR clearing centre (local or outstation).
▸Return cycle: next day; customer gets funds after settlement completion.
▸Physical movement of cheques — costly, slow.

CTS Process

▸Physical instrument TRUNCATED at presenting bank (branch or service branch level).
▸Images + data of collected instruments travel electronically to drawee bank for processing — SAME DAY.
▸Return cycle completed next day; settlement on completion.
▸Customer gets funds on completion of settlement.

Legal Definition — Section 6(b) of NI Act

"A cheque which is truncated during the course of a clearing cycle, either by the Clearing House or by the bank, whether paying or receiving payment, immediately on the generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing."

NI Act Section 6 originally defined cheque — amended in September 2002 to include cheque truncation and electronic cheques.

Key Characteristics of CTS

▸Electronic image of a paper cheque — substitutes physical cheque from point of truncation onward.
▸Only banks and Clearing House can truncate a cheque.
▸Truncation done ONLY during the clearing cycle.
▸Paper cheque after truncation kept in custody of bank/clearing house that truncated it.
▸Digital signature of truncating bank on electronic image: OPTIONAL.
▸Truncation methods: using MICR data (electronic MICR line exchange — no further cheque movement) OR image processing (scan both sides → digital storage → image used for processing).

Benefits of CTS

✓Extended cut-off time for customer cheque acceptance.
✓Easy retrieval of information.
✓Reduced clearing timelines.
✓No cost of physical paper movement.
✓No risk of data/image manipulation during transit.
✓CTS 2010 standards — enhanced security and automation.
✓Grid implementation allows better liquidity management for banks.
✓Fraud prevention: digital signature/encryption prevents manipulation.

Chapter Summary & Flashcards

Members Only

Chapter 45 in 6 Lines

Modem = modulates digital→analog (transmitting) + demodulates analog→digital (receiving). Transmission media: Twisted pair (2 copper wires, 150m, most popular) · Optical fibre (2 Gbps, EM interference-free, laser/LED) · Coaxial (inner copper core, 500 Mbps) · Microwave · Satellite (fastest, no distance limit). Processors: Message Switch (store-and-forward) · Multiplexer (multiple signals over one channel) · Front-end processor (off-loads host). Modes: Simplex (one direction — radio) · Half-duplex (both, one at a time) · Full-duplex (simultaneous).
India network committee 1987 — T.N. Anantharam Iyer (ED, RBI). INET: 1991, X.25, PSPD. BANKNET: INET + INAS combined, 1997, MasterCard, P2P VPN, 2M+ TXs/hour, 1,000+ data centers. NICNET: 1976 by NIC (India's largest WAN). RBINet: 'C' language, TCP/IP over X.25, free format messaging, encryption. INFINET: Hyderabad, per Saraf Committee, VSAT→MPLS, managed by IFTAS (wholly owned subsidiary of RBI), supports SFMS/RTGS/NEFT.
SWIFT: 1973, 239 banks, 15 countries, Belgian law, Brussels HQ, 11,000+ institutions, 215 countries, 22M+ daily messages, Mumbai regional processor. Security: Key authentication (detects text changes) · Encryption (confidentiality) · Checksum (uses text + receiver address). GPI announced; Payments Controls (Oct 2018); $81M Bangladesh Bank fraud 2016 → new safeguards.
Automated clearing: CHIPS (1970, New York, premier international, Federal Reserve settlement, 99.9% uptime) · CHAPS (UK, sterling same-day, irrevocable, 30+ participants) · CHATS (Hong Kong) · Fedwire (USA, 1956, X.25, 12 Federal Reserve districts, ~800 banks) · Bankwire (pioneer private sector USA, CASHWIRE clearing). POS: EFTPOS connects retailer to bank network; same bank = direct; different bank = via switching centre.
NEFT: Nov 2005; 24×7 from 16 Dec 2019; no min/max; 48 half-hourly batches (first 00:30, last 00:00); SFMS messages; NCC of RBI = clearing centre Mumbai; credit within 2 hours of batch settlement; positive N10 confirmation for all credits. ECS: 1995; credit clearing (multiple credits, single debit) + debit clearing (multiple debits, single credit, subscriber sets max limit); ECS-RAPID: Feb 1997, Mumbai.
RTGS: 2004; min ₹2 lakh; no upper limit; 24×7×365; final + irrevocable; NG-RTGS 2013 (ISO 20022); phases: SOD → OFB (IDL available) → ICO (customer TXs stop) → FCO (end normal ops) → IDL Reversal; RBI = settlement agent only. CTS: Section 6(b) NI Act (amended Sept 2002); 66 MICR centres before CTS; electronic image substitutes physical cheque; truncation using MICR data or image processing; digital signature optional; paper cheque stays in custody; CTS 2010 standards.

Flashcards — Chapter 45

1. What does a Modem do and where is it installed?▼

Modem = Modulator-Demodulator. Installed in pairs at each end of an analogue communication line. Transmitting end: modulates digital signals → analogue tones and sends over phone lines. Receiving end: demodulates incoming analogue signals back to original digital format.

2. Compare twisted pair, optical fibre, and coaxial cable.▼

Twisted pair: 2 insulated copper wires; up to 150 metres; minimises cross-talk; most popular (low cost). Optical fibre: 2 Gbps; low error rate; NOT affected by electromagnetic interference; glass/plastic fibres with laser/LED light — fastest and most reliable terrestrial medium. Coaxial cable: inner copper core with circular spacers; 500 Mbps; insulation + protective sheath.

3. What are the three modes of data transmission?▼

Simplex: ONE direction only — sender cannot receive, receiver cannot send. Example: commercial radio broadcast. Half-duplex: both directions but only ONE at a time — delay when direction changes (like walkie-talkies). Full-duplex: SIMULTANEOUS two-way communication — faster; avoids direction-change delay. Example: four-wire full-duplex modem on phone lines.

4. What is BANKNET and how does it differ from Visa's network?▼

BANKNET: INET + INAS combined; established 1997; operated by MasterCard; virtual private network (VPN) on a peer-to-peer (P2P) basis; 2 million+ transactions/hour; 1,000+ data centers. Visa uses a centralized hub-and-spoke ('star-based') system. BANKNET's P2P model is more flexible and has lower risk of failure — if one node fails, others continue; Visa's failure of a main node impacts more transactions.

5. When was NICNET set up and what does it serve?▼

NICNET set up in 1976 by National Informatics Centre (NIC). India's largest Wide Area Network (WAN). Secure through VPN + secure WiFi. Serves: G2G (Government-to-Government), G2B (Government-to-Business), G2C (Government-to-Citizen), G2E (Government-to-Employee).

6. What is INFINET and who manages it?▼

INFINET = Indian Financial Network. Set up per Saraf Committee recommendations in Hyderabad. Initially VSAT satellite-based. Now a closed user group MPLS network for banking/financial sector. Currently managed by IFTAS (Indian Financial Technology and Allied Services) — a wholly owned subsidiary of Reserve Bank of India. Supports SFMS, RTGS, NEFT, and government payments.

7. When was SWIFT founded and what are its key facts?▼

Founded 1973 by 239 banks in 15 countries. Cooperative non-profit under Belgian law; HQ Brussels. 11,000+ financial institutions in 215 countries; exchange 22M+ messages daily. In India: all nationalised banks are members; regional processor at Mumbai. Wholly owned by member banks. Operational 24 hours/day, year-round.

8. What are the three security features of SWIFT?▼

(1) Key Authentication: automated telegraphic test key calculated on entire message text — any change in text is detected. (2) Encryption: ensures data confidentiality across the SWIFT network. (3) Checksum: prevents automatic changes during transmission; uses both the message text AND the receiver's address.

9. What is CHIPS and when did it start?▼

CHIPS = Clearing House Interbank Payment System. Started 1970; run by a New York clearing house. World's premier system for international fund transfer. Operational time: 99.9–100%. Settlement of payments through Federal Reserve Bank. Dual systems at two sites (high-speed communication link). Full payment-message authentication. Direct interface with SWIFT.

10. What is CHAPS and where does it operate?▼

CHAPS = Clearing House Automated Payment System. Operates in the UK. Sterling same-day system for high-value wholesale + time-critical lower-value payments. Payments guaranteed on receipt and IRREVOCABLE (cannot be recalled). 30+ direct participants; 5,000+ financial institutions. Uses PSS (packet-switched stream) network; format based on SWIFT; encryption + authentication.

11. What is the Fedwire and what are its three access modes?▼

Fedwire = Federal Reserve Wire System; in operation since 1956; USA. ~800 banks linked. X.25 protocol packet-switched network. Used for: reserve account balances, government securities, high-value domestic, bank-to-bank, corporate-to-corporate transfers. 12 Federal Reserve districts. Three access modes: (1) Direct computer-to-computer; (2) Direct terminal via leased lines; (3) Dial-up terminal facility.

12. What are the key dates for Indian payment services?▼

EFT: 1997 (RBI). RTGS: 2004 (RBI). NEFT: Nov 2005 (RBI). CTS: Feb 2008 (NPCI). NECS: Oct 2008 (RBI). PPIs: 2009. IMPS: 2010 (NPCI). NACH: 2011 (NPCI). AePS: Jan 2016 (NPCI). UPI: Aug 2016 (NPCI; upper limit ₹2,00,000). NETC: 2016 (NPCI). BBPS: July 2017 (NPCI).

13. What is ECS and what were its types?▼

Electronic Clearing System; introduced by RBI in 1995. Alternative for bulk/repetitive payments. Types: (1) Electronic Credit Clearing: multiple credits to beneficiary accounts vs single debit to sponsor bank. (2) Electronic Debit Clearing: multiple debits (consumer accounts) vs single credit; consumers give mandate; subscriber can set max limit per debit. ECS-RAPID: Feb 1997, Mumbai — for service charge payments using MICR reader.

14. What are the key features of NEFT?▼

Introduced November 2005. No minimum or maximum limit. 24×7 from December 16, 2019 (including weekends and holidays). 48 half-hourly batches per day — first batch after 00:30, last ends at 00:00. Messages via SFMS. NCC of RBI = data processing clearing centre in Mumbai. Credit within 2 hours of batch settlement. Positive confirmation (N10) message for all credits.

15. What are the five phases of an RTGS business day?▼

(1) SOD (Start of Day): advances date, loads code files, accepts payment instructions into queue. (2) OFB (Open for Business): all RTGS functionality fully available; IDL (Intra-day Liquidity) provided by RBI against collateral. (3) ICO (Initial Cut-off): customer transactions stop — no new submissions. (4) FCO (Final Cut-off): end of all normal operations; IDL requests stop; pending transactions cancelled. (5) IDL Reversal Session: only for participants with outstanding IDL positions.

16. What is RTGS and what are its key parameters?▼

Real-Time Gross Settlement: continuous real-time processing; settled individually (gross basis — no netting). Final and irrevocable. Launched 2004. Minimum ₹2 lakh for customer transactions; no upper limit. 24×7×365. NG-RTGS introduced 2013 — ISO 20022 messaging standard. RBI acts ONLY as settlement agent (business information not known to RBI). Each bank has single gateway: Participant Interface (PI).

17. How is CTS defined legally and what was the prior system?▼

Section 6(b) of NI Act (amended September 2002): 'a cheque which is truncated during the course of a clearing cycle, either by the Clearing House or by the bank, whether paying or receiving payment, immediately on the generation of an electronic image for transmission, substituting the further physical movement of the cheque in writing.' Before CTS: 66 MICR centres across India; physical instruments transported to MICR centres for clearing.

18. What are the key operational rules of Cheque Truncation?▼

Only banks and Clearing House can truncate a cheque. Done ONLY during the clearing cycle. Electronic image substitutes physical cheque from point of truncation onward. Physical cheque kept in custody of bank/clearing house that truncated it. Digital signature of truncating bank on electronic image: OPTIONAL. Truncation methods: MICR data (IBDE — no further physical movement) OR image processing (scan both sides, store digitally, use image for processing).

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