Personal Finance

Banking Basics: How Does Netbanking Work?

Netbanking, also known as internet banking, is a digital method to conduct banking transactions by the means of the internet. It is an electronic system, which any individual with a bank account can activate and use for their financial proceedings.

Most means and uses of banking done physically can be conducted via internet banking.

Here’s what you need to know to begin using netbanking. 

Why Should You Use Netbanking?

Most banks in India have adopted technology, or are in the process of adopting technology, to meet the banking needs of consumers. While traditional banking, also known as a physical bank, is still the most used and accessed form of banking in India, netbanking is slowly becoming an essential aspect of banking activities.

Netbanking makes banking easier for consumers. Here’s how:

Netbanking Saves Time

A bank customer can access netbanking from any internet-enabled device such as a laptop, computer desktop or mobile phone. They do not necessarily need to visit the bank to transfer money from one account to another, to check their transactions statement or to address banking transactions-related queries. 

Netbanking Helps Open Accounts and Transact Digitally

A netbanking account enables customers to do all their new account openings digitally. This is possible with the help of the pre-submitted know-your-customer (KYC) details that consumers submit to their banks at the time of opening of the netbanking account. 

Consumers can open and transact in all six kinds of banking accounts that exist in India without having to visit the bank physically. 

Netbanking Ensures Security of the Bank Account

For netbanking, all information on your bank’s details, transactions and requests is exchanged electronically without any human intervention. This reduces the possibility of any kind of slip-ups on behalf of customers, in terms of revealing their private banking information to a third party, and avoids misuse of any information. With netbanking, your information remains completely confidential and you are in charge of all banking decisions based on your knowledge. 

Netbanking Aids Financial Empowerment

When a customer uses netbanking, it enables them to learn about the nitty-gritties associated with their bank accounts and the processes behind the transactions. It often is the case with physical banking that customers skip learning and comprehending important information that impacts their banking activities because a physical bank associate assists them. 

When a customer accesses netbanking, all steps of a process demand the customer to learn why the step is necessary and make an informed decision. In the long run, this brings financial empowerment.

How Can You Open a Netbanking Account?

A netbanking account is a digital extension of your bank account. Opening a netbanking account, however, requires you to generate specific digital passwords that enable you to transact over the internet. 

To open a netbanking account, you need to follow these four steps:

1. Approach Your Bank for a Netbanking Account

Your first step to begin a netbanking account is to approach your bank to enable an online banking facility for your existing bank account. Unless you request your bank to start your banking services online, you can’t begin using these services, given the high security maintained in enabling you to transact digitally.

You must let your bank know your intent to begin netbanking for your account. Once the bank receives your request, it provides you two key codes that help you log in to your account online. 

2. Collect Your User ID and Password

For netbanking to work, you need to know your User ID and password to log into your internet banking account. This User ID is different from your bank account number, which serves as the primary identity of your bank account. 

You have to request your bank to generate a User ID and password. In the case of a new account, documents with a User ID and password are handed over at the time of opening the account. 

3. Generate New User ID and Password

To generate your User ID, the bank initially provides you a unique set of numbers that have been generated from its end and a password is handed over in a concealed document to you. This password is used to log in once and the bank in most cases requests consumers to change this password after the first log in to maintain a high level of security of the account. 

It is also advisable to change your User ID after you authenticate your first log-in to ensure you have a fresh set of User ID and password.

The method to change both the User ID and password is simple: 

  • Log in to your bank’s website.
  • Enter the User ID and password that has been provided by the bank.
  • Then log out.
  • Upon logging out, you’ll see a tab on the bank’s website that says “generate new User ID.” 
  • Use that tab to generate a new User ID. 
  • When you request a new User ID, you’ll be asked details such as your date of birth, your mobile number and other details that the bank already has secured from you via your KYC documents. 
  • Upon entering all your details, a one-time password will be sent to your mobile phone. This is the second stage of security and often instills the customer’s faith in online banking.
  • Enter this one-time password to create the new User ID. 
  • Then, follow the same steps to generate a new password. 

4. Begin Transactions Online

You have now logged in to your bank account online and generated a new User ID and password. You can now begin your transactions online. 

What Are the Uses of a Netbanking Account?

Once you start using a netbanking account, it changes your perspective toward using simple banking services, which you would otherwise have kept delaying, awaiting a scheduled visit to the bank. 

Netbanking is most frequently used for seven banking processes: 

1. Using Netbanking to Transfer Funds 

With your netbanking active, you can move funds within your own internal bank accounts, from one bank account to another, from your own account in one bank to another account in another bank or from your own bank account to someone else’s bank account. 

You can use the provision of “Standing Instruction” to repeat transfers on a periodic basis.

2. Using Netbanking to Generate and Track Account Statements

You don’t have to visit your bank or your bank ATM to keep track of debits and credits into your bank account. By a simple click, you can find out transactions done for specific periods of time and request for account statements to be delivered in your email inbox whenever needed. 

3. Using Netbanking to Pay Bills

To make your busy everyday life easier, you can use netbanking to pay your bills, such as phone bills, electricity bills, water utilities bills and other bills that have an online network. 

Most big corporations offering everyday services have a well-established digital infrastructure that enables consumers to avoid physical visits and enjoy the convenience of paying for the use of their services online. 

4. Using Netbanking to Apply for Loans

Loans can be easily applied for online using netbanking. The process of getting personal loans in India and getting business loans is elaborate. Your netbanking activation enables you to be KYC-compliant such that the time taken by loan companies to verify you and your credit score to grant a loan gets much shorter and less cumbersome for both stakeholders. 

5. Using Netbanking to Pay Insurance Premiums

Payment of insurance premiums is one of the financial transactions that requires customers to adhere to strict timelines to avoid any penalties. With netbanking, customers can opt for “Standing Instructions” for specific future dates without worrying about missing a date or incurring a fine. 

6. Using Netbanking to Pay EMIs

You can pay your electronic monthly instalments, or EMIs, using netbanking. One of the frequently used facilities of netbanking of the younger generation that has used internet banking since they first started banking is paying EMIs.

There is no cap on the kinds of EMIs you can pay via netbanking. From your credit card EMI to your rent EMI or your shopping EMIs, all can be paid digitally and securely using netbanking. 

7. Using Netbanking to Apply for a New Debit Card and Cheque Books

With netbanking, you can apply for a new debit card and cheque books as and when needed without having to visit a bank. This is one of the easiest ways to apply for a new physical copy of a financial product of the bank that you’ve been using. 

In the digital age that we are in now, banking as a service is evolving faster than ever and it is in the best interest of consumers to learn how to transact and avail themselves of service digitally. It is especially important to embrace online banking in a heavily populated country such as India, where precious hours are wasted in long traffic jams and physical bank queues are often longer than expected.

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