Explainer: The introduction of ‘Electronic Bank Guarantee’ in the country, know what is the benefit to the customers?

Highlights

Electronic bank guarantee is a better alternative to paper based guarantee
E-Bank Guarantee can be easily processed, verified and delivered
With the help of bank guarantee, it is easy for the debtor to take loan for business or other purposes.

Mumbai: hdfc bank electronic bank guarantee (Electronic Bank Guarantee) Has become the first bank in the country to issue Issued e-Bank Guarantee on 4th September in partnership with National e-Governance Service Limited. The electronic bank guarantee will be issued on the portal of National e-Governance Service Limited. The bank said that through this it will provide quick and paperless services to the customers. On September 5, ICICI Bank in partnership with NESL issued e-Bank Guarantee.

Electronic Bank Guarantee does not require maintenance of manual signature for re-verification and other documents for record. This makes the entire process of bank guarantee easy.

What is a bank guarantee?
Bank guarantee generally signifies that the bank ensures that the liabilities of the borrower will be met. If the debtor fails to repay any loan, the bank will reimburse the same. Bank guarantee makes it easy for the debtor to take loan for business or other purposes. Nowadays, bank guarantee is sought in business to avoid check default. This reduces the risk in the transaction.

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Why the need for an electronic bank guarantee?
Electronic bank guarantee is a better alternative to paper based guarantee. The electronic version can be easily processed, verified and delivered quickly and the process is easy and completed in less time as compared to cumbersome paperwork. It usually takes 3 to 5 days to issue a paper based bank guarantee. In this process the applicant needs to collect the form from the bank, courier it to the beneficiary, stamp and re-verify. But in electronic bank guarantee, this whole process gets rid of.

Jayakrishna ji, an expert associated with Financial Services Consulting, said that the banking sector is passing through a phase of technology and digital transformation. Experts said that electronic bank guarantees have the potential to replace the process of paper-based guarantees in the coming years. He said that more banks may soon start giving e-bank guarantees.

Are electronic banks completely secure?
Incidents of fraud have come to the fore in many cases related to bank guarantees. Due to which the lenders suffered losses. But since electronic-bank guarantees have the potential to eliminate human intervention, many loopholes can now be removed. Although the risk of this fraud can be reduced, but it is not completely safe. Experts said that, because in this the privacy of data and other information can be harmed. Since all the information online
So anyone can misuse it.

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How can the risk in e-bank guarantee be mitigated?
According to experts, banks and NESL need to be alert to cyber security risks for problems arising after issuance of electronic bank guarantees as these are three-party transactions. Banks should also take the responsibility of educating and helping customers and beneficiaries to transition to the new digital process.

Tags: banking reforms, hdfc bank, ICICI bank, RBI

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