FAQs on Internet Banking

Banking is no longer confined to the traditional brick and mortar branches. Customers are being provided with multiple modes of accessing banking transactions, including Mobile Banking, banking through ATM and Point of Sales terminals and now Internet Banking.

What is Internet banking?
Internet Banking is a means by which customers can manage their bank accounts and conduct real time banking transactions electronically over the Internet. Internet Banking gives customers the control over nearly every aspect of managing their bank accounts. Besides, the customers can check balances, see cheques status, transfer money from one account to another account, view transaction history and impor­tantly avoid going to an actual bank. In addition, the customer can also use Internet Banking to pay bills to service providers and also shop online.

What are the advantages of going in for Internet banking?
The advantages are many. First, there is round-the-clock, real time access. And second, one can access the bank from anywhere in the world at one's own convenience.

What are the requirements for accessing Internet banking?
The user will first need to open an account with the bank providing Internet Banking and register for the online banking facility; thereafter the bank will pro­vide the customer a unique personal password or Per­sonal Identification Number (PIN) to log into the internet banking site. There on, the customer will simply re­quire a computer and an internet access to avail the service. No additional software will be required to avail Internet Banking.

How is it actually done?
The user needs to be online and visit the bank's web site on the Internet. Then the user will have to click onto the Internet Banking section. The personal password supplied by the bank enables the user to access the bank and do any required transaction. Some banks even provides demo in their web site, to famil­iarize first-time user with Internet Banking.

What type of transactions or operations can be undertaken?
A user will be allowed to perform a vast range of trans­actions; some of these are as follows:

• Account information.
• Funds transfer.
• Online real-time payment for shopping done on Internet.
• Requests and intimations.
• Contacting/communicating with the accounts or relationship manager.
• Electronic bill payment towards utility bills.
• For business users, they can also initiate issu­ance of Bank Guarantee, Letter of Credit etc.
  

Can funds be transferred from one bank to another on-line?
Some bank has this facility and but most of the banks does not support it. But all banks can transfer funds among the various branches of the bank.

What are the safety tips I need to remember?
Online users would be safe with Internet Banking, if they abide by these rules and other online banking guidance and safety tips as provided by the bank pro­viding Internet Banking. Some safety tips are as fol­lows:

• Users will need to read the bank's web site privacy policy and fully understand and satisfy with the policy before using the internet banking site.
• Bank providing Internet Banking should provide safe­guards to protect personal information from being accessed by unauthorized persons. Online users should ensure these security mechanism are in place.
• Secure method of sending information back and forth
• Scrambled or encrypted information
• Firewall
• Password protection
• Automatic sign off after a certain period of inactivity
• If someone contacts a user via e-mail or the internet and claims to be a representative from their bank, the user by no means should give them any infor­mation. If such instances occur, the bank should be immediately contacted.
• When choosing a password, the user should avoid using easily available information like the user's mother's maiden name, birth date, the last four dig­its of the user's passport number or phone number, or a series of consecutive numbers etc. User needs to use their judgment to have a difficult password at all time and frequently change them. Password should always be heavily guarded and not disclosed to anyone, anytime.

What is e-commerce and what are its current capabilities?
E-commerce is making payments electronically. Here both the buyer and the seller will require opening an account with the bank providing Internet Banking. For availing the products/services of the seller/supplier, the buyer will make payment online and the seller will be notified instantly on such payment either through emails or SMS.

The same concept applies to online shopping, wherein the retail customer of the bank will visit the website of the online shopping portal, chose a product as displayed in the online portal and at the time of making payments, the online shopper will log into the Internet Banking website of the bank and make such payments. Electronic payment through internet is slowly expected to decrease the usage of the conventionally used system of making payments through cheques.

Can one access bank accounts through a mobile phone?
Yes, one can access banking through the SMS Banking services of the bank. SMS stands for Short Messaging Service. In SMS technology, one has to key in certain predefined "keywords", as instructed by the bank, to access the services. As the keyword is entered, the cellular service provider connects the customer to the bank, which in turn, will flash the required information on the cellular phone screen.

Unlike SMS Banking, in WAP-enabled mobile bank­ing, one actually logs on to the bank's website, as in Internet Banking and avails the full services as pro­vided by the Internet Banking.

Foreign exchange of Nepal: A Brief History

Different currencies and the need to exchange them had existed since the Babylonians (who are credited with the first use of paper notes and receipts). Foreign exchange or foreign currency is the currency of an overseas country, which is purchased by a particular country in exchange for its own currency. The foreign exchange rate is the price of a country's currency in terms of another country's currency. The exchange rate is crucial in maintaining balance of receipts and payments between two trading countries. Understanding of the history of a countries exchange rate is important to formulate the country's exchange rate policy.

Commercial relationship between Nepal and India has existed more than five hundred years before Christian era. By first half of seventh century when the Lichhavis were ruling, Nepal had become the country of transit trade between India and Tibet. Barter system prevailed during those days. Nepal was divided into various small states, few states had there own metallic currencies. Exchange rates during that era were determined according to the market. Metals like gold and silver was mostly used as means of exchange. It was only after unification of Nepal did have a single currency. But minted coins came into use only after Jung Bahadur Rana set up a minting machine in Kathmandu.

Nepal has a rich history on foreign exchange. Evolution of Nepal's exchange rate policy begun only after unification of Nepal in 1769. We moved from having no defined exchange rate policy, but being market determined, to have clear exchange rate policy. Nepal's foreign exchange policies can be differentiated into six distinct periods. These periods are:

Floating exchange rate period
Prior to establishment of Nepal Rastra Bank, many currencies along with Nepalese currency were circulated in Nepal. The value between each currency was determined by market. Fluctuations in supply and demand of currencies were reflected in the floating rates. However, the currency was metallic and its value was based on metallic content. It existed up to 1956.

Dual currency period
Our country had dual currency from 1835 to 1934. Both Nepalese currency and Indian currency were used as currency of exchange in Nepal. Indian paper currency was acceptable for heavy transactions. Both Nepalese and Indian paper and metal currencies circulated. It lasted up to mid 20th century. In Kathmandu, Nepalese currency dominated whereas in Terai (near the border of India) Indian currency was heavily circulated but in hilly regions barter system still prevailed.

Pegged exchange rate period
1951 to 1955 was extremely volatile in respect to Nepalese currency-Indian currency exchange market. Changes occurred daily. Fluctuation in the value of Indian currency against value of Nepalese currency remained a source of unnecessary irritation and trouble for all walks of life until 1957 when the system of dual currency system was abolished under Nepal Currency Circulation and Expansion Act. Due to the volatile market of Nepalese currency and Indian currency and its adverse effect on confidence of Nepalese currency and economy of Nepal, the dual currency system was abolished and a single currency was fixed. Nepalese currency was pegged with Indian currency with unlimited convertibility at the fixed rate of 160NC to 100IC. Nepalese currency has been fixed with Indian currency for last 40 years with only 7 changes in the exchange rate so far.

Dual exchange rate period
After World War II, the foreign exchange market of the world became volatile. In order to bring economic order, United Nations Monetary Fund convened the Bretton Woods Accord. It established the policy of pegging currencies against the U.S. dollar so as to bring stability to a fractured and volatile global economic situation.

The first element of the Accord was to peg the U.S. dollar to the price of gold at $35.00 an ounce (The gold standard). With this benchmark anchoring the U.S. dollar, other major currencies were pegged to the greenback and allowed to fluctuate no more than 1% on either side of the pegged rate.

With accordance with the Bretton Woods system, Nepal Rastra Bank pegged 1 USD with 7.60 Nepalese currency. As Nepalese currency was already pegged with Indian currency, we adopted a Dual pegged system, i.e., one with USD (7.60=1USD) and second with Indian currency. This period extended from 1960 to 1973.

Basket of currency period
After collapse of Bretton Woods System in 1971, Nepal adopted the basket of currency system from 1983 to 1992. On June 1st 1983, Nepalese currency was pegged with basket of currencies. Basket of currency includes number of currencies based on trade weights. The exact composition of basket of currencies had not been divulged by Nepal Rastra Bank. Indian currency was also included in basket of currency, so Nepalese currency-Indian currency rates also changed on daily basis during that period.

Floated exchange rate periodBasket of currency system was discarded in 1992 and Nepalese currency was floated according to the demand for and supply of the market. Nepalese currency-Indian currency was again pegged at 160 Nepalese currency for 100 Indian currency. Other currencies were floated under supervision of Nepal Rastra Bank, i.e., from 1992 onwards Nepal adopted a managed float system. The central bank intervenes with floating exchange rate using various policies to maintain the desired exchange rate. The Central Bank provides money if exchange rates are dropping to bring it up again. This is the present status of our foreign exchange policy.