Connected Banking in Tally Prime – Complete Guide, Benefits & Usage Explained (2025 Updated)

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Managing business finances was never easy—especially for Indian SMEs, traders, manufacturers, and accountants dealing with daily bank transactions, reconciliations, RTGS/NEFT payments, vendor settlements, and receipt confirmations. Traditionally, accountants used to manually update ledgers inside Tally and then log in separately into banking portals for payment processing.

This manual method caused:

• errors in entry
• duplicate transactions
• mismatch of balances
• reconciliation difficulty
• data entry delay
• dependency on bank staff

To solve these challenges, Tally introduced Connected Banking Integration—a major innovation allowing businesses to handle accounting and banking operations together.

In this article, you’ll understand everything about Connected Banking in Tally Prime, including:

• What Connected Banking means
• How Tally integrates with banks
• Supported banks & formats
• How bank statements are imported
• Bank reconciliation process
• Making online payments through Tally
• Security, charges & compliance
• Who benefits most
• Real examples
• FAQs

Let’s begin.

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What Is Connected Banking in Tally Prime? (Simple Explanation)

Connected Banking is a feature that connects your Tally Prime accounting system with your bank account to automate:

• data import
• payment processing
• reconciliation
• statement validation
• ledger posting

In short:

You no longer have to manually enter every bank transaction.

Tally communicates with banks through secure digital APIs and approved formats to automate workflows.

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Why Connected Banking Is So Important in 2025?

Digital banking adoption in India has exploded:

• UPI
• Net banking
• RTGS
• IMPS
• NEFT
• Bill payments
• Auto settlement

Businesses need real-time accuracy across accounting and banking.

Connected Banking solves this demand by:

✔ Eliminating manual bank entry
✔ Reducing errors
✔ Speeding up reconciliations
✔ Strengthening internal control

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Key Features of Connected Banking in Tally Prime

1️⃣ Bank Statement Import

Users can directly import bank statements into Tally using:

• Excel formats
• XML
• CSV
• MT940
• API feeds (bank dependent)

Imported entries update ledgers instantly.

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2️⃣ Auto Ledger Mapping

While importing statements, Tally automatically identifies:

• vendor ledger
• customer ledger
• charges
• taxes
• GST classifications

This drastically reduces manual mapping.

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3️⃣ Online Payment Processing

Tally Prime supports online payments through:

• ICICI Connected Banking
• HDFC Connected Banking
• Axis Bank integrations
• Yes Bank
• SBI Corporate banking

Users can initiate payments directly from Tally.

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4️⃣ Reconciliation Automation

Connected Banking lets you match:

• bank statement line items
  with
• ledger entries
  inside seconds.

It highlights:

• matched
• mismatched
• pending
• difference entries

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5️⃣ Secure Approval Workflow

Businesses with multiple roles benefit from structured rights:

• entry maker
• approver
• viewer
• release controller

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6️⃣ Real-Time Bank Balance Tracking

Users can view accurate balances inside Tally dashboard—no need to open net banking separately.

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How Connected Banking Works – Step-by-Step Flow

Below is a universal workflow example:

Step 1: Configure Bank in Tally

Go to:

Gateway → Banking → Bank Accounts → Configure

Select bank type.

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Step 2: Download Bank Statement (If Needed)

Download from:

• net banking
• corporate portal
• auto feed

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Step 3: Import into Tally

Use:

Gateway → Banking → Bank Statement Import

Upload file.

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Step 4: Tally Auto Matches Entries

Mapped entries include:

• receipt → debtor ledger
• payment → supplier ledger

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Step 5: Bank Reconciliation is Updated

Outstanding and cleared entries show.

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Step 6: Online Payment Option

Tally integrates using a secure gateway.

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Banks Supported by Connected Banking in Tally

Bank support may vary by region, but generally includes:

• ICICI Bank
• HDFC Bank
• Axis Bank
• Yes Bank
• SBI
• Kotak Mahindra Bank

More banks are joining every year.

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Benefits of Connected Banking in Tally Prime

1️⃣ Saves Time

No repeated data entry for:

• payments
• receipts
• charges

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2️⃣ Removes Manual Errors

Automation avoids:

• posting mistakes
• duplication
• incorrect ledger mapping

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3️⃣ Speeds Up Audit Process

Auditors love Tally banking reports because:

• trial balance matches
• bank reconciliation documents
• movement trails

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4️⃣ Improves Cash Flow Clarity

Business owners see:

• receipts pending
• dues
• payment reminders
• cheque clearing status

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5️⃣ Makes Internal Control Strong

Connected Banking prevents fraud by keeping every transaction traceable.

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6️⃣ GST Compliance Simpler

Payments link directly to invoice entries.

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Real Example: Using Connected Banking for Vendor Payment

Before Connected Banking:

• Accountant enters voucher manually
• Goes to bank portal
• Fills beneficiary details
• Initiates payment
• Re-enters details into Tally
• Matches voucher next week

Cons: Slow and error prone

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With Connected Banking:

• Voucher created in Tally
• Approved
• Payment triggered
• Auto entry done
• Auto reconciliation created

Result: Minutes saved → monthly days saved.

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Online Payment in Tally – Options Explained

Tally supports online transfers such as:

• RTGS
• IMPS
• NEFT
• Fund Transfer
• Vendor settlement
• Salary payments

This removes portal dependency.

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Connected Banking Security Highlights

Tally uses:

• encrypted API endpoints
• OTP / token verification
• multi-factor authentication
• role control

Your bank password is never stored inside Tally.

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How Connected Banking Helps Audit Teams

Auditors analyse:

• vouchers
• bank statements
• approval trails
• dates and timestamps
• transaction mapping

Audit work reduces drastically.

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Bank Reconciliation Report in Tally Prime

Shows:

Status	Meaning
Cleared	Matches bank side
Pending	Not cleared yet
Difference	Amount mismatch

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Connected Banking Accuracy level

Approx 95–100% mapping accuracy achieved when:

• ledgers are well structured
• narration patterns match
• supplier/customer tags are consistent

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Limitations of Connected Banking

❌ Works best with supported bank partners
❌ Internet required
❌ Initial setup needed
❌ Staff training required

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Who Should Use Connected Banking in Tally Prime?

Strongly Recommended For:

• Multi-branch companies
• GST filers
• Purchase-heavy traders
• Online sellers
• Retail billing stores
• Manufacturing firms
• CAs with many clients

Optional for:

• Micro enterprises
• Cash-only businesses

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Tips for Efficient Connected Banking Usage

✔ Maintain proper naming of ledgers
✔ Configure approval layer
✔ Update UTR references
✔ Run daily reconciliation
✔ Maintain TSS active
✔ Always backup

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Future Scope of Connected Banking in India

The banking + ERP connection model will grow, including:

• automated rule-based payments
• AI reconciliation
• instant fraud alerts
• predictive expense analytics
• international banking links

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Conclusion

Connected Banking in Tally Prime gives Indian businesses a smarter way to manage accounting and banking transactions in one unified system. It:

• saves time,
• enhances accuracy,
• automates reconciliation,
• supports digital payments,
• and improves business confidence.

In an era where digital payment volume is exploding, implementing connected banking is no longer optional—it is a competitive advantage.

Whether you are a CA firm processing thousands of vouchers a month, or a retail store using bank feeds daily, Tally Prime Connected Banking will reduce manual work and provide clean financial clarity.

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