1

PROJECT REPORT
On
E-BANKING IN INDIA
BACHELOR OF COMMERCE
BANKING & INSURACE
V- SEMESTER
2012-2013
SUBMITTED BY
SHIVANI CHANDA
UNDER GUIDANCE OF
PROF. SUBHASHINI
GURU NANAK COLLEGE OF ARTS, SCIENCE & COMMERCE
MUMBAI -37.
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CERTIFICATE

This is to certify that of T.Y.B.COM
(BANKING AND INSURANCE) SEM V
has successfully completed the project of
in banks.





PROJECT GUIDE. CO-ORDINATOR.



PRINCIPLE. EXTERNAL EXAMINER.




DECLARATION

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I am SHIVANI CHANDA the student of T. Y. B.COM (BANKING AND
INSURANCE) SEM V.
hereby declared that I have completed the project on
E-BANKING IN INDIA.
The information submitted is true and original to the best of my
knowledge.



SIGNATURE OF STUDENT




NAME : - SHIVANI CHANDA
ROLL NO : - 40






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ACKNOWLEDGEMENT

We would like to acknowledge the following being as an idealistic
& fresh dimensions in the completion of this project.
First & forecast, we would like to thank to our prof. Sudha whose
invaluable support and guidance helped me in every aspect of this
project.
Secondly, we would like to express my deep sense of gratitude
towards our PRINCIPAL and our Banking & Insurance coordinator
for their valuable guidance & support without which this project
would not have been possible









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INDEX

SR NO TOPIC

1 INTRODUCION TO BANKING

2 INTRODUCTION TO E-BANKING

3 TYPES OF E-BANKING

4 ADVANTAGES AND DISADVANTAGES OF E-BANKING

5 RISK MEASURERING

6 E-BANKING IN REALITY

7 CONCLUSION







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CHAPTER-1
INTRODUCTION TO BANKING

A System of trading in money which involved safeguarding deposits and
making funds available for borrowers. In general terms , the business activity
of accepting and safeguarding money owned by individuals and entities , and
then lending out this money in order to earn a profit.
History of banking in India
Without a sound and effective banking system in India it cannot have a
healthy economy. The banking system of India should not only be hassle
free but it should be able to meet new challenges posed by the technology
and other external and internal factors.
For the past three decades Indias banking system has several outstanding
achievements to its credit. The most striking is its extensive reach. It is no
longer confined to only metropolitans or cosmopolitans in India. In fact,
Indian banking system has reached even to the remote corners of the
country. This is one of the main reasons of Indias growth process.
The governments regular policy for Indian bank since 1969 has paid rich
dividends with the nationalization of 14 major private banks of India.
Not long ago, an account holder had to wait for hours at the bank counters
for getting a draft or for withdrawing his own money. Today , he has a
choice. Go ne are days when the most efficient bank transferred money
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from one branch to other in two days. Now it is simple as instant
messaging or dials a pizza. Money has become the order of the day.



The first bank in India, though conservative, was established in 1786. From
1786 till today, the journey of Indian banking system can be segregated into
three distinct phases.
They are mentioned below:
Early phase from 1786 to 1969 of Indian banks
Nationalization of Indian Banks and up to 1991 prior Indian banking
sector Reforms.
New phase of Indian banking system with the advent of Indian
Financial & Banking sector Reforms after 1991.
To make this write-up more explanatory, I prefix the scenario as phase I,
phase II and phase III.
Phase I
The general Bank of India was set up in the year 1786. Next come bank of
Hindustan and Bengal bank. The East India Company established Bank of
Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) and Bank
of Madras (1843) as independent units and called it presidency Bank. These
three banks were amalgamated in 1920 and Imperial Bank of India was
established which started as private shareholders banks, mostly Europeans
shareholders.
In 1809 Allahabad banks was established and first time exclusively by
Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at
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Lahore. Between 1906 and 1913, central Bank of India, Bank of Baroda,
Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank
of India came in 1935.
During the first phase the growth was very slow and banks also experienced
periodic failures between 1913 and 1948. There were approximately 1100
banks, mostly small. To streamline the functioning and activities of
commercial banks, the Government of India came up with The Banking
Companies Act, 1949 which was later changed to Banking Regulation Act
1949 as per amending Act of 1965. Reserve Bank of India was vested with
extensive powers for the supervision of banking in India as the Central
Banking Authority.

Phase II
Government took major steps in this Indian Banking Sector Reform after
independence. In 1955, it nationalized Imperial Bank of India with extensive
banking facilities on a large scale especially in rural and semi-urban areas. It
formed State Bank of India to act as the principal agent of RBI and to
handle banking transaction of the Union and State Government all over the
country.
Seven banks forming subsidiary of State Bank of India was nationalized in
1960 on 19
th
July, 1969, major process of the Prime Minister of
nationalization was carried out. It was the effort of Prime Minister of India,
Mrs . Indira Gandhi. 14 major commercial banks in the country were
nationalized.
Second phase of nationalization Indian Banking Sector Reform was carried
out in 1980 with seven more banks. This step brought 80% of the banking
segment in India under Government ownership.
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The following are the steps taken by the government of India to Regulate
Banking Institutions in the Country :
1945 : Enactment of Banking Regulation Act.
1955 : Nationalization of State Bank of India.
1959 : Nationalization of SBI subsidiaries.


1961 : Insurance cover extended to deposits.
1969 : Nationalization of 14 major banks.
1971 : Creation of credit guarantee corporation.
1975 : Creation of regional rural banks.
1980 : Nationalization of seven banks with deposits over 200 cores.
After the nationalization of banks, the branches of the public sector bank
India rose to approximately 800% in deposits and advances took a huge
jump by 11,00o%.
Banking in the sunshine of government ownership gave the public implic it
faith and immense confidence about the subtainability of these institutions.
Phase III
This phase has introduced many more products and facilities in the banking
sector in its reforms measure. In 1991, under the chairmanship of M
Narasimham, a committee was set up by his name which worked for the
liberalization of banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts
are being put to give a satisfactory service to customers. Phone banking and
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net banking is introduced. The entire system become more convenient and
swift. Time is given more importance than money.
The financial system of India has shown a great deal of resilience. It is
sheltered from any crisis triggered by any external macroeconomics shock as
other East Asian Countries suffered. This is all due to a flexible exchange
rate regime, the foreign reserves are high, the capital account is not yet
fully convertible, and banks and their customers have limited foreign
reserves are high, the capital account is not yet fully convertible, and banks
and their customers have limited foreign exchange exposure.














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CHAPTER 2
INTRODUCTION TO E-BANKING
E-BANKING
Electronic banking in simple terms means, it does not involve any physical
exchange of money, but its all done electronically, from one account to
another, using the Internet. Internet banking is just like normal banking,
with one big exception. You dont have to go to the bank for transactions.
Instead, you can access your account any time and from any time and from
any part of the world, and do so when you have the time, and not when
the bank is open. For busy executives, students, and homemarkers,
e-banking is virtual blessing. No more talking precious time off from work to
get a demand draft made or a cheque book issued.
Banks offer Internet banking in tow main ways. An existing bank with
physical offices can establish a Web site and offer Internet banking to its
customers in addition to its traditional delivery channels.
A second alternative is to establish a virtual, branchless, or Internet-
only bank. The computer server that lies at the heart of a virtual bank
may be housed in an office that serves as the legal address of such a bank,
or at some other location.
Virtual banks may offer their customers the ability to make deposits and
withdraw fund via automated teller machines (ATMs) or other remote
delivery channels owned by other institutions.
Online system allow customers to plug into a host of banking services from
a personal computer by connecting with the banks computers over
telephone wires the convenience can be compelling. Not only is travel time
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reduced, but ATM machines, telephone banking or banking by mail are often
unnecessary. And, technology continues to make online banking once
attempted only by computer enthusiasts, easier for the average consumer.
Banks use a variety of names for online banking services, such as PC
banking, home banking electronic banking or Internet banking.
Can one imagine life without paper cash? Money has always been part of
human emotions. And although it is difficult to imagine that all those years
of savings at the bank is now just a whole bunch of bits and bytes, it is
becoming a reality and the sooner people adjust to it, the better it is.

EVOLUTION OF E-BANKING:
The story of technology in banking started with the use of punched card
machines like accounting machines or ledger posting machines. The use of
technology, at that time, was limited to keeping books of the bank. If
further developed with the birth of online real time system and vast
improvement in telecommunications during late 1970s and 1980s it a
resulted in a revolution in the field of banking with convenience banking
as a buzzword. Through convenience banking, the bank is carried to the
doorstep of the customer. The 1990s saw the birth of distributed computing
technologies and Relational Data Base Management System. The banking
industry was simply waiting for these technologies. Now with distribution
technologies, one could configure dedicated machines called front-end
machines for customer service and risk control while communication in the
batch mode without hampering the response time on the front- end
machine.


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HISTORY OF E BANKING
The precursor for the modern home online banking services were the
distance banking services over electronic media from the early 80s. the term
online become popular in the late 80s and refers to the use of a terminal,
keyboard and TV (or monitor) to access the banking system using a phone
line. Home Banking can also refer the use of numeric keypad to send
tones down a phone line with instructions to the bank. Online services
started in New York in 1981 when four of the citys major banks (Citibank,
chase Manhattan, chemical and manufacturers honover) offer home banking
services using the videotext these banking services never become popular
except in France where the use of videotext (Minitel) was subsidized by the
telecom provider and the UK, where the pestle system was used. The UKs
first home online banking services were set up by the Nottingham Building
Society (NBS) in 1983. The system used was based on the UKs pestle
system and used a computer, such as the BBC Micro, or keyboard
connected to the telephone system and television set. The system (known as
Home link) allowed on-line viewing of statement, bank transfers and bill
payment. In order to make bank transfers and bill payment, a written
instruction giving details of the intended recipient had to be sent to the
NBS who set the details up on the Home link system. Typical recipient were
gas, electricity and telephone companies and accounts with other bank.
Details of payments to be made were input into the NBS system by the
account holder via pestle. A cheque was then send by NBS to the payee
and an advice giving details of the payment was send to the account
holder. BACS was later used to transfer the payment directly. Stanford
federal credit Union was the first financial institution to offer online internet
banking services to all of its members in Oct, 1994.

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PRE E-BANKING SCENARIO IN INDIA
Traditional Banking
Traditionally the relationship between the bank and its customer has been
on a one-to-one level via the branch network. This was put into operation
with clearing and decision-making responsibility for the overall clearing
network, the size of the branch network and the training of staff in the
branch network. The bank monitored the organizations performance and set
the decision-making parameters, but the information available to both
branch staff and their customers was limited to one geographical location.
Traditional Banking structure

On IT Adoption
The Indian banking sector woke up to the world of technology in early
1990s. The banking sector in India has been dominated by public sector
banks, who hold between them more than 80% of total asset base. New
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private sector banks and foreign banks have tended to concentrate their
efforts more on the top 23 centers which house the cream of the countrys
urban customers. These banks have taken the which house the cream of the
countrys urban customers. These banks have taken the lead in technology
adoption and have succeeded in building up a substantial base of technology
savvy, high-end customer
Making and observation about the adoption of technology by the bank, P.C.
Narayan, vice-president (IT and retail banking) of Global Trust Bank Ltd, says.
The rate of adoption of IT by foreign and private sector banks in country
has been significant over the Internet phenomenon worldwide. A number of
banks in the public sector have also accelerated the pace of IT deployment
largely because of the competitive pressure brought upon them by private
sector banks and foreign banks.
Though in the beginning the employees resisted computerization (especially
in nationalized banks), the management finally succeeded in convincing its
employees about the benefit and need for adoption of technology. Says P.
Seshadri Rao, a financial consultant based in Hyderabad, The basic reason
for getting the nod for computerization was the competition from private
banks. Once the gates were opened to the private sector to operate banks,
they started with a bang, thereby forcing nationalized banks to reconsider
their way of doing business.
A SBI official in Delhi echoes the same sentiments: Needless to say,
competition from foreign banks was one of the motivation factors for us to
switch to computers. But housekeeping scored over everything else.
Maintaining books and regular tasks like computing interest at the end of
the calendar year yeas tedious. The quantum of database was so huge that
computerization was the only way out.
Banks would have certainly started downing their shutters had banking
software not taken over the reins.
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In sharp contrast, most of the private banks like GTB, HDFC, and ICICI
started their operations with the use of technology. And with these new
banks wooing the customers by offering what was till then an unknown
phenomenon-customer service-the nationalized banks were forced to take
remedial steps. The compulsion for private banks to adopt a very high level
of IT was driven by their desire to contain their operating cost at the
lowest levels and at the same time be able to offer a wide variety of
product and services in quickset possible time. Observes Narayan.
Commenting on the reasons for public sector banks being laggards in the
adoption of technology, State Bank of Mysore managing director sitarama
Murty says: The private banks started with a clean slate. They hired
technology savvy people. On the other hand, public sector banks didnt have
those advantages. We need to follow the public sector banks rules and
regulation while hiring people. We cant appoint computer professional in
the top management directly.
Computerization of the branches, especially in semi-urban and rural areas,
is still a far cry for public sector banks. This calls for huge investments and
retraining of staff. I think these factor are inhibiting most of the banks to
take technology to rural areas. But since IT is becoming an integral and
inevitable part of the banking system, rural banks computerization should
also happen very soon, comment a senior official with Andhra Bank.
Explains P.K. Seshadrinathan, CTO of SSI Technology: The key obstacles to
introduction of IT are non-integration or non-networking of branches, and a
lack of corporate network. Computerization has been introduced but each
branch acts as an island. And, of course, cultural/social issues continue to
pose problem. Overcoming these obstacles, therefore, would be the biggest
challenge by itself.
However, the nationalized banks have taken to computerization in right
earnest.
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Today most of them have their own in-house IT department which not only
takes care of deployment and implementation issues but is also into
developing specific and customized application for the bank. From SBI to
canara bank, everyone is expanding its IT division and making huge
investment to develop the division as a profit centre by itself. According to
an SBI official, It makes more sense to have our own division which
understand our needs and comes out with a solution. It is not just cost-
effective but also useful for a bank to have a separate division that takes
care of IT in totality.
Faced with deregulation, privatization and globalization , the Indian banks are
slowly looking at various options to stay ahead in the rat race. This has
resulted in the following recent trends:

Phone banking
This means carrying out of banking transaction through the telephone. A
customer can call up the banks help line or phone baking number to
conduct transaction like transfer of funds, making payments, checking of
account balance, ordering cheques, etc,. This also eliminate the customer of
the need to visit the banks branch.

ATM(Automatic Teller Machine)
An ATM is basically a machine that can deliver cash to customers on
demand after authentication. An ATM does the basic function of a banks
branch, i.e., delivering money on demand. Hence setting of branches is not
required thereby significantly lowering infrastructure costs. These machines
also hold the keys to future operational efficiency.

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CHAPTER 3
TYPES OF E-BANKING
E-BANKING IS DIVIDED IN FOLLOWING TYPES:
Types of E-Banking:-


ATM (Automatic teller machine)

Tele banking/Phone banking.

Mobile banking.

PC banking.

Internet banking.

Wireless/ PDA banking.








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AUTOMETED TELLER MACHINE (ATM)
Automated teller machine is seen everywhere. These machines brought
innovation in the banking sector all over the world. The advent of the ATM
has made the concept of the clock banking a reality. The ATM has been
helpful to both the bankers and customers. The load crowd of customers in
the banking hall of a branch waiting for their turn to collect cash is
dippearing.
The ATM is the device use by the bank customers to process account
transaction. This system is known as anytime money because with services
the person having the ATM card can withdraw cash any time he want. Since
the ATM machine can be build anywhere like near markets and railway
stations etc, so one can easily with draw money from it.

Advantages of ATM:
To banks
Less space required
Capital expenditure is lower as compare to branch
Banks staff gets more time to do marketing
Lower transaction cost
One more means for advertising banks products
To customer
Convenience of shopping no need to carry cash
No need to visit bank for transaction
Banking anytime, anywhere, anyhow
Fast and efficient service
Good currency notes

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Disadvantages of ATM:
Flexible to efficiencys expense, at present, for any one application it is
usually possible to find a more optimized technology.
Cost, although it will decrease with time.
New customer premises hardware and software are required
competition from other technologies - 100 Mbps Ethernet and fast
Ethernet.
Presently the application that can benefit from ATM such as multimedia
are rare.
The wait, with all the promise of ATMs capabilities many details are still in
the standards process.

Tele banking or Phone banking:
The customer interacts with the bank for various services over phone. There
will no charge for dialing to the toll free number provided by banks Tele-
banking, also know as voice over phone is consider under anywhere
banking. The customer indentifies himself to the system by entering his pin
number and is guided by a voice response for each banking services namely:
Balance in the account
Transaction status, e.g. whether cheque deposited is cleared or not
Request for issue of cheque book is registered
Request for issue of bank statement is registered
In normal course all above activities would have involved customer visit to a
branch and this Tele-banking has improved banking services and enabled
remote banking.

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Advantages of Tele-banking:
1. You may not have time to visit your bank every week and if our
business is located out of town, getting to a branch can be time
consuming and expensive. With telephone banking, your bank is on the
other end of the line whenever you need it.
2. You can manage your business account at any time, which is idial if
you are busy during the day with running your business.
3. As well as the basics of running your business account paying a bill,
transferring money, setting up a direct debit and so on you may also
be able to appointment with your bank manager.
4. Making payment by phone can simplify your banking you dont need
to confirm the payments in writing, and you can check all your
transactions against your statement when it arrives.

The disadvantages of Tele-banking:
The most common one would have to be the fact that not all banks and
building societies offer 24 hour telephone banking. They may if is simply a
case of checking your balance or recent transaction but for anything more
involved in that it can cause a problem. Also telephone banking is not
active usually over bank holidays such as Christmas day or New year day.

Mobile banking
Mobile banking comes in as a part of the bank initiative to offer multiple
channels banking providing convenience for its customer. A versatile multi
functional, free service that is accessible and viewable an the monitor of
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mobile phone. Mobile phones are playing great role in banking and other
channels.
Mobile banking can be divided into two broad categories of facilities:
Alert facility:
Mobile banking alert facility keeps you informed about the significant
transaction in your account. It keeps you update where ever u go.
Request facility:
Mobile banking request facility enables you to enables you to query for your
account balance.
Advantages of Mobile banking
Mobile banking through cell phone offers many advantages for customers as
well as banks. Some of them are as follows:-
1) Mobile banking has an edge over internet banking. In case of online
banking you must have an internet connection and computer. This is a
problem in developing countries. However, with mobile banking,
connectivity is not a problem. You can find connectivity in the remotest
of places also where having an internet connection is a problem.
2) You can make transaction or pay bills anytime. It saves a lot of time. Mobile
banking thorough cell phone is user friendly. The interface is also very
simple. You just need to follows the instructions to make the
transaction. It also saves the record of any transaction made.
3) Cell phone banking is cost effective. Various banks provide the facility
at a lower cost as compared to banking by self.
4) Banking through mobile reduces the risk of fraud. You will get an SMS
whenever there is an activity in your account. This includes deposits,
cash withdrawals, funds transfer etc. You will get a notice as soon as
any amount is deducted or deposited in your account.
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5) Banking thought cell phone benefits the banks too. It cuts down an the
cost of Tele-banking and is more economical.
6) Mobile banking through cell phone is very advantageous to the banks
as it severs as guide in order to help the banks improve their
customer care service.
7) Banks can be in tough with their clients with mobile banking.
8) Banks can also promote and sell their products and services like Credit
cards , loans etc to a specific group of customers.
9) Various banking services like Account Balance Enquiry, Credit/Debit
Alerts, Bill payment Alerts, Transaction History, Fund Transfer Facilities,
and Minimum Balance Alerts etc can be accessed from your mobile.
10) You can transfer money instantly to another account in the same
bank using mobile banking.

PC banking:
PC banking allows the customer to access the information regarding to
their bank accounts through a dial up connection. They can also
download the information and process it in their own manners. It is
different from the internet banking in the sense that internet banking is
done over a highly accessible public networks, where as PC banking is
accessible just to banks customers.
PC banking makes things easier
You can access your account just from your home PC, 24 hours per day,
7 days per week. All you need is a computer with an internet connection,
and a card reader, which can be obtained at your four Fortis Bank. The
card reader gives you unique codes based on your bank card and pin
number, so your account stays safe.

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PC banking goes faster
Because you dont need to go all the way to your local bank office, you
save a lot of time that you dont want to be wasting in traffic. A lot of
information and reports can be obtained with a few clicks, and
transactions can be done without signing papers. Most of your time will
be spend on time going to the website and logging in, so it is advisable
to do all youre banking at a certain time. For example, Every Monday
you log in and do your transaction and administration. Now you just log
in once and process all transfers and reports at once.

Advantages of PC banking:
PC Banking enables you round-the-clock access.
You usually do not think to stand an queue as a way to perform
important banking transaction. The PC banking enables you to do just
that suitable from the ultimate comfort and privacy of your homes.
In comparison towards the Online banking program, the PC banking
provide you increased security.
Since the level of security is very much greater in PC banking, you
can access very much more services that what you by way of online
banking.
Whats more, even the speed of the banking transaction is very
much faster that online banking.
In case you are using individual economic management computer
software and want the inputs from your checking, savings and cash
marketplace accounts, PC banking makes it probable for you to
download the related information suitable into the computer
software program.
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You could also check your balances and love the conversation and power
of electronic fund transfer.

Disadvantages:
There is no personal interaction between yourself and the bank
(employee/advisor).
You can access your account from the PC that you originally installed
the software.
You cannot deposit physical cash using internet banking i.e. cheques,
cash in hand. This would require a personal visit to the bank.

Internet banking:
Internet banking let you handle many baking transaction via your personal
computer. For instance, you may use your computer to view your account
balance, request between accounts, and pay bills electronically. Internet
banking system and method in which a personal computer is connected by
a network service provider directly to a host computer system of a bank
such that customer service requests can be processed automatically.
The advent of the Internet and the popularity of personal computer
presented both an opportunity and a challenge for the banking industry. For
years, financial institutions have used powerful computer network to
automate million of daily transaction ; today, often the only paper record is
the customers receipt at the point of sale. Now that their customers are
connected to the internet via personal computers are connected to the
Internet via personal computers, banks envision similar advantages by
adopting those same same internet electronic processes to home use. Bank
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view online banking as a powerful vale added tool to attract and retain
new customers while helping to competitive banking environment.
It generally implies a service that allows customers to use some form of
computer to access account-specific information and possibly conduct
transaction from a remote location - such as at home or the workplace. The
obvious advantage to the consumer is convinceone bank recently used the
advertising motto bank naked to emphasize the customers freedom to
conduct routine banking transaction from the comfort and security of his/her
home 24X7.

Type of Internet Banking:
There are three basic type of internet banking that is being employed in the market
place:
INFORMATION.

COMMUNICATION.

TRANSACTION.

Information:
This is most basic level of internet banking. The bank has marketing
information about its product and services on a stand-alone server. This
level of internet banking services can be provided by the bank it self or by
sourcing it out. Since the server and website may be vulnerable to
alteration, control must therefore be in place to prevent unauthorized
alterations to data the server or web site.
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Communication:
This type of internet banking allows the interaction between the banks
system and customer. It may be limited to electronic mail, account inquiry,
loan application, or static file update. This risk is higher with this
configuration that with the earlier system and therefore appropriate control
need to be in place to prevent, monitor, and alert management of any
unauthorized attempt to access banks internal network and computer
system. Under this system the client makes a request to which the bank
subsequent responds.
Transaction:
Under this system of internet banking customers are allowed to execute
transaction. Relative the information and communication type of internet
banking, this system processes the highest level of risk architecture and
must have the strongest control. Customer transaction can include accessing
accounts, paying bills, transferring funds, etc. this possibilities demand very
stringent security.


Advantages of Internet banking:

An internet banking account is simple to open and use. You just
enter a few answers to question in a form while sitting comfortably
in your own home or office . to access your account, you establish
security measures such as usernames and passwords. To complete
the set up of your account, you just print, sign and v send in a
form.
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Internet banking cost less. Because there are fewer building to
maintain, and less involvement by salaried employees, there is a
much lower overhead while with online banking. These saving allow
them to offer higher interest rates on saving accounts and lower
lending rates and service charges. Even traditional brick and mortar
banks offer better deals such as free bill paying services to
encourage their customers to do their banking online.
Comparing internet banking to get the best deal is easy. In a short
time, you can visit several online banks to compare what they offer
resaving and checking account deals as well as their interest rates.
Other things you can easily research are what credits cards are
available, credit card interest rates, loan term and the banks own
rating with the FDIC.
Bouncing a check (accidentally) should be a thing of the past
because you can monitor your account online any time, day or
night.
You can track your balance daily, seen what checks have cleared and
know when automatic deposit and payment are made this is all possible
by simply going online to the banks website and logging into your
account.
You can keep your account balance using your computer and your
monthly statement.
Your bank account information can be downloaded into software
program such as Microsoft money or quicken; making is easy to
reconcile your account with just a few mouse clicks. The convenience
of the data capture online makes it much easier to budget and track
where your money goes. Your internet bank account even allows you
to view copies of the checks you have written each month.
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With the ability to view your account at anytime, it is easier to
catch fraudulent activity in your account before much damage is
done.
As soon as you log into your account, you will quickly see whether
there is anything amiss when you check on your deposits and debits. If
anyone writes a check or withdraws fund from your account and you
know it wasnt you, you will see it right away. This lets you get
started on correcting the problem immediately rather that having to
wait a month to even have a clue it is happening as would be the
case with a traditional bank.
Internet banking offers a great deal more convenience that you could
get from a conventional bank.
You arent bound by bankers hours and you dont have to go there
physically in your car. Time is not wasted when you have work to do
because you can do your offices banking without leaving the office. No
matter where you are or what time it is, you can easily mnage your
money.
There are sound reasons why internet banking is growing. The economic
advantages have encourage banks to provide an increasing rang of easy
to use services via the internet.
Customers have found doing business online simple and speedy and
become have very have become very comfortable with the arrangement.
Internet banking gives people more control over their money in convenient
way that they find enjoyable and reassuring.
Disadvantages of internet banking:
Identity conformation
30

Federal regulations require that financial institutions confirm each
customers identity. This may present a logistical issue, as copying and
faxing documents is sometimes necessary.
Security concerns
With hacking and identity theft on the rise, internet banking customer
have to place a certain amount of trust in the bank that their account
information and personal information are safe.
Customer service
If you bank or a traditional bank, you can go to the bank and speck to
someone face to face about your problem but, with an internet bank,
you will likely spend a lot of time on the phone being passed around
and placed on hold.
Accessibility
If the internet goes down in your area or the area of the banking
office, you will be unable to access your accounts. This includes being
unable to withdraw money from ATMs or to use your debit card.
Fees
Many internet banks dont have ATMs, which means you will have to
pay ATM fees. This can cost you more money that paying the regular
monthly fees at a brick and mortar bank.


Growth in Internet banking
Numerous factors including competitive cost, customer service, and
demographic considerations are motivating banks to evaluate their
technology and assess their electronic commerce and internet banking
31

strategies. Many researchers expect rapid growth in customers using
online banking products and services. The challenge for national banks is
to make sure the savings from internet banking technology more that
offset the costs and risks associated with conducting business in
cyberspace. Some of the market factors that may drive a banks strategy
include the following:
Competition
Studies show that competitive pressure is chief driving force behind
increasing use of internet banking technology, ranking ahead of cost
reduction and revenue enhancement, in second and third place
respectively. Banks see internet banking as a way to keep existing
customer and attract new ones to the bank.
Cost Efficiencies:
National banks can deliver banking services on the Internet at transaction
costs far lower that traditional brick-and-mortar branches. The actual cost
to execute a transaction will vary depending on the delivery channel
used. For example, according to Booz, Allen & Hamilton, as of mid-1999,
the cost to deliver manual transactions at branch was typically more that
a dollar, ATM and call center. Transaction cost about 25 cents, and
Internet transactions cost about a penny. These costs are expected to
continue to decline.
Geographical Reach:
Internet banking allows expanded customer contact through increased
geographical reach and lower cost delivery channels. In fact some banks
doing the Internet they do not have traditional banking offices and only
reach their customers online. Other financial institutions are using the
Internet as an alternative delivery channel to reach existing customers
and attract new customer.
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Branding:
Relationship building is a strategic priority for many national bans.
Internet banking technology and products can provide a means for
national banks to develop and maintain an ongoing relationship with
their customers by offering easy access to a broad array of products and
services. By capitalizing brand identification and by providing broad array
of financial services, banks hope to build customer loyalty.

Wireless or PDA (Personal digital assistant) banking:
With a phone number and a special PIN number a customer can access
to his account balance balance from his cellular device.
Allows user to pay bills, transfer funds between accounts and check
accounts from anywhere.
Offers wireless banking.
Security is important issue in Wireless Banking.
Newsbytes reports that wireless banking users will number over 7
million in the US by 2005.

ONLINE SECURITY SYSTEMS
The concern of security remains the largest barrier to growth of online
banking. Most people seem to believe that it is a hacker jungle out
there, and stay very wary of trying to simplify their lives by using
cyberspace.
Most institutions providing online banking services are very security
conscious. After all, they wouldnt want to open their computers to a
stampeding public, would they? The security measures that organizations
33

take over the web are simply invincible, unlike the surveillance cameras
and lobby guards posted in many banks. If the general public is aware
of, or understand, the many features put into a place to guard their
finances, and then people remain skeptical.
Depending on how online accounts are accessed, security can be
guaranteed in a variety of ways. Moreover, when a service, it is not
opening its mainframes computer to the world. Usually, the bank installs
a group of separate computers that stand between the mainframe
computer and the network that will deliver data to your PC. At several
points along the way, protection is build in.
Some of the most common security features are firewalls, data
encryption, and password/personal identification number.
Firewalls
A firewall is a computer or software that protects the banks computers
and data from being accessed by any outsider. This firewall is located at
the point where the banks world connects with the rest of the world.
This firewall is basically a gatekeeper, checking each attempt at delivery
of data with a list of strict specifications; any criteria not met; does not
make it past the firewall.
Public Key Infrastructure
Public key infrastructure can be defined as solution to ensure secure
electronic business communication incorporating signatures and encryption
technology.
Every user in PKI transaction owns a pair of keys: A public key known to
everybody and a private key known only to the owner. The keys have 2
main characteristics. Once, they are complimentary sets of passwords.
34

This means that a document encrypted by a public key can only be
decrypted by a private key and vice-versa. Two, the keys are unique pair.
Lets now see how PKI compares with existing security technologies. Anti-
virus is merely for integrity, firewall give authentication and
confidentiality, Access is similar to firewall; encryption ensures
confidentiality. Thus PIK emerges as the only solution that guarantees all
the four pillars of security and trust via authentication, non-repudiation,
integrity and confidentiality.
Encryption
Encryption is the process of converting information into a more secure
format for transaction. In other words the plain text is converted to
scrambled code while being transmitted, and then plain text at the
receiving end of the transmission. It is comparable to writing a letter,
converting it to code, putting it in an envelope and mailing it with the
recipient descrambling the code.
Currently, there are 2 levels of encryption generally available in web
browsers: 40-bit encryption, and 128-bit encryption. Most commonly
available browsers use 40-bit encryption. However the 128-bit offer the
highest level of encryption and provides the best protection when
transmitting confidential data over the Internet. The different between
these two types of encryption is one of capability. 128-bit encryption is
exponentially more powerful than 40-bit encryption.
Digital Signatures:
Digital signature essentially use encryption to scramble information in
way that only the party who issued the certificate (usually the online
store or a trusted third party) can decrypt and read.
35

By using digital signatures, consumers are reassured that any sensitive
information the send across the web, such as postal addresses and credit
card details, is protected from interception along the way. Meanwhile ,
online merchants can be more confident that the customer placing the
purchasing order is indeed entitled to use the payment card in question.
Security experts believe that digital signatures will encourage more
consumer to purchase goods online.
Access Codes
The access codes used to indentify you to the online banking system are
called passwords, and are further protected by using PINs (personal
identification number).













36

CHAPTER 4
ADVANTAGES AND DISADVANTAGES OF
E-BANKING

BENEFITS OF E-BANING

Consumers are embracing the many benefits of Internet banking.
Benefits to customers:
Consumers can use their computers and telephone modem to dial
in from home or any sit where they have access to computer.
The services are available seven days a week, 24 hours a day
Transactions are executed and confirmed quickly, although not
instantaneously. Processing time is comparable to that of an ATM
transaction.
In general, the customer will find lower fees and higher interest
rates for deposits due to the reduced cost of operating online and
not needing numerous physical bank branches.
And the range of transaction available is fairly broad. Customers can
do everything from simply checking on an account balance to
applying from a mortgage.
The interface is very user-friendly and often intuitive. Additionally,
business customer will most likely use the Internet for more that
cash management, and they will be accustomed to similar look and
feel among all applications that the use.

37

Benefits to the bank:
Why should a bank bank online? Advantages Previously held by large
financial institutes have shrunk considerably. The Internet has leveled the
playing field and afforded opened access to customers in the global
marketplace. Internet banking is a cost-effective delivery channel for
financial institutions.
The bank has an opportunity to generate revenue, decrease operational
and transactional costs, increase productivity, and attract new customers.
Ability to increase Revenue
Financially, the bank can benefit a great deal from providing their
customers with an online banking service. The ban has the ability to
increase revenue by generating user and transaction fees for the use of
a bill payment product and has the option of charging an account access
fee for the use of the online system. Online banking provides an
excellent promotional opportunity to generate revenue by helping the
bank to cross-sell products such as credit cards, loans, certificate of
deposits, and other financial services.
Save money
In addition to making money, the bank can save money with an Internet
banking system. Online banking can actually decrease operating costs by
reducing the daily reproduction and distribution of paper-drawn
transaction and delivering and processing statements for accounts, credit
cards, and bills. Performing transactions via the Internet also provides
cost savings, as indicated by a study done by Booz, Allen & Hamilton that
shows a transaction over the phone cost $.54, at an ATM it cost $.27
and via the Internet the cost is $.0.1. using the Internet to perform
transactions greatly reduces the cost to the bank.
38


Improves productivity
Internet banking improves productivity as well. Bank representatives are
able to process data more quickly and efficiently; track account activity
with automated reports, help customers achieve daily tasks via the
Internet and reduce time spent handling service problems. There can be
a dramatic reduction reduction in the number of customer service calls,
as some banks that are providing this service has proven.
Marketing & Competitive Tools
Internet banking also offers the bank an exceptional marketing and
competitive tool. Large banking such as Nations Banks and Wells Fargo,
in the Unites States, have already capitalized on the Internet as a
mechanism to attract new customers. The majority of people using the
Internet are middle to high income and polls indicate that 50% of the
people are also the ones who want to have the convenience of online
banking for home or business use. This is an excellent opportunity for
the community bank to keep their hometown customers from looking to
national institutions for an online product.
Innumerable services are available via the Internet today. Internet
banking provides a higher level of convenience that both commercial and
retail customers desire to have. With this service, the bank not only has
the opportunity to manage their business better, but can also help their
customer achieve a much more efficient process of managing their
finances.



39

DISADVANTAGE OF E-BANING
The most obvious disadvantage is: technophobes need not apply i.e. if
you are still not comfortable using a computer,e-banking is not for you.
Investment of time upfront can be formidable. The data entry is
necessary before the numbers can be massaged and money
managed successfully. Online bill payment is an example of an effort
that requires setting up which leads to ultimate convenience.
Switching software or bank re-entry of data, although internet based
system are less impacts by this. But competition seems t be
minimizing this problem. The personal finance management software
Microsoft money enables users of competing software to import
data easily.
Like anything that deals with the transfer of large amount of
money, security is a major factor of online banking. It is taken very
serious during online banking procedures.
With a system as complex as Online Banking, some errors are
inevitable. i.e. : An interrupted online session; late arrival of
payments etc. a mistake made by either the user or the banks in
question, can affect both, causing problems. For example: An
Infinity (ICICIs Online Banking Brand name) customer from
Bangalore (who did not want to be named) paid his cell phone bill
thought the bank, only to receive another bill the following month,
with late fees. The amount had been debited from his account but
not passed on to cellular operator.
When dealing with computers, there is always concern of the
system crashing, viruses entering the system or power cut. There
are large problems and are not easily solved. In all this case, many
people would be affected, information may be lost and a back up
plan would have to be initiated.
40

CHAPTER 5
RISK MEASURERING
E-BANKING RISK
E-BANKING RISK:-
Strategic Risk

Operational Risk:
Technology infrastructure
Security
Data integrity
System availability
Internal control

Reputational Risk

Legal Risk

Other traditional banking Risk
Credit Risk
Liquidity Risk
Market Risk
Foreign Risk



41

E-banking using internet as an added delivery channel may shift bank risk
profiles to some degree and create new risk control challenges for banks.
Accordingly, supervisors need to consider the implication of a banks use of
e-banking delivery channels on its strategic risk, operational risk, reputational
risk, legal risk, market risk, and foreign exchange risk.
Strategic risk and business risk:
Strategic risk is one of the most significant risk that e-banking activity
presents for banking organization. Strategic risk differs for other risk
categories in that it is more general and board in nature. Strategic decision
to be given by banks board of directors and executive management will
have implicative for all other risk categories.
Some of the strategic risk involve with e-banking are directly linked with
timing issues. There can be significant strategic risk associated with
management decision to be a technology pioneer, particularly if the
institution becomes burdened with system made redundant by rapid
technological charges.
Operational risk:
Because of reliance of the technology for all facets of banking operational
risk is one of the most significant risks. To limit operational risk, banking
organization may want to consider implementing an integrated enterprise-
wide architecture and technology infrastructure that can facilitate
interoperability, ensure the security, integrity and availability of data and
support the management of relationship with third party services provider.
Technological infrastructure:
E-banking has brought the issue of technological system and application
integrated to the forefront. Many large banks now faced with the task of
42

integrating system for e-banking activities with their existing legacy system
and with system of multiple service providers and partners.
These banks are exposed to significant operational risk from errors in
transaction processing if the systems for e-banking are not properly
integrated.
Security:
The majority of the bankers surveyed by EBS (electronic banking group)
members indentified security risk as a primary concern relating to E-
banking external threats such as hacking, sniffing, and denial of
services attacks expose banks to new security risk. Open electronic
delivery channels cerate new security issues for banks with respect to
confidentiality and integrity of information, non repudiation of transaction,
authentication of users and access control.
Data integrity:
Data integrity is an important component of system security. Banking
organization must improve interoperability with in and across enterprise to
effectively manage relationship with customer, other banks and external
services provider.
System availability:
In additional to ensuring secure internal networks for their e-banking
activities, effectively capacity planning is critical to ensuring the ongoing
availability of e-banking product and services. Competitive pressures and
increased reliance on having services available 24 hours a day and 7 days
a week (24*7) have raised customer expectation considerably and in torn
reduce the tolerance for tolerance for error. To complete effectively and
avoid potentially significant reputation risk that could arise from system
outage, banks offering e-banking services may sliver the right mix of
43

product and services securely , accurately and consistently. Moreover
trends in outsourcing make it necessary for bankers to ensure that similar
plans are in place at their external services providers and are periodically
tested for effectiveness.
Internal control/audit:
The ability to correct and detect errors is critical internal control
component of any banking operation. Much of efficiency and reduction in
e-banking services stem from banks ability to implement straight-through
processing. While the benefit of straight-through processing are many,
the reality is that e-banking modifies how internal controls, proper
segregation of duties and clear audit trails are applied over broad access
channels.
Reputational risk:
The banks reputation can be impacted by any adverse development that
precludes the availability of their e-banking delivery channels. Bank has
long based their business on a reputation of trust. The ability to provide
a trusted network to support e-banking if critical, and banks reputation
can be damage by internet banking services that are properly executed or
otherwise alienate customer and the public. Banks reputation can suffer if
it fails to deliver secure, accurate and timely e-banking services on a
consistent basis. A banks reputation can also be adversely impacted if it
fails to respond to inquiries posted via email, does not provide proper
disclosure, or violates customer privacy.

Legal risk:
Legal risk arising from e-banking activates represents another ares of
increased concern. Currently supervision in every jurisdiction and
44

examining how existing legal and regulatory frameworks originally design
to address issues affecting the physical world of banking interact with
the developing e-banking delivery channels as well as examining potential
ambiguities.
A bank that develop relationships via the internet with customer in other
jurisdictions may be unfamiliar with the banking and customer protection
laws and regulation specific to those countries and may consequently
incur heightened legal risk.
Other traditional banking risk:
The e-banking delivery channels also has implication for other traditional
banking risks such as credit risk., Liquidity risk, interest rate risk and
market risk.
Credit risk:
The credit risk of banking institution can be affected by e banking activities
in a number of ways. The use of internal delivery channel may allow banks,
especially small institution, to expand very rappidly, which could lead to
heightened asset quality and internal control risks. The use of the internal
also allows bank to expand their geographical reach out of their traditional
area, which increase the challenge of understanding local market dynamics
and risks, verifying collateral and perfecting security lions with out-of-area
borrowers. In addition, the internal also makes it more difficult to
authenticate the identity and creditworthiness of potential customers, which
are essential element to sound credit decision.
b) Liquidity risk:
The speed with which the information and mis informatin moves over the
internet can have implication for liquidity risk profile of banks. Adverse
information about a bank, whether it is true or not, can be easily
45

disseminated over the internal through bulletin boards and news groups.
This couuld cause depositors to withdraw their funds in mass at any time of
the day, any day of the week. Accordingy, increased monitoring of liquidity
and changes in deposits and loan may be warranted depending on the
volume of activity created through e banking.
Market risk:
The impact of recent growth in securities issuance and tradind over the
internet on banks market risk is complex. From a market standpoint, the
increase volume of securities, which are traded over the internet volatility,
but on the other hand, it can lead to increased liquidity. From an individual
bank's standpoint, banks may be exposed to increase market risk if they
create or expand deposits brokering, loan sales, or securitization programmer
as a result of internet banking activities. As with liquidity risk, the effect the
increased E banking activities on market volatility need to be monitered by
banks and supervisors.
Foreign exchange risk:
A bank may be exposed risk if it is accepts deposits from foreign customers
or create accounts denominated in currencies other than their local currency.
Since the internet allow banks the opportunity to expand their geographic
range, even internationally, some bank may take a greater foreign exchange
risk through e banking activities then the have through their traditional
delivery channels. Supervision should ensure that a bank initiating cross-
border e banking activities through the internet has the appropriate risk
management systems and expertise to manage these risks properly.

RBI GUIDELINES FOR E-BANKING
The Reserve Bank of India on Friday released its final operativr guidelines
46

for e-banking. The central bank has decided to keep the limit on the ticket-
size for e-banking at Rs 2,500 per transaction, and Rs 5,000 per day. Banks
have also been allowed to put in place a monthly transaction limit,
depending on the bank's risk perception of the customer. While the
guidelines will enable lenders such as State Bank of India and Axis Bank to
go ahead with their launch of mobile banking services, the central bank has
decided to restrict the services only to holders of debit and credit cards.
The card user base in the country is 80 million, with 55 million debit card
users and 25 million credit card users. Only Indian rupee-based domestic
services shall be provided on the mobile- payment platform, and the use of
mobile-banking for cross-border transactions have been strictly prohibited.
Banks which are based, licensed and supervised in India will be allowed to
offer such services. Further, only banks which have implemented the core
banking platform will be allowed to offer e-banking. At the same time, the
RBI has recommended that all e-banking transactions are validated through a
two-factor authentication system, thereby complying with the latest security
and encryption standards.

CHALLENGES FOR INDIAN E-BANKS
The challenges that Indian banks are facing:
1.How to manage multiple distribution channels?
Internet banking is bound to become the most important channel in next
few years. Even the traditional banking would move towards internet
technology with open standards and low cost. Although all traditional
channels would not die down in a day and success would depend on how
the banks generate synergy in these two vastly different channels. The
services provided in all types of distribution channel must be in tandem with
each other and must be in synergy.
47


2.How to address the issue of internationalization i.e. how to take
in and make e-banking an integral part of one's attitudes or beliefs?
The real challenges for Internet banking is to penetrate the customer base
of banks. According to IDBI Bank's head (e-commerce and new product
initiatives) J Venkataramanan, the maximum usage of Internet banking is for
accessing account balances and making bill payments. For most customers,
there's nothing more reassuring than watching their cheques getting credit
on a paper ledger. Then, there is the question of how real is real time.
For instance, while you can requisition for, say, a new set of cheques any
time of the day, the request will get processed only during the banking
hours.
Perhaps, the biggest of all concerns for e-banking customers is the security
issue. People still aren't comfortable having information about their life's
hard-earned money saved on a server they don't know about. A physical
pass-book is still preferred. While e-bankers use multiple firewalls, filtering
routers, 128-bit. Encryption and digital certification for safe and confidential
transactions, there are still chances of a snafu.
Another problem is that an on-line service that merely mimics an off-line
one doesn't give customers an adequate inducement to move a significant
portion of their banking on-line. As a result, most customers tend to treat
on-line banking as no more than an extra channel to check their balances
and transactions histories, and they continue to do the rest of their
business at the ATM or the teller window. A vicious cycle ensues.
Also, there is no more security and customer loyalty. With Internet, the
gateway to low cost international expansion around, tackling the virtual
competition would be a key. Competition is just a 'click' away. Customers
would be loyal as long as the rates offered are competitive.
48

At the same time, banks would have to manage different product portfolios,
at different yet competitive prices to different corporate accross the world.
The issue of offering services in multiple geographics/customers - due to
increased global access and competition may ask for new virtual alliances
between small local banks and the global players.

3.How to address the emergences of value-focused specialist
competitors that are competing for specific value components
currently dominated by banks and now are increasingly gaining
access to the bank's customers?
The real trouble is that Internet Bank doesn't really need to be a bank. It
can even be a group of innovative persons with no bank branch at all, just
working through alliances and leading the field because of their superior
capabilities through focus and innovation advantage.
The entry of multiple non financial institution and other non-traditional
players would just fasten this whole process. E.g. Times Bank and IDBI
Bank.








49

CHAPTER 6
E -BANKING IN REALITY

The experiences of the west are the clear indicator that Internet Banking is
not far off for India. The Internet usage, combined with aggressive moves by
new Internet players in this highly fragmented industry will have profound
effects on financial services.
But are the Indians banks ready for the sudden change? where do we stand
as of today? would future be as diverse as today or would traditional banks
painfully lose incremental revenue growth opportunities to a host of
aggeressive players that may rapidly consolidate the news revenue
opportunities in the business. And what exactly do the banks need to do to
meet the challenges of ''Banking Business without barriers.''
Internet Banking Scenario
The lead in Internet banking in India has been taken by the new private
sector banks and foreign banks, and the four banks which offer Internet
banking facilities in a significant way are ICICI Bank, HDFC Bank, Citibank and
Global Trust Bank. Banks like UTI Banks, IndusInd, and SBI also offer net
banking facilities in a lesser time.
The current base of online banking customers has been estimated at 4.2
Lakhs, which is 8.7% of the overall Internet user base. The user base as of
December 2002 has been estimated under alternative scenarios: The
conservative scenario puts the user base as of 31st december; 2002 at 41.0
lakhs (14.7% of the internet user base), while the more optimisic forecast
puts the user base at 73.0 lakhs with an of overall penetration of 26.2 %.
ICICI, HDFC and CITIBANK have emerged as the early leaders in online
50

banking, with ICICI being the clear leader.
Research revealed that close to 40% of adult Internet users have accounts
with one of the four major Internet banks offline. However, only 10.8% of
adult Internet users are banking online.
In terms of activities, there is still a reluctance to actually conduct financial
transfers online, and the bulk of online banking activity is restricted to
checking balances and statments online. Barely 30% of online bankers have
paid bills online or transferred funds online.
Specific aspects of the Indian banking scenario which are pertinent to note
are:
The low ATM penetration
A regulatory framework which is not conducive to net only bnaks
The Relative lack of inter branch networking and e-readiness of
major public sector banks, which control a bulks of the deposit and
branchs network base
The Relative nascence of the Internet itself
The entry of many new players
The recents IT Act which accepts the legal validity of the digital signatures
Plans of Indian public sector banks to provide e-banking services by 2002
The rapid growth of the Internet
The last 4 points - from entry of new players to rapid growth are factors,
which should enable the growth of online banking in India.


51

STRATEGY FOR INDIAN BANKS
Inernet banking would drive us into age of creative destruction due to non-
phsyical exchange, complete transparency giving rise to perfectly electronic
market place and customer supremacy. The question to be asked right now
is "what the Indian Banks should do"?
Most banks today are pursuing what be described as a 'fortress' strategy,
defending themselves against new entrants while waiting for more clarity in
the online world. The fortress strategy has the benefit of relying on
traditional sources of advantage; it plays to the strengths of current legacy
banks. The risk, of course, is that these sources of advantage may not be
enough to keep out new entrants that rely on a totally different business
model.
Banks must today at least hedge by experimenting with the web business
model. But it calls for
profound organizational changes if it to be executed successfully.
It needs the banks to fundamentally re-assess their opportunities for adding
value and hence re-define their roles in the new paradigm.
Banks must first determine what kind of web to target. Customer webs
focus on maximizing a bank's share of wallet of a target customer segment
while Market webs seek to aggregate a critical mass of buyers and sellers
within one transaction category.
Within any web that it might target, there are a number of possible roles a
banks could play. web shapers are the one or two companies that own a
shaping platform, take initiative to mobilize other companies around it, and
define a set of standard practices or policies to coordinate participant's
activities. Banks that choose not be Web shaper would be adapters and
would need to define a clear niche that will help them differentiate
themselves from other participants. Some adapters may becomes influencers,
52

working closely with ensure the overall succcess of their web.
Indian Banks still have a few important lesssons in customer services that
they would do well to pay heed to.
Customer Relationship
Banks and other financial institutions cannot go completely virtual - they
need physical branches after all. This is probably one area where Internet
banking in India scores over the 'stand alone' Internet banks of the West.
Several Internet banks like E-trade have acquired ATM networks like Card
Capture Services to offer consumers a way to deposit and access their
money through ATMs. Physical branches help forge a
'relatonship' with customer that a virtual banks cannot. most online
consumers utilize account tracking, bill pay and e-shopping, they would
prefer direct, personal contact with their banker when shopping for financial
products.
Personalization
Banking solution become truly personalized when they are able to respond
to the changing customer needs, and this possible using strong data mining
and target marketing capabilities.
For example , software that migth tell you which credit balances to pay off
first, or alert you in advance when your cheque will boune. This level of
personalization is still lacking in the banking solutions offered by Indian
banks.
Integration
Another important aspect is integrating customer service interfaces and
channels, so that the customer deals with a single channel that cater to
diverse needs such as Kiosks, ATMs, Web TV, mobile phones, pagers, and
branches counters. Banks have to get their acts together. If the , and the
53

online Banking, and the ATM's, and the Branches don't work together,
there's no real benefits in havings the electronic tools.
Customer shouldn't have to go to one site to just pay their utility bill and
phone bill and then have to go offline to pay their cable and credit card
bills. They should be able to check the value of their investment portfolio,
updated daily, in their personal balance sheet, include all their other
assets and other personal finance.
Banks must learn to aggregate their customers' different on - line
financial-service relationships. The Purpose of aggregation is not to engage
in blatant cross-selling or to achieve "100 percent share of wallet" but
rather to develop a picture of the consumer's entire balance sheet. Any
institution that gains such a view can provide superior convenience and
advice.
Banks need to be 'One-stop shops' for an entire range of personal finance
products from loans and insurance to mutual funds and even tax saving
instruments. This is being done by 'account aggregators' such as Yodlee,
Corillian, eBalance and Vertical One that let you log in to one web site,
enter your username and password, and track information as diverse as
bank and cedit - card balances, value of investments, and fequent-flier
miles from several sites, each of which has its own username and
password.
Innovation
Today's value-added product could easily be tomorrow's commodity. That is
why banks would need to depend more on product innovation, expending
the range of their products and service offerings. Apart from just online
accounts, e-banks would need to tailor specific products for the Internet,
llike online bill presentment or credit cards with instant online approval.
Many Internet banks like Egg have taken the lead in offering innovative
54

products like Egg card- a credit card that features an introductory zero-
percent interest rate.
Migrate old customers and go after new ones
In building an on-line business, a bank's off line customer base is a huge
asset. for it will be harder for competitors to pick off the bank's current
customers than for the banks to get them on-line. But to do so, banks
must make one-time offers and then constantly provide incentives such as
free services (for example, bill payment and online trade) for increase
balance.
Banks must also move swiftly to acquire new on -line customers. Most of
the early attempts to do so, carried out in partnership with Internet
portals, have flopped largerly because the banks failed to offer any
differentiation in pricing or any other very compelling lure. Yet here, too,
banks have an advantage. Despite significant increases in revenue from on-
line relationships, credits card companies and brokerage firms have spent
so much money building their on-line customer base that some would
questions whether they will ever profit from these efforts. Most banks
already have a powerful retail distribution network that should allow them
both to migrate their customers and to accquire new ones at much lower
cost.
WHERE IS E-BANKING IN INDIA HEADED?
There will be a large-scale shift to online bankiing in the next decade as
banks go the extra mile in technology development to keep up with
competition. It is believed the low transaction cost will make banking on
the Net irresistible, but also that this will require institution to carefully
consider and plan customer relations programs. It is believed that
everything will be determined by content and context, and where
execution will be key. From a customer and service provider perspective,
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this is where the world is moving - it is going to be real-time, on-line,
personalization for both marketing and the services experience. If existing
banks don't want to disappear, it is this challenge that they need to
embrace in order to win and survive. Internet usuage is expected to
grow with cheaper bandwidth cost. The department of
telecommunication (DoT) is moving fast to make available additional
bandwidth, with the result that Internet access will become much faster in
the future. This is expected to give a fillip to Internet banking in India.
This setting up of a Credit Iformation Bureau for collecting and sharing
credit information on borrowers of lending institutions online would give a
fillip to electronic banking. Therecommendations of the
VasudevaCommittee on Technological Up gradation of Banks in India have
also been circulated to banks for implemantation. In this background,
banks are moving in for technological up gradation on a large scale.
Internet banking is expected to get a boost from such developments.
Other major developments will be:
Inter Bank Fund Transfer
Today, e-banking operations mainly consists of providing information
viz.requesting cheque books, statements, fund transfer, even online
share trading (with reference to a particular branch) but the next two
or three years are likely to see a huge change in the entire banking
value chain. It would be possible to process any inquiry or transaction
online without any reference to the branch at any time rather like
'anywhere banking - a service already being offered by HDFC, ICICI and
Citibank.
Interbank fund transfer between different banks are a feature that is
not a offered by any of the e-banking services in India. "At present, we
have no plans to offer third-party transfer outside the bank. Globally,
this is not allowed due to security reason. Also, the other banks also
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have to allow transfer/ debit of funds into/out of their Net banking
system. According to HDFC, the RBI needs to set up a clearinghouse to
route these transfer, and thus enable such transactions.
M-Banking
Today, with mobile being the 'in-thing', banks are not far behind to
position themselves for this new medium to ring in customers and
convenience. Most of them are talking about helping people access
information of their accounts and even do transactions while on the
move-calling this M-banking (mobile banking). Almost all major banks have
SMS-enable mobile banking. The use of WAP-based applications for
Internet banking is an increasing trend especially in the Asia pacific region,
though it doesn't seem likely that it will catch on in India given the
miniscule populace of WAP-enabled phone users.
"We have plans to offer WAP-enabled Fed Net soon" says Nair of Federal
Bank.
"WAP-enabled banking will become popular and affordable to a larger
number of users if the cost of the devices drops and airtime tariff come
down."
Account Aggregation
A new wave called 'Account Aggregation' is slowly sweeping through the
online banking/brokerage industry. Account aggregation -- or account
consolidation -- provides consumers with the ability to access the
information about all of their financial transactions sourced from different
web sites, at a single web site.
Now you can obtain updates of all of your investments (from banks,
mutual funds, online brokers), and liabilities (car lones, credit card lones,
bank lones) at a single point. That way you don't need to remember
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multiple login IIs, and passwords, and also don't need to consolidate this
information yourself. Further, at the same site you shall be able to get
'payment due' reminders, online payment services and even query your
transactions to find, say how much you spent on entertainment last year.
They could also provide you with e-mail; book your airline tickets and
more.
True Relationship Banking
The future will provide the bank with the ability to allow account
access and control privileges at the customer level. This means that all
accounts in a relationship will be accessible via the Internet while only
a subset of these accounts will be viewable and accessible for a third
party (such as son or daughter who is away at school). It allows your
tax consultant to view accounts in your relationship pertient to
performing their services. And, business customers will see their entire
commercial relationship bank.
Integration
Services provides will integrate and market their offerings across different
channels. The strategic and battles of the future are going to be fought
for channel Integration.
The beauty of integration is that one channel does not display another.
They feed on each other to create incremental value for the customer, as
well as the institution. The incremental value comes from two distinct
sources. Finally, you reduce inefficiencies. you don't send people junk mail
because you know that they are not likely to buy a particular product or
service today. The result in net saving for economy. Secondly, you
persuade people at the right time (the right time from the consumer's
perspective, not from the service provider's perspective) to opt for a tailor
made offering. This too increases value. Actually, this has to do with the
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Internet itself, and more to with the underlying technologies of the
Internet which allow incremental efficiency, and empowers the customers
to make more enlightened and timely choices. While the novelty of the
service will attract customers to bank online, right now only customer
services will determine whether Net banks get the thumbs up.
Banks in India that avail Internet Banking
Online banking in INDIA now days has been growing a lot and people all
over India are getting into the tech heat. In previous day, for depositing
amount into your account or friends account is all done manually going to
the bank. But with the latest internet technology all of the major banks in
INDIA are providing online access to all its customers and it is dead easy
to carry on any transaction, say it transferring money from your account
to your other account or your children account or any third party or
paying bills online or speaking to bank for any assistance. Thanks to the
latest technology.
You have advantage of viewing your bank account details, transactions
reports, detailed updates and statements, check clearances or activate
mobile banking or shop online, all through the convergence of the internet
technology. Now that there is no need to rush into a bank and finish of
transactions in a hurry. Expect for the cash transactions, everything can be
done with your laptop or desktop with a little modern attached to it for
internet.
Now days, all the major banks in India provide online banking. It is offered
freely to all its customers and doesn't require any additional deposits to
be done.
List of Indian banks providing Online Internet Banking
ICICI Bank
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Karur Vysya bank
State Bank of India
State Bank of Hyderabad
HDFC
HSBC
IDBI
ING Vysya
Axis Bank
Andhra Bank
Bank of Baroda
Bank of India
Citi bank
Indian Bank
South Indian Bank
Punjab National Bank (PNB)
There are many banks that avail internet banking to the customers, but
the list of the above banks is the famous banks in INDIA. Online internet
banking is something that you need to have. It's easy, fat, secure and
convenient.

Services of e-banking offered by banks in India:
Citibank
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See up-to-date account information
View transactions details
View account statements for up to 12 months
Order demand draft to couriered free to over 200 locations
Order a cheque book
Stop payments
Request a deposit slip
Pay utility bills
Email queries
ICICI Bank
Account information - Summary of accounts and transactions
Bill payment
Funds Transfer including third-party transfer
Request for cheque book, stop payment, account opening,
Reporting loss of ATM card
Online e-shopping payments
Communication with the account Manager
personal finance, select articles on e-commerce, information
technology, lifestyles,, travel and news.
HDFC Bank
Real-time account information including transactions
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Transfer money between accounts
Bill payments facility
Third party funds transfer - within HDFC bank
Request for Demand Draft/Bankers Cheque
Stop payment requests
Opening fixed-deposit accounts
sending message to bank via email
PUNJAB NATIONAL BANK:
Account information and transaction details
Depositary account
fund transfer between branches
Request for Demand Draft/Bankers Cheque, team deposite account
opening, and change the address.
Bill payment facility






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CHAPTER 7
CONCLUSION:
E-banking has its own advantages and disadvantages. The main
advantege of implementing E-Banking is an increase in customer
satisfaction. This is because customers do not have to go the branches
in order to access their accounts, make withdrawals and deposits. They
can also check it anytime of the day, a feature that physical branches
do not offer thus creating a good relationship with the bank and the
customer. E-Banking is also advantageous not only for customer but
also for the bank because it reduces costs in setting up a branch and
the resources to process transactiions. All these benefits are the reasons
why many banks are already investing in E-Banking.
The main disadvantage of E-Banking is the security problems that
surround it. It's a fact that making transactions online poses a much
bigger risk compared to making transactionns in a physical branch. This
is due to the hacking problems and identity theft. Addititon to these
risks, technical diffculities could also arise. Sometimes the bank's
website goes down, and if this happens it will be a hassle for the
customer because he/she has to go to a branch or make phone calls-
which are usually busy due to other customers also making a call.
Another case that has happened was an unpredicted rise in customer
that the servers of the bank were not able to cope with. A customer
may also run into a bad service. Sometimes you might wait a while for
your checks to clear and you certaintly can't do anything about it if it
is online. Even though all this disadvantages the banks the banks have
to make its E-Banking more fast and effective so that they cab able to
survey in the stiff competition in the market. It is fact that E-Banking
has increase a better relationship with the customer, because customer
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can transacted with the bank with the bank with visiting it on sitting in
the home.



BIBLIOGRAPHY

BOOKS
Indian Banking In Electronic Era
By-S.S.kaptan
E-Banking in India: challenges and opportunities
By-Rimpi Jatana, R.K Uppal

Website:
http://www.indianmba.com
http://www.worldjute.com





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