ONLINE BANKING CHALLENGES and

OPPORTUNITIES
Submitted by:
Priyanka Yadav
T.Y.B.C.B.I. (SEMESTER V)

Under the guidance of :

Ms. Rashmi J.

Submitted to:
University of Mumbai

RAJASTHANI SAMMELANS
Ghanshyamdas Saraf College
Affiliated to University of Mumbai
ACCREDITED BY NAAC WITH A GRADE
&

Durgadevi Saraf Junior College

(Arts & Commerce)
S.V. Road, Malad (West),
Mumbai 400 064.
Year : 2012 -2013

RAJASTHANI SAMMELANS
Ghanshyamdas Saraf College
Affiliated to University of Mumbai
ACCREDITED BY NAAC WITH A GRADE
&

Durgadevi Saraf Junior College

(Arts & Commerce)
S.V. Road, Malad (West),
Mumbai 400 064.

CERTIFICATE
I Prof. Rashmi J. hereby certify that Ms. Yadav Priyanka Omprakash,
a student of Ghanshyamdas Saraf College of T.Y.B.C.B.I. (Semester
V) has completed project on ONLINE BANKING
CHALLENGES & OPPORTUNITIES in the academic year 20122013. This information submitted is true and original to the best of my
knowledge.

External Examiner :

Principal :

Date :
Project Co-ordinator ;
Date :

College Seal :

ACKNOWLEDGEMENT

All these years we have just studying and passing. But this time
we have got an opportunity to make such a project study. So it is very
obvious for me to thank all those people associated with the making of
the project. I would like to thank the University of Mumbai for giving
me this chance.
I owe a great many thanks to my project guide Mrs. Rashmi J. who
has been a constant support and guidance throughout the making of
my project and for monitoring my project with attention and care. She
has taken the pains to go through the project and make necessary
corrections as needed.
I would also like to thank our course coordinator Mrs. for
being a moral support to us during this project.
I express thanks to my college Principal for extending her support.
And last but not the least I would take the opportunity to thank my
parents without whom the project would have been a distant reality.
Sincere thanks to all my fellow mates and well wishers.

DECLARATION

I Miss. Yadav Priyanka Omprakash, a student of

Ghanshyamdas Saraf College of Arts & Commerce, T.Y.B.C.B.I.
(Semester V) hereby declare that I have completed project on
ONLINE BANKING-CHALLENGES AND
OPPORTUNITIES in the academic year 2012-2013. This
information submitted is true and original to the best of my
knowledge.

Date :

Signature of Student :

SUMMARY

Technological developments have been growing at an alarming speed

in the international arena. Internet is proudly one of the best in those.
So, the banking sector is also making the best utilization of it. In this
study based on ONLINE BANKING, it has been observed that the
development of online banking has increased by leaps and bounds
during the past few years. Concentrating on the Indian economy, the
use of online banking is still in the developing stage.
Today in India the scope of online banking is growing by a good
decent rise in its usage. The rise in the usage of the Internet is the
main criteria for development of online banking.
This project helps us understand the how the online banking
came into existence and its need in the modern world. It shows us the
insights of the online banking in India. It helps us understand the
opportunities and the challenges associated with the online banking in
India.

INDEX
SR.N

TOPIC

PAGE

CHAPTER I INTRODUCTION

NO
1 - 42

1. Development of Online Banking through Evolution of

16

Information Technology & E-Commerce

2. What is online banking?
Features
Advantages
Disadvantages
3. How does online banking work and its structure.
4. Opportunities in Online Banking:

II

6 14

15 16
17 23

Is there a future in online banking?

Changes in trend
Why banks encourage online banking?
5. Challenges in Online Banking:

23 36

Main concerns
Related Problems
Adherences to guidelines
6. Solutions
7. Case Studies
8. ICICI Bank

36 40
40 42
42

CHAPTER II RESEARCH METHODOLOGY

43

1. Objectives of the study

2. Limits of the study
3. Methodology used
III

CHAPTER III DATA ANALYSIS

44 47

IV

CHAPTER IV RECOMMENDATION &

48 49

CONCLUSION
V

CHAPTER V BIBLIOGRAPHY

50 51

CHAPTER I INTRODUCTION
Online banking is a process that has evolved because of the
development of technology over the years. So before going into detail
on the online banking we should have a overview of its birth.
INFORMATION TECHNOLOGY
Information technology (IT) is the acquisition, processing, storage and
dissemination of vocal, pictorial, textual and numerical information by
a microelectronics-based combination
of computing and telecommunications. IT (information technology) is
a term that encompasses all forms of technology used to create, store,
exchange, and use information in its various forms (business data,
voice conversations, still images, motion pictures, multimedia
presentations, and other forms, including those not yet conceived). It's
a convenient term for including both telephony and computer
technology in the same word. It is the technology that is driving what
has often been called "the information revolution."
IT is the area of managing technology and spans wide variety of areas
that include but are not limited to things such as processes, computer
software, information systems, computer hardware, programming
languages, and data constructs. In short, anything that renders data,
information or perceived knowledge in any visual format whatsoever,
via any multimedia distribution mechanism, is considered part of the
domain space known as Information Technology (IT). IT provides
businesses with four sets of core services to help execute the business
strategy. These four core services are broken into business process
1

automation, providing information, connecting with customers, and

productivity tools.
IT

professionals

perform

variety

of

functions

(IT

Disciplines/Competencies) that ranges from installing applications to

designing complex computer networks and information databases. A
few of the duties that IT professionals perform may include data
management, networking, engineering computer hardware, database
and software design, as well as management and administration of
entire systems. Information technology is starting to spread further
than the conventional personal computer and network technologies,
and more into integrations of other technologies such as the use of cell
phones, televisions, automobiles, and more, which is increasing the
demand for such jobs.
TECHNOLOGY IN BANKING
Many of the largest and most successful banks in the world emerged
from the technical changes that they are able to recognize at an early
stage. Indias banking sector has a long way to go before it can
compete globally. Situation is especially maintained in the late
introduction of ICT in India banks. Our information technology is
designed to compete with information technology in the world, and
when we are in the area very quickly, it can be difficult for us to
benefit from liberalization.
Bank, with the right technology - to provide timely information, to
increase productivity and thus see a competitive advantage.
2

Competetion in the economy, which has been opened, it is certainly

the Indian banks to comply with the latest technology and adapt to its
surroundings. Except that the banks need much improved use of
technology to customer-friendly, efficient and competitive in the
current authorities and businesses, they also need the technology to
newer products and newer forms of service and the increasingly
dynamic global environment to offer. Information technology allows
banks to build new systems, which bite the needs of many customers
that cannot be considered today.
On-line banking, for example, promises customers to conduct banking
transactions in a direct access to the core of the bank customer
account works. Customers to verify all information, all so far, all the
checks, all credit card information.
In the future, the banks freed from the constraints of a delivery
channel. They can create, package, market and product niches, and
because the tumbling price of the technology, they can do so costeffectively.
Technology gives banks the opportunity to be closer to customers, to a
broader range of services at lower costs, streamline the March belang
systems so that all information in one place where it can be used for
the trends that can quickly lead into new products. Electronic banking
data can be gathered and analyzed. Interactivity allows the consumer
to save the settings, directing the development of truly new products.
The development of I.T has helped the boom of E Commerce.
So it is also important to know the concept of E Commerce.
3

 E-COMMERCE
Electronic

commerce,

commonly

known

as E-

commerce, eCommerce or E-commerce, refers to the buying and

selling of products or services over electronic systems such as the
Internet and other computer networks. However, the term may refer to
more than just buying and selling products online. It also includes the
entire online process of developing, marketing, selling, delivering,
servicing and paying for products and services. The amount of trade
conducted electronically has grown extraordinarily with widespread
Internet usage. The use of commerce is conducted in this way,
spurring

and

drawing

transfer, supply

chain

on

innovations

in electronic

management, Internet

funds

marketing, online

transaction processing, Electronic Data Interchange (EDI), inventory

management systems, and automated data collection systems. Modern
electronic commerce typically uses the World Wide Web at least at
one point in the transaction's life-cycle, although it may encompass a
wider range of technologies such as e-mail, mobile devices and
telephones as well.
A large percentage of electronic commerce is conducted entirely in
electronic form for virtual items such as access to premium content on
a website, but mostly electronic commerce involves the transportation
of physical items in some way. Online retailers are sometimes known

as E-tailers and online retail is sometimes known as E-tail. Almost all

big retailers are now electronically present on the World Wide Web.
Electronic commerce that takes place between businesses is referred
to as business-to-business or B2B. B2B can be open to all interested
parties (e.g. commodity exchange) or limited to specific, pre-qualified
participants (private electronic market). Electronic commerce that
takes place between businesses and consumers, on the other hand, is
referred to as business-to-consumer or B2C. This is the type of
electronic

commerce

conducted

by

companies

such

as Amazon.com. Online shopping is a form of electronic commerce

where the buyer is directly online to the seller's computer usually via
the internet. There is no intermediary service involved. The sale or
purchase transaction is completed electronically and interactively in
real-time such as in Amazon.com for new books. However in some
cases, an intermediary may be present in a sale or purchase transaction
such as the transactions on eBay.com.
Electronic commerce is generally considered to be the sales aspect
of e-business. It also consists of the exchange of data to facilitate the
financing and payment aspects of business transactions.
Business applications of E-commerce
Some common applications related to electronic commerce are the
following:
Email
Enterprise content management
5

 Instant messaging
Newsgroups
Online shopping and order tracking
Online banking
Online office suites
Domestic and international payment systems
Shopping cart software
Teleconferencing
Electronic tickets

E-COMMERCE APPLICATION IN BANKING INDUSTRY

New information technologies and emerging business forces have
triggered a new wave of financial innovation electronic banking (ebanking). The banking and financial industry is transforming itself in
unpredictable ways (Crane and Bodie 1996), powered in an important
way by advances in information technology (Holland and Westwood
2001). Since the 1980s, commercial banking has continuously
innovated through technology-enhanced products and services, such
as multi-function ATM, tele-banking, electronic transfers and
electronic cash cards. Over the past decade, the Internet has clearly
played a critical role in providing online services and giving rise to a
completely new channel. In the internet age, the extension of
6

commercial banking to the cyberspace is an inevitable development

(Liao and Cheung 2003).
E-banking creates unprecedented opportunities for the banks in the
ways they organize financial product development, delivery and
marketing via the internet. While it offers new opportunities to banks,
it also poses many challenges such as the innovation of IT
applications, the blurring of market boundaries, the breaching of
industrial barriers, the entrance of new competitors and the emergence
of new business models (Saatcioglu et al. 2001, Liao and Cheung
2003). Now the speed and scale of the challenge are rapidly increasing
with the pervasiveness of the internet and the extension of information
economy (Holland and Westwood 2001).
Globally, e-commerce growth has been led by the popularity of online
shopping portals like amazon.com and ebay.com but in India that has
not been the case. It is mainly driven by the online travel industry and
banking sector. For instance, 29% of Indian Internet users book airline
tickets online and the figure is expected to touch 46% next year.
Online rail ticket booking stands at 39% of the total bookings. As far
as banking is concerned, there are 4.6 million online banking users in
India. This figure is expected to go up to over 16 million by 2007-08
that will include both internet and mobile banking users. According to
the Internet and Mobile Association of India (IAMAI), the ecommerce industry in India is expected to grow to a size of Rs. 2,300
crore by 2007 against the Rs.1,200 crore. The total number of internet
users which right now is 38.5 million is expected to reach 100 million
by 2008.
7

 WHAT IS ONLINE BANKING?

If you're like most people, you've heard a lot about online banking but
probably haven't tried it yourself. You still pay your bills by mail and
deposit checks at your bank branch, much the way your parents did.
You might shop online for a loan, life insurance or a home mortgage,
but when it comes time to commit, you feel more comfortable
working with your banker or an agent you know and trust.
Online banking isn't out to change your money habits. Instead, it uses
today's computer technology to give you the option of bypassing the
time-consuming, paper-based aspects of traditional banking in order to
manage your finances more quickly and efficiently.
Origin of online banking
The advent of the Internet and the popularity of personal computers
presented both an opportunity and a challenge for the banking
industry.
For years, financial institutions have used powerful computer
networks to automate millions of daily transactions; today, often the
only paper record is the customer's receipt at the point of sale. Now
that its customers are connected to the Internet via personal
computers, banks envision similar economic advantages by adapting
those same internal electronic processes to home use.
Banks view online banking as a powerful "value added" tool to attract
and retain new customers while helping to eliminate costly paper
handling and teller interactions in an increasingly competitive banking
environment.
8

 Brick-to-click banks
Today, most large national banks, many regional banks and even
smaller banks and credit unions offer some form of online banking,
variously known as PC banking, home banking, electronic banking or
Internet banking. Those that do are sometimes referred to as "brick-toclick" banks, both to distinguish them from brick-and-mortar banks
that have yet to offer online banking, as well as from online or
"virtual" banks that have no physical branches or tellers whatsoever.
The challenge for the banking industry has been to design this new
service channel in such a way that its customers will readily learn to
use and trust it. After all, banks have spent generations earning our
trust; they aren't about to risk that on a Web site that is frustrating,
confusing or less than secure.
Most of the large banks now offer fully secure, fully functional online
banking for free or for a small fee. Some smaller banks offer limited
access or functionality; for instance, you may be able to view your
account balance and history but not initiate transactions online. As
more banks succeed online and more customers use their sites, fully
functional online banking likely will become as commonplace as
automated teller machines.
Understanding Online Banking Services
Online banking is a great convenience for many people. Whether
people use it to manage traditional accounts or switch all of their
banking to an online-only firm, it is a wonderful improvement over
the days when everything had to be done face-to-face.
9

No matter what kind of banking is done online, it starts with a secure

web site. Usually, the bank will have certain requirements to ensure
password strength as well. This and other security measures ensure
that online accounts are safe from tampering. From there, all of the
necessary services can be accessed.
Online banking is quite simple once the basics are understood.
Depositing money is simple, and can be done in a number of ways.
The most popular method is likely direct deposit. Many employers
offer direct deposit of paychecks, and by providing them with your
online bank account number, your checks will go right into that
account. Other ways of depositing money include bank and wire
transfers. Some accounts even allow customers to mail their checks in.
Paper checks are typically provided with online checking accounts.
This, however, is not likely to be the most common way a customer
will access funds. Online bill payment allows users to pay their bills
without mailing checks, and those who use web-based accounts
typically prefer this and other electronic payment methods. Most types
of bills can be paid via a debit card or electronic checks, as well. This
makes it easy to eliminate the need for paper checks entirely. Still,
many find it useful to have a few checks on hand for those few
companies that havent quite reached the modern age.
The management of traditional accounts is another common use for
online banking. Most banks offer online access to accounts, and all
customers need to do to make use of the service is sign up through
10

their banks site. Once this is done, checking your balance, seeing
which payments have cleared, and other common banking operations
can be done from the computer. This eliminates the need to call or
visit the bank for simple account maintenance needs.
Every online banking interface is slightly different, but all banks try to
make things easy and intuitive for users. It wont take long for a new
user to figure out exactly how everything works. Sign up for an online
bank account or online access to your current one, and soon youll
wonder how you could have lived without it.
FEATURES OF ONLINE BANKING
We need to be able to manage our finances from anywhere in the
world. Rich online banking services are much more important than a
physical location. Since I have been doing all of my banking online
with quite a few different online banks as I looked for the best
solution, Ive had a chance to really experiment with what works and
what doesnt work for us.
Here is a checklist of things to look for in an online bank. Some items
you may be familiar with. Others might be new to you if it isnt
something your current bank offers.
1. Bill Pay Service - One of the biggest reasons for going with an
online bank is to get really good bill payment services. Different banks
handle bill payment different ways. Here are some things to think
about:
11

A. How many bills are you allowed to pay per month?

B. What are the fees for going over the limit?
C. Can the bill payment send physical checks to merchants who arent
set up to take electronic payments?
D. Do checks come from your account or from a third party service?
For privacy reasons, it might be better to be able to pay someone
without giving them your bank account number on the check. On the
other hand, if the checks actually come from your account, the money
doesnt get taken out until the check is cashed.
E. Can you set up reoccurring payments?
2. Electronic Bill Notification With electronic bills, your merchant
(credit card company, gas company, electric company, etc.) sends an
electronic bill to your bank. You can set it up to pay automatically or
notify you for approval. This can be particularly good for people who
are on the road because it reduces the amount of physical mail you
have to somehow get read or forwarded to you.
3. Online Check Images Most banks will show you an image of the
check, which makes it really easy to balance your account if you cant
remember what a particular payment was for. (Ideally, you should
minimize the number of physical checks you write to reduce fraud.)
4. Online Deposit Slip Images Most banks just record the total with
no image. It will let you see an image of each deposit slip. Having the
images available can be very helpful if you ever have to prove
12

something for tax purposes or need to remember where that $2581

deposit came from.
5. Reporting Tools Most banks offer basic reporting tools that will
let you see how much you have spent in each category youve created.
This may not be an issue if you use desktop money management
software, but it still can be handy if you are traveling and want to see
how much youve paid on your mortgage over the past 12 months.
6. Linked Accounts Can you link your bank account with a
brokerage account? Can you add your minor children as custodial
accounts and manage them all centrally? If you and your spouse both
set them up IRAs, is it easy to view them both along side the rest of
your finances, or do you have to have a separate login for each IRA to
keep them on separate SSNs? These are small things that many banks
dont support, but it starts getting really complicated when you have to
manage a bunch of accounts instead of having a single place to
manage all of your money.
7. Convenient Deposit Methods - Since you may not be anywhere
near the physical location of your bank, make sure you understand
how to deposit money. Payroll can be set up on direct deposit, but
there will be times when you need to deposit checks. Does the bank
provide postage paid envelopes and deposit slips? Some banks work
with FedEx or UPS stores to allow you to send in a deposit overnight
for free.

13

8. Low ATM Fees and Convenient Locations If you need to get

cash, will the bank refund the ATM fees? Are there only certain ATMs
that are free, and if so, are they located near places you normally go?
Are the ATMs available nation wide so you can use them on vacation?
What are the fees for using the ATM internationally and how is the
exchange rate handled?
9. Integration with Desktop Software If you use Microsoft Money,
Quicken or something similar, youll want to make sure your bank
supports it. Make sure you understand if downloading transactions
require you to login and manually download a file, or if your money
management software can directly connect and download new
transactions. If you are using Quicken on a Mac, make sure the bank is
paying Quickens extortion fee so the files will work with Mac users.
10. Many Account Types Some banks only offer basic checking and
savings accounts. Ideally you want a bank that makes it easy to open
money market accounts, IRAs, health savings accounts, etc. If you
have to go to another institution to open a different type of account, it
is more difficult to manageespecially if you are on the road. You want
to be able to easily open a CD to take advantage of a higher interest
rate, easily open an IRA to help reduce your tax liability, etc.
11. Free Money Transfers Be sure to consider how easy it is to
move money in and out of the account. You should be able to set up
links with your accounts from other institutions to transfer money back
and forth as necessary. Make sure you understand what type of fees are
14

associated with these transfers. Good banks should allow a certain

number of transfers per month with no fee.
12. Security Balanced with Convenience - Some banks spend so
much effort trying to keep things secure that youll find yourself
automatically logged out of their website while you try to balance your
account. You want security but you dont want it to get in the way of
you doing your banking. Also check into what type of additional
security features are available. For example, some banks will offer you
an RSA keychain with a number that changes every 60 seconds. In
addition to your password, you will need the number from that key in
order to get access to your account.
13. Ease of Use This is something that most banks seem to struggle
with. Right now I have my personal account with one online bank and
my business accounts with another. I dread using the business accounts
and I absolutely love using my personal account. At first I thought I
was just more familiar with the bank where my personal accounts are,
but I finally realize that it comes down to the ease of use. One is ok
and the other is superb, but it makes a big difference.
Advantages of online banking:

Convenience: Unlike your corner bank, online banking sites

never close; they're available 24 hours a day, seven days a week,
and they're only a mouse click away.

15

Ubiquity: If you're out of state or even out of the country when

a money problem arises, you can log on instantly to your online
bank and take care of business, 24/7.

Transaction speed: Online bank sites generally execute and

confirm transactions at or quicker than ATM processing speeds.

Efficiency: You can access and manage all of your bank

accounts, including IRAs, CDs, even securities, from one secure
site.

Effectiveness: Many

online

banking

sites

now

offer

sophisticated tools, including account aggregation, stock quotes,

rate alerts and portfolio managing programs to help you manage all
of your assets more effectively. Most are also compatible with
money managing programs such as Quicken and Microsoft Money.

Disadvantages of online banking:

Start-up may take time: In order to register for your bank's

online program, you will probably have to provide ID and sign a
form at a bank branch. If you and your spouse wish to view and
manage your assets together online, one of you may have to sign a
durable power of attorney before the bank will display all of your
holdings together.

Learning curve: Banking sites can be difficult to navigate at

first. Plan to invest some time and/or read the tutorials in order to
become comfortable in your virtual lobby.
16

Bank site changes: Even the largest banks periodically upgrade

their online programs, adding new features in unfamiliar places. In
some cases, you may have to re-enter account information.

The trust thing: For many people, the biggest hurdle to online
banking is learning to trust it. Did my transaction go through? Did I
push the transfer button once or twice? Best bet: always print the
transaction receipt and keep it with your bank records until it shows
up on your personal site and/or your bank statement.

How Does Online Banking Work?

Online banking provides many identical services that a traditional

bank does with the biggest difference is in teller availability: Human
tellers leave; electronic tellersthe websitesare available virtually
all day, everydayweekends and holidays, included.
Online Banking Structure:
Online banking mirrors traditional banking procedures in many
instances, and in some, actually improves security and reduces both
banks and customers costs.
In electronic form, online banking still allows:
1. Deposits to the account, whether via payroll deposits or funds
transfers.
2. Bill payments via automatic payment schedules or individually
ordered payments. Most bill pay users opt for the bank-generated
17

checks, but payments can be ordered in a one off situation or

scheduled regularly.
3. Statement formats can be electronic or paper; most who prefer
online banking choose the electronic statements for convenience and
reduced paper use.
4. Wire transfers to accounts within and without the banks structure,
though some banks charge additional transaction fees for wire
transfers.
5. Differing services depending on the individual financial institute.
Online Actions
All online banking transactions are initiated by creating an
online account identity. Account login name and password creation is
followed by choosing and answering security questions. Its not
recommended that security questions and answers be common or
known by others; they should have unique answers, whether
historically true or not.
For example, if a user chooses a security question, What is the name
your first elementary school, choose an answer that is not the actual
name or the actual elementary school. Use instead the name of another
school or anything else that is easily remembered.
Provide an email address that is not tied to an Internet Service
Provider. If the user changes ISPs, that email address will be lost.

18

Instead, use a free email address that can last for as long as the user
chooses.
Once the security aspects are in place and verified, look around the
banks website and note important areas, such as:
1. Account activity
2. Statement delivery change areas
3. Customer Service options
4. Bill pay procedures, if any
5. And any other area provided on the website.

Online banking often reduces funds availability delays and hastens

resolution to disputes and inquiries. While some complaints and
problems do require human intervention, Customer Service Agents are
available for longer during a calendar day than local branch personnel
are.
Online banking differs from traditional banking when physical checks
or cash is deposited; human interaction via a drive thru lane or at the
counter is required. Cashier checks, traveler checks, and money orders
cannot be purchased from the institution via online banking, but
because all transactions allowed are electronic, tracking and
accountability are easily provided.

19

20

 OPPORTUNITIES IN ONLINE BANKING:

Is There a Future in Online Banking?

By this point, no one can dismiss online banking as a fad. However, it

is worth considering whether the trend towards online financial
transactions is going to slow or reverse in the years to come. There
will continue to be people who resist online banking in favor of
offline transactions just as there are people who prefer to keep their
money in mattresses instead of putting it in banks. Whether these
people will exert serious influence on the movement towards online
banking can be examined by looking at the needs of modern
consumers, and the interests of the banks themselves.
The Move to Online Business
The global connectivity provided by the internet, combined with the
fallout from the global financial crisis has encouraged a growing
number of entrepreneurs to start their own businesses online. As an
increasing number of people look to save themselves from
unemployment or augment otherwise insufficient salaries by finding
new ways to make money online, they will require new ways to send,
receive, and invest their online funds.

21

 The Rise of Mobile Banking

As handheld mobile devices become more sophisticated, users are
experimenting with more sophisticated transactions. Moving beyond
ringtone downloads; consumers can now shop online and purchase
software upgrades and augmentations through app stores. In addition
to this buying and selling, anyone with a web browser on their phone
can access their banks online banking site to move and manage their
money in more locations than ever before.

Staffing Solutions
As banks consolidate and grow larger, they are looking for more ways
to cut costs, and reducing the number of full-time employees on their
payroll is an attractive option. Encouraging customers to do their
banking online allows banks to close smaller branches in outlying
locations and use economies of scale to develop customer assistance
centers in locations where the labor market is more favorable.

Physical Footprints
Online banking is also more attractive to banks because a reduced
physical footprint means reduced costs in other areas. In addition to
saving the money that would normally be associated with operating
and maintaining physical branches, no longer having to print and mail
22

paper statements to customers would be a huge savings for banks. As

an added bonus, banks have been able to take advantage of current
pro-environment sentiment by marketing online banking as a green
alternative.
By appealing to more mobile customers and more cost-conscious
financial service providers alike, online banking continues to be an
attractive option for everyone involved. However, when discussing
the internet it is dangerous to assume that everything is going to be
moved online; there will always be individuals, industries, and
transactions that are grounded in the real world with no desire to
change the way they do business.

Growth of Internet
The increase in the growth of internet usage will definitely help the
cause of growth of online banking in India. The following chart shows
the growth of internet in India during the past decade or so:
YEAR

Users Population

% Penetration

1999

2,800,000

1,094,870,677 0.3 %

2000

5,500,000

1,094,870,677 0.5 %

2001

7,000,000

1,094,870,677 0.7 %

2002

16,500,000

1,094,870,677 1.6 %

2003

22,500,000

1,094,870,677 2.1 %

2004

39,200,000

1,094,870,677 3.6 %

23

2005

50,600,000

1,112,225,812 4.5 %

2006

40,000,000

1,112,225,812 3.6 %

2007

42,000,000

1,129,667,528 3.7 %

2009

81,000,000

1,156,897,766 7.0 %

2010

100,000,000

1,173,108,018 8.5 %

Why Banks Encourage Online Banking?

OVERVIEW
Online banking has enjoyed increased popularity, and some banks
actually require it. From standard, brick-and-mortar institutions to
cloud managed institutions, online banking offers flexibility and
convenience for all involved.
BANK ADVANTAGES:
Each visit to a bank costs the institution money, whether in
bank teller wages and benefits to security costs to maintenance
costs. Online banking reduces those costs and increases the
banks profit margin.
Online banking reduces the need for the number of physical
locations and services offered within each. Because Customer
Service Departments are united into fewer locations, asset
sharing within those locations further reduce bank costs.
24

 CUSTOMER ADVANTAGES:
Online security of financial data has evolved tremendously
since the early days of online banking, and often transactions
can be even more secure than those conducted in a drive thru
lane.
Online banking transactions require not only a secure login but
also require secured password entry. In-person transactions are
based on account information and a photo ID, both of which
can be obtained under the radar.Online banking transactions
also track the Internet Protocol (IP) address of the computer
used in the transaction. The IP can be traced to the method or
mode of Internet access, often through an Internet Service
Provider who always notes activity, computer, and actions
performed under that IP address assigned to the ISP account
holder. Whether a dynamic or changing IP address or a static or
unchanging IP address is used, the ISP always records what IP
address is assigned to what ISP account at any time.
Comprehensive Help sections on banks websites often reduce
on-location inquiries, further reducing overhead costs for
banking institutions. Additional service enrollment or disenrollment, address updates, and account status and verification
are all time saving activities for both the bank and the banking
customer.

25

 Online Bill Pay processes reduce stolen or counterfeit checks

which cost banks billions of dollars every month. Each online
bill pay transaction allows for a grace period from the payment
order date to the actual check delivery date, which also allows
the account holder additional time to preview activity and
account status.

DEVELOPMENT:
Increasingly, more and more people are switching to electronic

platforms for executing financial transactions. The wider usage of cell

phone and internet certainly seems to be playing a role in blurring
physical boundaries, and unlocking a whole new world of
opportunities for banks in tapping newer customer segments and in
recording greater volume of transactions.
If latest RBI data on retail electronic payment systems is anything to
go by, electronic banking is set to become the catalyst for change in
the way money moves. Provisional data show that in FY09 to January,
a total of 5,587.85 lakh transactions were executed through the
electronic channel, a rise of 234.76 lakh transactions over the previous
fiscal.
This growth was facilitated by the introduction of real-time gross
settlement (RTGS) and national electronic funds transfer (NEFT),
which enabled fund transfers among account holders of the same bank
as

well

as

inter-bank

transfers.

The growth has also been aided by banks' efforts to offer innovative
services and tighten security measures, and the increase in awareness
26

of services available. RBI outlining guidelines on mobile banking,

setting up of the National Payments Corporation of India and passage
of the Payments and Settlement Act too have given a positive thrust to
the growth in electronic payments. The impact of all these measures is
likely to be felt in the current fiscal, which may well mean FY10
could become a watershed year for e-banking. While opinions of
industry players differ on whether FY10 will indeed prove to be a
tipping point, there seems to be consensus that the year would mark a
critical phase in the evolution of the payments and settlement systems
in India. "FY10 will certainly herald an important phase for electronic
banking in India and an upsurge in internet and ATM transactions,"
says Ashvin Parekh, partner and national industry leader, financial
services, Ernst & Young. "At the same time, traditional fund transfer
will continue to hold its own. We are going to witness a co-existence
of these two systems. In the regulatory space, there will be huge
changes. As and when India Pay, which will eventually settle credit
card and ATM transactions, comes into the picture, we could witness a
gradual shift away from Visa and MasterCard." The implementation
of core banking solutions by all public sector banks has not only
helped banks rationalise their costs, but has also allowed them to
explore new ways of optimally utilising their resources. Core banking,
which facilitates linking up of a bank's branches across the country,
has enabled banks to improve their efficiency.
"Now, decisions can be taken remotely and the activities too can be
undertaken in a centralised location. This means that branches need
not spend time on processing transactions and other back office
27

operations, and rather utilise the time and resources to function as

selling outlets. Centralised operations benefit from economies of scale
and help in reducing bank costs," explains Janmejaya Sinha,
managing director of India operations, Boston Consulting Group.

Opportunities in e-banking: ARE WE READY?

It has always been a chicken-and-egg dilemma in business.
Either firms wait for the market to mature until customers are ready
for the products and services. Or, firms can go ahead and offer the
products and services, hoping that their customers will catch on soon.
The same is true for new products and services that have
emerged and continue to emerge in the world of electronic banking
(e-banking). Banking executives interviewed by BusinessWorld
Online have different ways of resolving the issue. Some would go
ahead with new ideas, wanting to take the first-mover advantage.
Others would wait in the sidelines, but armed nevertheless just in the
case the market take up suddenly increases.
Whether first-movers or latecomers, there is one partner in the ebanking game that is not waiting for the chicken to lay the egg, or
wait for the egg to hatch into a chick. Technology providers are
always up on their toes, like chicken ready to catch the early worm.
CHALLENGES

OF

ONLINE

BANKING

28

Information technology analyst firm, the Meta Group, recently

reported that "financial institutions who don't offer home banking by
the year 2000 will become marginalized." By the year of 2002, a large
sophisticated and highly competitive Internet Banking Market will
develop which will be driven by
Demand side pressure due to increasing access to low cost
electronic services.
Emergence of open standards for banking functionality.
Growing customer awareness and need of transparency.
Global players in the fray
Close integration of bank services with web based E-commerce
or even disintermediation of services through direct electronic
payments (E- Cash).
More convenient international transactions due to the fact that
the Internet along with general deregulation trends, eliminate
geographic boundaries.
Move from one stop shopping to 'Banking Portfolio' i.e.
unbundled product purchases.
Certainly some existing brick and mortar banks will go out of
business. But that's because they fail to respond to the challenge of the
Internet. The Internet and it's underlying technologies will change and
29

transform not just banking, but all aspects of finance and commerce. It
represents much more than a new distribution opportunity. It will
enable nimble players to leverage their brick and mortar presence to
improve customer satisfaction and gain share. It will force lethargic
players who are struck with legacy cost basis, out of business-since
they are unable to bring to play in the new context.

MAIN CONCERNS IN INTERNET BANKING:

In a survey conducted by the Online Banking Association, member
institutions rated security as the most important issue of online
banking. There is a dual requirement to protect customers' privacy and
protect against fraud. Banking Securely: Online Banking via the
World Wide Web provides an overview of Internet commerce and how
one company handles secure banking for its financial institution
clients and their customers. Some basic information on the
transmission of confidential data is presented in Security and
Encryption on the Web. PC Magazine Online also offers a primer:
How Encryption Works. A multi-layered security architecture
comprising firewalls, filtering routers, encryption and digital
certification ensures that your account information is protected from
unauthorised access:
Firewalls and filtering routers ensure that only the legitimate
Internet users are allowed to access the system.

30

 Encryption techniques used by the bank (including the

sophisticated public key encryption) would ensure that privacy
of data flowing between the browser and the Infinity system is
protected.
Digital certification procedures provide the assurance that the
data you receive is from the Infinity system.

Security concerns:
Security fears have served as deterrents to online growth. Of
particular concern are threats of pharming and phishing. Phishing is
an internet fraud, through which innocent people are enticed to
divulge their personal information like user ID and passwords, which
are later on used by scammers in unauthorized ways.
The most common method of phishing is sending emails claiming to
be from your bank or other financial institutions which are dealing
that already has your personal information and you will be asked to
confirm the details by clicking a particular link (URL) provided in this
fake email. This URL will take you to a fake website which will be
similar to your genuine website, and the information provided by the
customer in the forms provided in the fake website will be gathered
and used for committing fraud in their accounts or withdraw funds
unauthorizedly from these accounts.
Pharming is another internet fraud, whereby as many as users as
possible are redirected before they reach the legitimate online banking
31

websites they intend to visit and they are lead to malicious ones. The
bogus sites to which victims are redirected without their knowledge or
consent, will likely looks the same as genuine site. But when users
enter their login name or password, the information is captured by
criminals.

FURTHER PROBLEMS RELATING TO NET BANKING

IN INDIA:
Given that India is the IT and tech services outsourcing hotspot of the
world, it's surprising that Internet banking has not really taken off.
Despite the advent of a very tech-savvy and vast consumer class in
recent years, a mix of industry issues and unique challenges continue
to thwart the expansion of net banking in India. Technology
challenges, IT practices, certain cultural issues, industry lethargy, and
workplace constraints have affected widespread acceptance of Internet
banking.
Low Broadband Internet Penetration
India has one of the lowest broadband connectivity penetration rates
in Asia as compared to Japan, Taiwan, Korea and Singapore. While
the bigger cities such as Mumbai, Delhi, Chennai, and Bangalore have
relatively better broadband penetration rates, PC users in smaller cities
and towns still use dial-up options to connect to the Internet. Slow
connectivity speeds often dampen the online banking experience for
many customers eager to use such services.
32

 Banks' Ambivalent Commitment Levels

Internet banking did take off in India at the turn of the millennium but
soon faltered due to lack of takers. In the middle of this decade,
multinational and domestic private banks started offering net banking
services as a competitive differentiator. Only recently, state-owned
and public sector banks have started doing likewise. However, banks'
ambivalent commitment levels and their reluctance to allocate huge
budgets for net banking branding initiatives, as well as a lack of
industry advocacy efforts, have resulted in poor acceptance levels of
Internet banking by customers.
Customers' Preference for Traditional Branches
There are thousands of highly active traditional bank branches in
India's crowded cities and major towns. Office workers take longer
lunch breaks to finish banking activities and transactions at these
branches rather than conduct them online. Most customers prefer the
personal touch and customized service offered by staff in brick-andmortar bank branches. Many Indians are also averse to calling call
centers and banks' customer contact lines to address issues related to
online bank accounts.
Fear of Online Threats/Scams
Ubiquitous and prevalent online threats about hackers, identity theft,
stolen passwords, viruses, worms and spyware tend to make
customers wary just like in any other country. Conservative Indian
bank customers used to years of saving in an erstwhile mixed-socialist
33

economy are always fearful of losing hard-earned savings in online

scams. These customers are also not sure about the efficacy of banks'
websites and their commitment to allocate funds for reliable
encryption mechanisms and robust back-end technologies and
systems.
Other Problems
Workplace constraints and corporate policies about using external
websites or pursing personal activities such as online banking have
affected its expected fast-paced acceptance among the growing
affluent class in India. Cultural issues, such as parents giving priority
use of the home PC to their children rather than using it themselves,
stifle the potential growth of home access to Internet banking services.
Public sector banks with vast customer bases also don't tend to invest
money in training personnel for e-banking initiatives, resulting in poor
customer service levels.
Internet Banking in India Guidelines
Reserve Bank of India had set up a Working Group on Internet
Banking to examine different aspects of Internet Banking (Ibanking). The Group had focused on three major areas of I-banking,
i.e. (i) technology and security issues, (ii) legal issues and (iii)
regulatory

and

supervisory

issues.

RBI

has

accepted

the

recommendations of the Group to be implemented in a phased

manner. Accordingly, the following guidelines are issued for
implementation by banks. Banks are also advised that they may be
34

guided by the original report, for a detailed guidance on different

issues.
I. Technology and Security Standards:
a. Banks should designate a network and database administrator
with clearly defined roles as indicated in the Groups report.
b. Banks should have a security policy duly approved by the
Board of Directors. There should be a segregation of duty of
Security Officer / Group dealing exclusively with information
systems security and Information Technology Division which
actually implements the computer systems. Further, Information
Systems Auditor will audit the information systems.
c. Banks should introduce logical access controls to data, systems,
application

software,

utilities,

telecommunication

lines,

libraries, system software, etc. Logical access control

techniques may include user-ids, passwords, smart cards or
other biometric technologies.
d. At the minimum, banks should use the proxy server type of
firewall so that there is no direct connection between the
Internet and the banks system. It facilitates a high level of
control and in-depth monitoring using logging and auditing
tools. For sensitive systems, a state full inspection firewall is
recommended which thoroughly inspects all packets of
information, and past and present transactions are compared.
These generally include a real time security alert.
35

e. All the systems supporting dial up services through modem on

the same LAN as the application server should be isolated to
prevent intrusions into the network as this may bypass the
proxy server.
f. PKI (Public Key Infrastructure) is the most favoured
technology for secure Internet banking services. However, as it
is not yet commonly available, banks should use the following
alternative system during the transition, until the PKI is put in
place:
1. Usage of SSL (Secured Socket Layer), which ensures
server authentication and use of client side certificates
issued by the banks themselves using a Certificate Server.
2. The use of at least 128-bit SSL for securing browser to
web server communications and, in addition, encryption
of sensitive data like passwords in transit within the
enterprise itself. (Para 6.4.5)
g. It is also recommended that all unnecessary services on the
application server such as FTP (File Transfer Protocol), telnet
should be disabled. The application server should be isolated
from the e-mail server. (Para 6.4.6)
h. All computer accesses, including messages received, should be
logged. Security violations (suspected or attempted) should be
reported and follow up action taken should be kept in mind
while framing future policy. Banks should acquire tools for
36

monitoring systems and the networks against intrusions and

attacks. These tools should be used regularly to avoid security
breaches. The banks should review their security infrastructure
and security policies regularly and optimize them in the light of
their own experiences and changing technologies. They should
educate their security personnel and also the end-users on a
continuous basis.
i. The information security officer and the information system
auditor should undertake periodic penetration tests of the
system, which should include:
1. Attempting to guess passwords using password-cracking
tools.
2. Search for back door traps in the programs.
3. Attempt to overload the system using DDoS (Distributed
Denial of Service) & DoS (Denial of Service) attacks.
4. Check if commonly known holes in the software,
especially the browser and the e-mail software exist.
j. The penetration testing may also be carried out by engaging
outside experts (often called Ethical Hackers).
k. Physical access controls should be strictly enforced. Physical
security should cover all the information systems and sites
where they are housed, both against internal and external
threats.
37

l. Banks should have proper infrastructure and schedules for

backing up data. The backed-up data should be periodically
tested to ensure recovery without loss of transactions in a time
frame as given out in the banks security policy. Business
continuity should be ensured by setting up disaster recovery
sites. These facilities should also be tested periodically.
m. All applications of banks should have proper record keeping
facilities for legal purposes. It may be necessary to keep all
received and sent messages both in encrypted and decrypted
form.
n. Security infrastructure should be properly tested before using
the

systems

and

applications

for

normal

operations.

Banks should upgrade the systems by installing patches

released by developers to remove bugs and loopholes, and
upgrade to newer versions which give better security and
control.
II. Legal Issues
a. Considering the legal position prevalent, there is an obligation
on the part of banks not only to establish the identity but also to
make enquiries about integrity and reputation of the prospective
customer. Therefore, even though request for opening account
can be accepted over Internet, accounts should be opened only
after proper introduction and physical verification of the
identity of the customer.
38

b. From a legal perspective, security procedure adopted by banks

for authenticating users needs to be recognized by law as a
substitute for signature. In India, the Information Technology
Act, 2000, in Section 3(2) provides for a particular technology
(viz., the asymmetric crypto system and hash function) as a
means of authenticating electronic record. Any other method
used by banks for authentication should be recognized as a
source of legal risk.
c. Under the present regime there is an obligation on banks to
maintain secrecy and confidentiality of customers accounts. In
the Internet banking scenario, the risk of banks not meeting the
above obligation is high on account of several factors. Despite
all reasonable precautions, banks may be exposed to enhanced
risk of liability to customers on account of breach of secrecy,
denial of service etc., because of hacking/ other technological
failures. The banks should, therefore, institute adequate risk
control measures to manage such risks.
d. In Internet banking scenario there is very little scope for the
banks to act on stop-payment instructions from the customers.
Hence, banks should clearly notify to the customers the
timeframe and the circumstances in which any stop-payment
instructions could be accepted.
e. The Consumer Protection Act, 1986 defines the rights of
consumers in India and is applicable to banking services as
well. Currently, the rights and liabilities of customers availing
39

of Internet banking services are being determined by bilateral

agreements between the banks and customers. Considering the
banking practice and rights enjoyed by customers in traditional
banking, banks liability to the customers on account of
unauthorized transfer through hacking, denial of service on
account of technological failure etc. needs to be assessed and
banks providing Internet banking should insure themselves
against such risks.
III. Regulatory and Supervisory Issues:
As recommended by the Group, the existing regulatory framework
over banks will be extended to Internet banking also. In this regard, it
is advised that:
1. Only such banks which are licensed and supervised in India and
have a physical presence in India will be permitted to offer
Internet banking products to residents of India. Thus, both
banks and virtual banks incorporated outside the country and
having no physical presence in India will not, for the present, be
permitted to offer Internet banking services to Indian residents.
2. The products should be restricted to account holders only and
should not be offered in other jurisdictions.
3. The services should only include local currency products.
4. The in-out scenario where customers in cross border
jurisdictions are offered banking services by Indian banks (or
40

branches of foreign banks in India) and the out-in scenario

where Indian residents are offered banking services by banks
operating in cross-border jurisdictions are generally not
permitted and this approach will apply to Internet banking also.
The existing exceptions for limited purposes under FEMA i.e.
where resident Indians have been permitted to continue to
maintain their accounts with overseas banks etc. will, however,
be permitted.
5. Overseas branches of Indian banks will be permitted to offer
Internet banking services to their overseas customers subject to
their satisfying, in addition to the host supervisor, the home
supervisor.
Given the regulatory approach as above, banks are advised to follow
the following instructions:
a. All banks, who propose to offer transactional services on the
Internet should obtain prior approval from RBI. Banks
application for such permission should indicate its business
plan, analysis of cost and benefit, operational arrangements like
technology adopted, business partners, third party service
providers and systems and control procedures the bank
proposes to adopt for managing risks. The bank should also
submit a security policy covering recommendations made in
this circular and a certificate from an independent auditor that
the minimum requirements prescribed have been met. After the

41

initial approval the banks will be obliged to inform RBI any

material changes in the services / products offered by them.
b. Banks will report to RBI every breach or failure of security
systems and procedure and the latter, at its discretion, may
decide to commission special audit / inspection of such banks.
c. The guidelines issued by RBI on Risks and Controls in
Computers

and

Telecommunications

vide

circular

DBS.CO.ITC.BC. 10/ 31.09.001/ 97-98 dated 4th February 1998

will equally apply to Internet banking. The RBI as supervisor
will cover the entire risks associated with electronic banking as
a part of its regular inspections of banks.
d. Banks should develop outsourcing guidelines to manage risks
arising out of third party service providers, such as, disruption
in service, defective services and personnel of service providers
gaining intimate knowledge of banks systems and misutilizing
the same, etc., effectively.
e. With the increasing popularity of e-commerce, it has become
necessary to set up Inter-bank Payment Gateways for
settlement of such transactions. The protocol for transactions
between the customer, the bank and the portal and the
framework

for

setting

up

of

payment

gateways

as

recommended by the Group should be adopted.

f. Only institutions who are members of the cheque clearing
system in the country will be permitted to participate in Inter42

bank payment gateways for Internet payment. Each gateway

must nominate a bank as the clearing bank to settle all
transactions. Payments effected using credit cards, payments
arising out of cross border e-commerce transactions and all
intra-bank payments (i.e., transactions involving only one bank)
should be excluded for settlement through an inter-bank
payment gateway.
g. Inter-bank payment gateways must have capabilities for both
net and gross settlement. All settlement should be intra-day and
as far as possible, in real time.
h. Connectivity between the gateway and the computer system of
the member bank should be achieved using a leased line
network (not through Internet) with appropriate data encryption
standard. All transactions must be authenticated. Once, the
regulatory framework is in place, the transactions should be
digitally certified by any licensed certifying agency. SSL / 128
bit encryption must be used as minimum level of security.
Reserve Bank may get the security of the entire infrastructure
both at the payment gateways end and the participating
institutions end certified prior to making the facility available
for customers use.
i. Bilateral contracts between the payee and payees bank, the
participating banks and service provider and the banks
themselves will form the legal basis for such transactions. The

43

rights and obligations of each party must be clearly defined and

should be valid in a court of law.
j. Banks

must

make

mandatory

disclosures

of

risks,

responsibilities and liabilities of the customers in doing

business through Internet through a disclosure template. The
banks should also provide their latest published financial results
over the net.
k. Hyperlinks from banks websites, often raise the issue of
reputational risk. Such links should not mislead the customers
into believing that banks sponsor any particular product or any
business unrelated to banking. Hyperlinks from a banks
websites should be confined to only those portals with which
they have a payment arrangement or sites of their subsidiaries
or principals. Hyperlinks to banks websites from other portals
are normally meant for passing on information relating to
purchases made by banks customers in the portal. Banks must
follow the minimum recommended security precautions while
dealing with request received from other websites, relating to
customers purchases.
2. The Reserve Bank of India have decided that the Groups
recommendations as detailed in this circulars should be adopted by all
banks offering Internet banking services, with immediate effect. Even
though the recommendations have been made in the context of
Internet banking, these are applicable, in general, to all forms of

44

electronic banking and banks offering any form of electronic banking

should adopt the same to the extent relevant.
3. All banks offering Internet banking are advised to make a review of
their systems in the light of this circular and report to Reserve Bank
the types of services offered, extent of their compliance with the
recommendations, deviations and their proposal indicating a time
frame for compliance. The first such report must reach us within one
month from the date of this circular. Banks not offering any kind of Ibanking may submit a nil report.
4. Banks who are already offering any kind of transactional service
are advised to report, in addition to those mentioned in paragraph
above, their business models with projections of cost / benefits etc.
and seek our post-facto approval.

SOLUTIONS:
Here are some simple tips to prevent you from falling into the trap of
cyber criminals. Remember, a simple ignorance or oversight can make
a huge dent in your hard- earned savings.
Securing your account: Avoid online banking on unsecured wifi
systems and operate only from PCs at home. Never reveal
password to anyone. Do not even write it on a piece of paper on

45

diary. Just memorise it. It should be alphanumeric and change it

frequently.
Never reply to queries from bank online about account or personal
details. The personal information should not be kept in a public
computer or in emails.
Phishing: A person's personal details are obtained by fraudsters
posing as bankers, who float a site similar to that of the person's
bank. They are asked to provide all personal information about
themselves and their account to the bank on the pretext of database
upgradation. The number and password are then used to carry out
transactions on their behalf without their knowledge.
Phishing involves using a form of spam to fraudulently gain access to
people's online banking details. As well as targeting online banking
customers, phishing emails may target online auction sites or other
online payment facilities. Typically, a phishing email will ask an
online banking customer to follow a link in order to update personal
bank account details. If the link is followed, the victim downloads a
program which captures his or her banking login details and sends
them to a third party.
Spam: Spam is an electronic 'junk mail' or unwanted messages
sent to your email account or mobile phone. These messages vary,
but are essentially commercial and often annoying in their sheer
volume. They may try to persuade you to buy a product or service,
or visit a website where you can make purchases; or they may

46

attempt to trick you into divulging your bank account or credit card
details.
Nigerian Scam: Nigerian or Frauds 409 or 419 are basically the
lottery scam in which some overseas persons are involved to cheat
innocent persons or organizations by promising to give a good
amount of money at nominal fee charges. Their intention is to steal
money in the form of fee against the lottery prize.

Spyware: Spyware such as Trojan horse is generally considered to be

software that is secretly installed on a computer and takes things from
it without the permission or knowledge of the user. Spyware may take
personal information, business information, bandwidth; or processing
capacity and secretly gives it to someone else.
"Trojan Horse" scheme unfolds when malicious software (malware)
embeds to a consumer's computer without the consumer being aware
of it. Trojans often come in links or as attachments from unknown
email senders. After installation the software detects when a person
accesses online banking sites and records the username and password
to transmit to the offender. People using public computers, in places
like Internet cafes, are often susceptible to Trojans like malware or
spyware.
Check sites URL: Always check the URL of your bank's web site.
Fraudsters can lure you to enter your user ID and password at a
fake website that resembles your bank. If you see anything other
than the bank's genuine URL, it has to be fake.

47

Never enter your user ID or password or such sensitive information

without ascertaining that you are on the right website. Always type the
Web address of your bank into the browser address space. Never click
on the link in the email.
Fool-proof password: Change your online banking password at
regular intervals. Also, avoid easy-to-guess passwords, like first
names, birthdays, kid's or spouse's name and telephone numbers.
Try to have an alpha-numeric password, one that combines
alphabets and numbers.
If you have several bank accounts, never use the same online banking
password for all. Never select the option on browser that stores or
retains user name and password. As it can easily be cracked by cyber
criminals. Also, never paste your password, always type it in. This
little amount of `finger exercise' will go a long way in safety.
Always check 'last logged': Most banks have a 'last logged in'
panel on their websites. If your bank has it, check the panel
whenever you log in. If you notice irregularities (like you are
logging in after two days, but the panel says you logged in that
morning!), report the matter immediately to your bank and change
your password right away.
Always log out when you exit the online banking portal. Close the
browser to ensure that your secure session is terminated. Never exit
simply by closing the browser.
Keep your system up to date:

Regularly check for security

updates for your computer operating system. Most security updates

48

are aimed at reducing risks to your computer, these may be datarelated or otherwise. Make sure that your operating system and
browser have the latest security patches installed. And, always
install these only from trusted websites.
Install a personal firewall to prevent hackers from gaining
unauthorised access to your computer, especially if you connect to the
Internet through a cable or a DSL modem.
Public access can be injurious: Don't leave the PC unattended
after keying in information while transacting on the website. Avoid
accessing your bank online at cyber cafes or on a share or public
computer. Also, avoid locations that offer online connections
through wireless networks (Wi-Fi), where privacy and security are
minimal.
Follow

Bank

instructions:

Banks

say

that

appropriate

upgradations are carried out from time to time by their IT

departments for risk mitigation. They issue instructions to the
customers to manage their accounts through virtual keyboards by
way of which the characters typed by them are not identified by
hackers. SMS alerts are also an important tool since any
transaction carried out on account is reported to the account holder
through an SMS.
Protection:

Learn the ways to protect yourself from online

banking fraud schemes. Detect Trojans that appear on your PC in

the form of viruses, spyware or malware through Antivirus
Software, anti Spyware, and Adware. Also, learn to keep your
49

cards, documents and passwords safe, and monitor your accounts

to safeguard yourself from bank fraud committed through identity
theft.

50

 CASE STUDIES:
1. Email password Hacking-

One day a lady came to cyber cell office and reported that she
and her brothers e-mail IDS had been hacked by someone she
suspected him to be her husband. The lady had already lodged a case
against him for dowry and was pending for trial in Bhopal court.
The suspect had hacked ladys and her brother e-mail ID account and
copied all the information to his e-mail and produced selected e-mails
to claim that . she was happy with him and case of dowry is a false
one .
To malign the image of her brother the suspect sent a copy of FIR
lodged against him at police station Habibganj. This indicated that the
husband of the lady was behind the whole affair but police had not
any evidence against him.

Cyber cell started enquiry by an order of IGP and obtained the login
logs from rediff.com .The logs indicated that the email IDs password
were changed and anonymous emails were sent from the house of
ladys

husband

and

sent

from

his.

Cyber cell registered a case under section 66 IT act and submitted

Challan has been filed against the suspect and trial is over.
51

Court has hold the conviction against the suspect Sabrish Pillai but
found that the matter came before the court as Sabrish was having
family dispute with his wife and the, act of hacking was not against
the society at large, Hence let him free after warning.

2. Internet Lottery Fraud :

MP Cyber police has investigated several case of cheating

through Internet lottery offer which is commonly known as Nigerian
419 scam. In this kind of cheating the culprits used to send bulk
emails, bulk SMS to millions of users using software, stating that the
receiver has won lottery worth thousands of pounds or dollars which
comes out to be crores of Indian rupees, in a lucky draw. They used to
create fake lottery winning certificate using logo and text from
original website, which seems to be original at a glance. This kind of
sending bulk emails or SMS is an act of commonly known as Phishing
attack. Those who are lured by such offer often tempted to contact
them. The culprits then ask the target to fill a form and thus receive all
the personal information of the target and asks him to deposit token
money in various names to earn the lottery prize. The target who is
hoping to earn huge amount of money finds these charges to be
minimal. The culprit asks the target to deposit money in the name
yellow tag, custom clearance UN anti terrorism certificate, RBI
charges or any other name they feel it to suitable to convince the
52

target. The culprits ask the target to deposit in various bank accounts
and once the money is deposited by the target it is withdrawn same
day by the suspect.
After losing lakhs of amount people come to know that they are being
cheated. In this kind of cheating the contact number are usually taken
in the fake names or in the other Indian guys name, account are being
opened in the fake names or acquired on the basis of commission by
fooling the account holders.
Mp cyber police has investigated the case of Internet lottery fraud and
arrested Nigerian national Godspower from Meharauli Delhi with the
suspected mobile used for communication, one laptop, printer and box
used for black dollar scam.
Mp cyber police has investigated the case of Internet lottery fraud
Crime no 07/09 420,468,34 IPC and crime no 05/10 420,468,34 AIPC
and arrested Nigerian national Idiiogbe Joseph from Mumbai with the
suspected mobile used for communication, laptop, fake Income tax
certificate and seals.
Apart from the above MPCP is investigating two more such cases in
which suspects are being monitored and efforts are being made to
arrest them.

ICICI BANK

53

ICICI bank (formerly known as Industrial Credit and Investment

Corporation of India) is the largest private sector bank in India. ICICI
is the first bank to introduce Internet banking in India.
ICICI bank offers various online banking services to its customers
under the name ICICI Net Banking. The ICICI net banking system
allows you to access your bank account any time of the day from the
privacy of your home or office. Moreover, you can transfer funds to
any bank account across India instantly using ICICI net banking
facility.

CHAPTER II - RESEARCH METHODOLOGY

Objectives of the study:
1) The main objective of this study was to understand the
growth of the online banking sector in India.
2) To study the opportunities for growth of online banking in
India, since India is a very fast developing country.
3) To study the challenges associated with the growth of online
banking.
4) To understand the scope and the infrastructure that is there in
India for its development.
54

 Limits of the study:

The study of this project is limited to 25 people of Mumbai who
have been questioned to understand the project well.

Methodology used:
A. PRIMARY DATA: Questionnaire distributed among people having bank accounts.
A sample questionnaire of 10 questions distributed to 25 people.
B. SECONDARY DATA : Internet
Reference books

CHAPTER III - DATA ANALYSIS

A survey was conducted on online banking in India for the
primary data among 25 people. The analysis of this survey or data is
as follows:Q. What kind of banking do you prefer?

55

14
12
10
8
6
4
2
0
Traditional

Online

Both

POLL out of 25: Traditional 5 ; Online 8 ; Both 12

FINDINGS: This shows us the preference of the people towards the

type of banking. They prefer to use the services of both the online and
traditional banking rather than a particular type.

Q. Do you think online banking is better than traditional

banking?

56

YES

NO

CAN'T SAY

POLL out of 25: Yes - 13; No - 5; Cant Say 7

FINDINGS: The people understand that online banking is better than
the traditional banking because of its nature. While a few of the
people are still not fully convinced.
Q. Do you feel you account is secured in online banking?

12
10
8
6
4
2
0
YES

NO

CANT SAY

Poll out of 25: Yes - 11; No - 7; Cant Say 7

57

FINDINGS: Majority of the people think that their Account is

secured, but not all. Their security concern should be eradicated. This
will attract customers.
Q. How frequently do you use banking services?
12
10
8
6
4
2
0
WEEKLY

MONTHLY REGULARLY

RARELY

POLL out of 25: Weekly - 5; Monthly - 11; Regularly - 2; Rarely 7

FINDINGS: Most of the people do not need the services of banks
regularly or maybe there is no need. They may transact with the bank
on monthly basis for most of the time.
Q. How happy are you with services of online banking provided
by your bank?

58

10
8
6
4
2
0
COMPLETELY

PARTIALLY

FAIRLY

NOT AT ALL

POLL out of 25: Completely - 4; Partially - 9; Fairly - 9; Not at all 3

FINDINGS: The satisfaction level of people with the online banking
services of their banks has a mixed review. This may be due to
multiple reasons.
Q. What type of transaction do you make in online banking?

POLL out of 25: Check balances - 11; Payments - 7; Transfer of fund

- 2; Other -5

59

FINDINGS: The utility of the online banking is service is not used to

the extent is should be and it is being majorly used for the purpose of
checking the balance in the account. The reason for this is the low
volume of transaction among the people.

CHAPTER IV
RECOMMENDATIONS & CONCLUSIONS

CONCLUSION:
People are not confident enough to whether to rely completely
on online banking. There is hesitancy in their minds with
regards to preference. So they use both the techniques of
banking i.e. Online and Traditional.
Because of the complexity and the unawareness in the people
regarding the online banking, there is less utilization of the
online banking services provided by the banks.

60

 People are not sure whether their account is completely secured

in online banking. Security concern is the main and the core
reason why people do not tend to use online banking.
People in India are not aware of the full utility of online
banking and the services that can be availed of in online
banking.
Most of the Indian population are salaries employees who do
not have that volume of transaction that can be used for online
transaction.

61

 RECOMMENDATION:
After analyzing the entire study on online banking with respect to
both the primary and the secondary data, the following
recommendations can be put forth: The infrastructure for the development is not being
implemented in way that could be beneficial.
There are various obstacles in the banking scenario with regards
to guidelines and issues for functioning. This has led to decline
in the usage of the online banking service of the banks.
The people having accounts can be urged to take up an internet
banking facility. They should be motivated rather than just
being told that there exists a service of online banking.
There are more people who are not actually aware of all the
benefits that they reap out of the transaction of online banking.
They should be proper awareness.
Most of the people o not count online banking due the problems
of security concerns. Proper security software should be
developed and people should be convinced that their accounts
are secured in online transactions.

62

CHAPTER V

BIBLIOGRAPHY
INTERNET:
http://www.onlinebanking.net/online-banking-services/
http://www.productivity501.com/choosing-onlinebank/244/
http://www.thewisdomjournal.com/Blog/pros-and-consof-online-banking/
http://www.onlinebanking.net/how-does-onlinebanking-work/
http://www.onlinebanking.net/future-of-online-banking/
http://www.onlinebanking.net/why-banks-encourageonline-banking/
http://en.wikipedia.org/wiki/Electronic_commerce

63

 http://www.indianmba.com/Faculty_Column/FC889/fc8
89.html
http://www.banknetindia.com/banking/ibkg.htm
http://www.sendmoneyindia.org/icici-net-banking.php
http://economictimes.indiatimes.com/opinion/moneybanking/e-banking-could-open-opportunities-forbanks/articleshow/4461581.cms
http://www.ehow.com/about_5147496_problemsrelated-net-banking-india.html
http://www.ehow.com/about_5340363_different-typesonline-banking.html
http://www.networkmagazineindia.com/200302/feature.
shtml
http://theonlinebankingblog.blogspot.com/2011/04/chal
lenges-of-online-banking-security.html
http://searchcio.techtarget.com/definition/e-commerce
http://searchdatacenter.techtarget.com/definition/IT

64

 http://nedogluka.com/internet-banking-global-way-forbanks-in-india.html
http://nedogluka.com/the-size-and-growth-of-thebanking-jobs-in-india.html
http://mpcyberpolice.nic.in/casestudies.htm#top
http://www.internetworldstats.com/asia/in.htm

REFERENCE BOOKS:
R.K. UPPAL
BANKING WITH TECHNOLOGY
NEW CENTURY PUBLICATIONS
NEW DELHI

APPENDIX

ONLINE BANKING IN INDIA (Survey)

Q.1 WHICH BANK DO YOU HAVE AN ACCOUNT?

65

(1 Private sector bank; 2 Public sector bank; 3 Other)

Q.2 WHAT KIND OF BANKING DO YOU PREFER?
(1 Traditional; 2 Online; 3 Both)
Q.3 DO YOU THINK ONLINE BANKING IS USEFUL?
(1 Yes; 2 No; 3 Cant say)
Q.4 HOW FREQUENTLY DO YOU USE BANKING SERVICES?
(1 Weekly; 2 Monthly; 3 Regularly; 4 Rarely)
Q.5 DO YOU THINK ONLINE BANKING IS BETTER THAN
TRADITIONAL BANKING?
(1 Yes; 2 No; 3 Cant Say)
Q.6 DO YOU FEEL ONLINE BANKING HAS A GROWTH POTENTIAL
IN INDIA?
(1 Yes; 2 No; 3 Cant Say)
Q.7 WHAT TYPE OF TRANSACTION DO YOU MAKE IN ONLINE
BANKING?
(1 Check balances; 2 Make payments; 3 Transfer funds; 4
Other)
Q.8 DO YOU FEEL YOUR ACCOUNT IS COMPLETELY SECURED IN
ONLINE BANKING?
(1 Yes; 2 No; 3 Cant Say)
Q.9 ARE YOU HAPPY WITH THE SERVICES OF ONLINE BANKING
PROVIDED BY YOUR BANK?
(1 Completely; 2 Partially; 3 Fairly; 4 Not at all)
66

Q.10 FOR ME ONLINE BANKING IS

NAME:
PHONE:
EMAIL ID:

67