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E-BANKING IN INDIA

INDEX
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Executive Summary

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K. C. College

Introduction To E-Banking
Adaptation of E-banking in India
Features of E-banking
Services through E-banking
Various forms of E-banking
Types of E-Banking
Advantages of E-Banking
Disadvantages of E-Banking
Risk involve in E-Banking
Components of E-Banking
Internet Banking in India
Disadvantages in Internet Banking
Guidelines by R.B.I regarding E-banking
Mobile Banking in India
Indian Experience in E-Banking
Challenges Faced & Role of R.B.I in
Computerization of Banks
Developments in E-banking
Case studies
Conclusion
Bibliography

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EXECUTIVE SUMMARY:
The developments taking place in information and communication technology are
increasing competition in financial institutions worldwide. Thus, the deployment of advanced
technologies is essential to achieve a competitive edge. Recently, the banking industry was
highly affected by the technological revolution that transformed the way banks deliver their
services, using technologies such as automated teller machines, phones, the Internet, credit
cards, and electronic cash. This project covers the introduction and diffusion of retail banking
and the development in electronic delivery channels and payment systems in its marketplace
which is termed as E-BANKING. Electronic banking is an umbrella term for the process by
which a customer may perform banking transactions electronically without visiting any
institution. The following terms all refer to one form or another of electronic banking: personal
computer (PC) banking, Internet banking, virtual banking, online banking, home banking, remote
electronic banking, and Phone Banking. PC banking and Internet or online banking is the most
frequently used designations. It should be noted, however, that the terms used to describe the
various types of electronic banking are often used interchangeably.

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INTRODUCTION:
E-banking nowadays is the one of the fastest developing trends in Indian banking and is poised to
take the banking sector a notch higher. No more falling in line in banks, no more waiting tons of
hours in the bank, no more days and weeks of waiting. All can be done with one card, one
gadget. Its easy, it works, and most importantly, people like it. But still, some people are having a
hard time using this kind of technology, mostly people who are used to do things the old
traditional way. With the use of advertising, people are now motivated to use E-banking because
again, it eliminates the hassle encountered when using the old process of banking. The
advancement of electronic banking or commonly known as e-banking, began with the use of
automatic teller machines (ATMs) and has included telephone banking, direct bill payment,
electronic fund transfer, online banking and other electronic transactions. For many people, they
believe that the e-banking will go to the direction of mobile banking. Also, some people believe
that online banking will be the most popular method in the future. In order for users/customers to
use their banks online services, they need to have a personal computer and an Internet
connection. Also, their personal computers will be their assistant who will assist them in their
transactions and services. Examples of those transactions are paying bills, attaining information
about accounts and loans, and etc.
E-Banking (an abbreviation for electronic banking) is an umbrella term for the process by which a
customer may perform banking transactions electronically without visiting a brick-and-mortar
institution. In simple terms, it does not involve any physical exchange of money, but its all done
electronically, from one account to another, using the internet. From a personal computer, one
can access bank account information, and perform many banking functions, like transferring
money, making a loan payment. Electronic banking, also known as electronic fund transfer (EFT),
uses computer and electronic technology as a substitute for checks and other paper transactions.
In simple words, the systems that enable financial institution customers, individuals or
businesses, to access accounts, transact business, or obtain information on financial products
and services through a public or private network, including the Internet i.e. PC, ATM, Online
banking, etc. It means any user with a personal computer and a browser can get connected to his
bank -s website to perform any of the virtual banking functions. In Internet banking system the
bank has a centralized database that is web-enabled. All the services that the bank has permitted
on the internet are displayed in menu. Any service can be selected and further interaction is
dictated by the nature of service.
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E-BANKING IN INDIA
The traditional branch model of bank is now giving place to an alternative delivery
channels with ATM network. Once the branch offices of bank are interconnected through
terrestrial or satellite links, there would be no physical identity for any branch. It would a
borderless entity permitting anytime, anywhere and anyhow banking.

DEFINITION OF E-BANKING:
E-banking is defined as the automated delivery of new and traditional banking products
and services directly to customers through electronic interactive communication channels. It
includes the systems that enable financial institution customers, individuals or businesses, to
access accounts, transact business, or obtain information on financial products and services
through a public or private network, including the Internet. Customers access e-banking
services using an intelligent electronic device, such as a PC, personal digital assistant, ATM,
Touch tone telephone. E-banking is the term that describes all transactions that take place
among companies, organizations, and individuals and their banking institutions.

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ADAPTATION OF E-BANKING IN INDIA:
The IT revolution had a great impact in the Indian banking system. The use of computers had
led to introduction of online banking in India. The use of the modern innovation and
computerization of the banking sector of India has increased many fold after the economic
liberalization of 1991 as the country's banking sector has been exposed to the world's market.
The Indian banks were finding it difficult to compete with the international banks in terms of the
customer service without the use of the information technology and computers.
The RBI in 1984 formed Committee on Mechanisation in the Banking Industry (1984) whose
chairman was Dr C Rangarajan, Deputy Governor, Reserve Bank of India. The major
recommendations of this committee were introducing MICR (Magnetic Ink Character
Recognition) Technology in all the banks in the metropolis in India. This provided use of
standardized cheque forms and encoders.
In 1988, the RBI set up Committee on Computerisation in Banks (1988) headed by Dr. C.R.
Rangarajan which emphasized that settlement operation must be computerized in the clearing
houses of RBI in Bhubaneshwar, Guwahati, Jaipur, Patna and Thiruvananthapuram.It further
stated that there should be National Clearing of inter-city cheques at Kolkata,Mumbai,Delhi,
Chennai and MICR should be made Operational. It also focused on computerisation of
branches and increasing connectivity among branches through computers. It also suggested
modalities for implementing on-line banking .The committee submitted its reports in 1989 and
computerisation began form 1993 with the settlement between IBA and bank employees'
association.
In 1994, Committee on Technology Issues relating to Payments System, Cheque Clearing and
Securities Settlement in the Banking Industry (1994 was set up with chairman Shri WS Saraf,
Executive Director, Reserve Bank of India. It emphasized on Electronic Funds Transfer (EFT)
system, with the BANKNET communications network as its carrier. It also said that MICR
clearing should be set up in all branches of all banks with more than 100 branches.
Committee for proposing Legislation On Electronic Funds Transfer and other Electronic
Payments (1995) emphasized on EFT system. Electronic banking refers to DOING BANKING
by using technologies like computers, internet and networking,MICR,EFT so as to increase
efficiency, quick service, productivity and transparency in the transaction.

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E-banking has certain features which give it edge over traditional banking.
Real time banking:
Unlike traditional banking which suffers from time consuming procedures, E-Banking provides
real time banking to the customers. You get all the relevant information about your account
instantly. You can access all the details about your account sitting at home or at any distant
location.
24/7 banking:
E-banking has removed the time constraint from banking. Now you can withdraw cash or get
any banking facility anytime.
Banking from anywhere:
Dont worry if you are sitting in Middle East country and want to check

your account in New

York. E-Banking certainly leaves no room for blaming the distances. Smart banking is ready to
serve you anywhere, anytime.
Safe and secure Banking:
Electronic- banking is more immune to security and safety related problems. Password Based
Encryption (PBE), Secure Socket Layer (SSL), electronic signatures and electronic tokens gives
a high level of security. Any malfunctioning or any inconsistency in your account can be traced
easily. This makes E-Banking more reliable.
Easy Loans, Instant Loans:
Use of smart cards, debit cards, credit cards has eased you from hatred, time consuming
loaning procedures. Your banks provide you instant loans. No need to keep cash with you at all,
a small chip card has replaced piles of cash. Certain web sites provide facility of online
loaning .You can get instant loan there, just by filling a small form.
High Performance and flexibility:
E-Banking is a high performance system satisfying its customers for their every banking related
queries and desires. What makes it more interesting is its flexibility. Banking is using everyday
advancements in technology, which makes it smart and banking system of today and tomorrow.
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SERVICES THROUGH E-BANKING:
Bill payment service:
Customers can facilitate payment of electricity and telephone bills, mobile phone, credit card
and insurance premium bills as each bank has tie-ups with various utility companies, service
providers and insurance companies, across the country. To pay the bills, all one need to do is
complete a simple one-time registration for each biller. Customers can also set up standing
instructions online to pay their recurring bills, automatically. Generally, the bank does not charge
customers for online bill payment.
Fund transfer:
Customers can transfer any amount from one account to another of the same or any another
bank. Customers can send money anywhere in India. After login to the account, customers need
to mention the payees account number, his bank and the branch. The transfer will take place in
a day or so, whereas in a traditional method, it takes about three working days. ICICI Bank says
that online bill payment service and fund transfer facility have been their most popular online
services.
Investing through Internet banking:
You can now open an FD online through funds transfer. Now investors with interlinked demat
account and bank account can easily trade in the stock market and the amount will be
automatically debited from their respective bank accounts and the shares will be credited in their
demat account. Moreover, some banks even give you the facility to purchase mutual
funds directly from the online banking system. Nowadays, most leading banks offer both online
banking and demat account. However if you have your demat account with independent share
brokers, then you need to sign a special form, this will link your two accounts.

Recharging your prepaid phone:


Now customers can just top-up the prepaid mobile cards by logging in to Internet banking. By
just selecting the operator's name, entering the mobile number and the amount for recharge, the
phone is again back in action within few minutes.

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Shopping;
With a range of all kind of products, customer can shop online and the payment is also
made conveniently through the account. Customer can also buy railway and air tickets through
Internet banking.
Railway pass:
This is something that would interest all the aam janta. Indian Railways has tied up with ICICI
bank and they can now make railway passes for local trains online. The pass will be delivered to
the customers doorstep. But the facility is limited to Mumbai, Thane, Nashik, Surat and Pune.
Credit card customers:
With Internet banking, customers can not only pay their credit card bills online but also get a
loan on their cards. If the customer lose credit card, they can also report lost card online.

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VARIOUS FORMS OF E-BANKING:
AUTOMATED TELLER MACHINES (ATM):
An unattended electronic machine in a public place, connected to a data system and related
equipment and activated by a bank customer to obtain cash withdrawals and other banking
services is called as automatic teller machine, cash machine or called money machine. An
automated teller machine (ATM) is an electronic computerized telecommunications device that
allows a financial institution's customers to directly use a secure method of communication to
access their bank accounts, in order to make cash withdrawals (or cash advances using a credit
card) and check their account balances without the need for a human bank teller . Many ATMs
also allow people to deposit cash or cheques, transfer money between their bank accounts, top
up their mobile phones' pre-paid accounts or even buy stamps. On most modern ATMs, the
customer identifies him or herself by inserting a plastic card with a magnetic stripe or a plastic
smartcard with a chip that contains his or her account number. The customer then verifies their
identity by entering a pass code, often referred to as a PIN (Personal Identification Number) of
four or more digits. Upon successful entry of the PIN, the customer may perform a transaction.
If the number is entered incorrectly several times in a row (usually three attempts per card
insertion), some ATMs will attempt retain the card as a security precaution to prevent an
unauthorized user from discovering the PIN by guesswork. Captured cards are often destroyed
if the ATM owner is not the card issuing bank, as non-customer's identities cannot be reliably
confirmed.
The Indian market today has approximately more than 45, 000 ATMs.

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TELE BANKING:
Undertaking a host of banking related services including financial transactions from the
convenience of customers chosen place anywhere across the globe and any time of day and
night has now been made possible by introducing on-line Telebanking services. By dialing the
given Telebanking number through a landline or a mobile from anywhere, the customer can
access his account and by following the user-friendly menu, entire banking can be done
through Interactive Voice Response (IVR) system. With sufficient numbers of hunting lines
made available, customer call will hardly fail. The system is bi-lingual and has following facilities
offered:
1. Automatic balance voice out for the default account.
2. Balance inquiry and transaction inquiry
3. Inquiry of all term deposit accounts
4. Statement of account by Fax, e-mail or ordinary mail
5. Cheque book request
6. Stop payment which is on-line and instantaneous
7. Utility Bill Payments
8. Renewal of term deposit which is automatic
And instantaneous
9. Voice out of last five transactions.

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SMART CARD:
A smart card usually contains an embedded 8-bit microprocessor (a kind of computer chip). The
microprocessor is under a contact pad on one side of the card. Think of the microprocessor as
replacing the usual magnetic stripe present on a credit card or debit card. The microprocessor
on the smart card is there for security. The host computer and card reader actually "talk" to the
microprocessor. The microprocessor enforces access to the data on the card. The chips in
these cards are capable of many kinds of transactions. For example, a person could make
purchases from their credit account, debit account or from a stored account value that's reload
able. The enhanced memory and processing capacity of the smart card is many times that of
traditional magnetic-stripe cards and can accommodate several different applications on a
single card. It can also hold identification information, which means no more shuffling through
cards in the wallet to find the right one, the Smart Card will be the only one needed.
Smart cards can also be used with a smart card reader attachment to a personal computer to
authenticate a user.
Smart cards are much more popular in Europe than in the U.S. In Europe the health insurance
and banking industries use smart cards extensively. Every German citizen has a smart card for
health insurance. Even though smart cards have been around in their modern form for at least a
decade, they are just starting to take off in the U.S. In India they are not popular now.
DEBIT CARD:
Debit cards are also known as check cards. Debit cards look like credit cards or ATM
(automated teller machine) cards, but operate like cash or a personal check. Debit cards are
different from credit cards. While a credit card is a way to "pay later," a debit card is a way to
"pay now." When you use a debit card, your money is quickly deducted from your checking or
savings account. Debit cards are accepted at many locations, including grocery stores, retail
stores, gasoline stations, and restaurants. You can use your card anywhere merchants display
your card's brand name or logo. They offer an alternative to carrying a checkbook or cash.
In India debit card services are provided by almost all the banks. Debit card service is one of
the most fast growing services in India.

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CREDIT CARDS:
The credit card is usually a four-party card which involves two banks in each transaction, the
cardholder's bank (the issuer of the card) and the retailer's bank. The retailer hands over the
credit card slips to its own bank for payment, less a discount, typically about 2-3%. The
retailer's bank then passes the slips on to a clearing system. The clearing system presents
each slip for payment to the bank that issued the card on which it was written. The issuing bank
collects from the cardholder. All of these exchanges are now done by wire.
E-CHEQUE:
An E-Cheque is the electronic version or representation of paper cheque.
The Information and Legal Framework on the E-Cheque is the same as that of the paper
cheque.

It can now be used in place of paper cheques to do any and all remote transactions.

An E-cheque work the same way a cheque does, the cheque writer "writes" the eCheque using one of many types of electronic devices and "gives" the e-Cheque to the
payee electronically. The payee "deposits" the Electronic Cheque receives credit, and
the payee's bank "clears" the e-Cheque to the paying bank. The paying bank validates
the e-Cheque and then "charges" the check writer's account for the check.

Mobile Banking:
Mobile banking comes in as a part of the banks initiative to offer multiple channels banking
providing convenience for its customer. A versatile multifunctional, free service that is accessible
and viewable on the monitor of mobile phone. Mobile phones are playing great role in Indian
banking- both directly and indirectly. They are being used both as banking and other channels.

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Inter Bank Transfer:
Inter Bank Transfer is a special service that allows you to transfer funds electronically to
accounts in other banks in India through:
NEFT
The acronym NEFT stands for National Electronic Funds Transfer.

Funds are transferred to

the credit account with the other participating Bank using RBI's NEFT service. RBI acts as the
service provider and transfers the credit to the other bank's account.
RTGS
The acronym RTGS stands for Real Time Gross Settlement. The RTGS system facilitates
transfer of funds from accounts in one bank to another on a real time and on gross
settlement basis. The RTGS system is the fastest possible interbank money transfer facility
available through secure banking channels in India. In other words, this is an electronic payment
processing environment wherein transactions are settled as soon as they are processed.
EFT
Electronic Fund Transfer is the new facility provided to the Exporters for submitting the license
fee through the Internet without visiting the Bank for the payment. This procedure is being
proposed to facilitate payments through electronic means. The facility shall be available only for
electronically filed applications. Currently Electronic payment can be made through following
banks: ICICI, IDBI, HDFC, UTI, State Bank of India, Bank of India, Punjab National Bank, and
Union Bank of India.

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INTERNET BANKING:
It helps you handle many banking transactions via your personal computer. For instance, you
may use your computer to view your account balance, request transfers between accounts, and
pay bills electronically. Internet banking system is a 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 without need for intervention by
customer service representatives. The system is capable of distinguishing between those
customer service requests which are capable of automated fulfilment and those requests which
require handling by a customer service representative. The system is integrated with the host
computer system of the bank so that the remote banking customer can access other automated
services of the bank. The method of the intervention includes the steps of inputting a customer
banking request from among a menu of banking requests at a remote personnel computer,
transmitting the banking requests to a host computer and receiving it, identifying the type of
customer banking request received, automatic logging of the service request, comparing the
received request to a stored table of request types, each of the request types having an
attribute to indicate whether the request type is capable of being fulfilled by a customer service
representative or by an automated system and depending upon the attribute, directing the
request either for handling by a customer service representative or to a queue for processing by
an automated system.
Facilities through Internet banking

Online applications

Consumers can begin their banking relationship with an online application. No need to waste time
driving to a local branch to begin a banking relationship. Consumers can fill out and submit
electronically all necessary information needed to open a checking, savings account or even a
fixed deposit. When the application is submitted, the bank will mail a signature card for its records
and request one to mail or wire your initial funds. Some firms like American Express enable
customers applying for an account to fund their new account electronically via a credit card or
cheque from another banking institution. There are some firms such as Wingspan and USA
BancShares.com that enable customers to digitally sign their applications.

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Account Access

Internet banking customers now have the ability to view their accounts online, including checking,
savings, loans and credit cards. No need to wait for your monthly statements or wait in queue for
the next available customer service representative. Account access enables customers to view
most recent activity on accounts, including cleared checks, deposits, ATM transactions and
balances as of previous days activities. Customers no longer have to hold on to the cleared
checks, since their bank will store them for them online.

24/7 customer service

Although it is easy to yield to the temptation of allowing the Internet to replace expensive branch
personnel and overhead, many banks have found that an customer service staff ready at any
hour is well worth the expense. This can be especially true as customers transition to online
banking and need help learning the features. Offering telephone and email a contact is a basic
level of service. Offering live chat assistance is the exceptional level.

Access to old transactions

Choices made in designing the Internet interface may include how much history will be available
online. Some banks have chosen to show only 30-45 days, while others offer a history of six
months or a year.

Categorize transactions and produce reports

Functionality is king as online banking customers using these features enjoy a Web interface that
delivers the utility of a money management software application.

Export your banking data

Most banks offering the management interface also allow easy downloading of financial
information into files that can be imported into Microsoft Money and Intuit's Quicken.

Interactive guides & tools to help selection of proper product

Although online, interactive guides through a bank's products, adds complexity to the
programming it also serves the bank by assisting potential customers in choosing new products
or services. Interactive Tools to design a savings plan, choose a mortgage, obtain online
insurance quotes all tied to applications These tools help remove some of the mystery involved in
so many account options and costs.

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Loan status and credit card account information

Bank customers are familiar with reviewing their checking account information, but many banks
are adding the ability to look at one's loan status and credit card information as well. Access to as
many accounts held at the bank seems to be the goal.

View digital copies of checks

This, again, is removing a down side to online banking. It makes images of checks available as
replacement for sending out cancelled checks or sheets of printed check images.

Online forms for ordering checks, stop payment, etc.

Convenience is popular and if a customer visits his or her online account frequently it only makes
sense to allow the ability to reorder checks or perform certain other commands through the same
interface.
Internet Banking verses Traditional Banking:
In spite of so many facilities that Internet banking offers us, we still seem to trust our traditional
method of banking and is reluctant to use online banking. But here are few cases where Internet
banking will turn out to be a better option in terms of saving the money. Stop payment' done
through Internet banking will not cost any extra fees but when done through the branch, the bank
may charge you Rs 50 per cheque plus the service tax.
Through Internet banking, customers can check the transactions at any time of the day, and as
many times as they want to. On the other hand, in a traditional method, one get quarterly
statements from the bank and if they request for a statement at the required time, it may turn out
to be an expensive affair. The branch may charge Rs 25 per page, which includes only 30
transactions. Moreover, the bank branch would take eight days to deliver it at the doorstep.
If the fund transfer has to be made outstation, where the bank does not have a branch, the bank
would demand outstation charges. Whereas with the help of online banking, it will be absolutely
free for you. As per the Internet and Mobile Association of India's report on online banking 2006,
"There are many advantages of online banking. It is convenient, it isn't bound by operational
timings, there are no geographical barriers and the services can be offered at a miniscule cost."

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TYPES OF E-BANKING:
InformationalThis is the basic level of Internet banking. Typically, the bank has marketing
information about the banks products and services on a stand-alone server. The risk is relatively
low, as informational systems typically have no path between the server and the banks internal
network. This level of Internet banking can be provided by the banks or outsourced. While the risk
to a bank is relatively low, the server or web site may be vulnerable to alteration. Appropriate
controls therefore must be in place to prevent unauthorized alterations to the banks server or
web site.
CommunicativeThis type of Internet banking systems and the customer. The interaction
between the banks system and the customer. The interaction maybe limited to electronic mail,
account enquiry, loan applications, or static file updates (name and address change). Because
these servers may have a path to the banks internal networks, the risk is higher with this
configuration than with informational systems. Appropriate controls need to be in the place to
prevent, monitor, and alert management of any unauthorized attempt to access the banks
internal networks and computer systems. Virus controls also become much more critical in this
environment.
TransactionalThis level of Internet banking allows customers to execute transactions. Since a
path typically exists between the server and the bank or outsourcers internal network, this is the
highest risk architecture and must have the strongest controls. Customer transactions can include
accessing accounts, paying bills, transferring funds etc.

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ADVANTAGES OF E-BANKING:
Benefits to Consumers:
General consumers have been significantly affected in a positive manner by E-banking. Many of
the ordinary tasks have now been fully automated resulting in greater ease and comfort.
Customers account is extremely accesses able with an online account.
Customer can withdraw can at any time through ATMs that are now widely available
throughout the country.
Besides withdrawing cash customers can also have mini banks statements, balance inquiry at
these ATMs
Through Internet Banking customer can operate his account while sitting in his office or home.
There is no need to go to the bank in person for such matter.
E banking has also greatly helped in payment of utility bill. Now there is no need to stand in
long queues outside banks for his purpose.
All services that are usually available from the local bank can be found on a single website.
The Growth of credit card usage also owes greatly to E-banking. Now a customer can shop
worldwide without any need of carrying paper money with him.
Banks are available 24 hours a day; seven days a week and they are only a mouse click away.
Benefits to Banking Industry:
Banking industry has also received numerous benefits due to growth of E-Banking
infrastructure. There are highlighted below:
The growth of E-banking has greatly helped the banks in controlling their overheads and
operating cost
Many repetitive and tedious tasks have now been fully automated resulting in greater
efficiency, better time usage and enhanced control.
The rise of E-banking has made banks more competitive. It has also led to expansion of the
banking industry, opening of new avenues for banking operations.
Electronic banking has greatly helped the banking industry to reduce paper work, thus helping
them to move the paper less environment.
Electronic banking has also helped bank in proper documentation of their records and
transactions.

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The reach and delivery capabilities of computer networks, such as the Internet, are far better
than any branch network.
Benefits to General Economy:
Electronic Banking as already stated has greatly serviced both the general public and the
banking industry. This has resulted in creation of a better enabling environment that supports
growth, productivity and prosperity. Besides many tangible benefit in form of reduction if cost,
reduced delivery time, increased efficiency, reduced wastage, e-banking electronically controlled
and thoroughly monitored environment discourage many illegal and illegitimate practices
associated with banking industry like money laundering, frauds and embezzlements. Further Ebanking has helped banks in better monitoring of their customer base. This it is a useful tool in
the hand of the bank to device suitable commercial packages that are in conformity with
customer needs. As e banking provide opportunity to banking sector to enlarge their customer
base, a consequence to increase the of volume of credit creation which results in better
economic condition, Besides all this E-banking has also helped in documentation of the
economic activity of the masses.

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DISADVANTAGES/ISSUES RELATED TO E-BANKING:


Electronic banking is convenient and often quite safe, but problems do exist. Electronic
banking is a popular form of banking since the Internet became widespread. Electronic
banking occurs at the individual, commercial and investment levels. While fraud prevention
measures are taken very seriously at banking institutions, there are still some issues in
electronic banking that cause unrest and frustration.
Transaction Errors
Transaction errors can occur in your checking, savings, or credit card accounts. These
transaction problems can be caused by human error, but they're often as a result of technical
glitches or lost information. Consumers have 60 days to contact their financial institution and
notify them of the error. The company then has 30 days to respond to your enquiry and another
60 days to resolve and correct the issue. They do reserve the right to ask for supporting
documentation to agree with the inaccuracy of the issue.
Automatic Debits
Automatic debits are offered as convenience to banking and loan customers. These debits are
automatically withdrawn from your bank and paid to the vendor or lender. While this
convenience does save a stamp and a hassle, it can make mistakes. Customers often need to
request a halting of this process in writing at least seven days in advance. In addition, if you use
an automatic debit to pay for a recurring service and the service suddenly is unsatisfactory, you
must work out a refund with the service provider, not your bank.
Privacy Concerns
Sometimes electronic banking customers find themselves on marketing lists for other financial
institutions. This can lead to unsolicited offers on mortgages, loans, credit cards, auto loans and
investment products. Most electronic banks now have privacy agreements that allow customers
to opt in or out of unsolicited offers.

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TYPES OF RISK INVOLVED IN E-BANKING:
TRANSACTION/OPERATIONS RISK
It arises from fraud, processing errors, system disruptions, or other unanticipated events
resulting in the institutions inability to deliver products or services. The level of transaction risk
is affected by the structure of the institutions processing environment, including the types of
services offered and the complexity of the processes and supporting technology.
In most instances, e-banking activities will increase the complexity of the institutions
activities and the quantity of its transaction/operations risk, especially if the institution is offering
innovative services that have not been standardized. Since customers expect e-banking
services to be available 24 hours a day, financial institutions should ensure their e-banking
infrastructures contain sufficient capacity to ensure reliable service availability. Even institutions
that do not consider e-banking a critical financial service due to the availability of alternate
processing channels, should carefully consider customer expectations and the potential impact
of service disruptions on customer satisfaction and loyalty. The key to controlling transaction risk
lies in adapting effective policies, procedures, and controls to meet the new risk exposures
introduced by e-banking. Information security controls, in particular, become more significant
requiring additional processes, tools, expertise, and testing. Institutions should determine the
appropriate level of security controls based on the assessment.
CREDIT RISK
Generally, a financial institutions credit risk is not increased by the mere fact that a loan is
originated through an e-banking channel. However, management should consider additional
precautions when originating and approving loans electronically, including assured management
information systems and effectively track the performance of portfolios originated through ebanking channels. The following aspects of on-line loan origination and approval tend to make
risk management of the lending process more challenging. If not properly managed, these
aspects can significantly increase credit risk.
Verifying the customers identity for on-line credit applications and executing an enforceable
contract

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Monitoring and controlling the growth, pricing, underwriting standards, and ongoing credit
quality of loans originated through e-banking channels
Monitoring and oversight of third-parties doing business as agents or on behalf of the
financial institution (for example, an Internet loan origination site or electronic payments
processor)
Valuing collateral and perfecting liens over a potentially wider geographic area

Collecting loans from individuals over a potentially wider geographic area

Monitoring any increased volume of, and possible concentration in, out-of-area lending.

LIQUIDITY, INTEREST RATE, PRICE/MARKET RISKS


Funding and investment-related risks could increase with an institutions e-banking
initiatives depending on the volatility and pricing of the acquired deposits. The Internet provides
institutions with the ability to market their products and services globally. Internet-based
advertising programs can effectively match towards yield-focused investors with potentially highyielding deposits. But Internet-originated deposits have the potential to attract customers who
focus exclusively on rates and may provide a funding source with risk characteristics similar to
brokered deposits. An institution can control this potential volatility and expanded geographic
reach through its deposit contract and account opening practices, which might involve face-toface meetings or the exchange of paper correspondence. The institution should modify its
policies as necessary to address the following e-banking funding issues:

Potential increase in dependence on brokered funds or other highly rate-sensitive deposits


Potential acquisition of funds from markets where the institution is not licensed to engage in
banking, particularly if the institution does not establish, disclose, and enforce geographic
restrictions
Potential impact of loan or deposit growth from an expanded Internet market, including the
impact of such growth on capital ratios and
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Potential increase in volatility of funds in e-banking security problems

COMPLIANCE/LEGAL RISK
Compliance and legal issues arise out of the rapid growth in usage of e-banking and the
differences between electronic and paper-based processes. E-banking is a new delivery
channel where the laws and rules governing the electronic delivery of certain financial institution
products or services may be ambiguous or still evolving. Specific regulatory and legal
challenges include:
Uncertainty over legal jurisdictions and which states or countrys laws govern a specific ebanking transaction,
Delivery of credit and deposit-related disclosures/notices as required by law or regulation,
Retention of required compliance documentation for on-line advertising, applications,
statements, disclosures and notices and
Establishment of legally binding electronic agreements.
Laws and regulations governing consumer transactions require specific types of disclosures,
notices, or record keeping requirements. These requirements also apply to e-banking, and
federal banking agencies continue to update consumer laws and regulations to reflect the
impact of e-banking and on-line customer relationships. Some of the legal requirements and
regulatory guidance that frequently apply to e-banking products and services include:
Solicitation, collection and reporting of government monitoring information on
applications and loans, as required by Equal Credit Opportunity Act and Home Mortgage
Disclosure Act.
Advertising requirements, customer disclosures, or notices required by the Real Estate
Settlement Procedures Act (RESPA), Truth in Lending, Truth In Savings and Fair
Housing regulations.

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Proper and conspicuous display of FDIC or NCUA insurance notices
Conspicuous webpage disclosures indicating that certain types of investment, brokerage,
and insurance products offered have certain associated risks, and they are not insured
by federal deposit insurance.
Customer identification programs, as well as record retention and customer notification
requirements, required by the Bank Secrecy Act
Customer identification processes to determine whether transactions are prohibited by
the Office of Foreign Asset Control (OFAC) and, when necessary, whether customers
appear on any list of known or suspected terrorists or terrorist organization provided by
any government agency
Delivery of privacy and opt-out notices by hand, by mail, or with customer
acknowledgement of electronic receipt and record retention requirements of the Equal
Credit Opportunity Act and Fair Credit Reporting Act .
Institutions that offer e-banking services, both informational and transactional, assume a
higher level of compliance risk because of the changing nature of the technology, the speed
at which errors can be replicated, and the frequency of regulatory changes to address ebanking issues.
STRATEGIC
A financial institutions board and management should understand the risks associated with
e-banking services and evaluate risk management costs against the return on investment
prior to offering e-banking services. Poor e-banking planning and investment decisions can
increase a financial institutions strategic risk. Early adopters of new e-banking services can
establish themselves as innovators who anticipate the needs of their customers, but may do
so by incurring higher costs and increased complexity in operations. Late adopters may be
able to avoid the higher expense and added complexity, but do so at the risk of not meeting
customer demand for additional products and services. In managing the strategic risk
associated with e-banking services, financial institutions should develop defined e-banking
objectives and should pay attention to the following:

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Adequacy of management information systems to track e-banking usage and profitability
Costs involved in monitoring e-banking activities or costs involved in overseeing ebanking vendors and technology service providers
Delivery and pricing of services adequate to generate sufficient demand
Retention of electronic loan agreements and other electronic contracts in a format that
will be admissible and enforceable in litigation
Availability of staff to provide technical support for interchange involving multiple
operating systems, web browsers, and communication devices
Competition from other e-banking providers and adequacy of technical, operational, or
marketing support for e-banking products and services.
REPUTATION RISK
An institutions decision to offer e-banking services, especially the more complex
transactional services, significantly increases its level of reputation risk. Some of the
ways in which e-banking can influence an institutions reputation include:

Loss of trust due to unauthorized activity on customer accounts,


Disclosure or theft of confidential customer information to unauthorized parties (e.g.,
hackers),
Failure to deliver on marketing claims
Failure to provide reliable service due to the frequency or duration of service
disruptions
Customer complaints about the difficulty in using e-banking services and the inability
of the institutions help desk to resolve problems, and

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Confusion between services provided by the financial institution and services
provided by other businesses linked from the website.

COMPONENTS OF E-BANKING:
Financial institutions may choose to support their e-banking services internally. Alternatively,
financial institutions can outsource any aspect of their e-banking systems to third parties.
The following entities could provide or host (i.e., allow applications to reside on their servers)
e-banking-related services for financial institutions:
Another financial institution
Internet service provider
Internet banking software vendor or processor
Core banking vendor or processor
Managed security service provider
Bill payment provider
Credit bureau
Credit scoring company
Through a combination of internal and outsourced solutions, management has many
alternatives when determining the overall system configuration for the various components
of an e-banking system. However, for the sake of simplicity, it presents only basic variations.
One or more technology service providers can host the e-banking application and numerous
network components .While the institution does not have to manage the daily administration
of these component systems, its management and board remain responsible for the
content, performance, and security of the e-banking system.
E-banking systems rely on a number of common components or processes. The following
list includes many of the potential components and processes seen in a typical institution:

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Website design and hosting

Firewall configuration and management

Intrusion detection system or IDS (network and host-based)

Network administration

Security management

Internet banking server

E-commerce applications (e.g., bill payment, lending, brokerage)

Internal network servers

Core processing system

Programming support

Automated decision support systems

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INTERNET BANKING IN INDIA
The Reserve Bank of India constituted a working group on Internet Banking. The group divided
the Internet banking products in India into three types based on the levels of access granted.
They are:
Information Only System:
General purpose information like interest rates, branch location, bank products and their
features, loan and deposit calculations are provided in the banks website. There exist facilities
for downloading various types of application forms. The communication is normally done
through e-mail. There is no interaction between the customer and bank's application system. No
identification of the customer is done. In this system, there is no possibility of any unauthorized
person getting into production systems of the bank through internet.
Electronic Information Transfer System:
The system provides customer- specific information in the form of account balances, transaction
details, and statement of accounts. The information is still largely of the 'read only' format.
Identification and authentication of the customer is through password. The information is fetched
from the bank's application system either in batch mode or off-line. The application systems
cannot directly access through the internet.
Fully Electronic Transactional System:
This system allows bi-directional capabilities. Transactions can be submitted by the customer for
online update. This system requires high degree of security and control. In this environment, web
server and application systems are linked over secure infrastructure. It comprises technology
covering computerization, networking and security, inter-bank payment gateway and legal
infrastructure.

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DISADVANTAGES OF INTERNET BANKING
Start-up may take timeIn order to register for your banks online program, customer will probably have to provide ID and
sign a form at a bank branch. If customers and their spouse wish to view and manage their
assets together online, one of them may have to sign a durable power of attorney before the bank
will display all of their holdings together.
Learning curvesBanking 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.
Bank site changesEven the largest banks periodically upgrade their online programs, adding new features in
unfamiliar places. In some cases, customers may have to re-enter account information.

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GUIDLINES BY RBI FOR BANKS REGARDING E-BANKING:

All banks, who propose to offer transactional services on the Internet, should obtain prior
approval from RBI.

All applications of banks should have proper record keeping facilities for legal purposes.

Banks should designate a network and database administrator with clearly defined roles as
indicated in the Groups report.

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, and smart cards.

Banks should have proper infrastructure and schedules for backing up data. The backed-up
data should be periodically tested.

All applications of banks should have proper record keeping facilities for legal purposes.

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.

Banks should acquire tools for 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.

Banks should have a security policy duly approved by the Board of Directors.

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.

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MOBILE BANKING IN INDIA
The Reserve Bank of India (RBI) deputy governor H R Khan has hinted that mobile banking has
failed take-off in India and hence has called upon banks and mobile companies to work together
for the benefit of their customers. At a seminar in Bhubaneswar, Khan said that the growth rate
in the value and the volume of mobile based transaction is much lower compared to the number
of bank accounts and number of mobile subscribers.
Mobile banking transactions are transactions where customers undertake banking transactions
using mobile phones involving credit or debit to their accounts.
This, he said, indicates that those banks are yet to fully exploit this technology even for their
existing customers. In May 2012, close to 3.34 mn transactions were concluded for Rs 2.86 bn
through mobile as against Rs 1.28 mn transactions of Rs 0.91 bn in May 2011. "This growth rate
is low compared to the number of bank accounts and the vast mobile subscriber base of more
than 900 mn," said Khan.

He said that Reserve Bank has provided the policy framework for a collaborative relationship
between the banks and mobile network operators but 'the results of this collaboration are not yet
fully visible.' He said that some of the reasons which have been flagged relates to ownership of
the customer, control of transactions and developing an appropriate revenue sharing model.
"The need of the hour, therefore, is that the banks and the mobile operators reach a workable
understanding while protecting their mutual interests. Such an approach would result in a "winwin" situation for both and, more importantly, serve the larger cause of public good of financial
inclusion," he said.

With rapid growth mobile phone subscribers banks have sought collaboration with telecom
operators to develop an alternate channel of delivery of banking services. The RBI allowed
bank-led mobile banking model considering the diversity of network providers in India,
remittance centric approach of such model and KYC related concerns. As on May 31, 2012, RBI
had permitted 69 banks to provide mobile banking services to their customers.
The Reserve Bank of India has removed the ceiling of Rs 50,000 per customer per day limit on
mobile banking. Henceforth banks are now free to place per transaction limits based on their
own risk perception with the approval of its Board.

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THE INDIAN EXPERIENCE OF E-BANKING:
India is still in the early stages of E-banking growth and development. Competition and changes
in technology and lifestyle in the last five years have changed the face of banking. The changes
that have taken place impose on banks tough standards of competition and compliance. The
issue here is 'Where does India stand in the scheme of E-banking.' E-banking is likely to bring
a host of opportunities as well as unprecedented risks to the fundamental nature of banking in
India.
The impact of E- Banking in India is not yet apparent. Many global research companies believe
that E-banking adoption in India in the near future would be slow compared to other major Asian
countries. Indian E-banking is still nascent, although it is fast becoming a strategic necessity for
most commercial banks, as competition increases from private banks and non banking financial
institutions.
Despite the global economic challenges facing the IT software and services sector, the outlook
for the Indian industry remains optimistic.
The Reserve Bank of India has also set up a "Working Group on E-banking to examine different
aspects of E-banking. The group focused on three major areas of E-banking i.e. (1) Technology
and Security issues (2) Legal issues and (3) Regulatory and Supervisory issues. RBI has
accepted the guidelines of the group and they provide a good insight into the security
requirements of E-banking.
The importance of the impact of technology and information security cannot be doubted.
Technological developments have been one of the key drivers of the global economy and
represent an instrument that if exploited well can boost the efficiency and competitively of the
banking sector. However, the rapid growth of the Internet has introduced a completely new level
of security related problems. The problem here is that since the Internet is not a regulated
technology and it is readily accessible to millions of people, there will always be people who
want to use it to make illicit gains. The security issue can be addressed at three levels. The first
is the security of customer information as it is sent from the customer's PC to the Web server.
The second is the security of the environment in which the Internet banking server and
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customer information database reside. Third, security measures must be in place to prevent
unauthorized users from attempting to long into the online banking section of the website.
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..
Regarding the regulatory and supervisory issues, only such banks which are licensed and
supervised and have a physical presence in India will be permitted to offer E-banking products
to residents of India. With institutions becoming more and more global and complex, the nature
of risks in the international financial system has changed. The Regulators themselves who will
now be paying much more attention to the qualitative aspects of risk management have
recognized this.
Though the Indian Government has announced cyber laws, most corporate are not clear about
them, and feel they are insufficient for the growth of E-commerce. Lack of consumer protection
laws is another issue that needs to be tackled, if people have to feel more comfortable about
transacting online.
Taxation of E-commerce transaction has been one of the most debated issues that are yet to be
resolved by India and most other countries. The explosive growth of e-commerce has led many
executives to question how their companies can properly administer taxes on Internet sales.
Without sales tax, online sellers get a price advantage over brick and mortar companies. While
e-commerce has been causing loss of tax revenues to the Government, many politicians
continue to insist that the Net must remain tax-free to ensure continued growth, and that
collecting sales taxes on Net commerce could restrict its expansion.
A permanent ban on custom duties on electronic transmissions, international tax rules that are
neutral, simple and certain and simplification of state and local sales taxes. The Central Board
of Direct Taxes, which submitted its report in September 2001, recommended that e-commerce
transaction should be taxed just like traditional commerce.
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Also RBI is about to become the first Government owned digital signature certifying Authority in
India. The move is expected to initiate the electronic transaction process in the banking sector
and will have far reaching results in terms of cost and speed of transactions between
government- owned banks.
Thus efficiency, growth and the need to satisfy a growing tech-survey consumer base are three
clear rationales for implementing E-banking in India. The four forces-customers, technology,
convergence and globalization have the most important effect on the Indian financial sector and
these changes are forcing banks to redefine their business models and integrate technology
into all aspect of operation.

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CHALLENGES FACED IN COMPUTERIZATION:
Computerization is expensive and needs huge investment in hardware and software and
subsequent maintenance. The National Stock Exchange, India's No.1 user in computerised
service has spent Rs.180 Crores to enable investors and brokers across the country to trade
securities online. The rate of obsolescence in respect of both hardware and software is
considerable. New and better products are emerging in the market, whose use would enable a
rival organization to throw a challenge.
Computer crimes are committed widely in the West. India is no less potentially exposed to this
risk, when turnover under Internet banking increases. It is easier to enforce security of
information and accountability of performers in a manual system. But it needs elaborate steps to
incorporate these features in the electronic system.
The structure of legal system is so far based on manual record keeping. It has to provide for
electronic data to be accepted legally as evidence and in contracts.
Indian banking has accepted computerization since 1993, more out of sheer compulsion and
necessity to cope up increasing overload and incompatibility of the manual system to sustain
further growth.

ROLE OF RBI IN COMPUTERISATION OF BANKS IN INDIA:


Computerization became popular in the western countries right from the Sixties. Main Frames
were extensively used both by the Public Institutions and Major Private Organizations. In the
Seventies Mini Computer became popular and Personal Computers in early Eighties, followed
by introduction of several software products in high level language and simultaneous
advancement in networking technology. This enabled the use of personal computers extensively
in offices & commercial organizations for processing different kinds of data.
However in India organised Trade Unions were against introduction of computers in Public
Offices. Computerisation was restricted to major scientific research organizations and Technical
Institutes and defence organizations. Indian Railways first accepted computerisation for
operational efficiency.
The Electronics Corporation of India Ltd. was set up in 1967 with the objective of research &
development in the fields of Electronic Communication, Control, instrumentation, automation
and Information Technology. CMC Ltd (Computer Maintenance Corporation of India Ltd.) was
established in 1976 to look after maintenance operations of Main Frame Computers installed in
several organisations in India, to serve the gap, when IBM left India, due to the directive of the
then Central Government.
In the Private Sector the first major venture was TCS (Tata Consultancy Services) which started
functioning from 1968. In the year 1980 a few batch-mates of IIT Delhi pioneered the effort to
start a major education centre in India to impart training in Information Technology and their
efforts resulted in the setting up of NIIT in 1981. Aptech Computer Education was established in
1986 following the experiment of NIIT.
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Before large scale computerisation, computer education became popular in India and coveted
by bright students, when several Engineering Colleges and Technical Institutes introducing Post
Graduate Degree courses in Computer Engineering. The booming hardware and software
industry in the West attracted Indian students and many of them migrated for better
opportunities to the U.S.A. and settled there. We have today the paradox of India being one of
the major powers possessing diverse talents in fields of software development, but at the same
time, we are still a decade back to the using computerised service extensively in the country
and bringing the facility to the realms of the common man.
Rapid development of business and industry brought manual operations of data, a saturation
point. This acted as a overload on the growing banking operations. Government owned banks in
general found the "house-keeping" unmanageable. Several heads of accounts in particular
inter-bank clearing and inter-branch reconciliation of accounts went totally out of control.
Low productivity pushed cost of wages high and employees realised that unless they agreed for
computerisation further improvement in their wage structure was not possible.
In the year 1993, the Employees' Unions of Banks signed an agreement with Bank
Managements under the auspices of Indian Banks' Association (IBA). This agreement was a
major breakthrough in the introduction of computerised applications and development of
communication networks in Banks.
The first initiatives in the area of bank computerisation, however, stemmed out of the landmark
report of the two committees headed by the former Governor of the Reserve Bank of India and
currently Governor of Andhra Pradesh, His Excellency, Dr.C.Rangarajan. Both the reports had
strongly recommended computerisation of banking operations at various levels and suggested
appropriate architecture.
In the 'seventies, there was a four-fold increase in the number of branches, five-fold increase in
advances and a six-fold increase in deposits'. Mechanisation was seen as the best solution to
the "problems inherent in the manual system of operations, their adverse impact on customer
services and the grave dangers to banks in the context of increasing incidence of frauds.
The first of these Committees, viz. the Committee on the Mechanization of the Banking Industry
(1984) was set up for the first time to suggest a model for mechanisation of bank branches,
regional / controlling offices and Head Office necessitated by the explosive growth in the
geographical spread of banking following nationalization of banks in 1969.
In the first phase of computerisation spanning the five years ending 1989, banks in India had
installed 4776 ALPMs at the branch level, 233 mini computers at the Regional/Controlling office
levels and trained over 2000 programmers/systems personnel and over 12000 Data Entry
Terminal Operators. The Reserve Bank too had embarked upon an ambitious program to bring
about state-of-the-art technology in the clearing process and had introduced MICR clearing at 4
centres and computerized clearing settlement at 9 centres.
Against this backdrop, the Committee on Computerisation in Banks was set up once again
under Dr.Rangarajan's Chairmanship to draw up a perspective plan for computerisation in
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banks. In its report submitted in 1989, the Committee acknowledged the gains of the initial
efforts and sought to move away from the stand-alone dedicated systems to an on-line
transaction processing environment in branch banking. It recommended that the thrust of bank
computerisation for the following 5 years should be to fully computerise the operations at both
the front and back offices of large branches then numbering around 2500.
RECOMMENDATIONS OF COMMITTEE ON TECHNOLOGY UPGRADATION:
The Reserve Bank continued to be involved in shaping the technology vision of the banking
system. Following the recommendations of the Committee on Financial Sector Reforms, (which
is popularly known as the second Narasimham committee), a Committee on Technology Up
gradation was set up by the RBI for the Banking Sector in 1994. This committee has
representation from banks, Government, technical institutions and the RBI. Among other things,
this committee looked into issues relating to
Encryption of Public Switching Telephone Network (PSTN) lines
Admission of electronic files as evidence
Record keeping
Modalities for a satellite based WAN for banks and financial institutions with the necessary
security systems by banks and other financial institutions, to ultimately develop a sound and an
efficient payments system
Methods by which technological up gradation in banks and financial institutions could be
affected and in the context study the feasibility of establishment of standards, designing
payments system backbone and standards relating to security levels, messages and smart
cards.
The Committee realised the urgent need for training, research and development activities in the
Banking Technology area. Banks and Financial Institutions started setting up Technology based
training centres and colleges. However, a need was felt for an apex level Institute which could
be a Think-tank and Brain Trust for Banking Technology.
The committee recommended a variety of payment applications which can be implemented with
appropriate technology up gradation and development of a reliable communication network. The
committee also suggested setting up of an Information Technology Institute for the purpose of
Research and Development as well as Consultancy in the application of technology to the
Banking and Financial sector of the country. As recommended by the Committee, IDRBT was
established by RBI in 1996 as an autonomous centre for Development and Research in Banking
Technology at Hyderabad.

DEVELOPMENTS IN E-BANKING:

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Banks and financial institutions in India are in the process of Web-enabling their services in
order to offer Internet banking services to its customers. Its the new generation of banking in
India. Most private and MNC banks have already setup an elaborate Internet banking
infrastructure. And this exercise has provided them numerous benefits like:

Greater reach to customers and quicker time to market

Ability to introduce new products and services successfully

Ability to understand its customers needs

Customers are given access to information easily across any location


Greater customer loyalty
The Internet banking is changing the banking industry and is having the major effects on

banking relationships. Even the Morgan Stanley Dean Witter Internet research emphasized that
Web is more important for retail financial services than for many other industries. Internet
banking involves use of Internet for delivery of banking products & services. It falls into four
main categories, from Level 1 - minimum functionality sites that offer only access to deposit
account data - to Level 4 sites - highly sophisticated offerings enabling integrated sales of
additional products and access to other financial services- such as investment and insurance. In
other words a successful Internet banking solution offers
Exceptional rates on Savings, CDs, and IRAs
Checking with no monthly fee, free bill payment and rebates on ATM surcharges
Credit cards with low rates
Easy online applications for all accounts, including personal Loans and mortgages
24 hour account access
Quality customer service with personal attention

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CASE STUDY ICICI
ICICI is one of the leading private sector banks in India, which combines financial strength
with a reputation for innovation and a universal culture that embraces change. On March 31,
2002 ICICI formally merged with ICICI bank and emerged as India's first Universal Bank. The
strategy of ICICI bank after the merger with ICICI Ltd. is that of building a diversified portfolio.
The merged entity will continue to be into project finance and the focus will be to tap the
potential in retail financing. ICICI bank offers a wide spectrum of domestic and international
banking services to facilitate trade, investment, cross border business, treasury and foreign
exchange services. ICICI bank has been quick to realize that E- banking has changed from a
somewhat experimental delivery vehicle into an increasingly mainstream one for delivery of
broad spectrum of banking products and services. Basic E- banking services are rapidly
changing from competitive differentiator to competitive necessity. The group has leveraged on a
number of tie-ups to come up with its various offering. For its Internet banking offering the ICICI
bank uses Infinity from Infosys, for its credit card business its uses Vision Plus from Pay Sys,
USA, for WAP services the tie-up with cellular service providers Orange and Airtel helps reach
out to these users, while the WAP technology is being implemented by the in-house ICICI
InfoTech service. To leverage the Net for its marketing initiatives ICICI bank and Satyam Info
way have jointly set up a "COM" company to promote banking products on the Net. The bank
has also entered into agreements with leading corporate like BPL, Rediff.com. Usha Martin and
Tata Communications for B to C solutions in a bid to further strengthen its Internet banking
product offering and services. Also ICICI has joined hands with a consortium led by Compaq to
take the lead in offering a solution to the Indian e-commerce community. This consortium offers
a B2B and B2C ecommerce payment gateway within India. The Bank has been offering phone
banking free of charge and was first to launch an Internet Banking service in the country named
Infinity. Infinity now provides a host of online banking solutions to retail as well as corporate
customers. ICICI's constant endeavour in providing more value to the customers has resulted in
Infinity being the front-runner amongst online banking offerings in the country. Also, in keeping
with the customers need for increased security, Corporate Infinity now provides multiple levels
of authentication besides user ID/ password and includes security tokens.
ICICI also strives to be a center for leading research on financial engineering in India,
particularly in the area of valuation of securities, risk management and derivatives. By
leveraging on the groups resources ICICI provides custom tailored solution that can support
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even the most complex business strategy. ICICI is now moving all its operations into the era of
'virtual integration'. Not only has this drastically reduced costs, but it has also increased and
improved its services to customers. 1488 Money 2 India offers a unique facility by ICICI of
transferring funds to India. Additional modules were added-gifting and reminders to broaden its
scope and enhance ICICI's relationship with customers.

Case study-State bank of India


State Bank of India is Indias largest bank with a branch network of over 11000 branches and 6
associate banks located even in the remotest parts of India. State Bank of India (SBI) offers a
wide range of banking products and services to corporate and retail customers.
Online SBI is the Internet banking portal for State Bank of India. The portal provides anywhere,
anytime, online access to accounts for State Banks Retail and Corporate customers. The
application is developed using the latest cutting edge technology and tools. The infrastructure
supports unified, secure access to banking services for accounts in over 11,000 branches
across India.
The Retail banking application is an integration of several functional areas, and enables
customers to:

Issue Demand Drafts online


Transfer funds to own and third party accounts
Credit beneficiary accounts using the VISA Money Transfer, RTGS/NEFT feature
Generate account statements
Setup Standing Instructions
Configure profile settings
Use eTax for online tax payment
Use e Pay for automatic bill payments
Interface with merchants for railway and airline reservations
Avail DEMAT and IPO services

The Online SBI corporate banking application provides features to administer and manage
corporate accounts online. The corporate module provides roles such as Regulator, Admin, Up
loader, Transaction Maker, Authorizer, and Auditor. These roles have access to the following
functions:
Manage users, define rights and transaction rules on corporate accounts
Access accounts in several branches with a single sign-on mechanism
Upload files to make bulk transactions to third parties, supplier, vendor and tax collection
authorities.
Use online transactional features such as fund transfer to own accounts, third party payments
(both Inter and Intra bank), and draft issues
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Make bill payments over the Internet.
Authorize, modify, reschedule and cancel transactions, based on rights assigned to the user
Generate account statement
Enquire on transaction details or current balance
In addition to the above the Internet banking application also provides the following value added
services:

Tax payments to central and state governments through site to site integration.
Supply Chain Finance ( e-VFS- Electronic Vendor Finance Scheme)
Direct Debit Facility
E Collection Facilities for:
Core Banking Transactions
Inter Bank Transactions for incoming RTGS/NEFT Transactions
Internet Banking Transactions for SBI & Associate Banks
Direct Debit facility where suppliers can directly debit their customers account through
Internet Banking

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CONCLUSTION:
E-banking has become a necessary survival weapon and is fundamentally changing the
banking industry worldwide. Today, the click of the mouse offers customers banking services at
a much lower cost and also empowers them with unprecedented freedom in choosing vendors
for their financial service needs. No country today has a choice whether to implement E-banking
or not given the global and competitive nature of the economy. The invasion of banking by
technology has created an information age and commoditization of banking services. Banks
have come to realize that survival in the new e-economy depends on delivering some or all of
their banking services on the Internet while continuing to support their traditional infrastructure.
The rise of E-banking is redefining business relationships and the most successful banks will be
those that can truly strengthen their relationship with their customers.
Technology innovation and fierce competition among existing banks have enable a wide array of
banking products and services, being made available to retail and wholesale customer through
an electronic distribution channel, collectively referred to as e-banking. Banks have traditionally
been in the forefront of harnessing technology to improve product and efficiency. Technology is
altering the relationships between banks and its internal and external customers. Technology
has also eroded the entry barriers faced by many industries. With one time investment,
technology has brought about superior products and channel management with a special focus
on customer relationship. The incremental costs incurred for expansion and diversification are
also more beneficial.
The major driving force behind the rapid spread of e-banking is its acceptance as an extremely
cost effective delivery channel. But on the flipside, it is associated with risks such as reputation
risk, security risk, cross-border risk and strategic risk, which are unique to e-banking. Banks
need to have an effective disaster recovery plan along with comprehensive risk management
tool is significant not only to the bank but also to the banking system as a whole. Internet has
created plenty of opportunities for players in the banking sector. While the new entrants have
the advantage of latest technology, the good-will of the established banks gives them a special
opportunity to lead the online world. By merely putting existing service online wont help the
banks in holding their customer close. Instead, banks must learn to capitalize their customers
different online financial-services relationships.
E-banking in India is not fully transformed sector until now but due to increase in number of
online users in India it will be one day a fully transformed. Indian banks are now providing EBanking services in greater amount but they are lacking because of modern technology up
gradation which is adopted continually by overseas banks.

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BIBLIOGRAPHY:
WEBSITES:

www.banknetindia.com
www.bankersonline.com
www.acadjournal.com
www.worldjute.com
WWW.rbidocs.rbi.org.

NEWSPAPERS ARTICLES:
The Economics Times

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