A PROJECT REPORT ON

“INNOVATIVE PRODUCTS IN VARIOUS BANKS”

SUBMITTED BY
MANISH SANJAY POTDAR
ROLL NO: 532
TYBBI (BANKING & INSURANCE)
SEMESTER V
(2015-2016)
SUBMITTED TO
UNIVERSITY OF MUMBAI
ACADEMIC YEAR
(2015-2016)

AVPS`s
ADARSH COLLEGE OF ARTS, COMMERCE & SCIENCE
KULGAON,BADLAPUR(E)

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 DECLARATION BY THE STUDENT

I, POTDAR MANISH SANJAY Student of bachelor of

commerce (banking & insurance) Roll Number 532 hereby declare

that the project for the paper Economics of Global Trade &

Finance titled,

“INNOVATIVE PRODUCTS IN VARIOUS BANKS”

submitted by me for semester-V during the academic year

2015-16, is based on actual work carried out by me under the

guidance and supervision of .

I further state that this work is original and not

submitted anywhere else for any examination.

(MANISH POTDAR)

Signature of Student

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 ACKNOWLEDGEMENT

First of all, I would like to take this opportunity to

thank the Mumbai University for having projects as a part of
the TYBBI- SEM- 5 curriculum.

I want express my sincere gratitude to PROF. ABHAY

NEOGE SIR for assigning the responsibility to prepare
INNOVATIVE PRODUCTS IN VARIOUS BANKS

I would also like to say that subject was learning,

interesting, and exhaustive.

I would like to thank my parents, friends and teachers who

have helped and encouraged me throughout the working of the
project.

(MANISH S. POTDAR)

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 PREFACE

I wanted to present a report on “INNOVATIVE PRODUCTS IN

VARIOUS BANKS” to provide the readers with useful information
regarding this project. Therefore, I made sincere attempts to complete
information on the subject to present in a simple style.
I am sure that the information in this volume would certainty prove
useful for every reader to have a far better insight in the scope and
dimension of this project and its true perspective
The task of completion of this project thought being difficult was made
quite and simple, interesting and successful due to deep involvement and
complete dedication of my project guide

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 EVALUATION CERTIFICATE

This is to certify that the undersigned have assessed and

evaluated the project on “INNOVATIVE PRODUCTS IN
VARIOUS BANKS” submitted by POTDAR MANISH SANJAY
student of TYBBI sem-V.

This project is original to the best of our knowledge and has

been accepted for Internal Assessment.

Co-ordinator Principal
(Prof.Mansi Gokhale) ( Dr.Vaidehi Daptardar)

Project Guide/Internal Examiner External Examiner

(Prof.Abhay Neoge )

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EXECUTIVE SUMMARY
Banking in India originated in the last decades of the 18th century. The first banks
were The General Bank of India which started in 1786, and the Bank of Hindustan,
both of which are now defunct. The oldest bank in existence in India is the State
Bank of India, which originated in the Bank of Calcutta in June 1806, which
almost immediately became the Bank of Bengal. The three banks merged in 1921
to form the Imperial Bank of India, which, upon India's independence, became the
State Bank of India.

Currently (2009), overall, banking in India is considered as fairly mature in terms

of supply, product range and reach-even though reach in rural India still remains a
challenge for the private sector and foreign banks. Even in terms of quality of
assets and capital adequacy, Indian banks are considered to have clean, strong
and transparent balance sheets, as compared to other banks in comparable
economies in its region. The Reserve Bank of India is an autonomous body, with
minimal pressure from the government.

Banking environment has become highly competitive today. To be able to survive

and grow in the changing market environment banks are going for the latest
technologies, which is being perceived as an ‘enabling resource’ that can help in
developing learner and more flexible structure that can respond quickly to the
dynamics of a fast changing market scenario. It is also viewed as an instrument of
cost reduction and effective communication either people and institutions
associated with the banking business.

The banking scenario has changed drastically. The changes which have
taken place in the last ten years are more than the changes took place in last fifty
years because of the institutionalization, liberalization, globalization and

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automation in the banking industry. Indian banking system has several
outstanding achievements to its credit, the most striking of which is its
reach. Indian banks are now spread out into the remote corners of our
country.

In recent years the Indian banking system has come up with many innovations in
order to change the psychology of the customer.

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 TABLES OF CONTENT
Particulars Page No.
Introduction
 Banking in India 9
 Current scenario of Banking in India 10
 Organizational structure of Banks in India 12

 Role of Banks 15

Objectives 17
Research Methodology 17

Innovations in Banks 18
Some More Innovations 22
 Credit cards 22
 Debit cards 26
 ATM 27

 E-Cheque 30

 Electronic Fund Transfer 31

 Telebanking 32
33
 Mobile banking
34
 Internet banking
36
 Demat
Innovation by I.T in Banking Sector 37

E-Banking 40
 Benefits of E-Banking 42

Conclusion 44
References 46

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 CHAPTER-1

INTRODUCTION

BANKING IN INDIA

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INTRODUCTION

BANKING IN INDIA

Banking in India originated in the last decades of the 18th century. The first banks
were The General Bank of India which started in 1786, and the Bank of Hindustan,
both of which are now defunct. The oldest bank in existence in India is the State
Bank of India, which originated in the Bank of Calcutta in June 1806, which
almost immediately became the Bank of Bengal. This was one of the three
presidency banks, the other two being the Bank of Bombay and the Bank of
Madras, all three of which were established under charters from the British East
India Company. For many years the Presidency banks acted as quasi-central banks,
as did their successors. The three banks merged in 1921 to form the Imperial Bank
of India, which, upon India's independence, became the State Bank of India.

CURRENT SCENARIO OF BANKING IN INDIA

Currently (2009), overall, banking in India is considered as fairly mature in terms
of supply, product range and reach-even though reach in rural India still remains a
challenge for the private sector and foreign banks. Even in terms of quality of
assets and capital adequacy, Indian banks are considered to have clean, strong
and transparent balance sheets, as compared to other banks in comparable
economies in its region. The Reserve Bank of India is an autonomous body, with
minimal pressure from the government. The stated policy of the Bank on the
Indian Rupee is to manage volatility-without any stated exchange rate and this has
mostly been true. With the growth in the Indian economy expected to be
strong for quite some time-especially in its services sector, the demand for
banking services especially retail banking, mortgages and investment services are
expected to be strong.

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In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase
its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the
first time an investor has been allowed to hold more than 5% in a private sector
bank since the RBI announced norms in 2005 that any stake exceeding 5% in the
private sector banks would need to be vetted by them. Currently, India has 88
Scheduled Commercial Banks (SCBs), 28 public sector banks (that is

With the Government of India holding a stake), 29 private banks (these do not have
government stake; they may be publicly listed and traded on stock exchanges) and
31 foreign banks.

They have a combined network of over 53,000 branches and 17,000 ATMs.
According to a report by ICRA Limited, a rating agency, the public sector banks
hold over 75 percent of total assets of the banking industry, with the private and
foreign banks holding 18.2% and 6.5% respectively.

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ORGANIZATIONAL STRUCTURE OF BANKS IN INDIA

The organizational structure of banks in India is shown with the help of following
charts:

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1) The Reserve Bank of India:
The RBI is the supreme monetary and banking
authority in the country and has the responsibility to control the banking
system in the country. It keeps the reserves of all scheduled banks and
hence is known as the “Reserve Bank”.

2) Public Sector Banks:

 State Bank of India and its Associates (8)
 Nationalized Banks (19)
 Regional Rural Banks Sponsored by Public Sector Banks (196)

3) Private Sector Banks:

 Old Generation Private Banks (22)
 Foreign New Generation Private Banks (8)
 Banks in India (40)

4) Co-operative Sector Banks:

 State Co-operative Banks

 Central Co-operative Banks
 Primary Agricultural Credit Societies
 Land Development Banks
 State Land Development Banks

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5) Development Banks:
Development Banks mostly provide long term finance for
setting up industries. They also provide short-term finance for export and
import activities.
 Industrial Finance Co-operation of India (IFCI)
 Industrial Development of India (IDBI)
 Industrial Investment Bank of India (IIBI)
 Small Industries Development Bank of India (SIDBI)
 National Bank for Agriculture and Rural Development (NABARD)
 Export-Import Bank of India

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 ROLE OF BANKS

Banks play a positive role in economic development of a country as repositories of

community’s savings and as purveyors of credit. Indian Banking has aided the
economic development during the last fifty years in an effective way. The banking
sector has shown a remarkable responsiveness to the needs of planned economy. It
has brought about a considerable progress in its efforts at deposit
mobilization and has taken a number of measures in the recent past for accelerating
the rate of growth of deposits. As recourse to this, the commercial banks opened
branches in urban, semi-urban and rural areas and have introduced a number of
attractive schemes to foster economic development.

The activities of commercial banking have growth in multi-directional ways as

well as multi-dimensional manner. Banks have been playing a catalytic role in area
development, backward area development, extended assistance to rural
development all along helping agriculture, industry, international trade in a
significant manner. In a way, commercial banks have emerged as key financial
agencies for rapid economic development.

By pooling the savings together, banks can make available funds to specialized
institutions which finance different sectors of the economy, needing capital for
various purposes, risks and durations. By contributing to government securities,
bonds and debentures of term-lending institutions in the fields of agriculture,
industries and now housing, banks are also providing these institutions with an
access to the common pool of savings mobilized by them, to that
extent relieving them of the responsibility of directly approaching the saver. This
intermediation role of banks is particularly important in the early stages
of economic development and financial specification. A country like India, with
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different regions at different stages of development, presents an interesting
spectrum of the evolving role of banks, in the matter of inter-mediation and
beyond.

Mobilization of resources forms an integral part of the development process in

India. In this process of mobilization, banks are at a great advantage, chiefly
because of their network of branches in the country. And banks have to place
considerable reliance on the mobilization of deposits from the public to finance
development programmes. Further, deposit mobilization by banks in India acquired
greater significance in their new role in economic development.

Commercial banks provide short-term and medium-term financial assistance. The

short-term credit facilities are granted for working capital requirements. The
medium-term loans are for the acquisition of land, construction of factory
premises and purchase of machinery and equipment. These loans are generally
granted for periods ranging from five to seven years. They also establish letters of
credit on behalf of their clients favoring suppliers of raw materials/machinery (both
Indian and foreign) which extend the banker’s assurance for payment and thus help
their delivery. Certain transaction, particularly those in contracts of sale of
Government Departments, may require guarantees being issued in lieu of security
earnest money deposits for release of advance money, supply of raw materials for
processing, full payment of bills on the assurance of the performance etc.
Commercial banks issue such guarantees also.

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OBJECTIVES OF THE STUDY

To study the innovation that has been made in the Indian Banking System

RESEARCH METHODOLOGY

Secondary data have been used and is collected from different websites, the links
are been given in the bibliography section and also from various books and
magazines which are mentioned in bibliography section.

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 CHAPTER-2

INNOVATION IN BANK

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 INNOVATIONS IN BANKS:

The innovation that has been taken place in the Indian banks in recent years are as
follows:

1) RETAIL BANKING:
The introduction of retail banking is one of the most
important innovation introduced by banking in India:

Retail Banking includes:

 Deposits
 Loans, Cash Credit and Overdraft
 Negotiating for Loans and advances
 Remittances
 Book-Keeping (maintaining all accounting records)
 Receiving all kinds of bonds valuable for safe keeping

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2) TRADE FINANCE:

Trade finance includes:

 Issuing and confirming of letter of credit.

 Drawing, accepting, discounting, buying, selling, collecting of bills of
exchange, promissory notes, drafts, bill of lading and other securities.

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 3) Treasury Operations

Treasury operations include:

 Buying and selling of Foreign exchange

 Acquiring, holding, underwriting and dealing in shares, debentures, etc.
 Purchasing and selling of bonds and securities on behalf of
constituents.

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Some more innovations made in Indian banks are as follows:

1) Credit Card:

Credit Card is “post paid” or “pay later” card that draws from a credit line-money
made available by the card issuer (bank) and gives one a grace period to pay. If
the amount is not paid full by the end of the period, one is charged interest.

A credit card is nothing but a very small card containing a means of identification,
such as a signature and a small photo. It authorizes the holder to change goods or
services to his account, on which he is billed. The bank receives the bills from the
merchants and pays on behalf of the card holder.

These bills are assembled in the bank and the amount is paid to the bank by the
card holder totally or by installments. The bank charges the customer a small
amount for these services. The card holder need not have to carry money/cash with
him when he travels or goes for purchasing.

Credit cards have found wide spread acceptance in the ‘metros’ and big cities.
Credit cards are joining popularity for online payments. The major players in the
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Credit Card market are the foreign banks and some big public sector banks like
SBI and Bank of Baroda. India at present has about 3 million credit cards in
circulation.

Features of credit card

1. Alternative to cash-

Credit card is a better alternative to cash. It removes the worry of carrying

various currency denominations to pay at the trade counters. It is quite easy and
way fast to use a credit card rather than waiting for completion of cash
transactions.
As an alternative, credit card helps a cardholder to travel anywhere in the world
without a need to carry an ample amount of cash. It also reduces the possible
risk of money theft and gives its user a complete peace of mind.

2. Credit limit-

The credit cardholder enjoys the facility of a credit limit set on his card. This
limit of credit is determined by the credit card issuing entity (bank or NBFC)
only after analyzing the credit worthiness of the cardholder.

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The credit limit is of two types, viz.,
1. Normal credit limit, and
2. Revolving credit limit.
Normal credit limit is usual credit given by the bank or NBFC at the time of
issuing a credit card.
Revolving credit limit varies with the financial exposure of the credit
cardholder.

3. Aids payment in domestic and foreign currency-

Credit card aids its cardholder to make payments in any currency of choice. In
other words, it gives its holder a unique facility to make payments either in
domestic (native) currency or if necessary, also in foreign (non-native)
currency, that too as and when required.
Credit card reduces the cumbersome process of currency conversion. That is, it
removes the financial complexities often encountered in converting a domestic
currency into a foreign currency. It is because of this feature, a credit cardholder
can possibly make payments to merchants present in any corner of the world.

4. Record keeping of all transactions-

Credit card issuing entities like banks or NBFCs keeps a complete record of all
transactions made by their credit cardholders. Such a record helps these entities
to raise appropriate billing amounts payable by their cardholders, either on a
monthly or some periodic basis.

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5. Regular charges-

Regular charges are basic routine charges charged by the credit card issuing
entity on the usage of credit card by its cardholder. These charges are nominal
in nature.
The regular charges are primarily classified into two types, viz.,
1. Annual charges, and
2. Additional charges.

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Debit Cards:

Debit Card is a “prepaid” or “pay now” card with some stored value. Debit Cards
quickly debit or subtract money from one’s savings account, or if one were taking
out cash Every time a person uses the card, the merchant who in turn can get the
money transferred to his account from the bank of the buyers, by debiting an exact
amount of purchase from the card. To get a debit card along with a Personal
Identification Number (PIN)

When he makes a purchase, he enters this number on the shop’s PIN pad. When
the card is swiped through the electronic terminal, it dials the acquiring bank
system either Master Card or Visa that validates the PIN and finds out
from the issuing bank whether to accept or decline the transaction. The
customer never overspread because the amount spent is debited immediately from
the customer’s account. So, for the debit card to work, one must already have the
money in the account to cover the transaction. There is no grace period for a
debit card purchase. Some debit cards have monthly or per transaction fees.

Debit Card holder need not carry a bulky checkbook or large sums of cash when
he/she goes at for shopping. This is a fast and easy way of payment one can get

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debit card facility as debit cards use one’s own money at the time of sale, so they
are often easier than credit cards to obtain.

The major limitation of Debit Card is that currently only some 3000-4000 shops
country wide accepts it. Also, a person can’t operate it in case the telephone lines
are down.

2) Automatic Teller Machine

The introduction of ATM’s has given the customers the facility of round the
clock banking. The ATM’s are used by banks for making the customers dealing
easier. ATM card is a device that allows customer who has an ATM card to
perform routine banking transaction at any time without interacting with human
teller. It provides exchange services. This service helps the customer to withdraw
money even when the banks are closed. This can be done by inserting the card in
the ATM and entering the Personal Identification Number and secret Password.

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ATM’s are currently becoming popular in India that enables the customer to
withdraw their money 24 hours a day and 365 days. It provides the customers with
the ability to withdraw or deposit funds, check account balances, transfer funds and
check statement information. The advantages of ATM’s are many. It increases
existing business and generates new business. It allows the customers.

 To transfer money to and from accounts.

 To view account information.
 To order cash.
 To receive cash.

Advantages of ATM’s:

To the Customers

 ATM’s provide 24 hrs, 7 days and 365 days a year service

 Service is quick and efficient
 Privacy in transaction
 Wider flexibility in place and time of withdrawals.
 The transaction is completely secure you need to key in Personal
Identification Number (Unique number for every customer).
.
ATM’s can be installed anywhere like Airports, Railway Stations, Petrol Pumps,
Big Business arcades, markets, etc. Hence, it gives easy access to the customers,
for obtaining cash.

The ATM services provided first by the foreign banks like Citibank, Grind lays
bank and now by many private and public sector banks in India like ICICI Bank,
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HDFC Bank, SBI, UTI Bank etc. The ICICI has launched ATM Services to its
customers in all the Metropolitan Cities in India. By the end of 1990 Indian Private
Banks and public sector banks have come up with their own ATM Network in the
form of “SWADHAN”. Over the past year upto 44 banks in Mumbai, Vashi and
Thane, have became a part of “SWADHAN” a system of shared payments
networks, introduced by the Indian Bank Association (IBA).

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 3) E-Cheques

The e-cheques consists five primary facts. They are the consumers, the merchant,
consumer’s bank the merchant’s bank and the e-mint and the clearing process. This
chequering system uses the network services to issue and process payment that
emulates real world chequing. The payer issues digital cheques to the payee and
the entire transactions are done through internet. Electronic version of cheques
are issued, received and processed. A typical electronic cheque transaction takes
place in the following manner:

 The customer accesses the merchant server and the merchant server presents
its goods to the customer.
 The consumer selects the goods and purchases them by sending an e-cheque
to the merchant.
 The merchant validates the e-cheque with its bank for payment
authorization.
 The merchant electronically forwards the e-cheque to its bank.
 The merchant’s bank forwards the e-cheque to the clearing house
for cashing.

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  The clearing house jointly works with the consumer’s bank clears
the cheque and transfers the money to the merchant’s banks.
 The merchant’s bank updates the merchant’s account.

4) Electronic Funds Transfer (EFT)

Many modern banks have computerized their cheque handling process with
computer networks and other electronic equipments. These banks are dispensing
with the use of paper cheques. The system called electronic fund transfer (EFT)
automatically transfers money from one account to another. This system
facilitates speedier transfer of funds electronically from any branch to any other
branch. In this system the sender and the receiver of funds may be located in
different cities and may even bank with different banks. Funds transfer within the
same city is also permitted. The scheme has been in operation since February 7,
1996, in India.

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The other important type of facility in the EFT system is automated clearing
houses. These are the computer centers that handle the bills meant for deposits
and the bills meant for payment. In big companies pay is not disbursed by issued
cheques or issuing cash. The payment office directs the computer to credit an
employee’s account with the person’s pay.

5) Telebanking

Telebanking refers to banking on phone services. A customer can access

information about his/her account through a telephone call and by giving the
coded Personal Identification Number (PIN) to the bank. Telebanking is
extensively user friendly and effective in nature.

 To get a particular work done through the bank, the users may leave his
instructions in the form of message with bank.
 Facility to stop payment on request. One can easily know about the cheque
status.
 Information on the current interest rates.
 Information with regard to foreign exchange rates.

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  Request for a DD or pay order.
 D-Mat Account related services.
 And other similar services.

6) Mobile Banking

A new revolution in the realm of e-banking is the emergence of mobile banking.

On-line banking is now moving to the mobile world, giving everybody with a
mobile phone access to real-time banking services, regardless of their location. But
there is much more to mobile banking from just on-line banking. It provides a new
way to pick up information and interact with the banks to carry out the relevant
banking business. The potential of mobile banking is limitless and is
expected to be a big success. Booking and paying for travel and even tickets is also
expected to be a growth area.

According to this system, customer can access account details on mobile using the
Short Messaging System (SMS) technology6 where select data is pushed to the
mobile device. The wireless application protocol (WAP) technology, which will
allow user to surf the net on their mobiles to access anything and everything This is
a very flexible way of transacting banking business

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Already ICICI and HDFC banks have tied up cellular service provides such as
Airtel, Orange, Sky Cell, etc. in Delhi and Mumbai to offer these mobile banking
services to their customers.

7) Internet Banking

Internet banking involves use of internet for delivery of banking products and
services. With internet banking is now no longer confirmed to the branches where
one has to approach the branch in person, to withdraw cash or deposits a cheque or
requests a statement of accounts. In internet banking, any inquiry or transaction
is processed online without any reference to the branch (anywhere
banking) at any time.

The Internet banking now is more of a normal rather than an exception

due to the fact that it is the cheapest way of providing banking
services. As indicated by McKinsey Quarterly research, presently traditional
banking costs the banks, more than a dollar per person, ATM banking costs 27
cents and internet banking costs below 4 cents approximately. ICICI bank was the
first one to offer Internet Banking in India.

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Benefits of Internet Banking:

 Reduce the transaction costs of offering several banking services and

diminishes the need for longer numbers of expensive brick and mortar
branches and staff.
 Increase convenience for customers, since they can conduct many
banking transaction 24 hours a day.
 Increase customer loyalty.
 Improve customer access.
 Attract new customers.
 Easy online application for all accounts, including personal loans
and mortgages

8) Cyber Banking:

It refers to banking through online services. Banks with web site “Cyber” branches
allowed customers to check balances, pay bills, transfer funds, and apply for loans
on the Internet.

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 9) Demat

Demat is short for de-materialization of shares. In short, Demat is a process where

at the customer’s request the physical stock is converted into electronic entries in
the depository system.

In January 1998 SEBI (Securities and Exchange Board of India) initiated DEMAT
ACCOUNTANCY System to regulate and to improve stock investing. As on date,
to trade on shares it has become compulsory to have a share demat account and all
trades take place through demat.

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 CHAPTER-3

INNOVATION BY I.T. IN BANKING SECTOR

~ 37 ~
INNOVATION BY INFORMATION TECHNOLOGY (IT) IN THE
BANKING SECTOR

Banking environment has become highly competitive today. To be able to survive

and grow in the changing market environment banks are going for the latest
technologies, which is being perceived as an ‘enabling resource’ that can help in
developing learner and more flexible structure that can respond quickly to the
dynamics of a fast changing market scenario. It is also viewed as an instrument of
cost reduction and effective communication either people and institutions
associated with the banking business.

The Software Packages for Banking Applications in India had their beginnings in
the middle of 80s, when the Banks started computerizing the branches in a limited
manner. The early 90s saw the plummeting hardware prices and advent of cheap
and inexpensive but high powered PC’s and Services and banks went in
for what was called Total Branch Automation (TBA) packages. The middle and
late 90s witnessed the tornado of financial reforms, deregulation
globalization etc. coupled with rapid revolution in communication technologies
and evolution of novel concept of convergence of communication
technologies, like internet, mobile/cell phones etc. Technology has
continuously played on important role in the working of banking institutions and
the services provided by them. Safekeeping of public money, transfer of
money, issuing drafts, exploring investment opportunities and lending drafts,
exploring investment being provided

~ 38 ~
Information Technology enables sophisticated product development, better market
infrastructure, implementation of reliable techniques for control of risks and helps
the financial intermediaries to reach geographically distant and diversified markets.
Internet has significantly influenced delivery channels of the banks. Internet has
emerged as an important medium for delivery of banking products and services.

The customers can view the accounts; get account statements, transfer
funds and purchase drafts by just punching on few keys. The smart card’s i.e.,
cards with micro processor chip have added new dimension to the scenario. An
introduction of ‘Cyber Cash’ the exchange of cash takes place entirely
through ‘Cyber-books’. Collection of Electricity bills and telephone bills has
become easy. The upgradeability and flexibility of internet technology after
unprecedented opportunities for the banks to reach out to its customers.
No doubt banking services have undergone drastic changes and so also the
expectation of customers from the banks has increased greater.

IT is increasingly moving from a back office function to a prime assistant in

increasing the value of a bank over time. IT does so by maximizing banks of pro-
active measures such as strengthening and standardizing banks infrastructure in
respect of security, communication and networking, achieving inter branch
connectivity, moving towards Real Time gross settlement (RTGS) environment the
forecasting of liquidity by building real time databases, use of Magnetic
Ink Character Recognition and Imaging technology for cheque clearing to
name a few. Indian banks are going for the retail banking in a big way

The key driver to charge has largely been the increasing sophistication in
technology and the growing popularity of the Internet. The shift from
traditional banking to e-banking is changing customer’s expectations.

~ 39 ~
CHAPTER-4

E-BANKING

~ 40 ~
E-Banking:
E-banking made its debut in UK and USA 1920s. It becomes
prominently popular during 1960, through electronic funds transfer and credit
cards. The concept of web-based baking came into existence in Europe and USA in
the beginning of 1980. In India e-banking is of recent origin. The
traditional model for growth has been through branch banking. Only in the early
1990s has there been a start in the non-branch banking services. The new private
sector banks and the foreign banks are handicapped by the lack of a strong branch
network in comparison with the public sector banks. In the absence of such
networks, the market place has been the emergence of a lot of innovative services
by these players through direct distribution strategies of non-branch delivery. All
these banks are using home banking as a key “pull’ factor to remove
customers away from the well entered public sector banks.

Many banks have modernized their services with the facilities of

computer and electronic equipments. The electronics revolution has made it
possible to provide ease and flexibility in banking operations to the benefit
of the customer. The e-banking has made the customer say good-bye to huge
account registers and large paper bank accounts. The e-banks, which may call as
easy bank offers the following services to its customers:

 Credit Cards
 Debit Cards
 ATM
 E-Cheques

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  Electronic Funds Transfer
 DMAT Accounts
 Mobile Banking
 Telephone Banking
 Internet Banking
 EDI (Electronic Data Interchange)

Benefits of E-banking

To the Customer:

 Anywhere Banking no matter wherever the customer is in the world.

Balance enquiry, request for services, issuing instructions etc., from
anywhere in the world is possible.

 Anytime Banking – Managing funds in real time and most importantly, 24

hours a day, 7days a week.

 Convenience acts as a tremendous psychological benefit all the time.

 Brings down “Cost of Banking” to the customer over a period a period of

time.

 Cash withdrawal from any branch / ATM

 On-line purchase of goods and services including online payment for the
same.

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To the Bank:

 Innovative, scheme, addresses competition and present the bank as

technology driven in the banking sector market

 Reduces customer visits to the branch and thereby human intervention

 Inter-branch reconciliation is immediate thereby reducing chances of fraud

and misappropriation.

 On-line banking is an effective medium of promotion of various schemes of

the bank, a marketing tool indeed.

 Integrated customer data paves way for individualized and

customized services.

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CONCLUSION
The banking scenario has changed drastically. The changes which have
taken place in the last ten years are more than the changes took place in last fifty
years because of the institutionalization, liberalization, globalization and
automation in the banking industry. Indian banking system has several
outstanding achievements to its credit, the most striking of which is its
reach. Indian banks are now spread out into the remote corners of our
country. In terms of the number of branches, India’s banking system is one of the
largest in the world. According to the Banker 2004, India has 20 banks within the
world’s top 1000 out of which only 6 are within the top 500 banks.

Today banking sector is marked by high customer expectations and

technological innovations. Technology is playing a crucial role in the day to day
functioning of the banks. These banks that have harnessed and leveraged
technology best have a strategic advantage. To face competition it is necessary for
banks to absorb the technology and upgrade their services.

In recent years the Indian banking system has come up with many innovations in
order to change the psychology of the customer. Some of these innovations are as
follows:

 Credit Cards
 Debit Cards
 ATM
 E-Cheques

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 Electronic Funds Transfer
 DMAT Accounts
 Mobile Banking
 Telephone Banking
 Internet Banking etc.

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REFERENCES

 www.icmrindia.org/.../Banking%20Industry%20-
%20Business%20Report%20

 www.icmrindia.org/casestudies/catalogue/.../CLSM012.htm -
Cached

 www.icmrindia.org/casestudies/catalogue/.../BREP005.htm

 www.icmrindia.org/.../Finance%20ICICI%20Bank%20%20Innova
tions%20in%20Microfinance.htm

 www.customerthink.com/.../innovations_in_banking_in_next_5_y
ears_in_ India

 www.mbaknol.com/.../organizational-structure-and-role-of-banks-
in-India

 www.bankofindia.com/rtiorg.aspx

 www.mbaknol.com/business-finance/history-of-banking-in-india

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