Introduction

In the world of banking and finance nothing stands still. The biggest change of all is
in the, scope of the business of banking. Banking in its traditional from is concerned
with the acceptance of deposits from the customers, the lending of surplus of
deposited money to suitable customers who wish to borrow and transmission of funds.
Apart from traditional business, banks now a day provide a wide range of services to
satisfy the financial and non financial needs of all types of customers from the
smallest account holder to the largest company and in some cases of non customers.
The range of services offered differs from bank to bank depending mainly on the type
and size of the bank.

Reserve Bank’s Early Initiative

As a central bank in a developing country, the Reserve Bank of India (RBI) has
adopted development of the banking and financial market as one of its prime
objectives. "Institutional development" was the hallmark of this approach from 1950s
to 1970s. In the 1980s, the Reserve Bank focused on "improvements in the
productivity" of the banking sector. Being convinced that technology is the key for
improving in productivity, the Reserve Bank took several initiatives to popularize
usage of technology by banks in India.

Periodically, almost once in five years since the early 1980s, the Reserve Bank
appointed committees and working Groups to deliberate on and recommend the
appropriate use of technology by banks give the circumstances and the need. These
committees are as follows:
-Rangarajan committee -1 in early 1980s.
-Rangarajan committee -11 in late 1980s.
-Saraf working group in early 1990s.
-Vasudevan working group in late 1990s.
-Barman working group in early 2000s.

Based on the recommendations of these committees and working groups, the Reserve
Bank issued suitable guidelines for the banks. In the 1980s, usage of technology for
the back office operations of the banks pre-dominated the scene. It was in the form of
accounting of transactions and collection of MIS. In the inter-bank payment systems,
it was in the form of clearing and settlement using the MICR technology.

Two momentous decisions of the Reserve Bank in the 1990s changed the scenario for
ever there are:
a) The prescription of compulsory usage of technology in full measure by the new
private sector banks as a precondition of the license and
b) The establishment of an exclusive research institute for banking technology
institute for development and Research in Banking Technology.

As the new private sector banks came on the scene as technology-savvy banks and
offered several innovative products at the front office for the customers based on
technology, the demonstration effect caught on the reset of the banks. Multi channel
offerings like machine based (ATMs and pc-Banking), card based (credit/Debit/Smart
cards), Communication based (Tele-Banking and Internet Banking) ushered in
Anytime and Anywhere Banking by the banks in India. The IDRBT has been
instrumental in establishing a safe and secure, state of the art communication
backbone in the from of the Indian Financial NETwork (INFINET) as a closed user
group exclusively for the banking and financial sector in India.

Changing Face of Banking Services

Liberalization brought several changes to Indian service industry. Probably Indian

banking industry learnt a tremendous lesson. Pre-liberalization, all we did at a bank
was deposit and withdraw money. Service standards were pathetic, but all we could
do was grin and bear it. Post-liberalization, the tables have turned. It's a consumer
oriented market there.

Technology is revolutionizing every field of human endeavor and activity. One of

them is introduction of information technology into capital market. The internet
banking is changing the banking industry and is having the major effects on banking
relationship. Web is more important for retail financial services than for many other
industries.

Retail banking in India is maturing with time, several products, which further could
be customized. Most happening sector is housing loan, which is witnessing a cut-
throat competition. The home loans are very popular as they help you to realize your
most cherished dream. Interest rates are coming down and market has seen some
innovative products as well. Other retail banking products are personal loan,
education loan and vehicles loan. Almost every bank and financial institution is
offering these products, but it is essential to understand the different aspects of these
loan products, which are not mentioned in their colored advertisements.

Plastic Money

Plastic money was a delicious gift to Indian market. Giving respite from carrying too
much cash. Now several new features added to plastic money to make it more
attractive.

Credit Card

A credit card is part of a system of payments named after the small plastic card
issued to users of the system. It is a card entitling its holder to buy goods and services
based on the holder's promise to pay for these goods and services. The issuer of the
card grants a line of credit to the consumer (or the user) from which the user can
borrow money for payment to a merchant or as a cash advance to the user. Usage of
the term "credit card" to imply a credit card account is a metonym.

A credit card is different from a charge card, where a charge card requires the balance
to be paid in full each month. In contrast, credit cards allow the consumers to 'revolve'
their balance, at the cost of having interest charged. Most credit cards are issued by
local banks or credit unions, and are the shape and size specified by the ISO/IEC 7810
standard as ID-1. This is defined as 85.60 × 53.98 mm in size.

Advantages

• Compared to debit cards and cheques, a credit card allows small short-term
loans to be quickly made to a customer who need not calculate a balance
remaining before every transaction, provided the total charges do not exceed
the maximum credit line for the card.
 • Many credit cards offer rewards and benefits packages, such as offering
enhanced product warranties at no cost, free loss/damage coverage on new
purchases, and points which may be redeemed for cash, products, or airline
tickets.
• a credit card transaction is often more secure than other forms of payment,
such as cheques, because the issuing bank commits to pay the merchant the
moment the transaction is authorized, regardless of whether the consumer
defaults on the credit card payment

Disadvantages

• Credit cards with low introductory rates are limited to a fixed term, usually
between 6 and 12 months after which a higher rate is charged. As all credit
cards assess fees and interest, some customers become so encumbered with
their credit debt service that they are driven to bankruptcy.
• Merchants that accept credit cards must pay interchange fees and discount fees
on all credit-card transactions. However, merchants are usually barred by their
credit agreements from passing these fees directly to the credit card customers,
or from setting a minimum transaction amount. The result, at least in the
United States, is that even consumers that do not use credit cards experience
higher prices from most merchants to cover the hidden transaction fees
afforded for credit cards.

Debit Card

A debit card (also known as a bank card or check card) is a plastic card that provides
an alternative payment method to cash when making purchases. Functionally, it can
be called an electronic cheque, as the funds are withdrawn directly from either the
bank account, or from the remaining balance on the card. In some cases, the cards are
designed exclusively for use on the Internet, and so there is no physical card.

The use of debit cards has become widespread in many countries and has overtaken
the cheque, and in some instances cash transactions by volume. Like credit cards,
debit cards are used widely for telephone and Internet purchases, and unlike credit
cards the funds are transferred from the bearer's bank account instead of having the
bearer to pay back on a later date.
Debit cards can also allow for instant withdrawal of cash, acting as the ATM card for
withdrawing cash and as a cheque guarantee card. Merchants can also offer
"cashback"/"cashout" facilities to customers, where a customer can withdraw cash
along with their purchase.

Advantages are as follows:

• A consumer who is not credit worthy and may find it difficult or impossible to
obtain a credit card can more easily obtain a debit card, allowing him/her to
make plastic transactions.
• Use of a debit card is limited to the existing funds in the account to which it is
linked (except cases of offline payments), thereby preventing the consumer
from racking up debt as a result of its use, or being charged interest, late fees
or fees exclusive to credit cards.
• For most transactions, a cheque card can be used to avoid check writing
altogether. Cheque cards debit funds from the user's account on the spot,
thereby finalizing the transaction at the time of purchase, and bypassing the
requirement to pay a credit card bill at a later date, or to write an insecure
check containing the account holder's personal information.
• Like credit cards, debit cards are accepted by merchants with less
identification and scrutiny than personal checks, thereby making transactions
quicker and less intrusive. Unlike personal checks, merchants generally do not
believe that a payment via a debit card may be later dishonored.
• Unlike a credit card, which charges higher fees and interest rates when a cash
advance is obtained, a debit card may be used to obtain cash from an ATM or
a PIN-based transaction at no extra charge, other than a foreign ATM fee.

The Debit card has many disadvantages as opposed to cash or credit:

• Many banks are now charging over-limit fees or non-sufficient funds fees
based upon pre-authorizations, and even attempted but refused transactions by
the merchant (some of which may not even be known by the client).
• Many merchants mistakenly believe that amounts owed can be "taken" from a
customer's account after a debit card (or number) has been presented, without
agreement as to date, payee name, amount and currency, thus causing penalty
 fees for overdrafts, over-the-limit, amounts not available causing further
rejections or overdrafts, and rejected transactions by some banks.
• In some countries debit cards offer lower levels of security protection than
credit cards. Theft of the users PIN using skimming devices can be
accomplished much easier with a PIN input than with a signature-based credit
transaction. However, theft of users' PIN codes using skimming devices can be
equally easily accomplished with a debit transaction PIN input, as with a
credit transation PIN input, and theft using a signature-based credit transaction
is equally easy as theft using a signature-based debit transaction.
• In many places, laws protect the consumer from fraud much less than with a
credit card. While the holder of a credit card is legally responsible for only a
minimal amount of a fraudulent transaction made with a credit card, which is
often waived by the bank, the consumer may be held liable for hundreds of
dollars, or even the entire value of fraudulent debit transactions. The consumer
also has a shorter time (usually just two days) to report such fraud to the bank
in order to be eligible for such a waiver with a debit card, whereas with a
credit card, this time may be up to 60 days. A thief who obtains or clones a
debit card along with its PIN may be able to clean out the consumer's bank
account, and the consumer will have no recourse.

Automated Teller Machine

An automated teller machine (ATM) or the automatic banking machine (ABM) is

a computerised telecommunications device that provides the clients of a financial
institution with access to financial transactions in a public space without the need for
a cashier, human clerk or bank teller. On most modern ATMs, the customer is
identified by inserting a plastic ATM card with a magnetic stripe or a plastic smart
card with a chip, that contains a unique card number and some security information
such as an expiration date or CVVC (CVV). Authentication is provided by the
customer entering a personal identification number (PIN).

Using an ATM, customers can access their bank accounts in order to make cash
withdrawals (or credit card cash advances) and check their account balances as well
as purchase cellphone prepaid credit. If the currency being withdrawn from the ATM
is different from that which the bank account is denominated in (eg: Withdrawing
Japanese Yen from a bank account containing US Dollars), the money will be
converted at a wholesale exchange rate. Thus, ATMs often provide the best possible
exchange rate for foreign travelers and are heavily used for this purpose as well.

ATMs are known by various other names including Automated Transaction Machine,
automated banking machine, cashpoint (in Britain), money machine, bank machine,
cash machine, hole-in-the-wall, Bancomat (in various countries in Europe and
Russia), Multibano (after a registered trade mark, in Portugal), and Any Time Money
(in India).

Security

Security, as it relates to ATMs, has several dimensions. ATMs also provide a practical
demonstration of a number of security systems and concepts operating together and
how various security concerns are dealt with.

Physical

Early ATM security focused on making the ATMs invulnerable to physical attack;
they were effectively safes with dispenser mechanisms. A number of attacks on
ATMs resulted, with thieves attempting to steal entire ATMs by ram-raiding.

Transactional secrecy and integrity

The security of ATM transactions relies mostly on the integrity of the secure
cryptoprocessor: the ATM often uses commodity components that are not
considered to be "trusted systems".

Customer identity integrity

There have also been a number of incidents of fraud by Man-in-the-middle attacks,

where criminals have attached fake keypads or card readers to existing
machines. These have then been used to record customers' PINs and bank card
information in order to gain unauthorized access to their accounts. Various
ATM manufacturers have put in place countermeasures to protect the
equipment they manufacture from these threats.
Device operation integrity

Openings on the customer-side of ATMs are often covered by mechanical shutters to

prevent tampering with the mechanisms when they are not in use. Alarm sensors are
placed inside the ATM and in ATM servicing areas to alert their operators when doors
have been opened by unauthorized personnel.

Rules are usually set by the government or ATM operating body that dictate what
happens when integrity systems fail. Depending on the jurisdiction, a bank may or
may not be liable when an attempt is made to dispense a customer's money from an
ATM and the money either gets outside of the ATM's vault, or was exposed in a non-
secure fashion, or they are unable to determine the state of the money after a failed
transaction.

RTGS

Real time gross settlement systems (RTGS) are funds transfer systems where
transfer of money takes place from one bank to another on a "real time" and on
"gross" basis. Settlement in "real time" means payment transaction is not subjected to
any waiting period. The transactions are settled as soon as they are processed.

"Gross settlement" means the transaction is settled on one to one basis without
bunching or netting with any other transaction. Once processed, payments are final
and irrevocable.

RTGS does not require Core Banking to be implemented across participating banks.
Any RTGS would employ two sets of queues: one for testing funds availability, and
the other for processing debit/credit requests received from the Integrated Accounting
System. All transactions would be queued and submitted for funds availability testing
on a FIFO+Priority basis.

RTGS is used when funds are more than Rs. 1,00,000. Commission charged for
amount between Rs 1,00,000-5,00,000 is Rs. 25. If the amount exceeds Rs.
5,00,000, commission charged is Rs. 50. (Source: Indian Bank, Punjabi Bagh)
National Electronic Fund Transfer (NFT)

It is used for amount till Rs.1,00,000. Commission charged on it is Rs.5. It helps in

saving time and quick transfer of funds. It is also cheaper than making a demand
draft. (Source: Indian Bank, Punjabi Bagh)

Online Banking

Online banking (or Internet banking) allows customers to conduct financial

transactions on a secure website operated by their retail or virtual bank, credit union
or building society.

Features

Online banking solutions have many features and capabilities in common, but
traditionally also have some that are application specific.

The common features fall broadly into several categories

• Transactional (e.g., performing a financial transaction such as an account to

account transfer, paying a bill, wire transfer... and applications... apply for a
loan, new account, etc.)

o Electronic bill presentment and payment - EBPP

o Funds transfer between a customer's own checking and savings
accounts, or to another customer's account
o Investment purchase or sale
o Loan applications and transactions, such as repayments

• Non-transactional (e.g., online statements, check links)

o Bank statements
• Financial Institution Administration
• Support of multiple users having varying levels of authority
• Transaction approval process
Telephone Banking

Telephone banking is a service provided by a financial institution which allows its

customers to perform transactions over the telephone.

Most telephone banking use an automated phone answering system with phone
keypad response or voice recognition capability. To guarantee security, the customer
must first authenticate through a numeric or verbal password or through security
questions asked by a live representative. With the obvious exception of cash
withdrawals and deposits, it offers virtually all the features of an automated teller
machine: account balance information and list of latest transactions, electronic bill
payments, funds transfers between a customer's accounts, etc.

Usually, customers can also speak to a live representative located in a call centre or a
branch, although this feature is not guaranteed to be offered 24/7. In addition to the
self-service transactions listed earlier, telephone banking representatives are usually
trained to do what was traditionally available only at the branch: loan applications,
investment purchases and redemptions, chequebook orders, debit card replacements,
change of address, etc.

Banks which operate mostly or exclusively by telephone are known as phone banks.

Over the years, the banking sector in India has seen a no. of changes. Most of the
banks have begun to take an innovative approach towards banking with the objective
of creating more value for customers and consequently, the banks. Some of the
significant changes in the banking sector are discussed below:

Mobile Banking

Taking advantages of the booming market for mobile phones and cellular services,
several banks have introduced mobile banking which allows customers to perform
banking transactions using their mobile phones. For instances HDFC has introduced
SMS services. Mobile banking has been especially targeted at people who travel
frequently and to keep track of their banking transaction.
Rural Banking

One of the innovative scheme to be launched in rural banking was the KISAN
CREDIT CARD (KCC) SCHMME started in fiscal 1998-1999 by NABARD. KCC
mode it easier for framers to purchase important agricultural inputs. In addition to
regular agricultural loans, banks to offer several other products geared to the needs of
the rural people.

NRI Services

With a substantial number of Indians having relatives abroad, banks have begun to
offer service that allows expatriate Indians to send money more conveniently to
relatives India which is one of the major improvements in money transfer.

Eg. Western Union Money Transfer

Technological Development in Financial Sector

Financial market provides a platform to companies (or business houses who require
fund) and investors to come in contact of each other through market. What started in
India in 1875 as a place which was known as open-cry floor trading exchange became
an electronised exchange in 1995 which revolutionalised financial sector in India.

Bombay Stock Exchange and National Stock Exchange are updated in real time to
show prices of various securities being traded in market. Demat accounts were
started which allowed people to hold their investment in electronic form. Trading
accounts can be opened with intermediaries between investors and NSDL/CDSL like
Indiabulls, India infoline, sharekhan etc.

Applications Supported by Bloacked Amount (ASBA)

When a person applies in IPO, his amount of bid gets blocked when his cheque is
cleared but with ASBA, the amount remains in his bank account and when the
allotment is made, the amount due on allotment is debited from his account.
Case Study of Indiabulls and India Infoline

Indiabulls is India’s leading capital markets company with All-India Presence and an
extensive client base. Indiabulls Securities possesses state of the art trading platform,
best broking practices and is the pioneer in trading product innovations. Power
Indiabulls, in-house trading platform, is one of the fastest and most efficient trading
platforms in the country. Indiabulls Securities Limited is the first and only brokerage
house to be assigned the highest rating BQ – 1 by CRISIL.

The India Infoline group, comprising the holding company, India Infoline Limited
and its wholly-owned subsidiaries, straddle the entire financial services space with
offerings ranging from Equity research, Equities and derivatives trading,
Commodities trading, Portfolio Management Services, Mutual Funds, Life Insurance,
Fixed deposits, GoI bonds and other small savings instruments to loan products and
Investment banking.

Both have many demat accounts with them but Indiabulls with its continous
motivation to serve its customer better with innovation, always leave behind others.

1. Securities market gets closed at 3.30, even then a person can log onto his
demat and trading account and make bid for his desired share at desired price,
it is saved in its database which is communicated to the exchange when it
opens.
2. It has introduced Security token to prevent theft of shares of investors from
their accounts as recently one of its investor lost shares worth Rs. 2 crores. A
six digit number appears on the token which keeps on changing every 30
seconds.

Conclusion

Technology has been one of the most important factors for the development of
mankind. Information and communication technology is the major advent in the field
of technology which is used for access, process, storage and dissemination of
information electronically. Banking industry is fast growing with the use of
technology in the from of ATMs, on-line banking, Telephone banking, Mobile
banking etc., plastic card is one of the banking products that cater to the needs of
retail segment has seen its number grow. Financial sector has also seen considerable
development in recent years. Technology with providing better services brings risk
also so considerable measures for prevention will always be needed to serve
people better.