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RESEARCH METHODOLOGY

The primary source of the information in this research study is the secondary data.
The available information on internet regarding the E: Banking has been
extensively used to complete the dissertation report. All the available Journals,
Articles, papers provided necessary information to the group to finalize the
research study. The group worked hard to collect all the necessary data to frame
this report.

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INTRODUCTION
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. 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.
Customers access e-banking services using an intelligent electronic device, such as
a personal computer (PC), personal digital assistant (PDA), automated teller
machine (ATM), kiosk, or Touch Tone telephone.
The advent of Internet has initiated an electronic revolution in the global banking
sector. The dynamic and flexible nature of this communication channel as well as
its ubiquitous reach has helped in leveraging a variety of banking activities.
Electronic banking, also known as electronic funds transfer (EFT), is simply the
use of electronic means to transfer funds directly from one account to another,
rather than by Cheque or cash.
E-Banking has revolutionized to days banking by making it very fast, easy and far
reaching. The expectations are growing at very fast speed on the E-Banking
services. With the result, it is demanding more attention for study from various
people around the globe. Huge volume of research has been done and is still going
on different issues of E-banking. The research has helped the customers, the
bankers, and other dependent institutions in understanding various aspects of Ebanking. E-Banking has over-performed all the obsolete banking practices and the

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threat of security measures has also been growing with it. Researchers are trying to
find out the ways to cover up this risk in the E-Banking and make it more
sophisticated for everyone.
The present research study has been done in this context only. There were huge
amount of issues related to E-Banking available on the internet. But our study has
emphasized on threats and the preventive measures to accept the challenging
situations. Due, to the presence of time constraint, the study is based upon limited
papers on the same issue.
This allows customers to do their banking outside of bank hours and from
anywhere where Internet access is available. In most cases a web browser such as
Internet Explorer or Mozilla Firefox is utilized and any normal Internet connection
is suitable. No special software or hardware is usually needed.
Like any other business you have to select a bank that has a good reputation and
thats very important because you will be providing them with your account
number and password. It is also advisable to save or print any transaction done on
your behalf.
Online banking isn't out to change your money habits. Instead, it uses today's
computer technology to give you the option of bypassing the time-consuming,
paper-based aspects of traditional banking in order to manage your finances more
quickly and efficiently.

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E-BANKING IN INDIA

DEFINITION
E-banking is defined as the automated delivery of new and traditional banking
products and services directly to customers through electronic, interactive
communication channels.
E-banking 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.
Access of e-banking services is possible through using an intelligent electronic
device, such as a personal computer (PC), personal digital assistant (PDA),
automated teller machine (ATM), kiosk, or Touch Tone telephone. While the risks
and controls are similar for the various e-banking access channels, this booklet
focuses specifically on Internet-based services due to the Internets widely
accessible public network.
Electronic banking, also known as electronic funds transfer (EFT), is simply the
use of electronic means to transfer funds directly from one account to another,
rather than by Cheque or cash. You can use electronic funds transfer to:
Have your paycheck deposited directly into your bank or credit union checking
account.
Withdraw money from your checking account from an ATM machine with a
personal identification number (PIN), at your convenience, day or night.

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Instruct your bank or credit union to automatically pay certain monthly bills
from your account, such as your auto loan or your mortgage payment.
Have the bank or credit union transfer funds each month from your checking
account to your mutual fund account.
Have your government social security benefits check or your tax refund
deposited directly into your checking account.
Buy groceries, gasoline and other purchases at the point-of-sale, using a check
card rather than cash, credit or a personal check.
Use a smart card with a prepaid amount of money embedded in it for use
instead of cash at a pay phone, expressway road toll, or on college campuses at
the library's photocopy machine or bookstores.
Use your computer and personal finance software to coordinate your total
personal financial management process, integrating data and activities related
to your income, spending, saving, investing, record keeping, bill-paying and
taxes,

along

with

basic

financial

analysis

and

decision

making.

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FEATURES OF "E-BANKING"
You can do all of your banking 24 hours a day, seven days a week.
Internet banking is simply a means of providing Customers with more

banking choices.
Many of the transactions you do over-the-counter can now be done on
the Internet, on a computer, in your home - or anywhere else in the
world.
E-banking provides a range of convenient online banking services:
Transaction History - an online list of your transactions with a
convenient search option.
Bill payment provider.
Pay all your bills online.
Pay Anyone - transfer funds to any account.

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BENEFITS OF E-BANKING
In recent time E-banking has spread rapidly all over the globe. All Banks are
making greater use of E-banking facilities to provide better service and to excel in
competition. The spread of E-banking has also greatly benefited the ordinary
customer in general and corporate world in particular.
The following points summarize benefits of E-Banking.

Benefits to Consumers:
General consumers have been significantly affected in a positive manner by Ebanking. 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.
Beside 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.

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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.
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.

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Electronic banking has also helped bank in proper documentation of their records
and transactions.
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 E-banking 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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TYPES OF E-BANKING PRODUCTS PROVIDED BY BANKS

I.

ONLINE BANKING

II.

MOBILE BANKING

III.

TELE BANKING

IV.

AUTOMATED TELER MACHINE (ATM)

V.
VI.

I.

DEBIT CARD
CREDIT CARD

ONLINE BANKING:

Since the internet has become a popular place to buy and sell goods, online
banking services have made their way into most homes. Easier to pay bills, manage
money, and transfer money to other accounts, internet banking is a convenient way
to handle money. Many employers now have direct deposit, which makes it easier
to put money into one's account. No more trips to the bank every day. The money
is in the account the night before and is available for use on next morning. Most
banks now offer some type of banking services on the net.

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Features & benefits of Online Banking

1] Account services
You can now access up to date information on your accounts, ANYWHERE,
ANYTIME. Complete account details like account balance, monthly statements,
uncleared funds or Cheque status is available for your Savings account and Current
account.
2] Funds Transfers & Payments
Transfer funds instantly within your accounts or to any third party account in
Barclays. You can also leave standing instructions for frequent / periodic transfers.
3] Requests
Request a Cheque book or give stop payment instructions.
4] Bill Payments
Our Bill Payment facility allows you to pay your utility bills online, at your
convenience.
5] Other Services
Services (Secure Mail box and Bulletins).
6] Protection Cover
As a personal customer, you are fully protected against third party fraud when
banking using Barclays Online Banking/mobile banking. You will not suffer any loss

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if money is taken from your account without your permission provided you have not
acted fraudulently or negligently.
7] Security
Admittedly, such a service requires complete privacy protection and security of the
highest nature. We provide a completely secure environment, using 128-bit
encryption SSL (Secure Sockets Layer), digitally certified by Verisign. 128-bit SSL
guarantees world-class security for Internet and e-commerce applications.

Disadvantages
The world has come from far and we are every day digging into the unknown, what
was unthinkable then is now a practice. Today, you can bank right from the comfort
of your home and benefits come with it. However, though internet banking is such a
good and desirable innocent, it has some disadvantages as listed:

1] Setting up an account may take time

In order to register for your bank's online program, you will probably have to
provide ID and sign a form at a bank branch. Some banks even ask for photos
2] Legal issues
If you and your spouse wish to view and manage your assets together online, one of
you may have to sign a durable power of attorney before the bank will display all of
your holdings together.

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3] Learning difficulties
Banking sites can be difficult to navigate at first. Getting acquitted with the banking
sites software may require some time to read the tutorials in order to become
comfortable in your virtual lobby.
4] Site changes and upgrades
Even the largest banks periodically upgrade their online programs, adding new
features in unfamiliar places. In some cases, you may have to re-enter account
information.
5] Customer service
There is no personal contact with any of the staff, and if talk to any staff through the
telephone, you have guarantee you are talking to the best person available.
6] Internet account
You need to get an account with an Internet Service Provider (ISP) which may be
another hectic experience.
7] Security concern
Even though online banking sites are heavily encrypted, with the developing
technology, its hard to rule out the "hackers" who may access your bank accounts.
8] Switching banks
This can be more cumbersome online than in person.
9] Money usage

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You cant spend your money from the online bank account as you wish, in the end;
you will need to go to an ATM to withdraw money for usage.

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II.

E-BANKING IN INDIA

MOBILE BANKING:

Mobile banking through cell phone is really catching up. Now you can access your
account, transfer funds or make payments with your mobile. Mobile connectivity is
vast and this makes mobile banking very successful.

Advantages of

Mobile Banking

Mobile banking through cell phone offers many advantages for customers as well
as banks. Some of them are as follows:
1] You can make transactions or pay bills anytime. It saves a lot of time.
2] Mobile banking thorough cell phone is user friendly. The interface is also very
simple. You just need to follow the instructions to make the transaction. It also saves
the record of any transactions made.
3] Cell phone banking is cost effective. Various banks provide this facility at a lower
cost as compared to banking by self.
4] Banking through mobile reduces the risk of fraud. You will get an SMS whenever
there is an activity in your account. This includes deposits, cash withdrawals, funds
transfer etc. You will get a notice as soon as any amount is deducted or deposited in
your account.
5] Banking through cell phone benefits the banks too. It cuts down on the cost of
tele- banking and is more economical.

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6] Mobile banking through cell phone is very advantageous to the banks as it serves
as a guide in order to help the banks improve their customer care services.
7] Banks can be in touch with their clients with mobile banking.
8] Banks can also promote and sell their products and services like credit cards,
loans etc. to a specific group of customers.
9] Various banking services like Account Balance Enquiry , Credit/Debit Alerts, Bill
Payment Alerts, Transaction History, Fund Transfer Facilities, Minimum Balance
Alerts etc. can be accessed from your mobile.

Mobile banking has become really popular owing to the convenience that it gives
its customers. You can access your account, pay bills, and make cash transfers
through cell phone banking. It offers many benefits over internet banking and
banking in person. With the wide range of mobile connectivity, mobile banking
through cell phone can be accessed by anyone.

Pros. of Mobile Banking

1] Three ways to connect from your phone
Arising from the need to accommodate the limitations of different cell phones, banks
are trying to offer a connection to meet most models. The typical method to access
your banking information is via a web browser on those phones with Internet surfing
capability. You would log on in the same way as when using your computer. For
those phones without Internet capability, some banks provide special software that
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you can download onto your phone. Other banks offer balance information via text
messaging. How you access your banking information is really is a matter of cell
phone compatibility.
2] Account numbers are not displayed over wireless cell phone connections
When you log into your account from your cell phone you will not be asked for
account information and once you access your account the number is not visible.
Such precautions make it less likely (although not impossible) for your sensitive
financial information to be breached by hackers.
3] The servers of most banks are encrypted for wireless transactions
Although safety does vary from bank to bank, if handled correctly, wireless
transactions can actually be more secure than wired or landline connections due to
the use of encrypted serversthough, again, there is no guarantee.
4] Mobile banking is generally offered free by your bank
Most banks are not charging their customers additional fees for this service.
However, your cell phone bill will increase due to Internet usage. Some mobile
banking programs also allow customers to pay their bills from their phone. In this
regard,

the

service

might

actually

be

less

expensive

than

online bill

payment programs.

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III.

E-BANKING IN INDIA

TELE BANKING:

Tele bank helps track and control finances, all from the comfort of home or office.
Designed to save time and money, Tele bank allows 24 hour access to bank
accounts via the telephone. You can access current balances, transfer money
between accounts, and much more. It is safe and secureand free!
United Bank of India offers Tele-Banking Services to its Retail Customers. The
IVR (Interactive Voice Response) supports three languages Hindi, English &
Bengali. The facility is available for Savings, Current, Cash Credit, Overdraft,
Deposit and Loan accounts.

Features and Benefits of Telephone Banking_

With balance and basic account enquiries
Order Cheque and paying-in books
Stop a Cheque
Set up, cancel and amend standing orders
Order foreign currency and travelers cheese
Transfer money between your business and personal accounts
Order copies of your statements and change the date you receive them
With information on business products and services

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IV.

E-BANKING IN INDIA

AUTOMATED TELLER MACHINE (ATM):

A wallet-sized plastic Automatic Teller Machine (ATM) card linked to your bank
account makes financial transactions a breeze by eliminating the waste of writing
checks or the dangers of carrying large sums of cash. Also known as a debit card,
ATM cards benefit both consumers and the banking institution where they
originated.
On most modern ATMs, the customer is identified by inserting a plastic ATM
card with a magnetic 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).
The customers should register first their mobile phone number and bank will give a
four-digit code to enter into ATM to withdraw the cash.
Using an ATM, customers can access their bank accounts in order to make cash
withdrawals, debit card cash advances, and check their account balances as well as
purchase prepaid cell phone credit. If the currency being withdrawn from the ATM
is different from that which the bank account is denominated in (e.g.: Withdrawing
Japanese Yen from a bank account containing US Dollars), the money will be
converted at an official wholesale exchange. Thus, ATMs often provide one of the

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best possible official exchange rates for foreign travelers, and are also widely used
for this purpose.

Benefits of ATM
1] Benefits for Consumers
Use an ATM card to keep accurate records of banking transactions. Monthly
statements, usually available online or printed and mailed, itemize each transaction
made with the card. This benefit leads to fewer accidental overdrafts, and provides a
visual record of spending habits, unlike using cash. Transactions are processed
quickly with an ATM card. Sliding the card is faster than writing a check, more
accurate than paying with cash (since change can be miscounted), and makes some
transactions quicker. For example, using an ATM card at a gasoline pump eliminates
the hassle of standing in line in a convenience store to complete the sale. After a
quick swipe and approval, a receipt is often printed at the gas pump for user
convenience. ATM cards are usually free, according to Merchant's State Bank.
Unlike checks, many financial institutions do not charge their customers for an ATM
card.
2] Benefits for Businesses
When consumers use ATM cards to pay for purchases, funds are deposited quickly
into the business account. In as little as 48 hours, businesses will have access to
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money from ATM card transactions. Checks can take up to seven days to clear,
putting a hold on accessible funds. Business owners pay to offer the convenience of
credit card transactions for their customers. For each transaction, a small percentage
is paid to the credit card company as a convenience fee. ATM card transactions are a
win-win for both the businesses that accept the ATM card and the consumer. When
consumers pay retailers with an ATM card, the business owner doesn't have to pay a
fee. And, consumers don't have to pay interest or annual fees when using an ATM
card, like they would with use of a credit card.
3] Benefits for Travel
When you're trying to pack light, leave the checkbook and stack of paper money at
home. One simple ATM card can pay for purchases with funds directly withdrawn
from your checking account. The small card is simple to tuck in a small purse or in
a snug pocket. When cash is needed, get a better exchange rate in foreign countries
by using an ATM card. Foreign ATM machines offer users access to the wholesale
exchange rate, which is often less expensive than paying service fees when
exchanging cash or travelers checks in a foreign bank or currency exchange office.

Disadvantages of Automatic Teller Machines

Automated teller machines, or ATMs, are machines that function like bank tellers,
allowing customers to perform basic banking functions, such as making deposits,
making withdraws and shifting money between different accounts. In place of
identification, bank members use personalized debit cards to access their holdings.
There are a number of disadvantages to these machines.
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1] Security
Unlike bank tellers, ATMs do not require the person performing the transaction to
present picture identification. Rather, the person must only insert a bank card and
enter a personal identification number. If the bank card is stolen and the number
ascertained, an unauthorized person can easily access the account.
2] Inability to Perform Complex Transactions
ATMs can only perform relatively basic transactions. This means that people who
need to complete these longer transactions will be forced to use the teller,
restricting use of the ATM for people who need to complete simple business. In
this sense, the ATM Is rather like the express line in a supermarket--faster for
some, but unavailable to others.
3] Fees
With the advent of ATMs came ATM fees. Not only do banks of which you are not
a member charge fees for the use of their ATMs, but users are often charged
surreptitious fees by their own banks for using other banks' ATMs--meaning the
customer is docked twice for the same transaction.
4] Privacy
Unlike banks, in which security guards and tellers are present to ensure the person
performing a transaction receives privacy, there is no such guarantee when using
an ATM. People may try to spy on users as delicate information appears on the
screen, without the user being aware.
5] Difficulty of Use

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The performance of business at an ATM is generally quicker than that at a human

teller. However, the ATM is incapable of providing personalized instruction to the
user in a way that a human teller can. This can result in longer wait times if the
user currently using the machine is struggling to complete a transaction.
6] Eating a Card
Occasionally, ATMs will malfunction and swallow a user's ATM card. The
customer will then be directed to contact a service number or their bank and wait
for a repair technician to retrieve this card. While this happens only rarely, if it
occurs on a weekend or at night, the user may be left to wait for several days
before they can again use their card, something that would not happen with a
human cashier.

V.

DEBIT CARD:

A debit card (also known as a bank card or check card) is a plastic card that
provides the cardholder electronic access to his or her bank account(s) at a
financial institution. Some cards have a value with which a payment is made, while
most relay a message to the cardholder's bank to withdraw funds from a designated
account in favor of the payee's designated bank account. The card can be used as
an alternative payment method to cash when making purchases. In some cases,
the primary account number is assigned exclusively for use on the Internet and
there is no physical card.
In many countries, the use of debit cards has become so widespread that their
volume has overtaken or entirely replaced Cheque and, in some instances, cash
transactions. The development of debit cards, unlike credit cards and charge cards,

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has generally been country specific resulting in a number of different systems

around the world, which were often incompatible. Since the mid-2000s, a number
of initiatives have allowed debit cards issued in one country to be used in other
countries and allowed their use for internet and phone purchases.
Unlike credit and charge cards, payments using a debit card are immediately
transferred from the cardholder's designated bank account, instead of the them
paying the money back at a later date.
Debit cards usually also allow for instant withdrawal of cash, acting as the ATM
card for withdrawing cash. Merchants may also offer cash back facilities to
customers, where a customer can withdraw cash along with their purchase.

Advantages of debit cards

Obtaining a debit card is often easier than getting a credit card. If you
qualify to open a bank account, you can usually get a debit card.
Unlike when you write a check, using a debit card saves you from having to
show identification or give out personal information at the time of the
transaction.
It frees you from carrying cash or a checkbook.
It can save you from having to stock up on traveler's checks or cash when
you travel.
Debit cards may be more readily accepted than checks, especially in other
states or countries.

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If you return merchandise or cancel services paid for with a debit card, the
transaction will be treated as if it were made with cash or a check.
Customers usually get cash back for on-line purchases; for off-line
transactions, the amount is credited to your account.
Most ATMs will allow you to get a cash advance against the line of credit
on your credit card, using your credit card and a separate PIN. You do not
necessarily have to have a bank account to do this.
Disadvantages of debit cards
Unlike a credit card, debit card transactions give you no grace period. They
are a quick, pay-now deal.
They can make balancing your account tricky if you are not fastidious about
keeping receipts and recording transactions in a timely fashion. It is easy to
forget, for example, when you pay at the gas pump with a debit card and
drive off without your receipt.
Using a debit card may mean you have less protection than you would with
a credit card for goods that are never delivered, are defective or were
misrepresented. But, as with credit cards, you can dispute unauthorized
charges or other mistakes within 60 days. Contact your bank if a problem
with a merchant cannot be resolved.
Fees -- The convenience can be costly, especially when using an ATM that
is not affiliated with your bank.

VI.

CREDIT CARD:

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A credit card is a payment card issued to users as a system of payment. It allows

the cardholder to pay for goods and services based on the holder's promise to pay
for them. The issuer of the card creates a revolving account and 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.
A credit card is different from a charge card: a charge card requires the balance to
be paid in full each month. [2] In contrast, credit cards allow the consumers a
continuing balance of debt, subject to interest being charged. A credit card also
differs from a cash card, which can be used like currency by the owner of the card.

Advantage of credit cards

They allow you to make purchases on credit without carrying around a lot
of cash. This allows you a lot of flexibility.
They allow accurate record-keeping by consolidating purchases into a
single statement.
They allow convenient remote purchasing - ordering/shopping online or by
phone. They allow you to pay for large purchases in small, monthly
installments.
Under certain circumstances, they allow you to withhold payment for
merchandise which proves defective.
They are cheaper for short-term borrowing - interest is only paid on the
remaining debt, not the full loan amount.

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Many cards offer additional benefits such as additional insurance cover on

purchases, cash back, air miles and discounts on holidays.

Disadvantages
You may become an impulsive buyer and tend to overspend because of the
ease of using credit cards. Cards can encourage the purchasing of goods and
services you cannot really afford.
Credit cards are a relatively expensive way of obtaining credit if you don't
use them carefully, especially because of the high interest rates and other
costs.
Lost or stolen cards may result in some unwanted expense and
inconvenience.
The use of a large number of credit cards can get you even further into debt.
Using a credit card, especially remotely, introduces an element of risk as the
card details may fall into the wrong hands resulting in fraudulent purchases
on the card. Fraudulent or unauthorized charges may take months to
dispute, investigate, and resolve.

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POTENTIAL AREAS WHERE E-BANKING IS SUCCESSFULLY

USED
Online bill payment: Internet banking is frequently used for tax
payments, Bill payments like of electricity, water, municipal and
telephones. Many public sector companies are offering online payment
services, for e.g. MTNL, BSNL etc. Indian Railways has started online
reservation system for credit card and debit cardholders. In coming
future even persons having Internet bank account can book seat online at
ease of their home.
Online brokerage: Strong financial markets are always backbone of any
economy. Through e-banking channels stock trading can reach to the
people who want to invest their money in financial markets but due to
time constraints they are not able to visit the broker. At Asian tigers like
Korea and Taiwan 30% of the stock trading is done online. This will
create more dynamic environment and there will be more choice for
small investor for his investment. The small investor is not only
dependent on government bonds or other fixed deposits schemes.
Online Account Management: Citizens can manage their account online.
Anytime banking, it will reduce the time delays and dependency on bank
staff and timing of operations.
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Anywhere banking: Citizen can deposit/withdraw their money anywhere

in country irrespective of the branch where their parent account is held.
This will give greater security for traveling business people to deposit
money collected from traders/clients. ATMs is another mode of
anywhere banking, consumer can use services of ATMs anywhere in
country, reducing burden of carrying money while traveling.
Smart Card Solutions: Smart cards will give helpful in bringing
governmental services and banking more closer to people. Farmer
service centres are example of this initiative. Smart cards will be greater
flexibility to users reducing the frauds and malpractices what debit cards
and credit cards are not able to offer. On the other hand smart card can
be used as identification card for number of other services like driving
license, passport, election id card and other things. The application of
online banking in e-governance can explain by two real life case studies.

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E-BANKING GLOBAL PERSPECTIVE

The advent of Internet has initiated an electronic revolution in the global banking
Sector. The dynamic and flexible nature of this communication channel has helped
in leveraging a variety of banking activities.
The Internet has emerged as one of the major distribution channels of banking
products and services, for the banks in US and in the European countries. Initially,
banks promoted their core capabilities i.e., products, services and advice through
Internet. Then, they entered the e-commerce market as providers/distributors of
their own products and services. More recently, due to advances in Internet security
and the advent of relevant protocols, banks have discovered that they can play their
primary role as financial intermediates and facilitators of complete commercial
transactions via electronic networks especially through the Internet.
Some banks have chosen a route of establishing a direct web presence while others
have opted for either being an owner of financial services centric electronic
marketplace or being participants of a non-financial services centric electronic
marketplace.
Banking transactions had already started taking place through the Internet way
back in 1995. The Internet promised an ideal platform for commercial exchange,
helping banks to achieve new levels of efficiency in financial transactions by
strengthening customer relationship, promoting price discovery and spend
aggregation and increasing the reach. Electronic finance offered considerable

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opportunities for banks to expand their client base and rationalize their business
while the customers received value in the form of savings in time and money.

CHALLENGES OF THE "E-BANKING REVOLUTION"

Electronic banking is the wave of the future. It provides enormous benefits to
consumers in terms of the ease and cost of transactions. But it also poses new
challenges for country authorities in regulating and supervising the financial
system and in designing and implementing macroeconomic policy.

LOOKING FORWARD
An old Chinese saying goes: If you don't know where you are going - you will
never get there. Globally, the financial sector is metamorphosing under the impact
of competitive, regulatory and technological forces. The banking sector is currently
in a transition phase with re-alignment, mergers and entry of new players from
different industry is becoming common. Many countries including are deregulating their banking sector and government policies no longer form an entry
barrier to banks competitors.
Technology has leveled the playing field: the bargaining power of consumers is
increasing, switching costs are becoming lower and consumer loyalties are harder
to retain. Primary goal of the banking sector including every Bank is mainly to
make profit, which in turn is ploughed back to increase business and reach, and
pay dividends or share profits to the stakeholders. This is perfectly correct, yet
generic goal. More over the product (schemes) differentiation is very difficult for
banks as most of the products sold are constrained by legal or industry regulations.
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Now, if you are already thinking about Technology as a tool in Banking you could
probably set some of these goals:
Selling financial products and services
Cutting operational costs
Branding & Market recognition
Keeping profitable customers
Every day more and more people are turning to the Technology for their personal
banking. It is a safe, convenient way to shop for financial services, maintain bank
accounts and conduct business 24 hours a day. Every one of us has always enjoyed
a special relationship with their neighborhood bank. Why are so many people
suddenly choosing their personal computers as the new way to view and manage
their money?
Quite simple - because it is a valuable option to have. Bank customers can save
time by banking online. There is no need to stand in one more line to perform the
most basic transactions when they can be done quickly from the desktop PC
anytime, day or night. But even with more complicated transactions or investment
decisions, people like having direct control over their finances themselves. They
find it convenient to access all of their financial information in one place. Ease of
use is one of the most important factors. Navigation through online banking should
be simple and intuitive. Banks need to appeal to customers who may not be
technologically sophisticated, and should not require an engineering degree to get
started or use the service. Customers also choose banks whose online services are
reliable. Benefits for the bank should always reflect benefits for the customer of
banking services.
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INTERNATIONAL EXPERIENCE
Internet banking has presented regulators and supervisors worldwide with new
challenges. The Internet, by its very nature, reaches across borders and is, for this
reason, engaging the attention of regulatory and supervisory authorities all over the
world.
In the USA, the number of thrift institutions and commercial banks with
transactional web-sites is 1275 or 12% of all banks and thrifts. Approximately 78%
of all commercial banks with more than $5 billion in assets, 43% of banks with
$500 million to $5 billion in assets, and 10% of banks under $ 500 million in assets
have transactional web-sites.
Several new business process and technological advances such as Electronic Bill
Presentment and Payment (EBPP), handheld access devices such as Personal
Digital Assistants (PDAs), Internet Telephone and Wireless Communication
channels and phones are emerging in the US market.
For retail e-commerce in the US, most payments made over the Internet are
currently completed with credit cards and are cleared and settled through existing
credit card clearing and settlement systems. Efforts are under way to make it easier
to use debit cards, Cheque and the Automated Clearing House (ACH) to make
payments over the Internet. Versions of e-money, smart cards, e-Cheque and other
innovations are being experimented with to support retail payments over the
Internet.

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THE INDIAN SCENARIO

The entry of Indian banks into Net Banking

Internet banking, both as a medium of delivery of banking services and as a
strategic tool for business development, has gained wide acceptance internationally
and is fast catching up in India with more and more banks entering the fray. India
can be said to be on the threshold of a major banking revolution with net banking
having already been unveiled. A recent questionnaire to which 46 banks responded,
has revealed that at present, 11 banks in India are providing Internet banking
services at different levels, 22 banks propose to offer Internet banking in near
future while the remaining 13 banks have no immediate plans to offer such facility.
At present, the total Internet users in the country are estimated at 9 lakh. However,
this is expected to grow exponentially to 90 lakh by 2003. Only about 1% of
Internet users did banking online in 1998. This increased to 16.7% in March 2000.
The growth potential is, therefore, immense. Further incentives provided by banks
would dissuade customers from visiting physical branches, and thus get hooked
to the convenience of arm-chair banking. The facility of accessing their accounts
from anywhere in the world by using a home computer with Internet connection, is
particularly fascinating to Non-Resident Indians and High Net worth Individuals
having multiple bank accounts.

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Products and services offered

Banks in India are at different stages of the web-enabled banking cycle. Initially, a
bank, which is not having a web site, allows its customer to communicate with it
through an e-mail address; communication is limited to a small number of
branches and offices which have access to this e-mail account. As yet, many
scheduled commercial banks in India are still in the first stage of Internet banking
operations.
With gradual adoption of Information Technology, the bank puts up a web-site that
provides general information on the banks, its location, services available e.g. loan
and deposits products, application forms for downloading and e-mail option for
enquiries and feedback. Customers are required to fill in applications on the Net
and can later receive loans or other products requested for at their local branch.
Some of the more aggressive players in this area such as ICICI Bank Ltd., HDFC
Bank Ltd., UTI Bank Ltd., Citibank, Global Trust Bank Ltd. and Bank of Punjab
Ltd. offer the facility of receipt, review and payment of bills on-line. These banks
have tied up with a number of utility companies. The Infinity service of ICICI
Bank Ltd. Also allows online real time shopping mall payments to be made by
customers. HDFC Bank Ltd. has made e-shopping online and real time with the
launch of its payment gateway.
It has tied up with a number of portals to offer business-to-consumer (B2C)
ecommerce transactions. The first online real time e-commerce credit card
transaction in the country was carried out on the Easy3shoppe.com shopping mall,
enabled by HDFC Bank Ltd. on a VISA card.

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The Future Scenario of E-banking in India

Compared to banks abroad, Indian banks offering online services still have a long
way to go. For online banking to reach a critical mass, there has to be sufficient
number of users and the sufficient infrastructure in place. The Infinity product of
ICICI Bank Ltd. gets only about 30,000 hits per month, with around 3,000
transactions taking place on the Net per month through this service. Though
various security options like line encryption, branch connection encryption,
firewalls, digital certificates, automatic signoffs, random pop-ups and disaster
recovery sites are in place or are being looked at, there is as yet no Certification
Authority in India offering Public Key Infrastructure which is absolutely necessary
for online banking.
The communication bandwidth available today in India is also not enough to meet
the needs of high priority services like online banking and trading. Some banks
even today do not have uninterrupted power supply unit or systems to take care of
prolonged power breakdown. Proper encryption of data and effective use of
passwords are also matters that leave a lot to be desired. Systems and processes
have to be put in place to ensure that errors do not take place.
The Department of Telecommunications (DoT) is moving fast to make available
additional bandwidth, with the result that Internet access will become much faster
in the future. This is expected to give a fillip to Internet banking in India.
Reserve Bank of India has taken the initiative for facilitating real time funds
transfer through the Real Time Gross Settlement (RTGS) System. Under the RTGS
system, transmission, processing and settlements of the instructions will be done
on a continuous basis. Gross settlement in a real time mode eliminates credit and
liquidity risks. Any member of the system will be able to access it through only
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one specified gateway in order to ensure rigorous access control measures at the
user level. The system will have various levels of security, viz., Access security,
128 bit cryptography, firewall, certification etc. Further, Generic Architecture, both
domestic and cross border, aimed at providing inter-connectivity across banks has
been accepted for implementation by RBI. Following a reference made this year, in
the Monetary and Credit Policy statement of the Governor, banks have been
advised to develop domestic generic model in their computerization plans to ensure
seamless integration. The abovementioned efforts would enable online banking to
become more secure and efficient.

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SECURITY MEASURES
Protection through single password authentication, as is the case in most secure
Internet shopping sites, is not considered secure enough for personal online
banking applications in some countries. Online banking user interfaces are secure
sites (generally employing the https protocol) and traffic of all information including the password - is encrypted, making it next to impossible for a third party
to obtain or modify information after it is sent. However, encryption alone does not
rule out the possibility of hackers gaining access to vulnerable home PCs and
intercepting the password as it is typed in (key logging). There is also the danger of
password cracking and physical theft of passwords written down by careless users.
Many online banking services therefore impose a second layer of security.
Strategies vary, but a common method is the use of transaction numbers, or Tans,
which are essentially single, use passwords. Another strategy is the use of two
passwords, only random parts of which are entered at the start of every online
banking session. This is however slightly less secure than the TAN alternative and
more inconvenient for the user. A third option, used in many European countries
and currently being trialled in the UK is providing customers with security token
devices capable of generating single use passwords unique to the customer's token
(this is called two-factor authentication or 2FA). Another option is using digital
certificates, which digitally sign or authenticate the transactions, by linking them to
the physical device (e.g. computer, mobile phone, etc.). While most online banking
in the United States still uses single password protection, the FDIC has issued
regulations requiring that banks implement more secure authentication
mechanisms by the end of the year 2006.
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FRAUD OR RISK IN "E-BANKING"

Some customers avoid online banking as they perceive it as being too vulnerable to
fraud. The security measures employed by most banks are never 100% safe, but in
practice the number of fraud victims due to online banking is very small. Indeed,
conventional banking practices may be more prone to abuse by fraudsters than
online banking. Credit card fraud, signature forgery and identity theft are far more
widespread "offline" crimes than malicious hacking. Bank transactions are
generally traceable and criminal penalties for bank fraud are high. Online banking
can be more insecure if users are careless, gullible or computer illiterate. An
increasingly popular criminal practice to gain access to a user's finances is
phishing, whereby the user is in some way persuaded to hand over their
password(s) to a fraudster.
However, management should consider additional precautions when originating
and approving loans electronically, including assuring management information
systems effectively track the performance of portfolios originated through ebanking channels

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E-BANKING IN INDIA CHALLENGES AND OPPORTUNITIES

E-banking is a generic term for delivery of banking services and products through
electronic channels, such as the telephone, the internet, the cell phone, etc. The
concept and scope of E-banking is still evolving. It facilitates an effective payment
and accounting system thereby enhancing the speed of delivery of banking services
considerably. While E-banking has improved efficiency and convenience, it has
also posed several challenges to the regulators and supervisors. Several initiatives
taken by the government of India, as well as the Reserve Bank of India (RBI), have
facilitated the development of E-banking in India.
The government of India enacted the IT Act, 2000, which provides legal
recognition to electronic transactions and other means of electronic commerce. The
RBI has been preparing to upgrade itself as a regulator and supervisor of the
technologically dominated financial system. It issued guidelines on risks and
control in computer and telecommunication system to all banks, advising them to
evaluate the risks inherent in the systems and put in place adequate control
mechanisms to address these risks. The existing regulatory framework over banks
has also been extended to E-banking. It covers various issues that fall within the
framework of technology, security standards, and legal and regulatory issues.

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Reserve Bank has brought out a set of operating guidelines for adoption by
banks.
For the purpose of these Guidelines, mobile banking transactions is undertaking
banking transactions using mobile phones by bank customers that involve
credit/debit to their accounts. It also covers accessing the bank accounts by
customers

for

non-monetary

transactions

like

balance

enquiry

etc.

1. Regulatory & Supervisory Issues:

Only banks which are licensed and supervised in India and have a physical
presence in India will be permitted to offer mobile banking services.
The services shall be restricted only to customers of banks and holders of
debit/credit cards issued as per the extant Reserve Bank of India guidelines.
Only Indian Rupee based domestic services shall be provided. Use of
mobile banking services for cross border transfers is strictly prohibited.
Banks may also use the services of Business Correspondent appointed in
compliance with RBI guidelines, for extending this facility to their
customers.
The guidelines issued by the Reserve Bank on Risks and Controls in
Computers and Telecommunications vide circular DBS.CO.ITC.BC. 10/
31.09.001/ 97-98 dated 4th February 1998 will apply mutatis mutandis to
mobile banking.

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The guidelines issued by Reserve Bank on Know Your Customer (KYC),

Anti Money Laundering (AML) and combating the Financing of
Terrorism (CFT) from time to time would be applicable to mobile based
banking services also.
Only banks who have implemented core banking solutions would be
permitted to provide mobile banking services.
Banks shall file Suspected Transaction Report (STR) to Financial
Intelligence Unit India (FID-IND) for mobile banking transactions as in
the case of normal banking transactions.
2. Registration of customers for mobile service:
Banks shall put in place a system of document based registration with
mandatory physical presence of their customers, before commencing mobile
banking service.
On registration of the customer, the full details of the Terms and Conditions
of the service offered shall be communicated to the customer.
3. Technology and Security Standards:
Information Security is most critical to the business of mobile banking
services and its underlying operations. Therefore, technology used for
mobile banking must be secure and should ensure confidentiality, integrity,
authenticity and non-reputability.
4. Inter-operability

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Banks offering mobile banking service must ensure that customers having
mobile phones of any network operator is in a position to avail of the
service. Restriction, if any, to the customers of particular mobile operator(s)
is permissible only during the initial stages of offering the service, up to a
maximum period of six months subject to review.

The long term goal of mobile banking framework in India would be to

enable funds transfer from account in one bank to any other account in the
same or any other bank on a real time basis irrespective of the mobile
network a customer has subscribed to. This would require inter-operability
between mobile banking service providers and banks and development of a
host of message formats. To ensure inter-operability between banks, and
between their mobile banking service providers banks shall adopt the
message formats like ISO 8583, with suitable modification to address
specific needs.

5. Clearing and Settlement for inter-bank funds transfer transactions

To meet the objective of a nation-wide mobile banking framework,
facilitating inter-bank settlement, a robust clearing and settlement
infrastructure operating on a 24x7 basis would be necessary. Pending
creation of such a national infrastructure, banks may enter into bilateral or
multilateral arrangement for inter-bank settlements, with express permission
from Reserve Bank of India, wherever necessary.
6. Customer Complaints and Grievance Redressal Mechanism

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The customer /consumer protection issues assume a special significance in

view of the fact that the delivery of banking services through mobile phones
is relatively new.

7. Transaction limit
A per transaction limit of Rs. 2500/- shall be imposed on all Mobile
Banking transactions. Subject to an overall cap of Rs. 5000/- per day, per
customer.
Banks may also put in place monthly transaction limit depending on the
banks own risk perception of the customer.
8. Board approval
Approval of the Board of Directors (Local Board in case of foreign banks)
for the product as also the related security policies must be obtained before
launching the scheme.
9. Approval of Reserve Bank of India
Banks wishing to provide mobile banking services shall seek prior one time
approval of the Reserve Bank of India, by furnishing full details of the
proposal.
10. Security Precautions

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Customers should never share personal information like PIN numbers,

passwords etc. with anyone, including employees of the bank. It is important
that documents that contain confidential information are safeguarded. PIN or
password mailers should not be stored, the PIN and/or passwords should be
changed immediately and memorized before destroying the mailers.

Customers are advised not to provide sensitive account-related information

over unsecured e-mails or over the phone. Take simple precautions like
changing the ATM PIN and online login and transaction passwords on a
regular basis. Also ensure that the logged in session is properly signed out.

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EBANKING CAN EASE YOUR LIFE

Penalty due to non-payment of bill is not new to anyone of us. And quite
obviously, who likes the long procedure of writing a Cheque, standing in a long
queue and then ensuring that the particular amount is available in your bank
account?
Indian banks are trying to make your life easier. Not just bill payment, you can
make investments, shop or buy tickets and plan a holiday at your fingertips. In fact,
sources from ICICI Bank, "Our Internet banking base has been growing at an
exponential pace over the last few years. Currently around 78 per cent of the bank's
customer base is registered for Internet banking."
To get started, all you need is a computer with a modem or other dial-up device, a
checking account with a bank that offers online service and the patience to
complete about a one-page application--which can usually be done online. You can
avail the following services.
Bill payment service
Each bank has tie-ups with various utility companies, service providers and
insurance companies, across the country. You can facilitate payment of electricity
and telephone bills, mobile phone, credit card and insurance premium bills.
To pay your bills, all you need to do is complete a simple one-time registration for
each biller. You can also set up standing instructions online to pay your recurring
bills, automatically. One-time standing instruction will ensure that you don't miss

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out on your bill payments due to lack of time. Most interestingly, the bank does not
charge customers for online bill payment.
Fund transfer
You can transfer any amount from one account to another of the same or any
another bank. Customers can send money anywhere in India. Once you login to
your account, you 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.
Credit card customers
Credit card users have a lot in store. With Internet banking, customers can not only
pay their credit card bills online but also get a loan on their cards. Not just this,
they can also apply for an additional card, request a credit line increase and God
forbid if you lose your credit card, you can report lost card online.
Railway pass
The bank would just charge Rs 10 + 12.24 per cent of service tax. This is
something that would interest all the aam janta. Indian Railways has tied up with
ICICI bank and you can now make your railway pass for local trains online. The
pass will be delivered to you at your doorstep. But the facility is limited to
Mumbai, Thane, Nashik, Surat

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Investing through Internet banking

Opening a fixed deposit account cannot get easier than this. You can now open an
FD online through funds transfer. Online banking can also be a great friend for lazy
investors.
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.
So you need not worry about filling those big forms for mutual funds, they will
now be just a few clicks away. 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, which will link
your two accounts.
Recharging your prepaid phone
Now you no longer need to rush to the vendor to recharge your prepaid phone,
every time your talk time runs out. Just top-up your prepaid mobile cards by
logging in to Internet banking. By just selecting your operator's name, entering
your mobile number and the amount for recharge, your phone is again back in
action within few minutes.

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Shopping at your fingertips

Leading banks have tie ups with various shopping websites. With a range of all
kind of products, you can shop online and the payment is also made conveniently
through your account. You can also buy railway and air tickets through Internet
banking.

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INTERNET BANKING V/S 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 your 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, you can check your transactions at any time of the day,
and as many times as you want to.
On the other hand, in a traditional method, you get quarterly statements from the
bank and if you request for a statement at your required time, it may turn out to be
an expensive affair. The branch may charge you Rs 25 per page, which includes
only 30 transactions. Moreover, the bank branch would take eight days to deliver it
at your 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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CONCLUSION
While electronic banking can provide a number of benefits for customers and new
business opportunities for banks, it exacerbates traditional banking risks. Even
though considerable work has been done in some countries in adapting banking
and supervision regulations, continuous vigilance and revisions will be essential as
the scope of e-banking increases. In particular, there is still a need to establish
greater harmonization and coordination at the international level. Moreover, the
ease with which capital can potentially be moved between banks and across
borders in an electronic environment creates a greater sensitivity to economic
policy management. To understand the impact of e-banking on the conduct of
economic policy, policymakers need a solid analytical foundation. Without one, the
markets will provide the answer, possibly at a high economic cost. Further research
on policy-related issues in the period ahead is therefore critical.

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