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1.1 Introduction of the topic
Internet banking or online banking is a generic term
for the delivery of banking services and products through the
electronic channels such as the telephone, the internet, the cell
phone etc. The concept and scope of Internet banking is still
evolving. It facilitates an effective payment and accounting
system thereby enhancing the speed of delivery of banking
services considerably.
Banks have traditionally been in the forefront of
harnessing technology to improve their products, services and
efficiency. They have, over a long time, been using electronic and
telecommunication networks for delivering a wide range of value
added products and services. The delivery channels include direct
dial-up connections, private networks, public networks etc and
the devices include telephone, personal computers including the
Automated Teller Machines,etc.With the popularity of PC s,easy
access to Internet and World Wide Web(WWW),Internet is
increasingly used by banks as a channel for receiving instructions
and delivering their products and services to their customers. This
form of banking is generally referred to as Internet Banking,
although the range of products and services offered by different
banks vary widely both in their content and sophistication.
Broadly, the levels of banking services offered through
INTERNET BANKING can be categorized in to three types:

The Basic Level Service is the bankswebsites which
disseminate information on different products and services
offered to customers of public in general. It may receive and reply
to customers queries through e-mail,

In the next level are Simple Transactional Websites which
allow customers to submit their instructions, applications for
different services, queries on their account balances, etc, but do
not permit any fund-based transactions on their accounts,
(iii) The third level of Internet banking services are offered by
Fully Transactional Websites which allow the customer to operate
on their accounts for transfer of funds, payment of different bills,
subscribing to other products of the banks and to transact and
sale of securities, etc.

The above forms of internet banking services are offered by

traditional banks, as an additional method of serving the
customer or by new banks, who deliver banking services primarily
through Internet or other electronic delivery channels as the value
services. Some of these banks are known as virtual banks or
Internet-only banks and may not have any physical presence in
a country despite offering different banking services. From the
perspective of banking products and services being offered
through Internet, Internet banking is nothing more than traditional
banking services delivered through an Internet. But, in the
process it has thrown open issues which have ramifications
beyond what a new delivery channel would normally envisage
and, hence, has compelled regulators world over to take note of
this emerging channel.


1. It removes the traditional geographical barriers as it could
reach out to customers of different countries/legal jurisdiction.
This has raised the question of jurisdiction of law /supervisory
system, to which such transactions should be subjected,
2. It has added a new dimension to different kinds of risks
traditionally associated with banking, heightening some of them
and throwing new risk control challenges,
3. Security of banking transactions, validity of electronic contract,
customers privacy, etc.which have all along been concerns of
both bankers and supervisors have assumed different dimensions
given that Internet is a public domain, not subject to control by an
any single authority or group of users,
4.It poses a strategic risk of loss of business to those banks, who
do not respond in time, to this new technology, being the efficient
and cost effective delivery mechanism of banking services,
Transactional: (e.g. performing a financial transaction such as
an account to account transfer, paying a bill or applications like
applying for a loan, new account, etc.)
Electronic Bill Presentment and Payment (EBPP)
Funds transfer between customers own checking and savings
accounts, or to
Another customers account.

Investment purchase or sale.

Loan application and transactions such as repayments.
Non-transactional: (e.g. online statements, Check links, Chat,
Co-browsing etc.Financial Institution Administration- features
allowing financial institutions to Manage the online experience of
their end users
Hosting Administration features allowing the hosting company to
administer the solution across financial institution.
The various types of Internet banking will help examiners
assess the
risks involved. Currently, the following three basic kinds of
Internet banking are
being employed in the marketplace.
Informational- This is the basic level of Internet banking.
Typically, the bank
has marketing information about the banks products and services
on a standalone server. The risk is relatively low, as informational
systems typically
have no path between the server and the banks internal network.
This level of
Internet banking can be provided by the banks or outsourced.
While the risk to
a bank is relatively low, the server or web site may be vulnerable
to alteration.
Appropriate controls therefore must be in place to prevent
alterations to the banks server or web site.
Communicative- This type of Internet banking systems and
the customer. The
Interaction between the banks system and the customer. The
interaction may
be limited to electronic mail, account enquiry, loan applications,
or static file

Updates (name and address change). Because these servers may

have a path to
the banks internal networks, the risk is higher with this
configuration than
with informational systems. Appropriate controls need to be in the
place to
prevent, monitor, and alert management of any unauthorized
attempt to access
the banks internal networks and computer systems. Virus
controls also
become much more critical in this environment.
Transactional-This level of Internet banking allows customers
to execute
transactions. Since a path typically exists between the server and
the bank or
outsourcers internal network, this is the highest risk architecture
and must
have the strongest controls. Customer transactions can include
accounts, paying bills, transferring funds etc.

ADVANTAGES OF E-BANKING: Convenience- Unlike your corner bank, online banking sites
never close;
theyre available 24 hours a day, seven days a week, and theyre
only a mouse
click away. With pressures on time and longer travelling periods,
more and
more people find it tiresome waiting in queues. People want
flexibility, and
Internet banking offers just that.
Ubiquity- If youre out of state or even out of the country when
a money
problem arises, you can log on instantly to your online bank and
take care of
business, 24\7.
Transaction speed- Online bank sites generally execute and
transactions at or quicker than ATM processing speeds.
Efficiency-You can access and manage all of your bank
accounts, including
IRAs, CDs, even securities, from one secure site.
Effectiveness- Many online banking sites now offer
sophisticated tools,
including account aggregation, stock quotes, rate alert and
portfolio managing
program to help you manage all of your assets more effectively.
Most are also
compatible with money managing programs such as quicken and
Cheaper alternative: - With increasing competition, it seems
to be the cost

factor that is driving banks to offer the facility. The Internet is still
a very
cheap alternative to opening a physical branch, and most of the
push seems to
be coming from the supply side. The costs of a banking service
through the
Internet form a fraction of costs through conventional methods
From snob value to necessity:- A couple of years ago, there
was a belief even
among bankers that customers opening new accounts wanted the
banking facility, just to "feel good" and very few of them actually
used the
Services. Today, bankers believe that the trend from `nice to
have' is changing
to `need to have'. The "snob value" of banking with an
organization that could
offer service on the Internet has given way to a genuine
necessity, he feels. "It
all depends on how busy a person is."
Start-up may take time-In order to register
online program,
you will probably have to provide ID and sign a
branch. If you
and your spouse wish to view and manage their
online, one of
you may have to sign a durable power of attorney
will display
all of your holdings together.

for your banks

form at a bank
assets together
before the bank

Learning curves- Banking sites can be difficult to navigate at

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

Bank site changes- Even the largest banks periodically

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


In this context, the study aims at:
1. Ascertaining the size of Internet banking of balasore.
2. Finding out the ways to expand the use of Internet banking
as much as possible in the banking industry of India.
3. Determining whether the users feel secured about using
Internet banking.
4. Studying about the financial institution, that provides
internet banking.
5. How far the users are aware of the technology concern about
Internet banking.
1. The present study deals with only by taking a few numbers of
2. It w as not possible to make an exhaustive study due to
limitation of time and resources.
3. Every chapter needs more information.

1. Security of Internet banking transactions is one of the
most important areas of concerns to the regulators. Security
issues include question of adopting internationally accepted state
of the art minimum technology standards for access control,
encryption/decryption (minimum key length etc), firewalls,
verification of digital signature, Public Key Infrastructure (PKI) etc.
The regulator is equally concerned about the security policy for
the banking industry, security awareness and education.
2. The supervisory and operational issues include risk control
measures, advance warning system, Information technology audit
and re-engineering of operational procedures. The regulator
would also be concerned with whether the nature of products and
services offered are within the regulatory framework and weather
the transaction do not camouflage money-laundering operations.
3. The Central Bank may have its concern about the impact of
Internet banking on its monetary and credit policies. As long as
Internet is used only as a medium for delivery of banking services
and facilitator of normal payment transactions, perhaps, it may
not impact monetary policy. However, when it assumes a stage
where private sector initiative produces electronic substitution of
money like e-cheque, account based cards and digital coins, its
likely impact on monetary system cant be overlooked. Even
countries where Internet banking has been quite developed, its
impact on monetary policy has not been significant. In India, such
concern, for the present is not addressed as the Internet banking
is still in its in its formative stage.

4. The world over,