“ E-Banking ”

Submitted by:

Rakesh Ranjan Kumar (1361)

B.A. L.L.B (Hons.)

Submitted to

Prof. Dr. Ajay Kumar

Faculty of Banking Laws

Chanakya National Law University, Patna

 1. TABLE OF CONTENTS:
TABLE OF CONTENTS:.................................................................................................. 2
DECLARATION BY THE CANDIDATE ....................................................................... 3
ACKNOWLEDGEMENT ................................................................................................. 4
1. Introduction ........................................................................................................................ 5
a. Aims and objective: ........................................................................................................ 5
b. Hypothesis....................................................................................................................... 7
c. Research questions .......................................................................................................... 7
d. Limitation And Scope........................................................................................................7
2. Research methodology ....................................................................................................... 8
3. Meaning & Concept of E-Banking........................................................................... 9

4. Historical Prospective................................................................. ..................................12

5. E-Banking in India........................................................................................................14
6. Issues & Concerns with E_Banking.............................................................................19
7. Conclusion & Suggestion..............................................................................................23
BIBILIOGRAPHY...............................................................................................................26

2
 2. DECLARATION BY THE CANDIDATE

I, hereby, declare that the work reported in the L.L.B (Hons.) Project report entitled

“ E- Banking”

Submitted at CHANAKYA NATIONAL LAW UNIVERSITY, PATNA

is an authentic record of my work carried out under the supervision of Prof. Dr. Ajay Kumar, I

have not submitted this work elsewhere for any other degree or diploma. I am fully

responsible for the contents of my Project Report.

Rakesh Ranjan Kumar (1361)

B.A. L.L.B., 4th year

CNLU, Patna

3
 3. ACKNOWLEDGEMENT

I would like to show my gratitude towards our guide Prof. Dr. Ajay Kumar, sir, under whose

guidance, I structured my project. I owe the present accomplishment of my project to our

CNLU librarians, who helped me immensely with materials throughout the project and

without whom I couldn’t have completed it in the present way.

I would also like to extend my gratitude to my friends and all those unseen hands that helped
me out at every stage of my project.

THANK YOU,

Rakesh Ranjan Kumar

SEMESTER – 8th

CNLU, PATNA

4
 “E-Banking”

1. Introduction

Internet banking (or E-banking) means any user with a personal computer and a
browser can get connected to his bank -s website to perform any of the virtual banking
functions. In internet banking system the bank has a centralized database that is web-enabled.
All the services that the bank has permitted on the internet are displayed in menu. Any
service can be selected and further interaction is dictated by the nature of service. Once the
branch offices of bank are interconnected through terrestrial or satellite links, there would be
no physical identity for any branch. It would a borderless entity permitting anytime,
anywhere and anyhow banking.

The delivery channels include direct dialup connections, private networks, public
networks, etc. with the popularity of computers, 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. E-bank is the electronic
bank that provides the financial service for the individual client by means of Internet.

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.

5
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 E-banking. E-Banking has over-performed all the obsolete banking practices and
the 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.. There are huge amount of issues related to E-Banking available on the internet.

6
Aims and objective:
The aim of the researcher is to find out :

1) The Dominance of E-banking in todays’ globe with focus on India?

2) What are the the modes of E-banking applicable in India.

3) Which are the the regulatory banking governing E-banking in India

4) The concerns regarding the E-banking sector in India?

Hypothesis

The researcher presumes that:

The E-banking will transform the way Banking functions in Indian & Globe. At one
hand while it will be increasing the cost-effectiveness of Banks on other hand it will
be cutting jobs & adding woes to banks in terms of Technology.

Research questions

1. Why E-banking is more popular than the Traditional way of the banks especially
amoung youth?
2. Can Poor but Populous country afford to go to E-banking?
3. Is E-banking well accepted by the Public sector banks or it is a Private only
phenomena?
4. Are govt policies supporting the E-banking?
5. What are the Concern & constraints while doing E-Banking ?

7
Limitations & scope

Since the researcher is a student of 4th year in CNLU, he can access a limited area only. The
researcher being a second year student is not able to go through all the details thoroughly. It
lacks the chance of making the project more effective, if the study for it would have been a
comparative one with respect to other provisions listed therein. The researcher having read
the work on this topic could understand the problem clearly but it might have been clearer if
he would have read writings of more writers. The historical need and background is also
necessary for having a bird’s eye view of the particular topic and it gets developed only by
effective and extended reading over a long period of time. Hence, after facing all the
difficulties the researcher has managed to frame a complete and the clearest picture of the
problem, he could make through his best efforts.

Sources of Data
Primary Sources – Bare Acts, Legislative Rules, RBI circulars
Secondary Sources- Books on Banking Laws ,websites, Journals , Articles, Magazines etc.

2. Research methodology
The researcher will do doctrinal type of research in which he will go through the primary as
well secondary sources. The researcher through this methodology will be able to get an adjact
picture of the problem in question. The doctrinal method helps in doing a comparative study
of the topic. This methodology helps in going through not only the work of one eminent
person but of many other too. This helps in getting the bird’s eye view of the subject also.

8
 3. Meaning & Concept of E Banking

Liberalization and de-regulation process, which started in 1991-92 has made a drastic change
in the Indian banking system. From a totally regulated environment, we have gradually
moved into a market driven competitive system. In today‟s era, one cannot think about the
success of any service industry including banking industry without information technology. It
has increased the contribution of banking industry in the economy. Financial transactions and
payments can now be processed quickly and easily in friction of seconds. Every second
development in Information Technology (IT) and its acceptability by the commercial banks
in India has enabled them to use IT extensively to offer their products and services to
customers apart from just back office processes. Banks with latest information technology
techniques are more successful in the cut throat competitive market in these days1.

Further, they can generate more and more business opportunities resulting in greater
profitability. Information technology revolution in banking sector has not only provided
improved service to the customers, but also reduced the operational cost . Latest
Developments in Information Technology have also brought along a whole set of challenges
to deal with2. Speedy changes in technology, complexities, high costs, security and data
privacy issues, new rules and regulations and lack of trained manpower are some challenges
faced by commercial banks in India.

E-banking can simply be defined as using Automated Teller Machines (ATM‟s) , telephones,
internet and mobiles for doing day to day simple and advance transaction without being
physically present in the bank , to use the services like making queries for account balance,
making different type of payments like bills, mobile recharge, money transfer, filing income
tax return electronically. In simple words, ebanking is concerned with doing all these

1
Kunukunju Benson, “Commercial Banks in India: Growth, Challenges and Strategies”, New Century
Publications, New Delhi, 2008, pp. 61-107.
2
Uppal R.K & Kaur Rimpi, “Banking in the New Millennium-Issues, Challenges and Strategies”, Mahamaya
Publishing House, New Delhi, 2007, pp.118.

9
transactions from home or office without visiting the branch; 24 hours, 7 days in a week by
using ATM‟s , telephones, internet and mobiles etc for doing banking services.

Traditional banking methods (e.g. back office processes such as paper filling, paper work
processing, sorting cheques and cash handling ) from both banks and customers perspective,
has become most costly . Regular requests from customers for bill payment (telephone,
mobile, electricity, insurance and credit card bills), cash withdrawals, loan applications,
cheque clearings, money transfer were huge tasks for traditional banks, thus there was a clear
need to adopt information technology equipments to automate back office work. Despite the
benefit of e-banking technology in improving service quality, productivity and efficiency,
some banks have struggled to adopt and integrate information technology related services in
their current banking system .

E-banking system is growing its roots in developing countries like India. Private sector banks
have been adopting e-banking since their birth, but for public sector banks, it is an uphill task.
However, it is believed that e-banking will help banks to cut cost, increase revenue, cut time
for delivering service and become more convenient for the valuable customers . Cost of e-
banking services is very low to traditional way of delivering the services. Rough estimates in
India assume banking teller cost Re 1 per transaction, ATM transaction cost is only.0.45 Re ,
phone banking at 0.35 Re, debit card costs around 0.20 Re and internet banking cost only 10
paisa per transaction3.

The banking environment of today is rapidly changing and the rules of yesterday are no
longer applicable4. Most of the banks in India have adopted core-banking solutions (CBS) in
a fully networked environment. Back office functions have been taken away from branches to
a centralized place. While physical branches would continue to be relevant in the Indian
scenario, the real growth driver for reducing the cost would be virtual branches i.e.
Automated Teller Machines (ATMs), internet banking, mobile banking, kiosks, phone
banking etc., which is made possible by few persons and run on 24 x 7 basis to exploit the
real potential of these information technological utilities. New technologies cannot

3
Bhasin Niti, “Banking Development in India 1947 to 2007: Growth, Reforms & Outlook”, New Century
Publications, New Delhi, 2006, pp. 185-189.
4
Looking Forward, Looking Back (https://www.businesstoday.in/magazine/special/best-banks-2012-indian-
banking-challenges/story/189858.html ) Accessed on 10th Feb 2019

10
completely replace the branch network but it can support old methods of delivering the
services to their customers5.

Benefits of E-banking:

E-banking helps the customers as well as banks by overcoming the drawbacks of manual
system as computers are capable of storing , analysing , consolidating, searching and
presenting the data as per the requirement of customers and banks with a lot of speed and
accuracy.

Advantages to the Banking institutions

1. E-banking helps in reducing the cost of delivering the services to the customers.

2. It provides banks with competitive advantage among their peers.

3. It reduces the use of paper money that helps the central bank in printing less paper notes.

4. Through websites, banks can earn revenue by promotional activities.

5. FAQ‟s uploaded over the banks‟ website will reduce the workload on employees.

6. Customers can avail e-banking facility from anytime, anyplace, therefore there is a need to
invest more and more on relevant infrastructure.

Advantages to the customers

1. E-banking delivers 24x7 services to customer.

2. Easy access to account information in quick time.

3. Payment can be made online for the purchase of goods and services.

4. With e-banking, customers can check account balance, can get statement of their account,
apply for loans, check the progress of their investments and collect other relevant
information.

5
Gurusamy S, “Banking in the New Millennium: Issues, Challenges & Strategies”, Kanishka Publishers &
Distrubutors, New Delhi, 2001, pp. 62.

11
 4. HISTORICAL PROSPECTIVE

Information & Communication Technology came into picture in the year 1980 in banking
industry through the Rangarajan Committee recommendations. It totally changed the way the
banks and financial institutions were functioning. Quotation of Bill Gates, “we need banking,
do we really need banks?” is totally true in this area. Today, no banking business or corporate
strategy is complete without information technology. There were different phases introduced
during the evolution of ICT in the banking sector. To have a clear picture regarding the
developments of ICT, it has been divided into five phases6.

First Phase

During the First phase of development, the banks were focusing on automating the laborious
accounting process and the functions performed at back office operations like maintenance of
deposits, calculation of interest, and maintaining of ledger accounts.

Second Phase

Second phase of development took place in 1980 when the front office and back office
operations were automated. This helped in improving the customer service, reduction in
processing time on the front office and back office operations. In this way, the time on
carrying out the activities as well as providing the service to the customer was reduced to a
large extent7.

Third Phase

Then came the third phase which was started by opening up of new generation private sector
banks. These banks with small network and having the advantage of opening the branches
under the computerized environment from day one of operations introduced the networking
concept and centralized operations.

6
Uppal R K, “E-Age Technology- New Face of Indian Banking Industry: Emerging Challenges and New
Potentials”, Journal of Social and Development Sciences, pp. 115-129
7
Uppal R K, “E-Delivery Channels in Banks- A Fresh Outlook”, Researchers World Journal of Arts Science &
Commerce, , pp. 180-191.

12
Fourth Phase

The centralized operations led to the fourth phase of development where the customer carried
out his own required transactions through automated teller machine, mobile banking, internet
banking, and phone banking. The AAA mantra of anywhere, anytime and anyhow
implemented through ATMs, internet banking and mobile banking. The operational costs for
transactions through ATMs are comparatively less and also provide flexible options to the
customers. The other area where there is high potential to transact and operate by the
customers and where operating cost is low is “Internet banking”. Internet banking has a least
cost per transaction

Fifth Phase

The process of this phase is on. Through introduction of UPI, Mobile wallets now Money can
be sent from one Bank account to any other bank account internally or Globally.

From the different phases of banking sector, it is now clear that technological advancement
has totally changed the scenario of banking sector8. So, computerization, information
technology and automation of services are key issues for banks to survive in a competitive
environment; and are receiving prime attention as it touches everybody’s work in some way
or the other.

Role of Websites in the Functioning of Electronic Banking

Informational Websites: Informational websites provide customers access to general

information about the financial institution and its products or services. The customer can get
any sort of information about the bank from websites.

Transactional Websites: Transactional websites provide customers with the ability to conduct
transactions through the financial institution’s website by initiating banking transactions or
buying products and services. Banking transactions can range from something as basic as a
retail account balance inquiry to a large business-tobusiness funds transfer.

Thus the world is now switching to traditional bricks and mortar banking to e-banking.

8
Sharma Himani, “Banker‟s Perspective on e-banking”, NJRIM , pp. 71- 84.

13
 5. E-BANKING IN INDIA

E-banking is a term that includes the entire information technology revolution that has taken
place in the banking industry .E-banking simply refers to the use of electronic channels like
phone, mobile, internet etc for delivery of their services to their valuable customers. It
increases the efficiency in the area of effective payment by enhancing the delivery of banking
services in quick time. E-banking has helped banks to retain the current customers, increase
customer‟s satisfaction, acquire further share in the markets and reduce the costs of
delivering service to the customers. Delivery of services has gained increasing popularity
through electronic platform. It provides alternative way for delivery of services in a faster
way to the customers. Various number of services are being offered by banks through
electronic banking. It is quite difficult to measure the extent of such services, but an effort has
been made by classifying these services into following categories.

Automated Teller Machines (ATM’s)

Automatic teller machines have transformed the concept of banking in India. It has
eliminated the requirement of to stand in long queue and filling of forms for routine banking
transaction. Now customers of banks can access their money with the scratch of a ATM card.
An automated teller machine (ATM) is an electronic computerised device that allows banks
customers to directly use a secured method of communication to access their bank accounts.
Entry of Automated teller machines (ATM‟s) has changed the office atmosphere of the
branches of banks9. There is no need for a customer to visit branches for their day to day
banking transaction like cash deposits, cash withdrawals, balance enquiry, dropping cheque
etc. Electronic channels have opened new avenues for banks. ATM‟s are electronic machines
which are operated by customer himself to withdraw or deposit cash

If it takes ten seconds for an ATM transaction as compared to more than a minute for a
counter transaction then it can be said that number of customer serviced in a day will be

9
Growth and extent of electronic banking services in India”. Retrieved on 12/02/2019
http://shodhganga.inflibnet.ac.in/

14
much more via ATM‟s. Flexible payment methods and user friendly banking services are
now available for the customers. This has been possible due to introduction of information
technology in banking industry. Internet banking , mobile banking, phone banking are the
new development in banking industry and expected to result in more efficient banking
system. However the pressure from private and foreign banks in India to public sector banks
has posed a challenging environment. Latest advance banking technology brought up by
private and foreign banks have great impact on Indian banking system. These alternative
delivery channels includes ATM„s (Automated teller machines), phone banking, internet
banking, mobile banking. Out of all these e-banking services, automated teller machines are
most heavily demanded and fulfil most of the needs of the customers without visiting the
bank.

The customer is identified at ATM by inserting a plastic ATM/Debit card with a magnetic
stripe or a plastic smart card with a chip that has a unique card number issued to the customer
and some security information such as an expiration date or CVVC (CVV). Authentication is
provided by the customer entering a personal identification number (PIN) for using any
service at ATM‟s10.

10
INDIAN BANKING SYSTEM. I.K INTERNATIONAL PUBLISHING HOUSE PVT. LTD. 2006.

15
Telephone Banking/Tele Banking/Phone Banking

Phone banking, tele banking or telephone banking are all the same. In phone banking,
banking transaction is done over the telephone. Customers of banks can get information about
their accounts, make banking transaction like fixed deposits, money transfer, demand draft,
collection and payment of bills etc by using telephones. As more and more people are using
mobile phones, telephone banking is also possible with the help of mobile phones11 .

Internet banking

E-banking has been prevailing in India around sometime in the form of automated teller
machine. Thereafter, it has been transformed by the internet and a new delivery channel has
emerged that benefits both banks as well as customers. Internet banking or online banking, as
it is sometimes called, simply is an extension to traditional banking, which uses internet both
as a medium for receiving instructions from the customers and also delivering services to
them. Internet banking, as a medium of delivering the banking services to customers and as a
strategic tool for the development of banking business, has gained wide acceptability in all
developed nations and is quickly spreading in developing nations like India with more and
more banks entering the fray.

Internet technology has totally transformed the design of banking business. The success of
internet banking operation totally depends upon the well designed website of the bank. It
should be informative, functional, user-friendly and most importantly, secured.

Internet Banking lets clients handle many banking transactions via their personal computer.
For instance, one may use his/her computer/laptop/smart-phone to view his/her account
balance, request transfer between accounts and pay bills electronically.

11
Evolution of Banking in India (https://www.rbi.org.in/scripts/PublicationsView.aspx?id=155 ) Accessed oon
10th Feb 2019

16
Facilities provided to internet banking customers
Various services under Internet Banking Account are as follows:
1. Customers can check the current balance in their account.
2. All the past transactions from the date of opening the account can be checked by the
customers.
3. Money can be transferred to any bank account of that particular bank or any other bank.
4. Transfer of Fund having visa/maestro, debit card holders or credit card holders
5. Customers can recharge their prepaid mobile online anywhere, anytime in a few minutes.
6. Mutual Fund schemes can be bought/sold online with the help of internet banking account
7. With the help of internet banking account, fixed deposits and recurring deposits can be
applied for.
8. Cheque book request can be made and, the same will be delivered on the said address.
9. Customers can issue instruction to banks to stop payment of a particular cheque with the
help of internet banking account.
10. Payment of utility bills (electricity, telephone, house tax etc), bank credit, mobile bills,
insurance premium.

Mobile banking

Mobile technology is well accepted and widely available at an affordable price. It is also
suitable for banking and payment services and provides huge opportunity to extend financial
services to each and every individual irrespective of the place where one is residing. Internet
banking has helped the customers by accessing their account anytime, anywhere, at any
place. Customers can check their account details, get their banks statement, perform many
transaction in the comfort of their home or office. However, biggest limitation of internet
banking is the requirement of personal computer/laptop/smart phone with an internet
connection. Mobile banking reduces this very limitation of internet banking. As mobile
banking, reduces the customers‟ requirement to just having a mobile phone for using this
service12. Mobile phone usage has seen an explosive growth in India is the last decade. The
main reason that mobile banking score over internet banking is that mobile banking enables
anywhere, anytime banking home,

12
Gandhi, R. (2014), “Growing NPAs in Banks: Efficacy of Ratings Accountability & Transparency of Credit
Rating Agencies”, Conference conducted by ASSOCHAM on May 31, 2014

17
RBI Regulation on E-Banking in India

Banks which are licensed, supervised and having physical presence in India, are permitted to
offer mobile banking services. Only banks who have implemented core banking solutions are
permitted to provide mobile banking services. The services shall be restricted only to
customers of banks and/or 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 inward and outward 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
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. Banks shall file Suspicious Transaction Report (STR) to
Financial Intelligence Unit – India (FIU-IND) for mobile banking transactions as in the case
of normal banking transactions13.

Banks shall put in place a system of registration of customers for mobile banking. Banks
should strive to provide options for easy registration for mobile banking services to their
customers, through multiple channels, thus minimizing the need for the customer to visit the
branch for such services14. The time taken between registration of customers for mobile
banking services and activation of the service should also be minimal. The system put in
place by banks for registration of customers for mobile banking for new as well as existing
account holders (where mobile number is either registered with the bank or is not available) ,
is varied across banks15. Thus, there is a need for greater degree of standardization in
procedures relating to the above particularly when customers are using inter-operable mobile
banking platforms16. Banks wishing to provide mobile banking services shall seek prior one
time approval from Reserve Bank of India by furnishing full details of the proposal. Now,
The KYC also has been made mandatory by RBI.

13
Reforms in Banking System (https://www.rbi.org.in/scripts/PublicationsView.aspx?id=162) Accessed on 12th
Fab 2019
14
Raju, Y. B. (2014), “Healthy banks under healthy Regulation” & Reserve Bank of India (2014a), “Master
Circular on Frauds- Classification and Reporting”, RBI Circulars.
15
Reserve Bank of India (2015a), “Framework for dealing with loan frauds”, RBI Circulars
16
Tung, Ko-yung (2002) “The World Banks’ Institutional framework for combating fraud and corruption”,
Seminar on Monetary and Financial Law, May 8, 2002.

18
 6. ISSUES & CONCERNS WITH E-BANKING

The dependence on information technology is such that the banking business cannot be
thought of in isolation without it. Such has been the spread of information technology
footprints across the Indian commercial banking sector. Developments in IT have also
brought along a whole set of challenges to deal with17. The development of e-banking will
not proceed without conflict, as those who are likely to be worse off under this scenario will
try to slow down the process and delay the introduction of the distribution channels.

Language and literacy barrier

Unfamiliar language and illiteracy could be barriers in using ebanking service. Currently, all
the websites of banks providing internet banking service are mostly in English language. It is
difficult to be operated by those individuals who are residing in rural areas, especially those
who do not know English language.

Fraud by human resource of the bank

Apart from fraud from outside, banks are also exposed to risk from their respective
employees. Various employees of the banks are familiar with different systems and their
loopholes and their weaknesses. Thus they become possible threat to valuable customers and
bank also. Some employees can manage to acquire the private and confidential data of
customers to access their accounts causing losses to customers as well as to the bank

17
Gandhi, R. (2015), “Financial Frauds-Prevention: A Question of Knowing Somebody”, 2nd National
Conference on Financial Frauds Risks & Preventions organized by ASSOCHAM on June 26, 2015 at New
Delhi.

19
Skimming

Skim the information off the cards is another method of accessing customers private
information. It is a most commonly used method to obtain illegally any consumer‟s card
information. Skimmers are electronic device that is used by the criminals to capture the data
stored on the magnetic strip of the ATM card.

Cyber squatting

Cyber squatting is the act of registering a famous domain name and then selling it for a
fortune. Cyber Squatters register domain names identical to popular service providers‟
domains so as to attract their users and benefit from it. This is an issue that has not been
covered in the IT Act, 2000

Phishing

Phishing is just one of the many frauds on the Internet, trying to fool people into parting with
their money. Phishing refers to the receipt of unsolicited emails by customers of financial
institutions, requesting them to enter their username, password or other personal information
to access their account for some reason. Customers are directed to a lookalike replica of the
original institution's website. They click on the links to enter their information and remain
unaware that fraud has occurred. The fraudster then can access the customer's online bank
account and to the funds contained in that account.

SMS spoofing

It is a relatively new technology which uses the short message service (SMS), available on
most mobile phones and personal digital assistants, to set who the message appears to come
from by replacing the originating mobile number (Sender ID) with alphanumeric text.
Spoofing has both legitimate uses (setting the company name from which the message is
being sent, setting your own mobile number or a product name) and illegitimate uses (such as
impersonating another person, company, or product)

20
Cyber fraud

Banks are asking their customers to adopt newer service delivery electronic platforms like
mobile, internet, ATM‟s for delivering service efficiently and further it helps in cost cutting.
While the customers are becoming more tech-savvy and had started using electronic
channels, the fraudsters are using newer ways of doing frauds by exploiting the loopholes in
information technology systems and processes. There have been many frauds of low value
where the fraudster has used software programs, malware attacks, phishing, emailing and
through SMS etc18.

Growing Case of Cyber Frauds in INDIA with increase in NEFT/RTGS transactions

18
Frauds in the Banking Sector: Causes, Concerns and Cures”. Retrieved on 12/02/19
http://rbidocs.rbi.org.in/rdocs/Speeches/PDFs/DGKCAF29071 3.pdf

21
 19

Causes of causes of mobile payments fraud Globally

19
Deloitte (2014), “India Fraud Survey, Edition 1

22
 7. CONCLUSION & SUGGESTION

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. New banking intermediaries offering
entirely new types of banking services have emerged as a result of innovative e-business
models20. 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 countries21.

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 services22. 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
intermediate’s 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.

The trend towards electronic delivery of banking products and services is occurring partly as
a result of consumer demand and partly because of the increasing competitive environment in
the global banking industry. The Internet has changed the customers' behaviors who are
demanding more customized products/services at a lower price. Moreover, new competition
from pure online banks has put the profitability of even established brick and mortar banks
under pressure. However, very few banks have been successful in developing effective
strategies for fully exploiting the opportunities offered by the Internet. For traditional banks
to define what niche markets to serve and decide what products/services to offer there is a
need for a clear and concise Internet commerce strategy23.

20
The Internet Will Shake Banking's Medieval Foundations, Journal of Internet Banking and Commerce, 2.
Retrieved on 13 Feb 2019 http://www.arraydev.com/commerce/JIBC/ 9702- 01.htm.
21
Mols N P. . “The Internet and banks‟ strategic distribution channel decision”. International Journal of Bank
marketing, Vol.17, No.6. pp.295
22
Uppal, R.K., (2009). “Banking Services & Information Technology The Indian Experiance”. New century
Publications: New Delhi
23
Vastiney, P.N., (2009). “Banking Law & practice”. Sultan Chand & Sons: New Delhi.

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Suggestions to cope with the challenges of E-Banking

For making e-banking services a successful arsenal to cope with changing environment,
banks need to take certain measure to overcome the loopholes in securely delivering services
electronically24. The major initiatives could be :

1. The primary focus of banks should be on ensuring reliable service delivery through
investing on and implementing right technology.

2. Banks should improve the system security in ATM location and at the same time, they
must educate their customers about using their cards with due caution and about the risks
involved while transacting through cards.

3. Information Technology is expected to be the main facilitator of change in the banking

industry. Implementation of technology related solutions involves huge investment. Banks
need to look for ways to optimize resources for technology applications. In this regard, global
partnership on information technology and skills sharing may help

4. Banks using internet as a medium for financial transaction must have proper information
technology equipments and systems in place to build a secured environment for every
transaction.

5. Investment in outdated technology could land the bank in revenue loss. A defenceless
system and inefficient service is also risk of loss of business. Banks should always be armed
with latest technology to tackle the attacks. Acceptance of e-banking depends on factors like
convenience, experience, safety and security. Despite many steps taken up by banks, news
regarding cyber frauds are frequently in the air. Banks need to keep ahead of the fraudster by
investing and adopting latest technology.

6. For reducing risks, banks need to conduct a pilot survey, consult experts of various fields
and then monitor performance.

7. Banks should use proxy server type firewall so that there is no direct connection between
internet and banks system.

24
Sharma, R.K. (2005). “Technology and security in Indian Banking System”. Professional Banker, 5(10), 63-
68

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8. Banks should regularly keep back-up of their data. Banks should organise meetings with
the customers to educate them regarding the use of e-banking services securely.

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. We need to take new innovative steps to E-Banking
safe and relevant.

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 8. BIBILIOGRAPHY

BOOKS
 Uppal, Dr. R. K., E-Banking: The Indian Experience, Bharti Publications, 1st Edition
 Nayar, Dr. Jayaram, George, Mathew M; Banking in India, Manorama Books ,
 Gupta, Dr. R. K.; Modern Banking in India, ASIAN BOOKS, Edition 2013
 Tannan, M.L., Banking Law, Lexis Nexis, First Edition

WEBSITES

 The Advent of Modern Banking in India: 1720 to 1850s". Reserve Bank of India.
(https://www.rbi.org.in/currency/museum/m-1720.html) Retrieved on 13 Feb 2019
 Forbes India (http://www.forbesindia.com/article/special/you-cant-have-a-21st-
century-india-with-19th-century-institutions-amitabh-kant/47241/1) Retrieved on 14
Feb 2019
 PIB release on To Dedicate Mobile Banking Facility on Basic Mobile Phones to the
Nation (http://pib.nic.in/newsite/erelease.aspx?relid=109113) Retrieved 14 Feb 2019
 https://economictimes.indiatimes.com/industry/banking/finance/banking/3-2-million-
debit-cards-compromised-sbi-hdfc-bank-icici-yes-bank-and-axis-worst-
hit/articleshow/54945561.cms Retrieved 14 Feb 2019
 Mega Security Breach at SBI
(https://economictimes.indiatimes.com/industry/banking/finance/banking/security-
breach-sbi-blocks-over-6-lakh-debit-cards/articleshow/54933861.cms) Retrieved on
13 Feb 2019
 https://economictimes.indiatimes.com/expansion-of-banking-in-
india/articleshow/3107960.cms?from=mdr Retrieved on 14 Feb 2019

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