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PROJECT REPORT

On

“ E-BANKING IN INDIA ”

BACHELOR OF COMMERCE

BANKING & INSURACE

V- SEMESTER

2012-2013

SUBMITTED BY

SHIVANI CHANDA

UNDER GUIDANCE OF

PROF. SUBHASHINI

GURU NANAK COLLEGE OF ARTS, SCIENCE & COMMERCE

MUMBAI -37.

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CERTIFICATE

This is to certify that of T.Y.B.COM (BANKING AND INSURANCE) SEM V

has successfully completed the project of

in banks.

PROJECT GUIDE. CO-ORDINATOR.

PRINCIPLE. EXTERNAL EXAMINER.

DECLARATION

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I am SHIVANI CHANDA the student of T. Y. B.COM (BANKING AND INSURANCE) SEM V.

hereby declared that I have completed the project on

E-BANKING IN INDIA.

The information submitted is true and original to the best of my knowledge.

SIGNATURE OF STUDENT

NAME : - SHIVANI CHANDA

ROLL NO : - 40

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ACKNOWLEDGEMENT

We would like to acknowledge the following being as an idealistic

& fresh dimensions in the completion of this project.

First & forecast, we would like to thank to our prof. Sudha whose

invaluable support and guidance helped me in every aspect of this

project.

Secondly, we would like to express my deep sense of gratitude

towards our PRINCIPAL and our Banking & Insurance coordinator

for their valuable guidance & support without which this project

would not have been possible

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INDEX

SR NO TOPIC

1 INTRODUCION TO BANKING

2 INTRODUCTION TO E-BANKING

3 TYPES OF E-BANKING

4 ADVANTAGES AND DISADVANTAGES OF E-BANKING

5 RISK MEASURERING

6 E-BANKING IN REALITY

7 CONCLUSION

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CHAPTER-1 INTRODUCTION TO BANKING

A System of trading in money which involved safeguarding deposits and making funds available for borrowers. In general terms , the business activity of accepting and safeguarding money owned by individuals and entities , and then lending out this money in order to earn a profit.

History of banking in India

Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and other external and internal factors.

For the past three decades India’s banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India’s growth process.

The government’s regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today , he has a choice. Go ne are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dials a pizza. Money has become the order of the day.

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The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian banking system can be segregated into three distinct phases.

They are mentioned below:

Early phase from 1786 to 1969 of Indian banks Nationalization of Indian Banks and up to 1991 prior Indian banking

sector Reforms. New phase of Indian banking system with the advent of Indian

Financial & Banking sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as phase I, phase II and phase III.

Phase I

The general Bank of India was set up in the year 1786. Next come bank of Hindustan and Bengal bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) and Bank of Madras (1843) as independent units and called it presidency Bank. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders.

In 1809 Allahabad banks was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, central Bank of India, Bank of Baroda,

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Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965. Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority.

Phase II

Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI and to handle banking transaction of the Union and State Government all over the country.

Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July, 1969, major process of the Prime Minister of nationalization was carried out. It was the effort of Prime Minister of India, Mrs . Indira Gandhi. 14 major commercial banks in the country were nationalized.

Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership.

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The following are the steps taken by the government of India to Regulate Banking Institutions in the Country :

1945 : Enactment of Banking Regulation Act.

1955 : Nationalization of State Bank of India.

1959 : Nationalization of SBI subsidiaries.

1961 : Insurance cover extended to deposits.

1969 : Nationalization of 14 major banks.

1971 : Creation of credit guarantee corporation.

1975 : Creation of regional rural banks.

1980 : Nationalization of seven banks with deposits over 200 cores.

After the nationalization of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,00o%.

Banking in the sunshine of government ownership gave the public implic it faith and immense confidence about the subtainability of these institutions.

Phase III

This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalization of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and

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net banking is introduced. The entire system become more convenient and swift. Time is given more importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.

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CHAPTER 2

INTRODUCTION TO E-BANKING

E-BANKING

Electronic banking in simple terms means, it does not involve any physical exchange of money, but it’s all done electronically, from one account to another, using the Internet. Internet banking is just like normal banking, with one big exception. You don’t have to go to the bank for transactions. Instead, you can access your account any time and from any time and from any part of the world, and do so when you have the time, and not when the bank is open. For busy executives, students, and homemarkers, e-banking is virtual blessing. No more talking precious time off from work to get a demand draft made or a cheque book issued.

Banks offer Internet banking in tow main ways. An existing bank with physical offices can establish a Web site and offer Internet banking to its customers in addition to its traditional delivery channels.

A second alternative is to establish a “virtual,” “branchless,” or “Internet-only” bank. The computer server that lies at the heart of a virtual bank may be housed in an office that serves as the legal address of such a bank, or at some other location.

Virtual banks may offer their customers the ability to make deposits and withdraw fund via automated teller machines (ATMs) or other remote delivery channels owned by other institutions.

Online system allow customers to plug into a host of banking services from a personal computer by connecting with the bank’s computers over telephone wires the convenience can be compelling. Not only is travel time

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reduced, but ATM machines, telephone banking or banking by mail are often unnecessary. And, technology continues to make online banking once attempted only by computer enthusiasts, easier for the average consumer.

Banks use a variety of names for online banking services, such as PC banking, home banking electronic banking or Internet banking.

Can one imagine life without paper cash? Money has always been part of human emotions. And although it is difficult to imagine that all those years of savings at the bank is now just a whole bunch of bits and bytes, it is becoming a reality and the sooner people adjust to it, the better it is.

EVOLUTION OF E-BANKING:The story of technology in banking started with the use of punched card machines like accounting machines or ledger posting machines. The use of technology, at that time, was limited to keeping books of the bank. If further developed with the birth of online real time system and vast improvement in telecommunications during late 1970’s and 1980’s it a resulted in a revolution in the field of banking with “convenience banking” as a buzzword. Through convenience banking, the bank is carried to the doorstep of the customer. The 1990’s saw the birth of distributed computing technologies and Relational Data Base Management System. The banking industry was simply waiting for these technologies. Now with distribution technologies, one could configure dedicated machines called front-end machines for customer service and risk control while communication in the batch mode without hampering the response time on the front- end machine.

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HISTORY OF E – BANKINGThe precursor for the modern home online banking services were the distance banking services over electronic media from the early 80s. the term online become popular in the late 80s and refers to the use of a terminal, keyboard and TV (or monitor) to access the banking system using a phone line. “Home Banking” can also refer the use of numeric keypad to send tones down a phone line with instructions to the bank. Online services started in New York in 1981 when four of the city’s major banks (Citibank, chase Manhattan, chemical and manufacturers honover) offer home banking services using the videotext these banking services never become popular except in France where the use of videotext (Minitel) was subsidized by the telecom provider and the UK, where the pestle system was used. The UK’s first home online banking services were set up by the Nottingham Building Society (NBS) in 1983. The system used was based on the UK’s pestle system and used a computer, such as the BBC Micro, or keyboard connected to the telephone system and television set. The system (known as ‘Home link’) allowed on-line viewing of statement, bank transfers and bill payment. In order to make bank transfers and bill payment, a written instruction giving details of the intended recipient had to be sent to the NBS who set the details up on the Home link system. Typical recipient were gas, electricity and telephone companies and accounts with other bank. Details of payments to be made were input into the NBS system by the account holder via pestle. A cheque was then send by NBS to the payee and an advice giving details of the payment was send to the account holder. BACS was later used to transfer the payment directly. Stanford federal credit Union was the first financial institution to offer online internet banking services to all of its members in Oct, 1994.

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PRE E-BANKING SCENARIO IN INDIA

Traditional Banking

Traditionally the relationship between the bank and its customer has been on a one-to-one level via the branch network. This was put into operation with clearing and decision-making responsibility for the overall clearing network, the size of the branch network and the training of staff in the branch network. The bank monitored the organization’s performance and set the decision-making parameters, but the information available to both branch staff and their customers was limited to one geographical location.

Traditional Banking structure

On IT Adoption

The Indian banking sector woke up to the world of technology in early 1990’s. The banking sector in India has been dominated by public sector banks, who hold between them more than 80% of total asset base. New

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private sector banks and foreign banks have tended to concentrate their efforts more on the top 23 centers which house the cream of the country’s urban customers. These banks have taken the which house the cream of the country’s urban customers. These banks have taken the lead in technology adoption and have succeeded in building up a substantial base of technology savvy, high-end customer

Making and observation about the adoption of technology by the bank, P.C. Narayan, vice-president (IT and retail banking) of Global Trust Bank Ltd, says. “The rate of adoption of IT by foreign and private sector banks in country has been significant over the Internet phenomenon worldwide. A number of banks in the public sector have also accelerated the pace of IT deployment largely because of the competitive pressure brought upon them by private sector banks and foreign banks’’.

Though in the beginning the employees resisted computerization (especially in nationalized banks), the management finally succeeded in convincing its employees about the benefit and need for adoption of technology. Says P. Seshadri Rao, a financial consultant based in Hyderabad, “The basic reason for getting the nod for computerization was the competition from private banks. Once the gates were opened to the private sector to operate banks, they started with a bang, thereby forcing nationalized banks to reconsider their way of doing business.

A SBI official in Delhi echoes the same sentiments: “Needless to say, competition from foreign banks was one of the motivation factors for us to switch to computers. But housekeeping scored over everything else. Maintaining books and regular tasks like computing interest at the end of the calendar year yeas tedious. The quantum of database was so huge that computerization was the only way out.

“Banks would have certainly started downing their shutters had banking software not taken over the reins.”

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In sharp contrast, most of the private banks like GTB, HDFC, and ICICI started their operations with the use of technology. And with these new banks wooing the customers by offering what was till then an unknown phenomenon-customer service-the nationalized banks were forced to take remedial steps. “The compulsion for private banks to adopt a very high level of IT was driven by their desire to contain their operating cost at the lowest levels and at the same time be able to offer a wide variety of product and services in quickset possible time.” Observes Narayan.

Commenting on the reasons for public sector banks being laggards in the adoption of technology, State Bank of Mysore managing director sitarama Murty says: “The private banks started with a clean slate. They hired technology savvy people. On the other hand, public sector banks didn’t have those advantages. We need to follow the public sector bank’s rules and regulation while hiring people. We can’t appoint computer professional in the top management directly.”

Computerization of the branches, especially in semi-urban and rural areas, is still a far cry for public sector banks. “This calls for huge investments and retraining of staff. I think these factor are inhibiting most of the banks to take technology to rural areas. But since IT is becoming an integral and inevitable part of the banking system, rural banks’ computerization should also happen very soon,” comment a senior official with Andhra Bank. Explains P.K. Seshadrinathan, CTO of SSI Technology: “The key obstacles to introduction of IT are non-integration or non-networking of branches, and a lack of corporate network. Computerization has been introduced but each branch acts as an island. And, of course, cultural/social issues continue to pose problem. Overcoming these obstacles, therefore, would be the biggest challenge by itself”.

However, the nationalized banks have taken to computerization in right earnest.

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Today most of them have their own in-house IT department which not only takes care of deployment and implementation issues but is also into developing specific and customized application for the bank. From SBI to canara bank, everyone is expanding its IT division and making huge investment to develop the division as a profit centre by itself. According to an SBI official, “It makes more sense to have our own division which understand our needs and comes out with a solution. It is not just cost-effective but also useful for a bank to have a separate division that takes care of IT in totality.”

Faced with deregulation, privatization and globalization , the Indian banks are slowly looking at various options to stay ahead in the rat race. This has resulted in the following recent trends:

Phone banking

This means carrying out of banking transaction through the telephone. A customer can call up the banks help line or phone baking number to conduct transaction like transfer of funds, making payments, checking of account balance, ordering cheques, etc,. This also eliminate the customer of the need to visit the bank’s branch.

ATM(Automatic Teller Machine)

An ATM is basically a machine that can deliver cash to customers on demand after authentication. An ATM does the basic function of a bank’s branch, i.e., delivering money on demand. Hence setting of branches is not required thereby significantly lowering infrastructure costs. These machines also hold the keys to future operational efficiency.

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CHAPTER 3

TYPES OF E-BANKING

E-BANKING IS DIVIDED IN FOLLOWING TYPES:

Types of E-Banking:-

ATM (Automatic teller machine)

Tele banking/Phone banking.

Mobile banking.

PC banking.

Internet banking.

Wireless/ PDA banking.

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AUTOMETED TELLER MACHINE (ATM)

Automated teller machine is seen everywhere. These machines brought innovation in the banking sector all over the world. The advent of the ATM has made the concept of the clock banking a reality. The ATM has been helpful to both the bankers and customers. The load crowd of customers in the banking hall of a branch waiting for their turn to collect cash is dippearing.

The ATM is the device use by the bank customers to process account transaction. This system is known as “anytime money” because with services the person having the ATM card can withdraw cash any time he want. Since the ATM machine can be build anywhere like near markets and railway stations etc, so one can easily with draw money from it.

Advantages of ATM:

To banks

Less space required Capital expenditure is lower as compare to branch Bank’s staff gets more time to do marketing Lower transaction cost One more means for advertising bank’s products

To customer

Convenience of shopping no need to carry cash No need to visit bank for transaction Banking anytime, anywhere, anyhow Fast and efficient service Good currency notes

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Disadvantages of ATM:

Flexible to efficiency’s expense, at present, for any one application it is usually possible to find a more optimized technology.

Cost, although it will decrease with time. New customer premises hardware and software are required

competition from other technologies - 100 Mbps Ethernet and fast Ethernet.

Presently the application that can benefit from ATM such as multimedia are rare.

The wait, with all the promise of ATM’s capabilities many details are still in the standards process.

Tele banking or Phone banking:

The customer interacts with the bank for various services over phone. There will no charge for dialing to the toll free number provided by banks Tele-banking, also know as “voice over phone” is consider under anywhere banking. The customer indentifies himself to the system by entering his pin number and is guided by a voice response for each banking services namely:

Balance in the account Transaction status, e.g. whether cheque deposited is cleared or not Request for issue of cheque book is registered Request for issue of bank statement is registered

In normal course all above activities would have involved customer visit to a branch and this Tele-banking has improved banking services and enabled remote banking.

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Advantages of Tele-banking:

1. You may not have time to visit your bank every week and if our business is located out of town, getting to a branch can be time consuming and expensive. With telephone banking, your bank is on the other end of the line whenever you need it.

2. You can manage your business account at any time, which is idial if you are busy during the day with running your business.

3. As well as the basics of running your business account – paying a bill, transferring money, setting up a direct debit and so on – you may also be able to appointment with your bank manager.

4. Making payment by phone can simplify your banking – you don’t need to confirm the payments in writing, and you can check all your transactions against your statement when it arrives.

The disadvantages of Tele-banking:

The most common one would have to be the fact that not all banks and building societies offer 24 hour telephone banking. They may if is simply a case of checking your balance or recent transaction but for anything more involved in that it can cause a problem. Also telephone banking is not active usually over bank holidays such as Christmas day or New year day.

Mobile banking

Mobile banking comes in as a part of the bank initiative to offer multiple channels banking providing convenience for its customer. A versatile multi functional, free service that is accessible and viewable an the monitor of

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mobile phone. Mobile phones are playing great role in banking and other channels.

Mobile banking can be divided into two broad categories of facilities:

Alert facility:

Mobile banking alert facility keeps you informed about the significant transaction in your account. It keeps you update where ever u go.

Request facility:

Mobile banking request facility enables you to enables you to query for your account balance.

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) Mobile banking has an edge over internet banking. In case of online banking you must have an internet connection and computer. This is a problem in developing countries. However, with mobile banking, connectivity is not a problem. You can find connectivity in the remotest of places also where having an internet connection is a problem.

2) You can make transaction or pay bills anytime. It saves a lot of time. Mobile banking thorough cell phone is user friendly. The interface is also very simple. You just need to follows the instructions to make the transaction. It also saves the record of any transaction made.

3) Cell phone banking is cost effective. Various banks provide the 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.

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5) Banking thought cell phone benefits the banks too. It cuts down an the cost of Tele-banking and is more economical.

6) Mobile banking through cell phone is very advantageous to the banks as it severs as guide in order to help the banks improve their customer care service.

7) Banks can be in tough 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, and Minimum Balance Alerts etc can be accessed from your mobile.

10) You can transfer money instantly to another account in the same bank using mobile banking.

PC banking:

PC banking allows the customer to access the information regarding to their bank accounts through a dial up connection. They can also download the information and process it in their own manners. It is different from the internet banking in the sense that internet banking is done over a highly accessible public networks, where as PC banking is accessible just to bank’s customers.

PC banking makes things easier

You can access your account just from your home PC, 24 hours per day, 7 days per week. All you need is a computer with an internet connection, and a card reader, which can be obtained at your four Fortis Bank. The card reader gives you unique codes based on your bank card and pin number, so your account stays safe.

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PC banking goes faster

Because you don’t need to go all the way to your local bank office, you save a lot of time that you don’t want to be wasting in traffic. A lot of information and reports can be obtained with a few clicks, and transactions can be done without signing papers. Most of your time will be spend on time going to the website and logging in, so it is advisable to do all you’re banking at a certain time. For example, Every Monday you log in and do your transaction and administration. Now you just log in once and process all transfers and reports at once.

Advantages of PC banking:

PC Banking enables you round-the-clock access. You usually do not think to stand an queue as a way to perform

important banking transaction. The PC banking enables you to do just that suitable from the ultimate comfort and privacy of your homes. In comparison towards the Online banking program, the PC banking

provide you increased security. Since the level of security is very much greater in PC banking, you

can access very much more services that what you by way of online banking.

What’s more, even the speed of the banking transaction is very much faster that online banking.

In case you are using individual economic management computer software and want the inputs from your checking, savings and cash marketplace accounts, PC banking makes it probable for you to download the related information suitable into the computer software program.

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You could also check your balances and love the conversation and power of electronic fund transfer.

Disadvantages:

There is no personal interaction between yourself and the bank (employee/advisor).

You can access your account from the PC that you originally installed the software.

You cannot deposit physical cash using internet banking i.e. cheques, cash in hand. This would require a personal visit to the bank.

Internet banking:

Internet banking let you handle many baking transaction via your personal computer. For instance, you may use your computer to view your account balance, request between accounts, and pay bills electronically. Internet banking system and method in which a personal computer is connected by a network service provider directly to a host computer system of a bank such that customer service requests can be processed automatically.

The advent of the Internet and the popularity of personal computer presented both an opportunity and a challenge for the banking industry. For years, financial institutions have used powerful computer network to automate million of daily transaction ; today, often the only paper record is the customer’s receipt at the point of sale. Now that their customers are connected to the internet via personal computers are connected to the Internet via personal computers, banks envision similar advantages by adopting those same same internet electronic processes to home use. Bank

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view online banking as a powerful “vale added” tool to attract and retain new customers while helping to competitive banking environment.

It generally implies a service that allows customers to use some form of computer to access account-specific information and possibly conduct transaction from a remote location - such as at home or the workplace. The obvious advantage to the consumer is convince—one bank recently used the advertising motto “bank naked’ to emphasize the customer’s freedom to conduct routine banking transaction from the comfort and security of his/her home 24X7.

Type of Internet Banking:There are three basic type of internet banking that is being employed in the market place:

INFORMATION.

COMMUNICATION.

TRANSACTION.

Information:

This is most basic level of internet banking. The bank has marketing information about its product and services on a stand-alone server. This level of internet banking services can be provided by the bank it self or by sourcing it out. Since the server and website may be vulnerable to alteration, control must therefore be in place to prevent unauthorized alterations to data the server or web site.

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Communication:

This type of internet banking allows the interaction between the bank’s system and customer. It may be limited to electronic mail, account inquiry, loan application, or static file update. This risk is higher with this configuration that with the earlier system and therefore appropriate control need to be in place to prevent, monitor, and alert management of any unauthorized attempt to access bank’s internal network and computer system. Under this system the client makes a request to which the bank subsequent responds.

Transaction:

Under this system of internet banking customers are allowed to execute transaction. Relative the information and communication type of internet banking, this system processes the highest level of risk architecture and must have the strongest control. Customer transaction can include accessing accounts, paying bills, transferring funds, etc. this possibilities demand very stringent security.

Advantages of Internet banking:

An internet banking account is simple to open and use. You just enter a few answers to question in a form while sitting comfortably in your own home or office . to access your account, you establish security measures such as usernames and passwords. To complete the set up of your account, you just print, sign and v send in a form.

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Internet banking cost less. Because there are fewer building to maintain, and less involvement by salaried employees, there is a much lower overhead while with online banking. These saving allow them to offer higher interest rates on saving accounts and lower lending rates and service charges. Even traditional brick and mortar banks offer better deals such as free bill paying services to encourage their customers to do their banking online.

Comparing internet banking to get the best deal is easy. In a short time, you can visit several online banks to compare what they offer resaving and checking account deals as well as their interest rates. Other things you can easily research are what credits cards are available, credit card interest rates, loan term and the banks own rating with the FDIC.

Bouncing a check (accidentally) should be a thing of the past because you can monitor your account online any time, day or night.

You can track your balance daily, seen what checks have cleared and know when automatic deposit and payment are made this is all possible by simply going online to the banks website and logging into your account.

You can keep your account balance using your computer and your monthly statement.

Your bank account information can be downloaded into software program such as Microsoft money or quicken; making is easy to reconcile your account with just a few mouse clicks. The convenience of the data capture online makes it much easier to budget and track where your money goes. Your internet bank account even allows you to view copies of the checks you have written each month.

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With the ability to view your account at anytime, it is easier to catch fraudulent activity in your account before much damage is done.

As soon as you log into your account, you will quickly see whether there is anything amiss when you check on your deposits and debits. If anyone writes a check or withdraws fund from your account and you know it wasn’t you, you will see it right away. This lets you get started on correcting the problem immediately rather that having to wait a month to even have a clue it is happening as would be the case with a traditional bank.

Internet banking offers a great deal more convenience that you could get from a conventional bank.

You aren’t bound by ‘banker’s hours and you don’t have to go there physically in your car. Time is not wasted when you have work to do because you can do your office’s banking without leaving the office. No matter where you are or what time it is, you can easily mnage your money.

There are sound reasons why internet banking is growing. The economic advantages have encourage banks to provide an increasing rang of easy to use services via the internet.

Customers have found doing business online simple and speedy and become have very have become very comfortable with the arrangement. Internet banking gives people more control over their money in convenient way that they find enjoyable and reassuring.

Disadvantages of internet banking:

Identity conformation

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Federal regulations require that financial institutions confirm each customer’s identity. This may present a logistical issue, as copying and faxing documents is sometimes necessary.

Security concerns

With hacking and identity theft on the rise, internet banking customer have to place a certain amount of trust in the bank that their account information and personal information are safe.

Customer service

If you bank or a traditional bank, you can go to the bank and speck to someone face to face about your problem but, with an internet bank, you will likely spend a lot of time on the phone being passed around and placed on hold.

Accessibility

If the internet goes down in your area or the area of the banking office, you will be unable to access your accounts. This includes being unable to withdraw money from ATM’s or to use your debit card.

Fees

Many internet banks don’t have ATMs, which means you will have to pay ATM fees. This can cost you more money that paying the regular monthly fees at a brick and mortar bank.

Growth in Internet banking

Numerous factors including competitive cost, customer service, and demographic considerations are motivating banks to evaluate their technology and assess their electronic commerce and internet banking

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strategies. Many researchers expect rapid growth in customers using online banking products and services. The challenge for national banks is to make sure the savings from internet banking technology more that offset the costs and risks associated with conducting business in cyberspace. Some of the market factors that may drive a bank’s strategy include the following:

Competition

Studies show that competitive pressure is chief driving force behind increasing use of internet banking technology, ranking ahead of cost reduction and revenue enhancement, in second and third place respectively. Banks see internet banking as a way to keep existing customer and attract new ones to the bank.

Cost Efficiencies:

National banks can deliver banking services on the Internet at transaction costs far lower that traditional brick-and-mortar branches. The actual cost to execute a transaction will vary depending on the delivery channel used. For example, according to Booz, Allen & Hamilton, as of mid-1999, the cost to deliver manual transactions at branch was typically more that a dollar, ATM and call center. Transaction cost about 25 cents, and Internet transactions cost about a penny. These costs are expected to continue to decline.

Geographical Reach:

Internet banking allows expanded customer contact through increased geographical reach and lower cost delivery channels. In fact some banks doing the Internet they do not have traditional banking offices and only reach their customers online. Other financial institutions are using the Internet as an alternative delivery channel to reach existing customers and attract new customer.

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Branding:

Relationship building is a strategic priority for many national bans. Internet banking technology and products can provide a means for national banks to develop and maintain an ongoing relationship with their customers by offering easy access to a broad array of products and services. By capitalizing brand identification and by providing broad array of financial services, banks hope to build customer loyalty.

Wireless or PDA (Personal digital assistant) banking:

With a phone number and a special PIN number a customer can access to his account balance balance from his cellular device.

Allows user to pay bills, transfer funds between accounts and check accounts from anywhere.

Offers wireless banking. Security is important issue in Wireless Banking. Newsbytes reports that wireless banking users will number over 7

million in the US by 2005.

ONLINE SECURITY SYSTEMS

The concern of security remains the largest barrier to growth of online banking. Most people seem to believe that it is a hacker jungle out there, and stay very wary of trying to simplify their lives by using cyberspace.

Most institutions providing online banking services are very security conscious. After all, they wouldn’t want to open their computers to a stampeding public, would they? The security measures that organizations

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take over the web are simply invincible, unlike the surveillance cameras and lobby guards posted in many banks. If the general public is aware of, or understand, the many features put into a place to guard their finances, and then people remain skeptical.

Depending on how online accounts are accessed, security can be guaranteed in a variety of ways. Moreover, when a service, it is not opening its mainframes computer to the world. Usually, the bank installs a group of separate computers that stand between the mainframe computer and the network that will deliver data to your PC. At several points along the way, protection is build in.

Some of the most common security features are firewalls, data encryption, and password/personal identification number.

Firewalls

A firewall is a computer or software that protects the bank’s computers and data from being accessed by any outsider. This firewall is located at the point where the bank’s world connects with the rest of the world. This firewall is basically a gatekeeper, checking each attempt at delivery of data with a list of strict specifications; any criteria not met; does not make it past the firewall.

Public Key Infrastructure

Public key infrastructure can be defined as solution to ensure secure electronic business communication incorporating signatures and encryption technology.

Every user in PKI transaction owns a pair of keys: A public key known to everybody and a private key known only to the owner. The keys have 2 main characteristics. Once, they are complimentary sets of passwords.

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This means that a document encrypted by a public key can only be decrypted by a private key and vice-versa. Two, the keys are unique pair.

Let’s now see how PKI compares with existing security technologies. Anti-virus is merely for integrity, firewall give authentication and confidentiality, Access is similar to firewall; encryption ensures confidentiality. Thus PIK emerges as the only solution that guarantees all the four pillars of security and trust via authentication, non-repudiation, integrity and confidentiality.

Encryption

Encryption is the process of converting information into a more secure format for transaction. In other words the plain text is converted to scrambled code while being transmitted, and then plain text at the receiving end of the transmission. It is comparable to writing a letter, converting it to code, putting it in an envelope and mailing it with the recipient descrambling the code.

Currently, there are 2 levels of encryption generally available in web browsers: 40-bit encryption, and 128-bit encryption. Most commonly available browsers use 40-bit encryption. However the 128-bit offer the highest level of encryption and provides the best protection when transmitting confidential data over the Internet. The different between these two types of encryption is one of capability. 128-bit encryption is exponentially more powerful than 40-bit encryption.

Digital Signatures:

Digital signature essentially use encryption to scramble information in way that only the party who issued the certificate (usually the online store or a trusted third party) can decrypt and read.

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By using digital signatures, consumers are reassured that any sensitive information the send across the web, such as postal addresses and credit card details, is protected from interception along the way. Meanwhile , online merchants can be more confident that the customer placing the purchasing order is indeed entitled to use the payment card in question. Security experts believe that digital signatures will encourage more consumer to purchase goods online.

Access Codes

The access codes used to indentify you to the online banking system are called passwords, and are further protected by using PINs (personal identification number).

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CHAPTER 4

ADVANTAGES AND DISADVANTAGES OF

E-BANKING

BENEFITS OF E-BANING

Consumers are embracing the many benefits of Internet banking.

Benefits to customers:

Consumers can use their computers and telephone modem to dial in from home or any sit where they have access to computer.

The services are available seven days a week, 24 hours a day Transactions are executed and confirmed quickly, although not

instantaneously. Processing time is comparable to that of an ATM transaction.

In general, the customer will find lower fees and higher interest rates for deposits due to the reduced cost of operating online and not needing numerous physical bank branches.

And the range of transaction available is fairly broad. Customers can do everything from simply checking on an account balance to applying from a mortgage.

The interface is very user-friendly and often intuitive. Additionally, business customer will most likely use the Internet for more that cash management, and they will be accustomed to similar “look and feel” among all applications that the use.

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Benefits to the bank:

Why should a bank ‘bank online’? Advantages Previously held by large financial institutes have shrunk considerably. The Internet has leveled the playing field and afforded opened access to customers in the global marketplace. Internet banking is a cost-effective delivery channel for financial institutions.

The bank has an opportunity to generate revenue, decrease operational and transactional costs, increase productivity, and attract new customers.

Ability to increase Revenue

Financially, the bank can benefit a great deal from providing their customers with an online banking service. The ban has the ability to increase revenue by generating user and transaction fees for the use of a bill payment product and has the option of charging an account access fee for the use of the online system. Online banking provides an excellent promotional opportunity to generate revenue by helping the bank to cross-sell products such as credit cards, loans, certificate of deposits, and other financial services.

Save money

In addition to making money, the bank can save money with an Internet banking system. Online banking can actually decrease operating costs by reducing the daily reproduction and distribution of paper-drawn transaction and delivering and processing statements for accounts, credit cards, and bills. Performing transactions via the Internet also provides cost savings, as indicated by a study done by Booz, Allen & Hamilton that shows a transaction over the phone cost $.54, at an ATM it cost $.27 and via the Internet the cost is $.0.1. using the Internet to perform transactions greatly reduces the cost to the bank.

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Improves productivity

Internet banking improves productivity as well. Bank representatives are able to process data more quickly and efficiently; track account activity with automated reports, help customers achieve daily tasks via the Internet and reduce time spent handling service problems. There can be a dramatic reduction reduction in the number of customer service calls, as some banks that are providing this service has proven.

Marketing & Competitive Tools

Internet banking also offers the bank an exceptional marketing and competitive tool. Large banking such as Nations Banks and Wells Fargo, in the Unites States, have already capitalized on the Internet as a mechanism to attract new customers. The majority of people using the Internet are middle to high income and polls indicate that 50% of the people are also the ones who want to have the convenience of online banking for home or business use. This is an excellent opportunity for the community bank to keep their hometown customers from looking to national institutions for an online product.

Innumerable services are available via the Internet today. Internet banking provides a higher level of convenience that both commercial and retail customers desire to have. With this service, the bank not only has the opportunity to manage their business better, but can also help their customer achieve a much more efficient process of managing their finances.

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DISADVANTAGE OF E-BANING

The most obvious disadvantage is: technophobes need not apply i.e. if you are still not comfortable using a computer,e-banking is not for you.

Investment of time upfront can be formidable. The data entry is necessary before the numbers can be massaged and money managed successfully. Online bill payment is an example of an effort that requires setting up which leads to ultimate convenience.

Switching software or bank re-entry of data, although internet based system are less impacts by this. But competition seems t be minimizing this problem. The personal finance management software Microsoft money enables users of competing software to import data easily.

Like anything that deals with the transfer of large amount of money, security is a major factor of online banking. It is taken very serious during online banking procedures.

With a system as complex as Online Banking, some errors are inevitable. i.e. : An interrupted online session; late arrival of payments etc. a mistake made by either the user or the banks in question, can affect both, causing problems. For example: An ‘Infinity’ (ICICI’s Online Banking Brand name) customer from Bangalore (who did not want to be named) paid his cell phone bill thought the bank, only to receive another bill the following month, with late fees. The amount had been debited from his account but not passed on to cellular operator.

When dealing with computers, there is always concern of the system crashing, viruses entering the system or power cut. There are large problems and are not easily solved. In all this case, many people would be affected, information may be lost and a back –up plan would have to be initiated.

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CHAPTER 5

RISK MEASURERING

E-BANKING RISK

E-BANKING RISK:-

Strategic Risk

Operational Risk: Technology infrastructure Security Data integrity System availability Internal control

Reputational Risk

Legal Risk

Other traditional banking Risk Credit Risk Liquidity Risk Market Risk Foreign Risk

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E-banking using internet as an added delivery channel may shift bank risk profiles to some degree and create new risk control challenges for banks. Accordingly, supervisors need to consider the implication of a bank’s use of e-banking delivery channels on its strategic risk, operational risk, reputational risk, legal risk, market risk, and foreign exchange risk.

Strategic risk and business risk:

Strategic risk is one of the most significant risk that e-banking activity presents for banking organization. Strategic risk differs for other risk categories in that it is more general and board in nature. Strategic decision to be given by bank’s board of directors and executive management will have implicative for all other risk categories.

Some of the strategic risk involve with e-banking are directly linked with timing issues. There can be significant strategic risk associated with management decision to be a technology pioneer, particularly if the institution becomes burdened with system made redundant by rapid technological charges.

Operational risk:

Because of reliance of the technology for all facets of banking operational risk is one of the most significant risks. To limit operational risk, banking organization may want to consider implementing an integrated enterprise-wide architecture and technology infrastructure that can facilitate interoperability, ensure the security, integrity and availability of data and support the management of relationship with third party services provider.

Technological infrastructure:

E-banking has brought the issue of technological system and application integrated to the forefront. Many large banks now faced with the task of

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integrating system for e-banking activities with their existing legacy system and with system of multiple service providers and partners.

These banks are exposed to significant operational risk from errors in transaction processing if the systems for e-banking are not properly integrated.

Security:

The majority of the bankers surveyed by EBS (electronic banking group) members indentified security risk as a primary concern relating to E-banking external threats such as “hacking”, “sniffing”, “and denial of services” attacks expose banks to new security risk. Open electronic delivery channels cerate new security issues for banks with respect to confidentiality and integrity of information, non repudiation of transaction, authentication of users and access control.

Data integrity:

Data integrity is an important component of system security. Banking organization must improve interoperability with in and across enterprise to effectively manage relationship with customer, other banks and external services provider.

System availability:

In additional to ensuring secure internal networks for their e-banking activities, effectively capacity planning is critical to ensuring the ongoing availability of e-banking product and services. Competitive pressures and increased reliance on having services available 24 hours a day and 7 days a week (24*7) have raised customer expectation considerably and in torn reduce the tolerance for tolerance for error. To complete effectively and avoid potentially significant reputation risk that could arise from system outage, banks offering e-banking services may sliver the right mix of

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product and services securely , accurately and consistently. Moreover trends in outsourcing make it necessary for bankers to ensure that similar plans are in place at their external services providers and are periodically tested for effectiveness.

Internal control/audit:

The ability to correct and detect errors is critical internal control component of any banking operation. Much of efficiency and reduction in e-banking services stem from banks ability to implement “straight-through processing”. While the benefit of straight-through processing are many, the reality is that e-banking modifies how internal controls, proper segregation of duties and clear audit trails are applied over broad access channels.

Reputational risk:

The banks reputation can be impacted by any adverse development that precludes the availability of their e-banking delivery channels. Bank has long based their business on a reputation of trust. The ability to provide a trusted network to support e-banking if critical, and bank’s reputation can be damage by internet banking services that are properly executed or otherwise alienate customer and the public. Banks reputation can suffer if it fails to deliver secure, accurate and timely e-banking services on a consistent basis. A bank’s reputation can also be adversely impacted if it fails to respond to inquiries posted via email, does not provide proper disclosure, or violates customer privacy.

Legal risk:

Legal risk arising from e-banking activates represents another ares of increased concern. Currently supervision in every jurisdiction and

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examining how existing legal and regulatory frameworks originally design to address issues affecting the “physical” world of banking interact with the developing e-banking delivery channels as well as examining potential ambiguities.

A bank that develop relationships via the internet with customer in other jurisdictions may be unfamiliar with the banking and customer protection laws and regulation specific to those countries and may consequently incur heightened legal risk.

Other traditional banking risk:

The e-banking delivery channels also has implication for other traditional banking risks such as credit risk., Liquidity risk, interest rate risk and market risk.

Credit risk:

The credit risk of banking institution can be affected by e banking activities in a number of ways. The use of internal delivery channel may allow banks, especially small institution, to expand very rappidly, which could lead to heightened asset quality and internal control risks. The use of the internal also allows bank to expand their geographical reach out of their traditional area, which increase the challenge of understanding local market dynamics and risks, verifying collateral and perfecting security lions with out-of-area borrowers. In addition, the internal also makes it more difficult to authenticate the identity and creditworthiness of potential customers, which are essential element to sound credit decision.

b) Liquidity risk:

The speed with which the information and mis informatin moves over the internet can have implication for liquidity risk profile of banks. Adverse information about a bank, whether it is true or not, can be easily

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disseminated over the internal through bulletin boards and news groups. This couuld cause depositors to withdraw their funds in mass at any time of the day, any day of the week. Accordingy, increased monitoring of liquidity and changes in deposits and loan may be warranted depending on the volume of activity created through e banking.

Market risk:

The impact of recent growth in securities issuance and tradind over the internet on banks market risk is complex. From a market standpoint, the increase volume of securities, which are traded over the internet volatility, but on the other hand, it can lead to increased liquidity. From an individual bank's standpoint, banks may be exposed to increase market risk if they create or expand deposits brokering, loan sales, or securitization programmer as a result of internet banking activities. As with liquidity risk, the effect the increased E banking activities on market volatility need to be monitered by banks and supervisors.

Foreign exchange risk:

A bank may be exposed risk if it is accepts deposits from foreign customers or create accounts denominated in currencies other than their local currency. Since the internet allow banks the opportunity to expand their geographic range, even internationally, some bank may take a greater foreign exchange risk through e banking activities then the have through their traditional delivery channels. Supervision should ensure that a bank initiating cross-border e banking activities through the internet has the appropriate risk management systems and expertise to manage these risks properly.

RBI GUIDELINES FOR E-BANKING

The Reserve Bank of India on Friday released its final operativr guidelines

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for e-banking. The central bank has decided to keep the limit on the ticket-size for e-banking at Rs 2,500 per transaction, and Rs 5,000 per day. Banks have also been allowed to put in place a monthly transaction limit, depending on the bank's risk perception of the customer. While the guidelines will enable lenders such as State Bank of India and Axis Bank to go ahead with their launch of mobile banking services, the central bank has decided to restrict the services only to holders of debit and credit cards. The card user base in the country is 80 million, with 55 million debit card users and 25 million credit card users. Only Indian rupee-based domestic services shall be provided on the mobile- payment platform, and the use of mobile-banking for cross-border transactions have been strictly prohibited. Banks which are based, licensed and supervised in India will be allowed to offer such services. Further, only banks which have implemented the core banking platform will be allowed to offer e-banking. At the same time, the RBI has recommended that all e-banking transactions are validated through a two-factor authentication system, thereby complying with the latest security and encryption standards.

CHALLENGES FOR INDIAN E-BANKS

The challenges that Indian banks are facing:

1.How to manage multiple distribution channels?

Internet banking is bound to become the most important channel in next few years. Even the traditional banking would move towards internet technology with open standards and low cost. Although all traditional channels would not die down in a day and success would depend on how the banks generate synergy in these two vastly different channels. The services provided in all types of distribution channel must be in tandem with each other and must be in synergy.

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2.How to address the issue of internationalization i.e. how to take in and make e-banking an integral part of one's attitudes or beliefs?

The real challenges for Internet banking is to penetrate the customer base of banks. According to IDBI Bank's head (e-commerce and new product initiatives) J Venkataramanan, the maximum usage of Internet banking is for accessing account balances and making bill payments. For most customers, there's nothing more reassuring than watching their cheques getting credit on a paper ledger. Then, there is the question of how real is real time. For instance, while you can requisition for, say, a new set of cheques any time of the day, the request will get processed only during the banking hours.

Perhaps, the biggest of all concerns for e-banking customers is the security issue. People still aren't comfortable having information about their life's hard-earned money saved on a server they don't know about. A physical pass-book is still preferred. While e-bankers use multiple firewalls, filtering routers, 128-bit. Encryption and digital certification for safe and confidential transactions, there are still chances of a snafu.

Another problem is that an on-line service that merely mimics an off-line one doesn't give customers an adequate inducement to move a significant portion of their banking on-line. As a result, most customers tend to treat on-line banking as no more than an extra channel to check their balances and transactions histories, and they continue to do the rest of their business at the ATM or the teller window. A vicious cycle ensues.

Also, there is no more security and customer loyalty. With Internet, the gateway to low cost international expansion around, tackling the virtual competition would be a key. Competition is just a 'click' away. Customers would be loyal as long as the rates offered are competitive.

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At the same time, banks would have to manage different product portfolios, at different yet competitive prices to different corporate accross the world. The issue of offering services in multiple geographics/customers - due to increased global access and competition may ask for new virtual alliances between small local banks and the global players.

3.How to address the emergences of value-focused specialist competitors that are competing for specific value components currently dominated by banks and now are increasingly gaining access to the bank's customers?

The real trouble is that Internet Bank doesn't really need to be a bank. It can even be a group of innovative persons with no bank branch at all, just working through alliances and leading the field because of their superior capabilities through focus and innovation advantage.

The entry of multiple non financial institution and other non-traditional players would just fasten this whole process. E.g. Times Bank and IDBI Bank.

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CHAPTER 6

E -BANKING IN REALITY

The experiences of the west are the clear indicator that Internet Banking is not far off for India. The Internet usage, combined with aggressive moves by new Internet players in this highly fragmented industry will have profound effects on financial services.

But are the Indians banks ready for the sudden change? where do we stand as of today? would future be as diverse as today or would traditional banks painfully lose incremental revenue growth opportunities to a host of aggeressive players that may rapidly consolidate the news revenue opportunities in the business. And what exactly do the banks need to do to meet the challenges of ''Banking Business without barriers.''

Internet Banking Scenario

The lead in Internet banking in India has been taken by the new private sector banks and foreign banks, and the four banks which offer Internet banking facilities in a significant way are ICICI Bank, HDFC Bank, Citibank and Global Trust Bank. Banks like UTI Banks, IndusInd, and SBI also offer net banking facilities in a lesser time.

The current base of online banking customers has been estimated at 4.2 Lakhs, which is 8.7% of the overall Internet user base. The user base as of December 2002 has been estimated under alternative scenarios: The conservative scenario puts the user base as of 31st december; 2002 at 41.0 lakhs (14.7% of the internet user base), while the more optimisic forecast puts the user base at 73.0 lakhs with an of overall penetration of 26.2 %. ICICI, HDFC and CITIBANK have emerged as the early leaders in online

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banking, with ICICI being the clear leader.

Research revealed that close to 40% of adult Internet users have accounts with one of the four major Internet banks offline. However, only 10.8% of adult Internet users are banking online.

In terms of activities, there is still a reluctance to actually conduct financial transfers online, and the bulk of online banking activity is restricted to checking balances and statments online. Barely 30% of online bankers have paid bills online or transferred funds online.

Specific aspects of the Indian banking scenario which are pertinent to note are:

The low ATM penetration

A regulatory framework which is not conducive to net only bnaks

The Relative lack of inter branch networking and e-readiness of major public sector banks, which control a bulks of the deposit and branchs network base

The Relative nascence of the Internet itself

The entry of many new players

The recents IT Act which accepts the legal validity of the digital signatures

Plans of Indian public sector banks to provide e-banking services by 2002

The rapid growth of the Internet

The last 4 points - from entry of new players to rapid growth are factors, which should enable the growth of online banking in India.

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STRATEGY FOR INDIAN BANKS

Inernet banking would drive us into age of creative destruction due to non-phsyical exchange, complete transparency giving rise to perfectly electronic market place and customer supremacy. The question to be asked right now is "what the Indian Banks should do"?

Most banks today are pursuing what be described as a 'fortress' strategy, defending themselves against new entrants while waiting for more clarity in the online world. The fortress strategy has the benefit of relying on traditional sources of advantage; it plays to the strengths of current legacy banks. The risk, of course, is that these sources of advantage may not be enough to keep out new entrants that rely on a totally different business model.

Banks must today at least hedge by experimenting with the web business model. But it calls for profound organizational changes if it to be executed successfully. It needs the banks to fundamentally re-assess their opportunities for adding value and hence re-define their roles in the new paradigm.

Banks must first determine what kind of web to target. Customer webs focus on maximizing a bank's share of wallet of a target customer segment while Market webs seek to aggregate a critical mass of buyers and sellers within one transaction category.

Within any web that it might target, there are a number of possible roles a banks could play. web shapers are the one or two companies that own a shaping platform, take initiative to mobilize other companies around it, and define a set of standard practices or policies to coordinate participant's activities. Banks that choose not be Web shaper would be adapters and would need to define a clear niche that will help them differentiate themselves from other participants. Some adapters may becomes influencers,

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working closely with ensure the overall succcess of their web.

Indian Banks still have a few important lesssons in customer services that they would do well to pay heed to.

Customer Relationship

Banks and other financial institutions cannot go completely virtual - they need physical branches after all. This is probably one area where Internet banking in India scores over the 'stand alone' Internet banks of the West. Several Internet banks like E-trade have acquired ATM networks like Card Capture Services to offer consumers a way to deposit and access their money through ATMs. Physical branches help forge a 'relatonship' with customer that a virtual banks cannot. most online consumers utilize account tracking, bill pay and e-shopping, they would prefer direct, personal contact with their banker when shopping for financial products.

Personalization

Banking solution become truly personalized when they are able to respond to the changing customer needs, and this possible using strong data mining and target marketing capabilities.

For example , software that migth tell you which credit balances to pay off first, or alert you in advance when your cheque will boune. This level of personalization is still lacking in the banking solutions offered by Indian banks.

Integration

Another important aspect is integrating customer service interfaces and channels, so that the customer deals with a single channel that cater to diverse needs such as Kiosks, ATMs, Web TV, mobile phones, pagers, and branches counters. Banks have to get their acts together. If the , and the

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online Banking, and the ATM's, and the Branches don't work together, there's no real benefits in havings the electronic tools.

Customer shouldn't have to go to one site to just pay their utility bill and phone bill and then have to go offline to pay their cable and credit card bills. They should be able to check the value of their investment portfolio, updated daily, in their personal balance sheet, include all their other assets and other personal finance.

Banks must learn to aggregate their customers' different on - line financial-service relationships. The Purpose of aggregation is not to engage in blatant cross-selling or to achieve "100 percent share of wallet" but rather to develop a picture of the consumer's entire balance sheet. Any institution that gains such a view can provide superior convenience and advice.

Banks need to be 'One-stop shops' for an entire range of personal finance products from loans and insurance to mutual funds and even tax saving instruments. This is being done by 'account aggregators' such as Yodlee, Corillian, eBalance and Vertical One that let you log in to one web site, enter your username and password, and track information as diverse as bank and cedit - card balances, value of investments, and fequent-flier miles from several sites, each of which has its own username and password.

Innovation

Today's value-added product could easily be tomorrow's commodity. That is why banks would need to depend more on product innovation, expending the range of their products and service offerings. Apart from just online accounts, e-banks would need to tailor specific products for the Internet, llike online bill presentment or credit cards with instant online approval. Many Internet banks like Egg have taken the lead in offering innovative

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products like Egg card- a credit card that features an introductory zero-percent interest rate.

Migrate old customers and go after new ones

In building an on-line business, a bank's off line customer base is a huge asset. for it will be harder for competitors to pick off the bank's current customers than for the banks to get them on-line. But to do so, banks must make one-time offers and then constantly provide incentives such as free services (for example, bill payment and online trade) for increase balance.

Banks must also move swiftly to acquire new on -line customers. Most of the early attempts to do so, carried out in partnership with Internet portals, have flopped largerly because the banks failed to offer any differentiation in pricing or any other very compelling lure. Yet here, too, banks have an advantage. Despite significant increases in revenue from on-line relationships, credits card companies and brokerage firms have spent so much money building their on-line customer base that some would questions whether they will ever profit from these efforts. Most banks already have a powerful retail distribution network that should allow them both to migrate their customers and to accquire new ones at much lower cost.

WHERE IS E-BANKING IN INDIA HEADED?

There will be a large-scale shift to online bankiing in the next decade as banks go the extra mile in technology development to keep up with competition. It is believed the low transaction cost will make banking on the Net irresistible, but also that this will require institution to carefully consider and plan customer relations programs. It is believed that everything will be determined by content and context, and where execution will be key. From a customer and service provider perspective,

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this is where the world is moving - it is going to be real-time, on-line, personalization for both marketing and the services experience. If existing banks don't want to disappear, it is this challenge that they need to embrace in order to win and survive. Internet usuage is expected to grow with cheaper bandwidth cost. The department of telecommunication (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.

This setting up of a Credit Iformation Bureau for collecting and sharing credit information on borrowers of lending institutions online would give a fillip to electronic banking. Therecommendations of the VasudevaCommittee on Technological Up gradation of Banks in India have also been circulated to banks for implemantation. In this background, banks are moving in for technological up gradation on a large scale. Internet banking is expected to get a boost from such developments. Other major developments will be:

Inter Bank Fund Transfer

Today, e-banking operations mainly consists of providing information viz.requesting cheque books, statements, fund transfer, even online share trading (with reference to a particular branch) but the next two or three years are likely to see a huge change in the entire banking value chain. It would be possible to process any inquiry or transaction online without any reference to the branch at any time rather like 'anywhere banking - a service already being offered by HDFC, ICICI and Citibank.

Interbank fund transfer between different banks are a feature that is not a offered by any of the e-banking services in India. "At present, we have no plans to offer third-party transfer outside the bank. Globally, this is not allowed due to security reason. Also, the other banks also

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have to allow transfer/ debit of funds into/out of their Net banking system. According to HDFC, the RBI needs to set up a clearinghouse to route these transfer, and thus enable such transactions.

M-Banking

Today, with mobile being the 'in-thing', banks are not far behind to position themselves for this new medium to ring in customers and convenience. Most of them are talking about helping people access information of their accounts and even do transactions while on the move-calling this M-banking (mobile banking). Almost all major banks have SMS-enable mobile banking. The use of WAP-based applications for Internet banking is an increasing trend especially in the Asia pacific region, though it doesn't seem likely that it will catch on in India given the miniscule populace of WAP-enabled phone users.

"We have plans to offer WAP-enabled Fed Net soon" says Nair of Federal Bank.

"WAP-enabled banking will become popular and affordable to a larger number of users if the cost of the devices drops and airtime tariff come down."

Account Aggregation

A new wave called 'Account Aggregation' is slowly sweeping through the online banking/brokerage industry. Account aggregation -- or account consolidation -- provides consumers with the ability to access the information about all of their financial transactions sourced from different web sites, at a single web site.

Now you can obtain updates of all of your investments (from banks, mutual funds, online brokers), and liabilities (car lones, credit card lones, bank lones) at a single point. That way you don't need to remember

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multiple login IIs, and passwords, and also don't need to consolidate this information yourself. Further, at the same site you shall be able to get 'payment due' reminders, online payment services and even query your transactions to find, say how much you spent on entertainment last year. They could also provide you with e-mail; book your airline tickets and more.

True Relationship Banking

The future will provide the bank with the ability to allow account access and control privileges at the customer level. This means that all accounts in a relationship will be accessible via the Internet while only a subset of these accounts will be viewable and accessible for a third party (such as son or daughter who is away at school). It allows your tax consultant to view accounts in your relationship pertient to performing their services. And, business customers will see their entire commercial relationship bank.

Integration

Services provides will integrate and market their offerings across different channels. The strategic and battles of the future are going to be fought for channel Integration.

The beauty of integration is that one channel does not display another. They feed on each other to create incremental value for the customer, as well as the institution. The incremental value comes from two distinct sources. Finally, you reduce inefficiencies. you don't send people junk mail because you know that they are not likely to buy a particular product or service today. The result in net saving for economy. Secondly, you persuade people at the right time (the right time from the consumer's perspective, not from the service provider's perspective) to opt for a tailor made offering. This too increases value. Actually, this has to do with the

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Internet itself, and more to with the underlying technologies of the Internet which allow incremental efficiency, and empowers the customers to make more enlightened and timely choices. While the novelty of the service will attract customers to bank online, right now only customer services will determine whether Net banks get the thumbs up.

Banks in India that avail Internet Banking

Online banking in INDIA now days has been growing a lot and people all over India are getting into the tech heat. In previous day, for depositing amount into your account or friends account is all done manually going to the bank. But with the latest internet technology all of the major banks in INDIA are providing online access to all its customers and it is dead easy to carry on any transaction, say it transferring money from your account to your other account or your children account or any third party or paying bills online or speaking to bank for any assistance. Thanks to the latest technology.

You have advantage of viewing your bank account details, transactions reports, detailed updates and statements, check clearances or activate mobile banking or shop online, all through the convergence of the internet technology. Now that there is no need to rush into a bank and finish of transactions in a hurry. Expect for the cash transactions, everything can be done with your laptop or desktop with a little modern attached to it for internet.

Now days, all the major banks in India provide online banking. It is offered freely to all its customers and doesn't require any additional deposits to be done.

List of Indian banks providing Online Internet Banking

ICICI Bank

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Karur Vysya bank

State Bank of India

State Bank of Hyderabad

HDFC

HSBC

IDBI

ING Vysya

Axis Bank

Andhra Bank

Bank of Baroda

Bank of India

Citi bank

Indian Bank

South Indian Bank

Punjab National Bank (PNB)

There are many banks that avail internet banking to the customers, but the list of the above banks is the famous banks in INDIA. Online internet banking is something that you need to have. It's easy, fat, secure and convenient.

Services of e-banking offered by banks in India:

Citibank

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See up-to-date account information

View transactions details

View account statements for up to 12 months

Order demand draft to couriered free to over 200 locations

Order a cheque book

Stop payments

Request a deposit slip

Pay utility bills

Email queries

ICICI Bank

Account information - Summary of accounts and transactions

Bill payment

Funds Transfer including third-party transfer

Request for cheque book, stop payment, account opening,

Reporting loss of ATM card

Online e-shopping payments

Communication with the account Manager

personal finance, select articles on e-commerce, information technology, lifestyles,, travel and news.

HDFC Bank

Real-time account information including transactions

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Transfer money between accounts

Bill payments facility

Third party funds transfer - within HDFC bank

Request for Demand Draft/Bankers Cheque

Stop payment requests

Opening fixed-deposit accounts

sending message to bank via email

PUNJAB NATIONAL BANK:

Account information and transaction details

Depositary account

fund transfer between branches

Request for Demand Draft/Bankers Cheque, team deposite account opening, and change the address.

Bill payment facility

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CHAPTER 7

CONCLUSION:

E-banking has its own advantages and disadvantages. The main advantege of implementing E-Banking is an increase in customer satisfaction. This is because customers do not have to go the branches in order to access their accounts, make withdrawals and deposits. They can also check it anytime of the day, a feature that physical branches do not offer thus creating a good relationship with the bank and the customer. E-Banking is also advantageous not only for customer but also for the bank because it reduces costs in setting up a branch and the resources to process transactiions. All these benefits are the reasons why many banks are already investing in E-Banking.

The main disadvantage of E-Banking is the security problems that surround it. It's a fact that making transactions online poses a much bigger risk compared to making transactionns in a physical branch. This is due to the hacking problems and identity theft. Addititon to these risks, technical diffculities could also arise. Sometimes the bank's website goes down, and if this happens it will be a hassle for the customer because he/she has to go to a branch or make phone calls- which are usually busy due to other customers also making a call. Another case that has happened was an unpredicted rise in customer that the servers of the bank were not able to cope with. A customer may also run into a bad service. Sometimes you might wait a while for your checks to clear and you certaintly can't do anything about it if it is online. Even though all this disadvantages the banks the banks have to make its E-Banking more fast and effective so that they cab able to survey in the stiff competition in the market. It is fact that E-Banking has increase a better relationship with the customer, because customer can transacted

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with the bank with the bank with visiting it on sitting in the home.

BIBLIOGRAPHY

BOOKS

Indian Banking In Electronic Era

By-S.S.kaptan

E-Banking in India: challenges and opportunities

By-Rimpi Jatana, R.K Uppal

Website:

http://www.indianmba.com

http://www.worldjute.com

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