Project It in Bank-2

8/2/2019 Project It in Bank-2

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I.T IN BANKING SECTOR

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CH-1 HISTORY OF BANKING


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1.1 HISTORY OF BANKING:

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 any 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. Gone 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.

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 as mentioned below:

Early phase from 1786 to 1969 of Indian Banks

Nationalization of Indian Banks and up to 1991 prior to Indian banking

sector Reforms.

New phase of Indian Banking System with the advent of Indian Financial

& Banking Sector Reforms after 1991.


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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 came

Bank of Hindustan and Bengal Bank. The East India Company

established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of

Madras (1843) as independent units and called it Presidency Banks.These three banks were amalgamated in 1920 and Imperial Bank of India

was established which started as private shareholders banks, mostly

Europeans shareholders.

In 1865 Allahabad Bank 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, Bank of India, Central

Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank ofMysore 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 (Act No. 23of 1965). Reserve Bank of India was vested with extensive powers for the

supervision of banking in India as the Central Banking Authority.

During those days public has lesser confidence in the banks. As an

aftermath deposit mobilization was slow. Abreast of it the savings bank

facility provided by the Postal department was comparatively safer.

Moreover, funds were largely given to traders.


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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 transactions of the Union and State

Governments all over the country.

Seven banks forming subsidiary of State Bank of India was

nationalized in 1960 on 19th July, 1969, major process of nationalization

was carried out. It was the effort of the then 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% ofthe banking segment in India under Government ownership.

The following are the steps taken by the Government of India to Regulate

Banking Institutions in the Country:

1949: 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.


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1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.

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

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 11,000%.

Banking in the sunshine of Government ownership gave the public

implicit faith and immense confidence about the sustainability 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 net banking is introduced. The entire system became 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 macroeconomicsshock as other East Asian Countries suffered.


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1.2 STRUCTURE OF INDIAN BANKING SYSTEM

RBI

Commercial

Bank

Nationalized

Private

Co-operative

Bank

Short Term

Agricultural

Urban

Long Term

Development

Bank

Exim

Indutrial

Agricultural


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1.3 RBI&FUNCTIONS

The central bank of the country is the Reserve Bank of India

(RBI). It was established in April 1935 with a share capital of Rs. 5 crores

on the basis of the recommendations of the Hilton Young Commission.

The share capital was divided into shares of Rs. 100 each fully paid

which was entirely owned by private shareholders in the beginning. The

Government held shares of nominal value of Rs. 2, 20,000.

Reserve Bank of India was nationalized in the year 1949. The

general superintendence and direction of the Bank is entrusted to Central

Board of Directors of 20 members, the Governor and four Deputy

Governors, one Government official

from the Ministry of Finance, ten

nominated Directors by the

Government to give representation to

important elements in the economic

life of the country, and four

nominated Directors by the Central

Government to represent the four

local Boards with the headquarters at Mumbai, Kolkata, Chennai and

New Delhi. Local Boards consist of five members each Central

Government appointed for a term of four years to represent territorial and

economic interests and the interests of co-operative and indigenous

banks.

The Reserve Bank of India Act, 1934 was commenced on April 1, 1935.

The Act, 1934 (II of 1934) provides the statutory basis of the functioning

of the Bank.

The Bank was constituted for the need of following: To regulate the issue

of banknotesTo maintain reserves with a view to securing monetary

stability andTo operate the credit and currency system of the country to

its advantage.


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1.4 Functions of Reserve Bank of India

The Reserve Bank of India Act of 1934 entrust all the important functions

of a central bank the Reserve Bank of India.

Bank of Issue

Under Section 22 of the Reserve Bank of India Act, the Bank has the sole

right to issue bank notes of all denominations. The distribution of one

rupee notes and coins and small coins all over the country is undertaken

by the Reserve Bank as agent of the Government. The Reserve Bank has

a separate Issue Department which is entrusted with the issue of currency

notes. The assets and liabilities of the Issue Department are kept separate

from those of the Banking Department. Originally, the assets of the Issue

Department were to consist of not less than two-fifths of gold coin, gold

bullion or sterling securities provided the amount of gold was not less

than Rs. 40 crores in value. The remaining three-fifths of the assets might

be held in rupee coins, Government of India rupee securities, eligible bills

of exchange and promissory notes payable in India. Due to the exigencies

of the Second World War and the post-was period, these provisions were

considerably modified. Since 1957, the Reserve Bank of India is required

to maintain gold and foreign exchange reserves of Ra. 200 crores, of

which at least Rs. 115 crores should be in gold. The system as it exists

today is known as the minimum reserve system.


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Banker to Government

The second important function of the Reserve Bank of India is to act as

Government banker, agent and adviser. The Reserve Bank is agent of

Central Government and of all State Governments in India excepting that

of Jammu and Kashmir. The Reserve Bank has the obligation to transact

Government business, via. To keep the cash balances as deposits free ofinterest, to receive and to make payments on behalf of the Government

and to carry out their exchange remittances and other banking operations.

The Reserve Bank of India helps the Government - both the Union and

the States to float new loans and to manage public debt. The Bank makes

ways and means advances to the Governments for 90 days. It makes loans

and advances to the States and local authorities. It acts as adviser to the

Government on all monetary and banking matters.

Bankers' Bank and Lender of the Last Resort:

the Reserve Bank of India acts as the bankers' bank. According to the

provisions of the Banking Companies Act of 1949, every scheduled bank

was required to maintain with the Reserve Bank a cash balance

equivalent to 5% of its demand liabilities and 2 per cent of its time

liabilities in India. By an amendment of 1962, the distinction between

demand and time liabilities was abolished and banks have been asked to

keep cash reserves equal to 3 per cent of their aggregate deposit

liabilities. The minimum cash requirements can be changed by the

Reserve Bank of India.


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The scheduled banks can borrow from the Reserve Bank of India on the

basis of eligible securities or get financial accommodation in times of

need or stringency by rediscounting bills of exchange. Since commercial

banks can always expect the Reserve Bank of India to come to their help

in times of banking crisis the Reserve Bank becomes not only the

banker's bank but also the lender of the last resort.

Controller of Credit:

The Reserve Bank of India is the controller of credit i.e. it has the power

to influence the volume of credit created by banks in India. It can do so

through changing the Bank rate or through open market operations.

According to the Banking Regulation Act of 1949, the Reserve Bank of

India can ask any particular bank or the whole banking system not to lendto particular groups or persons on the basis of certain types of securities.

Since 1956, selective controls of credit are increasingly being used by the

Reserve Bank.

The Reserve Bank of India is armed with many more powers to control

the Indian money market. Every bank has to get a license from the

Reserve Bank of India to do banking business within India, the license

can be cancelled by the Reserve Bank of certain stipulated conditions arenot fulfilled. Every bank will have to get the permission of the Reserve

Bank before it can open a new branch. Each scheduled bank must send a

weekly return to the Reserve Bank showing, in detail, its assets and

liabilities. This power of the Bank to call for information is also intended

to give it effective control of the credit system. The Reserve Bank has

also the power to inspect the accounts of any commercial bank.


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As supreme banking authority in the country, the Reserve Bank of India,

therefore, has the following powers:

(a) It holds the cash reserves of all the scheduled banks.

(b) It controls the credit operations of banks through quantitative and

qualitative controls.

(c) It controls the banking system through the system of licensing,inspection and calling for information.

(d) It acts as the lender of the last resort by providing rediscount facilities

to scheduled banks.

Custodian of Foreign Reserves:

The Reserve Bank of India has the responsibility to maintain the official

rate of exchange. According to the Reserve Bank of India Act of 1934,

the Bank was required to buy and sell at fixed rates any amount of

sterling in lots of not less than Rs. 10,000. The rate of exchange fixed was

Re. 1 = sh. 6d. Since 1935 the Bank was able to maintain the exchange

rate fixed at lsh.6d. Though there were periods of extreme pressure in

favor of or against

the rupee. After India became a member of the International Monetary

Fund in 1946, the Reserve Bank has the responsibility of maintaining

fixed exchange rates with all other member countries of the I.M.F.

Besides maintaining the rate of exchange of the rupee, the Reserve Bank

has to act as the custodian of India's reserve of international currencies.

The vast sterling balances were acquired and managed by the Bank.


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Further, the RBI has the responsibility of administering the exchange

controls of the country.

Supervisory functions:

In addition to its traditional central banking functions, the Reserve bank

has certain non-monetary functions of the nature of supervision of banks

and promotion of sound banking in India. The Reserve Bank Act, 1934,

and the Banking Regulation Act, 1949 have given the RBI wide powers

of supervision and control over commercial and co-operative banks,relating to licensing and establishments, branch expansion, liquidity of

their assets, management and methods of working, amalgamation,

reconstruction, and liquidation. The RBI is authorized to carry out

periodical inspections of the banks and to call for returns and necessary

information from them. The nationalization of 14 major Indian scheduled

banks in July 1969 has imposed new responsibilities on the RBI for

directing the growth of banking and credit policies towards more rapid

development of the economy and realization of certain desired socialobjectives. The supervisory functions of the RBI have helped a great deal

in improving the standard of banking in India to develop on sound lines

and to improve the methods of their operation.

Promotional functions:

with economic growth assuming a new urgency since Independence, therange of the Reserve Bank's functions has steadily widened. The Bank

now performs a variety of developmental and promotional functions,

which, at one time, were regarded as outside the normal scope of central

banking. The Reserve Bank was asked to promote banking habit, extend

banking facilities to rural and semi-urban areas, and establish and

promote new specialized financing agencies. Accordingly, the Reserve


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Bank has helped in the setting up of the IFCI and the SFC; it set up the

Deposit Insurance Corporation in 1962, the Unit Trust of India in 1964,

the Industrial Development Bank of India also in 1964, the Agricultural

Refinance Corporation of India in 1963 and the Industrial Reconstruction

Corporation of India in 1972. These institutions were set up directly or

indirectly by the Reserve Bank to promote saving habit and to mobilize

savings, and to provide industrial finance as well as agricultural finance.

As far back as 1935, the Reserve Bank of India set up the AgriculturalCredit Department to provide agricultural credit. But only since 1951 the

Bank's role in this field has become extremely important. The Bank has

developed the co-operative credit movement to encourage saving, to

eliminate moneylenders from the villages and to route its short term

credit to agriculture. The RBI has set up the Agricultural Refinance and

Development Corporation to provide long-term finance to farmers.


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CH-2 I.T IN BANKING SECTOR


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2.1 INTRODUCTION:

The 21st

century will bring about an all-embracing convergence of

computing, communications, information and knowledge. This will

radically change the way we live, work, and think. The growth of highspeed networks, coupled

with the falling cost of

computing power, is making

possible applications

undreamed of in the past.

Voice, data, images, and

video may now be

transferred around the world

in micro-seconds. This

explosion of technology is

changing the banking

industry from paper and

branch banks to' digitized

and networked banking services. It has already changed the internal

accounting and management systems of banks. It is now fundamentally

changing the delivery systems banks use to interact with their customers.

All over the world, banks are still struggling to find a technological

solution to meet the challenges of a rapidly-changing environment. It is

clear that this new technology is changing the banking industry forever.

Banks with the ability to invest and integrate information technology will

become dominate in the highly competitive global market. Bankers are

convinced that investing in IT is critical. Its potential and consequences

on the banking industry future is enormous


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One of the most important challenges facing India now is theneed to match the urban development with the rural development .the role

that information technology(IT)can play needs to be viewed in this

context ,just as technology is important for effecting as quantum

improvement in farming technique and in increased agricultural

production ,it in banking is vital for quick progress in financial

intermediation and efficient payment system .At the outset ,the mere

usage of computers would not y itself herald IT revolution in the rural

sector .there are many other tools of IT which need to be introduced to actas catalysts in the progress of transformation with the geographical spread

of banking having penetrated most parts of the country , it is vital that

automated teller machine (ATMs)are widely used .ATMs would provide

in rural masses with the conveniences associated with retail technology .

At present, ATMs are city oriented ATMs with the rural customer as

focus points may have to be introduced .ATMs could provide cash drawls

as also deposit facilities to the rural common man.


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2.2 An Overview of: IT in Banking

In the five decades since independence, banking in India has

evolved through four distinct phases. During Fourth phase, also called as

Reform Phase, Recommendations of the Narasimham Committee (1991)

paved the way for the reform phase in the banking. Important initiatives

with regard to the reform of the banking system were taken in this phase.

Important among these have been introduction of new accounting and

prudential norms relating to income recognition, provisioning and capital

adequacy, deregulation

of interest rates & easing

of norms for entry in the

field of banking.

Entry of new banks

resulted in a paradigm

shift in the ways of

banking in India. The

growing competition,

growing expectations led

to increased awareness

amongst banks on the

role and importance of

technology in banking. The arrival of foreign and private banks with their

superior state-of-the-art technology-based services pushed Indian Banks

also to follow suit by going in for the latest technologies so as to meet the

threat of competition and retain their customer base.

Indian banking industry, today is in the midst of an IT revolution. A

combination of regulatory and competitive reasons have led to increasing

importance of total banking automation in the Indian Banking Industry.


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Information Technology has basically been used under two differentavenues in Banking. One is Communication and Connectivity and other

is Business Process Reengineering. Information technology enables

sophisticated product development, better market infrastructure,

implementation of reliable techniques for control of risks and helps the

financial intermediaries to reach geographically distant and diversified

markets.

In view of this, technology has changed the contours of three

major functions performed by banks, i.e., access to liquidity,

transformation of assets and monitoring of risks. Further, Information

technology and the communication networking systems have a crucial

bearing on the efficiency of money, capital and foreign exchange

markets.

The Software Packages for Banking Applications in India had

their beginnings in the middle of 80s, when the Banks started

computerizing the branches in a limited manner. The early 90s saw the

plummeting hardware prices and advent of cheap and inexpensive but

high-powered PCs and servers and banks went in for what was called

Total Branch Automation (TBA) Packages. The middle and late 90s

witnessed the tornado of financial reforms, deregulation, globalization etc

coupled with rapid revolution in communication technologies and

evolution of novel concept of 'convergence' of computer and

communication technologies, like Internet, mobile / cell phones etc.


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In India, banks as well as other financial entities entered the world of

information technology and with Indian Financial Net (INFINET).INFINET, a wide area satellite based network (WAN) using VSAT (Very

Small Aperture Terminals) technology, was jointly set up by the Reserve

Bank and Institute for Development and Research in Banking

Technology (IDRBT) in June 1999.

The Indian Financial Network (INFINET) which initially

comprised only the public sector banks was opened up for participationby other categories of members The first set of applications that could

benefit greatly from the use of technological advances in the computer

and communications area relate to the Payment systems which form the

lifeline of any banking activity. The process of reforms in payment and

settlement systems has gained momentum with the implementation of

projects such as NDS ((Negotiated Dealing System), CFMS (Centralized

Funds Management System) for better funds management by banks and

SFMS (Structured Financial Messaging Solution) for secure messagetransfer. This would result in funds transfers and funds-related message

transfer to be routed electronically across banks using the medium of the

INFINET. Negotiated dealing system (NDS), which has become

operational since February 2002 and RTGS (Real Time Gross Settlement

system) scheduled towards the end of 2003 are other major developments

in the area.

Internet has significantly influenced delivery channels of the banks.

Internet has emerged as an important medium for delivery of banking

products & services. Detailed guidelines of RBI for Internet Banking has

prepared the necessary ground for growth of Internet Banking in India.


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The Information Technology Act, 2000 has given legal recognition to

creation, trans-mission and retention of an electronic (or magnetic) datato be treated as valid proof in a court of law, except in those areas, which

continue to be governed by the provisions of the Negotiable Instruments

Act, 1881.

As stated in RBI's Annual Monetary and Credit Policy 2002-

2003: "To reap the full benefits of such electronic message transfers, it is

necessary that banks bestow sufficient attention on the computerizationand networking of the branches situated at commercially important

Centres on a time-bound basis. Intra-city and intra-bank networking

would facilitate in addressing the "last mile" problem which would in

turn result in quick and efficient funds transfers across the country".


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2.3 Role of IT in banking sector:

Banking environment has become highly competitive today. To be

able to survive and grow in the changing market environment banks are

going for the latest technologies, which is being perceived as an enabling

resource that can help in developing learner and more flexible structure

that can respond quickly to the dynamics of a fast changing market

scenario. It is also viewed as an instrument of cost reduction and effective

communication with people and institutions associated with the bankingbusiness.

The Software

Packages for Banking

Applications in India

had their beginnings

in the middle of 80s,when the Banks

started computerizing

the branches in a

limited manner. The early 90s saw the plummeting hardware prices and

advent of cheap and inexpensive but high powered PCs and Services and

banks went in for what was called Total Branch Automation (TBA)

packages. The middle and late 90s witnessed the tornado of financial

reforms, deregulation globalization etc. coupled with rapid revolution incommunication technologies and evolution of novel concept of

convergence of communication technologies, like internet, mobile/cell

phones etc. Technology has continuously played on important role in the

working of banking institutions and the services provided by them.

Safekeeping of public money, transfer of money, issuing drafts, exploring

investment opportunities and lending drafts, exploring investment being

provided.


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Information Technology enables sophisticated product development,

better market infrastructure, implementation of reliable techniques forcontrol of risks and helps the financial intermediaries to reach

geographically distant and diversified markets. Internet has significantly

influenced delivery channels of the banks. Internet has emerged as an

important medium for delivery of banking products and services.

The customers can view the accounts; get account statements,

transfer funds and purchase drafts by just punching on few keys. Thesmart cards i.e., cards with micro processor chip have added new

dimension to the scenario. An introduction of Cyber Cash the exchange

of cash takes place entirely through Cyber-books. Collection of

Electricity bills and telephone bills has become easy. The upgradeability

and flexibility of internet technology after unprecedented opportunities

for the banks to reach out to its customers. No doubt banking services

have undergone drastic changes and so also the expectation of customers

from the banks has increased greater.

IT is increasingly moving from a back office function to a prime

assistant in increasing the value of a bank over time. IT does so by

maximizing banks of pro-active measures such as strengthening and

standardizing banks infrastructure in respect of security, communication

and networking, achieving inter branch connectivity, moving towards

Real Time gross settlement (RTGS) environment the forecasting ofliquidity by building real time databases, use of Magnetic Ink Character

Recognition and Imaging technology for cheque clearing to name a few.

Indian banks are going for the retail banking in a big way


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2.4 Impact of IT on the Service Quality:

The most visible impact of technology is reflected in the way the

banks respond strategically for making its effective use for efficient

service delivery. This impact on service quality can be summed up as

below:

With automation, service no longer remains a marketing edge

with the large banks only. Small and relatively new banks with limited

network of branches become better placed to compete with the

established banks, by integrating IT in their operations.

The technology has commoditizing some of the financial

services. Therefore the banks cannot take a lifetime relationship with the

customers as granted and they have to work continuously to foster this

relationship and retain customer loyalty.

The technology on one hand serves as a powerful tool for

customer servicing, on the other hand, it itself results in depersonalizing

of the banking services. This has an adverse effect on relationship

banking. A decade of computerization can probably never substitute a

simple or a warm handshake.

In order to reduce service delivery cost, banks need to automate

routine customer inquiries through self-service channels. To do this theyneed to invest in call centers, kiosks, ATMs and Internet Banking today

require IT infrastructure integrated with their business strategy to be

customer centric.


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2.5 Impact of IT on Banking System:

The banking system is slowly shifting from the Traditional

Banking towards relationship banking. Traditionally the relationship

between the bank and its customers has been on a one-to-one level via the

branch network. This was put into operation with clearing and decision

making responsibilities concentrated at the individual branch level. Thehead office had 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 organizations 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 Sector
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The modern bank cannot rely on its branch network alone. Customers are

now demanding new, more convenient, delivery systems, and servicessuch as Internet banking have a dual role to the customer. They provide

traditional banking services, but additionally offer much greater access to

information on their account status and on the banks many other

services. To do this banks have to create account information layers,

which can be accessed both by the bank staff as well as by the customers

themselves.

The use of interactive electronic links via the Internet could go a long

way in providing the customers with greater level of information aboutboth their own financial situation and about the services offered by the

bank.

The New Relationship Oriented Bank
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2.6 Impact of technology in banking sector

Electronics and information technologies are rapidly changing thebanking and financial services industry. Online banking and electronic

payment systems are new and this allows customers to check their

balance and update and personal information, and the development and

diffusion of these technologies by financial institutions is expected toresult in a more efficient banking system.

This technology offers

institutions an alternative and

better delivery channels through

which banking products andservices can be provided to

consumers. The decline in cost

and increase in capacity of

computers, as well asdevelopments in communications

technology, have altered not onlythe way information is

transferred but also the cost of

processing and storinginformation.

To bring services closer to a customer and to guarantee the

opportunity to use them anytime a customer wants to, have been the most

important targets in banking during the last twenty years. The continuing

development of more and more complicated back-office systems wouldnot have been possible without information technology


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2.7 Impact of IT on Customer Service in Rural /

Urban Centers:

Improved and effective customer service in the rural and urban

centers is a matter of great concern for the Reserve Bank of India.

Banking functions have undergone a significant change. Large scale

usage of IT by banks has resulted in computerization of many branches

and their inter-connectivity by means of safe and reliable networks.

While the new private sector banks have all commenced as entities with

fully computerized operations, the older banks too have embraced the IT

in a big way.

Today, all the public sector

banks are on the threshold of

achieving the status of 100 per

cent computerization of their

business. In fact, the largestbank in the country has also

networked and interconnected

more than 3,000 of its branches.

This has resulted in three major benefits to the customer:

(i) The customer is now treated as a customer of the bank as a whole and

he is now capable of enjoying facilities such as 'anywhere banking' as

also 'anytime banking',

(ii) Costs have come down and with hair thin margins being the order of

the day, banks have to look for ways and means to reduce their operating

costs and IT has come as a savior in this area, and

(iii) There is a great impact on improved customer service and overall

efficiency of the banks


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All the above have positioned customers of banks as the most

important source of attention by banks, thereby conforming to MahatmaGandhi's oft-told adage of the customer being the 'King'. In present

context, customer is treated as an 'Emperor'. In terms of developing a

state-of-the art IT infrastructure for the banking sector, the issue needs to

be considered in terms of serving the two major sectors in India that have

slightly different priorities, viz., rural and urban.

The rural segment, at least as of today, is less mobile and the

focus is more on fairness' of the system and adequacy of credit. In urban

areas, on the other part, there is a greater mobility of consumers and arelatively higher frequency of use. Thus, access, convenience and time

are of the essence. To sum up:

Rural

-Quick Credit -The urban sector has all the needs of the rural

-On an objective basis sector plus the following:

-At reasonable rates -Easy to access

-Sensitive to the vagaries of nature -Of high quality

-A friendly supporting system for encouraging

-Customized to as narrow a segment of Savings and attracting them into

the financial customers as possible mainstream Urban

This should not be taken to mean that the two sectors have divergent

needs. In fact, the ultimate infrastructural needs for both the sectors are

the same. However, the priorities for the two sectors differ somewhat and

it would be advisable to keep this in mind in our technological solutions

to address their needs.


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GLOBALIZATION

NEW JOBS

MORE TIMES

BRIDGING THE CULTURAL GAP

COST EFFECTIVENESS

COMMUNICATION

CH-3 ADVANTAGES OF I.T


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Some of the advantages of information technology include:

Globalization

IT has not only brought the world closer together, but it has

allowed the world's economy to become a single interdependent system.

This means that we can not only share information quickly and

efficiently, but we can also bring down barriers of linguistic and

geographic boundaries. The world has developed into a global village due

to the help of information technology allowing countries like Chile and

Japan who are not only separated by distance but also by language to

shares ideas and information with each other.

Communication

With the help of information technology, communication has

also become cheaper, quicker, and more efficient. We can now

communicate with anyone around the globe by simply text messagingthem or sending them an email for an almost instantaneous response. The

internet has also opened up face to face direct communication from

different parts of the world thanks to the helps of video conferencing.

Cost effectiveness

Information technology has helped to computerize the business

process thus streamlining businesses to make them extremely cost

effective money making machines. This in turn increases productivity

which ultimately gives rise to profits that means better pay and less

strenuous working conditions.


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Bridging the cultural gap

Information technology has helped to bridge the cultural gap by

helping people from different cultures to communicate with one another,

and allow for the exchange of views and ideas, thus increasing awareness

and reducing prejudice.

More time -

IT has made it possible for businesses to be open 24 x7 all over

the globe. This means that a business can be open anytime anywhere,making purchases from different countries easier and more convenient. It

also means that you can have your goods delivered right to your doorstep

with having to move a single muscle.

Creation of new jobs

Probably the best advantage of information technology is the

creation of new and interesting jobs. Computer programmers, Systemsanalyzers, Hardware and Software developers and Web designers are just

some of the many new employment opportunities created with the help of

IT.


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DOMINANT

CULTURE

LACK OF JOB

SECURITY

PRIVACY

UNEMPLOYMENT

CH-4 DISADVANTAGES OF IT


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Some disadvantages of information technology include:

Unemployment -

While information technology may have streamlined the business

process it has also created job redundancies, downsizing and outsourcing.

This means that a lot of lower and middle level jobs have been done away

with causing more people to become unemployed.

Privacy

Though information technology may have made communication

quicker, easier and more convenient, it has also bought along privacy

issues. From cell phone signal interceptions to email hacking, people are

now worried about their once private information becoming public

knowledge.


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Lack of job security

Industry experts believe that the internet has made job security

a big issue as since technology keeps on changing with each day. This

means that one has to be in a constant learning mode, if he or she wishes

for their job to be secure.

Dominant Culture:

While information technology may have made the world a

global village, it has also contributed to one culture dominating another

weaker one. For example it is now argued that US influences how most

young teenagers all over the world now act, dress and behave. Languages

too have become overshadowed, with English becoming the primary

mode of communication for business and everything else.


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ATM

INTERNET

BANKING

MOBILE

BANKING

E-COMMERCE

VIRTUAL

BANKING

TELEBANKING

CH-5 INNOVATIVE SERVICES


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ATM:

An automated teller machine (ATM), also known as a Cash Point

(which is a trademark ofLloyds TSB), Cash Machine or sometimes a

Hole in the Wall in British English, is a computerized

telecommunications device that provides the clients of a financial

institution with access to financial transactions in a public space without

the need for a cashier, human clerk or bank teller. ATMs are known byvarious other names including ATM

Machine, automatic banking machine, cash

machine, and various regional variants

derived from trademarks on ATM systems

held by particular banks.

Invented by IBM, the first ATM was

introduced in December 1972 at Lloyds

Bankin the UK. On most modern ATMs,

the customer is identified by inserting a

plastic ATM card with a magnetic stripe or a

plastic smart card with a chip, that contains a

unique card number and some security

information such as an expiration date or CVVC (CVV). Authentication

is provided by the customer entering a personal identification number

(PIN).

Using an ATM, customers can access their bankaccounts in order to

make cash withdrawals, credit card cash advances, and check their

account balances as well as purchase prepaid cell phone credit.
http://en.wikipedia.org/wiki/Lloyds_TSBhttp://en.wikipedia.org/wiki/British_Englishhttp://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Bank_tellerhttp://en.wikipedia.org/wiki/Trademarkhttp://en.wikipedia.org/wiki/IBMhttp://en.wikipedia.org/wiki/Lloyds_Bankhttp://en.wikipedia.org/wiki/Lloyds_Bankhttp://en.wikipedia.org/wiki/ATM_cardhttp://en.wikipedia.org/wiki/Magnetic_stripehttp://en.wikipedia.org/wiki/Smart_cardhttp://en.wikipedia.org/wiki/Integrated_circuithttp://en.wikipedia.org/wiki/Card_Security_Codehttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/File:Diebold_1063_ATM_with_modem.jpghttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Card_Security_Codehttp://en.wikipedia.org/wiki/Integrated_circuithttp://en.wikipedia.org/wiki/Smart_cardhttp://en.wikipedia.org/wiki/Magnetic_stripehttp://en.wikipedia.org/wiki/ATM_cardhttp://en.wikipedia.org/wiki/Lloyds_Bankhttp://en.wikipedia.org/wiki/Lloyds_Bankhttp://en.wikipedia.org/wiki/IBMhttp://en.wikipedia.org/wiki/Trademarkhttp://en.wikipedia.org/wiki/Bank_tellerhttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/British_Englishhttp://en.wikipedia.org/wiki/Lloyds_TSB


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INTERNET BANKING:

Internet banking is a system of banking that enables customers to perform

various financial transactions on a secure website via the Internet. Thereare many banks and credit union that operate websites for internet

banking. Internet Banking is basically conducted via a personal computer

connected to Internet. Apart from it, people can also do financial

transactions using Internet banking on their cellular phones or personaldigital assistants.

Internet banking offers large number of benefits for people involved in

financial transactions. There is no need to visit your bank every time you

need to transfer money. You can do so by internet banking from thecomfort of your home. With net

banking facility, one can not only

transfer money, but also pay bills,

check bank statements, check

account balance, request for check

book and various other financialtransactions.

Internet banking has become

widely popular among the masses because of its wide array of benefits.

All banks offer the online banking facility for their customers nowadays.

Online banking has made the lives easier for people who are too busy to

go to bank for conducting their financial transactions. Net banking offers

the flexibility to do financial transaction on any day irrespective of thetime. In todays fast paced life, people are too much stressed out because

of their work pressure and net banking offers them peace of mind as they

can pay their bills, book their tickets, do online shopping, etc. by relaxing

on couch in their home. Best part of net banking is that it is very easy to

do any transaction over the net and highly secure website takes care of allyour worries.


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MOBILE BANKNG :

Mobile banking (also known as M-Banking,

mbanking, SMS Banking) is a term used for performing balance checks,account transactions, payments, credit applications and other banking

transactions through a mobile device such as a mobile phone or Personal

Digital Assistant (PDA). The earliest mobile banking services were

offered over SMS. With the introduction of the first primitive smart

phones with WAP support enabling the use of the mobile web in 1999,

the first European banks started to offer mobile banking on this platformto their customers. In one academic model, mobile banking is defined as:

Mobile Banking refers to provision and an ailment of banking- and

financial services with the help of mobile telecommunication devices.

The scope of offered services

may include facilities to conduct

bank and stock market

transactions, to administer

accounts and to access

customized information.

According to this model Mobile

Banking can be said to consist ofthree inter-related concepts:

Mobile Accounting

Mobile Brokerage

Mobile Financial Information Services

Most services in the categories designated Accounting and Brokerage are

transaction-based. The non-transaction-based services of an informational

nature are however essential for conducting transactions - for instance,

balance inquiries might be needed before committing a money

remittance. The accounting and brokerage services are therefore offeredinvariably in combination with information services. Informationservices, on the other hand, may be offered as an independent module
http://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/SMShttp://en.wikipedia.org/wiki/Smart_phoneshttp://en.wikipedia.org/wiki/Smart_phoneshttp://en.wikipedia.org/wiki/Wireless_Application_Protocolhttp://en.wikipedia.org/wiki/Mobile_webhttp://en.wikipedia.org/wiki/1999http://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Brokeragehttp://en.wikipedia.org/wiki/Brokeragehttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/1999http://en.wikipedia.org/wiki/Mobile_webhttp://en.wikipedia.org/wiki/Wireless_Application_Protocolhttp://en.wikipedia.org/wiki/Smart_phoneshttp://en.wikipedia.org/wiki/Smart_phoneshttp://en.wikipedia.org/wiki/SMShttp://en.wikipedia.org/wiki/Mobile_phone


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E-COMMERCE:

Electronic commerce,

commonly known as e-

commerce, eCommerce or e-

comm, refers to the buying and

selling ofproducts or servicesover electronic systems such as

the Internet and other computer

networks. However, the term

may refer to more than just

buying and selling products online. It also includes the entire onlineprocess of developing, marketing, selling, delivering, servicing andpaying for products and services. The amount of trade conducted

electronically has grown extraordinarily with widespread Internet usage.

The use of commerce is conducted in this way, spurring and drawing on

innovations in electronic funds transfer, supply chain management,

Internet marketing, online transaction processing, electronic datainterchange (EDI), inventory management systems, and automated data

collection systems. Modern electronic commerce typically uses the World

Wide Web at least at one point in the transaction's life-cycle, although itmay encompass a wider range of technologies such as e-mail, mobile

devices and telephones as well.

A large percentage of electronic commerce is conducted entirely in

electronic form for virtual items such as access to premium content on a

website, but mostly electronic commerce involves the transportation of

physical items in some way. Online retailers are sometimes known as e-tailers and online retail is sometimes known as e-tail. Almost all bigretailers are now electronically present on the World Wide Web.

Electronic commerce that takes place between businesses is

referred to as business-to-business or B2B. B2B can be open to all

interested parties (e.g. commodity exchange) or limited to specific, pre-
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qualified participants (private electronic market). Electronic commerce

that takes place between businesses and consumers, on the other hand, is

referred to as business-to-consumer or B2C. This is the type of electroniccommerce conducted by companies such as Amazon.com. Online

shopping is a form of electronic commerce where the buyer is directly

online to the seller's computer usually via the internet. There is no

intermediary service involved. The sale or purchase transaction is

completed electronically and interactively in real-time such as inAmazon.com for new books. However in some cases, an intermediary

may be present in a sale or purchase transaction such as the transactionson eBay.com.

Electronic commerce is generally considered to be the sales

aspect ofe-business. It also consists of the exchange of data to facilitatethe financing and payment aspects of business transactions.

Virtual Banking:

There is nothing virtual about a virtual bank. There are real

customers, real money, real successes, and real failures.Security First

Network Bank, which opened in October of 1995, is often cited byindustry analysts as being the first virtual bank. This is untrue. Security

First may have been the first banking operation to refer to themselves avirtual bankbut they werent the first to offer banking services without

branches. Manulife Bank, located in Waterloo, Canada, has been offeringbanking services without brick and mortar branches for almost 15 years.

Manulife Bank shed their retail outlets in 1993 (sold them to Laurentian

Bank) and transformed themselves into a bank that provided banking

services through advisors, banking consultants, call centre personnel,

interactive voice response and, in the mid1990s, web banking.

Not only was Manulife Bank an innovator when

it came to virtual banking, they also created thefirst product of its kind in North America (the

Manulife One product). Manulife One is a loan

product suitable to more sophisticated

consumers who are not highly leveragedING
http://en.wikipedia.org/wiki/Private_electronic_markethttp://en.wikipedia.org/wiki/Business-to-consumerhttp://en.wikipedia.org/w/index.php?title=B2C&action=edit&redlink=1http://en.wikipedia.org/wiki/Amazon.comhttp://en.wikipedia.org/wiki/Online_shoppinghttp://en.wikipedia.org/wiki/Online_shoppinghttp://en.wikipedia.org/wiki/EBay.comhttp://en.wikipedia.org/wiki/E-businesshttp://en.wikipedia.org/wiki/E-businesshttp://en.wikipedia.org/wiki/EBay.comhttp://en.wikipedia.org/wiki/Online_shoppinghttp://en.wikipedia.org/wiki/Online_shoppinghttp://en.wikipedia.org/wiki/Amazon.comhttp://en.wikipedia.org/w/index.php?title=B2C&action=edit&redlink=1http://en.wikipedia.org/wiki/Business-to-consumerhttp://en.wikipedia.org/wiki/Private_electronic_market


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DIRECT was another early virtual banking success for Canada. ING

DIRECT opened their virtualbanking doors in Canada by 1997, years

before they opened for business in Spain, Australia, the United States,France, Germany, UK, and Austria

TELEBANKING:

Telephone banking is a service provided by a financial institution, whichallows its customers to perform transactions over the telephone.

Most telephone banking services use an automated phone answering

system with phone keypad response or voice recognition capability. Toguarantee security, the customer

must first authenticate through a

numeric or verbal password orthrough security questions asked by

a live representative (see below).

With the obvious exception of cash

withdrawals and deposits, it offers

virtually all the features of an

automated teller machine: accountbalance information and list of latest

transactions, electronic bill

payments, funds transfers between acustomer's accounts, etc.

Usually, customers can also speak to

a live representative located in a call centre or a branch, although this

feature is not always guaranteed to be offered 24/7. In addition to the self-

service transactions listed earlier, telephone banking representatives are

usually trained to do what was traditionally available only at the branch:

loan applications, investment purchases and redemptions, cheque bookorders, debit card replacements, change of address, etc.

Banks which operate mostly or exclusively by telephone are known as

phone banks. They also help modernise the user by using specialtechnology
http://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Authenticationhttp://en.wikipedia.org/wiki/Passwordhttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Girohttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Call_centrehttp://en.wikipedia.org/wiki/Branch_%28banking%29http://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Debit_cardhttp://en.wikipedia.org/wiki/Phone_bankhttp://en.wikipedia.org/wiki/Phone_bankhttp://en.wikipedia.org/wiki/Debit_cardhttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Branch_%28banking%29http://en.wikipedia.org/wiki/Call_centrehttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Girohttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Passwordhttp://en.wikipedia.org/wiki/Authenticationhttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Financial_institution


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CREDITCARDS

DEBIT CARDS

CHEQUE

CARDS

CHARGE

CARDS

SMART

CARDS

CH-6 INNOVATIVE PRODUCTS


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CREDIT CARDS :

A credit card is a small plastic cardissued to users as a system ofpayment. It

allows its holder to buy goods and

services based on the holder's promise to

pay for these goods and services.[1]

The

issuer of the card creates a revolving account and grants a line of credit to

the consumer (or the user) from which the user can borrow money for

payment to a merchant or as a cash advance to the user.

A credit card is different from a charge card: a charge card requires thebalance to be paid in full each month.

[2]In contrast, credit cards allow the

consumers a continuing balance of debt, subject to interest being charged.

A credit card also differs from a cash card, which can be used likecurrency by the owner of the card

DEBIT CARDS :

A debit card (also known as a bank card or check card) is a

plastic card that provides the cardholder electronic access to his or her

bank account/s at a financial institution. Some cards have a stored value

with which a payment is made, while most relay a message to thecardholder's bank to withdraw funds from a designated account in favorof the payee's designated bank account. The card can be used as an

alternative payment method to cash when making purchases. In some

cases, the cards are designed exclusively for use on the Internet, and sothere is no physical card.

In many countries the use of debit cards has become so widespread that

their volume of use has overtaken or entirely replaced the checkand, in
http://en.wikipedia.org/wiki/Plastichttp://en.wikipedia.org/wiki/Paymenthttp://en.wikipedia.org/wiki/Credit_card#cite_note-0http://en.wikipedia.org/wiki/Credit_card#cite_note-0http://en.wikipedia.org/wiki/Credit_card#cite_note-0http://en.wikipedia.org/wiki/Revolving_accounthttp://en.wikipedia.org/wiki/Line_of_credithttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Merchanthttp://en.wikipedia.org/wiki/Cash_advancehttp://en.wikipedia.org/wiki/Charge_cardhttp://en.wikipedia.org/wiki/Credit_card#cite_note-1http://en.wikipedia.org/wiki/Credit_card#cite_note-1http://en.wikipedia.org/wiki/Credit_card#cite_note-1http://en.wikipedia.org/wiki/Credit_card_interesthttp://en.wikipedia.org/wiki/Cash_cardhttp://en.wikipedia.org/wiki/Bank_accounthttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/File:Smartcard3.pnghttp://en.wikipedia.org/wiki/File:CCardFront.svghttp://en.wikipedia.org/wiki/File:Smartcard3.pnghttp://en.wikipedia.org/wiki/File:CCardFront.svghttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Bank_accounthttp://en.wikipedia.org/wiki/Cash_cardhttp://en.wikipedia.org/wiki/Credit_card_interesthttp://en.wikipedia.org/wiki/Credit_card#cite_note-1http://en.wikipedia.org/wiki/Charge_cardhttp://en.wikipedia.org/wiki/Cash_advancehttp://en.wikipedia.org/wiki/Merchanthttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Line_of_credithttp://en.wikipedia.org/wiki/Revolving_accounthttp://en.wikipedia.org/wiki/Credit_card#cite_note-0http://en.wikipedia.org/wiki/Paymenthttp://en.wikipedia.org/wiki/Plastic


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some instances, cash transactions. Like credit cards, debit cards are used

widely for telephone and Internet purchases.

However, unlike credit cards, the funds paid using a debit card are

transferred immediately from the bearer's bank account, instead of havingthe bearer pay back the money at a later date.

Debit cards usually also allow for instant withdrawal of cash, acting as

the ATM card for withdrawing cash and as a check guarantee card.Merchants may also offer cash backfacilities to customers, where acustomer can withdraw cash along with their purchase.

CHEQUE CARDS:

A cheque guarantee card is

essentially an abbreviated portable

letter of credit granted by a bank to a

qualified depositor, providing thatwhen he is paying a business by

cheque and the retailer writes the

card number on the back of the

cheque, the cheque is signed in the

retailer's presence, and the retailer

verifies the signature on the cheque against the signature on the card, thenthe cheque cannot be stopped and payment cannot be refused by the bank.

This arrangement works only for cheques drawn on an account provided

by the bank that issues the card and can result in an overdraft with penaltyinterest.
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SMART CARDS:

A smart card may have the following genericcharacteristics:

Dimensions similar to those of a credit card. ID-1 of the ISO/IEC

7810 standard defines cards as nominally 85.60 by 53.98

millimetres (3.370 2.125 in). Another popular size is ID-000which is nominally 25 by 15 millimetres (0.984 0.591 in)(commonly used in SIM cards). Both are 0.76 millimetres

(0.030 in) thick.

Contains a tamper-resistant security system (for example a secure

crypto processor and a secure file system) and provides security

services (e.g., protects in-memory information).

Managed by an administration system which securely interchanges

information and configuration settings with the card, controlling

card blacklisting and application-data updates. Communicates with external services via card-reading devices,

such as ticket readers, ATMs, etc.
http://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/ISO/IEC_7810http://en.wikipedia.org/wiki/ISO/IEC_7810http://en.wikipedia.org/wiki/Subscriber_Identity_Modulehttp://en.wikipedia.org/wiki/Tamper-resistanthttp://en.wikipedia.org/wiki/Secure_cryptoprocessorhttp://en.wikipedia.org/wiki/Secure_cryptoprocessorhttp://en.wikipedia.org/wiki/File_systemhttp://en.wikipedia.org/wiki/Blacklist_%28computing%29http://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/File:Carte_vitale_anonyme.jpghttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Blacklist_%28computing%29http://en.wikipedia.org/wiki/File_systemhttp://en.wikipedia.org/wiki/Secure_cryptoprocessorhttp://en.wikipedia.org/wiki/Secure_cryptoprocessorhttp://en.wikipedia.org/wiki/Tamper-resistanthttp://en.wikipedia.org/wiki/Subscriber_Identity_Modulehttp://en.wikipedia.org/wiki/ISO/IEC_7810http://en.wikipedia.org/wiki/ISO/IEC_7810http://en.wikipedia.org/wiki/Credit_card


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ATM CARDS :

An ATM card (also known as a bank card, client card, key card or cash

card) is a card issued by a bank, credit union or building society that canbe used at an ATM for deposits, withdrawals, account information, andother types of transactions, often through interbank networks.

Some ATM cards can also be used:

at a branch, as identification for in-person transactions at merchants, for EFTPOS (point of sale) purchases

ATM cards are typically about 86 54 mm,i.e. ISO/IEC 7810 ID-1 size.

Unlike a debit card, in-store purchases or

refunds with an ATM card can generally bemade in person only, as they require

authentication through a personal

identification number or PIN. In other words,

ATM cards cannot be used at merchants thatonly accept credit cards.

However, other types of transactions through telephone or online banking

may be performed with an ATM card without in-person authentication.

This includes account balance inquiries, electronic bill payments or insome cases, online purchases (see Interact Online).

In some countries, the two functions of ATM cards and debit cards arecombined into a single card called a debit card or also commonly called a

bank card. These are able to perform banking tasks at ATMs and also

make point-of-sale transactions, both functions using a PIN. Canada's

Interact and Europe's Maestro are examples of networks that link bankaccounts with point-of-sale equipment.
http://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Building_societyhttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Interbank_networkhttp://en.wikipedia.org/wiki/EFTPOShttp://en.wikipedia.org/wiki/ISO/IEC_7810#ID-1http://en.wikipedia.org/wiki/Debit_cardhttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Credit_cardshttp://en.wikipedia.org/wiki/Telephone_bankinghttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Interac#Interac_Onlinehttp://en.wikipedia.org/wiki/Interachttp://en.wikipedia.org/wiki/Maestro_%28debit_card%29http://en.wikipedia.org/wiki/Maestro_%28debit_card%29http://en.wikipedia.org/wiki/Interachttp://en.wikipedia.org/wiki/Interac#Interac_Onlinehttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Telephone_bankinghttp://en.wikipedia.org/wiki/Credit_cardshttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Debit_cardhttp://en.wikipedia.org/wiki/ISO/IEC_7810#ID-1http://en.wikipedia.org/wiki/EFTPOShttp://en.wikipedia.org/wiki/Interbank_networkhttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Building_societyhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Bank


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HACKING

PHARMING

PHISHING

SKIMMING

TROJAN

CH-7 SECURITY ISSUES IN IT


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HACKING :

The term "hacker" also tends to connote membership in the global

community defined by the net (see the network and Internet address). For

discussion of some of the basics of this culture, see the How to Become aHacker FAQ. It also implies that the person described is seen to subscribe

to some version of the hacker ethic. It is better to be described as a hacker

by others than to describe oneself that way. Hackers consider themselvessomething of an elite (a meritocracy based on ability), though one to

which new members are gladly welcome. There is thus a certain ego

satisfaction to be had in identifyingyourself as a hacker (but if you claim

to be one and are not, you'll quickly

be labeled bogus). See also geek,

wannabe. This term seems to have

been first adopted as a badge in the

1960s by the hacker culturesurrounding TMRC and the MIT AI

Lab. We have a report that it was used

in a sense close to this entry's byteenage radio hams and electronics tinkerers in the mid-1950s.

The earliest Stanford revisions of the Jargon file (1975) did not describe

the term so positively, including only definitions 4, 5 and 8. The current

definition was written in more or less its current form around 1980 at

MIT. Definition 8 was "deprecated" in the 1990s by Jargon File editorEric S. Raymond, a known advocate of the positive usage of "hacker".

So, when we call ourselves 'hackers', or we distribute 'hacking'

documents, we encourage the propagation of information to the generalpublic, in order to get an idea of what they normally take for granted.


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PHARMING:

Pharming is a hacker's attack aiming to redirect a website's traffic to

another, bogus website. Pharming can be conducted either by changingthe hosts file on a victims computer or byexploitation of a vulnerability

in DNS server software. DNS servers are computers responsible for

resolving Internet names into their real addressesthey are the

"signposts" of the Internet. Compromised DNS servers are sometimesreferred to as "poisoned".

The term pharming is a neologism based on farming and phishing.

Phishing is a type ofsocial engineering attack to obtain access credentials

such as user names andpasswords. In recent

years both pharming

and phishing have been

used for online identity

theft information.

Pharming has becomeof major concern to

businesses hosting

ecommerce and online

banking websites.

Sophisticated measuresknown as anti-

pharming are required to protect against this serious threat. Antivirussoftware and spyware removal software cannot protect against pharming.
http://en.wikipedia.org/wiki/Black_hathttp://en.wikipedia.org/wiki/Websitehttp://en.wikipedia.org/wiki/Hosts_filehttp://en.wikipedia.org/wiki/Exploit_%28computer_security%29http://en.wikipedia.org/wiki/Exploit_%28computer_security%29http://en.wikipedia.org/wiki/Vulnerability_%28computing%29http://en.wikipedia.org/wiki/Domain_name_systemhttp://en.wikipedia.org/wiki/Softwarehttp://en.wikipedia.org/wiki/IP_addresshttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/DNS_cache_poisoninghttp://en.wikipedia.org/wiki/Neologismhttp://en.wikipedia.org/wiki/Phishinghttp://en.wikipedia.org/wiki/Social_engineering_%28computer_security%29http://en.wikipedia.org/wiki/Authenticationhttp://en.wikipedia.org/wiki/User_namehttp://en.wikipedia.org/wiki/Passwordhttp://en.wikipedia.org/wiki/Online_identity_thefthttp://en.wikipedia.org/wiki/Online_identity_thefthttp://en.wikipedia.org/wiki/Ecommercehttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Anti-pharminghttp://en.wikipedia.org/wiki/Anti-pharminghttp://en.wikipedia.org/wiki/Threat_%28computer%29http://en.wikipedia.org/wiki/Antivirus_softwarehttp://en.wikipedia.org/wiki/Antivirus_softwarehttp://en.wikipedia.org/wiki/Spyware_removal_softwarehttp://en.wikipedia.org/wiki/Spyware_removal_softwarehttp://en.wikipedia.org/wiki/Antivirus_softwarehttp://en.wikipedia.org/wiki/Antivirus_softwarehttp://en.wikipedia.org/wiki/Threat_%28computer%29http://en.wikipedia.org/wiki/Anti-pharminghttp://en.wikipedia.org/wiki/Anti-pharminghttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Ecommercehttp://en.wikipedia.org/wiki/Online_identity_thefthttp://en.wikipedia.org/wiki/Online_identity_thefthttp://en.wikipedia.org/wiki/Passwordhttp://en.wikipedia.org/wiki/User_namehttp://en.wikipedia.org/wiki/Authenticationhttp://en.wikipedia.org/wiki/Social_engineering_%28computer_security%29http://en.wikipedia.org/wiki/Phishinghttp://en.wikipedia.org/wiki/Neologismhttp://en.wikipedia.org/wiki/DNS_cache_poisoninghttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/IP_addresshttp://en.wikipedia.org/wiki/Softwarehttp://en.wikipedia.org/wiki/Domain_name_systemhttp://en.wikipedia.org/wiki/Vulnerability_%28computing%29http://en.wikipedia.org/wiki/Exploit_%28computer_security%29http://en.wikipedia.org/wiki/Hosts_filehttp://en.wikipedia.org/wiki/Websitehttp://en.wikipedia.org/wiki/Black_hat


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PHISHING:

Phishing is a way of

attempting to acquire sensitive

information such as usernames,

passwords and credit card details

by masquerading as a trustworthy

entity in an electronic communication. This is similar to Fishing, wherethe fisherman puts a bait at the hook, thus, pretending to be a genuine

food for fish. But the hook inside it takes the complete fish out of the

lake. Communications purporting to be from popular social web sites,

auction sites, online payment processors or IT administrators are

commonly used to lure the unsuspecting public. Phishing is typicallycarried out by e-mail spoofing or instant messaging, and it often directs

users to enter details at a fake website whose look and feel are almost

identical to the legitimate one. Phishing is an example ofsocial

engineering techniques used to deceive users, and exploits the poorusability of current web security technologies. Attempts to deal with the

growing number of reported phishing incidents include legislation, usertraining, public awareness, and technical security measures.

A phishing technique was described in detail in 1987, and the firstrecorded use of the term "phishing" was made in 1996. The term is a

variant of fishing, probably influenced by preaching, and alludes to

"baits" used in hopes that the potential victim will "bite" by clicking a

malicious link or opening a malicious attachment, in which case theirfinancial information and passwords may then be stolen.
http://en.wikipedia.org/wiki/Passwordhttp://en.wikipedia.org/wiki/Electronic_communicationhttp://en.wikipedia.org/wiki/E-mailhttp://en.wikipedia.org/wiki/E-mail_spoofinghttp://en.wikipedia.org/wiki/Instant_messaginghttp://en.wikipedia.org/wiki/Look_and_feelhttp://en.wikipedia.org/wiki/Social_engineering_%28computer_security%29http://en.wikipedia.org/wiki/Social_engineering_%28computer_security%29http://en.wikipedia.org/wiki/Legislationhttp://en.wikipedia.org/wiki/Phreakinghttp://en.wikipedia.org/wiki/Phreakinghttp://en.wikipedia.org/wiki/Legislationhttp://en.wikipedia.org/wiki/Social_engineering_%28computer_security%29http://en.wikipedia.org/wiki/Social_engineering_%28computer_security%29http://en.wikipedia.org/wiki/Look_and_feelhttp://en.wikipedia.org/wiki/Instant_messaginghttp://en.wikipedia.org/wiki/E-mail_spoofinghttp://en.wikipedia.org/wiki/E-mailhttp://en.wikipedia.org/wiki/Electronic_communicationhttp://en.wikipedia.org/wiki/Password


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TROJAN:

A Trojan horse, or

Trojan, is a destructive

program that masquerades as

an application. The software

initially appears to perform adesirable function for the user

prior to installation and/or

execution, but (perhaps in

addition to the expected

function) steals informationor harms the system. Unlikeviruses or worms, Trojan

horses do not replicate

themselves, but they can be

just as destructive.

The term is derived from the Greek myth of the Trojan War, in

which the Greeks gave a giant wooden horse to their foes, the Trojans,

ostensibly as a peace offering. However, after the Trojans dragged thehorse inside their city walls, the Greek soldiers sneaked out of the horse's

hollow belly to open the city gates and allowed their compatriots to pourin, capturing Troy.
http://en.wikipedia.org/wiki/Computer_virushttp://en.wikipedia.org/wiki/Computer_wormhttp://en.wikipedia.org/wiki/Trojan_Warhttp://en.wikipedia.org/wiki/Trojan_Warhttp://en.wikipedia.org/wiki/Computer_wormhttp://en.wikipedia.org/wiki/Computer_virus


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SKIMMING:

Skimming is the theft of credit card information used in an

otherwise legitimate transaction. It is typically an "inside job" by a

dishonest employee of a legitimate merchant. The thief can procure a

victim's credit card number using basic methods such as photocopying

receipts or more advanced methods such as using a small electronicdevice (skimmer) to swipe and store hundreds of victims credit card

numbers. Common scenarios for skimming are restaurants or bars where

the skimmer has possession of the victim's credit card out of their

immediate view. The thief may also use a small keypad to unobtrusively

transcribe the 3 or 4 digits Card Security Code which is not present on themagnetic strip. Call centers are another area where skimming can easilyoccur.

Instances of skimming have been reported where the perpetrator hasput a device over the card slot of an ATM (automated teller machine),

which reads the magnetic strip as the user unknowingly passes their card

through it. These devices are often used in conjunction with a miniature

camera (inconspicuously attached to the ATM) to read the user's PIN at

the same time.[11]

This method is being used very frequently in manyparts of the world, including South America, e.g. in Argentina and

Europe, e.g. in the Netherlands. Another technique used is a keypad

overlay that matches up with the buttons of the legitimate keypad below it

and presses them when operated, but records or transmits the key log of

the PIN entered by wireless. The device or groups of devices illicitly

installed on an ATM are also colloquially known as a "skimmer".Recently-made ATMs now often run a picture of what the slot and

keypad are supposed to look like as a background, so that consumers can

identify foreign devices attached.
http://en.wikipedia.org/wiki/Card_Security_Codehttp://en.wikipedia.org/wiki/Call_centershttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Credit_card_fraud#cite_note-10http://en.wikipedia.org/wiki/Credit_card_fraud#cite_note-10http://en.wikipedia.org/wiki/Credit_card_fraud#cite_note-10http://en.wikipedia.org/wiki/Credit_card_fraud#cite_note-10http://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Call_centershttp://en.wikipedia.org/wiki/Card_Security_Code


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CH-8 INITIATIVE OF RBI


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Initiatives of: Reserve Bank of India

Implementation of Centralized Funds Management System:

The centralized funds management system (CFMS) provides for a

centralized viewing of balance positions of the account holders across

different accounts maintained at various locations of RBI. While the first

phase of the system covering the centralized funds enquiry system

(CFES) has been made available to the users, the second phasecomprising the centralized funds transfer system (CFTS) would be made

available by the middle of 2003. So far, 54 banks have implemented the

system at their treasuries/funds management branches.

Certification and Digital Signatures:

The mid-term Review of October 2002 indicated the need for

information security on the network and the use of public key

infrastructure (PKI) by banks. The Controller of Certifying Authorities,

Government of India, have approved the Institute for Development and

Research in Banking Technology (IDRBT) as a Certification Authority

(CA) for digital signatures. Consequently, the process of setting up of

registration authorities (RA) under the CA has commenced at various

banks. In addition to the negotiated dealing system (NDS), the electronic

clearing service (ECS) and electronic funds transfer (EFT) are also being

enhanced in terms of security by means of implementation of PKI and

digital signatures using the facilities offered by the CA.


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Committee on Payment Systems:

In order to examine the entire gamut of the process of reforms in

payment and settlement systems which would be culminating with the

real time gross settlement (RTGS) system, a Committee on Payment

Systems (Chairman: Dr. R.H. Patil) was set up in 2002. The Committee,

after examining the various aspects relating to payment and settlement

systems, submitted its report in September 2002 along with a draft

Payment Systems Bill. The draft Bill provides, inter alia, a legal basis fornetting, apart from empowering RBI to have regulatory and oversight

powers over payment and settlement systems of the country. The report

of the Committee was put on the RBI website for wider dissemination.

The draft Bill has been forwarded to the Government.

Multi-application Smart Cards:

Recognizing the need for technology based payment products and

the growing importance of smart card based payment flows, a pilot

project for multi-application smart cards in conjunction with a few banks

and vendors, under the aegis of the Ministry of Communications and

Information Technology, Government of India, has been initiated. The

project is aimed at the formulation of standards for multi-application

smart cards on the basis of inter-operable systems and technologicalcomponents of the entire system.


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Special Electronic Funds Transfer:

As indicated in the mid-term Review of October 2002, national

EFT (NEFT) is being introduced using the backbone of the structured

financial messaging system (SFMS) of the IDRBT. NEFT would provide

for movement of electronic transfer of funds in a safe, secure and quick

manner across branches of any bank to any other bank through a central

gateway of each bank, with the inter-bank settlement being effected in the

books of account of banks maintained at RBI. Since this scheme requires

connectivity across a large number of branches at many cities, a special

EFT (SEFT) was introduced in April 2003 covering about 3000 branches

in 500 cities. This has facilitated same day transfer of funds across

accounts of constituents at all these branches.

National Settlement System (NSS):

The clearing and settlement activities are dispersed through 1,047

clearing houses managed by RBI, the State Bank of

Project It in Bank-2

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Transcript of Project It in Bank-2