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RESEARCH REPORT
ON
ROLE OF IT IN BANKINGSECTOR
Report Submitted to the Fulfillment of the Master of
Business Administration[2006-2008]
SUBMITTED TO SUBMITTED BY
MS. GEETIKA GARG SANJEEV KUMAR
FACULTY MBA – 4TH
SEMROLL # 0609970091
HARLAL INSTITUTE OF MANAGEMENT AND TECHNOLOGY,GREATER NOIDA
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DECLARATION
I declare that the project titled “Role of IT In Banking Sector” is an original project
done by me and no part of the project is taken from any other project or materials
submitted earlier to any other college.
Sanjeev Kumar
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ACKNOWLEDGEMENT
With a profound sense of gratitude, I record my indebtedness to
Ms. Geetika Garg, Faculty, HIMT, Greater Noida for providing me the support
to undergo this project.
The nurturing and blossoming of this present work was mainly due to
her valuable guidance, astute judgment, constructive criticism and an eye for
perfection. But for his overwhelming interest, the present work would not have
seen the light of days.
And last but not the least; I am thankful to all the helpful people whowere not even aware of the contribution they made towards the completion of
this project.
SANJEEV KUMAR
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CONTENTS
Topics Covered
!. Certificate
2. Acknowledgement
3. Table of Content
4. Executive Summary
5. Banking Industry in India
6. Banking and Technology
7. Research Methodology
8. Internet Banking
9. Indian Banks on the web – The major players
(ICICI, HDFC and CITIBANK)
10. Future of e-banking in India
11. Conclusion
12. Bibliography
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EXECUTIVE SUMMARY
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. Still to date, out of the over 50,000
branches of Public Sector Banks, only 3,668 branches have been
fully computerized, while a further 6,961 branches have been
partially computerized. This provides a huge market for players
in IT Industry.
The expansion of bank branches to far flung areas resulted in an
explosion of sorts in volumes of transactions and posed a severe
strain on all resources. More particularly, the inter-branch
reconciliation became one area that defied manual handling. It
was in this background that the first steps towards
mechanization were taken in late 50s/early sixties in the Calcutta
office of the SBI for the reconciliation of inter-branch
transactions.
The pace of branch expansion was so fast that by early sixties
this equipment was also considered inadequate and the Bank
went in for the first computer The whole system of reporting and
reconciliation of transactions was revamped and modernized.
Other larger nationalized Banks also followed suit.
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If banks opts for a high level of computerisation, even if it were
to be achieved in a phased manner, they would not only be able
to service customers better but would also reap bigger profits.
Imagine what would happen when business doubles, workload
increases manifold and bank employees are left grappling with
archaic adding machines and calculators. Foreign remittances
would get clogged in the pipeline, queues would lengthen at
tellers' counters, passbooks would take weeks to update and
senior citizens would be waiting for their pensions as clerks
manually prepare pension scrolls to be submitted to the treasury.
It's real ironic situation. Here on the one hand we claim to be a
nation of computer experts providing state-of-the-art solutions of
Fortune 500 companies. On the other, our own companies, which
can well afford computerisation, look askance when an IT
proposal falls on the chairman's desk. If unions are the stumbling
block, their leaders ought to be educated.
Lack of awareness, lack of will to accept change and to some
extent lack of money is coming in the way of those companies
that are in the business of handling the nation's money. These
are surmountable problems. The sooner we address these issues
the better it is for all of us.
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BANKING INDUSTRY IN INDIA
Banking Industry in India has always revolved around the
traditional function of deposits and credit. Their role had been
defined as to assist the overall economic growth with majority of
share being controlled by the Government of India in most of the
banks. But with the process of liberalization, and the
technological revolution the banking industry has also undergone
tremendous change in the last 5 years. The market, which was
largely controlled by the public sector banks, has now been
facing stiff competition not only from foreign players but also
from the new generation private sector banks. The rules of the
game have been changing with the RBI introducing new norms to
make banks more accountable and to adopt the practices
followed worldwide.
Most of the banks have now been trying to function on the
concept of a Universal Bank. Apart from the traditional functions
of a commercial bank, they are taking steps to build themselves
into a one stop financial centre wherein all the financial products
would be available. Banks have started catering to the retail
segment to improve their deposit portfolio. In order to have a
maximum share in this segment, most of the banks have been
introducing new products. The delivery channels have also been
shifted from branches to ATMs, phone banking, net banking etc.
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Technology has become an important medium of not only
attracting new customers but also in retaining them. The new
generation private sector banks have made a strong presence in
the most lucrative business areas in the country because of
technology upgradation. While, their operating expenses have
been falling as compared to the PSU banks, their efficiency ratios
(employee’s productivity and profitability ratios) have also
improved significantly.
Key Industry Statistics of Scheduled Commercial Banks
(Rs bn)
Mar-26'
2002
Mar-24'
2003
Sept-22'
2003
Total deposits 7140 8132 8729
demand 1174 1273 1266
time 5966 6859 7463
Total bank credit 3688 4358 4667
food 168 256 320
non-food 3520 4102 4347
Investments 2545 3088 3332
govt. sec 2232 2784 3023
other approved sec 313 304 309
Cash in hand 43 53 53
Balance with RBI 635 574 631
Cash-Deposit ratio 9.50% 7.70% 7.80%
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Investment-Deposit ratio 35.70% 38% 38.20%
Credit-Deposit ratio 51.70% 53.60% 53.50%
Source – RBI WSS
Banks traditionally involved in working capital financing have
started offering consumer loans and housing loans. Some of the
banks have started offering travel loans as well. Retail financing
is the other area where the banks have started to concentrate.
The loan formalities too have been relaxed to a great extent and
sanctioning time has been speeded up.
Mergers and Acquisitions have also started playing their role in
the banking industry where lots of players are trying to
consolidate their position. The recent merger of ICICI Bank with
Bank of Madura and the announcement of the merger of Global
Trust Bank with UTI Bank are important steps in this direction. In
recent times, most of the new private sector banks have shown
interest in inducting a foreign partner in their operations.
Most of the banks are also planning to enter the insurance
business and are in the process of identifying their strategic
partners. Since most of the banks already have an extensive
distribution network, this new business should result in
substantial revenues. But with most of the top league players
planning to enter this business, the more efficient and pro active
players would be able to take a lead.
Structure Of Indian Banking Industry
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The Indian Banking Industry can be broadly classified into:
• Public Sector Banks
The Indian Banking industry is largely dominated by the public
sector banks. These banks till the early 90s were involved in the
traditional banking business of deposits and credit lending. They
performed a supportive role in the overall growth of the
economy. While most of these banks used to focus on the growth
of balance sheet, profitability was not a significant factor in the
competition. In most of the banks, the government has a holding
of 100% whereas in the few banks, the stake has fallen because
of a public issue in the post liberalization period. The government
is proposing to bring out a bill wherein its share in all these
banks would stand reduced to 33% from the current levels.
The public sector banks have a strong distribution network all
over the country. But the strength of the earlier periods has now
become a concern for these banks. As compared to the tech-
equipped distribution network of the new private sector banks
and the foreign banks, these banks have found it difficult to
upgrade them on the technology front. These banks are also
facing the problem of surplus manpower. Most of these banks
are now coming out with a VRS to bring down their number of
employees and improve the efficiency ratios.
The public sector banks still control a major share in the banking
operations of the country. Their inefficiencies have been exposed
only when the market was throw open for competition and new
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players started eating up their share. But given their size and the
strong network, most of these banks can change their
perception. The recent thrust on reduction of government stake,
VRS, NPA settlement schemes etc have been some of the steps
in this direction. Since the growth of the economy is largely
dependent on the performance of these banks, even with the
growth of new private and foreign players, these banks will have
an important role to play.
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• Private Sector Banks
The Banking Regulation Act was amended in 1993 permitting the
entry of new private sector banks.
With emphasis on service and technology, it is for the first time
that Indian banks are challenging the foreign banks. These banks
are making heavy use of technology to give good service on par
with foreign banks but to a much wider audience e.g. branch size
has been reduced considerably by using technology and having
less manpower. In addition the ATM etc helps drawing large
customers to one branch.
The new private banks are on an expansion phase and are now
moving into semi-urban areas and satellite towns to fulfill their
branch expansion norms. Their technological edge and product
innovation has seen them gaining market share from the slower,
less efficient older banks.
The new private banks have been consistently gaining market
share from the public sector banks. The major beneficiary of this
has been corporate clients who are most sought after now.
The private sector banks have been able to make significant
inroads in the retail market of the public sector banks. During
the year, the two leading banks in this sector had set a new
trend in the Indian banking sector. HDFC Bank, as a part of its
expansion plans had taken over Times Bank. ICICI Bank became
the first bank in the country to list its shares on NYSE.
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• Foreign Banks
Foreign banks have been doing the normal banking business in
the country. During the period of nationalization, the entry of
new foreign banks and expansion by existing foreign banks were
prohibited. Even, when the norms were relaxed later on, RBI was
very slow in granting any further approvals to these banks. But
most of these banks have concentrated on the metropolitan
cities of the country and have been able to do reasonably well.
These banks have used the latest technology to compensate for
the limited number of branches they have.
In the post liberalization period, a number of new players have
entered and the existing players have consolidated their position
in the market. In the last couple of years, some of the foreign
banks have entered the retail segment and introduced a number
of new products in the market. This has intensified the
competition in the banking sector and has made most of the old
players rethink their strategy.
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BANKING AND TECHNOLOGY
There is no denying the fact that in the past two decades
information technology has been the most rapidly changing
industry in the world. But more than the rate of change, what is
remarkable is the way IT has changed the paradigms of business
in other industries. One industry that has really felt the impact of
IT has been the banking sector.
The banking scenario has been changing at fast pace. Banks,
traditionally just borrowers and lenders, have started providing
complete corporate and retail financial services to its customers.
Banks have been introducing new products to maintain their
share in this highly competitive market where things have been
changing quite rapidly.
Technology drive has benefited the customers in terms of faster,
improved, convenient banking services and variety of financial
products to suit their requirements. ATMs, phone banking, net
banking, anytime and anywhere banking are the services, which
banks has started offering following the changing trend in the
sector. In plastic money segment, customers have also got a
new option of debit cards against the earlier popular credit cards.
Earlier customers had to conduct their banking transactions
within the restricted time frame of banking hours. Now banking
hours have been extended. ATMs, phone banking and net
banking had enabled the customers to transact as per their
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convenience. Customers can now withdraw money at any time
and from any branch across the country. They can ascertain their
account transactions, order statement of account, and give
special instructions using the tele-banking or online banking
service. Infact, couple of banks in the country has started a new
facility wherein a customer can open an account with a very low
balance and avail all the latest tech facilities offered by the bank.
But the moment, the customer would visit a branch, he would
charged be a penalty which symbolizes the increasing practice of
the banks to discourage the customers from using branch
transactions. The main reason for this move could be lower
operating costs for these banks while operating from these new
channels.
Customers can apply for credit online and even the processing of
loan application is done online.
In a tight competitive environment where banks are making a
thrust towards technology to provide superior services to its
customers, customers stand to gain the most. The Customer is
now in an enviable position where he can demand superior
services at competitive prices. Those banks, which have been
able to realize the importance of technology in the day to day
operations, have witnessed a sharp increase in their overall
perception while the others have probably lost the first mover
advantage.
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The first mass-oriented infotech deployment in the banks
happened in 1998, with Citibank’s pilot project "Suvidha"
in Bangalore. The project focussed more on the ATMs and
less on the brick-and-mortar branches. Within two years, it
broke even and has now been launched in Delhi and the
NCR. The bank’s customers have access to over 149 ATMs in
the region including Citibank’s own ATMs and other ATMs in
the Cirrus network—an international banking network. Apart
from the bank’s Web site providing information about all the
ATM locations, Citibank has put up a 24×7 call center to
address all customer needs from a single location.
Another example is ICICI Bank. In Delhi alone, its on- and off-
site ATMs number about 139 while the brick-and-mortar
branches number about 30. It also has a call center to
handle any banking queries in Delhi.
From Traditional 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. The
head 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 organization’s
performance and set the decision-making parameters, but the
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information available to both branch staff and their customers
was limited to one geographical location.
… to Relationship Banking
The modern bank cannot rely on its branch network alone.
Customers are now demanding new, more convenient, delivery
systems. And services such 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 bank’s many other services. To do this
banks have to create information layers, which can be accessed
both by the bank staff as well as by the customers themselves.
Today banking in India has become an unpopular industry, much
blamed for problems of its own making. The use of interactive
electronic links via the Internet could go a long way in providing
the customers with greater level of information about both their
own financial situation and about the services offered by the
bank.
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Current Scenario
Of the existing 55,837 bank branches in the country, 21,309
were partially computerised and 5,910 fully computerised,
according to a Nasscom study on the status of computerisation in
the Indian banking industry.
Twenty-five per cent of banks in India are computerised and
Nasscom aims to achieve 90 per cent computerisation in the
industry by year 2006, said Mr. Dewang Mehta, at
`[email protected] 2000', a seminar organised by Nasscom and
Indian Banks' Association, on July 25, 2000.
There are 1,00,145 computers installed in banks, with 40,000
alone installed in the last one year.
Customers
Telephone, Branch, Electronic Banking, etc.
Shared Information
Clearing Systems Head Office RiskMonitoring
The New Relationship Oriented Bank
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The study showed installed ATMs at 1320, online terminals at
corporate customer sites at 2,202, credit cards at 10,56,200 and
debit cards at 1,20,210.
However, looking at the current status of banks, we do not seem
to have achieved either the improvement of service nor are we
setting up an environment of complete computerisation. With the
various kinds of computerisation, we have observed the
customer to note:
1. Increase in service time even when the system is
running.
2. Absolute chaos when the system is down temporarily when no
service is offered even if the system is not needed to dispense
the customer (mere acceptance of a cheque is also refused
even when the entry is possible to be done later).
3. Delay in receiving periodic statements.
4. Wrong balance being carried forward either at year-end or at
the time of switch-over to computers.
The use of computers to merely service the depositor customer
does not constitute Bank branch computerisation. Noticeable in
their absence is the department of advances and Inter-branch
transactions.
Advances -- Earning department ignored
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Bills are one of the products of the advances department and
most of the systems have ignored the important point that this is
the profit-earning department of the Bank. Bills purchase and
discount whether local or foreign is the mode encouraged by the
RBI from time to time since the transaction financed is
specifically identified. The calculations of each transaction are
complex especially when the Bill is paid after due date. Taking
care of this would ensure correctness of calculation of an
important source.
Inter-branch transactions
Issuance of any of the remittance instruments like Bank draft,
Telex transfers etc. is one of the major sources of creation of
inter-Branch transactions. Reconciliation of these is one of the
banes of the industry and few have managed to bring it into a
manageable size. Inter-branch reconciliation is easily possible
even with the lowest level of computerisation. All the Bank has to
do is obtain on a magnetic media say a floppy such inter-branch
transactions and let the central computer list out the variances
for the branches to respond.
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An idealistic view
Graphically speaking, we would like the system to achieve
basically:
Counter
computerisatio
n
Efficient
counter
computerisatio
n
Daily branch
efficient
computerisatio
n
Branch and
inter branch
computerisatio
n
Total
Computerisatio
n
Priority 1 Priority 2 Priority 3 Priority 4 Priority 5
Faster Service
to existing
customers
Controls
integrated into
the system
Back office
load taken
care of by the
system
Inter-branch
transactions
reported by
system
Statistical
information
extracted by
the system
Look at your Bank branch and you will see how far from total
computerisation is the branch. It is sad to note that even the
first stage is achieved by only a few.
1. All counter departments like savings, current, cash credit and
cash all linked. The voucher flow to be redesigned and not to
merely replicate the manual system.
2. Back-office also linked to daily transactions demanding only
the minimum of input at the end of the day.
3. Advances department with special modules to take care of
each of the products of the Bank taking into the unique control
and audit requirements of each.
4. Advances department to have special link to documentational
requirements and their follow-up to ensure the documents are
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not time barred.
5. A proposal evaluation system to offer quicker answer to
prospective borrowers.
6. Inter branch transactions linked to reduce reconciliation to not
more than a week.
7. Remittance of inter branch funds to take seconds instead of
days.
The idealist view just discussed is in reality very achievable
today provided the management has the will and the guidance to
do so. Merely replacing the calculator by a computer does not
mean computerisation. Unless we see a stark change in the
quality of Banking computerisation, we will have to consider their
computers to merely be used as typewriters with heavy under -
exploitation of computers and thus the entire Banking work-
force. In addition, the next Banking fraud is likely to be based on
weak computerisation and armed with such knowledge of
prevention, it will be a real pity if that occurs. We can see some
bold steps by a few Banks but these steps require to be much
more firm and advanced to achieve a leapfrog.
As a first measure, the National Association of Software and
Services Companies (Nasscom) has announced the formation of
a National E-banking Committee, consisting of representatives
from the Ministries of Information Technology and Finance, the
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Reserve Bank of India and public, private and foreign banks and
select information technology companies.
The committee will address matters ranging from telecom
infrastructure for banks to technology for detection and
prevention of frauds.
Whether the objective is achieved or not is to be seen.
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INTERNET BANKING
What is E-banking? In simple terms it does not involve any
physical exchange of money, but it’s all done electronically, from
one account to another, using the Internet.
Already, infotech in banking is become a strategic necessity for
banks, rather than being a key differentiator. Indeed, in its early
stages, the ATM was a source of strategic differentiation for
Citibank and other early adopters. Today, the ATM technology
doesn’t differentiate a bank—consumers expect it as a basic
service offering. ATMs have migrated from being a differentiator
to a strategic necessity.
The Internet banking is changing the banking industry and is
having the major effects on banking relationships. Even the
Morgan Stanley Dean Witter Internet research emphasised that
Web is more important for retail financial services than for many
other industries. Internet banking involves use of Internet for
delivery of banking products & services. It falls into four main
categories, from Level 1 - minimum functionality sites that offer
only access to deposit account data - to Level 4 sites - enabling
integrated sales of additional products and access to other
financial services- such as investment and insurance.
In other words a successful Internet banking solution offers:
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Checking with no monthly fee, free bill payment and
rebates on ATM surcharges
Easy online applications for all accounts, including personal
loans and mortgages
24 hour account access.
Quality customer service with personal attention.
The concept of electronic banking or E-banking is more prevalent
in the technologically developed parts of the world such as
Europe and the US. The number of online banks in Western
Europe has mushroomed. As per Bluesky International
Marketing, a US based research agency, the number is quoted
at 1,845 in mid 1999. The scene is similar in the US where a
recent Dataquest survey forecasts that the number of US
households banking online will reach 34.2 million by 2006. As the
world takes rapid strides in the world of banking the question is
where does India stand in the global scheme of things?
There is no denying the fact that information technology has
been the most rapidly changing industry in India, and the
marriage of technology and banking has to occur for India to
keep pace with changes in the global scenario. Looking back, the
Narasimham Committee deserves mention in that it was
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instrumental in forcing Indian banks to become competitive.
Private sector banks forced the public sector banks to embrace
technology and improve their level of customer service. Next, the
Khan Committee was highly important in that it recommended
the setting up of universal banks. Preference was given to
financial institutions, which could provide a whole range of
corporate financial solutions under one roof. But most
importantly, the Verma Committee recommended the need for
greater use of IT even in the weak Public sector banks. Actually,
the nationalization of banks back in the 80s is proving to be a
major obstacle in bringing about the required technological
changes.
Today, technology savvy private banks are making the most out
of opportunities thrown up by the Internet leaving behind their
slow moving public sector counterparts in valuations as well as
growth. Now, when one considers the fact that public sector
banks dominate the banking landscape in India, one realizes that
a lot has to be done and done quickly for India to catch up on E-
banking. Presently there are 33 private banks and 43 foreign
banks but the 27 public sector banks mop up the bulk of the
business. They account for over 84% of the total deposits and
over 82% of the total banking advances in India. In the words of
Mr. Bandi Ram Prasad, Chief Economist, Indian Banks
Associations, “ If Indian banking system has to undergo a
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transformation, then the public sector banks must be in the
forefront of the change.”
The boom in the IT sector has been persisting for quite a number
of years. The previous year however, will be remembered as the
“year of the dot”. From the acquisition of Indiaworld by Satyam
to the recent crowning of Wipro’s Azim Premji as the second
richest person in the world to the mushrooming of dotcoms in
every sphere of business, the message is clear. The Internet is
here to stay and stay for good. Most of the services offered on
the net have been received quite well by the customers and
there is no reason to believe that the same won’t be the case
with banking services. And if one takes into account the fact that
the major problem E-Commerce is facing today is that of security
in online transactions, the concept of e-money, whereby
customers seamlessly interact with the organization seems more
and more lucrative. This offers banks a huge opportunity. A
recent example of Rediff tying up with ICICI bank to offer such
services can be cited.
As per Mr. K V Kamath, MD and CEO ICICI Ltd., “ Technology
today, particularly via the internet, is creating a platform-
independent, low cost communication infrastructure permeating
all sectors of the economy and providing an affordable medium
to conduct business”. The cost per transaction through the
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Internet is 27 times less than through ATMs, 54 times less
than that of a telephone transaction and 107 times less
than that of a physical branch transaction. Even though PC
penetrations are still low in India, this provides tremendous
opportunities to Indian banks. Again the financial services
business will be among the industries most profoundly affected
by the Internet, since the distribution of financial products does
not entail any physical exchange of goods.
Today, the customer is the master. He has a lot of choices to
select from and if one has to retain one’s customers one will
have to ensure that that the customers get a much better deal
from their banks. In order to survive, all banks and financial
services would probably have to quickly and seriously re-
evaluate their delivery strategy, if they have to survive in the
market space. The Internet is slowly converting retail banking
into a commodity where the days of loyalty to bricks and mortar
banking are obsolete.
Coming back to our public sector banks, let us look at a few
problems they face in this regard.
Regulatory problems form the upper crust here. While public
sector banks can open and relocate in urban and metropolitan
areas, closure of branches requires prior RBI permission. These
banks are unable to compete effectively with the new private
sector banks with respect to restructuring and better delivery
systems. It is highly likely that public sector banks will get
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segregated into urban branches where Internet banking is a
must and residual rural branches where it is not. Moreover the
new private sector banks are providing complete solutions to
corporates at lower costs and better services and weaning away
corporate clients. The future paradigm of banking in India will
stress on mergers and ability to spread costs by leveraging on
technology.
Some Positive Steps
Banks as well as other financial entities in India have only
recently entered the world of information technology and
computer networking. Besides, the technology up gradation, an
efficient payment system is needed to improve the effectiveness
of monetary policy. One can highlight three distinct areas where
the application of IT has been quite substantial. This gives us an
idea regarding the preparedness level of India with regard to E-
banking.
Firstly, with regards to the payments and settlement systems,
since the introduction of MICR cheques in the mid-eighties, the
RBI has proceeded to make significant improvements in the
functioning of financial entities with respect to their application of
information technology. These include, introduction of Electronic
Funds Transfer (EFT), introduction of inter-bank electronic
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payment system, introduction of Automated Teller Machines
(ATM) by almost all major banks and the putting in place of a
Shared Payments Network System (SPNS). The RBI has also
operationalised the Very Small Aperture Terminal (VSAT)
network to provide reliable communication backbone to the
financial sector. The setting up of the INdian FInancial NETwork
(INFINET), based on satellite communication using VSAT
technology, is expected to facilitate connectivity within the
financial sector.
Against the backdrop of preparedness towards technology
upgradation, the RBI has made a proactive effort to move
towards a Real Time Gross Settlement (RTGS) system. Gross
Settlement systems have the advantage of significantly reducing
risks, as transactions are settled on a bilateral basis in real time
frame.
The INFINET deserves mention yet again as it serves as the
communication backbone. It needs to be augmented by addition
to the presently licensed transponder capacity as well as by
other communication modes.
Changes in recruitment procedures and training and managerial
responsibility at different levels of the staff structure are
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envisaged. This is augmented by the fact that in the present
placements in major B-schools, banks like Citibank, ICICI, and
HDFC etc have shown a distinct shift towards IT savvy people.
This projects a very optimistic picture regarding the future of E-
banking in our country.
Finally, it needs to be stated that the on-going process of
reforms cannot be successful without a supporting and
complementary legal framework which can provide for both
strong internal governance in the financial system as well as
external discipline by market forces.
A Reserve Bank of India (RBI) committee in July, 2001 came out
with the road map for electronic banking in India and has sought
promulgation of a legislation on electronic funds transfer (EFT)
system.
Banks have been advised to outsource software technology since
it was a better option in the context of rapid changes in the
information technology industry.
It felt computerisation of government departments should be
synchronised with the computerisation of bank branches dealing
with government transactions.
Essential Management Information System (MIS) founded on
data warehousing and data mining at individual bank level, has
been stressed.
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A suggestion has been made that banks choose the branches
and areas of operation where they have already introduced a
certain degree of automation and computerisation and review the
systems and procedures in these branches/areas to adapt them
to the technology that is newly introduced.
It has suggested that larger banks should explore the
possibilities of giving exposure to their technical staff on the
latest developments that are taking place around the world in
the area of it and allied areas by deputing technical officers to
the banks and other specialised institutions abroad.
Drivers of change
Advantages previously held by large financial institutions have
shrunk considerably. The Internet has leveled the playing field
and afforded open access to customers in the global
marketplace. Internet banking is a cost-effective delivery
channel for financial institutions. Consumers are embracing the
many benefits of Internet banking. Access to one's accounts at
anytime and from any location via the World Wide Web is a
convenience unknown a short time ago. Thus, a bank's Internet
presence transforms from 'brouchreware' status to 'Internet
banking' status once the bank goes through a technology
integration effort to enable the customer to access information
about his or her specific account relationship.
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The six primary drivers of Internet banking includes, in order of
primacy are:
♦ Improve customer access
♦ Facilitate the offering of more services
♦ Increase customer loyalty
♦ Attract new customers
♦ Provide services offered by competitors
♦ Reduce customer attrition
Emerging challenges
Information technology analyst firm, the Meta Group, recently
reported that "financial institutions who don't offer home banking
by the year 2002 will become marginalized." By the year of
2005, a large sophisticated and highly competitive Internet
Banking Market will develop which will be driven by -
Demand side pressure due to increasing access to low cost
electronic services.
Emergence of open standards for banking functionality.
Growing customer awareness and need of transparency.
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Close integration of bank services with web based E-
commerce or even disintermediation of services through
direct electronic payments (E- Cash).
More convenient international transactions due to the fact
that the Internet along with general deregulation trends,
eliminate geographic boundaries.
Move from one stop shopping to 'Banking Portfolio' i.e.
unbundled product purchases.
Certainly some existing brick and mortar banks will go out of
business. But that's because they fail to respond to the challenge
of the Internet. The Internet and it's underlying technologies will
change and transform not just banking, but all aspects of finance
and commerce. It represents much more than a new distribution
opportunity. It will enable the alert players to leverage their brick
and mortar presence to improve customer satisfaction and gain
share, and will force the lethargic players out of business-since
they are unable to bring to play in the new context.
While banks are enthusiastic about introducing e- banking, many
customers are less impressed. Once the novelty of the
transactions on the Internet wears off, it is not sure whether the
bulk of consumers really want to do their banking on telephone
or their computer screen. Customers worry about the leakage of
their financial information through electronic transmission of
their instructions to the bank. And despite the promise of having
access to an account from anywhere in the world or trading a
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stock seconds after opening the market, what happens if the call
drops in the middle of the transactions or the message gets
mutilated in the course of transmission?
Most customers need to know that they have a bank branch to
feel secure about where their money is. In particular, there are
elderly people and senior citizens who prefer to visit the branch
personally for their transactions and for whom it is as much a
social activity as an errand. True, banks cannot be expected to
open branches or keep them open for social reasons only, but
given the state of technology and the extent of computerisation,
it will be at least a generation before branch banking can be
substantially replaced.
Furthermore, many believe that the rush of banks into e-banking
is a sort of gimmick, a marketing ploy to prove how progressive
they are in terms of technology. But what banks in India really
require to win confidence of consumers is customer-orientation
and responsiveness of their staff. While e- banking may be useful
and welcome to large corporate customers, their number is
limited. The others are not exactly screaming for it yet. More
than anything else, banks need to strive for adequate
reorientation of attitudes of their staff, coupled with reasonable
computerisation of their operations, to obviate delays.
Nevertheless, some banks, particularly those with international
operations, feel they would rather be too early than too late.
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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, this is where the world is moving-it
is going to be real-time, on-line experience. If existing banks
don't want to disappear, it is this challenge of Integration that
they need to embrace in order to win and survive. The more
things change, the less they change. The strategic and
executional battles of the future are going to be fought for
Channel Integration. What does Channel Integration means? It
means that an institution presents an identical face to the
customer-be it in the branch, on the web, at an ATM or for that
matter, through a sales representative or a broker. An identical
face, an identical message. Or better still, messages that
reinforce each other. If a sales representative tries to sell you a
housing loan, you get e-mail a day later reminding you about the
loan. That's called Integrated Sales, which results in incremental
economic activity and improved efficiencies of communications.
The beauty of this approach is that one channel does not
displace 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.
Firstly, 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. That results in net saving for the
economy.
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Secondly, you persuade people at the right time (the right time
from the customer'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 Internet itself, and more
to with the underlying technologies of the Internet which allow
incremental efficiency, and empowers the customer to make
more enlightened and timely choices.
Lastly the product range is another issue which becomes
important. It will take a technological revolution to make
available advanced banking products on the net and given the
rate at which the technology is developing we can expect this to
happen in near future.
Main concerns in Internet banking
In a survey conducted by the Online Banking Association,
member institutions rated security as the most important issue
of online banking. There is a dual requirement to protect
customers' privacy and protect against fraud.
Firewalls and filtering routers ensure that only the
legitimate Internet users are allowed to access the system.
Encryption techniques used by the bank (including the
sophisticated public key encryption) would ensure that
privacy of data flowing between the browser and the
Infinity system is protected.
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Digital certification procedures provide the assurance that
the data you receive is from the Infinity system.
A new study by the Pew Research Foundation in Washington in
June reported that 84 per cent of Internet users are concerned
about and are not comfortable with the current state of privacy
and security on Internet. The concern about privacy becomes all
the more relevant and significant when it comes to banking on-
line, where any breach in security and privacy can have a
devastating effect on the individual consumers.
Yet even as the people express anxiety about privacy and
security on-line, the matter is further complicated by the
consumers' unfamiliarity with the basic mechanics of Internet
working and data flow. This being so, rushing into the on-line
banking without adequate preparations and awareness and legal
back-up, may rather prove catastrophic.
The position becomes all the more complicated when most
consumers venturing on-line would be doing so for the first time.
As lot of people who are not technically sophisticated may be
going for on-line banking; it is all the more necessary to provide
consumer education beforehand so that they can make
appropriate choices and intelligent decisions.
Apart from the need to evolve and build tools to streamline
security and privacy on-line and improve detection of virus in
time, there is also the need for universalise laws on computer
and cyber crimes.
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Decision making and Strategising
In this technology-based banking world, it’s the CIO who is fast
becoming the key to a bank’s success or failure. With increasing
needs to gear up to the fast-changing technology, the onus to
implement the right banking solutions lies on the CIO. With the
apparent huge potential of the market, the industry has seen
many players offering their financial solutions to the banking
sector. It’s imperative for the CIO to decide upon the best
technology.
Industry analysts say that the most important parameter in
evaluating the technology remains the flexibility of the solution
along with the scalability. With the growing popularity of Internet
banking, CIOs’ evaluation of the solutions becomes all the more
crucial for the future of the bank. Web sites which offer static
information and primarily replicate existing business processes,
will not be give a bank the cutting edge. It becomes the CIO’s
job to ensure that such sites allow the bank to take useful
advantage of the Net.
Parameters for the right banking solution:
• Flexibility
Does the solution have the capability to adapt quickly to
changing market requirements? Can new products and
services be introduced quickly with the technology.
• Reliability and availability
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With customers demanding any time access, does the
system operate reliably and round the clock.
• Scalability and stability
Can the solution handle growth in volumes with acceptable
response times and reasonable hardware costs.
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• Interoperability and compatibility
Can the system integrate with the other applications of the
bank. Also can the solution integrate with other platforms,
as may be the need due to the convergence of the financial
market
• Delivery channels
Does the technology allow the bank to seamlessly add new
delivery channels like mobile banking.
• Speed of deployment
The technology needs to be implemented before it
becomes obsolete.
• Stability
Internet banking would drive us into an age of complete
transparency giving rise to perfectly electronic market place and
customer supremacy. The question to be asked is "What the
Indian Banks should do".
The strategy can be implemented in four steps:
Familiarising the customer to new environment by demo
version of software on bank's web site. It will enable users to
give suggestions for improvements, which can be
incorporated in later versions wherever feasible.
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Second phase provides services such as account information
and balances, statement of account, transaction tracking, mail
box, check book issue, stop payment, financial and
customised information.
The third phase may include additional services such as fund
transfers, DD issue, standing instructions, opening fixed
deposits, intimation of loss of ATM cards.
The last step should include advanced corporate banking
services like third party payments, utility bill payments,
establishment of L/Cs etc.
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INDIAN BANKS ON WEB – The Major Players
``INTERNET banking is not an urgent need in India. People go
in for it for the novelty factor.''
‘People like to know that their bank is technologically advanced’
‘Customers even log in at odd times of the day -- not to make
transactions, but just to check if the network is up.’
- Mr. P. C. Narayan, The Executive Vice-President, Global
Trust Bank.
The banking industry in India is facing unprecedented
competition from non-traditional banking institutions, which now
offer banking and financial services over the Internet. The
deregulation of the banking industry coupled with the emergence
of new technologies, are enabling new competitors to enter the
financial services market quickly and efficiently.
While the world has seen corporate banking as the first choice
for Net bankers, India seems to be reversing the trend and most
initial developments seem to be in the retail banking area.
Currently, Internet banking in India is in the form of 'online
versions' of traditional banks. ICICI and HDFC for example, are
working at migrating their existing customer base online.
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A study which was conducted by students of IIML shows
some interesting facts:
Throughout the country, the Internet Banking is in the
nascent stage of development (only 50 banks are offering
varied kind of Internet banking services).
In general, these Internet sites offer only the most basic
services. 55% are so called 'entry level' sites, offering little
more than company information and basic marketing
materials. Only 8% offer 'advanced transactions' such as
online funds transfer, transactions & cash management
services.
Foreign & Private banks are much advanced in terms of the
number of sites & their level of development.
ICICI was the first bank to initiate the Internet banking
revolution in India as early as 1997 under the brand name
'Infinity'. This was soon followed by HDFC, IndusInd Bank,
Global Trust Bank, Federal Bank. Large public sector banks
like SBI and UTI, initially slow to adopt online banking, have
jumped into the fray with Bank of Baroda too planning to invest
around Rs 250 crore for its online banking operations.
Surprisingly, Indian private sector banks have outnumbered
foreign banks like Standard Chartered Grindlays in the Internet
banking arena with Citibank, the only foreign bank offering
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retail Net banking. Deutsche Bank has launched db-direct
Internet, a browser-based electronic banking system for a range
of corporate banking products, in place of its earlier PC-based
system, where customers had to dial up to access their network.
HSBC and Centurion Bank are also all set to kick off Net banking
this year but only for employees.
Worldwide, Internet banking has witnessed a healthy growth
from 2.5 million users less than four years ago, to seven million
users. In India, given the low PC penetration in the country,
HDFC bank alone claims to have more than 140,000 customers
since they launched 'Net Banking' in September 2003.
Major commercial banks in India appear to going e-banking, not
only because it carries mass appeal and vests the enabled bank
with special prestige as a progressive and technology-led
institution but also because it ultimately leads to lower operation
cost. The appeal to customers is also easy to understand. When
a customer uses an electronic device -- a personal computer or a
laptop -- to check his account or transfer funds, it is much more
convenient and cost-effective to him than visiting a bank branch.
Banks are enthusiastic because they expect that e-banking
would, by eliminating the costs associated with opening of new
branches and hiring large complement of staff, enable them to
improve their bottomline and face domestic and global
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competition more effectively. Banks in India did not go hi-tech
fast enough and are understandably hawkish on e-banking.
Scope of e-banking
Apart from being able to conduct normal business -- transfer
funds, carrying out standing instructions, check out the status of
an account, through his computer or a laptop -- on-line banking
can enable customers pay bills, buy and sell stocks, make
purchases and consult investment advisers. Using on-line
banking, customers can click on a link to thousands of merchants
to buy everything from flowers to rail or air tickets. Cost of
purchases can be debited directly from the customers' bank
accounts, which would be far cheaper for the sellers than
processing transactions -- cash or credit.
After realising the potential of Internet-banking and the window
of opportunities thrown open by e-commerce, the banks can
miss the opportunity at their own risk and cannot afford to
commit the same mistake as they did in the late start of
computerisation. Already, leading foreign banks are going the
whole hog for on-line banking and the banks feel that they
should not miss the bus this time.
Notwithstanding that the number of customers jumping on to the
bandwagon of electronic banking may not be large, there is no
doubt that e-banking is a matter of time only. Other customers
will warm to the concept over time as PCs, laptops and
telephone-based web devices become popular and easier and
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cheaper to use. As ATMs and credit cards are no longer viewed
with suspicion, consumers will be won over, over time, by the
convenience, affordability and portability of electronic banking
devices.
Nevertheless, there are valid reservations about the new
technology. And these need to be taken care of before e-
banking really catches up. First is the concern about privacy and
safety of their accounts. Despite numerous steps taken in this
direction and the availability of various software to meet these
concerns, the instances of hacking and computer virus are not
wanting.
Recently, Videsh Sanchar Nigam Ltd. that had its ADR listing on
the New York Stock Exchange, had its Web site penetrated.
Hackers claiming to be “people supporting the Kashmir cause”
inserted what they called `defacements' in the Web site of the
country's premier telecommunications services company. As a
result, the company was forced to temporarily take the Web site
offline to make investigations.
The incident happened not only on a crucial day when the
company was in the limelight; it also came at a time when the
Government was on the threshold of giving the green signal to
digital signature certification. This recognition, which will allow
for true online financial transaction, is already being viewed with
suspicion for reasons of security.
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This highlights why consumers are generally inclined to repose
more faith in branch-managed banking transactions than in
Internet banking. True, each customer would have a password or
personal identification number for all Internet services for
accessing his account on the Web as well as a printed list of one-
time codes for using with each transaction. This has been
designed to prevent electronic snoops and hackers from
intercepting the data in transition and defraud the consumers.
But this does not seem enough to instill confidence in customers,
as tricksters are known to have often outsmarted the technology
developers.
The above challenge is particularly daunting for a country such
as India, which has consciously and aggressively jumped on to
the IT bandwagon for economic development. Even after the IT
Bill has become operational, it may be desirable not to rush
headlong into e-banking. It would be desirable to hasten slowly,
with adequate emphasis on consumer education and awareness
and appropriate regulatory and monitoring mechanism, to
safeguard customers' interests.
At the same time, it must be remembered that with the
explosive growth of the Internet, we will unfortunately
increasingly see the dark side of technology and though there
will always be some risk in using a computer, such distortions
cannot and should not be permitted to cause a serious roadblock
in the march on the Information Superhighway.
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Advantages
Traditionally, rural areas have been exclusively served by banks
with large branch networks. This monopoly has been challenged
with the advent of e-banking, since it enables low-cost access
to rural areas. Physical infrastructure is no longer needed by
the branches.
E-banking will improve customerisation and offer business
potential that did not exist before.
E-banking is the lowest cost distribution channel currently
available to the banking sector. The relative cost per
transaction through e-banking will be only 12 per cent of
the cost that has to be incurred through the branch
networking, he added.
Another advantage of e-banking is that the service is available
24 hours a day, seven days a week, apart from offering
simpler transaction processing and better customer interactivity.
E-banking will lead to a customer-centric approach and
information-yielding interactions with customers will be
maximized.
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"Banks are using technology as an enabler to provide innovative
products, multiple delivery channels and have efficient service
mechanisms"
-CN Ram, Head, IT, HDFC
Bank
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Public sector: Lagging behind
With the liberalization of the banking sector, private banks
realized that the adage "customer is the king" could be their
ticket to success. The customer—long forgotten by the public
sector banks—could be attracted and retained through good
customer service. But without a countrywide presence like the
public sector banks, private sector banks could only compete
through innovative means. This came in the form of technology
and private banks resorted to leverage it to dish out a complete
banking menu to their customers.
Why has the private sector been taking the initiative while the
public sector keeps on watching its depleting market share. The
public sector, which controls about 65% of the banking industry,
is certainly aware of the implications. At the core of the problem
is the model on which the public sector banks are based—the
service model. As nationalized banks, they have certain social
obligations, which require them to provide services throughout
the country and it will take them time to mature to a different
model.
Moreover, branches spread across the entire country and a lack
of national bandwidth have become a big constraint for the IT
endeavors of public sector banks. Nevertheless, they are on the
technology route, though there is less visibility about that. On
the other hand, private banks have no such bottlenecks and from
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the beginning can plan their network in a fully computerized
environment even in B-class cities and hence are more visible.
Then there is the issue of the legacy systems. Since the public
sector banks are still in the process of automating their
processes, they need to run the manual processes for some
time. Most of the IT initiative so far has meant automating the
traditional paperwork to online process. Contrary to this, as late
entrants in the banking sector, private banks had the benefit of
working in a fully automated work environment right since their
inception, and could compete with the foreign players in terms of
technology. The private sector banks have the major advantage
of being able to effect changes quickly, and not have to deal with
a huge infrastructure, branch network, and manpower resource
pool that they need to transform. As a consequence, they have
also optimized the use of human resources.
To compound their woes, public sector banks also have the ever-
looming issue of unions. Automation was always resisted in these
banks by the unions since they perceived it as a threat to jobs.
In round one, the winners have been the private players.
However, with 60–65% of the banking still in control of the
public sector banks, they too have an important role to play and
the sooner they start incorporating technology into their overall
business plan, the faster they can recover, some if not all of their
lost market share. Banks have a key role to play in the emerging
e-commerce market. A big opportunity lies in positioning as a co-
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developer in the e-commerce space. Though private banks have
taken a clear lead in this area, public sector banks too can grab
some of the untapped opportunities by moving in quickly.
Comments Girish Vaidya, senior VP and head, banking, Infosys,
While private banks are deploying technology to cannibalize the
public sector market share, the game has just started. Proper
technology usage by public banks can still put them back in the
same league with the private ones. But for this they immediately
need to explore and exploit the technology to the fullest. They
also need to look at international trends of Internet-only units
supported with call centers and huge networks of ATMs. Timely
measures in these direction will put them back in the same
league as the private or foreign banks. The ongoing automation
in public sector banks is fine, but they also need to deploy the
state-of-the-art banking solutions and services quickly.
At the end of the day, the quality of banking services will win
long-term customer loyalty. Of course, the technology will
continue to play the enabler.
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Internet banking in India: Future Potential and Challenges
ICICI Bank is a commercial banking outfit set up by the ICICI
Group. The Bank was registered a banking company on January
5, 1994 and received its banking licence from the Reserve Bank
of India on May 17, 1994.
ICICI Bank's Infinity was the first Internet banking service in
the country, and a prelude to banking in the next millennium. It
is an online link to one’s ICICI Bank accounts through the
Internet.
ICICI Bank uses "Bankaway" from Infosys which is being used
by 5 out of 8 banks going for net banking.
Out of ICICI’s six lakh customers three years ago, only one-sixth
were net-savvy. Today, out of 1.5 million, three lakh have access
to the net and half of them conduct all or most of their
transactions over Internet.
Infinity provides you convenient facilities like :
• Details of transactions and balance information about your
accounts as at the end of the last business day.
• Retrieval of transaction details based on your need -
cheque number, transaction amount, date & so on.
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• Download of all your account information in QIF or text
format
• Despatch Mail and Instructions to ICICI Bank
• Transfer of funds between your own ICICI Bank accounts
across the country.
Infinity is free for individual Account Holders. For Corporates, the
rates will be decided on a case to case basis.
In the subsequent phases, more value added features will be
included like request for Demand Drafts and Pay Orders, Fixed
Deposits etc.
Infinity can be used from any country in the world. However,
operations in the accounts with ICICI Bank and the Infinity
service are subject to the relevant laws of India and not any
other country.
ICICI Bank seems to believe in catching customers young. Not
surprising that ICICI Bank has launched its banking product
"Bank@campus" in many campuses, including the Indian
Institutes of Technology across the country. ICICI Bank has
another product called "kid-e-bank" for kids.
Security
User id and password is your KEY to the Bank. To protect against
any unauthorised access to your accounts, your login is
automatically disabled after 5 consecutive login failures.
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ICICI-Bank takes utmost care to keep your account protected.
A multi-layered security architecture comprising of firewalls,
filtering routers, encryption and digitial certification will provide
you the confidence that your account information is protected
from unauthorised access.
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A PREVIEW OF TRANSACTIONS ON INFINITY
Accounts
A/c Type IdAccount NickName Currency Account Balance Branch
name
1 Fixed Deposit 10/1653 Retirement INR 40000.00 New Delhi
fund
2 Installment Loan 55/205 Auto loan INR -
214231.00 Mumbai
3 Current 05/2154 Joint checking INR 751500.00
Mumbai
4 Savings 01/3108 Laxman's INR 11200.00 New Delhi
Savings
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5 Savings 01/5071 Daily Cheques INR 43231.27
Mumbai
Select an account and click on
QuickView to get a view of the last 8 transactions
Query to view statements and details of transactions
Schedule to view details of Fixed Deposits and Loans
Details to get further information about the account.
Transfers
Now you can transfer funds to any person having an account
with us.
Transfer funds to your own accounts
Just choose the Debit & Credit account listed and enter the amount to be transferred
Transfer funds to any ICICI Bank account across India
Choose your account as Debit account ;Give credit party's account number, branch and full name.
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Requests
Select from the list of services below
Cheque Book Request
Stop Payment Instruction
Intimate loss of ATM Card
Many more to be introduced ...
Bills
Pay MTNL, MUMBAI
IMPORTANT
• Payments of only exact bill amount, before due date will
be accepted. In case of under/over payment,MTNL is likely
to reject the payment.
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• It takes two working days for transfer of funds to MTNL.
Please take this into account while making payments. e.g.
Payments made by (schedule date)12-Aug-1999 will reach MTNL
on 14-Aug-1999 only.
e.g. Kindly note that payments which are scheduled for 12-Aug-2003
have to be initiated before 12 Noon(IST) on that date
CA Number
Bill Number
Bill Date (dd-mm-yyyy)
Telephone Number
Payment Amount
Debit Date
30-11-2004(dd-mm-yyyy)
Debit Account
Please ensure that all the details have been entered correctly. Otherwise, payment is likely
to be rejected by MTNL.
All payments are subject to terms and conditions
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&#&#ay&##160;
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HDFC Bank introduced Netbanking, a convenient way to access
one’s bank account from around the world, through the Internet
in September 2003. It gives the following services :
• Account balance inquiry
• Account statement inquiry
• Cheque status inquiry
• Stop payment request
• Demand draft / Banker's cheque request
• Funds transfer
• Cheque book request
• Fixed deposit inquiry
• New fixed deposit request
• TDS inquiry
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Internet banking in India: Future Potential and Challenges
They also have special discounted rates for Stop Cheque
Payment instructions and Demand Draft / Banker Cheque
requests made over NetBanking.
HDFC Bank has adopted a very aggressive strategy for bringing
in new technology and has already invested around Rs. 50-100
Cr. on the system within a couple of years of adopting it.
Additionally it does not have any focus group as such but wants
to spread its services to all kinds of cosumers.
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A PREVIEW OF TRANSACTIONS ON NETBANKING
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Screen 1
Welcome Sunil Krishnan,
Thank you for banking with us.
Your registration / last visit was on 12 Dec2004
Please click below to proceed.
Consumer Banking
Depository Services
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Screen2
Account Holder : Sunil Krishnan
Account No : 201108000121
Your Accounts
Please choose your account from the list below and
select your transaction from the menu on the top right.
Account Number
Branch Name
201108000121
Sandoz, Mumbai
201108000133
Sandoz, Mumbai
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Screen 3
Account Holder : Sunil Krishnan
Account No : 201108000121
Account Statement Inquiry
For another transaction, please select from the options in the menu on the top right.
Closing BalanceRs. 22035.98
(in INR)
Date Narration Chq/Ref Number Value Date Debit Amount Credit Amount Closing Balance
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Jul 14 2003 Service Charge for 000000000000 Jul 14 2003 30.00 22035.98
Banker's Cheque Issue
Jul 14 2003 Banker's 000000212112 Jul 14 2003 1500.00 22005.98
Cheque Issue
Jun 26 2003 Cheque Deposit 000000003232 Jun 28 2003 15050.00 20505.98
Jun 19 2003 ATM Cash 000000000000 Jun 19 2003 500.00 5455.98
Withdrawal
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Screen 4
Account Holder : Sunil Krishnan
Account No : 201108000121
Funds Transfer
Please select the accounts and fill in the required information.
From Account Number
To Account Number
Transfer Amount
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Internet banking in India: Future Potential and Challenges
CitiDirect Internet Banking is the ability to do all your credit
card and banking transactions on-line, through Internet. It
offers you banking at your finger tips with the Citibank Security
using state-of-the-art 128 bit encryption. The internet now
allows you to conduct your banking business from your desktop
wherever in the world you may be. With a special H-PIN assigned
to you, you can experience world-class banking with a few clicks.
According to reports, 33% of Citibank’s banking customers in
India have shifted to Net-banking.
All the functions that are available in phone banking can be
easily done through CitiDirect also. You can:
• Check your Account balances.
• Find out about Interest rates.
• Do an Account to Account transfer.
• Ask for the latest Account Statement.
• Request for a Cheque book / Deposit slip.
• Make a Demand draft request.
• Seek information about any product or service or event.
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• Pay your bills for utilities like MTNL, Electricity etc
• Subscribe to a Mutual Fund
…and many more functions at the click of a button.
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Security features:
Citibank Internet Banking uses state-of-the-art encryption
technology and is absolutely secure.
When you open an account with Citibank, you are assigned a
HPIN or HOME-BANKING PERSONAL IDENTIFICATION
NUMBER which is your unique internet password, known only to
you and nobody else. Once you enter this in the CitiDirect Site,
you are enabled to transact on the net.
Transactions on CitiDirect are absolutely secure, starting
right from mailing your HPIN to actually using it on
CitiDirect. When the HPIN is mailed to you, the
communication does not carry your card number, so even
if it was intercepted, the interceptor would have just a
sequence of letters and numbers
A 128-bit key is
309,485,009,821,345,068,724,781,056 times more
secure than the 40-bit message !!! What this means it’s
practically impossible to break in to your account.
Any new functionality / Service that is introduced on
CitiDirect undergoes a Ethical hacking test, what this
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means is that we try and break into our own creation using
latest tools and only when it passes this most stringent of
tests, is a Service introduced for you.
Lockout after 6 consecutive unsuccessful attempts.
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A PREVIEW OF TRANSACTIONS ON CITIDIRECT
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CitiDirect – Login Screen
Sign-In
To enter CitiDirect, please choose from the pull-down menu and click on Enter.
Name*
* Select New User if this is your first time using CitiDirect from this computer, and
you will be using this computer regularly to sign-in.
* Select Guest if this computer is not where you will regularly use CitiDirect.
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If you are a New User, select 'New User' from the Name drop box. This would lead you to a screen
where you would need to supply your CitiCard number (ATM Card Number) or your Citibank / Diners
Credit Card number, your preferred Nick-Name or Short Name to identify yourself and your HPIN
(Internet Banking PIN).
If you will use the very same computer for CitiDirect banking every time, create a User Name using
this option. However, if you are always on the move, it is safe to use the 'Guest' mode of login. In this
mode, you will be expected to supply your Citicard number / Credit Card Number each time you log
in.
The third mode is that of a Regular User. Just select your User Name from the Name drop box.
CitiDirect – Creating a New User
Give yourself a name by which CitiDirect will identify you. Remember, when choosing a name, use
nomore than 10 characters (with no spaces).
Name:
Citicard Number:
Internet Banking PIN (HPIN):
Sign In
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Normal Track (Full Graphics) Fast Track (Minimal Graphics)
You will also notice that there are two display tracks to suit your convenience.
Choose the 'Normal Track (Full Graphics)' to view the regular CitiDirect screens.
The 'Fast Track (Minimal Graphics)' option lets you view the CitiDirect screens without heavy
graphics, therefore reducing your download time significantly. If you are a new CitiDirect user,
choose the 'Normal Track' till you are reasonably well-acquainted with the product. Later, you may
graduate to the 'Fast Track' option.
Credit Cards
Credit Line Increase
Second Card Request
Report Lost/Stolen Card
Add on Card Request
Swap your Credit Card
Redeem Reward Points
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Citibanking
A/C Opening Forms
Cheque Book Request
Deposit Slip Request
Stop Payment Request
Interest Credit Query
Others
Query Logging & Resln
Nomination
Choose APIN & TPIN
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Feedback
Address Change
PDC Stmt
Prepayment Simulation
ERA Upload Status
Interest Rates
NR Interest Rates
Forex Rates
Mutual Fund NAV Query
Product Features
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Contact Citiphones
Rupee Checking Account
Branch Banking Account
Suvidha Account
Download MF A/C opening form
Domestic
Multi Deposit Booking
Money Multiplier Booking
Demat
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Mutual Funds
Stocks & Shares
NR
NR Deposit Booking
NR Deposit Booking Simulation
Account Balance
Quick Glance Statement
Download Statement
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Internet banking in India: Future Potential and Challenges
ACCOUNT INFORMATION - Your Loan Account Statement
Statement of Account for Auto Loan Number L55A011329618
From Date
01-02-2000
To Date
14-02-2000
Customer Name
Prem Anand
Loan Amount *
42000.00
Disbursal Date
09-08-1999
Installment Amount *
1513.00
Tenor (Months)
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36
Remaining Tenor (Months)
20
Interest Rate (%)
12
Number of Installments due
36
* All amounts in Indian Rupees
[Indian Rupees]
Installment Due
23000.00
Penal Interest
0.00
Other Charges
500.00
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Principal Outstanding
38196.24
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A Comparison
As can be seen, in case of HDFC’s NetBanking there is not much
on offer in terms of transactional business except being able to
order for cheque books and statements, transfer funds between
accounts of the same person and open a fixed deposit account.
In contrast, ICICI Bank with its net banking service called
‘Infinity’ goes a step forward by allowing the account holder to
transfer funds into another person’s account within the bank.
Also one can intimate about the loss of an ATM Card over the net
when using Infinity. Moreover, corporate can issue of letters of
credit and make enquiry’s regarding bills sent for collection via
this service. A special feature on Infinity is the facility for
nicknaming all accounts to avoid remembering lengthy account
numbers.
In terms of safety, HDFC Bank allows one to have three login
attempts after which a new password is given while ICICI Bank
will disable the password after five login attempts.
Considering the fact that these services are offered without
charging a fee, the effort is commendable.
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All the three have free demonstrations on their respective
websites which are self-explanatory and can guide a first time
user on how to use the facility.
Looking at the following comparative charts, we can see that the
Indian private banks like ICICI and HDFC are no less than their
foreign counterparts, infact are better than them since they
understand the Indian consumer and market better.
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Internet banking in India: Future Potential and ChallengesICICI Bank HDFC Bank Citibank
Net banking demo YES YES YES
Account balance inquiry YES YES YES
Account statement inquiry YES YES YES
Cheque status inquiry YES YES NA
Stop payment request YES YES YES
DD / bankers cheque request -- YES YES
Funds transfer YES YES YES
Cheque book request YES YES YES
FD inquiry YES YES NA
New FD requests -- YES NA
TDS inquiry -- YES NA
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Comparison based on services offered
E-shopping
Banks E shopping
ICICIFabmart, Rediff, Sifymall, Magiccart, Malamall, Indiainfoline,
Indbazaar, Renew VSNL connection
HDFC
Fabmart.com, Sifymall, Noshutters.com, Mahadiscounts.com,
Xpressionmall.com, Shoppershyderabad.com Renew VSNL Internet
connection
Citibank Fabmart, Rediff, Sifymall, Mahadiscounts
Apart from these, the other banks do not have much to offer on this
front. IndusInd for example has no fund transfer facility and SBI and
UTI also do not have facilities for purchasing online.
Bill pay
Banks Bill Pay
ICICI
MTNL, BEST, BPL Mobile, Orange, BSES, Birla AT&T, Airtel, Essar,
Bangalore Telecom, Usha Martin Telekom, Spice Telecom, Skycell,
RPG cellular, Escotel, Tata Cellular, Tala Teleservices
HDFC
MTNL, Airtel, BPL Mobile, BSES, Orange, MSEB, RPG Cellular,
Skycell, Essar, Comman-Usha Martin, Spice Telecom, Tata Cellular,
Escotel, Fascel, Birla AT&T, BSNL (6 cities)
CitibankBangalore Telecom, Bangalore Water Supply, Spice Telecom, JT
mobiles, Hotline Paging, Maxpage (via credit card and bank account)
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Almost all banks except GTB and IndusInd have this facility of payment
of utility bills. Federal Bank and UTI are restricted to only BSNL
payments, Federal Bank limiting this service in Ernakulam only.
Account Tracking and Banking features
Banks Account Features
ICICIAccess Current, Savings account, stop payment request, chequebook
request, intimate loss of ATM card,
HDFC
Access Current, savings, FD accounts, Balance and statement
inquiry, Cheque status enquiry, Stop payment request, Bankers
cheque request, chequebook & statement request, Demand Draft
Request, FD enquiry, New FD request, TDS enquiry, direct debit
Citiban
k
Access savings,multi deposit, NRI, mutual funds, loan accounts,
account Balance and statement inquiry, chequebook request,
Demand Draft Request, EMI loan on Credit Card, pay credit card
expenses, New FD request,
All banks are providing the major functions for managing the accounts
and other banking services.
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Internet banking in India: Future Potential and Challenges
FUTURE OF E-BANKING IN INDIA
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 a distinct
possibility.
In concluding one may state that Indian banking in the next
millennium is likely to be driven by mergers, universal banking
and Internet technology. While mergers will confer economies of
scale, universal banking will dismantle the barriers between the
traditional dichotomies of financial services. While one realizes
the fact that the Internet is likely to convert banking into a
commodity one has to take into account that thirty years of
solitude has steeped Indian Banks into a morass of inefficiency,
slothfulness and complacency. If Indian banks refuse to visualize
this trend they may well be consigned to history. However, if
they react proactively Indian Banks stand to gain a lot from the
opportunities that E-banking offers.
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Internet banking in India: Future Potential and Challenges
There is no doubt that potential for net banking in India is
immense considering the rising penetration levels of the World
Wide Web in Indian homes and offices. When one takes a look at
what is available worldwide, one sees that net banking is more of
a norm rather than an exception in many developed countries.
The services offered enables one to check credit card
transactions, paying bills, transferring funds between accounts in
two different banks and scheduling future payments and
transfers. The gradual increase in net banking is logical as the
need to minimize costs catches attention.
A North American Internet Banking Survey done by management
consultancy Booz Allen & Hamilton in 1996 revealed that the
cheapest way of banking is Internet banking. The survey
estimated that a brick and mortar network of a bank would cost
US$1.07 per transaction while it is only US$0.01 for internet
banking. The same survey said that by 2000, 16 million US
households would be banking through the net.
Though there is no denying that the Internet has emerged as a
promising new medium for the financial sector, the issue of
security still remains to be tackled. However, banks are already
taking initiatives to address this issue. According to industry
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analysts, though security will remain an important concern for
financial institutions, it won’t come in the way of widespread
implementation of online banking, which will continue to be
driven by competitive pressures and market requirements.
In India, however, there may arise problems with nationalized
banks, which have in the past opposed computerization.
However, the fact remains that given a choice, customers would
like to bank via the net and the next decade could well see
virtual banking becoming a reality.
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BIBLIOGRAPHY
‘Banking : The Network is the bank’, by Yogesh Sharma,
Dataquest, January 31, 2003
‘The Potential Of e-banking’, Business Today, December 21,
2003.
‘Race will end in survival of the fittest’, The Financial
Express, November 29, 2002.
‘E-banking bandwagon getting crowded’ , by R. G.
Bhatnagar (former Chief General Manager, State Bank of India),
Business Line, Tuesday, October 10, 2002.
Could encryption bottleneck be causing e--bank failures?’,
by Will Garside, Computer Weekly, Sept 7, 2003, Reed Elsevier
Business Publishing Ltd.
The Times of India, 26 July, 2000.
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‘The future is in e-banking’ by Mr. K.V. Kamath (Managing
Director, ICICI), April 14, 2003, Business Line.
‘RBI road map for e-banking’, The Indian Express, July
21,2001.
‘Vision for the Banking System’, by Mr R Narasimhan (Deputy
Managing Director (Systems & Technology and Personal Banking),
State Bank of India)
Internet Banking in India, by Dr A. K. Mishra (Professor &
Chairman of Finance Group at IIM Lucknow).
Web-sites:
http://www.indiainfoline.com
http://www.thebharat.com
http://www.icicibank.com
http://www.hdfcbank.com
http://www.citibank.com
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Credit Cards
Details of Payment Recd
Pay for your Credit Card Exps
Convert transaction to EMI
Utility Payments
EMI Loan on Card
Citibanking
Utility Payments
NR Withdrawal Simulation
A/C to A/C Transfer - Self & Others
DD Request
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Withdraw from Deposit
Pay a Loan
Others
Pay for e-Shopping
Leave Standing Instructions
ERA Upload
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