91707723 Impact of Technology on Indian Banks

7/29/2019 91707723 Impact of Technology on Indian Banks

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To study the impact of technology on selected private

and public banks

Submitted

By

Chitresh Menon

University Roll No. 100372244478

Submitted

To

Prof. Navdeep Kaur

G.N.D.E.C. Ludhiana


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CONTENT

CHAPTER 1- INTRODUCTION TO TOPIC

Banking system

Technological Revolution and banking

Technological channels use by banks

Introduction to the organization

CHAPTER 2- REVIEW OF LITERATURE

CHAPTER 3- RESEARCH METHODOLOGY

Objectives of study

Scope of the study

Research plan

Data Collection Methods

Sampling Plan

Tools of analysis

Limitations of study

CHAPTER 4- DATA ANALYSIS AND INTERPRETATION

On the view point of customers

CHAPTER5- FINDINGS AND SUGGESSTIONS


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CHAPTER 1INTRODUCTION TO TOPIC

BANKING SYSTEM

A banker orbankis a financial institution that acts as a payment agent for customers,

and borrows and lends money. In some countries such as Germany and Japan banks are

the primary owners of industrial corporations while in other countries such as the United

States banks are prohibited from owning non-financial companies.

The first modern bank was founded in Italy in Genoa in 1406, its name wasBanco di San

Giorgio (Bank of St. George).Banks act as payment agents by conducting checking or

current accounts for customers, paying cheques drawn by customers on the bank, andcollecting cheques deposited to customers' current accounts. Banks also enable customer

payments via other payment methods such as telegraphic transfer,EFTPOS, and ATM.

Banks borrow money by accepting funds deposited on current account, accepting term

deposits and by issuing debt securities such as banknotes and bonds. Banks lend money

by making advances to customers on current account, by making instalment loans, and by

investing in marketable debt securities and other forms of lending.

Banks provide almost all payment services, and a bank account is considered

indispensable by most businesses, individuals and governments. Non-banks that provide

payment services such as remittance companies are not normally considered an adequate

substitute for having a bank account.

Banks borrow most funds borrowed from households and non-financial businesses, and

lend most funds lent to households and non-financial businesses, but non-bank lenders

provide a significant and in many cases adequate substitute for bank loans, and money

market funds, cash management trusts and other non-bank financial institutions in many

cases provide an adequate substitute to banks for lending savings to.
http://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Genoahttp://en.wikipedia.org/wiki/Bank_of_Saint_George_(Genoa)http://en.wikipedia.org/wiki/Bank_of_Saint_George_(Genoa)http://en.wikipedia.org/wiki/Transactional_accounthttp://en.wikipedia.org/wiki/Transactional_accounthttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Telegraphic_transferhttp://en.wikipedia.org/wiki/EFTPOShttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Banknoteshttp://en.wikipedia.org/wiki/Bond_(finance)http://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Genoahttp://en.wikipedia.org/wiki/Bank_of_Saint_George_(Genoa)http://en.wikipedia.org/wiki/Bank_of_Saint_George_(Genoa)http://en.wikipedia.org/wiki/Transactional_accounthttp://en.wikipedia.org/wiki/Transactional_accounthttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Telegraphic_transferhttp://en.wikipedia.org/wiki/EFTPOShttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Banknoteshttp://en.wikipedia.org/wiki/Bond_(finance)


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DEFINATION OF BANKING:- "Banking Business" means the business of either or

both of the following:

1. receiving from the general public money on current, deposit, savings or other

similar account repayable on demand or within less than [3 months] ... or with a

period of call or notice of less than that period;

2. paying or collecting cheques drawn by or paid in by customers.

History Of Banking In India

Without a sound and effective banking system in India it cannot have a healthy economy.

The banking system of India should not only be hassle free but it should be able to meet

new challenges posed by the technology and 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 reason of India's growth

process.The government's regular policy for Indian bank since 1969 has paid rich

dividends with the nationalisation of 14 major private banks of India

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

Nationalisation 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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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, PunjabNational 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 of Mysore were set up. Reserve Bank of India came in 1935.

During the first phase the growth was very slow and banks also experienced periodic

failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To

streamline the functioning and activities of commercial banks, the Government of India

came up with The Banking Companies Act, 1949 which was later changed to Banking

Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of

India was vested with extensive powers for the supervision of banking in india as the

Central Banking Authority.

Phase II

Government took major steps in this Indian Banking Sector Reform after independence.

In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a

large scale specially 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 nationalised in 1960 on 19th

July, 1969, major process of nationalisation was carried out. It was the effort of the then


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Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country

was nationalised. Second phase of nationalisation Indian Banking Sector Reform was

carried out in 1980 with seven more banks. This step brought 80% of the banking

segment in India under Government ownership.

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 : Nationalisation of State Bank of India.

1959 : Nationalisation of SBI subsidiaries.

1961 : Insurance cover extended to deposits.

1969 : Nationalisation of 14 major banks.

1971 : Creation of credit guarantee corporation.

1975 : Creation of regional rural banks.

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

After the nationalisation 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 andimmense 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 liberalisation 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.


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Current situation

Currently (2008), banking in India is generally fairly mature in terms of supply, product

range and reach-even though reach in rural India still remains a challenge for the private

sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks

are considered to have clean, strong and transparent balance sheets relative to other banks

in comparable economies in its region. The Reserve Bank of India is an autonomous

body, with minimal pressure from the government. The stated policy of the Bank on the

Indian Rupee is to manage volatility but without any fixed exchange rate-and this has

mostly been true.

With the growth in the Indian economy expected to be strong for quite some time-

especially in its services sector-the demand for banking services, especially retailbanking, mortgages and investment services are expected to be strong. One may also

expect M&As, takeovers, and asset sales.

In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake

in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor

has been allowed to hold more than 5% in a private sector bank since the RBI announced

norms in 2005 that any stake exceeding 5% in the private sector banks would need to be

vetted by them.
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The Reserve Bank of India act as a centralized body monitoring any discrepancies and

shortcoming in the system. It is the foremost monitoring body in the Indian financial

sector. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector

banks (that is with the Government of India holding a stake), 29 private banks (these do

not have government stake; they may be publicly listed and traded on stock exchanges)

and 31 foreign banks. They have a combined network of over 53,000 branches and

17,000 ATMs.
http://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Government_of_Indiahttp://en.wikipedia.org/wiki/Automated_teller_machine


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TECHNOLOGICAL REVOLUTION AND BANKING

We have been witnessing since early 1980s the phenomenon of widespread use of

computers and communication technology in the industrial, as well as emerging market

economies. This has resulted in faster funds movement across nations and borders.

Globalisations of economies and financial liberalisation within the economies have

opened new opportunities of growth for techno-savvy institutions, while for the others

these have resulted in shrinkage of revenues. The use of IT in the banking industry in

India has however been somewhat limited and has, as a result, restricted our presence in

international operations. Even in critical spheres such as those involving funds transfer,

and MIS based decision-making, there has been little evidence of proactive movement

towards wholesale computerisation up to the middle of the 1990s.

However, Indian Banks have come to start this process after a decade or so. It is only

with the growing recognition of the need for having in place financial reforms, has the

interest in IT application in the banking sector in India increased. But though the process

started late, computerising the vast network of branches of several banks is planned and

being executed methodically and the benefit is expected to be fully perceived by the year

2010.

EVOLUTION OF TECHNOLOGY IN BANKS:- The Rangarajan Committee report in

early 1980s was the first step towards computerization of banks. Banks started exploring

the idea of 'Total Bank Automation (TBA)'. Although titled 'Total Bank Automation,'

TBA was in most cases confined to branch automation. It was only in the early 1990s that

banks started thinking about tying-up disparate branches together to facilitate information

sharing.

At the same time, private banks entered the banking arena with radically different

strategies. Given the huge IT budgets at their disposal and with almost no legacy IT

equipment to worry about; private banks hastened the adoption of technology. The

philosophy for private banks was very clear: to provide a whole new range of financial

products and services at minimal costs. And technology made this possible.


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Says K.N.C. Nair, Head (IT), Federal Bank,"The new generation banks showed the way

and others had no option but to follow the tech infusion to retain and attract profitable

customers."

The improved connectivity and falling costs offered by leased lines and VSATs provided

a booster to inter-branch automation.

Confirms Naresh Wadhwa, Vice President-West, Cisco Systems (India), "With the

improved services and lowered costs of service providers such as DoT and VSNL, it

became more feasible for banks to network their branches. This gave banks an impetus to

network all the branches and set up centralized databases. With these developments it

became possible for operations such as MIS to be truly automated and centralized."

Core matters

After the turn of consolidated databases and networks come core banking applications.

Core banking applications help provide complete front and backend automation of banks.

These applications also help banks achieve centralized processing and provide 24-hour

customer service. "Core banking applications provide anywhere, anytime 24 by 7 non-

stop services, which is not possible with traditional localized branch automation systems

that are available only between 10 am to 2 pm," says V. Chandrasekhar.

Core banking applications help integrate the enterprise to existing in-house applications

to offer a single customer view. These applications provide automation across multiple

delivery channels.

A happy customer

Managing customers is one of the main issues that banks face in today's hypercompetitive

environment. If the service levels are not up to customer expectations, in all likelihood

the customer might take his business elsewhere. This is where Customer Relationship

Management (CRM) practices (most important) and software (on the technology side)


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play an important role. Before banks go for a CRM solution, they need to ask themselves

one question: How well do they know their customer?

For that matter how many customers have moved in the past? Or how existing customers

use various services that the bank provides.

"In banking, being the first to market alone is not enough since products can be copied

very fast. It is the customer service levels which matter," says Neeraj Bhai, CTO, IDBI

Bank.

This is where CRM techniques and tools come into place. While a foremost part of CRM

strategy is all about treating your customer right, technology does make a major

difference. "CRM is a tool that allows you to emote and relate with your customers.

Increasingly, all banks will require it as they get centralized," says P. K. Vohra.

CRM Tools

CRM tools can be broadly classified into two categories: Operational and Analytical.

Operational CRM provides the software support for businesses that require customer

contact. These tools are largely workflow based to provide information to employees anddocument customer interactions. This includes collaborative CRM type of tools used to

provide enterprise/customer interaction across all contact channels such as face-to-face,

telephonic, electronic, and wireless. Operational CRM types are the major CRM tools

being used nowadays for customer support in India. For example, say a premium

customer dials your call center from his home. Operational CRM can alert the call center

executive of his account status and other details by his home telephone. This will help the

employee in extending him the kind of service extended to a premium customer.

Analytical CRM helps you make sense of the information. It helps you target customers

and utilize their potential to the maximum. For example, say an account holder withdraws

Rs 10,000 every month from his account and deposits it in another bank as EMI for a

loan. Analytical CRM tools can help you track this activity. Techniques such as data


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warehousing and data mining are prominent tools used for this. Your bank could offer a

loan to the customer at a lower rate than what the other bank offers. This will keep the

customer happy since he knows that you are giving him better service. This translates to

gains for your bank as well. .

Mining for intelligence

Another important issue banks face is in proper analysis of financial data to identify

business potential. This helps a bank identify cross- sell and up-sell potentials.

Technologies such as data warehousing/mining come into play here.

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.

The core issues faced by banks today are on the fronts of customer's service expectations,

cutting operational costs, and managing competition. Technology can help banks in

meeting these objectives

Information Technology has basically been used under two different avenues 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.


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Payment and Settlement Systems

As part of restructuring of the banking sector, special emphasis has been accorded to

improvements in payment and settlement systems. Prominent among the measures

initiated in these areas include introduction of Electronic Funds Transfer (EFT), Real

Time Gross Settlement System (RTGS), Centralised Funds Management System

(CFMS), the NDS and the Structured Financial Messaging Solution (SFMS). The SFMS

would be the backbone for all message-based communication over the Indian Financial

Network (INFINET).

Electronic Funds Transfer (EFT)

The EFT scheme enables transfer of funds within and across cities and between branches

of a bank and across banks. The scheme, which is operated by the Reserve Bank, is

available for funds transfer across thirteen major cities in the country, as on September

30, 2001. The facility is being extended to two more centres. The scheme was originally

intended for small value transactions. However, with effect from October 1, 2001, even

large value transactions (as high as Rs. 2 crore) have also been permitted.

Real Time Gross Settlement System (RTGS)

The work on operationalisation of RTGS system continued during the year. The major

project components completed during the year included the finalisation of the design for

RTGS system, issue of the tender for the development of the software, evaluation of the

technical components of the bids received, site visits and evaluation of the commercial

proposals. The implementation of RTGS is targeted to be accomplished within 12 to 15

months of award of the contract for software development and implementation.


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Centralised Funds Management System (CFMS)

The CFMS would enable the funds and treasury managers of commercial banks to obtain

the consolidated account-wise, centre-wise position of their balances with all the 17

Deposit Accounts Departments (DAD) of the Reserve Bank. The system has been tested

prior to installation and phase-wise implementation commenced from November 2001.

The CFMS would enable better funds management by constituent current account holders

of the Reserve Bank.

Mechanised Cheque Processing System using MICR Technology

The term "MICR" stands for Magnetic Ink Character Recognition, and is used to describe

the line of numbers and special characters that appear at the bottom of every check. Since

the 1940s, banks have speeded check processing with special devices that " read" the

MICR encoding and translate the characters into the account number and other pertinent

information.

The Magnetic Ink Character Recognition (MICR) technology based cheque processing

was first introduced in Mumbai and Chennai in 1987 by the Reserve Bank of India and

gradually extended to Delhi in 1988 followed by Kolkata in 1989.

Electronic Data Interchange (EDI)

The Ministry of Commerce, Government of India has identified 114 centers as major

export / import intensive centers in the country. The Ministry desired that, at all these

centers, the bank branches should be fully computerised, inter-connected and networked

and there should be inter-bank connectivity so that on-line banking facility could be made

available to the exporter-importer customers.

The Department of Commerce in the Ministry of Commerce & Industry, Government of

India, New Delhi is the nodal agency for overseeing implementation of Electronic

Commerce (EC)/ Electronic Data Interchange (EDI) in the various organisations in the

country.


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Imaging of Instruments

A process of capturing the images of the instruments as they are being processed was

introduced during the year at the four metropolitan National Clearing Cells managed by

the Reserve Bank. Imaging facilitates in quicker balancing during the cheque-processing

cycle and also in reducing clearing reconciliation differences.

Electronic Clearing Services

Emphasis on widespread usage of Electronic Clearing Service (ECS) is being prescribed

by the Reserve Bank to encourage non-paper based funds movement. The prime thrust

areas forming part of this vital activity include the extension of ECS to more centres,

inclusion of more customers under the ambit of the scheme and provision of a centralised

facility for affording payments.

Computerisation in Public Sector Banks

The progress in implementation of the directive of the Central Vigilance Commission

(CVC) on the need to computerise 70 per cent of the banking business by public sector

banks before January 1, 2001 revealed that as on December 31, 2000, 13 banks had

achieved the desired level. Figures as at end of March 2001, indicated that 23 banks have

achieved the target, while two banks have computerisation levels ranging between 60 per

cent and 70 per cent and two others were at a level below 60 per cent.

Cheque Clearing

Magnetic Ink Character Recognition (MICR) based cheque-clearing accounts for about

65 per cent of the value of cheques processed in the country. In addition, Magnetic Media

Based Clearing Systems account for about 10 per cent of the remaining value while

claim-based processes cover the rest of clearing. It may be pertinent to note that growth

in cheque volumes has decelerated to 10 per cent in 2000-01 from 12 per cent during the

previous year. This is reflective of general trends the world over, indicating the migration

towards electronic funds transfer mechanisms.


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Computerisation of Banks India - Issues & Events

In the Eighteenth and Nineteenth Centuries the Industrial revolution brought profound

changes in the life style of man. Many activities that were hitherto performed by man

employing his hands and his finger skill came to be carried at great speed and efficiency

by machines. Man continued to carry out only those functions that needed his thinking

process to be involved.

The Industrial Revolution on account of mass production of goods and services brought

large commercial and business organizations, transcending national boundaries that

employed several thousands of persons for performing routine, repetitive clerical tasks,

relating to record keeping, maintaining accounts, attending/answering correspondence,

preparing vouchers, invoices, bills and multiple of such other functions. This created

white-collar employment for educated persons by leaps and bounds.

Clerical task is defined as a routine and repetitive performance involving, adding,

subtracting, multiplying, dividing numbers, and duplicating data/information from one

source to another. The tools employed are "a pen, ink and paper", the knowledge of

arithmetic tables, the basic knowledge of a language and minimum acquaintance with

rules & procedures of the organisation that are followed day in day out and relevant to thejob of the particular employee. Two plus two is four. It is always four. Should we need an

educated worker to compute this task again and again? A business needed human agents

to attend to production, marketing, finance etc. depicting high-level tasks. But more and

more people were employed for performing low-level tasks.

The advent of mechanical calculating devices and later electronic computing in the West

heralded a new age, that dispensed with this white collar and white-elephant employment

progressively. This evolved in the west three decades before, but the advent of this

evolution in India is only now taking place.

The per employee turnover for ICICI bank is Rs.2.3 Crores, that for SBI is Rs.1.56

Lakhs. The gap accounts for the difference between manual operations and high-tech

banking.


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Computerisation brings transparency, improves customer care and customer-service

tremendously and reduces substantially scope for corruption or extending undue favour to

particular constituents and uneven service to others.

Challenges Faced in Computerisation

Computerisation is expensive and needs huge investment in hardware and software and

subsequent maintenance. The National Stock Exchange, India's No.1 user in

computerised service has spent Rs.180 Crores to enable investors and brokers across the

country to trade securities online. The rate of obsolescence in respect of both hardware

and software is considerable. New and better products are emerging in the market, whose

use would enable a rival organization to throw a challenge.

Computer crimes are committed widely in the West. India is no less potentially exposed

to this risk, when turnover under Internet banking increases. It is easier to enforce

security of information and accountability of performers in a manual system. But it needs

elaborate steps to incorporate these features in the electronic system.

Role of RBI in Computerisation of Banks in India

Computerisation became popular in the western countries right from the Sixties. Main

Frames were extensively used both by the Public Institutions and Major Private

Organizations. In the Seventies Mini Computer became popular and Personal Computers

in early Eighties, followed by introduction of several software products in high level

language and simultaneous advancement in networking technology. This enabled the use

of personal computers extensively in offices & commercial organisations for processing

different kinds of data.

However in India organised Trade Unions were against introduction of computers in

Public Offices. Computerisation was restricted to major scientific research organizations

and Technical Institutes and defence organizations. Indian Railways first accepted

computerisation for operational efficiency.


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The Electronics Corporation of India Ltd. was set up in 1967 with the objective of

research & development in the fields of Electronic Communication, Control,

instrumentation, automation and Information Technology. CMC Ltd (Computer

Maintenance Corporation of India Ltd.) was established in 1976 to look after

maintenance operations of Main Frame Computers installed in several organisations in

India, to serve the gap, when IBM left India, due to the directive of the then Central

Government.

In the Private Sector the first major venture was TCS (Tata Consultancy Services) which

started functioning from 1968. In the year 1980 a few batch-mates of IIT Delhi pioneered

the effort to start a major education centre in India to impart training in Information

Technology and their efforts resulted in the setting up of NIIT in 1981. Aptech ComputerEducation was established in 1986 following the experiment of NIIT.

Before large scale computerisation, computer education became popular in India and

coveted by bright students, when several Engineering Colleges and Technical Institutes

introducing Post Graduate Degree courses in Computer Engineering. The booming

hardware and software industry in the West attracted Indian students and many of them

migrated for better opportunities to the U.S.A. and settled there. We have today the

paradox of India being one of the major powers possessing diverse talents in fields of

software development, but at the same time, we are still a decade back to the using

computerised service extensively in the country and bringing the facility to the realms of

the common man.

Rapid development of business and industry brought manual operations of data, a

saturation point. This acted as a overload on the growing banking operations.

Government owned banks in general found the "house-keeping" unmanageable. Several

heads of accounts in particular inter-bank clearing and inter-branch reconciliation of

accounts went totally out of control.

In the year 1993, the Employees' Unions of Banks signed an agreement with Bank

Managements under the auspices of Indian Banks' Association (IBA). This agreement


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was a major break through in the introduction of computerised applications and

development of communication networks in Banks.

The first initiatives in the area of bank computerisation, however, stemmed out of the

landmark report of the two committees headed by the former Governor of the Reserve

Bank of India and currently Governor of Andhra Pradesh, His Excellency, Dr. C.

Rangarajan. Both the reports had strongly recommended computerisation of banking

operations at various levels and suggested appropriate architecture.

Internet Banking in India - Guidelines Issued by RBI

Reserve Bank of India had set up a 'Working Group on Internet Banking' to examine

different aspects of Internet Banking (I-banking). The Group had focussed on three major

areas of I-banking, i.e,

i. technology and security issues,

ii. legal issues and

iii. regulatory and supervisory issues.

RBI has accepted the recommendations of the Group to be implemented in a phasedmanner. Accordingly, the following guidelines are issued for implementation by banks.

Banks are also advised that they may be guided by the original report, for a detailed

guidance on different issues.

Technology and Security Standards

a. Banks should designate a network and database administrator with clearly defined

roles as indicated in the Group's reportb. Banks should have a security policy duly approved by the Board of Directors.

There should be a segregation of duty of Security Officer / Group dealing

exclusively with information systems security and Information Technology

Division which actually implements the computer systems. Further, Information

Systems Auditor will audit the information systems.


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c. Banks should introduce logical access controls to data, systems, application

software, utilities, telecommunication lines, libraries, system software, etc.

Logical access control techniques may include user-ids, passwords, smart cards or

other biometric technologies.

d. At the minimum, banks should use the proxy server type of firewall so that there

is no direct connection between the Internet and the bank's system. It facilitates a

high level of control and in-depth monitoring using logging and auditing tools.

For sensitive systems, a stateful inspection firewall is recommended which

thoroughly inspects all packets of information, and past and present transactions

are compared. These generally include a real time security alert.

e. All the systems supporting dial up services through modem on the same LAN as

the application server should be isolated to prevent intrusions into the network as

this may bypass the proxy server.

f. . The application server should be isolated from the e-mail server.

Legal Issues

a. Considering the legal position prevalent, there is an obligation on the part of

banks not only to establish the identity but also to make enquiries about integrity

and reputation of the prospective customer. Therefore even though request for

opening account can be accepted over Internet,accounts should be opened only

after proper introduction and physical verification of the identity of the customer.

b. From a legal perspective, security procedure adopted by banks for authenticating

users needs to be recognized by law as a substitute for signature. In India, the

Information Technology Act, 2000, in Section 3(2) provides for a particular

technology (viz., the asymmetric crypto system and hash function) as a means of

authenticating electronic record. Any other method used by banks for

authentication should be recognized as a source of legal risk.


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c. Under the present regime there is an obligation on banks to maintain secrecy and

confidentiality of customers' accounts. In the Internet banking scenario, the risk of

banks not meeting the above obligation is high on account of several factors.

Despite all reasonable precautions, banks may be exposed to enhanced risk of

liability to customers on account of breach of secrecy, denial of service etc.,

because of hacking/ other technological failures. The banks should, therefore,

institute adequate risk control measures to manage such risks.

d. In Internet banking scenario there is very little scope for the banks to act on stop-

payment instructions from the customers. Hence, banks should clearly notify to

the customers the timeframe and the circumstances in which any stop-payment

instructions could be accepted.

All banks offering Internet banking are advised to make a review of their systems in the

light of this circular and report to Reserve Bank the types of services offered, extent of

their compliance with the recommendations, deviations and their proposal indicating a

time frame for compliance. The first such report must reach us within one month from the

date of this circular. Banks not offering any kind of I-banking may submit a 'nil' report.

TECHNOLOGICAL CHANNELS USED BY BANKS

Banking Industry has revolutionized the transaction and financial services system

worldwide. Through the development in technology banking services has been availed to

the customers at all times, even after the normal banking hours, on a 24x7 basis. Banking

Industry services is nothing but the access of most of the banking related services (such

as verification of account details, going with the transactions, etc.). In todays world,

progress of online services is available to all customers of the concerned bank and can be

accessed at any point of time and from anywhere provided the place is equipped with the

Internet facility. Now-a-days, almost all the banks all over the world, especially the

multinational ones, provide their customers with Online Banking facility.

From the staid over-the-counter delivery mode to ATMs, tele banking, Net banking, and

now mobile bankingthe number of delivery channels deployed by banks has increased


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by leaps and bounds. Srikanth R P & Chitra Padmanabhan look at the evolution and

impact of various delivery channels in the Indian banking scenario and forecast which

delivery channel could be the next killer app for banking players

While today each and every bank touts The customer is King mantra, it was a quite a

different story not so long ago. Customers patronising PSU banks were greeted with the

typical babu culture, where getting even a cheque encashed used to take ages.

Customers had to adjust their schedule to the bank and very rarely was it the other way

around. A person in a city like Bombay usually had to wait for a weekend to deposit a

cheque, because by the time he reached home, the bank would have closed. Today, while

the timings of banks have not changed drasticallybanks have become more customer-

friendly. Now, power has shifted into the hands of the customer.

Indian banks are investing heavily in the technologies such as telebanking, mobile

banking,net banking, automated teller machine (ATMs), credit cards, debit cards, smart

cards, call centers,CRM, data warehousing etc.

1. Automated teller machine (ATM) :-An automated teller machine (ATM) is a

computerized telecommunications device that provides the customers of a financial

institution with access to financial transactions in a public space without the need for a

human clerkorbank teller. On most modern ATMs, the customer is identified by

inserting a plastic ATM card with a magnetic stripe or a plastic smartcard with a chip,

that contains a unique card number and some security information, such as an expiration

date orCVC (CVV). Security is provided by the customer entering apersonal

identification number(PIN).

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

withdrawals (orcredit card cash advances) and check their account balances. ATMs are

known by various casual terms including automated banking machine, money machine,

bank machine, cash machine, hole-in-the-wall, cashpoint or Bancomat (in Europe and

Russia).

An ATM is typically made up of the following devices:
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CPU (to control the user interface and transaction devices)

Magnetic and/orChip card reader (to identify the customer)

PIN Pad (similar in layout to a Touch tone orCalculatorkeypad), often

manufactured as part of a secure enclosure.

Secure cryptoprocessor, generally within a secure enclosure.

Display (used by the customer for performing the transaction)

Function key buttons (usually close to the display) or a Touchscreen (used to

select the various aspects of the transaction)

Record Printer (to provide the customer with a record of their transaction)

Vault (to store the parts of the machinery requiring restricted access)

Housing (for aesthetics and to attach signage to)

Alternative uses

Although ATMs were originally developed as just cash dispensers, they have evolved to

include many other bank-related functions. In some countries, especially those which

benefit from a fully integrated cross-bank ATM network (e.g.: Multibanco in Portugal),

ATMs include many functions which are not directly related to the management of one's

own bank account, such as:

Deposit currency recognition, acceptance, and recycling

Paying routine bills, fees, and taxes (utilities, phone bills, social security, legal

fees, taxes, etc.)

Printingbank statements

Updatingpassbooks

Loading monetary value into stored value cards

Purchasing

o postage stamps.

o lottery tickets

o train tickets

o concert tickets

o shopping mall gift certificates.

Games and promotional features[47]
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Donating to charities[48]

Cheque Processing Module.

2. Debit card

A debit card is very similar to a cash card, but it allows you to do a lot more than use an

ATM machine.A debit card is like an electronic cheque that you can use to pay for goods

and services. There are different types of debit card and not all outlets will accept them as

payment. The main types of debit card are Visa delta, Solo, and Switch.

Many people prefer debit cards over checks for two reasons:

You don't have to carry your checkbook and present identification, but are still able

to make purchases directly from your checking account.

You pay your bills immediately, unlike when you use a credit card and get the bill

later. Although you have to be aged at least 11 before you are allowed to own a debit

card, most types of debit card are not available to under 18s.

When you use a debit card to pay for something, the money will normally be taken

from your account within three working days. As the money is automatically taken

from your account, it means that you can only spend the amount thats available in

your account at the time.Like the cheque guarantee card, there is a limit to how much

you can spend on your debit card, and this will differ depending on who you bank

with and the type of card you hold.

Like a cash card, a debit card can be used at an ATM machine. You will be issued

with a Personal Identification Number (PIN number) shortly after you receive your

card.

This is normally a four-digit number, which you will need to key in to the ATM

machine every time you wish to use your card.

You should always keep your PIN number safe. It is best to memorise it,and

destroy the paper on which is sent to you on. If someone else knows what your PIN

number is, and they can get access to your card, they can also get access to your
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money. By keeping your PIN number memorised, you can prevent anyone else

finding out what it is, and therefore, prevent someone from stealing your cash.

3. Telephone banking

Telephone banking is a service provided by a financial institution which allows its

customers to perform transactions over the telephone.Most telephone banking use an

automated phone answering system with phone keypad response or voice recognition

capability. To guarantee security, the customer must first authenticate through a numeric

or verbalpassword or through 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: account balance information and list of

latest transactions, electronic bill payments, funds transfers between a customer'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 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, chequebookorders, debit card replacements, change ofaddress, etc.

The Benefits of Telephone Banking :-

Check the balance of your accounts

Review withdrawals and deposits

Transfer funds between your accounts

Order statements

Pay selected bills

4. Smart Card

A smart card, chip card, orintegrated circuit card (ICC), is defined as any pocket-

sized card with embedded integrated circuits which can process information. This implies
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that it can receive input which is processed - by way of the ICC applications - and

delivered as an output. There are two broad categories of ICCs. Memory cards contain

only non-volatile memory storage components, and perhaps some specific security logic.

Microprocessor cards contain volatile memory and microprocessor components. The card

is made of plastic, generally PVC, but sometimes ABS. The card may embed a hologram

to avoid counterfeiting.

Overview

A "smart card" is also characterized as follows:

Dimensions are normally credit card size. The ID-1 ofISO/IEC 7810 standard

defines them as 85.60 53.98 mm. Another popular size is ID-000 which is 25 x

15 mm. Both are .76 mm thick. Contains a security system - tamper-resistant properties (e.g. a secure

cryptoprocessor, secure file system, human-readable features) and is capable of

providing security services (e.g. confidentiality of information in the memory).

Asset managed by way of a central administration system which interchanges

information and configuration settings with the card through the security system.

The latter includes card hotlisting, updates for application data.

Card data is transferred to the central administration system through card reading

devices, such as ticket readers, ATMs etc.

5. Online banking

Online banking (orInternet banking) Online banking (or Internet banking) is a term

used for performing transactions, payments etc. over the Internet through a bank, credit

union or building society's secure website. This allows customers to do their banking

outside of bank hours and from anywhere where Internet access is available.

Online banking solutions have many features and capabilities in common, but

traditionally also have some that are application specific.

The common features fall broadly into several categories
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Transactional (e.g., performing a financial transaction such as an account to

account transfer, paying a bill, wire transfer... and applications... apply for a loan,

new account, etc.)

o Electronic bill presentment and payment - EBPP

o Funds transferbetween a customer's own checking and savings accounts,

or to another customer's account

o Investmentpurchase or sale

o Loan applications and transactions, such as repayments

Non-transactional (e.g., online statements, check links, cobrowsing, chat)

o Bank statements

Financial Institution Administration - features allowing the financial institution to

manage the online experience of their end users

ASP/Hosting Administration - features allowing the hosting company to

administer the solution across financial institutions

Features commonly unique to business banking include

Support of multiple users having varying levels of authority

Transaction approval process

Wire transfer

Features commonly unique to Internet banking include

Personal financial management support, such as importing data into a personal

finance program such as Quicken, Microsoft Money orTurboTax. Some online

banking platforms support account aggregation to allow the customers to monitor

all of their accounts in one place whether they are with their main bank or with

other institutions.

6. Credit Card:-A credit card is a system ofpayment named after the small plastic

card issued to users of the system. A credit card is different from a debit card in that it

does not remove money from the user's account after every transaction. In the case of

credit cards, the issuer lends money to the consumer(or the user) to be paid to the
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merchant. It is different from a charge card (although this name is sometimes used to

describe credit cards), which requires the balance to be paid in full each month. In

contrast, a credit card allows the consumer to 'revolve' their balance, at the cost of

having interest charged. Most credit cards are the same shape and size, as specified by

the ISO 7810 standard. The most common credit card size, known as ID-1, is 85.60

53.98 mm.

Types of Credit Cards

Secured Credit Cards

Travel Credit Cards

Rewards Credit Cards

Bad Credit Credit Cards

Airline Credit Cards

Business Credit Cards

Cash Back Credit Cards

Instant Approval Credit Cards

Low Interest Credit Cards

Student Credit Cards

7. Mobile banking :-Mobile banking (also known as M-Banking, mbanking, SMS

Banking etc.) is a term used for performing balance checks, account transactions,

payments etc. via a mobile device such as a mobile phone. Mobile banking today (2007)

is most often performed via SMS or the Mobile Internet but can also use special

programs downloaded to the mobile device.

Mobile Banking Services

Mobile banking can offer services such as the following:

Account Information

1. Mini-statements and checking of account history

2. Alerts on account activity or passing of set thresholds

3. Monitoring of term deposits
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4. Access to loan statements

5. Access to card statements

6. Mutual funds / equity statements

7. Insurance policy management

8. Pension plan management

9. Status on cheque, stop payment on cheque

Payments & Transfers

1. Domestic and international fund transfers

2. Micro-payment handling

3. Mobile recharging

4. Commercial payment processing

5. Bill payment processing

6. Peer to Peer payments

Investments

1. Portfolio management services

2. Real-time stock quotes

3. Personalized alerts and notifications on security prices

Support

1. Status of requests for credit, including mortgage approval, and insurance coverage

2. Check (cheque) book and card requests

3. Exchange of data messages and email, including complaint submission and

tracking

4. ATM Location

Content Services

1. General information such as weather updates, news2. Loyalty-related offers

3. Location-based services

Based on a survey conducted by Forrester, mobile banking will be attractive mainly

to the younger, more "tech-savvy" customer segment. A third of mobile phone users
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say that they may consider performing some kind of financial transaction through

their mobile phone. But most of the users are interested in performing basic

transactions such as querying for account balance and making bill payment

INTRODUCTION TO THE ORGANISATION

ICICI BANK

Overview


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ICICI Bank is India's second-largest bank with total assets of Rs. 3,744.10 billion (US$

77 billion) at December 31, 2008 and profit after tax Rs. 30.14 billion for the nine months

ended December 31, 2008. The Bank has a network of 1,416 branches and about 4,644

ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking

products and financial services to corporate and retail customers through a variety of

delivery channels and through its specialised subsidiaries and affiliates in the areas of

investment banking, life and non-life insurance, venture capital and asset management.

The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches

in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai

International Finance Centre and representative offices in United Arab Emirates, China,

South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has

established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the

National Stock Exchange of India Limited and its American Depositary Receipts (ADRs)

are listed on the New York Stock Exchange (NYSE).

History

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financialinstitution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was

reduced to 46% through a public offering of shares in India in fiscal 1998, an equity

offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition

of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary

market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was

formed in 1955 at the initiative of the World Bank, the Government of India and

representatives of Indian industry. The principal objective was to create a development

financial institution for providing medium-term and long-term project financing to Indian

businesses. In the 1990s, ICICI transformed its business from a development financial

institution offering only project finance to a diversified financial services group offering a

wide variety of products and services, both directly and through a number of subsidiaries


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and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the

first bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the

emerging competitive scenario in the Indian banking industry, and the move towards

universal banking, the managements of ICICI and ICICI Bank formed the view that the

merger of ICICI with ICICI Bank would be the optimal strategic alternative for both

entities, and would create the optimal legal structure for the ICICI group's universal

banking strategy. The merger would enhance value for ICICI shareholders through the

merged entity's access to low-cost deposits, greater opportunities for earning fee-based

income and the ability to participate in the payments system and provide transaction-

banking services. The merger would enhance value for ICICI Bank shareholders througha large capital base and scale of operations, seamless access to ICICI's strong corporate

relationships built up over five decades, entry into new business segments, higher market

share in various business segments, particularly fee-based services, and access to the vast

talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of

ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail

finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital

Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI

and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March

2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in

April 2002

HDFC BANK

The Housing Development Finance Corporation Limited (HDFC) was amongst the first

to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a


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bank in the private sector, as part of the RBI's liberalisation of the Indian Banking

Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank

Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations

as a Scheduled Commercial Bank in January 1995. HDFC Bank has an nationwide

network of 1412 branches and 2890 ATMs IN 528 indian towns and cities.

Consolidated list of services

Personal banking

Accounts & Deposits

Savings Accounts

Regular Savings Account

Savings Plus Account

SavingsMax Account

Senior Citizens Account

No Frills Account

Institutional Savings Account

Payroll Salary Account

Classic Salary Account

Regular Salary Account

Premium Salary Account

Kid's Advantage Account

Family Savings Group

Pension Savings Account

Plan Current Account
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Trade Current Account

Demat Account

Cards

Credit Card

Debit Card

ForexPlus Card

GiftPlus Card

Loans

Personal Loan (PL)

Gold Loan (Term Loan)

Two Wheelers Loans

Express Loans

New Car Loans

Forex Services

Trade Services

Forex Limits

Investments & Insurance

Investment Services Account (Online MF a/c)

PUNJAB NATIONAL BANK

Profile


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With over 37 million satisfied customers and over 4589 offices, PNB has continued to

retain its leadership position among the nationalized banks. The bank enjoys strong

fundamentals, large franchise value and good brand image. Besides being ranked as one

of India's top service brands, PNB has remained fully committed to its guiding principles

of sound and prudent banking. Apart from offering banking products, the bank has also

entered the credit card & debit card business; bullion business; insurance business; Gold

coins & asset management business, etc.

Since its humble beginning in 1895 with the distinction of being the first Indian bank to

have been started with Indian capital, PNB has achieved significant growth in business

which at the end of March 2008 amounted to Rs 2,85959 crore. Today, with assets of

more than Rs 1,99,000 crore, PNB is ranked as the 3rd largest bank in the country (afterSBI and ICICI Bank) and has the 2nd largest network of branches (4589 including 322

extension counters).During the FY 2007-08, with 43% share of low cost deposits, the

bank achieved a net profit of Rs 2,049 crore, maintaining its number ONE position

amongst its peers. The banks Return on Assets at 1.15% was also the highest. During the

FY 2007-08,its ratio of priority sector credit to net bank credit at 44.11% & agriculture

credit to net bank credit at 18.94% was also higher than the respective national goals of

40% & 18%.

PNB has always looked at technology as a key facilitator to provide better customer

service and ensured that its IT strategy follows the Business strategy so as to arrive at

Best Fit. The bank has made rapid strides in this direction and achieved 100% branch

computerisation. A pioneering effort of the bank in the use of IT is the implementation of

Core Banking Solution (CBS) which facilitates any time, any where banking. PNB has

implemented CBS in 3503 service outlets at around centers to facilitate "anytime,

anywhere" banking to its clients. The bank has also been offering Internet banking

services to the customers of CBS branches like booking of tickets, payment of bills of

utilities, purchase of airline tickets etc.

Towards developing a cost effective alternative channels of delivery, the bank has

installed more than 1516 ATMs and entered into ATM sharing arrangement with other


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banks & IDRBT, making available a pool of additional 21,500 ATMs throughout the

country to its customers.

Backed by strong domestic performance, the bank is planning to realize its global

aspirations. In order to increase its international presence, the bank has already set up

representative offices at Almaty (Kazakhstan), Dubai (UAE) & Shanghai (China) ; a

branch at Kabul (Afghanistan) and a subsidiary at London (UK) and a branch at

Hongkong. Work on assessing potential at other international centers is progressing. The

bank also has a joint venture with Everest Bank Ltd. (EBL), Nepal, with 20 per cent

equity participation. With PNBs management, EBL has become one of the leading banks

in Nepal. As a tribute to its consistent business growth, improved assets & attractive

returns to shareholders in the joint venture, PNB has won Bank of the Year Award in

Nepal (2006) by The Banker, a publication of the London based Financial Times.

Amongst Top 1000 Banks in the World, The Banker listed PNB at 255th place. Further

the leading international Credit Rating index provider, Standard & Poors (2006) listed

PNB, amongst the 300 World companies & 7 Indian companies, which are expected to

emerge as challengers to the worlds leading blue chip companies.

Heritage

Established in 1895 at Lahore, undivided India, Punjab National Bank (PNB) has the

distinction of being the first Indian bank to have been started solely with Indian

capital.The bank was nationalised in July 1969 along with 13 other banks. From its

modest beginning, the bank has grown in size and stature to become a front-line banking

institution in India at present.

A professionally managed bank with a successful track record of over 110 years

Largest branch network in India - 4525 Offices including 432 Extension Counters spread

throughout the country.

Strategic business area covers the large Indo-Gangetic belt and the metropolitan centres


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Ranked as 248th biggest bank in the world by Bankers Almanac , London.

Strong correspondent banking relationships with more than 217 international banks of the

world.

More than 50 renowned international banks maintain their Rupee Accounts with PNB.

Well equipped dealing rooms; 20 different foreign currency accounts are maintained at

major centres all over the globe.

Rupee drawing arrangements with M/s UAE Exchange Centre, UAE, M/s Al Fardan

Exchange Co. Doha, Qatar,M/s Bahrain Exchange Co, Kuwait, M/s Bahrain Finance

Co, Bahrain,M/s Thomas Cook Al Rostamani Exchange Co. Dubai,UAE, and M/s

Musandam Exchange, Ruwi, Sultanate of Oman.

STATE BANK OF INDIA

Evolution


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The origin of the State Bank of India goes back to the first decade of the nineteenth

century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806.

Three years later the bank received its charter and was re-designed as the Bank of

Bengal (2 January 1809). A unique institution, it was the first joint-stock bank of

British India sponsored by the Government of Bengal. The Bank of Bombay (15

April 1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal.

These three banks remained at the apex of modern banking in India till their

amalgamation as the Imperial Bank of India on 27 January 1921.

Primarily Anglo-Indian creations, the three presidency banks came into existence

either as a result of the compulsions of imperial finance or by the felt needs of local

European commerce and were not imposed from outside in an arbitrary manner tomodernise India's economy. Their evolution was, however, shaped by ideas culled

from similar developments in Europe and England, and was influenced by changes

occurring in the structure of both the local trading environment and those in the

relations of the Indian economy to the economy of Europe and the global economic

framework.

Establishment

The establishment of the Bank of Bengal marked the advent of limited liability, joint-

stock banking in India. So was the associated innovation in banking, viz. the decision to

allow the Bank of Bengal to issue notes, which would be accepted for payment of public

revenues within a restricted geographical area. This right of note issue was very valuable

not only for the Bank of Bengal but also its two siblings, the Banks of Bombay and

Madras. It meant an accretion to the capital of the banks, a capital on which the

proprietors did not have to pay any interest. The concept of deposit banking was also an

innovation because the practice of accepting money for safekeeping (and in some cases,

even investment on behalf of the clients) by the indigenous bankers had not spread as a

general habit in most parts of India. But, for a long time, and especially upto the time that

the three presidency banks had a right of note issue, bank notes and government balances

made up the bulk of the investible resources of the banks.


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The three banks were governed by royal charters, which were revised from time to time.

Each charter provided for a share capital, four-fifth of which were privately subscribed

and the rest owned by the provincial government. The members of the board of directors,

which managed the affairs of each bank, were mostly proprietary directors representing

the large European managing agency houses in India. The rest were government

nominees, invariably civil servants, one of whom was elected as the president of the

board.

SBI is Indias largest commercial bank. SBI has a vast domestic network of over 9000

branches and commands one- fifth of deposits and loans of all scheduled commercial

banks in india

CHAPTER 2

REVIEW OF LITERATURE


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1. Sullivan A. Charlene & Worden Dercnik Debra Debra.(1995) The value of the

option to default on unsecured credit contracts is estimated and found to be

significantly impacted by state and federal laws governing creditors' collection

practices and bankruptcy. The data suggest that the expected value of the

option to default influences debtors' choices in default and is correlated with

their use of their credit cards before default. Cardholders who use their lines

of credit very intensely before default are significantly more likely to make

choices in default which allow them to realize a greater benefit from default.

Furthermore, these results offer a possible explanation for consumers' seeming

insensitivity to interest rates charged on revolving lines of credit.

2. Rogers A Wendy, Gilbert Kristen D., Cabrera Fraser Elizabeth.(1997)said that

It is often assumed that automatic teller machines (ATMs) are inherently easy

to use and require no training. However, there is evidence to suggest that

ATM users do experience difficulty when learning to use the system. The

purpose of the present study was to conduct an in-depth analysis of ATM

usage by older adults. Our approach consisted of telephone interviews

followed by structured individual interviews. The goals were to understand

the problems encountered by ATM users, to determine how ATMs might be

better designed and to assess the training needs of older individuals. The

phone interview data provide information about the relationships between age,

sex and ATM usage within the adult sample, as well as information about why

some people choose not to use ATMs. The structured interview data provide a

more in-depth view of the concerns of both users and non-users, and

information about training needs. The training and design implications of the

results are discussed.

3. Coley Kimberly, Wright Samantha,Park Eui, Ntuen Celestine.(1997)

discussed that This research provides relevant information for the redesign of

automated teller machines (ATMs) to better accommodate older adults, with

hopes of aiding financial institutions in their trend toward a tellerless bank.


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Forty subjects, ranging from 18 to 65 years of age, interacted with three

different ATM simulations. The level of detail was little, high and little with

on screen help available. The font color was varied: red, green, or white with

each participant. Font color and level of detail were investigated to determine

preferences of younger and older adults. The preferred level of detail was

found to vary by sex and age. A majority of the subjects, approximately 53%,

favored the simulation with the optional help button which accommodated

both first time and frequent ATM users. There were no significant interactions

between age, sex, and color.

4. Carow A Kenneth , Staten E Michael.(1999) said that We analyzed the

consumers payment option to use debit, general purpose credit cards,

gasoline credit cards, or cash. Based on the results from a nested multinomial

logit model, we found consumers are more likely to use cash when they have

less education, lower incomes, are middle-aged, and own fewer credit cards.

Debit and credit card users are younger, more educated, and hold more credit

cards. Respondents who use their debit card are less likely to use their

gasoline credit card. The results suggest that greater debit card usage will

place the greatest competitive pressure on the gasoline credit card program.

5. Aladwani M.Adel.(2001)presented that Online banking is the newest and least

understood delivery channel for retail banking services. Yet, few, if any,

studies were reported quantifying the issues relevant to this cutting-edge

technology. This paper reports the results of a quantitative study of the

perceptions of banks executive and IT managers and potential customers with

regard to the drivers, development challenges, and expectations of online

banking. The findings will be useful for both researchers and practitioners

who seek to understand the issues relevant to online banking.

6. Spivack Joseph, CFA.(2001) examined that In theory, pure play Internet

banking offers advantages both for the banks and their customers, but whether


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these benefits can be realized in practice is unclear. The author systematically

analyzes the financial performance of pure Internet banks. He finds that, as

with nonfinancial dot-coms, Internet banks grow rapidly but produce little or

no profits. Regulators have recognized this problem by requiring new Internet

banks to have more initial equity capital than traditional banks.

CHAPTER 3

RESEARCH METHODOLOGY

OBJECTIVES OF THE STUDY


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The present study will be undertaken in respect of banking sector with view of four banks

ICICI, HDFC, PNB, and SBI Banks. The main motive of the study is to analyze the

impact of technology on Indian banks, based on this main motive the objectives of study

are as follows: -

To explore the technological advancement in Indian banking sector.

To analyze the customer perceptions regarding the use of technology in

banks.

To analyze the bank employees perception regarding the use of technology

in banks

SCOPE OF THE STUDY

The scope of the study entitled Impact of technology on Indian banks with view of

ICICI, HDFC, PNB, SBI Banks is limited to Ludhiana region only. Only those

customers are taken for the study who resides in Ludhiana.

NEED OF THE STUDY

The study on impact of technology on banking can help organizations better understand

the real impact of their IT investments. This study will also be helpful to know that at

what extent banks are providing technological services to their customer and how

customers perceive the usage of technology in banks. And also it includes bank

employees perception regarding the use of technology. At some extent this study also

provides data in the form of problems faced by customers and employees while using

banking technology, which can become the area for improvement for banks.

Research Plan

The research study is exploratory and descriptive in nature. The establish objectives

were kept in mind during the study, however no hypothesis was formed as the study was

more in the form of descriptive design attempting to analyze the attitude of respondents


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towards the project which is new in the region can be considered at the fledging level as

far as the awareness among the respondents is concerned.

Data collection

The data, which is collected for the purpose of study, is divided into 2 bases:

Primary source: The primary data comprises information survey of Impact of

technology on Indian banks with view of ICICI, HDFC, PNB, and SBI Banks. The data

has been collected directly from respondents with the help of structured questionnaires.

Secondary Source: The secondary data has been collected from internet, references from

the banks .The information brochures of certain banks, informal links with the concerned

person in this line have also been consulted as a secondary source of information.

Sampling Plan

Universe: The respondents are those who have bank accounts in those particular banks

as well as employees were also contacted for the completion of project.

Area of study:Area of Study will be limited to Ludhiana City only.

Sampling Procedure: In this study, the respondents were chosen through convenience

sampling.

Sample Size: About 50 customers for the study of project.

Contact Method: The respondents were contacted personally and a structured

questionnaire was get filled and also interviews of some respondents were conducted.

Technique of Analysis: Bar graphs. Pie charts, Percentage method.

LIMITATIONS OF THE STUDY


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In attempt to make this project authentic and reliable, every possible aspect of the topic

was kept in mind. Neverthless, despite of fact constraints were at play during the

formulation of this project. The main limitations are as follows:

Some respondents did not have serious attitude towards the questionnaire and

hence their responses may not reflect the real picture.

Some of the respondents were not ready enough to reveal all the required

information. They might have given inflated or wrong data.

Because of the diversity of nature of the respondents the findings of the survey

could not be generalized.

Also some personal bias might have crept into the information provided by the

respondents in scope of this study.

The method of data collection was slow procedure as an considerable amount of

the time was lost in filling up the questionnaire.

Some of the respondents hide the real information as they think a particular Bank

has status symbol, which also have effect on the result of the stud

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