E-BANKING
Table of contents
Chapters Topic Page no.
1. Introduction 4-15
1.1 Preface 5
1.2 Objectives of the study 12
1.3 Research Methodology 13
1.4 Limitations of the study 14
2. Profile of the organisation
15-35
3. Analysis and interpretation of data 36-50
4. Conclusions and recommendations 51-54
Bibliography 55
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INTRODUCTION
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PREFACE
E-banking or Internet banking means any user with a personal computer and a browser can get connected to his bank’s website to perform any of the virtual banking functions.
In internet banking system, the bank has a centralized database that is web-enabled. All the services that the bank has permitted on the internet are displayed in menu. Any service can be selected and further interaction is dictated by the nature of service.
The traditional branch model of bank is now giving place to an alternative delivery channels with ATM network. Once the branch offices of bank are interconnected through terrestrial or satellite links, there would be no physical identity for any branch. It would a borderless entity permitting anytime, anywhere and anyhow banking. The network which connects the various locations and gives connectivity to the central office within the organization is called intranet. These networks are limited to organizations for which they are set up. SWIFT is a live example of intranet application.
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MEANING OF E-BANKING
Electronic banking (or net banking) refers to an application of the Internet that allows customers to dial into bank networks or their websites, using their own telephones and computers, and to get a host of banking services directly on their home or office PCs.
Net banking offers you armchair convenience and access to your account information from anywhere in the world, at any time of the day or night. That means, as long as you have a computer, a modem, a phone line and an Internet account, you don't need to worry about bank holidays or taking time out to go to the bank, or standing in long queues for a simple transaction! You can access most of the bank's services from the comfort of your home/office!!
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BENEFITS OF E-BANKING
For Banks:
1. Price - In the long run a bank can save on money by not paying for tellers or for managing branches. Plus, it's cheaper to make transactions over the Internet.
2. Customer Base - The Internet allows banks to reach a whole new market- and a well off one too, because there are no geographic boundaries with the Internet. The Internet also provides a level playing field for small banks who want to add to their customer base.
3. Efficiency - Banks can become more efficient than they already are by providing Internet access for their customers. The Internet provides the bank with an almost paper less system.
4. Customer Service and Satisfaction - Banking on the Internet not only allows the customers to have a full range of services available to them, but it also allows them some services not offered at any of the branches. The person does not have to go to a branch where that service may or may not be offer. A person can take print of information, forms, and applications via the Internet and be able to search for information efficiently instead of waiting in line and asking a teller. With more better and faster options a bank will surely be able to create better customer relations and satisfaction. Offering new services, results in improved customer experience and stronger customer retention.
5. Image - A bank seems more state of the art to a customer if they offer Internet access. A person may not want to use Internet banking but having the service available gives a person the feeling that their bank is on the cutting image.
6. Identifying profitable customers- Customers using E-banking services have higher balances than average branch teller customers. Investments are more than twice higher than the average.
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For Customers:
1. Bill Pay : Bill Pay is a service offered through Internet banking that allows the customer to set up bill payments to just about anyone. Customer can select the person or company whom he wants to make a payment and Bill Pay will withdraw the money from his account and send the payee a paper check or an electronic payment
2. Other Important Facilities : E- banking gives customer the control over nearly every aspect of managing his bank accounts. Besides the Customers can, Buy and Sell Securities, Check Stock Market Information, Check Currency Rates, Check Balances, See which checks are cleared, Transfer Money, View Transaction History and avoid going to an actual bank. The best benefit is that Internet banking is free. At many banks the customer doesn't have to maintain a required minimum balance. The second big benefit is better interest rates for the customer.
3. Bigger share in customer’s wallet: It is a well known fact that customers tend to keep their finances at one place. Banks holding customer accounts therefore have opportunity to cross sell different products and services. Recent studies show that banks in the USA lost 20% of their most valuable customers in favor of non-bank FI, which are flexible enough to offer diversified services and products. Through the facility of E-Banking banks can surely offer their customers different products and services, all at one place.
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LIMITATIONS OF E-BANKING
1. Safety situations around ATMs.
2. Abuse of bank cards by fraudsters at ATMs.
3. Danger of giving your card number when buying on-line.
The modern technology has influenced the financial sector to a large extent. It increases the competitive efficiency of the firms and provides sophistication to the end users. It makes everyone fittest to survive.
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CONCERNS WITH E-BANKING
As with any new technology new problems are faced, here are some concerns associated with e-banking as well. These are as follows:-
1. Customer support - banks will have to create a whole new customer relations department to help customers. Banks have to make sure that the customers receive assistance quickly if they need help. Any major problems or disastrous can destroy the banks reputation quickly an easily. By showing the customer that the Internet is reliable you are able to get the customer to trust online banking more and more.
2. Laws - While Internet banking does not have national or state boundaries, the law does. Companies will have to make sure that they have software in place software market, creating a monopoly.
3. Security : customer always worries about their protection and security or accuracy. There are always questions whether or not something took place.
4. Other challenges : lack of knowledge from customers end, sit changes by the banks, etc.
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Internet banking versus traditional method
In spite of so many facilities that Internet banking offers us, we still seem to trust our traditional method of banking and are reluctant to use online banking. But here are few cases where Internet banking will turn out to be a better option in terms of saving the money.
'Stop payment' done through Internet banking will not cost any extra fees but when done through the branch, the bank may charge you Rs 50 per cheque plus the service tax.
Through Internet banking, you can check your transactions at any time of the day, and as many times as you want to.
On the other hand, in a traditional method, you get quarterly statements from the bank and if you request for a statement at your required time, it may turn out to be an expensive affair. The branch may charge you Rs 25 per page, which includes only 30 transactions. Moreover, the bank branch would take eight days to deliver it at your doorstep.
If the fund transfer has to be made outstation, where the bank does not have a branch, the bank would demand outstation charges. Whereas with the help of online banking, it will be absolutely free for you.
As per the Internet and Mobile Association of India's report on online banking 2006, "There are many advantages of online banking. It is convenient, it isn't bound by operational timings, there are no geographical barriers and the services can be offered at a miniscule cost."
Cutting Operational Costs
Cutting transaction costs results in higher profit margin for the banks. The enclosed chart clearly indicates the benefits of E-banking over traditional methods banking.
Banking Method used Cost per Transaction for Bank
1 Manual, personal
Rs. 40 – 100/- depending on Bank
Higher for Foreign Banks, as salaries and overheads are higher
2 ATMs Rs. 20-30/- only
3 Internet / PC Rs. 8/- only
4 Telephone Banking Rs. 15/- only
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As every Bank wants to be profitable E-banking is becoming necessity for survival. It provides enormous benefits to consumers in terms of the ease and cost of transactions.
OBJECTIVES OF THE STUDY
To gain knowledge about the present scenario of e-Banking and its uses in the country.
To study the various services provided by IndusInd Bank to its customers through e-Banking.
To know about diverse measures adopted by different banks to increase customer satisfaction through the use of e-Banking.
To be on familiar terms with the different uses of IT and computers in banks.
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RESEARCH METHODOLOGY
METHOD OF ACCESSING THE DATA: -
Interaction with employees of IBL and of other banks. Secondary sources.
Books, financial newspapers and magazines. Websites of the banks and financial websites. Brochures and pamphlets of different banks.
SAMPLE AREA : -
Delhi
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LIMITATIONS OF THE STUDY
Although I had a wonderful experience in completing my project, yet I faced a couple of
difficulties. Every task has its own limitations, and so did the study of analysis of e-Banking
and its uses. They were as follows:
The study was taken up in Delhi and the responses may not be applicable to other
cities or states.
Time was too short to do an analysis of the present scenario of e-banking, prevalent in the country.
Limited product knowledge about other bank products as most of the study was done only by secondary data.
There are numerous banks in India. It was not feasible to study the e-banking services provided by all of them.
Biasness would also have also creep in during the interaction with the employees of banks regarding various services provided by them and the responses of the customers.
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PROFILE OF THE ORGANISATION
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ABOUT INDUSIND BANK
Quality Policy:-
IndusInd Bank is committed to meet and strive to exceed customer requirements through timely, error free and courteous service. We shall continually improve the effectiveness of our work processes through training, customer feedback and review of systems
IndusInd Bank is the First Indian Commercial Bank to have its entire network under ISO certification for Quality.
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Genesis
IndusInd Bank derives its name and inspiration from the Indus Valley civilization - a culture described by National Geographic as 'one of the greatest of the ancient world' combining a spirit of innovation with sound business and trade practices.
Mr. Srichand P. Hinduja, a leading Non-Resident Indian businessman and head of the Hinduja Group, conceived the vision of IndusInd Bank - the first of the new-generation private banks in India - and through collective contributions from the NRI community towards India's economic and social development, brought our Bank into being.
The Bank, formally inaugurated in April 1994 by Dr. Manmohan Singh, Honorable Prime Minister of India who was then the country’s Finance Minister, started with a capital base of Rs.1, 000 million (USD 32 million at the prevailing exchange rate), of which Rs.600 million was raised through private placement from Indian Residents while the balance Rs.400 million (USD 13 million) was contributed by Non-Resident Indians.
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A new era
The merger with the Bank in June 2004 of Ashok Leyland Finance Ltd., among the largest leasing finance and hire purchase companies in India, set in motion a process of consolidation through the combined customer base of the merged entity and its increased geographical penetration. IndusInd Bank has become one of the fastest-growing banks in the Indian banking sector today with its branch network expanding from 61 as on March 31, 2004 to 137 as on March 31, 2006 – reflecting an increase in excess of 125% in 24 months. The Bank has approximately 150 ATMs of its own, and has concluded multilateral arrangements with other banks with a total network of 15,000 ATM outlets. All the outlets of the Bank, including its branches and ATMs, are connected via satellite to its central database that operates on the latest version of IBM’s AS400-720 series hardware and Midas Kapiti (now, Misys) software.
IndusInd Bank’s broad lines of business include Corporate Banking, Retail Banking, Treasury and Foreign Exchange, Investment Banking, Capital Markets, Non-Resident Indian (NRI) / High Networth Individual (HNI) Banking, and (through a subsidiary) Information Technology.
IndusInd Bank provides multi-channel facilities including ATMs, Net Banking, Mobile Banking, Phone Banking, Multi-city Banking and International Debit Cards. It was one of the first banks to become a part of RBI’s Real Time Gross Settlement (RTGS) system. It has implemented an enterprise-wide risk management system encompassing global best practices in the area of Risk Management, with help from KPMG. This has enabled the Bank to remain in the forefront in complying with the requirements of Basel II. It is the first bank in India to receive ISO 9001:2000 certification for its Corporate Office and its entire network of branches.
With its roots in Indian tradition and emphasis on customer care, IndusInd Bank’s service philosophy is well reflected in the communication tagline “We Care… Dil Se”.
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INDUSIND BANK AT A GLANCE
First Scheduled Commercial Bank to be inaugurated in the post liberalised era, in the year 1994.
Majority stake owned by the global conglomerate Hinduja Group.
Ashok Leyland Finance (Vehicle Finance division of Ashok Leyland) merger with IndusInd Bank in 2004 increased geographical penetration and customer base.
Offers a comprehensive range of financial products and services in areas of retail deposits, advances, corporate deposits, SME advances, third party products, utility payments.
Has a much diversified customer base comprising salaried class, house-wives, NRIs, entrepreneurs, PSU’s, private sector organizations, etc.
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Coverage in India
IBL Presence:-
Incorporated in 1994
• 179 Branches• 316 ATMs
IBL serves the entire breadth of the Indian Economy along with its presence in 141 geographical locations in 27 states.
By March 2008 IBL is aiming to increase its branch network to 200.
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Technology used by IBL
IBL is a tech savvy bank and has got excellent systems which ensure error free, fast and cost effective transaction processing.
The technology partners include -
• IndusInd Technologies Ltd.• HTMT
TECHNOLOGY
• Centralized Core Banking Application - Equation/3 from Misys, UK.• Hardware Platform - IBM i - series AS/400 - highly scalable.
APPLICATION
• Internet Banking – ‘Bankworld’ from CR2, Ireland• ATM Switch – ‘Base24/Tandem’ an ATM switch from ACI, US.
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Board Members
BOARD OF DIRECTORS
Mr. R. Seshasayee Managing Director, Ashok Leyland Ltd.
Mr. R. Sundararaman Former Dy Managing Director of SBI
Mr. T. Anantha Narayanan Chartered Accountant and Expert in Agriculture and Rural Economy
Dr. T. T. Ram Mohan Professor, Finance & Accounting, IIM, Ahmedabad
Mrs. Pallavi Shroff Practising Lawyer
Mr. Premchand GodhaM.D. of Ipca Laboratories Ltd., having practical experience of SSI &
Agriculture
Mr. Ajay Hinduja Businessman
Mr. Sushil Chandra Tripathi I.A.S (Retired), Advocate
Mr. Ashok Kini Former Managing Director of SBI
Mr. Romesh Sobti Managing Director & CEO
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Milestones
Net worth crossed a milestone figure of Rs. 1000 crores at Rs. 1056 crores.
Successful completion of GDR issue of Rs. 145.96 crores.
Business Turnover touched a figure of Rs 28.700 crores registering a growth of 18.14% over the previous year.
Network of Branches increased to 170 along with 99 off-site ATMS, thus having presence in over 141 geographical locations spread over 27 States including Union Territories.
Highest A1+ rating for its Certificates of Deposits by ICRA and Highest P1+ rating for its FDs by CRISIL.
Bestowed with the prestigious IBA Award for technology implementation (STP).
Added a number of new business and product lines, via the launch of Indus GOLD and Indus Gift Card, E-Remittance facility, tie-up with number of Banks for ATM usage, tie-up with Religare Securities to extend Portfolio Management services and Bancassurance tie-up with Aviva Life Insurance.
Ranked among the top ten banks in the country in the ET500 list of leading companies in India.
Rated as the best among top 10 private sector banks in a survey conducted by Business Standard in November 2005.
Bestowed India’s Most Productive Bank status by a Business Today-KPMG Survey.
Presented Runner up-Banking Technology Award by IBA, Finacle and TFCI.
Honoured with Award for Corporate Social Responsibility at the India Brand Summit.
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e- BANKING SERVICES PROVIDED BY INDUSIND BANK
IndusInd Bank believes in adding convenience to the banking experience of its customers. Its Alternate Delivery Channels give 24x7 accesses to its services, from anywhere in the world.
The Bank provides various types of e-banking services to its customers, which aim to provide satisfaction and ease to them. These services are as under:-
1. INDUSNET
Indusnet - Internet Banking service from IndusInd Bank offers banking services online with the same personal efforts that customers receive at the branch. The online requests are processed by a proactive team of Personal Bankers adhering to service quality standards.
The Internet banking service provided by the bank adds more value to NRI's who can view their balances online and also effect funds transfer - just at the click of a mouse. Moreover, Internet banking has no time zones and is accessible round the clock without restricting it to any geographical boundary.
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2. INDUS PAY – E-WALLET
It is a simple and convenient way to transact online from anywhere at any time. With this service one can create own e-Wallet and assign accounts to it. The customers can then shop / donate / subscribe online with the list of Merchants and authorize the transaction from their chosen bank account using their transaction password. Moreover, they can also view all these transactions online.
3. VISA MONEY TRANSFER
VISA MONEY TRANSFER - [VISA CARD-to-CARD Transfer]No more waiting in queues in Bank branches, getting the Demand Drafts made, and writing cheques that takes days to clear, IndusInd Bank provides the only solution to make it simpler, convenient and faster by IndusInd Bank VISA Money Transfer.
From IndusInd Bank account, customers can now transfer money to any of the 23 million VISA Cards anywhere in India through IndusNet - IndusInd Bank’s Net Banking service and any of IndusInd Bank ATM.
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4. ATMs
The wide ATM network of IndusInd bank provides the following services to its customer base:-
Deposit Cash / Cheque - Special deposits slip-cum-envelopes are provided at the ATM centers. The customers just have to fill in the details of cash or cheques and insert it into the deposit slot. Withdraw Cash - One can withdraw up to Rs 15,000/- per day from his account using
the ATM/Debit card in any of the IndusInd ATMs across the country subject to availability of balance in the account. One can also shop up to Rs 25000 per day using his/her debit card.
Funds Transfer - Flexibility to allow on-line transfer of funds between the various accounts linked with the ATM/Debit card of the customer.
Fast Cash - In spite of holding multiple accounts, the customers have the option of withdrawing cash through their primary account only.
Visa Money Transfer - Visa Money Transfer is a revolutionary service which enables the customer of IndusInd Bank to transfer money from their debit card to any other visa debit /credit card anytime, anywhere in India.
5. INDUS BILL PAY
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Indus Bill pay is a simple, convenient and secure way of managing bills from anywhere, at anytime.The customers can pay their Telephone bills, Electricity bills, Mobile bills, Insurance Premium, Gas charges, Taxes etc. This service is absolutely FREE for customers.
6. PHONE BANKING
The customers of Indusind bank can now call on the toll free numbers 1800 22 00 61 (All MTNL & BSNL subscribers or 022-44066666 (Local call in Mumbai).
IndusInd bank offers following facilities which the customers can avail with the help of phone banking service:
• Balance Enquiry for Savings.• Reading out last 3 transactions.• Status of cheque issued by customer.• Stop payment of an issued cheque.• Detailed statement by FAX.• Internal funds transfer between 2 A/Cs.• Request for Cheque book.• Request debit card replacement.• Statement request for statement of A/C by mail or fax.
7. MOBILE TOP UPS
INDUS MOBILE TOP UP’S - enables the customer to refill his mobile prepaid card directly through IndusInd ATM’s. Mobile Top Ups is a Value added service offered to all IndusInd
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customers through ATM channel. Customers can recharge their mobile refills from IBL ATM’s anytime.
The USP of this product is availability for nearly all operators viz: Orange, Airtel, BPL Mobile, IDEA, SPICE, Reliance, Vodafone, Tata Indicom, BSNL, MTNL etc.
8. ONLINE REMITTANCE
Indus Fast Remit
Indus-Fast Remit is a fast, simple, safe and secure way to send money to your family in India from the comfort of your home. It uses the Automated Clearing House (ACH) which is paperless and 100% online remittance platform to transfer funds from United States to India.By using Indus-Fast Remit you can directly debit your local US bank account and credit the beneficiary’s account with IndusInd Bank or instruct IndusInd Bank to issue demand draft favoring beneficiary.
Indus Speed Remit
Indus Speed-Remit is a product under Rupee Drawing Arrangement Scheme of Reserve Bank of India, which facilitates NRI’s to transmit funds online through Exchange Houses. This product is offered to Exchange Houses in GCC countries as well as in Hong Kong and Singapore.
IndusInd Bank has a strong NRI base in GCC countries. The majority of Indians are remitting funds to India in Indian Rupees through Exchange Houses. IndusInd Bank has tie-ups with
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Exchange Houses in UAE, Oman, Bahrain, Kuwait and Hong Kong who serve the Indian population there. Reserve Bank of India under the RDA Scheme has permitted Bank to receive remittance through Speed Remittance route from various Exchange Houses in the World.
9. E-MAIL STATEMENTS
IndusInd Bank customers can have their account statements information at their fingertips. They can choose to receive their Monthly/Quarterly Savings or Current Account Statement Online at their e-mail address/es in an all-new PDF format. Their online statements can be downloaded to print, save and archive for future reference. It is completely user friendly.
This service comes to the IndusInd customers FREE of cost and is yet another measure in the constant endeavor of the Bank to enhance customer-convenience.
10. MOBILE BANKING
Under this, information based services is offered to customers by way of SMS messages, for which they have to register. These could be event or frequency based alerts.
Features:
• Daily balance update• Transaction based Alerts on Debits & Credits into the account• Standing Instructions ‘Success’ messages• PULL message service * by sending key words like ‘TXN’ or ‘BAL’ or with parameters to
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5676757• Deal maturity information would be sent to the customers before 3 days of maturity• Broadcasts.
11. FREEDOM 3-IN-1 ACCOUNT
IBL Freedom 3-in-1 a/c grants their customers complete independence from the hassles of conventional trading procedures by helping them to trade online. This means no more calling up brokers, writing cheques/delivery instructions or even waiting endlessly to get transactions done. Simply go online and get the deal done in seconds and reap the benefits of paper-free trading with complete transparency.
IBL helps the customers to integrate their Bank and Demat account with their trading account ensuring that the funds/shares can be seamlessly moved from their linked Bank/Demat account to execute their transactions. The Bank a/c and the Demat a/c are automatically debited or credited. The customers can trade in all NSE/BSE scrips as many times as possible.
12. EFT / SEFT FACILITY
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Electronic fund transfer facility is available at 40000 Bank branches in India. Funds transferred will be credited to the customers account on the second working day.
SEFT facility is available at 1000 locations with quicker remittance option. The customers can transfer funds to any Bank account with the funds getting credited in the next working day. All the IndusInd Branches are NEFT enabled.
13. RTGS FACILITY
RTGS facility is available at 25000 bank branches in India, who are connected to RTGS platform at RBI.
Under this service, funds transferred under the straight through process of RTGS, will be credited to the beneficiaries account on the same day (with in 2hrs).
14. ECS FACILITY
IndusInd bank provides two kind of Electronic Clearing System (ECS) facility to its customers which are as under:-
o ECS Credit for salary payments and other payments at fixed frequency.
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o ECS Debit is as per mandate given by the customers to debit their account towards EMI or Recurring Deposit installments.
e- BANKING SERVICES PROVIDED BY OTHER BANKS
Despite of various e-banking facilities provided by IndusInd bank, there are many services which the bank has not promoted as yet. As a suggestion measure, I may like to name and explain a few of it, which other banks have been providing from quiet a long time. I would like the Bank authorities to have a look at them and provide these services to its reputed customer base, and hence improve customer satisfaction and contentment. Some of these services are: -
1. TICKET BOOKING
This service is provided by ICICI Bank. With this service customers need not visit reservation centers for booking tickets any more. They can buy their train tickets online and pay using the Internet Banking Facility of the bank. For this ICICI Bank has tied up with Indian Railway Catering and Tourism Corporation Ltd (IRCTC).This facility is available to all internet banking customers of ICICI Bank.
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For the purpose of making payment the customer’s Bank Account will be immediately debited and payment confirmation number will be provided. Tickets are booked immediately and PNR number is provided online to the customer, at Partner's website.
Further, No cash will be paid at the time of cancellation. The customer’s bank account will be credited with the ticket amount less cancellation charges as levied by IRCTC. ICICI Bank does not levy any cancellation charges.
2. SMART MONEY ORDER
This facility is being provided by ICICI Bank. Smart Money Order is a service provided in partnership with India Post (The Department of Posts, Ministry of Communication and Information Technology, Government of India).
Smart Money Order is a unique service that allows the customers to send a money order anytime and to any destination in India. All Retail Internet Banking Customers can use this facility. Under this, money is delivered at the receiver's doorstep.
3. ONE VIEW
OneView is a revolutionary service from HDFC Bank that allows its customers to manage multiple accounts in different banks through one single online interface.
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If you are an HDFC Bank customer and have one or more accounts with Citibank, ICICI Bank, HSBC India, Standard Chartered Bank then OneView is just right for you.
For this service, the customers don’t need to individually log on to internet banking of every account. They just have to log on to One View and they can manage up to FIVE accounts in different banks. They will have to remember only ONE password. And this service is provided absolutely FREE to the customers of HDFC Bank.
4. ONLINE TAX PAYMENT
This service is provided by ICICI Bank. It has tied up with online tax preparation service providers to help its customers to prepare and file their taxes online. The customers can choose their desired service offered by the service providers, pay on-line using www.icicibank.com and avail of huge discounts.
Similarly, this service is also provided by many other banks including Axis Bank. Consequent to the authorisation of the Bank by RBI and Govt. of India for conducting Govt. Business, the Bank is handling Collection of various Central/ State Taxes through its authorised Branches.
5. E-PAYMENTS
Axis bank provides this e-banking facility to its customers. The Bank has entered into tie-ups with various Govt. Departments for providing various G2B and G2C online payment facility to the citizens and businesses thus providing convenience to them.
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Few of the important online payment tie-ups entered into by Axis Bank with various Govt. Departments is as under:
DGFT ePaymentsIRCTC - Online Railway ReservationMCD - Municipal Tax or Fees ePaymentsSampark - Utility Bill ePaymentsMCD - eTendering ProjectBangalore One Project - Utility Bill ePayments
6. ONLINE AUTHORISATION CODE (OAC )
This service is currently being provided by CitiBank. The customers can order a Demand Draft online and have it delivered in over 700 locations in India.
To do so, they will need an Online Authorisation Code (OAC) which is a one time process that has been introduced since November, 2006 in the Bank.
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ANALYSIS AND INTRPRETATION OF DATA
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Banking Services Through Internet
There are basically, 3 E- Banking service Levels provided by banks. These are discussed as below:-
i. The Basic Level Service is the Banks’ web sites which disseminate information on different products and services offered to customers and members of public in general. It may receive and reply to customer’s queries through e-mail,
ii. In the next level are Simple Transactional Web sites which allows customers to submit their instructions, applications for different services, queries in their account balances, etc. but do not permit any fund-based transactions on their accounts,
iii. The third level of Internet banking service are offered by Fully Transactional Web sites which allow the customers to operate on their accounts for transfer of funds, payment of different bills, subscribing to other products of the bank and to transact purchase and sale of securities, etc. The above forms of Internet banking service the customer or by new banks, who deliver banking service primarily through Internet or other electronic delivery channels as the value added services. Some of these banks are known as ‘Virtual’ banks or ‘Internet only’ banks and may not have physical presence in a country despite offering different banking services.
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e-Banking: The Indian Scenario
Internet Banking in India:
Online banking is expected to explode in the next few years. We will be entering the age of non-physical exchange of cash aided by complete transparency leading to perfectly competitive electronic market place and inevitably to customer supremacy. Growth in online banking will be driven by the following reasons:
Increasing access to low cost electronic services.
Emergence of open standards in the banking industry.
Improved customer awareness.
Entry of global majors in the market.
Integration of banking services with e-commerce and emergence of e-cash.
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Convenient international transactions, as Internet eliminates geographic boundaries.
Shift from one-stop shopping to unbundled product purchases.
Product and Services Offered: -
Banks in India are at different stages of the web-enabled banking cycle. Initially, a bank, which is not having a web site, allows its customer to communicate with it through an e-mail address’ communication, is limited to a small number of branches and offices which have access to this e-mail count.
With gradual adoption of Information Technology, the bank puts up a web site that provides general information on deposits products, application forms for downloading and e-mail option for enquiries and feedback.
Banks provide information on their websites about NRI and other services. Customers are required to fill in applications on the Net and can later receive loans or other products requested for at their local branches.
A few banks provide the customer to enquire into his demat account (security/shares) holding details, transaction details and status of instructions given by him. These web sites still do not allow online transactions for their customers.
Some of the banks permit customers to interact with them and transact electronically with them. Such services include request for opening of accounts, requisition for cheque books, stop payment of cheques, viewing and printing statements of accounts, movement of funds between accounts within the same bank, querying on status or requests, instructions for opening of Letter of Credit and Bank Guarantees, etc.
These services are being initiated by banks like ICICI Bank Ltd., Citibank, Global Trust Bank Ltd., AXIS Bank Ltd., IndusInd Bank, Citibank, Bank of Madura Ltd., Federal Bank Ltd., etc.
Some of the more aggressive players in this area such as ICICI Bank Ltd., HDFC Bank Ltd., AXIS Bank Ltd., IDBI Bank, HSBC Bank, IndusInd Bank, Global Trust Bank Ltd., and Bank of Punjab Ltd., offer the facility of receipt, review and payment of bills online.
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HDFC Bank Ltd. has made e-shopping online and real time with the launch of its payment gateway.
Banks providing internet banking services have been entering into agreements with their customers setting out the terms and conditions of the services.
The terms and conditions include information on the access through user-ID and secret password, minimum balance and charges, authority to the bank for carrying out transactions performed through the service, liability of the user and the bank, disclosure of personal information for statistical analysis and credit scoring also, etc.
The Future Scenario: -
o Compared to banks abroad, India banks offering online services still have a long way to go. For online banking to reach a critical mass, there has to be sufficient number of users and the sufficient infrastructure in place.
o Various security options like line encryption, branch connection encryption, firewalls, digital certificates, automatic sign-offs, random pop-ups and disaster recovery sites are is in place or are being looked at, there is as yet no Certification Authority in India offering Public Key Infrastructure, which is absolutely necessary for online banking.
o The communication bandwidth available today in India is also not enough to meet the needs of high priority services like online banking and trading.
o Banks offering online facilities also need to calculate their downtime losses, because even a few minutes of downtime in a week could mean substantial losses.
o A contractual agreement is entered into by the customer with the bank for using the Internet banking services.
o Domestic customers for whom other access points such as ATMs, telebanking, personal contact, etc. are available are often hesitant to use the Internet banking services offered by Indian banks. Internet Banking, as an additional delivery channel, may, therefore, be attractive/ appealing as a value added service to domestic customers. Non-resident Indians, for whom, it is expensive and time consuming to access their bank accounts maintained in India find net banking very convenient and useful.
o Cyber crimes are difficult to be identified and controlled.
o In order to promote Internet banking services, it is necessary that the proper legal infrastructure is in place.
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o The Department of Telecommunications (DoT) is moving fast to make available additional bandwidth, with the result that internet access will become much faster in the future.
o Reserve Bank of India has constituted a group to examine different issues relating to e-banking and recommend technology, security legal standards and operational standards keeping in view the international best practices.
What do Computers do in Banks
THE DIFFERENT USES OF INFORMATION TECHNOLOGY IN BANKS: -
1) Single Window System (SWS): -
o The cashier or teller who accepts the cash, keys in the data from his terminal after receipt of the amount.
o The amount is straight away posted to the system.
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o If the customer wishes to update passbook the same is also updated through the security form printer/pass book printer.
o If a customer wishes to obtain a draft, the clerk keys in the details of the account to be debited and the particulars of the drafts to be issued on the machine.
o The customer’s account is debited and security form printer prints out draft and clerk can hand over the same to customer duly signed.
2) Any Time Baking: -
This refers to banking service being available 24 hours a day and 365 days a year.
Banking, being a service industry, is primarily driven by customers needs.
Each customer is willing to pay a price for the services provided it is made available to him when he wants and where he wants.
In the present day of server competition, banking services are driven by technology, which is more oriented towards providing better services to the customer.
The concept of banking hours has been changed from the fixed 4 hours to 24 hours.
This has been made possible through use of ATMs. Even under the manual service, the banks have stated to extend the service from the traditional 4 hours to 5 hours and even up to 12 hours say from 8 AM to 8 PM.
Some banks have introduced the practice of Sunday Banking or Holiday Banking.
3) Automated Teller Machine (ATM): -
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ATM is a machine in the nature of a computer in general sense, but is dedicated to do certain types of specific jobs only.
The hardware and the proprietary i.e. the software used in one machine can not be used in one machine.
Customers can withdraw and deposit money through ATM at any hour of the day.
4) Shared Payment Network System (SPNS): -
The SPNS, named SWADHAN, has been sponsored by the Indian Bank’s Association
It is a network of ATMs, points of sale terminals and Cash Dispensers with a view to pool the resources of the banks and underlines the spirit of competition through cooperation.
It became operational in Mumbai on 1st February 1997 and in two years about 150 ATMs were owned and installed by 38 banks including foreign banks, public and private sector Indian commercial banks as also cooperative banks.
The biggest advantage of the network is that the ATM cards issued by different banks can used at any member banks ATM.
Banks can have as many ATM as they want and follow some standards set by the SPNS committee.
5) Customer Services: -
The following customer services are offered through the system:
i. Cash withdrawal (up to a specified limit).ii. Cheque/Cash deposit (the receipt being only for the deposit of the envelope
containing cash but not for the amount therein).
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iii. Enquiry about balances.iv. Printing of statement of accounts.v. Request for cheque book and standing instructions.
vi. Transfer of funds.vii. PIN change.
6) Tele banking: -
From the conventional banking, where the services were provided manually across the table, it has come to a stage where the customer is not required to visit the bank enquiry of balance in the account, sending a remittance, to get a statement of account, etc.
Telebanking services are, generally, provided by the bank over the telephone on a special number.
The number at the bank is connected to a terminal in the bank, which is either handled manually or is automated by connecting the same to the computer network.
7) Home Banking: -
Under home banking the customer is served at his residence and there is no need for the customer to visit the bank’s premises for a number of routine transactions.
If the customer needs some information the same can be got by contacting the bank over the phone as described in the telebanking.
If the customer wants to put through transaction and wishes to see his account or to get a statement of his account, he may have to use a PC.
The home banking service can be broadly classified under two groups, one without using the information technology and another using information technology.
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When customer contacts the bank on the phone no specific technology is involved and the services of telebanking are provided to him.
8) Electronic Fund Transfer -
o In India the fund transfers are basically done through Mail Transfer, Draft or Telegraphic Transfer.
o In case of Telegraphic Transfer (TT) again the Department of Telecommunication was the sole provider of Telephone, Telex and Telegram facilities.
o With the process of liberalization private operators have started providing alternative voice communication channels through mobile phones and vast communication as an alternative channels for data communication.
o It was normal for any TT to be credited to the beneficiary’s account after delay of 2 to 4 days
o The different forms of EFT prevalent in the use are:
EFT through Electronic Data Interchange BANKNET RBINET IDRBT VSAT Network EFT from Point of Sales Electronic Cash SWIFT- Global System for Funds Transfer Electronic Clearing Settlement
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9) Plastic Cards as Media for Payment: -
There are four types of plastic cards being used as a media for making payments. These are:
I. Credit Cards -
The credit card enables the cardholders to: Purchase any item like clothes, jewellery, railway/air tickets, etc. Pay bills for dining in a restaurant or boarding and lodging in a hotel. Avail of any service like car rental, etc.
II. Debit Card -
A debit card is issued on payment of a specified amount by the issuing company like a telephone company to a customer on cash payment or on debiting his account by a bank. Thus it is like an electronic purse, which can be read and debited by the required amount.
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It may be noted that while through a credit card, the customer first makes a purchase or avails service and pays later on, but for getting the debit card, a customer has to first pay the due amount and then make a purchase or avail the service.
III. Smart Cards -
Smart Cards have a built-in microcomputer chip, which can be used for storing and processing information. For example, a person can have a smart card from a bank with the specified amount stored electronically on it. As he goes on making transactions with the help of the card, the balance keeps on reducing electronically. When the specified amount is utilized by the customer, he can approach the bank to get his card validated for a further specified amount. Such cards are used for paying small amounts like telephone calls, petrol bills, etc.
IV. ATM Cards -
The card contains a PIN (Personal Identification Number) which is selected by the customer or conveyed to the customer and enables him to withdraw cash up to the transaction limit for the day. Customers can also deposit cash or cheque. They can do any kind of transaction at an ATM, at any time of the day.
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10) Intra-Bank & Inter-Bank applications: -
Computerization is now all pervasive in banks. Almost all the activities in a bank can be performed more efficiently with the help of computers. Broadly, we can divide the applications of computerization in banks in two types:-
A) Intra-Bank Applications:
i. Funds transfer and payment message.
ii. Inter-Branch Reconciliation.
iii. Quick disposal of loan/investment proposal.
iv. Funds information from clearing centers to the fund management office for optimal allocation of funds.
v. Cash Management Product.
vi. Treasury Management.
vii. Any Branch Banking.
viii. Asset Liability Management.
ix. E-mail.
x. Software distribution in the bank.
xi. Organizational bulletin boards, which may contain the following:a. Circulars.b. News letters, phone and address directories.c. Confidential circular on attempted frauds.
xii. Human Resources Development and Personnel Administration.
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xiii. Management Information Systemsa. Borrower’s profile.b. Branch profile.c. Employee analysis.d. Product/service profile.e. Business profile of branches.
B) Inter-Bank Applications: -
i. Electronic Funds Transfer, including:a. Retail EFT (Small value credit transfer) on net settlement basis.b. Wholesale EFT (Large value credit transfer) on Real Time Gross Settlement
(RTGS) basis for time critical payments.
ii. Transferring balance from net settlement systems to RTGS Server at periodic intervals. The net obligation could be from:
a. Local paper-based clearing b. Inter-city paper-based clearing (including IT discounting facilities)c. Bulk payments – ECS (Debit, Credit, RAPID) including intercity.d. Shared ATM networkse. Smart cards and other pre-paid/pre-authorized debit cards
iii. Exchange of defaulting borrowers list among RBI and banks
iv. EDI services to the extent they pertain to payment cycle to EDI (Electronic Data Interchange)
v. Reporting of government account transactions
vi. Reporting of BSR (Basic Statistical Returns) etc. to RBI
vii. Asset Liability Management
viii. Intranet in RBI to enable banks to get circulars, press releases etc.
ix. Returns to be submitted by the banks to Departments of Banking Supervision (DBS) for off-site supervision and monitoring.
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Internet Banking – An Overview
Internet Banking sites can be segregated into three categories from Level I, which offer just minimum functionalities such as access to one’s deposit account data, to Level III sites that offer sophisticated services. To be successful, an Internet bank must offer:
High rates on deposits. 24 hour access. Free checking and bill payment facilities with rebates on ATM surcharges. Credit cards with low rates. Simple and easy online applications for all accounts including personal loans. Innovative products. High quality customer service.
E-banking has become a necessary survival weapon and is fundamentally changing the banking industry worldwide. To day, the click of the mouse offers customers banking services at a much lower cost and also empowers them with unprecedented freedom in choosing vendors for their financial service needs. No country today has a choice whether to implement E-banking or not given the global and competitive nature of the economy. The invasion of banking by technology has created an information age and commoditization of banking services. Banks have come to realize that survival in the new e-economy depends on delivering some or all of their banking services on the Internet while continuing to support their traditional infrastructure.
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CONCLUSIONS AND RECOMMENDATIONS
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Conclusion
Technology innovation and fierce competition among existing banks have enabled e-banking to reach its existing level. Banks have traditionally been in the forefront of harnessing technology to improve product and efficiency. Technology is altering the relationships between banks and its internal and external customers.
The major driving force behind the rapid spread of e-banking is its acceptance as an extremely cost effective delivery channel. But on the flipside, it is associated with many risks. Banks need to have an effective disaster recovery plan along with comprehensive risk management tool, which is significant not only to the bank but also to the banking system as a whole.
Internet has created plenty of opportunities for players in the banking sector. While the new entrants have the advantage of latest technology, the good-will of the established banks gives them a special opportunity to lead the online world. By merely putting existing service online won’t help the banks in holding their customer close. Instead, banks must learn to capitalize their customer’s different online financial-services relationships.
Coming home, India is on threshold of a major banking revolution with the invasion of net banking. Many nationalized, private and foreign sector banks have adopted and have even relied on e-banking to enhance and maintain their customer base. E-banking is playing a major role in increasing the productivity and profitability of the Indian banks and banks are taking initiatives in adopting new and diversified techniques and policies to provide better customer satisfaction ways with the help of E-banking.
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From all of this, we have learnt that information technology has empowered customers and businesses with information needed to make better investment decisions. At the same time, technology is allowing banks to offer new products, operate more efficiently, raise productivity, expand geographically and compete globally. A more efficient, productive banking industry is providing services of greater quality and value.
The rise of E-banking is redefining business relationships and the most successful banks will be those that can truly strengthen their relationship with their customers.
With rapid advances in telecommunication systems and digital technology, E-banking has become a strategic weapon for banks to remain profitable. It has been transformed beyond what anyone could have foreseen 25 years ago.
To conclude we may say that, 2 years ago, E-banking was a strategic advantage, nowadays; it is a business reality, if not a necessity. The conclusions can be sum up as follows:
Technological development has been nothing less than explosion. Banks have been harnessing such technological innovations on one hand and adapting themselves to such changes on the other hand.
Processing, storage and transmission of information is very essence of banking and financial services.
The electronic technology has bought revolutionary changes in these areas. The elimination of paper as medium for processing and storage of transactions / information has been a great event. Large volume of information can be processed, stored and retrieved very economically at terrific speed, which is not possible manually.
The space required for managing enormous volume of information has been reduced dramatically.
With the revolution in telecommunication technology, information can be made accessible from remote distance at lightening speed. The final output of information after manipulation and analysis can be printed by printer at high speed directly from computers.
Thus, the computer now has the ability to retrieve data or update files instantaneously. Subsequently with the development in telecommunication, Local Area Network (LAN)/Wide Area Network (WAN) have been established.
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Recommendations
To prevent online banking from remaining an expensive additional channel that does little to retain footloose customers, banks must act quickly.
The first and most obvious step they should take is to see to it that the basic problem fueling dissatisfaction has been addressed.
After repairing this basic deficiency, banks must ensure that there services is competitive.
Obviously, it should include checking, savings and brokerage services, which anchor customers to the institution.
In addition, to meet the challenge of online brokerage and other new entrants, banks would need to add “supermarkets” selling products such as mortgage, mutual funds and insurance.
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Bibliography
Sen, Management Information System
Indian Banking, S. Natarahan and R. Parameswaran
Banking – In the New Millennium, ICFAI University
www.indusind.com
www.google.com
www.icici.com
www.idbi.com
www.hdfc.com
www.wikipedia.com
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