E- Banking in India.

Defining E – Banking.
• “Internet banking” refers to systems that enable
bank customers to access accounts and general
information on bank products and services
through a personal computer (PC) or other
intelligent device.
• Compared with traditional channels of offering
banking services through physical branches, e-
banking uses the Internet to deliver traditional
banking services to their customers.
• Internet banking may mirror products and
services offered through other bank delivery
channels.
• In recent time E-banking has spread rapidly all
over the globe. All Banks are making greater
use of E-banking facilities to provide batter
service and to excel in competition.
 Products/ Services offered via E- Banking

• Internet banking products and services can include

wholesale products for corporate customers as well
as retail products for consumers.
• Some examples of wholesale products and services
include:
• Cash management.
• Wire transfer.
• Automated clearinghouse (ACH) transactions.
• Bill presentment and payment.
• Examples of retail and products and services
include:
• Balance inquiry.
• Funds transfer.
• Downloading transaction information.
• Bill presentment and payment.
• Loan applications.
• Investment activity.
• Other value-added services
 Objectives of E – Banking.
• To Enable Online Payment of Bills
• To View Transactions.
• Transfer Money Between Accounts
• Online Protection
• 24*7 Service.
• Reduce Manpower
• Reduction in Cost
• Facilitate Online Shopping
• Ease & Convenience
 Types of Internet Banking
• Currently, the following three basic kinds of
Internet banking are being employed in the
marketplace:

1. Informational
2. Communicative
3. Transactional
 Informational
Informational —The bank has marketing
information about the bank’s products and
services on a stand-alone server. The risk is
relatively low, as informational systems typically
have no path between the server and the bank’s
internal network. This level of Internet banking
can be provided by the bank or outsourced. While
the risk to a bank is relatively low, the server or
Web site may be vulnerable to alteration.
Appropriate controls therefore must be in place to
prevent unauthorized alterations to the bank’s
server or Web site.
 Communicative
Communicative — This type of Internet banking
system allows some interaction between the bank’s
systems and the customer. The interaction may be
limited to electronic mail, account inquiry, loan
applications, or updates like name and address
changes. These servers may have a path to the
bank’s internal networks, the risk is higher than
informational systems. Appropriate controls need to
be in place to prevent, monitor, and alert
management of any unauthorized attempt to access
the bank’s internal networks and computer systems.
 Transactional
Transactional — This level of Internet banking
allows customers to execute transactions.
Since a path typically exists between the
server and the bank’s or outsourcer’s internal
network, this is the highest risk architecture
and must have the strongest controls.
Customer transactions can include accessing
accounts, paying bills, transferring funds, etc.
 Types of Internet Banking in India
The Reserve Bank of India constituted a working
group on Internet Banking. The group
divided the internet banking products in
India into 3 types based on the levels of
access granted. They are:
i) Information Only System.
ii) Electronic Information Transfer System.
iii) Fully Electronic Transactional System.
Commonly used E-Banking services.
• ATM - Automated Teller Machine is designed
to perform the most important function of bank.
It is operated by plastic card with its special
features. The plastic card is replacing cheque,
personal attendance of the customer, banking
hours restrictions and paper based verification.
• The on-line ATM enables the customer to avail
banking facilities from anywhere. In off-line
the facilities are confined to that particular
ATM assigned.
• Credit Cards/Debit Cards: The Credit Card
holder can spend with his Credit Card within the
limits fixed by his bank. Credit Card is a post
paid card. Debit Card, on the other hand, is a
prepaid card with some stored value. Every time
a person uses this card, the Internet Banking
house gets money transferred to its account from
the bank of the buyer. The buyers account is
debited with the exact amount of purchases. An
individual has to open an account with the
issuing bank which gives debit card with a
Personal Identification Number (PIN).
• How Credit/Debit Cards Works: When
customers makes a purchase, he enters his PIN
on shops PIN pad. When the card is slurped
through the electronic terminal, it dials the
acquiring bank system - either Master Card or
VISA that validates the PIN and finds out from
the issuing bank whether to accept or decline
the transactions. The customer can never
overspend because the system rejects any
transaction which exceeds the balance in his
account or the credit limit fixed by the bank.
• Smart Cards : Banks are adding chips to their
current magnetic stripe cards to enhance
security and offer new service, called Smart
Cards. Smart Cards allow thousands of times
of information storable on magnetic stripe
cards. In addition, these cards are highly secure,
more reliable and perform multiple functions.
They hold a large amount of personal
information, from medical and health history to
personal banking and personal preferences.
• EFT: Electronic Fund Transfer - An ATM is
an Electronic Fund Transfer terminal capable
of handling cash deposits, transfer between
accounts, balance enquiries, cash withdrawals
and pay bills. Any customer possessing ATM
card issued by the Shared Payment Network
System can go to any ATM linked to Shared
Payment Networks and perform his
transactions.
 Advantages Of E – Banking.
• The spread of E-banking has also greatly
benefited the ordinary customer in general and
corporate world in particular.
• 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 low cost.
 Benefits to Consumers:
• Customer can withdraw money at any time and
can also have mini banks statements through
ATMs that are now widely available throughout
the country.
• Through Internet Banking customer can operate
his account while sitting in his office or home.
There is no need to go to the bank in person for
such matter.
• E banking has also greatly helped in payment of
utility bill. Now there is no need to stand in long
queues outside banks for his purpose.
• All services that are usually available from the
local bank can be found on a single website.
• The Growth of credit card usage also owes
greatly to E-banking. Now a customer can shop
world wide without any need of carrying paper
money with him.
• Banks are available 24 hours a day, seven days a
week and they are only a mouse click away.
• Customer’s account is extremely accesses able
with an online account.
 Benefits to Banking Industry:
• The growth of E-banking has greatly
helped the banks in controlling their over
heads and operating cost
• Many repetitive and tedious tasks have
now been fully automated resulting in
greater efficiency, better time usage and
enhanced control.
• The rise of E-banking has made banks
more competitive.
• Electronic banking has greatly helped the
banking industry to reduce paper work, thus
helping them to move the paper less
environment.
• Electronic banking has also helped bank in
proper documentation of their records and
transactions.
• The reach and delivery capabilities of computer
networks, such as the Internet, are far better
than any branch network.
 Benefits to General Economy:
• E-Banking has resulted in creation of a better
enabling environment that supports growth,
productivity and prosperity.
• E-Banking’s electronically controlled and
thoroughly monitored environment discouraged
many illegal and illegitimate practices associated
with banking industry like money laundering,
frauds and embezzlements.
• E-banking has helped banks in better monitoring
of their customer base.
• E-banking has also helped in documentation of the
economic activity of the masses.
 Disadvantages Of E-Banking.
1. E-banking promotes lack of socialising/social contacts
2. Hackers may intercept data and defraud customers
3. Phone bills can increase
4. Customers will be more vulnerable to phishing.
5. Customers are compelled to have computers at home,
Internet access and computers skills
6. Easier for customers to mismanage their accounts due
to the 24-hour service that will be available