A

Project Report

On

Impact of Internet Banking System & Technology on

Indian Banks

Submitted in Partial Fulfilment for the Degree of

Bachelor of Business Administration

S.S. JAIN SUBODH P.G. (AUTONOMOUS) COLLEGE, JAIPUR

(2019-20)

SUBMITTED BY SUBMITTED TO
Aakanksha Rathore Dr. Chitra Rathore

B.B.A IV Semester HOD, BBA

Roll No.- 1941001

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 CERTIFICATE

This is to certify that the Project Report entitled “IMPACT OF INTERNET BANKING
SYSTEM & TECHNOLOGY ON INDIAN BANKS” is a record of project work done
independently by Ms. AAKANKSHA RATHORE under my guidance and supervision and that

it has not previously formed the basis for the award of any degree, fellowship or associate ship.

Dr. Chitra Rathore

Head of the Department, BBA

S.S. Jain Subodh P.G. (Autonomous) College

Jaipur

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 DECLARATION

I, AAKANKSHA RATHORE student of BBA Sem IV hereby declare that the project work

presented in this report is my own work and has been carried out under the supervision of

Dr. CHITRA RATHORE of S.S Jain Subodh P.G(Autonomous) College.

This work has not been previously submitted to any other university for any examination.

Aakanksha Rathore

BBA, IV-Semester

S. S. Jain Subodh P.G.(Autonomous)College

Jaipur

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 ACKNOWLEDGEMENT
It is not often in life that you get a chance of appreciating and expressing your feelings in black
and white to thank the people who have been a crucial part of your successes, your
accomplishments, and your being what you are today. I take this opportunity to first of all thank
the Faculty at S.S. Jain Subodh P.G.(Autonomous)College, especially Prof. K.B. Sharma,
Principal, and Dr. Chitra Rathore, Head of the Department, BBA for inculcating and instilling
me the knowledge, learning, will-power, values and the competitiveness and professionalism
required by me as a management student.

I express my sincere and heartiest thanks to everyone who has contributed towards the
successful completion of the Project.

Last but not the least; I would like to thank my family: my parents for supporting me spiritually
throughout my life. The errors and inconsistencies remain my own.

Aakanksha Rathore

BBA, IV-Semester

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 CONTENT

S. No. Name Of the Topic Page No.

1. Chapter-1 6

2. Chapter-2 7-8

3. Chapter-3 9-18

4. Chapter-4 19-32

5. Chapter-5 33-43

6. Conclusion 44-45

7. Appendices 46-47

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 CHAPTER-1
INTRODUCTION
In the development of Indian Economy, Banking sector plays a very important and crucial role.
With the use of internet & technology there had been an increase in productivity and efficiency.
It has not only increased the cost effectiveness but also has helped in making small value
transactions viable. It also enhances choices, creates new markets, and improves productivity
and efficiency.

Banking sector always stand at the forefront of the economy and innovation has paramount
concern to the application of modern technical devices. Electronic delivery channels, ATMs,
variety of cards, web-based banking, and mobile banking are the names of few outcomes of
the process of automation and computerization in Indian banking sector.

Banking industry is backbone of Indian financial system and it is afflicted by many challenging
forces. One such force is revolution of information technology. In this Globalized era,
technology support is very important for the successful functioning of the banking sector. This
research paper focuses on the impact of internet & technology in Indian banking sector.
Without information technology and internet, we cannot think about the success of banking
industry, it has enlarged the role of banking sector in Indian economy.

Information technology & internet in banking sector refers to the use of sophisticated
information and communication technologies together with computer science to enable banks
to offer better services to its customers in a secure, reliable and affordable manner and sustain
competitive advantage over other banks.

Banks are no longer restricted themselves to traditional banking activities, but explore newer
avenues to increase business and capture new market by implementing the new technology.
The significance of technology is greatly felt in the financial sector in view of the competitive
advantage for banks resulting in the efficient customer service.

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 CHAPTER-2

OBJECTIVES OF THE STUDY

The present study has the following objectives:

1. To evaluate the status of internet & technology implementation in Indian banking

sector.
2. To analyse the impact of Information technology adoption on the performance of Indian
banking sector.
3. To estimate the relative efficiency and productivity of Indian banking sector in pre and
post e banking revolution period.
4. To draw some policy implications based on the findings emanated from the study.

DATA AND METHODOLOGY

The present study is based upon the time-series data from 1999-2000 to 2017-2018. The time
period has been deliberately selected because the information technology has been introduced
only during this period. The data have been obtained from the public data sources on bank’s
financial statements and income expenses reports. The secondary data and information have
been collected from the publications of the Reserve Bank of India: ‘Report on Trend and
Progress of Banking in India’, ‘Handbook of Statistics on Indian Economy’, ‘RBI Bulletin
(monthly)’, Annual Reports of respective banks and other valuable publications of public sector
banks, private and foreign banks in India.

Various websites have also been used for the data mining. Data published by Indian Banking
Association in monthly bulletins, in special issues and annual publications on ‘Performance
Highlights of Banks’ have also been used.

For present research work, various journals, magazines and newspapers like ‘Indian Journal of
Commerce’, ‘Economic Survey of India’, ‘Economic and Political Weekly’, ‘Financial
Express’, ‘Economic Times’ have also been considered. To make the work manageable and
effective, it has been confined to 31 banks only. The sample represents all categories of banks:

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State Bank of India and its associates; nationalized banks; old private banks; new private banks;
and foreign banks.

By using a meaningful denominator, technology parameters have been normalized. To derive

the overall technology parameter, a technology index has been derived using the discrete
technology parameters. Performance analysis has been done by computing a performance
index which takes into consideration different variables.

The relation of technology index and performance index has been analysed by using correlation
and regression technique on both time series and panel data. Wherever needed, appropriate
price adjustments have been made. The study makes an attempt to study the efficiency and
productivity aspects of Indian banking industry at a disaggregated level. To measure efficiency
of bank groups and individual banks, DEA has been used and to measure the productivity,
Malmquist index has been used.

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 CHAPTER-3

WHAT IS BANK?
A bank is a financial institution that accepts deposits from the public and creates credit. Lending
activities can be performed either directly or indirectly through capital markets. Due to their
importance in the financial stability of a country, banks are highly regulated in most countries.

Most nations have institutionalized a system known as fractional reserve banking under which
banks hold liquid assets equal to only a portion of their current liabilities.

In addition to other regulations intended to ensure liquidity, banks are generally subject to
minimum capital requirements based on an international set of capital standards.

Banks act as payment agents by conducting checking or current accounts for customers, paying
cheques drawn by customers in the bank, and collecting cheques deposited to customers'
current accounts. Banks also enable customer payments via other payment methods such as
Automated Clearing House (ACH), Wire transfers or telegraphic transfer, and automated teller
machines (ATMs).

Banks borrow money by accepting funds deposited on current accounts, by accepting term
deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by
making advances to customers on current accounts, by making instalment loans, and by
investing in marketable debt securities and other forms of money lending. Banks provide
different payment services, and a bank account is considered indispensable by most businesses
and individuals. Non-banks that provide payment services such as remittance companies are
normally not considered as an adequate substitute for a bank account.

Banks can create new money when they make a loan. New loans throughout the banking system
generate new deposits elsewhere in the system. The money supply is usually increased by the
act of lending and reduced when loans are repaid faster than new ones are generated

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 HISTORY OF INDIAN BANKS
Modern banking in India originated in the last decade of the 18th century. Among the first
banks were the Bank of Hindustan, which was established in 1770 and liquidated in 1829–32;
and the General Bank of India, established in 1786 but failed in 1791.

The largest and the oldest bank which is still in existence is the State Bank of India (S.B.I). It
originated and started working as the Bank of Calcutta in mid-June 1806. In 1809, it was
renamed as the Bank of Bengal. This was one of the three banks founded by a presidency
government, the other two were the Bank of Bombay in 1840 and the Bank of Madras in 1843.
The three banks were merged in 1921 to form the Imperial Bank of India, which upon India's
independence, became the State Bank of India in 1955. For many years the presidency banks
had acted as quasi-central banks, as did their successors, until the Reserve Bank of India was
established in 1935, under the Reserve Bank of India Act, 1934.

In 1960, the State Banks of India was given control of eight state-associated banks under the
State Bank of India (Subsidiary Banks) Act, 1959. These are now called its associate banks.
In 1969 the Indian government nationalised 14 major private banks; one of the big banks was
Bank of India. In 1980, 6 more private banks were nationalised. These nationalised banks are
the majority of lenders in the Indian economy. They dominate the banking sector because of
their large size and widespread networks.

The Indian banking sector is broadly classified into scheduled and non-scheduled banks. The
scheduled banks are those included under the 2nd Schedule of the Reserve Bank of India Act,
1934. The scheduled banks are further classified into: nationalised banks; State Bank of India
and its associates; Regional Rural Banks (RRBs); foreign banks; and other Indian private sector
banks. The term commercial banks refers to both scheduled and non-scheduled commercial
banks regulated under the Banking Regulation Act, 1949.

Generally the supply, product range and reach of banking in India is fairly mature-even though
reach in rural India and to the poor still remains a challenge. The government has developed
initiatives to address this through the State Bank of India expanding its branch network and

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through the National Bank for Agriculture and Rural Development (NABARD) with facilities
like microfinance.

In the early 1990s, the then government embarked on a policy of liberalisation, licensing a
small number of private banks. These came to be known as New Generation tech-savvy banks,
and included Global Trust Bank (the first of such new generation banks to be set up), which
later amalgamated with Oriental Bank of Commerce, IndusInd Bank, UTI Bank (since renamed
Axis Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the
economy of India, revitalised the banking sector in India, which has seen rapid growth with
strong contribution from all the three sectors of banks, namely, government banks, private
banks and foreign banks.

The next stage for the Indian banking has been set up, with proposed relaxation of norms for
foreign direct investment. All foreign investors in banks may be given voting rights that could
exceed the present cap of 10% at present. It has gone up to 74% with some restrictions.

By 2010, the supply, product range and reach of banking in India was generally fairly mature-
even though reach in rural India still remains a challenge for the private sector and foreign
banks. In 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.

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 TYPES OF BANKS
During the last three centuries different types of banks have developed. Each type usually
specializes in a particular kind of business. We can, therefore, distinguish the different banks
according to the functions they perform.

TYPES OF
BANK

Commercial Central
Banks Banks
Exchange Savings
Banks Banks

Industrial
Banks

Fig. 1.1

1. Commercial Banks:
These banks play the most important role in modern economic organisation. Their
business mainly consists of receiving deposits, giving loans and financing the trade of
a country. They provide short-term credit, i.e., lend money for short periods. This is
their special feature.
2. Exchange Banks:
Exchange banks finance mostly the foreign trade of a country. Their main function is
to discount, accept and collect foreign bills of exchange. They also buy and sell foreign
currencies and help businessmen to convert their money into any foreign money they
need. Their share in the internal trade of a country is usually small. In addition, they
carry on ordinary banking business too.

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3. Industrial Banks:
There are a few industrial banks in India. But in some other countries, notably Germany
and Japan, these banks perform the function of advancing loans to industrial
undertakings. Industries require capital for a long period for buying machinery and
equipment. Industrial banks provide this type of Mock capital. Industrial banks have a
large capital of their own.
They also receive deposits for longer periods. They are thus in a position to advance
long-term loans. In India, the Central Government set up an Industrial Finance
Corporation of India (IFC1) in 1948. Its activities have since then been greatly enlarged.
Further the States have also set up State Financial Corporations. The Central
Government has also established the Industrial Credit and Investment Corporation of
India (ICICI) and the National Industrial Development Corporation for the financing
and promotion of industrial enterprises. In 1964 the Industrial Development Bank of
India (1DBI) was established as the apex or top term-lending institution. These new
institutions fill important gaps in our system of industrial finance.
4. Agricultural or Co-operative Banks:
The main business of agricultural banks is to provide funds to farmers. They are worked
on the co-operative principle. Long-term capital is provided by land mortgage banks,
nowadays called land-development banks, while short-term loans are given by co-
operative societies and co-operative banks. Long-term loans are needed by the farmers
for purchasing land or for permanent improvements on land, while short-period loans
help them in purchasing implements, fertilizers and seeds. Such banks and societies are
doing useful work in India.
5. Savings Banks:
These banks (perform the useful service of collecting small savings. Commercial banks
too run “savings departments” to mobilise the savings of men of small means. The idea
is to encourage thrift and discourage hoarding. Post Office Saving Banks in India are
doing this useful work.
6. Central Banks:
Over and above the various types of banks mentioned above, there exists in almost all
countries today a Central Bank. It is usually controlled and quite often owned by the
government of the country.

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7. Utility of Banks:
An efficient banking system is absolutely necessary for a country, if it is to progress
economically. The services that an efficient banking system can render a country are
indeed very valuable. Undeveloped banking system is not only an index of economic
backwardness of a country, it is also an important cause of it. The banking system can
be useful in the following ways, in addition to what has been mentioned in the functions
of banks.
(i) The banks create instruments of credit which are very convenient substitutes for
money.
(ii) This means a great saving Actual movement of money is avoided and expenses
saved. The banks increase the mobility of capital. They bring the borrowers and the
lenders together. They collect money from those who cannot use it, and give it to
those who can. Thus, they help the movement of funds from place to place, and
from person to person, in a very convenient and inexpensive manner.

(iii) They encourage the habit of habit by providing safe channels of investment. In the
absence of banking facilities, people would just squander their funds. By
encouraging savings, the banks bring about accumulation of large amount of capital
in the country from small individual savings. In this way, they make the resources
of the country more productive, and thus contribute to the general prosperity and
welfare, of the country.

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 FUNCTIONS OF BANK

FUNCTIONS OF BANK
FUNCTIONS OF BANK

Primary Secondary
Functions Functions

Accepting Granting Agency Utility

Deposits Advances Functions Functions

Fig.1.2

Primary Functions of Banks: The primary functions of a bank are also known as banking
functions. They are the main functions of a bank. These primary functions of banks are
explained below.

1. Accepting Deposits
The bank collects deposits from the public. These deposits can be of different types,
such as: -

a. Saving Deposits: - This type of deposits encourages saving habit among the public. The
rate of interest is low. At present it is about 4% p.a. Withdrawals of deposits are allowed subject
to certain restrictions. This account is suitable to salary and wage earners. This account can be
opened in single name or in joint names.

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 b. Fixed Deposits: - Lump sum amount is deposited at one time for a specific period. Higher
rate of interest is paid, which varies with the period of deposit. Withdrawals are not allowed
before the expiry of the period. Those who have surplus funds go for fixed deposit.

c. Current Deposits: - This type of account is operated by businessmen. Withdrawals are

freely allowed. No interest is paid. In fact, there are service charges. The account holders can
get the benefit of overdraft facility.

d. Recurring Deposits: - This type of account is operated by salaried persons and petty traders.
A certain sum of money is periodically deposited into the bank. Withdrawals are permitted
only after the expiry of certain period. A higher rate of interest is paid.

2. Granting of Loans and Advances

The bank advances loans to the business community and other members of the public. The rate
charged is higher than what it pays on deposits. The difference in the interest rates (lending
rate and the deposit rate) is its profit. The types of bank loans and advances are: -

a. Overdraft: - This type of advances is given to current account holders. No separate account
is maintained. All entries are made in the current account. A certain amount is sanctioned as
overdraft which can be withdrawn within a certain period of time say three months or so.
Interest is charged on actual amount withdrawn. An overdraft facility is granted against a
collateral security. It is sanctioned to businessman and firms.

b. Cash Credits: - The client is allowed cash credit up to a specific limit fixed in advance. It
can be given to current account holders as well as to others who do not have an account with
bank. Separate cash credit account is maintained. Interest is charged on the amount withdrawn
in excess of limit. The cash credit is given against the security of tangible assets and / or
guarantees. The advance is given for a longer period and a larger amount of loan is sanctioned
than that of overdraft.

c. Loans: - It is normally for short term say a period of one year or medium term say a period
of five years. Now-a-days, banks do lend money for long term. Repayment of money can be in
the form of instalments spread over a period of time or in a lumpsum amount. Interest is charged
on the actual amount sanctioned, whether withdrawn or not. The rate of interest may be slightly
lower than what is charged on overdrafts and cash credits. Loans are normally secured against
tangible assets of the company.

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d. Discounting of Bill of Exchange: - The bank can advance money by discounting or by
purchasing bills of exchange both domestic and foreign bills. The bank pays the bill amount to
the drawer or the beneficiary of the bill by deducting usual discount charges. On maturity, the
bill is presented to the drawee or acceptor of the bill and the amount is collected.

B. Secondary Functions of Banks

The bank performs a number of secondary functions, also called as non-banking functions.
These important secondary functions of banks are explained below.

1. Agency Functions: - The bank acts as an agent of its customers. The bank performs
a number of agency functions which includes: -
a. Transfer of Funds: - The bank transfer funds from one branch to another or from
one place to another.

b. Collection of Cheques: -The bank collects the money of the cheques through
clearing section of its customers. The bank also collects money of the bills of exchange.

c. Periodic Payments: - On standing instructions of the client, the bank makes periodic
payments in respect of electricity bills, rent, etc.

d. Portfolio Management: - The banks also undertake to purchase and sell the shares
and debentures on behalf of the clients and accordingly debits or credits the account.
This facility is called portfolio management.

e. Periodic Collections: - The bank collects salary, pension, dividend and such other
periodic collections on behalf of the client.

f. Other Agency Functions: - They act as trustees, executors, advisers and

administrators on behalf of its clients. They act as representatives of clients to deal with
other banks and institutions.

2. General Utility Functions

The bank also performs general utility functions, such as: -

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a. Issue of Drafts and Letter of Credits: - Banks issue drafts for transferring money
from one place to another. It also issues letter of credit, especially in case of, import
trade. It also issues travellers' cheques.

b. Locker Facility: - The bank provides a locker facility for the safe custody of valuable
documents, gold ornaments and other valuables.

c. Underwriting of Shares: - The bank underwrites shares and debentures through its
merchant banking division.

d. Dealing in Foreign Exchange: - The commercial banks are allowed by RBI to deal
in foreign exchange.

e. Project Reports: - The bank may also undertake to prepare project reports on behalf
of its clients.

f. Social Welfare Programmes: - It undertakes social welfare programmes, such as

adult literacy programmes, public welfare campaigns, etc

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 CHAPTER-4
INTERNET BANKING

Technology has touched every aspect of our lives. Right from the moment we wake up to the
moment we go back to bed at night, technology surrounds us. Be it shopping for groceries,
paying utility bills, learning to play a new instrument, finding a plumber, getting food delivered
or anything else for that matter, technology offers a solution for almost everything we could
possibly imagine

Banking is definitely not a stranger to technology. Internet banking has made life simpler for
millions and millions of people around the world. Especially in India, where a bank visit
implies waiting in never-ending queues, online banking is definitely a blessing. Online banking
has made it possible for customers to do simple tasks like accessing their Savings anytime,
keep track of their account balance, get e-statements, pay bills online, shop online, transfer
funds and much more in under a few clicks and within a matter of minutes.

WHAT IS ONLINE BANKING?

Online Banking, also known as net banking, e-banking or online banking, is the facility
provided by banks and financial institutions which allows customers to use banking services
via internet. There are scores of services like online money transfer, account opening, bill
payment, tracking account activity, etc., which are made available to customers with the help
of online banking. Online banking also allows banks to advertise their products and services
in a manner that it reaches out millions of customers. However, in order to use online banking,
an individual will require access to the internet, which is scarcely available in rural areas.
Internet banking can also be accessed via mobile phones which have a data 3G/4G connection.

SCOPE OF ONLINE BANKING SERVICES

With the help of online banking, there are several indispensable services which are made
available to customers, without them having to personally visit the bank. Customers can
perform financial transactions like transfer funds online, pay bills, apply for loans and open a

19
savings account among various other Debit card transactions. Under non-financial
transactions, customers can carry out several activities which may require going to the bank
like applying for a new cheque book, getting account statements, update contact information,
start/stop payment, etc.

What is an e-wallet?
A mobile wallet or an e-wallet is virtual digital wallet where you can save your funds to be
used without the need for swiping any debit or credit card. It is one of the fastest modes of
transaction and does not require a minimum deposit amount. E-wallets can be used to purchase
anything from groceries to flight tickets. E-wallets can be downloaded on your smartphone
through your app’s store.

How to use an e-wallet?

The most basic requirement for using an e-wallet is a smart phone and an active internet
connection. You are required to fill in the basic details such as name and mobile number to
sign up for the wallet. Once you are logged in, you can transfer money using net banking or
through your debit/credit card into the wallet. According to RBI’s notification, up to Rs.10,000
can be added into the e-wallet.

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 E-wallets Vs Net banking
Digital payments have seen a surge ever since there has been demonetisation of high currency
notes. More and more people have realised the convenience of making payments digitally. As
a part of cashless economy, mobile wallets and internet banking have played an integral role.

Features E-wallets/Mobile wallets Internet banking

Transaction Rs.20,000 per month as mandated by

As much as balance in account
limit RBI

 No usage charges
Annual/usage No usage charges except for specific
 Bank withdrawal charges
fees fund transfers
applicable

Offers such as cashback and

Rewards or
discount periodically introduced by None
offers
specific partner merchants

Usability Offline (POS) and online Only online

Protection from
Low to medium Highly secure
fraud

(Table- 1.1)

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INTERNET & TECHNOLOGY TRENDS IN INDIAN BANKS

Internet & Technology has changed the functioning of banks worldwide. The foremost
breakthrough started with the use of Advanced Ledger Posting Machines (ALPM) in 1980s.
The enormous automation at branch level reduced errors which resulted in customers receiving
error free services.

In late 1980s Total Bank Automation (TBA) was introduced both for the front-end and back-
end operations within the same branch followed by the establishment of mechanized cheque
processing systems which used the Magnetic Ink Character Recognition (MICR) technology.

Financial sector reforms and the emergence of internet facilitated banks in opting for
centralized database for all their branches which resulted in low cost networks. New private
sector banks and foreign banks employed ATMs, phone banking and internet banking pretty
early followed enthusiastically by the public sector banks. Technology adoption helped banks
in crafting their own web pages which customers can access through the web browsers from
their homes/workplaces. This kicked off online banking way back in 1996. Some of the
important electronic delivery channels include the ATMs, debit/credit cards, mobile banking,
and tele-banking where banking facilities are available on 24/7 basis across the world.
Establishment of the Indian Financial Network (INFINET) in 1999 resulted in introduction
of Real Time Gross Settlement (RTGS) system. Internet has thus ushered the concept of
anytime - anywhere banking. It resulted in compliance with the core principles for systemically
important payment systems of the Bank of International settlements (BIS), and has also
provided the way for risk free, credit push-based fund transfers settled on a real time basis.

22
Data warehousing is another development which effectively generates strategic information
required by the management for continuous strategic decision making like branch expansion,
product line expansion, market strengthening, credit risk assessment etc.

The year 2006-07 witnessed the consolidation of IT based efforts by the financial sector in
general and by the commercial banks in particular. The major developments during this year
include the establishment of data centres, a shift towards centralized systems and large-scale
implementation of core banking systems across bank branches. The Payment and Settlement
Systems Act, 2007 (PSS Act) was also legislated in December 2007. Reserve Bank has since
authorized payment system operators of pre-paid payment instruments, card schemes, cross-
border in-bound money transfers, Automated Teller Machine (ATM) networks and centralized
clearing arrangements. The payment system initiatives taken by the Reserve Bank of India have
resulted in deeper acceptance and penetration of non-cash payment modes. In the present study,
the year 2006-07 is taken as the reference year for dividing the total study period into two parts
i.e. Pre e-banking revolution period (1999-2000 to 2006-07) and Post e-banking revolution
period (2006-07 to 2014-15). These periods are referred to as Period-I and Period-II
respectively in the present study.

In 2017, banks try to meet the increasing demand of customers, Block chain will be one of the
enables for re-imagining processes. The new Emirates NBD & ICICI Bank Partnership to
launch a block chain pilot network for international remittances & trade financing in this
technology.

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 TECHNOLOGICAL DEVICES USED IN INDIAN BANKS

MICR

D EFT
V
I
RTGS
C
E
S ATM

MOBILE
BANKING

Fig.1.3

Electronic Payment and Settlement System-: The most common media of receipts and
payment through banks are negotiable instruments like cheques. These instruments could be
used in place of cash. The interbank cheques could be realized through clearing house systems.
Initially there was a manual system of clearing but the growing volume of banking transaction
emerged into the necessity of automating the clearing process. In order to strength the
institutional framework of electronic & clearing system, RBI constituted a board for regulation
and supervision of payment and settlement system (BPSS) in 2005.The Payment & settlement
system act was passed on 2007 which empowered the RBI to regulate & supervise the payment
and settlement system and provide a legal basis for multilateral netting and settlement.
Important innovation in payment & settlement system introduced by RBI.

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Use of MICR Technology-: Among the most important improvement in paper-based clearing
system was the introduction of MICR (Magnetic Ink Character Recognition) in the mid-1980s.
MICR overcomes the limitation of clearing the cheques within banking hours and thus enables
the customer to get the credit quickly. These are machine-readable codes added at the bottom
of every cheque leaf which helped in bank and branch-wise sorting of cheques for smooth
delivery to the respective banks on whom they are drawn. This no doubt helped in speeding up
the clearing process, but physical delivery of cheques continued even under this partial
automaton. CTS (Cheque Truncation System)- The CTS was launched on pilot basis in new
Delhi in 2008 with the participation of 10 Banks. Truncation means stopping the flow of the
physical cheques issued by a drawer to the drawee branch. The physical instrument is truncated
at some point route to the drawee branch and an electronic image of the cheque is sent to the
drawee branch along with the relevant information like the MICR fields, date of presentation,
presenting banks etc.

This would eliminate the need to move the physical instruments across branches, except in
exceptional circumstances, resulting in an effective reduction in the time required for payment
of cheques, the associated cost of transit and delays in processing, etc., thus speeding up the
process of collection or realization of cheques. Every bank customer is expected to obtain new
cheque books from their respective banks as early as possible preferably.

All bank customers should use only “CTS 2010” cheques, which have more security features
with effect from 1 January 2013.

Electronic Clearing Services (ECS)-: The ECS introduced by RBI in 1995 which is similar
to automated clearing houses that are operational in other countries like US. The ECS was the
first version of “Electronic Payments‟ in India. It is a mode of electronic funds transfer from
one bank account to another bank account using the mechanism of clearing house. It is very
useful in case of bulk transfers from one account to many accounts or vice- versa. The
beneficiary has to maintain an account with the one of bank at ECS centre.

There are two types of ECS (Electronic Clearing Service)-

ECS- Credit - ECS credit clearing operates on the principle of „single debit multiple credits‟
and is used for transactions like payment of salary, dividend, pension, interest etc.

25
ECS-Debit- CS debit clearing service operates on the principle of „single credit multiple
debits‟ and is used by utility service providers for collection of electricity bills, telephone bills
and other charges and also by banks for collections of principal and interest repayments.
Settlement under ECS is undertaken on T+1 basis. Any ECS user can undertake the transactions
by registering themselves with an approved clearing house.

The RBI had launched the National Electronic Clearing Service (NECS), in September 2008,
which was an improvement over the ECS. Under NECS, all transactions can be processed at a
centralized location called the National Clearing Cell, located in Mumbai, as against the ECS,
where processing done at 74 different locations. ECS system has a decentralized functioning,
and requires users to prepare separate set of ECS data centre-wise. Users are required to tie-up
with local sponsor banks for presenting ECS file to each ECS Centre. As on September 2018,
26000 branches of 114 banks participate in the NECS. Leveraging on the core banking system,
NECS is expected to bring more efficiency into the system.

Electronic Fund Transfer (EFT) -: The EFT System was implemented in 1995 covering 15
centres where the Reserve Bank managed the clearing houses. Special EFT (SEFT) scheme, a
variant of the EFT system, was introduced with effect from April 1, 2003, in order to increase
the coverage of the scheme and to provide for quicker funds transfers. SEFT was made
available across branches of banks that were computerized and connected via a network
enabling transfer of electronic messages to the receiving branch in a straight through manner
(STP processing). In the case of EFT, all branches of banks in the 15 locations were part of the
scheme, whether they are networked or not.

A new variant of the EFT called the National EFT (NEFT) was decided to implemented
(November 2005) so as to broad base the facilities of EFT. This was a nationwide retail
electronic funds transfer mechanism between the networked branches of banks. NEFT
provided for integration with the Structured Financial Messaging Solution (SFMS) of the
Indian Financial Network (INFINET). The NEFT uses SFMS for EFT message creation and
transmission from the branch to the bank’s gateway and to the NEFT Centre, thereby
considerably enhancing the security in the transfer of funds. The commencement of NEFT led
to discontinuation of SEFT, and EFT is now available only for government payments.

26
Real Time Gross Settlement (RTGS) -: RTGS was launched by RBI in 2004 which enabled
a real time settlement on a gross basis. RTGS system is a funds transfer mechanism where
transfer of money takes place from one bank to another on a “real time” and on “gross basis”.
This is the fastest possible money transfer system through the banking channel. Settlement in
“real time” means payment transaction is not subjected to any waiting period. The transactions
are settled as soon as they are processed. “Gross settlement” means the transaction is settled on
one to one basis without bunching with any other transaction. RTGS system is used only for
large value transactions and retail transactions take an alternate channel of electronic funds
transfer, a minimum threshold of two lakh rupees was prescribed for customer transactions
under RTGS on January 1, 2018.

Core banking Solutions (CBS) -: Computerization of bank branches had started with
installation of simple computers to automate the functioning of branches, especially at high
traffic branches. Core Banking Solutions (CBS) is the networking of the branches of a bank,
so as to enable the customers to operate their accounts from any bank branch, regardless of
which branch he opened the account with. The networking of branches under CBS enables
centralized data management and aids in the implementation of internet and mobile banking.

Besides, CBS helps in bringing the complete operations of banks under a single technological
platform. Development of Distribution Channels- The major and upcoming channels of
distribution in the banking industry, besides branches are ATMs, internet banking, mobile and
telephone banking and card-based delivery systems.

Automated Teller Machine (ATM) :- ATMs were introduced to the Indian banking industry
in the early 1990s initiated by foreign banks. It is perhaps most revolutionary aspect of virtual
banking. The facility to use ATM is provided through plastic cards with magnetic strip
containing information about the customer as well as the bank. In today's world ATMs are the
most useful tool to ensure the concept of "Any Time Banking" and "Any Where Banking”. The
total number of ATMs installed in India by various banks as of end Jan 2018 was 2.07 lakh
(approx.) The new private sector banks in India have the most offsite ATMs, followed by off-
site ATMs belonging to SBI and its subsidiaries and then by nationalized banks and foreign
banks, while on-site is highest for the nationalized banks of India.

27
 Number of ATMs

S. No. Bank Name No. of ATMs

1. HDFC Bank 12,260

2. Panjab National Bank 8,906

3. Axis Bank 11,801

4. State Bank of India 59,291

5. ICICI Bank 15,589

(Table No. 1.2)

Phone Banking-: Customers can now dial up the banks designed telephone number and he by
dialling his ID number will be able to get connectivity to bank’s designated computer. By using
Automatic voice recorder (AVR) for simple queries and transactions and manned phone
terminals for complicated queries and transactions, the customer can actually do entire non-
cash relating banking on telephone: Anywhere, Anytime.

Tele Banking-: Tele banking is another innovation, which provided the facility of 24-hour
banking to the customer. Tele-banking is based on the voice processing facility available on
bank computers. The caller usually a customer calls the bank anytime and can enquire balance
in his account or other transaction history. Tele banking is becoming popular since queries at
ATM‟s are now becoming too long.

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Internet Banking-: Internet banking enables a customer to do banking transactions through
the bank’s website on the Internet. It is a system of accessing accounts and general information
on bank products and services through a computer while sitting in its office or home. This is
also called virtual banking.

Mobile Banking-: Mobile banking facility is an extension of internet banking. Mobile banking
services are provided to the customers having the credit card accounts with bank. In mobile
banking, the services are provided by the association of banks and cellular service providers
through SMS or WAP enabled mobile instruments. Customer Relationship Management
(CRM) - (CRM) refers to the methodologies and tools that help businesses manage customer
relationships in an organized way-finding, getting and retaining customers.

CRM processes that help to provide employees with the information they need to know their
customers' wants and needs and build relationships between the company and its customers.

Electronic Cheques-: The electronic cheque or simply the e-cheque is gradually replacing the
longstanding paper cheque. The Negotiable Instruments (Amendments and Miscellaneous
Provisions) Act, 2002 was amended to include the phrase "electronic cheque" in the definition
of "cheque". Accordingly, the substituted definition of a cheque in Section 6 reads as "A
`cheque' is a bill of exchange drawn on a specified banker and not expressed to be payable
otherwise than on demand and it includes the electronic image of a truncated cheque and a
cheque in the electronic form."

It is a data string, which associates a message in the digital form with some originating entry.
It is created and verified by means of cryptography, the branch of applied mathematics that
concerns itself with transforming messages into apparently meaningless forms and back again.
It uses a scheme or mechanism consisting of signature generation algorithm with a method for
formatting data into messages to produce a digital signature, and a related signature verification
algorithm with the method to recover data from the message to authenticate a digital signature.

It is important to note that, the Information Technology Act, 2000, in Section 3(2) provides for
a particular asymmetric cryptosystem and hash function as a means of authenticating the
electronic record. Any other method used by banks for authentication should be recognized as
a source of legal risk.

29
Digital Signature-: A digital signature is used to make sure that the file(s) sent digitally
belongs to a designated source and reaches the intended receiver in its original format without
any tampering. In simple terms, a digital signature works in the same way as an envelope seal
does.

Imagine wanting to send a physically signed document from one country to another. You would
need to send the documents by means of a courier. This process involves loads of paperwork
and thereby wasting invaluable time. Instead, if you had just used a digital signature, the
documents could have been sent electronically in a matter of minutes. This way you can save
time as well as money. Numerous studies conducted around the world show that using digital
signatures can save a whole working week for any working professional. The time saved
combined with the undeniable savings in money is surely going to fuel the rapid acceptance of
digital signatures around the world.

How does it work -: Digital signatures are based on Public Key infrastructure. By this
mechanism, two keys are generated, a Public Key and Private Key. The private key is kept
by the signer and it should be kept securely. On the other hand, the receiver must have the
public key to decrypt the message.
For example, a person named Charlie wants to send an encrypted message to Lisbon. As stated
above, Charlie must have a private key to sign the message digitally.

Before encrypting the message using the private key, an algorithm named ‘MD algorithm’
encrypts the message to be sent by Charlie into a 128/256-bit format known as a hash value.

Then Charlie’s private key encrypts this hash value. On completion of both the processes,
Charlie’s message is said to be digitally signed.

On the side of Lisbon, the digitally signed message is decrypted with the help of the signer’s
public key. The public key decrypts the message and converts it into another hash value. Then
the program which is used to open the message (e.g., MS Word,

Adobe Reader etc.) compares this hash value to the original hash value which was generated
on Charlie’s side. If the hash value on Lisbon’s side matches with the hash value generated on
Charlie’s side, then the program will allow the message to open up and displays the message
“The document has not been modified since this signature was applied.” The program will not
allow the document to open if both the hash values don’t match.

30
 ADOPTION OF BANKING TECHNOLOGY
The IT revolution has had a great impact on the Indian banking system. The use of computers
has led to the introduction of online banking in India. The use of computers in the banking
sector in India has increased many folds after the economic liberalisation of 1991 as the
country's banking sector has been exposed to the world's market. Indian banks were finding it
difficult to compete with the international banks in customer service, without the use of
information technology.

The RBI set up a number of committees to define and co-ordinate banking technology. These
have included:

 In 1984 was formed the Committee on Mechanisation in the Banking Industry (1984)
whose chairman was Dr C Rangarajan, Deputy Governor, Reserve Bank of India. The
major recommendations of this committee were introducing MICR technology in all
the banks in the metropolises in India. This provided for the use of standardised cheque
forms and encoders.

 In 1988, the RBI set up the Committee on Computerisation in Banks (1988) headed by

Dr. C Rangarajan. It emphasised that settlement operation must be computerised in the

clearing houses of RBI in Bhubaneshwar, Guwahati, Jaipur, Patna and

Thiruvananthapuram. It further stated that there should be National Clearing of intercity

cheques at Kolkata, Mumbai, Delhi, Chennai and MICR should be made operational.

It also focused on computerisation of branches and increasing connectivity among

branches through computers. It also suggested modalities for implementing on-line

banking. The committee submitted its reports in 1989 and computerisation began from

1993 with the settlement between IBA and bank employees' associations.

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 In 1994, the Committee on Technology Issues relating to Payment systems, Cheque

Clearing and Securities Settlement in the Banking Industry (1994) was set up under

Chairman W S Saraf. It emphasised Electronic Funds Transfer (EFT) system, with the

BANKNET communications network as its carrier. It also said that MICR clearing

should be set up in all branches of all those banks with more than 100 branches.

 In 1995, the Committee for proposing Legislation on Electronic Funds Transfer and

other Electronic Payments (1995) again emphasised EFT system.

 Sobole and Cron (2006) “Impact of information Technology on Indian banks”, this

article has conducted the study to find the relationship between computerization and

several measures of overall firm performance. Three performance comparisons are

presented: users versus non-users of computers, three levels of usage, and class of

computer usage. Results indicate that computerization is related to overall performance.

Non-users tend to be small firms with about average overall performance.

 KPMG, “Technology enabled transformation in Banking”, The Economic Times

Banking Technology, Conclave 2011, this article has concluded that banking will be

transformed by new technology by 2015.customer friendly products, delivery channel,

easy and accessible services and competitive pricing would be driving forces-and

technology shall pay a dominant role in all these. Models using mobile devices and

efficient payment systems will make banking services more widely available 24 x 7.

 In July 2016, Deputy Governor Rama Gandhi of the Central Bank of India "urged
banks” to work to develop applications for digital currencies and distributed ledgers.

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 CHAPTER-5
BENEFITS OF INTERNET IN INDIAN BANKS
INTERNET BANKING:

Internet Banking Service allows customers to avail the bank’s services through internet.

 It allows conducting Banking Operations from House, Office or even during travel.
This service is available 24 hours & 365 days a year.
 It helps customers access their account from anywhere in the world using Internet.
Customers can use internet to transfer funds from his/her account to other bank
accounts.
 It can also be used for bill payments, insurance payments, credit card payments, mutual
fund payments, e-commerce etc. Complete details of accounts (SB, Deposit, Loan, etc)
can be obtained through this facility.

Inquiries:

 Get complete details of all the accounts (SB/Deposit/Loan …)

 View mini statement

 Print/Save the pass-sheet of any Operative accounts for any period.

 Cheque Status Inquiry

 Inquire on temporary overdraft

 Interest Details of Deposit Accounts

 Print Pass-sheet of any loan account for any period.

Funds Transfer:

 Fund transfer between own operative accounts.

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  Fund transfer to other operative accounts

 External fund transfer to other bank branches (NEFT / RTGS (24 x7)

 Online Bill payment/E-commerce transactions

 Fund transfer to Loan account

 Fund transfer to Recurring Deposit

 Set Standing Instruction

 Tax payment

Requests:

 Cheque book request

 DD request

 Stop cheque payment

 Simulate pre-closure of your deposit/loan account.

 Transaction limit inquiry

 Change User ID

Message centre

 Send secured instructions to your Relationship Manager.

 Receive immediate reply from Relationship Manager.

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Alerts

 Receive important account related Alerts from the system.

 Deposit maturing soon, loan repayment alert, minimum balance alert.

 Receive important account related Alerts from the system.

 Fraud risk management alerts.

Customize

 Give different nick-names to accounts for easy identification. Change the amount
& date format as per the choice. Change password option is also available.

Multiple users:

 Corporates can apply for Internet Banking facility for different officials responsible
for operation in bank accounts. Also, in addition to the authorised signatories for
the account operation, Net banking corporate user id can be issued to company staff
officials as transaction entry user with limited access.

Access restriction:
 Corporates can also restrict the account access to different users, based on their
requirement.

Bulk fund transfer - Files upload feature:

 Bulk fund transfer file upload facility can be availed for corporate customers or
request basis. This facility can be used for Bulk fund transfers between own
accounts (self-linked accounts), within bank accounts (salary payment) and other
bank accounts (NEFT/RTGS) by uploading data files in prescribed format.

Bulk Payee/Beneficiary addition -Files upload feature:

 Multiple Payee/ Beneficiary details can be added in Net banking by uploading a file of
Payee/Beneficiary details in prescribed format.

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  Immediate Payment Service IMPS Fund Transfer Facility:
Immediate Payment Service (IMPS) is a 24 x7 instant interbank electronic fund transfer
service provided by National Payments Corporation of India (NPCI). All Internet
Banking personal and corporate customers can make other bank fund transfers
24 x 7 even on bank holidays through IMPS facility offered through Internet Banking.

Goods and Service Tax (GST) payment:

 Now you can make GST payment through internet banking in 3 easy steps. GST
payment facility is available in internet banking under 'TAX Centre' wherein GST
payments can be made instantly without adding new Payee/Beneficiary.

Online Bill Payments / Shopping Mall:

 This facility enables the customers to make payment for almost all goods/services
through Internet Banking on-line real time in a secured way. In case of corporate where
account mode of operation is jointly, online bill payment/ e-commerce transaction
facility can be enabled for a designated user on request basis.

Bill Pay & Recharge Service:

 Instead of visiting different biller’s websites and making payment, now anyone can
make bill payments through SIB internet banking. Using this functionality, it can
register the biller, view the bill amount, pay the bill/ make instant payment and even
can set auto pay for the bill. Bill Pay & Recharge service helps to make payment
towards payment from a single platform. In addition to bill payments, it can also make
prepaid Mobile, DTH and Data card recharges.

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 PROS AND CONS OF INTERNET BANKING
Advantages:

 An online account is simple to open and easy to operate.

 It's convenient, because it can easily pay the bills and transfer funds between accounts
from nearly anywhere in the world.
 There is no need to stand in a queue to pay off the bills. Also, not to keep receipts of all
of the bills, as it can be now easily view the transactions.
 It is available all the time. The performance of the task can be done anywhere and at
any time, even at night or on holidays when the bank is closed. The only thing needs to
have is an active internet connection.
 It is fast and efficient. Funds get transferred from one account to the other very fast. It
can also manage several accounts easily through internet banking.
 It facilitates to keep an eye on the transactions and account balance all the time.
 It is easily get to know about any fraudulent activity or threat to the account before it
can pose any severe damage.
 It's a great medium for the banks to endorse their products and services.
 More online services include loans and investment options.

DISADVANTAGES:

 Understanding the usage of internet banking might be difficult at the first. That said,
there are some sites which offer a demo on how to access online accounts (not all banks
offer this). So, a person who is new to technology might face some difficulty.
 It cannot be access to online banking if there is no internet connection; thus, without
the availability of internet access, it may not be useful.
 Security of transactions is a big issue. The account information might get hacked by
unauthorized people over the internet.
 Password security is a must. After receiving the password, change it and memorize it.
Otherwise, the account may be misused.
 The banking information may be spread out on several devices, making it more at risk.

37
  If the bank’s server is down, then accounts cannot be accessed.
 If the bank's server is down, due to the loss of net connectivity or a slow connection,
then it might be hard to know if the transaction went through.
 It might get overly marketed too and become annoyed by notifications. That said, these
can easily be turned off.
 It might become annoyed by constant emails and updates.

FRAUD & PRECAUTIONS

ATM Card fraud: - Over the past two decades, consumers across the globe have come to
depend on and trust the ATM to conveniently meet their banking needs. As banks have
introduced ATMs approximately 25 years ago, from that time, the fraudsters are also trying to
start tapping into the system. In recent years there has been a proliferation of ATM frauds
across the globe. Many banks have not sufficiently educated the customers on the basic usage
of cards, resulting in ignorant card holders either losing their cards in the machine, or panic-
stricken customers breaking the glass door to exit the ATM enclosure after a late-night
transaction.

Though according to an assessment done by the State Bank of India, the organized frauds on
ATM’s in India have been minimal. Most ATM frauds happen due to the negligence of
customers in using the ATM. The number of ATM frauds in India is more due to giving up
Personal Identification Number (PIN) to others, than by sophisticated crimes like skimming.
There are many cases where customers give out their PIN number to their driver or relative to
withdraw money for them. Most ATM frauds in India, thus, happen due to this negligence and
not “fraud” per se. But as the Indian ATM market is growing exponentially, this provides an
opportunity to the fraudster to go for advanced techniques like dispenser trapping, “spoofed”
e-mail etc.

Therefore, ATM fraud and security have emerged as leading topics of interest among owners
and operators of ATMs. Minimizing losses, mitigating risks and maintaining consumer
confidence in the ATM channel are logical priorities for banks and others who deploy ATMs.

38
Precautions: -
Be alert: While transacting at an ATM, always pay attention to the surroundings. Before the
inserting of the card, look at the slot in which the card is to be inserted. If there is feeling of
any unusual thing, stay away from the ATM. It is possible that skimming devices are installed
in the ATM.
Ensure that there is no one in the ATM while making the transaction: Make sure that there
is no one in the ATM when the transaction is conducted. While entering the PIN, conceal the
keypad so that no one can see the numbers entered.
Memorise the card details: Do not write down the card details, especially PIN number. Many
people have a habit of writing down the PIN and keeping it in their wallets. In case of losing
the wallet, the card as well as the details will also be lost. Anyone who steals or finds the wallet
has easy access to the details. Therefore, it is important to set the PIN and memorise it.
Obtain a card protection plans: One of the ways to prevent a debit card fraud is to buy a card
protection plan. This is similar to insurance for the car.
The plan protects the card against various types of frauds, thefts or loss. Most banks in India
offer card protection plan. As an alternative, choosing fraud insurance is the best option. Such
a policy covers any damages caused to the bank account.

Shop on secure websites: There are a number of online shopping websites. However, not all
of them are secure. Before using the card to make any payment, check if the website is secured.
Secure websites are those that begin with https instead of http. In the former, the ‘S’ stands for
secure. Secure websites also have a padlock icon, either on the address (URL) bar or on the
pages of the website. This is a clear identifier of a secure website. It is also important to not
store debit card details on the laptop or mobile browser. It may be tempted to do so for
convenience. Nevertheless, this can put at a risk of debit card fraud.

Use credit cards instead of debit cards for online purchases: If someone has a credit card,
he/she should use it for online payment. Credit cards are a more secure method of online
transactions. Any fraudulent transaction can be disputed on your credit card. However, this
facility is not available for debit cards.
Check the expenses regularly: Keep a check on the bank statements regularly. If a transaction
looks unfamiliar, contact the bank as soon as possible.

39
Internet Banking Fraud: - Internet Banking Fraud is a fraud or theft committed using online
technology to illegally remove money from a bank account and/or transfer money to an
account in a different bank. Internet Banking Fraud is a form of identity theft and is usually
made possible through techniques such as phishing.

Now internet banking is widely used to check account details, make purchases, pay bills,
transfer funds, print statements etc. Generally, the user identity is the customer identity number
and password are provided to secure transactions. But due to some ignorance or silly mistakes
anyone can easily fall into the trap of cyber criminals.

Precautions: -

Securing the account: Avoid online banking on unsecured WIFI systems and operate only
from PCs at home. Never reveal password to anyone. Do not even write it on a piece of paper
on diary. Just memorise it. It should be alphanumeric and change it frequently.
Never reply to queries from bank online about account or personal details. The personal
information should not be kept in a public computer or in emails.

Spam: Spam is an electronic 'junk mail' or unwanted messages sent to email account or mobile
phone. These messages vary, but are essentially commercial and often annoying in their sheer
volume. They may try to persuade to buy a product or service or they may attempt to trick into
divulging the bank account or credit card details.

Fool-proof password: Change the online banking password at regular intervals. Also, avoid
easy-to-guess passwords, like first names, birthdays, kid's or spouse's name and telephone
numbers. Try to have an alpha-numeric password, one that combines alphabets and numbers.

If there are several bank accounts, the same online banking password should not be used for
all. Never select the option on browser that stores or retains user name and password. As it can
easily be cracked by cyber criminals. Also, never paste the password, always type it in. This
little amount of `finger exercise' will go a long way in safety.

Always check 'last logged': Most banks have a 'last logged in' panel on their websites. If the
bank has it, check the panel whenever last logged in. If there is any irregularities, report the
matter immediately to the bank and change the password right away.

40
Always log out when exit the online banking portal. Close the browser to ensure that the secure
session is terminated. Never exit simply by closing the browser.

Keep the system up to date: Regularly check for security updates for the computer operating
system. Most security updates are aimed at reducing risks to the computer, these may be data-
related or otherwise. Make sure that the operating system and browser have the latest security
patches installed. And, always install these only from trusted websites.

Install a personal firewall to prevent hackers from gaining unauthorised access to the computer,
especially if computer is connected to the Internet through a cable or a DSL modem.

Credit and Debit card fraud-: Credit and debit card fraud is an inclusive term for fraud
committed using a payment card, such as a credit card or debit card. The purpose may be to
obtain goods or services, or to make payment to another account which is controlled by a
criminal. The Payment Card Industry Data Security Standard (PCI DSS) is the data security
standard created to help businesses process card payments securely and reduce card fraud
.Credit & debit card fraud can be authorised, where the genuine customer themselves processes
a payment to another account which is controlled by a criminal, or unauthorised, where the
account holder does not provide authorisation for the payment to proceed and the transaction
is carried out by a third party.

Credit & debit cards are more secure than ever, with regulators, card providers and banks taking
considerable time and effort to collaborate with investigators worldwide to ensure fraudsters
aren't successful. Cardholders' money is usually protected from scammers with regulations that
make the card provider and bank accountable. The technology and security measures behind
credit cards are becoming increasingly sophisticated making it harder for fraudsters to steal
money.

Precautions: -

ATM safeguards: - Stay away from ATMs that appear dirty or in disrepair. They may not
work or, worse, may be fake machines set to capture your card information,” warns Navroze
Dastur, Managing Director, NCR India, a financial security solutions firm.

Here are some other things you should keep in mind:

Check machine: - Do not use ATMs with unusual signage, such as a command to enter your
PIN twice to complete the transaction. Also watch out for machines that appear to have been

41
altered, if the front looks crooked, lose or damaged. It could be a sign that someone has attached
a skimming device.
Cover keypad: Make sure to cover the keypad with your hand while entering the PIN to escape
any cameras attached nearby.
Don’t take help: It is advisable to use only the bank ATMs, particularly those attached to a
bank branch and those that have security guards. Also, avoid taking the help of any person
loitering outside the ATM or volunteering to assist.

Online precautions: -
Use safe sites: Go only to well-known, established sites for e-shopping. “Remember to
confirm the site’s legitimacy before using it and shop only on those that are Secure Sockets
Layer (SSL)-certified. These can be identified through the lock symbol next to the browser’s
URL box.
Also make sure that the website uses the ‘https’ protocol instead of ‘http’, where ‘s’ stands
for ‘secure’. Additionally, make sure not to click on the option that asks for saving your card
details on any site.
Also look out for a site’s payment verification tools, such as MasterCard’s Secure Code,
which verifies that authorised the payment while protecting the privacy of online transaction.

Anti-virus software:- While banks deploy ATM network security measures, on an individual
level it can safeguard transactions by installing anti-virus software on the computer and
smartphone to keep out malware. It can also possible to install identity theft detection apps on
the phone from an official app store. Besides, have software on smartphone that enables to
wipe out the data remotely in case the mobile gets stolen.
Debit card: - Make sure that do not use the debit card for e-commerce transactions. This is
because if the card is compromised, the entire cash in the bank account can be wiped out
instantly. The credit card, on the other hand, offers a month’s grace period before the cash
leaves the account, during which the investigation can possibly nail the fraud.

Hide CVV: - While entering the CVV on the site, it should be masked by asterisks. This is
especially important while shopping on foreign websites where the CVV is the only point of
verification. Also use a virtual keyboard to avoid keystroke logging.
Public Wi-Fi: - People must avoid using unsecured W-Fi networks or public Wi-Fi as these
are easy targets for identity theft cases in online transactions.

42
Register for alerts: This is a very important step since the bank will alert to any online card
transaction or ATM withdrawals the moment these take place. Also remember to update the
mobile contact number in case of a change.
Log out: - Always log out from social media sites and other online accounts to ensure data
security and avoid storing confidential passwords on the mobile phones as these can be used
by fraudsters.
Change passwords: Keep changing the passwords from time to time to reduce the probability
of identity theft.
Virtual cards: - These cards are prepaid card & not useful for a frequent shopper. It is a limited
debit card that does not provide the primary card information to the merchant and expires after
a day or 48 hours.

Offline preventive measures: -

Here are some additional precautions that can take to ensure the card is safe.
Don’t disclose details: Never reveal PIN, CVV or password to anyone. Make sure not to
respond to e-mails or SMS that ask for crucial personal or card-related details. No bank or
credit card firm is authorised to seek card details from customers on mail or through phone.

Check statements: Regularly go through the bank or credit card statements so that any
unauthorised transaction can be detected through identity theft and alert the bank immediately.
Don’t sign blank receipts: Ensure that never sign a blank receipt, and mark through any blank
lines or spaces before signing so that nobody can add an additional amount to the transaction.

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 CONCLUSION

The utilisation of information technology has magnificently increased in Indian banking

industry. All commercial banks have shown an impressive growth in ATM installation.
Notwithstanding such remarkable achievement, it is noted that India still lags far behind other
countries. The reason behind the slow growth in ATM expansion is the high installation costs.

Further at a disaggregate level, technology revolution in Indian banking industry has been
introduced by private and foreign banks and to compete public sector banks followed it. The
public sector banks have been followers in terms of number of ATMs in the beginning but by
their size and spread advantage; they have a wider coverage at the present. In terms of number
of computerized branches, the public sector, both SBI and its associates and nationalized banks
together, form the major share in Indian banking. The public sector, by its size and scale
advantage has been able to do the computerization of branches on a very large scale. The public
sector banks have a unique advantage over their competitors in terms of their branch network
and large customer base. When this gigantic computerization is viewed in terms of number of
customers served, as compared to public sector banks, the new private and foreign banks are
very small players in this context.

Number of credit cards has been experiencing an upward trend for the entire period. Sector
wise analysis shows that private sector banks are the market leader. Bank-wise growth of credit
cards is evenly distributed among the banks but the SBI in particular and public sector banks
in general have a major chunk of customer by virtue of their wider customer base. It is inferred
that growth of foreign banks in terms of credit card is shrinking due to competition with Indian
banks which are coming with better modernised and localized strategic solutions.

The new generation private banks and foreign banks are the leaders in introducing internet
banking in India. However, the number of public sector banks offering internet banking has
been increasing exponentially. Keeping in view the customer segment served by public sector
banks, the availability of hardware and security software for internet banking at the customer
end is still in queue, but the culture of internet banking is picking up in urban Indian segment.
New private banks and foreign banks have been able to create a niche in the mobile banking in
the early stages of technology adoption, as their share of mobile banking branches in the total

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branches has been much higher as compared to public sector banks. Here, the size, scale,
customer heterogeneity and mind set attuned towards resisting new technology are holding
back the public sector banks. It is proving to be an impediment and resulting in delayed
response in adoption of new technologies. This need elaborate customer awareness and change
in the mind set of banking staff.

Hence the overall conclusion that emerges from the analysis is that in banking industry,
performance is a positive function of information technology, if some other complement
conditions like intellectual capital, size and scale of operations compatible with it are available;
otherwise it can rather affect the performance adversely.

This is what explains the productivity paradox in service sector, in general, and in banking
sector, in particular. The study found strong evidences of the fact that technology can play a
major role not only in reducing operating cost but also improving productivity. Banks,
therefore, need to look at technology both from the point of view of increasing labour
productivity and cutting operating cost in the long run.

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 Bibliography

Books and Journals:

 Nurwani and Amaratunga (2003), “IT and Performance of Banks,”

Conference on Business and information. Battery march, P. (2003),
“Productivity and Information Technology”, Management Science,
Vol.40, No.11, pp 1525-1535.
 Beccalli, E. (2003), “Information Technology and Economic Performance:
Some Evidences from the EU Banking Industry”, Working Paper,
Accounting and Finance Department, London School of Economics.
 Chandrasekhar. and Sonar (2008), “Impact of Information Technology on
Efficiency and Total Factor Productivity of Indian Banks”, South Asian
Journal of Management.
 Ekta, G.E. (2012), “The Relationship between IT Expenditure and
Financial Performance of US Commercial Banks”,
 Gupta et al., (2008), “Dynamics of Productive Efficiency of Indian Banks”,
International Journal of Operations Research, Vol. 5, No. 2, pp. 7890.
Oxford University Press, New Delhi.
 Kumar N.K. (2006), “Technology- The Backbone of Banking’. Indian
Bankers – Special Issue on e-payments and Commerce”.
 Malhotra and Singh (2005), “New Revolution in Indian Banking Industry:
Internet Banking”, Punjab Journal of Business Studies.
 Mittal and Dhingra (2007), “Assessing the Impact of Computerization on
Productivity and Profitability of Indian Banks”, Delhi Business Review.
 Rahman, I.U. (2007), “Role of Information Technology in Banking
Industry.
 Battery march, P. (2003), “Productivity and Information Technology”,
Management Science

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Websites:

 www.worldjute.com
 www.slideshare.net
 https://www.google.com/search?INDIAN+traditional+banking+wikipedi
a
 friendsoftraditionalbanking.com
 en.wikipedia.org
 economictimes.indiatimes.com
 comodosslstore.com
 www.bankbazaar.com
 www.researchgate.netckel.com
 www.economicsdiscussion.net
 pdfs.semanticscholar.org
 www.investopedia.com
 en.wikipedia.org
 money.howstuffworks.com

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