Chapter:1

Introduction

1.1 Introduction
In the present world money is circulated all over the globe. Globalization, technological
advances and other factors money is circulating unimaginably .Financial Institutions mainly
Banks play a Pivotal role in matching a depositor and lenders and channeling money and
making the Economy more efficient. Although the history of Banking goes back to the 14th
century in Europe but Banks are now everywhere. Banks in Bangladesh play a significant
role compared to other financial Institutions.

The competition in the banking industry has intensified more than ever before. Global
financial crisis, share market crash, recessions and other factors affected the banking
industry. So banks should position themselves at a unique place in the minds of the
customers by offering attractive offers such as higher interest rates or by offering superior
service to the customers. Services include financial advice, flexible rates or dates of
payment, portfolio management etc.

E- Banking is a service offered to the customers which includes viewing the balances on
accounts, checking the transactions, downloading useful information, transfer of funds,
paying third parties, making loan applications etc. from a secured website of the bank. E-
Banking has opened up a new field of competition for banks. To operate online an
individual needs the customer number and password. E- Banking has started in the 1980s
but it is relatively a new concept in Bangladesh.

Customer satisfaction is positively related to E- Banking. It is believed that customers are

the king of the market place today. The competition in the banking industry is intensifying
and it is the bank’s priority to satisfy its respective customer.

1.2 Origin of the Study

As a mandatory part of the BBA program, all the students of the faculty of Business Studies
of Comilla University have to undergo a three-month long internship program with an
objective of gaining practical knowledge about current business world. After this internship
program each and every student have to submit an internship report mentioning their
activities during the internship program. I have started my internship at The Sonali Bank
Limited, Corporate Branch, Cumilla on Electronic Banking of Sonali Bank Limited.

At the end of the program I am submitting my internship report focusing on the contribution
of Electronic Banking System to the overall performance of bank under the supervision of
LAMINA BINTA JAHAN, Assistant Professor, Department of Accounting and
Information Systems, Comilla University.

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1.3 Rationale of the Study
Corporate governance is the way a corporation polices itself. In short, it is a method of
governing the company like a sovereign state, instating its own customs, policies and laws
to its employees from the highest to the lowest levels. Corporate governance is intended to
increase the accountability of your company and to avoid massive disasters before they
occur. Failed energy giant Enron, and its bankrupt employees and shareholders, is a prime
argument for the importance of solid corporate governance. Well-executed corporate
governance should be similar to a police department’s internal affairs unit, weeding out and
eliminating problems with extreme prejudice. A company can also hold meetings with
internal members, such as shareholders and debt-holders – as well as suppliers, customers
and community leaders, to address the request and needs of the affected parties.

It allows increased expertise to be brought to bear on strategic decision-making. The

concept of corporate governance sounds simple and unambiguous, but when one attempt to
define it perceptions behind available definitions (Fernando, A.C., 2012). However,
corporate governance is considered as the most important topic to be discussed by financial
entities and economic institutions because of two reasons Firstly, banks have an
overwhelmingly dominant position in developing-economy financial systems, and are
extremely important engines of economic growth (King and Levine, 1993 a & b; Levine,
1997). Secondly, as financial markets are usually underdeveloped, banks in developing
economies are typically the most important source of finance for the majority of firms
(Levine, 2004).

Banking sector can play a vital role to magnify the overall social economic situation of the
country. The number of scheduled banks operating in Bangladesh stand at 57 all of which
are under the purview of the Bangladesh Bank. In the last ten years or so, there has been
rapid growth in the banking sector with many new banks operating in the country for the
first time. So, Banks must compete in the market place both with local institution as well as
foreign ones. The management of the bank is responsible for taking decisions and
formulating plans and policies for the future. Eventually they need to evaluate the system of
internal controls and procedures to protect the rights and responsibilities of various
shareholders. For this purpose Corporate Governance is important to the company’s
management. It also aids to accomplish the goal of the organization and manages the
relationship among the stakeholders including the board of directors and the shareholders.

1.4 Background of the study:

This internship report is originated as a partial fulfillment of the BBA program. This report
is a mandatory requirement for completion of BBA. I have worked at Sonali Bank at
Corporate branch for 45 days and the experience of working at Sonali Bank has helped me
to match my theoretical knowledge with practical understanding. As an intern of Sonali
Bank I was provided with the topic “An analysis of the E- Banking services of Sonali Bank”

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1.5 Purpose of the Study:
• To evaluate E- Banking System of Sonali Bank Limited.
• To find out the customers demand from Sonali Bank’s E- Banking service.
• To identify the satisfaction level.
• To identify the relationship between E- Banking and customer satisfaction.
• To find out the problems and give some necessary suggestions.

1.6 Methodology of the Study:

Data collection:
Primary data was collected from the user of E bank services of Sonali bank, BUET branch
by conducting a survey on their requirement. Secondary data was collected from various
web site, previous work on Sonali Bank. Survey was conducted by using likert scale.

Sampling method: Random sampling method was used. Sample was collected from the
customers who regularly or frequently visit the branch office to take services provided by
bank.

Sample size: Sample size is 20. From these 20 customers 50% are male and 50% are
female respondent.

Data analysis:

Data was analyzed by using mean, mode and percentage. To complete the study I did not
use any satirical software.

1.7 Limitations of the study:

To prepare a report on the topic like this in a short duration is not easy task. From the
beginning to end, the study has been conducted with the intention of making it as a
complete and truthful one. In preparing this report some problems and limitations have
encountered which are as follows:

➢ In most cases, the bank is not willing to provide all the information because of
confidentiality, so the data are not in organized way.
➢ Lack of opportunity to access to internal data.
➢ I had to use secondary data for preparing this report.
➢ Being very busy, the bank personnel could not pay enough time.
➢ Legal action related information was not available.
➢ Time limitation was a major constraint to prepare the report.
➢ This study is so broad that analytical and comprehensive study is not possible.

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 Chapter:2
Overview of Sonali Bank Limited

2.1 History of Sonali Bank Limited

Soon after independence of the country Sonali Bank emerged as the largest and leading
Nationalized Commercial Bank by proclamation of the Banks' Nationalization Order 1972
(Presidential Order-26) liquidating the then National Bank of Pakistan, Premier Bank and
Bank of Bhwalpur. As a fully state owned institution, the bank had been discharging its
nation building responsibilities by undertaking government entrusted different socio-
economic schemes as well as money market activities of its own volition, covering all
spheres of the economy. The bank has been converted to a Public Limited Company with
100% ownership of the government and started functioning as Sonali Bank Limited from
November 15 2007 taking over all assets, liabilities and business of Sonali Bank. After
corporatization, the management of the bank has been given required autonomy to make the
bank competitive & to run its business effectively. Sonali Bank Limited is governed by a
Board of Directors consisting of 11(Eleven) members. The Bank is headed by the Chief
Executive Officer & Managing Director, who is a well-known Banker and a reputed
professional. The corporate head quarter of the bank is located at Motijheel, Dhaka,
Bangladesh, the main commercial center of the capital.

2.2 Vision & Mission

Vision: Socially committed leading banking institution with global presence.

Mission: Dedicated to extend a whole range of quality products that support divergent
needs of people aiming at enriching their lives, creating value for the stakeholders and
contributing towards socio-economic development of the country.

Slogan: “Your trusted partner in innovating banking”.

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2.3 Corporate Profile
Name of the Company Sonali Bank Limited

Chairman Mr. Md. Ashraful Moqbul

CEO & Managing Director Mr. Md. Obayed Ullah Al Masud

Company Secretary Mr. Md. Hasanul Banna

Legal Status Public Limited Company

Emerged as Nationalized Commercial Bank in

1972, following the Bangladesh Bank
(Nationalization) Order No. 1972(PO No.26 of
Genesis 1972)

Date of Incorporation 03 June, 2007

Date of Vendor’s Agreement 15 November, 2007

Registered Office 35-42, 44 Motijheel Commercial Area, Dhaka,

Bangladesh

Authorized Capital Tk. 6000.00 Crore

Paid-up Capital Tk. 4130.00 Crore

Number of Employee 18,167

Number of Branches 12015

Phone-PABX 9550426-31, 33, 34, 9552924

FAX 88-02-9561410, 9552007

SWIFT BSONBDDH

Website www.sonalibank.com.bd

E-mail [email protected]

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2.4 Some Notable Features of the Bank

Capital Structure
Authorized Capital BDT 60,000.00 Million
Paid-up Capital BDT 41,300.00 Million
Branches & Subsidiaries
1. Total No of Branches 1215
I. No of Rural Branches 745
II. No of Urban Branches 487
a. No of Foreign Branches 2
b. No of Local Branches 1213
2. No of Regional Offices 16
3. No of Principal Offices 46
4. no of G.M. Offices 11
1. Sonali Exchange Company
Incorporated (SECI) having 10 (Ten)
branches in USA.
2. Sonali Investment Limited (Merchant
Subsidiaries Banking) having 4 (Four) branches at
Motijheel, Paltan, Uttara, Mirpur in
Dhaka and 1 (One) branch in Khulna,
Bangladesh

1. Sonali Bank (UK) Limited having 2

(Two) branches in UK.
Associates 2. Sonali Polaris FT Limited

1 (one) in Jeddah, KSA; 1 (one) in Riyadh,

Representative Office
KSA and 1 (one) in Kuwait
Correspondent 639

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2.5 Hierarchy of Sonali Bank Limited

Management
The management of the bank is vested on a board of directors, subject to overall supervision
and directions on policy matters by the board which is constituted in terms of Bangladesh
bank (Nationalization) Order 1972 (Figure-.....). Board of directors, constituted by seven
members has authority to organize, operate and manage its affairs on commercial
consideration within the board policy of government. There are directors appointed by the
government. Other members of the board including MD are also government appointed out
of that at least three have the experience in the field of Finance, Banking, Trade,
Commerce, Industry and Agriculture. The managing director is the Chief Executive of
bank. He executes all the activities under the direction of board. All line and staff personnel
of banks are own recruitment except member of board of Direction.

Board of Directors

Managing Director & CEO

Deputy Managing Director at Head Office

General Managers's at Head Office General Manager's Field GM office at

Division

Deputy General Manager's at Divisional Head of Head office Deputy General Manager's at field office
(GMO, PO, and Corp. Br.)

Assistant General Manager's at Head Office

Assistant General Manager at Field office

Other Executives SEO, EO, SO, Officers at Field

Other Executives SEO, EO, SO, Officers at Head Office Office

Other Staffs at Field Office

Other Staffs at Head Office

Fig: Organogram of Sonali Bank Limited

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Organizational Structure
Sonali Bank is the largest nationalized commercial bank of Bangladesh. It has 1187
branches throughout the country. It has also two overseas branches. The Head Office of the
bank is located at the Motijheel commercial are, Dhaka. The Divisions are headed by the
DGMs and the departments are by AGMs. There are also many sections under every
department in the Head Office. A DGM is the chief of the Principal office and an AGM
usually runs a regional office. Principal offices are the local points of the bank’s
administrative zone in the districts. The regional offices are under control and supervision
of principal offices. The offices are situated at thana level within the districts. The corporate
branches are nearly equivalent to the GM office and usually headed by the DGMs. They
provide all the banking services such as general banking, loans & advances etc. Functional
hierarchy of Sonali bank is given below:

General Managers Overseas Br -2

Office at Head Office Division at HO-39 Kolkata and Shiliguri,
and Local Office-8 India

Head Office
Principal office-42
Inland Branch-1202
Regional Office-19
General Managers
Office at Field Office
and Local Office-8 Corporate Br-22
Authorized Dealer
Branch-45

Fig : Organizational Structure

2.6 Services of Sonali Bank Limited:

Principal Activity of the Bank:

The principal activities of the bank are
I. To facilitate and handle all kinds of commercial banking services to its
customers authorized by Bangladesh Bank.
II. To perform Government Treasury functions and also act as an agent of
Bangladesh Bank.
III. To export and import trade of Bangladesh with other countries under various
agreements.
IV. International banking.

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Subsidiary:
A subsidiary company named Sonali Exchange co. Inc. was incorporated on 4 April, 1994
under laws of the state of New York, Department of State, licensed on 17 October, 1994 by
the State of New York Banking Department and commenced operation as an International
Money Remitter from 12 December, 1994.

Associate:
On 4 November, 1998 Sonali Bank notified the financial Service Authority of the UK of its
intention to voluntarily surrender the banking license for Sonali Bank UK branch with
effect from June 30, 1990. Sonali Bank UK branch had extinguished all its retail deposits by
30 June, 1999 and is not permitted to accept any further deposits from the date. Bur a
representative was there till 7 December, 2001. A subsidiary money remitting company
under the name of Sonali Trade and Finance (UK) Limited has been incorporated under the
UK company act of 1985. The company has been allowed to start its function as a bank
from 7 December, 2001 (the operation activities was started on 10 December, 2001) by the
Financial Service Authority of UK changing its name as Sonali Bank (U.K.) Ltd. 51% share
capital of the newly renamed company is held by the Peoples’ Republic of Bangladesh and
remaining 49% by Sonali Bank.

Account Section:
This is a very much crucial section for each business concern. As such this is a crucial
department for a commercial bank. Records of all the transactions of every department are
maintained here. Accounts section verifies all financial accounts and contents of
transactions. Every working day all the accounts are balanced and reconciled to remove and
discrepancy. The overall activities of accounts section are as follows:

❖ Record all transactions in the cash book.

❖ Record all transactions in general and subsidiary ledger.
❖ Prepare daily fund function, weekly position, periodic statement of affairs etc.
❖ Prepare necessary statements for reporting purpose.
❖ Make salary statement and pay salary.
❖ Pay all expenditures on behalf of the branch.
❖ Branch to branch fund remittance and support for account treatment.
❖ Budgeting for branch.
❖ Make charges for different types of duties.

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Ancillary Services
Sonali Bank Limited offers multiple special services with its network of branches
throughout the country in addition to its normal banking operations.

Collection:
Gas bills travel tax
Electricity bills Customs & excise duties
Telephone bills Source tax & VAT
Water/sewerage bills Jakat fund
Municipal holding tax Hajj deposit
Passport fees, Land development tax
visa fees and

Payment:
Pension of employees of Government and other corporate bodies
Bangladesh Bank employees pension
Army pension British pension
Students’ stipend/scholarship
Govt. & Non-Govt. teachers’ salary
Food procurement bill on behalf of the Govt.

Social Services:
✓ Old age allowances
✓ Widows, divorcees and destitute women allowances
✓ Freedom fighters’ allowances
✓ Rehabilitation allowances for acid survival women
✓ Maternal allowances for poor women
✓ Disability allowances

Sale & Encashment/Purchase:

Savings Certificates
ICB Unit Certificates
Prize Bonds
Wage Earner’s Development Bonds
US Dollar Premium & Investment Bond
Lottery tickets of different Semi-Govt. and Autonomous Bodies
Sanchaypatra
Public Service Commission’s application form
Judicial Service Commission’s application form
Exchange of soiled/torn notes

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Misc. Services:
Bank a/c information of tax payee client according to demand of NBR
Local Governance Support Project
Enlist of Non Government Insurance Company

Other Activities
Memorandum of Understanding (MOU):
A memorandum of understanding has been signed by the bank with Bangladesh Bank on
30.06.2004. The memorandum embodies some specific conditions to be fulfilled regarding
monitoring and supervision of loans and advances including recovery of classified loans.

Risk Management:
Like any other business, risks are also inherent in banking business. But the risks are
complex and multi-dimensional. Although remarkable progress has been made in the field
of risk management in international areas, no structural policy/development in this matter
has yet been made in the banking sector. In this perspective, Bangladesh Bank has identified
5 (five) core areas relating to banking operations and issued necessary guidelines in 5 areas:

1. Credit risks
2. Asset and liability/balance sheet risks
3. Foreign exchange risks
4. Money laundering risks and
5. Internal control and compliance risks.

Personnel:
The total manpower of the bank as on 30.06.2008 was 23754 of which 12227 were officers
and 11527 were staffs.

Training:
Sonali Bank staff college, Dhaka along with three institutes at Chattagram, Rajshahi,
Khulna and one training center at Bogura have been conducting training programs covering
total banking activities in order to impart training to all categories of officers and staff of
Sonali Bank.

Library:
Sonali Bank central library is replete with a huge collection of books on diverse and
multifarious discipline. The library has also been enriched with the most recently published
books on Banking, Management, Accounting, agriculture, Industrial Finance, Economics,
Computer, and on many other disciplines and its collection is increasing every year.

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Customer Service:
To ensure qualified customer service Sonali Bank has started in addition to computerization
corporate client service and one stop service. To facilitate the foreign exchange activities
Sonali Bank has launched SWIFT (Society for Worldwide Interbank Finance and
Telecommunication) system in its 12 branches. The bank has launched Website, Reuter
service, Internet service, and Ready cash service. The bank has taken a plan to launch
shared ATM system in various important places.

Products of Sonali Bank Ltd

Export credit (Pre-shipment & Post shipment)
Facilitating supplier’s credit
LCs (Letters of Credit) Guarantees in foreign currency
- Bid bond
- Performance guarantee
- Advance payment guarantee
Bill purchasing/discounting
Remittance, collection, purchases and sales of foreign currency & traveler’s cheques
NRAT (Non-Resident Account in Taka)
NFCD A/C (Non-Resident Foreign currency Deposit)
RFCD A/C (Resident Foreign Currency Deposit)
Convertible and non-convertible taka account
Forward contracts
Correspondent banking relations

The products and services are provided through a well-established large network of
authorized branches all over the country.

Types of Account:
Accounts department is the most important functional area of this branch. The following
types of accounts are maintained in this bank:

1. Fixed deposits A/C 5. Savings deposits A/C

2. Short term deposits A/C 6. Current deposits A/C Call deposits A/C
3. Deposit pension scheme (DPS) A/C and
4. Sonali Bank special deposit & pension 7. Sundry deposit Accounts.
scheme A/C

Remittance:
The system of transmitting or sending money from one branch to another branch of the
same bank or from one bank to another bank within a country or outside the country is
known as remittance. It is one of the important functional areas of a bank. A bank can earn
handsome fees as commission from the dealings of money remittance. During my internship
program I have gathered practical experience about how money is remitted from one branch
to another branch of a bank or from one bank to another bank.

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Types of Remittance:
Remittance can be of two types:

A) Inland Remittance

B) Foreign Remittance

A) Inland Remittance:

When money is remitted within a country through proper banking channel, it is termed as
inland remittance. Sonali Bank, Rajshahi medical college hospital Branch deals a lot of
inland remittance at every working day.

a. Modes of Inland Remittance:

1)Demand Draft (DD):

DD is the most widely used instrument of remitting fund. It is order to pay money drawn
by one branch of a bank upon another branch of same bank for a particular amount of
money that is payable to order and demand.

2) Mail Transfer (MT):

MT is another widely used instrument of remitting fund from one branch of a bank to
another branch of the same bank. It is not used to remit fund from one bank to another. MT
is nearly same as DD.

3) Telegraphic Transfer (TT):

TT is the fastest means of remitting fund between two branches of the same bank. Fund
cannot be remitted from one bank to another bank through TT.

B) Foreign Remittance:

The procedure to transfer money from one country to another country through bank or other
govt. authorized agencies is called foreign remittance. The Sonali Bank, Mirpur Shilpa
Elaka Branch, Dhaka does not provide foreign remittance facility to its customer directly.

2.7 Duties Performed in the General Banking:

General banking is the one of the most important department of every banking transaction.
During the internship period I learn most this section. I did my work in the following
section under general banking Division.

1. Account opening. 4. Local Remittance.

2. Account closing. 5. Clearing House Section.
3. Cheque Issue. 6. Dispatch section.

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 Chapter:3
Theoretical Framework of E- Banking

3.1 What is Electronic Banking?

The study basically concentrates on the colossal revolution of E-banking and the Challenges
thereof. E-Banking has revolutionized to days banking by making it very fast, easy and far
reaching. The expectations are growing at very fast speed on the E-Banking services. With
the result, it is demanding more attention for study from various people around the globe.
Huge volume of research has been done and is still going on different issues of E-banking.
The research has helped the customers, the bankers, and other dependent institutions in
understanding various aspects of E-banking. E-Banking has over-performed all the obsolete
banking practices and the threat of security measures has also been growing with it.
Researchers are trying to find out the ways to cover up this risk in the E-Banking and make
it more sophisticated for everyone. The present research study has been done in this context
only. There were huge amount of issues related to E-Banking available on the internet. But
our study has emphasized on threats and the preventive measures to accept the challenging
situations. Due, to the presence of time constraint, the study is based upon limited papers on
the same issue.

E-Commerce (Conducting business through

electronic networks)

E-Finance (Providing financial services E-Money (Stored value or

through electronic channels) prepaid payment mechanisms)

E-Banking (Providing banking

Other financial services and products (
products and services through
Insurance, online brokering etc)
electronic delivery channels

Internet banking

Telephone banking

Other electronic delivery

channels

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3.2 Internet:
The internet is the network of networks. It is a global system of interconnected computer
networks that uses the standard internet protocol suite (Transmission Control
Protocol/Internet Protocol) or (TCP/IP). The internet consists of billions of public, private,
academic, business and government networks ranging from a local to a global scope. These
networks are linked by a broad range of electronic, wireless and optical networking
technologies. The internet has become a necessity in every field. The importance of internet
has reached to a new level as it carries inter-linked Hypertext documents of the World Wide
Web and a wide range of important information resources and sources. The internet not
only has helped many professionals in their respective fields by disseminating and sharing
information but has also reshaped the traditional communications of telephone, music,
television etc. E-mail or electronic mail has helped business and individuals to
communicate in a much cheaper way. Instant messaging has made communications much
easier than e-mails. Users can exchange messages using their Personal Computers, laptops,
PDA, Tabs , mobile phones etc in real time. The website technology has allowed users to
read news , books or other information which is accessible via a network. A web page is a
document usually written in plain text. However a web page is interspersed with formatting
instructions of Hypertext Mark Up Language (HTML) or (XHTML). The pages of a
website can be accessed from a simple Uniform Resource Locator called the web address.
The website Technology has allowed blogging and web feeds. Social Networking has
increased human interactions more than ever before. The internet has also users who are
located in distant places to talk via the VOIP or Voice over Internet Protocol. Millions of
users of the internet talk or chat with each other using the internet technologies. The internet
has helped doctors to carry out distant operation via teleconferencing or using instructions
on a robot through the internet to carry out a operation surgery on a patient on the other side
of the world. E-COMMERCE and online shopping has enabled the formations of new
business .Any one can trade using the website of an e-commerce website by sitting at home.
Businesses of many types use the internet to reach their customers most effectively. Both
(B2B) Business to Business transactions and (B2C) Business –To-Customer transactions are
carried out using the internet. Financial Institutions also use the internet for various
purposes for updated news, selling financial products to their clients and to provide
financial Services. The increasing use of Internet by people has convinced banks to come up
with the idea of E- Banking or E- Banking.

E- Banking:
E- Banking basically includes all types of banking activities performed through electronic
networks. In recent times E- Banking is used as a delivery channel of banking services to
both Business-to-Business (B2B) and Business-To-Customer (B2C) Transactions.

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3.3 A Brief Idea about E- Banking
E- Banking activities includes the payments of bills and invoices, transfer of funds from one
account to another, application of a loan, payment of loan installments, sending funds to
third parties. These activities are carried out via emails and internet based activities. E-
Banking is an electronic connection between a particular bank and its customers. It can be
used to prepare, manage and control financial transactions. E- Banking is simply a pathway
of carrying out the transactions through the networks and not a banking product or a
banking service.

The History of E- Banking

The idea of E- Banking came with the rise of users of the internet and with the development
of the World Wide Web. The programmers have been working on data bases of banking
transactions long ago and an idea of E- Banking transactions had evolved at that time in the
early 1980’s. New technologies and the advancement of computer devices created an
opportunity to start a new trend of online shopping. Online Shopping or shopping from the
website using the internet promoted the use of credit cards. To facilitate online shopping
date ware housing or date storage facilities were used. During the development of the
Automatic Teller Machines or ATMs the development of the databases of banking
transactions were also used. In the 1980’s the financial organizations and banking
institutions mainly in Europe and the United States of America carried out researches and
programming experiments on “Home Banking” . At that point of time Home Banking was
carried out using the telephones and fax machines. This was done because the internet was
not widely spread and many people were not aware of such facilities. The wide spread of
the internet and the advancement of programming technologies created new opportunities
for banks.

The first E- Banking service was introduced in the United Kingdom by the Nottingham
Building Society (NBS). The E- Banking Facility that was introduced is believed to have
been derived from a system which is known as “Prestel”. The E- Banking facility
introduced by the NBS was not very impressive and had drawbacks. The main drawback
was it restricted the number of transactions and functions that account holders could
execute. In the year 1994 the first E- Banking service was introduced in the United States. A
financial Institution named Stanford Federal Credit Union had developed this service of E-
Banking. There are many negative sides of E- Banking .These include a hacking , phishing ,
pharming, spoofing , sniffing and other unethical acts which makes E- Banking facilities
risky for both the users and the banks . Although E- Banking has negative sides but we
should also consider the positive sides. E- Banking has created a revolution and it has a
significant role to play in enhancing the banking sector.

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3.4 Products and Services of E- Banking:
The products and services of E- Banking ranges from wholesale to retail products for
corporate and individual customers. The different types of products and services are
designed to satisfy different groups of customers.

Wholesale products and Services include:

➢ Wire Transfer
➢ Automated Clearinghouse Transaction
➢ Bill Presentation and payment
➢ Cash Management

Retail Products and Services Include:

✓ Fund Transfer
✓ Downloading Transaction Information Facility
✓ Investment
✓ Presentation of Bill and Payment
✓ Loan Application from the web
✓ Balance Inquiry

3.5 Types of E- Banking

Informational
This is the most fundamental level of banking. This type of E- Banking does not allow its
customers to view or maintain their accounts. It also does not allow its customer and the
bank to communicate with each other. Rather it provides valuable information of its
products and services. This is used for marketing purposes only and can be provided either
by the bank or it can be outsourced to a third party. Appropriate controlling is required to
prevent unauthorized alterations to the bank’s server or website.

Communicative
At this particular level the E- Banking allows interactions between the bank’s systems and
the customers to an extent. It is limited to basic interactions such as inquiry of accounts,
loan applications, or updates of certain files (such as contact information). The risk is high
at this level as the servers may have a path to the bank’s internal networks. To prevent any
unauthorized attempt to access to the bank’s internal internet appropriate controls are
required.

Transactional
This is the most popular type of E- Banking and allows all the benefits of traditional
manual banking. This can allow its users to fully control their accounts. This includes
deposits, payments, withdrawals, transfer of funds etc. However very strong controlling is
required as the risks associated with unethical practices are the highest at this level. Proper
security measures are required to make E- Banking facilities useful and convenient in the
market place.

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3.6 The Risk Management of E- Banking
With the rise of internet and new technologies new threats have arisen. New challenges are
created for the banks senior management. The different types of risk of E- Banking are as
follows:

Credit Risk
E- Banking allows its users to apply for credit from anywhere around the world. There is a
risk to earnings or capital from a customer who has failed to meet his/her financial
obligations. It is difficult for banks to identify the identity of a customer. The bank will also
find difficult to verify the collateral against a particular loan. An individual can also
represent himself/herself as someone else and apply for a loan.

Interest Rate Risk

One of the risks of E- Banking is the risk to earnings or capital arising from movements in
interest rates. E- Banking can attract a large pool of deposits and loans. The internet can
allow customers to compare interest rates of different banks from the websites. This puts a
pressure on the interest rates. Often the bank needs to react with the changes of interest rates
in the market place. The interest rates can change due to the changes in maturities of
different investments, due the changing rate among different yields. The differences
between the timing of rate changes and the timing of the different cash flows can also affect
the interest risk.

Liquidity Risk
Sometimes banks face a difficulty of failing to meet its obligations. E- Banking increases
asset and deposit volatility. Some customers simply maintain their deposit accounts solely
on the basis of favorable interest rates, and they often bring cash out and deposit in other
banks if a more favorable rate is offered. In order to avoid such circumstances proper asset /
liability and loan management systems should be used.

Price Risk
One of the risks to earnings or capital arising from changes in the value of traded
portfolios of financial instruments is price risk. This is a risk which arises from activities
such as dealing, position taking in interest rate, foreign exchange, equity and commodity
markets. Banks are vulnerable to price risks if they create or expand the current deposit
brokering, loan sales or securitization programs. All of these activities can create price risks
for the banks if they carry out E- Banking activities.

Foreign Exchange Risks

This risk which arises when the assets of one currency are funded by liabilities in another
currency. Social, political an Economic development can intensify foreign exchange risks.
Customers of different countries can take speculative positions using the E- Banking. The
lower costs of transactions allow them to get involved in such activities. Sometimes banks
have higher holding transactions and investments in foreign currencies. This increases the
foreign exchange risks.

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Transactions risk
This risk to earnings and capital that arises from fraud, error, and the inability to deliver
services or products, or to maintain a competitive position or to manage information.
Transaction risk that may exist with E- Banking products if these are not properly planned
not properly implemented and not properly monitored. Banks which provide E- Banking
should always try to meet their customers’ expectations and satisfy them by ensuring them
that they have the right product mix and also have the capability to deliver accurate, timely
and reliable services .

Compliance Risk
The risks to earnings or capital that arises from the violations of , Non conformance with
the laws, rules, regulations , the prescribed practices an ethical standards of a country. This
risk can affect the reputation of a bank, business opportunities and positioning in the minds
of its customers. Banks should be careful in understanding and interpreting the laws of
different countries. Banks should also be careful in the privacy of customer and taking
customer consent wherever necessary.

Reputation Risk
This risks that has a current and prospective impact on earnings and capital that arises
from a negative public opinion. Reputational risk can affect the bank’s ability to create new
relationships with potential customers and to retain existing ones. Banks which have E-
Banking facilities should be concerned about the reputation risk as it can create a financial
loss for the bank diminish its customer base etc. The services of E- Banking should not have
a limited availability, poor response rate etc. Proper monitoring of the websites are required
so that hyperlinks of the website do not like to implicit endorsements of other websites.
These factors should be put into considerations as customers are likely to switch to other
companies if they find flaws in the E- Banking facilities of a particular bank.

Strategic Risk
This is risk of earnings or capital that arises from adequate business decisions and the
improper implementation of business decisions. Many bank managers and senior officers do
not understand how to implement the strategic and technical aspects of E- Banking. A
proper cost benefit analysis is required for this purpose. The organization should have the
proper structure, resources and expertise to carry out E- Banking.

Information Security Risk

One of the major risks to earnings and capital is information security risk. This arises when
the security process is not strong enough. This can expose the institution to malicious
hacker or insider attacks, viruses and other attacks. Data theft, fraud are other unethical
practice.

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3.7 Literature review
E-banking in today’s scenario is a very dynamic concept. It is a kind of self service
technology (Dixit & Datta,2010). Competition is the pushing force for the introduction of e-
banking. (Ziqi Liao and Michael Tow Cheung, 2003) .E-banking is delivery of new and
traditional banking products and services straight to customers using electronic, interactive
communication channels using computers. At a fundamental point, E- banking means
setting up of a web page by a bank to provide information about its products and services
their features, advantages, disadvantages, prices , duration and other details. On the other
hand, at an advanced level, it refers to providing facilities such as accessing accounts,
transferring funds, and buying financial products or services online, Making payments et
which is known as “transactional” E- banking (Sathye, 1999). E-banking includes the
systems that enable financial institutions, customers, individuals or businesses whether
small or big or medium scale to access accounts, carry out transactions or obtain
information on financial products and services through a public or private network using
Internet. (Vasanthakumari and Sheela rani, 2010)

E- Banking is the fastest growing service that banks can offer in order to gain and retain
new customers (Moody, 2002).

The rise of E-Banking is also due to its number of benefits for both the provider and the
customer as well. From the bank’s perspective these are mainly related to cost savings
(Sathye, 1999; Robinson, 2000) and E-Banking remains one of the cheapest and more
efficient delivery channels (see Pikkarainen et al., 2004).

The conception of electronic banking has been defined in a number of ways (Daniel, 1999).
According to Karjaluoto (2002) electronic banking is a construct that consists of several
channels of distribution. Daniel (1999) has defined electronic banking as providing banking
information, products and services by a bank to customers using a number of different
delivery platforms that can be used with different terminal devices such as a personal
computer, mobile phone, desktop software, telephone or digital television. Electronic
banking is also frequently known as internet banking or e-banking or PC banking or Home
banking or Phone Banking or tele banking.

Internet banking has changed the banking industry as well as banking relationships in a
positive way. E-banking provides banking products using internet including e-mails,
modems and various networks other networks like RBINET, NICNET, BRISKNET,
RBINET, BANKNET. E-banking services includes ATM’s, Electronic data interchange,
MICR, Cash dispensers, Automated ledger posting system, Electronic clearing system, Tele
banking, Anywhere Anytime Banking, Plastic money, E-cash, Smart cards etc and various
processing systems such as Real time processing, Batch processing system, Desktop
publishing etc.

However it is very complicated for banks as well as customers to decide a best and
appropriate approach to E-banking. (Dixit & Datta,2010)

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History Of E-banking In Bangladesh
Before E-banking In Bangladesh came into existence the dealings between customers and
banks was on one on one basis. The bank branch was involved in dealing with customers,
payments, clearing, loan applications, opening accounts etc. but the head office was
involved in overall clearing, size of branch, training, sanctioning of loans, keeping track of
accounts of customers and it does not deal directly with customers.

In the last 3 decades banking in Bangladesh has evolved through various phases. Due to
Globalization and Liberalization a new environment was seen in banks in the whole of the
world. Banks offered new services with latest technologies such as anywhere and anytime
banking, Tele banking, Internet banking etc.

The entry of foreign banks has pushed Bangladeshi banks to follow the path of latest
technologies so as meet threat of competition and to retain their customer base. The
growing competition and increased expectations has led to increase in awareness among
banks on and role of internet banking. E-banking has revolutionized banking industry and is
a product of innovation.

There is a prototype change in different parameters of transformation. Many factors both

internal and external are responsible for this shift. Competition from other bank group and
other global factors are forcing Bangladeshi banks to make these changes in their
functioning. E-banking services have replaced traditional services

To make a detailed perception plan for Computerization of banks and for extension of
automation to other areas such as funds transfer, e-mail, BANKNET, SWIFT, ATMs, E -
banking, etc.

A ‘Working Group’ on e-banking to examine different aspects of e-banking. This Group

mainly focused on three major areas of E – banking

(1) Technology and security issues,

(2) Legal issues and

(3) Regulatory and supervisory issues.

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 Chapter:4
E-Banking in Bangladesh

In this age of information technology, electronic communication is the cornerstone of a

country for its business, every government agency and economy. Modern banks play a
pivotal role in promoting economic advancement of a country. Electronic banking is a
modern banking system that delivers the new and traditional banking products and services
to the customers electronically. Electronic banking systems allow business parties or
individual to pay directly or to debit accounts via telecommunication systems. It provides
users, working with a home computer attached by network to their bank, with the ability to
authorize payments, reconcile accounts, and access a variety of other banking services with
the help of ATM (Automated Teller machine), visa card, master card, Q-cash, E-cash,
Ready cash, mobile, internet etc. This paper represents the scenario of electronic banking in
Bangladesh how it is up surging, makes our country with more state of the art facilities and
also highlights some drawbacks and recommendations of overcoming the drawbacks of
electronic banking.

In Bangladesh, the expansion of e-banking is beset with several infrastructural, institutional,

and regulatory constraints such as inadequate availability of reliable and secure
telecommunication infrastructure, absence of a backbone network connecting the whole
country, poor ICT penetration in the banking sector, lack of skilled manpower and training
facilities, absence of supportive policies, guidelines, rules and regulations relating to e-
transactions and the like. Despite the constraints, efforts by the Bangladesh Bank in
modernizing the country’s payment system and commitment by the government in building
‘Digital Bangladesh’ have brought competition among the scheduled banks to improve
banking services and rapidly adopt e-banking on a wider scale. This note provides a critical
overview on development of e-banking in Bangladesh and future prospects for better
understanding the issue that includes concept of e-banking, present status of scheduled
banks in adopting e-banking services, and prospects of e-banking in Bangladesh on the
basis of current trend in developing the ICT infrastructure in the country as well as ICT
penetration in the banking sector that follows some policy suggestions for BB, Govt. of
Bangladesh and scheduled banks so that optimum benefit through e-banking may be
obtained.

4.1 Introduction
Despite huge demand from the business community as well as the retail customers
particularly the urban customers, electronic banking (e-banking) in Bangladesh is still at a
budding state due mainly to a number of constraints such as unavailability of a backbone
network connecting the whole country; inadequacy of reliable and secure information
infrastructure especially telecommunication infrastructure; sluggish ICT penetration in
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banking sector; insufficient legal and regulatory support for adopting e-banking and so on.1
In Bangladesh, telephone connectivity is inadequate, cost of PCs are still beyond purchasing
capacity of most people, internet connection is costly, IT literacy is yet to reach satisfactory
level, banking sector lacks skilled IT personnel, and huge investment requirement for
establishing technology based banking services are prime drawbacks. In this backdrop, with
high potential of e-banking, Bangladesh Bank as the regulator of banking and financial
sector, government of Bangladesh, and the scheduled banks together need to come forward
with necessary initiatives for successful introduction of e-banking in Bangladesh.

The concept of e-banking includes all types of banking activities performed through
electronic networks. It is the most recent delivery channel of banking services which is used
for both business-to-business (B2B) and business-to-customer (B2C) transactions.
However, in true sense, e-banking includes activities like payment of bills and invoices,
transfer of funds between accounts, applying for a loan, payment of loan installments,
sending funds to third parties via emails or internet connections regardless of where the
client is located. The definition of e-banking varies amongst researchers partially because
electronic banking refers to several types of services through which a bank customer can
request information and carry out most retail banking services via computer, television or
mobile phone (Daniel 1999; Molls 1998; Sathye 1999). On the other hand, Burr (1996)
describes e-banking as an electronic connection between the bank and customer in order to
prepare, manage and control financial transactions. In brief, e-banking is not a banking
product or service; rather it explains the way transactions are conducted. Leow, Hock Bee
(1999) state that the terms PC banking, online banking, Internet banking, telephone banking
or mobile banking refers to a number of ways in which customer can access their banks
without having to be physically present at the bank branch. Therefore, e-banking covers all
these ways of banking business electronically.

Since e-banking offers some smart services benefiting both banks and customers compared
with traditional banking system, it has become imperative to make necessary room for the
scheduled banks to flourish e- banking. Among others, attractiveness of e-banking includes:
it lowers transaction cost; provide 24-hour services; ensure increased security and control
over transactions; reduces fraud risk; performs higher volume of transactions with less time;
increases number and volume of value payment through banks; allows remote transactions
facilities that replace physical presence of a customer in a bank branch and; increases
transaction speed and accuracy. On the other hand, traditional banking is time-consuming
and more costly and therefore, e-banking is replacing traditional banking all over the world.
In Bangladesh, e-banking facilities are yet to be fully developed although some technology
driven products and services have been in operation over the last few years. The existing
technology driven products and services offered by the traditional banks are ATM services,
debit card and credit card, transactions through POS terminals, inter-branch online
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transactions through individualized online closed network of individual bank, limited
customer services provided through internet and membership of SWIFT allowing scheduled
banks to conduct wireless transactions especially e-transactions.2 All these technology
based products and services have obviously unlocked the way to step toward e-banking.
Moreover, as a part of modernizing national payment and settlement system, Bangladesh
Automated Clearing House (BACH) that includes Bangladesh Automated Cheque
Processing System (BACPS), and Bangladesh Electronic Fund Transfer Network (BEFTN),
is being implemented under the “Remittance and Payments Partnership” (RPP) project of
the Bangladesh Bank funded by DFID-UK is expected to speed up the adoption of e-
banking as well.

In this context, it is important to recognize that the present state of technology based
banking in Bangladesh permits the banks to perform B2C transactions only whereas B2B
transactions are yet to be established. Successful implementation of e-banking will help to
conduct both B2C and B2B transactions.

4.2 Present Status of e-Banking

E-banking at per international standard is yet to develop in Bangladesh. At present, several
private commercial banks (PCBs) and foreign commercial banks (FCBs) offer limited
services of tele-banking, internet banking, and online banking facilities working within the
branches of individual bank in a closed network environment. As a part of stepping towards
e-banking, the FCBs have played the pioneering role with adoption of modern technology in
retail banking during the early 1990s whereas the state-owned commercial banks (SCBs)
and PCBs came forward with such services in a limited scale during the late 1990s.
Moreover, the banking industry as a whole, except for the four specialized banks (SBs),
rushed to offer technology based banking services during the middle of the current decade.
The existing form of e-banking that satisfies customer demand in banking activities
electronically throughout the world are PC banking or PC home banking that include online
banking, internet banking, mobile banking, and tele-banking.

PC banking or PC home banking

PC banking refers to use of personal computer in banking activities while under PC home
banking customers use their personal computers at home or locations outside bank branches
to access accounts for transactions by subscribing to and dialing into the banks’ Internet
proprietary software system using password. PC banking or PC home banking may be
categorized into two types such as online banking and Internet banking.

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Online banking
Transactions in online banking are performed within closed network for which the customer
use specialized software provided by the respective bank. International standard online
banking facilities are expanding in Bangladesh. At present, 29 scheduled banks offer any
branch banking facilities through their respective bank online network that provides
facilities like transaction through any branch under the respective bank online network;
payment against pay order or pay order encashment, demand draft encashment, opening or
redemption of FDR from any branch of the same bank; remote fund transfer, cash
withdrawal, cash deposit, account statement, clearing and balance enquiry within branches
of the same bank; and L/C opening, loan repayment facility to and from any branch of
respective bank under its own online network. Inter-bank transactions or transaction
between inter bank branches are yet to expand. Under the modernization program of the
National Payment and Settlement System, Bangladesh Automated Clearing House (which
includes Bangladesh Automated Cheque Processing System and Bangladesh Electronic
Fund Transfer Network) is scheduled to come into effect from September 2009 followed by
implementation of online banking at per international standard in near future.

Internet banking
Internet banking refers to the use of internet as a remote delivery channel for banking
services which permits the customer to conduct transactions from any terminal with access
to the internet. It is the WWW through which banks can reach their customers directly with
no intermediaries. Internet banking in true sense is still absent in Bangladesh. Only 7 out of
48 banks are providing some banking services via internet that include account balance
enquiry, fund transfer among accounts of the same customer, opening or modifying term
deposit account, cheque book or pay order request, exchange rate or interest rate enquiry,
bills payment, account summary, account details, account activity, standing instructions,
loan repayment, loan information, statement request, ,cheque status enquiry, stop payment
cheque, refill prepaid card, password change, L/C application, bank guarantee application,
lost card (debit/credit) reporting, pay credit card dues, view credit card statement, or check
balance. The core banking activities like fund transfer to third party, cross border
transactions and so on are still uncovered by internet banking offered by the scheduled
banks in Bangladesh.

Mobile banking
Mobile banking (also known as M-banking or SMS banking) is a term used for performing
balance checks, account transactions, payments etc. via a mobile device such as a mobile
phone. Mobile banking is most often performed via SMS or the Mobile Internet but can also
use special programs called clients downloaded to the mobile device. The standard package
of activities that mobile banking covers are: mini-statements and checking of account
history; alerts on account activity or passing of set thresholds; monitoring of term deposits;
Page | 25
access to loan statements; access to card statements; mutual funds/equity statements;
insurance policy management; pension plan management; status on cheque, stop payment
on cheque; ordering check books; balance checking in the account; recent transactions; due
date of payment (functionality for stop, change and deleting of payments); PIN provision,
change of PIN and reminder over the internet; blocking of (lost/stolen) cards; domestic and
international fund transfers; micro-payment handling; mobile recharging; commercial
payment processing; bill payment processing; peer to peer payments; withdrawal at banking
agent;3 and deposit at banking agent. Despite huge prospects, only a few banks adopted
mobile banking in Bangladesh during the last year.

Tele banking
Tele banking refers to the services provided through phone that requires the customers to
dial a particular telephone number to have access to an account which provides several
options of services. Despite huge potential, tele banking services have not been widened
enough in daily banking activities in Bangladesh. Only four banks so far provide a few
options of tele-banking services such as detail account information, balance inquiry,
information about products or services, ATM card activation, cheque book related service,
bills payment, credit card service and so on. Funds transfer between current, savings and
credit card account, stock exchange transactions etc are still inaccessible through tele-
banking in Bangladesh.

4.3 Prospects of e-Banking

E-banking is now a global phenomenon. Apart from the developed countries, the
developing countries are experiencing strong growth in e-banking. The Bank of Thailand
has created an industry payment body to involve other stakeholders, in particular from
commercial banks which take leading responsibility for the development of e-payment
system and technologies. Internet banking in Korea has increased at a rapid pace. Korea is
also leading in online brokerage and mobile banking. In Southeast Asia, internet banking is
also developing rapidly in Thailand, Malaysia, and Singapore and to a lesser extent in
Philippines (Mia et. al. 2007). In Nepal, ATMs are the most popular electronic delivery
channel for banking services but only a few customers are using internet banking facilities.
Among others, Nepal’s commercial banks have adopted Credit card, tele-banking, and
SMS-banking.

Remittance (Electronic Way)

Today’s fast changing electronic banking channels have massively improved the flow of
remittance across the world. In Bangladesh, Banks have grown up relations with many
international financial agencies, or intermediaries to master the inflow of remittance into the
country from the expatriates working in foreign countries. A few such operators working in
Bangladesh are: Western Union Money Transfer, Money Gram, XPress Money.
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Call Center
Call center is a streamlined customer interface and offers a range of banking services
through its call center agents. Customers are now getting improved services at a reduced
cost in an exciting manner. Available services at call center are:

Account related services

Balance inquiry, transaction inquiry, duplicate statement, cheque book request, ATM/Debit
card hot listing, and loan outstanding etc.

Product Information
Deposit accounts, Personal loan, Savings and current accounts, Debit card, Rates and tariff
Inquiry, exchange rates, lending rates, deposit rates, tariff etc.

Other Services
Complaints handling, account opening procedure, Bank Information, change request etc.

4.4 Status of Computerization and Electronic Banking System in Bangladesh

There are a total of 49 scheduled public and private banks in the country. Here there are
four state owned commercial banks (Nationalized Commercial Banks- NCBs) have 3496
branches, five specialized banks (DFIs) have 1311 branches, 30 local private commercial
banks (Private Commercial Banks-PCBs) have branches of the scheduled banks in the
country. The banking system of our country, depending on computerization can be
classified into three categories: (i.) Completely computerized (ii.) Partially computerized
(iii) Not computerized. Standard Chartered Grindlays Bank Ltd., City Bank NA, American
Express Bank, HSBC etc are completely computerized banks in our country. All privates
and state owned banks are partially computerized and not computerized.

The overall computer density in the banking sector is 1.64. For foreign commercial banks
(FCBs) the computer density is 45.34, where as for NCBs the ratio is only 0.41. The
specialized bank scenario is almost same as the NCBs, 0.43. On the other hand, private
commercial banks have comparatively higher ratio, 4.94. As a whole 81.81 percent bank
does not have any local area network (LAN), 30 percent have WAN (Wide Area Network)
but for some banks many branches are outside of WAN connectivity. At present, all of the
foreign banks of our country are using online banking system, they are invested a lot for
their automation banking services. For this reason, they are increasing market share every
year. They are the pioneer of implementing electronic banking systems in Bangladesh, but
now most of the private banks of our country are using electronic banking systems.
Recently a number of commercial banks of Bangladesh have become the member of
Belgium based Society for Worldwide Interbank Financial Telecommunication (SWIFT).
For international payment settlement 33 percent of banks are using now SWIFT. With the

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activation of the SWIFT system banks enjoy instant, low-cost, speedy and reliable
connectivity for L/C transmission, fund transfers, message communication and worldwide
financial activities. Earlier only foreign banks of this country were availing this facility.

4.5 Basic Components of Electronic Banking

An electronic banking system requires the following four components—
Banking system software
Communication Network
Delivery Channel
Switching system

1. Banking system software:

By using computer software package, banks can deal with the transaction of cash deposit,
withdrawals, bill payment, bill collection, salary and settlement of provident funds, making
accounting reports and statements etc. it does not require any use of papers to prepare
journals, ledgers, vouchers or notes.

2. Communication network:
It is an important issue in an online banking. In some cases dial-up telephone and in other
cases radio link is used for communication network.

3. Delivery channel:
These channels are used in corporate and retail banking, as well as to the individual or
family oriented banking. Modern banks and financial institutions are providing facilities
like balance reporting, accounts keeping, domestic and international payments, trade
financing, monitoring, netting, cash withdrawals and factoring and other sorts of services
related to these by using banksys, uroclear, swift etc.

4. Switching system:
To sort the transactions data in due places, e-banking network and various communication
tools in bank host computer requires the use of switching system. It helps to prepare various
reports and monitor the implementation of those.

4.6 Types of Electronic Banking

Electronic banking system provides customer services by means of various techniques or
products. Types of services offered are different for each single product. In the following
table, the basic types of electronic banking products are presented—-

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Automated Teller Machine (ATM)
Among the electronic fund transfer services, ATM is the most widely used and popular.
With this automated computing machine, clients can deposit or withdraw any time of 24
hours a day. With the help of this machine fund can be transferred from one account to
another and loan can be repaid. This automated machine can be established at the bank’s
lobby, at the clients business avenues, apartment complex, busy commercial areas, shopping
centers, factories etc. through ATM service, bank can render its retail services to the clients
door. Thus clients can save their time and the transactions seem to be easy to them. On the
other hand, banks earn their profit by providing services at lower cost.

Objectives of ATM

ATM has some objectives that make it popular:

➢ Reducing internal operational expenses and increasing profit by increasing the
market share are the main objectives of establishing ATM program. As ATM is an
automated system, so there is no need to engage any employee to provide deposit
and withdrawal services. As a result, periodic cost cutting can be possible.
➢ Create market in the domestic and foreign countries for their banks and to sustain in
the competition.
➢ To provide highly efficient services in this modern age of connectedness.
➢ To ensure the computational accuracy of the bank.

How does a customer operate ATM?

Banks supply plastic cards to their clients. Each card has its distinct number, client’s name,
and signature of the client with magnetic stripe. Each client has a PIN (Personal
Identification Number). During transaction, client put the card into the card input/ reader.
Then ATM instructs its client to input the PIN. PIN is to be input into the machine within a
specified time limit (Usually 30 to 90 seconds). If the client fails to input in due time or the
PIN is wrong, the machine will take the card inside of it and the card cannot be retrieved at
that time. Then clients have to go physically to the bank and get their cards if the authority
is satisfied with the cause of failure.

If the PIN is correct, the machine asks the client about the type of the service. If the clients
want to withdraw cash, then it asks the amount. The amount needs to be input with the
numerical keyboard. After typing the amount, client will press the “Enter key” and within
few seconds receive the cash, along with the card and transaction receipt and the machine
became prepared for the next transaction. Clients are required to change their transaction
types before the enter key. Because once the key is pressed, there is no other alternative to
change the transaction mode.

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Components of ATM:
An ATM mainly consists of two parts like input devices and output devices.

a) Input devices: the components of input devices of an ATM are as follows:

Card reader: The card reader captures the account information stored on the magnetic stripe
on the back of an ATM/debit or credit card. The host processor uses this information to
route the transaction to the cardholder’s bank.

Keypad: The keypad lets the cardholder tell the bank what kind of transaction is required
(cash withdrawal, Balance inquiry etc.) and for what amount. Also, the bank requires the
cardholders Personal Identification Number (PIN) for verification. Federal law requires that
the PIN block be sent to the host processor encrypted form.

b) Output devices:
An ATM has following four output components:
Speaker: The speaker provides the cardholder with auditory feedback when a key is
pressed.

Display Screen: The display screen prompts the cardholder through each step of the
transaction process. Leased line machines commonly use a monochrome or color CRT
(Cathode Ray Tube) display. Dial-up machines commonly use a monochrome or color
LCD.

Receipt printer: The receipt printer provides the cardholder with a paper receipt of the
transaction.

Cash dispenser: The heart of an ATM is the safe and cash-dispensing mechanism. The
entire bottom portion of most small ATMs is a safe that contains the cash.

Debit Card
Debit card is one of the systems of electronic fund transfer. It is called cash card or asset
card. Usually, in debit card, funds are directly debited to the clients deposit accounts. Debit
cards can be explained in the following ways-
Debit card is one of type of special plastic card issued by the banks or financial institutions
to the depositors, which hold magnetic coded number. The transactions can be operated as
required on the basis of the recognition of the magnetic coded number by the machine. The
holder of the debit card can easily operate Automated Terminal Based payment. Money can
be withdrawn from deposit account and fund can be easily transferred in electronic way
with this card.

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Credit Card
Credit card is a popular process in retail electronic banking. Generally, if the clients have
creditworthiness or have enough money in the deposit account, then the bank provides this
plastic cash to the clients. In spite of having debit balance in the deposit account, a client
can use this card. Generally, in a credit card, the loan account of a client is debited to
reimburse the transactions conducted through the credit card. This card is used for payment
of product or service or for withdrawing cash from some specific instructions.

Check Truncation
Check truncation is a process of service where, financial institutions do not return the
..

rejected and un-honored checks to clients. Financial institutions keep these checks with the
monthly statements and provide rejected checks along with monthly statements to the
clients.
Financial institutions keep rejected checks till 90 days. If the client finds any inconsistency
or difference between the statement provided by the financial institutions and his/her own
record, and then he/she can adjust the accounts by communicating with the institution
within the “preservation period”.

Home Banking
Through developed electronic fund transfer system, banks can offer its financial services to
the doors of customers. Banks at first launch telephone bill payments (TBP) process so that
clients can enjoy banking while staying at home. TBP is a fund transfer service by which
clients communicate with the financial institutions by phone and authorize them to collect
their (clients’) bills, because of which financial institutions debit their client’s account and
transfer the funds to the client directed payee account.

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 Chapter:5
E-Banking Services of Sonali Bank Limited
5.1 Digitalization status of Sonali Bank Limited

Branch Computerization:
1215 inland branches are now computerized.
Foreign Remittance:
Bank's own in-house software "Remittance Management System" (RMS+), having, among
others, the feature of paying foreign remittance instantly over the counter is being
implemented at all branches. This web based software provides digital services to the
expatriates through its unique advantage of sending confirmation message to the mobile
phone of the remitter/beneficiary.

ATM:
Sonali Bank Limited is a member of Q-Cash Consortium, National Payment Switch
Bangladesh (NPSB) and VISA. Customers can enjoy round the clock cash withdrawal
facility from 75 own ATM(s) and around 6500+ shared ATM booths across the country.
Sonali Bank recently launched Credit Card.

Online and SMS Banking :

At present 1215 branches of Sonali Banks are included in the Online Any Branch
Banking (ABB) network. SMS Banking service is runnig in 1213+ branches.
1215 branches are now in automation network within 1213 branches at home.
Total number of CBS running branch is 1213 and all CBS branches support sms banking
The bank is seriously working on connecting all branches in the Real-time Online Banking
network gradually. Branches having ABB facility are also rendering SMS banking
services.

5.2 Retail Automated Clearing House (ACH) Service

The Automated Clearing House is the electronic network which transfers and clears funds
between banking institutions on behalf of merchants and their customers.

ACH is integrated process of service by which payments of different financial institutions

are cleared and exchanged in electronic way. ACH is a computer based integrated system
and it is the distribution place of paperless transactions. Electronic payments are the
substitutes of papers and are recorded in machine-readable from in magnetic tape and one
account is debited and another is credited. The participants of ACH system are the members
of Automated Clearing House Association. ACH exchanges electronic transactions within a
specific geographical area.
Each transaction takes approximately 48 hours to clear, and we strongly suggest that
merchants wait five days from the initial transaction date before shipping any goods. This

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leaves two days to debit the consumer’s account, two days to deposit the funds into the
merchant’s account, and one day for the bank to post the transaction.

What is ACH?
Funds transfer system governed by the Rules of the National Automated Clearing House
Association, which provides for the inter-bank clearing of electronic entries for participating
financial institutions.

Wholesale Electronic Banking

Wholesale electronic banking is such banking systems where banking activities are
performed through inter- bank networks.
Generally, the following activities are performed in wholesale banking –

Cash Management
Recently banks and corporations are becoming conscious about cash management to ensure
available funds in response to the increase in money market rate. Cash management means.
➢ Raise the speeding up of collection of cheques and bills payable,
➢ Careful control of the cash disbursement,
➢ Monitoring of cash flows,
➢ Investment of the idle money.
➢ The Cash Management Department ensures that funds in transit move safely and on
time and maintains an optimum cash position. (The bursar staff processes student
receivables, which will be discussed in greater detail in subsequent sections of this
chapter.) The primary duties of the Cash Management Department include:
➢ Monitoring daily banking activity;
➢ Managing Automated Clearing House (ACH) transactions and wire transfer activity;
➢ Reconciling credit card transactions;
➢ Managing relationships with banks, credit card companies and check guarantee
services;
➢ Processing positive pay files that contain a listing of all checks that have been
presented to the bank for payment;
➢ Maintaining unclaimed property files;
➢ Verifying daily manual deposits;
➢ Tracking vouchers and providing backup to Accounts Payable;
➢ Processing vendor payment and student refund checks;
➢ Processing manual credit card refunds;
➢ Reviewing and approving mileage and travel reimbursement requests; and
➢ Maintaining an inventory of system wide depository bags and deposit tickets.

WIRE TRANSFER
Wire transfer is one of the most commonly used methods for transferring money from one
person to another. In order to make a wire transfer, a person needs to visit a bank or the cash
office. Wire transfer can be made from one bank account to another. In order to make a wire
transfer an individual needs to visit a bank and provide detailed order of making the wire
transfer. Banks require IBAN and BIC codes for knowing exactly where they need to send
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the money. Wife transfer is a process in which funds are transferred from sender to
receiver quickly and in due time. This type of transfer would be done within or outside of
the country.

Wire Transfer activities of electronic banking system include the following 4 stages
1) Payment ordering parties: The person here decides to transfer fund to the
recipient account
2) Payment ordering mechanism: In this stage, the sender instructs his bank to
transfer funds to the specific receiver’s accounts with the help of wire transfer.
(3) Payment processing and delivery: In this stage, bank transfers fund from one
account to another through fed wire, Bank wire, Chips, and SWIFT.
(4) Payment advising: After transferring funds, banks in this stage send messages to
the recipient. Banks use the following 4 networks to send messages of fund transfer.

a. Fed wire (The Federal Reserve Communication system)

b. Bank wire
c. Chips (The Clearing House Interbrain Payment Service)
d. SWIFT (The Society for Worldwide Inter-bank Financial Tele
Communication).

5.3 Corporate Clearing House

By clearing house, financial institutions clear and exchange their electronic payments. At
present, in developed countries more than half a million people are using ACH system in
paying their salary. Moreover, others are using ACH to serve other purposes. For
example, large insurance companies collect their insurance premiums by using the debit
entry of depository transfer check. Cash concentration strategy through ACH is very
popular and widely used service. Corporations are going for ACH service after considering
Financial the facilities (cost reduction, receipt of funds within one day, etc.) of the
collection of insurance premium and cash concentration strategy.

5.4 Other Types of Electronic Banking

The terms ‘PC banking’, ‘online banking’, ‘Internet banking’, ‘Telephone banking’ or
‘mobile banking’ refer to a number of ways in which customers can access their banks
without having to be physically present at the bank branch.
E-banking may be understood as term that covers all these ways of banking business
electronically (Leow, Hock Bee 1999).

Tele-banking
Tele-banking service is provided by phone. To access an account it is required to dial a
particular telephone number and there are several options of services. Options included-
• Checking account balance
• Funds transfer between current, savings and credit card accounts
• Bill payments
• Stock exchange transaction
• Receive statement via fax
• Loan payment information (http://www.csboak.com/telebank.htm)
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PC Banking
The increasing awareness of the importance of literacy of computer has resulted in
increasing use of personal computers through the entire world. Furthermore, incredible
plummet of cost of microprocessor has accelerated the use of computer. The term ‘PC
banking’ is used for banking business transacted from a customer’s PC. Using the PC
banking or home banking now customers can use their personal computers at home or at
their office to access their accounts for transactions by subscribing to and dialing into the
banks’ Intranet proprietary software system using password.

Types of PC Banking
Basically, there are two types of PC banking.
The first type is online banking, in which bank transactions are conducted within closed
networks. The customer needs specialized software provided by his bank. The second type
is Internet banking, which German banks have been offering since the mid-nineties,
although the only product they were offering at the time was information. Unlike closed
networks, Internet banking permits the customer to conduct transactions from any terminal
with access to the Internet.

Internet Banking
Internet banking would free both bankers and customers of the need for proprietary
software to carry on with their online banking transactions. Customer behavior is changing
rapidly. Now the financial service is characterized by individuality, independence of time
and place and flexibility.

These facts represent huge challenges for the financial service providers. So the Internet is
now considered to be a ‘strategic weapon’ for them to satisfy the ever-changing customers’
demand and innovative business needs.

Adequate legal framework and maximum security are the two essential factors for Internet
banking. The comprehensive security infrastructure includes layers of security from the
network to the browser, including sophisticated encryption that protects customers’ from
intrusion when they access the bank over the public network. Actually mobile banking is a
variation of Internet banking. Mobile banking is a good example of how the lines between
the various forms of e-banking are becoming gradually blurred. Due to the new
transmission technologies such as WAP (Wireless Application Protocol), portable terminal
like mobile phones, personal digital assistant (PDA) or small hand-held PCs are providing
bank customers with access to the Internet and thus paving the way to Internet banking
(Islam, Monirul, March 06, 2005).

It assures immense flexibility and makes the financial services independent of time and
place. However, the use of mobile banking is still in a nascent state. The slower
transmission speed of the WAP standard and the limited amount of information available
are just two of the factors inhibiting the use of those terminals.

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5.5 Advantage of E-Banking
➢ Swift transaction
➢ Digital service
➢ More security rather than traditional banking service
➢ Less time consuming for the transactions
➢ Twenty four hours service
➢ Less risky to carry cash.

5.6 Risks in Electronic Banking

With the burgeoning of transactional banking websites, regulatory agencies are increasingly
worried about the risks associated with e banking. The Basel Committee report on banking
supervision (1998) states that the agency “recognizes that along with the benefits, electronic
banking and electronic money activities carry risks for banking organizations, and these
risks must be balanced against the benefits”. Following is a review of some of the risks that
are inherent in e banking.

Operational Security Risk: External and internal security issues pose perhaps the greatest
threat to the growth of e banking. Banks also face the threat of viruses that can be placed in
the bank network, or a scenario where a hacker obtains confidential information and then
cyber-exhorts the bank with an offer to sell the information back to the bank.

Legal Risk: legal risks can arise due to violations of laws, rules, and regulations. In the
world of electronic commerce, where technology and business arc in a state of constant
flux, there is considerable ambiguity and uncertainty regarding legal rights. Banks involved
in electronic payments, such as stored value cards, must determine whether such
transactions impact reserve Requirements. Yet other risks of cross-border regulatory
compliance arise as the Internet blurs national boundaries for commerce and payments.

Reputation Risk: Any problems with either security or legal issues can significantly
impact the reputation of the bank. This is especially important in the banking industry
where public confidence is long touted as paramount. Reputation risk can range from
problems of customer dissatisfaction with online services to security breaches and fraud.
For instance, identity misrepresentation, or “spoofing”, where bank customer’s arc directed
toward a false site, can lead to an irreparable loss of trust between the customers and the
bank.

Traditional banking risks: Finally, the traditional banking risks such as interest rate risk,
credit risk, or liquidity risk can be exacerbated for a bank that has a significant online
lending and/or transactions presence. In May 2001, the Basel Committee has identified 14
risk management principles for electronic banking to help banking institutions expand their
existing risk oversight policies and processes to cover their e-banking activities, (Basel
Committee report on banking supervision, 2001, publications no. 82).

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 Chapter: 6
Data Analysis

6.1 Frequency
Bangladesh is deploying diversified planning in its each sector especially in financial
institutions providing financial services to the customer like banks. The financial services
provided by banks are crucial for the economic growth, employment and also in attraction
of foreign currency to the national economy. The country owned a well-developed domestic
banking system. The following is frequency distribution of banking sector as per description
Frequency Distribution
Table – I
Banks Frequency
Government 9
Privatized 4
Private 23
Foreign 7
Development Financial Institutions 7
Non-members 4
SME 2
Total 56

The research includes 9 public sectors, 4 privatized, 23 private, 7 foreign, 7 development

institutions, 4 non-members bank, 2 small and medium enterprises having the following
ranks of e-channels.
E-Transaction Level offered by Banks
Table – II
Factors Utilization
Level
(i) ATMs 1
(ii) Credit Cards 2
(iii) Internet-Banking 3
(iv) Mobile-Banking 4

Source: Survey of Banks operating in Bangladesh

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Percentage of banks operating as per category in Bangladesh are shown in the pie-chart-I

Services

Public
Privatized
Private
Foreign
DevelopFin.Instituti ons
NoN Member Banks

Pie-Chart – I

Results of e-Channels in Banking

Table – III
Services=> ATM Visa Cards Web sites M-Banking E- Banking
Bank
Public 56% 0% 88.80% 0% 60%
Privatized 100% 100% 100% 25% 100%
Private 65% 35% 95% 25% 70%
Non Member 25% 0% 75% 0% 75%
Bank

SME 0% 0% 100% 0% 100%

Results shows privatized banks are performing excellent in e-banking and utilizing the
information technology in the right way.
Therefore, they are ready to participate in digital competition. In leading technological
excellence, “Brac Bank initiated Bikash Mobile Banking”. It provides services using
information and communication technology to facilitate its customer based upon any where
any time methodology.

“Sonali Bank Limited offers ATM, Bill Payments, Virtual Banking and Mobil Banking. It
offers convenient options of making bill payments to different organization like IBBL,
DBBL. So, its e-banking services valuable time its pay bills facility.

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6.2 Level of satisfaction
1. E- Banking services are satisfactory to you?
2. By analyzing the above questions, I find the following things:

Category A:
1. 45% respondents said they use E-banking services for regular transaction. 25% said
they use service for the purpose of deposit and rest 30% use e banking services for
the purpose of withdrawal

Series 1
50% 45%
45%
40%
35% 30%
30% 25%
25%
20% Series 1
15%
10%
5% 0 0
0%
Regular Deposit Bills & tax Withdrawal E tender
transaction

2. 65% respondents’ marked ATM service is the most users friendly to them. 25%
thinks online banking is the most used friendly and 10% filled sms banking.

Services
0

25%

Online Banking
10% Sms Banking
65%
ATM Service
Others

3. 40% use e-banking services 1-3 times per week. 25% respondents use 4-6 times a
week. 25% use every day and rest 10% use 7-9 times per week.
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Category B:
1. 80% respondents want bank should develop smartphone mobile application.

Mobile Application
0

20%

Agree
Neutral
80% Disagree

2. 80% respondents want bank should keep separate computers for online banking
users.

0%
Separate Computer

20%

Agree
Neutral
Disagree

80%

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3. 80% user thinks that bank should open a 24 hours instant customer care support
facility especially for e banking user.

24 Hours Customer Care Service

Agree
Neutral
Disagree

Category C:

1. 90% wants better rates and low service charges for using e banking
services. 10% respondents find no problem with existing rates and charges.
2. There is no doubt that all the respondents marked that they want perfect
security.
3. 90% respondents want to get services very quickly.
4. 80% people want variety of features.
5. 65% wants convenience of services. 30% respondent s are neutral at this
question.

6. 85% people want user friendly services.

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 Important Neutral Not Important

10% 10% 15%

20%
30%

100%
90% 90% 85%
80%
65%

Category D:
30% people are satisfied with existing e-banking services. 35% respondents are neutral at
this question. But the rest 35% are dissatisfied with the services provided by Sonali Bank
Corporate branch.

E-Banking Services

35% 35% Neutral

Satisfied
Dissatisfied

30%

All customers have been positively affected by the new practice of online banking. Most of
the traditional tasks are now fully automated, providing greater comfort and ease. All the
services available from local banks can be located on one website. For instance, you can
easily access your account on the web. Besides simply accessing the account, you can also
request bank statements online.

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 Chapter:7
Findings, Recommendation and Conclusion

7.1 Findings:

Sonali Bank Limited faces few problems with ATM

1. Transaction Limit
2. Booths are Not Available in all places
3. Booths are in open place
4. Not available to restaurants and shopping center
5. ATM booths are not always UP
6. No Bangla Interface for mass people
7. No voice commanding option for blind people.
8. ATM’s fall short of money.

Problems relating to Branch Computerization

Server fails for long time

2. New software named CBS (core Banking Software) is now running for few
months. So if someone needs the statement or any data related to transaction more
than 4 moths then the previous software named Baxibank is needed.
Electronic token system is not in used.
Computers are not up to date.

Problems relating to SMS and Online Banking

SMS banking is not or rarely used.

SMS service is not available
Online Banking may have the risk of password fraudulent.
Online security is not as much powerful as the size of bank

Problems relating to Q cash network

1. This service is not available

2. Only designed braches deal with Q cash cards.
3. Most of Customers of SBL don’t know about this service because of poor
publicity.
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7.2 Recommendation:
Bank should establish more ATM booths
ATM booths should have enough money
Bangla interface should be introduced as soon as possible.
Branch office should not be connected with local broadband service. In this
case I suggest that the branches should use BTCL internet service.
SMS banking needs more development. Revival of this service is the demand
of time.
Head office should think about to develop smartphone mobile application
for providing better services.
E-banking services should try to mobilize more deposit schemes through
better marketing and innovative measures.
E-banking system should be more flexible.
All the statement relating to transaction should provide in the CBS software.
E banking should develop their communication among branches.
E-banking service should be according to the customer expectation and
satisfaction.
E-banking service should be resolve the entire problems very quickly that the
customer face in online transaction.
Marketing and sales force should be developed to attract customer.

7.3 Conclusion
The study clearly indicates that those who use E-banking features of Sonali Bank are not
very satisfied with the service. If the bank plans to expand the customer base of E-banking
they should focus more on speed, user friendliness, and safety and convenience, quick
response factors of E-banking. Proper web-hosting is required for this reason. Customers
should also be made aware of unethical practices like sniffing, spoofing, phishing, pharming
and other malicious software which can be used by hackers. Attention should also be given
in the encryption of the information which is exchanged between the users and the bank. So
the study is very beneficial for both Sonali bank and Bangladesh to get insights about E-
banking relations with customer satisfaction

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