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A

Project Report

On

E-BANKING

In partial fulfillment of requirements for the degree of

BBA

in

Banking and Insurance

SUBMITTED BY:

Savita Sharma

Gazal Punyani

Shadhvi Agarwal

Under the Guidance of

Mr. Balram Chaudhary

DEPARTMENT OF MANAGEMENT

JAYOTI VIDYAPEETH WOMENS UNIVERSITY

JAIPUR (RAJ.

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INTRODUCTIONE-banking nowadays is the one of the fastest developing trends in Indian banking and

is poised to take the banking sector a notch higher. No more falling in line in banks, no more

waiting tons of hours in the bank, no more days and weeks of waiting. All can be done with

one card, one gadget. Its easy, it works, and most importantly, people like it. But still, some

people are having a hard time using this kind of technology, mostly people who are used to do

things the old traditional way. With the use of advertising, people are now motivated to use E-

banking because again, it eliminates the hassle encountered when using the old process of

banking. The advancement of electronic banking or commonly known as e-banking, began

with the use of automatic teller machines (ATMs) and has included telephone banking, direct

bill payment, electronic fund transfer, online banking and other electronic transactions. For

many people, they believe that the e-banking will go to the direction of mobile banking. Also,

some people believe that online banking will be the most popular method in the future. In order

for users/customers to use their banks online services, they need to have a personal computer

and an Internet connection. Also, their personal computers will be their assistant who will

assist them in their transactions and services. Examples of those transactions are paying bills,

attaining information about accounts and loans, and etc.

E-Banking (an abbreviation for electronic banking) is an umbrella term for the process by

which a customer may perform banking transactions electronically without visiting a brick-

and-mortar institution. In simple terms, it does not involve any physical exchange of money,

but its all done electronically, from one account to another, using the internet. From a personal

computer, one can access bank account information, and perform many banking functions, like

transferring money, making a loan payment. Electronic banking, also known as electronic fund

transfer (EFT), uses computer and electronic technology as a substitute for checks and other

paper transactions.

In simple words, the systems that enable financial institution customers, individuals or

businesses, to access accounts, transact business, or obtain information on financial products

and services through a public or private network, including the Internet i.e. PC, ATM, Online

banking, etc. It means any user with a personal computer and a browser can get connected to

his bank -s website to perform any of the virtual banking functions. In Internet banking system

the bank has a centralized database that is web-enabled. All the services that the bank has

permitted on the internet are displayed in menu. Any service can be selected and further

interaction is dictated by the nature of service.

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The traditional branch model of bank is now giving place to an alternative delivery

channels with ATM network. Once the branch offices of bank are interconnected through

terrestrial or satellite links, there would be no physical identity for any branch. It would a

borderless entity permitting anytime, anywhere and anyhow banking.

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NEED FOR E-BANKING

Customer has to approach the branch in person, to withdraw cash or deposit a cheque or

request a statement of accounts. In true Internet banking, any inquiry or transaction is

processed online without any reference to the branch (anywhere banking) at any time.

Providing Internet banking is increasingly becoming a "need to have" than a "nice to have"

service. The net banking, thus, now is more of a norm rather than an exception in many

developed countries due to the fact that it is the cheapest way of providing banking services.

Banks have traditionally been in the forefront of harnessing technology to improve their

products, services and efficiency. They have, over a long time, been using electronic and

telecommunication networks for delivering a wide range of value added products and services.

The delivery channels include direct dial up connections, private networks, public networks

etc. and the devices include telephone, Personal Computers including the Automated Teller

Machines, etc. With the popularity of PCs, easy access to Internet and World Wide Web

(WWW), Internet is increasingly used by banks as a channel for receiving instructions and

delivering their products and services to their customers. This form of banking is generally

referred to as Internet Banking, although the range of products and services offered by

different banks vary widely both in their content and sophistication.

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EV L T OF E B

The st of technology in banking started with the use of punched card machines like

Accounting Machines or Ledger Posting Machines. The use of technology, at that time, was

limited to keeping books of the bank. It further developed with the birth of online real time

system and vast improvement in telecommunications during late1970s and 1980s.it resulted

in a revolution in the field of banking with convenience banking as a buzzword.Through

Convenience banking, the bankis carried to the doorstep ofthe customer.

The 1990s saw the birth of distributed computing technologies and Relational Data

Base Management System. The banking industry was simply waiting for these technologies.

Now with distribution technologies, one could configure dedicated machines called frontend

machines for customer service and risk control while communication in the batch mode

without hampering the response time on the front end machine.

Intense competition has forced banks to rethinkthe way they operated their business. They had

to reinvent and improve their products and services to make them more beneficial and costeffective. Technology in the form of E-banking has made it possible to find alternate banking

practices at lower costs. More and more people are using electronic banking products and

services because large section ofthe banks future customer base will be made up of computer

literate customer, the banks must be able to offerthese customer products and services that

Traditional

bankingE-Banking

Realtime

transactions,

integratedplatform,

alltimeaccess

Nuclear Charged

Personalizedservices,time

consuming,limited

access

Gunpowder

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allow them to do their banking by electronic means. If they fail to do this will, simply, not

survive. New products and services are emerging that are set to change the way we look at

money and the monetary system.

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FEATURES OF E-BANKING

y Transactional:performing a financial transaction such as an account to account transfer, paying a bill or

applications like applying for a loan, new account, etc.

Electronic Bill Presentment and Payment (EBPP) Funds transfer between customers own checking and savings accounts, or to another

customers account.

Investment purchase or sale. Loan application and transactions such as repayments.

yNon-transactional

:

Online statements, Check links, Chat, Co-browsing etc.

y Financial Institution Administration- features allowing financial institutions tomanage the online experience of their end users.

y ASP/ Hosting Administration features allowing the hosting company to administerthe solution across financial institution

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TYPES OF INTERNET BANKING OR E-BANKING

y Informational-This is the basic level of Internet banking. Typically, the bank has marketing

information about the banks products and services on a stand-alone server. The risk is

relatively low, as informational systems typically have no path between the server and the

banks internal network. This level of Internet banking can be provided by the banks or

outsourced. While the risk to a bank is relatively low, the server or web site may be vulnerable

to alteration. Appropriate controls therefore must be in place to prevent unauthorized

alterations to the banks server or web site.

y Communicative-This type of Internet banking systems and the customer. The interaction

between the banks system and the customer. The interaction maybe limited to electronic mail,

account enquiry, loan applications, or static file updates (name and address change). Because

these servers may have a path to the banks internal networks, the risk is higher with this

configuration than with informational systems. Appropriate controls need to be in the place to

prevent, monitor, and alert management of any unauthorized attempt to access the banks

internal networks and computer systems. Virus controls also become much more critical in this

environment.

y Transactional-This level of Internet banking allows customers to execute transactions. Since a

path typically exists between the server and the bank or outsourcers internal network, this is

the highest risk architecture and must have the strongest controls. Customer transactions can

include accessing accounts, paying bills, transferring funds etc.

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INTERNET BANKING ERSES TRADITIONAL BANKING

In spite of so many facilities that Internet banking offers us, we still seem to trust ourtraditional

method of banking and is reluctant to use online banking. But here are fewcases where Internet

banking will turn out to be a better option in terms of saving the money.'Stop payment' done

through Internet banking will not cost any extra fees but when done through the branch, the

bank may charge you Rs 50 per cheque plus the service tax.

Through Internet banking, customers can check the transactions at any time of the day, and as

many times as they want to. On the other hand, in a traditional method, onegetquarterly

statements from the bank and if they request for a statement at the requiredtime, it may turn out

to be an expensive affair. The branch may charge Rs 25 perpage, which includes only 30

transactions. Moreover, the bank branch would takeeight days to deliver it at the doorstep.

If the fund transfer has to be made outstation, where the bank does not have a branch, the bank

would demand outstation charges. Whereas with the help of online banking,it will be

absolutely free for you.As per the Internet and Mobile Association ofIndia's report on online

banking 2006, "There are many advantages of online banking. It is convenient, it isn't bound

by operational timings, there are no geographical barriers and the services can be offered at a

miniscule cost."

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INTERNET BANKING IN INDIA

The Reserve Bank of India constituted a working group on Internet Banking. The group

divided the Internet banking products in India into three types based on the levels of access

granted. They are:

y Information Only System:General purpose information like interest rates, branch location, bank products and their

features, loan and deposit calculations are provided in the banks website. There exist facilities

for downloading various types of application forms. The communication is normally done

through e-mail. There is no interaction between the customer and bank's application system.

No identification of the customer is done. In this system, there is no possibility of any

unauthorized person getting into production systems of the bank through internet.

y Electronic Information Transfer System:The system provides customer- specific information in the form of account balances,

transaction details, and statement of accounts. The information is still largely of the 'read

only' format. Identification and authentication of the customer is through password. The

information is fetched from the bank's application system either in batch mode or off-line. The

application systems cannot directly access through the internet.

y Fully Electronic Transactional System:This system allows bi-directional capabilities. Transactions can be submitted by the customer

for online update. This system requires high degree of security and control. In this

environment, web server and application systems are linked over secure infrastructure. It

comprises technology covering computerization, networking and security, inter-bank payment

gateway and legal infrastructure.

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E-BANKING PRODUCTS

y Automated Teller Machines (ATMs):These are cash dispensing machine, which are frequently seen at banks and other locations

such as shopping centres and building societies. Their main purpose is to allow customer to

draw cash at any time and to provide banking services where it would not have been viable to

open another branch e.g. on university campus.

An automated teller machine or automatic teller machine (ATM) is a computerized

telecommunications device that provides a financial institution's customers a method of

financial\ transactions in a public space without the need for a human clerk or bank teller. On

most modern ATMs, the customer identifies him or herself by inserting a plastic ATM card

with a magnetic stripe or a plastic smartcard with a chip that contains his or her card number

and some security information, such as an expiration date or CVC (CVV). Security is provided

by the customer entering a personal identification number (PIN). The plastic card is replacing

cheque, personal attendance of the customer, banking hours restrictions and paper based

verification.

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

withdrawals (or credit card cash advances) and check their account balances. Many ATMs also

allow people to deposit cash or checks, transfer money between their bank accounts, pay bills,

or purchase goods and services.

Some of the advantages of ATM to customers are:-

Ability to draw cash after normal banking hours

Quicker than normal cashier service

Complete security as only the card holder knows the PIN

Does not just operate as a medium of obtaining cash.

Customer can sometimes use the services of other bank ATMs.

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y Tele banking or Phone Banking:Telephone banking is relatively new Electronic Banking product. However it is fastly

becoming one of the most popular products.Customer can perform a number of transactions

from the convenience of their ownhome or office; in fact from anywhere they have access to

phone. Customers can:-

Check balances and statement information

Transfer funds from one account to another

Pay certain bills

Order statements or cheque books

Demand draft request

This facility is available with the help of Voice Response System (VRS). This system

basically, accepts only TONE dialled input. Like the ATM customer has to follow particular

process, initially account number and telephone PIN are fed for the process to start. Also the

VRS system provides the users within additional facilities such as changing existing password

with the new desired, information about new products, current interest rates etc.

y Mobile Banking:Mobile banking comes in as a part of the banks initiative to offer multiple channels banking

providing convenience for its customer. A versatile multifunctional, free service that is

accessible and viewable on the monitor of mobile phone. Mobile phones are playing great role

in Indian banking- both directly and indirectly. They are being used both as banking and other

channels.

y Internet Banking:The advent of the Internet and the popularity of personal computers presented both an

opportunity and a challenge for the banking industry. For years, financial institutions have used

powerful computer networks to automate millions of daily transactions; today, often the only

paper record is the customers receipt at the point of sale. Now that their customers are

connected to the Internet via personal computers, banks envision similar advantages by

adopting those same internal electronic processes to home use. Banks view online banking as a

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powerfulvalue added tool to attract and retain new customers while helping to

eliminatecostly paper handling and teller interactions in an increasingly competitive banking

environment. In India first one to move into this area was ICICI Bank. They startedweb based

banking as early as august 1997.

.

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SER ICES BY E-BANKING

y Bill payment service Customers can facilitate payment of electricity and telephone bills, mobile phone, credit card

and insurance premium bills as each bank has tie-ups with various utility companies, service

providers and insurance companies, across the country. To pay the bills, all one need to do is

complete a simple one-time registration for each biller. Customers can also set up standing

instructions online to pay their recurring bills, automatically. Generally, the bank does not

charge customers for online bill payment.

y Fund transfer Customers can transfer any amount from one account to another of the same or any another

bank. Customers can send money anywhere in India. After login to the account, customers

need to mention the payees account number, his bank and the branch. The transfer will take

place in a day or so, whereas in a traditional method, it takes about three working days. ICICI

Bank says that online bill payment service and fund transfer facility have been their most

popular online services.

y NEFT :-The NEFT stands for National electronic to the credit account with the other

participating bank using RBIs NEFT services. RBI act as the service provider and transfer thecredit to the other banks account. This system operates on a deferred Net Settlement (DNS)

basis which settles transaction in batches. In DNS, the settlement take place with all

transactions received till the particular cut- off time. For example currently NEFT operates in

hourly batches there are eleven settlements from 9 am to 7 pm on week days and five

settlements from 9 am to 4 pm on Saturdays. Any transaction initiated after a designated

settlement time would have to wait till the next designated settlement time.

y RTGS :-The acronym RTGS stands for Real Time Gross Settlement. RTGS system

is a funds transfer mechanism where transfer of money takes place from one bank to another

on a real time and on gross basis. This is the fastest possible money transfer system

through the banking channel. Settlement in real time means payment transaction is not

subjected to any waiting period. The transaction are settled as soon as they are processed.

Gross settlement means the transaction is settled on one to one basis without bunching with

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any other transaction. Considering that money transfer takes place in the books of RBI, the

payment is taken as final and irrevocable.

y Credit card customersWith Internet banking, customers can not only pay their credit card bills online but also get a

loan on their cards. If the customer lose credit card, they can also report lost card online.

y Railway pass-This is something that would interest all the aam janta. Indian Railways has tied up with ICICI

bank and they can now make railway passes for local trains online. The pass will be delivered

to the customers doorstep. But the facility is limited to Mumbai, Thane, Nashik, Surat and

Pune.

y Investing through Internet banking Customers can now open an FD online through funds transfer. Now investors with interlinked

Demat account and bank account can easily trade in the stock market and the amount will be

automatically debited from their respective bank accounts and the shares will be credited

in their demat account. Moreover, some banks even give the facility to purchase mutual

funds directly from the online banking system.

Nowadays, most leading banks offer both online banking and demat account. However if

customers have demat account with independent share brokers, then they need to sign a

special form, which will link two accounts.

y Recharging your prepaid phone Now customers can just top-up the prepaid mobile cards by logging in to Internet banking. By

just selecting the operator's name, entering the mobile number and the amount for recharge, the

phone is again back in action within few minutes.

y Shopping-With a range of all kind of products, customer can shop online and the payment is also

made conveniently through the account. Customer can also buy railway and air tickets through

Internet banking.

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The three broad facilities that e-banking offers are:

Convenience - Complete your banking at your convenience, in the comfort of your home or at

any place you can access the Net.

No more Qs - There are no queues at an online bank.

24/7 service - Bank online 24 hours a day, 7 days a week and 52 weeks a year.

Facilities through Internet banking

y Online applicationsConsumers can begin their banking relationship with an online application. No need to waste

time driving to a local branch to begin a banking relationship. Consumers can fill out and

submit electronically all necessary information needed to open a checking, savings account or

even a fixed deposit. When the application is submitted, the bank will mail a signature card for

its records and request one to mail or wire your initial funds. Some firms like American

Express enable customers applying for an account to fund their new account electronically via

a credit card or cheque from another banking institution. There are some firms such as

Wingspan and USA BancShares.com that enable customers to digitally sign their applications.

yAccount Access

Internet banking customers now have the ability to view their accounts online, including

checking, savings, loans and credit cards. No need to wait for your monthly statements or wait

in queue for the next available customer service representative. Account access enables

customers to view most recent activity on accounts, including cleared checks, deposits, ATM

transactions and balances as of previous days activities. Customers no longer have to hold on

to the cleared checks, since their bank will store them for them online.

y 24/7 customer serviceAlthough it is easy to yield to the temptation of allowing the Internet to replace expensive

branch personnel and overhead, many banks have found that an customer service staff ready at

any hour is well worth the expense. This can be especially true as customers transition to

online banking and need help learning the features. Offering telephone and email contacts is a

basic level of service. Offering live chat assistance is the exceptional level.

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y Access to old transactionsChoices made in designing the Internet interface may include how much history will be

available online. Some banks have chosen to show only 30-45 days, while others offer a

history of six months or a year.

y Categorize transactions and produce reportsFunctionality is king as online banking customers using these features enjoy a Web interface

that delivers the utility of a money management software application.

y Export your banking dataMost banks offering the management interface also allow easy downloading of financial

information into files that can be imported into Microsoft Money and Intuit's Quicken.

y Interactive guides & tools to help selection of proper productAlthough online, interactive guides through a bank's products, adds complexity to the

programming it also serves the bank by assisting potential customers in choosing new products

or services. Interactive Tools to design a savings plan, choose a mortgage, obtain online

insurance quotes all tied to applications These tools help remove some of the mystery involved

in so many account options and costs.

y Loan status and credit card account informationBank customers are familiar with reviewing their checking account information, but many

banks are adding the ability to look at one's loan status and credit card information as well.

Access to as many accounts held at the bank seems to be the goal.

y View digital copies of checksThis, again, is removing a down side to online banking. It makes images of checks available as

replacement for sending out cancelled checks or sheets of printed check images.

y Online forms for ordering checks, stop payment, etc.Convenience is popular and if a customer visits his or her online account frequently it only

makes sense to allow the ability to reorder checks or perform certain other commands through

the same interface.

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ADVANTAGES OF E-BANKING

y Convenience-Unlike the corner bank, online banking sites never close; theyre available 24 hours a day,

seven days a week, and theyre only a mouseclick away. With pressures on time and longer

travelling periods, more andmore people find it tiresome waiting in queues. People want

flexibility, andInternet banking offers just that.

y Ubiquity-If customers are out of state or even out of the country when a moneyproblem arises, they can

log on instantly to their online bank and take care ofbusiness, 24\7.

y Transaction speed-Online bank sites generally execute and confirmtransactions at or quicker than ATM

processing speeds.

y Efficiency-Customers can access and manage all of their bank accounts, including IRAs, CDs, even

securities, from one secure site.

y Effectiveness-Many online banking sites now offer sophisticated tools,including account aggregation, stock

quotes, rate alert and portfolio managing program to help them manage all of their assets more

effectively. Most are alsocompatible with money managing programs such as quicken and

Microsoftmoney.

y Cheaper alternative With increasing competition, it seems to be the costfactor that is driving banks to offer the

facility. The Internet is still a verycheap alternative to opening a physical branch, and most of

the push seems tobe coming from the supply side. The costs of a banking service through

theInternet form a fraction of costs through conventional methods.

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y From snob value to necessity-A couple of years ago, there was a belief evenamong bankers that customers opening new

accounts wanted the onlinebanking facility, just to "feel good" and very few of them actually

used theservices. Today, bankers believe that the trend from `nice to have' is changingto `need

to have'. The "snob value" of banking with an organisation that couldoffer service on theInternet has given way to a genuine necessity, he feels. "Itall depends on how busy a person

is."

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DISADVANTAGES OF INTERNET BANKING

y Start-up may take time-In order to register for your banks online program,customer will probably have to provide ID

and sign a form at a bank branch. If customers and their spouse wish to view and manage theirassets together online, one ofthem may have to sign a durable power of attorney before the

bank will displayall of their holdings together.

y Learning curves-Banking sites can be difficult to navigate at first. Plan toinvest some time and\or read the

tutorials in order to become comfortable inyour virtual lobby.

y Bank site changes-Even the largest banks periodically upgrade their onlineprograms, adding new features in

unfamiliar places. In some cases, customers mayhave to re-enter account information.

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SERVICES BY SBI

y Self account funds transfer across Indiay Third party transfers in the same branchy New account openingy Demand Draft requestsy New Cheque-book requesty Railway tickets bookingy Utility bill paymentsy LIC and other insurance premium paymenty SBI mutual funds Investmenty Credit card dues paymentsy Deposit taxesy Donations to religious inspirationsy Setting up SMS alerts for Transaction information

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GUIDLINES BY RBI FOR BANKS REGARDING E-BANKING

y All banks, who propose to offer transactional services on the Internet, should obtain priorapproval from RBI.

y All applications of banks should have proper record keeping facilities for legal purposes.y Banks should designate a network and database administrator with clearly defined roles as

indicated in the Groups report.

y Banks should introduce logical access controls to data, systems, application software,utilities, telecommunication lines, libraries, system software, etc. Logical access control

techniques may include user-ids, passwords, and smart cards.

y Banks should have proper infrastructure and schedules for backing up data. The backed-updata should be periodically tested.

y All applications of banks should have proper record keeping facilities for legal purposes.y Considering the legal position prevalent, there is an obligation on the part of banks not

only to establish the identity but also to make enquiries about integrity and reputation of

the prospective customer. Therefore, even though request for opening account can be

accepted over Internet, accounts should be opened only after proper introduction and

physical verification of the identity of the customer

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SUGGESTIONS FOR SAFE INTERNET BANKING

FOR CUSTOMER

As use of the Internet expands, more banks are using it to offer products and services to their

consumers. However, despite Web potential for safe and convenient new ways for financial

services and banking business, the scary truth is that online banking fraud is on the rise and

there are a number of ways it can be done.

Also, there are a number of ways how one can protect credit card and bank account if anyone

is transact over the internet.

Check the Bank

first, one have to confirm that an online bank is legitimate and that ones deposits are insured.

y Read key information about the bank posted on its Web site Most Banks Web sites have an "About Us" section that describes the institution. There can

be found useful info about history of the bank, name and address of the banks headquarters,

insurance, etc.

y Protect yourself from fraudulent Web sitesWatch out for copycat Web sites that deliberately use a name or Web address very similar to,

but not the same as, that of a real financial institution. The intent is to lure you into clicking

onto their Web site and giving your personal information, such as your account number and

password. Always check to see that you have typed the correct Web site address for your

bank before conducting a transaction.

Also, fraud can be done through the spam emails you receive every day. Although, the link in

those emails can be the same of your bank, always check the validity of the links. That means

that fraudulent links will be different from the bank links in the mail. that can be checked

by simple looking at the bottom of your email client (Gmail, Yahoo, or Outlook if you use it)

or using the Right Click/Properties option on link itself.

y Verify the banks insurance statusTo verify a banks insurance status, look for the familiar FDIC logo or the words "Member

FDIC" or "FDIC Insured" on the Web site.

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Choose and Protect ID and Password

After one choose bank; one will have to create an account. While ID is static and can be

change usually by the bank per request.

Its been recommended that customer should change their password frequently. Here are some

quick password tips:

1. Dont use the same password for everything2. Dont use a predictable password Dont use birthday, SSN, childs birthday or pets name.

Use something that makes sense and that one can easily remember.

Threats From Outside and Efficient Protection

As a technology-based platform, Internet banking comes with certain challenges in terms of

management of technology risks, as shown by a number of Internet banking fraud cases

reported all over the world. Some of those cases come in the form of fake websites that seek to

lure bank customers into divulging confidential personal information.

Other cases involve Trojan software or other infectious computer viruses and worms.

To put that simple, Trojan software is a code that is planted in a computer by a fraudster in

order to access the personal information of the computer user. The code may be planted in

various ways. Usually its when an unsuspecting user clicks on hyperlinks embedded in e-mails

or browses a website infected with malicious pop-up advertisements.

Once planted in a computer, Trojan may be activated when the user accesses certain

websites. Then it can capture keystrokes of the infected computer, which could lead to leakage

of sensitive personal information such as user IDs and passwords.

These are tips that every user of online banking should know:

y Bank customers should never access their Internet banking accounts through hyperlinksembedded in e-mails, suspicious pop-up windows, or Internet search engines.

y Users should be aware of opening unexpected e-mails with attachments or click onsuspicious links in the emails. Users should access their bank accounts by typing the

website addresses at the address bar of the browser, or even better, by bookmarking the

genuine website and using that function to access own accounts.

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y User should install personal firewall software and anti-virus and antispyware software, andregularly download the latest updates available. This software will be of great help in

defending the users from the attempts by fraudsters to plant harmful viruses or worms in

their personal computers.

For the end, there is a resume of the tips for safe internet banking:

y Keep computer secure and the access to it;y Don't send credit card or account details by e-mail;y Reject any email that asks to follow a link to website and input account details for

verification - even if the website looks authentic, its probably a fake replica

y Make sure when log out online account when finished - especially at work, libraries and netcafes.

y Deal only with established and reputable merchants;y Only make payments to secure websites.y One should ignore the "remember my password option" on banking and shopping sitesy Cancel any card that has been used fraudulently;y Read a company's privacy policy before buying online