Internet Banking

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internet banking in india

Transcript of Internet Banking

E-BANKING IN INDIA: A COMPARATIVE STUDY Dr. Tapas K. Bandhyopadhyay 1, Gargi Rajvanshi 2, Indrajit Dube 3 E-delivery channels has been used for Banking services and products, which has become increasingly popular in recent years. E-banking makes it possible to offer banking services around the world 24 hours a day. The Dependence on Technology with the necessary security and the cross border nature of transactions, involves additional risks for banks and new challenges for banking regulators and supervisors. This paper analyses the following issues : Development of E-banking, Proper Regulatory and supervisory authorities for E-banking, Position of E-banking in India and its comparison with that of USA, Malaysia and other well developed countries to draw out the fact with what is the status of e-banking in India, how we are going on, where we are lacking behind, causes for the problem and how things can be improved further for the efficient working of electronic banking in the larger interest of consumers as well in the interest of economy as a whole. Key Words: E-Banking, Regulatory System, Consumer, Economy, Technology E-Banking in India opened up with the liberalization in 1991 that marked the entry of foreign banks. They brought new technology with them. Banking products became more and more competitive. Hence, a need for differentiation of products and services was felt. The ICICI Bank had started online banking in 1996. Currently, 78% of its customer base is registered for online banking. 4 Between,1996 to 1998 this marked the adoption phase, while usage increased only in 1999, owing to lower ISP online charges, increased PC penetration and a tech-friendly atmosphere. It was in early 90s when the technology regarding computer and computer informatics come to the country. With this, a debate has been started to introduce these technological mechanism in every service provider sector may it be Telecom, Insurance and most importantly the BankingAssistant Professor, Rajiv Gandhi School of Intellectual property Law, Indian Institute of Technology, Kharagpur (W.B.) [email protected], Mobile number: +91-9475658924 2 PhD Research Scholar, Rajiv Gandhi School of Intellectual property Law, Indian Institute of Technology, Kharagpur (W.B.) [email protected], Mobile number: +91-9378438577 3 Assistant Professor, Rajiv Gandhi School of Intellectual property Law, Indian Institute of Technology, Kharagpur (W.B.), 4 Chinmay Sangoram ,E-Banking: An Overview. Available online at , [accessed Dec 2010]1

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sector. As a result, lots of efforts were made by the government in the banking sector and finally in year 2000 it became possible to inaugurate the E-Banking in the Indian Banking System. Though as far as the International scenario is concerned, Estonia 5 is internationally renowned for being a pioneer in the adaptation to new banking technologies. Thus, it can be made very clear that introduction of E-banking concept in the Banking field is not only to facilitate the transactions of the customers through the banking means but also in expanding their economic interests through an advanced technologically equipped medium. India never remains an exception in adopting new and well advanced technologies in every sphere be it polity, social, economic and others. Though somehow late, but India has also adopted EBanking in its Banking Sector as a means of making its Banking Sector more and more professional, reachable and feasible at par with the world. INTRICACIES IN E-BANKING The beginning of the Information Technology age has been motivational for the business environment and breaking out innovative and unconventional ways of doing transactions, communications business and other transaction through electronic mode. One of the latest outcomes of this E-transaction is E-Banking. Banking sector has been reengineering it to adopt the change and to be in the race of globalization. Thus it has become imperative for the banking industry to better gauge the E-Banking phenomenon. This study painstakingly attempts to bestow the process of utilizing E-banking in India under the questions: 1) To know about E-banking 2) To analyze the position of E-banking in India 3) To compare position of India with that of USA and Malaysia as to E-Banking 4) To find out the ways and methods to make E-Banking more advantageous, workable, effective, transparent as well as industrious. With this we will be giving our core attention to a study which compares the establishment and functioning of E-banking in India with that of the other developed countries which make us easy5

African Journal of Business Management Vol.3 (6), pp. 248-259, June 2009,Available online at 1993-8233 , [accessed Dec 2010]

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to find out that where we people are lacking and what would be the factors to remove loopholes from Indian E-banking service.

WHAT IS E-BANKING ALL ABOUT:Online banking allows people access all of their account through a secure bank-created website. Depending on the services chosen, a customer may simply be able to view the day-to-day activity of every account they have with a bank. 6 E-banking means any user with a personal computer and a browser can get connected to his banks website to perform any of the virtual banking functions. 7 In internet banking system the bank has a centralized database that is web-enabled. All the services that the bank has permitted on the internet are displayed in menu. Any service can be selected and further interaction is dictated by the nature of service. The traditional branch model of bank is now giving place to an alternative delivery channels with ATM network. 8 Once the branch offices of bank are interconnected through terrestrial or satellite links, there would be no physical identity for any branch. It would a borderless entity permitting anytime, anywhere and anyhow banking. The network which connects the various locations and gives connectivity to the central office within the organization is called intranet. These networks are limited to organizations for which they are set up. SWIFT is a live example of intranet application. ELECTRONIC BANKING IN INDIA: A REGULATORY PERSPECTIVE Before dealing with the position of Internet banking in India we have to keep one thing in our mind clearly that Internet banking is a part of E-banking. E-banking is genus and Internet Banking is its species. The Reserve Bank of India has 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.


Your Source of knowledge.2009.The Pros and Cons Of Online Banking. Available at [accessed Dec 2010]7

Economy Section. Internet Banking (E-Banking) Available at [accessed Dec 2010] 8 Andrea Schaechter, 2002. Issues in E-banking: An Overview. Washington D.C. IMF Policy Discussion Paper


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They are: 1) Information Only System 2) Electronic Information Transfer System: 3) Fully Electronic Transactional System9 There are various popular modes through which we can conduct the E-banking process in our day today life. These models include Automated Teller Machine (ATM), Credit Cards/Debit Cards, and Smart cards. There are other services as well which a customer can avail through the medium of E-banking. These services includes Bill payment service, Fund transfer, Credit card customers, Railway pass 10, Investing through Internet banking, Recharging your prepaid phone and Shopping etc. POSITION OF E-BANKING IN INDIA: A CRITICAL ANALYSIS E-banking is a generic term for delivery of banking services and products through electronic channels, such as the telephone, the internet, the cell phone, etc. The concept and scope of Ebanking is still evolving. It facilitates an effective payment and accounting system thereby enhancing the speed of delivery of banking services considerably. While E-banking has improved efficiency and convenience, it has also posed several challenges to the regulators and supervisors. Several initiatives taken by the government of India, as well as the Reserve Bank of India (RBI), have facilitated the development of E-banking in India 11. The government of India enacted the IT Act, 2000 12, which provides legal recognition to electronic transactions and other means of electronic commerce. The RBI has been preparing to upgrade itself as a regulator and supervisor of the technologically dominated financial system. It issued guidelines on risks and control in computer and telecommunication system to all banks, advising them to evaluate the risks inherent in the systems and put in place adequate control mechanisms to address these risks. The existing regulatory framework over banks has also been extended to E-banking. It covers various issues that fall within the framework of technology, security standards, and legal and regulatory issues.


Banking. Internet banking (or E-banking). [accessed Jan 2011] These E-railway pass are available only in some cities. 11 RBI Guidelines on E-Banking. Internet Banking in India Guidelines .DBOD.COMP.BC.No.130/ 07.03.23/ 2000-01 June 14, 2001 12 Information Technology Act, 2000: Recently got amended in Year 2008.10

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As far as the position of E-banking is concerned we will study the position in the following five heads: Feasibility of E-banking in India, Challenges before India as to E-banking, Future of E-banking, Legal Regul