nilesh 1111
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UNIVERSITY OF MUMBAI
BANKING INDUSTRY
Bachelor of commerce
Banking & Insurance
Semester V
( Academic Year )
2009-2010
Submitted By
NILESH .C. SONI
Roll No. 51
LAXMI CHARITABLE TRUST
SHRI CHINAI COLLEGE OF COMMERCE & ECONOMICS
OLD NAGARDAS ROAD, ANDHERI (EAST), MUMBAI - 400069
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BANKING INDUSTRY
UNIVERSITY OF MUMBAI
BANKING INDUSTRY
Bachelor of commerce
Banking & Insurance
Semester V
Submitted
In partial fulfillment of the requirements for the of Degree of
Commerce Banking & Insurance
BY
NILESH .C. SONI
Roll No. 51
LAXMI CHARITABLE TRUST
SHRI CHINAI COLLEGE OF COMMERCE & ECONOMICS
OLD NAGARDAS ROAD, ANDHERI (EAST), MUMBAI - 400069
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CERTIFICATE
This is to certify that Mr Nilesh Soni of B.com Banking and InsuranceSemester V (2009-10) has successfully completed the project onBANKING INDUSTRY under the guidance of Prof. Mikita Shah
Course Co-ordinator Principal
Project Guide/ Internal Examiner
External Examiner
DECLARATION
I Mr Nilesh Soni the student of B.com Banking & Insurance Semester V
(2009-10) hereby declare that I have completed the Project onBANKING INDUSTRYThe information submitted is true and original to the best of myknowledge.
Signature StudentNilesh Soni
Roll no. 51
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Acknowledgement
Initially it was a thought,
Then it was an excitement,
Later it became a challenge,
And now it is a Success.
Entrance, hard work gradual progress and existing year that is how
have reached this level and now I stand at the aside world.
So, first of all I would like to thank our college Shri Chinai
College of Commerce & Economics and principal of the college
Mrs.Malini Johri for this continuous faith and University of Mumbai
who has given this opportunity to do this project in this curriculum. I
would also like to thank co-coordinator Prof. Nishikant Jha and my
project guide Prof. Mikita Shah for being every supportive and helped
me to complete this project. I would also like to thank our librarian for
providing with the book .So, this goes all those knowingly orunknowingly been a great support for me to complete the price of work.
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TABLE OF CONTENTS
Sr.No TOPIC Pg.No1 INTRODUCTION OF BANKS 7-8
2OVERVIEW: IT IN BANKING
9-10
3 HISTORY OF BANKING 11-12
4 BENEFITS OF ECONOMY 13-14
5 IT PERSPECTIVE 15
6 BANKING INSTITUTIONS 16-19
7 BANKING SERVICES 20-23
8 BANKING IN OTHER COUNTRIES 24-28
9 INTERNATIONAL BANKING 29-30
10 BANK NATIONALISATION
&PUBLIC SECTOR BANKING
31-32
11 WORKING CONDITIONS 33
12 EMPLOYMENT 34
13 OTHER OCCUPATIONS 35-36
14 ONLINE BANKING 37-39
15 ELECTRONIC BANKING 40-46
16 MOBILE BANKING 47-48
17 SMS BANKING 49-5018 AUTOMATED TELLER MACHINE 51-53
19 CONCLUSION 54-55
20 BIBLIOGRAPHY 56
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1.INTRODUCTION OF BANKS
Banking, the business of providing financial services to consumers
and businesses. The basic services a bank provides are checking
accounts, which can be used like money to make payments and purchase
goods and services; savings accounts and time deposits that can be used
to save money for future use; loans that consumers and businesses can
use to purchase goods and services; and basic cash management services
such as check cashing and foreign currency exchange. Four types of
banks specialize in offering these basic banking services: commercial
banks, savings and loan associations, savings banks, and credit unions.
A broader definition of a bank is any financial institution that
receives, collects, transfers, pays, exchanges, lends, invests, or
safeguards money for its customers. This broader definition includes
many other financial institutions that are not usually thought of as banks
but which nevertheless provide one or more of these broadly defined
banking services. These institutions include finance companies,
investment companies, investment banks, insurance companies, pension
funds, security brokers and dealers, mortgage companies, and real estate
investment trusts. This article, however, focuses on the narrower
definition of a bank and the services provided by banks in Canada and the
United States. (For information on other financial institutions, see
Insurance; Investment Banking; and Trust Companies.)
Banking services are extremely important in a free market
economy such as that found in Canada and the United States. Banking
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services serve two primary purposes. First, by supplying customers with
the basic mediums-of-exchange (cash, checking accounts, and credit
cards), banks play a key role in the way goods and services are
purchased. Without these familiar methods of payment, goods could only
be exchanged by barter (trading one good for another), which is
extremely time-consuming and inefficient. Second, by accepting money
deposits from savers and then lending the money to borrowers, banks
encourage the flow of money to productive use and investments.
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2.OVERVIEW : IT IN BANKING
A banker or bank is a financial institution whose primary activity is
to act as a payment agent for customers and to borrow and lend money.
This is a commercial institution that keeps money in accounts for
individuals or organizations, makes loans, exchanges currencies, provides
credit to businesses, and offers other financial services.
Entry of new banks resulted in a paradigm shift in the ways of
banking in India. The growing competition, growing expectations led to
increased awareness amongst banks on the role and importance of
technology in banking. The arrival of foreign and private banks with their
superior state-of-the-art technology-based services pushed Indian Banks
also to follow suit by going in for the latest technologies so as to meet thethreat of competition and retain their customer base. Indian banking
industry, today is in the midst of an IT revolution. Information
Technology has basically been used under two different avenues in
Banking. One is Communication and Connectivity and other is Business
Process Reengineering. Information technology enables sophisticated
product development, better market infrastructure, implementation ofreliable techniques for control of risks . In view of this, technology has
changed the contours of three major functions performed by banks, i.e.,
access to liquidity, transformation of assets and monitoring of risks. The
Software Packages for Banking Applications in India had their
beginnings in the middle of 80s, when the Banks started computerising
the branches in a limited manner. The early 90s saw the plummeting
hardware prices and advent of cheap and inexpensive but high-powered
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PCs and servers and banks went in for what was called Total Branch
Automation (TBA) Packages. The middle and late 90s witnessed the
tornado of financial reforms, deregulation, globalization etc coupled with
rapid revolution in communication technologies and evolution of novel
concept of 'convergence' of computer and communication technologies,
like Internet, mobile / cell phones etc.
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3. HISTORY OF BANKING
A) Origins of Banking
Many of todays banking services were first practiced in ancient
Lydia, Phoenicia, China, and Greece, where trade and commerce
flourished. The temples in Babylonia made loans from their treasuries as
early as 2000 bc. The temples of ancient Greece served as safe-deposit
vaults for the valuables of worshipers. The Greeks also coined money and
developed a system of credit. The Roman Empire had a highly developed
banking system, and its bankers accepted deposits of money, made loans,
and purchased mortgages. Shortly after the fall of Rome in ad 476,
banking declined in Europe. The increase of trade in 13th-century Italy
prompted the revival of banking. The moneychangers of the Italian statesdeveloped facilities for exchanging local and foreign currency. Soon
merchants demanded other services, such as lending money, and
gradually bank services were expanded.
The first bank to offer most of the basic banking functions known
today was the Bank of Barcelona in Spain. Founded by merchants in
1401, this bank held deposits, exchanged currency, and carried out
lending operations. It also is believed to have introduced the bank check.
Three other early banks, each managed by a committee of city officials,
were the Bank of Amsterdam (1609), the Bank of Venice (1587), and the
Bank of Hamburg (1619). These institutions laid the foundation for
modern banks of deposit and transaction.
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For more than 300 years, banking on the European continent was
in the hands of powerful statesmen and wealthy private bankers, such as
the Medici family in Florence and the Fuggers in Germany. During the
19th century, members of the Rothschild family became the most
influential bankers in all Europe and probably in the world. This
international banking family was founded by German financier Mayer
Amschel Rothschild (1743-1812), but it soon spread to all the major
European financial capitals.
A1) a)) Bank of North AmericaThe first important bank in the United States was the Bank of
North America, established in 1781 by the Second Continental Congress.
It was the first bank chartered by the U.S. government. Other banks
existed in the colonies prior to this, most notably the Bank of
Pennsylvania, but these banks were chartered by individual states. In
1787 the Bank of North America changed to a Pennsylvania charterfollowing controversy about the legality of a congressional charter. Other
large banks were chartered in the early 1780s by the various states,
primarily to issue paper money called bank notes. These notes
supplemented the coins then in circulation and assisted greatly in
business expansion. The banks were also permitted to accept deposits and
to make loans.
Because there were no minimum reserve requirements on deposits,
bank notes were secured by the assets of the issuing banks. Most assets
took the form of business loans. The only restraint on a banks ability to
extend loans was the publics unwillingness to accept its notes.
Acceptance of a banks notes usually was determined by the banks
record in exchanging the notes for coins when called upon to do so.
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4. BENEFITS OF ECONOMY
The deposit and loan services provided by banks benefit an economy
in many ways. First, checking accounts, because they act like cash, make
it much easier to buy goods and services and therefore help both
consumers and businesses, who would find it inconvenient to carry or
send through the mail huge amounts of cash. Second, loans enable
consumers to improve their standard of living by borrowing money to
purchase cars, houses, and other expensive consumer goods that they
otherwise could not afford. Third, loans help businesses finance plant
expansion and production of new goods, and therefore increase
employment and economic growth. Finally, since banks want loans
repaid, banks choose borrowers carefully and monitor performance of a
companys managers very closely. This helps ensure that only the best
projects get financed and that companies are run efficiently. This creates
a healthy, efficient economy. In addition, since the owners (stockholders)
of a company receiving a loan want their company to be profitable and
managed efficiently, bankers act as surrogate monitors for stockholders
who cannot be present on a regular basis to watch the companys
managers.
The checking account services offered by banks provide an additional
benefit to the economy. Because checks are widely accepted as payment
for goods and services, the checking accounts offered by banks are
functionally equivalent to real moneythat is, currency and coin. When
banks issue checking accounts they, in effect, create money without the
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federal government having to print more currency. Under government
regulations in many countries, banks must hold a reserve of paper
currency and coin equal to at least 10 percent of their checking account
deposits. In the United States banks keep these reserves in their own
vaults or on deposit with the U.S. governments central bank known as
the Federal Reserve, or the Fed. If someone wants a $10 loan, the bank
can give that person a $10 checking account with only $1 of currency in
its vault. As a result U.S. banks can create at least $10 of checking
account money for every $1 of real money (currency or coin) actually
printed by the federal government. This arrangement, which allows extra
deposit money to be created by banks, is referred to as a fractional reserve
banking system.
Because banks attract large amounts of savings from depositors, banks
can make many loans to many different customers in various amounts
and for various maturities (dates when loans are due). Banks can thereby
diversify their loans, and this in turn means that a bank is at less risk if
one of its customers fails to repay a loan. The lowering of risk makes
bank deposits safer for depositors. Safeties encourage even more bank
deposits and therefore even more loans. This flow of money from savers
through banks to the ultimate borrower is called financial intermediation
because money flows through an intermediarythat is, the bank.
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5. IT PERSPECTIVEIndian Banking Industry, Today Is In The Midst Of an It
Revolution. A Combination Of Regulatory And Competitive Reasons
Have Led To Increasing Importance Of Total Banking Automation In
The Indian Banking Industry. As On 31
st
March 2002, Out Of The Over50,000 Branches Of Public Sector Banks, Only 11,578 Branches Have
Been Fully Computerized. Lack Of Computerization Among Over 50,000
Branches Of Public Sector Banks Provides A Huge Market For Players In
It Industry.
The Indian Banking System Has Been Operating Successfully
Over The Last Two Centuries. It Was In 50s That The Government Of
India Evolved The Policy Of Using The Banking system as an instrument
of economic development and social change and, as a first step,
nationalized the then Imperial Bank of India and re-christened it as State
Bank of India.(SBI). The SBI was given the mandate of a massive branch
expansion programme and was asked to open branches in far flung
unbanked areas and assist in their development. This resulted an
explosion of sorts in volumes of transactions and posed a severe strain on
all resources. More particularly, the inter-branch reconciliation became
one area that defied manual handling. It was in this background that the
first steps towards mechanization were taken by installing what was
known as ICL 40-column punched card equipment in late 50s/earlsixties
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in the Calcutta office of the SBI for the reconciliation of inter-branch
transactions.
6. BANKING INSTITUTIONS
Banking institutions include commercial banks, savings and loan
associations (SLAs), savings banks, and credit unions. The major
differences between these types of banks involve how they are owned and
how they manage their assets and liabilities. Assets of banks are typically
cash, loans, securities (bonds, but not stocks), and property in which the
bank has invested. Liabilities are primarily the deposits received from the
banks customers. They are known as liabilities because they are still
owned by, and can be withdrawn by, the depositors of the financial
institution.
6.1) Commercial Banks
Commercial banks are so named because they specialize in loans to
commercial and industrial businesses. Commercial banks are owned by
private investors, called stockholders, or by companies called bank
holding companies. The vast majority of commercial banks are owned by
bank holding companies. (A holding company is a corporation that exists
only to hold shares in another company.) In 1984, 62 percent of banks
were owned by holding companies. In 2000, 76 percent of banks were
owned by holding companies. The bank holding company form of
ownership became increasingly attractive for several reasons. First,
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holding companies could engage in activities not permitted in the bank
itselffor example, offering investment advice, underwriting securities,
and engaging in other investment banking activities. But these activities
were permitted in the bank if the holding company owned separate
companies that offer these services. Using the holding company form of
organization, bankers could then diversify their product lines and offer
services requested by their customers and provided by their European
counterparts. Second, many states had laws that restricted a bank from
opening branches to within a certain number of miles from the banks
main branch. By setting up a holding company, a banking firm could
locate new banks around the state and therefore put branches in locations
not previously available.
Commercial banks are for profit organizations. Their objective is
to make a profit. The profits either can be paid out to bank stockholders
or to the holding company in the form of dividends, or the profits can be
retained to build capital (net worth). Commercial banks traditionally have
the broadest variety of assets and liabilities. Their historical specialties
have been commercial lending to businesses on the asset side and
checking accounts for businesses and individuals on the liability side.
However, commercial banks also make consumer loans for automobiles
and other consumer goods as well as real estate (mortgage) loans for both
consumers and businesses.
6.2) Savings and Loan Associations
Savings and loan associations (SLAs) are usually owned by
stockholders, but they can be owned by depositors as well. (If owned by
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depositors, they are called mutuals.) If stock owned, the goal is to earn
a profit that can either be paid out as a dividend or retained to increase
capital. If owned by depositors, the objective is to earn a profit that can
be used either to build capital or lower future loan rates or to raise future
deposit rates for the depositor-owners. Until the early 1980s, regulations
restricted SLAs to investing in real estate mortgage loans and accepting
savings accounts and time deposits (savings accounts that exist for a
specified period of time). As a result, historically SLAs have specialized
in savings deposits and mortgage lending.
6.3) Savings Banks
Traditional savings banks, also known as mutual savings banks
(MSBs), have no stockholders, and their assets are administered for the
sole benefit of depositors. Earnings are paid to depositors after expenses
are met and reserves are set aside to insure the deposits. During the 1980s
savings banks were in a great state of flux, and many began to provide the
same kinds of services as commercial banks.
Since 1982 savings banks have been permitted to convert to SLAs.
SLAs also may convert to savings banks. Both SLAs and MSBs can now
offer a full range of financial services, including multiple savings
instruments; checking accounts; consumer, commercial, and agricultural
loans; and trust and credit card services. See also Savings Institutions.
6.4) Credit Unions
Credit unions are not-for-profit, cooperative organizations that are
owned by their members. Their goal is to minimize the rate members pay
on loans and maximize the rate paid to members on deposits. Whatever
surplus is earned is retained to build the capital of the credit union.
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Members must share a common bond. That bond is typically employment
(members all work for the same employers) or geography (members all
live in the same geographic area). Historically, credit unions specialized
in providing automobile and other personal loans and savings deposits for
their members. However, more recently credit unions have offered
mortgage loans, credit card loans, and some commercial loans in addition
to checking accounts and time deposits.
Credit unions, SLAs, and savings banks help encourage thriftiness
by paying interest to consumers who put their money in savings deposits.
Consequently, credit unions, SLAs, and savings banks are often referred
to as thrift institutions.
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7. BANKING SERVICES
Commercial banks and thrifts offer various services to their
customers. These services fall into three major categories: deposits, loans,
and cash management services.
7.1) Deposits
There are four major types of deposits: demand deposits, savings
deposits, hybrid checking/savings deposits, and time deposits. What
distinguishes one type from another are the conditions under which the
deposited funds may be withdrawn. A demand deposit is a deposit that
can be withdrawn on demand at any time and in any amount up to the full
amount of the deposit. The most common example of a demand deposit is
a checking account. Money orders and travelers checks are also
technically demand deposits. Checking accounts are also considered
transaction accounts in that payments can be made to third partiesthat
is, to someone other than the depositor or the bank itselfvia check,
telephone, or other authorized transfer instruction. Checking accounts are
popular because as demand deposits they provide perfect liquidity
(immediate access to cash) and as transaction accounts they can be
transferred to a third party as payment for goods or services. As such,
they function like money.
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Savings accounts pay interest to the depositor, but have no specific
maturity date on which the funds need to be withdrawn or reinvested.
Any amount can be withdrawn from a savings account up to the amount
deposited. Under normal circumstances, customers can withdraw their
money from a savings account simply by presenting their passbook or
by using their automated teller machine (ATM) card. Savings accounts
are highly liquid. They are different from demand deposits, however,
because depositors cannot write checks against regular savings accounts.
Savings accounts cannot be used directly as money to purchase goods or
services.
7.2) Loans
Banks and thrifts make three types of loans: commercial and
industrial loans, consumer loans, and mortgage loans. Commercial and
industrial loans are loans to businesses or industrial firms. These are
primarily short-term working capital loans (loans to finance the purchaseof material or labor) or transaction or longer-term loans (loans to
purchase machines and equipment). Most commercial banks offer a
variable rate on these loans, which means that the interest rate can change
over the course of the loan. Whether a bank will make a loan or not
depends on the credit and loan history of the borrower, the borrowers
ability to make scheduled loan payments, the amount of capital the
borrower has invested in the business, the condition of the economy, and
the value of the collateral the borrower pledges to give the bank if the
loan payments are not made.
Consumer loans are loans for consumers to purchase goods or
services. There are two types of consumer loans: closed-end credit and
open-end credit. Closed-end credit loans are loans for a fixed amount of
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money, for a fixed period of time (usually not more than five years), and
for a fixed purpose (for example, to buy a car).
Most closed-end loans are called installment loans because theymust be repaid in equal monthly installments. The item purchased by the
consumer serves as collateral for the loan. For example, if the consumer
fails to make payments on an automobile, the bank can recoup the cost of
its loan by taking ownership of the car.
Open-end credit loans are loans for variable amounts of money up
to a set limit. Unlike closed-end loans, open-end credit does not require a
borrower to specify the purpose of the loan and the lender cannot
foreclose on the loan. Credit cards are an example of open-end credit.
Most open-end loans carry fixed interest ratesthat is, the rate does not
vary over the term of the loan. Open-end loans require no collateral, but
interest rates or other penalties or fees may be chargedfor example, if
credit card charges are not paid in full, interest is charged, or if payment
is late, a fee is charged to the borrower. Open-end credit interest rates
usually exceed closed-end rates because open-end loans are not backed
by collateral.
Mortgage loans or real estate loans are loans used to purchase land
or buildings such as houses or factories. These are typically long-term
loans and the interest rate charged can be either a variable or a fixed rate
for the term of the loan, which often ranges from 15 to 30 years. The land
and buildings purchased serve as the collateral for the loan.
7.3) Cash Management and Other Services
Although deposits and loans are the basic banking services
provided by banks and thrifts, these institutions provide a wide variety of
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other services to customers. For consumers, these include check cashing,
foreign currency exchange, safety deposit boxes in which consumers can
store valuables, electronic wire transfer through which consumers can
transfer money and securities from one financial institution to another,
and credit life insurance which automatically pays off loans in the event
of the borrowers death or disability.
In recent years, banks have made their services increasingly
convenient through electronic banking. Electronic banking uses
computers to carry out transfers of money. For example, automated teller
machines (ATMs) enable bank customers to withdraw money from their
checking or savings accounts by inserting an ATM card and a private
electronic code into an ATM. The ATMs enable bank customers to
access their money 24 hours a day and seven days a week wherever
ATMs are located, including in foreign countries. Banks also offer debit
cards that directly withdraw funds from a customers account for the
amount of a purchase, much like writing a check. Banks also use
electronic transfers to deposit payroll checks directly into a customers
account and to automatically pay a customers bills when they are due.
Many banks also use the Internet to enable customers to pay bills, move
money between accounts, and perform other banking functions.
For businesses, commercial banks also provide specialized cashmanagement and credit enhancement services. Cash management
services are designed to allow businesses to make efficient use of their
cash. For example, under normal circumstances a business would sell
its product to a customer and send the customer a bill. The customer
would then send a check to the business, and the business would then
deposit the check in the bank.
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8. BANKING IN OTHER COUNTRIES
8.1)Canada
Because of Canadas close historical relationship with the United
States and the United Kingdom, development of the Canadian banking
system has been influenced by both countries. Unlike the United States,
however, Canada always had a branch-banking system. Until 1994 banks
in the United States were restricted to opening branches only in the city
or state where they were incorporated. One of the first laws passed by
Canadas Parliament after confederation, in 1867, allowed any Canadian-
chartered bank to operate in any part of the dominion. This law
encouraged the growth of Canadas branch-banking system, in which a
few large banks operate all the countrys banking offices. In 2000 there
were only 13 domestic banks in Canada, and the six largest controlled
more than 90 percent of all bank assets in Canada. The remaining seven
domestic banks accounted for about 2 percent of bank assets, and foreign
banks accounted for about 7 percent of bank assets.
The central bank of Canada is the Bank of Canada. Created in
1935, it is owned by the Ministry of Finance and is responsible for
Canadian monetary policy. Unlike the U.S. Federal Reserve, the Bank of
Canada is also responsible for issuing and managing the national debt. In
the United States, this function is performed by the Department of the
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Treasury. The primary policy group of the Bank of Canada is called the
Governing Council
8.2) The European Continent
Until recently, European banking was very different from banking
in the United States. European banks were frequently owned by the
government and could engage in activities that were prohibited to banks
in the United States. Most of these prohibited activities involved
investment banking such as security underwriting (selling a firms stock
or bonds at a guaranteed price) or security placement (finding buyers for
a firms stock or bonds). These services are important to businesses and
being able to provide them gave European banks an advantage over U.S.
banks. These differences are rapidly disappearing. Most European banks
are now privately owned and recent U.S. legislation has allowed U.S.
banks to engage in investment-banking activities through the bank
holding company form of organization.
Two differences remain between U.S. and European banking. The
first is that many European banks can own nonbank commercial and
industrial businesses. Such ownership is still prohibited, for the most part,
for U.S. banks and holding companies. As a result, banks in Europe tend
to be more business oriented and much more involved with corporategovernance (corporate decision-making) than their U.S. counterparts.
This also explains why most European companies rely more heavily on
bank loans to finance their activities than do U.S. companies which rely
more on funds raised by selling stocks and bonds in financial markets.
The second difference is that banking is much more concentrated
in Europe. In other words, banking markets are dominated by a few large
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banks whereas in the United States many banks compete for a customers
deposits and loans. This stems from the fact that European countries have
had very liberal branching laws allowing banks to have extensive deposit-
gathering networks in their home country and also from the fact that most
European countries are not as concerned about monopolies as are U.S.
regulators. It is not clear how long this difference will last, however, as
legislation in the United States in 1994 allowed banks to establish banks
and branches in other states.
8.3)UnitedKingdom
Since the 17th century Britain has been known for its prominence
in banking. The capital, London, still remains a major financial center,
and virtually all the worlds leading commercial banks are represented
there.
Aside from the central Bank of England, which was incorporated,
early English banks were privately owned rather than stock-issuing firms.
Bank failures were common; so in the early 19th century, stock-issuing
banks, with a larger capital base, were encouraged as a means of
stabilizing the industry. By 1833 these corporate banks were permitted to
accept and transfer deposits in London, although they were prohibited
from issuing money, a prerogative monopolized by the Bank of England.
Corporate banking flourished after legislation in 1858 approved limited
liability for stock-issuing banks. The banking system, however, failed to
preserve the large number of institutions typical of U.S. banking. At the
turn of the 20th century, a wave of bank mergers reduced both the
number of private and stock-issuing banks.
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The present structure of British commercial banking was
substantially in place by the 1930s, with the Bank of England, then
privately owned, at the apex, and 11 London clearing banks ranked below
the Bank of England. Clearing banks sort and then forward checks to the
bank from which they were originally drawn for payment. Two changes
have occurred since then: The Bank of England was nationalized (became
government-owned) in 1946 by the postwar Labour government; and in
1968 a merger among the largest five clearing banks left the industry in
the hands of four: Barclays, Lloyds (now Lloyds TSB Group), Midland
(now part of HSBC Holdings), and National Westminster (taken over by
the Royal Bank of Scotland in 2000).
The larger clearing banks, with their national branch networks, dominate
British banking. They are the key links in the transfer of business
payments through the checking system, as well as the primary source of
short-term business finance. Moreover, through their ownership and
control over subsidiaries, the big British banks influence other financial
markets such as consumer and housing finance and merchant banking.
The dominance of the clearing banks was challenged in recent years by
the rise of parallel markets, encompassing financial activities by
smaller banking houses, building societies (banking institutions similar to
SLAs in the United States), and other financial concerns, as well as local
government authorities.
8.4) Developing Countries
The type of national economic system that characterizes
developing countries plays a crucial role in determining the nature of the
banking system in those countries. In capitalist countries a system of
private enterprise in banking prevails. In state-managed economies, banks
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have been nationalized. Other countries have patterned themselves after
the social-democracies of Europe; in Egypt, Peru, and Kenya, for
instance, government-owned and privately owned banks coexist. In many
countries, the banking system developed under colonialism, with banks
owned by institutions in the parent country. In some, such as Zambia and
Cameroon, this heritage continued, although modified, after
decolonization. In other nations, such as Nigeria and Saudi Arabia, the
rise of nationalism led to mandates for majority ownership by the
indigenous population.
Banks in developing countries are similar to their counterparts in
developed nations. Commercial banks accept and transfer deposits and
are active lenders, especially for short-term purposes. Other financial
intermediaries, particularly government-owned development banks,
arrange long-term loans. Banks are often used to finance government
expenditures. The banking system may also play a major role in financing
exports.
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9. INTERNATIONAL BANKINGThe expansion of trade in recent decades has been paralleled by the
growth of multinational banking. Banks have historically financed
international trade, but a notable recent development has been the
expansion of branches and subsidiaries that are physically located abroad,
as well as the increased volume of loans to foreign borrowers. In 1960
only eight U.S. banks had foreign offices with a total of 131 branches. By
1998 about 82 U.S. banks had about 935 foreign branches.
Similarly, the number of foreign banks with offices in the United
States has increased dramatically. In 1975, 79 foreign banks were
chartered in the United States, accounting for 5 percent of U.S. bank
assets. In 1998, 243 foreign banks had U.S. offices, accounting for 23
percent of U.S. bank assets. Most of these banks are business-oriented
banks, but some have also engaged in retail banking. In 1978 the U.S.
Congress passed the International Banking Act, which imposed
constraints on the activities of foreign banks in the United States.
As banks make more international loans, many experts believe that
there must be greater international cooperation regarding standards and
regulations to lower the risk of bank failure and international financial
collapse. In 1988 the Basel Committee on Banking Supervision, an
international organization of bank regulators based in Basel, Switzerland,took the first steps in this direction with the Basel Capital Accord. The
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accord established a global standard for assessing the financial soundness
of banks and required banks to maintain a minimum ratio of capital to
risky assets. Many banking experts believe this accord became the
primary tool for strengthening the safety of international banking. The
accord was eventually adopted by 100 countries. In 2001 the Basel
Committee recommended a new set of regulations known as the New
BaselCapitalAccord. .
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10. BANK NATIONALISATION &PUBLICSECTOR BANKING
Organized banking in India is more than two centuries old. Till
1935 all the banks were in private sector and were set up by individuals
and/or industrial houses which collected deposits from individuals and
used them for their own purposes. In the absence of any regulatory
framework, these private owners of banks were at liberty to use the funds
in any manner, they deemed appropriate and resultantly, the bank failures
were frequent.
Move towards State ownership of banks started with the
nationalization of RBI and passing of Banking Companies Act 1949. On
the recommendations of All India Rural Credit Survey Committee, SBI
Act was enacted in 1955 and Imperial Bank of India was transferred to
SBI. Similarly, the conversion of 8 State-owned banks (State Bank of
Bikaner and State Bank of Jaipur were two separate banks earlier and
merged) into subsidiaries (now associates) of SBI during 1959 took place.
During 1968 the scheme of social control was introduced, which was
closely followed by nationalization of 14 major banks in 1969 and
Keeping in view the objectives of nationalization, PSBs undertook
expansion of reach and services. Resultantly the number of branches
increased 7 fold (from 8321 to more than 60000 out of which 58% in
rural areas) and no. of people served per branch office came down from
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65000 in 1969 to 10000. Much of this expansion has taken place in rural
and semi-urban areas.
The expansion is significant in terms of geographical distribution.
States neglected by private banks before 1969 have a vast network of
public sector banks. The PSBs including RRBs, account for 93% of bank
offices and 87% of banking system deposits.
Computerization in Public Sector Banks (As on March 31, 2008)i) Branches already Fully Computerized 48.5%
ii) Branches Under Core Banking Solutions 28.9%
iii) Fully Computerized Branches (i + ii) 77.5%
iv) Partially Computerized Branches 18.2%
v) Non Computerized Branches 4.3%
Other than branches under Core Banking Solutions.
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11. WORKING CONDITIONS
Hours:
The average workweek for nonsupervisory workers in depository
credit intermediation was 35.7 hours in 2006. Supervisory and managerial
employees, however, usually work substantially longer hours. About 1
out of 10 employees in 2006, mostly tellers, worked part-time.
Employees in a typical branch work weekdays, some evenings if
the bank is open late, and Saturday mornings. However, banks are
increasingly expanding the hours that their branches are open and
opening branches in nontraditional locationsAdministrative support
employees may work in large processing facilities, in the banks
headquarters, or in other administrative offices. Most support staff work a
standard 40-hour week; some may work overtime. Those support staff
located in the processing facilities may work evening shifts.
Work environment. Branch office jobs, particularly teller positions,
require continual communication with customers, repetitive tasks, and a
high level of attention to security. Tellers also work for long periods in a
confined space. Commercial and mortgage loan officers often work out of
the office, visiting clients, checking loan applications, and soliciting new
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business. Loan officers may travel to meet out-of-town clients, or work
evenings if that is the only time at which a client can meet
12. EMPLOYMENTThe banking industry employed about 1.8 million wage and salary
workers in 2008. About 7 out of 10 jobs were in commercial banks; the
remainders were concentrated in savings institutions and credit unions
(table).loyees in the private sector.
Table: Percent distribution of employment and establishments in banking by
detailed industry sector, 2008
Industry segment Employment Establishments
Total 100.00 100.00
Monetary authorities - central bank 1.2 0.3
Depository credit intermediation 98.8 99.7
Commercial banking 72.5 69.7Savings institutions 13.1 14.7
Credit unions 12.1 14.2
Other depository credit
intermediation
1.2 1.1
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In 2008, about 84 percent of establishments in banking employed
fewer than 20 workers (chart 1). However, these small establishments,
mostly bank branch offices, employed 36 percent of all employees. About
64 percent of the jobs were in establishments with 20 or more workers.
Banks are found everywhere in the United States, but most bank
employees work in heavily populated States such as New York,
California, Illinois, Pennsylvania, and Texas.
13. OTHER OCCUPATIONS
Occupations used widely by banks to maintain financial records
and ensure the banks compliance with Federal and State regulations are
accountants and auditors, and lawyers. In addition, computer specialists
maintain and upgrade the banks computer systems and implement the
banks entry into the world of electronic banking and paperless
transactions.
Table: Employment of wage and salary workers in banking by occupation,
2006 and projected change, 2008-2016. (Employment in thousands)
PARTICULARS OCCUPATIONEMPLOYMENT,2006
PERCENTAGE (%)
CHANGE 2008-16
NUMBER
PERCENTAG
E
All occupations 1,825 100.0 4.0
Management, business,and financial occupations
449 24.6 5.4
General and operationsmanagers
34 1.8 -8.4
Marketing and salesmanagers
11 0.6 1.9
Financial managers 73 4.0 1.9
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Human resources,training, and laborrelations specialists
15 0.8 5.3
Management analysts 8 0.5 1.4
Accountants and auditors 27 1.5 1.7Credit analysts 15 0.8 -8.3
Financial analysts 18 1.0 11.4
Personal financialadvisors
24 1.3 22.3
Loan officers 133 7.3 12.1
Professional and relatedoccupations
72 4.0 6.9
Computer specialists 56 3.0 8.8
Sales and relatedoccupations
82 4.5 11.8
Securities, commodities,and financial servicessales agents
50 2.7 17.2
Office and administrativesupport occupations
1,202 65.9 2.9
First-linesupervisors/managers of
office and administrativesupport workers
111 6.1 -5.2
Bookkeeping, accounting,and auditing clerks
63 3.5 1.7
Tellers 546 29.9 12.1
Brokerage clerks 9 0.5 -1.0
Customer servicerepresentatives
106 5.8 12.0
New accounts clerks 73 4.0 -18.4
Receptionists andinformation clerks 9 0.5 1.5
Couriers and messengers 6 0.3 -8.3
Executive secretaries andadministrative assistants
36 2.0 1.9
Secretaries, except legal,medical, and executive
15 0.8 -9.6
Data entry keyers 8 0.5 -18.6
Office clerks, general 40 2.2 0.2
Office machine operators,except computer 12 0.6 -14.9
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14. ONLINE BANKING
14.1) INTRODUCTION
The Internet banking is changing the banking industry and is
having the major effects on banking relationships. Even the Morgan
Stanley Dean Witter Internet research emphasised that Web is moreimportant for retail financial services than for many other industries.
Internet banking involves use of Internet for delivery of banking products
& services. It falls into four main categories, from Level 1 - minimum
functionality sites that offer only access to deposit account data - to Level
4 sites - highly sophisticated offerings enabling integrated sales of
additional products and access to other financial services- such as
investment and insurance. In other words a successful Internet banking
solution offers
. Exceptional rates on Savings, CDs, and IRAs
Checking with no monthly fee, free bill payment and rebates on ATM
surcharges
Credit cards with low rates
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Easy online applications for all accounts, including personal loans and
mortgages
24 hour account access
Quality customer service with personal attention
14.2) INDIAN BANKS ON WEB
The banking industry in India is facing unprecedented competition
from non-traditional banking institutions, which now offer banking and
financial services over the Internet. Indian banks are going for the retail
banking in a big way. However, much is still to be achieved. This studywhich was conducted by students of IIML shows some interesting facts:
Throughout the country, the Internet Banking is in the nascent stage of
development (only 50 banks are offering varied kind of Internet banking
services).
In general, these Internet sites offer only the most basic services. 55%
are so called 'entry level' sites, offering little more than company
information and basic marketing materials. Only 8% offer 'advanced
transactions' such as online funds transfer, transactions & cash
management services.
Foreign & Private banks are much advanced in terms of the number of
sites & their level of development.
Investing through Internet banking
Opening a fixed deposit account cannot get easier than this. You
can now open an FD online through funds transfer. Online banking can
also be a great friend for lazy investors.
Now investors with interlinked demat account and bank account
can easily trade in the stock market and the amount will be automatically
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debited from their respective bank accounts and the shares will be
credited in their demat account.Moreover, some banks even give you the
facility to purchase mutual funds directly from the online banking system.
MAIN CONCERNS IN INTERNET BANKING
In a survey conducted by the Online Banking Association, member
institutions rated security as the most important issue of online banking.
There is a dual requirement to protect customers' privacy and protect
against fraud. Banking Securely: Online Banking via the World Wide
Web provides an overview of Internet commerce and how one companyhandles secure banking for its financial institution clients and their
customers. Some basic information on the transmission of confidential
data is presented in Security and Encryption on the Web. PC Magazine
Online also offers a primer: How Encryption Works.
Expedited Online Bill Payments: A New Revenue Stream for
Financial Institutions
Online bill payment has grown to become an integral part of
financial services institutions Internet banking offerings. New research
from TowerGroup finds that expediting payments by speeding the posting
time of bill payment transactions can create a new revenue stream for
financial institutions via instituting an online bill payment user per
transaction fee to guarantee same-day posting Tower Group estimates
that nearly 24 million consumers are currently active users of online
banking bill payment in the U.S., and that the volume of online bill
payments will reach 3.87 billion transactions by 2012.
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15. ELECTRONIC BANKING
For many consumers, electronic banking means 24-hour access to
cash through an automated teller machine (ATM) or Direct Deposit of
paychecks into checking or savings accounts. But electronic banking now
involves many different types of transactions.
Electronic banking, also known as electronic fund transfer (EFT),
uses computer and electronic technology as a substitute for checks and
other paper transactions. EFTs are initiated through devices like cards or
codes that let you, or those you authorize, access your account. Many
financial institutions use ATM or debit cards and Personal IdentificationNumbers (PINs) The federal Electronic Fund Transfer Act (EFT Act)
covers some electronic consumer transactions.
15.1) Electronic Fund Transfers
EFT offers several services that consumers may find practical:
Automated Teller Machines or 24-hour Tellers are electronic
terminals that let you bank almost any time. To withdraw cash,
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make deposits, or transfer funds between accounts, you generally
insert an ATM card and enter your PIN. Some financial institutions
and ATM owners charge a fee, particularly to consumers who
dont have accounts with them or on transactions at remote
locations. Generally, ATMs must tell you they charge a fee and its
amount on or at the terminal screen before you complete the
transaction. Check the rules of your institution and ATMs you use
to find out when or whether a fee is charged.
Direct Deposit lets you authorize specific deposits, such as
paychecks and Social Security checks, to your account on a regular
basis. You also may pre-authorize direct withdrawals so that
recurring bills, such as insurance premiums, mortgages, and utility
bills, are paid automatically. Be cautious before you pre-authorize
direct withdrawals to pay sellers or companies with whom you are
unfamiliar; funds from your bank account could be withdrawn
fraudulently. Pay-by-Phone Systems let you call your financial institution with
instructions to pay certain bills or to transfer funds between
accounts. You must have an agreement with the institution to make
such transfers.
Personal Computer Banking lets you handle many banking
transactions via your personal computer. For instance, you may useyour computer to view your account balance, request transfers
between accounts, and pay bills electronically.
Debit Card Purchase Transactions let you make purchases with a
debit card, which also may be your ATM card. This could occur at
a store or business, on the Internet or online, or by phone. The
process is similar to using a credit card, with some important
exceptions. While the process is fast and easy, a debit card
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purchase transfers money fairly quickly from your bank
account to the companys account. So its important that you have
funds in your account to cover your purchase. This means you need
to keep accurate records of the dates and amounts of your debit
card purchases and ATM withdrawals in addition to any checks
you write. Also be sure you know the store or business before you
provide your debit card information, to avoid the possible loss of
funds through fraud. Your liability for unauthorized use, and your
rights for error resolution, may differ with a debit card.
15.2) Disclosures
To understand your legal rights and responsibilities regarding your
EFTs, read the documents you receive from the financial institution that
issued your access device. That is, a card, code or other means of
accessing your account to initiate electronic fund transfers. Although the
means varies by institution, it often involves a card and/or a PIN. No one
should know your PIN except you and select employees of the financial
institution. You also should read the documents you receive for your
bank account, which may contain more information about EFTs.
15.3) Errors
You have 60 days from the date a periodic statement containing a
problem or error was sent to you to notify your financial institution. The
best way to protect yourself if an error occurs including erroneous
charges or withdrawals from an account, or for a lost or stolen ATM or
debit card is to notify the financial institution by certified letter, return
receipt requested, so you can prove that the institution received your
letter. Keep a copy of the letter for your records.
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If you fail to notify the institution of the error within 60 days, you
may have little recourse. Under federal law, the institution has no
obligation to conduct an investigation if youve missed the 60-day
deadline. Once youve notified the financial institution about an error on
your statement, it has 10 business days to investigate. The institution
must tell you the results of its investigation within three business days
after completing it and must correct an error within one business day after
determining that the error has occurred. At the end of the investigation, if
no error has been found, the institution may take the money back if it
sends you a written explanation.
15.4) Lost or Stolen ATM or Debit Cards
If your credit card is lost or stolen, you cant lose more than $50. If
someone uses your ATM or debit card without your permission, you can
lose much more. If you report an ATM or debit card missing to the card
issuer before its used without your permission, you cant be heldresponsible for any unauthorized withdrawals.If unauthorized use occurs
before you report it, the amount you can be held responsible for depends
upon how quickly you report the loss to the card issuer.
If you report the loss within two business days after you realize
your card is missing, you wont be responsible for more than $50
for unauthorized use.
If you fail to report the loss within two business days after you
realize the card is missing, but do report its loss within 60 days
after your statement is mailed to you, you could lose as much as
$500 because of an unauthorized transfer.
If you fail to report an unauthorized transfer within 60 days after
your statement is mailed to you, you risk unlimited loss. That
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means you could lose all the money in your account and the unused
portion of your maximum line of credit established for overdrafts.
If you failed to notify the institution within the time periods allowedbecause of an extenuating circumstance, such as lengthy travel or illness,
the issuer must reasonably extend the notification period. In addition, if
state law or your contract imposes lower liability limits, those lower
limits apply instead of the limits in the federal EFT Act.
15.5) Limited Stop-Payment Privileges
When you use an electronic fund transfer, the EFT Act does not
give you the right to stop payment. If your purchase is defective or your
order is not delivered, its as if you paid cash. That is, its up to you to
resolve the problem with the seller and get your money back.There is one
situation, however, when you can stop payment. If youve arranged for
regular payments out of your account to third parties, such as insurance
companies, you can stop payment if you notify your institution at least
three business days before the scheduled transfer. The notice may be oral
or written, but the institution may require a written follow-up within 14
days of the oral notice. If you fail to provide the written follow-up, the
institutions responsibility to stop payment ends.
If this feature is important to you, you may want to shop around to be
sure youre getting the best stop-payment terms available.
15.6) Suggestions
If you decide to use EFT, keep these tips in mind:
Take care of your ATM or debit card. Know where it is at all
times; if you lose it, report it as soon as possible.
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Choose a PIN for your ATM or debit card thats different from
your address, telephone number, Social Security number, or
birthdate. This will make it more difficult for a thief to use your
card.
Keep and compare your receipts for all types of EFT transactions
with your periodic statements. That way, you can find errors or
unauthorized transfers and report them.
Make sure you know and trust a merchant or other company before
you share any bank account information or pre-authorize debits to
your account. Be aware that some merchants or companies may use
electronic processing of your check information when you provide
a check for payment.
Review your monthly statements promptly and carefully. Contact your
bank or other financial institution immediately if you find unauthorized
transactions and errors
15.7) Bill payment service
Each bank has tie-ups with various utility companies, service
providers and insurance companies, across the country. You can facilitate
payment of electricity and telephone bills, mobile phone, credit card and
insurance premium bills.To pay your bills, all you need to do is complete
a simple one-time registration for each biller. You can also set up
standing instructions online to pay your recurring bills, automatically.
One-time standing instruction will ensure that you don't miss out on your
bill payments due to lack of time. Most interestingly, the bank does not
charge customers for online bill payment.
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15.8) Credit card customers
Credit card users have a lot in store. With Internet banking,
customers can not only pay their credit card bills online but also get aloan on their cards. Not just this, they can also apply for an additional
card, request a credit line increase and God forbid if you lose your credit
card, you can report lost card online.
15.9) Railway pass
This is something that would interest all theaam janta. Indian
Railways has tied up with ICICI bank and you can now make your
railway pass for local trains online. The pass will be delivered to you at
your doorstep. But the facility is limited to Mumbai, Thane, Nashik, Surat
and Pune. The bank would just charge Rs 10 + 12.24 per cent of service
tax.
15.10) Recharging your prepaid phone
Now you no longer need to rush to the vendor to recharge your
prepaid phone, every time your talk time runs out. Just top-up your
prepaid mobile cards by logging in to Internet banking. By just selecting
your operator's name, entering your mobile number and the amount for
recharge, your phone is again back in action within few minutes.
Shopping at your fingertips
Leading banks have tie ups with various shopping websites. With a range
of all kind of products, you can shop online and the payment is also made
conveniently through your account. You can also buy railway and air
tickets through Internet banking.
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16.MOBILE BANKING
Mobile Banking is a term used for performing balance checks,
account transactions, payments etc. via a mobile device such as a mobile
phone. Mobile banking today is most often performed via SMS or the
Mobile Internet but can also use special programs called clients
downloaded to the mobile device.
In one academic model, mobile banking is defined as:
"Mobile Banking refers to provision and availment of banking-
and financial services with the help of mobile telecommunication
devices. The scope of offered services may include facilities to
conduct bank and stock market transactions, to administer accounts
and to access customized information."
16.1) Mobile Banking Services
Mobile banking can offer services such as the following:
16.2.1)) Account Information
1. Mini-statements and checking of account history
2. Alerts on account activity or passing of set thresholds
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3. Monitoring of term deposits
4. Access to loan statements
5. Access to card statements
6. Mutual funds / equity statements
7. Insurance policy management
8. Pension plan management
9. Status on cheque, stop payment on cheque
16.3)) Payments & Transfers
1. Domestic and international fund transfers
2. Micro-payment handling
3. Mobile recharging
4. Commercial payment processing
5. Bill payment processing
6. Peer to peer payments
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17. SMS BANKING
SMS Banking is a technology-enabled service offering from banks
to its customers, permitting them to operate selected banking services
over their mobile phones using SMS messaging.
17.1) Push and pull messages
SMS banking services are operated using both push and pull messages.
Push messages are those that the bank chooses to send out to a customer's
mobile phone, without the customer initiating a request for the
information. Typically push messages could be either Mobile marketing
messages or messages alerting an event which happens in the customer's
bank account, such as a large withdrawal of funds from the ATM or a
large payment using the customer's credit card, etc. Pull messages are
those that are initiated by the customer, using a mobile phone, for
obtaining information or performing a transaction in the bank account.
Examples of pull messages for information include an account balance
enquiry, or requests for current information like currency exchange rates
and deposit interest rates, as published and updated by the bank.
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17.1.1)) Typical push and pull services offered under SMS
banking
Depending on the selected extent of SMS banking transactions offered bythe bank, a customer can be authorized to carry out either non-financial
transactions, or both and financial and non-financial transactions. SMS
banking solutions offer customers a range of functionality, classified by
push and pull services as outlined below.
Typical push services would include:
Periodic account balance reporting (say at the end of month);
Reporting of salary and other credits to the bank account;
Successful payment of a cheque issued on the account;
Large value withdrawals on an account;
Large value withdrawals on the ATM or EFTPOS on a debit card;
Large value payment on a credit card or out of country activity on a
credit card.
One-time password and authentication
Typical pull services would include:
Account balance enquiry;
Mini statement request;
Electronic bill payment;
Transfers between customer's own accounts, like moving money
from a savings account to a current account to fund a cheque;
Stop payment instruction on a cheque;
Requesting for an ATM card or credit card to be suspended;
De-activating a credit or debit card when it is lost or the PIN is
known to be compromised;
Foreign currency exchange rates enquiry;
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Fixed deposit interest rates enquiry.
18. AUTOMATED TELLER MACHINE
18.1) INTRODUCTION
ATM, device used by bank customers to process account
transactions. Typically, a user inserts into the ATM a special plastic card
that is encoded with information on a magnetic strip Modems were
first used with teletype machines to send telegrams and cablegrams.. To
prevent unauthorized transactions, a personal identification number (PIN)
must also be entered by the user using a keypad. The computer then
permits the ATM to complete the transaction; most machines can
dispense cash, accept deposits, transfer funds, and provide information on
account balances. Banks have formed cooperative, nationwide networks
so that a customer of one bank can use an ATM of another for cash
access; by 1997 there were more than 160,000 ATMs across the United
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States. Some ATMs will also accept credit card, device used to obtain
consumer credit at the time of purchasing an article or service. The first
ATM was installed in 1969 by Chemical Bank at its branch in Rockville
Centre, N.Y. A customer using a coded card was dispensed a package
containing a set sum of money.
18.2) Growth of ATM
The number of ATMs installed in India grew by almost 28%, from21,000 in March 2006, to more than 27,000 by March 2007. Wide
acceptance of ATMs by consumers, introduction of biometric ATMs, and
increasing scope of value-added ATM services will maintain growth in
the industry.
18.3) SECURITY
18.3.1)) Transactional secrecy and integrity
The security of ATM transactions relies mostly on the integrity of
the secure crypt processor: the ATM often uses commodity components
that are not considered to be "trusted systems".Encryption of personal
information, required by law in many jurisdictions, is used to prevent
fraud. Sensitive data in ATM transactions are usually encrypted withDES, but transaction processors now usually require the use of Triple
DES. Remote Key Loading techniques may be used to ensure the secrecy
of the initialization of the encryption keys in the ATM. Message
Authentication Code (MAC) or Partial MAC may also be used to ensure
messages have not been tampered with while in transit between the ATM
and the financial network.
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18.3.2)) Customer identity integrity
There have also been a number of incidents of fraud where
criminals have attached fake keypads or card readers to existingmachines. These have then been used to record customers' PINs and bank
card information in order to gain unauthorized access to their accounts.
Various ATM manufacturers have put in place countermeasures to
protect the equipment they manufacture from these threats.
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19. CONCLUSION
Over the last decade, there has been a major transformation on the
technology front in the banking sector. There has been a sea change
compared to the old days when carrying out a transaction as simple as
cash withdrawal sometimes took hoursNow, increasingly, visits to
branches of banks especially in the metros and bigger towns are rare.With ATMs, internet banking and phone banking, banking has turned out
to be more of an inter-face with a machine or in other words it has
become faceless.
Many companies in India have adopted this strategy and have
managed to lower the interaction of the customer with the bank branches.
For instance, 10 years ago, 90% of all transactions made by the customers
of ICICI bank were through the branches and 10% were through online.
Adoption of technology not only delights the customers in terms of
convenience and satisfaction but also brings in certain other advantages
scalability, reliability and low costto the bank.
For instance, banks can carry out data analytics to guage the customers
requirements and thus offer customized products to a specific category of
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customers. Banks can use technology as an enabler as well as a
differentiator, said Ms Chanda Kochhar, Joint Managing Director
ofICICIBank.
No technology is good or bad and any investment in it should be
for improvement in business. The technology should be used to make
better business decisions. It is very important for the senior management
to decide which technology is working best for their organisation. The
top management obtains the feedback from different sources such as
employees and customers among others. In fact, for effective use of the
technology within a company, there should be continuous interaction
between technology department and different business divisions. This
will create more synergy and reduce the cost. Apart from this, technology
can also be used for managing credit risk which has taken centre stage
after the sub-prime crisis.
Going forward, technology will play a bigger role in using the cash
available in the so called bottom of pyramid.
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20.BIBLIOGRAPHY
WEB SITES
www.google.com
www.banknetindia.com
www.economictimes.com
www.rbi.org.in
WWW.managementparadise.COM