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I.T IN BANKING SECTOR
1 | P a g e
CH-1 HISTORY OF BANKING
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1.1 HISTORY OF BANKING:
Without a sound and effective banking system in India it cannot have
a healthy economy. The banking system of India should not only be
hassle free but it should be able to meet new challenges posed by the
technology and any other external and internal factors.
For the past three decades India's banking system has several
outstanding achievements to its credit. The most striking is its extensive
reach. It is no longer confined to only metropolitans or cosmopolitans in
India. In fact, Indian banking system has reached even to the remote
corners of the country. This is one of the main reasons of India's growth
process.
The government's regular policy for Indian bank since 1969 has paid
rich dividends with the nationalization of 14 major private banks of India.
Not long ago, an account holder had to wait for hours at the bank
counters for getting a draft or for withdrawing his own money. Today, he
has a choice. Gone are days when the most efficient bank transferred
money from one branch to other in two days. Now it is simple as instant
messaging or dials a pizza. Money has become the order of the day.
The first bank in India, though conservative, was established in 1786.
From 1786 till today, the journey of Indian Banking System can be
segregated into three distinct phases. They are as mentioned below:
Early phase from 1786 to 1969 of Indian Banks
Nationalization of Indian Banks and up to 1991 prior to Indian banking
sector Reforms.
New phase of Indian Banking System with the advent of Indian Financial
& Banking Sector Reforms after 1991.
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To make this write-up more explanatory, I prefix the scenario as Phase I,
Phase II and Phase III.
Phase I
The General Bank of India was set up in the year 1786. Next came
Bank of Hindustan and Bengal Bank. The East India Company
established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of
Madras (1843) as independent units and called it Presidency Banks.These three banks were amalgamated in 1920 and Imperial Bank of India
was established which started as private shareholders banks, mostly
Europeans shareholders.
In 1865 Allahabad Bank was established and first time exclusively
by Indians, Punjab National Bank Ltd. was set up in 1894 with
headquarters at Lahore. Between 1906 and 1913, Bank of India, Central
Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank ofMysore were set up. Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also
experienced periodic failures between 1913 and 1948. There were
approximately 1100 banks, mostly small. To streamline the functioning
and activities of commercial banks, the Government of India came up
with The Banking Companies Act, 1949 which was later changed to
Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23of 1965). Reserve Bank of India was vested with extensive powers for the
supervision of banking in India as the Central Banking Authority.
During those days public has lesser confidence in the banks. As an
aftermath deposit mobilization was slow. Abreast of it the savings bank
facility provided by the Postal department was comparatively safer.
Moreover, funds were largely given to traders.
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Phase II
Government took major steps in this Indian Banking Sector Reform
after independence. In 1955, it nationalized Imperial Bank of India with
extensive banking facilities on a large scale especially in rural and semi-
urban areas. It formed State Bank of India to act as the principal agent of
RBI and to handle banking transactions of the Union and State
Governments all over the country.
Seven banks forming subsidiary of State Bank of India was
nationalized in 1960 on 19th July, 1969, major process of nationalization
was carried out. It was the effort of the then Prime Minister of India, Mrs.
Indira Gandhi. 14 major commercial banks in the country were
nationalized.
Second phase of nationalization Indian Banking Sector Reform
was carried out in 1980 with seven more banks. This step brought 80% ofthe banking segment in India under Government ownership.
The following are the steps taken by the Government of India to Regulate
Banking Institutions in the Country:
1949: Enactment of Banking Regulation Act.
1955: Nationalization of State Bank of India.
1959: Nationalization of SBI subsidiaries.
1961: Insurance cover extended to deposits.
1969: Nationalization of 14 major banks.
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1971: Creation of credit guarantee corporation.
1975: Creation of regional rural banks.
1980: Nationalization of seven banks with deposits over 200 crore.
After the nationalization of banks, the branches of the public sector
bank India rose to approximately 800% in deposits and advances took a
huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public
implicit faith and immense confidence about the sustainability of these
institutions.
Phase III
This phase has introduced many more products and facilities in the
banking sector in its reforms measure. In 1991, under the chairmanship of
M Narasimham, a committee was set up by his name which worked for
the liberalization of banking practices.
The country is flooded with foreign banks and their ATM stations.
Efforts are being put to give a satisfactory service to customers. Phone
banking and net banking is introduced. The entire system became more
convenient and swift. Time is given more importance than money.
The financial system of India has shown a great deal of resilience. It
is sheltered from any crisis triggered by any external macroeconomicsshock as other East Asian Countries suffered.
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1.2 STRUCTURE OF INDIAN BANKING SYSTEM
RBI
Commercial
Bank
Nationalized
Private
Co-operative
Bank
Short Term
Agricultural
Urban
Long Term
Development
Bank
Exim
Indutrial
Agricultural
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1.3 RBI&FUNCTIONS
The central bank of the country is the Reserve Bank of India
(RBI). It was established in April 1935 with a share capital of Rs. 5 crores
on the basis of the recommendations of the Hilton Young Commission.
The share capital was divided into shares of Rs. 100 each fully paid
which was entirely owned by private shareholders in the beginning. The
Government held shares of nominal value of Rs. 2, 20,000.
Reserve Bank of India was nationalized in the year 1949. The
general superintendence and direction of the Bank is entrusted to Central
Board of Directors of 20 members, the Governor and four Deputy
Governors, one Government official
from the Ministry of Finance, ten
nominated Directors by the
Government to give representation to
important elements in the economic
life of the country, and four
nominated Directors by the Central
Government to represent the four
local Boards with the headquarters at Mumbai, Kolkata, Chennai and
New Delhi. Local Boards consist of five members each Central
Government appointed for a term of four years to represent territorial and
economic interests and the interests of co-operative and indigenous
banks.
The Reserve Bank of India Act, 1934 was commenced on April 1, 1935.
The Act, 1934 (II of 1934) provides the statutory basis of the functioning
of the Bank.
The Bank was constituted for the need of following: To regulate the issue
of banknotesTo maintain reserves with a view to securing monetary
stability andTo operate the credit and currency system of the country to
its advantage.
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1.4 Functions of Reserve Bank of India
The Reserve Bank of India Act of 1934 entrust all the important functions
of a central bank the Reserve Bank of India.
Bank of Issue
Under Section 22 of the Reserve Bank of India Act, the Bank has the sole
right to issue bank notes of all denominations. The distribution of one
rupee notes and coins and small coins all over the country is undertaken
by the Reserve Bank as agent of the Government. The Reserve Bank has
a separate Issue Department which is entrusted with the issue of currency
notes. The assets and liabilities of the Issue Department are kept separate
from those of the Banking Department. Originally, the assets of the Issue
Department were to consist of not less than two-fifths of gold coin, gold
bullion or sterling securities provided the amount of gold was not less
than Rs. 40 crores in value. The remaining three-fifths of the assets might
be held in rupee coins, Government of India rupee securities, eligible bills
of exchange and promissory notes payable in India. Due to the exigencies
of the Second World War and the post-was period, these provisions were
considerably modified. Since 1957, the Reserve Bank of India is required
to maintain gold and foreign exchange reserves of Ra. 200 crores, of
which at least Rs. 115 crores should be in gold. The system as it exists
today is known as the minimum reserve system.
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Banker to Government
The second important function of the Reserve Bank of India is to act as
Government banker, agent and adviser. The Reserve Bank is agent of
Central Government and of all State Governments in India excepting that
of Jammu and Kashmir. The Reserve Bank has the obligation to transact
Government business, via. To keep the cash balances as deposits free ofinterest, to receive and to make payments on behalf of the Government
and to carry out their exchange remittances and other banking operations.
The Reserve Bank of India helps the Government - both the Union and
the States to float new loans and to manage public debt. The Bank makes
ways and means advances to the Governments for 90 days. It makes loans
and advances to the States and local authorities. It acts as adviser to the
Government on all monetary and banking matters.
Bankers' Bank and Lender of the Last Resort:
the Reserve Bank of India acts as the bankers' bank. According to the
provisions of the Banking Companies Act of 1949, every scheduled bank
was required to maintain with the Reserve Bank a cash balance
equivalent to 5% of its demand liabilities and 2 per cent of its time
liabilities in India. By an amendment of 1962, the distinction between
demand and time liabilities was abolished and banks have been asked to
keep cash reserves equal to 3 per cent of their aggregate deposit
liabilities. The minimum cash requirements can be changed by the
Reserve Bank of India.
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The scheduled banks can borrow from the Reserve Bank of India on the
basis of eligible securities or get financial accommodation in times of
need or stringency by rediscounting bills of exchange. Since commercial
banks can always expect the Reserve Bank of India to come to their help
in times of banking crisis the Reserve Bank becomes not only the
banker's bank but also the lender of the last resort.
Controller of Credit:
The Reserve Bank of India is the controller of credit i.e. it has the power
to influence the volume of credit created by banks in India. It can do so
through changing the Bank rate or through open market operations.
According to the Banking Regulation Act of 1949, the Reserve Bank of
India can ask any particular bank or the whole banking system not to lendto particular groups or persons on the basis of certain types of securities.
Since 1956, selective controls of credit are increasingly being used by the
Reserve Bank.
The Reserve Bank of India is armed with many more powers to control
the Indian money market. Every bank has to get a license from the
Reserve Bank of India to do banking business within India, the license
can be cancelled by the Reserve Bank of certain stipulated conditions arenot fulfilled. Every bank will have to get the permission of the Reserve
Bank before it can open a new branch. Each scheduled bank must send a
weekly return to the Reserve Bank showing, in detail, its assets and
liabilities. This power of the Bank to call for information is also intended
to give it effective control of the credit system. The Reserve Bank has
also the power to inspect the accounts of any commercial bank.
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As supreme banking authority in the country, the Reserve Bank of India,
therefore, has the following powers:
(a) It holds the cash reserves of all the scheduled banks.
(b) It controls the credit operations of banks through quantitative and
qualitative controls.
(c) It controls the banking system through the system of licensing,inspection and calling for information.
(d) It acts as the lender of the last resort by providing rediscount facilities
to scheduled banks.
Custodian of Foreign Reserves:
The Reserve Bank of India has the responsibility to maintain the official
rate of exchange. According to the Reserve Bank of India Act of 1934,
the Bank was required to buy and sell at fixed rates any amount of
sterling in lots of not less than Rs. 10,000. The rate of exchange fixed was
Re. 1 = sh. 6d. Since 1935 the Bank was able to maintain the exchange
rate fixed at lsh.6d. Though there were periods of extreme pressure in
favor of or against
the rupee. After India became a member of the International Monetary
Fund in 1946, the Reserve Bank has the responsibility of maintaining
fixed exchange rates with all other member countries of the I.M.F.
Besides maintaining the rate of exchange of the rupee, the Reserve Bank
has to act as the custodian of India's reserve of international currencies.
The vast sterling balances were acquired and managed by the Bank.
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Further, the RBI has the responsibility of administering the exchange
controls of the country.
Supervisory functions:
In addition to its traditional central banking functions, the Reserve bank
has certain non-monetary functions of the nature of supervision of banks
and promotion of sound banking in India. The Reserve Bank Act, 1934,
and the Banking Regulation Act, 1949 have given the RBI wide powers
of supervision and control over commercial and co-operative banks,relating to licensing and establishments, branch expansion, liquidity of
their assets, management and methods of working, amalgamation,
reconstruction, and liquidation. The RBI is authorized to carry out
periodical inspections of the banks and to call for returns and necessary
information from them. The nationalization of 14 major Indian scheduled
banks in July 1969 has imposed new responsibilities on the RBI for
directing the growth of banking and credit policies towards more rapid
development of the economy and realization of certain desired socialobjectives. The supervisory functions of the RBI have helped a great deal
in improving the standard of banking in India to develop on sound lines
and to improve the methods of their operation.
Promotional functions:
with economic growth assuming a new urgency since Independence, therange of the Reserve Bank's functions has steadily widened. The Bank
now performs a variety of developmental and promotional functions,
which, at one time, were regarded as outside the normal scope of central
banking. The Reserve Bank was asked to promote banking habit, extend
banking facilities to rural and semi-urban areas, and establish and
promote new specialized financing agencies. Accordingly, the Reserve
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Bank has helped in the setting up of the IFCI and the SFC; it set up the
Deposit Insurance Corporation in 1962, the Unit Trust of India in 1964,
the Industrial Development Bank of India also in 1964, the Agricultural
Refinance Corporation of India in 1963 and the Industrial Reconstruction
Corporation of India in 1972. These institutions were set up directly or
indirectly by the Reserve Bank to promote saving habit and to mobilize
savings, and to provide industrial finance as well as agricultural finance.
As far back as 1935, the Reserve Bank of India set up the AgriculturalCredit Department to provide agricultural credit. But only since 1951 the
Bank's role in this field has become extremely important. The Bank has
developed the co-operative credit movement to encourage saving, to
eliminate moneylenders from the villages and to route its short term
credit to agriculture. The RBI has set up the Agricultural Refinance and
Development Corporation to provide long-term finance to farmers.
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CH-2 I.T IN BANKING SECTOR
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2.1 INTRODUCTION:
The 21st
century will bring about an all-embracing convergence of
computing, communications, information and knowledge. This will
radically change the way we live, work, and think. The growth of highspeed networks, coupled
with the falling cost of
computing power, is making
possible applications
undreamed of in the past.
Voice, data, images, and
video may now be
transferred around the world
in micro-seconds. This
explosion of technology is
changing the banking
industry from paper and
branch banks to' digitized
and networked banking services. It has already changed the internal
accounting and management systems of banks. It is now fundamentally
changing the delivery systems banks use to interact with their customers.
All over the world, banks are still struggling to find a technological
solution to meet the challenges of a rapidly-changing environment. It is
clear that this new technology is changing the banking industry forever.
Banks with the ability to invest and integrate information technology will
become dominate in the highly competitive global market. Bankers are
convinced that investing in IT is critical. Its potential and consequences
on the banking industry future is enormous
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One of the most important challenges facing India now is theneed to match the urban development with the rural development .the role
that information technology(IT)can play needs to be viewed in this
context ,just as technology is important for effecting as quantum
improvement in farming technique and in increased agricultural
production ,it in banking is vital for quick progress in financial
intermediation and efficient payment system .At the outset ,the mere
usage of computers would not y itself herald IT revolution in the rural
sector .there are many other tools of IT which need to be introduced to actas catalysts in the progress of transformation with the geographical spread
of banking having penetrated most parts of the country , it is vital that
automated teller machine (ATMs)are widely used .ATMs would provide
in rural masses with the conveniences associated with retail technology .
At present, ATMs are city oriented ATMs with the rural customer as
focus points may have to be introduced .ATMs could provide cash drawls
as also deposit facilities to the rural common man.
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2.2 An Overview of: IT in Banking
In the five decades since independence, banking in India has
evolved through four distinct phases. During Fourth phase, also called as
Reform Phase, Recommendations of the Narasimham Committee (1991)
paved the way for the reform phase in the banking. Important initiatives
with regard to the reform of the banking system were taken in this phase.
Important among these have been introduction of new accounting and
prudential norms relating to income recognition, provisioning and capital
adequacy, deregulation
of interest rates & easing
of norms for entry in the
field of banking.
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 the
threat of competition and retain their customer base.
Indian 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.
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Information Technology has basically been used under two differentavenues in Banking. One is Communication and Connectivity and other
is Business Process Reengineering. Information technology enables
sophisticated product development, better market infrastructure,
implementation of reliable techniques for control of risks and helps the
financial intermediaries to reach geographically distant and diversified
markets.
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. Further, Information
technology and the communication networking systems have a crucial
bearing on the efficiency of money, capital and foreign exchange
markets.
The Software Packages for Banking Applications in India had
their beginnings in the middle of 80s, when the Banks started
computerizing the branches in a limited manner. The early 90s saw the
plummeting hardware prices and advent of cheap and inexpensive but
high-powered 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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In India, banks as well as other financial entities entered the world of
information technology and with Indian Financial Net (INFINET).INFINET, a wide area satellite based network (WAN) using VSAT (Very
Small Aperture Terminals) technology, was jointly set up by the Reserve
Bank and Institute for Development and Research in Banking
Technology (IDRBT) in June 1999.
The Indian Financial Network (INFINET) which initially
comprised only the public sector banks was opened up for participationby other categories of members The first set of applications that could
benefit greatly from the use of technological advances in the computer
and communications area relate to the Payment systems which form the
lifeline of any banking activity. The process of reforms in payment and
settlement systems has gained momentum with the implementation of
projects such as NDS ((Negotiated Dealing System), CFMS (Centralized
Funds Management System) for better funds management by banks and
SFMS (Structured Financial Messaging Solution) for secure messagetransfer. This would result in funds transfers and funds-related message
transfer to be routed electronically across banks using the medium of the
INFINET. Negotiated dealing system (NDS), which has become
operational since February 2002 and RTGS (Real Time Gross Settlement
system) scheduled towards the end of 2003 are other major developments
in the area.
Internet has significantly influenced delivery channels of the banks.
Internet has emerged as an important medium for delivery of banking
products & services. Detailed guidelines of RBI for Internet Banking has
prepared the necessary ground for growth of Internet Banking in India.
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The Information Technology Act, 2000 has given legal recognition to
creation, trans-mission and retention of an electronic (or magnetic) datato be treated as valid proof in a court of law, except in those areas, which
continue to be governed by the provisions of the Negotiable Instruments
Act, 1881.
As stated in RBI's Annual Monetary and Credit Policy 2002-
2003: "To reap the full benefits of such electronic message transfers, it is
necessary that banks bestow sufficient attention on the computerizationand networking of the branches situated at commercially important
Centres on a time-bound basis. Intra-city and intra-bank networking
would facilitate in addressing the "last mile" problem which would in
turn result in quick and efficient funds transfers across the country".
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2.3 Role of IT in banking sector:
Banking environment has become highly competitive today. To be
able to survive and grow in the changing market environment banks are
going for the latest technologies, which is being perceived as an enabling
resource that can help in developing learner and more flexible structure
that can respond quickly to the dynamics of a fast changing market
scenario. It is also viewed as an instrument of cost reduction and effective
communication with people and institutions associated with the bankingbusiness.
The Software
Packages for Banking
Applications in India
had their beginnings
in the middle of 80s,when the Banks
started computerizing
the branches in a
limited manner. The early 90s saw the plummeting hardware prices and
advent of cheap and inexpensive but high powered PCs and Services 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 incommunication technologies and evolution of novel concept of
convergence of communication technologies, like internet, mobile/cell
phones etc. Technology has continuously played on important role in the
working of banking institutions and the services provided by them.
Safekeeping of public money, transfer of money, issuing drafts, exploring
investment opportunities and lending drafts, exploring investment being
provided.
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Information Technology enables sophisticated product development,
better market infrastructure, implementation of reliable techniques forcontrol of risks and helps the financial intermediaries to reach
geographically distant and diversified markets. Internet has significantly
influenced delivery channels of the banks. Internet has emerged as an
important medium for delivery of banking products and services.
The customers can view the accounts; get account statements,
transfer funds and purchase drafts by just punching on few keys. Thesmart cards i.e., cards with micro processor chip have added new
dimension to the scenario. An introduction of Cyber Cash the exchange
of cash takes place entirely through Cyber-books. Collection of
Electricity bills and telephone bills has become easy. The upgradeability
and flexibility of internet technology after unprecedented opportunities
for the banks to reach out to its customers. No doubt banking services
have undergone drastic changes and so also the expectation of customers
from the banks has increased greater.
IT is increasingly moving from a back office function to a prime
assistant in increasing the value of a bank over time. IT does so by
maximizing banks of pro-active measures such as strengthening and
standardizing banks infrastructure in respect of security, communication
and networking, achieving inter branch connectivity, moving towards
Real Time gross settlement (RTGS) environment the forecasting ofliquidity by building real time databases, use of Magnetic Ink Character
Recognition and Imaging technology for cheque clearing to name a few.
Indian banks are going for the retail banking in a big way
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2.4 Impact of IT on the Service Quality:
The most visible impact of technology is reflected in the way the
banks respond strategically for making its effective use for efficient
service delivery. This impact on service quality can be summed up as
below:
With automation, service no longer remains a marketing edge
with the large banks only. Small and relatively new banks with limited
network of branches become better placed to compete with the
established banks, by integrating IT in their operations.
The technology has commoditizing some of the financial
services. Therefore the banks cannot take a lifetime relationship with the
customers as granted and they have to work continuously to foster this
relationship and retain customer loyalty.
The technology on one hand serves as a powerful tool for
customer servicing, on the other hand, it itself results in depersonalizing
of the banking services. This has an adverse effect on relationship
banking. A decade of computerization can probably never substitute a
simple or a warm handshake.
In order to reduce service delivery cost, banks need to automate
routine customer inquiries through self-service channels. To do this theyneed to invest in call centers, kiosks, ATMs and Internet Banking today
require IT infrastructure integrated with their business strategy to be
customer centric.
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2.5 Impact of IT on Banking System:
The banking system is slowly shifting from the Traditional
Banking towards relationship banking. Traditionally the relationship
between the bank and its customers has been on a one-to-one level via the
branch network. This was put into operation with clearing and decision
making responsibilities concentrated at the individual branch level. Thehead office had responsibility for the overall clearing network, the size of
the branch network and the training of staff in the branch network. The
bank monitored the organizations performance and set the decision
making parameters, but the information available to both branch staff and
their customers was limited to one geographical location.
Traditional Banking Sector
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The modern bank cannot rely on its branch network alone. Customers are
now demanding new, more convenient, delivery systems, and servicessuch as Internet banking have a dual role to the customer. They provide
traditional banking services, but additionally offer much greater access to
information on their account status and on the banks many other
services. To do this banks have to create account information layers,
which can be accessed both by the bank staff as well as by the customers
themselves.
The use of interactive electronic links via the Internet could go a long
way in providing the customers with greater level of information aboutboth their own financial situation and about the services offered by the
bank.
The New Relationship Oriented Bank
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2.6 Impact of technology in banking sector
Electronics and information technologies are rapidly changing thebanking and financial services industry. Online banking and electronic
payment systems are new and this allows customers to check their
balance and update and personal information, and the development and
diffusion of these technologies by financial institutions is expected toresult in a more efficient banking system.
This technology offers
institutions an alternative and
better delivery channels through
which banking products andservices can be provided to
consumers. The decline in cost
and increase in capacity of
computers, as well asdevelopments in communications
technology, have altered not onlythe way information is
transferred but also the cost of
processing and storinginformation.
To bring services closer to a customer and to guarantee the
opportunity to use them anytime a customer wants to, have been the most
important targets in banking during the last twenty years. The continuing
development of more and more complicated back-office systems wouldnot have been possible without information technology
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2.7 Impact of IT on Customer Service in Rural /
Urban Centers:
Improved and effective customer service in the rural and urban
centers is a matter of great concern for the Reserve Bank of India.
Banking functions have undergone a significant change. Large scale
usage of IT by banks has resulted in computerization of many branches
and their inter-connectivity by means of safe and reliable networks.
While the new private sector banks have all commenced as entities with
fully computerized operations, the older banks too have embraced the IT
in a big way.
Today, all the public sector
banks are on the threshold of
achieving the status of 100 per
cent computerization of their
business. In fact, the largestbank in the country has also
networked and interconnected
more than 3,000 of its branches.
This has resulted in three major benefits to the customer:
(i) The customer is now treated as a customer of the bank as a whole and
he is now capable of enjoying facilities such as 'anywhere banking' as
also 'anytime banking',
(ii) Costs have come down and with hair thin margins being the order of
the day, banks have to look for ways and means to reduce their operating
costs and IT has come as a savior in this area, and
(iii) There is a great impact on improved customer service and overall
efficiency of the banks
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All the above have positioned customers of banks as the most
important source of attention by banks, thereby conforming to MahatmaGandhi's oft-told adage of the customer being the 'King'. In present
context, customer is treated as an 'Emperor'. In terms of developing a
state-of-the art IT infrastructure for the banking sector, the issue needs to
be considered in terms of serving the two major sectors in India that have
slightly different priorities, viz., rural and urban.
The rural segment, at least as of today, is less mobile and the
focus is more on fairness' of the system and adequacy of credit. In urban
areas, on the other part, there is a greater mobility of consumers and arelatively higher frequency of use. Thus, access, convenience and time
are of the essence. To sum up:
Rural
-Quick Credit -The urban sector has all the needs of the rural
-On an objective basis sector plus the following:
-At reasonable rates -Easy to access
-Sensitive to the vagaries of nature -Of high quality
-A friendly supporting system for encouraging
-Customized to as narrow a segment of Savings and attracting them into
the financial customers as possible mainstream Urban
This should not be taken to mean that the two sectors have divergent
needs. In fact, the ultimate infrastructural needs for both the sectors are
the same. However, the priorities for the two sectors differ somewhat and
it would be advisable to keep this in mind in our technological solutions
to address their needs.
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GLOBALIZATION
NEW JOBS
MORE TIMES
BRIDGING THE CULTURAL GAP
COST EFFECTIVENESS
COMMUNICATION
CH-3 ADVANTAGES OF I.T
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Some of the advantages of information technology include:
Globalization
IT has not only brought the world closer together, but it has
allowed the world's economy to become a single interdependent system.
This means that we can not only share information quickly and
efficiently, but we can also bring down barriers of linguistic and
geographic boundaries. The world has developed into a global village due
to the help of information technology allowing countries like Chile and
Japan who are not only separated by distance but also by language to
shares ideas and information with each other.
Communication
With the help of information technology, communication has
also become cheaper, quicker, and more efficient. We can now
communicate with anyone around the globe by simply text messagingthem or sending them an email for an almost instantaneous response. The
internet has also opened up face to face direct communication from
different parts of the world thanks to the helps of video conferencing.
Cost effectiveness
Information technology has helped to computerize the business
process thus streamlining businesses to make them extremely cost
effective money making machines. This in turn increases productivity
which ultimately gives rise to profits that means better pay and less
strenuous working conditions.
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Bridging the cultural gap
Information technology has helped to bridge the cultural gap by
helping people from different cultures to communicate with one another,
and allow for the exchange of views and ideas, thus increasing awareness
and reducing prejudice.
More time -
IT has made it possible for businesses to be open 24 x7 all over
the globe. This means that a business can be open anytime anywhere,making purchases from different countries easier and more convenient. It
also means that you can have your goods delivered right to your doorstep
with having to move a single muscle.
Creation of new jobs
Probably the best advantage of information technology is the
creation of new and interesting jobs. Computer programmers, Systemsanalyzers, Hardware and Software developers and Web designers are just
some of the many new employment opportunities created with the help of
IT.
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DOMINANT
CULTURE
LACK OF JOB
SECURITY
PRIVACY
UNEMPLOYMENT
CH-4 DISADVANTAGES OF IT
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Some disadvantages of information technology include:
Unemployment -
While information technology may have streamlined the business
process it has also created job redundancies, downsizing and outsourcing.
This means that a lot of lower and middle level jobs have been done away
with causing more people to become unemployed.
Privacy
Though information technology may have made communication
quicker, easier and more convenient, it has also bought along privacy
issues. From cell phone signal interceptions to email hacking, people are
now worried about their once private information becoming public
knowledge.
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Lack of job security
Industry experts believe that the internet has made job security
a big issue as since technology keeps on changing with each day. This
means that one has to be in a constant learning mode, if he or she wishes
for their job to be secure.
Dominant Culture:
While information technology may have made the world a
global village, it has also contributed to one culture dominating another
weaker one. For example it is now argued that US influences how most
young teenagers all over the world now act, dress and behave. Languages
too have become overshadowed, with English becoming the primary
mode of communication for business and everything else.
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ATM
INTERNET
BANKING
MOBILE
BANKING
E-COMMERCE
VIRTUAL
BANKING
TELEBANKING
CH-5 INNOVATIVE SERVICES
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ATM:
An automated teller machine (ATM), also known as a Cash Point
(which is a trademark ofLloyds TSB), Cash Machine or sometimes a
Hole in the Wall in British English, is a computerized
telecommunications device that provides the clients of a financial
institution with access to financial transactions in a public space without
the need for a cashier, human clerk or bank teller. ATMs are known byvarious other names including ATM
Machine, automatic banking machine, cash
machine, and various regional variants
derived from trademarks on ATM systems
held by particular banks.
Invented by IBM, the first ATM was
introduced in December 1972 at Lloyds
Bankin the UK. On most modern ATMs,
the customer is identified by inserting a
plastic ATM card with a magnetic stripe or a
plastic smart card with a chip, that contains a
unique card number and some security
information such as an expiration date or CVVC (CVV). Authentication
is provided by the customer entering a personal identification number
(PIN).
Using an ATM, customers can access their bankaccounts in order to
make cash withdrawals, credit card cash advances, and check their
account balances as well as purchase prepaid cell phone credit.
http://en.wikipedia.org/wiki/Lloyds_TSBhttp://en.wikipedia.org/wiki/British_Englishhttp://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Bank_tellerhttp://en.wikipedia.org/wiki/Trademarkhttp://en.wikipedia.org/wiki/IBMhttp://en.wikipedia.org/wiki/Lloyds_Bankhttp://en.wikipedia.org/wiki/Lloyds_Bankhttp://en.wikipedia.org/wiki/ATM_cardhttp://en.wikipedia.org/wiki/Magnetic_stripehttp://en.wikipedia.org/wiki/Smart_cardhttp://en.wikipedia.org/wiki/Integrated_circuithttp://en.wikipedia.org/wiki/Card_Security_Codehttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/File:Diebold_1063_ATM_with_modem.jpghttp://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Card_Security_Codehttp://en.wikipedia.org/wiki/Integrated_circuithttp://en.wikipedia.org/wiki/Smart_cardhttp://en.wikipedia.org/wiki/Magnetic_stripehttp://en.wikipedia.org/wiki/ATM_cardhttp://en.wikipedia.org/wiki/Lloyds_Bankhttp://en.wikipedia.org/wiki/Lloyds_Bankhttp://en.wikipedia.org/wiki/IBMhttp://en.wikipedia.org/wiki/Trademarkhttp://en.wikipedia.org/wiki/Bank_tellerhttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/British_Englishhttp://en.wikipedia.org/wiki/Lloyds_TSB -
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INTERNET BANKING:
Internet banking is a system of banking that enables customers to perform
various financial transactions on a secure website via the Internet. Thereare many banks and credit union that operate websites for internet
banking. Internet Banking is basically conducted via a personal computer
connected to Internet. Apart from it, people can also do financial
transactions using Internet banking on their cellular phones or personaldigital assistants.
Internet banking offers large number of benefits for people involved in
financial transactions. There is no need to visit your bank every time you
need to transfer money. You can do so by internet banking from thecomfort of your home. With net
banking facility, one can not only
transfer money, but also pay bills,
check bank statements, check
account balance, request for check
book and various other financialtransactions.
Internet banking has become
widely popular among the masses because of its wide array of benefits.
All banks offer the online banking facility for their customers nowadays.
Online banking has made the lives easier for people who are too busy to
go to bank for conducting their financial transactions. Net banking offers
the flexibility to do financial transaction on any day irrespective of thetime. In todays fast paced life, people are too much stressed out because
of their work pressure and net banking offers them peace of mind as they
can pay their bills, book their tickets, do online shopping, etc. by relaxing
on couch in their home. Best part of net banking is that it is very easy to
do any transaction over the net and highly secure website takes care of allyour worries.
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MOBILE BANKNG :
Mobile banking (also known as M-Banking,
mbanking, SMS Banking) is a term used for performing balance checks,account transactions, payments, credit applications and other banking
transactions through a mobile device such as a mobile phone or Personal
Digital Assistant (PDA). The earliest mobile banking services were
offered over SMS. With the introduction of the first primitive smart
phones with WAP support enabling the use of the mobile web in 1999,
the first European banks started to offer mobile banking on this platformto their customers. In one academic model, mobile banking is defined as:
Mobile Banking refers to provision and an ailment 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.
According to this model Mobile
Banking can be said to consist ofthree inter-related concepts:
Mobile Accounting
Mobile Brokerage
Mobile Financial Information Services
Most services in the categories designated Accounting and Brokerage are
transaction-based. The non-transaction-based services of an informational
nature are however essential for conducting transactions - for instance,
balance inquiries might be needed before committing a money
remittance. The accounting and brokerage services are therefore offeredinvariably in combination with information services. Informationservices, on the other hand, may be offered as an independent module
http://en.wikipedia.org/wiki/Mobile_phonehttp://en.wikipedia.org/wiki/SMShttp://en.wikipedia.org/wiki/Smart_phoneshttp://en.wikipedia.org/wiki/Smart_phoneshttp://en.wikipedia.org/wiki/Wireless_Application_Protocolhttp://en.wikipedia.org/wiki/Mobile_webhttp://en.wikipedia.org/wiki/1999http://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Brokeragehttp://en.wikipedia.org/wiki/Brokeragehttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/1999http://en.wikipedia.org/wiki/Mobile_webhttp://en.wikipedia.org/wiki/Wireless_Application_Protocolhttp://en.wikipedia.org/wiki/Smart_phoneshttp://en.wikipedia.org/wiki/Smart_phoneshttp://en.wikipedia.org/wiki/SMShttp://en.wikipedia.org/wiki/Mobile_phone -
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E-COMMERCE:
Electronic commerce,
commonly known as e-
commerce, eCommerce or e-
comm, refers to the buying and
selling ofproducts or servicesover electronic systems such as
the Internet and other computer
networks. However, the term
may refer to more than just
buying and selling products online. It also includes the entire onlineprocess of developing, marketing, selling, delivering, servicing andpaying for products and services. The amount of trade conducted
electronically has grown extraordinarily with widespread Internet usage.
The use of commerce is conducted in this way, spurring and drawing on
innovations in electronic funds transfer, supply chain management,
Internet marketing, online transaction processing, electronic datainterchange (EDI), inventory management systems, and automated data
collection systems. Modern electronic commerce typically uses the World
Wide Web at least at one point in the transaction's life-cycle, although itmay encompass a wider range of technologies such as e-mail, mobile
devices and telephones as well.
A large percentage of electronic commerce is conducted entirely in
electronic form for virtual items such as access to premium content on a
website, but mostly electronic commerce involves the transportation of
physical items in some way. Online retailers are sometimes known as e-tailers and online retail is sometimes known as e-tail. Almost all bigretailers are now electronically present on the World Wide Web.
Electronic commerce that takes place between businesses is
referred to as business-to-business or B2B. B2B can be open to all
interested parties (e.g. commodity exchange) or limited to specific, pre-
http://en.wikipedia.org/wiki/Product_%28business%29http://en.wikipedia.org/wiki/Service_%28economics%29http://en.wikipedia.org/wiki/Computer_networkhttp://en.wikipedia.org/wiki/Computer_networkhttp://en.wikipedia.org/wiki/Electronic_funds_transferhttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Internet_marketinghttp://en.wikipedia.org/wiki/Online_transaction_processinghttp://en.wikipedia.org/wiki/Electronic_data_interchangehttp://en.wikipedia.org/wiki/Electronic_data_interchangehttp://en.wikipedia.org/wiki/Inventory_managementhttp://en.wikipedia.org/wiki/World_Wide_Webhttp://en.wikipedia.org/wiki/World_Wide_Webhttp://en.wikipedia.org/wiki/E-mailhttp://en.wikipedia.org/wiki/Virtualhttp://en.wikipedia.org/wiki/E-tailerhttp://en.wikipedia.org/wiki/E-tailerhttp://en.wikipedia.org/wiki/World_Wide_Webhttp://en.wikipedia.org/wiki/Business-to-businesshttp://en.wikipedia.org/wiki/Commodity_exchangehttp://en.wikipedia.org/wiki/Commodity_exchangehttp://en.wikipedia.org/wiki/Business-to-businesshttp://en.wikipedia.org/wiki/World_Wide_Webhttp://en.wikipedia.org/wiki/E-tailerhttp://en.wikipedia.org/wiki/E-tailerhttp://en.wikipedia.org/wiki/Virtualhttp://en.wikipedia.org/wiki/E-mailhttp://en.wikipedia.org/wiki/World_Wide_Webhttp://en.wikipedia.org/wiki/World_Wide_Webhttp://en.wikipedia.org/wiki/Inventory_managementhttp://en.wikipedia.org/wiki/Electronic_data_interchangehttp://en.wikipedia.org/wiki/Electronic_data_interchangehttp://en.wikipedia.org/wiki/Online_transaction_processinghttp://en.wikipedia.org/wiki/Internet_marketinghttp://en.wikipedia.org/wiki/Supply_chain_managementhttp://en.wikipedia.org/wiki/Electronic_funds_transferhttp://en.wikipedia.org/wiki/Computer_networkhttp://en.wikipedia.org/wiki/Computer_networkhttp://en.wikipedia.org/wiki/Service_%28economics%29http://en.wikipedia.org/wiki/Product_%28business%29 -
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qualified participants (private electronic market). Electronic commerce
that takes place between businesses and consumers, on the other hand, is
referred to as business-to-consumer or B2C. This is the type of electroniccommerce conducted by companies such as Amazon.com. Online
shopping is a form of electronic commerce where the buyer is directly
online to the seller's computer usually via the internet. There is no
intermediary service involved. The sale or purchase transaction is
completed electronically and interactively in real-time such as inAmazon.com for new books. However in some cases, an intermediary
may be present in a sale or purchase transaction such as the transactionson eBay.com.
Electronic commerce is generally considered to be the sales
aspect ofe-business. It also consists of the exchange of data to facilitatethe financing and payment aspects of business transactions.
Virtual Banking:
There is nothing virtual about a virtual bank. There are real
customers, real money, real successes, and real failures.Security First
Network Bank, which opened in October of 1995, is often cited byindustry analysts as being the first virtual bank. This is untrue. Security
First may have been the first banking operation to refer to themselves avirtual bankbut they werent the first to offer banking services without
branches. Manulife Bank, located in Waterloo, Canada, has been offeringbanking services without brick and mortar branches for almost 15 years.
Manulife Bank shed their retail outlets in 1993 (sold them to Laurentian
Bank) and transformed themselves into a bank that provided banking
services through advisors, banking consultants, call centre personnel,
interactive voice response and, in the mid1990s, web banking.
Not only was Manulife Bank an innovator when
it came to virtual banking, they also created thefirst product of its kind in North America (the
Manulife One product). Manulife One is a loan
product suitable to more sophisticated
consumers who are not highly leveragedING
http://en.wikipedia.org/wiki/Private_electronic_markethttp://en.wikipedia.org/wiki/Business-to-consumerhttp://en.wikipedia.org/w/index.php?title=B2C&action=edit&redlink=1http://en.wikipedia.org/wiki/Amazon.comhttp://en.wikipedia.org/wiki/Online_shoppinghttp://en.wikipedia.org/wiki/Online_shoppinghttp://en.wikipedia.org/wiki/EBay.comhttp://en.wikipedia.org/wiki/E-businesshttp://en.wikipedia.org/wiki/E-businesshttp://en.wikipedia.org/wiki/EBay.comhttp://en.wikipedia.org/wiki/Online_shoppinghttp://en.wikipedia.org/wiki/Online_shoppinghttp://en.wikipedia.org/wiki/Amazon.comhttp://en.wikipedia.org/w/index.php?title=B2C&action=edit&redlink=1http://en.wikipedia.org/wiki/Business-to-consumerhttp://en.wikipedia.org/wiki/Private_electronic_market -
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DIRECT was another early virtual banking success for Canada. ING
DIRECT opened their virtualbanking doors in Canada by 1997, years
before they opened for business in Spain, Australia, the United States,France, Germany, UK, and Austria
TELEBANKING:
Telephone banking is a service provided by a financial institution, whichallows its customers to perform transactions over the telephone.
Most telephone banking services use an automated phone answering
system with phone keypad response or voice recognition capability. Toguarantee security, the customer
must first authenticate through a
numeric or verbal password orthrough security questions asked by
a live representative (see below).
With the obvious exception of cash
withdrawals and deposits, it offers
virtually all the features of an
automated teller machine: accountbalance information and list of latest
transactions, electronic bill
payments, funds transfers between acustomer's accounts, etc.
Usually, customers can also speak to
a live representative located in a call centre or a branch, although this
feature is not always guaranteed to be offered 24/7. In addition to the self-
service transactions listed earlier, telephone banking representatives are
usually trained to do what was traditionally available only at the branch:
loan applications, investment purchases and redemptions, cheque bookorders, debit card replacements, change of address, etc.
Banks which operate mostly or exclusively by telephone are known as
phone banks. They also help modernise the user by using specialtechnology
http://en.wikipedia.org/wiki/Financial_institutionhttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Authenticationhttp://en.wikipedia.org/wiki/Passwordhttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Girohttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Call_centrehttp://en.wikipedia.org/wiki/Branch_%28banking%29http://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Debit_cardhttp://en.wikipedia.org/wiki/Phone_bankhttp://en.wikipedia.org/wiki/Phone_bankhttp://en.wikipedia.org/wiki/Debit_cardhttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Investmenthttp://en.wikipedia.org/wiki/Loanhttp://en.wikipedia.org/wiki/Branch_%28banking%29http://en.wikipedia.org/wiki/Call_centrehttp://en.wikipedia.org/wiki/Deposit_accounthttp://en.wikipedia.org/wiki/Girohttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Passwordhttp://en.wikipedia.org/wiki/Authenticationhttp://en.wikipedia.org/wiki/Financial_transactionhttp://en.wikipedia.org/wiki/Financial_institution -
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CREDITCARDS
DEBIT CARDS
CHEQUE
CARDS
CHARGE
CARDS
SMART
CARDS
CH-6 INNOVATIVE PRODUCTS
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CREDIT CARDS :
A credit card is a small plastic cardissued to users as a system ofpayment. It
allows its holder to buy goods and
services based on the holder's promise to
pay for these goods and services.[1]
The
issuer of the card creates a revolving account and grants a line of credit to
the consumer (or the user) from which the user can borrow money for
payment to a merchant or as a cash advance to the user.
A credit card is different from a charge card: a charge card requires thebalance to be paid in full each month.
[2]In contrast, credit cards allow the
consumers a continuing balance of debt, subject to interest being charged.
A credit card also differs from a cash card, which can be used likecurrency by the owner of the card
DEBIT CARDS :
A debit card (also known as a bank card or check card) is a
plastic card that provides the cardholder electronic access to his or her
bank account/s at a financial institution. Some cards have a stored value
with which a payment is made, while most relay a message to thecardholder's bank to withdraw funds from a designated account in favorof the payee's designated bank account. The card can be used as an
alternative payment method to cash when making purchases. In some
cases, the cards are designed exclusively for use on the Internet, and sothere is no physical card.
In many countries the use of debit cards has become so widespread that
their volume of use has overtaken or entirely replaced the checkand, in
http://en.wikipedia.org/wiki/Plastichttp://en.wikipedia.org/wiki/Paymenthttp://en.wikipedia.org/wiki/Credit_card#cite_note-0http://en.wikipedia.org/wiki/Credit_card#cite_note-0http://en.wikipedia.org/wiki/Credit_card#cite_note-0http://en.wikipedia.org/wiki/Revolving_accounthttp://en.wikipedia.org/wiki/Line_of_credithttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Merchanthttp://en.wikipedia.org/wiki/Cash_advancehttp://en.wikipedia.org/wiki/Charge_cardhttp://en.wikipedia.org/wiki/Credit_card#cite_note-1http://en.wikipedia.org/wiki/Credit_card#cite_note-1http://en.wikipedia.org/wiki/Credit_card#cite_note-1http://en.wikipedia.org/wiki/Credit_card_interesthttp://en.wikipedia.org/wiki/Cash_cardhttp://en.wikipedia.org/wiki/Bank_accounthttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/File:Smartcard3.pnghttp://en.wikipedia.org/wiki/File:CCardFront.svghttp://en.wikipedia.org/wiki/File:Smartcard3.pnghttp://en.wikipedia.org/wiki/File:CCardFront.svghttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Cashhttp://en.wikipedia.org/wiki/Bank_accounthttp://en.wikipedia.org/wiki/Cash_cardhttp://en.wikipedia.org/wiki/Credit_card_interesthttp://en.wikipedia.org/wiki/Credit_card#cite_note-1http://en.wikipedia.org/wiki/Charge_cardhttp://en.wikipedia.org/wiki/Cash_advancehttp://en.wikipedia.org/wiki/Merchanthttp://en.wikipedia.org/wiki/Consumerhttp://en.wikipedia.org/wiki/Line_of_credithttp://en.wikipedia.org/wiki/Revolving_accounthttp://en.wikipedia.org/wiki/Credit_card#cite_note-0http://en.wikipedia.org/wiki/Paymenthttp://en.wikipedia.org/wiki/Plastic -
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some instances, cash transactions. Like credit cards, debit cards are used
widely for telephone and Internet purchases.
However, unlike credit cards, the funds paid using a debit card are
transferred immediately from the bearer's bank account, instead of havingthe bearer pay back the money at a later date.
Debit cards usually also allow for instant withdrawal of cash, acting as
the ATM card for withdrawing cash and as a check guarantee card.Merchants may also offer cash backfacilities to customers, where acustomer can withdraw cash along with their purchase.
CHEQUE CARDS:
A cheque guarantee card is
essentially an abbreviated portable
letter of credit granted by a bank to a
qualified depositor, providing thatwhen he is paying a business by
cheque and the retailer writes the
card number on the back of the
cheque, the cheque is signed in the
retailer's presence, and the retailer
verifies the signature on the cheque against the signature on the card, thenthe cheque cannot be stopped and payment cannot be refused by the bank.
This arrangement works only for cheques drawn on an account provided
by the bank that issues the card and can result in an overdraft with penaltyinterest.
http://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/ATM_cardhttp://en.wikipedia.org/wiki/Check_guarantee_cardhttp://en.wikipedia.org/wiki/Debit_card_cashbackhttp://en.wikipedia.org/wiki/Letter_of_credithttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Overdrafthttp://en.wikipedia.org/wiki/Overdrafthttp://en.wikipedia.org/wiki/Chequehttp://en.wikipedia.org/wiki/Letter_of_credithttp://en.wikipedia.org/wiki/Debit_card_cashbackhttp://en.wikipedia.org/wiki/Check_guarantee_cardhttp://en.wikipedia.org/wiki/ATM_cardhttp://en.wikipedia.org/wiki/Credit_card -
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SMART CARDS:
A smart card may have the following genericcharacteristics:
Dimensions similar to those of a credit card. ID-1 of the ISO/IEC
7810 standard defines cards as nominally 85.60 by 53.98
millimetres (3.370 2.125 in). Another popular size is ID-000which is nominally 25 by 15 millimetres (0.984 0.591 in)(commonly used in SIM cards). Both are 0.76 millimetres
(0.030 in) thick.
Contains a tamper-resistant security system (for example a secure
crypto processor and a secure file system) and provides security
services (e.g., protects in-memory information).
Managed by an administration system which securely interchanges
information and configuration settings with the card, controlling
card blacklisting and application-data updates. Communicates with external services via card-reading devices,
such as ticket readers, ATMs, etc.
http://en.wikipedia.org/wiki/Credit_cardhttp://en.wikipedia.org/wiki/ISO/IEC_7810http://en.wikipedia.org/wiki/ISO/IEC_7810http://en.wikipedia.org/wiki/Subscriber_Identity_Modulehttp://en.wikipedia.org/wiki/Tamper-resistanthttp://en.wikipedia.org/wiki/Secure_cryptoprocessorhttp://en.wikipedia.org/wiki/Secure_cryptoprocessorhttp://en.wikipedia.org/wiki/File_systemhttp://en.wikipedia.org/wiki/Blacklist_%28computing%29http://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/File:Carte_vitale_anonyme.jpghttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Blacklist_%28computing%29http://en.wikipedia.org/wiki/File_systemhttp://en.wikipedia.org/wiki/Secure_cryptoprocessorhttp://en.wikipedia.org/wiki/Secure_cryptoprocessorhttp://en.wikipedia.org/wiki/Tamper-resistanthttp://en.wikipedia.org/wiki/Subscriber_Identity_Modulehttp://en.wikipedia.org/wiki/ISO/IEC_7810http://en.wikipedia.org/wiki/ISO/IEC_7810http://en.wikipedia.org/wiki/Credit_card -
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ATM CARDS :
An ATM card (also known as a bank card, client card, key card or cash
card) is a card issued by a bank, credit union or building society that canbe used at an ATM for deposits, withdrawals, account information, andother types of transactions, often through interbank networks.
Some ATM cards can also be used:
at a branch, as identification for in-person transactions at merchants, for EFTPOS (point of sale) purchases
ATM cards are typically about 86 54 mm,i.e. ISO/IEC 7810 ID-1 size.
Unlike a debit card, in-store purchases or
refunds with an ATM card can generally bemade in person only, as they require
authentication through a personal
identification number or PIN. In other words,
ATM cards cannot be used at merchants thatonly accept credit cards.
However, other types of transactions through telephone or online banking
may be performed with an ATM card without in-person authentication.
This includes account balance inquiries, electronic bill payments or insome cases, online purchases (see Interact Online).
In some countries, the two functions of ATM cards and debit cards arecombined into a single card called a debit card or also commonly called a
bank card. These are able to perform banking tasks at ATMs and also
make point-of-sale transactions, both functions using a PIN. Canada's
Interact and Europe's Maestro are examples of networks that link bankaccounts with point-of-sale equipment.
http://en.wikipedia.org/wiki/Bankhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Building_societyhttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Interbank_networkhttp://en.wikipedia.org/wiki/EFTPOShttp://en.wikipedia.org/wiki/ISO/IEC_7810#ID-1http://en.wikipedia.org/wiki/Debit_cardhttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Credit_cardshttp://en.wikipedia.org/wiki/Telephone_bankinghttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Interac#Interac_Onlinehttp://en.wikipedia.org/wiki/Interachttp://en.wikipedia.org/wiki/Maestro_%28debit_card%29http://en.wikipedia.org/wiki/Maestro_%28debit_card%29http://en.wikipedia.org/wiki/Interachttp://en.wikipedia.org/wiki/Interac#Interac_Onlinehttp://en.wikipedia.org/wiki/Electronic_bill_paymenthttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Telephone_bankinghttp://en.wikipedia.org/wiki/Credit_cardshttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Debit_cardhttp://en.wikipedia.org/wiki/ISO/IEC_7810#ID-1http://en.wikipedia.org/wiki/EFTPOShttp://en.wikipedia.org/wiki/Interbank_networkhttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Building_societyhttp://en.wikipedia.org/wiki/Credit_unionhttp://en.wikipedia.org/wiki/Bank -
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HACKING
PHARMING
PHISHING
SKIMMING
TROJAN
CH-7 SECURITY ISSUES IN IT
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HACKING :
The term "hacker" also tends to connote membership in the global
community defined by the net (see the network and Internet address). For
discussion of some of the basics of this culture, see the How to Become aHacker FAQ. It also implies that the person described is seen to subscribe
to some version of the hacker ethic. It is better to be described as a hacker
by others than to describe oneself that way. Hackers consider themselvessomething of an elite (a meritocracy based on ability), though one to
which new members are gladly welcome. There is thus a certain ego
satisfaction to be had in identifyingyourself as a hacker (but if you claim
to be one and are not, you'll quickly
be labeled bogus). See also geek,
wannabe. This term seems to have
been first adopted as a badge in the
1960s by the hacker culturesurrounding TMRC and the MIT AI
Lab. We have a report that it was used
in a sense close to this entry's byteenage radio hams and electronics tinkerers in the mid-1950s.
The earliest Stanford revisions of the Jargon file (1975) did not describe
the term so positively, including only definitions 4, 5 and 8. The current
definition was written in more or less its current form around 1980 at
MIT. Definition 8 was "deprecated" in the 1990s by Jargon File editorEric S. Raymond, a known advocate of the positive usage of "hacker".
So, when we call ourselves 'hackers', or we distribute 'hacking'
documents, we encourage the propagation of information to the generalpublic, in order to get an idea of what they normally take for granted.
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PHARMING:
Pharming is a hacker's attack aiming to redirect a website's traffic to
another, bogus website. Pharming can be conducted either by changingthe hosts file on a victims computer or byexploitation of a vulnerability
in DNS server software. DNS servers are computers responsible for
resolving Internet names into their real addressesthey are the
"signposts" of the Internet. Compromised DNS servers are sometimesreferred to as "poisoned".
The term pharming is a neologism based on farming and phishing.
Phishing is a type ofsocial engineering attack to obtain access credentials
such as user names andpasswords. In recent
years both pharming
and phishing have been
used for online identity
theft information.
Pharming has becomeof major concern to
businesses hosting
ecommerce and online
banking websites.
Sophisticated measuresknown as anti-
pharming are required to protect against this serious threat. Antivirussoftware and spyware removal software cannot protect against pharming.
http://en.wikipedia.org/wiki/Black_hathttp://en.wikipedia.org/wiki/Websitehttp://en.wikipedia.org/wiki/Hosts_filehttp://en.wikipedia.org/wiki/Exploit_%28computer_security%29http://en.wikipedia.org/wiki/Exploit_%28computer_security%29http://en.wikipedia.org/wiki/Vulnerability_%28computing%29http://en.wikipedia.org/wiki/Domain_name_systemhttp://en.wikipedia.org/wiki/Softwarehttp://en.wikipedia.org/wiki/IP_addresshttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/DNS_cache_poisoninghttp://en.wikipedia.org/wiki/Neologismhttp://en.wikipedia.org/wiki/Phishinghttp://en.wikipedia.org/wiki/Social_engineering_%28computer_security%29http://en.wikipedia.org/wiki/Authenticationhttp://en.wikipedia.org/wiki/User_namehttp://en.wikipedia.org/wiki/Passwordhttp://en.wikipedia.org/wiki/Online_identity_thefthttp://en.wikipedia.org/wiki/Online_identity_thefthttp://en.wikipedia.org/wiki/Ecommercehttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Anti-pharminghttp://en.wikipedia.org/wiki/Anti-pharminghttp://en.wikipedia.org/wiki/Threat_%28computer%29http://en.wikipedia.org/wiki/Antivirus_softwarehttp://en.wikipedia.org/wiki/Antivirus_softwarehttp://en.wikipedia.org/wiki/Spyware_removal_softwarehttp://en.wikipedia.org/wiki/Spyware_removal_softwarehttp://en.wikipedia.org/wiki/Antivirus_softwarehttp://en.wikipedia.org/wiki/Antivirus_softwarehttp://en.wikipedia.org/wiki/Threat_%28computer%29http://en.wikipedia.org/wiki/Anti-pharminghttp://en.wikipedia.org/wiki/Anti-pharminghttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Online_bankinghttp://en.wikipedia.org/wiki/Ecommercehttp://en.wikipedia.org/wiki/Online_identity_thefthttp://en.wikipedia.org/wiki/Online_identity_thefthttp://en.wikipedia.org/wiki/Passwordhttp://en.wikipedia.org/wiki/User_namehttp://en.wikipedia.org/wiki/Authenticationhttp://en.wikipedia.org/wiki/Social_engineering_%28computer_security%29http://en.wikipedia.org/wiki/Phishinghttp://en.wikipedia.org/wiki/Neologismhttp://en.wikipedia.org/wiki/DNS_cache_poisoninghttp://en.wikipedia.org/wiki/Internethttp://en.wikipedia.org/wiki/IP_addresshttp://en.wikipedia.org/wiki/Softwarehttp://en.wikipedia.org/wiki/Domain_name_systemhttp://en.wikipedia.org/wiki/Vulnerability_%28computing%29http://en.wikipedia.org/wiki/Exploit_%28computer_security%29http://en.wikipedia.org/wiki/Hosts_filehttp://en.wikipedia.org/wiki/Websitehttp://en.wikipedia.org/wiki/Black_hat -
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PHISHING:
Phishing is a way of
attempting to acquire sensitive
information such as usernames,
passwords and credit card details
by masquerading as a trustworthy
entity in an electronic communication. This is similar to Fishing, wherethe fisherman puts a bait at the hook, thus, pretending to be a genuine
food for fish. But the hook inside it takes the complete fish out of the
lake. Communications purporting to be from popular social web sites,
auction sites, online payment processors or IT administrators are
commonly used to lure the unsuspecting public. Phishing is typicallycarried out by e-mail spoofing or instant messaging, and it often directs
users to enter details at a fake website whose look and feel are almost
identical to the legitimate one. Phishing is an example ofsocial
engineering techniques used to deceive users, and exploits the poorusability of current web security technologies. Attempts to deal with the
growing number of reported phishing incidents include legislation, usertraining, public awareness, and technical security measures.
A phishing technique was described in detail in 1987, and the firstrecorded use of the term "phishing" was made in 1996. The term is a
variant of fishing, probably influenced by preaching, and alludes to
"baits" used in hopes that the potential victim will "bite" by clicking a
malicious link or opening a malicious attachment, in which case theirfinancial information and passwords may then be stolen.
http://en.wikipedia.org/wiki/Passwordhttp://en.wikipedia.org/wiki/Electronic_communicationhttp://en.wikipedia.org/wiki/E-mailhttp://en.wikipedia.org/wiki/E-mail_spoofinghttp://en.wikipedia.org/wiki/Instant_messaginghttp://en.wikipedia.org/wiki/Look_and_feelhttp://en.wikipedia.org/wiki/Social_engineering_%28computer_security%29http://en.wikipedia.org/wiki/Social_engineering_%28computer_security%29http://en.wikipedia.org/wiki/Legislationhttp://en.wikipedia.org/wiki/Phreakinghttp://en.wikipedia.org/wiki/Phreakinghttp://en.wikipedia.org/wiki/Legislationhttp://en.wikipedia.org/wiki/Social_engineering_%28computer_security%29http://en.wikipedia.org/wiki/Social_engineering_%28computer_security%29http://en.wikipedia.org/wiki/Look_and_feelhttp://en.wikipedia.org/wiki/Instant_messaginghttp://en.wikipedia.org/wiki/E-mail_spoofinghttp://en.wikipedia.org/wiki/E-mailhttp://en.wikipedia.org/wiki/Electronic_communicationhttp://en.wikipedia.org/wiki/Password -
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TROJAN:
A Trojan horse, or
Trojan, is a destructive
program that masquerades as
an application. The software
initially appears to perform adesirable function for the user
prior to installation and/or
execution, but (perhaps in
addition to the expected
function) steals informationor harms the system. Unlikeviruses or worms, Trojan
horses do not replicate
themselves, but they can be
just as destructive.
The term is derived from the Greek myth of the Trojan War, in
which the Greeks gave a giant wooden horse to their foes, the Trojans,
ostensibly as a peace offering. However, after the Trojans dragged thehorse inside their city walls, the Greek soldiers sneaked out of the horse's
hollow belly to open the city gates and allowed their compatriots to pourin, capturing Troy.
http://en.wikipedia.org/wiki/Computer_virushttp://en.wikipedia.org/wiki/Computer_wormhttp://en.wikipedia.org/wiki/Trojan_Warhttp://en.wikipedia.org/wiki/Trojan_Warhttp://en.wikipedia.org/wiki/Computer_wormhttp://en.wikipedia.org/wiki/Computer_virus -
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SKIMMING:
Skimming is the theft of credit card information used in an
otherwise legitimate transaction. It is typically an "inside job" by a
dishonest employee of a legitimate merchant. The thief can procure a
victim's credit card number using basic methods such as photocopying
receipts or more advanced methods such as using a small electronicdevice (skimmer) to swipe and store hundreds of victims credit card
numbers. Common scenarios for skimming are restaurants or bars where
the skimmer has possession of the victim's credit card out of their
immediate view. The thief may also use a small keypad to unobtrusively
transcribe the 3 or 4 digits Card Security Code which is not present on themagnetic strip. Call centers are another area where skimming can easilyoccur.
Instances of skimming have been reported where the perpetrator hasput a device over the card slot of an ATM (automated teller machine),
which reads the magnetic strip as the user unknowingly passes their card
through it. These devices are often used in conjunction with a miniature
camera (inconspicuously attached to the ATM) to read the user's PIN at
the same time.[11]
This method is being used very frequently in manyparts of the world, including South America, e.g. in Argentina and
Europe, e.g. in the Netherlands. Another technique used is a keypad
overlay that matches up with the buttons of the legitimate keypad below it
and presses them when operated, but records or transmits the key log of
the PIN entered by wireless. The device or groups of devices illicitly
installed on an ATM are also colloquially known as a "skimmer".Recently-made ATMs now often run a picture of what the slot and
keypad are supposed to look like as a background, so that consumers can
identify foreign devices attached.
http://en.wikipedia.org/wiki/Card_Security_Codehttp://en.wikipedia.org/wiki/Call_centershttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Credit_card_fraud#cite_note-10http://en.wikipedia.org/wiki/Credit_card_fraud#cite_note-10http://en.wikipedia.org/wiki/Credit_card_fraud#cite_note-10http://en.wikipedia.org/wiki/Credit_card_fraud#cite_note-10http://en.wikipedia.org/wiki/Personal_identification_numberhttp://en.wikipedia.org/wiki/Automated_teller_machinehttp://en.wikipedia.org/wiki/Call_centershttp://en.wikipedia.org/wiki/Card_Security_Code -
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CH-8 INITIATIVE OF RBI
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Initiatives of: Reserve Bank of India
Implementation of Centralized Funds Management System:
The centralized funds management system (CFMS) provides for a
centralized viewing of balance positions of the account holders across
different accounts maintained at various locations of RBI. While the first
phase of the system covering the centralized funds enquiry system
(CFES) has been made available to the users, the second phasecomprising the centralized funds transfer system (CFTS) would be made
available by the middle of 2003. So far, 54 banks have implemented the
system at their treasuries/funds management branches.
Certification and Digital Signatures:
The mid-term Review of October 2002 indicated the need for
information security on the network and the use of public key
infrastructure (PKI) by banks. The Controller of Certifying Authorities,
Government of India, have approved the Institute for Development and
Research in Banking Technology (IDRBT) as a Certification Authority
(CA) for digital signatures. Consequently, the process of setting up of
registration authorities (RA) under the CA has commenced at various
banks. In addition to the negotiated dealing system (NDS), the electronic
clearing service (ECS) and electronic funds transfer (EFT) are also being
enhanced in terms of security by means of implementation of PKI and
digital signatures using the facilities offered by the CA.
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Committee on Payment Systems:
In order to examine the entire gamut of the process of reforms in
payment and settlement systems which would be culminating with the
real time gross settlement (RTGS) system, a Committee on Payment
Systems (Chairman: Dr. R.H. Patil) was set up in 2002. The Committee,
after examining the various aspects relating to payment and settlement
systems, submitted its report in September 2002 along with a draft
Payment Systems Bill. The draft Bill provides, inter alia, a legal basis fornetting, apart from empowering RBI to have regulatory and oversight
powers over payment and settlement systems of the country. The report
of the Committee was put on the RBI website for wider dissemination.
The draft Bill has been forwarded to the Government.
Multi-application Smart Cards:
Recognizing the need for technology based payment products and
the growing importance of smart card based payment flows, a pilot
project for multi-application smart cards in conjunction with a few banks
and vendors, under the aegis of the Ministry of Communications and
Information Technology, Government of India, has been initiated. The
project is aimed at the formulation of standards for multi-application
smart cards on the basis of inter-operable systems and technologicalcomponents of the entire system.
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Special Electronic Funds Transfer:
As indicated in the mid-term Review of October 2002, national
EFT (NEFT) is being introduced using the backbone of the structured
financial messaging system (SFMS) of the IDRBT. NEFT would provide
for movement of electronic transfer of funds in a safe, secure and quick
manner across branches of any bank to any other bank through a central
gateway of each bank, with the inter-bank settlement being effected in the
books of account of banks maintained at RBI. Since this scheme requires
connectivity across a large number of branches at many cities, a special
EFT (SEFT) was introduced in April 2003 covering about 3000 branches
in 500 cities. This has facilitated same day transfer of funds across
accounts of constituents at all these branches.
National Settlement System (NSS):
The clearing and settlement activities are dispersed through 1,047
clearing houses managed by RBI, the State Bank of