Banking

ONLINE BANKING – CHALLENGES and

OPPORTUNITIES

Submitted by:

Priyanka Yadav

T.Y.B.C.B.I. (SEMESTER V)

Under the guidance of :

Ms. Rashmi J.

Submitted to:

University of Mumbai

RAJASTHANI SAMMELAN’S

Ghanshyamdas Saraf College

Affiliated to University of Mumbai

ACCREDITED BY NAAC WITH ‘A’ GRADE

&

Durgadevi Saraf Junior College

(Arts & Commerce)

S.V. Road, Malad (West),

Mumbai – 400 064.

Year : 2012 -2013

RAJASTHANI SAMMELAN’S

Ghanshyamdas Saraf College

Affiliated to University of Mumbai

ACCREDITED BY NAAC WITH ‘A’ GRADE

&

Durgadevi Saraf Junior College

(Arts & Commerce)

S.V. Road, Malad (West),

Mumbai – 400 064.

CERTIFICATE

I Prof. Rashmi J. hereby certify that Ms. Yadav Priyanka Omprakash,

a student of Ghanshyamdas Saraf College of T.Y.B.C.B.I. (Semester

V) has completed project on “ONLINE BANKING –

CHALLENGES & OPPORTUNITIES” in the academic year 2012-

2013. This information submitted is true and original to the best of my

knowledge.

External Examiner : Principal :

Date :

Project Co-ordinator ; College Seal :

Date :

ACKNOWLEDGEMENT

All these years we have just studying and passing. But this time

we have got an opportunity to make such a project study. So it is very

obvious for me to thank all those people associated with the making of

the project. I would like to thank the University of Mumbai for giving

me this chance.

I owe a great many thanks to my project guide Mrs. Rashmi J. who

has been a constant support and guidance throughout the making of

my project and for monitoring my project with attention and care. She

has taken the pains to go through the project and make necessary

corrections as needed.

I would also like to thank our course coordinator Mrs. for

being a moral support to us during this project.

I express thanks to my college Principal for extending her support.

And last but not the least I would take the opportunity to thank my

parents without whom the project would have been a distant reality.

Sincere thanks to all my fellow mates and well wishers.

DECLARATION

I Miss. Yadav Priyanka Omprakash, a student of

Ghanshyamdas Saraf College of Arts & Commerce, T.Y.B.C.B.I.

(Semester V) hereby declare that I have completed project on

“ONLINE BANKING-CHALLENGES AND

OPPORTUNITIES” in the academic year 2012-2013. This

information submitted is true and original to the best of my

knowledge.

Date : Signature of Student :

SUMMARY

Technological developments have been growing at an alarming speed

in the international arena. Internet is proudly one of the best in those.

So, the banking sector is also making the best utilization of it. In this

study based on ONLINE BANKING, it has been observed that the

development of online banking has increased by leaps and bounds

during the past few years. Concentrating on the Indian economy, the

use of online banking is still in the developing stage.

Today in India the scope of online banking is growing by a good

decent rise in its usage. The rise in the usage of the Internet is the

main criteria for development of online banking.

This project helps us understand the how the online banking

came into existence and its need in the modern world. It shows us the

insights of the online banking in India. It helps us understand the

opportunities and the challenges associated with the online banking in

India.

INDEX

SR.NO TOPIC PAGE NO

I

1.

CHAPTER I – INTRODUCTION

Development of Online Banking through Evolution of Information Technology & E-Commerce

1 - 42

1 – 6

2. What is online banking? Features Advantages Disadvantages

6 – 14

3. How does online banking work and its structure. 15 – 16 4. Opportunities in Online Banking:

Is there a future in online banking? Changes in trend Why banks encourage online banking?

17 – 23

5. Challenges in Online Banking: Main concerns Related Problems Adherences to guidelines

23 – 36

6. Solutions 36 – 407. Case Studies 40 – 428. ICICI Bank 42

II

1.

CHAPTER II – RESEARCH METHODOLOGY

Objectives of the study

43

2. Limits of the study3. Methodology used

III CHAPTER III – DATA ANALYSIS 44 – 47

IV CHAPTER IV – RECOMMENDATION & CONCLUSION

48 – 49

V CHAPTER V – BIBLIOGRAPHY 50 – 51

CHAPTER I – INTRODUCTION

Online banking is a process that has evolved because of the

development of technology over the years. So before going into detail

on the online banking we should have a overview of its birth.

INFORMATION TECHNOLOGY

Information technology (IT) is the acquisition, processing, storage and

dissemination of vocal, pictorial, textual and numerical information by

a microelectronics-based combination

of computing and telecommunications. IT (information technology) is

a term that encompasses all forms of technology used to create, store,

exchange, and use information in its various forms (business data,

voice conversations, still images, motion pictures, multimedia

presentations, and other forms, including those not yet conceived). It's

a convenient term for including both telephony and computer

technology in the same word. It is the technology that is driving what

has often been called "the information revolution."

IT is the area of managing technology and spans wide variety of areas

that include but are not limited to things such as processes, computer

software, information systems, computer hardware, programming

languages, and data constructs. In short, anything that renders data,

information or perceived knowledge in any visual format whatsoever,

via any multimedia distribution mechanism, is considered part of the

domain space known as Information Technology (IT). IT provides

businesses with four sets of core services to help execute the business

strategy. These four core services are broken into business process

1

automation, providing information, connecting with customers, and

productivity tools.

IT professionals perform a variety of functions (IT

Disciplines/Competencies) that ranges from installing applications to

designing complex computer networks and information databases. A

few of the duties that IT professionals perform may include data

management, networking, engineering computer hardware, database

and software design, as well as management and administration of

entire systems. Information technology is starting to spread further

than the conventional personal computer and network technologies,

and more into integrations of other technologies such as the use of cell

phones, televisions, automobiles, and more, which is increasing the

demand for such jobs.

TECHNOLOGY IN BANKING

Many of the largest and most successful banks in the world emerged

from the technical changes that they are able to recognize at an early

stage. India’s banking sector has a long way to go before it can

compete globally. Situation is especially maintained in the late

introduction of ICT in India banks. Our information technology is

designed to compete with information technology in the world, and

when we are in the area very quickly, it can be difficult for us to

benefit from liberalization.

Bank, with the right technology - to provide timely information, to

increase productivity and thus see a competitive advantage.

Competetion in the economy, which has been opened, it is certainly

2

the Indian banks to comply with the latest technology and adapt to its

surroundings. Except that the banks need much improved use of

technology to customer-friendly, efficient and competitive in the

current authorities and businesses, they also need the technology to

newer products and newer forms of service and the increasingly

dynamic global environment to offer. Information technology allows

banks to build new systems, which bite the needs of many customers

that cannot be considered today.

On-line banking, for example, promises customers to conduct banking

transactions in a direct access to the core of the bank customer

account works. Customers to verify all information, all so far, all the

checks, all credit card information.

In the future, the banks freed from the constraints of a delivery

channel. They can create, package, market and product niches, and

because the tumbling price of the technology, they can do so cost-

effectively.

Technology gives banks the opportunity to be closer to customers, to a

broader range of services at lower costs, streamline the March belang

systems so that all information in one place where it can be used for

the trends that can quickly lead into new products. Electronic banking

data can be gathered and analyzed. Interactivity allows the consumer

to save the settings, directing the development of truly new products.

The development of I.T has helped the boom of E – Commerce.

So it is also important to know the concept of E – Commerce.

3

E-COMMERCE

Electronic commerce, commonly known as E-

commerce, eCommerce or E-commerce, refers to the buying and

selling of products or services over 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 online process of developing, marketing, selling, delivering,

servicing and paying 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 Data Interchange (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 it may 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

big retailers 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

4

parties (e.g. commodity exchange) or limited to specific, pre-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

electronic commerce 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 in Amazon.com for new books. However in some

cases, an intermediary may be present in a sale or purchase transaction

such as the transactions on eBay.com.

Electronic commerce is generally considered to be the sales aspect

of e-business. It also consists of the exchange of data to facilitate the

financing and payment aspects of business transactions.

Business applications of E-commerce

Some common applications related to electronic commerce are the following:

Email Enterprise content management Instant messaging Newsgroups Online shopping and order tracking Online banking Online office suites Domestic and international payment systems Shopping cart software Teleconferencing Electronic tickets

5

E-COMMERCE APPLICATION IN BANKING INDUSTRY

New information technologies and emerging business forces have

triggered a new wave of financial innovation – electronic banking (e-

banking). The banking and financial industry is transforming itself in

unpredictable ways (Crane and Bodie 1996), powered in an important

way by advances in information technology (Holland and Westwood

2001). Since the 1980s, commercial banking has continuously

innovated through technology-enhanced products and services, such

as multi-function ATM, tele-banking, electronic transfers and

electronic cash cards. Over the past decade, the Internet has clearly

played a critical role in providing online services and giving rise to a

completely new channel. In the internet age, the extension of

commercial banking to the cyberspace is an inevitable development

(Liao and Cheung 2003).

E-banking creates unprecedented opportunities for the banks in the

ways they organize financial product development, delivery and

marketing via the internet. While it offers new opportunities to banks,

it also poses many challenges such as the innovation of IT

applications, the blurring of market boundaries, the breaching of

industrial barriers, the entrance of new competitors and the emergence

of new business models (Saatcioglu et al. 2001, Liao and Cheung

2003). Now the speed and scale of the challenge are rapidly increasing

with the pervasiveness of the internet and the extension of information

economy (Holland and Westwood 2001).

6

Globally, e-commerce growth has been led by the popularity of online

shopping portals like amazon.com and ebay.com but in India that has

not been the case. It is mainly driven by the online travel industry and

banking sector. For instance, 29% of Indian Internet users book airline

tickets online and the figure is expected to touch 46% next year.

Online rail ticket booking stands at 39% of the total bookings. As far

as banking is concerned, there are 4.6 million online banking users in

India. This figure is expected to go up to over 16 million by 2007-08

that will include both internet and mobile banking users. According to

the Internet and Mobile Association of India (IAMAI), the e-

commerce industry in India is expected to grow to a size of Rs. 2,300

crore by 2007 against the Rs.1,200 crore. The total number of internet

users which right now is 38.5 million is expected to reach 100 million

by 2008.

WHAT IS ONLINE BANKING?

If you're like most people, you've heard a lot about online banking but

probably haven't tried it yourself. You still pay your bills by mail and

deposit checks at your bank branch, much the way your parents did.

You might shop online for a loan, life insurance or a home mortgage,

but when it comes time to commit, you feel more comfortable

working with your banker or an agent you know and trust.

Online banking isn't out to change your money habits. Instead, it uses

today's computer technology to give you the option of bypassing the

time-consuming, paper-based aspects of traditional banking in order

to manage your finances more quickly and efficiently.

7

Origin of online banking

The advent of the Internet and the popularity of personal computers

presented both an opportunity and a challenge for the banking

industry.

For years, financial institutions have used powerful computer

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

only paper record is the customer's receipt at the point of sale. Now

that its customers are connected to the Internet via personal

computers, banks envision similar economic advantages by adapting

those same internal electronic processes to home use.

Banks view online banking as a powerful "value added" tool to attract

and retain new customers while helping to eliminate costly paper

handling and teller interactions in an increasingly competitive banking

environment.

Brick-to-click banks

Today, most large national banks, many regional banks and even

smaller banks and credit unions offer some form of online banking,

variously known as PC banking, home banking, electronic banking or

Internet banking. Those that do are sometimes referred to as "brick-to-

click" banks, both to distinguish them from brick-and-mortar banks

that have yet to offer online banking, as well as from online or

"virtual" banks that have no physical branches or tellers whatsoever.

The challenge for the banking industry has been to design this new

service channel in such a way that its customers will readily learn to

8

use and trust it. After all, banks have spent generations earning our

trust; they aren't about to risk that on a Web site that is frustrating,

confusing or less than secure.

Most of the large banks now offer fully secure, fully functional online

banking for free or for a small fee. Some smaller banks offer limited

access or functionality; for instance, you may be able to view your

account balance and history but not initiate transactions online. As

more banks succeed online and more customers use their sites, fully

functional online banking likely will become as commonplace as

automated teller machines.

Understanding Online Banking Services

Online banking is a great convenience for many people. Whether

people use it to manage traditional accounts or switch all of their

banking to an online-only firm, it is a wonderful improvement over

the days when everything had to be done face-to-face.

No matter what kind of banking is done online, it starts with a secure

web site. Usually, the bank will have certain requirements to ensure

password strength as well. This and other security measures ensure

that online accounts are safe from tampering. From there, all of the

necessary services can be accessed.

Online banking is quite simple once the basics are understood.

Depositing money is simple, and can be done in a number of ways.

The most popular method is likely direct deposit. Many employers

offer direct deposit of paychecks, and by providing them with your

9

online bank account number, your checks will go right into that

account. Other ways of depositing money include bank and wire

transfers. Some accounts even allow customers to mail their checks in.

Paper checks are typically provided with online checking accounts.

This, however, is not likely to be the most common way a customer

will access funds. Online bill payment allows users to pay their bills

without mailing checks, and those who use web-based accounts

typically prefer this and other electronic payment methods. Most types

of bills can be paid via a debit card or electronic checks, as well. This

makes it easy to eliminate the need for paper checks entirely. Still,

many find it useful to have a few checks on hand for those few

companies that haven’t quite reached the modern age.

The management of traditional accounts is another common use for

online banking. Most banks offer online access to accounts, and all

customers need to do to make use of the service is sign up through

their bank’s site. Once this is done, checking your balance, seeing

which payments have cleared, and other common banking operations

can be done from the computer. This eliminates the need to call or

visit the bank for simple account maintenance needs.

Every online banking interface is slightly different, but all banks try to

make things easy and intuitive for users. It won’t take long for a new

user to figure out exactly how everything works. Sign up for an online

bank account or online access to your current one, and soon you’ll

wonder how you could have lived without it.

10

FEATURES OF ONLINE BANKING

We need to be able to manage our finances from anywhere in the

world. Rich online banking services are much more important than a

physical location. Since I have been doing all of my banking online

with quite a few different online banks as I looked for the best

solution, I’ve had a chance to really experiment with what works and

what doesn’t work for us.

Here is a checklist of things to look for in an online bank. Some items

you may be familiar with. Others might be new to you if it isn’t

something your current bank offers.

1. Bill Pay Service - One of the biggest reasons for going with an

online bank is to get really good bill payment services. Different banks

handle bill payment different ways. Here are some things to think

about:

A. How many bills are you allowed to pay per month?

B. What are the fees for going over the limit?

C. Can the bill payment send physical checks to merchants who aren’t

set up to take electronic payments?

D. Do checks come from your account or from a third party service?

For privacy reasons, it might be better to be able to pay someone

without giving them your bank account number on the check. On the

other hand, if the checks actually come from your account, the money

doesn’t get taken out until the check is cashed.

E. Can you set up reoccurring payments?

11

2. Electronic Bill Notification – With electronic bills, your merchant

(credit card company, gas company, electric company, etc.) sends an

electronic bill to your bank. You can set it up to pay automatically or

notify you for approval. This can be particularly good for people who

are on the road because it reduces the amount of physical mail you

have to somehow get read or forwarded to you.

3. Online Check Images – Most banks will show you an image of the

check, which makes it really easy to balance your account if you can’t

remember what a particular payment was for. (Ideally, you should

minimize the number of physical checks you write to reduce fraud.)

4. Online Deposit Slip Images – Most banks just record the total with

no image. It will let you see an image of each deposit slip. Having the

images available can be very helpful if you ever have to prove

something for tax purposes or need to remember where that $2581

deposit came from.

5. Reporting Tools – Most banks offer basic reporting tools that will

let you see how much you have spent in each category you’ve created.

This may not be an issue if you use desktop money management

software, but it still can be handy if you are traveling and want to see

how much you’ve paid on your mortgage over the past 12 months.

6. Linked Accounts – Can you link your bank account with a

brokerage account? Can you add your minor children as custodial

accounts and manage them all centrally? If you and your spouse both

12

set them up IRAs, is it easy to view them both along side the rest of

your finances, or do you have to have a separate login for each IRA to

keep them on separate SSNs? These are small things that many banks

don’t support, but it starts getting really complicated when you have to

manage a bunch of accounts instead of having a single place to

manage all of your money.

7. Convenient Deposit Methods - Since you may not be anywhere

near the physical location of your bank, make sure you understand

how to deposit money. Payroll can be set up on direct deposit, but

there will be times when you need to deposit checks. Does the bank

provide postage paid envelopes and deposit slips? Some banks work

with FedEx or UPS stores to allow you to send in a deposit overnight

for free.

8. Low ATM Fees and Convenient Locations – If you need to get

cash, will the bank refund the ATM fees? Are there only certain ATMs

that are free, and if so, are they located near places you normally go?

Are the ATMs available nation wide so you can use them on vacation?

What are the fees for using the ATM internationally and how is the

exchange rate handled?

9. Integration with Desktop Software – If you use Microsoft Money,

Quicken or something similar, you’ll want to make sure your bank

supports it. Make sure you understand if downloading transactions

require you to login and manually download a file, or if your money

management software can directly connect and download new

13

transactions. If you are using Quicken on a Mac, make sure the bank is

paying Quickens extortion fee so the files will work with Mac users.

10. Many Account Types – Some banks only offer basic checking

and savings accounts. Ideally you want a bank that makes it easy to

open money market accounts, IRAs, health savings accounts, etc. If

you have to go to another institution to open a different type of

account, it is more difficult to manage–especially if you are on the

road. You want to be able to easily open a CD to take advantage of a

higher interest rate, easily open an IRA to help reduce your tax

liability, etc.

11. Free Money Transfers – Be sure to consider how easy it is to

move money in and out of the account. You should be able to set up

links with your accounts from other institutions to transfer money back

and forth as necessary. Make sure you understand what type of fees

are associated with these transfers. Good banks should allow a certain

number of transfers per month with no fee.

12. Security Balanced with Convenience - Some banks spend so

much effort trying to keep things secure that you’ll find yourself

automatically logged out of their website while you try to balance your

account. You want security but you don’t want it to get in the way of

you doing your banking. Also check into what type of additional

security features are available. For example, some banks will offer you

an RSA keychain with a number that changes every 60 seconds. In

14

addition to your password, you will need the number from that key in

order to get access to your account.

13. Ease of Use – This is something that most banks seem to struggle

with. Right now I have my personal account with one online bank and

my business accounts with another. I dread using the business

accounts and I absolutely love using my personal account. At first I

thought I was just more familiar with the bank where my personal

accounts are, but I finally realize that it comes down to the ease of use.

One is ok and the other is superb, but it makes a big difference.

Advantages of online banking:

Convenience: Unlike your corner bank, online banking sites never

close; they're available 24 hours a day, seven days a week, and

they're only a mouse click away.

Ubiquity: If you're out of state or even out of the country when a

money problem arises, you can log on instantly to your online bank

and take care of business, 24/7.

Transaction speed: Online bank sites generally execute and

confirm transactions at or quicker than ATM processing speeds.

Efficiency: You can access and manage all of your bank accounts,

including IRAs, CDs, even securities, from one secure site.

Effectiveness: Many online banking sites now offer sophisticated

tools, including account aggregation, stock quotes, rate alerts and

portfolio managing programs to help you manage all of your assets

15

more effectively. Most are also compatible with money managing

programs such as Quicken and Microsoft Money.

Disadvantages of online banking:

Start-up may take time: In order to register for your bank's online

program, you will probably have to provide ID and sign a form at a

bank branch. If you and your spouse wish to view and manage your

assets together online, one of you may have to sign a durable power

of attorney before the bank will display all of your holdings

together.

Learning curve: Banking sites can be difficult to navigate at first.

Plan to invest some time and/or read the tutorials in order to

become comfortable in your virtual lobby.

Bank site changes: Even the largest banks periodically upgrade

their online programs, adding new features in unfamiliar places. In

some cases, you may have to re-enter account information.

The trust thing: For many people, the biggest hurdle to online

banking is learning to trust it. Did my transaction go through? Did I

push the transfer button once or twice? Best bet: always print the

transaction receipt and keep it with your bank records until it shows

up on your personal site and/or your bank statement.

How Does Online Banking Work?

Online banking provides many identical services that a traditional bank does with the biggest difference is in teller availability: Human

16

tellers leave; electronic tellers—the websites—are available virtually all day, everyday—weekends and holidays, included.

Online Banking Structure:

Online banking mirrors traditional banking procedures in many instances, and in some, actually improves security and reduces both banks’ and customer’s costs.

In electronic form, online banking still allows:

1. Deposits to the account, whether via payroll deposits or funds

transfers.

2. Bill payments via automatic payment schedules or individually

ordered payments. Most bill pay users opt for the bank-generated

checks, but payments can be ordered in a one off situation or

scheduled regularly.

3. Statement formats can be electronic or paper; most who prefer

online banking choose the electronic statements for convenience and

reduced paper use.

4. Wire transfers to accounts within and without the bank’s structure,

though some banks charge additional transaction fees for wire

transfers.

5. Differing services depending on the individual financial institute.

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Online Actions

All online banking transactions are initiated by creating an

online account identity. Account login name and password creation is

followed by choosing and answering security questions. It’s not

recommended that security questions and answers be common or

known by others; they should have unique answers, whether

historically true or not.

For example, if a user chooses a security question, “What is the name

your first elementary school,” choose an answer that is not the actual

name or the actual elementary school. Use instead the name of another

school or anything else that is easily remembered.

Provide an email address that is not tied to an Internet Service

Provider. If the user changes ISPs, that email address will be lost.

Instead, use a free email address that can last for as long as the user

chooses.

Once the security aspects are in place and verified, look around the bank’s website and note important areas, such as:

1. Account activity2. Statement delivery change areas3. Customer Service options4. Bill pay procedures, if any5. And any other area provided on the website.

Online banking often reduces funds availability delays and hastens

resolution to disputes and inquiries. While some complaints and

problems do require human intervention, Customer Service Agents

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are available for longer during a calendar day than local branch

personnel are.

Online banking differs from traditional banking when physical checks

or cash is deposited; human interaction via a drive thru lane or at the

counter is required. Cashier checks, traveler checks, and money orders

cannot be purchased from the institution via online banking, but

because all transactions allowed are electronic, tracking and

accountability are easily provided.

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OPPORTUNITIES IN ONLINE BANKING:

Is There a Future in Online Banking?

By this point, no one can dismiss online banking as a fad. However, it

is worth considering whether the trend towards online financial

transactions is going to slow or reverse in the years to come. There

will continue to be people who resist online banking in favor of

offline transactions just as there are people who prefer to keep their

money in mattresses instead of putting it in banks. Whether these

people will exert serious influence on the movement towards online

banking can be examined by looking at the needs of modern

consumers, and the interests of the banks themselves.

The Move to Online Business

The global connectivity provided by the internet, combined with the

fallout from the global financial crisis has encouraged a growing

number of entrepreneurs to start their own businesses online. As an

increasing number of people look to save themselves from

unemployment or augment otherwise insufficient salaries by finding

new ways to make money online, they will require new ways to send,

receive, and invest their online funds.

The Rise of Mobile Banking

As handheld mobile devices become more sophisticated, users are

experimenting with more sophisticated transactions. Moving beyond

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ringtone downloads; consumers can now shop online and purchase

software upgrades and augmentations through app stores. In addition

to this buying and selling, anyone with a web browser on their phone

can access their bank’s online banking site to move and manage their

money in more locations than ever before.

Staffing Solutions

As banks consolidate and grow larger, they are looking for more ways

to cut costs, and reducing the number of full-time employees on their

payroll is an attractive option. Encouraging customers to do their

banking online allows banks to close smaller branches in outlying

locations and use economies of scale to develop customer assistance

centers in locations where the labor market is more favorable.

Physical Footprints

Online banking is also more attractive to banks because a reduced

physical footprint means reduced costs in other areas. In addition to

saving the money that would normally be associated with operating

and maintaining physical branches, no longer having to print and mail

paper statements to customers would be a huge savings for banks. As

an added bonus, banks have been able to take advantage of current

pro-environment sentiment by marketing online banking as a “green”

alternative.

By appealing to more mobile customers and more cost-conscious

financial service providers alike, online banking continues to be an

attractive option for everyone involved. However, when discussing

the internet it is dangerous to assume that everything is going to be

21

moved online; there will always be individuals, industries, and

transactions that are grounded in the real world with no desire to

change the way they do business.

Growth of Internet

The increase in the growth of internet usage will definitely help the

cause of growth of online banking in India. The following chart shows

the growth of internet in India during the past decade or so:

YEAR Users Population % Penetration1999 2,800,000 1,094,870,677 0.3 %2000 5,500,000 1,094,870,677 0.5 %2001 7,000,000 1,094,870,677 0.7 %2002 16,500,000 1,094,870,677 1.6 %2003 22,500,000 1,094,870,677 2.1 %2004 39,200,000 1,094,870,677 3.6 %2005 50,600,000 1,112,225,812 4.5 %2006 40,000,000 1,112,225,812 3.6 %2007 42,000,000 1,129,667,528 3.7 %2009 81,000,000 1,156,897,766 7.0 %2010 100,000,000 1,173,108,018 8.5 %

Why Banks Encourage Online Banking?

OVERVIEW

Online banking has enjoyed increased popularity, and some banks

actually require it. From standard, brick-and-mortar institutions to

cloud managed institutions, online banking offers flexibility and

convenience for all involved.

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BANK ADVANTAGES:

Each visit to a bank costs the institution money, whether in

bank teller wages and benefits to security costs to maintenance

costs. Online banking reduces those costs and increases the

bank’s profit margin.

Online banking reduces the need for the number of physical

locations and services offered within each. Because Customer

Service Departments are united into fewer locations, asset

sharing within those locations further reduce bank costs.

CUSTOMER ADVANTAGES:

Online security of financial data has evolved tremendously

since the early days of online banking, and often transactions

can be even more secure than those conducted in a drive thru

lane.

Online banking transactions require not only a secure login but

also require secured password entry. In-person transactions are

based on account information and a photo ID, both of which

can be obtained “under the radar.”Online banking transactions

also track the Internet Protocol (IP) address of the computer

used in the transaction. The IP can be traced to the method or

mode of Internet access, often through an Internet Service

Provider who always notes activity, computer, and actions

performed under that IP address assigned to the ISP account

holder. Whether a dynamic or changing IP address or a static or

unchanging IP address is used, the ISP always records what IP

address is assigned to what ISP account at any time.

23

Comprehensive Help sections on banks’ websites often reduce

on-location inquiries, further reducing overhead costs for

banking institutions. Additional service enrollment or dis-

enrollment, address updates, and account status and verification

are all time saving activities for both the bank and the banking

customer.

Online Bill Pay processes reduce stolen or counterfeit checks

which cost banks billions of dollars every month. Each online

bill pay transaction allows for a grace period from the payment

order date to the actual check delivery date, which also allows

the account holder additional time to preview activity and

account status.

DEVELOPMENT:

Increasingly, more and more people are switching to electronic

platforms for executing financial transactions. The wider usage of cell

phone and internet certainly seems to be playing a role in blurring

physical boundaries, and unlocking a whole new world of

opportunities for banks in tapping newer customer segments and in

recording greater volume of transactions.

If latest RBI data on retail electronic payment systems is anything to

go by, electronic banking is set to become the catalyst for change in

the way money moves. Provisional data show that in FY09 to January,

a total of 5,587.85 lakh transactions were executed through the

electronic channel, a rise of 234.76 lakh transactions over the previous

fiscal.

24

This growth was facilitated by the introduction of real-time gross

settlement (RTGS) and national electronic funds transfer (NEFT),

which enabled fund transfers among account holders of the same bank

as well as inter-bank transfers. 

The growth has also been aided by banks' efforts to offer innovative

services and tighten security measures, and the increase in awareness

of services available. RBI outlining guidelines on mobile banking,

setting up of the National Payments Corporation of India and passage

of the Payments and Settlement Act too have given a positive thrust to

the growth in electronic payments. The impact of all these measures is

likely to be felt in the current fiscal, which may well mean FY10

could become a watershed year for e-banking. While opinions of

industry players differ on whether FY10 will indeed prove to be a

tipping point, there seems to be consensus that the year would mark a

critical phase in the evolution of the payments and settlement systems

in India. "FY10 will certainly herald an important phase for electronic

banking in India and an upsurge in internet and ATM transactions,"

says Ashvin Parekh, partner and national industry leader, financial

services, Ernst & Young. "At the same time, traditional fund transfer

will continue to hold its own. We are going to witness a co-existence

of these two systems. In the regulatory space, there will be huge

changes. As and when India Pay, which will eventually settle credit

card and ATM transactions, comes into the picture, we could witness

a gradual shift away from Visa and MasterCard." The implementation

of core banking solutions by all public sector banks has not only

helped banks rationalise their costs, but has also allowed them to

explore new ways of optimally utilising their resources. Core banking,

25

which facilitates linking up of a bank's branches across the country,

has enabled banks to improve their efficiency.

"Now, decisions can be taken remotely and the activities too can be

undertaken in a centralised location. This means that branches need

not spend time on processing transactions and other back office

operations, and rather utilise the time and resources to function as

selling outlets. Centralised operations benefit from economies of scale

and help in reducing bank costs," explains Janmejaya Sinha,

managing director of India operations, Boston Consulting Group. 

Opportunities in e-banking: ARE WE READY?

It has always been a chicken-and-egg dilemma in business.

Either firms wait for the market to mature until customers are ready

for the products and services. Or, firms can go ahead and offer the

products and services, hoping that their customers will catch on soon.

The same is true for new products and services that have

emerged and continue to emerge in the world of electronic banking

(e-banking). Banking executives interviewed by BusinessWorld

Online have different ways of resolving the issue. Some would go

ahead with new ideas, wanting to take the first-mover advantage.

Others would wait in the sidelines, but armed nevertheless just in the

case the market take up suddenly increases.

Whether first-movers or latecomers, there is one partner in the e-

banking game that is not waiting for the chicken to lay the egg, or

26

wait for the egg to hatch into a chick. Technology providers are

always up on their toes, like chicken ready to catch the early worm.

CHALLENGES OF ONLINE

BANKING

Information technology analyst firm, the Meta Group, recently

reported that "financial institutions who don't offer home banking by

the year 2000 will become marginalized." By the year of 2002, a large

sophisticated and highly competitive Internet Banking Market will

develop which will be driven by

Demand side pressure due to increasing access to low cost

electronic services.

Emergence of open standards for banking functionality.

Growing customer awareness and need of transparency.

Global players in the fray

Close integration of bank services with web based E-commerce

or even disintermediation of services through direct electronic

payments (E- Cash).

More convenient international transactions due to the fact that

the Internet along with general deregulation trends, eliminate

geographic boundaries.

Move from one stop shopping to 'Banking Portfolio' i.e.

unbundled product purchases.

Certainly some existing brick and mortar banks will go out of

business. But that's because they fail to respond to the challenge of the

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Internet. The Internet and it's underlying technologies will change and

transform not just banking, but all aspects of finance and commerce. It

represents much more than a new distribution opportunity. It will

enable nimble players to leverage their brick and mortar presence to

improve customer satisfaction and gain share. It will force lethargic

players who are struck with legacy cost basis, out of business-since

they are unable to bring to play in the new context.

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 company handles 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. A multi-layered security architecture

comprising firewalls, filtering routers, encryption and digital

certification ensures that your account information is protected from

unauthorised access:

Firewalls and filtering routers ensure that only the legitimate

Internet users are allowed to access the system.

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Encryption techniques used by the bank (including the

sophisticated public key encryption) would ensure that privacy

of data flowing between the browser and the Infinity system is

protected.

Digital certification procedures provide the assurance that the

data you receive is from the Infinity system.

Security concerns:

Security fears have served as deterrents to online growth. Of

particular concern are threats of pharming and phishing. Phishing is

an internet fraud, through which innocent people are enticed to

divulge their personal information like user ID and passwords, which

are later on used by scammers in unauthorized ways.

The most common method of phishing is sending emails claiming to

be from your bank or other financial institutions which are dealing

that already has your personal information and you will be asked to

confirm the details by clicking a particular link (URL) provided in this

fake email. This URL will take you to a fake website which will be

similar to your genuine website, and the information provided by the

customer in the forms provided in the fake website will be gathered

and used for committing fraud in their accounts or withdraw funds

unauthorizedly from these accounts.

Pharming is another internet fraud, whereby as many as users as

possible are redirected before they reach the legitimate online banking

29

websites they intend to visit and they are lead to malicious ones. The

bogus sites to which victims are redirected without their knowledge or

consent, will likely looks the same as genuine site. But when users

enter their login name or password, the information is captured by

criminals.

FURTHER PROBLEMS RELATING TO NET BANKING

IN INDIA:

Given that India is the IT and tech services outsourcing hotspot of the

world, it's surprising that Internet banking has not really taken off.

Despite the advent of a very tech-savvy and vast consumer class in

recent years, a mix of industry issues and unique challenges continue

to thwart the expansion of net banking in India. Technology

challenges, IT practices, certain cultural issues, industry lethargy, and

workplace constraints have affected widespread acceptance of Internet

banking.

Low Broadband Internet Penetration

India has one of the lowest broadband connectivity penetration rates

in Asia as compared to Japan, Taiwan, Korea and Singapore. While

the bigger cities such as Mumbai, Delhi, Chennai, and Bangalore have

relatively better broadband penetration rates, PC users in smaller cities

and towns still use dial-up options to connect to the Internet. Slow

connectivity speeds often dampen the online banking experience for

many customers eager to use such services.

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Banks' Ambivalent Commitment Levels

Internet banking did take off in India at the turn of the millennium but

soon faltered due to lack of takers. In the middle of this decade,

multinational and domestic private banks started offering net banking

services as a competitive differentiator. Only recently, state-owned

and public sector banks have started doing likewise. However, banks'

ambivalent commitment levels and their reluctance to allocate huge

budgets for net banking branding initiatives, as well as a lack of

industry advocacy efforts, have resulted in poor acceptance levels of

Internet banking by customers.

Customers' Preference for Traditional Branches

There are thousands of highly active traditional bank branches in

India's crowded cities and major towns. Office workers take longer

lunch breaks to finish banking activities and transactions at these

branches rather than conduct them online. Most customers prefer the

personal touch and customized service offered by staff in brick-and-

mortar bank branches. Many Indians are also averse to calling call

centers and banks' customer contact lines to address issues related to

online bank accounts.

Fear of Online Threats/Scams

Ubiquitous and prevalent online threats about hackers, identity theft,

stolen passwords, viruses, worms and spyware tend to make

customers wary just like in any other country. Conservative Indian

bank customers used to years of saving in an erstwhile mixed-socialist

economy are always fearful of losing hard-earned savings in online

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scams. These customers are also not sure about the efficacy of banks'

websites and their commitment to allocate funds for reliable

encryption mechanisms and robust back-end technologies and

systems.

Other Problems

Workplace constraints and corporate policies about using external

websites or pursing personal activities such as online banking have

affected its expected fast-paced acceptance among the growing

affluent class in India. Cultural issues, such as parents giving priority

use of the home PC to their children rather than using it themselves,

stifle the potential growth of home access to Internet banking services.

Public sector banks with vast customer bases also don't tend to invest

money in training personnel for e-banking initiatives, resulting in poor

customer service levels.

Internet Banking in India – Guidelines

Reserve Bank of India had set up a ‘Working Group on Internet

Banking’ to examine different aspects of Internet Banking (I-

banking). The Group had focused on three major areas of I-banking,

i.e. (i) technology and security issues, (ii) legal issues and (iii)

regulatory and supervisory issues. RBI has accepted the

recommendations of the Group to be implemented in a phased

manner. Accordingly, the following guidelines are issued for

implementation by banks. Banks are also advised that they may be

guided by the original report, for a detailed guidance on different

issues.

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I. Technology and Security Standards:

a. Banks should designate a network and database administrator

with clearly defined roles as indicated in the Group’s report.

b. Banks should have a security policy duly approved by the

Board of Directors. There should be a segregation of duty of

Security Officer / Group dealing exclusively with information

systems security and Information Technology Division which

actually implements the computer systems. Further,

Information Systems Auditor will audit the information

systems.

c. Banks should introduce logical access controls to data, systems,

application software, utilities, telecommunication lines,

libraries, system software, etc. Logical access control

techniques may include user-ids, passwords, smart cards or

other biometric technologies.

d. At the minimum, banks should use the proxy server type of

firewall so that there is no direct connection between the

Internet and the bank’s system. It facilitates a high level of

control and in-depth monitoring using logging and auditing

tools. For sensitive systems, a state full inspection firewall is

recommended which thoroughly inspects all packets of

information, and past and present transactions are compared.

These generally include a real time security alert.

e. All the systems supporting dial up services through modem on

the same LAN as the application server should be isolated to

33

prevent intrusions into the network as this may bypass the

proxy server.

f. PKI (Public Key Infrastructure) is the most favoured

technology for secure Internet banking services. However, as it

is not yet commonly available, banks should use the following

alternative system during the transition, until the PKI is put in

place:

1. Usage of SSL (Secured Socket Layer), which ensures

server authentication and use of client side certificates

issued by the banks themselves using a Certificate

Server.

2. The use of at least 128-bit SSL for securing browser to

web server communications and, in addition, encryption

of sensitive data like passwords in transit within the

enterprise itself. (Para 6.4.5)

g. It is also recommended that all unnecessary services on the

application server such as FTP (File Transfer Protocol), telnet

should be disabled. The application server should be isolated

from the e-mail server. (Para 6.4.6) 

h. All computer accesses, including messages received, should be

logged. Security violations (suspected or attempted) should be

reported and follow up action taken should be kept in mind

while framing future policy. Banks should acquire tools for

monitoring systems and the networks against intrusions and

attacks. These tools should be used regularly to avoid security

breaches. The banks should review their security infrastructure

and security policies regularly and optimize them in the light of

34

their own experiences and changing technologies. They should

educate their security personnel and also the end-users on a

continuous basis.

i. The information security officer and the information system

auditor should undertake periodic penetration tests of the

system, which should include:

1. Attempting to guess passwords using password-cracking

tools.

2. Search for back door traps in the programs. 

3. Attempt to overload the system using DDoS (Distributed

Denial of Service) & DoS (Denial of Service) attacks.

4. Check if commonly known holes in the software,

especially the browser and the e-mail software exist.

j. The penetration testing may also be carried out by engaging

outside experts (often called ‘Ethical Hackers’).

k. Physical access controls should be strictly enforced. Physical

security should cover all the information systems and sites

where they are housed, both against internal and external

threats.

l. Banks should have proper infrastructure and schedules for

backing up data. The backed-up data should be periodically

tested to ensure recovery without loss of transactions in a time

frame as given out in the bank’s security policy. Business

continuity should be ensured by setting up disaster recovery

sites. These facilities should also be tested periodically.

m. All applications of banks should have proper record keeping

facilities for legal purposes. It may be necessary to keep all

35

received and sent messages both in encrypted and decrypted

form.

n. Security infrastructure should be properly tested before using

the systems and applications for normal operations.

Banks should upgrade the systems by installing patches

released by developers to remove bugs and loopholes, and

upgrade to newer versions which give better security and

control.

II. Legal Issues

a. Considering the legal position prevalent, there is an obligation

on the part of banks not only to establish the identity but also to

make enquiries about integrity and reputation of the prospective

customer. Therefore, even though request for opening account

can be accepted over Internet, accounts should be opened only

after proper introduction and physical verification of the

identity of the customer.

b. From a legal perspective, security procedure adopted by banks

for authenticating users needs to be recognized by law as a

substitute for signature. In India, the Information Technology

Act, 2000, in Section 3(2) provides for a particular technology

(viz., the asymmetric crypto system and hash function) as a

means of authenticating electronic record. Any other method

used by banks for authentication should be recognized as a

source of legal risk.

c. Under the present regime there is an obligation on banks to

maintain secrecy and confidentiality of customers‘ accounts. In

36

the Internet banking scenario, the risk of banks not meeting the

above obligation is high on account of several factors. Despite

all reasonable precautions, banks may be exposed to enhanced

risk of liability to customers on account of breach of secrecy,

denial of service etc., because of hacking/ other technological

failures. The banks should, therefore, institute adequate risk

control measures to manage such risks.

d. In Internet banking scenario there is very little scope for the

banks to act on stop-payment instructions from the customers.

Hence, banks should clearly notify to the customers the

timeframe and the circumstances in which any stop-payment

instructions could be accepted.

e. The Consumer Protection Act, 1986 defines the rights of

consumers in India and is applicable to banking services as

well. Currently, the rights and liabilities of customers availing

of Internet banking services are being determined by bilateral

agreements between the banks and customers. Considering the

banking practice and rights enjoyed by customers in traditional

banking, banks’ liability to the customers on account of

unauthorized transfer through hacking, denial of service on

account of technological failure etc. needs to be assessed and

banks providing Internet banking should insure themselves

against such risks.

III. Regulatory and Supervisory Issues:

37

As recommended by the Group, the existing regulatory framework

over banks will be extended to Internet banking also. In this regard, it

is advised that:

1. Only such banks which are licensed and supervised in India and

have a physical presence in India will be permitted to offer

Internet banking products to residents of India. Thus, both

banks and virtual banks incorporated outside the country and

having no physical presence in India will not, for the present, be

permitted to offer Internet banking services to Indian residents.

2. The products should be restricted to account holders only and

should not be offered in other jurisdictions.

3. The services should only include local currency products.

4. The ‘in-out’ scenario where customers in cross border

jurisdictions are offered banking services by Indian banks (or

branches of foreign banks in India) and the ‘out-in’ scenario

where Indian residents are offered banking services by banks

operating in cross-border jurisdictions are generally not

permitted and this approach will apply to Internet banking also.

The existing exceptions for limited purposes under FEMA i.e.

where resident Indians have been permitted to continue to

maintain their accounts with overseas banks etc. will, however,

be permitted.

5. Overseas branches of Indian banks will be permitted to offer

Internet banking services to their overseas customers subject to

their satisfying, in addition to the host supervisor, the home

supervisor. 

38

Given the regulatory approach as above, banks are advised to follow

the following instructions: 

a. All banks, who propose to offer transactional services on the

Internet should obtain prior approval from RBI. Bank’s

application for such permission should indicate its business

plan, analysis of cost and benefit, operational arrangements like

technology adopted, business partners, third party service

providers and systems and control procedures the bank

proposes to adopt for managing risks. The bank should also

submit a security policy covering recommendations made in

this circular and a certificate from an independent auditor that

the minimum requirements prescribed have been met. After the

initial approval the banks will be obliged to inform RBI any

material changes in the services / products offered by them.

b. Banks will report to RBI every breach or failure of security

systems and procedure and the latter, at its discretion, may

decide to commission special audit / inspection of such banks.

c. The guidelines issued by RBI on ‘Risks and Controls in

Computers and Telecommunications’ vide circular

DBS.CO.ITC.BC. 10/ 31.09.001/ 97-98 dated 4th February 1998

will equally apply to Internet banking. The RBI as supervisor

will cover the entire risks associated with electronic banking as

a part of its regular inspections of banks.

d. Banks should develop outsourcing guidelines to manage risks

arising out of third party service providers, such as, disruption

in service, defective services and personnel of service providers

39

gaining intimate knowledge of banks’ systems and misutilizing

the same, etc., effectively.

e. With the increasing popularity of e-commerce, it has become

necessary to set up ‘Inter-bank Payment Gateways’ for

settlement of such transactions. The protocol for transactions

between the customer, the bank and the portal and the

framework for setting up of payment gateways as

recommended by the Group should be adopted.

f. Only institutions who are members of the cheque clearing

system in the country will be permitted to participate in Inter-

bank payment gateways for Internet payment. Each gateway

must nominate a bank as the clearing bank to settle all

transactions. Payments effected using credit cards, payments

arising out of cross border e-commerce transactions and all

intra-bank payments (i.e., transactions involving only one bank)

should be excluded for settlement through an inter-bank

payment gateway.

g. Inter-bank payment gateways must have capabilities for both

net and gross settlement. All settlement should be intra-day and

as far as possible, in real time.

h. Connectivity between the gateway and the computer system of

the member bank should be achieved using a leased line

network (not through Internet) with appropriate data encryption

standard. All transactions must be authenticated. Once, the

regulatory framework is in place, the transactions should be

digitally certified by any licensed certifying agency. SSL / 128

bit encryption must be used as minimum level of security.

40

Reserve Bank may get the security of the entire infrastructure

both at the payment gateway’s end and the participating

institutions’ end certified prior to making the facility available

for customers use. 

i. Bilateral contracts between the payee and payee’s bank, the

participating banks and service provider and the banks

themselves will form the legal basis for such transactions. The

rights and obligations of each party must be clearly defined and

should be valid in a court of law.

j. Banks must make mandatory disclosures of risks,

responsibilities and liabilities of the customers in doing

business through Internet through a disclosure template. The

banks should also provide their latest published financial results

over the net.

k. Hyperlinks from banks’ websites, often raise the issue of

reputational risk. Such links should not mislead the customers

into believing that banks sponsor any particular product or any

business unrelated to banking. Hyperlinks from a banks’

websites should be confined to only those portals with which

they have a payment arrangement or sites of their subsidiaries

or principals. Hyperlinks to banks’ websites from other portals

are normally meant for passing on information relating to

purchases made by banks’ customers in the portal. Banks must

follow the minimum recommended security precautions while

dealing with request received from other websites, relating to

customers’ purchases.

41

2. The Reserve Bank of India have decided that the Group’s

recommendations as detailed in this circulars should be adopted by all

banks offering Internet banking services, with immediate effect. Even

though the recommendations have been made in the context of

Internet banking, these are applicable, in general, to all forms of

electronic banking and banks offering any form of electronic banking

should adopt the same to the extent relevant.

3. All banks offering Internet banking are advised to make a review of

their systems in the light of this circular and report to Reserve Bank

the types of services offered, extent of their compliance with the

recommendations, deviations and their proposal indicating a time

frame for compliance. The first such report must reach us within one

month from the date of this circular. Banks not offering any kind of I-

banking may submit a ‘nil’ report.

4. Banks who are already offering any kind of transactional service

are advised to report, in addition to those mentioned in paragraph

above, their business models with projections of cost / benefits etc.

and seek our post-facto approval. 

SOLUTIONS:

42

Here are some simple tips to prevent you from falling into the trap of

cyber criminals. Remember, a simple ignorance or oversight can make

a huge dent in your hard- earned savings.

Securing your account: Avoid online banking on unsecured wifi

systems and operate only from PCs at home. Never reveal

password to anyone. Do not even write it on a piece of paper on

diary. Just memorise it. It should be alphanumeric and change it

frequently.

Never reply to queries from bank online about account or personal

details. The personal information should not be kept in a public

computer or in emails.

Phishing: A person's personal details are obtained by fraudsters

posing as bankers, who float a site similar to that of the person's

bank. They are asked to provide all personal information about

themselves and their account to the bank on the pretext of database

upgradation. The number and password are then used to carry out

transactions on their behalf without their knowledge.

Phishing involves using a form of spam to fraudulently gain access to

people's online banking details. As well as targeting online banking

customers, phishing emails may target online auction sites or other

online payment facilities. Typically, a phishing email will ask an

online banking customer to follow a link in order to update personal

bank account details. If the link is followed, the victim downloads a

program which captures his or her banking login details and sends

them to a third party.

43

Spam: Spam is an electronic 'junk mail' or unwanted messages

sent to your email account or mobile phone. These messages vary,

but are essentially commercial and often annoying in their sheer

volume. They may try to persuade you to buy a product or service,

or visit a website where you can make purchases; or they may

attempt to trick you into divulging your bank account or credit card

details.

Nigerian Scam: Nigerian or Frauds 409 or 419 are basically the

lottery scam in which some overseas persons are involved to cheat

innocent persons or organizations by promising to give a good

amount of money at nominal fee charges. Their intention is to steal

money in the form of fee against the lottery prize.

Spyware: Spyware such as Trojan horse is generally considered

to be software that is secretly installed on a computer and takes

things from it without the permission or knowledge of the user.

Spyware may take personal information, business information,

bandwidth; or processing capacity and secretly gives it to

someone else.

"Trojan Horse" scheme unfolds when malicious software (malware)

embeds to a consumer's computer without the consumer being aware

of it. Trojans often come in links or as attachments from unknown

email senders. After installation the software detects when a person

accesses online banking sites and records the username and password

to transmit to the offender. People using public computers, in places

like Internet cafes, are often susceptible to Trojans like malware or

spyware.

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Check sites URL: Always check the URL of your bank's web site.

Fraudsters can lure you to enter your user ID and password at a

fake website that resembles your bank. If you see anything other

than the bank's genuine URL, it has to be fake.

Never enter your user ID or password or such sensitive information

without ascertaining that you are on the right website. Always type the

Web address of your bank into the browser address space. Never click

on the link in the email.

Fool-proof password: Change your online banking password at

regular intervals. Also, avoid easy-to-guess passwords, like first

names, birthdays, kid's or spouse's name and telephone numbers.

Try to have an alpha-numeric password, one that combines

alphabets and numbers.

If you have several bank accounts, never use the same online banking

password for all. Never select the option on browser that stores or

retains user name and password. As it can easily be cracked by cyber

criminals. Also, never paste your password, always type it in. This

little amount of `finger exercise' will go a long way in safety.

Always check 'last logged': Most banks have a 'last logged in'

panel on their websites. If your bank has it, check the panel

whenever you log in. If you notice irregularities (like you are

logging in after two days, but the panel says you logged in that

morning!), report the matter immediately to your bank and change

your password right away.

45

Always log out when you exit the online banking portal. Close the

browser to ensure that your secure session is terminated. Never exit

simply by closing the browser.

Keep your system up to date: Regularly check for security

updates for your computer operating system. Most security updates

are aimed at reducing risks to your computer, these may be data-

related or otherwise. Make sure that your operating system and

browser have the latest security patches installed. And, always

install these only from trusted websites.

Install a personal firewall to prevent hackers from gaining

unauthorised access to your computer, especially if you connect to the

Internet through a cable or a DSL modem.

Public access can be injurious: Don't leave the PC unattended

after keying in information while transacting on the website. Avoid

accessing your bank online at cyber cafes or on a share or public

computer. Also, avoid locations that offer online connections

through wireless networks (Wi-Fi), where privacy and security are

minimal.

Follow Bank instructions: Banks say that appropriate

upgradations are carried out from time to time by their IT

departments for risk mitigation. They issue instructions to the

customers to manage their accounts through virtual keyboards by

way of which the characters typed by them are not identified by

hackers. SMS alerts are also an important tool since any

transaction carried out on account is reported to the account holder

through an SMS.

46

Protection: Learn the ways to protect yourself from online

banking fraud schemes. Detect Trojans that appear on your PC in

the form of viruses, spyware or malware through Antivirus

Software, anti Spyware, and Adware. Also, learn to keep your

cards, documents and passwords safe, and monitor your accounts

to safeguard yourself from bank fraud committed through identity

theft.

47

CASE STUDIES:

1. Email password Hacking-

One day a lady came to cyber cell office and reported that she

and her brothers e-mail ID’S had been hacked by someone she

suspected him to be her husband. The lady had already lodged a case

against him for dowry and was pending for trial in Bhopal court.

The suspect had hacked lady’s and her brother e-mail ID account and

copied all the information to his e-mail and produced selected e-mails

to claim that . she was happy with him and case of dowry is a false

one .

To malign the image of her brother the suspect sent a copy of FIR

lodged against him at police station Habibganj. This indicated that the

husband of the lady was behind the whole affair but police had not

any evidence against him.

Cyber cell started enquiry by an order of IGP and obtained the login

logs from rediff.com .The logs indicated that the email IDs password

were changed and anonymous emails were sent from the house of

lady’s husband and sent from his.

Cyber cell registered a case under section 66 IT act and submitted

Challan has been filed against the suspect and trial is over.

Court has hold the conviction against the suspect Sabrish Pillai but

found that the matter came before the court as Sabrish was having

family dispute with his wife and the, act of hacking was not against

the society at large, Hence let him free after warning.

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2. Internet Lottery Fraud   :

MP Cyber police has investigated several case of cheating

through Internet lottery offer which is commonly known as Nigerian

419 scam. In this kind of cheating the culprits used to send bulk

emails, bulk SMS to millions of users using software, stating that the

receiver has won lottery worth thousands of pounds or dollars which

comes out to be crores of Indian rupees, in a lucky draw. They used to

create fake lottery winning certificate using logo and text from

original website, which seems to be original at a glance. This kind of

sending bulk emails or SMS is an act of commonly known as Phishing

attack. Those who are lured by such offer often tempted to contact

them. The culprits then ask the target to fill a form and thus receive all

the personal information of the target and asks him to deposit token

money in various names to earn the lottery prize. The target who is

hoping to earn huge amount of money finds these charges to be

minimal. The culprit asks the target to deposit money in the name

yellow tag, custom clearance UN anti terrorism certificate, RBI

charges or any other name they feel it to suitable to convince the

target. The culprits ask the target to deposit in various bank accounts

and once the money is deposited by the target it is withdrawn same

day by the suspect.

After losing lakhs of amount people come to know that they are being

cheated. In this kind of cheating the contact number are usually taken

in the fake names or in the other Indian guys name, account are being

49

opened in the fake names or acquired on the basis of commission by

fooling the account holders.

Mp cyber police has investigated the case of Internet lottery fraud and

arrested Nigerian national Godspower from Meharauli Delhi with the

suspected mobile used for communication, one laptop, printer and box

used for black dollar scam.

 Mp cyber police has investigated the case of Internet lottery fraud

Crime no 07/09 420,468,34 IPC and crime no 05/10 420,468,34 AIPC

and arrested Nigerian national Idiiogbe Joseph from Mumbai with the

suspected mobile used for communication, laptop, fake Income tax

certificate and seals.

Apart from the above  MPCP is investigating two more such cases in

which  suspects are being monitored and efforts are being made to

arrest them.

ICICI BANK

ICICI bank (formerly known as Industrial Credit and Investment

Corporation of India) is the largest private sector bank in India. ICICI

is the first bank to introduce Internet banking in India.

ICICI bank offers various online banking services to its customers

under the name ICICI Net Banking. The ICICI net banking system

allows you to access your bank account any time of the day from the

privacy of your home or office. Moreover, you can transfer funds to

any bank account across India instantly using ICICI net banking

facility.

50

CHAPTER II - RESEARCH METHODOLOGY

Objectives of the study:

1) The main objective of this study was to understand the

growth of the online banking sector in India.

2) To study the opportunities for growth of online banking in

India, since India is a very fast developing country.

3) To study the challenges associated with the growth of online

banking.

4) To understand the scope and the infrastructure that is there

in India for its development.

Limits of the study:

The study of this project is limited to 25 people of Mumbai who

have been questioned to understand the project well.

Methodology used:

A. PRIMARY DATA: -

Questionnaire distributed among people having bank accounts.

A sample questionnaire of 10 questions distributed to 25 people.

B. SECONDARY DATA :-

Internet

Reference books

51

CHAPTER III - DATA ANALYSIS

A survey was conducted on online banking in India for the

primary data among 25 people. The analysis of this survey or data is

as follows:-

Q. What kind of banking do you prefer?

Traditional Online Both0

2

4

6

8

10

12

14

POLL out of 25: Traditional – 5 ; Online – 8 ; Both – 12

FINDINGS: This shows us the preference of the people towards the

type of banking. They prefer to use the services of both the online and

traditional banking rather than a particular type.

52

Q. Do you think online banking is better than traditional

banking?

YESNOCAN'T SAY

POLL out of 25: Yes - 13; No - 5; Can’t Say – 7

FINDINGS: The people understand that online banking is better than

the traditional banking because of its nature. While a few of the

people are still not fully convinced.

Q. Do you feel you account is secured in online banking?

YES NO CANT SAY0

2

4

6

8

10

12

Poll out of 25: Yes - 11; No - 7; Can’t Say – 7

53

FINDINGS: Majority of the people think that their Account is

secured, but not all. Their security concern should be eradicated. This

will attract customers.

Q. How frequently do you use banking services?

WEEKLY MONTHLY REGULARLY RARELY0

2

4

6

8

10

12

POLL out of 25: Weekly - 5; Monthly - 11; Regularly - 2; Rarely – 7

FINDINGS: Most of the people do not need the services of banks

regularly or maybe there is no need. They may transact with the bank

on monthly basis for most of the time.

Q. How happy are you with services of online banking provided

by your bank?

COMPLETELY PARTIALLY FAIRLY NOT AT ALL0

2

4

6

8

10

54

POLL out of 25: Completely - 4; Partially - 9; Fairly - 9; Not at all -

3

FINDINGS: The satisfaction level of people with the online banking

services of their banks has a mixed review. This may be due to

multiple reasons.

Q. What type of transaction do you make in online banking?

CHECK BALANCES

PAYMENTS TRANSFER OF FUNDS

OTHER

POLL out of 25: Check balances - 11; Payments - 7; Transfer of fund

- 2; Other -5

FINDINGS: The utility of the online banking is service is not used to

the extent is should be and it is being majorly used for the purpose of

checking the balance in the account. The reason for this is the low

volume of transaction among the people.

55

CHAPTER IV

RECOMMENDATIONS & CONCLUSIONS

CONCLUSION:

People are not confident enough to whether to rely completely

on online banking. There is hesitancy in their minds with

regards to preference. So they use both the techniques of

banking i.e. Online and Traditional.

Because of the complexity and the unawareness in the people

regarding the online banking, there is less utilization of the

online banking services provided by the banks.

People are not sure whether their account is completely secured

in online banking. Security concern is the main and the core

reason why people do not tend to use online banking.

People in India are not aware of the full utility of online

banking and the services that can be availed of in online

banking.

Most of the Indian population are salaries employees who do

not have that volume of transaction that can be used for online

transaction.

56

RECOMMENDATION:

After analyzing the entire study on online banking with respect to

both the primary and the secondary data, the following

recommendations can be put forth:-

The infrastructure for the development is not being

implemented in way that could be beneficial.

There are various obstacles in the banking scenario with regards

to guidelines and issues for functioning. This has led to decline

in the usage of the online banking service of the banks.

The people having accounts can be urged to take up an internet

banking facility. They should be motivated rather than just

being told that there exists a service of online banking.

There are more people who are not actually aware of all the

benefits that they reap out of the transaction of online banking.

They should be proper awareness.

Most of the people o not count online banking due the problems

of security concerns. Proper security software should be

developed and people should be convinced that their accounts

are secured in online transactions.

CHAPTER V

57

BIBLIOGRAPHY

INTERNET:

http://www.onlinebanking.net/online-banking-services/

http://www.productivity501.com/choosing-online-

bank/244/

http://www.thewisdomjournal.com/Blog/pros-and-cons-

of-online-banking/

http://www.onlinebanking.net/how-does-online-

banking-work/

http://www.onlinebanking.net/future-of-online-banking/

http://www.onlinebanking.net/why-banks-encourage-

online-banking/

http://en.wikipedia.org/wiki/Electronic_commerce

http://www.indianmba.com/Faculty_Column/FC889/

fc889.html

http://www.banknetindia.com/banking/ibkg.htm

http://www.sendmoneyindia.org/icici-net-banking.php

http://economictimes.indiatimes.com/opinion/money-

banking/e-banking-could-open-opportunities-for-

banks/articleshow/4461581.cms

http://www.ehow.com/about_5147496_problems-

related-net-banking-india.html

58

http://www.ehow.com/about_5340363_different-types-

online-banking.html

http://www.networkmagazineindia.com/200302/

feature.shtml

http://theonlinebankingblog.blogspot.com/2011/04/

challenges-of-online-banking-security.html

http://searchcio.techtarget.com/definition/e-commerce

http://searchdatacenter.techtarget.com/definition/IT

http://nedogluka.com/internet-banking-global-way-for-

banks-in-india.html

http://nedogluka.com/the-size-and-growth-of-the-

banking-jobs-in-india.html

http://mpcyberpolice.nic.in/casestudies.htm#top

http://www.internetworldstats.com/asia/in.htm

REFERENCE BOOKS:

R.K. UPPALBANKING WITH TECHNOLOGYNEW CENTURY PUBLICATIONSNEW DELHI

APPENDIX

ONLINE BANKING IN INDIA (Survey)

59

Q.1 WHICH BANK DO YOU HAVE AN ACCOUNT?(1 – Private sector bank; 2 – Public sector bank; 3 – Other)

Q.2 WHAT KIND OF BANKING DO YOU PREFER?

(1 – Traditional; 2 – Online; 3 – Both)

Q.3 DO YOU THINK ONLINE BANKING IS USEFUL?

(1 – Yes; 2 – No; 3 – Can’t say)

Q.4 HOW FREQUENTLY DO YOU USE BANKING SERVICES?

(1 – Weekly; 2 – Monthly; 3 – Regularly; 4 – Rarely)

Q.5 DO YOU THINK ONLINE BANKING IS BETTER THAN

TRADITIONAL BANKING?

(1 – Yes; 2 – No; 3 – Can’t Say)

Q.6 DO YOU FEEL ONLINE BANKING HAS A GROWTH POTENTIAL

IN INDIA?

(1 – Yes; 2 – No; 3 – Can’t Say)

Q.7 WHAT TYPE OF TRANSACTION DO YOU MAKE IN ONLINE

BANKING?

(1 – Check balances; 2 – Make payments; 3 – Transfer funds; 4 –

Other)

Q.8 DO YOU FEEL YOUR ACCOUNT IS COMPLETELY SECURED IN

ONLINE BANKING?

(1 – Yes; 2 – No; 3 – Can’t Say)

60

Q.9 ARE YOU HAPPY WITH THE SERVICES OF ONLINE BANKING

PROVIDED BY YOUR BANK?

(1 – Completely; 2 – Partially; 3 – Fairly; 4 – Not at all)

Q.10 FOR ME ONLINE BANKING IS

NAME:

PHONE:

EMAIL ID:

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