Future Indian Banking- Internet Banking

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RESEARCH REPORT

ON

ROLE OF IT IN BANKINGSECTOR

Report Submitted to the Fulfillment of the Master of

Business Administration[2006-2008]

SUBMITTED TO SUBMITTED BY

MS. GEETIKA GARG SANJEEV KUMAR

FACULTY MBA – 4TH

SEMROLL # 0609970091

HARLAL INSTITUTE OF MANAGEMENT AND TECHNOLOGY,GREATER NOIDA



DECLARATION

I declare that the project titled “Role of IT In Banking Sector” is an original project

done by me and no part of the project is taken from any other project or materials

submitted earlier to any other college.

Sanjeev Kumar



ACKNOWLEDGEMENT

With a profound sense of gratitude, I record my indebtedness to

Ms. Geetika Garg, Faculty, HIMT, Greater Noida for providing me the support

to undergo this project.

The nurturing and blossoming of this present work was mainly due to

her valuable guidance, astute judgment, constructive criticism and an eye for

perfection. But for his overwhelming interest, the present work would not have

seen the light of days.

And last but not the least; I am thankful to all the helpful people whowere not even aware of the contribution they made towards the completion of

this project.

SANJEEV KUMAR



CONTENTS

Topics Covered

!. Certificate

2. Acknowledgement

3. Table of Content

4. Executive Summary

5. Banking Industry in India

6. Banking and Technology

7. Research Methodology

8. Internet Banking

9. Indian Banks on the web – The major players

(ICICI, HDFC and CITIBANK)

10. Future of e-banking in India

11. Conclusion

12. Bibliography



Internet banking in India: Future Potential and Challenges

EXECUTIVE SUMMARY

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. Still to date, out of the over 50,000

branches of Public Sector Banks, only 3,668 branches have been

fully computerized, while a further 6,961 branches have been

partially computerized. This provides a huge market for players

in IT Industry.

The expansion of bank branches to far flung areas resulted in an

explosion of sorts in volumes of transactions and posed a severe

strain on all resources. More particularly, the inter-branch

reconciliation became one area that defied manual handling. It

was in this background that the first steps towards

mechanization were taken in late 50s/early sixties in the Calcutta

office of the SBI for the reconciliation of inter-branch

transactions.

The pace of branch expansion was so fast that by early sixties

this equipment was also considered inadequate and the Bank

went in for the first computer The whole system of reporting and

reconciliation of transactions was revamped and modernized.

Other larger nationalized Banks also followed suit.




If banks opts for a high level of computerisation, even if it were

to be achieved in a phased manner, they would not only be able

to service customers better but would also reap bigger profits.

Imagine what would happen when business doubles, workload

increases manifold and bank employees are left grappling with

archaic adding machines and calculators. Foreign remittances

would get clogged in the pipeline, queues would lengthen at

tellers' counters, passbooks would take weeks to update and

senior citizens would be waiting for their pensions as clerks

manually prepare pension scrolls to be submitted to the treasury.

It's real ironic situation. Here on the one hand we claim to be a

nation of computer experts providing state-of-the-art solutions of

Fortune 500 companies. On the other, our own companies, which

can well afford computerisation, look askance when an IT

proposal falls on the chairman's desk. If unions are the stumbling

block, their leaders ought to be educated.

Lack of awareness, lack of will to accept change and to some

extent lack of money is coming in the way of those companies

that are in the business of handling the nation's money. These

are surmountable problems. The sooner we address these issues

the better it is for all of us.




BANKING INDUSTRY IN INDIA

Banking Industry in India has always revolved around the

traditional function of deposits and credit. Their role had been

defined as to assist the overall economic growth with majority of

share being controlled by the Government of India in most of the

banks. But with the process of liberalization, and the

technological revolution the banking industry has also undergone

tremendous change in the last 5 years. The market, which was

largely controlled by the public sector banks, has now been

facing stiff competition not only from foreign players but also

from the new generation private sector banks. The rules of the

game have been changing with the RBI introducing new norms to

make banks more accountable and to adopt the practices

followed worldwide.

Most of the banks have now been trying to function on the

concept of a Universal Bank. Apart from the traditional functions

of a commercial bank, they are taking steps to build themselves

into a one stop financial centre wherein all the financial products

would be available. Banks have started catering to the retail

segment to improve their deposit portfolio. In order to have a

maximum share in this segment, most of the banks have been

introducing new products. The delivery channels have also been

shifted from branches to ATMs, phone banking, net banking etc.




Technology has become an important medium of not only

attracting new customers but also in retaining them. The new

generation private sector banks have made a strong presence in

the most lucrative business areas in the country because of

technology upgradation. While, their operating expenses have

been falling as compared to the PSU banks, their efficiency ratios

(employee’s productivity and profitability ratios) have also

improved significantly.

Key Industry Statistics of Scheduled Commercial Banks

(Rs bn)

Mar-26'

2002

Mar-24'

2003

Sept-22'

2003

Total deposits 7140 8132 8729

demand 1174 1273 1266

time 5966 6859 7463

Total bank credit 3688 4358 4667

food 168 256 320

non-food 3520 4102 4347

Investments 2545 3088 3332

govt. sec 2232 2784 3023

other approved sec 313 304 309

Cash in hand 43 53 53

Balance with RBI 635 574 631

Cash-Deposit ratio 9.50% 7.70% 7.80%




Investment-Deposit ratio 35.70% 38% 38.20%

Credit-Deposit ratio 51.70% 53.60% 53.50%

Source – RBI WSS

Banks traditionally involved in working capital financing have

started offering consumer loans and housing loans. Some of the

banks have started offering travel loans as well. Retail financing

is the other area where the banks have started to concentrate.

The loan formalities too have been relaxed to a great extent and

sanctioning time has been speeded up.

Mergers and Acquisitions have also started playing their role in

the banking industry where lots of players are trying to

consolidate their position. The recent merger of ICICI Bank with

Bank of Madura and the announcement of the merger of Global

Trust Bank with UTI Bank are important steps in this direction. In

recent times, most of the new private sector banks have shown

interest in inducting a foreign partner in their operations.

Most of the banks are also planning to enter the insurance

business and are in the process of identifying their strategic

partners. Since most of the banks already have an extensive

distribution network, this new business should result in

substantial revenues. But with most of the top league players

planning to enter this business, the more efficient and pro active

players would be able to take a lead.

Structure Of Indian Banking Industry




The Indian Banking Industry can be broadly classified into:

• Public Sector Banks

The Indian Banking industry is largely dominated by the public

sector banks. These banks till the early 90s were involved in the

traditional banking business of deposits and credit lending. They

performed a supportive role in the overall growth of the

economy. While most of these banks used to focus on the growth

of balance sheet, profitability was not a significant factor in the

competition. In most of the banks, the government has a holding

of 100% whereas in the few banks, the stake has fallen because

of a public issue in the post liberalization period. The government

is proposing to bring out a bill wherein its share in all these

banks would stand reduced to 33% from the current levels.

The public sector banks have a strong distribution network all

over the country. But the strength of the earlier periods has now

become a concern for these banks. As compared to the tech-

equipped distribution network of the new private sector banks

and the foreign banks, these banks have found it difficult to

upgrade them on the technology front. These banks are also

facing the problem of surplus manpower. Most of these banks

are now coming out with a VRS to bring down their number of

employees and improve the efficiency ratios.

The public sector banks still control a major share in the banking

operations of the country. Their inefficiencies have been exposed

only when the market was throw open for competition and new




players started eating up their share. But given their size and the

strong network, most of these banks can change their

perception. The recent thrust on reduction of government stake,

VRS, NPA settlement schemes etc have been some of the steps

in this direction. Since the growth of the economy is largely

dependent on the performance of these banks, even with the

growth of new private and foreign players, these banks will have

an important role to play.




• Private Sector Banks

The Banking Regulation Act was amended in 1993 permitting the

entry of new private sector banks.

With emphasis on service and technology, it is for the first time

that Indian banks are challenging the foreign banks. These banks

are making heavy use of technology to give good service on par

with foreign banks but to a much wider audience e.g. branch size

has been reduced considerably by using technology and having

less manpower. In addition the ATM etc helps drawing large

customers to one branch.

The new private banks are on an expansion phase and are now

moving into semi-urban areas and satellite towns to fulfill their

branch expansion norms. Their technological edge and product

innovation has seen them gaining market share from the slower,

less efficient older banks.

The new private banks have been consistently gaining market

share from the public sector banks. The major beneficiary of this

has been corporate clients who are most sought after now.

The private sector banks have been able to make significant

inroads in the retail market of the public sector banks. During

the year, the two leading banks in this sector had set a new

trend in the Indian banking sector. HDFC Bank, as a part of its

expansion plans had taken over Times Bank. ICICI Bank became

the first bank in the country to list its shares on NYSE.




• Foreign Banks

Foreign banks have been doing the normal banking business in

the country. During the period of nationalization, the entry of

new foreign banks and expansion by existing foreign banks were

prohibited. Even, when the norms were relaxed later on, RBI was

very slow in granting any further approvals to these banks. But

most of these banks have concentrated on the metropolitan

cities of the country and have been able to do reasonably well.

These banks have used the latest technology to compensate for

the limited number of branches they have.

In the post liberalization period, a number of new players have

entered and the existing players have consolidated their position

in the market. In the last couple of years, some of the foreign

banks have entered the retail segment and introduced a number

of new products in the market. This has intensified the

competition in the banking sector and has made most of the old

players rethink their strategy.




BANKING AND TECHNOLOGY

There is no denying the fact that in the past two decades

information technology has been the most rapidly changing

industry in the world. But more than the rate of change, what is

remarkable is the way IT has changed the paradigms of business

in other industries. One industry that has really felt the impact of

IT has been the banking sector.

The banking scenario has been changing at fast pace. Banks,

traditionally just borrowers and lenders, have started providing

complete corporate and retail financial services to its customers.

Banks have been introducing new products to maintain their

share in this highly competitive market where things have been

changing quite rapidly.

Technology drive has benefited the customers in terms of faster,

improved, convenient banking services and variety of financial

products to suit their requirements. ATMs, phone banking, net

banking, anytime and anywhere banking are the services, which

banks has started offering following the changing trend in the

sector. In plastic money segment, customers have also got a

new option of debit cards against the earlier popular credit cards.

Earlier customers had to conduct their banking transactions

within the restricted time frame of banking hours. Now banking

hours have been extended. ATMs, phone banking and net

banking had enabled the customers to transact as per their




convenience. Customers can now withdraw money at any time

and from any branch across the country. They can ascertain their

account transactions, order statement of account, and give

special instructions using the tele-banking or online banking

service. Infact, couple of banks in the country has started a new

facility wherein a customer can open an account with a very low

balance and avail all the latest tech facilities offered by the bank.

But the moment, the customer would visit a branch, he would

charged be a penalty which symbolizes the increasing practice of

the banks to discourage the customers from using branch

transactions. The main reason for this move could be lower

operating costs for these banks while operating from these new

channels.

Customers can apply for credit online and even the processing of

loan application is done online.

In a tight competitive environment where banks are making a

thrust towards technology to provide superior services to its

customers, customers stand to gain the most. The Customer is

now in an enviable position where he can demand superior

services at competitive prices. Those banks, which have been

able to realize the importance of technology in the day to day

operations, have witnessed a sharp increase in their overall

perception while the others have probably lost the first mover

advantage.




The first mass-oriented infotech deployment in the banks

happened in 1998, with Citibank’s pilot project "Suvidha"

in Bangalore. The project focussed more on the ATMs and

less on the brick-and-mortar branches. Within two years, it

broke even and has now been launched in Delhi and the

NCR. The bank’s customers have access to over 149 ATMs in

the region including Citibank’s own ATMs and other ATMs in

the Cirrus network—an international banking network. Apart

from the bank’s Web site providing information about all the

ATM locations, Citibank has put up a 24×7 call center to

address all customer needs from a single location.

Another example is ICICI Bank. In Delhi alone, its on- and off-

site ATMs number about 139 while the brick-and-mortar

branches number about 30. It also has a call center to

handle any banking queries in Delhi.

From Traditional 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. The

head 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 organization’s

performance and set the decision-making parameters, but the




information available to both branch staff and their customers

was limited to one geographical location.

… to Relationship Banking

The modern bank cannot rely on its branch network alone.

Customers are now demanding new, more convenient, delivery

systems. And services such 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 bank’s many other services. To do this

banks have to create information layers, which can be accessed

both by the bank staff as well as by the customers themselves.

Today banking in India has become an unpopular industry, much

blamed for problems of its own making. The use of interactive

electronic links via the Internet could go a long way in providing

the customers with greater level of information about both their

own financial situation and about the services offered by the

bank.




Current Scenario

Of the existing 55,837 bank branches in the country, 21,309

were partially computerised and 5,910 fully computerised,

according to a Nasscom study on the status of computerisation in

the Indian banking industry.

Twenty-five per cent of banks in India are computerised and

Nasscom aims to achieve 90 per cent computerisation in the

industry by year 2006, said Mr. Dewang Mehta, at

`[email protected] 2000', a seminar organised by Nasscom and

Indian Banks' Association, on July 25, 2000.

There are 1,00,145 computers installed in banks, with 40,000

alone installed in the last one year.

Customers

Telephone, Branch, Electronic Banking, etc.

Shared Information

Clearing Systems Head Office RiskMonitoring

The New Relationship Oriented Bank




The study showed installed ATMs at 1320, online terminals at

corporate customer sites at 2,202, credit cards at 10,56,200 and

debit cards at 1,20,210.

However, looking at the current status of banks, we do not seem

to have achieved either the improvement of service nor are we

setting up an environment of complete computerisation. With the

various kinds of computerisation, we have observed the

customer to note:

1. Increase in service time even when the system is

running.

2. Absolute chaos when the system is down temporarily when no

service is offered even if the system is not needed to dispense

the customer (mere acceptance of a cheque is also refused

even when the entry is possible to be done later).

3. Delay in receiving periodic statements.

4. Wrong balance being carried forward either at year-end or at

the time of switch-over to computers.

The use of computers to merely service the depositor customer

does not constitute Bank branch computerisation. Noticeable in

their absence is the department of advances and Inter-branch

transactions.

Advances -- Earning department ignored




Bills are one of the products of the advances department and

most of the systems have ignored the important point that this is

the profit-earning department of the Bank. Bills purchase and

discount whether local or foreign is the mode encouraged by the

RBI from time to time since the transaction financed is

specifically identified. The calculations of each transaction are

complex especially when the Bill is paid after due date. Taking

care of this would ensure correctness of calculation of an

important source.

Inter-branch transactions

Issuance of any of the remittance instruments like Bank draft,

Telex transfers etc. is one of the major sources of creation of

inter-Branch transactions. Reconciliation of these is one of the

banes of the industry and few have managed to bring it into a

manageable size. Inter-branch reconciliation is easily possible

even with the lowest level of computerisation. All the Bank has to

do is obtain on a magnetic media say a floppy such inter-branch

transactions and let the central computer list out the variances

for the branches to respond.




An idealistic view

Graphically speaking, we would like the system to achieve

basically:

Counter

computerisatio

n

Efficient

counter

computerisatio

n

Daily branch

efficient

computerisatio

n

Branch and

inter branch

computerisatio

n

Total

Computerisatio

n

Priority 1 Priority 2 Priority 3 Priority 4 Priority 5

Faster Service

to existing

customers

Controls

integrated into

the system

Back office

load taken

care of by the

system

Inter-branch

transactions

reported by

system

Statistical

information

extracted by

the system

Look at your Bank branch and you will see how far from total

computerisation is the branch. It is sad to note that even the

first stage is achieved by only a few.

1. All counter departments like savings, current, cash credit and

cash all linked. The voucher flow to be redesigned and not to

merely replicate the manual system.

2. Back-office also linked to daily transactions demanding only

the minimum of input at the end of the day.

3. Advances department with special modules to take care of

each of the products of the Bank taking into the unique control

and audit requirements of each.

4. Advances department to have special link to documentational

requirements and their follow-up to ensure the documents are




not time barred.

5. A proposal evaluation system to offer quicker answer to

prospective borrowers.

6. Inter branch transactions linked to reduce reconciliation to not

more than a week.

7. Remittance of inter branch funds to take seconds instead of

days.

The idealist view just discussed is in reality very achievable

today provided the management has the will and the guidance to

do so. Merely replacing the calculator by a computer does not

mean computerisation. Unless we see a stark change in the

quality of Banking computerisation, we will have to consider their

computers to merely be used as typewriters with heavy under -

exploitation of computers and thus the entire Banking work-

force. In addition, the next Banking fraud is likely to be based on

weak computerisation and armed with such knowledge of

prevention, it will be a real pity if that occurs. We can see some

bold steps by a few Banks but these steps require to be much

more firm and advanced to achieve a leapfrog.

As a first measure, the National Association of Software and

Services Companies (Nasscom) has announced the formation of

a National E-banking Committee, consisting of representatives

from the Ministries of Information Technology and Finance, the




Reserve Bank of India and public, private and foreign banks and

select information technology companies.

The committee will address matters ranging from telecom

infrastructure for banks to technology for detection and

prevention of frauds.

Whether the objective is achieved or not is to be seen.




INTERNET BANKING

What is E-banking? In simple terms it does not involve any

physical exchange of money, but it’s all done electronically, from

one account to another, using the Internet.

Already, infotech in banking is become a strategic necessity for

banks, rather than being a key differentiator. Indeed, in its early

stages, the ATM was a source of strategic differentiation for

Citibank and other early adopters. Today, the ATM technology

doesn’t differentiate a bank—consumers expect it as a basic

service offering. ATMs have migrated from being a differentiator

to a strategic necessity.

The Internet banking is changing the banking industry and is

having the major effects on banking relationships. Even the

Morgan Stanley Dean Witter Internet research emphasised that

Web is more important for retail financial services than for many

other industries. Internet banking involves use of Internet for

delivery of banking products & services. It falls into four main

categories, from Level 1 - minimum functionality sites that offer

only access to deposit account data - to Level 4 sites - enabling

integrated sales of additional products and access to other

financial services- such as investment and insurance.

In other words a successful Internet banking solution offers:




Checking with no monthly fee, free bill payment and

rebates on ATM surcharges

Easy online applications for all accounts, including personal

loans and mortgages

24 hour account access.

Quality customer service with personal attention.

The concept of electronic banking or E-banking is more prevalent

in the technologically developed parts of the world such as

Europe and the US. The number of online banks in Western

Europe has mushroomed. As per Bluesky International

Marketing, a US based research agency, the number is quoted

at 1,845 in mid 1999. The scene is similar in the US where a

recent Dataquest survey forecasts that the number of US

households banking online will reach 34.2 million by 2006. As the

world takes rapid strides in the world of banking the question is

where does India stand in the global scheme of things?

There is no denying the fact that information technology has

been the most rapidly changing industry in India, and the

marriage of technology and banking has to occur for India to

keep pace with changes in the global scenario. Looking back, the

Narasimham Committee deserves mention in that it was




instrumental in forcing Indian banks to become competitive.

Private sector banks forced the public sector banks to embrace

technology and improve their level of customer service. Next, the

Khan Committee was highly important in that it recommended

the setting up of universal banks. Preference was given to

financial institutions, which could provide a whole range of

corporate financial solutions under one roof. But most

importantly, the Verma Committee recommended the need for

greater use of IT even in the weak Public sector banks. Actually,

the nationalization of banks back in the 80s is proving to be a

major obstacle in bringing about the required technological

changes.

Today, technology savvy private banks are making the most out

of opportunities thrown up by the Internet leaving behind their

slow moving public sector counterparts in valuations as well as

growth. Now, when one considers the fact that public sector

banks dominate the banking landscape in India, one realizes that

a lot has to be done and done quickly for India to catch up on E-

banking. Presently there are 33 private banks and 43 foreign

banks but the 27 public sector banks mop up the bulk of the

business. They account for over 84% of the total deposits and

over 82% of the total banking advances in India. In the words of

Mr. Bandi Ram Prasad, Chief Economist, Indian Banks

Associations, “ If Indian banking system has to undergo a




transformation, then the public sector banks must be in the

forefront of the change.”

The boom in the IT sector has been persisting for quite a number

of years. The previous year however, will be remembered as the

“year of the dot”. From the acquisition of Indiaworld by Satyam

to the recent crowning of Wipro’s Azim Premji as the second

richest person in the world to the mushrooming of dotcoms in

every sphere of business, the message is clear. The Internet is

here to stay and stay for good. Most of the services offered on

the net have been received quite well by the customers and

there is no reason to believe that the same won’t be the case

with banking services. And if one takes into account the fact that

the major problem E-Commerce is facing today is that of security

in online transactions, the concept of e-money, whereby

customers seamlessly interact with the organization seems more

and more lucrative. This offers banks a huge opportunity. A

recent example of Rediff tying up with ICICI bank to offer such

services can be cited.

As per Mr. K V Kamath, MD and CEO ICICI Ltd., “ Technology

today, particularly via the internet, is creating a platform-

independent, low cost communication infrastructure permeating

all sectors of the economy and providing an affordable medium

to conduct business”. The cost per transaction through the




Internet is 27 times less than through ATMs, 54 times less

than that of a telephone transaction and 107 times less

than that of a physical branch transaction. Even though PC

penetrations are still low in India, this provides tremendous

opportunities to Indian banks. Again the financial services

business will be among the industries most profoundly affected

by the Internet, since the distribution of financial products does

not entail any physical exchange of goods.

Today, the customer is the master. He has a lot of choices to

select from and if one has to retain one’s customers one will

have to ensure that that the customers get a much better deal

from their banks. In order to survive, all banks and financial

services would probably have to quickly and seriously re-

evaluate their delivery strategy, if they have to survive in the

market space. The Internet is slowly converting retail banking

into a commodity where the days of loyalty to bricks and mortar

banking are obsolete.

Coming back to our public sector banks, let us look at a few

problems they face in this regard.

Regulatory problems form the upper crust here. While public

sector banks can open and relocate in urban and metropolitan

areas, closure of branches requires prior RBI permission. These

banks are unable to compete effectively with the new private

sector banks with respect to restructuring and better delivery

systems. It is highly likely that public sector banks will get




segregated into urban branches where Internet banking is a

must and residual rural branches where it is not. Moreover the

new private sector banks are providing complete solutions to

corporates at lower costs and better services and weaning away

corporate clients. The future paradigm of banking in India will

stress on mergers and ability to spread costs by leveraging on

technology.

Some Positive Steps

Banks as well as other financial entities in India have only

recently entered the world of information technology and

computer networking. Besides, the technology up gradation, an

efficient payment system is needed to improve the effectiveness

of monetary policy. One can highlight three distinct areas where

the application of IT has been quite substantial. This gives us an

idea regarding the preparedness level of India with regard to E-

banking.

Firstly, with regards to the payments and settlement systems,

since the introduction of MICR cheques in the mid-eighties, the

RBI has proceeded to make significant improvements in the

functioning of financial entities with respect to their application of

information technology. These include, introduction of Electronic

Funds Transfer (EFT), introduction of inter-bank electronic




payment system, introduction of Automated Teller Machines

(ATM) by almost all major banks and the putting in place of a

Shared Payments Network System (SPNS). The RBI has also

operationalised the Very Small Aperture Terminal (VSAT)

network to provide reliable communication backbone to the

financial sector. The setting up of the INdian FInancial NETwork

(INFINET), based on satellite communication using VSAT

technology, is expected to facilitate connectivity within the

financial sector.

Against the backdrop of preparedness towards technology

upgradation, the RBI has made a proactive effort to move

towards a Real Time Gross Settlement (RTGS) system. Gross

Settlement systems have the advantage of significantly reducing

risks, as transactions are settled on a bilateral basis in real time

frame.

The INFINET deserves mention yet again as it serves as the

communication backbone. It needs to be augmented by addition

to the presently licensed transponder capacity as well as by

other communication modes.

Changes in recruitment procedures and training and managerial

responsibility at different levels of the staff structure are




envisaged. This is augmented by the fact that in the present

placements in major B-schools, banks like Citibank, ICICI, and

HDFC etc have shown a distinct shift towards IT savvy people.

This projects a very optimistic picture regarding the future of E-

banking in our country.

Finally, it needs to be stated that the on-going process of

reforms cannot be successful without a supporting and

complementary legal framework which can provide for both

strong internal governance in the financial system as well as

external discipline by market forces.

A Reserve Bank of India (RBI) committee in July, 2001 came out

with the road map for electronic banking in India and has sought

promulgation of a legislation on electronic funds transfer (EFT)

system.

Banks have been advised to outsource software technology since

it was a better option in the context of rapid changes in the

information technology industry.

It felt computerisation of government departments should be

synchronised with the computerisation of bank branches dealing

with government transactions.

Essential Management Information System (MIS) founded on

data warehousing and data mining at individual bank level, has

been stressed.




A suggestion has been made that banks choose the branches

and areas of operation where they have already introduced a

certain degree of automation and computerisation and review the

systems and procedures in these branches/areas to adapt them

to the technology that is newly introduced.

It has suggested that larger banks should explore the

possibilities of giving exposure to their technical staff on the

latest developments that are taking place around the world in

the area of it and allied areas by deputing technical officers to

the banks and other specialised institutions abroad.

Drivers of change

Advantages previously held by large financial institutions have

shrunk considerably. The Internet has leveled the playing field

and afforded open access to customers in the global

marketplace. Internet banking is a cost-effective delivery

channel for financial institutions. Consumers are embracing the

many benefits of Internet banking. Access to one's accounts at

anytime and from any location via the World Wide Web is a

convenience unknown a short time ago. Thus, a bank's Internet

presence transforms from 'brouchreware' status to 'Internet

banking' status once the bank goes through a technology

integration effort to enable the customer to access information

about his or her specific account relationship.




The six primary drivers of Internet banking includes, in order of

primacy are:

♦ Improve customer access

♦ Facilitate the offering of more services

♦ Increase customer loyalty

♦ Attract new customers

♦ Provide services offered by competitors

♦ Reduce customer attrition

Emerging challenges

Information technology analyst firm, the Meta Group, recently

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

by the year 2002 will become marginalized." By the year of

2005, 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.




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 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 the alert players to leverage their brick

and mortar presence to improve customer satisfaction and gain

share, and will force the lethargic players out of business-since

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

While banks are enthusiastic about introducing e- banking, many

customers are less impressed. Once the novelty of the

transactions on the Internet wears off, it is not sure whether the

bulk of consumers really want to do their banking on telephone

or their computer screen. Customers worry about the leakage of

their financial information through electronic transmission of

their instructions to the bank. And despite the promise of having

access to an account from anywhere in the world or trading a




stock seconds after opening the market, what happens if the call

drops in the middle of the transactions or the message gets

mutilated in the course of transmission?

Most customers need to know that they have a bank branch to

feel secure about where their money is. In particular, there are

elderly people and senior citizens who prefer to visit the branch

personally for their transactions and for whom it is as much a

social activity as an errand. True, banks cannot be expected to

open branches or keep them open for social reasons only, but

given the state of technology and the extent of computerisation,

it will be at least a generation before branch banking can be

substantially replaced.

Furthermore, many believe that the rush of banks into e-banking

is a sort of gimmick, a marketing ploy to prove how progressive

they are in terms of technology. But what banks in India really

require to win confidence of consumers is customer-orientation

and responsiveness of their staff. While e- banking may be useful

and welcome to large corporate customers, their number is

limited. The others are not exactly screaming for it yet. More

than anything else, banks need to strive for adequate

reorientation of attitudes of their staff, coupled with reasonable

computerisation of their operations, to obviate delays.

Nevertheless, some banks, particularly those with international

operations, feel they would rather be too early than too late.




It is believed that everything will be determined by content and

context, and where execution will be key. From a customer and

service provider perspective, this is where the world is moving-it

is going to be real-time, on-line experience. If existing banks

don't want to disappear, it is this challenge of Integration that

they need to embrace in order to win and survive. The more

things change, the less they change. The strategic and

executional battles of the future are going to be fought for

Channel Integration. What does Channel Integration means? It

means that an institution presents an identical face to the

customer-be it in the branch, on the web, at an ATM or for that

matter, through a sales representative or a broker. An identical

face, an identical message. Or better still, messages that

reinforce each other. If a sales representative tries to sell you a

housing loan, you get e-mail a day later reminding you about the

loan. That's called Integrated Sales, which results in incremental

economic activity and improved efficiencies of communications.

The beauty of this approach is that one channel does not

displace another. They feed on each other to create incremental

value for the customer, as well as the institution. The

incremental value comes from two distinct sources.

Firstly, you reduce inefficiencies. You don't send people junk mail

because you know that they are not likely to buy a particular

product or service today. That results in net saving for the

economy.




Secondly, you persuade people at the right time (the right time

from the customer's perspective, not from the service provider's

perspective) to opt for a tailor made offering. This too increases

value. Actually, this has to do with the Internet itself, and more

to with the underlying technologies of the Internet which allow

incremental efficiency, and empowers the customer to make

more enlightened and timely choices.

Lastly the product range is another issue which becomes

important. It will take a technological revolution to make

available advanced banking products on the net and given the

rate at which the technology is developing we can expect this to

happen in near future.

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.

Firewalls and filtering routers ensure that only the

legitimate Internet users are allowed to access the system.

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.

A new study by the Pew Research Foundation in Washington in

June reported that 84 per cent of Internet users are concerned

about and are not comfortable with the current state of privacy

and security on Internet. The concern about privacy becomes all

the more relevant and significant when it comes to banking on-

line, where any breach in security and privacy can have a

devastating effect on the individual consumers.

Yet even as the people express anxiety about privacy and

security on-line, the matter is further complicated by the

consumers' unfamiliarity with the basic mechanics of Internet

working and data flow. This being so, rushing into the on-line

banking without adequate preparations and awareness and legal

back-up, may rather prove catastrophic.

The position becomes all the more complicated when most

consumers venturing on-line would be doing so for the first time.

As lot of people who are not technically sophisticated may be

going for on-line banking; it is all the more necessary to provide

consumer education beforehand so that they can make

appropriate choices and intelligent decisions.

Apart from the need to evolve and build tools to streamline

security and privacy on-line and improve detection of virus in

time, there is also the need for universalise laws on computer

and cyber crimes.




Decision making and Strategising

In this technology-based banking world, it’s the CIO who is fast

becoming the key to a bank’s success or failure. With increasing

needs to gear up to the fast-changing technology, the onus to

implement the right banking solutions lies on the CIO. With the

apparent huge potential of the market, the industry has seen

many players offering their financial solutions to the banking

sector. It’s imperative for the CIO to decide upon the best

technology.

Industry analysts say that the most important parameter in

evaluating the technology remains the flexibility of the solution

along with the scalability. With the growing popularity of Internet

banking, CIOs’ evaluation of the solutions becomes all the more

crucial for the future of the bank. Web sites which offer static

information and primarily replicate existing business processes,

will not be give a bank the cutting edge. It becomes the CIO’s

job to ensure that such sites allow the bank to take useful

advantage of the Net.

Parameters for the right banking solution:

• Flexibility

Does the solution have the capability to adapt quickly to

changing market requirements? Can new products and

services be introduced quickly with the technology.

• Reliability and availability




With customers demanding any time access, does the

system operate reliably and round the clock.

• Scalability and stability

Can the solution handle growth in volumes with acceptable

response times and reasonable hardware costs.




• Interoperability and compatibility

Can the system integrate with the other applications of the

bank. Also can the solution integrate with other platforms,

as may be the need due to the convergence of the financial

market

• Delivery channels

Does the technology allow the bank to seamlessly add new

delivery channels like mobile banking.

• Speed of deployment

The technology needs to be implemented before it

becomes obsolete.

• Stability

Internet banking would drive us into an age of complete

transparency giving rise to perfectly electronic market place and

customer supremacy. The question to be asked is "What the

Indian Banks should do".

The strategy can be implemented in four steps:

Familiarising the customer to new environment by demo

version of software on bank's web site. It will enable users to

give suggestions for improvements, which can be

incorporated in later versions wherever feasible.




Second phase provides services such as account information

and balances, statement of account, transaction tracking, mail

box, check book issue, stop payment, financial and

customised information.

The third phase may include additional services such as fund

transfers, DD issue, standing instructions, opening fixed

deposits, intimation of loss of ATM cards.

The last step should include advanced corporate banking

services like third party payments, utility bill payments,

establishment of L/Cs etc.




INDIAN BANKS ON WEB – The Major Players

``INTERNET banking is not an urgent need in India. People go

in for it for the novelty factor.''

‘People like to know that their bank is technologically advanced’

‘Customers even log in at odd times of the day -- not to make

transactions, but just to check if the network is up.’

- Mr. P. C. Narayan, The Executive Vice-President, Global

Trust Bank.

The banking industry in India is facing unprecedented

competition from non-traditional banking institutions, which now

offer banking and financial services over the Internet. The

deregulation of the banking industry coupled with the emergence

of new technologies, are enabling new competitors to enter the

financial services market quickly and efficiently.

While the world has seen corporate banking as the first choice

for Net bankers, India seems to be reversing the trend and most

initial developments seem to be in the retail banking area.

Currently, Internet banking in India is in the form of 'online

versions' of traditional banks. ICICI and HDFC for example, are

working at migrating their existing customer base online.




A study which was conducted by students of IIML shows

some interesting facts:

Throughout the country, the Internet Banking is in the

nascent stage of development (only 50 banks are offering

varied kind of Internet banking services).

In general, these Internet sites offer only the most basic

services. 55% are so called 'entry level' sites, offering little

more than company information and basic marketing

materials. Only 8% offer 'advanced transactions' such as

online funds transfer, transactions & cash management

services.

Foreign & Private banks are much advanced in terms of the

number of sites & their level of development.

ICICI was the first bank to initiate the Internet banking

revolution in India as early as 1997 under the brand name

'Infinity'. This was soon followed by HDFC, IndusInd Bank,

Global Trust Bank, Federal Bank. Large public sector banks

like SBI and UTI, initially slow to adopt online banking, have

jumped into the fray with Bank of Baroda too planning to invest

around Rs 250 crore for its online banking operations.

Surprisingly, Indian private sector banks have outnumbered

foreign banks like Standard Chartered Grindlays in the Internet

banking arena with Citibank, the only foreign bank offering




retail Net banking. Deutsche Bank has launched db-direct

Internet, a browser-based electronic banking system for a range

of corporate banking products, in place of its earlier PC-based

system, where customers had to dial up to access their network.

HSBC and Centurion Bank are also all set to kick off Net banking

this year but only for employees.

Worldwide, Internet banking has witnessed a healthy growth

from 2.5 million users less than four years ago, to seven million

users. In India, given the low PC penetration in the country,

HDFC bank alone claims to have more than 140,000 customers

since they launched 'Net Banking' in September 2003.

Major commercial banks in India appear to going e-banking, not

only because it carries mass appeal and vests the enabled bank

with special prestige as a progressive and technology-led

institution but also because it ultimately leads to lower operation

cost. The appeal to customers is also easy to understand. When

a customer uses an electronic device -- a personal computer or a

laptop -- to check his account or transfer funds, it is much more

convenient and cost-effective to him than visiting a bank branch.

Banks are enthusiastic because they expect that e-banking

would, by eliminating the costs associated with opening of new

branches and hiring large complement of staff, enable them to

improve their bottomline and face domestic and global




competition more effectively. Banks in India did not go hi-tech

fast enough and are understandably hawkish on e-banking.

Scope of e-banking

Apart from being able to conduct normal business -- transfer

funds, carrying out standing instructions, check out the status of

an account, through his computer or a laptop -- on-line banking

can enable customers pay bills, buy and sell stocks, make

purchases and consult investment advisers. Using on-line

banking, customers can click on a link to thousands of merchants

to buy everything from flowers to rail or air tickets. Cost of

purchases can be debited directly from the customers' bank

accounts, which would be far cheaper for the sellers than

processing transactions -- cash or credit.

After realising the potential of Internet-banking and the window

of opportunities thrown open by e-commerce, the banks can

miss the opportunity at their own risk and cannot afford to

commit the same mistake as they did in the late start of

computerisation. Already, leading foreign banks are going the

whole hog for on-line banking and the banks feel that they

should not miss the bus this time.

Notwithstanding that the number of customers jumping on to the

bandwagon of electronic banking may not be large, there is no

doubt that e-banking is a matter of time only. Other customers

will warm to the concept over time as PCs, laptops and

telephone-based web devices become popular and easier and




cheaper to use. As ATMs and credit cards are no longer viewed

with suspicion, consumers will be won over, over time, by the

convenience, affordability and portability of electronic banking

devices.

Nevertheless, there are valid reservations about the new

technology. And these need to be taken care of before e-

banking really catches up. First is the concern about privacy and

safety of their accounts. Despite numerous steps taken in this

direction and the availability of various software to meet these

concerns, the instances of hacking and computer virus are not

wanting.

Recently, Videsh Sanchar Nigam Ltd. that had its ADR listing on

the New York Stock Exchange, had its Web site penetrated.

Hackers claiming to be “people supporting the Kashmir cause”

inserted what they called `defacements' in the Web site of the

country's premier telecommunications services company. As a

result, the company was forced to temporarily take the Web site

offline to make investigations.

The incident happened not only on a crucial day when the

company was in the limelight; it also came at a time when the

Government was on the threshold of giving the green signal to

digital signature certification. This recognition, which will allow

for true online financial transaction, is already being viewed with

suspicion for reasons of security.




This highlights why consumers are generally inclined to repose

more faith in branch-managed banking transactions than in

Internet banking. True, each customer would have a password or

personal identification number for all Internet services for

accessing his account on the Web as well as a printed list of one-

time codes for using with each transaction. This has been

designed to prevent electronic snoops and hackers from

intercepting the data in transition and defraud the consumers.

But this does not seem enough to instill confidence in customers,

as tricksters are known to have often outsmarted the technology

developers.

The above challenge is particularly daunting for a country such

as India, which has consciously and aggressively jumped on to

the IT bandwagon for economic development. Even after the IT

Bill has become operational, it may be desirable not to rush

headlong into e-banking. It would be desirable to hasten slowly,

with adequate emphasis on consumer education and awareness

and appropriate regulatory and monitoring mechanism, to

safeguard customers' interests.

At the same time, it must be remembered that with the

explosive growth of the Internet, we will unfortunately

increasingly see the dark side of technology and though there

will always be some risk in using a computer, such distortions

cannot and should not be permitted to cause a serious roadblock

in the march on the Information Superhighway.




Advantages

Traditionally, rural areas have been exclusively served by banks

with large branch networks. This monopoly has been challenged

with the advent of e-banking, since it enables low-cost access

to rural areas. Physical infrastructure is no longer needed by

the branches.

E-banking will improve customerisation and offer business

potential that did not exist before.

E-banking is the lowest cost distribution channel currently

available to the banking sector. The relative cost per

transaction through e-banking will be only 12 per cent of

the cost that has to be incurred through the branch

networking, he added.

Another advantage of e-banking is that the service is available

24 hours a day, seven days a week, apart from offering

simpler transaction processing and better customer interactivity.

E-banking will lead to a customer-centric approach and

information-yielding interactions with customers will be

maximized.




"Banks are using technology as an enabler to provide innovative

products, multiple delivery channels and have efficient service

mechanisms"

-CN Ram, Head, IT, HDFC

Bank




Public sector: Lagging behind

With the liberalization of the banking sector, private banks

realized that the adage "customer is the king" could be their

ticket to success. The customer—long forgotten by the public

sector banks—could be attracted and retained through good

customer service. But without a countrywide presence like the

public sector banks, private sector banks could only compete

through innovative means. This came in the form of technology

and private banks resorted to leverage it to dish out a complete

banking menu to their customers.

Why has the private sector been taking the initiative while the

public sector keeps on watching its depleting market share. The

public sector, which controls about 65% of the banking industry,

is certainly aware of the implications. At the core of the problem

is the model on which the public sector banks are based—the

service model. As nationalized banks, they have certain social

obligations, which require them to provide services throughout

the country and it will take them time to mature to a different

model.

Moreover, branches spread across the entire country and a lack

of national bandwidth have become a big constraint for the IT

endeavors of public sector banks. Nevertheless, they are on the

technology route, though there is less visibility about that. On

the other hand, private banks have no such bottlenecks and from




the beginning can plan their network in a fully computerized

environment even in B-class cities and hence are more visible.

Then there is the issue of the legacy systems. Since the public

sector banks are still in the process of automating their

processes, they need to run the manual processes for some

time. Most of the IT initiative so far has meant automating the

traditional paperwork to online process. Contrary to this, as late

entrants in the banking sector, private banks had the benefit of

working in a fully automated work environment right since their

inception, and could compete with the foreign players in terms of

technology. The private sector banks have the major advantage

of being able to effect changes quickly, and not have to deal with

a huge infrastructure, branch network, and manpower resource

pool that they need to transform. As a consequence, they have

also optimized the use of human resources.

To compound their woes, public sector banks also have the ever-

looming issue of unions. Automation was always resisted in these

banks by the unions since they perceived it as a threat to jobs.

In round one, the winners have been the private players.

However, with 60–65% of the banking still in control of the

public sector banks, they too have an important role to play and

the sooner they start incorporating technology into their overall

business plan, the faster they can recover, some if not all of their

lost market share. Banks have a key role to play in the emerging

e-commerce market. A big opportunity lies in positioning as a co-




developer in the e-commerce space. Though private banks have

taken a clear lead in this area, public sector banks too can grab

some of the untapped opportunities by moving in quickly.

Comments Girish Vaidya, senior VP and head, banking, Infosys,

While private banks are deploying technology to cannibalize the

public sector market share, the game has just started. Proper

technology usage by public banks can still put them back in the

same league with the private ones. But for this they immediately

need to explore and exploit the technology to the fullest. They

also need to look at international trends of Internet-only units

supported with call centers and huge networks of ATMs. Timely

measures in these direction will put them back in the same

league as the private or foreign banks. The ongoing automation

in public sector banks is fine, but they also need to deploy the

state-of-the-art banking solutions and services quickly.

At the end of the day, the quality of banking services will win

long-term customer loyalty. Of course, the technology will

continue to play the enabler.




ICICI Bank is a commercial banking outfit set up by the ICICI

Group. The Bank was registered a banking company on January

5, 1994 and received its banking licence from the Reserve Bank

of India on May 17, 1994.

ICICI Bank's Infinity was the first Internet banking service in

the country, and a prelude to banking in the next millennium. It

is an online link to one’s ICICI Bank accounts through the

Internet.

ICICI Bank uses "Bankaway" from Infosys which is being used

by 5 out of 8 banks going for net banking.

Out of ICICI’s six lakh customers three years ago, only one-sixth

were net-savvy. Today, out of 1.5 million, three lakh have access

to the net and half of them conduct all or most of their

transactions over Internet.

Infinity provides you convenient facilities like :

• Details of transactions and balance information about your

accounts as at the end of the last business day.

• Retrieval of transaction details based on your need -

cheque number, transaction amount, date & so on.




• Download of all your account information in QIF or text

format

• Despatch Mail and Instructions to ICICI Bank

• Transfer of funds between your own ICICI Bank accounts

across the country.

Infinity is free for individual Account Holders. For Corporates, the

rates will be decided on a case to case basis.

In the subsequent phases, more value added features will be

included like request for Demand Drafts and Pay Orders, Fixed

Deposits etc.

Infinity can be used from any country in the world. However,

operations in the accounts with ICICI Bank and the Infinity

service are subject to the relevant laws of India and not any

other country.

ICICI Bank seems to believe in catching customers young. Not

surprising that ICICI Bank has launched its banking product

"Bank@campus" in many campuses, including the Indian

Institutes of Technology across the country. ICICI Bank has

another product called "kid-e-bank" for kids.

Security

User id and password is your KEY to the Bank. To protect against

any unauthorised access to your accounts, your login is

automatically disabled after 5 consecutive login failures.




ICICI-Bank takes utmost care to keep your account protected.

A multi-layered security architecture comprising of firewalls,

filtering routers, encryption and digitial certification will provide

you the confidence that your account information is protected

from unauthorised access.




A PREVIEW OF TRANSACTIONS ON INFINITY

Accounts

A/c Type IdAccount NickName Currency Account Balance Branch

name

1 Fixed Deposit 10/1653 Retirement INR 40000.00 New Delhi

fund

2 Installment Loan 55/205 Auto loan INR -

214231.00 Mumbai

3 Current 05/2154 Joint checking INR 751500.00

Mumbai

4 Savings 01/3108 Laxman's INR 11200.00 New Delhi

Savings




5 Savings 01/5071 Daily Cheques INR 43231.27

Mumbai

Select an account and click on

QuickView to get a view of the last 8 transactions

Query to view statements and details of transactions

Schedule to view details of Fixed Deposits and Loans

Details to get further information about the account.

Transfers

Now you can transfer funds to any person having an account

with us.

Transfer funds to your own accounts

Just choose the Debit & Credit account listed and enter the amount to be transferred

Transfer funds to any ICICI Bank account across India

Choose your account as Debit account ;Give credit party's account number, branch and full name.




Requests

Select from the list of services below

Cheque Book Request

Stop Payment Instruction

Intimate loss of ATM Card

Many more to be introduced ...

Bills

Pay MTNL, MUMBAI

IMPORTANT

• Payments of only exact bill amount, before due date will

be accepted. In case of under/over payment,MTNL is likely

to reject the payment.




• It takes two working days for transfer of funds to MTNL.

Please take this into account while making payments. e.g.

Payments made by (schedule date)12-Aug-1999 will reach MTNL

on 14-Aug-1999 only.

e.g. Kindly note that payments which are scheduled for 12-Aug-2003

have to be initiated before 12 Noon(IST) on that date

CA Number

Bill Number

Bill Date (dd-mm-yyyy)

Telephone Number

Payment Amount

Debit Date

30-11-2004(dd-mm-yyyy)

Debit Account

Please ensure that all the details have been entered correctly. Otherwise, payment is likely

to be rejected by MTNL.

All payments are subject to terms and conditions




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HDFC Bank introduced Netbanking, a convenient way to access

one’s bank account from around the world, through the Internet

in September 2003. It gives the following services :

• Account balance inquiry

• Account statement inquiry

• Cheque status inquiry

• Stop payment request

• Demand draft / Banker's cheque request

• Funds transfer

• Cheque book request

• Fixed deposit inquiry

• New fixed deposit request

• TDS inquiry




They also have special discounted rates for Stop Cheque

Payment instructions and Demand Draft / Banker Cheque

requests made over NetBanking.

HDFC Bank has adopted a very aggressive strategy for bringing

in new technology and has already invested around Rs. 50-100

Cr. on the system within a couple of years of adopting it.

Additionally it does not have any focus group as such but wants

to spread its services to all kinds of cosumers.




A PREVIEW OF TRANSACTIONS ON NETBANKING




Screen 1

Welcome Sunil Krishnan,

Thank you for banking with us.

Your registration / last visit was on 12 Dec2004

Please click below to proceed.

Consumer Banking

Depository Services




Screen2

Account Holder : Sunil Krishnan

Account No : 201108000121

Your Accounts

Please choose your account from the list below and

select your transaction from the menu on the top right.

Account Number

Branch Name

201108000121

Sandoz, Mumbai

201108000133

Sandoz, Mumbai




Screen 3


Account No : 201108000121

Account Statement Inquiry

For another transaction, please select from the options in the menu on the top right.

Closing BalanceRs. 22035.98

(in INR)

Date Narration Chq/Ref Number Value Date Debit Amount Credit Amount Closing Balance




Jul 14 2003 Service Charge for 000000000000 Jul 14 2003 30.00 22035.98

Banker's Cheque Issue

Jul 14 2003 Banker's 000000212112 Jul 14 2003 1500.00 22005.98

Cheque Issue

Jun 26 2003 Cheque Deposit 000000003232 Jun 28 2003 15050.00 20505.98

Jun 19 2003 ATM Cash 000000000000 Jun 19 2003 500.00 5455.98

Withdrawal




Screen 4


Account No : 201108000121

Funds Transfer

Please select the accounts and fill in the required information.

From Account Number

To Account Number

Transfer Amount




CitiDirect Internet Banking is the ability to do all your credit

card and banking transactions on-line, through Internet. It

offers you banking at your finger tips with the Citibank Security

using state-of-the-art 128 bit encryption. The internet now

allows you to conduct your banking business from your desktop

wherever in the world you may be. With a special H-PIN assigned

to you, you can experience world-class banking with a few clicks.

According to reports, 33% of Citibank’s banking customers in

India have shifted to Net-banking.

All the functions that are available in phone banking can be

easily done through CitiDirect also. You can:

• Check your Account balances.

• Find out about Interest rates.

• Do an Account to Account transfer.

• Ask for the latest Account Statement.

• Request for a Cheque book / Deposit slip.

• Make a Demand draft request.

• Seek information about any product or service or event.




• Pay your bills for utilities like MTNL, Electricity etc

• Subscribe to a Mutual Fund

…and many more functions at the click of a button.




Security features:

Citibank Internet Banking uses state-of-the-art encryption

technology and is absolutely secure.

When you open an account with Citibank, you are assigned a

HPIN or HOME-BANKING PERSONAL IDENTIFICATION

NUMBER which is your unique internet password, known only to

you and nobody else. Once you enter this in the CitiDirect Site,

you are enabled to transact on the net.

Transactions on CitiDirect are absolutely secure, starting

right from mailing your HPIN to actually using it on

CitiDirect. When the HPIN is mailed to you, the

communication does not carry your card number, so even

if it was intercepted, the interceptor would have just a

sequence of letters and numbers

A 128-bit key is

309,485,009,821,345,068,724,781,056 times more

secure than the 40-bit message !!! What this means it’s

practically impossible to break in to your account.

Any new functionality / Service that is introduced on

CitiDirect undergoes a Ethical hacking test, what this




means is that we try and break into our own creation using

latest tools and only when it passes this most stringent of

tests, is a Service introduced for you.

Lockout after 6 consecutive unsuccessful attempts.




A PREVIEW OF TRANSACTIONS ON CITIDIRECT




CitiDirect – Login Screen

Sign-In

To enter CitiDirect, please choose from the pull-down menu and click on Enter.

Name*

* Select New User if this is your first time using CitiDirect from this computer, and

you will be using this computer regularly to sign-in.

* Select Guest if this computer is not where you will regularly use CitiDirect.




If you are a New User, select 'New User' from the Name drop box. This would lead you to a screen

where you would need to supply your CitiCard number (ATM Card Number) or your Citibank / Diners

Credit Card number, your preferred Nick-Name or Short Name to identify yourself and your HPIN

(Internet Banking PIN).

If you will use the very same computer for CitiDirect banking every time, create a User Name using

this option. However, if you are always on the move, it is safe to use the 'Guest' mode of login. In this

mode, you will be expected to supply your Citicard number / Credit Card Number each time you log

in.

The third mode is that of a Regular User. Just select your User Name from the Name drop box.

CitiDirect – Creating a New User

Give yourself a name by which CitiDirect will identify you. Remember, when choosing a name, use

nomore than 10 characters (with no spaces).

Name:

Citicard Number:

Internet Banking PIN (HPIN):

Sign In




Normal Track (Full Graphics) Fast Track (Minimal Graphics)

You will also notice that there are two display tracks to suit your convenience.

Choose the 'Normal Track (Full Graphics)' to view the regular CitiDirect screens.

The 'Fast Track (Minimal Graphics)' option lets you view the CitiDirect screens without heavy

graphics, therefore reducing your download time significantly. If you are a new CitiDirect user,

choose the 'Normal Track' till you are reasonably well-acquainted with the product. Later, you may

graduate to the 'Fast Track' option.

Credit Cards

Credit Line Increase

Second Card Request

Report Lost/Stolen Card

Add on Card Request

Swap your Credit Card

Redeem Reward Points




Citibanking

A/C Opening Forms

Cheque Book Request

Deposit Slip Request

Stop Payment Request

Interest Credit Query

Others

Query Logging & Resln

Nomination

Choose APIN & TPIN




Feedback

Address Change

PDC Stmt

Prepayment Simulation

ERA Upload Status

Interest Rates

NR Interest Rates

Forex Rates

Mutual Fund NAV Query

Product Features




Contact Citiphones

Rupee Checking Account

Branch Banking Account

Suvidha Account

Download MF A/C opening form

Domestic

Multi Deposit Booking

Money Multiplier Booking

Demat




Mutual Funds

Stocks & Shares

NR

NR Deposit Booking

NR Deposit Booking Simulation

Account Balance

Quick Glance Statement

Download Statement




ACCOUNT INFORMATION - Your Loan Account Statement

Statement of Account for Auto Loan Number L55A011329618

From Date

01-02-2000

To Date

14-02-2000

Customer Name

Prem Anand

Loan Amount *

42000.00

Disbursal Date

09-08-1999

Installment Amount *

1513.00

Tenor (Months)




36

Remaining Tenor (Months)

20

Interest Rate (%)

12

Number of Installments due

36

* All amounts in Indian Rupees

[Indian Rupees]

Installment Due

23000.00

Penal Interest

0.00

Other Charges

500.00




Principal Outstanding

38196.24




A Comparison

As can be seen, in case of HDFC’s NetBanking there is not much

on offer in terms of transactional business except being able to

order for cheque books and statements, transfer funds between

accounts of the same person and open a fixed deposit account.

In contrast, ICICI Bank with its net banking service called

‘Infinity’ goes a step forward by allowing the account holder to

transfer funds into another person’s account within the bank.

Also one can intimate about the loss of an ATM Card over the net

when using Infinity. Moreover, corporate can issue of letters of

credit and make enquiry’s regarding bills sent for collection via

this service. A special feature on Infinity is the facility for

nicknaming all accounts to avoid remembering lengthy account

numbers.

In terms of safety, HDFC Bank allows one to have three login

attempts after which a new password is given while ICICI Bank

will disable the password after five login attempts.

Considering the fact that these services are offered without

charging a fee, the effort is commendable.




All the three have free demonstrations on their respective

websites which are self-explanatory and can guide a first time

user on how to use the facility.

Looking at the following comparative charts, we can see that the

Indian private banks like ICICI and HDFC are no less than their

foreign counterparts, infact are better than them since they

understand the Indian consumer and market better.



Internet banking in India: Future Potential and ChallengesICICI Bank HDFC Bank Citibank

Net banking demo YES YES YES

Account balance inquiry YES YES YES

Account statement inquiry YES YES YES

Cheque status inquiry YES YES NA

Stop payment request YES YES YES

DD / bankers cheque request -- YES YES

Funds transfer YES YES YES

Cheque book request YES YES YES

FD inquiry YES YES NA

New FD requests -- YES NA

TDS inquiry -- YES NA




Comparison based on services offered

E-shopping

Banks E shopping

ICICIFabmart, Rediff, Sifymall, Magiccart, Malamall, Indiainfoline,

Indbazaar, Renew VSNL connection

HDFC

Fabmart.com, Sifymall, Noshutters.com, Mahadiscounts.com,

Xpressionmall.com, Shoppershyderabad.com Renew VSNL Internet

connection

Citibank Fabmart, Rediff, Sifymall, Mahadiscounts

Apart from these, the other banks do not have much to offer on this

front. IndusInd for example has no fund transfer facility and SBI and

UTI also do not have facilities for purchasing online.

Bill pay

Banks Bill Pay

ICICI

MTNL, BEST, BPL Mobile, Orange, BSES, Birla AT&T, Airtel, Essar,

Bangalore Telecom, Usha Martin Telekom, Spice Telecom, Skycell,

RPG cellular, Escotel, Tata Cellular, Tala Teleservices

HDFC

MTNL, Airtel, BPL Mobile, BSES, Orange, MSEB, RPG Cellular,

Skycell, Essar, Comman-Usha Martin, Spice Telecom, Tata Cellular,

Escotel, Fascel, Birla AT&T, BSNL (6 cities)

CitibankBangalore Telecom, Bangalore Water Supply, Spice Telecom, JT

mobiles, Hotline Paging, Maxpage (via credit card and bank account)




Almost all banks except GTB and IndusInd have this facility of payment

of utility bills. Federal Bank and UTI are restricted to only BSNL

payments, Federal Bank limiting this service in Ernakulam only.

Account Tracking and Banking features

Banks Account Features

ICICIAccess Current, Savings account, stop payment request, chequebook

request, intimate loss of ATM card,

HDFC

Access Current, savings, FD accounts, Balance and statement

inquiry, Cheque status enquiry, Stop payment request, Bankers

cheque request, chequebook & statement request, Demand Draft

Request, FD enquiry, New FD request, TDS enquiry, direct debit

Citiban

k

Access savings,multi deposit, NRI, mutual funds, loan accounts,

account Balance and statement inquiry, chequebook request,

Demand Draft Request, EMI loan on Credit Card, pay credit card

expenses, New FD request,

All banks are providing the major functions for managing the accounts

and other banking services.




FUTURE OF E-BANKING IN INDIA

Can one imagine life without paper cash?

Money has always been part of human emotions. And although it

is difficult to imagine that all those years of savings at the bank

is now just a whole bunch of bits and bytes, it is a distinct

possibility.

In concluding one may state that Indian banking in the next

millennium is likely to be driven by mergers, universal banking

and Internet technology. While mergers will confer economies of

scale, universal banking will dismantle the barriers between the

traditional dichotomies of financial services. While one realizes

the fact that the Internet is likely to convert banking into a

commodity one has to take into account that thirty years of

solitude has steeped Indian Banks into a morass of inefficiency,

slothfulness and complacency. If Indian banks refuse to visualize

this trend they may well be consigned to history. However, if

they react proactively Indian Banks stand to gain a lot from the

opportunities that E-banking offers.




There is no doubt that potential for net banking in India is

immense considering the rising penetration levels of the World

Wide Web in Indian homes and offices. When one takes a look at

what is available worldwide, one sees that net banking is more of

a norm rather than an exception in many developed countries.

The services offered enables one to check credit card

transactions, paying bills, transferring funds between accounts in

two different banks and scheduling future payments and

transfers. The gradual increase in net banking is logical as the

need to minimize costs catches attention.

A North American Internet Banking Survey done by management

consultancy Booz Allen & Hamilton in 1996 revealed that the

cheapest way of banking is Internet banking. The survey

estimated that a brick and mortar network of a bank would cost

US$1.07 per transaction while it is only US$0.01 for internet

banking. The same survey said that by 2000, 16 million US

households would be banking through the net.

Though there is no denying that the Internet has emerged as a

promising new medium for the financial sector, the issue of

security still remains to be tackled. However, banks are already

taking initiatives to address this issue. According to industry




analysts, though security will remain an important concern for

financial institutions, it won’t come in the way of widespread

implementation of online banking, which will continue to be

driven by competitive pressures and market requirements.

In India, however, there may arise problems with nationalized

banks, which have in the past opposed computerization.

However, the fact remains that given a choice, customers would

like to bank via the net and the next decade could well see

virtual banking becoming a reality.



BIBLIOGRAPHY

‘Banking : The Network is the bank’, by Yogesh Sharma,

Dataquest, January 31, 2003

‘The Potential Of e-banking’, Business Today, December 21,

2003.

‘Race will end in survival of the fittest’, The Financial

Express, November 29, 2002.

‘E-banking bandwagon getting crowded’ , by R. G.

Bhatnagar (former Chief General Manager, State Bank of India),

Business Line, Tuesday, October 10, 2002.

Could encryption bottleneck be causing e--bank failures?’,

by Will Garside, Computer Weekly, Sept 7, 2003, Reed Elsevier

Business Publishing Ltd.

The Times of India, 26 July, 2000.



‘The future is in e-banking’ by Mr. K.V. Kamath (Managing

Director, ICICI), April 14, 2003, Business Line.

‘RBI road map for e-banking’, The Indian Express, July

21,2001.

‘Vision for the Banking System’, by Mr R Narasimhan (Deputy

Managing Director (Systems & Technology and Personal Banking),

State Bank of India)

Internet Banking in India, by Dr A. K. Mishra (Professor &

Chairman of Finance Group at IIM Lucknow).

Web-sites:

http://www.indiainfoline.com

http://www.thebharat.com

http://www.icicibank.com

http://www.hdfcbank.com

http://www.citibank.com



Credit Cards

Details of Payment Recd

Pay for your Credit Card Exps

Convert transaction to EMI

Utility Payments

EMI Loan on Card

Citibanking

Utility Payments

NR Withdrawal Simulation

A/C to A/C Transfer - Self & Others

DD Request



Withdraw from Deposit

Pay a Loan

Others

Pay for e-Shopping

Leave Standing Instructions

ERA Upload

Future Indian Banking- Internet Banking

Documents

Transcript of Future Indian Banking- Internet Banking