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A STUDY ON ONLINE BANKING SERVICE OF SBI CUSTOMERS IN

COIMBATORE CITY.
CHAPTER-1
INTRODUCTION
1.1.

MEANING OF BANK:
A bank is a financial intermediary and money creator that creates money by

lending money to a borrower, thereby creating a corresponding deposit on the bank's


balance sheet. Lending activities can be performed directly by loaning or indirectly through
capital markets. Due to their importance in the financial system and influence on national
economies, banks are highly regulated in most countries. Most nations have institutionalized
a system known as fractional reserve banking, central banking, under which banks hold
liquid assets equal to only a portion of their current liabilities. In addition to other
regulations intended to ensure liquidity, banks are generally subject to minimum capital
requirements based on an international set of capital standards, known as the Basel Accords.
Banking in its modern sense evolved in the 14th century in the rich cities of
Renaissance Italy but in many ways was a continuation of ideas and concepts of credit and
lending that had its roots in the ancient world. In the history of banking, a number of
banking dynasties notably, the Medicis, the Fuggers, the Welsers, the Berenbergs and the
Rothschilds have played a central role over many centuries. The oldest existing retail bank
is Monte dei Paschi di Siena, while the oldest existing merchant bank is Berenberg Bank.
1.2.

DEFINITION OF BANK :
A financial institution licensed as a receiver of deposits.

There are two types of banks: commercial/retail banks and investment


banks.

In

most

countries,

government or central bank.

banks

are

regulated

by

the

national

1.3.

FEATURES OF A BANK:

1. Dealing in Money
Bank is a financial institution which deals with other people's money i.e. money given by
depositors.
2. Individual / Firm / Company
A bank may be a person, firm or a company. A banking company means a company
which is in the business of banking.
3. Acceptance of Deposit
A bank accepts money from the people in the form of deposits which are usually
repayable on demand or after the expiry of a fixed period. It gives safety to the deposits of
its customers. It also acts as a custodian of funds of its customers.
4. Giving Advances
A bank lends out money in the form of loans to those who require it for different
purposes.
5. Payment and Withdrawal
A bank provides easy payment and withdrawal facility to its customers in the form of
cheques and drafts, It also brings bank money in circulation. This money is in the form of
cheques, drafts, etc.
6. Agency and Utility Services
A bank provides various banking facilities to its customers. They include general
utility services and agency services.
7. Profit and Service Orientation
A bank is a profit seeking institution having service oriented approach.
8. Ever increasing Functions

Banking is an evolutionary concept. There is continuous expansion and


diversification as regards the functions, services and activities of a bank.
9. Connecting Link
A bank acts as a connecting link between borrowers and lenders of money. Banks
collect money from those who have surplus money and give the same to those who are in
need of money.
10. Banking Business
A bank's main activity should be to do business of banking which should not be
subsidiary to any other business.
11. Name Identity
A bank should always add the word "bank" to its name to enable people to know that
it is a bank and that it is dealing in money.
1.4. TYPES OF BANKING
2. PERSONAL BANKING
Our internet banking portal provides personal banking services that gives you
complete control over all your banking demands online.
More Features
Register for SBI Net Banking
Online SB Account Application
Life insurance cover of Rs.1 Cr for Rs.18 a day
Forex Outward Remittance Scheme
Mobile & DTH Recharge / Utility Bill Payment
Online Term Deposits
Online SBI on your Mobile
Pay Central & State Govt Taxes
ASBA facility

Block ATM Card

3. CORPORATE BANKING
Corporate Banking application provides features to administer and manage
non personal accounts online.

More Features

Collect Fee Online - State Bank Collect

User management at your fingertips

Bulk file upload facility for payments

Pay Central & State Govt Taxes

Pay EPF subscription online

Utility Bill Payment

Merchant Payments

Easy synchronization with Corporate ERP System

Provision for customized MIS

Supply Chain Finance

1.4.

OTHER SERVICES

Tech Learning Centre for Customers

SBI Finder

Reprint Remittance Form - MOPS

OnlineSBI Global

Genuine Applications !

Customer Complaint Form

Secure Card Transactions

Merchant Acquiring Business - POS

SBI e file

Foreign Travel/EZ-Pay/Gift Cards

Mobile Banking Services

NRI Services

SBI Express Remit

SBI F.A.S.T.

Debit Card Loyality Rewardz

SBICAP Trustee Company Ltd


1.6. FACILITIES PROVIDED IN BANKS
1. Bank Draft:
Bank draft is a facility allowed to customers for sending money to other places.
Generally, banks allow this facility to the account holders only. When a customer wants to
send money to other places then he will have to fill a specific proforma for this purpose. The
name of the person/party to whom the amount is to be sent, the amount for which the draft is
required, the place for which the draft is required, bank charges are mentioned in the
proforma. The bank will issue a draft to the customer after debiting his account with the said
amount.
The customer will send the draft to the person/party to whom the money is to be
paid. The recipient of the draft will deposit the draft with his bank and the bank will credit
the amount to his account. The bank also sends an intimation to the branch where the draft is
payable. It is time-consuming process of transferring money and bank charges are also high
on the drafts.
2. Banker's Cheque:
Banker's cheque means pay order issued by bank itself withdrawing the amount from
payer's account. It will be safe for payee because it cannot bounce. It is also a method of
sending money by a bank. It is similar to that of draft. The banker issues a cheque in the
name of the party to whom the customer wants to make payment. The bank charges
commission for this service as is done for issuing a draft. A banker's cheque is generally
used for making local payments. The banker's cheque is paid at par.

3. RTGS (Real Time Gross Settlement):


It is a system to transfer funds from one bank to another bank on a 'real time' and
'gross basis'. The settlement in 'real time' means payment transaction is not subjected to any
waiting period. The transaction is settled as soon as processed. 'Gross settlement' means the
transaction is settled on one to one basis, without bunching or netting with any other
transaction.
Once processed, the payment is final and irrevocable. This system of electronic
transfer takes place with the help of Central Bank of the country. The electronic payment
system is maintained or controlled by the Central Bank of the Country.
In India, Reserve Bank of India (RBI, Central Bank of the Country) maintains this payment
network. RTGS is the fastest possible money transfer system. Core Banking enabled banks
and branches are assigned an Indian Financial System Code (IFSC) for RTGS and NEFT
purposes.
This is an eleven digit alphanumeric code and unique to each branch of bank. The
first four alphabets indicate the identity of the bank and remaining seven numerals indicate a
single branch. This code is provided on the cheque books which are required for transaction
along-with recipient's account number. Customers can access RTGS facility between 9 a.m.
to 4.30 p.m. on week days and 9.30 a.m. to 1.30 p.m. on Saturday. This timing may also
vary from bank to bank, depending upon the timings of the branches.

4. NEFT (National Electronic Funds Transfer):


NEFT refers to an online system for transferring funds from one financial institution
to another within India. The system was launched in November 2005 and was to inherit
every bank that was assigned to the SEFT clearing system. There is no minimum or
maximum limit for fund transfer in NEFT system. The persons or parties which have bank
accounts, generally use this facility.

This facility is open even to those, who do not have bank account. The persons
without bank accounts can deposit cash at the NEFT-enabled branch with instructions to
transfer funds using NEFT. A separate Transaction Code (No. 50) has been allotted in the
NEFT system to facilitate walk-in-customers to deposit cash and transfer funds to the
beneficiary.
1.7. Comparison between RTGS and NEFT:
(i) The main difference between the two is that RTGS is on gross settlement basis, NEFT is
on net settlement basis.
(ii) RTGS completes transactions in real-time while NEFT completes transactions in cycles.
(iii)The transfer in RTGS is completed on a one to one basis, while NEFT is on a deferred
net basis, where transfers are bundled and deferred for a specific time.
(iv) RTGS is a high value transfer system, handling funds worth Rs, 1, 00,000 and above,
while NEFT transfers smaller amounts below Rs. 10,000.
5. Bank Overdraft:
An overdraft is an advance given by the bank allowing a customer to overdraw his
current account up to an agreed amount. An overdraft account is operated in the same way
as a current account. In overdraft the interest is charged on the credit actually utilised, i.e. to
the extent amount is overdrawn.
Overdraft facility is widely used by the businessmen. They can use more money than
the credit amount in their account, and secondly, interest is paid only on the amount actually
withdrawn from the bank and not to the overdraft limit allowed by the bank.
6. Cash-credit:

Under cash-credit a bank advances loans to the customer on the basis of his current
assets, receivables or fixed assets by hypothecating them in favour of the banker.
1.8.

Basically, cash-credit differs from overdraft in two respects:

(i) Security and


(ii) Duration.
Generally, cash-credit is advanced against current assets and receivables, while
overdraft is allowed against negotiable security. Further, overdraft is, usually, a temporary
facility, while cash credit is relatively a long term facility. The rate of interest charged on
overdraft may be lower because of lesser risk and service cost.
1.9. OTHER SPECIAL SCHEMES AND FACILITIES
i.

Various other deposit schemes to meet the requirements of individual depositors, like

Multi Option Deposit Scheme etc. are also available with the branches of the Bank. Detailed
information on these schemes is available from our branches.
ii.

Deposit Schemes for Senior Citizens: The fixed deposits of senior citizens (60 years

and over)attract additional interest of 0.50% for maturity period of one year and above up to
5 years and 0.25% for maturity period of 5 years. These are subject to change.

iii.

Articles in safe custody: Articles such as shares, securities etc. can be kept in safe

custody of the Bank. The terms and conditions and charges for safe custody are available on
request at branches and our helplines.
iv.

Exchange of soiled/mutilated currency notes: All the branches of the Bank will

exchange freely soiled/slightly mutilated currency notes and certain other types of mutilated
currency notes of all denominations. The Bank's currency chest branches will exchange all
categories of mutilated currency notes. Currency exchange facility is offered to the Bank's
customers and others. The Bank follows RBI guidelines in this respect. RBI has permitted

the banks to exchange mutilated currency notes which are genuine and where mutilations
are such as not to cause suspicion or fraud.

v.

Safe Deposit Lockers: This ancillary service available at select branches is by hiring

a locker of various sizes by an individual, firms, limited companies etc. for a minimum
period of one year for which rent is payable in advance. Nomination facility is available to
the hirer. Terms and conditions and annual hire charges can be obtained from the branches.
The hire charges are also available on clicking the link Service Charges and fees on the
home page of the Banks website.
vi.

Foreign Exchange Services and Cross-Border Payments : Details of the exchange

rate and charges which will apply to foreign exchange transactions are provided at select
branches. Cross border payments will be made subject to the provisions of the applicable
Regulations about foreign exchange.

vii.

Use of self-service enquiry terminal if available within the branch premises is

allowed free of cost to the customer to access his accounts.


viii.

Automated Teller Machine (ATM) card is issued to all savings bank and current

account holders if the branch is ATM enabled. The card can be used to for withdrawal of
cash, for balance enquiries, for statement of accounts of recent transactions and in certain
ATMs for services like payment of fees, temple donations etc. The use of card is subject to
an Annual fee which at present is Rs 50/- for domestic, VISA, Master card and Rs 100/- for
International Card per annum from the second year of use. Replacement of damaged ATM
card is free of cost. A service charge of Rs.200/- is recovered for replacement of lost card.
As transactions in accounts using ATM cards are possible only by a person holding both the
card and the Personal Identification Number (PIN) known only to him, all successful
transactions through ATM will be considered authentic. If the cardholder suspects
irregularity, this must immediately be reported and request be given for hotlisting the card.

ix.

Internet Banking: Customers can access their bank accounts and transact online

through SBIs internet banking website www.onlinesbi.com if their branches are internet
enabled. A list of internet enabled branches is available at the web site. The customers will
need to sign up for registration by submitting the application form downloadable from
www.onlinesbi.com. Log in will require user id and password customisable by the account
holder. the facilities available include viewing account balances, generating account
statements, bill payments for registered billers, purchase of train tickets online, ordering
chequebooks and drafts, funds transfer within the same branch etc. Further details can be
had from the branch or from the internet banking site www.onlinesbi.com
ONLINE BANKING
Definition
A system allowing individuals to perform banking activities at home, via the
internet. Some online banks are traditional banks which also offer online banking, while
others are online only and have no physical presence. Online banking through traditional
banks enable customers to perform all routine transactions, such as account transfers,
balance inquiries, bill payments, and stop-payment requests, and some even offer online
loan and credit card applications. Account information can be accessed anytime, day or
night, and can be done from anywhere. A few online banks update information in real-time,
while others do it daily. Once information has been entered, it doesn't need to be re-entered
for similar subsequent checks, and future payments can be scheduled to occur automatically.
Many banks allow for file transfer between their program and popular accounting software
packages, to simplify record keeping. Despite the advantages, there are a few drawbacks. It
does take some time to set up and get used to an online account. Also, some banks only offer
online banking in a limited area. In addition, when an account holder pays online, he/she
may have to put in a check request as much as two weeks before the payment is due, but the
bank may withdraw the money from the account the day that request is received, meaning
the person has lost up to two weeks of interest on that payment. Online-only banks have a
few additional drawbacks: an account holder has to mail in deposits (other than direct
deposits), and some services that traditional banks offer are difficult or impossible for
online-only banks to offer, such as traveler's checks and cashier's checks.

How it works/Example:

Most banks offer customers the option of online banking. Customers are able to
access to all of their accounts through an internet connection using the banks own website or
a commercial software package such as Quicken or Money.
Online banking allows customers to monitor accounts, download transactions,
transfer funds between accounts, including checking, saving, and money market/CD
accounts, management investments, and handle loan activity, including applications and
repayments.

Clients can transfer funds to their bank accounts, and pay bills either

electronically (with an account transfer) or by having the bank issue paper checks directly to
the payee.
Banks have set up security systems to ensure that transactions conducted online are
protected from internet security threats.

Most banks use an industry-standard Secure

Transaction software and protocol to manage the security on their systems.


MEANING OF ONLINE BANKING
FEATURES OF ONLINE BANKING
Online banking facilities offered by various financial institutions have many features and
capabilities in common, but also have some that are application specific.
The common features fall broadly into several categories and a bank customer can perform
non-transactional tasks through online banking, including

Viewing account balances


Viewing recent transactions
Downloading bank statements, for example in PDF format
Viewing images of paid cheques
Ordering cheque books
Download periodic account statements
Downloading applications for M-banking, E-banking etc.
Bank customers can transact banking tasks through online banking, including Funds transfers between the customer's linked accounts
Paying third parties, including bill payments (see, e.g., BPAY) and third party fund

transfers(see, e.g., FAST)


Investment purchase or sale

Loan applications and transactions, such as repayments of enrollments


Credit card applications
Register utility billers and make bill payments
Financial institution administration
Management of multiple users having varying levels of authority
Transaction approval process
the process of banking has become much faster

Some financial institutions offer unique Internet banking services, for example:
Personal financial management support, such as importing data into personal
accounting software. Some online banking platforms support account aggregation to allow
the customers to monitor all of their accounts in one place whether they are with their main
bank or with other institutions.
ONLINE BANKING ADVANTAGES AND DISADVANTAGES
Online banking account is easy to open and operate. The online services offered might differ
from bank to bank, and from country to country. To know about the various services, always
go through the welcome kit that you get at the time of opening the account. You also get the
password to access your online account, which you are supposed to keep with great care for
security reasons.
The common online services offered by banks are:
Transactional activities like funds transfer, bill pay, loan applications and transactions.
Non-transactional activities like request for cheque book, stop payment, online statements,
updating your contact information.
Advantages of Internet Banking
Internet Banking has several advantages over traditional one which makes operating an
account simple and convenient. It allows you to conduct various transactions using the
bank's website and offers several advantages. Some of the advantages of internet banking
are:

Online account is simple to open and easy to operate.

It is quite convenient as you can easily pay your bills, can transfer funds between
accounts, etc. Now you do not have to stand in a queue to pay off your bills; also you
do not have to keep receipts of all the bills as you can now easily view your
transactions.

It is available all the time, i.e. 24x7. You can perform your tasks from anywhere and
at any time; even in night when the bank is closed or on holidays. The only thing you
need to have is an active internet connection.

It is fast and efficient. Funds get transferred from one account to the other very fast.
You can also manage several accounts easily through internet banking.

Through Internet banking, you can keep an eye on your transactions and account
balance all the time. This facility also keeps your account safe. This means that by
the ease of monitoring your account at anytime, you can get to know about any
fraudulent activity or threat to your account before it can pose your account to severe
damage.

It also acts as a great medium for the banks to endorse their products and services.
The services include loans, investment options, and many others.

Disadvantages of Internet Banking


Though there are many advantages of internet banking, but nothing comes without
disadvantages and everything has its pros and cons; same is with internet banking. It also

has some disadvantages which must be taken care of. The disadvantages of online banking
include the following:

Understanding the usage of internet banking might be difficult for a beginner at the
first go. Though there are some sites which offer a demo on how to access online
accounts, but not all banks offer this facility. So, a person who is new, might face
some difficulty.

You cannot have access to online banking if you dont have an internet connection;
thus without the availability of internet access, it may not be useful.

Security of transactions is a big issue. Your account information might get hacked by
unauthorized people over the internet.

Password security is a must. After receiving your password, do change it and


memorize it otherwise your account may be misused by someone who gets to know
your password inadvertently.

You cannot use it, in case, the banks server is down.

Another issue is that sometimes it becomes difficult to note whether your transaction
was successful or not. It may be due to the loss of net connectivity in between, or
due to a slow connection, or the banks server is down.

Internet Banking has definitely made the life easy for users by providing online
access to various banking services.