INTRODUCTION

Electronic banking is an umbrella term for the process by which a customer may perform
banking transactions electronically without visiting any institution. The following terms all
refer to one form or another of electronic banking: personal computer (PC) banking, Internet
banking, virtual banking, online banking, home banking, remote electronic banking, and
Phone Banking.

E-banking nowadays is the one of the fastest developing trends in Indian banking and is
poised to take the banking sector a notch higher.. With the use of advertising, people are now
motivated to use E-banking because again, it eliminates the hassle encountered when using
the old process of banking. The advancement of electronic banking or commonly known as e-
banking, began with the use of automatic teller machines (ATMs) and has included telephone
banking, direct bill payment, electronic fund transfer, online banking and other electronic
transactions. For many people, they believe that the e-banking will go to the direction of
mobile banking. Also, some people believe that online banking will be the most popular
method in the future. In order for users/customers to use their banks online services, they
need to have a personal computer and an Internet connection. Also, their personal computers
will be their assistant who will assist them in their transactions and services. Examples of
those transactions are paying bills, attaining information about accounts and loans, and etc.

E-Banking (an abbreviation for electronic banking) is an umbrella term for the process by
which a customer may perform banking transactions electronically without visiting a brick-and-
mortar institution. In simple terms, it does not involve any physical exchange of money, but its
all done electronically, from one account to another, using the internet. From a personal
computer, one can access bank account information, and perform many banking functions,
like transferring money, making a loan payment. Electronic banking, also known as electronic
fund transfer (EFT), uses computer and electronic technology as a substitute for checks and
other paper transactions.

In simple words, the systems that enable financial institution customers, individuals or
businesses, to access accounts, transact business, or obtain information on financial products
and services through a public or private network, including the Internet i.e. PC, ATM, Online
banking, etc. It means any user with a personal computer and a browser can get connected to
his bank -s website to perform any of the virtual banking functions. In Internet banking system
the bank has a centralized database that is web-enabled. All the services that the bank has
permitted on the internet are displayed in menu. Any service can be selected and further
interaction is dictated by the nature of service.
 The traditional branch model of bank is now giving place to an alternative delivery
channels with ATM network. Once the branch offices of bank are interconnected through
terrestrial or satellite links, there would be no physical identity for any branch. It would a
borderless entity permitting anytime, anywhere and anyhow banking.

DEFINITION OF E-BANKING:

E-banking is defined as the automated delivery of new and traditional banking products
and services directly to customers through electronic interactive communication channels. It
includes the systems that enable financial institution customers, individuals or businesses, to
access accounts, transact business, or obtain information on financial products and services
through a public or private network, including the Internet. Customers access e-banking
services using an intelligent electronic device, such as a PC, personal digital assistant, ATM,
Touch tone telephone. E-banking is the term that describes all transactions that take place
among companies, organizations, and individuals and their banking institutions.
ADAPTATION OF E-BANKING IN INDIA:

The IT revolution had a great impact in the Indian banking system. The use of computers
had led to introduction of online banking in India. The use of the modern innovation and
computerization of the banking sector of India has increased many fold after the economic
liberalization of 1991 as the country's banking sector has been exposed to the world's
market. The Indian banks were finding it difficult to compete with the international banks in
terms of the customer service without the use of the information technology and computers.
The RBI in 1984 formed Committee on Mechanisation in the Banking Industry (1984) whose
chairman was Dr C Rangarajan, Deputy Governor, Reserve Bank of India. The major
recommendations of this committee were introducing MICR (Magnetic Ink Character
Recognition) Technology in all the banks in the metropolis in India. This provided use of
standardized cheque forms and encoders.
In 1988, the RBI set up Committee on Computerisation in Banks (1988) headed by Dr. C.R.
Rangarajan which emphasized that settlement operation must be computerized in the
clearing houses of RBI in Bhubaneshwar, Guwahati, Jaipur, Patna and
Thiruvananthapuram.It further stated that there should be National Clearing of inter-city
cheques at Kolkata,Mumbai,Delhi, Chennai and MICR should be made Operational. It also
focused on computerisation of branches and increasing connectivity among branches
through computers. It also suggested modalities for implementing on-line banking .The
committee submitted its reports in 1989 and computerisation began form 1993 with the
settlement between IBA and bank employees' association.
In 1994, Committee on Technology Issues relating to Payments System, Cheque Clearing
and Securities Settlement in the Banking Industry (1994 was set up with chairman Shri WS
Saraf, Executive Director, Reserve Bank of India. It emphasized on Electronic Funds
Transfer (EFT) system, with the BANKNET communications network as its carrier. It also
said that MICR clearing should be set up in all branches of all banks with more than 100
branches.
Committee for proposing Legislation On Electronic Funds Transfer and other Electronic
Payments (1995) emphasized on EFT system. Electronic banking refers to DOING
BANKING by using technologies like computers, internet and networking,MICR,EFT so as to
increase efficiency, quick service, productivity and transparency in the transaction.
E-banking has certain features which give it edge over traditional banking.

Real time banking:

Unlike traditional banking which suffers from time consuming procedures, E-Banking
provides real time banking to the customers. You get all the relevant information about your
account instantly. You can access all the details about your account sitting at home or at any
distant location.

24/7 banking:

E-banking has removed the time constraint from banking. Now you can withdraw cash or get
any banking facility anytime.

Banking from anywhere:

Dont worry if you are sitting in Middle East country and want to check your account in New
York. E-Banking certainly leaves no room for blaming the distances. Smart banking is ready
to serve you anywhere, anytime.

Safe and secure Banking:

Electronic- banking is more immune to security and safety related problems. Password
Based Encryption (PBE), Secure Socket Layer (SSL), electronic signatures and electronic
tokens gives a high level of security. Any malfunctioning or any inconsistency in your account
can be traced easily. This makes E-Banking more reliable.

Easy Loans, Instant Loans:

Use of smart cards, debit cards, credit cards has eased you from hatred, time consuming
loaning procedures. Your banks provide you instant loans. No need to keep cash with you at
all, a small chip card has replaced piles of cash. Certain web sites provide facility of online
loaning .You can get instant loan there, just by filling a small form.

High Performance and flexibility:

E-Banking is a high performance system satisfying its customers for their every banking
related queries and desires. What makes it more interesting is its flexibility. Banking is using
everyday advancements in technology, which makes it smart and banking system of today
and tomorrow.

SERVICES THROUGH E-BANKING:

Bill payment service:

Customers can facilitate payment of electricity and telephone bills, mobile phone, credit card
and insurance premium bills as each bank has tie-ups with various utility companies, service
providers and insurance companies, across the country. To pay the bills, all one need to do
is complete a simple one-time registration for each biller. Customers can also set up
standing instructions online to pay their recurring bills, automatically. Generally, the bank
does not charge customers for online bill payment.

Fund transfer:

Customers can transfer any amount from one account to another of the same or any another
bank. Customers can send money anywhere in India. After login to the account, customers
need to mention the payees account number, his bank and the branch. The transfer will take
place in a day or so, whereas in a traditional method, it takes about three working days.
ICICI Bank says that online bill payment service and fund transfer facility have been their
most popular online services.

Investing through Internet banking:

You can now open an FD online through funds transfer. Now investors with interlinked demat
account and bank account can easily trade in the stock market and the amount will be
automatically debited from their respective bank accounts and the shares will be credited
in their demat account. Moreover, some banks even give you the facility to purchase mutual
funds directly from the online banking system. Nowadays, most leading banks offer both
online banking and demat account. However if you have your demat account with
independent share brokers, then you need to sign a special form, this will link your two
accounts.

Recharging your prepaid phone:

Now customers can just top-up the prepaid mobile cards by logging in to Internet banking.
By just selecting the operator's name, entering the mobile number and the amount for
recharge, the phone is again back in action within few minutes.

Shopping;
With a range of all kind of products, customer can shop online and the payment is also
made conveniently through the account. Customer can also buy railway and air tickets
through Internet banking.

Railway pass:

This is something that would interest all the aam janta. Indian Railways has tied up with
ICICI bank and they can now make railway passes for local trains online. The pass will be
delivered to the customers doorstep. But the facility is limited to Mumbai, Thane, Nashik,
Surat and Pune.

Credit card customers:

With Internet banking, customers can not only pay their credit card bills online but also get a
loan on their cards. If the customer lose credit card, they can also report lost card online.
VARIOUS FORMS OF E-BANKING:

AUTOMATED TELLER MACHINES (ATM):

An automated teller machine (ATM) is an electronic computerized telecommunications

device that allows a financial institution's customers to directly use a secure method of
communication to access their bank accounts, in order to make cash withdrawals (or cash
advances using a credit card) and check their account balances without the need for a
human bank teller .

TELE BANKING:

By dialing the given Telebanking number through a landline or a mobile from anywhere, the
customer can access his account and by following the user-friendly menu, entire banking
can be done through Interactive Voice Response (IVR) system. With sufficient numbers of
hunting lines made available, customer call will hardly fail.

SMART CARD:

A smart card usually contains an embedded 8-bit microprocessor (a kind of computer chip).
The microprocessor is under a contact pad on one side of the card. Think of the
microprocessor as replacing the usual magnetic stripe present on a credit card or debit card.
The microprocessor on the smart card is there for security. The host computer and card
reader actually "talk" to the microprocessor. The microprocessor enforces access to the data
on the card. The chips in these cards are capable of many kinds of transactions. For
example, a person could make purchases from their credit account, debit account or from a
stored account value that's reload able. The enhanced memory and processing capacity of
the smart card is many times that of traditional magnetic-stripe cards and can accommodate
several different applications on a single card

DEBIT CARD:

Debit cards are also known as check cards. Debit cards look like credit cards or ATM
(automated teller machine) cards, but operate like cash or a personal check. Debit cards are
different from credit cards. While a credit card is a way to "pay later," a debit card is a way to
"pay now." When you use a debit card, your money is quickly deducted from your checking
or savings account.
 CREDIT CARDS:

The credit card is usually a four-party card which involves two banks in each transaction, the
cardholder's bank (the issuer of the card) and the retailer's bank. The retailer hands over
the credit card slips to its own bank for payment, less a discount, typically about 2-3%. The
retailer's bank then passes the slips on to a clearing system. The clearing system presents
each slip for payment to the bank that issued the card on which it was written. The issuing
bank collects from the cardholder. All of these exchanges are now done by wire.

E-CHEQUE:

An E-Cheque is the electronic version or representation of paper cheque.

The Information and Legal Framework on the E-Cheque is the same as that of the
paper cheque.
It can now be used in place of paper cheques to do any and all remote transactions.

Mobile Banking:

Mobile banking comes in as a part of the banks initiative to offer multiple channels banking
providing convenience for its customer. A versatile multifunctional, free service that is
accessible and viewable on the monitor of mobile phone. Mobile phones are playing great
role in Indian banking- both directly and indirectly. They are being used both as banking and
other channels.
 Inter Bank Transfer:
Inter Bank Transfer is a special service that allows you to transfer funds electronically
to accounts in other banks in India through:

NEFT
The acronym NEFT stands for National Electronic Funds Transfer. Funds are transferred
to the credit account with the other participating Bank using RBI's NEFT service. RBI acts as
the service provider and transfers the credit to the other bank's account.

RTGS
The acronym RTGS stands for Real Time Gross Settlement. The RTGS system facilitates
transfer of funds from accounts in one bank to another on a real time and on gross
settlement basis. The RTGS system is the fastest possible interbank money transfer facility
available through secure banking channels in India. In other words, this is an electronic
payment processing environment wherein transactions are settled as soon as they are
processed.

EFT
Electronic Fund Transfer is the new facility provided to the Exporters for submitting the
license fee through the Internet without visiting the Bank for the payment. This procedure is
being proposed to facilitate payments through electronic means. The facility shall be
available only for electronically filed applications. Currently Electronic payment can be made
through following banks: ICICI, IDBI, HDFC, UTI, State Bank of India, Bank of India, Punjab
National Bank, and Union Bank of India.
 INTERNET BANKING:

It helps you handle many banking transactions via your personal computer. For instance,
you may use your computer to view your account balance, request transfers between
accounts, and pay bills electronically. Internet banking system is a method in which a
personal computer is connected by a network service provider directly to a host computer
system of a bank such that customer service requests can be processed automatically
without need for intervention by customer service representatives. The system is capable of
distinguishing between those customer service requests which are capable of automated
fulfilment and those requests which require handling by a customer service representative.
The system is integrated with the host computer system of the bank so that the remote
banking customer can access other automated services of the bank. The method of the
intervention includes the steps of inputting a customer banking request from among a menu
of banking requests at a remote personnel computer, transmitting the banking requests to a
host computer and receiving it, identifying the type of customer banking request received,
automatic logging of the service request, comparing the received request to a stored table of
request types, each of the request types having an attribute to indicate whether the request
type is capable of being fulfilled by a customer service representative or by an automated
system and depending upon the attribute, directing the request either for handling by a
customer service representative or to a queue for processing by an automated system.

Facilities through Internet banking

Online applications

Consumers can begin their banking relationship with an online application. No need to waste
time driving to a local branch to begin a banking relationship. Consumers can fill out and
submit electronically all necessary information needed to open a checking, savings account or
even a fixed deposit. When the application is submitted, the bank will mail a signature card for
its records and request one to mail or wire your initial funds. Some firms like American
Express enable customers applying for an account to fund their new account electronically via
a credit card or cheque from another banking institution. There are some firms such as
Wingspan and USA BancShares.com that enable customers to digitally sign their applications.

Account Access
Internet banking customers now have the ability to view their accounts online, including
checking, savings, loans and credit cards. No need to wait for your monthly statements or wait
in queue for the next available customer service representative. Account access enables
customers to view most recent activity on accounts, including cleared checks, deposits, ATM
transactions and balances as of previous days activities. Customers no longer have to hold
on to the cleared checks, since their bank will store them for them online.

24/7 customer service

Although it is easy to yield to the temptation of allowing the Internet to replace expensive
branch personnel and overhead, many banks have found that an customer service staff ready
at any hour is well worth the expense. This can be especially true as customers transition to
online banking and need help learning the features. Offering telephone and email a contact is
a basic level of service. Offering live chat assistance is the exceptional level.

Access to old transactions

Choices made in designing the Internet interface may include how much history will be
available online. Some banks have chosen to show only 30-45 days, while others offer a
history of six months or a year.

Categorize transactions and produce reports

Functionality is king as online banking customers using these features enjoy a Web interface
that delivers the utility of a money management software application.

Export your banking data

Most banks offering the management interface also allow easy downloading of financial
information into files that can be imported into Microsoft Money and Intuit's Quicken.

Interactive guides & tools to help selection of proper product

Although online, interactive guides through a bank's products, adds complexity to the
programming it also serves the bank by assisting potential customers in choosing new
products or services. Interactive Tools to design a savings plan, choose a mortgage, obtain
online insurance quotes all tied to applications These tools help remove some of the mystery
involved in so many account options and costs.

Loan status and credit card account information

Bank customers are familiar with reviewing their checking account information, but many
banks are adding the ability to look at one's loan status and credit card information as well.
Access to as many accounts held at the bank seems to be the goal.

View digital copies of checks

This, again, is removing a down side to online banking. It makes images of checks available
as replacement for sending out cancelled checks or sheets of printed check images.

Online forms for ordering checks, stop payment, etc.

Convenience is popular and if a customer visits his or her online account frequently it only
makes sense to allow the ability to reorder checks or perform certain other commands through
the same interface.

ADVANTAGES OF E-BANKING:

Benefits to Consumers:
General consumers have been significantly affected in a positive manner by E-banking.
Many of the ordinary tasks have now been fully automated resulting in greater ease and
comfort.
Customers account is extremely accesses able with an online account.
Customer can withdraw can at any time through ATMs that are now widely available
throughout the country.
Besides withdrawing cash customers can also have mini banks statements, balance inquiry
at these ATMs
Through Internet Banking customer can operate his account while sitting in his office or
home. There is no need to go to the bank in person for such matter.
E banking has also greatly helped in payment of utility bill. Now there is no need to stand in
long queues outside banks for his purpose.
All services that are usually available from the local bank can be found on a single website.
The Growth of credit card usage also owes greatly to E-banking. Now a customer can shop
worldwide without any need of carrying paper money with him.
Banks are available 24 hours a day; seven days a week and they are only a mouse click
away.

Benefits to Banking Industry:

Banking industry has also received numerous benefits due to growth of E-Banking
infrastructure. There are highlighted below:
The growth of E-banking has greatly helped the banks in controlling their overheads and
operating cost
Many repetitive and tedious tasks have now been fully automated resulting in greater
efficiency, better time usage and enhanced control.
The rise of E-banking has made banks more competitive. It has also led to expansion of
the banking industry, opening of new avenues for banking operations.
Electronic banking has greatly helped the banking industry to reduce paper work, thus
helping them to move the paper less environment.
Electronic banking has also helped bank in proper documentation of their records and
transactions.
The reach and delivery capabilities of computer networks, such as the Internet, are far
better than any branch network.

Benefits to General Economy:

Electronic Banking as already stated has greatly serviced both the general public and the
banking industry. This has resulted in creation of a better enabling environment that supports
growth, productivity and prosperity. Besides many tangible benefit in form of reduction if
cost, reduced delivery time, increased efficiency, reduced wastage, e-banking electronically
controlled and thoroughly monitored environment discourage many illegal and illegitimate
practices associated with banking industry like money laundering, frauds and
embezzlements. Further E-banking has helped banks in better monitoring of their customer
base. This it is a useful tool in the hand of the bank to device suitable commercial packages
that are in conformity with customer needs. As e banking provide opportunity to banking
sector to enlarge their customer base, a consequence to increase the of volume of credit
creation which results in better economic condition, Besides all this E-banking has also
helped in documentation of the economic activity of the masses.
DISADVANTAGES/ISSUES RELATED TO E-BANKING:

Electronic banking is convenient and often quite safe, but problems do exist. Electronic
banking is a popular form of banking since the Internet became widespread. Electronic
banking occurs at the individual, commercial and investment levels. While fraud prevention
measures are taken very seriously at banking institutions, there are still some issues in
electronic banking that cause unrest and frustration.

Transaction Errors

Transaction errors can occur in your checking, savings, or credit card accounts. These
transaction problems can be caused by human error, but they're often as a result of technical
glitches or lost information. Consumers have 60 days to contact their financial institution and
notify them of the error. The company then has 30 days to respond to your enquiry and
another 60 days to resolve and correct the issue. They do reserve the right to ask for
supporting documentation to agree with the inaccuracy of the issue.

Automatic Debits

Automatic debits are offered as convenience to banking and loan customers. These debits
are automatically withdrawn from your bank and paid to the vendor or lender. While this
convenience does save a stamp and a hassle, it can make mistakes. Customers often need
to request a halting of this process in writing at least seven days in advance. In addition, if
you use an automatic debit to pay for a recurring service and the service suddenly is
unsatisfactory, you must work out a refund with the service provider, not your bank.

Privacy Concerns

Sometimes electronic banking customers find themselves on marketing lists for other
financial institutions. This can lead to unsolicited offers on mortgages, loans, credit cards,
auto loans and investment products. Most electronic banks now have privacy agreements
that allow customers to opt in or out of unsolicited offers.
 GUIDLINES BY RBI FOR BANKS REGARDING E-BANKING:

All banks, who propose to offer transactional services on the Internet, should obtain prior
approval from RBI.

All applications of banks should have proper record keeping facilities for legal purposes.

Banks should designate a network and database administrator with clearly defined roles
as indicated in the Groups report.

Banks should introduce logical access controls to data, systems, application software,
utilities, telecommunication lines, libraries, system software, etc. Logical access control
techniques may include user-ids, passwords, and smart cards.

Banks should have proper infrastructure and schedules for backing up data. The backed-
up data should be periodically tested.

All applications of banks should have proper record keeping facilities for legal purposes.

Considering the legal position prevalent, there is an obligation on the part of banks not
only to establish the identity but also to make enquiries about integrity and reputation of
the prospective customer. Therefore, even though request for opening account can be
accepted over Internet, accounts should be opened only after proper introduction and
physical verification of the identity of the customer.

Banks should acquire tools for monitoring systems and the networks against intrusions
and attacks. These tools should be used regularly to avoid security breaches. The banks
should review their security infrastructure and security policies regularly and optimize
them in the light of their own experiences and changing technologies.

Banks should have a security policy duly approved by the Board of Directors.

Banks must make mandatory disclosures of risks, responsibilities and liabilities of the
customers in doing business through Internet through a disclosure template. The banks
should also provide their latest published financial results over the net.
CONCLUSTION:

E-banking has become a necessary survival weapon and is fundamentally changing the
banking industry worldwide. Today, the click of the mouse offers customers banking services
at a much lower cost and also empowers them with unprecedented freedom in choosing
vendors for their financial service needs. No country today has a choice whether to
implement E-banking or not given the global and competitive nature of the economy. The
invasion of banking by technology has created an information age and commoditization of
banking services. Banks have come to realize that survival in the new e-economy depends
on delivering some or all of their banking services on the Internet while continuing to support
their traditional infrastructure.

The rise of E-banking is redefining business relationships and the most successful banks will
be those that can truly strengthen their relationship with their customers.

Technology innovation and fierce competition among existing banks have enable a wide
array of banking products and services, being made available to retail and wholesale
customer through an electronic distribution channel, collectively referred to as e-banking.
Banks have traditionally been in the forefront of harnessing technology to improve product
and efficiency. Technology is altering the relationships between banks and its internal and
external customers. Technology has also eroded the entry barriers faced by many industries.
With one time investment, technology has brought about superior products and channel
management with a special focus on customer relationship. The incremental costs incurred
for expansion and diversification are also more beneficial.

The major driving force behind the rapid spread of e-banking is its acceptance as an
extremely cost effective delivery channel. But on the flipside, it is associated with risks such
as reputation risk, security risk, cross-border risk and strategic risk, which are unique to e-
banking. Banks need to have an effective disaster recovery plan along with comprehensive
risk management tool is significant not only to the bank but also to the banking system as a
whole. Internet has created plenty of opportunities for players in the banking sector. While
the new entrants have the advantage of latest technology, the good-will of the established
banks gives them a special opportunity to lead the online world. By merely putting existing
service online wont help the banks in holding their customer close. Instead, banks must
learn to capitalize their customers different online financial-services relationships.

E-banking in India is not fully transformed sector until now but due to increase in number of
online users in India it will be one day a fully transformed. Indian banks are now providing E-
Banking services in greater amount but they are lacking because of modern technology up
gradation which is adopted continually by overseas banks.
BIBLIOGRAPHY:

WEBSITES:

www.banknetindia.com
www.bankersonline.com
www.acadjournal.com
www.worldjute.com
WWW.rbidocs.rbi.org.

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