ACKNOWLEDGEMENT

The successful completion of any task would be incomplete without

mentioning the people who have made it possible. So it`s with the gratitude that I

acknowledge the help, which crowned my efforts with success.

Life is a process of accumulating and discharging debts, not all of those can

be measured. We cannot hope to discharge them with simple words of thanks but

we can certainly acknowledge them.

I owe my gratitude to miss. Priya Jainani for his constant guidance and

support.

I would also like to thank the various department officials and staff who not

only provided me with required opportunity but also extended their valuable time and

I have no words to express my gratefulness to them.

Megh

M.B.A. Part-I

EXECUTIVE SUMMARY

Banking in India originated in the last decades of the 18th century. The first

banks were The General Bank of India which started in 1786, and the Bank of

Hindustan, both of which are now defunct. The oldest bank in existence in India is

the State Bank of India, which originated in the Bank of Calcutta in June 1806, which

almost immediately became the Bank of Bengal. The three banks merged in 1921 to

form the Imperial Bank of India, which, upon India's independence, became the State

Bank of India.

Currently (2009), overall, banking in India is considered as fairly mature in

terms of supply, product range and reach-even though reach in rural India still

remains a challenge for the private sector and foreign banks. Even in terms of quality

of assets and capital adequacy, Indian banks are considered to have clean, strong

and transparent balance sheets, as compared to other banks in comparable

economies in its region. The Reserve Bank of India is an autonomous body, with

minimal pressure from the government.

Banking environment has become highly competitive today. To be able to

survive and grow in the changing market environment banks are going for the latest

technologies, which is being perceived as an ‘enabling resource’ that can help in

developing learner and more flexible structure that can respond quickly to the

dynamics of a fast changing market scenario. It is also viewed as an instrument of

cost reduction and effective communication either people and institutions associated

with the banking business.

The banking scenario has changed drastically. The changes which

have taken place in the last ten years are more than the changes took place in last

fifty years because of the institutionalization, liberalization, globalization and

automation in the banking industry. Indian banking system has several

outstanding achievements to its credit, the most striking of which is its

reach. Indian banks are now spread out into the remote corners of our

country.

In recent years the Indian banking system has come up with many

innovations in order to change the psychology of the customer.

PREFACE

Innovation in banking should be directed at improving the infrastructure that

fosters efficient financial services and international trade. In this work, innovation

theory is used to show how modern payment systems have transformed the

technology of banking and facilitated changes in the strategy and structure of

financial services organisations. Design, implementation and dissemination of

payment systems are described and the analysis of their costs and benefits is

combined with case studies of banks undergoing change. By studying firm

capabilities, competencies, and resources, the approach is extended to services in

general and linked to the ability of firms to compete and promote national

economies. Payment systems vary and advanced and developing economies face

obstacles in their legal and technical infrastructure, and maturity of banks. By

adopting an international perspective, the book offers a unique comparative analysis

that shows what kind of investments are likely to be effective.

CONTENTS

Acknowledgement

Executive Summary

Preface

Contents

About Banking 1

Banking In India 4

Current Structure of Indian Banking 5

Innovation In Indian Banking Sector 6

I. Types of innovative Banking. 7

II. Types of Product & Servies. 13

III. Electronic System 23

Conclusion

Bibliography

ABOUT BANKING

A bank is a financial intermediary and appears in several related basic forms:

a central bank issues money on behalf of a government, and regulates

the money supply

a commercial bank accepts deposits and channels those deposits

into lending activities, either directly or through capital markets. A bank connects

customers with capital deficits to customers with capital surpluses on the world's

open financial markets.

Banking is generally a highly regulated industry, and government restrictions

on financial activities by banks have varied over time and location.

The oldest bank still in existence is Monte dei Paschi di Siena, headquartered

in Siena, Italy, and has been operating continuously since 1472.

Standard activities :

Banks act as payment agents by conducting checking or current accounts for

customers, paying cheques drawn by customers on the bank, and collecting

cheques deposited to customers' current accounts. Banks also enable customer

payments via other payment methods such as telegraphic transfer, EFTPOS,

and ATM.

Banks borrow money by accepting funds deposited on current accounts, by

accepting term deposits, and by issuing debt securities such

as banknotes and bonds. Banks lend money by making advances to customers on

current accounts, by making installment loans, and by investing in marketable debt

securities and other forms of money lending.

Banks provide almost all payment services, and a bank account is considered

indispensable by most businesses, individuals and governments. Non-banks that

provide payment services such as remittance companies are not normally

considered an adequate substitute for having a bank account.

Banks borrow most funds from households and non-financial businesses, and

lend most funds to households and non-financial businesses, but non-bank lenders

provide a significant and in many cases adequate substitute for bank loans, and

money market funds, cash management trusts and other non-bank financial

institutions in many cases provide an adequate substitute to banks for lending

savings too

Channels :

Banks offer many different channels to access their banking and other services:

ATM  is a machine that dispenses cash and sometimes takes deposits without the

need for a human bank teller. Some ATMs provide additional services.

A branch is a retail location

Call center

Mail : most banks accept check deposits via mail and use mail to communicate to

their customers, e.g. by sending out statements

Mobile banking  is a method of using one's mobile phone to conduct banking

transactions

Online banking  is a term used for performing transactions, payments etc. over the

Internet

Relationship Managers , mostly for private banking or business banking, often

visiting customers at their homes or businesses

Telephone banking  is a service which allows its customers to perform

transactions over the telephone without speaking to a human

Video banking  is a term used for performing banking transactions or professional

banking consultations via a remote video and audio connection. Video banking

can be performed via purpose built banking transaction machines (similar to an

Automated teller machine), or via a videoconference enabled bank

branch.clarification.

Products :

Retail

Business loan

Cheque account

Credit card

Home loan

Insurance advisor

Mutual fund

Personal loan

Savings account

Wholesale

Capital raising (Equity / Debt / Hybrids)

Mezzanine finance

Project finance

Revolving credit

Risk management (FX, interest rates, commodities, derivatives)

Term loan

BANKING IN INDIA

Banking in India originated in the last decades of the 18th century. The first

banks were The General Bank of India, which started in 1786, and Bank of

Hindustan, which started in 1790; both are now defunct. The oldest bank in

existence in India is the State Bank of India, which originated in the Bank of Calcutta

in June 1806, which almost immediately became the Bank of Bengal. This was one

of the three presidency banks, the other two being the Bank of Bombay and

the Bank of Madras, all three of which were established under charters from the

British East India Company. For many years the Presidency banks acted as quasi-

central banks, as did their successors. The three banks merged in 1921 to form

the Imperial Bank of India, which, upon India's independence, became the State

Bank of India.

Nationalisation

Despite the provisions, control and regulations of Reserve Bank of India,

banks in India except theState Bank of India or SBI, continued to be owned and

operated by private persons. By the 1960s, the Indian banking industry had become

an important tool to facilitate the development of the Indian economy. At the same

time, it had emerged as a large employer, and a debate had ensued about the

nationalization of the banking industry. Indira Gandhi, then Prime Minister of India,

expressed the intention of the Government of India in the annual conference of the

All India Congress Meeting in a paper entitled "Stray thoughts on Bank

Nationalisation." The meeting received the paper with enthusiasm.

Thereafter, her move was swift and sudden. The Government of India issued

an ordinance and nationalised the 14 largest commercial banks with effect from the

midnight of July 19, 1969.

CURRENT STRUCTURE OF INDIAN BANKING

Innovation in banking

Innovation in banking should be directed at improving the infrastructure that

fosters efficient financial services and international trade. In this work, innovation

theory is used to show how modern payment systems have transformed the

technology of banking and facilitated changes in the strategy and structure of

financial services organisations. Design, implementation and dissemination of

payment systems are described and the analysis of their costs and benefits is

combined with case studies of banks undergoing change. By studying firm

capabilities, competencies, and resources, the approach is extended to services in

general and linked to the ability of firms to compete and promote national

economies. Payment systems vary and advanced and developing economies face

obstacles in their legal and technical infrastructure, and maturity of banks. By

adopting an international perspective, the book offers a unique comparative analysis

that shows what kind of investments are likely to be effective.

INNOVATIONS IN INDIAN BANKING SECTOR

Category I: Types Of Innovative Banking

Category II: Types Of Product & Services

Category III: Electronic Systems

I - Types of Innovative Banking

E-BANKING

Introduction:

With the trend of globalization all over the world, it

is difficult for any nation whether big or small, developed, to remain isolated from

what is happening around. The growth of e-commerce and Internet has transformed

the world into the GLOBAL VILLAGE. Fast development in electronic technology has

concerned the computers to take over the bank counters and to convert brick

banking into electronic banking.

Usage of technology by banks is due to challenge of competition, rising

consumer expectations and shrinking margins of banks, which lead to reduction in

cost, and enhancement of productivity, efficiency and customer convenience.

Meaning:

E-banking means, “application of electronic technology towards transfer of

funds through an electronic terminal, computer or magnetic tape to conduct various

transactions like cash receipts, payments, transfer of funds etc.”

It is often known as banking on net. It does not involve any physical

exchange of money, but it’s all done electronically, from one account to another,

using the Internet. With the advent of e banking, customers are benefited by

unlimited accessibility through the network of Automated Teller Machines, personal

computers or even through mobile phones. Customer can perform various banking

transactions such as balance enquires, bill payments, and transaction histories,

transfer money between accounts, without having to step to office of the branch.

Features of e banking:

Anywhere any time banking: customers can avail banking facility while

sitting at their home/office.

Globalization of service: E-Banking has a special feature of globalizing

bank’s services all over.

Intense competition: E-Commerce is a product of handling intense

competition among various banks.

Cash less banking: E-Commerce also provides feature of cash less

banking as cash is not require in raw form but electronic cash like debit or

credit cards may serve the purpose.

Promptness: Another feature of E-Commerce is provides promptness in

services.

Process of E-Banking/ procedure of E-Banking :

E-Banking process can be explained with the help of following diagram and

explanation as under:

Log on to

website Verification

Of password

Processing Of information

Credit Card request

Final Approval

Advantages of E-Banking:

Importance of E-Banking can be explained from four aspects:

Limitations of E Banking:

Problems of security:

High cost:.

Lack of awareness:

Lack of computerization:.

Wrong assumption by people:

CORE BANKING

Core banking is a general term used to describe the services provided by a

group of networked bank branches. Bank customers may access their funds and

other simple transactions from any of the member branch offices.

Core banking solutions :

Core banking solutions are banking applications on a platform enabling a

phased, strategic approach that is intended to allow banks to improve operations,

reduce costs, and be prepared for growth.

Core Banking Solutions is new jargon frequently used in banking circles. The

advancement in technology, especially internet and information technology has led

Advantages

To banks To customers

To

Govt.

To merchant

Trader

to new ways of doing business in banking. These technologies have cut down time,

working simultaneously on different issues and increasing efficiency. 

CORPORATE BANKING

Financial services to large corporate & MNCs

Services:

Overdraft facility

Domestic and international payments

Funding

Channel financing

Letters of guarantee

Working capital facility for domestic & international trade

INVESTMENT BANKING

An investment bank is a financial institution that assists individuals,

corporations and governments in raising capital by underwriting and/or acting as the

client's agent in the issuance of securities. An investment bank may also assist

companies involved in mergers and acquisitions, and provide ancillary services such

as market making, trading of derivatives, fixed income instruments, foreign

exchange,commodities, and equity securities.

Main activities :

An investment bank is split into the so-called front office, middle office,

and back office. While large service investment banks offer all of the lines of

businesses, both sell side and buy side, smaller ones sell side investment firms such

as boutique investment banks and small broker-dealers focus on investment banking

and sales/trading/research, respectively.

Investment banks offer services to both corporations issuing securities and

investors buying securities. For corporations, investment bankers offer information

on when and how to place their to an investment bank's reputation, and hence loss

of business. Therefore, investment bankers play a very important role in issuing new

security offerings.

RURAL BANKING

It provides & regulates credit services for the promotion & development of rural

sector mainly agriculture, SSI, cottage and village industries, handicrafts and many

more.

Examples Of Regional Rural Banks are NABARD, HARYANA STATE

COPERATIVE APEX BANK LIMITED, SYNDICATE BANK, UNITED BANK

OF INDIA

KIOSK BANKING

NRI BANKING

This facility is designed for diverse banking requirements of the vast nri population

spread across the globe.

NRE (Non Resident External Account)

NRO (Non Resident Ordinary Account)

FCNR (Foreign Currency Non Resident Account)

RETAIL BANKING

Meaning Retail banking is activity devised in past few years and now used

extensively. It represents any banking, which be not wholesale based. It includes any

business that is conducted through branch network, which is mainly focused towards

personal sector. It encompasses all institutions that provide a related range of

banking services—money deposit, credit services and some form of financial advice.

Retail banking today is characterized by three areas:

Multiple products (deposits, credit cards, insurance, investment)

Multiple channels of distribution (call center, branch internet)

Multiple customer groups (consumer, small business)

Need for retail banking

Economic prosperity and the consequent increase in the purchasing power of

consumer.

Technological factors also added to the requirement convenience of using credit

cards, internet and phone banking anywhere and any time banking has also flood

customers into banking.

Decline in interest rates have also contributed to increase retail banking.

With the large corporate borrowers having diversified the sources to fund their

financial requirements, frequent reduction in cash reserve ratio resulting in

pumping in of liquidity, declining bank rate leading to decline in spreads un-

attractive yields on government securities etc. have all forced banks to be in

search of alternative opportunity to deploy their funds.

WHOLESALE BANKING

Wholesale banking is the provision of services by banks to the like of large

corporate clients, mid-sized companies, real estate developers and investors,

international trade finance businesses, institutional customers (such as pension funds

and government entities/agencies), and services offered to other banks or other

financial institutions. In essence, wholesale banking services usually involve high

value transactions.

Wholesale banking contrasts with retail banking, which is the provision of

banking services to individuals.

(Wholesale finance means financial services, which are conducted between

financial services companies and institutions such as banks, insurers, fund

managers, and stockbrokers.)

Modern wholesale banks are engaged in: finance wholesaling, underwriting,

market making, consultancy, mergers and acquisitions, fund management.

II. TYPES OF PRODUCTS & SERVICES

TOTAL BRANCH AUTOMATION

Speed up bank transactions and less error

More customer friendly and flexible

Towards paperless transactions

ANY BRANCH BANKING

It is a facility for customers to operate their account from any of the same banks

network branch

Facilities available:

Cash withdrawal & Cash deposits

Account statement

Facility to issue multi- city cheques

Fund transfer

Balance enquiry

Purchase of demand drafts pay order

Repayment of loan account

DEMAT SERVICES

It offers secure and convenient way to keep track your securities and

investment over a period of time without the hassle of handling physical

documents

It provide facility of online trading

“NO FRILLS” SAVING ACCOUNT

In an effort to make banking simpler and more accessible for customers,

many banks have introduced the 'No Frills' Savings Account, which offers you all the

basic banking facilities. You can even avail of services like NetBanking,

Mobilebanking free of cost.

Features & Benefits:

Access a wide network of branches and over a thousand ATMs across the

country to meet all your banking needs.

Bank conveniently with Free Net Banking

Enjoy Free IVR based Phone Banking. (Agent assisted calls will be charged*)

Get Free Quarterly Account Statements.

Access your account through a Free ATM Card.

Enjoy free Cash/ Cheque Deposits at Branch/ATM

Free cash withdrawal transactions at any Bank ATMS through Debit Card*

Free Cash withdrawal per month at the Branch. Additional Branch Cash

withdrawals in the month will be charged @ Rs.50/- per transaction.

International Debit Card available only on request at the branch @ Rs. 100/-

p.a. (plus applicable taxes) for each applicant.

First Chequebook consisting of 25 leaves free and subsequent cheque books to

be charged at the rate of Rs 5/- per cheque leaf.

Free InstaQuery facility

Take advantage of BillPay, an instant solution to all your frequent utility bill

payments. Instruct for payment over the phone or through the Internet*.

Enjoy Free InstaAlerts via e-mails or SMS

Avail facilities like Safe Deposit Locker, Sweep-In and Super Saver on your

account.

Free Email Statement facility .

MICROFINANCE

It refers to a movement that envisions a world in which low income

households have permanent access to a range of high quality financial service to

finance their income producing activities, build assets, stabilize consumption and

protect against risks.

KISAN CREDIT CARD

Kisan Credit Cards were started by the Government of India, RBI (Reserve

Bank of India), and NABARD (National Bank for Agricultural and Rural Development)

in 1998-99 to help farmers access timely and adequate credit.

The Kisan Credit Care allows farmers to have cash credit facilities without

going through the credit screening processes repeatedly. Repayment can be

rescheduled if there is a bad crop season, and extensions are offered for up to 4

years. The card is valid for 3 years and subject to annual renewals. Banks in India

that lend for agricultural purposes usually offer the KCC. Withdrawals are made

using slips, cards, and a passbook.[1]

KCC OFFERED BY IDBI Crop Loan with Kisan Credit Card

Credit to Farmers/ Group of farmers for Crop Loan, working capital or

investment credit for viable agriculture purpose.

Who is the eligible for the Loan? All Farmers/ Owner cultivators, tenant

cultivators and Share croppers / Individual farmer having agreement with institution.

Extent of Exposure :

As per scale of finance specific to the crop and KCC norms. Int rate is 7% (SI)

co-op bank nahan H.P.

Tenure

The card would be valid for 5 years, of which crop loan and working capital

components has to be renewed annually. Kisan Credit Card Scheme: Himachal

Pradesh

Details of Kisan Credit Card Scheme

ParticularsDescription Name of the Scheme Kisan Credit Card Scheme Sponsored

by State Government Funding Pattern Rs. 50000/- for Rabi Crops. Rs. 50000/- for

Kharif Crops. Ministry/Department State Government PSU Description 1 Maximum

Limits Rs. 50000/- for Rabi Crops. Rs. 50000/- for Kharif Crops. 2 Eligibility Individual

/ Society. 3 Purposes Agriculture. 4 Repayment period Kharif 31 January Rabi 31

July. 5 Collateral Security Charge on land in case loan is above Rs. 10000/- and two

sureties if loan is below Rs. 10000/-. 6 Margin Stipulation As per nature of the loan

Beneficiaries Individual,Community, Benefits Benefit Type Loan, Eligibility criteria

Individual / Society. How to Avail Approach to the State Headquarters and Branch

Manager at District Level Branches Validity of the Scheme Introduced On 31 / 03 /

2006 Valid Up to 31 / 03 / 2012

PLASTIC MONEY

Plastic money is the generic term for all types of bank cards, credit cards,

debit cards, smart cards, etc. They are the alternative to the cash or the standard

'money'. Plastic money is used to refer to the credit cards or the debit cards that we

use to make purchases in our everyday life.

There has been a growth on electronic payment due to the shift in technology,

growing access to internet among the customers and convenient modes of delivery

and payment. Plastic money also known as Plastic cards acts as a vital tool for every

day transaction of people today.

The various Plastic cards include ATM cards,Debit Card,ATM cum Debit

Card,Credit Cards, Smart Card, Charge Cards, Co-branded cards, add on cards and

so on.

ATM Cards  :

Automated Teller machine (ATM) cards is capable of doing variety of

functions.It can perform both cash and non-cash transactions in secured

environment.

* ATM Cash Transactions includes deposits and withdrawals

* Non cash transactions incude

* Providing Mini Statement of last five transactions.In some banks upto last 

ten transactions

* Balance enquiry

* Stop Payment instructions

* Transfer of funds between accounts

* Requisition of Cheque books,drafts etc.

* Bill payments ( electricity bills,Telephone bills etc)

Debit Card

The bank issues debit card only if the person has an account in the bank.This

card is useful to make payment from Member Establishments (ME) who have

arrangements with the card issuing bank or agency.They check the balance and

deduct the amount from the bank balance online. When a debit card is issued to

make the payment,the total amount charged is instantly reduced from the bank

balance of the account holder.

All credit and debit cards are affiliated to two major issuers-VISA and Master

Card.Master Card and VISA are global non-profit organizations who promote the

growth of the card business throughout the world.They have built vast network of

Member Establishments so that customers can use the cards worldwide for their

debit and credit purchases.

Debit Cum ATM Card:

This is most common nowadays.The same debit card can be used to draw

cash from the ATM and also make payment to the shops for purchases.This is two in

one card.

Credit Cards:

This card enables the client to obtain goods or services from the various

shops having arrangement with the issuing agency even if there is no balance in

his/her savings or current account.The bank assumes that the loan will be repaid by

the customers at later date.The credit card holder has to make payment for the dues

before the due date. Otherwise late payment fee is levied in the next billing

statement. Normally,a limit of the credit will be fixed by the bank for the amount of

purchases to be made by the customer based on the net worth of the customer. 

Charge Cards :

A Charge card has all features of credit card.But, after using the charge card

the entire payments of the bills has to be made by the due date.If it is failed to be

done,then the client is likely to be considered as a defaulter and he has to pay a

steep late payment charges. But in case of Credit cards, the client is not declared as

a defaulter if he misses to pay by due date..In such case,a late fee is levied in the

next billing statements of the credit card holder.

AMEX (American Express) and Diners Club card are well known branded

charge cards.They have their own merchant establishments and tie ups and does

not depend on the network of Master card or VISA. These care are typically meant

for the high income group categories and companies. These cards are not

acceptable at many outlets. But wide variety of special privileges are enjoyed by the

AMEX card holders and Diners Club Cardholders.

Smart Cards :

A smart Card contains an electronic chip which is used to store Cash. This is

most useful to pay for small purchases for example in Fairs,coffee shops etc. No

identification,signature or payment authorization is required for using this card. The

exact amount of purchase is deducted from smart card during payment.Currently,

this product is available in very developed countries like US.

Affinity Card :

The card issuer has a tie up with popular organizations and institutions which

are often non-profit organizations like Stanchart Cricket Cards or City WWF

card.When a card is used, a certain percentage is contributed to the organization or

institution by the card issuer.

Photo Card :

When a Photo is imprinted on the card,it helps to identify the user of the credit

card and is considered to be safer. In many cases,Photo card can also be used as

identity card.

Global Card :

Global cards can be used as credit cards instead of cash and traveler

cheques while traveling abroad to foreign countries for business or personal

reasons.

Add On Cards :

It is a privilege offered to the spouse, parents, Children or other family

members of the original card holder.Normally, an issuing bank permits two add on

cards per credit card. All expenses incurred on add on card are billed to the primary

card holder.

Petro Card :

Some Petroleum companies allow customers to pay for the fuel through

electronic medium.It offers a scheme of gifting the points to the customers,when they

pay for the fuel using petro card.It is convenient, secured and speedy mode of

transaction. Co-branded credit cards like IOC-Citi bank and HPCL-ICICI bank are the

co-branded petro cards avaiable in the market.

Today,the Indian mode of payment has shifted from currency to electronic

mode.This is due to the high money valued transactions and more risk

involvement.The new electronic payment and settlement act should follow the strict

norms for banks and merchants to make secure payments and prevent money

laundering as the transactions through plastic money will be increasing and

increasing in the near future.

MOBILE BANKING

Mobile banking (also known as M-Banking, mbanking, SMS Banking) is a

term used for performing balance checks, account transactions, payments, credit

applications and other banking transactions through a mobile device such as

a mobile phone or Personal Digital Assistant (PDA). The earliest mobile banking

services were offered over SMS. With the introduction of the first primitive smart

phones withWAP support enabling the use of the mobile web in 1999, the first

European banks started to offer mobile banking on this platform to their customers [1].

Mobile banking has until recently (2010) most often been performed via SMS

or the Mobile Web. Apple'sinitial success with iPhone and the rapid growth of

phones based on Google's Android (operating system)have led to increasing use of

special client programs, called apps, downloaded to the mobile device.

A mobile banking conceptual model

In one academic model,[2] mobile banking is defined as:

Mobile Banking refers to provision and availment of banking- and financial

services with the help of mobile telecommunication devices.The scope of offered

services may include facilities to conduct bank and stock market transactions, to

administer accounts and to access customised information."

According to this model Mobile Banking can be said to consist of three inter-

related concepts:

Mobile Accounting

Mobile Brokerage

Mobile Financial Information Services

Most services in the categories designated Accounting and Brokerage are

transaction-based. The non-transaction-based services of an informational nature

are however essential for conducting transactions - for instance, balance inquiries

might be needed before committing a money remittance. The accounting and

brokerage services are therefore offered invariably in combination with information

services. Information services, on the other hand, may be offered as an independent

module. Mobile phone banking may also be used to help in business situations.

Trends in mobile banking :

The advent of the Internet has enabled new ways to conduct banking

business, resulting in the creation of new institutions, such as online banks, online

brokers and wealth managers. Such institutions still account for a tiny percentage of

the industry.

Over the last few years, the mobile and wireless market has been one of the

fastest growing markets in the world and it is still growing at a rapid pace. According

to the GSM Association and Ovum, the number of mobile subscribers exceeded 2

billion in September 2005, and now exceeds 2.5 billion (of which more than 2 billion

are GSM).

With mobile technology, banks can offer services to their customers such as

doing funds transfer while travelling, receiving online updates of stock price or even

performing stock trading while being stuck in taffic. Smartphones  and 3G

connectivity provide some capabilities that older text message-only phones do not.

Mobile Banking Services :

Mobile banking can offer services such as the following:

Account Information :

Mini-statements and checking of account history

Alerts on account activity or passing of set thresholds

Monitoring of term deposits

Access to loan statements

Access to card statements

Mutual funds / equity statements

Insurance policy management

Pension plan management

Status on cheque, stop payment on cheque

Ordering cheque books

Balance checking in the account

Recent transactions

Due date of payment (functionality for stop, change and deleting of payments)

PIN provision, Change of PIN and reminder over the Internet

Blocking of (lost, stolen) cards

Payments, Deposits, Withdrawals, and Transfers

Domestic and international fund transfers

Micro-payment handling

Mobile recharging

Commercial payment processing

Bill payment processing

Peer to Peer payments

Withdrawal at banking agent

Deposit at banking agent

A specific sequence of SMS messages will enable the system to verify if the

client has sufficient funds in his or her wallet and authorize a deposit or withdrawal

transaction at the agent. When depositing money, the merchant receives cash and

the system credits the client's bank account or mobile wallet. In the same way the

client can also withdraw money at the merchant: through exchanging sms to provide

authorization, the merchant hands the client cash and debits the merchant's account.

Investments :

Portfolio management services

Real-time stock quotes

Personalized alerts and notifications on security prices

mobile banking

Support :

Status of requests for credit, including mortgage approval, and insurance

coverage

Check (cheque) book and card requests

Exchange of data messages and email, including complaint submission and

tracking

ATM Location

Content Services :

General information such as weather updates, news

Loyalty-related offers

Location-based services

Based on a survey conducted by Forrester, mobile banking will be attractive

mainly to the younger, more "tech-savvy" customer segment. A third of mobile phone

users say that they may consider performing some kind of financial transaction

through their mobile phone. But most of the users are interested in performing basic

transactions such as querying for account balance and making bill payment.

III. Type of Electronic Systems

ATM

Introduction:

ATM facility was started in early 1990’s by foreign banks like HSBC, City

bank. ATM is made to work 24 Hrs a day. For the purpose of withdrawing cash

from ATM machine, plastic currency and debit cards are used. The account number

and credit limit of customers are magnetically embedded on a strip of the tape on

the back of card.

ATM enables user to perform banking transactions by actually interacting

with the human teller. This is one of the unattended or unmanned devices usually

located on or off the bank’s premises. Its function is to receive and dispense cash

and to handle routine financial transactions.

An automated teller machine (ATM) is a computerized telecommunications

device that provides the customers of a financial institution with access to financial

transactions in a public space without the need for a human clerk or bank teller. On

most modern ATMs, the customer is identified by inserting a plastic ATM card with a

magnetic stripe or a plastic smartcard with a chip, that contains a unique card

number and some security information, such as an expiration date or CVC (CVV).

Security is provided by the customer entering a personal identification number (PIN).

Working of ATM

Real Time Gross Settlement

India has two main electronic funds settlement systems for one to one

transactions: the Real Time Gross Settlement system (RTGS) and the National

Electronic Fund Transfer system (NEFT). Transactions which are bulk and repetitive

in nature are routed through Electronic Clearing Service (ECS) which is further of

two categories viz ECS-Credit (one debit and multiple credits e.g. Salary, Dividends)

and ECS-Debit (one credit and multiple debits e.g. bill payments, SIPs etc.). ECS is

currently provided in around 75 centres in India.

The acronym 'RTGS' stands for Real Time Gross Settlement. The Reserve

Bank of India (India's Central Bank) maintains this payment network. RTGS system

is a funds transfer mechanism where transfer of money takes place from one bank to

another on a 'real time' and on 'gross' basis. This is the fastest possible money

transfer system through the banking channel. Settlement in 'real time' means

payment transaction is not subjected to any waiting period. The transactions are

settled as soon as they are processed. 'Gross settlement' means the transaction is

settled on one to one basis without bunching with any other transaction. Considering

that money transfer takes place in the books of the Reserve Bank of India, the

payment is taken as final and irrevocable.

Insertion ofCard into ATM

Activation

of account

Transmission of Tape

data to Processor

Actual

Transaction

Clicking of keys

of keyboard

Display of details

on screen

FINACLE

Finacle universal banking products are designed to address the core banking,

e-banking,Islamic banking, treasury, wealth management and CRM requirements of

retail, corporate and universal banks. It was developed by Infosys, and is one of the

major player in the arena of core banking in Indian and Asian banking domains.[1] CA. T.V. Mohandas Pai was closly associated with it.

CONCLUSION

The BANKING sector in India has become stronger in terms of capital and the

number of customers. It has become globally competitive and diverse aiming, at

higher productivity and efficiency.

Exposure to worldwide competition and deregulation in Indian financial sector

has led to the emergence of better quality products and services. Reforms have

changed the face of Indian banking and finance. The banking sector has improved

manifolds in terms of Technology, Deregulation, Product & Services, Information

Systems, Etc

“With new opportunities unfolding Banking Sector, India is emerging as

a global power in banking services in the next two decade."

BIBLIOGRAPHY

www.wikepeadia.com

www.google.com

www.lycos.com

www.central bank of india.com

Value notes.com

White papers.com

Banknetindia.com

Finance biz.com

Gahoo yoogle.com

Banking Law and Practice by Sharma publications.

Banking theory and practices by kalyani publishers.

Principles of banking by AIBA (All India banking associations)