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7/31/2019 Synopsis Toc Banking Proj
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INTRODUCTION
E-banking is the wave of the future. It provides enormous benefits to
consumers in terms of ease and cost of transactions, either through Internet,
telephone or other electronic delivery. Electronic finance (Efinance) has
become one of the most essential technological changes in the financial
industry. E-finance as the provision of financial services and markets using
electronic communication and computation. In practice, e-finance includes
e-payment, e-trading, and e-banking.
According to the definitions from the Bank for International Settlement
(BIS-EBG, 2003b), e-payment creates considerable efficiencies and is
superior to traditional paper based solution. E-trading is referred to as a wide
variety of systems that provide electronic order routing, automated trade
execution, and electronic dissemination of pre-trade and post-trade
information. With the help of the e-trading systems, the transactions can be
executed at a remote server and information can be conveyed to a remote
location. And e-banking means the provision of retail and small value
banking products and services through electronic channels and large value
electronic payments and other wholesale banking services delivered
electronically. Although clients have enjoyed great convenience of e-
banking and bankers have improved cost efficiency of banks (Lin and Lin,
2006, 2007), e-banking may lead to unstable financial environments. In
other words, e-banking could make the financial markets less manageable by
the regulators. Internetbanking refers to the deployment over the Internet of
retail and wholesale banking services. It involves individual and corporate
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TYPES OF E-BANKING
Types of Internet Banking:
Information: This is the most basic level of Internet banking. The bank has
marketing information about its products and services on a stand-alone server.
This level of Internet banking service can be provided by the bank itself or by
sourcing it out. Since the server or Web site may be vulnerable to alteration,
appropriate controls must therefore be in place to prevent unauthorized alterations
to data in the server or web site.
Communication: This type of Internet banking allows interaction between the
banks systems and the customer. It may be limited to electronic mail, account
inquiry, loan applications, or static file updates. The risk is higher with this
configuration than with the earlier system and therefore appropriate controls need
to be in place to prevent, monitor, and alert management of any unauthorized
attempt to access banks internal network and computer systems. Under this
system the client makes a request to which the bank subsequently responds.
Transaction: Under this system of Internet banking customers are allowed to
execute transactions. Relative to the information and communication types of
Internet banking, this system possesses the highest level of risk architecture and
must have the strongest controls. Customer transactions can include accessing
accounts, paying bills, transferring funds, etc. These possibilities demand very
stringent security.
The six primary drivers of Internet banking includes, in order of primacy are:
Improve customer access
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Facilitate the offering of more services
Increase customer loyalty
Attract new customers
Provide services offered by competitors
Reduce customer attrition
Impact of the Information and Technology Act, 2000:
The information and technology act is an act to provide legal recognition for transactions
carried out by means of electronic data interchange and other means of electronic
communication commonly referred to as "electronic commerce".
Reasons for adopting the online banking:
The growth of online banking has been fuelled by broadband availability as well as secures
connections over the Internet. Many banks now offer some form of online banking activity,
whether it is checking bank balance, paying bills online or even simple cash transfer
transactions. As customers gain more confidence in carrying out secure transactions over
the Internet, vulnerabilities are present and can be exploited by cyber criminals to obtain a
user's personal banking details. In one of the latest developments, FSecure, a leading
security provider for Internet and mobile networks, has issued a warning against computer
users of an upsurge in attacks against banking sites, targeting personal user data. It started
with software that was capable of retrieving the data typed into the computer keyboard and
then more complex mechanisms arrived on the scene such as Phishing1 and Pharming2. .
1 Phishing typically involves fraudulent bulk e-mail messages that guide recipients to legitimate-lookingbut fake Web sites and try to get them to supply personal information like account passwords2 Pharming tampers with the domain-name server system so that traffic to a Web site is secretly redirectedto a different site altogether, even though the browser seems to be displaying the Web address you wanted
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A new concept of cell phone banking has taken over the Indians. Basix, an organization
that specializes in bringing micro loans and other financial services to India's poor, has
teamed up with Axis, an Indian commercial bank, to begin offering accounts to workers in
Delhi's slums. Its approach relies on a combination of high technology and old-fashioned
shoe leather.
The main risk of online banking is the security concerns. For this the IT Act has a
provision, Section 3(2) which, provides for a particular asymmetric crypto system and
function as a means of authenticating electronic record. Any other method used by banks
for authentication should be recognized as a source of legal risk.
The provisions for the offences committed:
Under the chapter IX Section 43, the punishments for the offences so caused are defined.
By this act under chapter X, Section 48 defines the establishment of a cyber appellate
tribunal. But there is one fundamental difficulty in punishing the cyber criminals. It is the
matter of jurisdiction. This is because any person who possesses a computer and an internet
can commit this crime and it is practically impossible to trace the person out. Even if the
person can be traced, there is no geographical border to bring him under the jurisdiction of
a particular country. However the banking regulatory body, RBI has issued a guideline
dated 14th June, 2001, which discusses issues pertaining to his territorial jurisdiction within
which the internet banking products can be made available.
Advantages of Internet Banking System:
to visit.
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The benefits of Internet banking are plentiful as witnessed by the consequential reaction of
a tremendous rise in usage and application. The potential appears to be unlimited ranging
from virtual banks to e-cash.
Reduced Transaction Costs: It has been repeated shown that as a delivery or
distribution channel, the Internet could bring a substantial cost advantage for banks. No
doubt the ATM is considerably cheaper than a teller, but even so, the Internet is nearly
3 times cheaper than the ATM usage. In short, replacing a teller with an Internet
channel should in theory, show a 10 fold increase in the distribution revenue for the
bank. This reason alone should be sufficient for banks to encourage this form of
distribution channel.
Perfect Information: Internet makes perfect information available to all market
participants by bringing about efficiencies in the search process. For buyers of banking
services, there are sites that aggregate information on product offerings from different
providers at a single location. By merely making information available to customers
about multiple providers, the Internet performs the function of dismantling the
oligopoly of a few providers and bringing about a structure favorable towards perfect
competition.
Perfect Competition: This is achieved by two means. The first is through the
aggregation of buyers and sellers and also through the provision of a search function
platform. The second is by bringing about efficiency in determining price that is
enabled by the online auction mechanism which makes pricing transparent and also
makes it dynamic since it is driven by near perfect market conditions of demand and
supply. Similarly, by creating competition among the providers of capital, the Internet
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helps companies raise money at much finer spreads. Also banks using the Internet have
pioneered the use of online auction to price Initial Public Offerings (IPOs). In this
manner market forces are given greater prominence thus ensuring conditions for perfect
or near perfect competition.
Disadvantages of Internet Banking System:
There are always two sides to a coin. Similarly Internet banking too has a bane side to it.
The bane lies in its inexorable slide towards higher risk from various facets of bank
operations. Risk is the potential that unexpected events may have an adverse impact on the
banks earnings. Internet banking risks consists of risk associated with credit, interest rate,
transaction, etc. These risks are not mutually exclusive but invariably all of these are
associated with Internet banking.
Credit Risk: Credit risk is the risk to earning and eventually capital, arising from a
borrowers failure to meet the terms of a credit contract with the bank or otherwise to
perform as agreed. It is found in all activities where success depends on counterparty,
issuer, or borrower performance. It arises any time bank findings are extended,
committed, invested, or otherwise exposed through actual or implied contractual
agreements, whether on or off the banks balance sheet..
Interest Rate Risk: Interest rate risk is the risk to earnings arising from
movements in interest rates. From an economic perspective, a bank focuses on the
sensitivity of the value of its assets, liabilities and revenues to changes in interest rates.
Interest rate risk arises from differences between the timing of rate changes and the
timing of cash flows (repricing risk); from changing rate relationships among different
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yield curves affecting bank activities (basis risk); from changing rate relationships
across the spectrum of maturities (yield curve risk); and from interest-related options
embedded in bank products (options risk) (Comptrollers Handbook, 1999).
Liquidity Risk: Liquidity risk is the uncertainty arising from a banks inability to
meet its obligations when they are due, without incurring unacceptable losses. Liquidity
risk includes the inability to manage unplanned changes in market conditions affecting
the ability of the bank to liquidate assets quickly and with minimal loss in value.
Transaction Risk: Transaction risk is the current and prospective risk to earnings
and capital arising from fraud, error, the inability to deliver products or services, the
failure to maintain a competitive position and services, and the inability to manage
information properly. This risk is evident in each product and service offered and
encompasses product development and delivery, transaction processing, systems
development, computing systems, complexity of products and services, and the internal
control environment (Comptrollers Handbook, 1999). A high level of transaction risk
may exist with Internet banking products, particularly if those lines of business are not
adequately planned, implemented, and monitored.
Total Reliability Risk: As with most other Internet ventures, an exclusive reliance
on virtual channels is probably not a very wise move. A strategy of combining brick
and mortar with click and avatar is probably more viable. There are transactions such as
balance enquiry that are ideally suited for the Internet. But transactions such as working
capital loan applications are more detailed and personal discussions may be necessary.
In the latter, the absence of a physical channel is a problem.
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Internet banking is on the rise. When viewed as another channel, its benefits are modest.
However, when integrated with other channels, Internet banking becomes a powerful tool
for improving customer satisfaction and increasing cross-selling opportunities. But at the
same time banks must keep in mind that, every electronic channel including the Internet
has its short falls which can have major consequences. Keeping track of the ever changing
banking industry and the latest update in Internet technology, banks need to equip
themselves for the competition. Even though there are enormous opportunities and virtual
banks are on the rise brick and mortar banks and transactions should not be neglected or
relegated to the sidelines.
However, Indian internet banking faces following challenges3:
Proper understanding of the customer - i.e. proper identification of their needs
and wants. For this a massive survey must be undertaken may be in collaboration
with other banks.
There is need for transparency in offering services as customers awareness has
grown considerably.
Breach of privacy: online transactions enter straightaway into the records
revealing the identity of customer. Thus black money cannot be transferred with
ease.
Bandwidth: Though companies claim to offer good speed and high bandwidth,
still there are problems in accessing high speed on net. Internet banking can go
high only on the wings of proper infrastructure comprising telecommunications and
bandwidth.
Computer literacy in India is still very low and that is a barrier in fast
acceptance of Internet banking.
3
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The mindset of the Indian customer need to be changed.
Customer has to be protected against being "net-jacked" i.e. he needs to be
protected from fraud. Threats19 can be
Cracking login and passwords is a common way of fiddling with the data.
Denial of services: Directing millions of queries can block computer network.
Data Diddling: Data can be modified in an unauthorized manner. A customer
can therefore receive bills of higher amounts than the actual transactions
Session hijacking: Hijackers become unauthorized intermediaries between the
server and the client; they can then hijack the data and prevent it from reaching
the destination.
HISTORY OF E-BANKING
In countries like Korea, two SIM Card is used in e-banking. One
for the telephonic purpose and the other for banking. Bank account
data is encrypted on a smart-card chip. About 3.3 million transactions
were reported by Bank of Korea in 2004. In a move that will take thefrontiers of banking transactions beyond the ATM and internet, full-
fledged banking transactions through e-banking have been
introduced by ICICI Bank. The bank has now kicked off a e-banking
service, where a customer can replicate all transactions through e-
banking similar to an internet banking transaction. Till now,
customers were only able to get all information like balance in the
account and e-banking alerts through e-banking.
The past few years have seen customers migrating from branch
banking to a host of non-branch channels like ATMs, call centre and
internet banking. In case of ICICI Bank, around 55% of the
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transactions now happen through ATMs, 22% through the internet,
12% through call centre and the remaining through branches.
Incidentally, around five years ago, transactions through internet
banking was a minuscule 2%. Through the new platform Mobile, allinternet banking transactions can now be done on e-banking.
Customers can now transfer funds to ICICI Bank and non-ICICI Bank
accounts, pay their utility bills and insurance premium and do a host
of other operations. The application covers savings accounts, demat,
credit card and loan accounts.
According to ICICI Bank ED V Vaidyanathan said, the new
service will help to give more power to the customer. They can now
transact from practically anywhere. He expects the new service to see
transactions of over 40% over a period of time.
Both GPRS and non-GPRS customers would be able to use the
service. Customers will be required to enter four-digit PIN to enter
the e-banking application, which will prevent unauthorized use of the
service.
Currently, ICICI Bank has 13 million customers, Of which, there
are 2.5-million active customers. It also has 7-million registered
customers for SMS alerts. The bank currently sends around 20
million alerts a month. Citi and HSBC have this service in other parts
of the world. Some of these banks are now looking at launching these
services here. Until now, e-banking services, which were provided by
banks, have been SMS-enabled. Moreover, these were push-services
like SMS alerts and balance enquiries. There have also been security
http://economictimes.indiatimes.com/Forget_bank_visits_try_mobile_banking/rssarticleshow/2694156.cmshttp://economictimes.indiatimes.com/Forget_bank_visits_try_mobile_banking/rssarticleshow/2694156.cms7/31/2019 Synopsis Toc Banking Proj
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concerns plaguing the introduction of such services since the SMS
route, through which the information travels, is totally unsecured.
Aditya Menon, Chief IT officer of Obopay India a e-
bankingpayments solutions company said many banks have been
working on a mobile-payment solution. Obopay is working with six
other banks to provide a service that will enable bank customers to
transfer funds to anyone who has a e-bankingphone and a bank
account. In fact, banks like Corporation Bank and Union Bank of
India also have similar products in the pipeline.
The first e-banking and payment initiative was announced
during 1999. The first major deployment was made by a company
called Pay box (largely supported financially by Deutsche Bank). The
company was founded by two young German's (Mathias Entemann
and Eckart Ortwein) and successfully deployed the solution in
Germany, Austria, Sweden, Spain and the UK. At about 2003 more
than a million people were registered on Pay box and the company
was rated by Gartner as the leader in the field. Unfortunately
Deutsche Bank withdraws their financial support and the company
had to reorganize quickly. All but the operations in Austria closed
down.
Another early starter and also identified as a leader in the fieldwas a Spanish initiative (backed by BBVA and Telephonica), called
Mobi Pago. The name was later changed to Mobi Pay and all banks
and e-banking operators in Spain were invited to join. The product
was launched in 2003 and many retailers were acquired to accept the
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special USSD payment confirmation. Because of the complex
shareholding and the constant political challenges of the different
owners, the product never fulfilled the promise that it had. With no
marketing support and no compelling reason for adoption, thisinitiative is floundering at the moment.
Many other large players announced initiatives and ran pilots with
big fanfare, but never showed traction and all initiatives were
ultimately discontinued. Some of the early examples are the famous
vending machines at the Helsinki airport supported by a system from
Nokia. Siemens made announcements in conjunction with
listed and high-flying German e-commerce company, Brocket.
Brocket also won the lucrative Vodafone contract in 2002, but
crashed soon afterwards when it runs out of funds. Israel (as can be
expected) produced a large number of e-banking payment start-ups.
Of the many, only one survived - Trivet. Others like Advantech and
Patty disappeared after a number of pilots but without any successful
production deployments.
Initiatives in Norway, Sweden and France never got traction.
France Telecom launched an ambitious product based on a special e-
banking with an integrated card reader. The solution worked well, but
never became popular because of the unattractive, special phone thatparticipants needed in order to perform these payments. Since 2004,
e-banking and payment industry has come of age. Successful
deployments with positive business cases and big strategic impact
have been seen recently.
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E- BANKING SERVICES:
1. Bill payment service
Each bank has tie-ups with various utility companies, service providers and
insurance companies, across the country. It facilitates the payment of electricity
and telephone bills, mobile phone, credit card and insurance premium bills.
To pay bills, a simple one-time registration for each biller is to be completed.
Standing instructions can be set, online to pay recurring bills, automatically. One-
time standing instruction will ensure that bill payments do not get delayed due to
lack of time. Most interestingly, the bank does not charge customers for online
bill payment.
2. Fund transfer
Any amount can be transferred from one account to another of the same or any
another bank. Customers can send money anywhere in India. Payees account
number, his bank and the branch is needed to be mentioned after logging in the
account. 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 billpayment service and fund transfer facility have been their most popular online
services.
3. Credit card customers
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Credit card users have a lot in store. With Internet banking, customers can not
only pay their credit card bills online but also get a loan on their cards. Not just
this, they can also apply for an additional card, request a credit line increase and
God forbid if you lose your credit card, you can report lost card online.
4. Railway pass
This is something that would interest all the aam janta. Indian Railways has tied
up with ICICI bank and you can now make your railway pass for local trains
online. The pass will be delivered to you at your doorstep. But the facility is
limited to Mumbai, Thane, Nasik, Surat and Pune. The bank would just charge
Rs 10 + 12.24 percent of service tax.
5. Investing through Internet banking
Opening a fixed deposit account cannot get easier than this. An FD can be
opened online through funds transfer. Online banking can also be a great friend
for lazy investors.
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 the facility to purchase mutual funds directly
from the online banking system.
So it removes the worry about filling those big forms for mutual funds, they will
now be just a few clicks away. Nowadays, most leading banks offer both online
banking and demat account. However if the customer have there demat account
with independent share brokers, then need to sign a special form, which will link
your two accounts.
6. Recharging your prepaid phone
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Now there is no need to rush to the vendor to recharge the prepaid phone, every
time the talk time runs out. 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.
7. Shopping at your fingertips
Leading banks have tie ups with various shopping websites. With a range of all
kind of products, one can shop online and the payment is also made
conveniently through the account. One can also buy railway and air tickets
through Internet banking.
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List of some banks operating E-Banking in India
Bank Name Technology Vendor Service offering
ABN AMRO Bank Infosys (Bank Away) NetBanking
Abu Dhabi Commercial Bank Infosys (Bank Away) ADCB NetLink
Bank of India I-flex BOIonline
Citibank Orbitech (now Polaris) Citibank Online
Corporation Bank I-flex CorpNet
Deutsche Bank db direct
Federal Bank Sanchez FedNet
Global Trust Bank Infosys (BankAway) ibank@gtb
HDFC Bank i-flex/ Satyam NetBanking
HSBC Online@hsbc
ICICI Bank Infosys, ICICI Infotech Infinity
IDBI Bank Infosys (Bank Away) i-net banking
IndusInd Bank CR2 IndusNet
Punjab National Bank Infosys (Bank Away) Internet Banking
Standard Chartered Bank In-House Me Standard Chartered Online
State Bank of India Satyam/Broadvision onlinesbi.com
UTI Bank Infosys (Bank Away) I connect
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PROJECT SCOPE
The projects aim is to automate the system,pre-checking the inclusion of all
required material and automatically process the transactions used in a
banking. The criterions which include over here is to creation of an account
and its all respective perspectives. The data used by the system is stored in a
database that will be the centre of all information held about the customer
and the base for the remainder of the process after initial signing up been
made. This enables things to be simplified and considerably quickened,making the jobs of the involved people easier. It supports the current
process but centralizes it and makes it possible for decisions to be made
earlier and easier way.
The main goal of the system is to automate the process carried out in the
bank with improved performance an realize the vision of paperless banking.
some of the goals of the system are listed below:-
Manage large number of customer details with ease.
Manage all details of the student who are registered with the bank and send
appropriate details about latest policy of the bank to each of its customer.
Create customer account and maintain its data efficiently and effectively.
View all the details of the customer.
Create a statistical report to facilitate the finance department work.
Activities like updating, modification, deletion of records should be easier.
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OBJECTIVES OF THE
PROPOSED SYSTEM
The aim of the proposed system is to address the limitations of the
current system .The requirements for the system has been gathered
from the defects recorded in the past and also based on the feedback
users of the previous metrics tools.
Manual Process
Inquires for an existing serviceor some specific information
Customerphysically visits
the bank
The incharge clerk checks the
specification and answers the
query
Associated and integrates the
information as needed
Leaves
the
bank
Raises a request for new
checkbook by filling in the
prescribed form
Customer
physically visits
the bank
The incharge clerk accepts the
request and prepares the
cheque book with respect to
given specification
The cheque book is sent for
manages initials
Customer
makes a
counter sign
and receives
the checkbook
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The development of the new system contains the following activities
which try to automate theentire process keeping in view of the
database integrationapproach. Following are the Objectives of the
proposed system:
1. The administrators have grates accessibility in collecting the consistent
information that is very much necessary for the system to exist and coordinate.
2. The system at any point of time can give the customers information related to their
Accounts and accounts status
The balance enquiry
The fund transfer standards
The cheque book request
3. The system can provide information related to the different types of accounts that
are existing within the bank.
4. The system can provide the bank administration with information on the number of
customers who are existing in the system.
5. The system at any point of time can provide the information related to the executed
transactions by the customer.
6. The system with respect to the necessities can identify all the history details of the
trial participants along with their outcome of the results.
7. The system with respect to the necessities can provide the status of research and
development process that is under schedule within the organization currently.
8. With proper storage of the data in a relational environment the system can
Applegate itself to cater to the standards of providing a clear and easy path for future
research standards that may arise due to organizational policies.
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FEASIBILITY STUDY
A significant transformation in banking system has occurred in the world.The online system of banking and improvements has been made throughrecognizing difficulties encountered by the customer and the authority.Both qualitative and quantitative research, through parent/career surveys.Focus groups and staff training sessions have influenced the online process.As a result this had produced an efficient and user friendly system, thatrelies on an effective online form, but on the coordination between ban andits customer.A comprehensive feasibility study of social, economical and technicalaspects has also been made and implemented as below:-
Social Feasibility It has simplified the banking procedure.
Customers and banking authority had a huge acceptance to the notion.
It had a good social impact and no objections or problems regardingthe project is found
Economic Feasibility The project is economically Feasible since we are getting ample
economic support required for the project from banking authorities.
Technical Feasibility Minimum requirement for execution of the project is a java
supporting operating system since the connection to the database willbe made using JSP and SERVLETS,minimum of 64 MB of RAM, adatabase software, a server and a web browser with which we werepreviously equipped.
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DATABASE DRIVEN WEB
APPLICATION
A database wb application is an appliction wizard based on WWW(WORLDWIDE WEB) and database using web browser as a client
TRADITIONAL CLIENT-SERVER(2-tier archietechture)
A client computer handles the user interface (Access forms, Oracle forms,
reports) and a database server stores the data.The actual functionality
(business logic)of the application resides on the client and/or in the
databases.
WEB BASED MULTI-TIER ARCHIETECHTURE
A client computer uses a browser to access information from two or more
servers(web servers, application servers, database servers) i.e. a web serverhandles a web request, an application server handles the dynamic request
and a database server stores the data.
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System Specification
SOFTWARE SPECIFICATION
Client on Internet: Web browser(any),operating system(any)
Client on Intranet: Client software, Web Browser, Operating System
(any)
Web server: Apache Tomcat or Glassfish, Operating System(any)
Database Server: MS-access, Operating System(Microsoft
Windows)
Development End: Net beans (J2EE, Java, Servlets, JSP), MS-
Access (DBtool).
HARDWARE SPECIFICATION
CLIENT SIDE :-PROCESSOR RAM DISK SPACE
INTERNET
EXPLORER 6.0
PENTIUM II at 500
MHz
64 MB 500 MB
SERVER SIDE :-APACHE TOMCAT PENTIUM III at
1GHz
512 MB 1GB
MS-ACCESS PENTIUM III at1GHz
512 MB 512 MB
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DATABASE TABLE
OVERVIEW
The database tables which are used over here are ten in number which are
customer,administrator,account,transaction,businessloan,homeloan,
personal loan,educational loan,agricultural loan.The structures of the tables
are shown as follows:
1.customerATTRIBUTE NAME ATTRIBUTE TYPE ATTRIBUTE SIZE
F_NAME Text 50
L_NAME Text 50
ACC_NO Number 50
E_MAIL Text 20
BR_NAME Text 40
USER_ID Text 10
PIN Text 5
DOB Text 10
2.administrator
ATTRIBUTE NAME ATTRIBUTE TYPE ATTRIBUTE SIZE
USER_ID Text 20
PASS_WD Text 10
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2.account
ATTRIBUTE NAME ATTRIBUTE TYPE ATTRIBUTE SIZE
ACC_NO Number 50
OPENDATE Text 10
BALANCE Number 100
2.transaction
ATTRIBUTE NAME ATTRIBUTE TYPE ATTRIBUTE SIZE
SL_T Number
ACC_NO Number 50
DOT Text 10
DESOT Text 20
CORD Text 5
AMOUNT Number
2.businessloanATTRIBUTE NAME ATTRIBUTE TYPE ATTRIBUTE SIZE
TYPEOF_BUSINESS Text 100
ANN_INC Number 100
AMT_LOAN Number 100
TENURE Number 10
SECURITY_DET Text 100
PAN_NO Text 50
BR_NAME Text 20
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F_NAME Text 50
L_NAME Text 50
ADD Text 100
ACC_NO Number 50
CON_NO Number 10
2.homeloan
ATTRIBUTE NAME ATTRIBUTE TYPE ATTRIBUTE SIZE
LOC_PRO Text 100
AR_CONS Text 100
OCC_DET Text 100
AMT_LOAN Number 100
TENURE Number 10
SECURITY_DET Text 100
PAN_NO Text 50
BR_NAME Text 20
F_NAME Text 50
L_NAME Text 50
ADD Text 100
ACC_NO Number 50
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CON_NO Number 10
3.personalloan
ATTRIBUTE NAME ATTRIBUTE TYPE ATTRIBUTE SIZE
REASON_LOAN Text 100
OCC_DET Text 100
ANN_INC Number 100
AMT_LOAN Number 100
TENURE Number 10
SECURITY_DET Text 100
PAN_NO Text 50
BR_NAME Text 20
F_NAME Text 50
L_NAME Text 50
ADD Text 100
ACC_NO Number 50
CON_NO Number 10
4.educationalloan
ATTRIBUTE NAME ATTRIBUTE TYPE ATTRIBUTE SIZE
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TYPEOF_COURSE Text 100
PRE_EDU_QUALIFICATION Text 100
SEC_MARKS Number 100
HIGHSEC_MARKS Number 100
GRADUATION_MARKS Number 10
ANN_INC Text 100
TENURE Number 10
PAN_NO Text 50
BR_NAME Text 20
F_NAME Text 50
L_NAME Text 50
ADD Text 100
ACC_NO Number 50
CON_NO Number 10
4.agriculturalloan
ATTRIBUTE NAME ATTRIBUTETYPE
ATTRIBUTE SIZE
AR_LAND Text 100
ANN_PRO Text 100
OCC_DET Number 100
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ANN_INC Text 100
TENURE Number 10
SECURITY_DET Text 50
PAN_NO Text 50
BR_NAME Text 20
F_NAME Text 50
L_NAME Text 50
ADD Text 100
ACC_NO Number 50
CON_NO Number 10
PROS N CONS
Features of Internet banking
The features available from an on-line bank account are similar to those
which are available via 'phone banking or visiting the local branch. On-
line banking features do differ between the banks, but usually include:
Transfer of funds between accounts; It brings efficiency in CRM(Customer relationship management)
Make Payment of bills
Introduces new & innovative products &services.
View balance and statements.
Brings door to door services.
Create, view and maintain Standing Orders
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Have evolutionary trend at a globle scenario.
Customer can View Direct Debits.
Advantages of Internet Banking
Opening & closing of accountes
Make the payments of merchandise transaction through Debit & Credit
cards.
It gives reliefs to their customer from carrying heavy cash.
Enables prompt & speedy operation to clients.
It saves lot of time to their customers &convenient to access.
Disadvantages of Internet Banking
Customer may have to face risky transaction & fraud.
Failure of power supply cause to break down of system.
Loss of heavy income at times of settlement of higher magnitude.
Cost involved in trainning staff may not be profitable specially in times
of attrition.
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Development of an attitude of lethargy.
PROFILE OF THE TEN BANKS UNDER STUDY
1. State Bank of India:
State Bank of India (SBI) is the leading commercial bank in India, offering services such as
retail banking, commercial banking, international banking and treasury operations. The
bank is an integral part of State Bank Group, which includes seven other banks and offers
additional services such as mutual funds and insurance. The bank primarily operates in
India. It is headquartered in Mumbai, India and employs about 179,205 people.
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The company recorded revenues of INR902,188.1 million (approximately $22,410.4
million) in the financial year ended March 2008 (FY2008), an increase of 34.4% over
2007. The operating profit of the company was INR183,315.4 million (approximately
$4,553.6 million) in the financial year 2008, an increase of 27.4% over 2007. The net profit
was INR89, 606.1 million (approximately $2,225.8 million) in the financial year 2008, an
increase of 40.8% over 2007.
The company primarily operates through four business units, treasury, wholesale banking,
mid corporate group, retail banking and other banking business.
The retail banking comprises the bank's national banking group (NBG), which consists of
business groups, personal banking, small & medium enterprise (SME), government
banking. The bank's wholesale banking group consists of strategic business units, corporate
accounts group (CAG), project finance & leasing SBU, stressed assets management group
and mid corporate group. The mid corporate group (MCG) has been serving the needs of
mid corporate units through relationship management and quicker credit processing. 695
new mid corporate clients were added to the MCG during the year 2007.
In keeping with its integrated approach to all treasury activities in various markets in
different time zones i.e., forex, interest rates, bullion, equity and alternative assets, the bank
redesignated its treasury operations into global markets. The other banking businesses
include rural business unit serves the financial needs of farmers through different schemes
such as adoption of villages for overall development and economic upliftment and so far
237 villages have been adopted and self help groups. International banking has a network
of 84 overseas offices spread over 32 countries.
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The bank offers a range of services such as SBI foreign travel cards, broking services,
ATM services, internet banking, bill payments, gift cheques, safe deposit lockers and
foreign inward remittances. The bank has a factoring services arm under the name SBI
Factors and Commercial Services and Global Trade Finance. Through its subsidiary, SBI
Capital Markets, it offers merchant banking services throughout the country. SBI offers life
insurance association with BNP Paribas through its subsidiary SBI Life Insurance
Company.
SBI is the largest (public sector scheduled commercial bank) bank in India on several
parameters (number of branches/offices, employees, deposits, loans/advances, assets, and
profits etc). The bank has over 10,186 domestic branches and it offers more than 8,460
ATMs (Automated Teller Machines). In fact, SBI has the second largest bank branch
network in the world. The dominance of the bank in the Indian banking sector is evident
from the fact that it commands around 16.11% market share in total deposits and 16% in
advances.
Online cash transactions (E-transactions) are gaining popularity, with more people
preferring to send and receive money electronically. As more bank branches get
interconnected through core banking systems, settlements through the electronic systems
have almost tripled since April 2007. According to RBIs data, the number of transactions
settled through electronic funds transfer (EFT) and the national electronics funds transfer
system (NEFT) increased to 1.92 million a month in June 2008 from 0.7 million in April
2007, although the value of transactions have not picked up at the same pace. The total
amount settled electronically was INR121.6 billion in April 2007. It went up to INR200.7
billion by May 2008. The substantially lower costs and ease of transaction have been major
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factors for the increased adoption of electronic fund transfers. The value of these
transactions has also grown considerably over the past year.
RBI has been promoting the use of electronic funds transfer systems for a while now, and it
has made it mandatory for all payments between entities it regulates to be done
electronically. In fact, all branches that are on the core-banking network are equipped to
carry out NEFT transactions. Since, SBI has the country's largest network of NEFT-
enabled branches, it is expected that SBI would gain maximum (in comparison to other
banks) from the increasing adoption of E-transactions4.
2. Canara Bank Ltd.:
Canara Bank5was founded by Shri Ammembal Subba Rao Pai, a great visionary and
philanthropist, in July 1906, at Mangalore, then a small port in Karnataka. The Bank has
gone through the various phases of its growth trajectory over hundred years of its
existence. Growth of Canara Bank was phenomenal, especially after nationalization in the
year 1969, attaining the status of a national level player in terms of geographical reach and
clientele segments. Eighties was characterized by business diversification for the Bank. In
June 2006, the Bank completed a century of operation in the Indian banking industry. The
eventful journey of the Bank was strewn with many memorable milestones. Today, Canara
Bank occupies a premier position in the comity of Indian banks. With an unbroken record
of profits since its inception, Canara Bank has several firsts to its credit. These include:
Launching of Inter-City ATM Network
4 Datamonitor, (2008) Company Profile State Bank of India, source: www.datamonitor.com5 Datamonitor, (2008) Company Profile Canara bank Ltd., source: www.datamonitor.com
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Obtaining ISO Certification for a Branch
Articulation of Good Banking Banks Citizen Charter
Commissioning of Exclusive Mahila Banking Branch
Launching of Exclusive Subsidiary for IT Consultancy
Issuing credit card for farmers
Providing Agricultural Consultancy Services
Over the years, the Bank has been scaling up its market position to emerge as a major
'Financial Conglomerate' with as many as nine subsidiaries/sponsored institutions/joint
ventures in India and abroad. As at September 2008, the Bank has further expanded its
domestic presence, with 2710 branches spread across all geographical segments. Keeping
customer convenience at the forefront, the Bank provides a wide array of alternative
delivery channels that include over 2000 ATMs- the highest among nationalized banks-
covering 698 centres, 1351 branches providing Internet and Mobile Banking (IMB)
services and 2027 branches offering 'Anywhere Banking' services. Under advanced
payment and settlement system, all branches of the Bank have been enabled to offer Real
Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) facilities.
3. Indian Overseas Bank:
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Indian Overseas Bank was established in 1937 with the aim to specialize in foreign
exchange and overseas banking business in India. It started with simultaneously three
branches in Chennai, India; Rangoon, Burma (Now Myanmar) and Penang. On the
Independence Day, Indian Overseas Bank had expanded to 38 branches within the country
and 7 branches abroad.
Before nationalization in 1969, the bank had ventured into consumer credit, had begun
computerization of their branch in 1964 and had established an independent department for
agricultural finance. In 1969, IOB had 195 branches in India. In 1977, Indian Overseas
Bank opened a branch in Seoul followed by a foreign currency-banking unit in Colombo in
1979. In 1997, the bank launched its official website and introduced online Bill Payment
Services for MTNL Bills to its New Delhi branch customers in 1999.
The IOB presence is marked in key trade centres of the world like Singapore, Seoul, Hong
Kong, Bangkok and Germany. Its India presence is well networked branch system
spanning the country with multiple branches in major cities like Bangalore, Chennai,
Mumbai, Noida, Hyderabad, New Delhi, Coimbatore, Pune, Faridabad, Gurgaon and
Kolkata.
Indian Overseas Bank currently provides specialized banking services to its retail
customers that include Any Branch Banking (ABB), ATM Banking, IOB STARS (Indian
Overseas Bank - Speedy Transfer And Realization Service) and the most popular and latest
one is the 8% Saving (Taxable) Bond Scheme.
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4. Axis Bank:
Axis Bank6was founded in 1994 as UTI Bank. Axis Bank is a banking corporation offering
retail and corporate banking services, including retail loans, corporate and business credit,
forex and trade finance services, investment banking, depository services, and investment
advisory services.The bank primarily operates in India, where it is headquartered in
Mumbai and employs about 15,000 people.
The company recorded revenues of INR88,010 million (approximately $2,186.2 million) in
the fiscal year ended March 2008, an increase of 60.9% over 2007. Its net profit was
INR10,591.4 million (approximately $263.1 million) in fiscal 2008, an increase of 61.9%
over 2007.
The business of the bank is divided into four segments: treasury, corporate/wholesale
banking, retail banking and other banking business. Treasury operations include
investments in sovereign and corporate debt, equity and mutual funds, trading operations,
derivative trading and foreign exchange operations on the proprietary account and for
customers and central funding corporate. Corporate / Wholesale banking includes corporate
relationships not included under retail banking, corporate advisory services, placements
and syndication, management of public issue, project appraisals, capital market related
services and cash management services Retail banking constitutes lending to
individuals/small businesses subject to the orientation, product and granularity criterion
and also includes low value individual exposures not exceeding the threshold limit of
6 10. Datamonitor, (2008) Company Profile Axis bank Ltd., source: www.datamonitor.com
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INR50 million. Retail banking activities also include liability products, card services,
internet banking, ATM services, depository, financial advisory services and NRI (non-
residence Indian) services. Other banking business includes all banking transactions not
covered under any of the above three segments.
In 1998, UTI bank went for an initial public offering (IPO). In the following year, the
banks Cashmanagement services (CMS) were launched. In 2000, the bank launched its
internet banking module, and iConnect retail loans was introduced by the bank in the same
year. After two years, in 2002, the bank signed memorandum of understanding with BSNL
regarding bill collection services across the country through both online and offline
channels.
UTI bank signed an agreement with Employees Provident Fund Organization (EPFO) for
disbursement of pension in 2003. In the same year, the bank launched Travel Currency
Card. In 2004, the bank signed a bilateral arrangement with State Bank of India (and its
seven associate member banks) for a combined network of over 4,000 ATMs. UTI Bank
was listed on the London Stock Exchange in 2005. In the same year, UTI Bank launched
Smart Privilege, a special bank account designed for women. In 2006, UTI Bank and UTI
Mutual Fund launched a new service for sale and redemption of mutual fund schemes
through the Bank's ATMs across the country. In the same year, UTI Bank opened its first
international branch in Singapore. UTI Bank along with Geojit Financial Services offered
online trading service to its customers in 2006.
Moreover in 2006, UTI Bank launched its Credit Card business and operations of UBL
Sales, its sales subsidiary, and inaugurated its first office in Bangalore. In February 2007,
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UTI Bank launched gift card and meal card. In the same month, the bank launched Co-
branded credit card exclusively for Small Road Transport Operators (SRTOS). UTI Bank
opened a branch in Hong Kong in March 2007. In the same month, UTI Bank formed an
agreement with IIFCL to provide finance for infrastructural projects in India. In the
following month, the Bank opened a branch in Dubai. In July 2007, the bank changed its
name from UTI to Axis Bank.
In September 2007, Axis Bank made a tie up with Banque Privee Edmond de Rothschild
Europe for wealth management. In the following month, Axis Bank decided to incorporate
a Public Limited Company, as a wholly owned subsidiary of the Bank to undertake the
Trustee Services Business. In the same month, the bank also decided to incorporate an
Asset Management Company as a subsidiary of the Bank to carry out the activities of Asset
and Fund Management and Advisory and other related activities; and also proposed to
establish a Mutual Fund, in the form of a Trust.
In June 2008, Axis Bank decided to raise INR65,200 million (approximately $1619.6
million) by way of upper Tier II capital in Indian or foreign currencies and/or lower Tier II
capital in the form of sub-ordinate debentures. In the same Month, Axis Private Equity, an
operating unit of Axis Bank, decided to invest a total of INR1,420 million (approximately
$35.3 million) in two Indian companies namely Neesa Leisure and Corrtech International.
In July 2008, Axis Private Equity, a unit of Axis Bank, invested $15 million in Vishwa
Infrastructure & Services, a firm involved in water supply and sanitation projects.
5. Dena Bank ltd.:
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Dena Bank, in July 1969 along with 13 other major banks was nationalized and is now a
Public Sector Bank constituted under the Banking Companies (Acquisition & Transfer of
Undertakings) Act, 1970. Under the provisions of the Banking Regulations Act 1949, in
addition to the business of banking, the Bank can undertake other business as specified in
Section 6 of the Banking Regulations Act, 1949.
Dena Bank was founded on 26th May, 1938 by the family of Devkaran Nanjee under the
name Devkaran Nanjee Banking Company Ltd. It became a Public Ltd. Company in
December 1939 and later the name was changed to Dena Bank Ltd.
In July 1969 Dena Bank Ltd. along with 13 other major banks was nationalized and is now
a Public Sector Bank constituted under the Banking Companies (Acquisition & Transfer of
Undertakings) Act, 1970. Under the provisions of the Banking Regulations Act 1949, in
addition to the business of banking, the Bank can undertake other business as specified in
Section 6 of the Banking Regulations Act, 1949.
Bank has set up its own network DENANET using leased lines, VSATs, dial-up lines
and ISDN Backup for ATMs connecting more than 1051 branches and 34 offices spread
over 100 centres. Dena m-banking offers customers an easy, hassle free means to access
banking information with the help of Mobile phones 24 hours a day, 7 days a week. Now
our customers can get the required information regarding their bank account by using SMS
facility from their mobile phones. Presently m-banking provides facilities like
Balance Inquiry
Mini Statement of accounts
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Status of the cheques issued.
6. Syndicate Bank:
Syndicate Bank was established in 1925 in Udupi, the abode of Lord Krishna in coastal
Karnataka with a capital of Rs.8000/- by three visionaries - Sri Upendra Ananth Pai, a
businessman, Sri Vaman Kudva, an engineer and Dr.T M A Pai, a physician - who shared a
strong commitment to social welfare. Their objective was primarily to extend financial
assistance to the local weavers who were crippled by a crisis in the handloom industry
through mobilising small savings from the community. The bank collected as low as 2
annas daily at the doorsteps of the depositors through its Agents under its Pigmy Deposit
Scheme started in 1928. This scheme is the Bank's brand equity today and the Bank
collects around Rs. 2 crore per day under the scheme.
The progress of Syndicate Bank has been synonymous with the phase of progressive
banking in India. Spanning over 80 years of pioneering expertise, the Bank has created for
itself a solid customer base comprising customers of two or three generations. Being firmly
rooted in rural India and understanding the grassroot realities, the Bank's perception had
vision of future India. It has been propagating innovations in Banking and also has been
receptive to new ideas, without however getting uprooted from its distinctive socio-
economic and cultural ethos. Its philosophy of growth by mutual sustenance of both the
Bank and the people has paid rich dividends. The Bank has been operating as a catalyst of
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development across the country with particular reference to the common man at the
individual level and in rural/semi urban centres at the area level.
The Bank is well equipped to meet the challenges of the 21st century in the areas of
information technology, knowledge and competition. A comprehensive IT plan is being put
in place and the skills and knowledge of the Bank's personnel are being upgraded through a
variety of training programmes to promote customer delight in every sphere of its activity.
The Bank has launched an ambitious technology plan called Centralised Banking Solution
(CBS) whereby 500 of our strategic branches with their ATMs are being networked
nationwide over a 4 year period.
7. HDFC Bank:
HDFC Bank specializes in the provision of banking and other financial services to
corporate and institutional clients.The company's services include commercial,
transactional and electronic banking products. It also provides treasury services, retail
banking and capital markets infrastructure. The company primarily operates in India.
HDFC Bank is headquartered in Mumbai, India and employs about 14,900 people.
The company recorded revenues of INR124,928 million (approximately $3,131.9 million)
during the fiscal year ended March 2008, an increase of 51.9% over 2007. The net profit
was INR15901.8 million (approximately $398.7 million) in fiscal year 2008, an increase of
39.3% over 2007.
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HDFC Bank was incorporated in 1994 and was amongst the first to receive an 'in principle'
approval from the Reserve Bank of India, to set up a bank in the private sector. HDFC
Bank began operations as a Scheduled Commercial Bank in early 1995.
TimesBank (a private sector bank promoted by Bennett, Coleman & Co/Times Group)
merged with HDFC Bank in 2000.The amalgamation added significant value to HDFC
Bank in terms of increased branch network, expanded geographic reach, enhanced
customer base, skilled manpower and the opportunity to cross-sell and leverage alternative
delivery channels.
HDFC Bank was the first bank in India to launch an international debit card (in association
with VISA) and also issued the MasterCard Maestro debit card. The bank launched its
credit card in association with VISA in the year 2001. In the same year, HDFC became the
first private sector bank authorized to collect income tax for Central Government.
Following this, the bank listed its stock on NYSE through ADS issue of $172.5 million.
The bank also launched credit card business in Chennai during the year.
In the following year, the bank's branch network expanded to 200. Also during the year, the
bank entered into a joint venture agreement for non-life insurance with Chubb Corporation
(a global non-life insurer). In 2003, the bank was named 'Best Local Bank- India' by The
Asian Bankers Journal. The bank launched its credit card in over 100 cities, with its credit
card base crossing one million by 2004. HDFC's branch network expanded to 400 in the
same period. The bank was included in the Forbes Global listing of 'best under a billion',
100 best smaller size enterprises in Asia Pacific and Europe.
8. UCO Bank:
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Founded in 1943, UCO Bank is a commercial bank and a Government of India
Undertaking. Its Board of Directors consists of government representatives from the
Government of India and Reserve Bank of India as well as eminent professionals like
accountants, management experts, economists, businessmen, etc.
UCO Bank, with years of dedicated service to the Nation through active financial
participation in all segments of the economy - Agriculture, Industry, Trade & Commerce,
Service Sector, Infrastructure Sector etc., is keeping pace with the changing environment.
With a countrywide network of more than 2000 service units which includes specialised
and computerised branches in India and overseas, UCO Bank has marched into the 21st
Century matched with dynamism and growth.
9. Punjab National Bank:
Punjab National Bank (PNB) is a India based banking corporation. It offers a range of
banking services such as corporate and personal banking, industrial finance, agricultural
finance, financing of trade and international banking. The bank primarily operates in India.
It is headquartered in New Delhi, India and employs about 56,000 people.
The company recorded revenues of INR162,625.8 million (approximately $4,039.6
million) in the fiscal year ended March 2008, an increase of 25.4% over 2007.The
company's operating profit was INR40,062.4 million (approximately $995.2 million) in
fiscal year 2008, an increase of 10.7% over 2007. Its net profit was INR20,487.6 million
(approximately $508.9 million) in fiscal year 2008, an increase of 33% over 2007.
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The bank was nationalised in 1969. In September 2007, PNB partnered with Venture
Infotech Global (VIG) and American International Group (AIG) Consortium to form a
Joint Venture for credit card business in Bhutan. In the following month, PNB entered into
a memorandum of understanding with India Infrastructure Finance Company (IFCL) to
finance infrastructure projects in the country. In the same month, PNB launched a pilot
project on financial inclusion at Neemrana in Alwar district of Rajasthan as part of a plan
to cover 75 million people by 2010.
10. ICICI Bank:
ICICI Bank is a diversified financial services company that provides a range of banking
and financial services to customers, including retail banking, project and corporate finance,
working capital finance, insurance, venture capital and private equity, investment banking,
broking, and treasury products and services. The company operates in, India, the UK,
Canada and Russia. It is headquartered in Mumbai, India and employs about 25, 400
people.
The company recorded revenues of INR257.6 billion (approximately $5.8 billion) during
the fiscal year ended March 2006, an increase of 52.2% over 2005. The net profit was
INR24.2 billion (approximately $0.5 billion) in fiscal year 2006, an increase of 30.7% over
2005.
In early 2004, ICICIBank.com, the online banking channel of ICICI Bank, became the first
online air booking service in India. Teaming up with India mobile, ICICI launched mobile
banking in India in mid-2004. Later in the year, offshore banking unit was opened in
Bahrain. The company launched a new remittance service in 2005 in partnership with the
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US bank Wells Fargo. Following that Lloyds TSB inaugurated an Indian banking service
with ICICI.
In January 2006, the company opened its first branch in Sri Lanka, establishing a branch
presence for the first time outside India in the SAARC region. ICICI Bank signed
cooperation agreement with BMW India for offering finance through BMW Financial
Services and Raiffeisenlandesbank Oberosterreich for intensifying cooperation between
India and Austria in financial sector; in February 2007. It also entered into an agreement
with Sarovar Hotels, to launch the ICICI Bank Sarovar Hotels co-branded credit card.
The Reserve Bank of India approved the amalgamation of Sangli Bank with ICICI Bank in
April 2007. In the same month ICICI Bank received a license to set up a branch in the
Qatar Financial Centre, Doha, Qatar.
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RESEARCH METHODOLOGY
Population:
All the Branches of Commercial Banks in Mangalore region.
Customers having Accounts in Banks in Mangalore, i.e. both users and non users of
Internet banking Services.
Sample Size and Sampling Techniques:
10 Banks operating in Mangalore that provides Internet Banking Services selected
using Simple Random Sampling technique.
100 Customers of banks selected using Stratified Random Sampling from the above
selected 10 Banks.
Scope of the Study:
The Area covered for this study is Mangalore. This study is relevant only to Mangalore
Region and the Banks performing in Mangalore. Also, it is relevant only to the time period
when this study is conducted since the Technology is fast growing and there might be more
advancement in Banking Services. This study also is useful for those who are interested in
the Banking sector to know the recent advancements in Banking Industry as of this time
period.
Data Source:
Required data was collected from two main sources:
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The statistical tools used are:
Chi- Square technique to test whether the usage of Internet Banking Services
depends on the perception regarding the security level in Banking transactions.
ANOVA technique to find whether the average of the maximum amount transacted
by different customers through the Banks IBS in 10 different banks are equal or not.
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DEVELOPMENT OF E-BANKING
So, these are some of the particular risks arising in E-banking
that we have hitherto identified in the UK domestic environment
though I suspect that many of my regulator colleagues outside the UKwould share many of these views. I would like to move on to the
international side.
Supervision in todays global environment can only ever be
effective if it has an international dimension. This is especially the
case with e-banking because of its non-territorial nature, the ease
with which customers outside the home country can access the site
and the opportunity to buy several types of product. Of course,
regulators have long had to deal with the regulatory problems of
international banking. They had set up mechanisms for cross-border
supervision; agreements over home/host responsibilities (especially
within the Community), bilateral agreement for information sharing
and general standards by which they expect all banks, including those
offshore territories, to abide. In principle, the expectation is that this
general mechanism for international supervision will be robust
enough to work just as well in the e-banking as the physical
environment.
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Nevertheless, it will not be quite as easy as that! Inevitably the
nature of e-banking raises particular issues in the application of the
general approach outlined here. E-banking makes it even more
necessary to develop a cohesive international approach to regulation not only in the field of prudential regulation where Basel has made
much progress, but also in the areas of conduct of business for
consumer protection.
The Basel Committee E-Banking Group believes that Basel
"should provide the international supervisory community with a
broad set of advisory guidance with respect to electronic banking,"
thereby providing a basis for domestic regulation and supporting
consumer and industry education. Globally, such guidance would
assist international co-operation and act as a foundation for a
coherent approach to supervising e-banking. It could facilitate
international e-banking by creating consumer confidence in sound
banks based in different, possibly less satisfactory, regimes and mightdissuade host supervisors from imposing additional, potentially
draconian, regulation on such banks. The Group identified:
Authorization,
prudential standards,
transparency,
privacy, money laundering, and
cross border supervision
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as issues on which they felt that there is need for further work, both at
the analytical and policy level before any such guidance could be
developed. The FSA is involved in the Basel Group and will be
contributing to the work, participating in the drafting of papers andhosting both the groups next meeting and a roundtable for its
members and a number of European banks and service providers. We
welcome any contributions from the industry to this debate; and have
indeed been actively soliciting them.
Cross-border issues
There are also significant cross-border issues.
We foresee difficulties for depositors identifying the jurisdiction
within which e-banks offering services in the UK are based, given the
potential absence of physical presence and the ability for e-banks to
move to a new jurisdiction relatively rapidly. These concerns have
prompted a considerable amount of debate and analysis in the
international supervisory community. Within Europe home v host
state supervision is a particularly important issue. Banks may tend to
seek authorization wherever the tax, compliance and costs are lowest,
as location will become less of a critical issue since services may easily
be provided on a cross-border basis. E-banking is likely therefore to
significantly increase the usage of the 2BCD passport (that is theCommunity equivalent of your passport, but for a bank), thereby
making it even more crucial that all European regulators undertake
supervision in a satisfactory (and harmonised) manner and that
communication between regulators is adequate.
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A number of initiatives with implications for home and host
state supervision are being discussed, for example the draft e-
commerce and distance marketing directives and the Rome and
Brussels conventions. The debate is far from being resolved and aconsiderable degree of uncertainty remains. For example within the
e-commerce Directive home and host have been replaced with
home and country of origin, the implications of which are as yet
unclear. The current drafting (agreed at Council) is sufficiently vague
to potentially allow numerous regulators to assert jurisdiction over an
Internet service, thereby nullifying the main advantage of the
Directive, home state regulation. However we would expect that a
suitable compromise on the point will be worked out so as to avoid
this outcome. Certainly this is what we at the FSA are working
towards.
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CHALLENGES AND OPPORTUNITIES
E-banking is a generic term for delivery of banking services and
products through electronic channels, such as the telephone, the
internet, the cell phone, etc. The concept and scope of E-banking is
still evolving. It facilitates an effective payment and accounting
system thereby enhancing the speed of delivery of banking services
considerably. While E-banking has improved efficiency and
convenience, it has also posed several challenges to the regulators and
supervisors. Several initiatives taken by the government of India, as
well as the Reserve Bank of India (RBI), have facilitated thedevelopment of E-banking in India. The government of India enacted
the IT Act, 2000, which provides legal recognition to electronic
transactions and other means of electronic commerce. The RBI has
been preparing to upgrade itself as a regulator and supervisor of the
technologically dominated financial system. It issued guidelines on
risks and control in computer and telecommunication system to all
banks, advising them to evaluate the risks inherent in the systems and
put in place adequate control mechanisms to address these risks. The
existing regulatory framework over banks has also been extended to
E-banking. It covers various issues that fall within the framework of
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technology, security standards, and legal and regulatory issues. This
book containing 12 scholarly articles will benefit those interested
in the technological developments of E-banking in India
Electronic banking is the wave of the future. It provides
enormous benefits to consumers in terms of the ease and cost of
transactions. But it also poses new challenges for country authorities
in regulating and supervising the financial system and in designing
and implementing macroeconomic policy.
Electronic banking has been around for some time in the form
of automatic teller machines and telephone transactions. More
recently, it has been transformed by the Internet, a new delivery
channel for banking services that benefits both customers and banks.
Access is fast, convenient, and available around the clock, whatever
the customer's location (see illustration above). Plus, banks can
provide services more efficiently and at substantially lower costs. For
example, a typical customer transaction costing about $1 in a
traditional "brick and mortar" bank branch or $0.60 through a phone
call costs only about $0.02 online.
Electronic banking also makes it easier for customers to
compare banks' services and products, can increase competition
among banks, and allows banks to penetrate new markets and thus
expand their geographical reach. Some even see electronic banking as
an opportunity for countries with underdeveloped financial systems
to leapfrog developmental stages. Customers in such countries can
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access services more easily from banks abroad and through wireless
communication systems, which are developing more rapidly than
traditional "wired" communication networks.
The flip side of this technological boom is that electronic
banking is not only susceptible to, but may exacerbate, some of the
same risks-particularly governance, Legal, operational, and
reputational-inherent in traditional banking. In addition, it poses new
challenges. In response, many national regulators have already
modified their regulations to achieve their main objectives: ensuring
the safety and soundness of the domestic banking system, promoting
market discipline, and protecting customer rights and the public trust
in the banking system. Policymakers are also becoming increasingly
aware of the greater potential impact of macroeconomic policy on
capital movements.
MACROECONOMIC CHALLENGES
But the challenges are not limited to regulators. As the advent
of e-banking quickly changes the financial landscape and increases
the potential for quick ross-border capital movements,
macroeconomic policymakers face several cdifficult questions.
If electronic banking does make national boundaries
irrelevant by facilitating capital movements, what does
this imply for macroeconomic management?
How is monetary policy affected when, for example, the
use of electronic means makes it easier for banks to avoid
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reserve requirements, or when business can be conducted
in foreign currencies as easily as in domestic currency?
When offshore banking and capital flight are potentially
only a few mouse clicks away, does a government have
any leeway for independent monetary or fiscal policy?
How will the choice of the exchange rate regime be
affected, and how will e-banking influence the targeted
level of international reserves of a central bank
Can a government afford to make any mistakes? Will the spread
of electronic banking impose harsh market discipline on governments
as well as on businesses?
The answers to these questions fall into two emerging strands of
thought. First, the technological revolution-- particularly the
expansion of electronic money but also, more broadly, electronic
advances in banking practices-- could result in a decoupling of
households' and firms' decisions from the purely financial operations
of the central bank. Thus, the ability of monetary policy to influence
inflation and economic activitywould be threatened.
Second, as electronic banking expands, financial transaction
costs can decline significantly. The result would be tantamount to a
reduction in the "sand in the wheels" of the financial sector
machinery, making capital flows even easier to effect, with a potential
erosion of the effectiveness of domestic monetary policy. In this
regard, proponents of the Tobin tax--which would tax short-term
capital flows to increase their cost and, thereby, the sand in the
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wheels-- would feel that electronic banking makes an even more
compelling case for introducing such a tax.
CHALLENGES
Key challenges in developing a sophisticated e-banking application
1. Interoperability
There is a lack of common technology standards for e-banking.
Many protocols are being used for e-banking HTML, WAP,
SOAP, XML to name a few. It would be a wise idea for the vendor
to develop a e-banking application that can connect multiple
banks. It would require either the application to support multiple
protocols or use of a common and widely acceptable set of
protocols for data exchange.
There are a large number of different e-bankingphone devices
and it is a big challenge for banks to offer e-banking solution on
any type of device. Some of these devices support J2ME and others
support WAP browser or onlySMS.
Overcoming interoperability issues however have been localized,
with countries like India using portals like R-World to enable the
limitations of low end java based phones, while focus on areas such
as South Africa have defaulted to the USSD as a basis of
communication achievable with any phone.
The desire for interoperability is largely dependent on the banks
themselves, where installed applications (Java based or native)
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provide better security, are easier to use and allow development of
more complex capabilities similar to those of internet banking
while SMS can provide the basics but becomes difficult to operate
with more complex transactions.
2. Security
Security of financial transactions, being executed from some
remote location and transmission of financial information over the
air, are the most complicated challenges that need to be addressed
jointly by e-banking application developers, wireless networkservice providers and the banks' IT departments.
The following aspects need to be addressed to offer a secure
infrastructure for financial transaction over wireless network:
Physical part of the hand-held device. If the bank is offering
smart-card based security, the physical security of the deviceis more important.
Security of any thick-client application running on the
device. In case the device is stolen, the hacker should require
at least an ID/Password to access the application.
Authentication of the device with service provider before
initiating a transaction. This would ensure that unauthorized
devices are not connected to perform financial transactions.
User ID / Password authentication of banks customer.
Encryption of the data being transmitted over the air.
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Encryption of the data that will be stored in device for later /
off-line analysis by the customer.
3. Scalability & Reliability
Another challenge for the CIOs and CTOs of the banks is to scale-
up the e-banking infrastructure to handle exponential growth of
the customer base. With e-banking, the customer may be sitting in
any part of the world (true anytime, anywhere banking) and hence
banks need to ensure that the systems are up and running in a true
24 x 7 fashion. As customers will find e-banking more and more
useful, their expectations from the solution will increase. Banks
unable to meet the performance and reliability expectations may
lose customer confidence.
4. Application distribution
Due to the nature of the connectivity between bank and its
customers, it would be impractical to expect customers to regularly
visit banks or connect to a web site for regular upgrade of their e-
banking application. It will be expected that the e-banking
application itself check the upgrades and updates and download
necessary patches (so called Over the Air updates). However, therecould be many issues to implement this approach such as
upgrade / synchronization of other dependent components.
5. Personalization
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It would be expected from the e-banking application to support
personalization such as:
Preferred Language
Date / Time format
Amount format
Default transactions
Standard Beneficiary list
Alert.
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IMPACT OF E-BANKING ON
TRADITIONAL SERVICES
One of the issues currently being addressed is the impact of e-
banking on traditional banking players. After all, if there are risks
inherent in going into e-banking there are other risks in not doing so.
It is too early to have a firm view on this yet. Even to practitioners the
future of e-banking and its implications are unclear. It might be
convenient nevertheless to outline briefly two views that are prevalent
in the market. The view that the Internet is a revolution that will
sweep away the old order holds much sway. Arguments in favor are as
follows:
E-banking transactions are much cheaper than branch or even
phone transactions. This could turn yesterdays competitive
advantage - a large branch network, into a comparative
disadvantage, allowing e-banks to undercut bricks-and-mortar
banks. This is commonly known as the "beached dinosaur"
theory.
E-banks are easy to set up so lots of new entrants will arrive.
Old-world systems, cultures and structures will not encumber
these new entrants. Instead, they will be adaptable and
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responsive. E-banking gives consumers much more choice.
Consumers will be less inclined to remain loyal.
E-banking will lead to an erosion of the endowment effect
currently enjoyed by the major UK banks.
Deposits will go elsewhere with the consequence that these
banks will have to fight to regain and retain their customer base. This
will increase their cost of funds, possibly making their business less
viable. Lost revenue may even result in these banks taking more risks
to breach the gap. Portal providers, are likely to attract the most
significant share of banking profits. Indeed banks could become
glorified marriage brokers. They would simply bring two parties
together e.g. buyer and seller, payer and payee. The products will be
provided by monoclines, experts in their field. Traditional banks may
simply be left with payment and settlement business even this could
be cast into doubt. Traditional banks will find it difficult to evolve.
Not only will they be unable to make acquisitions for cash as opposed
to being able to offer shares, they will be unable to obtain additional
capital from the stock market. This is in contrast to the situation for
Internet firms for whom it seems relatively easy to attract investment.
There is of course another view which sees e-banking more as an
evolution than a revolution. E-banking is just banking offered via anew delivery channel. It simply gives consumers another service (just
as ATMs did). Like ATMs, e-banking will impact on the nature of
branches but will not remove their value. Traditional banks are
starting to fight back.
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The start-up costs of an e-bank are high. Establishing a trusted
brand is very costly as it requires significant advertising expenditure
in addition to the purchase of expensive technology (as security andprivacy are key to gaining customer approval). E-banks have already
found that retail banking only becomes profitable once a large critical
mass is achieved. Consequently many e-banks are limiting themselves
to providing a tailored service to the better off.
Nobody really knows which of these versions will triumph. This is
something that the market will determine. However, supervisors will
need to pay close attention to the impact of e-banks on the traditional
banks, for example by surveillance of: strategy customer levels
earnings and costs advertising spending margins funding costs
merger opportunities and threats.
Before talking about the issues of risks and responses to E
banking, I would like to spend a little time considering the widerquestion of what the e-banking revolution might mean for the future.
I take "E" to mean anything electronic whether it be Internet,
television, telephone or all three.
One of the issues currently being addressed is the impact of e-
banking on traditional banking players. After all, if there are risks
inherent in going into e-banking there are other risks in not doing so.It is too early to have a firm view on this yet. Even to practitioners the
future of e-banking and its implications are unclear. It might be
convenient nevertheless to outline briefly two views that are prevalent
in the market.
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Th