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11 I T IN BANKING SECTOR

1. INTRODUCTION

The Indian Banking system has an old age legacy. Earlier there
were indigenous bankers who consisted mainly of unorganized
moneylenders, mahajans and sahukars. Later, when British came to India
they brought with themselves the concept of organized banking. British
while leaving India left behind large number of small and privately held
banks. In 1964, the first major banking reform took place when 14 banks
were nationalized. It led to the rising of Indian Public Sector Banks. The
second banking reform was witnessed in 1990s when Indian Banking
Sector underwent complete change after the recommendations of the
Narsimhan Committee. Private and MNC banks entered banks entered
into the Indian Banking arena and challenged the monopoly of the PSU
banks. The Private and MNC banks brought new technologies and
technology intensive services with themselves. They rendered quality
service, which PSU banks were not providing, to service starved Indian
customers. There were a series of technological innovations and up-
gradations, e.g., ATMs, Internet Banking, credit cards and online banking,
etc. Private Banks and MNC banks had to provide something extra and it
was their service, which attracted a bulk of customer from the PSU banks.
Indian customers were lacking the world-class service in baking; they
were accustomed to the PSU (Sarkari) culture and the service of Private
and MNC banks was a delight for them.
Technology is helping the Indian Banks to cater to customer needs
in a much more efficient manner continuous and error free services to
customers. With the help of computerization and the use of modern
software, which can be called the gift of technology, the banks have been
able to provide single window system to their customers. In a single
window system, all the needs of the customers are taken care at a single

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counter. It is like a multipurpose counter where one can deposit cheque,


receive payments and deposit cash etc. This has been made possible only
due to the use of technology. Earlier one had to move from one counter to
the other counter for different sort of works. Thus this type of service not
only helps in better customer service but also minimizes the customer
service time as it avoids duplication of work and unnecessary hassles to
the customers. With the use of technology, banks are trying to minimize
there per customer service cost. According to industry estimates, assume
teller cost Re.1 per transaction, ATM transactions cost Re.0.45, phone
banking at Re.0.35, debit cards at Re.0.20 and Internet banking at Re.0.10
per transaction. So, now the emphasis is more on net banking then on real
banking or brick and mortar banking. Indian Banking system is moving
from real banking realm to virtual banking realm. Banks are establishing
more and more ATMs at different convenient locations and
interconnecting these ATMs not only with their networks but also with
their partner banks. Network with whom they have got mutual
understanding for sharing ATMs. With the least cost of Internet banking,
banks are paying higher emphasis on Internet banking.
In India, ICICI bank was the pioneer to introduce Internet
Banking. And later Citibank, HDFC Bank and other banks followed the
suit. PSU banks have lagged far behind in adoption of the Internet
banking facilities. But State Bank of India, which entered the arena of
ATM banking quite late, was able to expand at a rapid pace and cover
almost all the cities of India. Now ATM banking has become an integral
part of traditional cheque or withdrawal based banking. These services
have helped the PSU banks to maintain their customers. Now money is
transferred more in electronic form than in physical form. With the cost
of PC fast declining and the government’s initiative in providing the
infrastructural facilities for net banking and the faster developments in the

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telecommunication sector would be helping in the adoption of new


technology and IT-based banking services. Some authors’ view that the
Internet banking is just the extension of the traditional banking services
because it is the same service with customer friendly technological
interface. So, it is the value addition to the existing services. Banks are
reaping following benefits with the use of technology:

 With low investment, banks would be able to satisfy large


customer base. The technology has allowed the banks to move
from brick and mortar building to virtual interface which cost less
in comparison to the rising real estate prices which in turn leads to
increase investment. Low investment in turn helps in satisfying
large client base.
 These practices are leading to lower service cost per customer.
Thus leading to enhance profitability for the banks, which in turn
enhances the corporate image of the banks.
 With the use of technology banks are in a position to obtain the
customer database with a press of key and this helps the bank to
maintain high profile customers because it is an accepted
marketing principle that 80% of the revenue are generated by 20%
customers (20:80 principle). Thus, the modern technology helps in
tracking the key customers and provides them better services or
customized services.
 The alternative channels of service helps the bankers to add new
products to their portfolio and it helps them to device new products
according to customer needs. The banks can provide customized
value added services or tailor-made service to each customer based
on his/her requirement, e.g., foreign money transfer service,
electronic money etc.
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With the present avenues being saturated and greater


competition due to the entry of more players in the arena, the banks are
diversifying into new areas where they can use their financial expertise in
financial consultancy, insurance sectors, and fee-based earnings instead of
fund-based earnings. The mushrooming of the multichannel,
multifunction, self-service electronic delivery channels is fast replacing
the brick and mortar branches (real to virtual). There is a need to redefine
the business model of the Indian banking sector so that to optimize the
resources and deliver world class service in the light of modern day
technology. Today’s concept is to minimize the visit of the customer to
the bank and let him use the technology or let technology handle him-this
is the new survival mantra in the cutthroat scenario for banks.

OBJECTIVES OF THE STUDY

The objectives of the project “The Study of Application of


Information Technology in Banking Sector” include the following: -

 To know the present condition of technology in Indian banking


sector.

 To know about the electronic payment system.

 To know about the hackers and frauds in online banking.

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 To know about the risk management policies of Indian banking


sector.

 To know about the electronic banking sector.

LIMITATIONS OF THE STUDY

The scope of the project “The Study of Application of Information


Study in Banking Sector” has been restricted to some extent i.e. the
project does not include the following: -

 Supervision of Electronic Banking by Reserve Bank Of India

 Information Technology in Banks in International Scenario

 Software Application to Protect from Hackers & Frauds

 Case Studies Related To Hackers & Frauds

RESEARCH METHODOLOGY

COLLECTION OF SECONDARY DATA:


The secondary data has been collected from various sources which
are as follows:
 Various books related to information technology.
 Brochures of various banks.
 Weekly journals.
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 Articles in newspapers.
SAMPLE FRAME:
The data has been analyzed using ten samples of employees of
three different banks viz., Bank of Maharashtra, HDFC Bank and ICICI
Bank.

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2. E-BANKING: IN NASCENT STAGE IN INDIA

To keep pace with the changing environment worldwide, Indian


banking industry is fast adopting technology. It has embraced many new
features like Internet banking, ATMs, Phone banking etc. With the help of
new technology, banks are now able to offer products and services, which
were difficult or impossible with traditional banking. But the banks in
India still have to go a long way before making themselves technology
savvy.

With IT integration, a paradigm shift in the banking norms is on


cards. Banking fundamentals are thus facing major overhauls/
reengineering/ restructuring.

Two major trends have emerged in the transition of traditional


banking to high-tech banking:

 Advancements and restructuring through mergers, acquisition and


alliances.

 Universal banking where one stop shop provides all related


products and services to a customer.

At this point, it should be emphasized that mergers,


acquisitions, alliances, and adoption of Universal Banking concept are
just outcomes of IT-banking integration.

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Banking and IT
Advancements and innovations in IT industry have created a
revolution in the communication and distribution system of various
products and services through Web networking. Networking, as we know
has connected people around the globe, thus creating a revolution in
modern business activities.

Integration of these technological advances and existing banking


structures has changed and will change the definition and faces of global
banking. Internet banking has made banking a commodity where quality
is measured by efficient servicing and effective pricing and timeliness.

Technology Solutions for Indian Banks


Two types of technology stock bank products are available in the
market.

 Hardware products like ATMs and


 Software products like branch connectivity, cluster-banking
software, and trade finance software.

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3. ELECTRONIC CHEQUES AND EVIDENTIARY


VALUE

The advancement in technology has led to the creation of


electronic cheques, particularly in a business environment. Different
countries have a choice of cheque systems, which are governed by the
laws applicable to each country’s jurisdiction. The authentication of these
electronic instruments is proposed to be endorsed by digital signature. In
India, the enactment of the Information Technology Act, 2000 obligated
amendments to The Negotiable Instruments Act, 1881 in order to impart
legal validity to such electronic instruments. The authors in this article
elucidate the amended provisions and examine the evidentiary value of
such electronic instruments.
The electronic cheque or simply the e-cheque is gradually
replacing the longstanding paper cheque. The Negotiable Instruments
(Amendments and Miscellaneous Provisions) Act, 2002 was amended
to include the phrase “electronic cheque” in the definition of a cheques in
Section 6 reads as “ A ‘cheque’ is a bill of exchange drawn on a specified
banker and not expressed to be payable otherwise than on demand and it
includes the electronic form. “Explanation I. – For the purpose of this
section, the expression-
“A cheque in the electronic form” means a cheque which contains
the exact mirror image of a paper cheque and is generate, written and
signed in a secure system ensuring the minimum safety standards with the
use of digital signature (with or without biometrics signature) and
asymmetric cryptosystem.”
An electronic cheque simply means a cheque in the electronic
form, which is an exact replica of a physical cheque. It contains all the

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information that is found on a physical cheque, but it is “signed digitally”


or “endorsed”.
In an attempt to provide authentication, an apparatus commonly
known as “signature” was evolved as a proof asserting intention. This
involved appending a unique identifier to a message to identify the
sender/recipient. Conventionally, handwritten signatures are affixed
paper-based cheques. These signatures affixed using ink are used as an
authentication tool to identify that the person signing the document has
read and understood the contents. In the anonymous digital world, where
individuals may not actually communicate with each other, much
emphasis is placed on the authentication of the electronic information.
Therefore, it becomes necessary for evolving a secure authentication tool,
which led to the promotion of digital signatures.

DIGITAL SIGNATURE – HOW IT OPERATES


It is a data string, which associates a message in the digital form
with some originating entry. It is created and verified by means of
cryptography, the branch of applied mathematics that concerns itself with
transforming messages into apparently meaningless forms and back
again. It uses a scheme or mechanism consisting of signature generation
algorithm with a method for formatting data into message to produce a
digital signature, and a related signature verification algorithm with the
method to recover data from the message to authenticate a digital
signature.
It is important to note that, the Information Technology Act,
2000, in Section 3(2) provides for a particular asymmetric cryptosystem
and hash function as a means of authentication should be recognized as a
source of legal risk.

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The digital signature mechanism follows an “asymmetric


cryptosystem”. In this method of creating and verifying a digital
signature, there are two basic technical processes or functions: “Public
key encryption”, where encryption is the process by which information
is scrambled by the use of a code and “hash”.
The process of a creation and verification of digital signatures
using hash algorithm involves the following steps:
 Create a data unit that is to be signed, e.g., precisely an encircled
portion of data in digital form, which can be a text document,
software or any other digital information.
 Generate hash value called “Message Digest” or “Fingerprint” of
the message. A hash function is a process that creates a relatively
small number (called message digest) that represents a much larger
amount of electronic data.
 This hash value is computed from the data unit- a number using a
hash algorithm, which creates the compressed digital signature.
Digital signatures use a “one way hash function” and the important
thing about such a hash value is that it is nearly impossible to
derive the original data unit without knowing the data unit used to
create the hash value. Therefore, if the data unit is changed or
otherwise tampered with, the hash value will no longer correspond
to this data unit and produces an error message.
 Encrypt hash value with the private key of the signatory.
Encryption is a process of disguising a message in such a way so as
to conceal its meaning and substance. It also consists of a
procedure of converting plain text to a cipher text. Hence, the plain
text refers to the original digital file, whereas the ciphertext refers
to the disguised file.

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 Final step in the verification process, which involves the


regeneration of the hash value on the basis of the same data unit
and the same algorithm. The determined hash value is again
computed with rhea public policy key, which is then compared
with the signature attached to the data unit. If the product is
matching, it will verify the signatory’s private key, which is used to
sign and guarantee that the data unit has not been altered.

In this context, digital signatures are created when the drawer of


the cheque runs, the cheque through a one-way function creating a
message digest. The private key used by the drawer of the cheque is
known only to him. The drawer encrypts the resulting message digest by
using an asymmetric cryptosystem will allow the paying banker to verify
the signature by using it to decrypt the cheque.

EVIDENTIARY VALUE OF DIGITAL SIGNATURE ON


E-CHEQUES
Generally, authentication is achieved by what is known as security
procedure, but from the legal perspective, the security procedure requires
to be recognized by the law as a substitute for signature.
With the emergence of cyberspace it became necessary to amend
certain provision of the Indian Evidence Act to make electronic evidence
admissible in courts of law. Accordingly, the second schedule to the
Information Technology Act has amended the Indian Evidence Act,
1872 to remove any obstacle to the legal acceptance and validity of
electronic evidence.

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According to the amended Section 3 of the Evidence Act,


electronic records stand on par with paper-based documents and will be
deemed as documentary evidence in a court of law.
Section 39 of the Indian Evidence Act provides, “when any
statement of which evidence is given forms part of a longer
statement, or is contained in a document which forms part of a book,
or is contained in part of electronic record or of a connected series of
letters or papers, evidence shall be given of so much and no more of
the statement, conversation, document, electronic record, book or
series of letters or papers as the court considers necessary in that
particular case to the full understanding of the nature and effect of
the statement, and of the circumstances under which it was made.” It
can be inferred from this provision that where entry of an electronic
cheque forms a part of an electronic record, only that part which is
relevant may be taken as evidence before the court. Again what part is
relevant depends on the discretion of the court. The court must exercise
this discretion judicially to determine such relevance.
In India, evidentiary value of the digital signature has been in
question for long. A genre of evidence dominating the digital transaction
world leads to be recognized by the Indian Evidence Act, 1872, by
making the necessary amendments there in.
The IT Act 2000 provides for specific evidentiary value for secure
records and secure digital signatures. Subsequently, sub-section (2) to
Section 85B of the Indian Evidence Act has been inserted to be in
consonant with the IT Act to provide that, “In any proceedings, involving
secure digital signature, the court shall presume unless the contrary is
proved that-

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 The secured digital is affixed by the subscriber with the intention


of signing or approving the electronic records;

 Except in the case of a secure electronic record or a secured


digital signature, nothing in this Section shall create any
presumption relating to authenticity integrity of the electronic
record or any digital signature.”

The section limits its opinion to a secure digital signature by indicating


that there shall be no presumption relating to authenticity and integrity of
a digital signature except where it is a secure digital signature. If, by
application of a security procedure agreed to by the parties concerned it
can be verified that a digital that a digital signature, at the time it was
affixed, was-

 Unique to the subscriber affixing it

 Capable of identifying such a subscriber

 Created in a manner or using means under the exclusive control of


the subscriber and is linked to the electronic record to which it
relates in such a manner that if the electronics record was altered
the digital signature would be invalidated then such a digital
signature shall be deemed to be a secure digital signature.

As distinct from such a secure digital signature, Section 67A of the


Indian Evidence Act provides for proof as to the digital signature, and
Section 73A prescribes the method by which such a digital signature may

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be proved. According to Section 67A of the Indian Evidence Act,


“Except in case of a secure digital signature, if the digital signature of
any subscriber is alleged to have been affixed to an electronic record
the fact that such digital signature is the digital signature of the
subscriber must be proved.”
The Information Technology Act by inserting a new Sub-Section A
to Section 47 recognizes opinions of third parties not relevant as evidence
unless specifically provided for Section 47A reads as, “When the court
has to form an opinion as to the digital signature of any person, the
opinion of the certifying authority, which has issued the Digital
Signature Certificate, is an relevant fact”. An opinion of third parties is
in admissible and as evidence except in certain cases when the court
requires an opinion of experts. With this insertion, opinion of third parties
became relevant.

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4. THE FUTURE OF PLASTIC MONEY

Use of plastic Money is growing at an unprecedented rate in India.


Lesser number of installed Point-of sale (PoS) terminals is the major
obstacle in the growth of debt cards; smart card has many innovative
features, which may spurt the use of cards in India. Smart card is safer to
use in electronic form than the present form of cards

“Credit card business is a volume game and initially highly

capital intensive.”

- A senior banker

Plastic money is growing by leaps and bounds in India. Today,


many banks are offering cards. Though the foreign banks have a
dominant share, aggressive entry of the Indian banks like SBI, ICICI and
HDFC Bank may soon change the rules of the game. Today, SBI-GE is
the third largest issuer of credit cards.
The credit card market in India is projected to grow at the rate of
20-25% per annum in the coming years. There are currently around 3.8
million credit card users compared to 3.0 million in 1990. Visa credit card
grew by 46.4% in India while the growth in Asia Pacific was only 6% for
Q3 of 2003. The competition among banks has been growing and they are
offering so many add-on incentives like waiver of first year annual fee,
discount on retail stores, personal loans etc., to woo the customers.
Debit card is another segment, which is catching up fast. There are only
80,000 to 90,000 merchants having point-of-sale (PoS) terminals installed and
majority of them are located in metros, which is the major obstacle to the growth of

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debit cards. To increase the usage of debit cards, banks should concentrate on
increasing installation of PoS terminals in semi-urban and rural areas.

Smart Card: A Future Card


Smart cards are the wave of the future for consumer use,
commercial use and terminal network security. Smart cards are in much
wider use in Europe than in US.
A smart card is a plastic card with an imbedded computer chip that has been
stored inside the card. It has the capacity to store up to 80 times more information
than other magnetic stripe cards. This mini-computer using an intelligent chip, stores
payment information similar to a magnetic stripe card, but it also includes additional
information such as online authorization controls, credit limits, stored value (gift
card), reward points (loyalty), Personal Identification Number (PIN), etc. Smart cards
can be contact less, suggesting that the chip transfers data via a built-in antenna
without physically touching the smart card reader.
In order to accept smart cards, the business must have an EMV ready smart
card Point-of-Sale (PoS) terminal. Merchants can be standalone PoS smart card
terminals or smart card readers that are integrated with cash registers. Currently, over
90% PoS terminals are not EMV smart card ready.

Smart Cards and Internet Payment


Issues of security and fraud are major drawbacks to using credit
and debit cards over the Internet. Unlike the hand-written receipts, there
are no signed sales receipts associated with today’s e-commerce
transactions. Without such evidence, it is difficult as much as 84% of all
electronic commerce transactions.
At the same time, consumers are holding back on making Internet purchases
due to lingering security concerns. According to Master Card, 90% of Internet non-
buyers worry that their personal and financial information may fall into the hands of
hackers. It is this reluctance that is the real barrier to building an online business.
Using smart cards along with a strong Internet authentication will help overcome
these issues.

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5. LEADING ISSUE IN BANKING TECHNOLOGY

Many Indian banks are adopting the information technology not


merely as a frill, but as a dire need. It is helping the banks in many core
and diversified functions. Technology is key business enabler in six
critical areas of banks. These are augmentation profit pool, operation
efficiency, customer management, product innovation, distribution and
reach, and efficient payment and settlement system. For the success of
any IT program, integration of IT and business strategy is crucial factor.
Banking basics have undergone radical shifts, thanks to the advent
of modern technology, increasing pace of globalization and the need for
stronger fundamentals to operate in the fiercely competitive environment.
The digital divide among Indian banks that was quite discernible before
the millennium has considerably narrowed down with many banks taking
to technology not merely as a frill, but as a dire necessity. Technology
today catalyzes many core and diversified functions in banks, including
issues like transaction automation and multiple delivery channels, product
innovation, data warehousing and effective MIS, secured storage
mechanisms and a real-time based payment and settlement system.

Seen in the present context, technology is a key business enabler


in six critical areas of banking.
Augmenting Profit Pool
Sustained profits and profitability have been major yardsticks for
assessing the true health of banks in a fiercely competitive and
compelling business environment. Technology has proved, at least in case
of new generation banks and major public sector banks to be a major
profit driver. With progressive decline in interest rates, banks’ spreads
have come under pressure, which per se, affects their profitability.
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However, technology had a favorable effect in terms of reducing the


operating cost and improving the burden to a considerable extent.
Technology also enable commissioning of new products like Net banking,
mobile banking and other forms of 24X7 banking like ATMs and
Networked services across branches like anywhere banking, electronic
funds transfer, customer relationship management, call centers across the
banks. Hi-tech and hi-touch services, it goes without saying, have also
enlarged the clientele base in banks and commanded considerable
customer loyalty. Technology has created an enabling environment for
banks to diversify into various fee-based activities like bancassurance and
funds transfer arrangements.

Operational Efficiency
Operational efficiency, in terms of optimum utilization of
resources, has been one of the most positive offshoots of technological
application in banks. Thanks to greater technological application, banking
system has seen a near consistent improvement in the intermediation
efficiency and consequent decline in transaction cost. Yet, technology
application has been by and large confined, especially in the state-owned
banks, towards cost saving and improved service standards through
product innovation. While savings in cost and improvement in service
quality could turn out to be short-term in nature, it is essential that
technology is leveraged as a long-term and efficient cross-functional
application. It is also time that the focus of technology shifts from
product innovation to process innovation commonly referred to as
Business Process Reengineering (BRP), for banks to gain long-term
operational efficiency.

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Customer Management
Technology also spells significant benefits on the realm of
customer research and management. In a predominantly buyers’ market
and high propensity if customers to switch service providers, customer
management need no longer is a front office function, but a bank-wide
obsession. Many banks have duly realized the significance of such
functions and introduced new models like the High Net Worth clients’
branch, imbued with state of the art technology, exquisite ambience and
quickest possible processing of transactions. Customer management is a
very sensitive issue entity hears only from 4% of its dissatisfied customer,
while 96% of its customers quietly go away of which 91% never come
back. Technology, thus, already implemented the tech aided e-CRM
application as strategic tool to retain as well as expand their customer
base. The bottom line is that banking products are getting commodities
and price wars are slowly leading to a zero-sum game. In such a scenario,
technology backed customer orientation will hold the key to take service
standards anywhere near to world-class.
Product Research
In the field of product research as well, technology plays a decisive role, in
terms of swift product innovation, an active R&D set up effective pricing of products
to protect banks’ margins and safeguard customers’ interests. Banking product life
cycles are getting shorter day by day and more than delivery, product servicing
defines competitive edge for banks. Marked to market product processes are equally
important for sustained improvement in the value chain of services and command ‘top
of the mind recall’ from the customers. Technology also aids product profitability
research and review, which have not adequate attention in many of the banks.

Distribution Reach
The thumb rule for strategic management masters is that structure
must follow strategy in any business reorganization. Technology, thus,

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calls for attendant restructuring endeavors that will be in tune with the
level of technology application. For instance, many banks need to put in a
place a leaner structure and remove intermediate decision-making tiers.
That is how one can see that many of the regional outfits of banks are
slowly being dismantled while branch expansion is not being accorded
the thrust it used to be given earlier. Rightsizing of human and physical
overheads is a major strategy adopted by many banks wherein the role of
the earlier brick and mortar banking is slowly getting dissipated. In turn,
devices like Internet and mobile banking. Technology, thus, facilitates
downsizing of overheads cost without compromising much on clientele
reach. Public sector in the rural and semi-urban areas. Many of these
branches are not performing to their potential mainly because of their
typical business mix, cost diseconomies and lack of technology-based
services offered in these branches. Technology can facilitate the branch
rationalization exercise such as setting up mobile branches and satellite
branches, especially in the rural areas, and bring many of those into the
“Performing” category without affecting the extent of client reach.

Efficient Payment and Settlement


Innovation in technology and worldwide revolution in information
and communication technology have emerged as dynamic sources of
productivity growth. This is true about banking as well as its relationship
with technology has become symbiotic fundamentally. Payment system is
probably the most important mechanism in the banking sector where
technology’s interactive dynamics is getting manifested in an increasing
measure each day.
However, so far as integration is concerned, Indian banks still have a fair
distance to traverse. In order to efficiency leverage an integrated payment and

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settlement systems, banks, especially those in the public sector, need to address
certain core issues expeditiously. These include the following:

 Toning up of infrastructure in terms of standardization and build


up security features like firewalls, Intrusion Detecting System
(IDS) and implementing a security policy.
 Total inter-branch connectivity.
 Popularization of electronic funds transfers mechanism.
 Institute collaborative arrangements, including outsourcing of IT
expertise.
In addition to the above, banking sector is also confronted with a
classic dilemma. It relates to differentiating between and mapping the
role of business vis-à-vis the role of information technology, a feature
typifying an enterprise wide technology initiative. This is where the
significance of integrating business and IT plans comes to the fore.
Integration of IT and Business Strategy
Many banks, especially those in the public sector, are embarking
on a comprehensive set of IT initiatives encompassing total branch
automation, core banking solution, networking of ATMs, Internet and
mobile banking, data warehousing and a comprehensive MIS backed
decision support system. Contrary to popular perception, such initiatives
are not merely because of competitive pressure from the foreign and new
generation private banks. The avowed goal of these initiatives was to
improve overall efficiency in terms of lower intermediation cost, swifter
decision-making process, grater customer convenience and effective
internal control, including an objective risk management mechanism. It
goes without saying that the fast pace of globalization and progressive
move towards reaching global operational benchmarks also catalyzed the

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technology drive dividends to these banks although the need of the hour
is to consolidate the gains so far and address the weak links.
Recently, a study was conducted by National Institute of Bank
Management, at the behest of RBI, for suggesting a methodology to
integrate IT and business plans in banks. The study has proposed an
‘Enterprise Maturity Model’, for attaining total convergence of
technology and business strategies with focus on selected, generic
business strategies. The model suggests solutions not merely for business
and technology, but for issues related to human resources and customers
who form an integral part of banks’ strategic road map.

The suggestions in the study promise to be useful benchmarks for banks in


their complete switchover to the virtual mode. Application of the model can help
banks to develop effective Executive Information System as effective decision
support, integration of varied workflow processes, objective customer analysis and
most importantly, devise simulative and real-time based tools to track business, profits
and profitability. Effective and an objective technology application system will also
enable a business process reengineering mechanism that will considerably enhance
the real technological capabilities of banks.

Core Banking Solution


In the light of ongoing emphasis on business process
reengineering, one comes across many banks assiduously pursuing a
centralized server-based system, better known as Core Banking Solution
(CBS). CBS offers, among others, benefits like privilege of single
window service to customer in order to facilitate a shift from “customer
of the branch” to “customer of the bank” concept, online transfer of
funds, longer business hours, lower transaction costs, slimmer staff
structure at branches, effective monitoring of business, comprehensive
MIS as a policy support and above al, improved visibility of the banks
implementing CBS. A robust MIS also supports vital functions like ALM,

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risk management, product profitability and customer profitability


analyses leading ultimately to efficient portfolio management in banks.
CBS also leads to significant mileage in terms of staff and other overhead
costs. Staff rendered surplus on account of CBs can also be put for
marketing and recovery functions, which warrant dedicated staff in the
present context.

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6. TECHNOLOGY AND FRAUDS

ATM CRIMES FRAUDS:


ATM crimes and frauds are rising throughout the world. ATM
industry and money other organizations are fighting with them in many
ways like, by issuing security tips, making ATMs more innovative etc. In
India, where the use of ATMs is growing by exponential, banks have to
take benefit from international experiences and safeguard their customers
from frauds.
ATM crimes and frauds are mounting day by day. Even though
they make up a small percentage of criminal activities they are not less
important. Criminals are raiding millions every year.

Popular Ways to Card Frauds:


Some of the popular techniques used to carry out ATM crime are:
 Through Card Jamming ATM’s card reader is tampered with in
order to trap a customer’s card. Later on the criminal removes the
card.

 Card Skimming is the illegal way of stealing the card’s security


information from the card’s magnetic stripe.
 Card Swapping, through this customer’s card is swapped for
another card without the knowledge of cardholder.
 Website Spoofing, here a new fictitious site is made which looks
authentic to the user and customers are asked to give their card
number, PIN and other information, which are used to reproduce
the card for removing the cash.
Global Measures to Fight the Frauds

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To guard against these frauds ‘The Global ATM Security Alliance


(GASA)’, which was formed in June 2003, has issued the customers
guide and some tips to prevent against card-related frauds.

The World’s Top 10 tips for ATM Use to Enhance the ATM customer
Experience and Security

CHOOSING AN ATM
Tip 1: Where possible, use ATMs with which you are most familiar.
Alternatively, choose well-lit, well-placed ATMs where you feel
comfortable.

Tip 2: Scan the whole ATM area before you approach it. Avoid using the
ATM altogether if there are any suspicious-looking individuals around or
if it looks too isolated or unsafe.
Tip 3: Avoid opening your purse, bag or wallet while in the queue for the
ATM. Have your card ready in your hand before you approach the ATM.

Tip 4: Check that other individuals in the queue keep an acceptable


distance from you. Be on the lookout for individuals who might be
watching you enter your PIN.
Tip 5: Stand close to the other ATM and shield the keypads with you’re
when keying in your PIN (you may wish to use the knuckle of your
middle finger to key in the PIN).
Tip 6: Follow the instructions on the display screen, e.g., do not key in
your PIN until the ATM request you to do so.
Tip 7: If you feel the ATM is not working normally, press the cancel key
and withdraw your card and then proceed to another ATM, reporting the
matter to your financial institution.
Tip 8: Never force your card into the card slots.

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Tip 9: Keep your printed transaction record so that you can compare your
ATM receipts to your monthly statement.
While the ATM industry is aggressively addressing ATM-related
frauds and crimes, few in the industry know about these extraordinary
efforts. Some of the important works are given below:

 From time to time the Electronic Funds Transfer Association


(EFTA) with the help of ATMIA is publishing tips on PIN security.
 To combat the cross-border crimes, GASA is working in
association with Interpol, the Metropolitan Police Flying Squad for
New Scotland Yard and leading card issuers.
 ATMIA is educating the people and ATM industry about most
effective way of fighting ATM crimes and frauds and honoring
with award that contributes significantly counter the fraud.
 Fair Isaac Card Alert – it is a service, which analyzes millions of
daily transaction, identifies the suspicious transactions and sends
the card number and related information of suspicious transaction
to the concerned bank. This services has helped a lot in solving
many card-related frauds including high-profile skimming cases.
 Leading ATM manufacturers are producing innovative ATMs,
which are helping to counter the frauds. Biometric technology is
one of the examples, which removes the need of Personal
Identification Numbers (PINs).
Biometric systems identify or authenticate a person’s identity
using different alternatives like face expressions, fingerprint, hand
geometry, voice, retina, etc.

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INTERNET BANKING AND FRAUDS


Fraudsters are using innovative ways like Web and Mail spoofing,
attacking the bank’s server etc. to break the security walls and commit
fraud. There is a need for arrangements, which help presence of
integrity, confidentiality and authorization of information.

“Thieves are not born, but made out of opportunities”

This quote exactly reflects the present environment related to


technology, where it is changing very fast. By the time regulators come
up with preventive measures to protect customers from innovative frauds,
either the environment itself changes or new technology emerges. This
helps criminals to find new areas to commit the fraud.
Some common Internet banking frauds and their causes have been
discussed here.

 Attacking the Bank’s Server


In this case, the fraudster takes control of the server of the bank
and by visiting the bank’s website carries out transaction through
impersonation.
These attacks are due to bad programming, which mostly
prevail in general purpose software. Such attacks are called buffer-over-
flow attacks. Due to buffer-over-flow defects in the software, fraudster
can use the commands on the server without providing essential
information like password etc.
 Mail Spoofing
In the mail spoofing or e-mail forgery, the fraudster sends the
information to bank customers in such a form that it seems that
information is from the authentic bank source. One such incident
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happened with ICICI Bank customers to disclose passwords and other


information. The e-mail said:
“For security purpose your account has been randomly chosen for
verification. To verify your account information we are asking you to
provide us with all the data we are requesting. Otherwise, we will not
be able to verify your identity and access to your account will be
denied. Please click on the link below to get to the ICICI secure page
and verify your account details. Thank you.”

Mail spoofing happens due to lack of criteria to verify the


source address authenticity. Anyone can set up a mail server and can
forge a mail posing as an authentic source.

 Web Spoofing
In Web Spoofing, customers of the bank are lured to log in at the
fraudster’s website, which is similar to the bank’s website. Once the
customer provides sensitive information, they can be stolen easily by the
fraudster, who uses the stolen sensitive information like password and
username etc., to carry out the transaction on the bank as a real customer.
In the whole case, the only loser is the customer because he does
not have any means to prove that it was not he who did those
transactions, but the fraudster.
Ignorance of the customer to intercept Universal Resource Locator
(URL) is the major cause of Web spoofing. Look at the following two
URLs
 http://secure.bankname.com/carloanfind/carloans.asp
 http://secure.bankname.com?
@569857125/carloanfind/carloans.asp

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It is very difficult for a normal customer to understand the


difference between these two URLs. He can be easily cheated because the
first URL will drive him to the original site while the second one to the
fraudster’s site.

Denying Service from Bank’s Server


The fraudster’s intent here is not to commit any fraud but to create
inconvenience for the banks. The customer here literally cannot access
the services of the bank.
Intervention of fraudster’s with Transmission Control
Protocol/Internet Protocol (TCP/IP), the computer communication
languages, Router Poisoning that help the customers to reach different
parts of the network and Domain Name System (DNS) service, that helps
the two computers to communicate through IP number are some reasons
for such inconvenience.

It is clear that to plug all the loopholes is very difficult for any
regulator. This is a challenge to the mission of fast automation. It is
essential on the part of the banks, the regulators and the service providers
to create a source and safe automation environment that has the
confidence and trust of the customers.

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7. CREDIT CARD FRAUD ON INTERNET

Credit card fraud has become regular on Internet. All the agencies
involved in the transaction, cardholders, online merchants and the card
issuers suffer losses. However, it is the online merchant who suffers the
most. This article examines the nature of credit card fraud, types of credit
card frauds, and the effects. This article also discusses the preventive
measures.

Common Types of Card Frauds


There are different types of frauds involving credit cards. The
fraudulent activities start from the application process itself.

Application Fraud:
In application fraud, the fraudster obtains personal confidential
information of the other person needed in the credit card applications, like
social security number, date of birth using a variety of means. Internet
search engines and databases are making these tasks easier. Using this
information, he fills in an application for a credit card and after receiving
it, uses it as if he is the true holder. The person in whose name the card is
issued might come to know about this only after the damage is done.

Counterfeit Cards:
In this, a criminal gains access to a valid card number and other
information. For example, the salesperson at the supermarket briefly
takes possession of the customer’s card during payment process, which
he runs on a terminal. But without the knowledge of the cardholder, the
salesman can also run it on another machine, which can capture all the
details in the card. Using this information and tools like embossing

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machines, a fraudster can create a counterfeit card. This process is known


as ‘skimming’ and simple hand-held devices are now available for the
purpose. Further, the information skimmed can also be used for purchases
on the Internet or Telephone.

Stolen and Lost Cards:


By far, this is the most common form of fraud in the market place.
When the criminal has access to a stolen or lost card, he also gains access
to all the personal information. Apart from using this card fraudulently,
the criminal can also use the information to ‘broaden’ the fraud by
applying for new cards or fabricating new ones.

Other Forms:
From the point of view of a merchant, credit card frauds can be
divided into three ways. There are organized fraud, opportunistic fraud
and cardholder fraud. The advantages offered by Internet are also
attracting the criminals in a big way. In an organized criminal activity, the
gang’s obtain credit cards using any of the means discussed above. They
normally identify a drop location like a vacant house or warehouse, spend
the card up to the maximum limit, and ask the merchandise to be dropped
at this selected location. These gangs have a thorough understanding of
the system and take advantage of the fact that there is normally a time gap
of more on to the next card. Opportunistic fraud is committed normally
by amateurs who get an opportunity of handling credit cards, like waiters
in restaurants. Cardholder fraud involves the cardholder himself who
might claim that he never placed the order or he never received the goods.
It could also involve one of his family members or friends who used the
card without his knowledge.

Bust Out Fraud:

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According to Daniel Buttafogo of Juniper, an Internet-based credit


card company, in this fraud, true customers gradually build up as much
available credit card and then ‘bust out’ with large purchases of items that
could easily resold like jewelry or draw large cash advances etc. Here the
fraudster will draw bad checks on one account to pay when this cannot be
done any longer, the customer does a vanishing act. This kind of fraud is
the most difficult to catch, as the customer exhibits exemplary behavior
till the last moment.

Friendly Fraud / Denial of Receiving Product:


Friendly fraud occurs when the actual cardholder carries out a
transaction but later denies or claims that his card was stolen or used
without his authorization. Customers might deny receipt or signing or
even ordering the product.

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8. INFORMATION TECHNOLOGY RISK IN BANKING:


MANAGEMENT & MEASUREMENT

Information Technology (IT) is not merely a technical function,


but a management process, which needs to be managed effectively. To
measure the IT risk in banks there are various methodologies available.
All of them at large follow the same primary steps like threat analyst etc.
for technology risk assessment; American Banker Association has
recommended various resources.

Risk management approach enables the management to give


appropriate treatment to the business assets and decisions based on their
criticality to business goals and business continuity. While the basic
concepts remain the same, Information Technology introduces new
vulnerabilities as well as new techniques for risk management. As such,
technology risk management, while following the fundamentals, needs to
address these new vulnerabilities.

Technology Risk Management


Information Technology Risk is the risk that can arise due to use
or non-use of technology in business or for business. The primary
objective of an organization and its ability to conduct business. The
business of IT in business is to see that the business continues. IT risks
management has to ensure that this purpose is achieved. As such IT risk
management process should not be treated as a mere technical function
carried out by the IT people and should not just confine to IT assets. It is
essentially a management function. However, the role of IT people is also
vital because IT security and IT risk management are interrelated and an
effective risk management process is an important component of a
successful IT security program.
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The broad objective of performing IT risk management is to


enable the organization to achieve its business goals by better securing
the IT systems and enabling management to make well-informed risk
management decisions in areas where technology is involved.

IT risk management is to the process that helps to balance the


operational and economic costs of risk mitigation measures and achieve
gains by protecting the IT systems and data that support their
organization’s goals. A well-structured risk management methodology,
when used effectively, can help management identify appropriate controls
for providing the mission-essential security capabilities.

Various organizations worldwide have come out with risk


management frameworks, policies, standards and principles that are quite
useful in IT risk management and measurement.

In India, RBI has been providing much guidance in this area to


Indian banks. There is a good number of references and guidelines
provide in the reports of various RBI Committees. The report of the RBI
Committee on computer audit provide a comprehensive checklist
covering many technology-related areas, which is useful in Technology
Risk Assessment.

Technology Risk Assessment/Measurement


Risk assessment/measurement is a process used to identify and
evaluate risks and their potential effect/exposure. Risk exposure is equal
to the amount of probability multiplied with impact on business.

. Unlike financial risk, technology risk cannot be easily quantified or


measured. But, banks can gain financial and operational benefits by
conducting an effective Technology Risk Assessment (TRA). These
include enhancing corporate governance over IT activities, proactively

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identifying vulnerabilities and implementing risk business imperatives,


and efficiently using corporate risk management resource, including
audit, in ensuring a cost-benefit control environment.

Threats to an IT system must be analyzed in conjunction with the


potential vulnerabilities and the controls in place for the IT system to
determine the likelihood of a future adverse event and its impact. Impact
refers to the magnitude of harm that could be caused by a threat. The
level of impact is governed by the potential impact on organizational
goals and, in turn, determines the level of criticality of an IT
asset/resource.

Technology Risk Assessment (TRA) Methodologies


The quality of the technology risk assessment affects the
effectiveness of risk-based decision of management. With the increasing
interest in operational risk management and concerns about corporate
governance, May proprietary enterprise risk-management
methods/solutions came in the market to help banks to meet the
assessment challenge. Since these methodologies are mostly developed
for and by traditional risk managers, they are generally weak in areas
relating to technology, although they provide an adequate perspective
from a credit, financial, and environmental standpoint.

Risk assessment methodology generally follows the following primary


steps:

 Threat and Vulnerability Identification


 Probability/Likelihood Determination
 Impact Analysis
 Risk Determination
 Control Recommendations

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 Results Documentation
Technology Risk Assessment (TRA) methodologies are not much
different from general risk assessment methodologies and they, too,
follow these steps. However, the risk assessment tools would be different
in case of technology risk because to assess adequately and to prioritize
technology risk, the risk assessment tools must be supplemented with
methodologies specifically geared to technology.

The American Bankers Association lists the following


recommended resources for TRAs:

 International Standards Organization (ISO) 17799 (ISO


Standards)
 Control Objectives for Information Technology (COBIT)
 SysTrust
 Operationally Critical Threat, Asset and Vulnerability
Evaluation (OCTAVE)
 National Institute of Standards and Technology (NIST)
These resources are inexpensive to implement and serve the
purpose in most cases. They are based on extensive research from
government and professional security experts and are vendor neutral.
These methodologies enjoy excellent reputation among corporate
governance experts.

A summary description of each of the above TRA methods is as


follows:

ISO Standards (International Standards Organization)


The ISO along with the International Electro-technical
Commission forms the specialized system for worldwide standardization.
The stated purpose of the ISO standards is to “provide a common basis

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for developing organizational security standards and effective security


management practice and to provide confidence in inter organizational
dealings.” Originally, developed in Britain, it is a favored TRA approach
in Europe. The standard is often referenced and leveraged by other
prominent methods and covers 10 areas namely, Security policy,
Communications and operations management, Organizational security,
Access control, Asset classification and control, System development and
maintenance, Personal security, Business continuity management,
Physical and environment security, and Compliance.

COBIT (Control Objectives for Information Technology)


COBIT has been developed as a generally applicable and accepted
standard for good IT security and control practices that provides a
reference framework for IT governance. COBIT is sponsored by the IT
Governance Institute, established by the Information Systems Audit and
Control Association (ISACA), and addresses risk from both the business
and technology perspectives. It is an internationally recognized tool,
incorporating both operation management and audit concerns, which have
been adopted in organizations including the US House of
Representatives, Charles Schwab & Co., and Swift.

COBIT focuses on processes and their ownership. It provides


excellent methodology for various parts of an organization to have the
same perspective at IT risk management. However, COBIT is more of a
general assessment tool and detailed issues are to be considered in the
form of audit programs. As such some consider it to be too theoretical.

Sys Trust
The American Institute of Certified Public Accountants (AICPA)
and the Canadian Institute of Chartered Accountants (CICA) introduced a

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service to provide assurance on the reliability of systems. The purpose of


this service, known as Sys Trust, is to increase the comfort of
management, customers and business partners with the systems that
support a business or particular activity. The service considers four
principles to evaluate whether a system is reliable.

 Availability: The system is available for operation and use at


times set forth in service level statements or agreements.

 Security: The system is protected against unauthorized physical


and logical access.

 Integrity: System processing is complete, accurate, timely and


authorized.

 Maintainability: The system can be updated when required in a


manner that continues to provide for system availability, security
and integrity.

OCTAVE (Operationally Critical Threat, Asset and


Vulnerability Evaluation)
Developed by the Software Engineering Institute (SEI) at Carnegie
Mellon University, OCTAVE is a comprehensive, self-directed approach
to TRA. It differs from traditional TRAs in that it first determines which
information assets really need to be protected and then evaluates the
technology infrastructure to determine the vulnerability of those assets.
OCTAVE presents an exciting TRA to ORMs because the SEI is home to

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the CERT alerts and other information relating to managing security


vulnerabilities. This robustness of tools, workshops, and publications
relating to OCTAVE significantly enhances an effective assessment by
the ORM.

NIST (National Institute of Standards and Technology)


The Information Technology Laboratory (ITL) at the NIST in USA
is a body, which provides technical leadership for the nation’s
measurement and standards infrastructure. These include developing
standards and guidelines for the cost-effective security and privacy of
sensitive unclassified information in federal computer systems.

Like the other organizations mentioned previously, NIST provides


a detailed checklist of IT-related risk mitigation strategies that should be
assessed as a part of a TRA. In addition to its detailed coverage of
security issues, the checklist enables to determine if risk is managed by
using five “levels of effectiveness”.

1. Control objectives documented in a security policy.

2. Security controls documented as procedures.

3. Procedures have been implemented.

4. Procedures and security controls are tested and reviewed.

5. Procedures and security controls are fully integrated in to a


comprehensive program.

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However, this is mostly followed by big government organizations


and following these methodologies could be too burdensome in a smaller
organization.

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9. PRIMARY DATA & ITS ANALYSIS

The primary data has been collected through surveys in banks


(questionnaire) viz., Bank of Maharashtra, ICICI bank, HDFC bank.

Q.1) I.T. in banks is much more advanced than traditional banking?

AGREE DISAGREE FIFTY-FIFTY

ANALYSIS: -
Bank of ICICI HDFC
Maharashtra
AGREE 96% 98% 100%
DISAGREE 3% 2% 0%
FIFTY-FIFTY 1% 0% 0%

GRAPH: -

100%
99%
98%
97%
96%
95%
94%
Bank of ICICI HDFC
Maharashtra

AGREE DISAGREE FIFTY-FIFTY

EXPLANATION: -

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It is clear2:1 ed from questionnaire method that every one agrees


to the statement “I.T. in banks is much more advance than traditional
banking”. Approximately ninety eight percent of bank employees agree to
the above statement.

Q.2) The ratio of online transaction v/s manual transaction.

1:2 2:1 Equal Can’t Say

ANALYSIS: -
Bank of Maharashtra ICICI HDFC

1:2 30% 0% 0%
2:1 60% 100% 100%
Equal 0% 0% 0%

Can’t Say 10% 0% 0%

GRAPH: -

100%

80%

60% Can’t Say


Equal
40%
2:1
20% 1:2

0%
HDFC ICICI Bank of
Maharashtra

EXPLANATION: -

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According to the above data collected it is clear that


approximately ten percentage of employees says that the ratio of online
transaction v/s manual transaction is 1:2, eighty seven percentage says it
is 2:1, zero percent says it is equal & three percent cant say anything.

Q.3) Information technology in banks encouraging online frauds.


Yes No To some extent

ANALYSIS: -
Bank of Maharashtra ICICI HDFC

Yes 90% 92% 98%


No 6% 5% 1%
To some extent 4% 3% 1%

GRAPH: -

100%
80%

60%
To some extent
40% No
20% Yes

0%
Bank of ICICI HDFC
Maharashtra

EXPLANATION: -
According to the above data collected it is clear that approximately ninety
three percent of employees says yes, four percent says no and three percent says to
some extent.

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Q.4) Type of banking facility that will be friendly to illiterate


customer.
Online banking Manual-banking Both

ANALYSIS:-
Bank of Maharashtra ICICI HDFC

Online banking 2% 0% 0%
Manual banking 97% 98% 100%
Both 1% 2% 0%

GRAPH: -
1%

0%
2%

100%
80%
60%
100%
97%

98%

40%
20%
2%

0%

0%

0%
Bank of ICICI HDFC
Maharashtra

Online banking Manual banking Both

EXPLANATION:
According to the above data collected it is clear that
approximately ninety seven percent of employees says that manual
banking type of facility is friendly to illiterate customers, two percent
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says online banking and one percent says both online as well as manual
banking is friendly to the illiterate customers.

Q.5) In what way I.T. in banks affects the work of the employees.
Increases the work Decreases the work

Same at both levels

ANALYSIS: -

Bank of Maharashtra ICICI HDFC

Increases the work 45% 30% 40%


Decreases the work 50% 63% 55%
Same at both levels 5% 7% 5%

GRAPH: -

100%
5%

5%
7%

80%
50%

55%
63%

60%
40%
45%

40%

20%
30%

0%
Bank of ICICI HDFC
Maharashtra

Increases the work Decreases the work Same at both levels

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EXPLANATION:
According to the above data collected it is clear that approximately
thirty eight percent says I.T. in banks increases the work of the
employees, fifty six percent says decreases the work and six percent says
it is same at both the levels.

Q.6) Does I.T. in banks increasing the cost of banking operations /


banking transaction.

YES NO EQUAL

ANALYSIS: -

Bank of Maharashtra ICICI HDFC

Yes 98% 94% 100%


No 2% 5% 0%
Equal 0% 1% 0%

GRAPH: -

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0%

0%
1%
2%
100%

5%
80%

60%

100%
98%

94%
40%

20%

0%
Bank of ICICI HDFC
Maharashtra

Yes No Equal

EXPLANATION:
According to the above data collected it is clear that
approximately eighty seven percent of employees says yes i.e. I.T.
increases the cost of banking operations or banking transactions, two
percent says no and one percent says equal.

10. SECONDARY DATA AND ANALYSIS


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Indian Scenario

Major players in the Indian Market

Banks No. of cards in lakhs

2002 2003
16 20
Citibank
14 18
Stan Chart
9 13
SBI-GE

According to an analyst, it is estimated that the Indian smart card


industry is growing around 45% annually, would reach the size of $6 by
2010. In the next five years, the number of smart cards being used in the
country can touch 400 million from around 50 million cards today.
To standardize the smart card, the Government has recently
standardized the technical aspects of smart cards. An operating system
called “SCOSTA” (Smart Card Operating System for Transport
Application) developed by IIT Kanpur has been chosen as the standard
operating system for transport-related projects. India is planning to issue
smart card based identity cards to citizens. State Governments are also
planning to issue smart card based driving licenses. Kerala recently tried
a ration card project at Thiruvananthapuram. But the lack of resources
with state governments may halt many such projects. States like Kerala
have stopped several smart card related projects due to resources crunch.
“It is the market for SIM cards for mobile phone that is growing
faster in India-at about 70-80% annually. Once the National Identity Card

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project is launched, the demand for smart cards will skyrocket,” opines
Sanjay Dharwadkar, Head of Systems Marketing, Smart Chip Ltd.

11. I.T. OF ICICI BANK

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" Internet Banking " refers to the internet banking service offered by
ICICI Bank to the user including services such as enquiry about balance
in the Account, details about transactions in the Account(s), statement of
Account, transfer of funds, bill payment and any other service as ICICI
Bank may decide to provide from time to time through internet. The
availability/non-availability of a particular service shall be communicated
to the user through email, web page of ICICI Bank or in writing as may
be deemed fit by ICICI Bank. Such Internet Banking may be provided by
ICICI Bank directly or through its associates or contracted service
providers.

1. Applicability of Terms:

These Terms form the contract between the user and ICICI Bank for
availing Internet Banking. The user shall apply to ICICI Bank in the
prescribed form for use of Internet Banking. ICICI Bank shall be entitled
at its sole discretion to accept or reject such applications as may be
submitted by the users. By applying for or availing of Internet Banking,
the user acknowledges and accepts these Terms. Notwithstanding
anything contained herein, all terms and conditions stipulated by ICICI
Bank and/or its Affiliates pertaining to the Account(s) and/or to any
services/facilities offered by ICICI Bank and/or its Affiliates, shall
continue to be applicable to the users, provided, however, in the event of
a conflict in such other terms and conditions stipulated by ICICI Bank
and/or its Affiliates and the Terms herein, the Terms shall have an
overriding effect. These Terms will be in addition to and not in derogation
of the terms and conditions relating to any Account(s) of the user and/or
to those relating to services/facilities offered by ICICI Bank and/or its
Affiliates and availed by the user. The user agrees that in the event the
user avails of any services/ facilities offered by ICICI Bank through the
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Website, the user shall be bound by all the terms and conditions stipulated
by ICICI Bank pertaining to such services/facilities, offered by ICICI
Bank and availed by the user through the Website.

2. Internet Banking:

The information provided to the user through the Internet


Banking is not updated continuously but at regular intervals.
Consequently, any information supplied to the user through Internet
Banking will pertain to the date and time when it was last updated and
not as the date and time when it is supplied to the user. ICICI Bank shall
not be liable for any loss that the user may suffer by relying on or acting
on such information. ICICI Bank may keep its records of the transactions
in any form it wishes. In the event of any dispute, ICICI Bank's records
shall be binding as the conclusive evidence of the transactions carried out
through Internet Banking in the absence of clear proof that ICICI Bank's
records are erroneous or incomplete. The user shall ensure that Internet
Banking or any related service is not used for any purpose which is
illegal, improper or which is not authorized under these Terms.

3. Internet Banking Access:

The user would be allotted an Internet Banking user-id and a set


of secret passwords by ICICI Bank in the first instance. The user will be
required to change the password assigned by ICICI Bank on accessing
Internet Banking for the first time. As a safety measure, the user shall
change the password as frequently thereafter as possible. The User shall
also be given a one-time facility to change the user-id, available only
after logging in to Internet Banking, to such user-id as may be suggested
by ICICI Bank or as per User’s own discretion. The User unconditionally

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undertakes to have the user-id of such number of letters/digits as may be


notified by ICICI Bank at the time the User attempts to change the user-id
and ensure that the same is kept confidential; and to not let any
unauthorized person have access to the internet while the User is
accessing the Internet Banking. If the User forgets the user-id or the same
gets disabled after a number of incorrect password attempts, upto such
number as may be intimated by ICICI Bank from time to time, then the
user may request for the re issue of his user id through the ICICI Bank
24-Hour Customer Care Centre or the ICICI Bank Branch and this shall
not be construed as the commencement of a new contract. In addition to
user-id and password ICICI Bank may, at its discretion, advise the user to
adopt such other means of authentication including but not limited to
digital certification and/ or smart cards. The user shall not attempt or
permit others to attempt accessing the Account information stored in the
computers of ICICI Bank through any means other than the Internet
Banking.

4. Internet Banking Password:

The user acknowledges, represents and warrants that the


password which will be issued to it, provides access to the Account and
that user is the sole and exclusive owner and is the only authorized user
of the password and accepts sole responsibility for use, confidentiality
and protection of the password, as well as for all orders and information
changes.

5. Joint Accounts:

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In case of Joint Accounts, transactions through Internet Banking,


shall be available if the mode of operation is indicated as 'either or
survivor' or 'anyone or survivor'. The user desirous of using the Internet
Banking should either be the account holder and sole signatory or
authorized to act independently in case of a joint account. For such joint
accounts, one user-id and password for Internet Banking will be issued to
each of the joint account holders when requested. The other joint account
holders shall expressly agree with the arrangement and give their consent
on the application form for use of Internet Banking. In case of joint
accounts operated by more than one user, ICICI Bank shall act on the
instruction received first and any subsequent instruction shall be
neglected. All correspondence will be addressed to the first named person
only. All transactions arising from the use of Internet Banking in the joint
account shall be binding on all the joint account holders, jointly and
severally.

6. Application for Facilities through Internet Banking:

Clause as applicable up to May 8, 2009:

The User shall have the option of applying for facilities provided
by ICICI Bank on Internet Banking. The facility shall be extended to the
User subject to the User complying with ICICI Bank’s credit parameters
and submitting all documents required by ICICI Bank in a physical form
to ICICI Bank. ICICI Bank may in its sole discretion reject the
application for the facility by the User.

The User can check the availability of a pre-approved offer that


may be made by ICICI Bank to the user through Internet Banking. The
eligibility of a User for a facility provided by ICICI Bank shall be

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decided by ICICI Bank at its sole discretion. Any pre-approved offer by


ICICI Bank to the User does not constitute grant of facility to the User
and shall be subject to the User complying with ICICI Bank’s credit
parameters and submitting all documents required by ICICI Bank in a
physical form to ICICI Bank.

7. Termination of Internet Banking:

The user may request for termination of the Internet Banking any time by
giving a written notice of at least 15 days to ICICI Bank. The termination
shall take effect on the completion of the fifteenth day. The user will
remain responsible for any transactions made through the Internet
Banking until the time of such termination. For the access of depository
account through Internet Banking user and ICICI Bank shall have the
right to terminate the applicability Clause 12 of this agreement after
giving a notice of at least 10 days to the other party.

8. Governing Law:

These Terms and/or the operations in the Accounts of the user shall be
governed by the laws of India. The Parties hereby agree that any legal
action or proceedings arising out of the Terms for Internet Banking shall
be brought in the courts or tribunals at Mumbai in India and irrevocably
submit themselves to the jurisdiction of such courts and tribunals. ICICI
Bank may, however, in its absolute discretion, commence any legal action
or proceedings arising out of the Terms for Internet Banking in any other
court, tribunal or other appropriate forum, and the user hereby consents to
that jurisdiction. Any provision of the Terms for Internet Banking which
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of prohibition or unenforceability

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but shall not invalidate the remaining provisions of the Terms or affect
such provision in any other jurisdiction.

12. FINDINGS AND CONCLUSIONS


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According to the survey conducted in Bank of Maharashtra, ICICI


Bank & HDFC Bank, the following points are concluded:

1. I.T. in banking sector is much more advanced than traditional


banking.
2. Online transactions are widely used than manual transactions.
3. Manual banking facility is more friendly to illiterate customers.
4. I.T. in banks to some extents reduces the work of employees.
5. I.T. in banks to some extent encourages online frauds.
6. Online banking is much more costlier than manual banking. It
increases the cost of banking operations.
7. Online banking facility can lead to progress of the banking sector.

13. SUGGESTIONS AND RECOMMENDATIONS

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 Some highly advanced software’s / programs should be


implemented in banking sector in order to prevent hackers and
frauds.

 Online banking operations cost or banking transaction cost should


be reduced so that middle class customer can have access to online
banking facility.

 Further research can be done in topics related to this project viz.,


software application in banking sector, technology and frauds.

 Awareness programs related to online banking for middle class


people.

14. BIBLIOGRAPHY

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REFERENCE RELATED TO BOOKS


 Katuri Nageshwara Rao & Yashpaul Pahuja, (2005), ‘IT IN
BANKS – EMERGING TRENDS’
 Kamlesh k Bajaj & Debjani Nag, ‘ELECTRONIC
COMMERCE- THE CUTTING EDGE OF BUSINESS’, Delhi,
Tata McGraw Hill Publishing Co. Ltd.

JOURNALS AND MAGAZINES


 Ravi Kumar Sharma, ‘PROFESSIONAL BANKER’, Nov.2005.

RESEARCH REPORTS
 THE EFFECT OF INFORMATION AND COMMUNICATION
ON THE BANKING SECTOR AND PAYMENT SYSTEM
-BY ARBUSSA REIXACH
 INTERNET BANKING
COMPTROLLERS HANDBOOK

INTERNET
 www.banknetindia.com
 www.microsoft.com
 www.goggle.com
 www.icicibank.com
 www.sbi.com

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