ONLINE BANKING Challenges and Opportunities

RESEARCH PROJECT REPORTSubmitted to Punjab Technical University in partial fulfillment of the requirements for the degree

Of

MASTER OF BUSINESS ADMINISTRATION (Specialization: Finance)

SUBMITTED BY: VIPUL SHARMA (104512248289)Gian Jyoti Institute of Management & Technology Mohali (2010-2012) ONLINE BANKING Challenges and Opportunities

RESEARCH PROJECT REPORTSubmitted to Punjab Technical University in partial fulfillment of the requirements for the degree

Of

MASTER OF BUSINESS ADMINISTRATION

SUBMITTED BY: VIPUL SHARMA (104512248289)Gian Jyoti Institute of Management & Technology Mohali (2010-2012)ACKNOWLEDGEMENT

Expression of Gratitude is the least oneCan do in response to the favours received.I take this opportunity to express my deep sense of gratitude to all those who have contributed significantly by sharing their knowledge and experience in the completion of this project work.At the outset I wish to express my sincere gratitude to Dr. Vimal K. Aggarwal (Director, GJIMT) for encouraging me to take initiative in a totally new field and continuously guiding me throughout the project. I would also like to express my indebtedness to my revered and learned faculty Advisor Prof. Pawan who helped me through the completion of the project and were a constant source of reference for me and showed full interest at each and every step of my project.Finally, I would also like to thank all my dear friends for their kind cooperation, advice and encouragement during the long and arduous task of preparing this report and carrying out the project.At last but not the least, who are always at the top of my heart, my dear family members whose blessings, inspiration and encouragement have resulted in the successful completion of the project.

VIPUL SHARMA

CERTIFICATE-I

This is to certify that the thesis entitled ONLINE BANKING Challenges and Opportunities submitted for the degree of MBA in the subject of Finance (Minor-Marketing) for the Punjab Technical University, Jalandhar, is a bonafide research work carried out by VIPUL SHARMA under my supervision and that no part of this thesis have been submitted for any other degree. This assistance and help received during the course of investigation have been fully acknowledged.

Advisor Prof. Pawan

CERTIFICATE II

This is to certify that the thesis entitled ONLINE BANKING Challenges and Opportunities submitted by Vipul Sharma to the Punjab Technical University, Jalandhar in partial fulfillment of the requirements of the degree of MBA in a subject of Finance (Minor-Marketing) has been approved by the students Advisory Committee after an oral examination on the same, in collaboration with an External Examiner.

(Prof. Pawan) External Examiner Advisor

DECLARATION

I, "Vipul Sharma, hereby declare that the work presented herein is genuine work done by me and has not been published or submitted elsewhere for the requirement of a degree programme. I have not submitted this project for the award of any other degree, diploma, fellowship or any other similar title or prize.I undertake responsibility for the contents of this report.

Vipul Sharma

EXECUTIVE SUMMARYTechnological developments have been growing at an alarming speed in the international arena. Internet is proudly one of the best in those. So, the banking sector is also making the best utilization of it. In this study based on ONLINE BANKING, it has been observed that the development of online banking has increased by leaps and bounds during the past few years. Concentrating on the Indian economy, the use of online banking is still in the developing stage.Today in India the scope of online banking is growing by a good decent rise in its usage. The rise in the usage of the Internet is the main criteria for development of online banking.This project helps us understand the how the online banking came into existence and its need in the modern world. It shows us the insights of the online banking in India. It helps us understand the opportunities and the challenges associated with the online banking in India.

Title of thesis: ONLINE BANKING Challenges and Opportunities

Name of Student: Vipul Sharma

Roll No 104512248289 Major Subject: Finance

Minor Subject: Marketing

Name of Major advisor Prof. Pawan

Degree to be awarded: MBA

Year of award of Degree: 2010-2012

Total pages in thesis: 65

ChapterTABLE OF CONTENTSTopicsPage No.

1.1.1 Introduction to Online Banking1.1.1 Online Banking - an overview1.1.2 What is online banking?1.1.3 How does online banking work and its structure1.1.4 Opportunities in Online Banking1.1.5 Challenges in Online Banking1.1.6 Solutions1.1.7 Case Studies1.1.8 ICICI Bank1-56-1213-14 15-20 21-31 32-35 36-37 38

2.2.1 Review of literature39-47

3.3.1 Objectives, Limits and Research Methodology3.1.1 Objectives and limits of Study3.1.2 Research Methodology484950

4.4.1 Data Analysis 51-57

5.5.1 Findings & Conclusion 58-59

6.6.1 Recommendations &Suggestions60-61

7.7.1 Annexure7.1.1 Questionnaire7.1.2 Bibliography6263-6465

CHAPTER- 1INTRODUCTION TO ONLINE BANKING

1.1.1 ONLINE BANKING- AN OVERVIEWOnline banking is a process that has evolved because of the development of technology over the years. So before going into detail on the online we should have a overview of it birth. INFORMATION TECHNOLOGYInformation technology(IT) is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by amicroelectronics - based combination ofcomputingandtelecommunications. IT (information technology) is a term that encompasses all forms of technology used to create, store, exchange, and useinformationin its various forms (business data, voice conversations, still images, motion pictures, multimedia presentations, and other forms, including those not yet conceived). It's a convenient term for including both telephony and computer technology in the same word. It is the technology that is driving what has often been called "the information revolution."IT is the area of managing technology and spans wide variety of areas that include but are not limited to things such as processes, computer software,information systems,computer hardware, programming languages, and data constructs. In short, anything that renders data, information or perceived knowledge in any visual format whatsoever, via any multimedia distribution mechanism, is considered part of the domain space known as Information Technology (IT). IT provides businesses with four sets of core services to help execute the business strategy. These four core services are broken into business process automation, providing information, connecting with customers, and productivity tools.IT professionals perform a variety of functions (IT Disciplines/Competencies) that ranges from installingapplicationsto designing complexcomputer networksand informationdatabases. A few of the duties that IT professionals perform may includedata management, networking, engineeringcomputer hardware, database and software design, as well as management and administration of entire systems. Information technology is starting to spread further than the conventionalpersonal computerand network technologies, and more into integrations of other technologies such as the use of cell phones, televisions, automobiles, and more, which is increasing the demand for such jobs. TECHNOLOGY in BankingMany of the largest and most successful banks in the world emerged from the technical changes that they are able to recognize at an early stage. Indias banking sector has a long way to go before it can compete globally. Situation is especially maintained in the late introduction of ICT in India banks. Our information technology is designed to compete with information technology in the world, and when we are in the area very quickly, it can be difficult for us to benefit from liberalization.Bank with the right technology to provide timely information to increase productivity and thus see a competitive advantage. Compete in the economy, which has been opened, it is certainly the Indian banks to comply with the latest technology and adapt to its surroundings. Except that the banks need much improved use of technology to customer-friendly, efficient and competitive in the current authorities and businesses, they also need the technology to newer products and newer forms of service and the increasingly dynamic global environment to offer. Information technology allows banks to build new systems, which bite the needs of many customers that cannot be considered today.

On-line banking, for example, promises customers to conduct banking transactions in a direct access to the core of the bank customer account works. Customers to verify all information, all so far, all the checks, all credit card information.In the future, the banks freed from the constraints of a delivery channel. They can create, package, market and product niches, and because the tumbling price of the technology, they can do so cost-effectively.Technology gives banks the opportunity to be closer to customers, to a broader range of services at lower costs, streamline the March belang systems so that all information in one place where it can be used for the trends that can quickly lead into new products. Electronic banking data can be gathered and analyzed. Interactivity allows the consumer to save the settings, directing the development of truly new products.The development of I.T has helped the boom of E Commerce. So it is also important to know the concept of E Commerce.

E-COMMERCEElectronic commerce, commonly known ase-commerce,eCommerceore-commerce, refers to the buying and selling ofproductsorservicesover electronic systems such as the Internet and other computer networks. However, the term may refer to more than just buying and selling products online. It also includes the entire online process of developing, marketing, selling, delivering, servicing and paying for products and services. The amount of trade conducted electronically has grown extraordinarily with widespread Internet usage. The use of commerce is conducted in this way, spurring and drawing on innovations inelectronic funds transfer,supply chain management,Internet marketing,online transaction processing,electronic data interchange(EDI),inventory managementsystems, and automated data collection systems. Modern electronic commerce typically uses theWorld Wide Webat least at one point in the transaction's life-cycle, although it may encompass a wider range of technologies such ase-mail, mobile devices and telephones as well.A large percentage of electronic commerce is conducted entirely in electronic form forvirtualitems such as access to premium content on a website, but mostly electronic commerce involves the transportation of physical items in some way. Online retailers are sometimes known ase-tailersand online retail is sometimes known ase-tail. Almost all big retailers are now electronically present on theWorld Wide Web.Electronic commerce that takes place between businesses is referred to asbusiness-to-businessor B2B. B2B can be open to all interested parties (e.g.commodity exchange) or limited to specific, pre-qualified participants (private electronic market). Electronic commerce that takes place between businesses and consumers, on the other hand, is referred to asbusiness-to-consumerorB2C. This is the type of electronic commerce conducted by companies such asAmazon.com.Online shoppingis a form of electronic commerce where the buyer is directly online to the seller's computer usually via the internet. There is no intermediary service involved. The sale or purchase transaction is completed electronically and interactively in real-time such as in Amazon.com for new books. However in some cases, an intermediary may be present in a sale or purchase transaction such as the transactions oneBay.com.Electronic commerce is generally considered to be the sales aspect ofe-business. It also consists of the exchange of data to facilitate the financing and payment aspects of business transactions.Business applications of ecommerceSome common applications related to electronic commerce are the following: Email Enterprise content management Instant messaging Newsgroups Online shopping and order tracking Online banking Online office suites Domestic and international payment systems Shopping cart software Teleconferencing Electronic tickets

E-COMMERCE APPLICATION IN BANKING INDUSTRYNew information technologies and emerging business forces have triggered a new wave of financial innovation electronic banking (e-banking). The banking and financial industry is transforming itself in unpredictable ways (Crane and Bodie 1996), powered in an important way by advances in information technology (Holland and Westwood 2001). Since the 1980s, commercial banking has continuously innovated through technology-enhanced products and services, such as multi-function ATM, tele-banking, electronic transfers and electronic cash cards. Over the past decade, the Internet has clearly played a critical role in providing online services and giving rise to a completely new channel. In the internet age, the extension of commercial banking to the cyberspace is an inevitable development (Liao and Cheung 2003).E-banking creates unprecedented opportunities for the banks in the ways they organize financial product development, delivery and marketing via the internet. While it offers new opportunities to banks, it also poses many challenges such as the innovation of IT applications, the blurring of market boundaries, the breaching of industrial barriers, the entrance of new competitors and the emergence of new business models (Saatcioglu et al. 2001, Liao and Cheung 2003). Now the speed and scale of the challenge are rapidly increasing with the pervasiveness of the internet and the extension of information economy (Holland and Westwood 2001).Globally, e-commerce growth has been led by the popularity of online shopping portals like amazon.com and ebay.com but in India that has not been the case. It is mainly driven by the online travel industry and banking sector. For instance, 29% of Indian Internet users book airline tickets online and the figure is expected to touch 46% next year. Online rail ticket booking stands at 39% of the total bookings. As far as banking is concerned, there are 4.6 million online banking users in India. This figure is expected to go up to over 16 million by 2007-08 that will include both internet and mobile banking users. According to the Internet and Mobile Association of India (IAMAI), the e-commerce industry in India is expected to grow to a size of Rs. 2,300 crore by 2007 against the Rs.1,200 crore. The total number of internet users which right now is 38.5 million is expected to reach 100 million by 2008.

1.1.2 WHAT IS ONLINE BANKING?If you're like most people, you've heard a lot about online banking but probably haven't tried it yourself. You still pay your bills by mail and deposit checks at your bank branch, much the way your parents did. You might shop online for a loan, life insurance or a home mortgage, but when it comes time to commit, you feel more comfortable working with your banker or an agent you know and trust.Online banking isn't out to change your money habits. Instead, it uses today's computer technology to give you the option of bypassing the time-consuming, paper-based aspects of traditional banking in order to manage your finances more quickly and efficiently. Origin of online bankingThe advent of the Internet and the popularity of personal computers presented both an opportunity and a challenge for the banking industry.For years, financial institutions have used powerful computer networks to automate millions of daily transactions; today, often the only paper record is the customer's receipt at the point of sale. Now that its customers are connected to the Internet via personal computers, banks envision similar economic advantages by adapting those same internal electronic processes to home use.Banks view online banking as a powerful "value added" tool to attract and retain new customers while helping to eliminate costly paper handling and teller interactions in an increasingly competitive banking environment. Brick-to-click banksToday, most large national banks, many regional banks and even smaller banks and credit unions offer some form of online banking, variously known as PC banking, home banking, electronic banking or Internet banking. Those that do are sometimes referred to as "brick-to-click" banks, both to distinguish them from brick-and-mortar banks that have yet to offer online banking, as well as from online or "virtual" banks that have no physical branches or tellers whatsoever.The challenge for the banking industry has been to design this new service channel in such a way that its customers will readily learn to use and trust it. After all, banks have spent generations earning our trust; they aren't about to risk that on a Web site that is frustrating, confusing or less than secure.Most of the large banks now offer fully secure, fully functional online banking for free or for a small fee. Some smaller banks offer limited access or functionality; for instance, you may be able to view your account balance and history but not initiate transactions online. As more banks succeed online and more customers use their sites, fully functional online banking likely will become as commonplace as automated teller machines. Understanding Online Banking Services

Online banking is a great convenience for many people. Whether people use it to manage traditional accounts or switch all of their banking to an online-only firm, it is a wonderful improvement over the days when everything had to be done face-to-face.No matter what kind of banking is done online, it starts with a secure web site. Usually, the bank will have certain requirements to ensure password strength as well. This and other security measures ensure that online accounts are safe from tampering. From there, all of the necessary services can be accessed.Online banking is quite simple once the basics are understood. Depositing money is simple, and can be done in a number of ways. The most popular method is likely direct deposit. Many employers offer direct deposit of paychecks, and by providing them with your online bank account number, your checks will go right into that account. Other ways of depositing money include bank and wire transfers. Some accounts even allow customers to mail their checks in.Paper checks are typically provided with online checking accounts. This, however, is not likely to be the most common way a customer will access funds. Online bill payment allows users to pay their bills without mailing checks, and those who use web-based accounts typically prefer this and other electronic payment methods. Most types of bills can be paid via a debit card or electronic checks, as well. This makes it easy to eliminate the need for paper checks entirely. Still, many find it useful to have a few checks on hand for those few companies that havent quite reached the modern age.The management of traditional accounts is another common use for online banking. Most banks offer online access to accounts, and all customers need to do to make use of the service is sign up through their banks site. Once this is done, checking your balance, seeing which payments have cleared, and other common banking operations can be done from the computer. This eliminates the need to call or visit the bank for simple account maintenance needs.Every online banking interface is slightly different, but all banks try to make things easy and intuitive for users. It wont take long for a new user to figure out exactly how everything works. Sign up for an online bank account or online access to your current one, and soon youll wonder how you could have lived without it. FEATURES OF ONLINE BANKINGWe need to be able to manage our finances from anywhere in the world. Rich online banking services are much more important than a physical location. Since I have been doing all of my banking online with quite a few different online banks as I looked for the best solution, Ive had a chance to really experiment with what works and what doesnt work for us.Here is a checklist of things to look for in an online bank. Some items you may be familiar with. Others might be new to you if it isnt something your current bank offers.

1. Bill Pay Service - One of the biggest reasons for going with an online bank is to get really good bill payment services. Different banks handle bill payment different ways. Here are some things to think about:A. How many bills are you allowed to pay per month?B. What are the fees for going over the limit?C. Can the bill payment send physical checks to merchants who arent set up to take electronic payments?D. Do checks come from your account or from a third party service? For privacy reasons, it might be better to be able to pay someone without giving them your bank account number on the check. On the other hand, if the checks actually come from your account, the money doesnt get taken out until the check is cashed.E. Can you set up reoccurring payments?

2. Electronic Bill Notification With electronic bills, your merchant (Credit Card Company, gas company, electric company, etc.) sends an electronic bill to your bank. You can set it up to pay automatically or notify you for approval. This can be particularly good for people who are on the road because it reduces the amount of physical mail you have to somehow get read or forwarded to you.

3. Online Check Images Most banks will show you an image of the check, which makes it really easy to balance your account if you cant remember what a particular payment was for. (Ideally, you should minimize the number of physical checks you write to reduce fraud.)

4. Online Deposit Slip Images Most banks just record the total with no image. It will let you see an image of each deposit slip. Having the images available can be very helpful if you ever have to prove something for tax purposes or need to remember where that $2581 deposit came from.

5. Reporting Tools Most banks offer basic reporting tools that will let you see how much you have spent in each category youve created. This may not be an issue if you use desktop money management software, but it still can be handy if you are traveling and want to see how much youve paid on your mortgage over the past 12 months.

6. Linked Accounts Can you link your bank account with a brokerage account? Can you add your minor children as custodial accounts and manage them all centrally? If you and your spouse both set them up IRAs, is it easy to view them both along side the rest of your finances, or do you have to have a separate login for each IRA to keep them on separate SSNs? These are small things that many banks dont support, but it starts getting really complicated when you have to manage a bunch of accounts instead of having a single place to manage all of your money.

7. Convenient Deposit Methods - Since you may not be anywhere near the physical location of your bank, make sure you understand how to deposit money. Payroll can be set up on direct deposit, but there will be times when you need to deposit checks. Does the bank provide postage paid envelopes and deposit slips? Some banks work with FedEx or UPS stores to allow you to send in a deposit overnight for free.

8. Low ATM Fees and Convenient Locations If you need to get cash, will the bank refund the ATM fees? Are there only certain ATMs that are free, and if so, are they located near places you normally go? Are the ATMs available nationwide so you can use them on vacation? What are the fees for using the ATM internationally and how is the exchange rate handled?

9. Integration with Desktop Software If you use Microsoft Money, Quicken or something similar, youll want to make sure your bank supports it. Make sure you understand if downloading transactions require you to login and manually download a file, or if your money management software can directly connect and download new transactions. If you are using Quicken on a Mac, make sure the bank is paying Quickens extortion fee so the files will work with Mac users.

10. Many Account Types Some banks only offer basic checking and savings accounts. Ideally you want a bank that makes it easy to open money market accounts, IRAs, health savings accounts, etc. If you have to go to another institution to open a different type of account, it is more difficult to manageespecially if you are on the road. You want to be able to easily open a CD to take advantage of a higher interest rate, easily open an IRA to help reduce your tax liability, etc.

11. Free Money Transfers Be sure to consider how easy it is to move money in and out of the account. You should be able to set up links with your accounts from other institutions to transfer money back and forth as necessary. Make sure you understand what types of fees are associated with these transfers. Good banks should allow a certain number of transfers per month with no fee.

12. Security Balanced with Convenience - Some banks spend so much effort trying to keep things secure that youll find yourself automatically logged out of their website while you try to balance your account. You want security but you dont want it to get in the way of you doing your banking. Also check into what type of additional security features are available. For example, some banks will offer you an RSA keychain with a number that changes every 60 seconds. In addition to your password, you will need the number from that key in order to get access to your account.

13. Ease of Use This is something that most banks seem to struggle with. Right now I have my personal account with one online bank and my business accounts with another. I dread using the business accounts and I absolutely love using my personal account. At first I thought I was just more familiar with the bank where my personal accounts are, but I finally realize that it comes down to the ease of use. One is ok and the other is superb, but it makes a big difference.

Advantages of online banking: Convenience:Unlike your corner bank, online banking sites never close; they're available 24 hours a day, seven days a week and they're only a mouse click away. Ubiquity:If you're out of state or even out of the country when a money problem arises, you can log on instantly to your online bank and take care of business, 24/7. Transaction speed:Online bank sites generally execute and confirm transactions at or quicker than ATM processing speeds. Efficiency:You can access and manage all of your bank accounts, including IRAs, CDs, even securities, from one secure site. Effectiveness:Many online banking sites now offer sophisticated tools, including account aggregation, stock quotes, rate alerts and portfolio managing programs to help you manage all of your assets more effectively. Most are also compatible with money managing programs such as Quicken and Microsoft Money. Disadvantages of online banking: Start-up may take time:In order to register for your bank's online program, you will probably have to provide ID and sign a form at a bank branch. If you and your spouse wish to view and manage your assets together online, one of you may have to sign a durable power of attorney before the bank will display all of your holdings together. Learning curve:Banking sites can be difficult to navigate at first. Plan to invest some time and/or read the tutorials in order to become comfortable in your virtual lobby. Bank site changes:Even the largest banks periodically upgrade their online programs, adding new features in unfamiliar places. In some cases, you may have to re-enter account information. The trust thing:For many people, the biggest hurdle to online banking is learning to trust it. Did my transaction go through? Did I push the transfer button once or twice? Best bet: always print the transaction receipt and keep it with your bank records until it shows up on your personal site and/or your bank statement.1.1.3 How Does Online Banking Work? Online banking provides many identical services that a traditional bank does with the biggest difference is in teller availability: Human tellers leave; electronic tellersthe websitesare available virtually all day, everydayweekends and holidays, included.Online Banking Structure:Online banking mirrors traditional banking procedures in many instances, and in some, actually improves security and reduces both banks and customers costs.In electronic form, online banking still allows:1. Deposits to the account, whether via payroll deposits or funds transfers. 2. Bill payments via automatic payment schedules or individually ordered payments. Most bill pay users opt for the bank-generated checks, but payments can be ordered in a one off situation or scheduled regularly.3. Statement formats can be electronic or paper; most who prefer online banking choose the electronic statements for convenience and reduced paper use.4. Wire transfers to accounts within and without the banks structure, though some banks charge additional transaction fees for wire transfers.5. Differing services depending on the individual financial institute.Online ActionsAll online banking transactions are initiated by creating an online account identity. Account login name and password creation is followed by choosing and answering security questions. Its not recommended that security questions and answers be common or known by others; they should have unique answers, whether historically true or not.For example, if a user chooses a security question, What is the name your first elementary school, choose an answer that isnotthe actual name or the actual elementary school. Use instead the name of another school or anything else that is easily remembered.Provide an email address that is not tied to an Internet Service Provider. If the user changes ISPs, that email address will be lost. Instead, use a free email address that can last for as long as the user chooses.Once the security aspects are in place and verified, look around the banks website and note important areas, such as:

1. Account activity2. Statement delivery change areas3. Customer Service options4. Bill pay procedures, if any5. And any other area provided on the website.

Online banking often reduces funds availability delays and hastens resolution to disputes and inquiries. While some complaints and problems do require human intervention, Customer Service Agents are available for longer during a calendar day than local branch personnel are.Online banking differs from traditional banking when physical checks or cash is deposited; human interaction via a drive thru lane or at the counter is required. Cashier checks, traveler checks, and money orders cannot be purchased from the institution via online banking, but because all transactions allowed are electronic, tracking and accountability are easily provided.

1.1.4 OPPORTUNITIES IN ONLINE BANKING Is There a Future in Online Banking?

By this point, no one can dismiss online banking as a fad. However, it is worth considering whether the trend towards online financial transactions is going to slow or reverse in the years to come. There will continue to be people who resist online banking in favor of offline transactions just as there are people who prefer to keep their money in mattresses instead of putting it in banks. Whether these people will exert serious influence on the movement towards online banking can be examined by looking at the needs of modern consumers, and the interests of the banks themselves. The Move to Online BusinessThe global connectivity provided by the internet, combined with the fallout from the global financial crisis has encouraged a growing number of entrepreneurs to start their own businesses online. As an increasing number of people look to save themselves from unemployment or augment otherwise insufficient salaries by finding new ways to make money online, they will require new ways to send, receive, and invest their online funds.

The Rise of Mobile BankingAs handheld mobile devices become more sophisticated, users are experimenting with more sophisticated transactions. Moving beyond ringtone downloads; consumers can now shop online and purchase software upgrades and augmentations through app stores. In addition to this buying and selling, anyone with a web browser on their phone can access their banks online banking site to move and manage their money in more locations than ever before. Staffing SolutionsAs banks consolidate and grow larger, they are looking for more ways to cut costs, and reducing the number of full-time employees on their payroll is an attractive option. Encouraging customers to do their banking online allows banks to close smaller branches in outlying locations and use economies of scale to develop customer assistance centers in locations where the labor market is more favorable.

Physical FootprintsOnline banking is also more attractive to banks because a reduced physical footprint means reduced costs in other areas. In addition to saving the money that would normally be associated with operating and maintaining physical branches, no longer having to print and mail paper statements to customers would be a huge savings for banks. As an added bonus, banks have been able to take advantage of current pro-environment sentiment by marketing online banking as a green alternative.By appealing to more mobile customers and more cost-conscious financial service providers alike, online banking continues to be an attractive option for everyone involved. However, when discussing the internet it is dangerous to assume that everything is going to be moved online; there will always be individuals, industries, and transactions that are grounded in the real world with no desire to change the way they do business. Growth of InternetThe increase in the growth of internet usage will definitely help the cause of growth of online banking in India. The following chart shows the growth of internet in India during the past decade or so:YEARUsersPopulation% Penetration

20001,400,0001,094,870,6770.1 %

20012,800,0001,094,870,6770.3 %

20025,500,0001,094,870,6770.5 %

20037,000,0001,094,870,6770.7 %

200416,500,0001,094,870,6771.6 %

200522,500,0001,094,870,6772.1 %

200639,200,0001,094,870,6773.6 %

200750,600,0001,112,225,8124.5 %

200840,000,0001,112,225,8123.6 %

200942,000,0001,129,667,5283.7 %

201081,000,0001,156,897,7667.0 %

2011100,000,0001,173,108,0188.5 %

Why Banks Encourage Online Banking?

OVERVIEWOnline banking has enjoyed increased popularity, and some banks actually require it. From standard, brick-and-mortar institutions to cloud managed institutions, online banking offers flexibility and convenience for all involved.

BANK ADVANTAGES: Each visit to a bank costs the institution money, whether in bank teller wages and benefits to security costs to maintenance costs. Online banking reduces those costs and increases the banks profit margin. Online banking reduces the need for the number of physical locations and services offered within each. Because Customer Service Departments are united into fewer locations, asset sharing within those locations further reduce bank costs.

CUSTOMER ADVANTAGES: Online security of financial data has evolved tremendously since the early days of online banking, and often transactions can be even more secure than those conducted in a drive thru lane. Online banking transactions require not only a secure login but also require secured password entry. In-person transactions are based on account information and a photo ID, both of which can be obtained under the radar.Online banking transactions also track the Internet Protocol (IP) address of the computer used in the transaction. The IP can be traced to the method or mode of Internet access, often through an Internet Service Provider who always notes activity, computer, and actions performed under that IP address assigned to the ISP account holder. Whether a dynamic or changing IP address or a static or unchanging IP address is used, the ISP always records what IP address is assigned to what ISP account at any time. Comprehensive Help sections on banks websites often reduce on-location inquiries, further reducing overhead costs for banking institutions. Additional service enrollment or dis-enrollment, address updates, and account status and verification are all time saving activities for both the bank and the banking customer. Online Bill Pay processes reduce stolen or counterfeit checks which cost banks billions of dollars every month. Each online bill pay transaction allows for a grace period from the payment order date to the actual check delivery date, which also allows the account holder additional time to preview activity and account status. DEVELOPMENT:Increasingly, more and more people are switching to electronic platforms for executing financial transactions. The wider usage of cell phone and internet certainly seems to be playing a role in blurring physical boundaries, and unlocking a whole new world of opportunities for banks in tapping newer customer segments and in recording greater volume of transactions.If latest RBI data on retail electronic payment systems is anything to go by, electronic banking is set to become the catalyst for change in the way money moves. Provisional data show that in FY09 to January, a total of 5,587.85 lakh transactions were executed through the electronic channel, a rise of 234.76 lakh transactions over the previous fiscal.This growth was facilitated by the introduction of real-time gross transfer (RTGS) and national electronic funds transfer (NEFT), which enabled fund transfers among account holders of the same bank as well as inter-bank transfers.The growth has also been aided by banks' efforts to offer innovative services and tighten security measures, and the increase in awareness of services available. RBI outlining guidelines on mobile banking, setting up of the National Payments Corporation of India and passage of the Payments and Settlement Act too have given a positive thrust to the growth in electronic payments. The impact of all these measures is likely to be felt in the current fiscal, which may well mean FY10 could become a watershed year for e-banking. While opinions of industry players differ on whether FY10 will indeed prove to be a tipping point, there seems to be consensus that the year would mark a critical phase in the evolution of the payments and settlement systems in India. "FY10 will certainly herald an important phase for electronic banking in India and an upsurge in internet and ATM transactions," says Ashvin Parekh, partner and national industry leader, financial services, Ernst & Young. "At the same time, traditional fund transfer will continue to hold its own. We are going to witness a co-existence of these two systems. In the regulatory space, there will be huge changes. As and when India Pay, which will eventually settle credit card and ATM transactions, comes into the picture, we could witness a gradual shift away from Visa and MasterCard." The implementation of core banking solutions by all public sector banks has not only helped banks rationalise their costs, but has also allowed them to explore new ways of optimally utilising their resources. Core banking, which facilitates linking up of a bank's branches across the country, has enabled banks to improve their efficiency."Now, decisions can be taken remotely and the activities too can be undertaken in a centralised location. This means that branches need not spend time on processing transactions and other back office operations, and rather utilise the time and resources to function as selling outlets. Centralised operations benefit from economies of scale and help in reducing bank costs," explains Janmejaya Sinha, managing director of India operations, Boston Consulting Group.

Opportunities in e-banking: ARE WE READY?It has always been a chicken-and-egg dilemma in business. Either firm waits for the market to mature until customers are ready for the products and services. Or, firms can go ahead and offer the products and services, hoping that their customers will catch on soon.The same is true for new products and services that have emerged and continue to emerge in the world of electronic banking (e-banking). Banking executivesinterviewed by BusinessWorld Online have different ways of resolving the issue. Some would go ahead with new ideas, wanting to take the first-mover advantage. Others would wait in the sidelines, but armed nevertheless just in the case the market takes up suddenly increases.Whether first-movers or latecomers, there is one partner in the e-banking game that is not waiting for the chicken to lay the egg, or wait for the egg to hatch into a chick. Technology providers are always up on their toes, like chicken ready to catch the early worm.

1.1.5 Challenges in Online BankingInformation technology analyst firm, the Meta Group, recently reported that "financial institutions who don't offer home banking by the year 2000 will become marginalized." By the year of 2002, a large sophisticated and highly competitive Internet Banking Market will develop which will be driven by Demand side pressure due to increasing access to low cost electronic services. Emergence of open standards for banking functionality. Growing customer awareness and need of transparency. Global players in the fray Close integration of bank services with web based E-commerce or even disintermediation of services through direct electronic payments (E- Cash). More convenient international transactions due to the fact that the Internet along with general deregulation trends, eliminate geographic boundaries. Move from one stop shopping to 'Banking Portfolio' i.e. unbundled product purchases.Certainly some existing brick and mortar banks will go out of business. But that's because they fail to respond to the challenge of the Internet. The Internet and it's underlying technologies will change and transform not just banking, but all aspects of finance and commerce. It represents much more than a new distribution opportunity. It will enable nimble players to leverage their brick and mortar presence to improve customer satisfaction and gain share. It will force lethargic players who are struck with legacy cost basis, out of business-since they are unable to bring to play in the new context. MAIN CONCERNS IN INTERNET BANKING:In a survey conducted by the Online Banking Association, member institutions rated security as the most important issue of online banking. There is a dual requirement to protect customers' privacy and protect against fraud. Banking Securely: Online Banking via the World Wide Web provides an overview of Internet commerce and how one company handles secure banking for its financial institution clients and their customers. Some basic information on the transmission of confidential data is presented in Security and Encryption on the Web. PC Magazine Online also offers a primer: How Encryption Works. A multi-layered security architecture comprising firewalls, filtering routers, encryption and digital certification ensures that your account information is protected from unauthorised access: Firewalls and filtering routers ensure that only the legitimate Internet users are allowed to access the system. Encryption techniques used by the bank (including the sophisticated public key encryption) would ensure that privacy of data flowing between the browser and the Infinity system is protected. Digital certification procedures provide the assurance that the data you receive is from the Infinity system.Security concerns:Security fears have served as deterrents to online growth. Of particular concern are threats of pharming and phishing. Phishing is an internet fraud, through which innocent people are enticed to divulge their personal information like user ID and passwords, which are later on used by scammers in unauthorized ways.The most common method of phishing is sending emails claiming to be from your bank or other financial institutions which are dealing that already has your personal information and you will be asked to confirm the details by clicking a particular link (URL) provided in this fake email. This URL will take you to a fake website which will be similar to your genuine website, and the information provided by the customer in the forms provided in the fake website will be gathered and used for committing fraud in their accounts or withdraw funds unauthorizedly from these accounts.Pharming is another internet fraud, whereby as many as users as possible are redirected before they reach the legitimate online banking websites they intend to visit and they are lead to malicious ones. The bogus sites to which victims are redirected without their knowledge or consent, will likely looks the same as genuine site. But when users enter their login name or password, the information is captured by criminals.FURTHER PROBLEMS RELATING TO NET BANKING IN INDIAGiven that India is the IT and tech services outsourcing hotspot of the world, it's surprising that Internet banking has not really taken off. Despite the advent of a very tech-savvy and vast consumer class in recent years, a mix of industry issues and unique challenges continue to thwart the expansion of net banking in India. Technology challenges, IT practices, certain cultural issues, industry lethargy, and workplace constraints have affected widespread acceptance of Internet banking. Low Broadband Internet PenetrationIndia has one of the lowest broadband connectivity penetration rates in Asia as compared to Japan, Taiwan, Korea and Singapore. While the bigger cities such as Mumbai, Delhi, Chennai, and Bangalore have relatively better broadband penetration rates, PC users in smaller cities and towns still use dial-up options to connect to the Internet. Slow connectivity speeds often dampen the online banking experience for many customers eager to use such services. Banks' Ambivalent Commitment LevelsInternet banking did take off in India at the turn of the millennium but soon faltered due to lack of takers. In the middle of this decade, multinational and domestic private banks started offering net banking services as a competitive differentiator. Only recently, state-owned and public sector banks have started doing likewise. However, banks' ambivalent commitment levels and their reluctance to allocate huge budgets for net banking branding initiatives, as well as a lack of industry advocacy efforts, have resulted in poor acceptance levels of Internet banking by customers. Customers' Preference for Traditional BranchesThere are thousands of highly active traditional bank branches in India's crowded cities and major towns. Office workers take longer lunch breaks to finish banking activities and transactions at these branches rather than conduct them online. Most customers prefer the personal touch and customized service offered by staff in brick-and-mortar bank branches. Many Indians are also averse to calling call centers and banks' customer contact lines to address issues related to online bank accounts. Fear of Online Threats/ScamsUbiquitous and prevalent online threats about hackers, identity theft, stolen passwords, viruses, worms and spyware tend to make customers wary just like in any other country. Conservative Indian bank customers used to years of saving in an erstwhile mixed-socialist economy are always fearful of losing hard-earned savings in online scams. These customers are also not sure about the efficacy of banks' websites and their commitment to allocate funds for reliable encryption mechanisms and robust back-end technologies and systems. Other ProblemsWorkplace constraints and corporate policies about using external websites or pursing personal activities such as online banking have affected its expected fast-paced acceptance among the growing affluent class in India. Cultural issues, such as parents giving priority use of the home PC to their children rather than using it themselves, stifle the potential growth of home access to Internet banking services. Public sector banks with vast customer bases also don't tend to invest money in training personnel for e-banking initiatives, resulting in poor customer service levels. Internet Banking in India GuidelinesReserve Bank of India had set up a Working Group on Internet Banking to examine different aspects of Internet Banking (I-banking).The Group had focused on three major areas of I-banking, i.e. (i) technology and security issues, (ii) legal issues and (iii) regulatory and supervisory issues. RBI has accepted the recommendations of the Group to be implemented in a phased manner. Accordingly, the following guidelines are issued for implementation by banks.Banks are also advised that they may be guided by the original report, for a detailed guidance on different issues.I. Technology and Security Standards:a. Banks should designate a network and database administrator with clearly defined roles as indicated in the Groups report.b. Banks should have a security policy duly approved by the Board of Directors. There should be a segregation of duty of Security Officer / Group dealing exclusively with information systems security and Information Technology Division which actually implements the computer systems. Further, Information Systems Auditor will audit the information systems.c. Banks should introduce logical access controls to data, systems, application software, utilities, telecommunication lines, libraries, system software, etc. Logical access control techniques may include user-ids, passwords, smart cards or other biometric technologies.d. At the minimum, banks should use the proxy server type of firewall so that there is no direct connection between the Internet and the banks system. It facilitates a high level of control and in-depth monitoring using logging and auditing tools. For sensitive systems, a state full inspection firewall is recommended which thoroughly inspects all packets of information, and past and present transactions are compared. These generally include a real time security alert.e. All the systems supporting dial up services through modem on the same LAN as the application server should be isolated to prevent intrusions into the network as this may bypass the proxy server.f. PKI (Public Key Infrastructure) is the most favoured technology for secure Internet banking services. However, as it is not yet commonly available, banks should use the following alternative system during the transition, until the PKI is put in place:1. Usage of SSL (Secured Socket Layer), which ensures server authentication and use of client side certificates issued by the banks themselves using a Certificate Server.2. The use of at least 128-bit SSL for securing browser to web server communications and, in addition, encryption of sensitive data like passwords in transit within the enterprise itself. (Para 6.4.5)g. It is also recommended that all unnecessary services on the application server such as FTP (File Transfer Protocol), telnet should be disabled. The application server should be isolated from the e-mail server. (Para 6.4.6)h. All computer accesses, including messages received, should be logged. Security violations (suspected or attempted) should be reported and follow up action taken should be kept in mind while framing future policy. Banks should acquire tools for monitoring systems and the networks against intrusions and attacks. These tools should be used regularly to avoid security breaches. The banks should review their security infrastructure and security policies regularly and optimize them in the light of their own experiences and changing technologies. They should educate their security personnel and also the end-users on a continuous basis.i. The information security officer and the information system auditor should undertake periodic penetration tests of the system, which should include:1. Attempting to guess passwords using password-cracking tools.2. Search for back door traps in the programs.3. Attempt to overload the system using DDoS (Distributed Denial of Service) & DoS (Denial of Service) attacks.4. Check if commonly known holes in the software, especially the browser and the e-mail software exist.j. The penetration testing may also be carried out by engaging outside experts (often called Ethical Hackers).k. Physical access controls should be strictly enforced. Physical security should cover all the information systems and sites where they are housed, both against internal and external threats.l. Banks should have proper infrastructure and schedules for backing up data. The backed-up data should be periodically tested to ensure recovery without loss of transactions in a time frame as given out in the banks security policy. Business continuity should be ensured by setting up disaster recovery sites. These facilities should also be tested periodically.m. All applications of banks should have proper record keeping facilities for legal purposes. It may be necessary to keep all received and sent messages both in encrypted and decrypted form.n. Security infrastructureshould be properly tested before using the systems and applications for normal operations. Banksshould upgrade the systems by installing patches released by developers to remove bugs and loopholes, and upgrade to newer versions which give better security and control.II. Legal Issuesa. Considering the legal position prevalent, there is an obligation on the part of banks not only to establish the identity but also to make enquiries about integrity and reputation of the prospective customer. Therefore, even though request for opening account can be accepted over Internet,accounts should be opened only after proper introduction and physical verification of the identity of the customer.b. From a legal perspective, security procedure adopted by banks for authenticating users needs to be recognized by law as a substitute for signature. In India, the Information Technology Act, 2000, in Section 3(2) provides for a particular technology (viz., the asymmetric crypto system and hash 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.c. Under the present regime there is an obligation on banks to maintain secrecy and confidentiality of customers accounts. In the Internet banking scenario, the risk of banks not meeting the above obligation is high on account of several factors. Despite all reasonable precautions, banks may be exposed to enhanced risk of liability to customers on account of breach of secrecy, denial of service etc., because of hacking/ other technological failures. The banks should, therefore, institute adequate risk control measures to manage such risks.d. In Internet banking scenario there is very little scope for the banks to act on stop-payment instructions from the customers. Hence,banks should clearly notify to the customers the timeframe and the circumstances in which any stop-payment instructions could be accepted.e. The Consumer Protection Act, 1986 defines the rights of consumers in India and is applicable to banking services as well. Currently, the rights and liabilities of customers availing of Internet banking services are being determined by bilateral agreements between the banks and customers. Considering the banking practice and rights enjoyed by customers in traditional banking, banks liability to the customers on account of unauthorized transfer through hacking, denial of service on account of technological failure etc. needs to be assessed and banks providing Internet banking should insure themselves against such risks.III. Regulatory and Supervisory Issues:As recommended by the Group, the existing regulatory framework over banks will be extended to Internet banking also. In this regard, it is advised that:1. Only such banks which are licensed and supervised in India and have a physical presence in India will be permitted to offer Internet banking products to residents of India. Thus, both banks and virtual banks incorporated outside the country and having no physical presence in India will not, for the present, be permitted to offer Internet banking services to Indian residents.2. The products should be restricted to account holders onlyand should not be offered in other jurisdictions.3. The services should only include local currency products.4. The in-out scenario where customers in cross border jurisdictions are offered banking services by Indian banks (or branches of foreign banks in India) and the out-in scenario where Indian residents are offered banking services by banks operating in cross-border jurisdictions are generally not permitted and this approach will apply to Internet banking also. The existing exceptions for limited purposes under FEMA i.e. where resident Indians have been permitted to continue to maintain their accounts with overseas banks etc. will, however, be permitted.5. Overseas branches of Indian banks will be permitted to offer Internet banking services to their overseas customers subject to their satisfying, in addition to the host supervisor, the home supervisor.Given the regulatory approach as above, banks are advised to follow the following instructions:a. All banks, who propose to offer transactional services on the Internet should obtain prior approval from RBI. Banks application for such permission should indicate its business plan, analysis of cost and benefit, operational arrangements like technology adopted, business partners, third party service providers and systems and control procedures the bank proposes to adopt for managing risks. The bank should also submit a security policy covering recommendations made in this circular and a certificate from an independent auditor that the minimum requirements prescribed have been met. After the initial approval the banks will be obliged to inform RBI any material changes in the services / products offered by them.b. Banks will report to RBI every breach or failure of security systems and procedure and the latter, at its discretion, may decide to commission special audit / inspection of such banks.c. The guidelines issued by RBI on Risks and Controls in Computers and Telecommunications vide circular DBS.CO.ITC.BC. 10/ 31.09.001/ 97-98 dated 4thFebruary 1998 will equally apply to Internet banking. The RBI as supervisor will cover the entire risks associated with electronic banking as a part of its regular inspections of banks.d. Banks should develop outsourcing guidelines to manage risks arising out of third party service providers, such as, disruption in service, defective services and personnel of service providers gaining intimate knowledge of banks systems and misutilizing the same, etc., effectively.e. With the increasing popularity of e-commerce, it has become necessary to set up Inter-bank Payment Gateways for settlement of such transactions. The protocol for transactions between the customer, the bank and the portal and the framework for setting up of payment gateways as recommended by the Group should be adopted.f. Only institutions who are members of the cheque clearing system in the country will be permitted to participate in Inter-bank payment gateways for Internet payment. Each gateway must nominate a bank as the clearing bank to settle all transactions. Payments effected using credit cards, payments arising out of cross border e-commerce transactions and all intra-bank payments (i.e., transactions involving only one bank) should be excluded for settlement through an inter-bank payment gateway.g. Inter-bank payment gateways must have capabilities for both net and gross settlement. All settlement should be intra-day and as far as possible, in real time.h. Connectivity between the gateway and the computer system of the member bank should be achieved using a leased line network (not through Internet) with appropriate data encryption standard. All transactions must be authenticated. Once, the regulatory framework is in place, the transactions should be digitally certified by any licensed certifying agency. SSL / 128 bit encryption must be used as minimum level of security. Reserve Bank may get the security of the entire infrastructure both at the payment gateways end and the participating institutions end certified prior to making the facility available for customers use.i. Bilateral contracts between the payee and payees bank, the participating banks and service provider and the banks themselves will form the legal basis for such transactions. The rights and obligations of each party must be clearly defined and should be valid in a court of law.j. Banks must make mandatory disclosures of risks, responsibilities and liabilities of the customers in doing business through Internet through a disclosure template. The banks should also provide their latest published financial results over the net.k. Hyperlinks from banks websites, often raise the issue of reputational risk. Such links should not mislead the customers into believing that banks sponsor any particular product or any business unrelated to banking.Hyperlinks from a banks websites should be confined to only those portals with which they have a payment arrangement or sites of their subsidiaries or principals. Hyperlinks to banks websites from other portals are normally meant for passing on information relating to purchases made by banks customers in the portal. Banks must follow the minimum recommended security precautions while dealing with request received from other websites, relating to customers purchases.2. The Reserve Bank of India have decided that the Groups recommendations as detailed in this circulars should be adopted by all banks offering Internet banking services, with immediate effect.Even though the recommendations have been made in the context of Internet banking, these are applicable, in general, to all forms of electronic banking and banks offering any form of electronic banking should adopt the same to the extent relevant.3. All banks offering Internet banking are advised to make a review of their systems in the light of this circular and report to Reserve Bank the types of services offered, extent of their compliance with the recommendations, deviations and their proposal indicating a time frame for compliance. The first such report must reach us within one month from the date of this circular. Banks not offering any kind of I-banking may submit a nil report.4. Banks who are already offering any kind of transactional service are advised to report, in addition to those mentioned in paragraph above, their business models with projections of cost / benefits etc. and seek our post-facto approval.

1.1.6 SolutionsHere are some simple tips to prevent you from falling into the trap of cyber criminals. Remember, a simple ignorance or oversight can make a huge dent in your hard- earned savings. Securing your account: Avoid online banking on unsecured wifi systems and operate only from PCs at home. Never reveal password to anyone. Do not even write it on a piece of paper on diary. Just memorise it. It should be alphanumeric and change it frequently. Never reply to queries from bank online about account or personal details. The personal information should not be kept in a public computer or in emails. Phishing: A person's personal details are obtained by fraudsters posing as bankers, who float a site similar to that of the person's bank. They are asked to provide all personal information about themselves and their account to the bank on the pretext of database upgradation. The number and password are then used to carry out transactions on their behalf without their knowledge. Phishing involves using a form of spam to fraudulently gain access to people's online banking details. As well as targeting online banking customers, phishing emails may target online auction sites or other online payment facilities. Typically, a phishing email will ask an online banking customer to follow a link in order to update personal bank account details. If the link is followed, the victim downloads a program which captures his or her banking login details and sends them to a third party. Spam: Spam is an electronic 'junk mail' or unwanted messages sent to your email account or mobile phone. These messages vary, but are essentially commercial and often annoying in their sheer volume. They may try to persuade you to buy a product or service, or visit a website where you can make purchases; or they may attempt to trick you into divulging your bank account or credit card details. Nigerian Scam: Nigerian or Frauds 409 or 419 are basically the lottery scam in which some overseas persons are involved to cheat innocent persons or organizations by promising to give a good amount of money at nominal fee charges. Their intention is to steal money in the form of fee against the lottery prize. Spyware: Spyware such as Trojan horse is generally considered to be software that is secretly installed on a computer and takes things from it without the permission or knowledge of the user. Spyware may take personal information, business information, bandwidth; or processing capacity and secretly gives it to someone else. "Trojan Horse" scheme unfolds when malicious software (malware) embeds to a consumer's computer without the consumer being aware of it. Trojans often come in links or as attachments from unknown email senders. After installation the software detects when a person accesses online banking sites and records the username and password to transmit to the offender. People using public computers, in places like Internet cafes, are often susceptible to Trojans like malware or spyware. Check sites URL: Always check the URL of your bank's web site. Fraudsters can lure you to enter your user ID and password at a fake website that resembles your bank. If you see anything other than the bank's genuine URL, it has to be fake. Never enter your user ID or password or such sensitive information without ascertaining that you are on the right website. Always type the Web address of your bank into the browser address space. Never click on the link in the email. Fool-proof password: Change your online banking password at regular intervals. Also, avoid easy-to-guess passwords, like first names, birthdays, kid's or spouse's name and telephone numbers. Try to have an alpha-numeric password, one that combines alphabets and numbers. If you have several bank accounts, never use the same online banking password for all. Never select the option on browser that stores or retains user name and password. As it can easily be cracked by cyber criminals. Also, never paste your password, always type it in. This little amount of `finger exercise' will go a long way in safety. Always check 'last logged': Most banks have a 'last logged in' panel on their websites. If your bank has it, check the panel whenever you log in. If you notice irregularities (like you are logging in after two days, but the panel says you logged in that morning!), report the matter immediately to your bank and change your password right away. Always log out when you exit the online banking portal. Close the browser to ensure that your secure session is terminated. Never exit simply by closing the browser. Keep your system up to date: Regularly check for security updates for your computer operating system. Most security updates are aimed at reducing risks to your computer, these may be data-related or otherwise. Make sure that your operating system and browser have the latest security patches installed. And, always install these only from trusted websites. Install a personal firewall to prevent hackers from gaining unauthorised access to your computer, especially if you connect to the Internet through a cable or a DSL modem. Public access can be injurious: Don't leave the PC unattended after keying in information while transacting on the website. Avoid accessing your bank online at cyber cafes or on a share or public computer. Also, avoid locations that offer online connections through wireless networks (Wi-Fi), where privacy and security are minimal. Follow Bank instructions: Banks say that appropriate upgradations are carried out from time to time by their IT departments for risk mitigation. They issue instructions to the customers to manage their accounts through virtual keyboards by way of which the characters typed by them are not identified by hackers. SMS alerts are also an important tool since any transaction carried out on account is reported to the account holder through an SMS. Protection: Learn the ways to protect yourself from online banking fraud schemes. Detect Trojans that appear on your PC in the form of viruses, spyware or malware through Antivirus Software, anti Spyware, and Adware. Also, learn to keep your cards, documents and passwords safe, and monitor your accounts to safeguard yourself from bank fraud committed through identity theft.

1.1.7 Case Studies1. Email password Hacking-

One day a lady came to cyber cell office and reported that she and her brothers e-mail IDS had been hacked by someone she suspected him to be her husband. The lady had already lodged a case against him for dowry and was pending for trial in Bhopal court.The suspect had hacked ladys and her brother e-mail ID account and copied all the information to his e-mail and produced selected e-mails to claim that . she was happy with him and case of dowry is a false one .To malign the image of her brother the suspect sent a copy of FIR lodged against him at police station Habibganj. This indicated that the husband of the lady was behind the whole affair but police had not any evidence against him.

Cyber cell started enquiry by an order of IGP and obtained the login logs from rediff.com The logs indicated that the email IDs password were changed and anonymous emails were sent from the house of ladys husband and sent from his.Cyber cell registered a case under section 66 IT act and submitted Challan has been filed against the suspect and trial is over.Court has hold the conviction against the suspect Sabrish Pillai but found that the matter came before the court as Sabrish was having family dispute with his wife and the, act of hacking was not against the society at large, Hence let him free after warning.

2. Internet Lottery Fraud:MP Cyber police has investigated several case of cheating through Internet lottery offer which is commonly known as Nigerian 419 scam. In this kind of cheating the culprits used to send bulk emails, bulk SMS to millions of users using software, stating that the receiver has won lottery worth thousands of pounds or dollars which comes out to be crores of Indian rupees, in a lucky draw. They used to create fake lottery winning certificate using logo and text from original website, which seems to be original at a glance. This kind of sending bulk emails or SMS is an act of commonly known as Phishing attack. Those who are lured by such offer often tempted to contact them. The culprits then ask the target to fill a form and thus receive all the personal information of the target and ask him to deposit token money in various names to earn the lottery prize. The target who is hoping to earn huge amount of money finds these charges to be minimal. The culprit asks the target to deposit money in the name yellow tag, custom clearance UN anti terrorism certificate, RBI charges or any other name they feel it to suitable to convince the target. The culprits ask the target to deposit in various bank accounts and once the money is deposited by the target it is withdrawn same day by the suspect.After losing lakhs of amount people come to know that they are being cheated. In this kind of cheating the contact number are usually taken in the fake names or in the other Indian guys name, account are being opened in the fake names or acquired on the basis of commission by fooling the account holders.Mp cyber police has investigated the case of Internet lottery fraud and arrested Nigerian national Gods power from Meharauli Delhi with the suspected mobile used for communication, one laptop, printer and box used for black dollar scam.Mp cyber police has investigated the case of Internet lottery fraud Crime no 07/09 420,468,34 IPC and crime no 05/10 420,468,34 AIPC and arrested Nigerian national Idiiogbe Joseph from Mumbai with the suspected mobile used for communication, laptop, fake Income tax certificate and seals.Apart from the above MPCP is investigating two more such cases in which suspects are being monitored and efforts are being made to arrest them.

1.1.8 ICICI BANKICICI bank (formerly known asIndustrial Credit and Investment Corporation of India) is the largest private sector bank in India. ICICI is the first bank to introduceInternet banking in India.ICICI bank offers variousonline banking servicesto its customers under the nameICICI Net Banking. The ICICI net banking system allows you to access your bank account any time of the day from the privacy of your home or office. Moreover, you can transfer funds to any bank account across India instantly usingICICI net banking facility.

CHAPTER- 2LITERATURE REVIEW

2.1 REVIEW OF LITERATUREMalhotra, Pooja & Singh, B. (2010) this study is an attempt to present the present Status of online banking in India and the extent of online banking services offered by banks. In addition, it seeks to examine the factors affecting the extent of online banking services. The data for this study are based on a survey of bank websites explored during July 2008. The sample consists of 82 banks operating in India at 31 March 2007. Multiple regression technique is employed to explore the determinants of the extent of Online banking services. The results show that the private and foreign online banks have performed well in offering a wider range and more advanced services of online banking in comparison with public sector banks. Among the determinants affecting the extent of Online banking services, size of the bank, experience of the bank in offering Online banking, financing pattern and ownership of the bank are found to be significant. The primary limitation of the study is the scope and size of its sample as well as other variables (e.g. market, environmental, regulatory etc) which may have an effect on the decision of the banks to offer a wide range of Online banking services. The purpose of the study is to help fill significant gaps in knowledge about the Online banking landscape in India. The findings are expected to be of great use to the government, regulators, commercial banks, and other financial institutions, e.g. co-operative banks planning to offer Online banking, bank customers and researchers. The bankers as well as society at large will come to know where the banks lag in terms of adoption of online banking and in providing different products and services. An understanding of the factors affecting the extent of Online banking services is essential both for economists studying the determinants of growth and for the creators and producers of such technologies. Moreover, this paper contributes to the empirical literature on diffusion of financial innovations, particularly online banking, in a developing country, i.e. India.Polaris Software Lab (2010) In this study Polaris Software Lab Limited (POLS.BO), a leading Financial Technology Company, launched Intellect(TM) PRIVACY based on state-of-the-art technology and four patents filed by the Indian Institute of Technology Madras. IndusInd Bank has become the first bank in India to implement Intellect(TM) PRIVACY, an online and Online banking security card, for its Online banking customers. The technology will protect customers and banks from practically all kinds of phishing attacks, viz. deceptive e-mail, key/screen logger, brute force/dictionary attacks and Trojans, etc. Intellect PRIVACY uses multi factor, dynamic authentication technology providing for authorizing online banking transactions, in a completely secure platform. Commenting on the innovation, Professor L S Ganesh, Coordinator of the programmer, said, "At IIT Madras, the Department of Computer Science and Engineering and the Department of Management Studies got particularly interested in designing an online security technology that is cost efficient and easy to use in a rapidly growing e-commerce scenario, and transferring it commercially. We chose the Cost-Usability-Security (CUS) approach to arrive at a solution and Polaris Software created an eminently usable application for the banking industry. IndusInd Bank, which was looking for providing greater security for web based transactions, became the first organization to adopt it." Intellect PRIVACY is a simple plastic card that customers can use to generate a one-time password (OTP) for carrying out any kind of online banking transaction including the sign on. Banks can issue booklets containing a desired number of cards that would last many transactions. The card has no pilferage value by itself and customers can easily manage its life cycle, including making a request for a new booklet and reporting loss of cards through online banking.Azouzi, D. (2009) this paper aims to check if the current and prompt technological revolution altering the whole world has crucial impacts on the Tunisian banking sector. Particularly, this study seeks some clues on which we can rely in order to understand the customers' behavior regarding the adoption of online banking. To achieve this purpose, an empirical research is carried out in Tunisia and it reveals that panoply of factors is affecting the customers-attitude toward online banking. For instance; age, gender and educational qualifications seem to be important and they split up the group into electronic banking adopters and traditional banking defenders and so, they have significant influence on the customers' adoption of online banking. Furthermore, this study shows that despite the presidential incentives and in spite of being fully aware of the online banking's benefits, numerous respondents are still using the conventional banking. It is worthy to mention that the fear of loss because of transactions errors or hackers plays a significant role in alienating Tunisian customers from online banking.B. Dizon, J.A. (2009) In this study they have founded that while big banks still conduct the bulk of their business in brick and mortar bank branches, the finance sector has been increasingly investing on Online banking facilities to offer 24-hour, queue free services to their regular clients, whether through ATM machines, mobile phones. "Online Banking's appeal is primarily its convenience. Clients nowadays want instant results; they don't want to wait anymore," said Francisco M. Caparros, Jr., senior vice-president of Asia United Bank and president of Banc Net. It's also turned out to be a more efficient way to process transactions, as online banking does away with most of the paperwork that clients have to accomplish. "A lot of people don't like filling forms," Mr. Caparros added. "Online banking, in particular, relies on user names and passwords which need to be protected," said Ferdinand G. La Chica, first vice- president and marketing group head for Sterling Bank of Asia. These anti- theft barriers are at times supplemented by transaction passwords and "tokens", often a keychain-like device that is issued to the client and generates random, one-time passwords to enable him to log into his account online. Last year, the Rural Bank Association of the Philippines announced that its members are looking to appoint local merchants like sari-sari stores as third party agents where consumers can open new accounts and make large payments. Such informal outlets will enable banks to reach out to small-income businesses and individuals, particularly those in the agrarian sector, most of who are based outside the city center.Uppal, R.K. & Chawla, R. (2009) this study highlights customer perceptions regarding online banking services. A survey of 1,200 respondents was conducted in October 2008 in Ludhiana district, Punjab. The respondents were equally divided among three bank groups namely, public sector, private sector and foreign banks. The present study investigates the perceptions of the bank customers regarding necessity of Online banking services, quality of online banking services, bank frauds, future of online banking, preference of bank customers regarding banks, comparative study of banking services in various bank groups, preferences regarding use of online channels and problems faced by online bank customers. The major finding of this study is that customers of all bank groups are interested in online banking services, but at the same time are facing problems like, inadequate knowledge, poor network, lack of infrastructure, unsuitable location, misuse of ATM cards and difficulty to open an account. Keeping in mind these problems faced by bank customers, this paper frames some strategies like customer education, seminars/meetings, proper network and infrastructure facilities, online shopping facilities, proper working and installation of ATM machines, etc., to enhance Online banking services. Majority of professionals and business class customers as well as highly educated and less educated customers also feel that online banking has improved the quality of customer services in banks.Reeti, Sanjay, and Malhotra, A. (2009) Stated about the Customers perspectives regarding online banking in an emerging economy. So that, the author determining various factors affecting customer perception and attitude towards and satisfaction with online banking is an essential part of a bank's strategy formulation process in an emerging economy like India. To gain this understanding in respect of Indian customers, the study was conducted on respondents taken from the northern part of India. The major findings depict that customers are influenced in their usage of online banking services by the kind of account they hold, their age and profession, attach highest degree of usefulness to balance enquiry service among Online banking services, consider security & trust most important in affecting their satisfaction level and find slow transaction speed the most frequently faced problem while using online banking.Hsun, K.S. (2008) this study considers the coherence of the financial service sector and adopts different observational variables to identify innovation capital (training and R&D density) and process capital (IT system sufficiency). The results show that human capital has a direct impact on both innovation capital and process capital, which in turn affect customer capital; while finally, customer capital affects business performance. In addition, there is a negative relationship between process capital and customer capital in the financial service sector. It suggests that in the financial service sector, customer satisfaction relies on a sufficient degree of training and R&D density. Intemperate investment on the support of online banking operation systems may not be a good answer.Laukkanen, P., Sinkkonen, S. & Laukkanen, T. (2008) The purpose of this paper is to further the understanding of innovation resistance by dividing online banking non-adopters into three groups based on their intentions to use the innovation. Thereafter, the aim is to identify how the resistance differs in these customer groups. This study identifies three groups of Online banking non-adopters, namely postponers, opponents and rejectors. The data were collected by conducting an extensive postal survey among the retail banking customers in Finland who had not adopted online banking. The measurement development was based on consumer resistance theory and the earlier literature on online banking. Principal component analysis was used to classify the resistance items into five adoption barriers derived from the earlier literature. Thereafter, analysis of variance was used to analyze the statistical differences in resistance to online banking between the three groups. Significant differences were identified between the groups explored. The resistance of the rejectors is much more intense and diverse than that of the opponents, while the postponers show only slight resistance. The results also indicate that psychological barriers are even higher determinants of resistance than usage and value, which are constructs related to ease-of-use and usefulness determining acceptance in the traditional technology acceptance model. Moreover, the findings highlight the role of self-efficacy in bank customers' risk perceptions to online banking. This study provides further understanding of what inhibits online banking adoption by comparing three non-adopter groups with respect to their resistance to online banking. It also has implications for management in overcoming non-adopters' resistance to the innovation.Routray (2008) the study describes that Mobile and Wireless communication devices are becoming enablers for organizations to conduct business more effectively and efficiently. One of the most effective applications is mobile banking (m-banking). For any application to gain recognition technological advancements play a vital role. To make m-banking application a success bandwidth management is an important issue. The increased flexibility and mobility feature of wireless ATM and its bandwidth on demand function is motivating a large number of carriers towards deployment of the WATM networks. But there are certain issues which are required to be addressed in WATM. The issues are cost effective planning of network, location management and handover management. In this paper we have suggested and evaluated a technological framework for the m-banking application using wireless ATM which optimizes the bandwidth usage and provides an effective handover management. Simulation results show that the resultant framework is very effective in handling the bandwidth and the handover issue in wireless ATM and provides an effective WATM framework model.Malhotra, P. & Singh, B. (2007) Stated about this research tells us that the larger banks, banks with younger age, private ownership, higher expenses for fixed assets, higher deposits and lower branch intensity evidence a higher probability of adoption of this new technology. Banks with lower market share also see the Online banking technology as a means to increase the market share by attracting more and more customers through this new channel of delivery. Further, the adoption of Online banking by other banks increases the probability that a decision to adopt will be made. An understanding of the factors affecting this choice is essential both for economists studying the determinants of growth and for the creators and producers of such technologies. From this perspective, understanding the factors determining the adoption of technology becomes highly relevant from the policy point of view. Moreover, the studies on the adoption of financial innovations are related to developed markets, e.g. US or European banking markets. Hence, this paper contributes to the empirical literature