UNIT 1

E-Banking
Introduction
The usage of e banking by the enterprises came into existence in mid 90’s. E-banking
came into existence in greater numbers because of low operating costs. First it is in the form
of ATM’s and phone transactions. Recently it transformed to internet a new channel between
customers and banks which benefits both. The main aim of e-banking services is to provide
the customers a much faster services with low cost. From the last twenty years, banking
sector has chosen a new method of banking based on the progress of information technology.
In addition to these customers, transaction and communication abilities are fastened based on
information technology.
The progress of electronic banking started with use of automatic teller machines and
afterwards it developed to online banking. In the future it will be done in mobile phones
(wap-enabled). Anyway online banking continues to be the best for financial transactions.
E-Banking Meaning
E-banking made its debut in UK and USA 1920s. It becomes prominently popular during
1960, through electronic funds transfer and credit cards. The concept of web-based baking
came into existence in Europe and USA in the beginning of 1980.
In India e-banking is of recent origin. The traditional model for growth has been through
branch banking. Only in the early 1990s has there been a start in the non-branch banking
services. The new private sector banks and the foreign banks are handicapped by the lack of a
strong branch network in comparison with the public sector banks. In the absence of such
networks, the market place has been the emergence of a lot of innovative services by these
players through direct distribution strategies of non-branch delivery. All these banks are
using home banking as a key “pull’ factor to remove customers away from the well entered
public sector banks.
Many banks have modernized their services with the facilities of computer and electronic
equipments. The electronics revolution has made it possible to provide ease and flexibility in
banking operations to the benefit of the customer. The e-banking has made the customer say
good-bye to huge account registers and large paper bank accounts. The e-banks, which may
includes
 Credit Cards/Debit Cards
 ATM
 E-Cheques
  EFT (Electronic Funds Transfer)
 DeMAT Accounts
 Mobile Banking
 Telephone Banking
 Internet Banking
 EDI (Electronic Data Interchange)
E-banking Services in India
E-banking is a term that includes the entire information technology revolution that has
taken place in the banking industry. E-banking simply refers to the use of electronic channels
like phone, mobile, internet etc for delivery of their services to their valuable customers. It
increases the efficiency in the area of effective payment by enhancing the delivery of banking
services in quick time. E-banking has helped banks to retain the current customers, increase
customer’s satisfaction, acquire further share in the markets and reduce the costs of delivering
service to the customers. Delivery of services has gained increasing popularity through
electronic platform. It provides alternative way for delivery of services in a faster way to the
customers. Various number of services are being offered by banks through electronic
banking. It is quite difficult to measure the extent of such services, but an effort has been
made by classifying these services into following categories.
What is e-banking?
Electronic funds transfer means computer systems are used to perform financial
transactions electronically. The EFT is used for electronic payments and customer initiated
transactions where the cardholder pays using credit or debit card.
The transaction types are, Withdrawal, deposit, inter account transfer, inquiry, administrative
transactions that covers non financial transactions including PIN change. Electronic Fund
Transfer transactions need authorisation and a means to match the card and card holder.
NEFT transactions require the cardholder’s PIN to send online in encrypted form for
validation by the issuer of the card. Other information may include the card holder’s address
or the CVV2 security value printed on the card.
Electronic funds transfer transactions are activated during e-banking procedures. The
different methods of e-banking are
 Online banking
 Short Message Service banking
 Telephone banking
 Mobile banking
Online banking:
Online banking also called as internet banking, allows the customers to use all the
banking services from a computer which has internet access. The customer can perform
financial transactions on a secure website operated by the bank. Online banking offers
features such as bank statements, loan applications, funds transfer, e-bill payments and
account aggregation allows customers to monitor all their accounts in one place.
Telephone Banking:
Telephone banking is a service provided by the banks which provides customers to
perform transactions on phone. All the telephone banking systems uses automated answering
system with keypad response or voice recognition capability. To prove their identity
customers must provide a numeric or verbal password or answering the questions asked by
the call centre representative. In telephone banking customer can’t withdraws and deposits
cash but can do all the other transactions.
Mostly there will be a customer care representative to which the customers speak,
although this feature is not guaranteed. The customer care representatives are trained to do
what are available at the branch like chequebook orders, address change, and debit card
replacements.
SMS Banking:
SMS banking is a service permitting banks to do select banking services from the
users mobile by the SMS messaging. SMS banking services have push and pull messages.
Push messages are sent by the banks for alerting customer about new offers, marketing
messages, alerts to events happening in customers account such as large amount of
withdrawals from ATM or credit card etc.
Interactive - TV banking:
Interactive TV is a service that allows users to interact with TV content as they view
it. It is also called as iTV or idTV. If the customer subscribes to a cable television service
some banking facilities like balance enquiry, funds transfer between accounts, bills payment
are made available all the way through TV. Most of the major banks in UK have
experimented banking services through cable and satellite TV companies.
Importance of E-banking
E-banking provides many advantages for banks and customer’s. E-banking has made
life much easier and banking much faster for both customers and banks.
Main advantages are
 It saves time spent in banks
  It provides ways for international banking.
 It provides banking throughout the year 24/7 days from any place have internet
access.
 It provides well-organized cash management for internet optimization
 It provides convenience in terms of capital, labour, time all the resources needed to
make a transaction.
 Taking advantage of integrated banking services, banks may compete in new markets
can get new customers and grow their market share.
 It provides some security and privacy to customers, by using state-of-the-art
encryption and security technologies.
Some of the Statistics are:
 Half of the customers registering for online banking are giving up before signing up.
 10% people who used internet banking services gave up due to poor usability or
security concerns.
 In 2001, 1/3rd of the top European banks offered some form of interactive TV
banking.
 In 2004 it is approximated that there were ten million users of interactive-TV based
banking services in Europe.
 In 2007, the estimated number of Europeans using internet banking is 130 million
 88% of e-banking users visit their banking websites as a at least once a week
 It is estimated that 35% of online banking households will be using mobile banking
by 2010.
 By 2011 it is predicted that 80% of the bank customers in UK will use the internet to
connect to their bank.
 Problems encountered by disabled people and the ageing population using e-banking.
Physically Impaired:
The people with physical impairments who are using telephone banking finds hard to
hold and activate the buttons. People with physical disability cannot have proper control on
hands and arms therefore it is difficult to use mouse effectively so using the banking website
becomes a problem.
Hearing impaired:
People with hearing impairments require visual representation of the auditory
information that is in the banking website. With increasing use of multimedia e.g video
streaming the banking people should take care that these will be understood by the people
having hearing problems. One of the straight forward ways to make the banking site
accessible to the hearing impaired people is to make the language simple particularly for BSL
users for whom English is second language. So it is necessary to use a simple language and
the inclusion of a glossary of banking terms. The people who are hearing impaired, cannot
use telephone banking. And the users of hearing aids will experience electromagnetic
interference, from mobile phones. The radio signals from mobile telephones canarise
humming and buzzing inside hearing aid.
Blind and partially sighted
People having vision problems have a problem to insert the card into the ATM
machine and typing their PIN .And people with vision problems can use online banking
based on how the site is designed for the people with vision disabilities i.e blind people use
browsers should with speech or Braille output which are text-based systems and should be
browsed independent of graphics.
Cognitively impaired
The Banking websites with too many steps and unhelpful messages are difficult to
browse for cognitively impaired people. The websites designed with complex page layouts,
tables and navigation structures confuse these people and are become difficult to browse. In
telephone banking, mobile phones of latest technology are coming with so many features and
complex operating systems. People with Cognitive disabilities find difficult to operate these
kinds of mobile phones. People having dyslexia finds difficult to remember the PIN in the
correct order and may enter incorrectly. So these people are prone to writing them down
which lessens the security and can be misused.
Age-related Impairments
People as they age will experience so many changes in memory, eye sight, hearing
and dexterity and they might not consider having disabilities. These people will be benefited
by the accessibility provisions that make websites accessible. People having age related eye
sight may access the website by changing the text size. These people also finds difficult to
use the mouse. Older people finds difficult to use mobiles having complex operating systems
and too many options.
Benefits of E-banking:
To the Customer:
 Anywhere Banking no matter wherever the customer is in the world. Balance enquiry,
request for services, issuing instructions etc., from anywhere in the world is possible.
  Anytime Banking – Managing funds in real time and most importantly, 24 hours a
day, 7days a week.
 Convenience acts as a tremendous psychological benefit all the time.
 Brings down “Cost of Banking” to the customer over a period a period of time.
 Cash withdrawal from any branch / ATM
 On-line purchase of goods and services including online payment for the same.
To the Bank:
 Innovative, scheme, addresses competition and present the bank as technology driven
in the banking sector market
 Reduces customer visits to the branch and thereby human intervention
 Inter-branch reconciliation is immediate thereby reducing chances of fraud and
misappropriation
 On-line banking is an effective medium of promotion of various schemes of the bank,
a marketing tool indeed.
 Integrated customer data paves way for individualised and customised services.
Features
Online banking facilities typically have many features and capabilities in common,
but also have some that are application specific. The common features fall broadly into
several categories:
A bank customer can perform non-transactional tasks through online banking, including:
 Viewing account balances
 Viewing recent transactions
 Downloading bank statements, for example in PDF format
 Viewing images of paid cheques
 Ordering cheque books
 Download periodic account statements
 Downloading applications for M-banking, E-banking etc.
 Bank customers can transact banking tasks through online banking, including
 Funds transfers between the customer's linked accounts
 Paying third parties, including bill payments and third party fund transfers
 Investment purchase or sale
 Loan applications and transactions, such as repayments of enrolments
 Credit card applications
 Register utility billers and make bill payments
  Financial institution administration
 Management of multiple users having varying levels of authority
 Transaction approval process
Role of Information Technology (IT) in the Banking Sector
Banking environment has become highly competitive today. To be able to survive and
grow in the changing market environment banks are going for the latest technologies, which
is being perceived as an ‘enabling resource’ that can help in developing learner and more
flexible structure that can respond quickly to the dynamics of a fast changing market
scenario. It is also viewed as an instrument of cost reduction and effective communication
with people and institutions associated with the banking business.
The Software Packages for Banking Applications in India had their beginnings in the
middle of 80s, when the Banks started computerising the branches in a limited manner. The
early 90s saw the plummeting hardware prices and advent of cheap and inexpensive but high
powered PC’s and Services and banks went in for what was called Total Branch Automation
(TBA) packages. The middle and late 90s witnessed the tornado of financial reforms,
deregulation globalisation etc. coupled with rapid revolution in communication technologies
and evolution of novel concept of convergence of communication technologies, like internet,
mobile/cell phones etc. Technology has continuously played on important role in the working
of banking institutions and the services provided by them. Safe keeping the public money,
transfer of money, issuing drafts, exploring investment opportunities and lending drafts, and
exploring investment being provided.
Information Technology enables sophisticated product development, better market
infrastructure, implementation of reliable techniques for control of risks and helps the
financial intermediaries to reach geographically distant and diversified markets. Internet has
significantly influenced delivery channels of the banks. Internet has emerged as an important
medium for delivery of banking products and services.
The customers can view the accounts; get account statements, transfer funds and
purchase drafts by just punching on few keys. The smart card’s i.e., cards with micro
processor chip have added new dimension to the scenario. An introduction of ‘Cyber Cash’
the exchange of cash takes place entirely through ‘Cyber-books’. Collection of Electricity
bills and telephone bills has become easy. The upgradeability and flexibility of internet
technology after unmatched opportunities for the banks to reach out to its customers. No
doubt banking services have undergone drastic changes and so also the expectation of
customers from the banks has increased greater.
IT is increasingly moving from a back office function to a prime assistant in increasing the
value of a bank over time. IT does so by maximizing banks of pro-active measures such as
strengthening and standardising banks infrastructure in respect of security, communication
and networking, achieving inter branch connectivity, moving towards Real Time gross
settlement (RTGS) environment the forecasting of liquidity by building real time databases,
use of Magnetic Ink Character Recognition and Imaging technology for cheque clearing to
name a few. Indian banks are going for the retail banking in a big way. The key driver to
charge has largely been the increasing sophistication in technology and the growing
popularity of the Internet. The shift from traditional banking to e-banking is changing
customer’s expectations.
Impact of IT on the Service Quality:
The most visible impact of technology is reflected in the way the banks respond
strategically for making its effective use for efficient service delivery. This impact on service
quality can be summed up as below:
With automation, service no longer remains a marketing edge with the large banks
only. Small and relatively new banks with limited network of branches become better placed
to compete with the established banks, by integrating IT in their operations.
The technology has commoditising some of the financial services. Therefore the
banks cannot take a lifetime relationship with the customers as granted and they have to work
continuously to foster this relationship and retain customer loyalty.
The technology on one hand serves as a powerful tool for customer servicing, on the
other hand, it itself results in depersonalising of the banking services. This has an adverse
effect on relationship banking. A decade of computerization can probably never substitute a
simple or a warm handshake.
In order to reduce service delivery cost, banks need to automate routine customer
inquiries through self-service channels. To do this they need to invest in call centers, kiosks,
ATM’s and Internet Banking today require IT infrastructure integrated with their business
strategy to be customer centric.
Impact of IT on Banking System:
The banking system is slowly shifting from the Traditional Banking towards
relationship banking. Traditionally the relationship between the bank and its customers has
been on a one-to-one level via the branch network. This was put into operation with clearing
and decision making responsibilities concentrated at the individual branch level. The head
office had responsibility for the overall clearing network, the size of the branch network and
the training of staff in the branch network. The bank monitored the organisation’s
performance and set the decision making parameters, but the information available to both
branch staff and their customers was limited to one geographical location.
Impact of IT on Privacy and Confidentiality of Data:
Data being stored in the computers is now being displayed when required on through
internet banking mobile banking, ATM’s etc. all this has given rise to the issues of privacy
and confidentially of data are:
 The data processing capabilities of the computer, particularly the rapid throughput,
integration, and retrieval capabilities, give rise to doubts in the minds of individuals as
to whether the privacy of the individuals is being eroded.
 So long as the individual data items are available only to those directly concerned,
everything seems to be in proper place, but the incidence of data being cross
referenced to create detailed individual dossiers gives rise to privacy problems.
 Customers feel threatened about the inadequacy of privacy being maintained by the
banks with regard to their transactions and link at computerised systems with
suspicion.
Aside from any constitutional aspect, many nations deem privacy to be a subject of human
right and consider it to be the responsibility of those who concerned with computer data
processing for ensuring that the computer use does not revolve to the stage where different
data about people can be collected, integrated and retrieved quickly. Another important
responsibility is to ensure the data is used only for the purpose intended.
Channels for Delivery of Banking Services
Branch Banking:
A branch of a bank is a place, office, unit where all banking operations are done under
the single roof. People go to the branch for their banking requirements. This is the most
popular and therefore most important channel of the Bank.
It is a place where customers can visit personally and can make use of different kind of
services and banking products in one place. In case of any difficulty the customers are able to
seek advise of the bank staff, remove their all doubts, get their all clarifications about banking
operations.
Branch in fact is a place that serves as a channel of sales and services and bank
employees can play vital role of customer satisfaction with smile. The branch is a channel
that can boost the image of the entire bank by developing personal relations with customers
and enhancing the customer relationship management of the bank.
Extension Counters:
The Extension Counter is a part of Branch Banking. Whenever any Branch deals with
some huge Business House, A big Institution or Organization may be Government or Private
it has to perform banking transactions in Bulk. In addition to keeping the accounts of such big
houses, branch has to provide banking services to the staff of these organizations which may
run in thousands in number. Other ancillary services are also required to be provided by the
branch.
In case such organizations are not located very near to the branch the dealing branch
opens a counter in the premises of such organization to facilitate the easy access to banking
requirements and deploys some staff on such Extension Counters. The business conducted by
these extension counters is always on behalf of the main branch and is taken into the account
of the branch itself.
ATM Channel of Banking:
In simple words The ATM is known as Automated Teller Machine. Before the
introduction of ATM in 80’s the people were familiar with one teller only. A human being
sitting behind the cash counter and making cash payments or receiving cash from customers.
For cash transactions one was required to go to the teller physically and that too within the
working hours of the bank. The invention of the ATM has changed the entire scenario.
Now you can withdraw money 24 hours a day without going to bank through an ATM
installed in a nearby place. It has provided customers an option to access the banking services
beyond the regular banking hours. ATM is a machine for receiving and dispensing cash
round the clock. In its initial stage it was able to dispense cash only without able to perform
any other function.
1. Cash withdrawal,
2. Cash Deposits,
3. Balance Enquiry,
4. Providing mini statement,
5. Deposit cheques, and
6. Fund Transfers.
Some more advance ATMs provides services like paying utility Bills, Recharging Mobile
services, Cheque Book requests. Etc.
Mobile Banking or Phone Banking, Tele-Banking:
It is matter of surprise that many people are using mobile or phone banking without knowing
that restricted services are being provided to them. Like ATM it is another electronic banking
Channel which provides round the clock 24 hours banking for the customers. You deposit
some amount in cash or through cheques a SMS shall flash on your mobile informing that
such and such amount has been credited in your such and such account.
Likewise the moment any withdrawal is made from your account a similar message shall be
sent on your mobile. This phone banking is one part that banks are doing themselves to keep
their customers updated about the transactions of their respective accounts.
On the other part customers can approach to their banks and request for using the Phone
banking or tele-banking. The bank shall enable its customers with their computerized system
of IVR. This IVR technology is known as Interactive Voice Response which automates
interactions with telephone callers.
1. Asking for account balance,
2. Status of a cheque deposited for collection,
3. Request for cheque book or statement of account,
4. Record stop payments, and
5. Information on bank products.
Off course enquires relating to banking services are also attended.
PC Banking, Self Service Banking:
The internet banking as known today has gone through many phases of development.
In each phase it was known by different names. In its initial stage in early 80s it was known
as Home Banking means the banking transactions that can be done while sitting at home.
During contemporary period it was also known as Self Service banking.
Initially the customers were able to perform some routine banking functions at home For
availing home banking services telephone or cable connections were required and
transactions were performed with the help of a terminal, keyboard and a monitor (TV or PC).
With the help of this facility customers were able to access to bank services like inquiry of
account balance, moving funds between accounts, payment of bills and buy/sell investments
or securities. All this was done by the customers themselves on their own system while sitting
home, office, or work place.
That is why it was also known as self service banking although everything was done
online. It was than a luxury for the customers. In New York this services were started in 1981
by some banks. In the year of 1983 it was started in U.K. by Bank of stock land. But the
facility at that time was limited some restricted areas and also to only some select class of
customers. But now the internet banking or online banking has changed the entire scenario of
banking industry throughout the world. From luxury it has become necessity. Banks are no
longer confined to branches only, it has become a world vide phenomena.
Internet Banking, Online Banking, E-Banking:
In India now most of the banks have their own websites for the purpose of offering
banking services on the internet. The Reserve Bank of India has also issued guidelines for
internet banking which all the banks are required to follow. The multinational and private
sector banks have been successful in setting up internet banking but some Public Sector
banks had been lagging behind because of their inherent difficulties.
Most of the public sector banks have very large network of their branches and good
number of them are located in far flung remote areas and they face lack of connectivity.
These banks have very large base of customers and include illiterate customers also. Some
are still following old dated and traditional type of application methods and are not flexible
for change.
Providing infrastructure for starting internet banking to wide spread network of
branches in one go may not be possible. But it is really credible that these banks have done
much and are now near to a stage when all will be web enabled.
Automated Teller Machine
An automated teller machine (ATM) is an electronic telecommunications device that
enables customers of financial institutions to perform financial transactions, such as cash
withdrawals, deposits, transfer funds, or obtaining account information, at any time and
without the need for direct interaction with bank staff.
ATMs are known by a variety of names, including automatic teller machine in the
United States (ATM, American, British, Australian, Malaysian, South African, Singaporean,
Indian, Maldivian, Hiberno, Philippines and Sri Lankan English), often redundantly ATM
machine, automated banking machine (ABM, Canadian English). Although ABM is used in
Canada, ATM is still very commonly used in Canada and many Canadian organization used
ATM over ABM. In British English, the terms cash point, cash machine, minibank (the
official name of the Yorkshire bank ATM's), and "hole in the wall" are most widely used.
Other terms include cashline, nibank, tyme machine, cash dispenser, bankomat or bancomat.
Many ATMs have a sign above them, indicating the name of the bank or organisation that
owns the ATM, and possibly including the networks to which it can connect. In Canada,
ABMs that are not operated by a financial institution are known as "white-label ABMs".
According to the ATM Industry Association (ATMIA),[10] there are now close to 3.5 million
ATMs installed worldwide. However, the use of ATMs in Australia is gradually declining –
most notably in retail precincts. On most modern ATMs, customers are identified by inserting
a plastic ATM card (or some other acceptable payment card) into the ATM, with
authentication being by the customer entering a personal identification number (PIN), which
must match the PIN stored in the chip on the card (if the card is so equipped), or in the
issuing financial institution's database.
Using an ATM, customers can access their bank deposit or credit accounts in order to
make a variety of financial transactions such as cash withdrawals, check balances, or credit
mobile phones. ATMs can be used to withdraw cash in a foreign country. If the currency
being withdrawn from the ATM is different from that in which the bank account is
denominated, the money will be converted at the financial institution's exchange rate.
Internet banking
E-banking has been prevailing in India around sometime in the form of automated
teller machine. Thereafter, it has been transformed by the internet and a new delivery channel
has emerged that benefits both banks as well as customers. Internet banking or online
banking, as it is sometimes called, simply is an extension to traditional banking, which uses
internet both as a medium for receiving instructions from the customers and also delivering
services to them. Internet banking, as a medium of delivering the banking services to
customers and as a strategic tool for the development of banking business, has gained wide
acceptability in all developed nations and is quickly spreading in developing nations like
India with more and more banks entering the fray.
Internet technology has totally transformed the design of banking business. The
success of internet banking operation totally depends upon the well designed website of the
bank. It should be informative, functional, user-friendly and most importantly, secured.
Internet Banking lets clients handle many banking transactions via their personal computer.
For instance, one may use his/her computer/laptop/smart-phone to view his/her account
balance, request transfer between accounts and pay bills electronically.
Facilities provided to internet banking customers
Various services under Internet Banking Account are as follows:
1. Customers can check the current balance in their account.
2. All the past transactions from the date of opening the account can be checked by the
customers.
3. Money can be transferred to any bank account of that particular bank or any other
bank.
4. Transfer of Fund having visa/maestro, debit card holders or credit card holders
5. Customers can recharge their prepaid mobile online anywhere, anytime in a few
minutes.
6. Mutual Fund schemes can be bought/sold online with the help of internet banking
account.
7. With the help of internet banking account, fixed deposits and recurring deposits can
be applied for.
8. Cheque book request can be made and, the same will be delivered on the said address.
9. Customers can issue instruction to banks to stop payment of a particular cheque with
the help of internet banking account.
10. Internet banking account provides customer one point access to all accounts securely.
With this facility, customers can view all his/her account like credit card, Demat, loan
account through single user ID.
11. Request of ATM/Debit cards can be made with the help of internet banking account.
12. Re-issue and up-gradation of ATM/Debit Cards can be made with the help of internet
banking.
13. Statement of bank account can be received on emails.
14. Customer can make request for a Demand Draft with Internet banking account.
15. Renewal of current fixed deposit and recurring deposit and request of its premature
closure can be made.
16. A customer can change password whether it is log in or transaction password.
17. Demat account detail and transaction can be provided.
18. A customer can view detail related to loan account, type of loan, date of sanction, date
of maturity, rate of interest.
19. Customer can get information about the rate of interest on deposit and loan scheme.
20. Payment of utility bills (electricity, telephone, house tax etc), bank credit, mobile
bills, insurance premium.
21. With internet banking account, customers can pay e-shopping bills
22. Booking of railway and air ticket can be done with the help of Internet banking
account.
23. Share trading in security market can also be done.
24. Customer can make online payment of service tax, income tax, house tax etc.
25. Loans can be sanctioned online with help of internet banking account.
26. Internet banking account allows the customers to send money anytime anywhere in
India through money order. The fund will be delivered to the beneficiaries doorstep.
 27. All the donation of customers can be made from the convenience of your home or
office with the help of internet banking account.
28. Recharging of DTH connection from comfort of home or office, anytime, anywhere
can be done.
29. Customer can even buy gold and silver with the help of internet banking account.
30. Forex can be bought and delivered to the doorstep of the customer with the help of
internet banking account.
31. Document storage facilities are also provided by the banks to their customers via
internet banking account to store birth or marriage certificate, passbook statement, life
insurance policy, PAN card copy or any other prized document etc.
32. Account opening request can be made online. One can apply for a new account only
in branches where he/she already has an account.
Telephone banking
Telephone banking is a service provided by a bank or other financial institution, that
enables customers to perform over the telephone a range of financial transactions which do
not involve for cash or documents (such as cheques), without the need to visit a bank branch
or ATM. Telephone banking times are usually longer than branch opening times, and some
financial institutions offer the service on a 24-hour basis. However, some banks impose
restrictions on which accounts may be accessed through telephone banking and usually limit
the amounts that can be transacted.
The types of financial transactions which customers may transact through telephone
banking include obtaining account balances and list of latest transactions, electronic bill
payments, and funds transfers between a customer's or to another's accounts.
From the bank's point of view, telephone banking reduces the cost of handling transactions by
reducing visits by customers to a bank branch for non-cash withdrawals and deposit
transactions. However, the use of telephone banking services has been declining in favour of
internet banking since internet banking became available in the early 2000s, and further
eroded with the advent of mobile banking in the 2010s.
Telephone Banking/Tele Banking/Phone Banking
Phone banking, tele banking or telephone banking are all the same. In phone banking,
banking transaction is done over the telephone. Customers of banks can get information about
their accounts, make banking transaction like fixed deposits, money transfer, demand draft,
collection and payment of bills etc by using telephones. As more and more people are using
mobile phones, telephone banking is also possible with the help of mobile phones. Telephone
banking satisfies the customer with fast, anytime transaction and account information via
telephone access. With a simple push of a button, customers can check a deposit, account
information, transfer fund as well as perform number of other functions. Telephone banking
system uses technology that keeps the cost of delivering the service very low. On the other
hand, customers can do the banking work directly from their homes or from their office desk,
without being stuck in traffic and without standing in queue for hours and without the need to
visit a bank branch or automated teller machine. Telephone banking allows the customers to
access their account 24 hours a day, 7 days a week. They can dial in and get the current
account information.
For using telephone banking facilities, a customer must first register with the bank’s
branch for availing the service and a password is set for customer verification. Password may
or may not be same as in internet banking. For using telephone banking, customer has to dial
special phone number set up by the bank. Most telephone banking services use automated
phone answering system with phone keypad response or voice recognition capability.
Facilities provided to telephone/phone banking customers
1. Customer can get the details of saving, current, fixed deposits available in their
account balance.
2. With phone banking facility, customers can get their cheque book and latest account
statement delivered to them.
3. Money transfer can be possible with the help of phone banking.
4. Customers can request the bank to stop payment of a particular cheque by using
phone banking service.
5. Mobile banking request can be made with the help of phone banking.
6. Customers can get the latest information about the interest rates prevailing along with
the foreign exchange rates.
7. Customer can use phone banking for blocking of Internet Banking User ID
8. Blocking of ATM/debit card credit cards can be done by phone banking.
9. Phone banking can be used by the customers for issuing ATM card.
10. TDS certificate can also be received by the customers via phone banking.
Telephone Banking Features & Benefits
Enjoy peace of mind with instant access to your accounts over the phone.
The automated service is simple to use and is available 24 hours a day, 7 days a week.
Some of the features to avail through Commercial Bank’s Telephone Banking Service are:
Accounts cards loans utility payments
 * Know your account *Know your Credit *Know your Loan *Pay your Ooredoo
balance and last Card balance and last outstanding balance Bill
5 transactions 5 transactions *Request Loan *Pay your Kahrama
*Get your IBAN *Pay your Credit statement through Bill
through SMS Card bills FAX
*Account Statement *Credit Card
through FAX Statement through
*Know your last FAX
salary credit
Allow Overseas Update Mobile Setting a PIN
Card Usage
*Update Travelling *Update your local *Credit Card PIN
Country Mobile Number Change
*Update Travel *Update international *Debit Card PIN
Period Mobile Number Change
Telephone Banking is easy and convenient
 Caller Identification: Your calls are automatically recognized when called from
registered mobile number.
 International call prioritization – International calls are automatically identified and
prioritized in the queue.
 Dynamic Card activation – IVR provides instant card activation menu if you have any
cards pending activation.
 IBAN SMS: Receive your IBAN number via SMS through Telephone Banking.
 Instant TPIN Registration: Telephone Banking Pin registration is made simpler, faster
and more secure.
 Updating mobile number: Now you can update your local or international mobile
number in quick steps.
 Card PIN Change: Change your Credit and Debit Card PIN through IVR instantly.
Mobile banking
Mobile banking is a service provided by a bank or other financial institution that
allows its customers to conduct financial transactions remotely using a mobile device such as
a smart phone or tablet. Unlike the related internet banking it uses software, usually called an
app, provided by the financial institution for the purpose. Mobile banking is usually available
on a 24-hour basis. Some financial institutions have restrictions on which accounts may be
accessed through mobile banking, as well as a limit on the amount that can be transacted.
Transactions through mobile banking may include obtaining account balances and lists of
latest transactions, electronic bill payments, and funds transfers between a customer's or
another's accounts. Some apps also enable copies of statements to be downloaded and
sometimes printed at the customer's premises; and some banks charge a fee for mailing
hardcopies of bank statements.
From the bank's point of view, mobile banking reduces the cost of handling
transactions by reducing the need for customers to visit a bank branch for non-cash
withdrawal and deposit transactions. Mobile banking does not handle transactions involving
cash, and a customer needs to visit an ATM or bank branch for cash withdrawals or deposits.
Many apps now have a remote deposit option; using the device's camera to digitally transmit
cheques to their financial institution.
Mobile banking differs from mobile payments, which involves the use of a mobile
device to pay for goods or services at the point of sale or remotely, analogously to the use of
a debit or credit card to effect an EFTPOS payment.
Most services in the categories designated accounting and brokerage are transaction-
based. The non-transaction-based services of an informational nature are however essential
for conducting transactions - for instance, balance inquiries might be needed before
committing a money remittance. The accounting and brokerage services are therefore offered
invariably in combination with information services. Information services, on the other hand,
may be offered as an independent module. Mobile banking may also be used to help in
business situations as well as financial.
Mobile banking services
Typical mobile banking services may include:
Account information
1. Mini-statements and checking of account history
2. Alerts on account activity or passing of set thresholds
3. Monitoring of term deposits
4. Access to loan statements
5. Access to card statements
6. Mutual funds / equity statements
7. Insurance policy management
Transaction
 1. Funds transfers between the customer's linked accounts
2. Paying third parties, including bill payments and third party fund transfers
3. Check Remote Deposit
Investments
1. Portfolio management services
2. Real-time stock
Support
1. Status of requests for credit, including mortgage approval, and insurance coverage
2. Check (cheque) book and card requests
3. Exchange of data messages and email, including complaint submission and tracking
4. ATM Location
Content services
i. General information such as weather updates, news
ii. Loyalty-related offers
iii. Location-based services
A report by the US Federal Reserve (March 2012) found that 21 percent of mobile
phone owners had used mobile banking in the past 12 months. Based on a survey conducted
by Forrester, mobile banking will be attractive mainly to the younger, more "tech-savvy"
customer segment. A third of mobile phone users say that they may consider performing
some kind of financial transaction through their mobile phone. But most of the users are
interested in performing basic transactions such as querying for account balance and making
bill
Challenges for a mobile banking solution
Key challenges in developing a sophisticated mobile banking application are:
Handset accessibility
There are a large number of different mobile phone devices and it is a big challenge
for banks to offer a mobile banking solution on any type of device. Some of these devices
support Java ME and others support SIM Application Toolkit, a WAP browser, or only SMS.
Initial interoperability issues however have been localized, with countries like India using
portals like "R-World" to enable the limitations of low end java based phones, while focus on
areas such as South Africa have defaulted to the USSD as a basis of communication
achievable with any phone.
The desire for interoperability is largely dependent on the banks themselves, where installed
applications (Java based or native) provide better security, are easier to use and allow
development of more complex capabilities similar to those of internet banking while SMS
can provide the basics but becomes difficult to operate with more complex transactions.
There is a myth that there is a challenge of interoperability between mobile banking
applications due to perceived lack of common technology standards for mobile banking. In
practice it is too early in the service lifecycle for interoperability to be addressed within an
individual country, as very few countries have more than one mobile banking service
provider. In practice, banking interfaces are well defined and money movements between
banks follow the IS0-8583 standard. As mobile banking matures, money movements between
service providers will naturally adopt the same standards as in the banking world.
Security
As with most internet-connected devices, as well as mobile-telephony devices,
cybercrime rates are escalating year-on-year. The types of cybercrimes which may affect
mobile-banking might range from unauthorized use while the owner is using the mobile
banking, to remote-hacking, or even jamming or interference via the internet or telephone
network data streams. In the banking world, currency rates may change by the millisecond.
Security of financial transactions, being executed from some remote location and
transmission of financial information over the air, are the most complicated challenges that
need to be addressed jointly by mobile application developers, wireless network service
providers and the banks' IT departments.
The following aspects need to be addressed to offer a secure infrastructure for financial
transaction over wireless network:
 Physical part of the hand-held device. If the bank is offering smart-card based
security, the physical security of the device is more important.
 Security of any thick-client application running on the device. In case the device is
stolen, the hacker should require at least an ID/Password to access the application.
 Authentication of the device with service provider before initiating a transaction.
This would ensure that unauthorized devices are not connected to perform
financial transactions.
 User ID / Password authentication of bank’s customer.
 Encryption of the data being transmitted over the air.
 Encryption of the data that will be stored in device for later / off-line analysis by
the customer.
One-time password (OTP) is the latest tool used by financial and banking service providers in
the fight against cyber fraud. Instead of relying on traditional memorized passwords, OTPs
are requested by consumers each time they want to perform transactions using the online or
mobile banking interface. When the request is received the password is sent to the
consumer’s phone via SMS. The password is expired once it has been used or once its
scheduled life-cycle has expired.
Because of the concerns made explicit above, it is extremely important that SMS gateway
providers can provide a decent quality of service for banks and financial institutions in
regards to SMS services. Therefore, the provision of service level agreements (SLAs) is a
requirement for this industry; it is necessary to give the bank customer delivery guarantees of
all messages, as well as measurements on the speed of delivery, throughput, etc. SLAs give
the service parameters in which a messaging solution is guaranteed to perform.
Scalability and Reliability
Another challenge for the CIOs and CTOs of the banks is to scale-up the mobile
banking infrastructure to handle exponential growth of the customer base. With mobile
banking, the customer may be sitting in any part of the world (true anytime, anywhere
banking) and hence banks need to ensure that the systems are up and running in a true 24 x 7
fashion. As customers will find mobile banking more and more useful, their expectations
from the solution will increase. Banks unable to meet the performance and reliability
expectations may lose customer confidence. There are systems such as Mobile Transaction
Platform which allow quick and secure mobile enabling of various banking services.
Recently in India there has been a phenomenal growth in the use of Mobile Banking
applications, with leading banks adopting Mobile Transaction Platform and the Central Bank
publishing guidelines for mobile banking operations.
Application Distribution
Due to the nature of the connectivity between bank and its customers, it would be
impractical to expect customers to regularly visit banks or connect to a web site for regular
upgrade of their mobile banking application. It will be expected that the mobile application
itself check the upgrades and updates and download necessary patches (so called "Over The
Air" updates). However, there could be many issues to implement this approach such as
upgrade / synchronization of other dependent components.
User Adoption
It should be noted that studies have shown that a huge concerning factor of having
mobile banking more widely used, is a banking customer's unwillingness to adapt. Many
consumers, whether they are misinformed or not, do not want to begin using mobile banking
for several reasons. These can include the learning curve associated with new technology,
having fears about possible security compromises, just simply not wanting to start using
technology, etc.
Personalization
It would be expected from the mobile application to support personalization such as :
 Preferred Language
 Date / Time format
 Amount format
 Default transactions
 Standard Beneficiary list
 Alerts
RBI Guidelines for mobile banking
Guidelines define mobile banking as, “doing any banking transaction by using mobile
phones by the banks‟ customer that would include debit/credit of customers account”. After
the initial guidelines set by Reserve Bank of India , several relaxation policies have also been
made to encourage the use of mobile banking due to continuous change in the environment
and priorities of banking customers.
1. Any branch which offers mobile banking services should note that the mobile banking
service should be available to customers on any network available. It should not be
limited to few networks only.
2. In the long run, each bank would enable transaction between two accounts in different
banks, irrespective of the network.
Regulatory and supervisory issue
1. Only banks which are licensed, supervised and have physical presence in India are
permitted to offer mobile banking services.
2. Mobile banking service will only be issued to the customers who have debit/credit
cards issued as per the Reserve Bank of India guidelines.
3. Domestic services shall be provided i.e. only transaction of Indian rupee is permitted.
4. For extending this facility to their customers, banks can also use the services of
Business Correspondent appointed in compliance with RBI guidelines etc.
Facilities provided to Mobile banking customers
1. Information about the updated account balance without using internet or phone
banking can be gathered with the help of mobile banking that includes balance
enquiry and mini statement.
2. Fund transfer can be made possible with the help of mobile banking.
 3. Customer can request a cheque book with the help of mobile banking.
4. Mobile banking provides the facility of demat inquiry to the customers.
5. Making payment of all bills (utility bills, credit cards, insurance premium).
6. Customers can donate money via mobile banking account.
7. Mobile/DTH recharges can be done with the help of mobile banking account.
8. Online payments for shopping, movie etc can be done too.
IFSC
IFSC is an acronym for Indian Financial System Code. IFSC code is a unique eleven-
digit number which is a combination of alphabets and numerals. It is used to transfer funds
online for NEFT, IMPS and RTGS transactions. Usually, the IFSC code can be found on the
cheque-book provided by the bank. It can also be found on the front page of the
accountholder’s passbook. The IFSC code of each bank branch is assigned by the Reserve
Bank of India. The accountholders can easily check the IFSC code of their bank/branch on
the Reserve Bank of India’s website. Internet banking transactions for transferring funds,
using NEFT, IMPS and RTGS, can’t be initiated without a valid Indian Financial System
Code.
Generally, there isn’t any change or update in the 11-digit IFSC code. Recently, the
State Bank of India changed Indian Financial System Code of its branches all over the nation
after the merger with five associate banks and 1 other bank.
The Importance of IFSC code
The points mentioned below highlight the importance of IFSC code.
 Unique Identification- It helps in identifying a particular bank branch
 Elimination Errors It helps to eliminate any discrepancy in the fund transfer process.
 Electronic Payments Made Easier- It used in electronic payment tools such as RTGS,
IMPS, and NEFT.
Format for Bank IFSC Code
The first 4 characters of IFSC code are alphabets which represent the bank. The fifth
character is zero (0). Usually, the last 6 characters are numbers but they can be alphabets as
well and represent the bank branch.
How does IFSC CODE work?
Electronic funds transfer in India is facilitated by an alpha-numeric code called the
Indian Financial System Code (IFS Code or IFSC). This code exclusively recognises each
bank branch which participates in the two main settlement and payment systems in India,
namely, National Electronic Funds Transfer (NEFT) and Real Time Gross Settlement
(RTGS).
IFSC code is an eleven-character code that is assigned by the Reserve Bank of India
(RBI). The first portion of the code is composed of four letters representing the bank. Next
character is zero that is reserved for future use. The last 6 characters are the identification
code of the branch.
Let’s take an example:
IFSC Code of State Bank of India (SBI) starts with letters ‘SBI’. As there are a lot of
banks with several branches, the IFSC code is used to identify the branch involved in the
transaction.
IFSC codes are vital while carrying out payment transactions including RTGS, NEFT
transfers. Like, for SBI, the IFSC Code will be SBIN0011569 for the branch located in Sector
31, Gurugram.
Modes of Online Money Transfer Using IFSC Code (Detailed Info about NEFT, RTGS,
IMPS)
There is no denying the fact that almost everyone in our circle is dependent on online
payment modes and most certainly, you too are no exception. This online trend is supported
by a plethora of options – thanks to the digitization of monetary transactions.
The convenience of transferring funds online has certainly made our lives much easier.
Almost, every other bank provides multiple payment options such as Immediate Payment
Service (IMPS), National Electronic Funds Transfer (NEFT), Real Time Gross Settlement
(RTGS), etc.
Based on different parameters, such as the speed of transfer, the transaction value,
service availability, etc. each of the above-stated payment transfer methods will offer a
diverse range of features and flexibility. Although these payment methods have their own set
of benefits, yet they come with their varied flexibility and convenience for the customers.
How can IFSC code help you Transfer your Money through NEFT?
National Electronic Fund Transfer (NEFT) is one of the most widespread online
methods of transferring funds from one bank to another. NEFT is based on a deferred
arrangement which actually means that the money is transferred in different sets (batches).
Currently, there are 12 payment settlements sets arranged between the time slab of 8 am and
7 pm for weekdays (Monday to Friday) and six payment settlements between 8 am and 1 pm
for Saturdays. Although there isn’t any cap on the amount that one can transfer through
NEFT, however, a few banks have put a limit. For instance, SBI (State Bank of India) has put
a cap of Rs 10 lakhs for NEFT transfer amount under their retail banking option.
Step-by-step procedure to transfer money via NEFT:
 To start with, your bank branch should be NEFT-enabled. You can visit RBI’s
(Reserve Bank of India) website to check and confirm so.
 Complete the registration process for your net banking account by creating a
username and password. However, your mobile number should be registered with
your bank to complete the net banking registration.
 Afterwards, you need to add the beneficiary to your account to whom you want to
transfer the money. To do this, you will need the beneficiary’s name, her/his bank
account number and the IFSC (Indian Financial System Code) of her/his bank branch.
IFSC can be either found on the bank statement or on the cheque leaf.
 Once you have successfully added the beneficiary, there might be a waiting time
(assigned by the bank) before you can transfer funds to the added beneficiary. Again,
for instance, SBI has a waiting time of 4 hours.
 Once logged into your net banking account, go to the option of ‘Transfer Funds’,
select the name of the particular beneficiary you want to transfer funds to and
complete the transfer with the help of an OTP (One Time Password) sent to your
registered mobile number.
 The amount will be transferred to the beneficiary as per the next settlement’s
schedule.
 The NEFT costs between Rs 2.50 to Rs 25 (+ tax), depending on the amount
transferred to the beneficiary.
There are also certain limitations of NEFT transactions like you cannot transfer funds at
any time you feel doing so. This service is available only on working days and within the
working hours of your bank. You won’t be able to avail this service on weekends and bank
holidays.
The RTGS Option (Real Time Gross Settlement)
RTGS transfer is basically meant for high-value funds transactions. The minimum
amount that can be transferred through RTGS is Rs 2 lakhs. There isn’t any cap on maximum
transfer. As this transfer takes place on a real-time basis, the individual to whom the amount
is being transferred to will receive the amount in approximately 30 minutes.
The RTGS service works from 9 am to 4:30 pm on weekdays and 9 am to 2 pm on
Saturdays.
 The procedure to use RTGS service is same as NEFT. You simply need to make sure
that your, as well as the beneficiary’s, bank accounts are RTGS-enabled and you have the
IFSC code of his/her bank branch.
RTGS is a bit costlier than NEFT, wherein a transfer of Rs 2- Rs 5 lakhs may cost you
a fee of Rs 30, whereas the transactions above Rs 5 lakhs may cost you Rs 55.
The Immediate Payment Service (IMPS)
IMPS is an instant fund service and works 24*7. It can be used 365 days a year to
transfer funds to any other bank account. This service was introduced in 2010 by National
Payments Corporation of India.
You don’t have to register separately for IMPS service once you are logged into your
net banking account, you will get the option of transferring your funds either by NEFT,
RTGS or IMPS. You can choose the IMPS option to carry out the transfer.
Once again, you will need the beneficiary’s full name, her/his bank account number and IFSC
code to complete the transfer. In case you transferring funds through the mobile app of your
bank, you would also need MMID (Mobile Money Identifier) code for IMPS.
MMID is a 7-digit number issued by the bank for IMPS service if the individual is
using mobile banking as a beneficiary. Also, while conducting IMPS through mobile, there
isn’t any need of the beneficiary to get registered.
The charges for using IMPS are decided by the banks. However, usually the charge
for fund transfer up to Rs 1 lakh is Rs 5 and for a transfer between Rs 1-2 lakhs is up to Rs
15.
What is the use of IFSC?
An IFSC code is used by the Indian financial system to facilitate online and electronic
transfer of money. It is the IFSC code of a bank which enables it to help people with NEFT
and RTGs.
IFSC Code Pattern
In an IFSC code, the first four characters are alphabets which denote the bank name. Hence,
the IFSC code of each branch of the same bank will begin with the same four letters. The
fifth character is a zero.
The remaining six characters are digits or numbers which denote the branch code. This is the
part which makes an IFSC code unique.
How to know the IFSC?
It is simple. If you have an account with any branch of any bank, you will
automatically get to know its IFSC as it is printed on the passbook. However, if you want to
know the code without creating an account, you can do so via the internet. There is an official
website of IFSC where you can know all about this code.
Difference between IFSC & MICR
As monetary transactions are not limited to financial institutions like banks, thorough
verification is necessary before processing a transaction. To make the process faster, simpler
and automatic, banks and other financial institutions rely on certain codes. These codes,
namely, MICR Code and IFSC Code, play a significant role in verifying the authenticity of a
transaction. However, there is a difference between the usages of both these codes.
Let’s gather a clear understanding of both and learn how they differ from each other-
IFSC Code MICR Code
It is used to facilitate electronic money MICR code is initiated to make cheque
transfer between the banks in India. processing simpler and faster.
IFSC Code is an 11-digit alpha-numeric code MICR is a 9-digit code
The first four characters indicate the name of The first three digits represent the city code
the bank. where the bank branch is located.
Last 6 digits represent the bank location Last three digits indicate the bank branch
code.
 Unit II
Automated Teller Machines (ATM’s)
An automated teller machine (ATM) is an electronic banking outlet that allows
customers to complete basic transactions without the aid of a branch representative or teller.
Anyone with a credit card or debit card can access most ATMs. The first ATM appeared in
London in 1967, and in less than 50 years, ATMs had spread around the globe, securing a
presence in every major country and even tiny little island nations such as Kiribati and the
Federated States of Micronesia.John Adrian Shepherd-Barron, OBE (23 June 1925 – 15
May 2010) was a British inventor, who led the team that installed the first cash machine,
sometimes referred to as the automated teller machine or ATM.
Automatic teller machines have transformed the concept of banking in India. It has
eliminated the requirement of to stand in long queue and filling of forms for routine banking
transaction. Now customers of banks can access their money with the scratch of a ATM card.
An automated teller machine (ATM) is an electronic computerised device that allows banks
customers to directly use a secured method of communication to access their bank accounts.
Entry of Automated teller machines (ATM’s) has changed the office atmosphere of the
branches of banks. There is no need for a customer to visit branches for their day today
banking transaction like cash deposits, cash withdrawals, balance enquiry, dropping cheque
etc. Electronic channels have opened new avenues for banks. ATM’s are electronic machines
which are operated by customer himself to withdraw or deposit cash.
If it takes ten seconds for an ATM transaction as compared to more than a minute for
a counter transaction then it can be said that number of customer serviced in a day will be
much more via ATM’s. Flexible payment methods and user friendly banking services are
now available for the customers. This has been possible due to introduction of information
technology in banking industry. Internet banking, mobile banking, phone banking are the new
development in banking industry and expected to result in more efficient banking system.
However the pressure from private and foreign banks in India to public sector banks has
posed a challenging environment. Latest advance banking technology brought up by private
and foreign banks have great impact on Indian banking system. These alternative delivery
channels includes ATM’s (Automated teller machines), phone banking, internet banking,
mobile banking. Out of all these e-banking services, automated teller machines are most
heavily demanded and fulfil most of the needs of the customers without visiting the bank.
ATM delivers multiple services 24x7, which is major cause of making it a success in
he history of banking industry. In fact, e-banking services became profitable and successful
due to various services delivered through ATM’s. The management of ATM’s involves
loading of cash, arrangement of money with bank service of car that delivers cash,providing
insurance for all areas such as theft of cash from ATM’s. ATM’s helps customers in
withdrawing cash at anytime, from anyplace. Along with these services, many more services
are also provided by ATM’s that includes checking their account balances, recharging
prepaid mobile phone credit, transfer of money, making bill payments.
The customer is identified at ATM by inserting a plastic ATM/Debit card with a
magnetic stripe or a plastic smart card with a chip that has a unique card number issued to the
customer and some security information such as an expiration date or CVVC
(CVV).Authentication is provided by the customer entering a personal identification number
(PIN) for using any service at ATM’s. The number of ATM machines has grown from 34789
in March 2008 to114014 in March 2013(RBI working report, 2013).
Automated Telling Machine Block Diagram:
The automated teller machine consists of mainly two input devices and four output
devices that are; Input device and Output device
Input Devices:
Card Reader:
The card reader is an input device that reads data from a card .The card reader is part
of the identification of your particular account number and the magnetic strip on the back
side of the ATM card is used for connection with the card reader. The card is swiped or
pressed on the card reader which captures your account information i.e. the data from the
card is passed on the host processor (server). The host processor thus uses this data to get the
information from the card holders.
Keypad:
The card is recognized after the machine asks further details like your personal
identification number, withdrawal and your balance enquiry Each card has a unique PIN
number so that there is little chance for some else to withdraw money from your account.
There are separate laws to protect the PIN code while sending it to host processor. The PIN
number is mostly sent in encrypted from. The key board contains 48 keys and is interfaced to
the processor.
Output Devices:
Speaker:
The speaker provides the audio feedback when the particular key is pressed.
Display Screen:
 The display screen displays the transaction information. Each steps of withdrawal is
shown by the display screen. A CRT screen or LCD screen is used by most of ATMs.
Receipt Printer:
The receipt printer print all the details recording your withdrawal, date and time and
the amount of withdrawn and also shows balance of your account in the receipt.
Cash Dispenser:
The cash dispenser is a heart of the ATM. This is a central system of the ATM
machine from where the required money is obtained. From this portion the user can collect
the money. The duty of the cash dispenser is to count each bill and give the required amount.
If in some cases the money is folded, it will be moved another section and becomes the reject
bit. All these actions are carried out by high precision sensors. A complete record of each
transaction is kept by the ATM machine with help of an RTC device.
ATM Networking:
The internet service provider (ISP) also plays an important role in the ATMs. This
provides communication between ATM and host processors. When the transaction is made,
the details are input by the card holder. This information is passed on to the host processor by
the ATM machine. The host processor checks these details with authorized bank. If the
details are matched, the host processor sends the approval code to the ATM machine so that
the cash can be transferred.
Features of Automated Teller Machine:
 Transfer funds between linked bank accounts
 Receive account balance
 Prints recent transactions list
 Change your pin
 Deposit your cash
 Prepaid mobile recharge
 Bill payments
 Cash withdrawal
 Perform a range of feature in your foreign language.
Functions of Automated Teller Machine:
 The ATM provides 24 hours service
 The ATM provides privacy in banking communications
 The ATMs reduce the work load banks staff
 The ATM may give customer new currency notes
  The ATMs are convenient to banks customers
 The ATM is very beneficial for travellers
 The ATM provide services without any error
Facilities provided to the ATM customers
1. Anytime, anywhere access to cash, withdrawal of cash is available 24x7.
2. Transfer of money from one account to another account is possible with the help of
ATM‟s.
3. A customer with the help of ATM‟s can check his/her last transactions and current
balance. In addition to these, a mini statement can also be generated with the help of
ATM‟s.
4. Change of personal identification number of ATM/debit card can be made with
ATM‟s.
5. Cheque book request can be made by the customers through ATM‟s.
6. Fixed deposits can be done with the help of ATM‟s.
7. Utility bills can be paid by the customers with the help of ATM‟s.
8. Customers can pay their credit card bill with ATM‟s.
9. Mobiles can be recharged via ATM‟s.
10. To get the latest updates on mobile, customers can change their mobile number
through ATM‟s.
11. Check drop facility can also be used by customers at ATMs.
Advantages of ATM
Quick Cash Withdrawal
As the name suggests and is well known to all, just insert your ATM Debit Card into
the Automated Teller Machine, punch the code and the amount you want to withdraw and
you get the cash in your hands. In addition to the above there are many lesser known but
useful features such as:
Anyone Can Have Bank Card
All you need is a Bank Account to get a debit card cum ATM card issued to you. This
is much easier than applying for a credit card as a debit card is simply linked to your bank
account.
Account balance inquiry
You can check your account balance at the ATM. Also there is a facility to get mini
statement of your bank account.
Details of recent transactions
 Through the ATM card you can quickly get the mini statement giving the details of
recent transactions carried out in your bank account. Not only that, you can print this
statement too. Of course, the information would be in brief and limited to the last 8 or 10
transactions only.
Deposit cash / cheques
Did you miss the banking hours or are you far away from the bank branch? Now there
is no need to go the branch to deposit cash or cheques. Just go to the nearest ATM and do the
needful. The ATM clearing times are displayed at the ATM.
Request for new cheque book
As in my case you can also make a request for a new cheque book through the ATM
24 x 7, instead of driving down to the branch and filling in the requisition slip.
Transfer funds between accounts within the same Bank
If you are holding the ATM card then most of the banks allow you to transfer the
funds from one account to another account on a real time basis. Some banks also let you
transfer funds from your accounts to any third party provided the account is with the same
bank.
Pay your Utility bills
Under this useful feature provided by most of the banks, you can make payment for
utility bills.
Make other payments too
Using your ATM card you can now make payment for your Credit Card Bill, Pay
Taxes, do Mobile Phone re charge etc.
Save time
This is perhaps the single most benefit. Save time in driving down to the branch and
you do not have to waste time waiting in the queue to perform your transactions. The ATM
Card facilities provide you with the option of banking instantly for various transactions
mentioned above.
Convenient 24×7 Banking
At the ATM, now you are not bound to do your transactions within banking hours.
There no need to worry about bank holidays or public holidays. It is 24 x 7, 365 days a year
banking facility.
Withdraw Cash when overseas
Depending on the type of facility provided by your bank, if you are travelling
overseas, then the card can be used to draw currency of the country you are travelling to,
from the ATM. Of course, you should check before hand if your bank has given you this
facility.
Universally Accepted
Whether you are in town or out of town (or in another country), you can forget about
carrying loads of cash with you. Just carry your ATM cum debit card. It is normally accepted
everywhere. However you must check with the restaurant or the hotel if they have a system
of accepting the credit and debit cards. You can almost be sure if there is mastercard logo on
your debit card. Also you should make double sure by telling your bank that you’re leaving
your station and there should be any interruption in the service.
Security features
The use of ATM is restricted only to the person who knows the PIN. Thus if you keep
the PIN confidential then no one but you can use the ATM to do the banking transactions.
Also for safety purposes, you can set daily transaction limits and the ATM receipts can help
you keep track of your transactions and the money withdrawn or transferred. Also you can
change your PIN as an additional security measure.
Save your account from being dormant
Often one or the other account goes dormant if you have not done any transaction for
6 months or so. To make it operational again is a hassle. The reason for this is that most of us
are hard pressed for time. Now you can do one small transaction at regular intervals to keep it
active.
Helpful Budgeting Tool
With an ATM Debit card you can never go overboard with your money spending. The
debit card ensures that you get to spend only that much money that you have in your bank
account. This means you cannot go into a situation like “credit card debt”. This helps you to
strictly stay within the budget limits, unlike with credit cards.
Other Advantages and Benefits of using Bank ATM Debit Cards
ATM points are conveniently located at multiple locations. You can go the ATM of
any bank to withdraw cash – provided your ATM card is linked with that bank.
There is no need to fill out withdrawal and deposit slips – unlike the practice at the bank
branch.
Even when travelling overseas, you can withdraw cash at ATMs – provided your local laws
permit it.
Some Guidelines
If there are advantages and benefits of using Bank ATM cards, there are some potential risks
associated too. Here are some guidelines, if followed you can avert or minimize the risk of
debit card frauds:
 As soon as you receive your card, sign at the back.
 Keep the card safe to guard against loss or theft – just like you would keep your cash,
credit cards or jewelry.
 If possible, carry credit cards and debit cards separately from your cash wallet
 If you lose or misplace your ATM debit card, immediately notify your bank.
 Choose a PIN number which is different from your house number or birthday so that
it is difficult to guess by a hacker.
 Never share your PIN number with anyone and also do not write it somewhere. Just
memorize it.
 Keep receipts of all transactions done through your ATM debit card for your records
and future reference.
 Periodically you should check your statements and if you find any discrepancy then
take up with your bank immediately.
 Ask your bank to issue you a chip-enabled debit card, if available. While doing
transactions for retail purchases, this is more secure than swiping the magnetic strip.
Cash Deposit Machine
The Cash Deposit Machine (CDM) is a self-service terminal that lets you make
deposits and payment transactions by cash. Surprised? Yes, you can skip the long queues at
your bank and simply head to your nearest ATM if you wish to deposit money in your
account or would like to make a payment.
The biggest advantage about these machines installed at ATMs is that you can deposit money
round the clock. How cool is that?
However, you will also find CDMs located inside your bank, which can be used
during regular banking working hours. These machines save you time spent waiting in those
long queues where a teller would normally assist you to deposit your money.
How does a Cash Deposit Machine work?
A Cash Deposit Machine is easy to use. All you need is your Debit Card or your bank
account number. Some Cash Deposit Machines allow you to swipe your Debit Card to make
a transaction, while others require you to manually key in your bank account number.
The machine prompts you for confirmation when you enter the account number before you
deposit the currency notes. You will also be asked to enter your Debit Card PIN number.
 Once you select the option for ‘deposits’, you will then have to choose the account
you want to deposit the money into. And once you enter the correct amount, your transaction
will go through successfully. Customers will receive an advice slip confirming completion of
the transaction.
Tip: Remember, your deposit transaction is timed by the machine. If you take too
long to feed the money into the machine, your transaction will be timed out.
Step by step procedure to deposit money using your Debit Card
1. Just like how you would use your Debit Card to withdraw money, you need to insert
your card into the machine.
2. After you’ve inserted your card, you will be prompted to enter your PIN number.
3. Once you’ve entered the correct PIN, the machine will ask you to enter the amount
you wish to deposit in your account.
4. And upon entering the amount, you will have to confirm the amount on the machine.
Once this is done you will receive a confirmation slip stating that the transaction has
taken place successfully.
Wasn’t this easy?
So, what happens when you don’t have your Debit Card and need to deposit money? That’s
possible too. Let’s find out how!
Step by step procedure to deposit money without a Debit Card
You can deposit money into your account even if you don’t have your Debit Card
with you.Check for the option ‘deposit without card’ on the CDM and select it. Once you
select that option, the machine will ask you to enter your bank account number.
1. Once you enter your bank account number, you will then have to press the amount
you wish to deposit.
2. The next step is to confirm the amount on the machine.
3. Since this transaction will take place without your Debit Card, you will have to place
the cash in the deposit slot and let the machine take it in. When the machine takes in
the cash, it will display the currency denominations received on the screen.
4. You will then receive a confirmation slip for the completion of your transaction.
Keep in mind that you can also make payments to different accounts using this machine. All
you need to do is follow the same steps that you would in case you don’t have a Debit Card.
But, you need to know the account numbers you wish to transfer the money to.
What is the maximum and minimum amount that can be deposited in a Cash Deposit
Machine?
The per transaction limit to deposit money varies from bank to bank. However, the minimum
amount that can be deposited is Rs. 100 and the maximum amount is Rs. 49,900 per
transaction (or below Rs. 50,000). The cash deposit machine will accept all currency notes in
multiples of Rs. 100 up to Rs. 2,000.
Other services available on the CDM:
Cash Withdrawal
You can also withdraw cash through this machine of SBI as well as of Other Banks accounts.
PIN change
Use this service to change your password at regular intervals.
Balance Enquiry
Expecting an inflow of funds in your account? Use this service to check the current
available balance in your account. This service is available on the main option screen after
swiping your card. You can also ‘Go Green' by selecting the view option as the balance is
displayed on the screen else get a transaction receipt by selecting print.
Mini Statement of Account
Keep track of the transactions in your account by availing this service. Mini-statement
gives you an insight into the last 10 transactions in your account.
Debit Card
A debit card is a payment card that deducts money directly from a consumer’s
checking account to pay for a purchase. Debit cards eliminate the need to carry cash or
physical checks to make purchases. In addition, debit cards, also called check cards, offer the
convenience of credit cards and many of the same consumer protections when issued by
major payment processors like Visa or MasterCard.
Unlike credit cards, they do not allow the user to go into debt, except perhaps for
small negative balances that might be incurred if the account holder has signed up for
overdraft protection. However, debit cards usually have daily purchase limits, meaning it may
not be possible to make an especially large purchase with a debit card. See Credit versus
Debit Cards: Which Is Better?
Debit cards serve a dual purpose: They allow the user to withdraw money from his or
her checking account through an ATM or through the cash-back function many merchants
offer at the point of sale. In addition they also allow the user to make purchases. ATM cards,
by contrast, only allow the user to withdraw money from an ATM, while credit cards only
allow purchases unless the credit card holder has a PIN-enabled cash advance feature (and the
cash advance will incur interest, unlike withdrawing cash from a checking account).
 Debit card purchases can usually be made with or without a personal identification
number (PIN). If the card has a major payment processor’s logo, it can be run as a credit card,
and the cardholder won’t need to take the risk of exposing their PIN number. The money will
still come directly out of the cardholder’s checking account, and there won’t be any finance
charges when the debit card is run as a credit card. Some debit cards also offer reward
programs, similar to credit card reward programs, such as 1% back on all purchases.
Tracking Payments with Debit Cards
Every transaction made with a debit or check card will appear on the account holder’s
monthly statement, making it easy to keep track of purchases. Consumers are effectively
making their purchases in cash – that is, with money they actually have, as opposed to money
borrowed on credit – but unlike cash purchases, there’s no way to lose track of amounts spent
on a debit card. And while lost or stolen cash is gone forever, a lost or stolen bank card can
be reported to the bank, which can deactivate the card, remove any fraudulent transactions
from the cardholder’s account and issue a new card.
Disadvantages of ATMs
The world's first automated teller machine was installed in a branch of Barclays Bank
in London back in 1967. Since then, ATMs have made it quick, easy and convenient for
consumers to quickly get cash in their hands. There is a price to pay for this convenience.
Naturally, ATMs don't have the human element you'll encounter with a teller. If there's a
problem, you can't talk it out with the machine. Beyond that, ATM use can be costly, and can
leave cardholders vulnerable to fraud and theft.
Fraud
Criminals can fit skimming devices and small cameras to ATMs. These machines
record account details and personal identification numbers, which the crook uses to withdraw
money from those accounts. ATM skimming costs the U.S. banking system around $1 billion
each year, or $350,000 a day, according to the Secret Service. In January 2012, Mike Urban,
director of product management for Fiserv's Financial Crimes division, told "Bank Info
Security" ATM skimming had reached "epidemic" levels and continued to grow.
Fees
Banks and machine owners draw a huge source of revenue from ATM fees.
Cardholders can usually withdraw cash for free from ATMs owned by their bank, but
typically have to pay to use machines owned by other companies. In 2011, the average fee
was $2.40 according to Bankrate.com'scking Survey.
Theft Risk
 If you go to a bank, you're likely walking into a secured area watched by multiple
cameras or a life guard. Those elements encourage crooks to keep their distance from the
bank. You'll find no such security blankets with an ATM. It also takes a little time to take a
card out, insert it in the machine, access your account and get your cash. That can be enough
time for a crook to attack, which is why some people won't use an ATM after dark or in
secluded locations.
Card Retention
ATMs give, but they can also take. They can malfunction and simply not be available
when you need them. Some will also retain damaged cards, or any card if its owner fails to
enter a correct PIN after three attempts. A cardholder can usually reclaim her card if it's been
retained by a machine owned by her bank. However, if the card is kept by another bank's
ATM, there's no guarantee she'll ever see it again.
What is a Pin?
A personal identification number (PIN) is a security code for verifying your identity.
Similar to a password, your PIN should be kept secret because it allows access to important
services like the ability to withdraw cash, change personal information, and more. Unlike
most passwords, a PIN is numeric only—there are no letters or special characters in a PIN.
PINs are commonly used for financial transactions and (historically) student loans. But you
can use a PIN for anything from unlocking a door to unlocking a phone.
PINs are sometimes called “pin numbers,” which is redundant because the word "number" is
already included in “PIN.”
Financial PINs
ATM PINs: When you get cash from an ATM with a debit or credit card, you need to
enter a PIN to prove that you're authorized to make the withdrawal. The PIN serves as a
secondary form of verification. Anybody could have possession of your card, but only you
should know the PIN that works with the card.
Card PINs are often four-digit numbers, such as 1234. It’s best to use a PIN that is hard to
guess (although some people ignore that advice), and there are several strategies to create
great PINs.
Keep it Secret, but Accessible
Because the PIN authorizes you (or whoever knows it) to access sensitive
information, it's essential to keep the number secret. Protect it, and never write it on your
ATM or debit card—thieves know to look for four-digit codes written on the back of stolen
cards.
 Hide PIN entry: When you enter your PIN at an ATM or cash register, cover the
keypad with your free hand so that nobody can see what you type in. Thieves can install
hidden cameras on ATMs and other devices (like gas pumps) for recording PINs. If you want
to be extra safe, touch some of the other keys after you enter your PIN to thwart heat-
sensitive cameras and other tactics.
Easy vs. secure: PINs can be hard to remember—especially if you have multiple
cards. This creates a challenging situation: Strong security measures are harder to use. As a
result, you may be tempted to take shortcuts like re-using the same PIN or using numbers
from your birthday. Fortunately, several tricks make it easy to store PINs safely (while
making them easy to access or remember).
Password managers: Especially if you have multiple PINs, it may be helpful to have
a record of each PIN and account. Password managers are useful tools for doing this (much
better than a sticky note on your monitor or in your wallet). Develop and remember a strong
password for the password manager, and you can look up your PINs whenever needed.
 Unit III
Internet Banking
Banks have traditionally been in the forefront of harnessing technology to improve
their products, services and efficiency. They have, over a long time, been using electronic and
telecommunication networks for delivering a wide range of value added products and
services. The delivery channels include direct dial – up connections, private networks, public
networks etc and the devices include telephone, Personal Computers including the Automated
Teller Machines, etc. With the popularity of PCs, easy access to Internet and World Wide
Web (WWW), Internet is increasingly used by banks as a channel for receiving instructions
and delivering their products and services to their customers. This form of banking is
generally referred to as Internet Banking, although the range of products and services offered
by different banks vary widely both in their content and sophistication.
Broadly, the levels of banking services offered through INTERNET can be
categorized in to three types: (i) The Basic Level Service is the banks’ websites which
disseminate information on different products and services offered to customers and members
of public in general. It may receive and reply to customers’ queries through e-mail, (ii) In the
next level are Simple Transactional Websites which allow customers to submit their
instructions, applications for different services, queries on their account balances, etc, but do
not permit any fund-based transactions on their accounts, (iii) The third level of Internet
banking services are offered by Fully Transactional Websites which allow the customers to
operate on their accounts for transfer of funds, payment of different bills, subscribing to other
products of the bank and to transact purchase and sale of securities, etc. The above forms of
Internet banking services are offered by traditional banks, as an additional method of serving
the customer or by new banks, who deliver banking services primarily through Internet or
other electronic delivery channels as the value added services. Some of these banks are
known as ‘virtual’ banks or ‘Internet-only’ banks and may not have any physical presence in
a country despite offering different banking services.
From the perspective of banking products and services being offered through Internet,
Internet banking is nothing more than traditional banking services delivered through an
electronic communication backbone, viz, Internet. But, in the process it has thrown open
issues which have ramifications beyond what a new delivery channel would normally
envisage and, hence, has compelled regulators world over to take note of this emerging
channel. Some of the distinctive features of I-banking are:
  It removes the traditional geographical barriers as it could reach out to customers of
different countries / legal jurisdiction. This has raised the question of jurisdiction of
law / supervisory system to which such transactions should be subjected,
 It has added a new dimension to different kinds of risks traditionally associated with
banking, heightening some of them and throwing new risk control challenges,
 Security of banking transactions, validity of electronic contract, customers’ privacy,
etc., which have all along been concerns of both bankers and supervisors have
assumed different dimensions given that Internet is a public domain, not subject to
control by any single authority or group of users,
 It poses a strategic risk of loss of business to those banks who do not respond in time,
to this new technology, being the efficient and cost effective delivery mechanism of
banking services,
 A new form of competition has emerged both from the existing players and new
players of the market who are not strictly banks.
Internet Banking and Its Evolution
Internet banking was first started in 80’s. The term online became famous in the late
‘80s. Online banking during the formative years included usage at terminal, keyboard and TV
(or monitor) with an intention to approach the banking system using a phone line. Online
services started in New York in 1981 when four of the city’s major banks (Citibank, Chase
Manhattan, Chemical and Manufacturers Hanover) offered home banking services using the
videotext system. Later on, the concept of videotext became popular in France. In UK, first
home online banking services were set up by the Nottingham Building Society (NBS) in the
year 1983. It was based on the UK’s Prestel system and used a computer, such as the BBC
Micro, or keyboard (Tandata) connected to the telephone system and television set. It
provided customer an option to make bill payment for gas, electricity and telephone
companies and accounts with other banks. It was Stanford Federal Credit Union which
offered online internet banking services to all of its customers..
Internet banking refers to the use of Internet as a remote delivery channel for banking
services such as opening a deposit account or transferring funds at different accounts etc.
Further, it is a desirable opportunity for banks where the key to success is customer adoption.
There is evolution in development of internet banking. At the basic level, Internet banking
includes the setting up of a web page by a bank to give information about its product and
services. At an advance level, it involves provision of facilities such as accessing accounts,
funds transfer, enabling integrated sales of additional process and access to other financial
services such as investment and insurance. There is advantage for customers as it provides
opportunity to handle their banking transactions without visiting bank tellers. The services
through Internet banking are e-tax payment; access the account to check balance, online
trading of shares, online remittance of money, electronic bill payment system, railway
reservation, transfer of funds from one customer’s account to other, application of loan, etc.
Internet banking channel is convenient compared to bank branch system because stakeholders
can access their account at any time. Banks leveraged the advantage of the Internet by
offering online services in recent years.
Three functional levels of Internet banking which are informational, communicative
and transactional. Under informational level, it has been identified that banks have the
marketing information about the bank’s products and services on a standalone server. The
risk is very low as informational systems have no path between the server and the bank’s
internal network. Communicative level of Internet banking allows some interaction between
the bank’s systems and the customer. This level of interaction is limited to e-mail, account
inquiry, loan application, static file updates and it permits no fund transfer. Transactional
level Internet banking allows bank customers to electronically transfer funds to/from their
accounts, pay bills and conduct other banking transactions online. There are higher risk levels
in transaction levels as compared to that of other two levels.
Internet – its basic structure and topology
Internet is a vast network of individual computers and computer networks connected
to and communicate with each other using the same communication protocol – TCP/IP
(Transmission Control Protocol / Internet Protocol). When two or more computers are
connected a network is created; connecting two or more networks create ‘inter-network’ or
Internet. The Internet, as commonly understood, is the largest example of such a system.
Internet is often and aptly described as ‘Information Superhighway’, a means to reach
innumerable potential destinations. The destination can be any one of the connected networks
and host computers.
Internet has evolved to its present state out of a US Department of Defence project
ARPANet (Advanced Research Project Administration Network), developed in the late 1960s
and early 1970s as an experiment in wide area networking. A major perceived advantage of
ARPANet was that the network would continue to operate even if a segment of it is lost or
destroyed since its operation did not depend on operation of any single computer. Though
originally designed as a defence network, over the years it was used predominantly in areas
of scientific research and communication. By the 1980s, it moved out of Pentagon’s control
and more independent networks from US and outside got connected to it. In 1986, the US
National Science Foundation (NSF) established a national network based on ARPA protocol
using commercial telephone lines for connectivity. The NSFNet was accessible by a much
larger scientific community, commercial networks and general users and the number of host
computers grew rapidly. Eventually, NSFNet became the framework of today’s Internet.
ARPANet was officially decommissioned in 1990.
It has become possible for innumerable computers operating on different platforms to
communicate with each other over Internet because they adopt the same communication
protocol, viz, TCP/IP. The latter, which stands for ‘Transmission Control Protocol / Internet
Protocol’, is a set of rules which define how computers communicate with each other. In
order to access Internet one must have an account in a host computer, set up by any one of the
ISPs (Internet Service Providers). The accounts can be SLIP (Serial Line Internet Protocol) or
PPP (Point to Point Protocol) account. These accounts allow creating temporary TCP/IP
sessions with the host, thereby allowing the computer to join the Internet and directly
establish communication with any other computer in the Internet. Through this type of
connection, the client computer does not merely act as a remote terminal of the host, but can
run whatever programs are available on the web. It can also run several programs
simultaneously, subject to limitations of speed and memory of the client computer and
modem. TCP/IP protocol uses a unique addressing scheme through which each computer on
the network is identified.
TCP / IP protocol is insecure because data packets flowing through TCP / IP networks
are not normally encrypted. Thus, any one who interrupts communication between two
machines will have a clear view of the data, passwords and the like. This has been addressed
through Secured Socket Layer(SSL), a Transport Layer Security (TLS) system which
involves an encrypted session between the client browser and the web server.
FTP or File Transfer Protocol is a mechanism for transferring files between computers on the
Internet. It is possible to transfer a file to and from a computer (ftp site) without having an
account in that machine. Any organization intending to make available to public its
documents would normally set up a ftp site from which any one can access the documents for
download. Certain ftp sites are available to validated users with an account ID and password.
e-mail: The most common and basic use of Internet is the exchange of e-mail (electronic
mail). It is an extremely powerful and revolutionary result of Internet, which has facilitated
almost instantaneous communication with people in any part of the globe. With
enhancements like attachment of documents, audio, video and voice mail, this segment of
Internet is fast expanding as the most used communication medium for the whole world.
Many websites offer e-mail as a free facility to individuals. Many corporates have interfaced
their private networks with Internet in order to make their e-mail accessible from outside their
corporate network.
The entry of Indian banks into Net Banking
Internet banking, both as a medium of delivery of banking services and as a strategic
tool for business development, has gained wide acceptance internationally and is fast
catching up in India with more and more banks entering the fray. India can be said to be on
the threshold of a major banking revolution with net banking having already been unveiled. A
recent questionnaire to which 46 banks responded, has revealed that at present, 11 banks in
India are providing Internet banking services at different levels, 22 banks propose to offer
Internet banking in near future while the remaining 13 banks have no immediate plans to
offer such facility.
At present, the total Internet users in the country are estimated at 9 lakh. However,
this is expected to grow exponentially to 90 lakh by 2003. Only about 1% of Internet users
did banking online in 1998. This increased to 16.7% in March 2000.* The growth potential
is, therefore, immense. Further incentives provided by banks would dissuade customers from
visiting physical branches, and thus get ‘hooked’ to the convenience of arm-chair banking.
The facility of accessing their accounts from anywhere in the world by using a home
computer with Internet connection, is particularly fascinating to Non-Resident Indians and
High Networth Individuals having multiple bank accounts.
Costs of banking service through the Internet form a fraction of costs through conventional
methods. Rough estimates assume teller cost at Re.1 per transaction, ATM transaction cost at
45 paise, phone banking at 35 paise, debit cards at 20 paise and Internet banking at 10 paise
per transaction. The cost-conscious banks in the country have therefore actively considered
use of the Internet as a channel for providing services. Fully computerized banks, with better
management of their customer base are in a stronger position to cross-sell their products
through this channel.
Products and services offered
Banks in India are at different stages of the web-enabled banking cycle. Initially, a
bank, which is not having a web site, allows its customer to communicate with it through an
e-mail address; communication is limited to a small number of branches and offices which
have access to this e-mail account. As yet, many scheduled commercial banks in India are
still in the first stage of Internet banking operations.
With gradual adoption of Information Technology, the bank puts up a web-site that provides
general information on the banks, its location, services available e.g. loan and deposits
products, application forms for downloading and e-mail option for enquiries and feedback. It
is largely a marketing or advertising tool. For example, Vijaya Bank provides information on
its web-site about its NRI and other services. Customers are required to fill in applications on
the Net and can later receive loans or other products requested for at their local branch. A few
banks provide the customer to enquire into his demat account (securities/shares) holding
details, transaction details and status of instructions given by him. These web sites still do not
allow online transactions for their customers.
Some of the banks permit customers to interact with them and transact electronically
with them. Such services include request for opening of accounts, requisition for cheque
books, stop payment of cheques, viewing and printing statements of accounts, movement of
funds between accounts within the same bank, querying on status of requests, instructions for
opening of Letters of Credit and Bank Guarantees etc. These services are being initiated by
banks like ICICI Bank Ltd., HDFC Bank Ltd. Citibank, Global Trust Bank Ltd., UTI Bank
Ltd., Bank of Madura Ltd., Federal Bank Ltd. etc. Recent entrants in Internet banking are
Allahabad Bank (for its corporate customers through its ‘Allnet’ service) and Bank of Punjab
Ltd. State Bank of India has announced that it will be providing such services soon. Certain
banks like ICICI Bank Ltd., have gone a step further within the transactional stage of Internet
banking by allowing transfer of funds by an account holder to any other account holder of the
bank.
Some of the more aggressive players in this area such as ICICI Bank Ltd., HDFC
Bank Ltd., UTI Bank Ltd., Citibank, Global Trust Bank Ltd. and Bank of Punjab Ltd. offer
the facility of receipt, review and payment of bills on-line. These banks have tied up with a
number of utility companies. The ‘Infinity’ service of ICICI Bank Ltd. also allows online real
time shopping mall payments to be made by customers. HDFC Bank Ltd. has made e-
shopping online and real time with the launch of its payment gateway. It has tied up with a
number of portals to offer business-to-consumer (B2C) e-commerce transactions. The first
online real time e-commerce credit card transaction in the country was carried out on the
Easy3shoppe.com shopping mall, enabled by HDFC Bank Ltd. on a VISA card.
Banks like ICICI Bank Ltd., HDFC Bank Ltd. etc. are thus looking to position themselves as
one stop financial shops. These banks have tied up with computer training companies,
computer manufacturers, Internet Services Providers and portals for expanding their Net
banking services, and widening their customer base. ICICI Bank Ltd. has set up a web based
joint venture for on-line distribution of its retail banking products and services on the
Internet, in collaboration with Satyam Infoway, a private ISP through a portal named as
icicisify.com. The customer base of www.satyamonline.com portal is also available to the
bank. Setting up of Internet kiosks and permeation through the cable television route to widen
customer base are other priority areas in the agendas of the more aggressive players.
Centurion Bank Ltd. has taken up equity stake in the teauction.com portal, which aims to
bring together buyers, sellers, registered brokers, suppliers and associations in the tea market
and substitute their physical presence at the auctions announced.
Banks providing Internet banking services have been entering into agreements with
their customers setting out the terms and conditions of the services. The terms and conditions
include information on the access through user-id and secret password, minimum balance and
charges, authority to the bank for carrying out transactions performed through the service,
liability of the user and the bank, disclosure of personal information for statistical analysis
and credit scoring also, non-transferability of the facility, notices and termination, etc.
The Future Scenario
Compared to banks abroad, Indian banks offering online services still have a long way
to go. For online banking to reach a critical mass, there has to be sufficient number of users
and the sufficient infrastructure in place. The ‘Infinity’ product of ICICI Bank Ltd. gets only
about 30,000 hits per month, with around 3,000 transactions taking place on the Net per
month through this service. Though various security options like line encryption, branch
connection encryption, firewalls, digital certificates, automatic sign-offs, random pop-ups and
disaster recovery sites are in place or are being looked at, there is as yet no Certification
Authority in India offering Public Key Infrastructure which is absolutely necessary for online
banking. The customer can only be assured of a secured conduit for its online activities if an
authority certifying digital signatures is in place. The communication bandwidth available
today in India is also not enough to meet the needs of high priority services like online
banking and trading. Banks offering online facilities need to have an effective disaster
recovery plan along with comprehensive risk management measures. Banks offering online
facilities also need to calculate their downtime losses, because even a few minutes of
downtime in a week could mean substantial losses. Some banks even today do not have
uninterrupted power supply unit or systems to take care of prolonged power breakdown.
Proper encryption of data and effective use of passwords are also matters that leave a lot to be
desired. Systems and processes have to be put in place to ensure that errors do not take place.
Users of Internet Banking Services are required to fill up the application forms online and
send a copy of the same by mail or fax to the bank. A contractual agreement is entered into
by the customer with the bank for using the Internet banking services. In this way, personal
data in the applications forms is being held by the bank providing the service. The contract
details are often one-sided, with the bank having the absolute discretion to amend or
supplement any of the terms at any time. For these reasons domestic customers for whom
other access points such as ATMs, telebanking, personal contact, etc. are available, are often
hesitant to use the Internet banking services offered by Indian banks. Internet Banking, as an
additional delivery channel, may, therefore, be attractive / appealing as a value added service
to domestic customers. Non-resident Indians for whom it is expensive and time consuming to
access their bank accounts maintained in India find net banking very convenient and useful.
The Internet is in the public domain whereby geographical boundaries are eliminated. Cyber
crimes are therefore difficult to be identified and controlled. In order to promote Internet
banking services, it is necessary that the proper legal infrastructure is in place. Government
has introduced the Information Technology Bill, which has already been notified in October
2000. Section 72 of the Information Technology Act, 2000 casts an obligation of
confidentiality against disclosure of any electronic record, register, correspondence and
information, except for certain purposes and violation of this provision is a criminal offence.
Notification for appointment of Authorities to certify digital signatures, ensuring
confidentiality of data, is likely to be issued in the coming months. Comprehensive
enactments like the Electronic Funds Transfer Act in U.K. and data protection rules and
regulations in the developed countries are in place abroad to prevent unauthorized access to
data, malafide or otherwise, and to protect the individual’s rights of privacy. The legal issues
are, however, being debated in our country and it is expected that some headway will be
made in this respect in the near future.
Reserve Bank of India has taken the initiative for facilitating real time funds transfer
through the Real Time Gross Settlement (RTGS) System. Under the RTGS system,
transmission, processing and settlements of the instructions will be done on a continuous
basis. Gross settlement in a real time mode eliminates credit and liquidity risks. Any member
of the system will be able to access it through only one specified gateway in order to ensure
rigorous access control measures at the user level. The system will have various levels of
security, viz., Access security, 128 bit cryptography, firewall, certification etc. Further,
Generic Architecture (see fig. 2), both domestic and cross border, aimed at providing inter-
connectivity across banks has been accepted for implementation by RBI. Following a
reference made this year, in the Monetary and Credit Policy statement of the Governor, banks
have been advised to develop domestic generic model in their computerization plans to
ensure seamless integration. The abovementioned efforts would enable online banking to
become more secure and efficient.
At present, there are only 2.6 phone connections per 100 Indians, against the world
average of 15 connections per 100. The bandwidth capacity available in the country is only
3.2 gigabits per second, which is around 60% of current demand. Demand for bandwidth is
growing by 350% a year in India. With the help of the latest technology, Indian networks will
be able to handle 40 gigabits of Net traffic per second (as compared to 10 gigabits per second
in Malaysia). Companies like Reliance, Bharti Telecom and the Tata Group are investing
billions of rupees to build fibre optic lines and telecom infrastructure for data, voice and
Internet telephony. The online population has increased from just 500,000 in 1998 to 5
million in 2000. By 2015, the online population is expected to reach 70 million. IT services is
a $1.5 billion industry in India growing at a rate of 55% per annum. Keeping in view all the
above developments, Internet banking is likely to grow at a rapid pace and most banks will
enter into this area soon. Rapid strides are already being made in banking technology in India
and Internet banking is a manifestation of this. Every day sees new tie-ups, innovations and
strategies being announced by banks. State Bank of India has recently announced its intention
to form an IT subsidiary. A sea change in banking services is on the cards. It would, however,
be essential to have in place a proper regulatory, supervisory and legal framework,
particularly as regards security of transactions over the Net, for regulators and customers
alike to be comfortable with this form of banking.
Features of HDFC Bank Net Banking
HDFC Net Banking brings you multiple features and benefits which make it infinitely
easier for you to manage your HDFC savings account and carry out transactions. Given
below are just a few of the many features which HDFC Net Banking offers you. You can
check your account balance and also download your account statement for the past 5 years in
multiple formats with the click of a button. You can open a Fixed / Recurring Deposit
Account with the bank.
Transfer funds in a hassle free and secure manner via online fund transfer modes like NEFT
and RTGS. You can also register for Third Party Transfer or even transfer funds between
HDFC accounts as well as to non-HDFC bank accounts.
1. Make quick and easy payments of various types of utility bills like electricity bills,
water bills, landline bill, etc.
 2. Check your Credit Card details and also pay off Credit Card bills
3. Do a quick recharge on your DTH connection or your prepaid mobile bill.
4. NetBanking also allows you to invest in Mutual Fund schemes of your choice.
5. Booking travel tickets has never been easier. Now you can book air or train tickets
(via third party travel booking websites or IRCTC ) with the help of NetBanking.
6. Make easy payments to online merchants for purchasing Gift Cards for your loved
ones.
7. Make a variety of tax related transactions online like tax payments and viewing your
Tax Credit Statement (Form 26AS).
8. You can also update your PAN Card details via NetBanking.
9. Carry out banking related transactions like requesting for a new cheque book /
Demand Draft, hotlist your debit/credit card or even make stop payment instructions
of a cheque.
10. NetBanking also allows you to conveniently view your loan related details under the
same portal.
11. You can place a request to re-generate your Debit Card PIN with the help of
NetBanking by following some easy steps.
12. NetBanking also allows you to apply for an IPO.
Registering Online
1. You can now Register for NetBanking online by following the below steps
2. Go to the HDFC NetBanking website, enter your Customer ID & confirm the same
upon being prompted.
3. Non-resident customers holding an Indian mobile number must first choose the Debit
Card option and then provide their Debit Card details. Following this, they must
confirm their mobile number and finally authenticate the registration by providing the
OTP (One Time Password) which will be sent to their registered Indian mobile
number.
4. Non-resident customers holding an International mobile number will be required to
follow the same procedure as above. However, they will receive the OTP (One Time
Password) on their registered mobile number as well as their email ID. Both the OTPs
must be provided in this case.
5. Following this, customers must provide their new IPIN.
6. Now you may log-in to your NetBanking account with the new IPIN.
Registering via Phone Banking
 1. You must call the HDFC Phone Banking number provided for your city. You will be
asked to enter your Customer ID and HDFC Debit Card + PIN / Telephone
Identification Number (TIN).
2. The HDFC Phone Banking representative will record your NetBanking registration
request and initiate the process.
3. Your NetBanking IPIN will be couriered to your registered mailing address within 5
working days.
Registration via Download
1. Visit the HDFC NetBanking website and download the NetBanking registration form
– corporate or individual as is applicable.
2. Fill out the form completely and submit the same at any HDFC Bank branch.
3. Your request will be registered and the IPIN will be couriered to your registered
mailing address.
Registration via ATM
1. Go to any HDFC Bank ATM.
2. Input your HDFC Bank Debit Card number along with your ATM PIN.
3. From the main screen, tap on 'Other Option'.
4. Now, tap on 'NetBanking Registration' and confirm the action upon being prompted.
5. Your NetBanking request will be registered and the IPIN will be couriered to your
registered mailing address.
NetBanking FAQs
1. Which customers are eligible for NetBanking?
All customers holding Savings or Current account with HDFC Bank can access
NetBanking services.
2. Are there any added benefits which I get with NetBanking?
HDFC NetBanking provides multiple benefits like statement requests, BillPay
facility, fund transfer facility, stop cheque payment, tec.
3. Are there any charges applicable for use of HDFC NetBanking?
No, currently HDFC does not levy any charges for the use of its NetBanking facility.
Customers must, however, maintain all minimum balance requirements associated
with their accounts.
One-Time Password
A one-time password (OTP) is a password that is valid for only one login session or
transaction, on a computer system or other digital device. OTPs avoid a number of
shortcomings that are associated with traditional (static) password-based authentication; a
number of implementations also incorporate two factor authentication by ensuring that the
one-time password requires access to something a person has (such as a small keying fob
device with the OTP calculator built into it, or a smartcard or specific cell phone) as well as
something a person knows (such as a PIN).
The most important advantage that is addressed by OTPs is that, in contrast to static
passwords, they are not vulnerable to replay attacks. This means that a potential intruder who
manages to record an OTP that was already used to log in to a service or to conduct a
transaction will not be able to abuse it, since it will no longer be valid. A second major
advantage is that a user who uses the same password for multiple systems, is not made
vulnerable on all of them, if the password for one of these is gained by an attacker. A number
of OTP systems also aim to ensure that a session cannot easily be intercepted or impersonated
without knowledge of unpredictable data created during the previous session, thus reducing
the attack surface further.
Funds Transfer
According to the Electronic Fund Transfer Act an Electronic funds transfer (EFT) is:
a funds transfer initiated through an electronic terminal, telephone, computer (including on-
line banking) or magnetic tape for the purpose of ordering, instructing, or authorizing a
financial institution to debit or credit a consumer’s account.
EFT are electronic transfer of money from one bank account to another, either within
a single financial institution or across multiple institutions, via computer-based systems,
without the direct intervention of bank staff.
EFT transactions are known by a number of names across countries and different
payment systems. For example, in the United States, they may be referred to as "electronic
checks" or "e-checks". In the United Kingdom, the term "bank transfer" and "bank payment"
are used, while in several other European countries "giro transfer" is the common term.
 Unit IV
Electronic Fund Management
Banking operations over the years and decades have witnessed many changes and
have been adopting from time to time new innovations. The technological revolution
especially in the Information and Technology front has changed the functioning of banks. In
today’s globalized competitive business environment banks are trying to have the competitive
edge by using the latest technology to cut down turnaround time, cut costs and increase
efficiency. “E-Banking” through many innovative products and services has revolutionized
banking operations.
Electronic Clearing System (ECS)
One of the earliest electronic forms of funds transfer is the Electronic Clearing
System. ECS is a retail funds transfer system to effect payments (utility bills, dividends,
interest, etc) ECS helps corporates, government departments, public sector undertakings,
utility service providers to receive and/or pay bulk payments. ECS is divided into ECS
(credit) and ECS (debit).
On receipt of the required mandate, the funds (payments/ receipts) can be handled by
a bank through ECS. ECS (debit) is generally used by utility companies like electricity
companies, telephone companies and other to receive the bill payments directly from bank
accounts of their clients. Instead of payment of utility bills by means of cash or cheque
payments, an individual or a company can make payment through ECS. In case the company
has the facility of payment through ECS, the client can give a mandate to the company to
receive the utility bill amount from his bank account directly. The utility company (service
provider) based on the ECS mandate given by the client, would advise the client’s bank to
debit the bill amount to the client’s account on the due date (or on a any date before the due
date as per the client’s request) and transfer the amount to the company’s own bank account.
Similarly, ECS (Credit) can facilitate payment to various clients like dividend warrants,
maturity values of Annuities.
Real Time Gross Settlement (RTGS)
One of the important IT revolutions in Indian Banking Scenario was the
implementation of the Real Time Gross Settlement (RTGS) system by the Reserve Bank of
India. With the changing scenario from manual environment to electronic mode, banks
started to use faster, safer and efficient methods to transfer funds. In this regard, two
important and popular electronic funds transfer systems are Real Time Gross System (RTGS)
and National Electronic Funds Transfer System (NEFT).
 RTGS is an electronic payment system, where payment instructions are processed on
a ‘continuous’ or ‘REAL TIME’ basis and settled on a ‘GROSS’ or ‘individual’ basis without
netting the debits against credits. In India, RBI introduced this system and the system is
functioning well. The payments so effected are ‘final’ and ‘irrevocable’. The settlement is
done in the books of the central bank (RBI). The RTGS system allows transfer of funds
across banks on a real time (immediate) basis. Each participant bank needs to open a
dedicated settlement account for putting through its RTGS transactions. Not only does it
allow transfer of funds, it also reduces the credit risk. Both customers and banks can transfer
funds monies the same day at regular intervals within the banking hours.
‘RTGS’ or Real Time Gross Settlement is a fund transfer method through which
money is sent in ‘real time’ basis without any delays. This electronic fund transfer system
allows the money sent by the remitter to immediately reach the payee/beneficiary as and
when the money transfer transaction is initiated. Here, ‘Gross Settlement’ refers to the
processing of transactions on an individual basis and not in a batch wise system. RTGS is
typically meant for larger value transactions and the minimum amount that can be sent via
this mode is Rs.2 lakh.
Money can be sent using RTGS through net banking. To initiate such a transaction, it
is important to collect some details from the payee such as account number, bank name, IFSC
code, and account holder name. Another interesting feature about this wire transfer method is
that transactions can be scheduled in advance.
The following information is required for an RTGS transaction:
 The amount thats needs to be transferred in rupees
 Name of the payee/beneficiary as in the bank account
 IFSC code of the payee/beneficiary
 Account number of the payee/beneficiary
 Name of beneficiary bank and bank branch
The RTGS payment system is maintained by the Reserve Bank of India (RBI) and
hence is a safe and reliable method of sending and receiving money at any given point of
time in the country. In fact, RTGS is one among the fastest ways to send money to anyone. It
is much faster than the NEFT method of payment. All RTGS charges are very reasonable and
range anywhere between Rs.25 to Rs.55.
Features of RTGS
1. Real Time Gross Settlement helps banks to settle interbank and forex settlements
2. It also helps banks in handling big ticket funds transfers
 3. Since RTGS it is routed through RBI platform, the credit risk is minimized (this is one
of the main advantages in settlement of funds)
4. Unlike in case of cheque clearance, the drawer of the cheque cannot enjoy the float
time (the date of issuance of cheque and the date on which it is received in inward
clearing and debited by his banker). However, in the case of RTGS, the remitter’s
account is debited first and then only the funds are transferred
5. If all relevant details such as the beneficiary’s name, account number, IFSC code of
the receiving branch, name of the beneficiary bank, etc., are correctly furnished it
would assist the remitting bank to effect the transfer quickly
6. As the name RTGS suggests, the transfer mechanism works on real time and,
therefore, the beneficiary branch/bank should receive the funds immediately. The
beneficiary’s branch/bank should give credit to the beneficiary’s account immediately
or latest within 2 hours of receiving the funds transfer message.
Functions of RTGS
Here are the main features of an RTGS transaction that one should be aware of before using
it:
 Realtime online fund transfer
 Used for high value transactions
 Safe and secure
 Reliable and backed by RBI
 Immediate clearing
 Funds credited on a one-on-one basis
 Transactions executed on an individual and gross basis
Stepwise procedure for RTGS fund transfers
Step 1: Log in to your respective bank’s internet banking account by entering your
username and password
Step 2: Go to the home page and click on the Funds Transfer option
Step 3: Proceed to choose RTGS, key in beneficiary/payee details such as account
number, IFSC code, etc
Step 4: Review all details and then submit. The funds will be credited immediately to
the payee account
National Electronic Funds Transfer (NEFT)
NEFT is a system similar to RTGS with certain differences. RTGS handles big ticket
transactions, whereas NEFT handles smaller size transactions. Most branches are using this
facility to transfer funds in an efficient manner. Once the applicant for the transfer of funds
furnishes full and correct details (correct account details means correct name of the
beneficiary, the correct account number, the branch and bank of the beneficiary, and the
correct IFS code, etc.) funds can be transferred to the beneficiary’s account by the remitting
bank. Transfer of funds through NEFT is safe, quick. It reduces the paper work and is cost
effective.
Features of NEFT
1. NEFT is a funds transfer system which enables a customer of a bank to transfer funds
to another customer of another bank having account with any participating bank
2. NEFT allows both intra and inter-bank funds transfer within a city and across cities
3. Since it is in the form of e transfer, without any physical movement of instruments,
funds can be transferred quickly
4. The beneficiary customer gets funds in his account on the same day or at the earliest
on the next day depending upon the time of settlement
5. Both the originating and destination bank branches should be on NEFT platform
6. The correct details of IFSC, beneficiary’s name, account numbers, etc., should be
furnished to the originating bank
7. The originating bank branch can keep track of the status of the NEFT transaction
8. In case for any reason the destination branch is not able to afford credit to the
beneficiary’s account, destination branch/bank have to return the funds to the
originating bank within two hours of completion of the batch through which the
transaction was processed
Important Points to Know about NEFT:
1. The National Electronic Funds Transfer enables electronic transfer of funds between
two NEFT-enabled bank branches. It can also be used to transfer funds from or to
NRE/NRO accounts in India. Remittance is not allowed to a foreign country, except
Nepal.
2. The transactions are bunched up and settled in batches at specified times. There are 12
settlements from 8 am to 7 pm on weekdays, and six from 8 am to 1 pm on Saturdays.
If a transaction is initiated after a batch settlement time, it’s deferred to the next batch.
3. There is no minimum or maximum limit on the amount that can be transferred under
NEFT. Even those who do not have a bank account with a branch can deposit cash at
the NEFT-enabled branches, but such remittances can be made up to a maximum of
Rs 50,000 per transaction.
 4. The credit for the first 10 batches on weekdays (8 a.m. to 5 p.m.) and the first five
batches on Saturdays (8 a.m. to 12 noon) takes place on the same day. For the other
batches, the funds may be credited on the next working day.
5. The inward transactions for NEFT are free, while the outward transactions are
charged. This ranges from a maximum of Rs 2.50 for amounts up to Rs 10,000 to a
maximum of Rs 25 for transfer amounts above Rs 2 lakh.
NEFT offers many advantages over the other modes of funds transfer:
 The remitter need not send the physical cheque or Demand Draft to the beneficiary.
 The beneficiary need not visit his / her bank for depositing the paper instruments.
 The beneficiary need not be apprehensive of loss / theft of physical instruments or the
likelihood of fraudulent encashment thereof.
 Cost effective.
 Credit confirmation of the remittances sent by SMS or email.
 Remitter can initiate the remittances from his home / place of work using the internet
banking also.
 Near real time transfer of the funds to the beneficiary account in a secure manner.
Step By Step NEFT Transfer Procedure
The procedure for National Electronic Funds Transfer (NEFT) is mentioned below: To
transfer funds via NEFT online follow these procedure
Step 1: First login to your net banking account. If you do not have a net banking
account then register for it on the website of your bank.
Step 2: Add the beneficiary as a payee. To do so, you have to enter the following
details about the beneficiary in the ‘Add New Payee’ section:
Account Number.
Name.
IFSC Code.
Account Type.
Step 3: Once the payee is added, choose NEFT as mode of Fund Transfer.
Step 4: Select the account you wish to transfer money from, select the payee, enter the
amount that you wish to transfer and add remarks (optional).
Step 5: Click on submit.
Timings for NEFT Transactions:
Top Banks NEFT
ICICI NEFT
 SBI NEFT
Central Bank of India NEFT
Bank of Baroda NEFT
HDFC NEFT
Axis Bank NEFT
Punjab National Bank (PNB) NEFT
Union Bank of India NEFT
Indian Overseas Bank (IOB) NEFT
Syndicate Bank NEFT
At the moment NEFT functions in hourly batches hence between the service centers
operational hours (8:00 AM to 7:00 PM on any given week day along with 8 am to 1 pm on
Saturdays there are 8 and 6 batches that operate, respectively.
Hence money can be transferred from Monday to Saturdays (Except the 2nd and 4th
Saturday of the month) from 8:00 AM to 6:30 PM. Also, NEFT transactions do not get
credited on public and bank holidays.
But, the sender can queue in the transaction for the recipient and wait, when NEFT
picks it up their next working hour and day.
Public Holidays when NEFT Transactions are not completed include Republic Day,
Good Friday, Annual Closing of Banks, RBI's Annual Closing of Accounts, Ramzan Id (Id-
ul-Fitr)/Ratha Yatra, Independence Day, Dasara / Vijaya Dashami and Muharram.
Key Differences Between NEFT, RTGS and IMPS
Online transfer methods are subject to availability based on the customer’s eligibility
and level of access granted by the bank. Additionally, the limits on fund value, timings,
settlement speed, and other factors are a part of the online fund transfer method to provide a
positive experience to the customer when they choose one transfer method over the other.
Currently, NEFT, RTGS, and IMPS are the most popular methods of fund transfer in India,
few of the notable differences between these methods are listed below:
NEFT - The funds transferred under this method are settled in batches (based on Deferred
Net Settlement (DNS) and at a specific time of the day. If the transfer is initiative beyond the
cut-off time specified by RBI, the funds are typically settled on the next working day. At
present, the fund transfer requests under NEFT are processed in twelve batches between 8
a.m. to 7 p.m. on weekdays and six batches between 8 a.m. to 1 p.m. on Saturdays.
Unfortunately, NEFT is not available on Sundays and bank holidays. One of the biggest
advantages of NEFT is the cost-effectiveness, an individual can carry out smaller value
transfers without worrying about the transaction fee and service charges. A smaller fee on the
transfer enables the individual to carry out more payments which make NEFT the most
popular and extensively used method for online fund transfers.
Under NEFT, the transactions can be initiated and settled from the bank account of one
particular bank to another bank’s account throughout India at no additional cost apart from
the standard charges, provided both the banks are a part of the NEFT transfer network
(NEFT-enabled). Though some banks might have their own policies concerning the NEFT
service provided by them, such as restrictions on transferring funds immediately to a newly
added beneficiary, fund value limits restricting the value of transfer beyond a specified limit,
etc., these protocols are proven to be effective for safeguarding the customer’s financials.
RTGS - This type of transfer methods is applicable and available for fund transfers
between Rs.2 lakh to Rs.10 lakh, however, the biggest advantage for RTGS is the fastest/real-
time settlement factor. As soon as the transfer instructions are sent, the fund gets settled
almost immediately. However, in order to take advantage of the RTGS facility, both the
originator's and the beneficiary’s account has to be RTGS-enabled. Even though most banks
are a part of the vast and popular RTGS transfer network facilitated by RBI, individuals are
recommended to either get in touch with their bank directly or refer to their online banking
section to discover their eligibility concerning access to RTGS payment system. The
transaction fee under RTGS is higher than the other methods due to the faster settlement
speed performed on an instruction by instruction basis.
RTGS comes with limits on the minimum and maximum fund value, however, it is
efficiently used in situations where individuals and businesses require immediate settlement
of high-value funds that are well within the specified limits. Efficiency, speed, and reliability
factors are few among the many factors that make RTGS as one the most-sought medium of
online fund transfers.
IMPS - Also known for being one of the popular and fastest methods of fund transfer,
IMPS is used widely across most banks. Unlike other methods of fund transfer that become
unavailable on bank holidays and during off working hours, IMPS functions 24/7 allowing a
fund transfer at any time of the day. Similar to NEFT, IMPS also allows transfer of low
value-funds but what makes it unique is, it immediately settles the funds. NEFT functions as
more or less the combined version of NEFT and RTGS, where remitters are neither worried
about the size of the fund and service availability nor do they have to be concerned about the
settlement speed.
 IMPS facility is provided only on the internet and online banking services. Few banks
may offer SMS-based IMPS service to mobile banking users. Many of the digital wallets in
India utilise IMPS services to credit the money from an individual's wallet to his/her bank
account. Though IMPS provides an immediate fund settlement facility, the transaction fees
are as low as NEFT.
Things to consider before initiating a fund transfer
 Timings - The timings for each type of fund transfer methods are specific to the bank.
Since NEFT and RTGS are largely based on the bank’s hours of operation, depending
on the location and specific working hours, the service availability may differ for
either of the party involved in the fund transfer.
 GST - GST is applicable on the transaction fee as per the latest norms which are
subject to change.
 Transaction fee - A fee is charged for initiating the transfer and not for receiving the
funds.
 Transfer network - The remitter needs to check whether the beneficiary's account is
eligible to receive funds or not since the bank might not be a part of the transfer
network.
The key differences between the funds transfer systems, NEFT and RTGS, are listed in the
table below

Indian Financial System Code (IFSC)

 IFSC is an alpha-numeric code that identifies a bank-branch participating in the
RTGS/NEFT system. IFSC has 11 digit code and the first four alpha characters represents the
bank, the 5th code is 0 (zero), which is reserved for future use and the last six digits are
numeric characters represents the branch. Correct IFSC code is essential for identifying the
beneficiary’s branch and bank as destination for funds transfers. E.g. Syndicate Bank, Cuffe
Parade Branch, Mumbai- SYNB0005087
Cheque Truncation System (CTS)
Cheques are being used as a medium for exchange of funds, which play a key role in
the funds management of customers and banks. The efficient cheque clearing system helps in
settlement of receipts and payments. Cheque Truncation is a new system introduced in Indian
Banking Scenario. It is a system of cheque clearance and settlement between banks based on
electronic data and/or images without the need for exchange of physical cheques and
negotiable instruments like demand drafts, pay orders, dividend warrants, etc.,
Features of CTS
1. Bank customers would get their cheques realized faster
2. Quick realization helps in better cash management (receivables/payables)
3. In the long run, it would reduce the administrative costs for bank
4. Importantly this would assist banks’ in reconciliation and also reduction in clearing
frauds
Electronic Bill Payment
Electronic bill payment is a feature of online, mobile and telephone banking, similar
in its effect to a giro, allowing a customer of a financial institution to transfer money from
their transaction or credit card account to a creditor or vendor such as a public utility,
department store or an individual to be credited against a specific account. These payments
are typically executed electronically as a direct deposit through a national payment system,
operated by the banks or in conjunction with the government. Payment is typically initiated
by the payer but can also be set up as a direct debit.
In addition to the bill payment facility, most banks will also offer various features
with their electronic bill payment systems. These include the ability to schedule payments in
advance to be made on a specified date (convenient for instalments such as mortgage and
support payments), to save the biller information for reuse at a future time and various
options for searching the recent payment history. In many cases the payment data can also be
downloaded and posted directly into the customer's accounting or personal finance software.
 Unit V
Structured Financial Messaging System (SFMS)
Safety System for Electronic Transfer of Funds in India
In November 2001 RBI has introduced the Structured Financial Messaging System
(SFMS), an application which would be riding on the backbone of the Indian Financial
Network (INFINET) intended as a measure, to ensure greater security in the process of
electronic funds transfers. The SFMS provides security in the various electronic funds
transfers services introduced by RBI such as he Credit Clearing and Debit Clearing and the
retail Electronic Funds Transfer (EFT) system and prevents unauthorized usage
Objective and Benefits of Structured Financial Messaging System (SFMS)
The usage of the Structured Financial Messaging System (SFMS) over the INFINET
would automatically bring the benefits of safe, secure and efficient funds transfers
There would also be the added benefit of settlement of inter-bank transfers taking place in the
books of accounts of banks maintained with the RBI thereby providing for finality of
settlement. Structured Financial Messaging System (SFMS) would have adequate security
measures incorporated, including that of PKI-Public Key Infrastructure, with encryption
software comparable to some of the best implementations in the world.
How Structured Financial Messaging System (SFMS) was Developed
Institute for Development and Research in Banking Technology (IDRBT) and Tata
Consultancy Services (TCS) entered into an agreement on 15th February 2001 for deploying
a Messaging System for the Indian Banking and Financial Sector. The system aimed at
providing Secured Multi-tiered Financial Messaging will enable Banks to send financial and
non-financial messages across the Indian Financial Network (INFINET) in a secure
environment.
The Structured Financial Messaging System (SFMS) is based on TCS’s messaging
gateway product COMS-eNABLER®. It is being customized and deployed in a multi-tiered
architecture consisting of a central HUB, Bank Gateways and the Branch Front-ends. The
system allows the definition of message structures, message formats, and authorization of the
same for usage by the financial community. Specifically, the banks and financial institutions
will use the designated messages for a wide range of applications such as simple messaging,
EFT (Retail, RTGS), ECS, Electronic Debit, online trading in Government securities,
centralized funds query for Banks and FIs, Anywhere/Anytime Banking, Inter-Branch
Reconciliation etc. through INFINET.
How Structured Financial Messaging System (SFMS) Operates
 To use Structured Financial Messaging System (SFMS), banks must have their
terminals in their branches connected through LAN, WAN or even PSTN lines to the server
located at a central place in a city. The terminal can be accessed only by means of a Smart
Card and a personal identification number (PIN). The messages will have to be digitally
signed under a public key infrastructure (PKI).
Based on this platform, messages are processed in a safe and secure environment and
banks and financial institutions will be able to ensure a secure electronic message delivery.
An advantage built into the system is that it facilitates banks to launch innovative products
across centres and cities, say the software developers. Another advantage is that it provides a
safe and secure interbank communication. Individual banks only need to integrate their
systems with the SFMS to leverage the facility. Applications such as simple messaging,
electronic clearing system, electronic debt, online trading in Government securities,
centralised fund queries for banks and financial institutions, anywhere anytime banking,
inter-branch reconciliation etc, through INFINET are possible to be communicated through
SFMS
The integration of existing bank applications would require interaction among the
concerned bank, the IDRBT, and TCS and the bank’s application provider. Application
programme interfaces are provided for this purpose.
The Front-ends in the branches are connected to the Gateway(s), and in turn the
Gateways are connected to a Central Hub. The system is integrated with a Smart Card-based
PKI infrastructure ensuring total privacy, integrity, security, encryption and decryption
mechanisms with full acknowledgement and non-repudiation techniques. These will conform
to ISO and ANSI standards, as recommended by the Dr. Vasudevan Committee Report on
Technology Upgradation in the Banking Sector.
Structured Financial Messaging System (SFMS) facilitates online message creation,
which, after authorization, is communicated across without further human intervention as in
straight through processing (STP). The financial messaging system ensures that the Indian
banking and financial services sectors are on a par with the rest of the world
Under the system, any financial transaction communicated between the two branches
of two different banks, which normally took between one and three weeks despite
computerization, would now be completed within a few minutes. Being a Web enabled
modular software, the system facilitates either centralized or distributed messaging and works
in a secure environment.
 The security system is built on a Smart Card-based user access and the messages are
secured via standard encryption and authentication services conforming to ISO and SWIFT
standards. The system has provision for complete auditing, logging, time stamping and
warehousing of messages.
TCS, which has engineered the software in close association with the IDRBT team,
has built the messaging system on a similar system developed for the Global Straight
Through Processing Association (GSTPA). The messaging system is designed based on a
multi tiered system covering the Indian Financial Network (INFINET) hub, bank gateways
and bank sites.
All banks public sector, private, foreign and cooperative and financial institutions can
benefit through the system by being members of the IDRBT. The system has been initially
deployed, covering Punjab National Bank, Bank of Maharashtra and Canara Bank on a pilot
initiative. A large number of banking and financial institutions have now leverage the facility.
With regard to inter-bank applications, the Reserve Bank of India (RBI) has already taken the
initiative in implementing applications such as RTGS (Real-Time Gloss Settlement System),
DVP (Delivery Versus Payments) and the CFMC (Centralised Funds Management System)
which can benefit by using the Structured Financial Messaging System (SFMS) system. The
advantage with the system is banks can link their high volume branches, irrespective of their
categories, through connectivity such as PSTN or ISDN or leased lines to Infinet.
Use SFMS for sending and receiving Letter of Credit and Bank Guarantee instruments
1. The need for a secure and common messaging System that would serve as the basic
platform for intra-bank and inter-bank applications, and would fulfill the requirements
of domestic financial messaging, gave birth to the Structured Financial Messaging
System (SFMS). The SFMS was launched on December 14, 2001, at the Institute for
Development and Research in Banking Technology (IDRBT).
2. The SFMS is built on the lines of SWIFT but has many more utilities to offer. The
major advantage of SFMS is that it can be used practically for all purposes of secure
communication within the bank and between banks. The intra-bank part of SFMS can
be used by the banks to take full advantage of the secure messaging facility it
provides. The inter-bank messaging part is useful for applications like Electronic
Funds Transfer (EFT), Real Time Gross Settlement System (RTGS), Delivery Versus
Payments (DVP), Centralized Funds Management System (CFMS) etc.
3. Considering the advantages associated with the use of SFMS, the Indian Banks’
Association (IBA) had formally launched a Pilot Project on Trade Finance using
 SFMS format on the INFINET network connectivity provided by IDRBT as a secured
messaging system that would serve as a basic platform for intra-bank and interbank
application on February 15, 2007. The pilot project was joined by 10 banks. Letters of
Credit (LC) were opened and communicated through the network to the advising
banks to mark the launch of the project.
4. Currently, among the initial participants, very few banks still offer Trade Finance
services through SFMS. IBA had requested all banks vide letter dated 27.08.2009 to
join the SFMS platform for trade finance project.
5. It has been observed that SFMS platform has been used by banks and some state
governments for NEFT and it has been a huge success. The volumes have touched
nearly three million a day and have grown over 100% on YOY basis. Thus the
platform has demonstrated its resilience, security and scalability. SFMS has been
recently opened for RRBs and Co-operative banks and a number of them have joined.
6. The platform is capable of handling nonpayment applications like domestic LCs and
Bank Guarantees (BG) in a secure and cost effective way. Only a few banks are using
this. Unless majority of banks join, there would not be enough counterparties which
generate volumes.
7. Presently, there is no directive mandating use of SFMS platform for this purpose, in
the absence of which, banks cannot unilaterally send the messages to the beneficiary
banks. Banks also cannot also have bilateral/multilateral agreements for this purpose
due to feasibility issues.
8. There have been a number of cases of frauds in case of LC discounting and BGs. This
is a great cause of concern with regard to strategy of Public Sector Banks (PSBs).
9. Therefore, it is felt that making the use of FSMS mandatory in this regard will help
banks to establish a secure medium for transferring trade finance messages for
sending and receiving LCs and BG instruments, thereby establishing a safe and secure
environment in the Indian banking industry for conducting Trade Finance business. A
methodology for using SFMS Platform for issuing BGs is suggested at Annexure.
Structured Financial Messaging System (SFMS) is a secure messaging standard developed to
serve as a platform for intra-bank and inter-bank applications. It is an indian standard similar
to SWIFT (Society for World-wide Interbank Financial Telecommunications) which is the
international messaging system used for financial messaging globally. SFMS can be used
practically for all purposes of secure communication within the bank and between banks. The
SFMS was launched on December 14, 2001 at IDRBT. SFMS has a number of special
features and it is a modularized and web enabled software, with a flexible architecture
facilitating centralized or distributed deployment. The access control is through Smart Card
based user access and messages are secured by means of standard encryption and
authentication services conforming to ISO standards. RBI applications like Real Time Gross
Settlement (RTGS), Negotiated Dealing System (NDS), Security Settlement System (SSS)
and Integrated Accounting System (IAS) have interface with SFMS and RTGS uses SFMS
for messaging.
The intra-bank part of SFMS, which is most important, is used by the banks to take
full advantage of the secure messaging facility it provides. The inter-bank messaging part is
useful for applications like Electronic Funds Transfer (EFT), Real Time Gross settlement
System (RTGS), Delivery Versus Payments (DVP), Centralized Funds Management System
(CFMS) etc. The SFMS provides easy to use Application Program Interfaces (APIs), which
can be used to integrate all existing and future applications with the SFMS. Several Banks
have integrated it with their core or centralized banking software.
In order to explore how SFMS can be used for Mobile Payments in India, let us look
at the scope of different Message types, that it provides. They are (a) several messages with
specific INFINET (INdian FIinancial NeETwork ) Format Number (IFN) for each of the IFC
(INFINET Format Category) message, (b)Proprietary Messages and (c) System Messages.
The IFC and IFN follow the pattern of SWIFT standards. The following are the categories of
IFC messages.
IFC 1 - Customer Payments and Cheques
IFC 2 – Financial Institution Transfers
IFC 3 – Treasury Markets – Foreign Exchange, Money Market, Derivatives
IFC 4 – Collections and Cash Letters
IFC 5 – Securities Markets
IFC 6 – Precious Metals and Syndications
IFC 7 - Documentary Credits and Guarantees
IFC 8 – Travelers Cheques
IFC 9 – Cash Management and Customer Status
IFC n – Common Group Messages
Remote Access Service (RAS)
Microsoft RAS is a feature in the Windows Server family, and is included in all
versions of Windows Server. A Limited version of RAS is also included in Non-server
editions of Windows, including Windows 7, XP and Vista. RAS allows remote dial-up clients
to connect to a Local Area Network using analog phone lines or ISDN lines. A typical use
would be by an ISP (Internet Service Provider) to allow users to dial in to their LAN, or by a
corporate network administrator to allow their users to connect to the corporate LAN from
remote sites. The remote clients connect to RAS using the TCP/IP protocol encapsulated in
the Point-to-Point (PPP) protocol, which allows the remote client to access the LAN as if they
were plugged directly into it.
A RAS Server will typically have either multiple analog phone lines, or it will have
one or more T1, E1, or ISDN-BRI lines for the incoming calls. When a large number of
telephone lines are required, they are usually provided by the phone company in bundles of
lines known as 'T1 ISDN-PRI' or 'E1 ISDN-PRI' lines. A T1 contains 23 phone lines, and an
E1 contains 30 phone lines. An ISDN-BRI only contains two phone lines. These lines will
either connect to digital modems, which can support both analog and digital calls, or they will
connect to analog modems. Digital modems require a digital connection from the telephone
company (T1, E1, or single ISDN-BRI lines). If you use analog modems on your RAS server,
the maximum speed is 33.6k rather then 56k, because 56k speeds require one end of the
connection to be a digital modem.
Building a Microsoft Remote Access Service (RAS) can be very simple, but there are
some security precautions that need to be addressed before you begin. The RAS server is
responsible for authenticating that the user is really who they claim to be, and granting them
access. A RAS Server is a common target for hackers who may wish to break into your
network, or just happened to find it while war-dialing a range of phone numbers. Once a
hacker locates a phone number to your RAS Server, the most common method of breaking in
is to guess common usernames such as 'Administrator' and trying thousands of passwords
using a script and a dictionary file. Therefore you should always use passwords that are a
combination of letters and numbers, rather then plain words.
If your users always dial in from a specific phone number, then one of the best
methods of securing your RAS is a function known as 'call back'. The way this works is when
a particular user dials in, they log in with their username and password, and then the server
disconnects them and immediately calls them back on their pre-defined phone number. This
makes it virtually hack proof, even if the users password was ever breached.
If your users need to dial in while they are traveling, then good security becomes
more complex. For the maximum security in this situation, a third party token based system
could be used, in which users need to have a pin number and also a token. The token is either
a device or a program that generates a key which changes every minute, and only the token
and the server know the sequence in which it changes. The most popular token based system
is RSA SecurID.
Is RAS Safe?
"Is it safe?" is a valid question, given that about 11 million Americans telecommute at
least once a day. The increasing popularity of telecommuting is pressuring businesses to give
employees and customers secure access to enterprise networks and the Internet. Network
administrators and managers are spending thousands and even millions of dollars to secure
their sites and networks.
In the past, companies often used clear text passwords for remote access connectivity.
Although some Internet Service Providers (ISPs) still offer only clear text authentication,
many are switching to more secure authentication methods, such as the one in Windows NT
4.0.
NT 4.0's Remote Access Service (RAS) offers much more than encrypted
authentication. Microsoft claims that using NT RAS to dial in remotely is even more secure
than logging on to a LAN file server. This claim carries some weight because RAS security
features--such as authentication protocols, encryption standards, security hosts, and Point-to-
Point Tunneling Protocol (PPTP)--are not usually available when you log on to a LAN.
Information Technology Act, 2000
The Information Technology Act, 2000 (also known as ITA-2000, or the IT Act) is an
Act of the Indian Parliament (No 21 of 2000) notified on 17 October 2000. It is the primary
law in India dealing with cybercrime and electronic commerce. It is based on the United
Nations Model Law on Electronic Commerce 1996 (UNCITRAL Model) recommended by
the General Assembly of United Nations by a resolution dated 30 January 1997. The Act to
provide legal recognition for transactions carried out by means of electronic data interchange
and other means of electronic communication, commonly referred to as "electronic
commerce", which involve the use of alternatives to paper-based methods of communication
and storage of information, to nusta editing electronic filing of documents with the
Government agencies and further to amend the Indian Penal Code, the Indian Evidence Act,
1872, the Bankers' Books Evidence Act, 1891 and the Reserve Bank of India Act, 1934 and
for matters connected therewith or incidental thereto. A major amendment was made in 2008.
It introduced the Section 66A which penalized sending of "offensive messages". It also
introduced the Section 69, which gave authorities the power of "interception or monitoring or
decryption of any information through any computer resource". It also introduced for child
porn, cyber terrorism and voyeurism. It was passed on 22 December 2008 without any debate
in Lok Sabha. The next day it was passed by the Rajya Sabha. It was signed by the then
President (Pratibha Patil) on 5 February 2009.
Changes
On 2 April 2015, the Chief Minister of Maharashtra, Devendra Fadnavis revealed to
the state assembly that a new law was being framed to replace the repealed Section 66A.
Fadnavis was replying to a query Shiv Sena leader Neelam Gorhe. Gorhe had said that repeal
of the law would encourage online miscreants and asked whether the state government would
frame a law to this regard. Fadnavis said that the previous law had resulted in no convictions,
so the law would be framed such that it would be strong and result in convictions.
On 13 April 2015, it announced that the Ministry of Home Affairs would form a committee
of officials from the Intelligence Bureau, Central Bureau of Investigation, National
Investigation Agency, Delhi Police and ministry itself to produce a new legal framework.
This step was reportedly taken after complaints from intelligence agencies that, they were no
longer able to counter online posts that involved national security matter or incite people to
commit an offence, such as online recruitment for ISIS. Former Minister of State with the
Ministry of Information Technology, Milind Deora has supported a new "unambiguous
section to replace 66A".
Cyber Crimes and The Law
In the era of cyber world as the usage of computers became more popular, there was
expansion in the growth of technology as well, and the term ‘Cyber’ became more familiar to
the people. The evolution of Information Technology (IT) gave birth to the cyber space
wherein internet provides equal opportunities to all the people to access any information, data
storage, analyse etc. with the use of high technology. Due to increase in the number of
netizens, misuse of technology in the cyberspace was clutching up which gave birth to cyber
crimes at the domestic and international level as well.
Though the word Crime carries its general meaning as “a legal wrong that can be
followed by criminal proceedings which may result into punishment” whereas Cyber Crime
may be “unlawful acts wherein the computer is either a tool or target or both”.
The world 1st computer specific law was enacted in the year 1970 by the German State
of Hesse in the form of ‘Data Protection Act, 1970’ with the advancement of cyber
technology. With the emergence of technology the misuse of technology has also expanded to
its optimum level and then there arises a need of strict statutory laws to regulate the criminal
activities in the cyber world and to protect technological advancement system. It is under
these circumstances Indian parliament passed its “INFORMATION TECHNOLOGY ACT,
2000” on 17th oct to have its exhaustive law to deal with the technology in the field of e-
commerce, e-governance, e-banking as well as penalties and punishments in the field of
cyber crimes.
 Cyber Crimes Actually Means: It could be hackers vandalizing your site, viewing
confidential information, stealing trade secrets or intellectual property with the use of
internet. It can also include ‘denial of services’ and viruses attacks preventing regular
traffic from reaching your site. Cyber crimes are not limited to outsiders except in
case of viruses and with respect to security related cyber crimes that usually done by
the employees of particular company who can easily access the password and data
storage of the company for their benefits. Cyber crimes also includes criminal
activities done with the use of computers which further perpetuates crimes i.e.
financial crimes, sale of illegal articles, pornography, online gambling, intellectual
property crime, e-mail, spoofing, forgery, cyber defamation, cyber stalking,
unauthorized access to Computer system, theft of information contained in the
electronic form, e-mail bombing, physically damaging the computer system etc.
 Classifications Of Cyber Crimes: Cyber Crimes which are growing day by day, it is
very difficult to find out what is actually a cyber crime and what is the conventional
crime so to come out of this confusion, cyber crimes can be classified under different
categories which are as follows:
1. Cyber Crimes against Persons:
There are certain offences which affects the personality of individuals can be defined as:
1. Harassment via E-Mails: It is very common type of harassment through sending
letters, attachments of files & folders i.e. via e-mails. At present harassment is
common as usage of social sites i.e. Facebook, Twitter etc. increasing day by day.
2. Cyber-Stalking: It means expressed or implied a physical threat that creates fear
through the use to computer technology such as internet, e-mail, phones, text
messages, webcam, websites or videos.
3. Dissemination of Obscene Material: It includes Indecent exposure/ Pornography
(basically child pornography), hosting of web site containing these prohibited
materials. These obscene matters may cause harm to the mind of the adolescent and
tend to deprave or corrupt their mind.
4. Defamation: It is an act of imputing any person with intent to lower down the dignity
of the person by hacking his mail account and sending some mails with using vulgar
language to unknown persons mail account.
 5. Hacking: It means unauthorized control/access over computer system and act of
hacking completely destroys the whole data as well as computer programmes.
Hackers usually hacks telecommunication and mobile network.
6. Cracking: It is amongst the gravest cyber crimes known till date. It is a dreadful
feeling to know that a stranger has broken into your computer systems without your
knowledge and consent and has tampered with precious confidential data and
information.
7. E-Mail Spoofing: A spoofed e-mail may be said to be one, which misrepresents its
origin. It shows it’s origin to be different from which actually it originates.
8. SMS Spoofing: Spoofing is a blocking through spam which means the unwanted
uninvited messages. Here a offender steals identity of another in the form of mobile
phone number and sending SMS via internet and receiver gets the SMS from the
mobile phone number of the victim. It is very serious cyber crime against any
individual.
9. Carding: It means false ATM cards i.e. Debit and Credit cards used by criminals for
their monetary benefits through withdrawing money from the victim’s bank account
mala-fidely. There is always unauthorized use of ATM cards in this type of cyber
crimes.
10. Cheating & Fraud: It means the person who is doing the act of cyber crime i.e.
stealing password and data storage has done it with having guilty mind which leads to
fraud and cheating.
11. Child Pornography: It involves the use of computer networks to create, distribute, or
access materials that sexually exploit underage children.
12. Assault by Threat: refers to threatening a person with fear for their lives or lives of
their families through the use of a computer network i.e. E-mail, videos or phones.
2. Crimes Against Persons Property:
As there is rapid growth in the international trade where businesses and consumers are
increasingly using computers to create, transmit and to store information in the electronic
form instead of traditional paper documents. There are certain offences which affects persons
property which are as follows:
1. Intellectual Property Crimes: Intellectual property consists of a bundle of rights. Any
unlawful act by which the owner is deprived completely or partially of his rights is an
offence. The common form of IPR violation may be said to be software piracy,
 infringement of copyright, trademark, patents, designs and service mark violation,
theft of computer source code, etc.
2. Cyber Squatting: It means where two persons claim for the same Domain Name either
by claiming that they had registered the name first on by right of using it before the
other or using something similar to that previously. For example two similar names
i.e. www.yahoo.com and www.yaahoo.com.
3. Cyber Vandalism: Vandalism means deliberately destroying or damaging property of
another. Thus cyber vandalism means destroying or damaging the data when a
network service is stopped or disrupted. It may include within its purview any kind of
physical harm done to the computer of any person. These acts may take the form of
the theft of a computer, some part of a computer or a peripheral attached to the
computer.
4. Hacking Computer System: Hacktivism attacks those included Famous Twitter,
blogging platform by unauthorized access/control over the computer. Due to the
hacking activity there will be loss of data as well as computer. Also research
especially indicates that those attacks were not mainly intended for financial gain too
and to diminish the reputation of particular person or company.
5. Transmitting Virus: Viruses are programs that attach themselves to a computer or a
file and then circulate themselves to other files and to other computers on a network.
They usually affect the data on a computer, either by altering or deleting it. Worm
attacks plays major role in affecting the computerize system of the individuals.
6. Cyber Trespass: It means to access someone’s computer without the right
authorization of the owner and does not disturb, alter, misuse, or damage data or
system by using wireless internet connection.
7. Internet Time Thefts: Basically, Internet time theft comes under hacking. It is the use
by an unauthorised person, of the Internet hours paid for by another person. The
person who gets access to someone else’s ISP user ID and password, either by
hacking or by gaining access to it by illegal means, uses it to access the Internet
without the other person’s knowledge. You can identify time theft if your Internet
time has to be recharged often, despite infrequent usage.
3. Cybercrimes Against Government:
There are certain offences done by group of persons intending to threaten the international
governments by using internet facilities. It includes:
 1. Cyber Terrorism: Cyber terrorism is a major burning issue in the domestic as well as
global concern. The common form of these terrorist attacks on the Internet is by
distributed denial of service attacks, hate websites and hate e-mails, attacks on
sensitive computer networks etc. Cyber terrorism activities endanger the sovereignty
and integrity of the nation.
2. Cyber Warfare: It refers to politically motivated hacking to conduct sabotage and
espionage. It is a form of information warfare sometimes seen as analogous to
conventional warfare although this analogy is controversial for both its accuracy and
its political motivation.
3. Distribution of pirated software: It means distributing pirated software from one
computer to another intending to destroy the data and official records of the
government.
4. Possession of Unauthorized Information: It is very easy to access any information by
the terrorists with the aid of internet and to possess that information for political,
religious, social, ideological objectives.
4. Cybercrimes Against Society at large:
An unlawful act done with the intention of causing harm to the cyberspace will affect large
number of persons. These offences includes:
1. Child Pornography: It involves the use of computer networks to create, distribute, or
access materials that sexually exploit underage children. It also includes activities
concerning indecent exposure and obscenity.
2. Cyber Trafficking: It may be trafficking in drugs, human beings, arms weapons etc.
which affects large number of persons. Trafficking in the cyberspace is also a gravest
crime.
3. Online Gambling: Online fraud and cheating is one of the most lucrative businesses
that are growing today in the cyber space. There are many cases that have come to
light are those pertaining to credit card crimes, contractual crimes, offering jobs, etc.
4. Financial Crimes: This type of offence is common as there is rapid growth in the users
of networking sites and phone networking where culprit will try to attack by sending
bogus mails or messages through internet. Ex: Using credit cards by obtaining
password illegally.
5. Forgery: It means to deceive large number of persons by sending threatening mails as
online business transactions are becoming the habitual need of today’s life style.
 Affects To Whom: Cyber Crimes always affects the companies of any size because
almost all the companies gain an online presence and take advantage of the rapid gains in the
technology but greater attention to be given to its security risks. In the modern cyber world
cyber crimes is the major issue which is affecting individual as well as society at large too.
Need of Cyber Law: information technology has spread throughout the world. The
computer is used in each and every sector wherein cyberspace provides equal opportunities to
all for economic growth and human development. As the user of cyberspace grows
increasingly diverse and the range of online interaction expands, there is expansion in the
cyber crimes i.e. breach of online contracts, perpetration of online torts and crimes etc. Due
to these consequences there was need to adopt a strict law by the cyber space authority to
regulate criminal activities relating to cyber and to provide better administration of justice to
the victim of cyber crime. In the modern cyber technology world it is very much necessary to
regulate cyber crimes and most importantly cyber law should be made stricter in the case of
cyber terrorism and hackers.
Penalty For Damage To Computer System: According to the Section: 43 of
‘Information Technology Act, 2000’ whoever does any act of destroys, deletes, alters and
disrupts or causes disruption of any computer with the intention of damaging of the whole
data of the computer system without the permission of the owner of the computer, shall be
liable to pay fine upto 1crore to the person so affected by way of remedy. According to the
Section:43A which is inserted by ‘Information Technology(Amendment) Act, 2008’ where a
body corporate is maintaining and protecting the data of the persons as provided by the
central government, if there is any negligent act or failure in protecting the data/ information
then a body corporate shall be liable to pay compensation to person so affected. And Section
66 deals with ‘hacking with computer system’ and provides for imprisonment up to 3 years or
fine, which may extend up to 2 years or both.
Case Study-Attacks on Cyberspace:
 Worm Attack: The Robert Tappan Morris well Known as First Hacker, Son of former
National Security Agency Scientist Robert Morris, was the first person to be
prosecuted under the ‘Computer and Fraud Act, 1986’. He has created worm while at
Cornell as student claiming that he intended to use the worm to check how large the
internet was that time. The worm was uncontrollable due to which around 6000
computer machines were destroyed and many computers were shut down until they
had completely malfunctioned. He was ultimately sentenced to three years probation,
 400 hours of community service and assessed a fine of $10500. So there must be strict
laws to punish the criminals who are involved in cyber crime activities.
 Hacker Attack: Fred Cohen, a Ph.D. student at the University of Southern California
wrote a short program in the year 1983, as an experiment, that could “infect”
computers, make copies of itself, and spread from one machine to another. It was
beginning & it was hidden inside a larger, legitimate program, which was loaded into
a computer on a floppy disk and many computers were sold which can be
accommodate at present too. Other computer scientists had warned that computer
viruses were possible, but Cohen’s was the first to be documented. A professor of his
suggested the name “virus”. Cohen now runs a computer security firm.
 Internet Hacker: Wang Qun, who was known by the nickname of “playgirl”, was
arrested by chinese police in the Hubei province first ever arrest of an internet hacker
in China. He was a 19 year old computing student, arrested in connection with the
alleged posting of pornographic material on the homepages of several government-run
web sites. Wang had openly boasted in internet chat rooms that he had also hacked
over 30 other web sites too.
Preventive Measures For Cyber Crimes:
Prevention is always better than cure. A netizen should take certain precautions while
operating the internet and should follow certain preventive measures for cyber crimes which
can be defined as:
1. Identification of exposures through education will assist responsible companies and
firms to meet these challenges.
2. One should avoid disclosing any personal information to strangers via e-mail or while
chatting.
3. One must avoid sending any photograph to strangers by online as misusing of
photograph incidents increasing day by day.
4. An update Anti-virus software to guard against virus attacks should be used by all the
netizens and should also keep back up volumes so that one may not suffer data loss in
case of virus contamination.
5. A person should never send his credit card number to any site that is not secured, to
guard against frauds.
6. It is always the parents who have to keep a watch on the sites that your children are
accessing, to prevent any kind of harassment or depravation in children.
7. Web site owners should watch traffic and check any irregularity on the site. It is the
responsibility of the web site owners to adopt some policy for preventing cyber
crimes as number of internet users are growing day by day.
8. Web servers running public sites must be physically separately protected from
internal corporate network.
9. It is better to use a security programmes by the body corporate to control information
on sites.
10. Strict statutory laws need to be passed by the Legislatures keeping in mind the interest
of netizens.
11. IT department should pass certain guidelines and notifications for the protection of
computer system and should also bring out with some more strict laws to breakdown
the criminal activities relating to cyberspace.
12. As Cyber Crime is the major threat to all the countries worldwide, certain steps
should be taken at the international level for preventing the cybercrime.
13. A complete justice must be provided to the victims of cyber crimes by way of
compensatory remedy and offenders to be punished with highest type of punishment
so that it will anticipate the criminals of cyber crime.