A DISSERTATION REPORT ON

Submitted to Uttrakhand technical university in the fulfillment of Master of business administration (TWO YEAR FULL TIME DEGREE PROGRAMME)

SUBMITTED BY Sana Zaidi M.B.A (4th SEMESTER)

UNDER THE OF SUPERVISION Mrs. Aditi Sharma Batch 2009-2011

Quantum School of Technology Mandawar (22 Km milestone) Roorkee - Dehradun Highway (NH 73) Roorkee 247167, Uttrakhand India.

QUANTUM SCHOOL OF BUSINESS

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CONTENTS
1. Internet Banking.(8-18) 2. Challenges for Banks and Regulators.(18-23) 3. What do Computers do in Banks?(24-35) Credit Card Frauds. Banks Control in Online Banking. 4. ICICI Bank A Case Study. 5. Recommendations. 6. Suggestions. 7. Role and Significance. 8. Conclusion.

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1: - Internet Banking

1.1 Internet Banking a) Introduction b) Banking service though Internet c) The Indian Scenario d) Product & Service offered e) The future scenario 1.2 Risk & Rewards a) Operational Risk b) Security Risk c) System architecture & design d) Reputational Risk e) Legal Risk f) Money Laundering Risk g) Cross Border Risks h) Strategic Risk i) Other Risk j) Risk of unfair completion

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TO WHOM IT MAY CONCERN

This

is

to

certify

that

aforesaid

candidate

of

MASTER

OF

BUSINESS

ADMINISTRATION (MBA) of the QUANTUM SCHOOL OF BUSINESS have satisfactory completed dissertation project on the topic INTERNET BANKING IN INDIA WITH REFERENCE TO A CASE STUDY OF ICICI per rules of UTTARAKHAND TECHNICAL UNIVERSITY, DEHRADUN in academic session 2009-2011.

His performance was satisfactory during the period of dissertation work.

(MRS. ADITI ARORA)

Dated:

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DECLARATION
I, hereby declare that the project report entitled A study on INTERNET BANKING IN INDIA WITH REFERENCE TO A CASE STUDY OF ICICI as prepared and submitted by me is an original work conducted by me under the guidance of MRS. ADITI ARORA and nothing has been taken from other such documents.

SANA ZAIDI (MBA 4thSemester)

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ACKNOWLEDGEMENT
An attempt has been made to examine the Microfinance in India with Special Reference to the Linkage Banking Programme a Case Study of SKS.

The report is the outcome of the guidance and valuable suggestions provided by all the faculty of QUANTUM BUSINESS SCHOOL (QBS). I would like to express my sincere thanks and primarily the gratitude to Mrs. ADITI ARORA , MBA Department, QUANTUM, Roorkee who had been the main driving force in guiding, in the analysis and presentation of the project work right from the initiation to the final stage.

I also wish to express my sincere thanks to my parents, friends and well wishers for their enthusiastic support and who have directly or indirectly helped me in one way or the other in preparation of the final report.

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Research Objectives of the study

Objectives of a project tell us why project has been taken under study. It helps us to know more about the topic that is being undertaken and helps us to explore future prospects of the topic. Basically it tells what all have been studied while making the project.

The various research objectives of the study are: 1. To study the internet banking facilities offered by the banks to its customers 2. To study as to how much internet banking has penetrated in the minds of the customers 3. To gain insights about functioning of internet banking. 4. To explore the future prospects of internet banking. 5. To study the benefits that are provided to the individual under internet banking

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Internet Banking:-

a) Introduction: The delivery channels include direct dialup connections, private networks, public networks, etc. with the popularity of computers, 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.

b) Banking Services through Internet: i. The Basic Level Service is the banks web sites 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 Web sites which allows customers to submit their instructions, applications for different services, queries in their account balances, etc. but do not permit any fund-based transactions on their accounts,

iii.

The third level of Internet banking service are offered by Fully Transactional Web sites 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 8

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banking service the customer or by new banks, who deliver banking service 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 physical presence in a country despite offering different banking services.

c) The Indian Scenario: The entry of India banks into Net Banking Internet banking, both as a medium of delivery of banking services and as a strategic tool for business development.

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 percent of Internet users did banking online in 1998. This is increased to 16.7 percent in March 2000 (India Research, May 29, 2000, Kotak Securities).

Cost of banking service through the Internet from 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.

d) Product 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 count.

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With gradual adoption of Information Technology, the bank puts up a web site that provides general information on deposits products, application forms for downloading and e-mail option for enquiries and feedback.

Vijaya Bank provides information on its website 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 (security/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 or requests, instructions for opening of Letter of Credit and Bank Guarantees, etc.

These services are being initiated by banks like ICICI Bank Ltd., Citibank, Global Trust Bank Ltd., UTI Bank Ltd., Bank of Citibank Bank of Madura Ltd., Federal Bank Ltd., etc.

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 online.

The Infinity service of ICICI Bank Ltd. Also allows online real time shopping all payments to be made by customers.

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HDFC Bank Ltd. Has made e-shopping online and real time with the launch of its payment gateway.

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.

e) The Future Scenario: -

o Compared to banks abroad, India 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. o Various security options like line encryption, branch connection encryption, firewalls, digital certificates, automatic sign-offs, random pop-ups and disaster recovery sites are is 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. o The communication bandwidth available today in India is also not enough to meet the needs of high priority services like online banking and trading.

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o 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. o 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. o A contractual agreement is entered into by the customer with the bank for using the Internet banking services. o 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. o Cyber crimes are, therefore, difficult to be identified and controlled. o In order to promote Internet banking services, it is necessary that the proper legal infrastructure is in place. o The Department of Telecommunications (DoT) is moving fast to make available additional bandwidth, with the result that internet access will become much faster in the future. o Reserve Bank of India has constituted a group to examine different issues relating to i-banking and recommend technology, security legal standards and operational standards keeping in view the international best practices. In the following paragraphs a generic set of risks discussed as the basis for formulating general risk control guidelines. 12

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1.2 Risk & Rewards: -

a) Operational Risk: Operational risk, also referred to as transactional risk is the most common form of risk associated with i-banking. It takes them from of inaccurate processing of transactions, non-enforceability of contracts, compromises in data integrity, data privacy and confidentiality, unauthorized access / intrusion to banks systems and transaction, etc. Such risks can arise out of weaknesses in design, implementation and monitoring of banks information system. Besides inadequacies in technology, human factors like negligence by customers and employees, fraudulent activity of employees and crackers/ hackers, etc. can become potential source of operational risk.

b) Security Risk: Security risk arises on account of unauthorized access to a banks critical information stores like accounting system, risk management system, portfolio management system, etc.

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Other related risks are loss of reputation, infringing customers privacy and its legal implications, etc. Attackers could be hackers, unscrupulous vendors, disgruntled employee or even pure thrill seekers. In addition to external attacks banks are exposed to security risk from internal sources e.g. employee fraud. Employee being familiar with different systems and their weaknesses become potential security threats in a loosely controlled environment. They can manage to acquire the authentication data in order to access the customer accounts causing losses to the bank. Unless specifically protected, all data/ information transfer over the internet can be monitored or read by unauthorized persons.

c) System architecture and design: Banks face the risk of wrong choice of technology, improper system design and inadequate control processes. Numerous protocols are used for communication across internet. Each protocol is designed for specific types of data transfer. A system allowing communications with all protocols, say HTTP (Hyper Text Transfer Protocol), FTP (File Transfer Protocol), telnet, etc. is more prone to attack than one designed to permit say, only HTTP. Many banks rely on outside service providers to implement, operate and maintain their e-banking system.

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Security related operational risk include access control, use of firewalls, cryptographic techniques, public key encryption, digital signature, etc.

d) Reputational Risk: -

Reputational risk is the risks of getting significant negative public opinion, which may result in a critical loss of funding or customers. Such risks arise from actions which cause major loss of the public confidence in the banks ability to perform critical functions or impair bank-customer relationship. It may be due to banks own action or due to third parties action. The main reasons for this risk may be system or product not working to the expectations of the customers, significant security breach (both due to internal and external attack), inadequate information to customers about product use and problem resolution procedures, significant problems with communication networks that impair customers access to their funds or account information especially if, there are, no alternative means of account access.

e) Legal Risk: Legal risk arises from violation of, or non-conformance with laws, rules, regulations, or prescribed practices, or when the legal rights and obligations of parties to a transaction are not well established.

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A customer inadequately informed about his rights and obligations, may not take proper precautions in using Internet banking products or services, leading to disputed transactions, unwanted suits against the bank or other regulatory sanctions.

f) Money Laundering Risk: o As internet banking transactions are conducted remotely banks may find it difficult to apply traditional method for detecting and preventing undesirable criminal activities. Application of money laundering rules may also be inappropriate for some forms of electronic payments. o To avoid this, banks need to design proper customer identification and screening techniques, develop audit trails, conduct periodic compliance reviews, and frame policies in internet transactions.

g) Cross-Border Risks: Internet banking is based on technology that, by its very nature, is designed to extend the geographic reach of banks and customers. Such market expansion can extend beyond national borders. This causes various risks. Such considerations may expose banks to legal risks associated with noncompliance of different national laws and regulations, including consumer

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protection laws, record keeping and reporting requirements, privacy rules and money laundering laws. The foreign-based service provider or foreign participants in internet banking are sources of country risk to the extent that foreign parties become unable to fulfill their obligations due to economic, social or political factors.

h) Strategic Risk: For reducing such risk, banks need to conduct proper survey, consult experts from various fields, establish achievable goals and monitor performance. Also they need to analyze the availability and cost of additional resources, provision of adequate supporting staff, proper training of staff and adequate insurance coverage.

i) Other Risk: Traditional banking risks such as credit risk, liquidity risk, interest rate risk and market risk are also present in internet banking.

These risks get intensified due to the very nature of internet banking on account of use of electronic channels as well as absence of geographical limits. Credit risk: Is the risk that a counterparty will not settle an obligation for full value, either when due or at any time thereafter. Banks may not be able to properly

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evaluate the creditworthiness of the customer while extending credit through remote banking procedures, which could enhance the credit risk. Another facility of internet banking is electronic money. It brings various types of risks associated with it. If a bank purchases e-money from an issuer in order to resell it to a customer, it exposes itself to credit risk in the event of the issuer defaulting on its obligation to redeem electronic money. Liquidity risk: It is important for a bank engaged in electronic money transfer activities that it ensures that funds are adequate to cover redemption and settlement demands at any particular time. Failure to do so, besides exposing the bank to liquidity risk, may even give rise to legal action and reputational risk.

j) Risk of unfair completion: Internet banking is going to intensify the competition among various banks. The open nature of internet may induce a few banks to use unfair practices to take advantage over rivals. Any leaks at network connection or operating system, etc. may allow them to interfere in a rival banks system.

Thus, one can find that along with the benefits internet banking carries various risks for bank itself as well as banking system as a whole.

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2: - Internet Banking: Challenges for Banks & Regulators.

2.1 Internet Banking in the United States New Risks

2.2 The Basel Committees Electronic Banking Group

2.3 e-Finance Oversight

2.4 Security Controls

2.5 Legal & Reputational Risk Management

Internet Banking in the United States:

An average industry estimates indicates the about 13 million US households banked online by the end of 2000 twice as many as in the previous years.

At the beginning of 2001, 37% of all US national banks, including nearly all of the largest national banks, were offering full transactional capabilities online a near twofold increase in little over a year.

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Banks offering Internet-based transaction service and there are more of them each day should be well positioned to compete in the financial markets of the future.

New Risks: Internet banking poses risks that are different from those that bank supervisors customarily dealt with in assessing credit, market, or interest rate risk. First, banks must manage the unprecedented speed of technological change, and assess how it relates to their technology investments and their ability to provide consistently high-quality customer service. Second, bank is increasingly dependent on third parties to provide the necessary information technology. Security is another area of significant risk. So far, relatively few financial institutions have reported being victimized by online security violations.

2.2 The Basel Committees Electronic banking Group: -

o The Basel Committee on Banking Supervision has taken the lead in this area through the creation of its Electronic Banking Group (EBG) in late 1999 a group whose members represent 17 Central banks and bank supervisory agencies.

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The major focus of the EBGs work has been to develop risk management guidance for Internet banking that will guide bankers and promote effective and consistent bank supervision around the world. o The EBG has identified fourteen Risk Management Principles for Electronic Banking to promote sound risk management of e-banking. These principles are intended to help banking institutions expand their existing oversight policies and processes to cover their e-banking activities.

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e-Finance Oversight: The EBG has dedicated considerable time and effort to communicating supervisory expectations and guidance for home country supervisors to oversee cross-border Internet banking activity conducted by their local institutions. In February of this year, the Financial Stability Forums Contact Group on EFinance held its first formal meeting. This group was formed to promote enhanced information-sharing among the various international sector-based working groups dealing with e-finance supervisory issues e-banking, e-trading, retail payments systems, e-commerce, and so on.

Security Controls: Authentication of e-banking customers. No repudiation and accountability for e-banking transaction of duties. Appropriate measures to ensure segregation of duties. Proper authorization controls within e-banking systems, databases and applications. Data integrity of e-banking transactions, records and information. Establishment of clear audit trails for e-banking transactions. Confidentiality of key bank information.

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Legal & Reputational Risk Management: Appropriate disclosure for e-banking services. Privacy of customer information. Capacity, business continuity and contingency planning to ensure availability of e-banking systems and services. Incident response planning. The complete EBG Report on Risk Management Principles for Electronic Banking can be obtained at the Bank for International Settlements web site at

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3: - What do Computers do in Banks

The different uses of Information Technology: -

a) Single Window System b) Any Time Banking c) Automated Teller machine d) Shared Payment Network System e) Customer Service f) Telebanking g) Home Banking h) Electronic Fund Transfer i) Plastic Cards as Media for Payment 1. Credit Card 2. Debit Card 3. Smart Card 4. ATM Card j) Intra-bank and Inter-bank Applications

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The different uses of Information Technology: -

a) Single Window System (SWS): o The cashier or teller who accepts the cash, keys in the data from his terminal after receipt of the amount. o The amount is straight away posted to the system. o If the customer wishes to update passbook the same is also updated through the security form printer/pass book printer. o If a customer wishes to obtain a draft, the clerk keys in the details of the account to be debited and the particulars of the drafts to be issued on the machine. o The customers account is debited and security form printer prints out draft and clerk can hand over the same to customer duly signed.

b) Any Time Banking: This refers to banking service available 24 hours a day and 365 days a year.

Such facility is made available to the customer through the Automated Teller machine.

Banking, being a service industry, is primarily driven by customers needs.

Each customer is willing to pay a price for the services provided it is made available to him when he wants and where he wants.

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In the present day of server competition, banking services are driven by technology, which is more oriented towards providing better services to the customer.

The concept of banking hours has been changed from the fixed 4 hours to 24 hours.

This has been made possible through use of ATMs. Even under the manual service, the banks have stated to extend the service from the traditional 4 hours to 5 hours and even up to 12 hours say from 8 AM to 8 PM.

Some banks have introduced the practice of Sunday Banking or Holiday Banking.

c) Automated Teller Machine (ATM): ATM is a machine in the nature of a computer in general sense, but is dedicated to do certain types of specific jobs only. The hardware and the proprietary i.e. the software used in one machine cannot be used in one machine.

d) Shared Payment Network System (SPNS): The SPNS, named SWADHAN, has been sponsored by the Indian Banks Association (IBA).

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It is a network of ATMs, points of sale terminals and Cash Dispensers with a view to pool the resources of the banks and underlines the spirit of competition through cooperation. It became operational in Mumbai on 1st February 1997 and in two years about 150 ATMs were owned and installed by 38 banks including foreign banks, public and private sector Indian commercial banks as also cooperative banks. The biggest advantage of the network is that the ATM cards issued by different banks can used at any member banks ATM. Banks can have as many ATM as they want and follow some standards set by the SPNS committee. The heart of the network is the Switch and its main components are: Tandem Mainframe Computer, BASE 24 Software, Motorola networking equipments and the leased lines.

e) Customer Services: The following customer services are offered through the system:

i. ii.

Cash withdrawal (up to a specified limit) Cheque/Cash deposit (the receipt being only for the deposit of the envelope containing cash but not for the amount therein)

iii. iv. v.

Enquiry about balances Printing of statement of accounts Request for cheque book and standing instructions. 27

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vi. vii. Transfer of funds PIN change

f) Telebanking: From the conventional banking, where the services were provided manually across the table, it has come to a stage where the customer is not required to visit the bank enquiry of balance in the account, sending a remittance, to get a statement of account, etc. The concept has become so popular that in USA customers do not visit the bank for 97% of their transactions and these are done from either customers residence or office using a telephone or a home PC. In telebanking the customer is required to open the account with the bank initially by visiting the bank. Telebanking services are, generally, provided by the bank over the telephone on a special number. The number at the bank is connected to a terminal in the bank, which is either handled manually or is automated by connecting the same to the computer network. Where the system is automated, two types of technology are used.

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g) Home Banking: Under home banking the customer is served at his residence and there is no need for the customer to visit the banks premises for a number of routine transactions.

If the customer needs some information the same can be got by contacting the bank over the phone as described in the telebanking.

If the customer wants to put through transaction and wishes to see his account or to get a statement of his account, he may have to use a PC.

This type of facility is available with a town, city or metropolitan area.

Under such a situation the customer should have a: PC Modem Telephone line A compatible software for the home PC

The home banking service can be broadly classified under two groups, one without using the information technology and another using information technology.

When customer contacts the bank o the phone no specific technology is involved and the service of telebanking is provided to him.

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h) Electronic Fund Transfer (EFT): o In India the fund transfers are basically done through Mail Transfer, Draft or Telegraphic Transfer. o In case of Telegraphic Transfer (TT) again the Department of Telecommunication was the sole provider of Telephone, Telex and Telegram facilities. o With the process of liberalization private operators have started providing alternative voice communication channels through mobile phones and vast communication as an alternative channels for data communication. o It was normal for any TT to be credited to the beneficiarys account after delay of 2 to 4 days o The different forms of EFT prevalent in the use are: EFT through Electronic Data Interchange BANKNET RBINET IDRBT VSAT Network EFT from Point of Sales Electronic Cash SWIFT- Global System for Funds Transfer Electronic Clearing Settlement

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i) Plastic Cards as Media for Payment: There are four types of plastic cards being used ad media for making payments. These are:

1. Credit Card 2. Debit Card 3. Smart Card 4. ATM Card

1. Credit Cards: The credit card enables the cardholders to: Purchase any item like clothes, jewellery, railway/air tickets, etc. Pay bills for dining in a restaurant or boarding and lodging in a hotel Avail of any service like car rental, etc.

2. Debit Card: A debit card is issued on payment of a specified amount by the issuing company like a telephone company to a customer on cash payment or on debiting his account by a bank.

Thus it is like an electronic purse, which can be read and debited by the required amount. 31

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It may be noted that while through a credit card, the customer first makes a purchase or avails service and pays later on, but for getting the debit card, a customer has to first pay the due amount and then make a purchase or avail the service. For this reason, debit card are not as popular as credit cards.

3. Smart Cards: Smart Cards have a built-in microcomputer chip, which can be used for storing and processing information. For example, a person can have a smart card from a bank with the specified amount stored electronically on it. As he goes on making transactions with the help of the card, the balance keeps on reducing electronically. When the specified amount is utilized by the customer, he can approach the bank to get his card validated for a further specified amount. Such cards are used for paying small amounts like telephone calls, petrol bills, etc.

In India, a smart card, suiting Indian banking environment, is being developed and tested at IIT, Mumbai, in collaboration with the RBI and SBI. The card is being used as an experimental tool for promoting cashless society in and around the IIT Campus. The latest smart card being developed will combine all the features of electronic purses, credit cards and ATM cards.

4. ATM Cards: The card contains a PIN (Personal Identification Number) which is selected by the customer or conveyed to the customer and enables him to withdraw cash up to the transaction limit for the day. He can also deposit cash or cheque.

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Function of ATM Card: The customer has to enter the card into the machine slot. The machine first reads for hot carding of the card number, i.e. it checks whether the card has already been cancelled or placed on the rejection list. Rejection can be because of the reason like lost card or stolen card. The machine then reads the PIN and asks for the PIN from the customer. If the PIN matches, it presents the main menu on the screen. The menu contains options from which the withdrawal option is selected. The ATM then checks whether the amount is under the day limit magnetically inscribed by the customer. Accordingly, the ATM dispenses cash. It then releases the card and a printed statement comes out of the slot.

5. Intra-Bank & Inter-Bank applications: Computerization is now all pervasive in banks. Almost all the activities in a bank can be performed more efficiently with the help of computers. Broadly, we can divide the applications of computerization in banks in two types

A) Intra-Bank Applications: i. ii. iii. iv. v. Funds transfer and payment message Banks owned ATM/Credit Card and other application on the corporate network Inter-Branch Reconciliation Quick disposal of loan/investment proposal Funds information from clearing centers to the fund management office for optimal allocation of funds. vi. Cash Management Product 33

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vii. viii. ix. x. xi. xii. Treasury Management Any Branch Banking Asset Liability Management E-mail Software distribution in the bank Organizational bulletin boards may contain the following: a. Circulars b. Newsletters, phone and address directories c. Undesirable parties d. Missing security items e. Confidential circular on attempted frauds. xiii. xiv. xv. Human Resources Development and Personnel Administration Auditing and Inspecting computerized branches using the network Organizational database may include a. Statutory returns b. Control returns c. Standardized returns xvi. Management Information Systems a. Borrowers profile b. Branch profile c. Employee analysis d. Product/service profile e. Business profile of branches. xvii. Apart from providing efficient service to customers the financial network will also fulfill the following objectives: a. Timely information to top management b. Helping in development of new products c. Speedy communication among branches and with the controlling offices.

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B) Inter-Bank Applications: i. Electronic Funds Transfer a. Retail EFT (Small value credit transfer) on net settlement basis. b. Wholesale EFT (Large value credit transfer) on Real Time Gross Settlement (RTGS) basis for time critical payments. ii. Clearing and settlement systems for securities Delivery vs. Payment (DVP). The final delivery of securities will occur if and only if final payment occurs. iii. Transferring balance from net settlement systems to RTGS Server at periodic intervals. The net obligation could be from: a. Local paper-based clearing b. Inter-city paper-based clearing (including IT discounting facilities) c. Bulk payments ECS (Debit, Credit, RAPID) including intercity. d. Shared ATM networks e. Smart cards and other pre-paid/pre-authorized debit cards iv. v. Exchange of defaulting borrowers list among RBI and banks EDI services to the extent they pertain to payment cycle to EDI (Electronic Data Interchange) vi. Consolidation of current account balance from the existing DAD (Deposit Accounts Department in RBI Offices) applications synchronously/asynchronously to facilitate balance enquiry by banks on all India/center-wise basis and if necessary to activate transfer of funds among DADs at different centers. vii. viii. ix. x. xi. Reporting of government account transactions Reporting of BSR (Basic Statistical Returns) etc. to RBI Asset Liability Management Intranet in RBI to enable banks to get circulars, press releases etc. Returns to be submitted by the banks to Departments of Banking Supervision (DBS) for off-site supervision and monitoring.

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4: Credit Card Frauds

4.1 Credit Card Frauds Meaning Defrauder Aware of Credit Card Advantages of Credit Card Credit Card Frauds

4.2 The Prevention of Frauds Duplicate Card White plastics Bankers Role Cyber Laws Altering Sale terminals Internet Relays Monitoring Deposit 36

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Risk Management Central Credit Card Clearing House Loss of Credit Cards in Transit Fraud Consciousness Physical Evidence Check the handwriting

4.3 How to Accept the Master Card 4.4 How to get Reimbursed 4.5 ICICI Bank: Case Study

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4.1 Credit Card Frauds: -

Meaning: A credit card is a money transaction device without using cash or fiduciary documents.

Defrauder: The defrauder has been slow to exploit the credit card, for making a fast buck. In USA, he made 15 million dollars. Through the cards, in 1981, In 1982 his earning through the card, rose to 50 million dollars. In 1983, the fraudulent card brought over 100 million dollars to its creators. The fraudulent card industry is rising higher and higher to dizzy height every year. Like other countries if the genuine credit card has come in India, the fraudulent credit card cannot be far behind.

Aware of Credit Card: The credit card, as already seen, is a money transaction device. The institutions issuing the credit card give the card holders authority to obtain money, goods, services or any other thing of value, on credit. They guarantee payment of debit so raised. These institutions are banks and other financial institutions, clubs and travel agencies and departmental stores, etc. Credit Cards, Bob Cards, Master Cards, Visa Cards, express Cards, Euro Cards have wide circulation. Some of them have wide circulation. Some of them have world-wide circulation..

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Advantages of Credit Cards: Following types of safety measures are being introduced increasingly in the credit card manufacture. They can be adopted with advantages

1. Simultaneous printing on both sides of the cards,; creating some superimposed graphics, patterns, digits or writings. 2. Multi-layered laminates incorporating lateen images which may distinguish the genuine from the forged. 3. Intricate graphics and distinctive letter and digit designs. 4. Laser printing to engrave the letter and digits on the credit card. 5. Three dimensional insignia, logo of high artistic quality on the credit card. 6. Encoded information track in magnetic inks on magnetic stripe. 7. Cards inserted in the imprinter head, designed and manufactured to rigid specification to permit limited tolerance to admit only genuine credit cards. 8. Secure Signature Panel. 9. 3- Dimensional hologram. 10. U.V. fluorescent images and designs. 11. Micro printing 12. Optically illusive figures, designs, etc. 13. Heavy duty embossing logo.

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Credit Card Frauds: Credit card frauds manifest themselves in a number of ways: 1. Genuine cards are manipulated. 2. Genuine cards are altered. 3. Counterfeit cards are created. 4. Fraudulent telemarketing is done with credit cards. 5. Genuine cards are obtained on fraudulent applications in the names/addresses of other persons and used.

It is feared that with the expansion of E-Commerce, M-Commerce, and Internet facilities being available on massive scale, the fraudulent fund freaking via credit cards will increase tremendously. The shape it takes will be limited only by the ingenuity of the future.

4.2 The Prevention of Frauds

Duplicate Card: The duplicate fraudulent credit cards are those where the defrauders have made sincere efforts to duplicate the original cards through photo-mechanical processes.

They follow the footsteps of the original manufactures of the genuine credit cards to produce as close a replica of the genuine card as possible, employing similar materials and similar processes of printing and embossing, besides magnetic encodings.

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White Plastic: The counterfeit credit cards known as white plastics are imitations of credit cards in general aspect.

Bankers Role: The credit card industry is one of the fastest growing activities of the banking industry. The artist has to be there (where the money is). The banks have to suffer losses.

Cyber Laws: Information Technology Ministry be approached for stringent laws against credit card crimes.

Altering Sales terminals: Internet E-Mail should be utilized on the pattern of Hot Box organized about a decade ago suitably modified to benefit from the advances the information technology has made since them.

Internet Relays: Computers should be pressed into service via internet connection by suitably upgrading the Television System Vertical blanking Intervals for notifying the fraudulent cards in the market.

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Monitoring Deposit: Monitoring system can help locate the unscrupulous merchants who use or allow the use of white plastics and fraudulent cards, knowing full well their fraudulent nature for making a fast back.

Risk Management: To meet the menace one of the top card companies has imitated risk management service to identify these high risk centers where daily all the inter-change transactions of the areas are scrutinized and the credit card number are checked against those which have been declared fraudulent, stolen or lost.

Central credit Card Clearing House: There should be a joint list of credit card holders on central basis with their addresses and other details, if any. New applicants to any bank for credit cards should be checked: If he is holding card from other issuers. If he has held a card at other times. If so, when? Why did he discontinue? If he has applied to more than one credit card issuers The new card holders business transactions should be watched for some time.

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Loss of Credit cards in Transit: It must be prevented.

It is simple for either the customer to collect personally or the banker should deliver it personally, or it should be sent by courier and confirmation obtained on telephone, in addition to the paper receipt.

Fraud Consciousness: The problem of credit card frauds must be brought to the notice of users as well as of the servers at sale terminals.

Proper training in the check up of the credit card in its various aspects has no substitute and in view of the huge issues the same is indispensable.

Physical Evidence: Immediately on the discovery of fraud all the physical evidence available should at once be taken into possession and the case reported to the police for investigation.

Check the Handwriting: Handwriting (in signatures) is available on sale drafts and on credit cards. The comparison of hand-writing inter se and with that of the suspect and of genuine card holders, can lead to the identity or non-identity of alleged writer.

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4.3 How to accept the Master Card: Master Card International guarantees payment of all Master Card Travelers Cheques if the following procedures are followed:

Watch the customer signs each cheque in ink on the countersignature line. Compare this signature to the original signature. Ensure they look the same. If a cheque is already countersigned, or if you doubt the two signatures are the same, ask the customer to sign the cheque again on the back for comparison. Also, request identification such as a passport, driving license or similar document, and write the details on the back of the cheque.

If a cheque is presented by anyone other than the original purchaser, treat it the same way you would a personal check from a third party. You should know the customer and be able to contact the customer if theres problem.

4.4: How to get Reimbursed:

Stamp or write your company name on the front of the cheque where it says, Issuer will pay to the order of.. and also endorse at the back of the cheque. Deposit cheques in your bank as cash items. US dollar Master Card Travelers Cheques, regardless of location of issuer, are cleared and paid in the US. Do not send cheque directly to the issuing institution.

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4.5: Credit Card Fraud in ICICI Bank:

ICICI Bank Credit Card Division is a Shame: I lost my card a few months back and it was used by someone to make a transaction of about 18k I raised a dispute with ICICI Bank which was settled against me. After spending a month trying to get a copy of the investigation report from ICICI Bank customer care and their hallowed and inaccessible Chargeback Department - I have finally received it, and guess what, its an utter pack of LIES!! I am not kidding - some of it is plain unbelievable. Here are some snippets from the report. CM=customer, ME=merchant ME told us that CM came to his outlet and taken original charge slip & bill, no clue found, however the identity of card user was not ascertained, on asking CM of show charge slip and bill copy he refused to show. Wow! I was never asked for a charge slip by the investigator, nor did I have one. I accompanied the police to Big Bazaar (the merchant), where the police collected the IMEI codes (the card was used to buy a couple of phones), but not the charge slips. I went again recently, and I was told that I could not get the charge slip from the merchant now, without the consent of the bank. So the investigator not only turned me into someone who refused to show charge slip (when he has a disputed transaction of 18k!), he has turned the merchant into a liar as well! So they dont just screw their retail customers, but even their merchants! CM had not informed field team that he himself had visited to ME BIG BAZAAR for investigation, When asked for charge slips CM refused to show charge slip and bill copy. CM was not responding well during Investigation. The point is reiterated, and evidently I had not informed the field team I had visited the merchant. This when I myself, gave the field team the contact number of the concerned employee at Big Bazaar. Oh! By the way that amounts to not responding well during investigation CM is not working anywhere and staying in a hostel in Gurgaon. 45

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This one takes the cake. It literally threw me over the edge. Here I am, a director of a pvt. ltd. company, staying with my parents in Gurgaon - he turns me into an unemployed hosteller! Phew! Unbelievable. And this is when the investigator visited me at my residence! So, you see what a fraud ICICI Bank credit card division is. Until now, my concerns were around long waiting times, long turnaround times - but this takes it to a whole new level.

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5: - Banks Control in Online Banking

5.1 Will Banks Control Online Banking:

Internet Banking in India Real threats Online

5.2 Banking in the Cyber world: Internet Purchases without Payment Gateways Risk of Gateway

.1 Will Banks Control Online Banking: Internet Banking in India: -

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Online banking is expected to explode in the next few years. We will be entering the age of non-physical exchange of cash aided by complete transparency leading to perfectly competitive electronic market place and inevitably to customer supremacy. Growth in online banking will be driven by the following reasons: Increasing access to low cost electronic services Emergence of open standards in the banking industry Improved customer awareness Entry of global majors in the market Integration of banking services with e-commerce and emergence of e-cash Convenient boundaries Shift from one-stop shopping to unbundled product purchases international transactions as Internet eliminates geographic

E-BANKING TRANSACTIONS:

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The introduction of new technologies has radically transformed banking transactions. In the past, customers had to come physically into the bank branch to do banking transactions including transfers, deposits and withdrawals. Banks had to employ several tellers to physically make all those transactions. Automatic Teller Machines (ATMs) were then introduced which allowed people to do their banking on their own, practically anytime and anywhere. This helped the banks cut down on the number of tellers and focus on managing money. The Internet then brought another venue with which customers could do banking, reducing the need for ATMs. Online banking allowed customers to do financial transactions from their PCs at home via Internet. Now, with the emergence of Wireless Application Protocol (WAP) technology, banks can use the infrastructure and applications developed for the Internet and move it to mobile phones. Now people no longer have to be tied to a desktop PC to do their banking. The WAP interface is much faster and convenient than the Internet, allowing customers to see account details, transaction details, make bill payments, and even check credit card balance. The cost of the average payment transaction on the Internet is minimum. Several studies found that the estimated transaction cost through mobile phone is16 cents, a fully computerized bank using its own software is 26 cents, a telephone bank is 54 cents, a bank branch, $1.27, an ATM, 27 cents, and on the Internet it costs just 13 cents. As a result, the use of the Internet for commercial transactions started to gain momentum in 1995. More than 2,000 banks in the world now have transactional websites and the growth of online lending solutions is making them more cost efficient. Recent developments are now encouraging banks to target small businesses as a separate lending category online. Banks are increasingly building payment infrastructure with various security mechanisms (SSL, SET) because there is tremendous 49

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potential for profit, as more and more payments will pass through the Internet. However, the challenge for banks is to offer a payments backbone system that will be open enough to support multiple payment instruments (credit cards, debit cards, direct debit to accounts, echecks, digital money etc.) and scalable enough to allow for a stable service regardless of the workload. The market for Electronic Bill Presentment and Payment (EBPP) is growing. According to a study, 18 million households in the US are expected to pay their bills online by 2003 compared to 2 million households in 2001. As more number of bill payers are getting online, several banks are making efforts to find ways to meet the growing needs of EBPP. Established banks can emerge as key online integrators of customer bills and can capitalize on this high potential market. Growing with the popularity of EBPP is also the paying of multiple bills at a single site known as bill aggregation. Offering online bill payment and aggregation will increase the competitiveness and attractiveness of E-banking services and will allow banks to generate service-fee income from the billers. In the B2B segment, the customer value proposition for online bill payment is more compelling. B2B e-commerce is expected to grow from $406 bn in 2000 to $2.7 tn by 2004, and more than half of all transactions will be routed through online B2B marketplaces. There is a need for automated payment systems to reduce cost and human error, and enhance cash-flow management. To meet this need, a group of banks and non-financial institutions led by Citibank and Wells Fargo have formed a company called

FinancialSettlementsMatrix (FSMx). It provides business buyers and sellers with access to secure payment processing, invoicing and other services that participating financial services firms offer.

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A B2B marketplace would provide minimum value to its customers if it just matches buyers and sellers, leaving the financial aspects of transactions to be handled through traditional non-Internet channels. Hence, the marketplace must be capable of providing the payments processing, treasury management services, payables/receivables data flows, and credit solutions to complete the full cycle of a commercial transaction on the Internet. The web-based B2B ecommerce offers tremendous opportunities for banks, payment technology vendors and e-commerce companies to form strategic alliances. This new form of collaboration between partners with complementary core

competencies may prove to be an effective business model for e-business.

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E-BANKING TREND
Internet banking is gaining ground. Banks increasingly operate websites through which customers are able not only to inquire about account balances and interest and exchange rates but also to conduct a range of transactions. Unfortunately, data on Internet banking are scarce, and differences in definitions make cross-country comparisons difficult. Even so, one finds that Internet banking is particularly widespread in Austria, Korea, the Scandinavian countries, Singapore, Spain, and Switzerland, where more than 75 percent of all banks offer such services (see chart). The Scandinavian countries have the largest number of Internet users, with up to one-third of bank customers in Finland and Sweden taking advantage of E-banking.

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In the United States, Internet banking is still concentrated in the largest banks. In mid-2001, 44 percent of national banks maintained transactional websites, almost double the number in the third quarter of 1999. These banks account for over 90 percent of national banking system assets. The larger banks tend to offer a wider array of electronic banking services, including loan applications and brokerage services. While most U.S. consumers have accounts with banks that offer Internet services, only about 6 percent of them use these services. To date, most banks have combined the new electronic delivery channels with traditional brick and mortar branches ("brick and click" banks), but a small number have emerged that offer their products and services predominantly, or only, through electronic distribution

channels. These "virtual" or Internet-only banks do not have a branch network but might have a physical presence, for example, an administrative office or nonbranch facilities like kiosks or automatic teller machines. The United States has about 30 virtual banks; Asia has 2, launched in 2000 and 2001; and the European Union has several either as separately licensed entities or as subsidiaries or branches of brick and mortar banks.

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THE INDIAN EXPERIENCE
India is still in the early stages of E-banking growth and development. Competition and changes in technology and lifestyle in the last five years have changed the face of . The changes that have taken place impose on banks tough standards of competition and compliance. The issue here is 'Where does India stand in the scheme of Ebanking.' E-banking is likely to bring a host of opportunities as well as unprecedented risks to the fundamental nature of banking in India.

The impact of E- Banking in India is not yet apparent. Many global research companies believe that Ebanking adoption in India in the near future would be slow compared to other major Asian countries.Indian E-banking is still nascent, although it is fast becoming a strategic necessity for most commercial banks, as competition increases from private banks and non banking financial institutions.

Despite the global economic challenges facing the IT software and services sector, the outlook for the Indian industry remains optimistic.

The Reserve Bank of India has also set up a "Working Group on E-banking to examine different aspects of E-banking. The group focused on three major areas of E-banking i.e. (1) Technology and Security issues (2) Legal issues and (3) Regulatory and Supervisory issues. RBI has accepted the guidelines of the group and they provide a good insight into the security requirements of E-banking.

The importance of the impact of technology and information security cannot be doubted. Technological developments have been one of the key drivers of the global economy and represent an 54

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instrument that if exploited well can boost the efficiency and competitivity of the banking sector. However, the rapid growth of the Internet has introduced a completely new level of security related problems. The problem here is that since the Internet is not a regulated technology and it is readily accessible to millions of people, there will always be people who want to use it to make illicit gains. The security issue can be addressed at three levels. The first is the security of customer information as it is sent from the customer's PC to the Web server. The second is the security of the environment in which the Internet banking server and customer information database reside. Third, security measures must be in place to prevent unauthorized users from attempting to long into the online banking section of the website.

From a legal perspective, security procedure adopted by banks for authenticating users needs to be recognized by law as a substitute for signature. In India, the Information Technology Act, 2000, in section 3(2) provides for a particular technology (viz., the asymmetric crypto system and hash function) as a means of authenticating electronic record. Any other method used by banks for authentication should be recognized as a source of legal risk..

Regarding the regulatory and supervisory issues, only such banks which are licensed and supervised and have a physical presence in India will be permitted to offer E-banking products to residents of India. With institutions becoming more and more global and complex, the nature of risks in the international financial system has changed. The Regulators themselves who will now be paying much more attention to the qualitative aspects of risk management have recognized this.

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Though the Indian Government has announced cyber laws, most corporate are not clear about them, and feel they are insufficient for the growth of E-commerce. Lack of consumer protection laws is another issue that needs to be tackled, if people have to feel more comfortable about transacting online.

Taxation of E-commerce transaction has been one of the most debated issues that are yet to be resolved by India and most other countries. The explosive growth of e-commerce has led many executives to question how their companies can properly administer taxes on Internet sales. Without sales tax, online sellers get a price advantage over brick and mortar companies. While e-commerce has been causing loss of tax revenues to the Government, many politicians continue to insist that the Net must remain tax-free to ensure continued growth, and that collecting sales taxes on Net commerce could restrict its expansion.

A permanent ban on custom duties on electronic transmissions, international tax rules that are neutral, simple and certain and simplification of state and local sales taxes. The Central Board of Direct Taxes, which submitted its report in September 2001, recommended that e-commerce transaction should be taxed just like traditional commerce.

Also RBI is about to become the first Government owned digital signature Certifying Authority (CA) in India. The move is expected to initiate the electronic transaction process in the banking sector and will have far-reaching results in terms of cost and speed of transactions between government- owned banks.

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Thus efficiency, growth and the need to satisfy a growing techsurvey consumer base are three clear rationales for implementing Ebanking in India. The four forces-customers, technology, convergence and globalization have the most important effect on the Indian financial sector and these changes are forcing banks to redefine their business models and integrate technology into all aspect of operation.

Internet Banking An Overview: Internet Banking sites can be segregated into four categories from Level I, which offer just minimum functionalities such as access to ones deposit account data, to Level IV sites that offer sophisticated services. To be successful, an Internet bank must offer: High rates on deposits 24 hour access Free checking and bill payment facilities with rebates on ATM surcharges Credit cards with low rates Simple and easy online applications for all accounts including personal loans Innovative products High quality customer service

Real Threats: A majority of leading online brokers are beginning to offer banking products and services as part of their overall offers. They are actively seeking to capture excess balances in existing checking and saving accounts by offering better rates.

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There are other threats to banks as well. Several leading system providers have developed bank-in-a-box solution unbranded, electronic, full-service, virtualbank system that can be bought, branded, and offered to consumer by any authorized company that wishes to provide banking service.

Online: An online service that merely mimics an offline one has a second problem as well; it doesnt give customers an adequate inducement to move a significant portion of their banking online.

As a result, most customers tend to tend to treat online banking as no more than an extra channel to check their balance and transaction histories, and they continue to do the rest of their business at the ATM or the teller window. A vicious offering increase the banks total costs. This makes the banks reluctant to make further large investments in the online channel, which thus, does nothing to move customers away from tellers and ATMs. In fact, consumers didnt stop using tellers to the extent that banks has hoped, but they also used ATMs so frequently that the reduction in cost per use was more than offset by the higher volume of transactions. The study of information systems through broad band connection, satellite, a network or through a view chat. This online information system provides information about all aspects, Information providing on the demand of the subscriber. This online information system may be of study program, a graduation program or sharing of data through internets, extranet and internet.

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Sharing of Data: The data base store data and information extracted from selected operational and external databases. The database has most needed information by a manager or any end users. This database can be accessed by the ONLINE ANALYTICAL POCESSING (OLAP) systems. This network model can access a data element by several paths. In an organization departmental records can be related to more than one employee record. Thus in an organization data can be shared through internet, internet and extranet.

ONLINE LEARNING: This online information system provides online courses through internet, broad band satellite connection. The recent online course is provided by XLRI, (Xavier Labour Relations Institute) joined hands with Hughes Escorts communication limited. Their main course is on BUSINESS MANAGEMENT. Hughes Escorts is the Indian Operations of US based communication major, Hughes network systems, which is a wing of Hughes electronics. This job is being done by Directing Global education which is joint venture between Hughes network systems and one touch knowledge systems. This job arrangement with Hughes Escorts to offer Management training on satellite platform will take expertise of XLRI faculty beyond the borders of their concern. This information has live videos, voice and transmission to classes through Hughes broadband satellite network. Interaction is through voice and data. This course is conducted across through four metros, Trichy, Bangalore, Hyderabad, Chandigarh, Pune, Kochi, Coimbatore and Madurai.

This course is targeted at working executives

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COUNTRY STUDIES: This country studies by online service is from 1988 onwards. In this, the study of every country is made. B-B (Business Business E-Commerce). Despite the entire buzz, we still dont know about what makes B-B. there is a growing relation that B-B will take years to mature, and the rate of adoption even if companies deliver a huge value equation improvement will be gradual because it requires system and individuals to act in fundamentally new ways. The next thing after B-B is enabling technologies to incorporate more sophisticated back-end integration system, financing options and logistical support. In India, NASSCOM puts the value of online B-B transactions at Rs. 400 crore in 199900 of total E Commerce of Rs. 450. But the question is how much B-B-E-Commerce is really happening in India? It is hard to quantify in terms of real numbers with no established data available in specific reference to the Indian context. But there is a possibility of this business assuming a huge proportion in future. B-B has been happening all through and a new channel has been opened with the advent of the Internet. Obviously organizations will switch over to this channel for the cost effectiveness it provides. The market is emerging in the country and it will be a boom time in the next year.

Banking in the Cyber world: Internet Purchases without Payment Gateway: -

The dangers are three-fold

Since a manual process requires human intervention, risk of information leakage exists. No exchange of Digital ID, so no authentication of the merchant risk of bogus merchant. No exchange of Digital Certificate to authenticate card holder risk of repudiation of transaction by the card holder. 60

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The benefits which the user would get by using the Internet payment gateway are

Card details travel encrypted on the Net (if encryption facility available on the gateway). On-line status of order, if the gateway has on-line authorization. Secure Merchant identification, so that fraudulent web sites posing as genuine merchants get weeded out

Whats a Payment Gateway?

A payment gateway is software that supports multiple payment models simultaneously in a safe and secure manner.

Funds can be transferred through credit, debit and smart cards, cheques, electronic payment wallets and even direct debits through a central payment switch.

Put simply, a payment gateway enables on-line commercial transactions on the internet on a secure system, which have firewalls against hacking.

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Risk of Gateways: Currently, in India HDFC Bank and ICICI have launched payment gateways for business to customer (B2C) transactions.

Payments can be effected through credit cards or through directly debiting the account of the customers of the respective banks.

Some payment mechanisms on the Internet are not safe, as they are in the openloop where a merchant portal can see the credit card number.

This is unsafe for credit card holder and is susceptible to fraud as his number can be physically seen.

The dust is yet to settle in the B2C payment gateways, but action is already heating up in the business to business (B2B) arena.

Besides HDFC Bank and ICIC, Global Tele-System and a few other non-bank companies are toying the idea of launching payment gateways for inter bank and B2B transactions.

No prizes for guessing who they are targeting, Nationalized banks, of course.

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6: ICICI BANK: A CASE STUDY: 6.1: ICICI Bank and Sify for online distribution of retail banking products & services. In a major development in the Internet world, ICICI Bank, the banking subsidiary of ICICI Ltd. (NYSE: IC and IC.D) and Satyam Infoway Ltd. (NASDAQ: SIFY) announced the setting up of a new .COM company for on-line distribution of retail banking products and services on the Internet. This landmark agreement marks the coming together of Indias first Internet Banking provider, ICICI Bank, and Indias largest private ISP and mega-Portal, Satyam Infoway, to create a unique partnership between a major Bank and a mega-Portal. The marriage between banking and portals is expected to be a win-win potent combination, which is expected to result in improved customer orientation, lower distribution cost, long-term customer relationships with ease of banking wherever and whenever the customer wants it and enhanced profitability. The range of retail banking products to be distributed through the portal would include savings accounts, current accounts, fixed deposits, bill payments and other retail banking products that ICICI Bank may offer through this on-line channel. The surge in demand for e-commerce related services stems from the rapid growth in Internet penetration in the country and a fundamental change in the business paradigm. The two companies would therefore also explore several opportunities to complement each others strengths to capitalist on the opportunities in e-commerce. This would include providing a platform for trade facilitation and payments over the Internet using innovative banking products of ICICI Bank. SIFY has a buyer to seller ordering/selling website, SeekandSource.com, which is on-line except for the payments that are still physical. ICICI Bank has developed an Internet based business to business payment module for purchasers and sellers to effect payments online. A synergistic offering of these two products would be made so that such customers/users can complete the entire transaction and payments online. The two companies would expect to co-operate wherever feasible to extend the reach and channels for distribution of financial products from ICICI Bank and Internet products from SIFY. ICICI Bank, as a part of its Click and Brick strategic focus would set up 63

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ATMs at the Satyam Access Points and Cyber Cafes, thereby increasing its reach across the country. It would also offer Satyam Internet terminals at its branches, enabling visitors to surf the Internet, thereby attracting new customers to branches. The two companies shall examine further business opportunities, which would effectively synergies the financial services strength of ICICI Bank and its Affiliates and the technological expertise of Satyam Infoway and its Affiliates. ICICI Bank and Satyam Infoway through this partnership will play a strategic role in providing revolutionary ecommerce solutions in India. The memorandum of understanding was signed today between Mr. H.N Sinor, Managing Director & CEO of ICICI Bank and Mr. R. Ramraj, Managing Director of Satyam Infoway. ICICI is a diversified financial services company offering a wide range of products and services to corporate and retail customers in India. ICICI Bank, a subsidiary company has been the pioneer of Internet banking in India. ICICI Bank has been gearing itself for the opportunities that would be created from the e-Commerce revolution. Satyam Infoway Ltd. Is the leading integrated Internet and e-commerce company operating in India. SatyamOnline, the most comprehensive portal site of Indian origin is one of the key offerings from SIFY in the business to consumer segment. Recently it entered into an agreement to acquire IndiaWorld Communications Private Limited, which would result in the integration of IndiaWorlds popular websites like samachar.com, khel.com and khoj.com with SIFYs portals. The combined portal would be the largest India related Internet portal.

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Recent E-Mail Fraud:ONLINE fraudsters targeted ICICI Bank customers through spam mail that asked them to disclose passwords and other information, but the bank said no financial loss was reported so far. E-mails from `support@icici.com' with the subject `Important information from ICICI Bank' and `Official information from ICICI Bank' started circulating from Monday. Once opened, the mail asked customers to click on a link. "For security purposes your account has been randomly chosen for verification. To verify your account information we are asking you to provide us with all the data we are requesting. Otherwise we will not be able to verify your identity and access to your account will be denied. Please click on the link below to get to the ICICI secure page and verify your account details. Thank you," the e-mail said. The ingenuity of the e-mail is striking as when clicked on the link, it opens a Web page that is an exact replica of ICICI Bank's and simultaneously opens the bank Web site. Customers were asked to key in their identification number, login and fund transfer passwords. The link, however, didn't work on Wednesday. An ICICI Bank spokesman said so far no financial loss was reported because of the fraud. "It's not easy to say how many of our customers have got it. First, we felt it will be a large number. But now our assessment is it's a small number," the spokesman said. ICICI Bank sent e-mail to its customers, warning them about the fraud and urging not to respond to such mails. "Such fraudulent communication may also be sent via SMS or the phone," the bank said. The ICICI Bank spokesman said the bank has alerted the cyber crime cells about the spam mails. But the origin of the spam mail had not been traced, he said. Such fraudulent mails are becoming rampant across the world as Internet banking has grown in popularity. 6.3 Online fraud: 60-yr-old seeks police action against ICICI Bank officials:Karve Nagar resident Vinod Malhotra suffered a loss of Rs 95,000, which was transferred through 19 phone bank transactions in just two minutes

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While cyber criminals are on the prowl, the increasing number of online fraud has also put a question mark on the security system of banks. Vinod Malhotra, a 60-year-old citizen from Karve Nagar, who lost Rs 95,000 to an online fraud, gave a letter to the Shivajinagar police station today requesting the investigation officer, police sub inspector S B Ghorpade, to book the ICICI Bank authorities in the case. The police have so far booked Bhavin Gunwantilal Kakadia of Chira Bazaar, Mumbai. That is because Malhotras money was transferred into Kakadias account on June 2. But Malhotra has alleged that the loss occurred because ICICI Bank failed to protect his account. Malhotra received a fraudulent e-mail on April 18, carrying a logo of ICICI Bank, seeking his credit card account details. Taking it to be genuine request, the elderly citizen submitted the details. He then sent an e-mail to ICICI Bank to check if they had actually sought the information. On April 20, the bank replied that it was a fraudulent email. But on April 21, fraudsters used his credit card for booking tickets worth Rs 4,000 for Adlabs theatre, Mumbai. On April 21, the credit card was again used for online shopping worth Rs 3,083 through a US-based website. Malhotra received the customary SMS alert about this transaction. He immediately contacted the bank and submitted details of the illegal transactions. The bank replied that it was a phishing attack. The bank then blocked his credit card and issued a new one, assuring him that his account would be protected properly. But again on June 2, Rs 95,000 was transferred from his savings account. A stunned Malhotra filed a complaint with the Kothrud police on June 3. The case was transferred to Shivajinagar police station since his account was with the Shivajinagar branch of ICICI Bank. When I went to the bank with the police, a senior officer from the Operations Department said that money was transferred from my savings account through phone banking, said Malhotra. The officer said that my mobile number was changed from the system. The fraudster replaced it with an Airtel mobile number from Punjab and then transferred money to Kakadias account through 19 phone banking transactions of Rs 5,000 each in just two minutes, he added. The money was further transferred to a private business firms account in Mumbai and withdrawn by the fraudster using cheques, he added. Malhotra said that he had given his mobile phone number to ICICI Bank only for receiving SMS alerts on account details. I never used the net banking and phone banking facility. I dont even remember the passwords required for these facilities. So there was no chance of me submitting the passwords to any phishing mail or person. I believe the fraud could have been avoided if ICICI Bank had not failed to keep vigilance on its internal security system, he said. 66

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Malhotra communicated with K V Kamath, the MD and CEO of the bank, requesting him to investigate the case and repay his money. After a 30-day internal investigation, ICICI Bank replied that it was not at fault and would not compensate for the loss. So Malhotra lodged a first information report (FIR) with the police on July 12. On Tuesday, the bank replied that his case would be re-investigated. When contacted, ICICI Bank Head (Corporate Communications) Charudutta Deshpande said, ICICI Bank has a fool-proof security system. But we dont doubt the genuineness of our customers. Proper investigations will be done. Police Sub-Inspector Ghorpade said, We have dispatched a team to Mumbai for investigations. But there is not much progress because the bank has not yet given us complete information about the suspects. We have not yet booked the ICICI bank officials. But we would be interrogating bank officials if required, he said. Pune police Cyber Committee Coordinator Sudam Choure said, There have been cases in the past where secret information was leaked from banks. Usually, the bank employees on contract basis or courier companies were involved in the frauds. There is need for the banks to increase their internal security system.

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ANALYSIS

1.

Are you aware of net banking services offered by the

banks? (a) (b) Yes No

Analysis of the above diagram It is good for the banks as most of the respondents were aware of the internet banking and all the services provided under internet banking

2.

In which company bank do you have your acccount? (a) (b) (c) Axis bank Standard Chartered Bank HSBC Bank 68

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(d) (e) HDFC Bank State Bank of India

Analysis of the above diagram It was witnessed that today public sector bank State bank of India has the largest customer base but the private banks are also catching up and after State bank of India HDFC has the highest customer base .Multi-national banks are also making their presence noticeable in the Indian scenario

3.

Do you feel safe in disclosing your details on net? (a) (b) Yes No

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Analysis of the above diagram This question witnessed a fifty fifty answer from most of the respondents, few of the respondents felt safe in disclosing their details but still there were a lot people who felt unsafe in disclosing and feared their personal information may used by some other person

4.

Are you satisfy with your bank services? (a) (b) Yes No

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Analysis of the above diagram It is very interesting to see that most of the respondents are happy from the services their respective bank is providing ,the rest of the respondents felt there is a scope of improvement still they were also happy

5.

What are your main transactions you would prefer to do

by net (a) (b) (c) (d) (e) (f) (g) Money transfers Checking of your current balance Create Fixed Deposits Online Request a Demand Draft Pay Bills Order a Cheque Book Request Stop Payment on a Cheque

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Analysis of the above diagram It is interesting to see that a respondent would like to do all the transactions which one does personally on a visit to the bank. Thus, internet banking has a promising future ahead

6.

Are you aware of the benefits of net banking which are available (a) (b) Yes No

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Analysis of the above diagram It is pretty amazing to see that most of the respondents are aware of the benefits of internet banking

7.

Are you aware of the methods which can be undertaken to make any kind of fraud (a) (b) Yes No

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Analysis of the above diagram Its pretty tragic but most of the respondents are unaware of the techniques which can be taken up for any type of fraud

8.

Are you aware of all the methods which can be taken up to secure

your transaction (a) (b) Yes No

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Analysis of the above diagram Even with the increasingly knowledge of internet banking most of the respondents are unaware the softwares and methods taken up by the bank to secure each and every transaction. 9. Does your bank educate you about the internet banking services

being offered? (a) (b) Yes No

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Analysis of the above diagram Most of the respondents felt that they are not properly educated of internet banking and its benefits to them.

10.

Would you prefer using net banking instead of visiting your bank every

now and then? (a) (b) Yes No

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Analysis of the above diagram It was witnessed that most of the respondents preferred using internet banking over there conventional banking system. Thus , internet banking has a bright future ahead

11. What benefits do you see in internat banking?

(a) Convenience (b) Speed (c) Transparency (d) Time

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Analysis of the above diagram Most of the respondents felt that the transparency provided by internet banking is the highest motivating factor for an individual to use internet banking ,rest speed convenience and time are also the other motivating factors

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Research Methodology
Research is a process through which we attempt to achieve systematically and with the support of data the answer to a question, the resolution of a problem, or a greater understanding of a phenomenon. This process, which is frequently called research methodology, has eight distinct characteristics: 1. Research originates with a question or problem. 2. Research requires a clear articulation of a goal. 3. Research follows a specific plan of procedure. 4. Research usually divides the principal problem into more manageable subproblems. 5. Research is guided by the specific research problem, question, or hypothesis. 6. Research accepts certain critical assumptions. 7. Research requires the collection and interpretation of data in attempting to resolve the problem that initiated the research. 8. Research is, by its nature, cyclical; or more exactly, helical. Descriptive research is used in this project report in order to know about cash management services to clients and determining their level of satisfaction. This is the most popular type of research technique, generally used in survey research design and most useful in describing the characteristics of consumer behavior. The method used were following:

Questionnaire method Direct Interaction with the clients.

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Research Design: There are three kinds of research designs namely; Exploratory Descriptive Causative In my project, a Descriptive Research was initiated because it was generally a study which was carried out to describe the market characteristics of various airlines, and of Indian Airlines in particular, as well as the buying behaviour of travellers. Situation Analysis: - Conducting a situational analysis means analysing the company, its market, its competition and the industry in general. The situation analysis is a background investigation. It involves obtaining information about the company and its business environment by means of library, research.

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MODE OF DATA COLLECTION

Primary Data: - The sources of questionnaires and personal interviews.

Primary

data

were

Secondary data: - the sources of secondary data were internet, books and newspaper articles.

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Recommendations: Technological development has been nothing less than explosion. Banks have been harnessing such technological innovations on one hand and adapting themselves to such changes on the other hand.

The most significant event has been development of semi-conductor technology, which has resulted in spectacular expansion of automation.

Processing, storage and transmission of information is very essence of banking and financial services.

The electronic technology has bought revolutionary changes in these areas. The elimination of paper as medium for processing and storage of transactions / information has been a great event. Large volume of information can be processed, stored and retrieved very economically at terrific speed, which is not possible manually.

The space required for managing enormous volume of information has been reduced dramatically.

With the revolution in telecommunication technology, information can be made accessible from remote distance at lightning speed. The final output of information after manipulation and analysis can be printed by printer at high speed directly from computers.

Thus, the computer now has the ability to retrieve data or update files instantaneously. Subsequently with the development in telecommunication, Local Area Network (LAN)/Wide Area Network (WAN) have been established.

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Suggestions: To prevent online banking from remaining an expensive additional channel that does little to retain footloose customers, banks must act quickly. The first and most obvious step they should take is to see to it that the basic problem fueling dissatisfaction have been addressed. After repairing this basic deficiency, banks must ensure that their services is competitive. Obviously, it should include checking, savings and brokerage services, which anchor customers to the institution. In addition, to meet the challenge of online brokerage and other new entrants, banks would need to add supermarkets selling products such as mortgage, mutual funds and insurance.

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ROLE AND SIGNIFICANCE:
If computerization has today become a byword in banking, its sustained growth is wholly due to its role as an enabler in the smooth and efficient conduct of a whole range of banking practices. Computers were originally destined for a minor role in banks, primarily intended to facilitate accounting transactions. Subsequently, once its superiority was firmly established, it grew in status as a tool for management information and a host of other inventions. Although the accounting aspect is still quite important and relevant, IT has a far greater role to play to day to day banking operations, especially in decision making process. Further, facilities like ATM, Anywhere Banking, Internet as well as Mobile Banking have been increasing their presence. It has, to be conceded that Information Technology is not the end in itself, but is useful tool in the hands of the management to leverage business prospects in its favour and enhance efficiency.

Banks now have come under great pressure to reduce operational costs to safeguard their bottom lines. With banking tuning more and more customer-centric with every passing day, technology as an enabler has helped banks to launch a whole array of customer-centric products such as ATMs, Debit Cards, 24 hour Anywhere Banking. The nomenclature Banking Accounts have also yielded to more sophisticated term banking relationship. Customer Relations Management is now a very potent and potential concept. Internet - Banking also has a role to play in ensuring a fair return to shareholders, by facilitating in ensuring greater profits to the banking sector. The recent emerging trends in self-service channels, namely ATM,s, Call-centers, Internet and mobile banking would increase the use of E-banking as this offer the twin benefit i.e. convenience to the customers and reduction and cost of operation to the banks. Internet - Banking can increase the easy access of internet facilities among the masses which would raise the comfort level for transacting via the web. The popularity of internet banking likely depends upon inculcating in customers about their security and personal privacy of their money and assets.

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Conclusion: Technology innovation and fierce competition among existing banks have enable a wide array of banking products and services, being made available to retail and wholesale customer through an electronic distribution channel, collectively referred to as ebanking. The integration of e-banking application with legacy system implies an integrated risk management approach for all banking activities of a banking institution. Latest recommendations of Basle Committee recognize that each banks risk profile is different and requires a tailored risk mitigation approach appropriate for the scale of ebanking operations, the materiality of the risks present and the willingness and ability of the institution to manage their risks. This implies that a one size fits all approach to ebanking risk management issues may not be appropriate. Banks have traditionally been in the forefront of harnessing technology to improve product and efficiency. Technology is altering the relationships between banks and its internal and external customers. Technology has also eroded the entry barriers faced by many industries. With one time investment, technology has brought about superior products and channel management with a special focus on customer relationship. The incremental costs incurred for expansion and diversification are also more beneficial.

The major driving force behind the rapid spread of e-banking is its acceptance as an extremely cost effective delivery channel. But on the flipside, it is associated with risks such as reputation risk, security risk, cross-border risk and strategic risk, which are unique to e-banking. Banks need to have an effective disaster recovery plan along with comprehensive risk management tool is significant not only to the bank but also to the banking system as a whole. All these issues underscore the importance of sound supervisory policies and high level of international co-operation among the bank regulators. The Basle Committee on banking Supervision has taken the lead in this area through the creation of its Electronic Banking Group a group comprising 17 central

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banks and bank supervisory agencies in the late 1999. The main focus of this group has been to develop sound risk management practices. Internet has created plenty of opportunities for players in the banking sector. While the new entrants have the advantage of latest technology, the good-will of the established banks gives them a special opportunity to lead the online world. By merely putting existing service online wont help the banks in holding their customer close. Instead, banks must learn to capitalize their customers different online financial-services relationships. The article Will Banks Control Online Banking? focuses on how banks have to reinvent their role to remain as their customers preferred bank.

Coming home, India is on threshold of a major banking revolution with the invasion of net banking. With the concept of payment gateway coming in, banks are vying with one another for the lions share in the market. Highlighting the benefits of payment gateway over the open-loop payment mechanism, the article Banking in the Cyber worlds gives a brief report of the tug of war between the two major Indian e-banking players.

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BIBLIOGRAHY: -

O Brien James. A, Management Information System, Galgotia Publication

Muedic & Ross, Management Information System

Lucae, Management Information System

Sen, Management Information System

Indian Banking, S. Natarahan and R. Parameswaran Banking In the New Millennium, ICFAI University ICICI BANK www.icicibank.com Special Thanks to ICICI BANK MALAD BRANCH MR. THE BUSINESS LINE.

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