INTERNET BANKING

Internet Banking

CONTENTS
1. 2.

Internet Banking. Regulators.

Internet Banking: Challenges for Banks and 3. What do Computers do in Banks? 4. Credit Card Frauds. 5. Banks Control in Online Banking. 6. ICICI Bank A Case Study. 7. Recommendations. 8. Suggestions. 9. Role and Significance. 10.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

Interne t Banki ng 1.
1 In te rn et B an ki ng :a) In tr od uc ti on :-

T h e d e
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very 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

information on different products and services offered to customers and
members of public in general. It may receive and reply to customers

disseminate

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

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other products of the bank and to transact purchase and sale of securities,
etc. The above forms of Internet 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.

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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.
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

Internet Banking
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.

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
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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.

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.

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o A contractual agreement is entered into by the customer with the bank for using the Internet banking services.

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.

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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, nonenforceability 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: 10

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! Security risk arises on account of unauthorized access to a banks critical

information stores like accounting system, risk management system,

portfolio management system, etc.

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.

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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.

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
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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.

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.

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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 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: -

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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 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
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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, exposing the bank to liquidity risk, may even give rise to legal action and besides

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. B C e E B G

2. F O

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

2.1 Internet Banking in the United States

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2.4 Security Controls 2.5 Legal & Reputational Risk Management

2.1 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.

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: -

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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.

o 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.
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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.

2.3 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 E-Finance 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, etrading, retail payments systems, e-commerce, and so on.

2.4 Security Controls: 20

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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.

2.5 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.

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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 www.bis.org.

3: Banks

What do Computers do in

The different uses of Information Technology: a) Single Window System b) Any Time Banking

c) Automated Teller machine

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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

3.1 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.

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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.

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.

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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).

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
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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. vi. Enquiry about balances Printing of statement of accounts Request for cheque book and standing instructions. Transfer of funds
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vii.

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. g) Home Banking: -

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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.

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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.

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
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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.

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.

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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.

Funds transfer and payment message

Banks owned ATM/Credit Card and other application on the corporate

network iii. iv.

v.

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. vii. viii. ix. x. xi. xii. Cash Management Product 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.
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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. 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.

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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

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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
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Monitoring Deposit Risk Management Central Credit Card Clearing House Loss of Credit Cards in Transit Fraud Consciousness Physical Evidence Check the handwriting 4.1 Credi t Card Fraud s: -

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

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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: -

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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.

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
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The new card holders business transactions should be watched for some time.

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: 44

Internet Banking

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.

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: 45

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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. 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.

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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. 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.

5: - Banks Control in Online Banking

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Ris k of Ga te wa y

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

5.1 Will Banks Contr ol Onlin e Banki ng: -

Interne t Bankin g
I nt er n et B a n ki n g in I n di a: -

Online bankin g is expect ed to

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explod e 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 international transactions as Internet eliminates geographic

boundaries Shift from one-stop shopping to unbundled product purchases

Internet Banking An Overview: 4 9

Internet Banking

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.

There are other threats to banks as well. Several leading system providers

have developed bank-in-a-box solution unbranded, electronic, fullservice, virtual-bank system that can be bought, branded, and offered to

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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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Internet Banking

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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Internet Banking

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

1999-00 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.

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5.2 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.

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.

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Internet Banking
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.

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

open-loop 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.

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Internet Banking
Besides HDFC Bank and ICIC, Global Tele-System and a few other nonbank 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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Internet Banking

6: ICICI BANK: A CASE STUDY: 6.1: ICICI Bank and Sify for online distribution of retail 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 ecommerce. 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 online except for the payments that are still physical. ICICI Bank has developed an
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banking

Internet Banking
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 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 e-commerce 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
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Internet Banking
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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Internet Banking 6.2: 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.

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Internet Banking 6.3 Online fraud: 60-yr-old seeks police action against ICICI officials:Bank

Karve Nagar resident Vinod Malhotra suffered a loss of Rs 95,000, which was transferred through 19 phone bank transactions in just two minutes
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 60year-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.

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Internet Banking
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.

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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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.

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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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Internet Banking

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 e-banking. 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 e-banking 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 e-banking 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

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importance of sound supervisory policies and high level of international cooperation 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 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: 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 THE BUSINESS LINE.

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