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UNIVERSITY OF MUMBAI

BANKING INDUSTRY

Bachelor of commerce

Banking & Insurance

Semester V

( Academic Year )

2009-2010

Submitted By

NILESH .C. SONI

Roll No. 51

LAXMI CHARITABLE TRUST

SHRI CHINAI COLLEGE OF COMMERCE & ECONOMICS

OLD NAGARDAS ROAD, ANDHERI (EAST), MUMBAI - 400069

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UNIVERSITY OF MUMBAI

BANKING INDUSTRY

Bachelor of commerce

Banking & Insurance

Semester V

Submitted

In partial fulfillment of the requirements for the of Degree of

Commerce Banking & Insurance

BY

NILESH .C. SONI

Roll No. 51

LAXMI CHARITABLE TRUST

SHRI CHINAI COLLEGE OF COMMERCE & ECONOMICS

OLD NAGARDAS ROAD, ANDHERI (EAST), MUMBAI - 400069

T.Y.B.COM (BANKING & INSURANCE)

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CERTIFICATE

This is to certify that Mr Nilesh Soni of B.com Banking and InsuranceSemester V (2009-10) has successfully completed the project onBANKING INDUSTRY under the guidance of Prof. Mikita Shah

Course Co-ordinator Principal

Project Guide/ Internal Examiner

External Examiner

DECLARATION

I Mr Nilesh Soni the student of B.com Banking & Insurance Semester V

(2009-10) hereby declare that I have completed the Project onBANKING INDUSTRYThe information submitted is true and original to the best of myknowledge.

Signature StudentNilesh Soni

Roll no. 51


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Acknowledgement

Initially it was a thought,

Then it was an excitement,

Later it became a challenge,

And now it is a Success.

Entrance, hard work gradual progress and existing year that is how

have reached this level and now I stand at the aside world.

So, first of all I would like to thank our college Shri Chinai

College of Commerce & Economics and principal of the college

Mrs.Malini Johri for this continuous faith and University of Mumbai

who has given this opportunity to do this project in this curriculum. I

would also like to thank co-coordinator Prof. Nishikant Jha and my

project guide Prof. Mikita Shah for being every supportive and helped

me to complete this project. I would also like to thank our librarian for

providing with the book .So, this goes all those knowingly orunknowingly been a great support for me to complete the price of work.


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TABLE OF CONTENTS

Sr.No TOPIC Pg.No1 INTRODUCTION OF BANKS 7-8

2OVERVIEW: IT IN BANKING

9-10

3 HISTORY OF BANKING 11-12

4 BENEFITS OF ECONOMY 13-14

5 IT PERSPECTIVE 15

6 BANKING INSTITUTIONS 16-19

7 BANKING SERVICES 20-23

8 BANKING IN OTHER COUNTRIES 24-28

9 INTERNATIONAL BANKING 29-30

10 BANK NATIONALISATION

&PUBLIC SECTOR BANKING

31-32

11 WORKING CONDITIONS 33

12 EMPLOYMENT 34

13 OTHER OCCUPATIONS 35-36

14 ONLINE BANKING 37-39

15 ELECTRONIC BANKING 40-46

16 MOBILE BANKING 47-48

17 SMS BANKING 49-5018 AUTOMATED TELLER MACHINE 51-53

19 CONCLUSION 54-55

20 BIBLIOGRAPHY 56


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1.INTRODUCTION OF BANKS

Banking, the business of providing financial services to consumers

and businesses. The basic services a bank provides are checking

accounts, which can be used like money to make payments and purchase

goods and services; savings accounts and time deposits that can be used

to save money for future use; loans that consumers and businesses can

use to purchase goods and services; and basic cash management services

such as check cashing and foreign currency exchange. Four types of

banks specialize in offering these basic banking services: commercial

banks, savings and loan associations, savings banks, and credit unions.

A broader definition of a bank is any financial institution that

receives, collects, transfers, pays, exchanges, lends, invests, or

safeguards money for its customers. This broader definition includes

many other financial institutions that are not usually thought of as banks

but which nevertheless provide one or more of these broadly defined

banking services. These institutions include finance companies,

investment companies, investment banks, insurance companies, pension

funds, security brokers and dealers, mortgage companies, and real estate

investment trusts. This article, however, focuses on the narrower

definition of a bank and the services provided by banks in Canada and the

United States. (For information on other financial institutions, see

Insurance; Investment Banking; and Trust Companies.)

Banking services are extremely important in a free market

economy such as that found in Canada and the United States. Banking


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services serve two primary purposes. First, by supplying customers with

the basic mediums-of-exchange (cash, checking accounts, and credit

cards), banks play a key role in the way goods and services are

purchased. Without these familiar methods of payment, goods could only

be exchanged by barter (trading one good for another), which is

extremely time-consuming and inefficient. Second, by accepting money

deposits from savers and then lending the money to borrowers, banks

encourage the flow of money to productive use and investments.


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2.OVERVIEW : IT IN BANKING

A banker or bank is a financial institution whose primary activity is

to act as a payment agent for customers and to borrow and lend money.

This is a commercial institution that keeps money in accounts for

individuals or organizations, makes loans, exchanges currencies, provides

credit to businesses, and offers other financial services.

Entry of new banks resulted in a paradigm shift in the ways of

banking in India. The growing competition, growing expectations led to

increased awareness amongst banks on the role and importance of

technology in banking. The arrival of foreign and private banks with their

superior state-of-the-art technology-based services pushed Indian Banks

also to follow suit by going in for the latest technologies so as to meet thethreat of competition and retain their customer base. Indian banking

industry, today is in the midst of an IT revolution. Information

Technology has basically been used under two different avenues in

Banking. One is Communication and Connectivity and other is Business

Process Reengineering. Information technology enables sophisticated

product development, better market infrastructure, implementation ofreliable techniques for control of risks . In view of this, technology has

changed the contours of three major functions performed by banks, i.e.,

access to liquidity, transformation of assets and monitoring of risks. The

Software Packages for Banking Applications in India had their

beginnings in the middle of 80s, when the Banks started computerising

the branches in a limited manner. The early 90s saw the plummeting

hardware prices and advent of cheap and inexpensive but high-powered


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PCs and servers and banks went in for what was called Total Branch

Automation (TBA) Packages. The middle and late 90s witnessed the

tornado of financial reforms, deregulation, globalization etc coupled with

rapid revolution in communication technologies and evolution of novel

concept of 'convergence' of computer and communication technologies,

like Internet, mobile / cell phones etc.


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3. HISTORY OF BANKING

A) Origins of Banking

Many of todays banking services were first practiced in ancient

Lydia, Phoenicia, China, and Greece, where trade and commerce

flourished. The temples in Babylonia made loans from their treasuries as

early as 2000 bc. The temples of ancient Greece served as safe-deposit

vaults for the valuables of worshipers. The Greeks also coined money and

developed a system of credit. The Roman Empire had a highly developed

banking system, and its bankers accepted deposits of money, made loans,

and purchased mortgages. Shortly after the fall of Rome in ad 476,

banking declined in Europe. The increase of trade in 13th-century Italy

prompted the revival of banking. The moneychangers of the Italian statesdeveloped facilities for exchanging local and foreign currency. Soon

merchants demanded other services, such as lending money, and

gradually bank services were expanded.

The first bank to offer most of the basic banking functions known

today was the Bank of Barcelona in Spain. Founded by merchants in

1401, this bank held deposits, exchanged currency, and carried out

lending operations. It also is believed to have introduced the bank check.

Three other early banks, each managed by a committee of city officials,

were the Bank of Amsterdam (1609), the Bank of Venice (1587), and the

Bank of Hamburg (1619). These institutions laid the foundation for

modern banks of deposit and transaction.


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For more than 300 years, banking on the European continent was

in the hands of powerful statesmen and wealthy private bankers, such as

the Medici family in Florence and the Fuggers in Germany. During the

19th century, members of the Rothschild family became the most

influential bankers in all Europe and probably in the world. This

international banking family was founded by German financier Mayer

Amschel Rothschild (1743-1812), but it soon spread to all the major

European financial capitals.

A1) a)) Bank of North AmericaThe first important bank in the United States was the Bank of

North America, established in 1781 by the Second Continental Congress.

It was the first bank chartered by the U.S. government. Other banks

existed in the colonies prior to this, most notably the Bank of

Pennsylvania, but these banks were chartered by individual states. In

1787 the Bank of North America changed to a Pennsylvania charterfollowing controversy about the legality of a congressional charter. Other

large banks were chartered in the early 1780s by the various states,

primarily to issue paper money called bank notes. These notes

supplemented the coins then in circulation and assisted greatly in

business expansion. The banks were also permitted to accept deposits and

to make loans.

Because there were no minimum reserve requirements on deposits,

bank notes were secured by the assets of the issuing banks. Most assets

took the form of business loans. The only restraint on a banks ability to

extend loans was the publics unwillingness to accept its notes.

Acceptance of a banks notes usually was determined by the banks

record in exchanging the notes for coins when called upon to do so.


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4. BENEFITS OF ECONOMY

The deposit and loan services provided by banks benefit an economy

in many ways. First, checking accounts, because they act like cash, make

it much easier to buy goods and services and therefore help both

consumers and businesses, who would find it inconvenient to carry or

send through the mail huge amounts of cash. Second, loans enable

consumers to improve their standard of living by borrowing money to

purchase cars, houses, and other expensive consumer goods that they

otherwise could not afford. Third, loans help businesses finance plant

expansion and production of new goods, and therefore increase

employment and economic growth. Finally, since banks want loans

repaid, banks choose borrowers carefully and monitor performance of a

companys managers very closely. This helps ensure that only the best

projects get financed and that companies are run efficiently. This creates

a healthy, efficient economy. In addition, since the owners (stockholders)

of a company receiving a loan want their company to be profitable and

managed efficiently, bankers act as surrogate monitors for stockholders

who cannot be present on a regular basis to watch the companys

managers.

The checking account services offered by banks provide an additional

benefit to the economy. Because checks are widely accepted as payment

for goods and services, the checking accounts offered by banks are

functionally equivalent to real moneythat is, currency and coin. When

banks issue checking accounts they, in effect, create money without the


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federal government having to print more currency. Under government

regulations in many countries, banks must hold a reserve of paper

currency and coin equal to at least 10 percent of their checking account

deposits. In the United States banks keep these reserves in their own

vaults or on deposit with the U.S. governments central bank known as

the Federal Reserve, or the Fed. If someone wants a $10 loan, the bank

can give that person a $10 checking account with only $1 of currency in

its vault. As a result U.S. banks can create at least $10 of checking

account money for every $1 of real money (currency or coin) actually

printed by the federal government. This arrangement, which allows extra

deposit money to be created by banks, is referred to as a fractional reserve

banking system.

Because banks attract large amounts of savings from depositors, banks

can make many loans to many different customers in various amounts

and for various maturities (dates when loans are due). Banks can thereby

diversify their loans, and this in turn means that a bank is at less risk if

one of its customers fails to repay a loan. The lowering of risk makes

bank deposits safer for depositors. Safeties encourage even more bank

deposits and therefore even more loans. This flow of money from savers

through banks to the ultimate borrower is called financial intermediation

because money flows through an intermediarythat is, the bank.


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5. IT PERSPECTIVEIndian Banking Industry, Today Is In The Midst Of an It

Revolution. A Combination Of Regulatory And Competitive Reasons

Have Led To Increasing Importance Of Total Banking Automation In

The Indian Banking Industry. As On 31

st

March 2002, Out Of The Over50,000 Branches Of Public Sector Banks, Only 11,578 Branches Have

Been Fully Computerized. Lack Of Computerization Among Over 50,000

Branches Of Public Sector Banks Provides A Huge Market For Players In

It Industry.

The Indian Banking System Has Been Operating Successfully

Over The Last Two Centuries. It Was In 50s That The Government Of

India Evolved The Policy Of Using The Banking system as an instrument

of economic development and social change and, as a first step,

nationalized the then Imperial Bank of India and re-christened it as State

Bank of India.(SBI). The SBI was given the mandate of a massive branch

expansion programme and was asked to open branches in far flung

unbanked areas and assist in their development. This resulted an

explosion of sorts in volumes of transactions and posed a severe strain on

all resources. More particularly, the inter-branch reconciliation became

one area that defied manual handling. It was in this background that the

first steps towards mechanization were taken by installing what was

known as ICL 40-column punched card equipment in late 50s/earlsixties


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in the Calcutta office of the SBI for the reconciliation of inter-branch

transactions.

6. BANKING INSTITUTIONS

Banking institutions include commercial banks, savings and loan

associations (SLAs), savings banks, and credit unions. The major

differences between these types of banks involve how they are owned and

how they manage their assets and liabilities. Assets of banks are typically

cash, loans, securities (bonds, but not stocks), and property in which the

bank has invested. Liabilities are primarily the deposits received from the

banks customers. They are known as liabilities because they are still

owned by, and can be withdrawn by, the depositors of the financial

institution.

6.1) Commercial Banks

Commercial banks are so named because they specialize in loans to

commercial and industrial businesses. Commercial banks are owned by

private investors, called stockholders, or by companies called bank

holding companies. The vast majority of commercial banks are owned by

bank holding companies. (A holding company is a corporation that exists

only to hold shares in another company.) In 1984, 62 percent of banks

were owned by holding companies. In 2000, 76 percent of banks were

owned by holding companies. The bank holding company form of

ownership became increasingly attractive for several reasons. First,


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holding companies could engage in activities not permitted in the bank

itselffor example, offering investment advice, underwriting securities,

and engaging in other investment banking activities. But these activities

were permitted in the bank if the holding company owned separate

companies that offer these services. Using the holding company form of

organization, bankers could then diversify their product lines and offer

services requested by their customers and provided by their European

counterparts. Second, many states had laws that restricted a bank from

opening branches to within a certain number of miles from the banks

main branch. By setting up a holding company, a banking firm could

locate new banks around the state and therefore put branches in locations

not previously available.

Commercial banks are for profit organizations. Their objective is

to make a profit. The profits either can be paid out to bank stockholders

or to the holding company in the form of dividends, or the profits can be

retained to build capital (net worth). Commercial banks traditionally have

the broadest variety of assets and liabilities. Their historical specialties

have been commercial lending to businesses on the asset side and

checking accounts for businesses and individuals on the liability side.

However, commercial banks also make consumer loans for automobiles

and other consumer goods as well as real estate (mortgage) loans for both

consumers and businesses.

6.2) Savings and Loan Associations

Savings and loan associations (SLAs) are usually owned by

stockholders, but they can be owned by depositors as well. (If owned by


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depositors, they are called mutuals.) If stock owned, the goal is to earn

a profit that can either be paid out as a dividend or retained to increase

capital. If owned by depositors, the objective is to earn a profit that can

be used either to build capital or lower future loan rates or to raise future

deposit rates for the depositor-owners. Until the early 1980s, regulations

restricted SLAs to investing in real estate mortgage loans and accepting

savings accounts and time deposits (savings accounts that exist for a

specified period of time). As a result, historically SLAs have specialized

in savings deposits and mortgage lending.

6.3) Savings Banks

Traditional savings banks, also known as mutual savings banks

(MSBs), have no stockholders, and their assets are administered for the

sole benefit of depositors. Earnings are paid to depositors after expenses

are met and reserves are set aside to insure the deposits. During the 1980s

savings banks were in a great state of flux, and many began to provide the

same kinds of services as commercial banks.

Since 1982 savings banks have been permitted to convert to SLAs.

SLAs also may convert to savings banks. Both SLAs and MSBs can now

offer a full range of financial services, including multiple savings

instruments; checking accounts; consumer, commercial, and agricultural

loans; and trust and credit card services. See also Savings Institutions.

6.4) Credit Unions

Credit unions are not-for-profit, cooperative organizations that are

owned by their members. Their goal is to minimize the rate members pay

on loans and maximize the rate paid to members on deposits. Whatever

surplus is earned is retained to build the capital of the credit union.


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Members must share a common bond. That bond is typically employment

(members all work for the same employers) or geography (members all

live in the same geographic area). Historically, credit unions specialized

in providing automobile and other personal loans and savings deposits for

their members. However, more recently credit unions have offered

mortgage loans, credit card loans, and some commercial loans in addition

to checking accounts and time deposits.

Credit unions, SLAs, and savings banks help encourage thriftiness

by paying interest to consumers who put their money in savings deposits.

Consequently, credit unions, SLAs, and savings banks are often referred

to as thrift institutions.


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7. BANKING SERVICES

Commercial banks and thrifts offer various services to their

customers. These services fall into three major categories: deposits, loans,

and cash management services.

7.1) Deposits

There are four major types of deposits: demand deposits, savings

deposits, hybrid checking/savings deposits, and time deposits. What

distinguishes one type from another are the conditions under which the

deposited funds may be withdrawn. A demand deposit is a deposit that

can be withdrawn on demand at any time and in any amount up to the full

amount of the deposit. The most common example of a demand deposit is

a checking account. Money orders and travelers checks are also

technically demand deposits. Checking accounts are also considered

transaction accounts in that payments can be made to third partiesthat

is, to someone other than the depositor or the bank itselfvia check,

telephone, or other authorized transfer instruction. Checking accounts are

popular because as demand deposits they provide perfect liquidity

(immediate access to cash) and as transaction accounts they can be

transferred to a third party as payment for goods or services. As such,

they function like money.


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Savings accounts pay interest to the depositor, but have no specific

maturity date on which the funds need to be withdrawn or reinvested.

Any amount can be withdrawn from a savings account up to the amount

deposited. Under normal circumstances, customers can withdraw their

money from a savings account simply by presenting their passbook or

by using their automated teller machine (ATM) card. Savings accounts

are highly liquid. They are different from demand deposits, however,

because depositors cannot write checks against regular savings accounts.

Savings accounts cannot be used directly as money to purchase goods or

services.

7.2) Loans

Banks and thrifts make three types of loans: commercial and

industrial loans, consumer loans, and mortgage loans. Commercial and

industrial loans are loans to businesses or industrial firms. These are

primarily short-term working capital loans (loans to finance the purchaseof material or labor) or transaction or longer-term loans (loans to

purchase machines and equipment). Most commercial banks offer a

variable rate on these loans, which means that the interest rate can change

over the course of the loan. Whether a bank will make a loan or not

depends on the credit and loan history of the borrower, the borrowers

ability to make scheduled loan payments, the amount of capital the

borrower has invested in the business, the condition of the economy, and

the value of the collateral the borrower pledges to give the bank if the

loan payments are not made.

Consumer loans are loans for consumers to purchase goods or

services. There are two types of consumer loans: closed-end credit and

open-end credit. Closed-end credit loans are loans for a fixed amount of


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money, for a fixed period of time (usually not more than five years), and

for a fixed purpose (for example, to buy a car).

Most closed-end loans are called installment loans because theymust be repaid in equal monthly installments. The item purchased by the

consumer serves as collateral for the loan. For example, if the consumer

fails to make payments on an automobile, the bank can recoup the cost of

its loan by taking ownership of the car.

Open-end credit loans are loans for variable amounts of money up

to a set limit. Unlike closed-end loans, open-end credit does not require a

borrower to specify the purpose of the loan and the lender cannot

foreclose on the loan. Credit cards are an example of open-end credit.

Most open-end loans carry fixed interest ratesthat is, the rate does not

vary over the term of the loan. Open-end loans require no collateral, but

interest rates or other penalties or fees may be chargedfor example, if

credit card charges are not paid in full, interest is charged, or if payment

is late, a fee is charged to the borrower. Open-end credit interest rates

usually exceed closed-end rates because open-end loans are not backed

by collateral.

Mortgage loans or real estate loans are loans used to purchase land

or buildings such as houses or factories. These are typically long-term

loans and the interest rate charged can be either a variable or a fixed rate

for the term of the loan, which often ranges from 15 to 30 years. The land

and buildings purchased serve as the collateral for the loan.

7.3) Cash Management and Other Services

Although deposits and loans are the basic banking services

provided by banks and thrifts, these institutions provide a wide variety of


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other services to customers. For consumers, these include check cashing,

foreign currency exchange, safety deposit boxes in which consumers can

store valuables, electronic wire transfer through which consumers can

transfer money and securities from one financial institution to another,

and credit life insurance which automatically pays off loans in the event

of the borrowers death or disability.

In recent years, banks have made their services increasingly

convenient through electronic banking. Electronic banking uses

computers to carry out transfers of money. For example, automated teller

machines (ATMs) enable bank customers to withdraw money from their

checking or savings accounts by inserting an ATM card and a private

electronic code into an ATM. The ATMs enable bank customers to

access their money 24 hours a day and seven days a week wherever

ATMs are located, including in foreign countries. Banks also offer debit

cards that directly withdraw funds from a customers account for the

amount of a purchase, much like writing a check. Banks also use

electronic transfers to deposit payroll checks directly into a customers

account and to automatically pay a customers bills when they are due.

Many banks also use the Internet to enable customers to pay bills, move

money between accounts, and perform other banking functions.

For businesses, commercial banks also provide specialized cashmanagement and credit enhancement services. Cash management

services are designed to allow businesses to make efficient use of their

cash. For example, under normal circumstances a business would sell

its product to a customer and send the customer a bill. The customer

would then send a check to the business, and the business would then

deposit the check in the bank.


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8. BANKING IN OTHER COUNTRIES

8.1)Canada

Because of Canadas close historical relationship with the United

States and the United Kingdom, development of the Canadian banking

system has been influenced by both countries. Unlike the United States,

however, Canada always had a branch-banking system. Until 1994 banks

in the United States were restricted to opening branches only in the city

or state where they were incorporated. One of the first laws passed by

Canadas Parliament after confederation, in 1867, allowed any Canadian-

chartered bank to operate in any part of the dominion. This law

encouraged the growth of Canadas branch-banking system, in which a

few large banks operate all the countrys banking offices. In 2000 there

were only 13 domestic banks in Canada, and the six largest controlled

more than 90 percent of all bank assets in Canada. The remaining seven

domestic banks accounted for about 2 percent of bank assets, and foreign

banks accounted for about 7 percent of bank assets.

The central bank of Canada is the Bank of Canada. Created in

1935, it is owned by the Ministry of Finance and is responsible for

Canadian monetary policy. Unlike the U.S. Federal Reserve, the Bank of

Canada is also responsible for issuing and managing the national debt. In

the United States, this function is performed by the Department of the


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Treasury. The primary policy group of the Bank of Canada is called the

Governing Council

8.2) The European Continent

Until recently, European banking was very different from banking

in the United States. European banks were frequently owned by the

government and could engage in activities that were prohibited to banks

in the United States. Most of these prohibited activities involved

investment banking such as security underwriting (selling a firms stock

or bonds at a guaranteed price) or security placement (finding buyers for

a firms stock or bonds). These services are important to businesses and

being able to provide them gave European banks an advantage over U.S.

banks. These differences are rapidly disappearing. Most European banks

are now privately owned and recent U.S. legislation has allowed U.S.

banks to engage in investment-banking activities through the bank

holding company form of organization.

Two differences remain between U.S. and European banking. The

first is that many European banks can own nonbank commercial and

industrial businesses. Such ownership is still prohibited, for the most part,

for U.S. banks and holding companies. As a result, banks in Europe tend

to be more business oriented and much more involved with corporategovernance (corporate decision-making) than their U.S. counterparts.

This also explains why most European companies rely more heavily on

bank loans to finance their activities than do U.S. companies which rely

more on funds raised by selling stocks and bonds in financial markets.

The second difference is that banking is much more concentrated

in Europe. In other words, banking markets are dominated by a few large


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banks whereas in the United States many banks compete for a customers

deposits and loans. This stems from the fact that European countries have

had very liberal branching laws allowing banks to have extensive deposit-

gathering networks in their home country and also from the fact that most

European countries are not as concerned about monopolies as are U.S.

regulators. It is not clear how long this difference will last, however, as

legislation in the United States in 1994 allowed banks to establish banks

and branches in other states.

8.3)UnitedKingdom

Since the 17th century Britain has been known for its prominence

in banking. The capital, London, still remains a major financial center,

and virtually all the worlds leading commercial banks are represented

there.

Aside from the central Bank of England, which was incorporated,

early English banks were privately owned rather than stock-issuing firms.

Bank failures were common; so in the early 19th century, stock-issuing

banks, with a larger capital base, were encouraged as a means of

stabilizing the industry. By 1833 these corporate banks were permitted to

accept and transfer deposits in London, although they were prohibited

from issuing money, a prerogative monopolized by the Bank of England.

Corporate banking flourished after legislation in 1858 approved limited

liability for stock-issuing banks. The banking system, however, failed to

preserve the large number of institutions typical of U.S. banking. At the

turn of the 20th century, a wave of bank mergers reduced both the

number of private and stock-issuing banks.


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The present structure of British commercial banking was

substantially in place by the 1930s, with the Bank of England, then

privately owned, at the apex, and 11 London clearing banks ranked below

the Bank of England. Clearing banks sort and then forward checks to the

bank from which they were originally drawn for payment. Two changes

have occurred since then: The Bank of England was nationalized (became

government-owned) in 1946 by the postwar Labour government; and in

1968 a merger among the largest five clearing banks left the industry in

the hands of four: Barclays, Lloyds (now Lloyds TSB Group), Midland

(now part of HSBC Holdings), and National Westminster (taken over by

the Royal Bank of Scotland in 2000).

The larger clearing banks, with their national branch networks, dominate

British banking. They are the key links in the transfer of business

payments through the checking system, as well as the primary source of

short-term business finance. Moreover, through their ownership and

control over subsidiaries, the big British banks influence other financial

markets such as consumer and housing finance and merchant banking.

The dominance of the clearing banks was challenged in recent years by

the rise of parallel markets, encompassing financial activities by

smaller banking houses, building societies (banking institutions similar to

SLAs in the United States), and other financial concerns, as well as local

government authorities.

8.4) Developing Countries

The type of national economic system that characterizes

developing countries plays a crucial role in determining the nature of the

banking system in those countries. In capitalist countries a system of

private enterprise in banking prevails. In state-managed economies, banks


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have been nationalized. Other countries have patterned themselves after

the social-democracies of Europe; in Egypt, Peru, and Kenya, for

instance, government-owned and privately owned banks coexist. In many

countries, the banking system developed under colonialism, with banks

owned by institutions in the parent country. In some, such as Zambia and

Cameroon, this heritage continued, although modified, after

decolonization. In other nations, such as Nigeria and Saudi Arabia, the

rise of nationalism led to mandates for majority ownership by the

indigenous population.

Banks in developing countries are similar to their counterparts in

developed nations. Commercial banks accept and transfer deposits and

are active lenders, especially for short-term purposes. Other financial

intermediaries, particularly government-owned development banks,

arrange long-term loans. Banks are often used to finance government

expenditures. The banking system may also play a major role in financing

exports.


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9. INTERNATIONAL BANKINGThe expansion of trade in recent decades has been paralleled by the

growth of multinational banking. Banks have historically financed

international trade, but a notable recent development has been the

expansion of branches and subsidiaries that are physically located abroad,

as well as the increased volume of loans to foreign borrowers. In 1960

only eight U.S. banks had foreign offices with a total of 131 branches. By

1998 about 82 U.S. banks had about 935 foreign branches.

Similarly, the number of foreign banks with offices in the United

States has increased dramatically. In 1975, 79 foreign banks were

chartered in the United States, accounting for 5 percent of U.S. bank

assets. In 1998, 243 foreign banks had U.S. offices, accounting for 23

percent of U.S. bank assets. Most of these banks are business-oriented

banks, but some have also engaged in retail banking. In 1978 the U.S.

Congress passed the International Banking Act, which imposed

constraints on the activities of foreign banks in the United States.

As banks make more international loans, many experts believe that

there must be greater international cooperation regarding standards and

regulations to lower the risk of bank failure and international financial

collapse. In 1988 the Basel Committee on Banking Supervision, an

international organization of bank regulators based in Basel, Switzerland,took the first steps in this direction with the Basel Capital Accord. The


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accord established a global standard for assessing the financial soundness

of banks and required banks to maintain a minimum ratio of capital to

risky assets. Many banking experts believe this accord became the

primary tool for strengthening the safety of international banking. The

accord was eventually adopted by 100 countries. In 2001 the Basel

Committee recommended a new set of regulations known as the New

BaselCapitalAccord. .


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10. BANK NATIONALISATION &PUBLICSECTOR BANKING

Organized banking in India is more than two centuries old. Till

1935 all the banks were in private sector and were set up by individuals

and/or industrial houses which collected deposits from individuals and

used them for their own purposes. In the absence of any regulatory

framework, these private owners of banks were at liberty to use the funds

in any manner, they deemed appropriate and resultantly, the bank failures

were frequent.

Move towards State ownership of banks started with the

nationalization of RBI and passing of Banking Companies Act 1949. On

the recommendations of All India Rural Credit Survey Committee, SBI

Act was enacted in 1955 and Imperial Bank of India was transferred to

SBI. Similarly, the conversion of 8 State-owned banks (State Bank of

Bikaner and State Bank of Jaipur were two separate banks earlier and

merged) into subsidiaries (now associates) of SBI during 1959 took place.

During 1968 the scheme of social control was introduced, which was

closely followed by nationalization of 14 major banks in 1969 and

Keeping in view the objectives of nationalization, PSBs undertook

expansion of reach and services. Resultantly the number of branches

increased 7 fold (from 8321 to more than 60000 out of which 58% in

rural areas) and no. of people served per branch office came down from


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65000 in 1969 to 10000. Much of this expansion has taken place in rural

and semi-urban areas.

The expansion is significant in terms of geographical distribution.

States neglected by private banks before 1969 have a vast network of

public sector banks. The PSBs including RRBs, account for 93% of bank

offices and 87% of banking system deposits.

Computerization in Public Sector Banks (As on March 31, 2008)i) Branches already Fully Computerized 48.5%

ii) Branches Under Core Banking Solutions 28.9%

iii) Fully Computerized Branches (i + ii) 77.5%

iv) Partially Computerized Branches 18.2%

v) Non Computerized Branches 4.3%

Other than branches under Core Banking Solutions.


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11. WORKING CONDITIONS

Hours:

The average workweek for nonsupervisory workers in depository

credit intermediation was 35.7 hours in 2006. Supervisory and managerial

employees, however, usually work substantially longer hours. About 1

out of 10 employees in 2006, mostly tellers, worked part-time.

Employees in a typical branch work weekdays, some evenings if

the bank is open late, and Saturday mornings. However, banks are

increasingly expanding the hours that their branches are open and

opening branches in nontraditional locationsAdministrative support

employees may work in large processing facilities, in the banks

headquarters, or in other administrative offices. Most support staff work a

standard 40-hour week; some may work overtime. Those support staff

located in the processing facilities may work evening shifts.

Work environment. Branch office jobs, particularly teller positions,

require continual communication with customers, repetitive tasks, and a

high level of attention to security. Tellers also work for long periods in a

confined space. Commercial and mortgage loan officers often work out of

the office, visiting clients, checking loan applications, and soliciting new


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business. Loan officers may travel to meet out-of-town clients, or work

evenings if that is the only time at which a client can meet

12. EMPLOYMENTThe banking industry employed about 1.8 million wage and salary

workers in 2008. About 7 out of 10 jobs were in commercial banks; the

remainders were concentrated in savings institutions and credit unions

(table).loyees in the private sector.

Table: Percent distribution of employment and establishments in banking by

detailed industry sector, 2008

Industry segment Employment Establishments

Total 100.00 100.00

Monetary authorities - central bank 1.2 0.3

Depository credit intermediation 98.8 99.7

Commercial banking 72.5 69.7Savings institutions 13.1 14.7

Credit unions 12.1 14.2

Other depository credit

intermediation

1.2 1.1


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In 2008, about 84 percent of establishments in banking employed

fewer than 20 workers (chart 1). However, these small establishments,

mostly bank branch offices, employed 36 percent of all employees. About

64 percent of the jobs were in establishments with 20 or more workers.

Banks are found everywhere in the United States, but most bank

employees work in heavily populated States such as New York,

California, Illinois, Pennsylvania, and Texas.

13. OTHER OCCUPATIONS

Occupations used widely by banks to maintain financial records

and ensure the banks compliance with Federal and State regulations are

accountants and auditors, and lawyers. In addition, computer specialists

maintain and upgrade the banks computer systems and implement the

banks entry into the world of electronic banking and paperless

transactions.

Table: Employment of wage and salary workers in banking by occupation,

2006 and projected change, 2008-2016. (Employment in thousands)

PARTICULARS OCCUPATIONEMPLOYMENT,2006

PERCENTAGE (%)

CHANGE 2008-16

NUMBER

PERCENTAG

E

All occupations 1,825 100.0 4.0

Management, business,and financial occupations

449 24.6 5.4

General and operationsmanagers

34 1.8 -8.4

Marketing and salesmanagers

11 0.6 1.9

Financial managers 73 4.0 1.9


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Human resources,training, and laborrelations specialists

15 0.8 5.3

Management analysts 8 0.5 1.4

Accountants and auditors 27 1.5 1.7Credit analysts 15 0.8 -8.3

Financial analysts 18 1.0 11.4

Personal financialadvisors

24 1.3 22.3

Loan officers 133 7.3 12.1

Professional and relatedoccupations

72 4.0 6.9

Computer specialists 56 3.0 8.8

Sales and relatedoccupations

82 4.5 11.8

Securities, commodities,and financial servicessales agents

50 2.7 17.2

Office and administrativesupport occupations

1,202 65.9 2.9

First-linesupervisors/managers of

office and administrativesupport workers

111 6.1 -5.2

Bookkeeping, accounting,and auditing clerks

63 3.5 1.7

Tellers 546 29.9 12.1

Brokerage clerks 9 0.5 -1.0

Customer servicerepresentatives

106 5.8 12.0

New accounts clerks 73 4.0 -18.4

Receptionists andinformation clerks 9 0.5 1.5

Couriers and messengers 6 0.3 -8.3

Executive secretaries andadministrative assistants

36 2.0 1.9

Secretaries, except legal,medical, and executive

15 0.8 -9.6

Data entry keyers 8 0.5 -18.6

Office clerks, general 40 2.2 0.2

Office machine operators,except computer 12 0.6 -14.9


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14. ONLINE BANKING

14.1) INTRODUCTION

The Internet banking is changing the banking industry and is

having the major effects on banking relationships. Even the Morgan

Stanley Dean Witter Internet research emphasised that Web is moreimportant for retail financial services than for many other industries.

Internet banking involves use of Internet for delivery of banking products

& services. It falls into four main categories, from Level 1 - minimum

functionality sites that offer only access to deposit account data - to Level

4 sites - highly sophisticated offerings enabling integrated sales of

additional products and access to other financial services- such as

investment and insurance. In other words a successful Internet banking

solution offers

. Exceptional rates on Savings, CDs, and IRAs

Checking with no monthly fee, free bill payment and rebates on ATM

surcharges

Credit cards with low rates


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Easy online applications for all accounts, including personal loans and

mortgages

24 hour account access

Quality customer service with personal attention

14.2) INDIAN BANKS ON WEB

The banking industry in India is facing unprecedented competition

from non-traditional banking institutions, which now offer banking and

financial services over the Internet. Indian banks are going for the retail

banking in a big way. However, much is still to be achieved. This studywhich was conducted by students of IIML shows some interesting facts:

Throughout the country, the Internet Banking is in the nascent stage of

development (only 50 banks are offering varied kind of Internet banking

services).

In general, these Internet sites offer only the most basic services. 55%

are so called 'entry level' sites, offering little more than company

information and basic marketing materials. Only 8% offer 'advanced

transactions' such as online funds transfer, transactions & cash

management services.

Foreign & Private banks are much advanced in terms of the number of

sites & their level of development.

Investing through Internet banking

Opening a fixed deposit account cannot get easier than this. You

can now open an FD online through funds transfer. Online banking can

also be a great friend for lazy investors.

Now investors with interlinked demat account and bank account

can easily trade in the stock market and the amount will be automatically


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debited from their respective bank accounts and the shares will be

credited in their demat account.Moreover, some banks even give you the

facility to purchase mutual funds directly from the online banking system.

MAIN CONCERNS IN INTERNET BANKING

In a survey conducted by the Online Banking Association, member

institutions rated security as the most important issue of online banking.

There is a dual requirement to protect customers' privacy and protect

against fraud. Banking Securely: Online Banking via the World Wide

Web provides an overview of Internet commerce and how one companyhandles secure banking for its financial institution clients and their

customers. Some basic information on the transmission of confidential

data is presented in Security and Encryption on the Web. PC Magazine

Online also offers a primer: How Encryption Works.

Expedited Online Bill Payments: A New Revenue Stream for

Financial Institutions

Online bill payment has grown to become an integral part of

financial services institutions Internet banking offerings. New research

from TowerGroup finds that expediting payments by speeding the posting

time of bill payment transactions can create a new revenue stream for

financial institutions via instituting an online bill payment user per

transaction fee to guarantee same-day posting Tower Group estimates

that nearly 24 million consumers are currently active users of online

banking bill payment in the U.S., and that the volume of online bill

payments will reach 3.87 billion transactions by 2012.


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15. ELECTRONIC BANKING

For many consumers, electronic banking means 24-hour access to

cash through an automated teller machine (ATM) or Direct Deposit of

paychecks into checking or savings accounts. But electronic banking now

involves many different types of transactions.

Electronic banking, also known as electronic fund transfer (EFT),

uses computer and electronic technology as a substitute for checks and

other paper transactions. EFTs are initiated through devices like cards or

codes that let you, or those you authorize, access your account. Many

financial institutions use ATM or debit cards and Personal IdentificationNumbers (PINs) The federal Electronic Fund Transfer Act (EFT Act)

covers some electronic consumer transactions.

15.1) Electronic Fund Transfers

EFT offers several services that consumers may find practical:

Automated Teller Machines or 24-hour Tellers are electronic

terminals that let you bank almost any time. To withdraw cash,


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make deposits, or transfer funds between accounts, you generally

insert an ATM card and enter your PIN. Some financial institutions

and ATM owners charge a fee, particularly to consumers who

dont have accounts with them or on transactions at remote

locations. Generally, ATMs must tell you they charge a fee and its

amount on or at the terminal screen before you complete the

transaction. Check the rules of your institution and ATMs you use

to find out when or whether a fee is charged.

Direct Deposit lets you authorize specific deposits, such as

paychecks and Social Security checks, to your account on a regular

basis. You also may pre-authorize direct withdrawals so that

recurring bills, such as insurance premiums, mortgages, and utility

bills, are paid automatically. Be cautious before you pre-authorize

direct withdrawals to pay sellers or companies with whom you are

unfamiliar; funds from your bank account could be withdrawn

fraudulently. Pay-by-Phone Systems let you call your financial institution with

instructions to pay certain bills or to transfer funds between

accounts. You must have an agreement with the institution to make

such transfers.

Personal Computer Banking lets you handle many banking

transactions via your personal computer. For instance, you may useyour computer to view your account balance, request transfers

between accounts, and pay bills electronically.

Debit Card Purchase Transactions let you make purchases with a

debit card, which also may be your ATM card. This could occur at

a store or business, on the Internet or online, or by phone. The

process is similar to using a credit card, with some important

exceptions. While the process is fast and easy, a debit card


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purchase transfers money fairly quickly from your bank

account to the companys account. So its important that you have

funds in your account to cover your purchase. This means you need

to keep accurate records of the dates and amounts of your debit

card purchases and ATM withdrawals in addition to any checks

you write. Also be sure you know the store or business before you

provide your debit card information, to avoid the possible loss of

funds through fraud. Your liability for unauthorized use, and your

rights for error resolution, may differ with a debit card.

15.2) Disclosures

To understand your legal rights and responsibilities regarding your

EFTs, read the documents you receive from the financial institution that

issued your access device. That is, a card, code or other means of

accessing your account to initiate electronic fund transfers. Although the

means varies by institution, it often involves a card and/or a PIN. No one

should know your PIN except you and select employees of the financial

institution. You also should read the documents you receive for your

bank account, which may contain more information about EFTs.

15.3) Errors

You have 60 days from the date a periodic statement containing a

problem or error was sent to you to notify your financial institution. The

best way to protect yourself if an error occurs including erroneous

charges or withdrawals from an account, or for a lost or stolen ATM or

debit card is to notify the financial institution by certified letter, return

receipt requested, so you can prove that the institution received your

letter. Keep a copy of the letter for your records.


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If you fail to notify the institution of the error within 60 days, you

may have little recourse. Under federal law, the institution has no

obligation to conduct an investigation if youve missed the 60-day

deadline. Once youve notified the financial institution about an error on

your statement, it has 10 business days to investigate. The institution

must tell you the results of its investigation within three business days

after completing it and must correct an error within one business day after

determining that the error has occurred. At the end of the investigation, if

no error has been found, the institution may take the money back if it

sends you a written explanation.

15.4) Lost or Stolen ATM or Debit Cards

If your credit card is lost or stolen, you cant lose more than $50. If

someone uses your ATM or debit card without your permission, you can

lose much more. If you report an ATM or debit card missing to the card

issuer before its used without your permission, you cant be heldresponsible for any unauthorized withdrawals.If unauthorized use occurs

before you report it, the amount you can be held responsible for depends

upon how quickly you report the loss to the card issuer.

If you report the loss within two business days after you realize

your card is missing, you wont be responsible for more than $50

for unauthorized use.

If you fail to report the loss within two business days after you

realize the card is missing, but do report its loss within 60 days

after your statement is mailed to you, you could lose as much as

$500 because of an unauthorized transfer.

If you fail to report an unauthorized transfer within 60 days after

your statement is mailed to you, you risk unlimited loss. That


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means you could lose all the money in your account and the unused

portion of your maximum line of credit established for overdrafts.

If you failed to notify the institution within the time periods allowedbecause of an extenuating circumstance, such as lengthy travel or illness,

the issuer must reasonably extend the notification period. In addition, if

state law or your contract imposes lower liability limits, those lower

limits apply instead of the limits in the federal EFT Act.

15.5) Limited Stop-Payment Privileges

When you use an electronic fund transfer, the EFT Act does not

give you the right to stop payment. If your purchase is defective or your

order is not delivered, its as if you paid cash. That is, its up to you to

resolve the problem with the seller and get your money back.There is one

situation, however, when you can stop payment. If youve arranged for

regular payments out of your account to third parties, such as insurance

companies, you can stop payment if you notify your institution at least

three business days before the scheduled transfer. The notice may be oral

or written, but the institution may require a written follow-up within 14

days of the oral notice. If you fail to provide the written follow-up, the

institutions responsibility to stop payment ends.

If this feature is important to you, you may want to shop around to be

sure youre getting the best stop-payment terms available.

15.6) Suggestions

If you decide to use EFT, keep these tips in mind:

Take care of your ATM or debit card. Know where it is at all

times; if you lose it, report it as soon as possible.


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Choose a PIN for your ATM or debit card thats different from

your address, telephone number, Social Security number, or

birthdate. This will make it more difficult for a thief to use your

card.

Keep and compare your receipts for all types of EFT transactions

with your periodic statements. That way, you can find errors or

unauthorized transfers and report them.

Make sure you know and trust a merchant or other company before

you share any bank account information or pre-authorize debits to

your account. Be aware that some merchants or companies may use

electronic processing of your check information when you provide

a check for payment.

Review your monthly statements promptly and carefully. Contact your

bank or other financial institution immediately if you find unauthorized

transactions and errors

15.7) Bill payment service

Each bank has tie-ups with various utility companies, service

providers and insurance companies, across the country. You can facilitate

payment of electricity and telephone bills, mobile phone, credit card and

insurance premium bills.To pay your bills, all you need to do is complete

a simple one-time registration for each biller. You can also set up

standing instructions online to pay your recurring bills, automatically.

One-time standing instruction will ensure that you don't miss out on your

bill payments due to lack of time. Most interestingly, the bank does not

charge customers for online bill payment.


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15.8) Credit card customers

Credit card users have a lot in store. With Internet banking,

customers can not only pay their credit card bills online but also get aloan on their cards. Not just this, they can also apply for an additional

card, request a credit line increase and God forbid if you lose your credit

card, you can report lost card online.

15.9) Railway pass

This is something that would interest all theaam janta. Indian

Railways has tied up with ICICI bank and you can now make your

railway pass for local trains online. The pass will be delivered to you at

your doorstep. But the facility is limited to Mumbai, Thane, Nashik, Surat

and Pune. The bank would just charge Rs 10 + 12.24 per cent of service

tax.

15.10) Recharging your prepaid phone

Now you no longer need to rush to the vendor to recharge your

prepaid phone, every time your talk time runs out. Just top-up your

prepaid mobile cards by logging in to Internet banking. By just selecting

your operator's name, entering your mobile number and the amount for

recharge, your phone is again back in action within few minutes.

Shopping at your fingertips

Leading banks have tie ups with various shopping websites. With a range

of all kind of products, you can shop online and the payment is also made

conveniently through your account. You can also buy railway and air

tickets through Internet banking.


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16.MOBILE BANKING

Mobile Banking is a term used for performing balance checks,

account transactions, payments etc. via a mobile device such as a mobile

phone. Mobile banking today is most often performed via SMS or the

Mobile Internet but can also use special programs called clients

downloaded to the mobile device.

In one academic model, mobile banking is defined as:

"Mobile Banking refers to provision and availment of banking-

and financial services with the help of mobile telecommunication

devices. The scope of offered services may include facilities to

conduct bank and stock market transactions, to administer accounts

and to access customized information."

16.1) Mobile Banking Services

Mobile banking can offer services such as the following:

16.2.1)) Account Information

1. Mini-statements and checking of account history

2. Alerts on account activity or passing of set thresholds


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3. Monitoring of term deposits

4. Access to loan statements

5. Access to card statements

6. Mutual funds / equity statements

7. Insurance policy management

8. Pension plan management

9. Status on cheque, stop payment on cheque

16.3)) Payments & Transfers

1. Domestic and international fund transfers

2. Micro-payment handling

3. Mobile recharging

4. Commercial payment processing

5. Bill payment processing

6. Peer to peer payments


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17. SMS BANKING

SMS Banking is a technology-enabled service offering from banks

to its customers, permitting them to operate selected banking services

over their mobile phones using SMS messaging.

17.1) Push and pull messages

SMS banking services are operated using both push and pull messages.

Push messages are those that the bank chooses to send out to a customer's

mobile phone, without the customer initiating a request for the

information. Typically push messages could be either Mobile marketing

messages or messages alerting an event which happens in the customer's

bank account, such as a large withdrawal of funds from the ATM or a

large payment using the customer's credit card, etc. Pull messages are

those that are initiated by the customer, using a mobile phone, for

obtaining information or performing a transaction in the bank account.

Examples of pull messages for information include an account balance

enquiry, or requests for current information like currency exchange rates

and deposit interest rates, as published and updated by the bank.


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17.1.1)) Typical push and pull services offered under SMS

banking

Depending on the selected extent of SMS banking transactions offered bythe bank, a customer can be authorized to carry out either non-financial

transactions, or both and financial and non-financial transactions. SMS

banking solutions offer customers a range of functionality, classified by

push and pull services as outlined below.

Typical push services would include:

Periodic account balance reporting (say at the end of month);

Reporting of salary and other credits to the bank account;

Successful payment of a cheque issued on the account;

Large value withdrawals on an account;

Large value withdrawals on the ATM or EFTPOS on a debit card;

Large value payment on a credit card or out of country activity on a

credit card.

One-time password and authentication

Typical pull services would include:

Account balance enquiry;

Mini statement request;

Electronic bill payment;

Transfers between customer's own accounts, like moving money

from a savings account to a current account to fund a cheque;

Stop payment instruction on a cheque;

Requesting for an ATM card or credit card to be suspended;

De-activating a credit or debit card when it is lost or the PIN is

known to be compromised;

Foreign currency exchange rates enquiry;


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Fixed deposit interest rates enquiry.

18. AUTOMATED TELLER MACHINE

18.1) INTRODUCTION

ATM, device used by bank customers to process account

transactions. Typically, a user inserts into the ATM a special plastic card

that is encoded with information on a magnetic strip Modems were

first used with teletype machines to send telegrams and cablegrams.. To

prevent unauthorized transactions, a personal identification number (PIN)

must also be entered by the user using a keypad. The computer then

permits the ATM to complete the transaction; most machines can

dispense cash, accept deposits, transfer funds, and provide information on

account balances. Banks have formed cooperative, nationwide networks

so that a customer of one bank can use an ATM of another for cash

access; by 1997 there were more than 160,000 ATMs across the United


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States. Some ATMs will also accept credit card, device used to obtain

consumer credit at the time of purchasing an article or service. The first

ATM was installed in 1969 by Chemical Bank at its branch in Rockville

Centre, N.Y. A customer using a coded card was dispensed a package

containing a set sum of money.

18.2) Growth of ATM

The number of ATMs installed in India grew by almost 28%, from21,000 in March 2006, to more than 27,000 by March 2007. Wide

acceptance of ATMs by consumers, introduction of biometric ATMs, and

increasing scope of value-added ATM services will maintain growth in

the industry.

18.3) SECURITY

18.3.1)) Transactional secrecy and integrity

The security of ATM transactions relies mostly on the integrity of

the secure crypt processor: the ATM often uses commodity components

that are not considered to be "trusted systems".Encryption of personal

information, required by law in many jurisdictions, is used to prevent

fraud. Sensitive data in ATM transactions are usually encrypted withDES, but transaction processors now usually require the use of Triple

DES. Remote Key Loading techniques may be used to ensure the secrecy

of the initialization of the encryption keys in the ATM. Message

Authentication Code (MAC) or Partial MAC may also be used to ensure

messages have not been tampered with while in transit between the ATM

and the financial network.


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18.3.2)) Customer identity integrity

There have also been a number of incidents of fraud where

criminals have attached fake keypads or card readers to existingmachines. These have then been used to record customers' PINs and bank

card information in order to gain unauthorized access to their accounts.

Various ATM manufacturers have put in place countermeasures to

protect the equipment they manufacture from these threats.


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19. CONCLUSION

Over the last decade, there has been a major transformation on the

technology front in the banking sector. There has been a sea change

compared to the old days when carrying out a transaction as simple as

cash withdrawal sometimes took hoursNow, increasingly, visits to

branches of banks especially in the metros and bigger towns are rare.With ATMs, internet banking and phone banking, banking has turned out

to be more of an inter-face with a machine or in other words it has

become faceless.

Many companies in India have adopted this strategy and have

managed to lower the interaction of the customer with the bank branches.

For instance, 10 years ago, 90% of all transactions made by the customers

of ICICI bank were through the branches and 10% were through online.

Adoption of technology not only delights the customers in terms of

convenience and satisfaction but also brings in certain other advantages

scalability, reliability and low costto the bank.

For instance, banks can carry out data analytics to guage the customers

requirements and thus offer customized products to a specific category of


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customers. Banks can use technology as an enabler as well as a

differentiator, said Ms Chanda Kochhar, Joint Managing Director

ofICICIBank.

No technology is good or bad and any investment in it should be

for improvement in business. The technology should be used to make

better business decisions. It is very important for the senior management

to decide which technology is working best for their organisation. The

top management obtains the feedback from different sources such as

employees and customers among others. In fact, for effective use of the

technology within a company, there should be continuous interaction

between technology department and different business divisions. This

will create more synergy and reduce the cost. Apart from this, technology

can also be used for managing credit risk which has taken centre stage

after the sub-prime crisis.

Going forward, technology will play a bigger role in using the cash

available in the so called bottom of pyramid.


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20.BIBLIOGRAPHY

WEB SITES

www.google.com

www.banknetindia.com

www.economictimes.com

www.rbi.org.in

WWW.managementparadise.COM

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