CONCEPTUAL FRAMEWORK CONCERNING THE AREA OF

THE PROJECT/ NATIONAL AND INTERNATIONAL SCENARIO

 Generate an overview of online banking:-

E- Banking: Global experience-
1981: The early version of what was considered online banking began in 1981. New
York City was the first place in the U.S. to test out the innovative way of doing business by
providing remote services as four of its major banks — Citibank, Chase Manhattan,
Chemical Bank and Manufacturers Hanover — made home-banking access available to
their customers. 
1983: The Bank of Scotland offered customers the first UK internet banking service called
Homelink.
1994: In October 1994, Stanford Federal Credit Union became the first financial
institution in the U.S. to offer internet banking to all of its customers. A year later,
Presidential Bank became the first bank in the country to offer customers access to their
accounts online.

1996: Net Bank Is Founded in1996 and closed in 2007.

1999: Bank of Internet USA was officially founded as part of the incorporation of BofI
Holding Inc. on July 6, 1999, making it America’s oldest internet bank; it opened for business
on July 4, 2000.
2001: Bank of America Has 3 Million Online Customers
2006: 80% of US Banks Offer Internet Banking
2009: In 2009, Ally transformed GMAC Bank into what we know today as Ally Bank,
joining the ranks of internet-only banks. In recent years, it has repeatedly been named the top
online bank in GOBankingRates’ annual Best Banks rankings.
2010: Online Banking Is Growing Faster Than the
Internet

2018: Online Banking Is Standard Practice

Online banking has become so widespread today that customers expect accounts to include
free online banking, and many banks only operate on the internet, effectively decreasing
overhead costs to offer more competitive rates on savings accounts and enjoy higher profit
margins.

History of Indian Banking System:-

 The Banking system of the country is the base of the economy and economic development of
the country. It is the most leading part of the financial sector of the country as it is
responsible for more than 70 % of the funds flowing through the financial sector in the
country.
  The Banking system in India can be categorized in two phases:

 Pre-Independence Phase (1786-1947)

 Post- Independence Phase (1947 to till date)

The post-Independence period may further be divided into

three phases-
 Pre-nationalisation Period (1947 to 1969)
 Post nationalisation Period (1969 to 1991)
 Liberalisation Period (1991 to till date)

Pre-Independence Era (1786-1947):-

The origin of the Banking system in India can be traced with the foundation of Bank of
Calcutta in 1786. The Banking in India originates in the last decade in the 18th century with
the foundation of the English Agency houses in Bombay and Calcutta (now Kolkata).

 Three presidency banks Bank of Bengal, Bank of Bombay and Bank of

Madras established in the 19th Century under the charter of the British East India Company.
 In 1935, the presidency banks merge together and formed a new bank named
Imperial Bank of India which was run by European Shareholders.
 The Imperial Bank of India subsequently named the State Bank of India.
 The first Indian-owned Allahabad Bank was set up in 1865 in Allahabad.
 In 1895, the Punjab National Bank was established.
 The Bank of India founded in 1906 in Mumbai.
 Many more commercial banks such as Canara Bank, Indian Bank, Central Bank of
India, Bank of Baroda and Bank of Mysore were established between 1906 and 1913 under
Indian ownership.
 The central Bank of India, RBI establish in 1935 on the recommendation of Hilton-
Young Commission. At the time of first phase the growth of banking sector was very slow.
Between 1913 and 1948 there were approximately 1100 small banks in India.

Post-Independence Era:-
 At the time independence, the entire Banking sector was under private ownership.
The rural population of the country had to dependent on small money lenders for their
requirements. To solve these issues and better development of the economy the
Government t of India nationalized the Reserve Bank of India in 1949.
 In 1955 the Imperial Bank of India was nationalized and named the State Bank of
India to act as the principal agent of RBI and to handle banking transactions all over the
India.
 Seven Banks forming subsidiary of State Bank of India was nationalized in 1960.
 The Banking Regulation Act enacted in 1949.
 RBI was vested with extensive powers for the supervision of banking in India as a
Central Banking Authority.
 Nationalization Period (1969 to 1991)
On 19th July, 1969, major process of nationalization was carried out. At the same time 14
major Indian Commercial banks of the country was nationalized.
In 1969, Government of India nationalised 14 major banks whose national deposits were
more than 50 cores.

1. Allahabad Bank               2.Bank of India                          3.Punjab National Bank 4.Bank

of Baroda 5.Bank of Maharashtra          6.Central Bank of India
7. Canara Bank         8.Dena Bank 10.Indian Overseas Bank
11. Indian Bank 12.United Bank                         13.Syndicate Bank             
14. Union Bank of India 15.UCO Bank

The Indian Banking system immensely developed after nationalisation but the rural and
weaker section of the society was still not covered under the system.
To solve these issues, the Narasimham Committee in 1974 recommended the
establishment of Regional Rural Banks (RRB). On 2nd October 1975, RRBs were
established with an objective to extend the amount of credit to the rural section of the
society.

 Six more banks further nationalised in the year 1980. With the second wave of
nationalisation, the target of priority sector lending was also raised to 40%.
 Seven more banks were nationalized with deposit over 200 cores.

Liberalization Phase (1990 to till)

In order to improve financial stability and profitability of Public Sector Banks, the
Government of India set up a committee under the chairmanship of Shri. M. Narasimham.
The committee recommended several measures to reform banking system in the country.

 The major thrust of the recommendations was to make banks competitive and
strong and conducive to the stability of the financial system.
 The committee suggested for no more nationalisation of banks.
 Foreign banks would be allowed to open offices in India either as branches or as
subsidiaries.
 In order to make banks more competitive, the committee suggested that public
sector banks and private sector banks should be treated equally by the Government and
RBI.
 10 Privates banks got a license from the RBI to entry in the Banking sector. These
were Global Trust Bank, ICICI Bank, HDFC Bank, Axis Bank, Bank of Punjab, IndusInd Bank,
Centurion Bank, IDBI Bank, Times Bank and Development Credit Bank.
 The Government of India accepted all the major recommendation of the committee.

Recent Development in Indian Banking Sector:

 Kotak Mahindra Bank and Yes Bank got a license from RBI to entry in the system in the
year 2003 and 2004.
 In 2014, RBI grants in-principle approval to IDFC and Bandhan Financial Services to set
up banks.
 Further RBI also set up two kinds of small banks, i.e., Payment Bank and Small Bank.

 Current Scenario of E-Banking in India:-

Internet Banking has become an integral part of banking system in India. The concept of e-
banking is of fairly recent origin in India.
The Indian government enacted the IT Act, 2000, with effect from the 17th October 2000.
To examine different aspects of Internet banking RBI set up a committee on Internet
Banking. The committee had focused on three major areas of Internet banking, Technology
and security issues, legal issues and regulatory and supervisory issues.
This table shows evidence for ATM, POS (Point of sale) and electronic cards (credit and
debit cards) deployed in India as on March, 2016. Table also compared the data of March,
2016 with March, 2012. It shows growth rate of these banking channels and it seems to be
great in Indian context.

Types of Electronic No of channels Growth in

Channels %
Year
March,2012 March,2016

No of ATMs deployed 95686 199099 108.07

No of POS deployed 660920 1385668 109.65
No of CREDIT CARD issued 17653818 24505219 38.81
No of DEBIT CARD issued 2782839 661824092 227.82

 From the above table, it is clearly shown that no doubt Indian banks are making sincere
efforts for the adoption of advanced technology and installation of e-delivery channels
but still the concept and scope of E-banking is still evolving.
 It facilitates an effective payment and accounting system thereby enhancing the speed
of delivery of banking services considerably.
 The government of India enacted the IT Act, 2000, which provides legal recognition to
electronic transactions and other means of electronic commerce.
 RBI issued guidelines on risks and control in computer and telecommunication system to
all banks, advising them to evaluate the risks inherent in the systems and put in place
 adequate control mechanisms to address these risks. It covers various issues that fall
within the framework of technology, security standards, and legal and regulatory issues.
[International Journal of Science and Research (IJSR) SSN (Online):
2319-7064
Index Copernicus Value (2015): 78.96 | Impact Factor (2015): 6.391]

 Banking Law:-
Banking law is the broad term for laws that govern how banks and other financial
institutions conduct business. Banks must comply with a myriad of federal, state and even
local regulations. Lawyers perform a wide variety of functions that relate to creating,
following and enforcing regulations.
Banking laws may exist in order to achieve many objectives. Some of these objectives
include:

 Provide transparency for consumers

 Reduce risk for banking customers

 Avoid misuse of banks for purposes like money laundering
 Allow consumers to bank with confidentiality
 Prevent other crimes
 Prioritize bank lending according to economic and social priorities
 Provide fair banking and equal opportunities for banking
 Prevent terrorism
 Create fair debt collection practices
 Make credit card agreements fair to consumers
 Prevent banks from making unfair loans to insiders like officers and principal
shareholders
 Allow customers to reasonably raise disputes

 Classification of Banking Industry in India:-

An outline of the Indian Banking structure may be presented as follows-
1. Reserve Bank of India
2. Indian Scheduled Commercial Banks
a) State Banks of India and its associate banks
b) Twenty Nationalized banks
c) Regional Rural Banks
d) Other scheduled Commercial Banks
3. Foreign banks
4. Non- scheduled banks
5. Co-operative banks

 Methods or Process of Online Banking :-

1. Initial Set-Up
Online Baking is very easy to use, but it requires a one-time registration or set up on your
financial institution’s website. To do this, look for “Home Banking” or “Online Banking” log
in, typically located prominently at the top of your bank’s website. You’ll typically need to
enter the name on the account, your account number, and social security card number for
verification. Then you’ll create a user name, enter your email address (so you can be
notified when your monthly statement is available), and set a password.
A few banks require you to register in person or over the phone in order to set up online
banking, so if you can’t find the online banking registration info on your bank’s website you
may need to contact them for instructions on how to set it up.

2. Logging in
After the initial set-up, you can log in and access your account any time by entering your
username and password at the online banking section of your bank’s website. Typically,
once you’re logged in you’ll come to a summary page which shows you an at-a-glance look
at your accounts and their balances, the most recent transactions, and any items that are
pending.

3. Use the tools your bank offers

Each financial institution offers a variety of online banking tools, including automatic savings
transfers between accounts, bill pay, and more. Features vary, so if you don’t see what
you’re looking for, contact your bank for information. May offer live chat with a customer
service representative online, but you can also contact them by phone.

 Different type’s transaction :-

Banking account transaction types-

 ATM – Deposit or withdraw funds using an ATM

 Charge- Withdraw funds using a debit card, or record a purchase on credit card
 Cheque- Withdraw funds by writing a paper cheque. Choosing this type will
automatically insert a number in the ‘#’ field ( the next number sequence from the
highest in the account)
 Deposit- Add funds to an account by any method
 Online- Withdraw funds through a web based store or online banking service
 POS- Withdraw funds through a point-of-sale transactions (typically a debit card
purchase)
 Transfer- Move funds from one account to another ( for more information, see
account transfer)
 Withdrawals – Deduct funds from an account by any method.
Investment account transaction types-

 Buy- Withdraw or purchase shares of security

 Buy to Close- Close a short position (opened with ‘Sell to Open’) by withdrawing
cash and purchasing shares of an option (put or call) .Use transaction type with a price
of “0.00” to close a short position that expired or was exercised.
 Buy to open- Open a long position by withdrawing cash and purchasing shares of an
option ( put or call)
 Dividend- Deposit cash or shares received from the profit made on an investment.
Use the findings/distribution setting to designate the dividend as a reinvestment if
necessary.
 Capital distribution- Deposit cash received as capital distribution (return of capital)
that should not be treated as a dividend for tax purposes.
 Capital Gains Long- Deposit cash received from a mutual fund, partnership or
hedge fund from sale of long-term security shares (the number of shares you own is
not affected)
  Capital Gains Short- Deposit cash received from a mutual fund, partnership or
hedge fund from sale of short-term security shares (the number of shares you own is
not affected)
 Interest Income- Deposit cash earned as interest on a security (most commonly a
bond)
 Sell- Deduct shares of a security and deposit cash from sales.
 Sell to Close- Close a long position (opened with ‘Buy to Open’) by deducting
shares of an option (put or call) and depositing cash from the sales. Use transaction
type with a price of “0.00” to close a long position that expired or was exercised.
 Sell to open- Open a short position by deducting shares of an option ( put or call)
and depositing cash from sale.

 Different forms of online-banking-

AUTOMATED TELLER MACHINES (ATM):

An automated teller machine or automatic teller machine (ATM) is an electronic
computerized telecommunications device that allows a financial institution’s customers to
directly use a secure method of communication to access their bank accounts, order or
make cash withdrawals (or cash advances using a credit card) and check their account
balances without the need for a human bank teller.

TELE BANKING:
By dialing the given Telebanking number through a landline or a mobile from anywhere, the
customer can access his account and by following the user-friendly menu, entire banking
can be done through Interactive Voice Response (IVR) system.

SMART CARD:
A smart card usually contains an embedded 8-bit microprocessor (a kind of computer chip).
The microprocessor is under a contact pad on one side of the card. Think of the
microprocessor as replacing the usual magnetic stripe present on a credit card or debit card.

The microprocessor on the smart card is there for security. The host computer and card
reader actually “talk” to the microprocessor. The microprocessor enforces access to the
data on the card. The chips in these cards are capable of many kinds of transactions.

DEBIT CARD:
Debit cards are also known as check cards. Debit cards look like credit cards or ATM
(automated teller machine) cards, but operate like cash or a personal check. Debit cards are
different from credit cards. While a credit card is a way to “pay later,” a debit card is a way
to “pay now.” When you use a debit card, your money is quickly deducted from your
checking or savings account.
E-CHEQUE:
An e-Cheque is the electronic version or representation of paper cheque. The Information
and Legal Framework on the E-Cheque is the same as that of the paper cheque’s. It can now
be used in place of paper cheques to do any and all remote transactions.
OTHER FORMS OF ELECTRONIC BANKING-
1. Direct Deposit 2.Electronic Bill Payment 3. Electronic Check Conversion 4.Cash
Value Stored, Etc.