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.C. SONI Roll No. 51
LAXMI CHARITABLE TRUST SHRI CHINAI COLLEGE OF COMMERCE & ECONOMICS OLD NAGARDAS ROAD, ANDHERI (EAST), MUMBAI - 400069
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)
This is to certify that Mr Nilesh Soni of B.com Banking and Insurance Semester V (2009-10) has successfully completed the project on “BANKING INDUSTRY” under the guidance of Prof. Mikita Shah
Course Co-ordinator Project Guide/ Internal Examiner External Examiner
I Mr Nilesh Soni the student of B.com Banking & Insurance Semester V (2009-10) hereby declare that I have completed the Project on “BANKING INDUSTRY” The information submitted is true and original to the best of my knowledge. Signature Student Nilesh Soni Roll no. 51
T.Y.B.COM (BANKING & INSURANCE)
“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 or unknowingly been a great support for me to complete the price of work.
T.Y.B.COM (BANKING & INSURANCE)
India’s Top Banks 2008 captures the development of banking in India in FY07 and profiles the scheduled commercial banks, consisting of 28 Public Sector Banks, 23 Private Sector Banks and 29 Foreign Banks. The public sector banks consist of State Bank of India and its seven associates, 19 nationalised banks and IDBI Bank Ltd. The Private Sector Banks consist of 15 Old Private Sector Banks and 8 New Private Sector Banks. Foreign Banks have a strong presence in number. FY07 has been another year of rapid growth for Indian banking. The 80 banks together reported a y-o-y growth of 24.3% in assets, 24.6% in deposits, 30.6% in advances, 21.2% in operating profi t and 26.9% in net profit.Major aspects of the performance of these banks in FY07 is summarised below The group of New Private Sector Banks dominated the league tables of growth as against the average of other bank groups average y-o-y growth in assets at as also all banks, with
38.7%, for deposits at 38.8%, Public Sector Banks accounted for 74% of the total deposits, 73% of total advances and 64% of the aggregate net profits.
T.Y.B.COM (BANKING & INSURANCE)
COM (BANKING & INSURANCE) .‘‘BANKING INDUSTRY’’ TABLE OF CONTENTS Sr.No 7-8 9-10 11-12 13-14 15 16-19 20-23 24-28 29-30 31-32 33 34 35-36 37-39 40-46 47-48 49-50 51-53 54-55 56 INTERNATIONAL BANKING BANK NATIONALISATION &PUBLIC SECTOR BANKING WORKING CONDITIONS EMPLOYMENT OTHER OCCUPATIONS ONLINE BANKING ELECTRONIC BANKING MOBILE BANKING SMS BANKING AUTOMATED TELLER MACHINE CONCLUSION BIBLIOGRAPHY 6 T.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 TOPIC INTRODUCTION OF BANKS OVERVIEW: IT IN BANKING HISTORY OF BANKING BENEFITS OF ECONOMY IT PERSPECTIVE BANKING INSTITUTIONS BANKING SERVICES BANKING IN OTHER COUNTRIES Pg.Y.B.
These institutions include finance companies. and basic cash management services such as check cashing and foreign currency exchange. savings and loan associations. exchanges. investment companies. transfers. savings accounts and time deposits that can be used to save money for future use.Y. (For information on other financial institutions. or safeguards money for its customers. and Trust Companies. collects. 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.INTRODUCTION OF BANKS Banking. and credit unions. and real estate investment trusts. the business of providing financial services to consumers and businesses. This article. The basic services a bank provides are checking accounts.COM (BANKING & INSURANCE) . however. Four types of banks specialize in offering these basic banking services: commercial banks. savings banks. A broader definition of a bank is any financial institution that receives. see Insurance. insurance companies.‘‘BANKING INDUSTRY’’ 1. focuses on the narrower definition of a bank and the services provided by banks in Canada and the United States. invests. Investment Banking. pension funds. mortgage companies. security brokers and dealers. pays.B. loans that consumers and businesses can use to purchase goods and services. which can be used like money to make payments and purchase goods and services.) Banking services are extremely important in a free market economy such as that found in Canada and the United States. investment banks. lends. Banking 7 T.
and credit cards). banks encourage the flow of money to productive use and investments. by supplying customers with the basic mediums-of-exchange (cash. 8 T. goods could only be exchanged by barter (trading one good for another). checking accounts.COM (BANKING & INSURANCE) . Without these familiar methods of payment. which is extremely time-consuming and inefficient. by accepting money deposits from savers and then lending the money to borrowers.B. Second.‘‘BANKING INDUSTRY’’ services serve two primary purposes.Y. First. banks play a key role in the way goods and services are purchased.
technology has changed the contours of three major functions performed by banks. when the Banks started computerising the branches in a limited manner. and offers other financial services. transformation of assets and monitoring of risks.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. better market infrastructure. Information technology enables sophisticated product development. The Software Packages for Banking Applications in India had their beginnings in the middle of 80s. Indian banking industry. growing expectations led to increased awareness amongst banks on the role and importance of technology in banking. The early 90s saw the plummeting hardware prices and advent of cheap and inexpensive but high-powered 9 T. makes loans. Entry of new banks resulted in a paradigm shift in the ways of banking in India.Y.B. i.‘‘BANKING INDUSTRY’’ 2. 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 the threat of competition and retain their customer base. In view of this. One is Communication and Connectivity and other is Business Process Reengineering. access to liquidity. today is in the midst of an IT revolution. The growing competition.e. This is a commercial institution that keeps money in accounts for individuals or organizations. implementation of reliable techniques for control of risks . Information Technology has basically been used under two different avenues in Banking. provides credit to businesses.COM (BANKING & INSURANCE) . exchanges currencies..
like Internet. mobile / cell phones etc. deregulation.Y.COM (BANKING & INSURANCE) .B. globalization etc coupled with rapid revolution in communication technologies and evolution of novel concept of 'convergence' of computer and communication technologies.‘‘BANKING INDUSTRY’’ 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. 10 T.
COM (BANKING & INSURANCE) . 11 T. The increase of trade in 13th-century Italy prompted the revival of banking. HISTORY OF BANKING A) Origins of Banking Many of today’s banking services were first practiced in ancient Lydia. where trade and commerce flourished. The moneychangers of the Italian states developed facilities for exchanging local and foreign currency. were the Bank of Amsterdam (1609). and the Bank of Hamburg (1619). each managed by a committee of city officials. It also is believed to have introduced the bank check. the Bank of Venice (1587). The Greeks also coined money and developed a system of credit.Y. Phoenicia. China. and purchased mortgages. These institutions laid the foundation for modern banks of deposit and transaction. made loans. Soon merchants demanded other services. Three other early banks. Shortly after the fall of Rome in ad 476. this bank held deposits. The first bank to offer most of the basic banking functions known today was the Bank of Barcelona in Spain. such as lending money. and its bankers accepted deposits of money.B. Founded by merchants in 1401. exchanged currency. banking declined in Europe. The temples of ancient Greece served as safe-deposit vaults for the valuables of worshipers. and carried out lending operations. The temples in Babylonia made loans from their treasuries as early as 2000 bc. The Roman Empire had a highly developed banking system. and gradually bank services were expanded.‘‘BANKING INDUSTRY’’ 3. and Greece.
government. These notes supplemented the coins then in circulation and assisted greatly in business expansion. banking on the European continent was in the hands of powerful statesmen and wealthy private bankers. The only restraint on a bank’s ability to extend loans was the public’s unwillingness to accept its notes.S. Most assets took the form of business loans. It was the first bank chartered by the U. but these banks were chartered by individual states. The banks were also permitted to accept deposits and to make loans. bank notes were secured by the assets of the issuing banks. but it soon spread to all the major European financial capitals. Acceptance of a bank’s notes usually was determined by the bank’s record in exchanging the notes for coins when called upon to do so. Because there were no minimum reserve requirements on deposits.Y. Other banks existed in the colonies prior to this. primarily to issue paper money called bank notes. members of the Rothschild family became the most influential bankers in all Europe and probably in the world.‘‘BANKING INDUSTRY’’ For more than 300 years.B. established in 1781 by the Second Continental Congress. 12 T. Other large banks were chartered in the early 1780s by the various states. During the 19th century. This international banking family was founded by German financier Mayer Amschel Rothschild (1743-1812). In 1787 the Bank of North America changed to a Pennsylvania charter following controversy about the legality of a congressional charter.COM (BANKING & INSURANCE) . most notably the Bank of Pennsylvania. such as the Medici family in Florence and the Fuggers in Germany. A1) a)) Bank of North America The first important bank in the United States was the Bank of North America.
This creates a healthy. checking accounts. currency and coin. BENEFITS OF ECONOMY The deposit and loan services provided by banks benefit an economy in many ways. Third. make it much easier to buy goods and services and therefore help both consumers and businesses. and therefore increase employment and economic growth. First. This helps ensure that only the best projects get financed and that companies are run efficiently.‘‘BANKING INDUSTRY’’ 4.COM (BANKING & INSURANCE) . The checking account services offered by banks provide an additional benefit to the economy. the checking accounts offered by banks are functionally equivalent to real money—that is. create money without the 13 T. in effect. loans enable consumers to improve their standard of living by borrowing money to purchase cars. In addition. bankers act as surrogate monitors for stockholders who cannot be present on a regular basis to watch the company’s managers. banks choose borrowers carefully and monitor performance of a company’s managers very closely. loans help businesses finance plant expansion and production of new goods. and other expensive consumer goods that they otherwise could not afford. who would find it inconvenient to carry or send through the mail huge amounts of cash. since the owners (stockholders) of a company receiving a loan want their company to be profitable and managed efficiently. efficient economy. because they act like cash. Because checks are widely accepted as payment for goods and services. since banks want loans repaid. When banks issue checking accounts they.Y.B. Finally. Second. houses.
which allows extra deposit money to be created by banks. the bank can give that person a $10 checking account with only $1 of currency in its vault. the bank.B. and this in turn means that a bank is at less risk if one of its customers fails to repay a loan. 14 T. government’s central bank known as the Federal Reserve.‘‘BANKING INDUSTRY’’ federal government having to print more currency.COM (BANKING & INSURANCE) . The lowering of risk makes bank deposits safer for depositors.S. This flow of money from savers through banks to the ultimate borrower is called financial intermediation because money flows through an intermediary—that is. or the Fed. In the United States banks keep these reserves in their own vaults or on deposit with the U. Safeties encourage even more bank deposits and therefore even more loans. If someone wants a $10 loan. is referred to as a fractional reserve banking system.Y. banks must hold a reserve of paper currency and coin equal to at least 10 percent of their checking account deposits. 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. Banks can thereby diversify their loans. As a result U.S. 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). Under government regulations in many countries.
The Indian Banking System Has Been Operating Successfully Over The Last Two Centuries. Lack Of Computerization Among Over 50. 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 15 T.COM (BANKING & INSURANCE) .000 Branches Of Public Sector Banks. nationalized the then Imperial Bank of India and re-christened it as State Bank of India.B.000 Branches Of Public Sector Banks Provides A Huge Market For Players In It Industry.(SBI).Y.578 Branches Have Been Fully Computerized. A Combination Of Regulatory And Competitive Reasons Have Led To Increasing Importance Of Total Banking Automation In The Indian Banking Industry. IT PERSPECTIVE Indian Banking Industry. This resulted an explosion of sorts in volumes of transactions and posed a severe strain on all resources. Out Of The Over 50. Today Is In The Midst Of an It Revolution. as a first step. More particularly. 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. Only 11. 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. the inter-branch reconciliation became one area that defied manual handling. As On 31st March 2002.‘‘BANKING INDUSTRY’’ 5.
16 T.‘‘BANKING INDUSTRY’’ in the Calcutta office of the SBI for the reconciliation of inter-branch transactions. 62 percent of banks were owned by holding companies. In 2000. savings banks. and can be withdrawn by. 76 percent of banks were owned by holding companies. The bank holding company form of ownership became increasingly attractive for several reasons. called stockholders.) In 1984. securities (bonds. savings and loan associations (SLAs).B. 6. but not stocks). They are known as liabilities because they are still owned by. 6. Liabilities are primarily the deposits received from the bank’s customers.COM (BANKING & INSURANCE) . the depositors of the financial institution. The vast majority of commercial banks are owned by bank holding companies. The major differences between these types of banks involve how they are owned and how they manage their assets and liabilities.Y. loans. BANKING INSTITUTIONS Banking institutions include commercial banks. Commercial banks are owned by private investors. First.1) Commercial Banks Commercial banks are so named because they specialize in loans to commercial and industrial businesses. or by companies called bank holding companies. and credit unions. Assets of banks are typically cash. (A holding company is a corporation that exists only to hold shares in another company. and property in which the bank has invested.
offering investment advice. The profits either can be paid out to bank stockholders or to the holding company in the form of dividends. and engaging in other investment banking activities. Their objective is to make a profit. By setting up a holding company. but they can be owned by depositors as well. commercial banks also make consumer loans for automobiles and other consumer goods as well as real estate (mortgage) loans for both consumers and businesses. a banking firm could locate new banks around the state and therefore put branches in locations not previously available. Second. bankers could then diversify their product lines and offer services requested by their customers and provided by their European counterparts.‘‘BANKING INDUSTRY’’ holding companies could engage in activities not permitted in the bank itself—for example. (If owned by 17 T. many states had laws that restricted a bank from opening branches to within a certain number of miles from the bank’s main branch. Commercial banks traditionally have the broadest variety of assets and liabilities. However.B.Y. underwriting securities. Commercial banks are “for profit” organizations.COM (BANKING & INSURANCE) . 6. Using the holding company form of organization. Their historical specialties have been commercial lending to businesses on the asset side and checking accounts for businesses and individuals on the liability side. or the profits can be retained to build capital (net worth). But these activities were permitted in the bank if the holding company owned separate companies that offer these services.2) Savings and Loan Associations Savings and loan associations (SLAs) are usually owned by stockholders.
cooperative organizations that are owned by their members. and their assets are administered for the sole benefit of depositors. and trust and credit card services. commercial. have no stockholders. also known as mutual savings banks (MSBs).COM (BANKING & INSURANCE) .3) Savings Banks Traditional savings banks. the goal is to earn a profit that can either be paid out as a dividend or retained to increase capital.Y. 6. During the 1980s savings banks were in a great state of flux. If owned by depositors. Until the early 1980s. 6. Earnings are paid to depositors after expenses are met and reserves are set aside to insure the deposits. 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.‘‘BANKING INDUSTRY’’ depositors. including multiple savings instruments. See also Savings Institutions. As a result. Both SLAs and MSBs can now offer a full range of financial services.”) If stock owned. Their goal is to minimize the rate members pay on loans and maximize the rate paid to members on deposits. Since 1982 savings banks have been permitted to convert to SLAs. 18 T. they are called “mutuals. 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). historically SLAs have specialized in savings deposits and mortgage lending. and many began to provide the same kinds of services as commercial banks. Whatever surplus is earned is retained to build the capital of the credit union. checking accounts. SLAs also may convert to savings banks.B. consumer.4) Credit Unions Credit unions are not-for-profit. and agricultural loans.
‘‘BANKING INDUSTRY’’ Members must share a common bond. and some commercial loans in addition to checking accounts and time deposits. and savings banks are often referred to as thrift institutions. Consequently. Credit unions. However. more recently credit unions have offered mortgage loans. 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. SLAs. and savings banks help encourage thriftiness by paying interest to consumers who put their money in savings deposits. credit unions specialized in providing automobile and other personal loans and savings deposits for their members. SLAs.B.Y. credit card loans.COM (BANKING & INSURANCE) . 19 T.
or other authorized transfer instruction. hybrid checking/savings deposits. Checking accounts are also considered transaction accounts in that payments can be made to third parties—that is. As such.Y. The most common example of a demand deposit is a checking account. 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. to someone other than the depositor or the bank itself—via check. loans. and cash management services. 20 T.COM (BANKING & INSURANCE) . savings deposits. Money orders and traveler’s checks are also technically demand deposits.B. BANKING SERVICES Commercial banks and thrifts offer various services to their customers. 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. they function like money.‘‘BANKING INDUSTRY’’ 7. 7. and time deposits.1) Deposits There are four major types of deposits: demand deposits. What distinguishes one type from another are the conditions under which the deposited funds may be withdrawn. These services fall into three major categories: deposits. telephone.
but have no specific maturity date on which the funds need to be withdrawn or reinvested.2) Loans Banks and thrifts make three types of loans: commercial and industrial loans. and mortgage loans. Closed-end credit loans are loans for a fixed amount of 21 T. Most commercial banks offer a variable rate on these loans. There are two types of consumer loans: closed-end credit and open-end credit. the condition of the economy. customers can withdraw their money from a savings account simply by presenting their “passbook” or by using their automated teller machine (ATM) card. Whether a bank will make a loan or not depends on the credit and loan history of the borrower.Y.COM (BANKING & INSURANCE) . Savings accounts are highly liquid. consumer loans.B. 7. the borrower’s ability to make scheduled loan payments. Commercial and industrial loans are loans to businesses or industrial firms. and the value of the collateral the borrower pledges to give the bank if the loan payments are not made. however. the amount of capital the borrower has invested in the business. Under normal circumstances. which means that the interest rate can change over the course of the loan. These are primarily short-term working capital loans (loans to finance the purchase of material or labor) or transaction or longer-term loans (loans to purchase machines and equipment). Consumer loans are loans for consumers to purchase goods or services. They are different from demand deposits.‘‘BANKING INDUSTRY’’ Savings accounts pay interest to the depositor. Savings accounts cannot be used directly as money to purchase goods or services. Any amount can be withdrawn from a savings account up to the amount deposited. because depositors cannot write checks against regular savings accounts.
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. and for a fixed purpose (for example.COM (BANKING & INSURANCE) .‘‘BANKING INDUSTRY’’ money. The land and buildings purchased serve as the collateral for the loan. the bank can recoup the cost of its loan by taking ownership of the car. Open-end credit interest rates usually exceed closed-end rates because open-end loans are not backed by collateral. interest is charged. which often ranges from 15 to 30 years. Mortgage loans or real estate loans are loans used to purchase land or buildings such as houses or factories. Open-end loans require no collateral. for a fixed period of time (usually not more than five years). if credit card charges are not paid in full.B. a fee is charged to the borrower.Y. The item purchased by the consumer serves as collateral for the loan. these institutions provide a wide variety of 22 T. For example. Most closed-end loans are called installment loans because they must be repaid in equal monthly installments. Unlike closed-end loans. 7. open-end credit does not require a borrower to specify the purpose of the loan and the lender cannot foreclose on the loan. to buy a car). Most open-end loans carry fixed interest rates–that is.3) Cash Management and Other Services Although deposits and loans are the basic banking services provided by banks and thrifts. Open-end credit loans are loans for variable amounts of money up to a set limit. if the consumer fails to make payments on an automobile. or if payment is late. the rate does not vary over the term of the loan. but interest rates or other penalties or fees may be charged—for example. Credit cards are an example of open-end credit.
In recent years. much like writing a check. Electronic banking uses computers to carry out transfers of money. For businesses.Y. Cash management services are designed to allow businesses to make efficient use of their cash. move money between accounts. electronic wire transfer through which consumers can transfer money and securities from one financial institution to another. Banks also use electronic transfers to deposit payroll checks directly into a customer’s account and to automatically pay a customer’s bills when they are due. Banks also offer debit cards that directly withdraw funds from a customer’s account for the amount of a purchase. banks have made their services increasingly convenient through electronic banking. commercial banks also provide specialized cash management and credit enhancement services.B. and credit life insurance which automatically pays off loans in the event of the borrower’s death or disability. The customer would then send a check to the business.COM (BANKING & INSURANCE) . For example. including in foreign countries. foreign currency exchange. The ATMs enable bank customers to access their money 24 hours a day and seven days a week wherever ATMs are located. For consumers. safety deposit boxes in which consumers can store valuables. under normal circumstances a business would sell its product to a customer and send the customer a bill. 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. Many banks also use the Internet to enable customers to pay bills.‘‘BANKING INDUSTRY’’ other services to customers. 23 T. these include check cashing. and the business would then deposit the check in the bank. For example. and perform other banking functions.
and foreign banks accounted for about 7 percent of bank assets.S.‘‘BANKING INDUSTRY’’ 8. the Bank of Canada is also responsible for issuing and managing the national debt. development of the Canadian banking system has been influenced by both countries. Unlike the U. The central bank of Canada is the Bank of Canada. in 1867.COM (BANKING & INSURANCE) . allowed any Canadianchartered bank to operate in any part of the dominion. Created in 1935. however.1)Canada Because of Canada’s close historical relationship with the United States and the United Kingdom. it is owned by the Ministry of Finance and is responsible for Canadian monetary policy. this function is performed by the Department of the 24 T. In the United States. Until 1994 banks in the United States were restricted to opening branches only in the city or state where they were incorporated. and the six largest controlled more than 90 percent of all bank assets in Canada. One of the first laws passed by Canada’s Parliament after confederation. BANKING IN OTHER COUNTRIES 8. The remaining seven domestic banks accounted for about 2 percent of bank assets.B. Federal Reserve. Canada always had a branch-banking system. Unlike the United States. This law encouraged the growth of Canada’s branch-banking system. in which a few large banks operate all the country’s banking offices. In 2000 there were only 13 domestic banks in Canada.Y.
S. banks to engage in investment-banking activities through the bank holding company form of organization. These services are important to businesses and being able to provide them gave European banks an advantage over U.S.‘‘BANKING INDUSTRY’’ Treasury. Such ownership is still prohibited.S.S. Most of these prohibited activities involved investment banking such as security underwriting (selling a firm’s stock or bonds at a guaranteed price) or security placement (finding buyers for a firm’s stock or bonds). The second difference is that banking is much more concentrated in Europe.Y. legislation has allowed U. The primary policy group of the Bank of Canada is called the Governing Council 8.B. As a result. companies which rely more on funds raised by selling stocks and bonds in financial markets. for the most part. banks and holding companies. Two differences remain between U. for U.S. In other words.S. The first is that many European banks can own nonbank commercial and industrial businesses. banks in Europe tend to be more business oriented and much more involved with corporate governance (corporate decision-making) than their U. and European banking. European banks were frequently owned by the government and could engage in activities that were prohibited to banks in the United States.S. counterparts. This also explains why most European companies rely more heavily on bank loans to finance their activities than do U.COM (BANKING & INSURANCE) . banks. banking markets are dominated by a few large 25 T. These differences are rapidly disappearing. Most European banks are now privately owned and recent U.2) The European Continent Until recently. European banking was very different from banking in the United States.
were encouraged as a means of stabilizing the industry.S. London. 8. By 1833 these corporate banks were permitted to accept and transfer deposits in London.3)UnitedKingdom Since the 17th century Britain has been known for its prominence in banking. early English banks were privately owned rather than stock-issuing firms.‘‘BANKING INDUSTRY’’ banks whereas in the United States many banks compete for a customer’s deposits and loans. banking. failed to preserve the large number of institutions typical of U. This stems from the fact that European countries have had very liberal branching laws allowing banks to have extensive depositgathering networks in their home country and also from the fact that most European countries are not as concerned about monopolies as are U. as legislation in the United States in 1994 allowed banks to establish banks and branches in other states.B. stock-issuing banks. although they were prohibited from issuing money. however. Bank failures were common. a wave of bank mergers reduced both the number of private and stock-issuing banks. Corporate banking flourished after legislation in 1858 approved limited liability for stock-issuing banks. with a larger capital base. It is not clear how long this difference will last. however. The banking system.COM (BANKING & INSURANCE) . still remains a major financial center. 26 T. so in the early 19th century. regulators. The capital. a prerogative monopolized by the Bank of England.Y. At the turn of the 20th century.S. and virtually all the world’s leading commercial banks are represented there. which was incorporated. Aside from the central Bank of England.
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.Y. with their national branch networks. and in 1968 a merger among the largest five clearing banks left the industry in the hands of four: Barclays.‘‘BANKING INDUSTRY’’ The present structure of British commercial banking was substantially in place by the 1930s.” encompassing financial activities by smaller banking houses. at the apex. They are the key links in the transfer of business payments through the checking system. with the Bank of England. banks 27 T. Moreover. Clearing banks sort and then forward checks to the bank from which they were originally drawn for payment. through their ownership and control over subsidiaries. Lloyds (now Lloyds TSB Group). the big British banks influence other financial markets such as consumer and housing finance and merchant banking. as well as local government authorities. and National Westminster (taken over by the Royal Bank of Scotland in 2000). Midland (now part of HSBC Holdings). dominate British banking. In capitalist countries a system of private enterprise in banking prevails. then privately owned.COM (BANKING & INSURANCE) . In state-managed economies. building societies (banking institutions similar to SLAs in the United States). and other financial concerns. and 11 London clearing banks ranked below the Bank of England. The dominance of the clearing banks was challenged in recent years by the rise of “parallel markets.B. The larger clearing banks. Two changes have occurred since then: The Bank of England was nationalized (became government-owned) in 1946 by the postwar Labour government. 8. as well as the primary source of short-term business finance.
especially for short-term purposes. In other nations. and Kenya.COM (BANKING & INSURANCE) . In some. in Egypt. Banks in developing countries are similar to their counterparts in developed nations. this heritage continued.‘‘BANKING INDUSTRY’’ have been nationalized.B. for instance. although modified. 28 T.Y. such as Zambia and Cameroon. Peru. In many countries. such as Nigeria and Saudi Arabia. after decolonization. Banks are often used to finance government expenditures. the rise of nationalism led to mandates for majority ownership by the indigenous population. the banking system developed under colonialism. Commercial banks accept and transfer deposits and are active lenders. Other countries have patterned themselves after the social-democracies of Europe. The banking system may also play a major role in financing exports. with banks owned by institutions in the parent country. government-owned and privately owned banks coexist. particularly government-owned development banks. Other financial intermediaries. arrange long-term loans.
but some have also engaged in retail banking. INTERNATIONAL BANKING The expansion of trade in recent decades has been paralleled by the growth of multinational banking. Congress passed the International Banking Act. Similarly. banks had about 935 foreign branches. The 29 T.COM (BANKING & INSURANCE) . 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.S.Y. but a notable recent development has been the expansion of branches and subsidiaries that are physically located abroad. which imposed constraints on the activities of foreign banks in the United States. 79 foreign banks were chartered in the United States. 243 foreign banks had U. bank assets. accounting for 23 percent of U. bank assets. Switzerland. offices.B. In 1960 only eight U. In 1975. took the first steps in this direction with the Basel Capital Accord.S.S. Banks have historically financed international trade.‘‘BANKING INDUSTRY’’ 9. In 1998.S. as well as the increased volume of loans to foreign borrowers. As banks make more international loans. accounting for 5 percent of U. the number of foreign banks with offices in the United States has increased dramatically.S. an international organization of bank regulators based in Basel. By 1998 about 82 U. banks had foreign offices with a total of 131 branches.S. In 1988 the Basel Committee on Banking Supervision. Most of these banks are business-oriented banks. In 1978 the U.
COM (BANKING & INSURANCE) . The accord was eventually adopted by 100 countries.B. Many banking experts believe this accord became the primary tool for strengthening the safety of international banking. In 2001 the Basel Committee recommended a new set of regulations known as the New BaselCapitalAccord. .‘‘BANKING INDUSTRY’’ 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.Y. 30 T.
BANK NATIONALISATION &PUBLIC SECTOR BANKING Organized banking in India is more than two centuries old. 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. SBI Act was enacted in 1955 and Imperial Bank of India was transferred to SBI. these private owners of banks were at liberty to use the funds in any manner. PSBs undertook expansion of reach and services. 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. Resultantly the number of branches increased 7 fold (from 8321 to more than 60000 out of which 58% in rural areas) and no. In the absence of any regulatory framework. which was closely followed by nationalization of 14 major banks in 1969 and Keeping in view the objectives of nationalization. On the recommendations of All India Rural Credit Survey Committee. they deemed appropriate and resultantly. the bank failures were frequent. During 1968 the scheme of ‘social control’ was introduced.COM (BANKING & INSURANCE) .Y.‘‘BANKING INDUSTRY’’ 10.B. of people served per branch office came down from 31 T. Move towards State ownership of banks started with the nationalization of RBI and passing of Banking Companies Act 1949. Similarly.
States neglected by private banks before 1969 have a vast network of public sector banks. account for 93% of bank offices and 87% of banking system deposits. 32 T.5% ii) Branches Under Core Banking Solutions 28.‘‘BANKING INDUSTRY’’ 65000 in 1969 to 10000.B. Much of this expansion has taken place in rural and semi-urban areas. Computerization in Public Sector Banks (As on March 31.3% Other than branches under Core Banking Solutions. 2008) i) Branches already Fully Computerized 48.5% iv) Partially Computerized Branches 18. The PSBs including RRBs.Y. The expansion is significant in terms of geographical distribution.COM (BANKING & INSURANCE) .9% iii) Fully Computerized Branches (i + ii) 77.2% v) Non Computerized Branches 4.
However. Most support staff work a standard 40-hour week.‘‘BANKING INDUSTRY’’ 11. and a high level of attention to security. worked part-time.COM (BANKING & INSURANCE) . in the banks’ headquarters. Employees in a typical branch work weekdays. Branch office jobs. Tellers also work for long periods in a confined space. Those support staff located in the processing facilities may work evening shifts. or in other administrative offices.7 hours in 2006. 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. usually work substantially longer hours. WORKING CONDITIONS Hours: The average workweek for nonsupervisory workers in depository credit intermediation was 35. Work environment. mostly tellers. repetitive tasks.Y. require continual communication with customers. Commercial and mortgage loan officers often work out of the office.B. checking loan applications. particularly teller positions. Supervisory and managerial employees. visiting clients. About 1 out of 10 employees in 2006. some may work overtime. some evenings if the bank is open late. and Saturday mornings. and soliciting new 33 T. however.
8 million wage and salary workers in 2008.00 1.Y. or work evenings if that is the only time at which a client can meet 12.central bank Depository credit intermediation Commercial banking Savings institutions Credit unions Other depository credit intermediation 100. the remainders were concentrated in savings institutions and credit unions (table).7 69.1 34 T.8 72.2 100.2 1.7 14.loyees in the private sector. Loan officers may travel to meet out-of-town clients. About 7 out of 10 jobs were in commercial banks.1 12.5 13.00 0. EMPLOYMENT The banking industry employed about 1. Table: Percent distribution of employment and establishments in banking by detailed industry sector.COM (BANKING & INSURANCE) .7 14. 2008 Industry segment Employment Establishments Total Monetary authorities .3 99.‘‘BANKING INDUSTRY’’ business.1 1.2 98.B.
‘‘BANKING INDUSTRY’’ In 2008.2006 CHANGE 2008-16 NUMBE PERCENTAG R E All occupations 1. and lawyers. Illinois.4 and financial occupations General and operations 34 1. mostly bank branch offices. 2008-2016. 449 24.4 managers Marketing and sales 11 0.9 35 T. 2006 and projected change. California.9 managers Financial managers 73 4.6 5.COM (BANKING & INSURANCE) . Banks are found everywhere in the United States. computer specialists maintain and upgrade the bank’s computer systems and implement the bank’s entry into the world of electronic banking and paperless transactions.B. these small establishments.0 Management.825 100. Table: Employment of wage and salary workers in banking by occupation. business. About 64 percent of the jobs were in establishments with 20 or more workers. However. and Texas. OTHER OCCUPATIONS Occupations used widely by banks to maintain financial records and ensure the bank’s compliance with Federal and State regulations are accountants and auditors. Pennsylvania. employed 36 percent of all employees.6 1. but most bank employees work in heavily populated States such as New York.8 -8. 13. about 84 percent of establishments in banking employed fewer than 20 workers (chart 1).0 4. In addition.0 1. (Employment in thousands) PARTICULARS OCCUPATION PERCENTAGE (%) EMPLOYMENT.Y.
9 T.2 -14.5 5.8 1. medical.6 0. training.0 0.9 0.8 0.0 1.0 0. and auditing clerks Tellers Brokerage clerks Customer service representatives New accounts clerks Receptionists and information clerks Couriers and messengers Executive secretaries and administrative assistants Secretaries.9 -5.202 111 0.3 12.9 8. except legal.9 6. and labor relations specialists Management analysts Accountants and auditors Credit analysts Financial analysts Personal financial advisors Loan officers Professional and related occupations Computer specialists Sales and related occupations Securities.2 0.3 1.B.0 3.0 12.4 22.7 65.7 12.3 7. and financial services sales agents Office and administrative support occupations First-line supervisors/managers of office and administrative support workers Bookkeeping.‘‘BANKING INDUSTRY’’ Human resources.8 17.0 4.Y.5 2.5 0.1 5.1 -1. general Office machine operators.6 -18.6 1.2 63 546 9 106 73 9 6 36 15 8 40 12 36 3. except computer 15 8 27 15 18 24 133 72 56 82 50 1.5 1.5 2.2 2.8 11. commodities.0 -18.8 4.4 1. and executive Data entry keyers Office clerks.3 11.5 -8.3 2.COM (BANKING & INSURANCE) .4 1.7 -8.5 29.5 0.9 -9.3 4.3 1. accounting.1 6.8 0.
In other words a successful Internet banking solution offers .‘‘BANKING INDUSTRY’’ 14.highly sophisticated offerings enabling integrated sales of additional products and access to other financial services. and IRAs · Checking with no monthly fee.to Level 4 sites . ONLINE BANKING 14. from Level 1 .COM (BANKING & INSURANCE) .Y.B. Internet banking involves use of Internet for delivery of banking products & services. Exceptional rates on Savings.1) INTRODUCTION The Internet banking is changing the banking industry and is having the major effects on banking relationships.such as investment and insurance. It falls into four main categories. free bill payment and rebates on ATM surcharges · Credit cards with low rates 37 T. Even the Morgan Stanley Dean Witter Internet research emphasised that Web is more important for retail financial services than for many other industries.minimum functionality sites that offer only access to deposit account data . CDs.
COM (BANKING & INSURANCE) services.‘‘BANKING INDUSTRY’’ · Easy online applications for all accounts. which now offer banking and financial services over the Internet.Y.B. You can now open an FD online through funds transfer. This study which was conducted by students of IIML shows some interesting facts: · Throughout the country. including personal loans and mortgages · 24 hour account access · Quality customer service with personal attention 14. Indian banks are going for the retail banking in a big way. offering little more than company information and basic marketing materials. 55% are so called 'entry level' sites. Online banking can also be a great friend for lazy investors. · In general. the Internet Banking is in the nascent stage of development (only 50 banks are offering varied kind of Internet banking services). transactions & cash management sites & their level of development.2) INDIAN BANKS ON WEB The banking industry in India is facing unprecedented competition from non-traditional banking institutions. · Foreign & Private banks are much advanced in terms of the number of . much is still to be achieved. Now investors with interlinked demat account and bank account can easily trade in the stock market and the amount will be automatically 38 T. these Internet sites offer only the most basic services. However. Only 8% offer 'advanced transactions' such as online funds transfer. Investing through Internet banking Opening a fixed deposit account cannot get easier than this.
87 billion transactions by 2012.COM (BANKING & INSURANCE) . 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.. some banks even give you the facility to purchase mutual funds directly from the online banking system. 39 T.B.Moreover. Banking Securely: Online Banking via the World Wide Web provides an overview of Internet commerce and how one company handles secure banking for its financial institution clients and their customers.‘‘BANKING INDUSTRY’’ debited from their respective bank accounts and the shares will be credited in their demat account. MAIN CONCERNS IN INTERNET BANKING In a survey conducted by the Online Banking Association.Y. PC Magazine Online also offers a primer: How Encryption Works. 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. There is a dual requirement to protect customers' privacy and protect against fraud. and that the volume of online bill payments will reach 3. member institutions rated security as the most important issue of online banking. Some basic information on the transmission of confidential data is presented in Security and Encryption on the Web.S.
access your account. also known as electronic fund transfer (EFT). To withdraw cash.COM (BANKING & INSURANCE) . electronic banking means 24-hour access to cash through an automated teller machine (ATM) or Direct Deposit of paychecks into checking or savings accounts. Many financial institutions use ATM or debit cards and Personal Identification Numbers (PINs) The federal Electronic Fund Transfer Act (EFT Act) covers some electronic consumer transactions. or those you authorize.‘‘BANKING INDUSTRY’’ 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. 15. uses computer and electronic technology as a substitute for checks and other paper transactions. 40 T. ELECTRONIC BANKING For many consumers. But electronic banking now involves many different types of transactions.B. EFTs are initiated through devices like cards or codes that let you. Electronic banking.Y.
‘‘BANKING INDUSTRY’’ make deposits. and utility bills. ATMs must tell you they charge a fee and its amount on or at the terminal screen before you complete the transaction. Some financial institutions and ATM owners charge a fee. mortgages. are paid automatically.Y. For instance. Generally. on the Internet or online. such as paychecks and Social Security checks. Pay-by-Phone Systems let you call your financial institution with instructions to pay certain bills or to transfer funds between accounts. This could occur at a store or business. Debit Card Purchase Transactions let you make purchases with a debit card. request transfers between accounts. While the process is fast and easy. You also may pre-authorize direct withdrawals so that recurring bills. or by phone. which also may be your ATM card. Check the rules of your institution and ATMs you use to find out when or whether a fee is charged.COM (BANKING & INSURANCE) • • • . and pay bills electronically. The process is similar to using a credit card. Personal Computer Banking lets you handle many banking transactions via your personal computer. funds from your bank account could be withdrawn fraudulently. with some important exceptions. or transfer funds between accounts. particularly to consumers who don’t have accounts with them or on transactions at remote locations. Be cautious before you pre-authorize direct withdrawals to pay sellers or companies with whom you are unfamiliar. you may use your computer to view your account balance. such as insurance premiums. you generally insert an ATM card and enter your PIN.B. • Direct Deposit lets you authorize specific deposits. You must have an agreement with the institution to make such transfers. a debit card 41 T. to your account on a regular basis.
and your rights for error resolution. read the documents you receive from the financial institution that issued your “access device.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. Although the means varies by institution. may differ with a debit card.‘‘BANKING INDUSTRY’’ purchase transfers money — fairly quickly — from your bank account to the company’s account. 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. return receipt requested.2) Disclosures To understand your legal rights and responsibilities regarding your EFTs. which may contain more information about EFTs. The best way to protect yourself if an error occurs — including erroneous charges or withdrawals from an account. Your liability for unauthorized use. Keep a copy of the letter for your records.” That is. No one should know your PIN except you and select employees of the financial institution.Y. or for a lost or stolen ATM or debit card — is to notify the financial institution by certified letter. 15. it often involves a card and/or a PIN.B. to avoid the possible loss of funds through fraud. So it’s important that you have funds in your account to cover your purchase. You also should read the documents you receive for your bank account. Also be sure you know the store or business before you provide your debit card information. a card. 15. code or other means of accessing your account to initiate electronic fund transfers.COM (BANKING & INSURANCE) . 42 T. so you can prove that the institution received your letter.
if no error has been found. it has 10 business days to investigate. you may have little recourse.COM (BANKING & INSURANCE) • • . you can’t be held responsible for any unauthorized withdrawals. you won’t be responsible for more than $50 for unauthorized use.4) Lost or Stolen ATM or Debit Cards If your credit card is lost or stolen. If someone uses your ATM or debit card without your permission. the institution has no obligation to conduct an investigation if you’ve missed the 60-day deadline. but do report its loss within 60 days after your statement is mailed to you.‘‘BANKING INDUSTRY’’ If you fail to notify the institution of the error within 60 days. you risk unlimited loss.If unauthorized use occurs before you report it. 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. Under federal law.Y. At the end of the investigation. the amount you can be held responsible for depends upon how quickly you report the loss to the card issuer. If you report an ATM or debit card missing to the card issuer before it’s used without your permission. If you fail to report the loss within two business days after you realize the card is missing. Once you’ve notified the financial institution about an error on your statement. you could lose as much as $500 because of an unauthorized transfer. • If you report the loss within two business days after you realize your card is missing. you can’t lose more than $50. the institution may take the money back if it sends you a written explanation. If you fail to report an unauthorized transfer within 60 days after your statement is mailed to you. That 43 T. you can lose much more.B. 15.
you may want to shop around to be sure you’re getting the best “stop-payment” terms available. If your purchase is defective or your order is not delivered. If you fail to provide the written follow-up. those lower limits apply instead of the limits in the federal EFT Act. if you lose it. 44 T. keep these tips in mind: • Take care of your ATM or debit card. such as insurance companies. the institution’s responsibility to stop payment ends.COM (BANKING & INSURANCE) .5) Limited Stop-Payment Privileges When you use an electronic fund transfer. the issuer must reasonably extend the notification period. If you’ve arranged for regular payments out of your account to third parties. 15. when you can stop payment. you can stop payment if you notify your institution at least three business days before the scheduled transfer. If you failed to notify the institution within the time periods allowed because of an extenuating circumstance. if state law or your contract imposes lower liability limits. Know where it is at all times. If this feature is important to you. report it as soon as possible. it’s as if you paid cash.6) Suggestions If you decide to use EFT.B. such as lengthy travel or illness. In addition. 15. but the institution may require a written follow-up within 14 days of the oral notice.Y. That is.There is one situation. The notice may be oral or written.‘‘BANKING INDUSTRY’’ means you could lose all the money in your account and the unused portion of your maximum line of credit established for overdrafts. however. the EFT Act does not give you the right to stop payment. it’s up to you to resolve the problem with the seller and get your money back.
You can facilitate payment of electricity and telephone bills. Contact your bank or other financial institution immediately if you find unauthorized transactions and errors 15. That way. Be aware that some merchants or companies may use electronic processing of your check information when you provide a check for payment. This will make it more difficult for a thief to use your card. the bank does not charge customers for online bill payment. telephone number.To pay your bills. mobile phone. service providers and insurance companies. you can find errors or unauthorized transfers and report them.7) Bill payment service Each bank has tie-ups with various utility companies. One-time standing instruction will ensure that you don't miss out on your bill payments due to lack of time. across the country.B.COM (BANKING & INSURANCE) . You can also set up standing instructions online to pay your recurring bills. 45 T. or birthdate. Most interestingly.Y. credit card and insurance premium bills. automatically.‘‘BANKING INDUSTRY’’ • Choose a PIN for your ATM or debit card that’s different from your address. • • Review your monthly statements promptly and carefully. 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. Social Security number. all you need to do is complete a simple one-time registration for each biller. Keep and compare your receipts for all types of EFT transactions with your periodic statements.
Nashik. Shopping at your fingertips Leading banks have tie ups with various shopping websites. Thane.10) Recharging your prepaid phone Now you no longer need to rush to the vendor to recharge your prepaid phone. you can report lost card online.B.9) Railway pass This is something that would interest all the aam janta. The pass will be delivered to you at your doorstep. every time your talk time runs out. With a range of all kind of products. 15. The bank would just charge Rs 10 + 12. your phone is again back in action within few minutes. they can also apply for an additional card. entering your mobile number and the amount for recharge. You can also buy railway and air tickets through Internet banking. Not just this. 46 T. request a credit line increase and God forbid if you lose your credit card.Y.‘‘BANKING INDUSTRY’’ 15. Surat and Pune. 15. But the facility is limited to Mumbai. By just selecting your operator's name. Just top-up your prepaid mobile cards by logging in to Internet banking. you can shop online and the payment is also made conveniently through your account.8) Credit card customers Credit card users have a lot in store. With Internet banking.COM (BANKING & INSURANCE) .24 per cent of service tax. customers can not only pay their credit card bills online but also get a loan on their cards. Indian Railways has tied up with ICICI bank and you can now make your railway pass for local trains online.
Alerts on account activity or passing of set thresholds 47 T.B. Mini-statements and checking of account history 2.1)) Account Information 1.‘‘BANKING INDUSTRY’’ 16. payments etc.2. via a mobile device such as a mobile phone. The scope of offered services may include facilities to conduct bank and stock market transactions. In one academic model.1) Mobile Banking Services Mobile banking can offer services such as the following: 16. account transactions. to administer accounts and to access customized information." 16. 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.Y.MOBILE BANKING Mobile Banking is a term used for performing balance checks.COM (BANKING & INSURANCE) . mobile banking is defined as: "Mobile Banking refers to provision and availment of bankingand financial services with the help of mobile telecommunication devices.
Mutual funds / equity statements 7. Micro-payment handling 3. Access to loan statements 5. Peer to peer payments 48 T. Insurance policy management 8.‘‘BANKING INDUSTRY’’ 3.COM (BANKING & INSURANCE) . Commercial payment processing 5.Y. Bill payment processing 6.3)) Payments & Transfers 1. Monitoring of term deposits 4. Status on cheque. Mobile recharging 4. Access to card statements 6. stop payment on cheque 16. Domestic and international fund transfers 2. Pension plan management 9.B.
Y.B.1) Push and pull messages SMS banking services are operated using both push and pull messages. without the customer initiating a request for the information. 17. using a mobile phone. for obtaining information or performing a transaction in the bank account. Pull messages are those that are initiated by the customer.COM (BANKING & INSURANCE) .‘‘BANKING INDUSTRY’’ 17. Push messages are those that the bank chooses to send out to a customer's mobile phone. as published and updated by the bank. such as a large withdrawal of funds from the ATM or a large payment using the customer's credit card. or requests for current information like currency exchange rates and deposit interest rates. Typically push messages could be either Mobile marketing messages or messages alerting an event which happens in the customer's bank account. etc. SMS BANKING SMS Banking is a technology-enabled service offering from banks to its customers. 49 T. Examples of pull messages for information include an account balance enquiry. permitting them to operate selected banking services over their mobile phones using SMS messaging.
One-time password and authentication Typical pull services would include: Account balance enquiry. SMS banking solutions offer customers a range of functionality.1. Mini statement request. Stop payment instruction on a cheque. or both and financial and non-financial transactions. Successful payment of a cheque issued on the account.B. Large value withdrawals on an account. Typical push services would include: • • • • • • Periodic account balance reporting (say at the end of month). Requesting for an ATM card or credit card to be suspended.‘‘BANKING INDUSTRY’’ 17. Electronic bill payment. Transfers between customer's own accounts.1)) Typical push and pull services offered under SMS banking Depending on the selected extent of SMS banking transactions offered by the bank. classified by push and pull services as outlined below. Large value payment on a credit card or out of country activity on a credit card. like moving money from a savings account to a current account to fund a cheque. a customer can be authorized to carry out either non-financial transactions. Reporting of salary and other credits to the bank account. De-activating a credit or debit card when it is lost or the PIN is known to be compromised. Foreign currency exchange rates enquiry. Large value withdrawals on the ATM or EFTPOS on a debit card.COM (BANKING & INSURANCE) • • • • • • • • • • .Y. 50 T.
by 1997 there were more than 160. device used by bank customers to process account transactions. 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.000 ATMs across the United 51 T. a personal identification number (PIN) must also be entered by the user using a keypad. To prevent unauthorized transactions.. 18. The computer then permits the ATM to complete the transaction. Banks have formed cooperative. AUTOMATED TELLER MACHINE 18. accept deposits. transfer funds.1) INTRODUCTION ATM.COM (BANKING & INSURANCE) .Y. Typically.‘‘BANKING INDUSTRY’’ • Fixed deposit interest rates enquiry. and provide information on account balances. most machines can dispense cash. nationwide networks so that a customer of one bank can use an ATM of another for cash access.B.
N. A customer using a coded card was dispensed a package containing a set sum of money.‘‘BANKING INDUSTRY’’ States.3) SECURITY 18. Sensitive data in ATM transactions are usually encrypted with DES.B. Some ATMs will also accept credit card. The first ATM was installed in 1969 by Chemical Bank at its branch in Rockville Centre. 52 T.COM (BANKING & INSURANCE) . is used to prevent fraud. device used to obtain consumer credit at the time of purchasing an article or service.Y. but transaction processors now usually require the use of Triple DES. and increasing scope of value-added ATM services will maintain growth in the industry. Remote Key Loading techniques may be used to ensure the secrecy of the initialization of the encryption keys in the ATM.3.2) Growth of ATM The number of ATMs installed in India grew by almost 28%. Wide acceptance of ATMs by consumers.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". 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. to more than 27. introduction of biometric ATMs. 18.Y. from 21.000 by March 2007. 18.000 in March 2006. required by law in many jurisdictions.Encryption of personal information.
53 T.2)) Customer identity integrity There have also been a number of incidents of fraud where criminals have attached fake keypads or card readers to existing machines. Various ATM manufacturers have put in place countermeasures to protect the equipment they manufacture from these threats.3. These have then been used to record customers' PINs and bank card information in order to gain unauthorized access to their accounts.Y.COM (BANKING & INSURANCE) .‘‘BANKING INDUSTRY’’ 18.B.
10 years ago.Y. For instance. there has been a major transformation on the technology front in the banking sector. increasingly.‘‘BANKING INDUSTRY’’ 19. visits to branches of banks especially in the metros and bigger towns are rare. 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 cost—to the bank. internet banking and phone banking. banks can carry out data analytics to guage the customer’s requirements and thus offer customized products to a specific category of 54 T.COM (BANKING & INSURANCE) . banking has turned out to be more of an inter-face with a machine or in other words it has become faceless. 90% of all transactions made by the customers of ICICI bank were through the branches and 10% were through online. Many companies in India have adopted this strategy and have managed to lower the interaction of the customer with the bank branches. There has been a sea change compared to the old days when carrying out a transaction as simple as cash withdrawal sometimes took hoursNow.B. For instance. CONCLUSION Over the last decade. With ATMs.
technology will play a bigger role in using the cash available in the so called bottom of pyramid. This will create more synergy and reduce the cost. No technology is good or bad and any investment in it should be for improvement in business. there should be continuous interaction between technology department and different business divisions. 55 T.‘‘BANKING INDUSTRY’’ customers. The technology should be used to make better business decisions. In fact. Joint Managing Director ofICICIBank.B. Apart from this.Y. The top management obtains the feedback from different sources such as employees and customers among others. for effective use of the technology within a company. technology can also be used for managing credit risk which has taken centre stage after the sub-prime crisis.COM (BANKING & INSURANCE) . said Ms Chanda Kochhar. It is very important for the senior management to decide which technology is working best for their organisation. Going forward. “Banks can use technology as an enabler as well as a differentiator”.
B.Y.‘‘BANKING INDUSTRY’’ 20.google.COM (BANKING & INSURANCE) .managementparadise.BIBLIOGRAPHY WEB SITES www.economictimes.banknetindia.org.com www.in • WWW.COM 56 T.com www.com www.rbi.