Chapter I: PREAMBLE

1.1 Introduction

The financial transactions have at most important in a society and so is

the case when it comes to India. If we look at in the Indian history we realized
that it has started with the exchange of goods with another goods or service
provided. It means to cope up with the once own needs the goods were used
as a medium. It can be stressed in the history and it is referred as barter
system. Later on the need of human beings were made with the help of the
currency called different typical types of stone.

When it was realized stone currency has limitations and as it was

confined to particular area. The same time, in one of the area the metal was
used as substitute for the exchange of goods and stone currency which has
slowly developed in to common currency. Banking domain had its own
importance in to the common people daily life routine life also these banking
services are used widely across all over the world. It is everywhere counter
one of aspects of banking.

The significance of banking can be experienced in our day to day life.

We need to look at it with different aspects such as the institutions, which are
inevitable in the present day set up. One needs to understand how they
transact. How the concept of transaction did have emerged? There were few
simple questions and concerns which were aroused and need to understand
deeply. Currency is vital and has an important part in everyones day to day
transactions and deals. Since historical times, the currency was evolved in
different types like metal coins, paper notes and plastic money. Plastic
money can be segregated into Credit cards, debit cards, vouchers. The
banking transaction has been rapidly grown across the globe on large scale
in terms of online shopping, online banking, etc.

The need arose for a third party to assist for smooth bandwidth for
transaction which mediates between the seller and buyer. It helps to hold
custody of money and goods, remit funds and to collect proceeds.

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 This leads to the requirement of an external entity which would facilitate
and smoothly handle the transaction between the two parties. (Customer and
vendor).The body which will ensure that the transaction is fairly done
between customer and vendor and everything is dealt in appropriate manner.
This mediator is known as Banker.

As the number of mediators/bankers grows there must be a body which

should govern these mediators/bankers and must improve the quality of the
banking services and policies. These governing bodies are also known as
BANK and the theory is known as BANKING. People require money, and
to fulfill the same the bank can lend them money for long or short term
duration. Banks are there to help such people by providing them loans with
charging them appropriate interest rate. The world wouldn't run smoothly
without credit and hence the bank comes in picture.

Banking sector had a history of long journey starting from drowsy

commercial organization towards an exceedingly preemptive as well as
energetic unit. The revolution had mainly taken out due to huge amount of
liberalization along with the changes in economy which permitted finance
institution to look for new areas of professional prospects other from running
regular business streams for revenue generation (i.e. monetary transactions).
This way banking domain of India was extremely split into 30 different banking
components which added at max 50% of credits along with 60% of advances.
Banks in Nationalized sector are remain to be the major moneylenders for
economy by virtue of sheer magnitude and perceptive linkages that ensures
the large deposit enlistment.

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1.2 History of Banking

In India, at the times of Vedic era and during the Maurya reign there
was a device namely ADESHA was being used for the purpose of the
coping with financial requirements and also used to maintain the details of
the loan and its transactions.

There was a particular order in which the currency was paid to the
needful which in terms of banking was termed as a transaction. Later it was
termed as bill of exchange which is understood today and is mostly used
worldwide.

During the era of Buddha, multiple instruments were used in the

banking operations. There is handwritten agreement in which the details of all
the transactions and amounts were shared and agreed upon and shared
between two merchant parties. In the current era the banking domain was re-
introduced in the 18th Century.

The first banks which were established in India are The General Bank
of India (establishment year 1786) and Bank of Hindustan (establishment
year 1770).In spite of these even after independence, for longer period of
time the Presidency Bank operated as a quasi-central bank. It was continued
until the governing body Reserve Bank of India was formed year of 1935.

Central government in the year 1969 took the decision of nationalizing

all big banks which were operating in India and brought them under their
ownership and control. These bank were ran under a format defined which is
called as profit-making public sector undertaking' (PSU). These banks were
granted to participate against each other in the ways they function as
commercial banks in true sense.

The banking sector of India is divided into the 4 types including public
sector undertakings along with the state bank. Later these were combined by
private commercial banks and foreign banks as well in the year of 1990s.

3
 The Banking domain of India is matured enough in the region of money
source, specially built product varieties along with richness. However, the
banking facilities are the major concern and challenge in the rural parts of
India.

Indian government is taking initiatives and trying to launch different

plans and schemes along with the help of State Bank of India who were trying
for increasing their network along with NABARD for processes like micro
finance.

Nationalization of the banks is done in 1960s. In spite of the rules and

regulations and policies implied by the central regulatory body i.e. RBI, the
other banking institutes in India excluding SBI (State Bank of India) were
controlled and the operations are governed by the individuals.

Later by the end 1960s, the banking sector was grown to a good extent
and was one of the major factors to boost the Indian economy and
development of the country.

The banking sector came across one of the largest employer during this
period. These discussions and debates lead to the nationalization of the all
banks in the banking domain of India. Prime Minister of India, Indira Gandhi
also sent out a message saying that the nationalization of all banks in India
must be carried out.

The ordinance was passed by the Government of India known as

('Banking Companies (Acquisition and Transfer of Undertakings) Ordinance,
1969') (GOI, 1969) post which government started the process of
Nationalization" of all the private banks with an immediate effect from 19th
July 1969 which was later approved by the President on 9 Aug 1969.

The 85% of bank deposits were covered/shared by these private banks

in country. Political personality such as Shri. Jayaprakash Narayan has
described this step as a "masterstroke of political sagacity". The Bill was
accepted and passed in Parliament of India.

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 Later, there was a phase in which 6 or even more number of private
banks was nationalized. This indirectly lead the government to control and
monitor the transactions these banks. About 91 percentages of the
transactions all over India was mentored by Government of India. There were
merger of different which were performed which decreased the count of the
nationalized banks in India. The first merger example was between New Bank
of India along with PNB.

The nationalized bank grew with an average of 4% with respect to the

Indian economy. In the year of 1990 government came up with the
policy/rules of liberalization under which a very small number of private banks
were granted permission or license to carry out the banking transactions.

Few of the examples that can be listed are Global Trust Bank, OBC,
UTI Bank (renamed afterwards as Axis Bank limited), ICICI bank Limited
&HDFC bank limited. It also led to the immediate increase in the economy of
the country and refreshed the banking industry in the country. The banks from
the private sector, government sector and foreign sector helped a lot to
increase the financial system of India.

The further step in the Indian banking was a policy to be implemented

for the Investors all around the world. The foreigners who show interest and
invest in the Indian banks were granted the right to vote. There was a
significant rise in foreign investors. At the moment it is 74% with some
restrictions were imposed.

The policy had a significant impact on the banking industry in India. Till
now the Bank authorities followed the method 4-6-4 (i.e. Borrow @ 4%, Lend
@6%, Go home @4%) of operations and functions. This new methodology
and the operations of the banks were noticed in the modern age. This in turn
directed towards the progress of the merchandizing business in India. The
people got more benefits and the banks were also benefitted by business.

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1.3 Current Period

At present the overall banking institutes being a part of IInd Schedule of the
RBI Act, 1934 are termed as Scheduled Bank. This includes the scheduled
co-operative and commercial bank. The Scheduled Commercial Banking
institutes are further classified into five different categories with respect to the
operation and functioning of the bank. These banks are as mentioned:

State Bank of India and its Associates Nationalized Banks

Private Sector Banks

Foreign Banks

Regional Rural Banks.

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1.4 Implementation of Banking Technology:

The Information Technology has significant influence over banking

sector of India and organization. In India by and large online banking is
introduced with the use of computers.

After the liberalization took place in 1990 the Banking domain in India
is exposed to the global market and was in highlighted worldwide. It also
helped to lift the economy of India. It was a bit difficult for the Indian banks to
compete with the international banks in align with the services which were
given to the end customers and without using the information technology.

The RBI has come up with different policies and has set up a board to
deal and co-ordinate with the Information Technology people. In the year of
1984 government founded a commission on computerization of banking
sector.

The major recommendations of A Bank is to deal in with the financial

transactions in which the bank a user can get the benefits of banking
services like withdrawal, deposit, loans, etc. It also became a huge
organization to provide personal loans, business loans and other service like
credit and debit cards, online banking to people.

Introduction of Magnetic ink character recognition (MICR) technology

was introduced in most of the banks in the metro cities. It helps to use of
consistent cheque form and encoders.

In the year 1988 a commission was set up on automation in Banks which was
led by Dr. C. Rangarajan. Its primary objective was to automate the banking
transaction in almost all banks. They also thought of computerization of bank
branches and improve the network and connectivity by virtue of computer
networks and information technology. This will help each bank to carry out the
transaction in a smooth and safe way.

In the year 1994, a board was set up to handle all the technology
related issues in the banks. They mostly focused on the EFT (Electronic Fund
Transfer) system, with online net banking with the help of computer networks

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and communications. It also mentioned that MICR clearing must be included
in all banks.

In the year 1995, the board of authority which was emphasizing on the
EFT along with supplementary e-transactions agreed for the MICR policy.
This led to installation of EFT machines almost over all banks in India. The
Automated Teller Machine (ATM) which was first launched by HSBC in 1987
in Mumbai. All other banks installed ATMs for all their branches all over India.
The private sector banks are the one who have largest count of ATM
machines in India. As per current statistics India has more than 1 lakh ATMs.

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1.5 Overview of Banking Sector of the World:
International financial institutions (IFIs) is well renowned financial
institution which were formed by number of nations, and therefore it is
subjected to international act. Owners or stakeholders were normally
governments, even though other international commercial institutions and
different organizations rarely figured out as a stakeholders.

The supreme famous IFIs are creations of many countries, even though
some mutual financial institutions (created by 2 countries) are also existed
and were officially IFIs. The finest acknowledged IFIs were established later
than World War II to help in the modernization of European countries and
make available mechanisms for international support of administration with
the global financial system.

It has multiple types such as multilateral development bank

A multilateral development bank (MDB) is an organization, created by

a group of countries that provides financing and expert advising for the point
of development. MDBs have huge memberships including both developed
contributor countries and rising borrower countries. MDBs finance projects in
the structure of long-standing loans at market tariff, very-long-term loans (also
known as credits) lower market rates, and all the way through grants.

The subsequent are generally classified as the main MDBs:

1 World Bank1

2 International Fund for Agricultural Development (IFAD)2

3 European Investment Bank(EIB)

4 Asian Development Bank (ADB)

5 European Bank for Reconstruction and Development (EBRD)

6 CAF - Development Bank of Latin America (CAF)

1
World Bank :- http://www.worldbank.org/
2
IFAD:- http://www.ifad.org/

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 7 Inter-American Development Bank Group (IDB, IADB)

8 African Development Bank (AFDB)

1.5.1 World Bank

The World Bank is a United Nations worldwide monetary organization

which offers / lends money to the rising nations for their resources plans. This
World Bank considered as a part of World Bank Group, and an associate of
the United Nations Development Group.

As an instruction to the World Bank's operations in any exacting country, a

Country Assistance policy is produced, in assistance with the local
government and any concerned stakeholders and may rely on logical work
performed by the Bank or additional parties.

The World Bank's official objective is the decrease of poor quality.

According to its Articles of Agreement, all the verdicts should be directed with
promise for the sponsorship of overseas venture and global business fair and
to facilitation of capital investment

World Bank has not to be mystified with the United Nations World Bank
Group, a member of the United Nations Economic and Social Council, and
relations of five international organizations that make leveraged loans to poor
countries.

1. International Bank for Reconstruction and Development (IBRD)

2. International Development Association (IDA)

3. International Finance Corporation (IFC)

4. Multilateral Investment Guarantee Agency (MIGA)

5. International Centre for Settlement of Investment Disputes (ICSID)

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1.6 Ranking of Indian Banking sector in Globe:
Table 1.1 Ranking of Major financial institutions in World

Sr. Revenue
Company Industry Headquarters
No. (Billion $)
1 Japan Post Holdings Insurance 201.2 Japan
2 Berkshire Hathaway Insurance 162.5 United States
3 AXA Insurance 147.5 France
4 Allianz Insurance 140.3 Germany
5 ICBC Banking 134.8 China
Invest.
6 Fannie Mae 131.9 United States
Services
7 ING Insurance 130 Netherlands
8 BNP Paribas Banking 126.2 France
9 Generali Group Insurance 116.7 Italy
China Construction
10 Banking 113.1 China
Bank
11 Banco Santander Banking 108.8 Spain
CAPEC
12 Banking 108.2 Country data MR
MAURITANIA
13 Socit Gnrale Banking 107.8 France
14 HSBC Banking 104.9 United Kingdom
Agricultural Bank of
15 Banking 103 China
China
16 Bank of America Banking 100.1 United States
17 Bank of China Banking 98.1 China
18 Wells Fargo Banking 91.2 United States
19 Citigroup Banking 90.7 United States
20 Prudential Insurance 90.2 United Kingdom
62 State Bank of India Banking 35.1 India
Source: (wikipedia, 2014)

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1.7 Overview of Banking Sector in India

1.7.1 Physical Structure

It is important to view the framework of banking sector.

Figure 1.1: Banking Structure of India

Source: - (Bank, 2010)

1.7.2 Ministry of Finance:

It is important ministry under Govt. of India and has concern itself with
taxation, financial legislation which also covers financial institutions, capital
markets, center and state finances, and the Union Budget.

1.7.3 Reserve Bank of India (RBI):

RBI (Reserve Bank of India) came into existence during the British rule
on 1st April 1835 as per the requirements of the Act called Reserve Bank of

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India Act 1934. In banking industry of India, RBI (Reserve Bank of India) is
treated as uppermost body and called as central bank which controls the
Banking system in India.

After India achieved Independence on 15th August 1947, the RBI was
declared as the nationalized bank the share capital was divided and it
comprises of 100 shares shared across each whose ownership was with the
private shareholders previously. After the India's independence in 1947, the
RBI was nationalized bank in 1949. The RBI has a chief part for expansion in
every sector of the nation and to improve the banking facilities in India along
with the help of the government.

There is an Asian Clearing Union and Reserve Bank of India is part of

it. There is a Board of Directors in RBI which consists of 21 members. The
board comprises of the Governor, 4 de. Governors, 2 diplomats from the
Ministry of finance, and 10 executives which are nominated by the
government along with 4 representatives of the local boards.

1.7.4 Scheduled Banks:

RBI has passed a second schedule ACT in 1934. Scheduled banks lie
under this category and follow the rules and regulations as per the second
schedule ACT of RBI. There are certain limits which are imposed and need to
be satisfied by these banks like having a paid up funds and treasure of at
least 0.5 Million abiding to the rules and regulations of the Reserve Bank of
India and its policies not damage the amount and the interest of the investors
and depositors(customers).

Commercial Bank and Co-operative banks are the two categories of

the Scheduled banks. There is a small difference between their operations
and functioning and hence they are categorized differently. They are classified
on the basis of the holding pattern. There is an Act of Cooperative Societies
under which all scheduled banks are registered. The Cooperative society
have rules are regulations and all scheduled banks are abide to these rules.

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1.7.5 Scheduled Commercial Banks (SCBs):

The SCBs are playing an important role in getting business to the

scheduled Banks. It is a very important factor and plays a vital role in growth
of the Scheduled Business. Further to this these SCBs are classified into five
different categories depending on the operations performed by them to
function and according to the owner of the bank.

For example, SBI and its acquaintances are termed as different group
of SCBs, as these were administered as per SBI Subsidiary Bank Act which
came into existence in 1959. The public sector banks are contains all
nationalized banks of India, the State Bank of India along with acquaintances
cover almost 70% of the business all over the country. There was an inclusion
of IDBI limited in the nationalized banks category in the month of December in
2004.

1.7.6 Co-operative Banks

These banks came into existence because at one time the

Government sponsored and supported the cooperative movement and
special emphasis was laid down on the rural banking sector. These banks
had limited banking functions and their presence was restricted in limited
areas.

Their objective was to support small scale Industries, SMEs, and

operating in the rural sectors of the country. The setup of the cooperative
banks was under the category of scheduled banks as well as non- scheduled
banks depending on their constitution and the approval from the principals.
These banks came into existence on the basis of the Indian Societies Act,
which came into existence in the country in the year 1904. The chief
constituents for the approval of cooperative banks and transactions are
monitored by the bodies such as the Reserve Bank of India, NABARD, the
Central as well as the State Government agencies.

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1.7.7 Public Sector Banks

In the case of Public Sector Banks, the government of the country

controls the major holding which should not be less than fifty percent at any
given time and that the majority of the holding is vested with the government.
Another important criteria laid down is that the shares of these banks should
be listed on all the major stock exchanges in India.

1.7.8 Private Sector Banks

As the economy of the country changed drastically, the need for

banking and financial institutions also grew drawing the attention from
International Markets. Foreign Banks, Banks having Partnerships as well as
strategic tie-ups also entered into competition with the nationalized banks and
the areas of focus was primarily to offer better, reasonable, advanced service
in banking sector.

The key areas where the Multi-national as well as Private Banks

focused was on the Customer Services, Client Satisfaction, International
Services, Internet Banking, Phone Banking, Computerized Operations,
Quicker delivery mechanisms. There are many other examples of Private
Sector Banks which are co-operative and non-scheduled. These are small co-
operative banks but which are non-scheduled.Mahesh Sahakari Bank Limited
is one of the examples of local co-operative bank.

1.7.9 Foreign banks

The foreign banks are the one who have their base location outside
India and they have established their branches in the country. It is solely
responsible for the development of the banks and monitoring the overall
status of the banks and institutes and any of the financial bodies in India. It
also determines in combination with the government of India, the financial and
recognition policies and is also managed by RBI. The existence of the foreign
banks and institutions are present in the country either via the supplementary
resources or by setting up their branches in India.

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1.7.10 Regional Rural Banks

The Narasimham committee introduced new features which were

followed by the Regional Rural Banks. The objective of these rural banks was
to have a strategic tie-up with a Nationalized or a Cooperative Bank, offer the
services to the rural population and show their existence in India as a mode
of forward integration in the offer better services and enter into completion
with the Nationalized Banks.

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1.8 E-Banking

This has alias electronic banking or internet based banking web

applications, at the same time it is also called by name of virtual banking as
well. The services which allows bank consumers to retrieve their own
information, carrying out various monetary dealings, and save money in to
accounts, amount withdraw or pay number of bills via Internet without
physical presence at the branch or bank counters. It was expediency of
retrieving banking services from the comfort of their home or office. Now days
E-banking has become buzz word.

The functionality of E-banking allows any one of consumer by having a

personal computer attached to the network and browser which get associated
to own banking online portal and execute anything of simulated bank
transactions.

What do we understand by the term of e-banking? It is related to the

carrying out bank related business with the help of the computers or tele-
banking. The beauty of the e-banking is system is updated immediately after
every transaction automatically.

The beauty of the e-banking is that user /customer or who can be

called as account holder can carry out all banking transactions seating at
home with the help of website for which one will have to complete required
formalities such as getting registered on line, obtaining pass ward , which is
treated as key to operate.

As of now, in online banking portal consumers bank has been

supported with integrated database which is handled with web-based
application. Number of facilities offered through e-banking are visible to the
user on the website of the concerned bank.

Online /Internet Banking services were established and introduced in

our banking system from the late eighties. This began when the ideas was
primarily projected and try out. Though, this was become materialized only in
year of 1995 when Presidential Savings Bank publicized the ability of online

17
banking for daily consumers.

This was hurriedly taken up by various other banks like Wells Fargo,
Chase Manhattan etc. Currently, very often banks operated solely without the
Internet based applications and now most of the customers need not have
four-wall' thing for any reason.

At starting phase, creators had foreseen that this will be matter of time
which decides a fore web-based banking entirely swapped out the manual
method. On the other hand the realities has proven that this was an over
positive calculationlot of bank users were aligned to older method and
having inborn disbelief on the online banking process. Number of consumers
has chosen not to utilize multiple online banking facilities just because of
nasty experience of scams and in capacity of usage of web-based banking
applications.

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1.9 Overview of Internet Banking in India

RBI had formed a committee for online banking portals, which was
classified and separated total web-based banking services availed in India in
three sub groups. Classification was grounded on allowed permission access
stages. Detailed description as below

I. Only Information based System:

This assists to get the common info such as loan rate, location of
branch center, availed banking services and types were hosted on the
banking portal. Significantly prevailing services could be availed to copy
different process/applications form of used for day to day banking. E-mail has
been used as the major way of communication among the users and others.

The credentials of bank user are important parameters in order to

operate online banking portal services. These credentials are provided by
bank organization and assisted to end user in case of mismatch. Risk of
unauthorized access and security of such applications are take care
appropriately.

II. System for Electronic Information Transfer:

These kinds of applications offer specific user data as an output which

may be in style of balance sheet, minute information about banking
transaction or account holding report. Most of the data still treated as a 'read
only' presentation. Authentication and authorization of banking user carried
out with the help of passwords based processes.

Statistics is retrieved through online banking portal either offline or in

batch process. These web-based systems are not connected via computer
networks.

III.Complete E-Transaction Applications:

These kinds of application are having capacity of both way

communications for the e-transactions incurred using online banking portal.
User may generate/initiate any banking operation on the web-based
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applications. These applications are having very high degree of safety
processes and governing mechanism.

With current settings, application servers along with other related

applications are placed in secure set-up. This encompasses various factors
as like different technology including automation, computer network also
security as major part, & legal frame etc

1.9.1 Forms of e-Banking

Online banking portal is trying to settle down and is biz word as well.
Regular banking consumers are gradually increasing which are working
through web-based applications. Consumers are now able to perform task
related with not only information about balance or rates but also to carry out
various banking functions. Inappropriately, inadequacy of information about
online banking portal is a challenge.

Someone may catch the variations in meanings of routine banking

operations and which may lead to difficult computations across globe. Online
portal of banking is predominantly pervasive in most of European as well as
East Asian countries etc. There are higher percentage of population is
habitual of online banking in developed countries.

Different forms of E-banking are as follows:

Automatic Teller Machines

Cards:- Credit or Debit

Chip based smart Card

Tele Banking

E-Cheque

Internet Banking (Online banking or E-banking)

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 1.9.1.1 Automatic Teller Machine:

This is also known as ATM. This functionality was intended to

accomplish day to day transactions at the branch center of withdrawing
money. This functionality based on usage of plastic card along with some
characteristics.

Now a days plastic card is treated as replacement of cheque

transactions. It is also independent of own presence of consumer, timing
restrictions for the banking operations& mostly authentication and
authorization for every single transaction which consumes lot of paper.

These ATMs are able to give data of consumer to the banking

applications along with receiving instructions and operate as per instructions
of the authenticate bank ATM card user. These ATMs are now capable of
transferring the amount electronically along with cash handling capacity which
include balance inquiries, money withdrawals or bill payments.

In simple word one can say that this is covering every banking
functions of routine banking life. Now a days one can use ATM card facility
anywhere in the world. When operated in the off-line mode most of services
are restricted to that specific machine allotted. This avails consumer holding
appropriate machine cards distributed by appropriate payment organization
may use any ATM associated with the card for performing the banking
operations and fulfill particular needs.

1.9.1.2 Credit Cards

The concept of Plastic Money was introduced in BNFS for convenience

of the bank consumers. In these cases capping on carrying of cash, ending
transactions in a quicker manner, purchase of goods online as well as by the
use of such cards. These credit cards on an international levels are offered by
two giant organizations such as MasterCard International and Visa
International. In Indian banking sector the nationalized banks also introduced
credit cards for their customers after tying up with these organizations.

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 The services offered by MasterCard and Visa included a variety of
cards for the preferences and usage by customers. These card services were
offered according to the information furnished by the customers to establish
their credibility and financial standing in the society. Flexibility in making
payments in a stipulated time frame, monthly instalments, with a minimum
payment due option given to the customers availing the credit card facility.

Emergency cash withdrawal facility was also provided in these credit

cards along with the purchases various items and listings as per the policies
governing the cards. Earlier these cards needed to be swiped at the
establishments and the facilities availed. Now with the increase in the frauds
in banking sector, many establishments have improvised their security
measures and online approval process for the purchases as well as
maintaining the authenticity of the cardholders have been maintained.

With the increasing popularity of this Plastic Money operations, many

organizations such as Petroleum companies, large business houses, and
commercial establishments have introduced their own cards which need not
have a tie-up with banking and financial institutions but such cards offering
discounts, privileges for the consumers.

1.9.1.3 Debit Cards

Along with the success of the usage of the credit cards, the introduction of
debit cards also came into existence. The major difference being that in the
credit card usage, the privilege was on the credit system whereas in the debit
card the amount would be directly debited from the bank account of the
customer. The condition being that the card holder needs to have sufficient
balance in his / her account so as to complete the transaction or else the
transaction would be declined by the merchant establishment. In both the
cases whether it is a credit card or a debit card, with the mandatory signature
of the card holder.

In addition to this for cash transactions or debit card transactions, the

banking institution has provided a Personal Identification Number which is

22
normally a four digit / six digit code for the sole utilization of the card holder.
This code is used for all such transactions on the debit card. The amount that
has been debited from the bank consumers account is directly credited in
another account of the merchant establishment, who in return can offer
certain additional privileges to the customers for prompt payments. These are
used by such people who would like to spend from their savings and not
rather go on credit.

1.9.1.4 Smart Card:

Some cards are nothing but having additional electronic chip along
with magnetic stripe for strengthening the security aspects of it and provide
some new feature to bank customers, known as Smart Cards. These kinds of
smart card permits multiple of times of data which also can be stored on
regular magnetic cards.

1.9.1.5 Tele-banking:

The business of Tele-banking in general is carrying out financial

transactions using telephones and/or computers. It is a way through which
individuals do business with a bank using a computer or telephone. Tele
banking has been introduced by the banking and financial institutions for the
benefit of the customers in such a complex environment. These services in
line with customer satisfaction and help line services offer round the clock
services to its customers world-wide. Many and simpler to complex services
are now being offered to the customers and the same can be updated by the
customers without visiting their branch or the bank.

These services can be availed by calling on the toll free number

provided by the bank or special service numbers on which their data can be
updated offering confidentiality of data without being compromised. To use
tele-banking service from the bank or financial institution's telephone banking
facility, a bank consumer should registered at first level to allotted service,
where consumer need to set up password (under various names) for own
verification. Post that for accessing telephone banking, consumer have to call

23
specific phone number assigned by financial institution.

The different types of financial transactions can be completed by the

customer by using the option of the tele-banking. A consumer may transact
through telephone banking and obtain the services which include obtaining
account balances and list of latest transactions.

1.9.1.6 E Cheque (Electronic Cheque Payment System)

In the present era most of consumers are at ease with the words like e-
governance, e-commerce, e-tail etc. In the same manner, a new technology is
being developed e-cheque, which will eventually replace the conventional
paper cheque. Electronic cheque addresses the prerequisites of many of
companies, where as of now manual process with paper based cheque is
followed in order to make payment towards other dealers, customers and
management. Common transaction is carried out as where an bank account
user need to generate an automated file consist of various details of user to
whom payment need to be done such as banking institution name, account
number, payees name along with most important field of amount to be
remunerated. Electronic cheque is having every data in the encrypted format.
Also as like normal cheque these e-cheque accept the digital signature of
consumer. The digital signature is in form of calculated digits so that it will
validate-cheque for authorized bank account holder. There is a lot of futuristic
scope for e-cheque imbursement other than replacement of current manual
cheque process as like for internet based spending and payment etc

Advantages of Electronic cheque:

The consumer need not oblige to disclose bank account info to any
other entities for public sale.

The consumer need not oblige to frequently submit subtle monetary

data through internet.

Cheaper than the credit card usage and other related payment
formats.

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 E-cheque process speedily than old-style paper cheque. This also
helps to defend account holders secrecy.

Disadvantages of e-cheque:

E-cheque is having comparatively huge static charges

This has restricted consumption and valid only in simulated domain.

The method of e-cheque is not much applicable for the wholesale

business customers but can be implemented for usage of the government
and other business functions as reason of they are independent of
anonymous access. Processing charges applied for these kinds of operations
are minor as compare to the number of transactions incurred.

E-cheque affords a safety and good online payment method to

companies along with it allows a flawless log in mechanism on the portal.
These are independent of noteworthy venture for latest skills or legal
methods.

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