INTRODUCTION TO BANKING

While walking in the streets of any town or city you might have seen some signboards
on buildings with names- Canara Bank, Punjab National Bank, State Bank of India,
United Commercial Bank, etc. What do these names stand for? Did you ever try to
know about them? If you enter any such building you will find some kind of a business
office. You will see some employees sitting behind counters dealing with visitors
standing in front of them. You will find that some are depositing money at one counter
while some are receiving money at another counter. Behind the counters in the office
you will see tables and chairs occupied by officers. On one side of the office you will
also see a chamber (small partitioned room) where the manager is sitting with papers on
his table.
This is the office of a ‘Bank’.

MEANING OF BANK

You know people earn money to meet their day-to-day expenses on food, clothing,
education of children, housing, etc. They also need money to meet future expenses on
marriage, higher education of children, house building and other social functions. These
are heavy expenses, which can be met if some money is saved out of the present
income. Saving of money is also necessary for old age and ill health when it may not be
possible for people to work and earn their living.
The necessity of saving money was felt by people even in olden days. They used
to hoard money in their homes. With this practice, savings were available for use
whenever needed, but it also involved the risk of loss by theft, robbery and other
accidents. Thus, people were in need of a place where money could be saved safely and
would be available when required. Banks are such places where people can deposit their
savings with the assurance that they will be able to withdraw money from the deposits
whenever required. People who wish to borrow money for business and other purposes
can also get loans from the banks at reasonable rate of interest.

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 Bank is a lawful organisation, which accepts deposits that can be withdrawn on
demand. It also lends money to individuals and business houses that need it.
Banks also render many other useful services – like collection of bills, payment
of foreign bills,\safe-keeping of jewellery and other valuable items, certifying the
credit-worthiness of business, and so on.
Banks accept deposits from the general public as well as from the business
community. Any one who saves money for future can deposit his savings in a bank.
Businessmen have income from sales out of which they have to make payment for
expenses. They can keep their earnings from sales safely deposited in banks to meet
their expenses from time to time. Banks give two assurances to the depositors –
1. Safety of deposit, and
2. Withdrawal of deposit, whenever needed

On deposits, banks give interest, which adds to the original amount of deposit. It is a
great incentive to the depositor. It promotes saving habits among the public. On the
basis of deposits banks also grant loans and advances to farmers, traders and
businessmen for productive purposes.
Thereby banks contribute to the economic development of the country and well being of
the people in general. Banks also charge interest on loans. The rate of interest is
generally higher than the rate of interest allowed on deposits. Banks also charge fees for
the various other services, which they render to the business community and public in
general. Interest received on loans and fees charged for services which exceed the
interest allowed on deposits are the main sources of income for banks from which they
meet their administrative expenses.
The activities carried on by banks are called banking activity. ‘Banking’ as an activity
involves acceptance of deposits and lending or investment of money. It facilitates
business activities by providing money and certain services that help in exchange of
goods and services. Therefore, banking is an important auxiliary to trade. It not only
provides money for the production of goods and services but also facilitates their
exchange between the buyer and seller.

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 You may be aware that there are laws which regulate the banking activities in
our country.
Depositing money in banks and borrowing from banks are legal transactions. Banks are
also under the control of government. Hence they enjoy the trust and confidence of
people. Also banks depend a great deal on public confidence. Without public
confidence banks cannot survive.

DISTINCTION BETWEEN BANKS AND MONEYLENDERS

You may be thinking that a bank is like a moneylender who provides funds to
borrowers and charges interest on the loan. But it is not so. A bank is quite different
from a moneylender. A bank performs two main functions. Firstly, it accepts deposits,
and on that basis it lends money.
The moneylenders, on the other hand, advance money out of their own private
wealth and usually do not accept deposits from others. The following table shows the
distinction between a bank and moneylender.

Basis Banks Moneylenders

1. Entity Bank is organised institutions. Moneylenders are individuals.
2. Activity Banking activities of moneylender include acceptance may not include of
deposits as well as acceptance of deposits, lending of money.
3. Clients Banks meet the needs Moneylenders meet of people in general the needs and
the business of agriculturists and community in particular, poor people.
4. Security Banks accept tangible Moneylenders generally and personal security accepts
gold, jewellery against loans or land as security for giving loan.
5. The process of recovery of loans is flexible, rigid and strict.
6. Interest Rate Interest charged by Rate of Interest banks on loan is decided by the
moneylender governed by RBI and is normally very high.

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 ROLE OF BANKING

Banks provide funds for business as well as personal needs of individuals. They play a
significant role in the economy of a nation. Let us know about the role of banking.
 It encourages savings habit amongst people and thereby makes funds available
for productive use.
 It acts as an intermediary between people having surplus money and those
requiring money for various business activities.
 It facilitates business transactions through receipts and payments by cheques
instead of currency.
 It provides loans and advances to businessmen for short term and long-term
purposes.
 It also facilitates import export transactions.
 It helps in national development by providing credit to farmers, small-scale
industries and self-employed people as well as to large business houses which
lead to balanced economic development in the country.
 It helps in raising the standard of living of people in general by providing loans
for purchase of consumer durable goods, houses, automobiles, etc.
.
TYPES OF BANKS

There are various types of banks which operate in our country to meet the financial
requirements of different categories of people engaged in agriculture, business,
profession, etc. On the basis of functions, the banking institutions in India may be
divided into the following types:

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 Types of Banks

Central Bank Development Banks Specialised Bank

(RBI, in India) (EXIM Bank
SIDBI,
NABARD)
Commercial Banks Co-operative Banks
(1) Public Sector Banks (1) Primary Credit Societies
(2) Private Sector Banks (2) Central Co-operative Banks
(3) Foreign Banks (3) State Co-operative Banks

a) Central Bank
A bank which is entrusted with the functions of guiding and regulating the banking
system of a country is known as its Central bank. Such a bank does not deal with the
general public. It act essentially as Government’s banker, maintain deposit accounts of
all other banks and advance money to other banks, when needed. The Central Bank
provides guidance to other bank whenever they face any problem. It is therefore known
as the banker’s bank. The Reserve Bank of India is the central bank of our country.
The Central Bank maintains record of Government revenue and expenditure under
various heads. It also advises the Government on monetary and credit policies and
decides on the interest rates for bank deposits and bank loans. In addition, foreign
exchange rates are also determined by the central bank. Another important function of
the Central Bank is the issuance of currency notes, regulating their circulation in the
country by different methods. No other bank than the Central Bank can issue currency.

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b) Commercial Banks
Commercial Banks are banking institutions that accept deposits and grant short-term
loans and advances to their customers. In addition to giving short-term loans,
commercial banks also give medium-term and long-term loan to business enterprises.
Now-a-days some of the commercial banks are also providing housing loan on a long-
term basis to individuals. There are also many other functions of commercial banks,
which are discussed later in this lesson.
Types of Commercial banks: Commercial banks are of three types i.e., Public sector
banks,
Private sector banks and Foreign banks.
(i) Public Sector Banks: These are banks where majority stake is held by the
Government of India or Reserve Bank of India. Examples of public sector banks are:
State Bank of India, Corporation Bank, Bank of Baroda and Dena Bank, etc.
(ii) Private Sectors Banks: In case of private sector banks majority of share capital of
the bank is held by private individuals. These banks are registered as companies with
limited liability. For example: The Jammu and Kashmir Bank Ltd., Bank of Rajasthan
Ltd., Development Credit Bank Ltd, Lord Krishna Bank Ltd., Bharat Overseas Bank
Ltd., Global Trust Bank, Vysya Bank, etc.
(iii) Foreign Banks: These banks are registered and have their headquarters in a foreign
country but operate their branches in our country. Some of the foreign banks operating
in our country are Hong Kong and Shanghai Banking Corporation (HSBC), Citibank,
American Express Bank, Standard & Chartered Bank, Grindlay’s Bank, etc. The
number of foreign banks operating in our country has increased since the financial
sector reforms of 1991.
The functions of commercial banks are of two types.
(A) Primary functions; and
(B) Secondary functions.

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(A) Primary functions
The primary functions of a commercial bank include:
a) Accepting deposits; and
b) Granting loans and advances.

a) Accepting deposits
The most important activity of a commercial bank is to mobilise deposits from the
public. People who have surplus income and savings find it convenient to deposit the
amounts with banks. Depending upon the nature of deposits, funds deposited with bank
also earn interest. Thus, deposits with the bank grow along with the interest earned. If
the rate of interest is higher, public are motivated to deposit more funds with the bank.
There is also safety of funds deposited with the bank.

b) Grant of loans and advances

The second important function of a commercial bank is to grant loans and advances.
Such loans and advances are given to members of the public and to the business
community at a higher rate of interest than allowed by banks on various deposit
accounts. The rate of interest charged on loans and advances varies according to the
purpose and period of loan and also the mode of repayment.
i) Loans
A loan is granted for a specific time period. Generally commercial banks provide short-
term loans. But term loans, i.e., loans for more than a year may also be granted. The
borrower may be given the entire amount in lump sum or in installments. Loans are
generally granted against the security of certain assets. A loan is normally repaid in
installments. However, it may also be repaid in lump sum.
ii) Advances
An advance is a credit facility provided by the bank to its customers. It differs from loan
in the sense that loans may be granted for longer period, but advances are normally
granted for a short period of time. Further the purpose of granting advances is to meet

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the day-to-day requirements of business. The rate of interest charged on advances varies
from bank to bank.
Interest is charged only on the amount withdrawn and not on the sanctioned amount.

Types of Advances
Banks grant short-term financial assistance by way of cash credit, overdraft and bill
discounting.
 Cash Credit
Cash credit is an arrangement whereby the bank allows the borrower to draw
amount up to a specified limit. The amount is credited to the account of the
customer. The customer can withdraw this amount as and when he requires.
Interest is charged on the amount actually withdrawn. Cash Credit is granted as
per terms and conditions agreed with the customers.

 Overdraft
Overdraft is also a credit facility granted by bank. A customer who has a current
account with the bank is allowed to withdraw more than the amount of credit
balance in his account.
It is a temporary arrangement. Overdraft facility with a specified limit may be
allowed either on the security of assets, or on personal security, or both.

 Discounting of Bills
Banks provide short-term finance by discounting bills, that is, making payment
of the amount before the due date of the bills after deducting a certain rate of
discount. The party gets the funds without waiting for the date of maturity of the
bills. In case any bill is dishonored on the due date, the bank can recover the
amount from the customer.

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(B) Secondary functions
In addition to the primary functions of accepting deposits and lending money, banks
perform a number of other functions, which are called secondary functions. These are as
follows:
 Issuing letters of credit, traveller’s cheque, etc.
 Undertaking safe custody of valuables, important document and securities by
providing safe deposit vaults or lockers.
 Providing customers with facilities of foreign exchange dealings.
 Transferring money from one account to another; and from one branch to
another branch of the bank through cheque, pay order, demand draft.
 Standing guarantee on behalf of its customers, for making payment for purchase
of goods, machinery, vehicles etc.
 Collecting and supplying business information.
 Providing reports on the credit worthiness of customers.
 Providing consumer finance for individuals by way of loans on easy terms for
purchase of consumer durables like televisions, refrigerators, etc.
 Educational loans to students at reasonable rate of interest for higher studies,
especially for professional courses.

c) Development Banks
Business often requires medium and long-term capital for purchase of machinery and
equipment, for using latest technology, or for expansion and modernization. Such
financial assistance is provided by Development Banks. They also undertake other
development measures like Public Sector Banks comprise 19nationalised banks and
State Bank of India and its 7 associate banks subscribing to the shares and debentures
issued by companies, in case of under subscription of the issue by the public. Industrial
Finance Corporation of India (IFCI) and State Financial Corporations (SFCs) are
examples of development banks in India.

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d) Co-operative Banks
People who come together to jointly serve their common interest often form a co-
operative society under the Co-operative Societies Act. When a co-operative society
engages itself in banking business it is called a Co-operative Bank. The society has to
obtain a license from the Reserve Bank of India before starting banking business. Any
co-operative bank as a society isto functions under the overall supervision of the
Registrar, Co-operative Societies of the State.
As regards banking business, the society must follow the guidelines set and issued by
the Reserve Bank of India.

Types of Co-operative Banks

There are three types of co-operative banks operating in our country. They are primary
credit societies, central co-operative banks and state co-operative banks. These banks
are organized at three levels, village or town level, district level and state level.
(i) Primary Credit Societies: These are formed at the village or town level
with borrower and non-borrower members residing in one locality. The
operations of each society are restricted to a small area so that the members
know each other and are able to watch over the activities of all members to
prevent frauds.
(ii) Central Co-operative Banks: These banks operate at the district level
having some of the primary credit societies belonging to the same district as
their members. These banks provide loans to their members (i.e., primary
credit societies) and function as a link between the primary credit societies
and state co-operative banks.
(iii) State Co-operative Banks: These are the apex (highest level) co-operative
banks in all the states of the country. They mobilise funds and help in its
proper channelisation among various sectors. The money reaches the
individual borrowers from the state co-operative banks through the central
co-operative banks and the primary credit societies.

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e) Specialised Banks
There are some banks, which cater to the requirements and provide overall support for
setting up business in specific areas of activity. EXIM Bank, SIDBI and NABARD are
examples of such banks. They engage themselves in some specific area or activity and
thus, are called specialised banks. Let us know about them.
i. Export Import Bank of India (EXIM Bank): If you want to set up a business
for exporting products abroad or importing products from foreign countries for
sale in our country, EXIM bank can provide you the required support and
assistance. The bank grants loans to exporters and importers and also provides
information about the international market. It gives guidance about the
opportunities for export or import, the risks involved in it and the competition to
be faced, etc.
ii. Small Industries Development Bank of India (SIDBI): If you want to
establish a Small-scale business unit or industry, loan on easy terms can be
available through SIDBI. It also finances modernisation of small-scale industrial
units, use of new technology and market activities. The aim and focus of SIDBI
is to promote, finance and develop small-scale industries.
iii. National Bank for Agricultural and Rural Development (NABARD): It is a
central or apex institution for financing agricultural and rural sectors. If a person
is engaged in agriculture or other activities like handloom weaving, fishing, etc.
NABARD can provide credit, both short-term and long-term, through regional
rural banks. It provides financial assistance, especially, to co-operative credit, in
the field of agriculture, small-scale industries, cottage and village industries
handicrafts and allied economic activities in rural areas.

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 INTRODUCTION OF ANYWHERE BANKING

With advancement in information and communication technology, banking services are

also made available through computer. Now, in most of the branches you see computers
being used to record banking transactions. Information about the balance in your
deposit account can be known through computers. In most banks now a days human or
manual teller counter is being replaced by the Automated Teller Machine (ATM).
Banking activity carried on through computers and other electronic means of
communication is called ‘electronic banking’ or ‘e-banking’. Let us now discuss about
some of these modern trends in banking in India.

 Automated Teller Machine

Banks have now installed their own Automated Teller Machine (ATM)
throughout the country at convenient locations. By using this, customers can
deposit or withdraw money from their own account any time.

 Debit Card
Banks are now providing Debit Cards to their customers having saving or
current account in the banks. The customers can use this card for purchasing
goods and services at different places in lieu of cash. The amount paid through
debit card is automatically debited (deducted) from the customers account.

 Credit Card
Credit cards are issued by the bank to persons who may or may not have an
account in the bank. Just like debit cards, credit cards are used to make
payments for purchase, so that the individual does not have to carry cash. Banks
allow certain credit period to the credit cardholder to make payment of the credit
amount. Interest is charged if a cardholder is not able to pay back the credit
extended to him within a stipulated period. This interest rate is generally quite
high.

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 Net Banking
With the extensive use of computer and Internet, banks have now started
transactions over Internet. The customer having an account in the bank can log
into the bank’s website and access his bank account. He can make payments for
bills, give instructions for money transfers, fixed deposits and collection of bill,
etc.

 Phone Banking
In case of phone banking, a customer of the bank having an account can get
information of his account; make banking transactions like, fixed deposits,
money transfers, demand draft, collection and payment of bills, etc. by using
telephone.
As more and more people are now using mobile phones, phone banking is
possible through mobile phones. In mobile phone a customer can receive and
send messages (SMS) from and to the bank in addition to all the functions
possible through phone banking.

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 WHY ANYWHERE BANKING IS NEEDED?

In India, with competition heating up in the banking industry and the increase in the
number of private and foreign banks in the post liberalization era, all players in this
market are gearing up their supply chain management processes for better customer
acquisition and retention. Most of these new private sector banks and the foreign banks
are handicapped by the lack of a strong branch network as compared to their public
sector counterparts to distribute their products or services. In the absence of such a
network, the market place has seen the emergence of a lot of innovative services by the
players to increase their market share and reduce their cost of service delivery through
direct distribution strategies of Non-Branch Delivery. All these are using "home
banking" as the key "pull" factor to wean customers away from the well-entrenched
public sector bank.

Technology is enabling banks to provide the convenience of "anytime-anywhere"

banking to increasingly demanding customers. Banks are now reengineering the way in
which their services can be "distributed" to their customers. The earlier brick-and-
mortar branch is no longer sufficient, technology is now taking banks to the homes and
offices, 24 hours a day, 365 days a year through ATMs, phone banking and PC banking.
Therefore, the financial supply chain is undergoing a fundamental strategic change. In
this paper, the four major category of players, in the Indian banking sector, i.e. Public
Sector Banks, Private Sector Banks, Financial Institutions like ICICI and IDBI, and
Foreign Banks have been studied to identify competitive strategies followed by each to
get into the Non-Branch Delivery Business. Developmental Banks, Rural Banks and
Co-operative Banks have been left out of the scope of this study, since this is not their
area of focus.

Rohlwink (1991) explains how this form of banking is becoming a competitive

advantage. According to him, "distribution channel strategies are particularly important
because many new types of channel for financial services are emerging and rapidly
gaining importance. For example, technological advances have made home, office and

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telephone bunking more effective and efficient as a means of selling and delivering
products, and these channels are gradually gaining more acceptance among customers.
At the same time, the rapidly rising costs of operating a physical branch network,
particularly in terms of staff and premises, are making this traditional channel less
attractive. Such developments are changing the relative competitive advantage of
various distribution channels. They can thus pose a major threat to established
competitors with extensive branch networks while creating specific opportunities for
new entrants to improve their competitive position with respect to this key success
factor."

According to the leading management consultants PriceWaterhouse Coopers (1999)

"...with the advent of ATMs, "Anytime Banking" has come into the picture. Satellites
and telecom networks across the world have made "Anywhere Banking" possible. Now
it is the turn of "Anyhow Banking", and the leading bank of the next century will be the
one which has all the three A's..."

Electronic Banking in India

In India, Electronic Banking is of fairly recent origin. The traditional model for growth
has been through branch banking. Only in the early 1990's has there been a start in the
non-branch bunking services. The new private sector banks and the foreign banks are
handicapped by the lack of a strong branch network in comparison with the public
sector banks. In the absence of such networks, the market place has seen the emergence
of a lot of innovative services by the non-public sector players to increase their market
share and reduce their cost of service delivery through direct distribution strategies of
Non-Branch-Delivery. All these banks are using "home banking" as a key "pull" factor
to wean customers away from the well entrenched public sector banks. Some relevant
facts are given below:

* ATMs made their first appearance in the early nineties, started by foreign banks like
Citibank and Hong Kong Bank. By the end nineties, even private banks and public

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sector banks have come up with their own ATM networks, the private sector banks
being more aggressive of the two to adopt the new technology.

* Under the initiative of the Indian Banks Association (IBA), in Mumbai, a pilot project
to link up 156 ATMs of 31 member banks has come up in the form of SWADHAN, a
shared payment network system, which boasts of a card base of 1,000,000 cards and 30,
OUO transactions per month. MasterCard and VISA arc also following suit to offer
shared ATM networks.

* Credit cards have found widespread acceptance in the metros and big cities. The
major players in the credit card market are the foreign banks and some big public sector
blinks like SBl and Bank of Baroda. India now has about three million credit cards in
circulation.

* Debit cards have also now started becoming popular in the last 2 years only with
MasterCard and VISA tying up with Indian and foreign banks.

* Telephone banking is available with a few foreign and private banks offering this
service through the technology called Interactive Voice Response Service (IVRS). It has
moved into the domain of mobile phones as well, in a service that is being marketed as
mobile commerce (M-commerce).

* Internet banking has made its debut with IClCI bank's product called Infiniti and
Citibank being the pioneers in this field. H is now being offered by some select other
banks as well. This seems to be the latest growth area.

There are interesting contrasts in the approach followed by the each of the four
categories of players in the study. This has been described in detail in subsequent
paragraphs.

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Foreign Banks Operating in India

Most foreign banks, especially the American banks like Citibank, Bank of America,
American Express and ABN AMRO have followed the strategy of having one branch
per city and reaching the customers geographically through non-branch-delivery
mechanisms (Bank of America has subsequently sold its consumer bunking business to
ABN AMRO).

On the other hand, banks like ANZ Grindlays Bank and Standard Chartered Bank,
which have historically had a large number of branches in some cities like Calcutta, are
in the process of closing and consolidating them into fewer numbers. All these foreign
banks have embraced electronic banking in a big way and are investing heavily in
computerization and setting up ATM networks. But because they require licenses from
the Reserve Bank of India (RBI) before they can set up branches, they have utilized the
licenses granted to them to set up new branches in new cities where they had no
presence, rather than opening more branches in the same cities. HSBC Bank on the
other hand, is an exception to this trend amongst foreign banks, and has set up branches
in the same cities where they were already present.

The products offered by most of the banks are state-of-the-art products on electronic
banking like ATMs, credit cards, debit cards, phone banking, internet banking etc.

Indian Private Sector Banks

In the 1990s, the private sector banks have been aggressively following a mixed
approach to enhancing their reach. They have no restrictions in opening branches. This
explains the reason why Timesbank, Centurion Bank, Global Trust Bank and HDFC
Bank have been setting up new branches at a fast pace. Very recently, HDFC Bank and
Timesbank have merged and created India's largest private bank under the umbrella of
HDFC Bank. These branches are very small and operate as Front Office Sales and
Service points only. No backroom accounting or processing activity happens here.
Backrooms of these branches are centralized in regional locations, and serve multiple

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branches. Therefore, the approach of these private banks has been the best mixture of
ATM driven electronic banking and sales and service driven branches as distribution
points. Other smaller private banks like Bank of Madura, Bank of Rajasthan or Vyasa
Bank have not got into electronic banking in any big way.

Indian Financial Institutions

A very interesting study is the approach followed by the traditional Developmental

financial Institutions like ICICI, IDBl and UTI, All these organizations have expanded
their scope of operations from being the traditional developmental financial institutions
or mutual fund organizations to full function commercial banks with consumer and
corporate banking functions,

In-effect, IClCI Bank in particular, has become one of (he most aggressive players in
the consumer banking Held, emerging as very strong competitor to the foreign banks in
this arena. The approach of IDBl and UTI has been more relaxed. All these financial
institutions have opened many branches, and most of the brandies have ATMs
associated with them. IDHI has also tied up with American Express, as ' a result of
which American Express Cards can be used in their ATMs.

Thus, we see that these traditional financial institutions have also reinvented themselves
and are trying to become players in the consumer banking arena through electronic
banking as one of the prominent service delivery mechanisms.

Indian Public sector Banks

In terms of sheer geographical spread, the public sector banking system is probably the
largest in the world- The statistics are as Follows; a network of 64,000 branches - one
branch for every 14,000 Indians with over 46 crore customers. This labour intensive
network has built-in costs which make the public sector banks inherently uncompetitive.
Therefore, reduction of branches to achieve cost savings has not received as much thrust
as it should. The other factor inhibiting this process is that all these banks have a huge

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unionized workforce, which is difficult to relocate or retrain. An attempt is being made
to reduce manpower through the launch of “Voluntary Retirement Schemes (VRS)”.

"Despite the compelling business case for restructuring their distribution channels, the
public sector banks have not given too much priority to non branch delivery. Also, the
customer profile for the public sector bank is probably not (he right ("it for electronic
banking services, because of their social obligations to provide banking services for the
masses as well. Hleeironie banking products require a certain sophistication that may
prove to be a hurdle on the way of smooth absorption of this technology by the client
profile of that public sector banks. Therefore., there is not much locus on electronic
banking services here, even though exceptions are there like Bank of Baroda and State
Bonk of India, who have aggressively pushed their credit cards. Bank of Baroda has a
credit card brand of its own called the BOBCard, which is India's one and only
proprietary card. SBI has tied up with the multinational UF. Capital to provide its VISA
credit cards. It has already become the second highest issuer of credit cards in India
within just 3 years.

Many of the banks like Allahabad Bank, Vijaya Bank. Central Bank and Andhra Bank
etc. have issued credit cards as well, in collaboration with either Visa or Mastercard, but
they u re not actively promoting these cards. Some of these banks also have ATMs,
which are mostly attached to their branches, and can he used by customers of that
particular branch only. Some of them have also gone to the extent of having a
homepage on the net, which, by and large, is just for the purpose of information
dissemination to prospective customers, primarily NRIs. Though they have plans of
networking them in future, it becomes evident while talking to their personnel that it is
not a key area of focus yet.

The Flexible Distribution Model

IC we look at the direction in which the successful banks seem to be growing their
business, it becomes very clear that even in India, and the traditional model of branch
based banking is slowly changing. This is primarily because of the fact that over the

19
years, the consumer profile has changed. The fast pace of modern lifestyle has started
pulling a premium on the consumer's time. They want flexible and conveniently situated
distribution channels available at times and places them suit them and not the bank.
They no longer have the time to find a separate lime slot to do their banking. Instead,
they prefer banks which come to their doorsteps to enable them to do their banking.

Traditionally, banks had built branches closer to the customer habitation in an effort 10
distribute their services. This approach had seen the mushrooming of branches at
residential and commercial centers. While this distribution model has had a lair degree
of success so long, it has also been an expensive route, because of the real estate costs
and the manpower costs that this has entailed for banks. More branches mean more
rentals, renovation, maintenance, administration and salary costs. But even alter
spending so much, distributed branches have not been able to fully address the
consumer's need for anytime-anywhere banking. The consumers still need to come to
the bank to withdraw or deposit cash or for other banking services like overdrafts or
payment instruments, A comparative table of costs of servicing through the different
channels.

The problem with this model is that it confines the payment mechanism, by and large,
to the four walls of the branch. It does not make funds available at the point of sale,
which is the ultimate convenience that the customer is seeking.

The ideal scenario for both the buyer and the seller would he a system where the
payment settlement happens at the point of sale itself, when the goods or services are
exchanging hands. This is what electronic banking has achieved. Through electronic
data networks, it makes the payment on-line, at the same time as the actual exchange of
goods or services is taking place. As a distribution model, it brings the bank closer to
the consumer - either at his doorstep or at a telephone call or at his PC or in his wallet,
wherever he goes.

It is this need that non-branch banking is serving, which the route is taken by the
foreign banks and the private banks to attract their customers. They have successfully

20
extended the reach of the target market for client account acquisition and service
delivery capabilities beyond the branch network by using alternative delivery channels
for sales and servicing of their customers.

The re-engineered supply chain of these banks has six main components as follows:

 Branch Acquisition
 Remote Acquisition
 Branch Servicing
 Remote Servicing
 Centralized Operations Facility
 Vendors and suppliers

Branch Acquisition

Branch acquisition or sales are restricted to customers who walk-in to the branch to
open an account or apply for a loan. Such customers are serviced by Customer Service
Stations; manned by front-office staff. They facilitate the process of explaining lhc
different products and helping the customer fill up the necessary forms. Once the
customer interaction is over, the documentation for setting up a new account or
disbursing a new loan moves to the centralized processing site, which takes over the rest
of the processing.

Remote Acquisition

To augment the capacity of the branches to act as catchments areas, banks have set up
outsourcing channels, alliances and franchisees to reconfigure the distribution network
and improve the variable/fixed cost ratio, these include deploying new sales channel by
Direct Selling Agents (DSA's). Who are mobile franchise agents (like insurance-agents)
selling the products of the bank door-to-door. These mobile franchise agents source
business on a commission basis, depending on the volume of business they are able to
generate. These days, for a few select banks, it is possible to open a bank account or

21
apply for an automobile loan or credit card, by just calling up any of these agents on the
phone, without having to ever step into a branch. In this fashion, it is possible to achieve
greater penetration attraction of the cost of setting up an extensive branch network by
outsourcing the sales force. Most of these agents work on a retainer ship basis, and are
cheaper in the long run than having own sales employees on the bank's rolls. The
emphasis therefore needs to shift tram waiting to get business in the branches to
aggressively going out and acquiring business at a much reduced cost.

Branch Servicing

The branches maintain some infrastructure to service customers to transact on their

account. Only the following activities require a large amount of customer interaction,
for which the branch needs to provide teller stations:

 Encash/deposit cheque
 Request for payorders/remittances
 Opening/closing of accounts and fixed deposits
 Loans and overdrafts
 Trade finance transactions

All other transactions, which do not require customer interaction, are shifted to a
centralized facility, which can service multiple branches.

Remote Servicing

This is the area where technology is playing a big role in reducing transaction costs and
giving customer convenience at the same time. ATMs at shopping centers, airports,
railway stations, busy office localities, full service phone banking (either automated or
operator assisted) and PC/Internet banking are revolutionizing the way customers are
using banking services and accessing their money while saving time. Many banks are
also having strategic alliances with oilier banks to distribute products or services, by
leveraging each other's infrastructure. Thus, they are sharing ATM networks, allowing

22
cash advances on credit cards of member banks of Mastercard/VlSA. Apart from
technology driven products, banks are also offering customers the convenience of being
able to order for cash pickup/ delivery, dial-a-draft llmiugh courier services, so that
these items are delivered at their doorsteps, without their having to move.

Centralized Operations

This centralized operations facility services multiple branches and does all back-room
driven processing activities, which do riot require direct customer face-to-face
interaction. It issues chequebooks, ATM cards, fixed deposit receipts or loan disbursal
payments, processes clearing checks and trade finance or treasury operations,
reconciliation/accounting etc. The branches thus reduce the floor space required by
eliminating duplicate infrastructure at each branch therefore cut down on unnecessary
rentals. These centralized backrooms are never on prime real estate, but at remote
locations with low rental costs, so that further economies are available to the bank.

Vendors and suppliers

This facility in turn outsources processing work to cheap data processing agencies,
either on-site or off-site. Most of low value added activities like statement printing and
mailing, chequebook printing and mailing, ATM card embossing, even some low risk
data entry jobs are outsourced to external vendors and suppliers, thus further bringing
costs down.

The prerequisite of such an operation is bank computerization, which can link branches
and the central processing unit through wide area networks to make distributed
processing possible. The encouraging sign is that bank computerization has acquired a
substantial momentum in banks in India,

* The foreign banks operating in India have computerized from the 1980's onwards.
Most of them have branches which are connected to each other.

23
* The private banks are fairly new, and most have started their operations with
computerized networks.

* Even in the public sector banks, bank computerization has come a long way since the
days of manual operations. Following the Rangarajan Committee recommendations, the
unions of these banks have reluctantly agreed to the introduction of electronic funds
transfers, computerization of major clearing houses, setting up of communications
networks to connect the far Hung branches. PCs are therefore becoming increasingly a
common site in bank branches. But distributed processing is still a far way off.

24
 BANKS THAT PROVIDE ANYWHERE BANKING FACILITY

There are many banks that provide the facility of anywhere banking in India. Here the
list of few:

 ABN AMRO BANK

ABN AMRO Bank (India) has an eight decade long experience of the Indian
business scenario.

Traditionally known as a strong "diamond financing bank", it has turned into a

bank providing a comprehensive range of services with a difference.

ABN AMRO (India) has branches in Mumbai, Delhi, Chennai, Kolkata, Pune,
Baroda, Hyderabad , Bangalore and Noida with each branch servicing multi-
product relationships.

Consumer Banking offers a suite of products for your personal financial needs
offered through various channels including ATMs, Doorstep Banking and
NetBanking.

ABN AMRO Bank in India enjoys a strong image as a corporate bank with
comprehensive Global Transaction Services.Its investment banking services are
delivered through ABN AMRO (India) Corporate Finance and the Global
Financial Market Teams which strive to maintain the permanent position we
have built in the marketplace.

ABN AMRO Bank has launched its Private Banking Services in India offering a
comprehensive range of high quality Portfolio Advisory Services along with a
comprehensive transaction execution platform, complemented by personalised
Banking and custodial services.

25
 ABN AMRO Bank has also launched its microfinance program in India. The
program is aimed at delivering credit to the poor women of India, especially in
the rural areas, through Microfinance Institutions (MFIs).

With assets over US $504 billion and an AA credit rating, ABN AMRO Bank
ranks among the top 10 banks in the world in size and strength. ABN AMRO
international network comprises 3,568 branches and offices in over 320 cities
and 76 countries and territories, with over 100,000 highly qualified staff. As a
global bank, they can handle the most complicated cross-border transactions, yet
they also understand the subtleties of local markets.

 ANDHRA BANK

Andhra Bank was founded by Dr.Bhogaraju Pattabhi Sitaramayya.The Bank

was registered on 20th November 1923 and commenced business on 28th
November 1923 with a paid up capital of Rs 1.00 lakh and an authorised capital
of Rs 10.00 lakhs. Since then Andhra Bank has grown leaps and bounds and
presently it has network of 1022 branches spread across India and a total
business Reached a Level of Rs 25,992 crores.

 BANK OF BARODA

It has been a long and eventful journey of almost a century across 21 countries.
Starting in 1908 from a small building in Baroda to its new hi-rise and hi-tech
Baroda Corporate Centre in Mumbai, is a saga of vision, enterprise, financial
prudence and corporate governance.

It is a story scripted in corporate wisdom and social pride. It is a story crafted in

private capital, princely patronage and state ownership. It is a story of ordinary
bankers and their extraordinary contribution in the ascent of Bank of Baroda to
the formidable heights of corporate glory. It is a story that needs to be shared
with all those millions of people - customers, stakeholders, employees & the

26
 public at large - who in ample measure, have contributed to the making of an
institution.

 CANARA BANK
Canara Bank is one of the premier banks in the country, accredited with
umpteen distinctions. The present stature of the Bank is due to its strong
fundamentals and quality customer orientations. Profit making since inception,
the Bank today epitomizes a perfect blend of commercial and social banking.

For the year March 2005, the Bank clocked the highest net profit ( Rs.1110 crore
) among nationalized banks, with significant improvement in capital adequacy
ratio (12.78%) and asset quality (net NPA ratio of 1.88%).

The Bank has already carved a niche in providing IT-based services. With
100% computerisation of the branches, the bank provides a wide array of
services, such as, Networked ATMs, Anywhere Banking, Telebanking, Remote
Access Terminals Internet & Mobile Banking, Debit Card etc. The Bank was the
first among banks to launch networked ATMs and obtain ISO Certification.

Commercial consideration has, no way, diluted the Bank's role in national

priorities. Canara Bank is in fact the first bank to be conferred FICCI award for
contribution to rural development.

Founding Principles

1. To remove Superstition and ignorance.

2. To spread education among all to sub-serve the first principle.
3. To inculcate the habit of thrift and savings.
4. To transform the financial institution not only as the financial heart of the
community but the social heart as well.
5. To assist the needy.
6. To work with sense of service and dedication.

27
7. To develop a concern for fellow human being and sensitivity to the
surroundings with a view to make changes/remove hardships and sufferings.

Sound founding principles, enlightened leadership, unique work culture and

remarkable adaptability to changing banking environment have enabled Canara
Bank to be a frontline banking institution of global standards.

 CENTURION BANK

At Centurion, every customer is a customer of the bank and not merely of a

particular branch...

Centurion Bank has an extensive network of branches across India. Each branch
has access to Centurion Banks technologies to offer you unparalled services.

Centurion Bank, as its very positioning suggests, has an extensive network of

branches across India. And each of these branches are harnessed to state of the
art technologies to offer unparallel customer service. But of course, we go way
beyond merely offering our valued customers technology driven solutions.
Centurion Bank constantly endeavours to offer customised services that are
driven by customer requirements rather than just exhibiting technological
prowess.

Among Centurion Bank’s greatest strengths is the fact that it is a professionally

managed bank with a globally experienced management team.

 HDFC BANK

The Housing Development Finance Corporation Limited (HDFC) was amongst

the first to receive an ‘in principle’ approval from the Reserve Bank of India
(RBI) to set up a bank in the private sector, as part of the RBI’s liberalisation of
the Indian Banking Industry in 1994. The bank was incorporated in August 1994
in the name of ‘HDFC Bank Limited’, with its registered office in Mumbai,

28
India. HDFC Bank commenced operations as a Scheduled Commercial Bank in
January 1995.

HDFC Bank’s mission is to be a World-Class Indian Bank. The objective is to

build sound customer franchises across distinct businesses so as to be the
preferred provider of banking services for target retail and wholesale customer
segments, and to achieve healthy growth in profitability, consistent with the
bank’s risk appetite. The bank is committed to maintain the highest level of
ethical standards, professional integrity, corporate governance and regulatory
compliance. HDFC Bank’s business philosophy is based on four core values -
Operational Excellence, Customer Focus, Product Leadership and People.

The authorised capital of HDFC Bank is Rs.450 crore (Rs.4.5 billion). The paid-
up capital is Rs.309.9 crore (Rs.3.09 billion). The HDFC Group holds 22.2% of
the bank’s equity and about 19.5% of the equity is held by the ADS Depository
(in respect of the bank’s American Depository Shares (ADS) Issue). Roughly
31.7% of the equity is held by Foreign Institutional Investors (FIIs) and the bank
has about 190,000 shareholders. The shares are listed on the The Stock
Exchange, Mumbai and the National Stock Exchange. The bank’s American
Depository Shares are listed on the New York Stock Exchange (NYSE) under
the symbol “HDB”.

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable

network of over branches spread over cities across India. All branches are
linked on an online real-time basis. Customers in over 120 locations are also
serviced through Telephone Banking. The Bank’s expansion plans take into
account the need to have a presence in all major industrial and commercial
centres where its corporate customers are located as well as the need to build a
strong retail customer base for both deposits and loan products. Being a
clearing/settlement bank to various leading stock exchanges, the Bank has
branches in the centres where the NSE/BSE have a strong and active member

29
base.

The Bank also has a network of about over networked ATMs across these cities.
Moreover, HDFC Bank’s ATM network can be accessed by all domestic and
international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and
American Express Credit/Charge cardholders.

HDFC Bank operates in a highly automated environment in terms of

information technology and communication systems. All the bank’s branches
have online connectivity, which enables the bank to offer speedy funds transfer
facilities to its customers. Multi-branch access is also provided to retail
customers through the branch network and Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best
technology available internationally, to build the infrastructure for a world class
bank. In terms of software, the Corporate Banking business is supported by
Flexcube, while the Retail Banking business by Finware, both from i-flex
Solutions Ltd. The systems are open, scaleable and web-enabled.

The Bank has prioritised its engagement in technology and the internet as one of
its key goals and has already made significant progress in web-enabling its core
businesses. In each of its businesses, the Bank has succeeded in leveraging its
market position, expertise and technololy to create a competitive advantage and
build market share.

 INDUSTRIAL DEVELOPMENT BANK OF INDIA

The genesis of "Industrial Development Bank of India Limited" (IDBI Ltd) can
be traced to the establishment of The Industrial Development Bank of India

30
(IDBI), its predecessor entity, in 1964, by an Act of Parliament to provide credit
and other facilities for the development of Indian industry.

The erstwhile IDBI has played a pioneering role in fulfilling its mission of
promoting industrial growth through financing of medium and long-term
projects, in consonance with national plans and priorities. IDBI has been
instrumental not only in establishing a well-developed, diversified and efficient
industrial and institutional structure but also has added a qualitative dimension
to the process of industrial development in the country.

Over the years, IDBI has enlarged its basket of products and services to
industrial concerns, covering almost the entire spectrum of industrial activities,
including manufacturing and services. IDBI and its successor entity IDBI Ltd
provides financial assistance, both in rupee and foreign currencies, for greenfield
projects as also for expansion, modernisation and diversification purposes.

IDBI Ltd entered commercial banking with the incorporation of IDBI Bank Ltd
as a its subsidiary. On April 2, 2005, IDBI Bank Ltd was merged into IDBI Ltd
as per the scheme of amalgamation sanctioned by RBI. The merger seeks to
consolidate business across the value chain and provide economies of scale to
the merged entity, enabling it to offer an array of customer friendly services to
its existing and prospective clients, both within the geographical boundaries of
India and, in due course, abroad.

Going forward, IDBI Ltd seeks to emerge as a top-drawer commercial bank,

providing innovative financial and banking solutions for corporates and
individuals. Capitalising on its intimate knowledge of Indian industry and client
requirements and a large retail base, significant benefits are expected to accrue
from the merger.

Now, as a single entity, IDBI Ltd looks confidently into the future to face and
thrive in the intense competitive environment that is emerging. The bank has

31
now gained experience and has in place the strategies required for gaining a
leadership position. With cutting edge relevant technology, aggressive
marketing, innovation, tight control over costs and with its motivated workforce,
the bank is all set to emerge as a model global corporate citizen in the days
ahead.

 INDUSIND BANK

IndusInd Bank derives its name and inspiration from the Indus Valley
civilisation - a culture described by National Geographic as "one of the greatest
of the ancient world" combining a spirit of innovation with sound business and
trade practices.

Mr. Srichand P. Hinduja, a leading Non-Resident Indian businessman and head

of the Hinduja Group, conceived the vision of IndusInd Bank - the first of the
new-generation private banks in India - and through collective contributions
from the NRI community towards India's economic and social development,
brought our Bank into being. It was pioneer in introducing internet banking.

 ICICI BANK

ICICI Bank is India's second-largest bank with total assets of about Rs.1,676.59
bn(US$ 38.5 bn) at March 31, 2005 and profit after tax of Rs. 20.05 bn(US$ 461
mn) for the year ended March 31, 2005 (Rs. 16.37 bn(US$ 376 mn) in fiscal
2004). ICICI Bank has a network of about 573 branches and extension counters
and over 2,000 ATMs. ICICI Bank offers a wide range of banking products and
financial services to corporate and retail customers through a variety of delivery
channels and through its specialised subsidiaries and affiliates in the areas of
investment banking, life and non-life insurance, venture capital and asset
management. ICICI Bank set up its international banking group in fiscal 2002 to
cater to the cross border needs of clients and leverage on its domestic banking
strengths to offer products internationally. ICICI Bank currently has subsidiaries

32
in the United Kingdom, Canada and Russia, branches in Singapore and Bahrain
and representative offices in the United States, China, United Arab Emirates,
Bangladesh and South Africa.

ICICI Bank's equity shares are listed in India on the Bombay Stock Exchange
and the National Stock Exchange of India Limited and its American Depositary
Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

At September 20, 2005, ICICI Bank, with free float market capitalization* of
about Rs. 400.00 billion (US$ 9.00 billion) ranked third amongst all the
companies listed on the Indian stock exchanges.

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian

financial institution, and was its wholly-owned subsidiary. ICICI's shareholding
in ICICI Bank was reduced to 46% through a public offering of shares in India
in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in
fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock
amalgamation in fiscal 2001, and secondary market sales by ICICI to
institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955
at the initiative of the World Bank, the Government of India and representatives
of Indian industry. The principal objective was to create a development financial
institution for providing medium-term and long-term project financing to Indian
businesses. In the 1990s, ICICI transformed its business from a development
financial institution offering only project finance to a diversified financial
services group offering a wide variety of products and services, both directly
and through a number of subsidiaries and affiliates like ICICI Bank. In 1999,
ICICI become the first Indian company and the first bank or financial institution
from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of

the emerging competitive scenario in the Indian banking industry, and the move
towards universal banking, the managements of ICICI and ICICI Bank formed

33
the view that the merger of ICICI with ICICI Bank would be the optimal
strategic alternative for both entities, and would create the optimal legal
structure for the ICICI group's universal banking strategy. The merger would
enhance value for ICICI shareholders through the merged entity's access to low-
cost deposits, greater opportunities for earning fee-based income and the ability
to participate in the payments system and provide transaction-banking services.
The merger would enhance value for ICICI Bank shareholders through a large
capital base and scale of operations, seamless access to ICICI's strong corporate
relationships built up over five decades, entry into new business segments,
higher market share in various business segments, particularly fee-based
services, and access to the vast talent pool of ICICI and its subsidiaries. In
October 2001, the Boards of Directors of ICICI and ICICI Bank approved the
merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI
Personal Financial Services Limited and ICICI Capital Services Limited, with
ICICI Bank. The merger was approved by shareholders of ICICI and ICICI
Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March
2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of
India in April 2002. Consequent to the merger, the ICICI group's financing and
banking operations, both wholesale and retail, have been integrated in a single
entity.

 PANJAB NATIONAL BANK

With its presence virtually in all the important centres of the country, Punjab
National Bank offers a wide variety of banking services which include corporate
and personal banking, industrial finance, agricultural finance, financing of trade
and international banking. Among the clients of the Bank are Indian
conglomerates, medium and small industrial units, exporters, non-resident
Indians and multinational companies. The large presence and vast resource base
have helped the Bank to build strong links with trade and industry.

34
Punjab National Bank is serving over 3.5 crore customers through 4497 offices,
largest amongst Nationalized Banks. The Bank was recently ranked 38th
amongst top 500 companies by the leading financial daily, Economic Times.
PNB's attempts at providing best customer service has earned it 9th place among
Indias Most Trusted top 50 service brands in Economic Times- A.C Nielson
Survey. PNB is also ranked 313 amongst the top 1000 banks in the world
according to "The Banker" London.

At the same time, the bank has been conscious of its social responsibilities by
financing agriculture and allied activities and small scale industries (SSI).
Considering the importance of small scale industries bank has established 31
specialised branches to finance exclusively such industries.

Keeping in tune with changing times and to provide its customers more efficient
and speedy service, the Bank has taken major initiative in the field of
computerization. All the Branches of the Bank have been computerized. The
Bank has also launched aggressively the concept of "Any Time, Any Where
Banking" through the introduction of Centralized Banking Solution (CBS) and
over 1100 offices have already been brought under its ambit.

PNB also offers Internet Banking services in the country for Corporates as well
as individuals. Internet Banking services are available through all Branches of
the Bank networked under CBS. Providing 24 hours, 365 days banking right
from the PC of the user, Internet Banking offers world class banking facilities
like anytime, anywhere access to account, complete details of transactions, and
statement of account, online information of deposits, loans overdraft account
etc. PNB has recently introduced Online Payment Facility for railway
reservation through IRCTC Payment Gateway Project and Online Utility Bill
Payment Services which allows Internet Banking account holders to pay their
telephone, mobile, electricity, insurance and other bills anytime from anywhere
from their desktop.

35
Another step taken by PNB in meeting the changing aspirations of its clientele is
the launch of its Debit card, which is also an ATM card. It enables the card
holder to buy goods and services at over 99270 merchant establishments across
the country. Besides, the card can be used to withdraw cash at more than 11000
ATMs, where the 'Maestro' logo is displayed, apart from the PNB's over 555
ATMs and tie up arrangements with other Banks.

 STANDARD CHARTED BANK

The Chartered Bank opened its first overseas branch in India, at Kolkata, on 12
April 1858. Eight years later the Kolkata agent described the Bank's credit
locally as splendid and its business as flourishing, particularly the substantial
turnover in rice bills with the leading Arab firms. When The Chartered Bank
first established itself in India, Kolkata was the most important commercial city,
and was the centre of the jute and indigo trades. With the growth of the cotton
trade and the opening of the Suez Canal in 1869, Bombay took over from
Kolkata as India's main trade centre. Today the Bank's branches and sub-
branches in India are directed and administered from Mumbai (Bombay) with
Kolkata remaining an important trading and banking centre.

 SYNDICATE BANK

Syndicate Bank was established in 1925 in Udupi, the abode of Lord Krishna in
coastal Karnataka with a capital of Rs.8000/- by three visionaries - Sri Upendra
Ananth Pai, a businessman, Sri Vaman Kudva, an engineer and Dr.T M A Pai, a
physician - who shared a strong commitment to social welfare. Their objective
was primarily to extend financial assistance to the local weavers who were
crippled by a crisis in the handloom industry through mobilising small savings
from the community. The bank collected as low as 2 annas daily at the doorsteps
of the depositors through its Agents under its Pigmy Deposit Scheme started in
1928. This scheme is the Bank's brand equity today and the Bank collects

36
around Rs. 2 crore per day under the scheme.

The progress of Syndicate Bank has been synonymous with the phase of
progressive banking in India. Spanning over 80 years of pioneering expertise,
the Bank has created for itself a solid customer base comprising customers of
two or three generations. Being firmly rooted in rural India and understanding
the grassroot realities, the Bank’s perception had vision of future India. It has
been propagating innovations in Banking and also has been receptive to new
ideas, without however getting uprooted from its distinctive socio-economic and
cultural ethos.

 UNION BANK OF INDIA

Inaugurated by father of the Nation at the onset of 20th century, Union Bank of
India has traversed the long road of successful Banking of 85 years. We trace
our origin to the profound thoughts of Mahatma Gandhi. "We should have the
ability to carry on a big bank, to manage efficiently crores of rupees in the
course of our national activities. Though we have not many banks amongs us, it
does not follow that we are not capable of efficiently managing crores and tens
of crores of rupees."

Union Bank of India is committed to maintain its identity as a leading

innovative commercial Bank, alive to the changing needs of the society. Union
Bank has offered vast and varied services to its entire valuable clientele taking
care of their needs. Today, with its efficient customer service, consistent
profitability & growth, adoption of new technologies and value added services,
Union Bank truly lives up to the image of, “GOOD PEOPLE TO BANK
WITH”. Anticipative banking is an integral ingredient of value-based services.
This ability to gauge the customer's needs long before he realizes, best reduces
the gap between expectations and deliverance.

37
Manpower is the key factor for the success of any organization. Union Bank has
a dedicated family of about 26,000 qualified / skilled employees who will and
always will be delighted to extend their services to the customers with heartfelt
efforts.

The Bank is a Public Sector Unit with 60.85% Share Capital held by the
Government of India. The Bank came out with its Initial Public Offer (IPO) in
August 20, 2002 and 39.15 % of Share Capital is presently held by Institutions,
Individuals and Others.

The Bank has over the years earned the reputation of being a techno-savvy Bank
and is one of the front runners amongst public sector bank in the field of
technology. It is one of the pioneer public sector banks, which launched Core
Banking Solution in 2002. As of September 2005, more than 670
branches/extension counters of Bank are networked under Core Banking
Solution, powered with the centralized technology platform, the Bank has
launched multiple Electronic Delivery Channels and has installed nearly 423
networked ATMs. Online Tele banking facility is available to all its Core
Banking customers. The multi facility versatile Internet Banking Solution
provides extensive information in addition to the on line transaction facility to
both individuals and corporates banking with the Core Banking branches of the
Bank. In addition to regular banking facilities, today customer can also avail
variety of value added services like cash management service, insurance, mutual
funds, Demat from the Bank.

The Bank will continue its endeavor in providing excellent services to its
customer and enhance its businesses thereby fulfilling its vision of becoming
“THE BANK OF FIRST CHOICE IN OUR CHOSEN AREA BY BUILDING
BENEFICIAL AND LASTING RELATIONSHIP WITH CUSTOMERS
THROUGH A PROCESS OF CONTINUOUS IMPROVEMENT”.

38
 UTI BANK

UTI Bank was the first of the new private banks to have begun operations in
1994, after the Government of India allowed new private banks to be
established. The Bank was promoted jointly by the Administrator of the
specified undertaking of the Unit Trust of India (UTI - I), Life Insurance
Corporation of India (LIC) and General Insurance Corporation Ltd. and its
associates viz. National Insurance Company Ltd., The New India Assurance
Company, The Oriental Insurance Corporation and United Insurance Company
Ltd.

The Bank today is capitalized to the extent of Rs. 278.50 Crores with the public
holding (other than promoters) at 72.26 %.

The Bank's Registered Office is at Ahmedabad and its Central Office is located
at Mumbai. Presently the Bank has a very wide network of more than 373
branch offices and Extension Counters. The Bank has a network of over 1737
ATMs providing 24hrs a day banking convenience to its customers. This is one
of the largest ATM networks in the country.

The Bank has strengths in both retail and corporate banking and is committed to
adopting the best industry practices internationally in order to achieve
excellence.

39
 OBJECTIVES

To study the various service which has been provide by the Indian banks in the modern
era of the fast moving environment to the customer so that the people can access the
operations of the bank without visiting any branch of the bank. The services are as
follows:
 Net/Online Banking
 Automated Teller Machine
 Credit Cards
 Debit Cards
 Telephone Banking
 RTGS
 EFT
 ECS

40
 CASE STUDIES

In this section, we present two case studies to highlight how banks are adopting non-
branch service delivery in varying degrees.

ICICI Bank

The Industrial Credit and Investment Corporation of India Limited (ICICI) was founded
by the World Bank, the Government of India and representatives of private industry on
January 5, 1955 to encourage and assist industrial development and investment in India,
Over the years, ICICI has evolved into a diversified financial institution, which is into
medium term and long-term project financing for the infrastructure and manufacturing
sectors, corporate finance, lease finance etc.

The liberalization of the Indian economy in the 1990s offered ICICI an opportunity to
provide a wider range of financial services. ICICI then set up specialized subsidiaries in
the areas of commercial banking, investment banking, nonbanking finance, investor
servicing, broking, venture capital financing and state-level infrastructure financing.

ICICI Bank is a commercial banking outfit set up by the ICICI Group. The Bank was
registered as a banking company on January 5, 1094 and received its banking license
from the Reserve Bank of India on May 17, 1994, The first IClCI Bank branch was
started in Madras in June 1994. For the last two years, ICICI Bank has been in the
forefront as a provider of state-of-the-art electronic banking services.

As of July 2000, it has opened 102 branches. These branches are a judicious mix of full
service branches and partial service branches. The full service branches offer the entire
range of product and services under the ICICl umbrella, while the partial branches offer
a restricted range of services. The branches are fully computerized with state-of-the-art
technology und systems. All of them are fully networked through V-SAT (Satellite)
technology. The Bank is connected to the international SWIFT network since March
1995. Currently the Bank has around 150,000 customers.

41
It also has a centralized backroom in Mumbai. which does all the backroom processing
activities like opening of accounts, issuance of chequebooks, statements, various types
of cards like ATM cards. Credit Cards, Debit Cards and PINs.

In electronic banking, ICICI has launched a total of 227 ATMs, with ambitious plans to
add many more to the network. Amongst all banks operating in India, it has the biggest
ATM network, most of which was added in the last two years only. Clearly, a very
successful implementation of an aggressive growth plan.

It was the first bank in India to launch Internet banking services through its product
branded as "Infinity", much before the other foreign banks could do so. It calls itself the
"virtual universal bank", which is a reflection of the fact that most of its products are
available in the net as well. These include account views and reconciliations, funds
transfers, bill payments, mutual funds and bond applications, e-shopping and loan
applications.

In the last six months, ICICI has also started offering phone banking and mobile
banking through cell phones. Its latest ventures are into credit cards and debit cards,
where it has tied up with VISA to provide its services.

For its consumer finance operations, its subsidiary, ICICI Personal Financial Services
Limited (IClCI PFS), formerly IClCI-Credit was one of the first four companies to
obtain registration as a Non-Banking Financial Company (NBFC) from the Reserve
Bank of India (RBI) on September 10, 1997 under the new section 45 IA of the Reserve
Bank of India Act, 1934.

During the year 1998-99, there was a significant shift in IClCI PFS's operations from
leasing and hire purchase to distribution and servicing of all retail products for the
ICICI Group. It is now a focal point for marketing and distribution of all retail asset
products for ICICI, including auto loans, consumer durable finance and other financial
products. This subsidiary has thus become a critical part of ICICI's retail strategy aimed
at offering a comprehensive range of products and services to retail customers. It uses

42
Direct Selling Agents (DSA’s) to source asset products from the markets, very similar
to the approach followed by the foreign banks and private banks.

IClCl Capital Services Ltd, is another wholly owned subsidiary of ICICI effective from
April 1, 1996. It carries our retail resource raising activities and provides front office
services related to all retail and semi retail liability products of IClCI. The Company
also operates the network of ICICI Centres being set up by IClCl. As on date the
company has set up 91 centers across the country.

This subsidiary was earlier involved in distribution of bond product (in the brand name
of Safety Bonds) and private placement treasury products from IClCI. However, from
December 1999 onwards the Company has focused on being a provider of a
comprehensive range of financial products and services like IClCI Bonds, ICICl Fixed
deposits, Mutual Funds, IPOS, e - invest accounts, Depository services, select IPOS,
investment consulting and is all set for the forthcoming foray into insurance, with a
joint venture with Prudential Insurance.

The widespread geographical locations of centers, which are well equipped with the
necessary infrastructure, have provided the Company with strategic distribution
initiatives so as to become one of the lop distribution houses in the country. The
company has also strengthened its distribution network by effectively managing over
11000 agents.

This is the story of the transformation of one of India's premier infrastructure financing
institutions into a universal provider of financial services. In its revised vision of
becoming the one-stop-shop for providing the entire suite of financial services, it has re-
engineered its business model completely. Its revamped business model now looks very
similar to the model proposed in Figure 2. All the elements of the new flexible supply
chain - the judicious mix of direct branch acquisition and remote acquisitions through
channel partners or DSA's. a strong centralized backroom, robust electronic banking
infrastructure and products are very visible.

43
A clear vision and strategy, backed with excellent implementation, has made ICICl
Bank one of the best providers of consumer financial services in India in a short span of
just two years. It is proven itself to be a strong competitor to the more established
foreign banks like Citibank. American express Bank and ABN AMRO Bank, all of
whom have lost substantial market share to the homegrown Indian financial
powerhouse.

Bank of America/ABN AMRO Bank

Bank of America (BoA) started its operations in India in 1962, with the opening of its
first branch in Delhi. After that, it extended its operations in the other metros by
opening a branch each in these three cities. Till the 1980's. BoA in India was by and
large a Corporate Bank. It dealt primarily with the American multinationals operating in
India and other large Indian and foreign corporate houses. On the Consumer banking
side, it dealt only with the high net worth individuals and Non-Resident Indians (NRIs),
this was in contrast to its global operations. In the US it is the largest middle-market
consumer bank in the west coast, primarily in California.

Of all the foreign banks that were operating in India at that time. Citibank was the first
to start Consumer Banking in a big way in the 1980s. Citibank and Hong Kong Bank
were the first to start with ATMs in early 1990s. Citibank went into electronic banking
as a deliberate strategy of technological leadership to widen its consumer banking
operations. Like BoA, it had only one branch in the cities that it operated in. Therefore,
to broaden its distribution network, it followed up the launch of the ATMs with other
electronic banking products like credit cards, phone banking, net banking and debit
cards, one after the other. The others like Hong Kong Bank, Grindlays Bank and
Standard Chartered Bank were more sedate in their approach to non-branch banking,
because they already had a large branch network as well. These banks therefore were
more sedate in their approach to introduce electronic banking for their customers.

In 1990, BoA too changed its strategy to enter into the consumer banking area. By
1994, it came out with its first consumer loan products in the form of loans against

44
shares and car loans. In 1996, it pioneered the concept of the 7 days - 10 to 7 banking in
India.

But BoA's approach in consumer banking was very different from the other banks in the
area of remote banking. Rather than getting into technology-driven investment-intensive
electronic banking products like Credit Cards, Debit Cards and Net Banking, it chose to
use a wide network of Direct Sales Agents to distribute its products and services to its
customers. These agents would go from door-to-door and offer BoA's products and
services. This was in sharp contrast to the other banks, which depended on technology
to increase their reach to consumers.

Being a foreign bank, BoA required licenses from the Reserve Bank of India to open
new branches. It had one branch each in all the four metro cities that it operated in. So
long as it was into corporate banking only, these few branches were sufficient for BoA
to service its few corporate clientele. But, when it entered consumer banking, these
branches located at the heart of the city were inadequate to offer consumer banking on a
mass scale, since the consumers were located all over the city. To BoA's credit, it
overcame this limitation in a very innovative fashion, in 1996, it brought about a
paradigm change in the concept of banking by being the first bank to offer cash delivery
to its customers at their homes and offices. It used the services of local couriers and
direct sales agents to deliver cash and pay-orders, pick up cheques, complete account
opening documentation etc. In this manner, it was able to overcome the limitations of
branch banking to provide banking services way beyond the geographical reaches of its
only branch. It also centralized its backroom in Delhi to service its branches
economically in the four other cities and linked up the operations through Satellite
communications and leased telephone lines.

This was a big success, because it targeted the middle market segment of consumers
that was not very technology-savvy. Its doorstep banking brought the cherished human
touch right to the consumer's doorstep. This was a concept that the electronic banking
products clearly could not match. With one phone call, consumers could open accounts,

45
get cash delivered, cheques picked up for deposit into their accounts, as well as
overdrafts and loans for purchase of cars with the aid of an agent of the bank who
would come to their homes and offices. All this was designed in a manner that
consumers would not have to visit a bank branch at all to avail of its services. Following
this innovative approach, within two years of its launch, BoA by 1998 had increased its
market share in the consumer banking business to become a market leader in consumer
loans, ahead of its well-entrenched competitor Citibank. This distribution model soon
became the industry practice, when other banks also started offering the same service.

To compare the approach of ICICl Dank with BoA, one realizes that that there are many
similarities as well as dissimilarities. While both of them aggressively promoted non-
branch distribution through direct sales agents, ICICI Bank pursued the strategy of
state-of-the-art electronic banking as well - by offering an entire range of ATMs. Credit
Cards, Debit Cards, Phone Banking, Net Banking etc. BoA on the other hand just
offered a few ATMs in a very few locations. Apart from that it had no other electronic
banking product Io talk about. But, in its own way, it was just as successful in acquiring
market share. The contrast becomes clearer from Table 2:

After Bank of America merged with Nations Bank in the US in the year 1998, it sold off
its highly successful consumer banking business in India to ABN AMRO Bank, a Dutch
bank. ABN AMRO Bank thus gained entry into the consumer banking business in India
through this strategic purchase. While retaining the approach of non-branch banking
through its agent’s network, ABN AMRO does plan to get into electronic banking as
well. Its first offering is likely to be credit cards.

Issues in Electronic Banking

This is not to suggest that banks need to close down all branches and go completely into
the direct distribution route. The key is in being able to do a judicious mix of both direct
distribution and indirect distribution to increase breadth of geographical coverage while
keeping the costs low. This is more so, because while consumers' comfort with
technology is increasing, it is yet to reach a critical mass in India, which still has a large

46
 proportion of the population which does not understand technology at all, and would get
alienated if the human face of the bank goes totally away, to be replaced by machines to
which they cannot relate easily.

While electronic banking and the Internet docs offer exciting possibilities for payment
mechanisms, there are many open questions that have still not been satisfactorily
addressed, without which this form of banking cannot make significant progress.

On-line banking will meet its full potential when the following key consumer issues are
addressed:

 Consumer protection from fraud

Electronic fraud is a scourge in the west and is on the rise even in India. Unless
electronic message transmission can be safeguarded from unauthorized access through
hacking, people will continue to be hesitant about using electronic banking for fear of
fraud.

 Transaction privacy

In India, cash transactions are popular because of the anonymity it provides, because of
the absence of any paper trail. A substantial part of Indian economy is the black
economy, where transactions are in cash and there are no audit trails. This will be a
factor that will continue to hinder wider acceptance of electronic banking, because
electronic payments always leave a paper trail.

 Infrastructural issues of telecommunication and bandwidth

This form of banking thrives only when telecommunication infrastructure is robust,

since it requires large scale wide area network connectivity. India still has a long way to
go.

 Comfort with technology and proliferation of PCs

47
 The average Indian consumer is still PC illiterate and prefers the human touch over
technology driven service. It is still the long way off when PCs become like TVs in
every household. The consumer behavior towards technology wills also lake some time
to change. Till such time, electronic banking will remain restricted to the younger,
upwardly mobile consumer only.

 Legal recognition of electronic contracts

Is an electronic contract a valid contract? Negotiable Instruments Act covers payment in

writing only, what about electronic instruments? When will digital signature get legal
validity? These are some of the crucial questions that stand in the way of electronic
banking gaining momentum. Some progress has been made with the passing of the
Cyber laws in the IT Act by the Indian Parliament recently. It is now a question of
successful implementation.

INDIAN BANKS ON WEB

The banking industry in India is facing unprecedented competition from non-traditional

banking institutions, which now offer banking and financial services over the Internet.
The deregulation of the banking industry coupled with the emergence of new
technologies, are enabling new competitors to enter the financial services market
quickly and efficiently.

Indian banks are going for the retail banking in a big way. However, much is still to be
achieved. This study which was conducted by students of IIML shows some interesting
facts:

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

development (only 50 banks are offering varied kind of Internet banking
services).
• In general, these Internet sites offer only the most basic services. 55% are so
called ‘entry level’ sites, offering little more than company information and

48
 basic marketing materials. Only 8% offer ‘advanced transactions’ such as online
funds transfer, transactions & cash management services.
• Foreign & Private banks are much advanced in terms of the number of sites &
their level of development.

49
 OBJECTIVES

To study the various service which has been provide by the Indian banks in the modern
era of the fast moving environment to the customer so that the people can access the
operations of the bank without visiting any branch of the bank. The services are as
follows:
 Net/Online Banking
 Automated Teller Machine
 Credit Cards
 Debit Cards
 Telephone Banking
 RTGS
 EFT
 ECS

50
 RESEARCH METHODOLOGY

RESEARCH USED:
The study of dissertation is based on descriptive research. The major purpose of
descriptive research is to give description of the state of affairs as it’s exists at
present. The main characteristic of this method is that the research has no control
over variables; this can only report what has happened or what is happening

DATA USED:

The Information Regarding the dissertation has been obtained through

Secondary Sources

 Websites
 Magazines And Reports
 Journals
 Newspapers

Based on the information obtained from the above sources concepts were
developed on which analysis was made.

51
 ONLINE BANKING/NET BANKING

It is the dotcom age whereby, anybody and everybody right from a grocery vendor to an
automobile dealer is becoming an integral part of the technology revolution. Nobody
wants to be left out of this "most happening thing ". The sheer pace and accuracy of the
computer coupled with the brilliance of the human brain make a powerful and deadly
combination.

Today Internet has touched all aspects of our life right from shopping, seeking
knowledge to banking and investments. This medium has brought together various
bodies like companies, government organizations, financial institutions, and
autonomous bodies, for reaching out to their customers, subscribers and users and vice
versa.

Internet Banking is one such concept that has dramatically changed the mode of
banking from what it was earlier. The main advantages to the customer are quick and
anytime, anyplace banking. The banks are also benefited in that they can now serve
their customers round the clock, throughout the year and that too, in a much more
efficient manner. The global reach of the Internet has also enabled banks in increasing
their business across the world.

Online banking is the practice of making bank transactions or paying bills via the
Internet. Thanks to technology, and the Internet in particular, we no longer have to
leave the house. We can shop online, communicate online, and now, we can even do
our banking online. Online banking allows us to make deposits, withdrawals and pay
bills all with the click of a mouse. It doesn’t get much more convenient than that.

Despite the convenience, cost savings and high security of online banking, recent
studies have shown that less than 25% of Indians are taking advantage of their bank's
online banking options. Some of the benefits of online banking include 24 hour a day
access, a monthly cost savings and security that matches the security of banking in
person. In addition to these benefits many banks are trying to squeeze their clients into

52
online banking in an effort to reduce their administrative costs. Yet despite all of these
benefits and efforts, after over six years since its inception, online banking has not
become the standard practice.

The Internet banking is changing the banking industry and is having the major effects
on banking relationships. Even the Morgan Stanley Dean Witter Internet research
emphasised that Web is more important for retail financial services than for many other
industries. Internet banking involves use of Internet for delivery of banking products &
services. A successful Internet banking solution offers exceptional rates on Savings,
CDs, and IRAs

 Checking with no monthly fee, free bill payment and rebates on ATM
surcharges
 Credit cards with low rates
 Easy online applications for all accounts, including personal loans and
mortgages
 24 hour account access
 Quality customer service with personal attention

DRIVERS OF CHANGE

Advantages previously held by large financial institutions have shrunk considerably.

The Internet has leveled the playing field and afforded open access to customers in the
global marketplace. Internet banking is a cost-effective delivery channel for financial
institutions. Consumers are embracing the many benefits of Internet banking. Access to
one's accounts at anytime and from any location via the World Wide Web is a
convenience unknown a short time ago. Thus, a bank’s Internet presence transforms
from ‘brouchreware’ status to ‘Internet banking’ status once the bank goes through a
technology integration effort to enable the customer to access information about his or
her specific account relationship. The six primary drivers of Internet banking includes,
in order of primacy are:

53
  Improve customer access
 Facilitate the offering of more services
 Increase customer loyalty
 Attract new customers
 Provide services offered by competitors
 Reduce customer attrition

What exactly is Internet Banking?

To a layman Internet banking is banking via the Internet. India was a late beginner and
initially catered to the non-resident Indians (NRIs), the reason being NRIs already had
ready access to the Internet. Today with the growth of Internet services in India, these
services have been extended to cover the local market as well.

Electronic banking has been present for some time before the concept of Internet
banking was introduced. We are familiar with Automated Teller Machine (ATMs)
facilities, intra-and inter-city banking facilities etc., which are a part of the Electronic
banking system. In electronic banking customers have a very limited range of services
and generally the big banks offer these services.

Internet Banking can be broadly said to perform two kinds of functions, viz.

1. Retail Banking, and

2. Wholesale Banking.

Retail Banking
As is obvious the retail banking services cater to the needs of the individual customers.
The customer can know the balance in his account, get his statement, get a chequebook
or make an inquiry about the clearing of a cheque deposited. He can also issue a

54
demand draft, transfer funds between accounts etc. He can also get facilities for paying
of utility bills, applying for loan, investing funds, payment of on-line shopping bills etc.

Wholesale Banking
The wholesale banking on the other hand meets the needs of corporate customers and
includes services related to inward letter of credit (LC), outward LC, import bills,
export bills, guarantees, corporate loans, derivatives, cash management etc.

As far as the Indian scenario is concerned our banks are concentrating more on the
retail-banking segment, with very little wholesale banking services. The reason behind
this being Reserve Bank of India is yet to give its approval for cash management
services on the Internet, like foreign exchange etc.

Internet Banking is conducted through the World Wide Web, which is an open platform
where anyone can make an entry at any time. This brings to the fore fear regarding the
security aspects. The much-awaited ' Cyber Laws ' will hopefully solve all the security
related aspects and make Internet Banking safer.

At present the facilities provided to ensure security includes: customer ID code

provided by the banks, and signature verification module, which is an image capture
and retrieval facility. It is used for on-line verification by tellers and back-office
verification for incoming payment instruments. Through this module, it is possible to
store multiple signatures and signatories for an account or customer. Biometrics enables
an ATM to identify a customer from their physical characteristics like fingerprints,
facial characters or image of the iris in the eye. It thus ensures full security while
conducting business.

In our country Internet Banking has not yet developed to its full potential. A very few
number of banks like HDFC, ICICI, Global Trust Bank, Federal Bank and more

55
recently Deutsche Bank are offering these services. Even these are offering the retail
banking facilities due to non-approval of cash transactions on the ‘net. This one of the
main reason why the current status of Internet banking is so limited.

EMERGING CHALLENGES

Information technology analyst firm, the Meta Group, recently reported that "financial
institutions who don't offer home banking by the year 2000 will become marginalized."
By the year of 2002, a large sophisticated and highly competitive Internet Banking
Market will develop which will be driven by

 Demand side pressure due to increasing access to low cost electronic

services.
 Emergence of open standards for banking functionality.
 Growing customer awareness and need of transparency.
 Global players in the flay.
 Close integration of bank services with web based E-commerce or
even disintermediation of services through direct electronic payments
(E- Cash).
 More convenient international transactions due to the fact that the
internet along with general deregulation trends, eliminates
geographic boundaries.
 Move from one stop shopping to ‘Banking Portfolio’ i.e. unbundled
product purchases.

Certainly some existing brick and mortar banks will go out of business. But that's
because they fail to respond to the challenge of the Internet. The Internet and it's
underlying technologies will change and transform not just banking, but all aspects of
finance and commerce. It represents much more than a new distribution opportunity. It
will enable nimble players to leverage their brick and mortar presence to improve
customer satisfaction and gain share. It will force lethargic players who are struck with

56
legacy cost basis, out of business-since they are unable to bring to play in the new
context.

BENEFITS OF ONLINE/INTERNET BANKING

For the online banking customer, the convenience factor rates high. No longer does a
person have to wait for the bank statement to arrive in the mail to check account
balances. One can check the balance every day just by logging onto one’s account. In
addition to checking balances and transactions, one can catch discrepancies in the
account right away and deal with them swiftly. The best part is that this can be done
anywhere! As long as one has Internet access, one can practice online banking.

Since bills are paid online, the necessity of writing checks, affixing postage and posting
the payment in the mail is eliminated. Once the amount is entered and the payee is
checked off, the funds are automatically deducted from the payer’s choice of account.

Since the cost to the bank is minimal, the cost to the consumer, in many cases, is also
minimal. While there is usually a fee for online banking, it can be extremely low. Those
who partake in online banking all agree it’s worth every penny. Not having to spend all
Saturday morning standing in a crowded bank line is justification for most. It can even
pay for itself since costs like postage and ATM fees are reduced.

Online banking also eliminates paper waste, which is a plus not only for those who have
to handle all the paper work, but also for the environment.

Of course, there are also cons.

Security is always an issue with Internet transactions. Although information is

encrypted, and the chances of your account being hacked are slim, it happens. Banks
pay big bucks to install high tech firewalls. Chances are your money is in good hands.

57
You’re also missing the personal service. No smiling teller or representative hands you
a receipt. Instead, except for what’s printed into your account, all the paperwork is up to
you. Always print copies of important transactions.

If you have to deposit cash or checks, you’ll still have to spend time at the ATM. Unless
a payment to you is directly deposited, this is one thing you’ll always have to handle
manually.

Still, the benefits far outweigh the risks. The convenience of online banking is a perk
well worth the cost. What would you rather do, stand in a long line on a weekend
morning or handle your transactions in the comfort of your own home?

Online Banking Offers Convenience

Online banking offers conveniences that can be beneficial for business use and personal
use. Many business owners are too busy during normal business hours to handle their
banking needs, but with online banking they can access their account, print out
statements and even transfer money without leaving the comfort of their home or office.

Likewise many busy professionals are often too busy during normal banking hours to
attend to their finances, but online banking takes away this concern by offering 24 hour
access to all of the banking options that your local bank branch can handle as well as a
few additional perks such as instant statements for specific date ranges. No longer do
private citizens or businesses have to request information in person and then wait
several weeks for the information to be processed and mailed out. The conveniences of
online banking can not be matched for business or personal use.

58
 AUTOMATED TELLER MACHINE

An automatic teller machine or ATM allows a bank customer to conduct their banking
transactions from almost every other ATM machine in the world. Don Wetzel was the
co-patentee and chief conceptualist of the automated teller machine, an idea he said he
thought of while waiting in line at a Dallas bank. At the time (1968) Wetzel was the
Vice President of Product Planning at Docutel, the company that developed automated
baggage-handling equipment. The other two inventors listed on the patent were Tom
Barnes, the chief mechanical engineer and George Chastain, the electrical engineer. It
took five million dollars to develop the ATM. The concept of the modern ATM first
began in 1968, a working prototype came about in 1969 and Docutel was issued a
patent in 1973. The first working ATM was installed in a New York based Chemical
Bank. (editor's note: There are different claims to which bank had the first ATM, I have
used Don Wetzel's reference.)
"No, it wasn't in a lobby, it was actually in the wall of the bank, out on the street. They
put a canopy over it to protect it from the rain and the weather of all sorts.
Unfortunately they put the canopy too high and the rain came under it. (laughing) One
time we had water in the machine and we had to do some extensive repairs. It was a
walkup on the outside of the bank. That was the first one. And it was a cash dispenser
only, not a full ATM... We had a cash dispenser, and then the next version was going to
be the total teller (created in 1971), which is the ATM we all know today -- takes
deposits, transfers money from checking to savings, savings to checking, cash advances
to your credit card, takes payments; things like that. So they didn't want just a cash
dispenser alone." - Don Wetzel on the first ATM installed at the Rockville Center, New
York Chemical Bank from a NMAH interview.
The first ATMs were off-line machines, meaning money was not automatically
withdrawn from an account. The bank accounts were not (at that time) connected by a
computer network to the ATM. Therefore, banks were at first very exclusive about who
they gave ATM privileges to. Giving them only to credit card holders (credit cards were

59
used before ATM cards) with good banking records. Wetzel, Barnes and Chastain
developed the first real ATM cards, cards with a magnetic strip and a personal ID
number to get cash. ATM cards had to be different from credit cards (then without
magnetic strips) so account information could be included.
Automated teller machine (ATM), device used by bank customers to process
account transactions. Typically, a user inserts into the ATM a special plastic card that is
encoded with information on a magnetic strip. The strip contains an identification code
that is transmitted to the bank's central computer by modem. To prevent unauthorized
transactions, a personal identification number (PIN) must also be entered by the user
using a keypad. The computer then permits the ATM to complete the transaction; most
machines can dispense cash, accept deposits, transfer funds, and provide information on
account balances. Banks have formed cooperative, nationwide networks so that a
customer of one bank can use an ATM of another for cash access. Some ATMs will
also accept credit cards for cash advances. The first ATM was installed in 1969 by
Chemical Bank at its branch in Rockville Centre, N.Y. A customer using a coded card
was dispensed a package containing a set sum of money.
Most ATMs are connected to interbank networks, enabling people to withdraw
and deposit money from machines not belonging to the bank where they have their
account. This is a convenience, especially for people who are travelling: it is possible to
make withdrawals in places where one's bank has no branches, and even to withdraw
local currency in a foreign country, often at a better exchange rate than would be
available by changing cash.
ATMs rely on authorization of a transaction by the card issuer or other
authorizing institution via the communications network. Many banks in the India not
charges fees for the use of their ATMs.

Reliability
ATMs are generally reliable, but if they do go wrong customers will be left without
cash until the following morning or whenever they can get to the bank during opening

60
hours. Of course, not all errors are to the detriment of customers; there have been cases
of machines
Security
Early ATM security focused on making the ATMs invulnerable to physical attack; they
were effectively safes with dispenser mechanisms. A number of attacks on ATMs
resulted, with thieves attempting to steal entire ATMs by ram-raiding.
Modern ATM physical security, like other modern money-handling security,
concentrates on denying the use of the money inside the machine to a thief, by means of
techniques such as dye markers and smoke canisters. This change in emphasis has
meant that ATMs are now frequently found free-standing in places like shops, rather
than mounted into walls.
Alternate uses
Although ATM's were originally developed as cash dispensers, they have evolved to
include many other bank-related functions. In some countries, especially those which
benefit from a fully integrated cross-bank ATM network. ATMs include many functions
which are not directly related to the management of one's own bank account, such as:
 Paying routine bills, fees, and taxes (utilities, phone bills, legal fees, taxes, etc.)
 Loading monetary value into pre-paid cards (cell phones, tolls)
 Ticket purchases (train etc.)

ATM – Today’s Channel

ATM channel is now becoming more versatile. It is no longer merely a convenient

24X7 cash dispenser. Tying up with the cellular service providers, banks have started
offering mobile top up facility through ATMs. There are banks that have provided the
services of utility bills payment through ATMs. Even the Government has found ATM
to be attractive and banks are facilitating payment of Income Tax through ATMs. The
most recent and claimed to be the first in the world is IDBI Bank’s service of booking
of Indian Airlines air tickets through their ATMs. The transaction slip of the ATM
serves as the air ticket and is exchangeable with the boarding pass at the airport.

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Customers can also find information on various schedules, seat availability and also on
various regular and apex fares for Indian Airlines.

ATM channel has is gaining greater popularity. The data relating to it is given below:
 ATM users are spread in both urban and semi-urban areas, and ATMs have
more male users than female users.
 Majority of users are over 35 years of age and 25.1 % of users belong to over 55
years category.
 Around 35 5 of users have annual income of more than Rs.1.75 lac.
 More than 78% of users used ATMs for the reasons of convenience of place and
timing of withdrawal of cash or safety.
 A little over 11% of users used ATMs so as to avoid going to the bank.
 The usage of ATM was mostly (over 56%) after 5 pm, within that upto 9 pm the
usage was in 46% of cases.

While banks are encouraging customers to increasingly use ATMs so that their
transaction costs are reduced, they are making efforts to make the experience of using
ATMs more satisfying for the customers. ATMs involve huge investments; it is
estimated that in India banks have invested about Rs.3375 crores. Thus banks need to
get more return on their investments in ATMs. Nearly 50% of retail banking
transactions in private banks and 40% in public sector banks are estimated to be done
through ATMs. To make this channel more user friendly ATMs are now designed to
offer to the customer a choice of language. To add a personal touch, some banks have
designed ATMs that display a welcome note with the customer’s name.

The offerings through ATMs can further be personalized by reminding about the due
date of maturity of fixed deposit, by offering to withdraw the usual amount withdrawn
by the customer through ATM. Similarly, ATMs can be used for cross selling various
other products of the bank by displaying advertising campaign on new products or
promotions of the bank during the time that the pin information is verified or the

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transaction is being processed. Banks can make special personalized offers of say a
personal loan, or a housing loan, etc, to the customer and seek customers response on
his interest in the offer. This creates a feeling of live communication between the bank
and the customer.

BENEFITS OF THE ATM CARD

 Power of Instant Cash

 Power of Anytime Anywhere Money - Withdrawals through ATMs
 Power of Convenience- No Queues, No Paperwork
 Power of Reach – through Visa Merchant Outlets

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 CREDIT CARDS

Credit Cards - It's credit to you!

"I have the VISA power" says a beaming Sachin Tendulkar with a credit card in his
hands. And not without good reason. After all, that small piece of 'plastic' has been
acknowledged worldwide much like his batting. In yet an another message, a young
man on a date with his girlfriend finds that carrying cash is actually a great 'pain' in the
neck.
From being an item of desire, credit cards have now become every man’s idea of ready
money. In India, over the past few years, they have rapidly penetrated urban
consciousness and are slowly becoming part of our collective existence. But is
everything as hunky dory in the world of credit cards as issuers would have us believe.
A Credit card is the smart solution to these problems. It is a convenient and safe
alternative for cash.

Besides, it says things about you. Most people associate a credit card with a prestige,
which it most certainly bestows on you, but more importantly, it says that you have
taken the onus of being responsible - to be extended credit! So, when you get yourself a
card, remember that, because your bank does!
Convergence of technology, banking and payment systems have led to significant
growth in financial cards in the Indian banking system. Of these — credit cards, debit
cards, charge cards and smart cards—credit and debit cards are gaining momentum.
These days, a credit or debit card is not treated as a status symbol of a banking
customer, as perceived in the last decade. Large increases in disposable income for mid-
level and high-level income groups in metros and mini-metros are one of the reasons for
exponential growth in the card business.

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During the past few years, India has witnessed year-on-year growth of over 60% in
debit cards. Earlier, debit cards were used as just ATM cards. Now, with the increased
number of points-of-sale (POS) and bilateral arrangements, transaction volumes are
getting multiplied. One interesting fact is that all the 150 million banking customers
would be eligible for a debit card, unlike the credit card.
But, a large number of these customers would be able to use it only as an ATM card for
cash withdrawal, due to lack of POS terminals in the rural segment. Here is the
opportunity for growth. In the coming years, banks would add these rural locations for
e-payments, which require lot of customer awareness on e-payment opportunities and
solutions.
Card-to-card domestic funds transfer facility is another encouraging feature for debit
card growth in coming years. The Indian customer is using debit cards as a check on
overspending, unlike credit cards, as the amount is getting debited then and there from
the account.
Even though there is a perception among a section of customers that credit cards are
driving them into a debt trap, we have noticed a credit card revolution in the industry.
Customer preference is for revolving credit than for charge cards. In charge cards, the
entire bill has to be settled fully, unlike credit cards, where a minimum payment of 5%
of the bill would be sufficient to revolve the limit. It is also noticed that customers are
using credit cards for high-value purchases, like jewellery and electronic goods, on
account of the flexible repayment structure available.
Consumer loans linked with credit cards are also gaining momentum, because of the
‘buy now and pay later’ attitude of younger banking customers. Co-branded credit
cards, with discounts and reward points, encourage our customers to go for credit cards.
There are smart customers, who are repaying their entire dues on time and availing
purchase discounts, benefits and reward points on credit cards.
Higher interest rate and charges/fee are hindering factors for the growth of the credit
card business. Recent guidelines by the Reserve Bank of India on the credit card
business would address this issue. Many banks are now waiving the joining fee and
annual fee for their customers.

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Delinquency in the credit card business is reported to be a little over 7%, which is on
the higher side, compared to the international standard of 3-4%. Establishment of a
credit bureau, updated information on card defaulters across the country and latest
credit risk management techniques have addressed this issue to a great extent. It is
expected to come down to the desired level in the coming years.
Currently, only 14% of Indians hold credit cards. The total transaction through credit
cards is only 1% of personal consumption expenditure, which indicates tremendous
opportunity for growth in this segment.
The credit card market is growing at 25-28% and this growth rate is expected to
increase in the coming years. Since the existing number of debit cards is over 30
million, compared with 14 million credit cards, it would be difficult to surpass credit
cards with that of debit cards in actual numbers. For, all banking customers would be
eligible for debit cards, unlike credit cards.
But, the future of the credit card business is bright. The Indian customer will soon
receive the credit card as a mass product at affordable interest rates, with discounts and
benefits, as a result of competition in the market.

Salient features

Annual Fee:
All credit card issuers charge an annual fee which is payable at the start of the year. The
start of the year, of course, is your membership year, and not the calendar year. So, if
you got yourself a card in March, you can expect to be billed the annual fee every
March until you cancel your card. As a privilege, this fee is sometimes waived the first
time. When the time comes for renewal of your card, you can even use the reward
points you have accumulated from using the credit card over the year to settle your
annual fee.

Forwarding Balance (or Revolving):

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The most attractive feature of a credit card is that you need not pay off your dues in
whole. You can opt to pay 5% of the total amount on or before the due date, every
month, the rest is carried forward. But there's a price to pay for this extended credit -
interest! Normally, interest varies between 2.5% and 3% per month.

APR or Annual percentage Rate:

The interest rate that reflects the yearly cost of the interest the outstandings on your card
is called the annual percentage rate. This rate is charged to the card holder on the
amounts carried forward beyond the due date for the payment of balances. Most card
issuers will tell you their monthly rate of interest. It might sound low at 3%, but when
you look at the interest rate over the year, it turns out to be as high as 43%.

Cash Advance:
An important feature - lets you withdraw cash from designated ATMs using your credit
card. Use discretion when withdrawing cash on your credit card because the charges for
this facility are high, around 2.5% to 3% per transaction!

Benefits

Want to go take the girlfriend out for dinner? Be smart enough to carry a credit card
along with you. Or otherwise, like the young man in the Standard Chartered ad, the cash
you have could prove to be ‘a pain the neck’. There are other tangible benefits also.
With a credit card one can spare frequent visits to the bank for withdrawing cash. The
purchases you make can be paid for after a month or so before it starts attracting
interest.
Nowadays, a credit card has many freebies attached to it. For starters, you can log on
free air miles and hotel nights every time you use a Citibank credit card. One can also
get a certain amount of extra protection on one’s purchases with a credit card. For
example, a HSBC card insures you for lost baggage and damages by theft or fire.

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Credit:
When you use a Credit card to pay for anything, you get an interest-free period of 45
days. Billing cycles are structured in such a way that you definitely get at least 30 days
out of these as clean credit time, which is especially beneficial to salaried people. Better
still, you can opt to pay your bill in full when you receive it or you can carry forward
your payments by paying as little as 5% of the total amount on or before the due date,
every month. You can spend now, pay later.

Convenience:
With a credit card on you, you don't need to run the risk of carrying a lot of cash.

Cash Advance:
Another advantage of a Credit card is that you can use it as an ATM card too! But
remember, there's a fee to it. It typically starts with a flat fee going up to a percentage
based fee on the amount of the withdrawal.

OTHER BENEFITS

 Global Acceptance

A Global Card enables you to use your credit card when you are overseas. It is
therefore very convenient for those who travel abroad frequently.You can spend
in dollars or any other foreign currency and settle the dues in your local
currency. Your credit limit is based on the Basic Travel Quota (BTQ)
entitlement, and if this is more than your assessed credit limit, you could buy
traveller’s cheques. You can also withdraw cash up to US$ 500 against the card.

Another advantage is that banks are not charging extra for the card over the local
credit card.

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 Travel Discounts

This offers a facility whereby cardholders get exclusive discounts upto 3.5 % on
basic domestic air fares and upto 6.5% on basic international air fares. This is
applicable only when the amount is charged to your credit card & booked
through the associates (like M/s Cox & Kings India Ltd) of your card company.

 Buy-On-The-Spot

A facility for availing Equated Monthly Installment (EMI) billing options for a
wide range of high value purchase items – like consumer-durables, computers,
2-wheelers, cellular phones etc. The cardholder has to ensure that the outlet
he/she is purchasing from has a tie-up with your card issuer

 Revolving Facility

Under this offer, one needs to pay only the "Minimum Payment Due" which is
normally 5% of the outstanding balance amount, while the balance can be
carried forward to the next month's statement . As a policy, it is advisable for the
cardholder to pay the whole amount on the due date as interest charges for the
balance could edge around whopping 36%p.a .

But as most of the card holders do not, this facility actually becomes a major
revenue earner for the card company.

 Free Credit Period

Your Statement is generated every month on a specified date called Statement

Date. The Payment Due Date is generally 20days from the Statement Date. If
any transaction is billed to your card account one day after your statement date
& therefore reflects only in your next statement, you enjoy a maximum of 50
days of free credit. In any case, since your Payment Due Date is always 20 days

69
 after your statement date, you always get a minimum of 20 days of free credit.
Consequently, on an average, your card provides you with 35 days of interest
free credit period.

Again the card holders here have to read the fine print. The free credit of 20
days is available provided the Total Payment Due shown in the previous
Statement is settled in full. Otherwise you will be charged interest on the
outstanding balance right from day one.

 Insurance

Credit card companies offer their members a comprehensive insurance cover,

which includes

Personal accident insurance-This covers air accidents, road accidents or

otherwise .The amount insured differs across the categories and again varies
from one player to another. Citibank Silver card gives an Air insurance of Rs
10,00,000 and General insurance of Rs 5,00,000.

Insurance for spouse/supplementary card holder- This includes the above

mentioned Personal accident insurance for spouse/supplementary card holders.
ICICI Bank Sterling Silver card gives an add-on cover of Rs 4,00,000.

Baggage Cover-This provides cover against the loss of one’s baggage while
travelling. This feature is not standard on every credit card and frequent
travellers may find this feature useful. The baggage cover for Canara Bank
Mastercard is Rs 25,000.

Purchase protection -The purchase protection feature automatically insures all

items bought on the credit card from damage or loss due to fire or theft, upto a
certain some of money. This generally works out to around Rs 40,000 worth of
cover.

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 Global ATM Access

Within India, you could have access to any time cash withdrawals from ATM's
of the card company.
In case of Standard Chartered bank, you can also withdraw cash from all ATMs
in India which are participants in the Visa/MasterCard domestic ATM
Networks.
When travelling abroad, you can access cash from any one of the 450,000
ATMs bearing the Visa / Plus logo ( in case of Visa cardholders), or anyone of
the 400,000 ATMs bearing the MasterCard /Cirrus logo (in case of MasterCard
cardholders). Other players like Citibank, HSBC, ANZ Grindlays also provide
similar facilities to their members.

 Privileges At Select Hotels/Restaurants

These include exclusive offerings like dining programs at specially selected

restaurants across India, offering discounts upto 25%. Special discount on room
tariff, free stay for spouse, express check-in and late check-out at no extra
charge are some of the benefits.

 Rebate On IBTC Membership

For overseas travelIers, you can also avail of a 55% discount on the regular
membership fee of the International Business Travellers Club (IBTC) which
allows you to save upto 50% in over 3500 star hotels worldwide and upto 15%
on rentals of cars like that of Hertz Rent-a-Car at over 4700 worldwide
locations.

 Airport Lounges

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 Access to business lounges and to fax, telephone, telex and secretarial services
at domestic airports in leading metropolitan cities like Calcutta, Chennai, Delhi,
Mumbai.

 Cash Advance Limit

Normally the cash advance limit is set as a percentage of your credit limit which
is around 40%. The cash advance fee taken through ATMs in India and overseas
is very high nearing 2.5% ( watch out as this is charged on a daily basis at
monthly compounding ). Mind it that’s not all, there is also a transaction fee that
might be slapped on the card holder if the ATM used is not that of the card
conpany.

 Teledraft
Card members can order bank drafts through telephone and even have them
delivered to their doorstep. Again nothing comes free, as there is a teledraft fee
which is around 2.5% of the teledraft value, subject to a minimum fee.
 Petrol Against Card

Your Card will be accepted at all petrol pumps across India with whom the card
companies have a tie-up. A transaction fee of around 2.5%, which is the industry
practice, will be levied. This fee is waived for Co-branded cards like Citibank
Indian Oil Mastercard.

 Supplementary Cards

If you opt for two or more cards (Additional/Supplementary), your combined

credit limit will now be available across all your cards. No worrying about
exceeding your credit limit on any one card as long as you do not exceed your
combined Credit Limit.

 Railway Ticket Bookings

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 Indian Railways provides a separate booking counter for credit card holders
which allows them to book railway tickets using their credit cards. So you can
say adieu to serpentine queues and sleepless nights near the railway counter.

 Express Retail Loans

Some banks like ABN AMRO bank offer a cut in interest rate upto around 1.5%
on their retail products like auto loans and consumer loans. Processing time is
also reduced as your credit worthiness is already appraised. This strategy has
been used by various players to cross sell other products to the existing
customers.

 Payment Of Electricity And Telephone Bills

Some banks like Citibank allow you to pay electricity and telephone bills and
even your children’s school fees using your credit card. Check out for the
ECS( Electronic Clearing Service) facility whereby the bills will be
automatically debited to your Bank account.

 Railway Credit Card Counters

These special counters for railway tickets at key cities in India normally have
shorter queues. A processing fee, as per industry practice and as applicable, will
be levied for this facility.

 Overseas Purchasing

You can use your card to subscribe to your favourite foreign magazines like the
Economist, Harvard Business Review.

DRAWBACKS

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 If you are prone to go on shopping binges, beware, the plastic money in your
possession makes it a little too easy. And one may not know of it till the monthly bill
stares right on your face. Secondly, one may end up paying too much if the balance is
allowed to carry over for a long period of time. For this it is important to read the fine
print before one applies for a card. There are myriad ways a bank could charge you on
the services offered. And God forbid if you happen to lose your card and remain
unaware of it. Nowadays credit cards have become game for con artists who have
mastered the art of living off them.
Greed!
Just because you have credit being extended to you doesn't mean that you should go on
a rampage! Use your card with discretion and caution. Remember, it is an extremely
expensive way to borrow money! View it as a convenient and safe way to carry cash, a
timely help in an emergency or taking advantage of an opportunity that you would have
otherwise lost out on, like an investment!

BEWARE BEFORE POSSESSING A CREDIT CARD

With the credit card truly becoming an international citizen, issuers have begun
highlighting the value added features offered along with the basic product. While some
of them are offering attractive interest rates, others are luring customers by their reward
schemes. With a plethora of choices on offer it is not easy to come to a decision on any
particular card. However, a comparison on the basis of a few basic parameters is will
help us make an informed choice.

First, there's the credit limit. All banks have different limits set for customers depending
upon the type of card in their possession. Even within a particular type of card, limits
may vary depending upon the credit worthiness of the individual. This depends, among
other things, on the gross income of the individual and the period for which he/she is
using the card. However, some banks like Citibank and American Express have cards
which have no set credit limit. Amex, for e.g., has a charge card which has no upper

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limit and allows one to spend as much as one likes (provided the holder repays the
amount at one go).

Second criteria could be the lost card liability. If one is traveling and has lost his/her
credit card then reporting the loss will not be much of a problem. HSBC, Citibank, Stan
chart and Amex can be reached from any corner of the world for information on one's
card as well as for reporting the loss. However, except for Amex, all others will mail a
replacement card to the holder's mailing address. Amex will replace the card within 48
hours free of cost. Liability for a lost card is nil for Citibank, HSBC, Amex (once the
bank is informed about the loss) and the Stan chart photo card. However, the non-photo
card carries a liability of Rs1,000.
Nowadays, almost all cards come with various goodies attached. These include airline
ticket booking and insurance benefits on lost luggage and accidental deaths. HSBC, for
eg, offers discounts of 3.5% on domestic air fares and 6.5% on international ones if
tickets are charged to their cards. The latest in line of value added features are the
rewards programs. Here a card holder earns a certain number of points by spending a
particular sum of money. Stanchart, for eg, uses a conversion of Rs125 (spent in India)
or Rs80 (spent abroad) for one point. HSBC, on the other hand, only allows points
collected to be squared against a discount on the annual fees. A minimum of 350 points
is needed to get a discount on the annual fee. Citibank awards one point on spending
Rs100.

The table below gives an indication of the various value added services on offer from
various banks.

Value Added Features Citibank Stanchart HSBC Amex

Hotel discounts - - - Yes
Travel fare discounts Yes Yes Yes Yes
Free global calling card Yes (G) - Yes Yes
Lost baggage insurance Yes Yes Yes -
Accident insurance Yes Yes Yes -
Insurance on goods purchased Yes Yes Yes -

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Waiver of payment in case of accidental
- - Yes* -
death
Household insurance Yes (G) - - -
(G) - Gold card / * Rs20,000 for Classic and Rs40,000 for Gold
An innovative scheme offered by American Express, called Balance Transfer Service,
helps the cardholder to pay off outstanding on other credit cards. Amex will pay the
card issuer and transfer the amount due to the Amex card. And for the first six months
the Amex card holder gets the benefit of a lower interest rate of 1.99% per month as
compared to 2.95% for most other banks. For frequent users, Amex has a scheme for
waiving the annual fees if the cardholder spends more than Rs45,000 in the preceding
12 months.
Another new thing on the horizon are the so-called co-branded cards. Several of them
have been have been launched recently. Companies like Indian Oil Corporation have
tied up with Citibank to launch Indian Oil Citibank card. With this card one does not
require to pay a transaction fee for purchasing petrol at any Indian Oil outlet. The card
holder gets a 5% discount on all AMCO and Exide make batteries from authorized
dealers and Rs1,000 off at select outlets for MRF autocoat car painting charges.

There are also the Times card and Bharat Petroleum BOB card. These cards give you
discounts at several outlets. For example the Mahindra Stanchart card gives you priority
check-in and check-out facilities at Guestline hotels (run by Mahindras).

TYPES OF CARDS

MasterCard – MasterCard is a product of MasterCard International and along with

VISA are distributed by financial institutions around the world. Cardholders borrow
money against a line of credit and pay it back with interest if the balance is carried over
from month to month. Its products are issued by 23,000 financial institutions in 220
countries and territories. In 1998, it had almost 700 million cards in circulation, whose
users spent $650 billion in more than 16.2 million locations.

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VISA Card – VISA cards is a product of VISA USA and along with MasterCard is
distributed by financial institutions around the world. A VISA cardholder borrows
money against a credit line and repays the money with interest if the balance is carried
over from month to month in a revolving line of credit. Nearly 600 million cards carry
one of the VISA brands and more than 14 million locations accept VISA cards.
Affinity Cards - A card offered by two organizations, one a lending institution, the
other a non-financial group. Schools, non-profit groups, pro wrestlers, popular singers
and airlines are among those featured on affinity cards. Usually, use of the card entitles
holders to special discounts or deals from the non-financial group.
Standard Card – It is the most basic card (sans all frills) offered by issuers.
Classic Card – Brand name for the standard card issued by VISA.
Gold Card/Executive Card – A credit card that offers a higher line of credit than a
standard card. Income eligibility is also higher. In addition, issuers provide extra perks
or incentives to cardholders.
Platinum Card – A credit card with a higher limit and additional perks than a gold
card.
Titanium Card – A card with an even higher limit than a platinum card.
Secured Card – A credit card that a cardholder secures with a savings deposit to ensure
payment of the outstanding balance if the cardholder defaults on payments. It is used by
people new to credit, or people trying to rebuild their poor credit ratings.
Smart Card – Smart cards, sometimes called chip cards, contain a computer chip
embedded in the plastic. Where a typical credit card's magnetic stripe can hold only a
few dozen characters, smart cards are now available with 16K of memory. When read
by a special terminals, the cards can perform a number of functions or access data
stored in the chip. These cards can be used as cash cards or as credit cards with a preset
credit limit, or used as ID cards with stored-in passwords.
Charge Card – Falls between a debit and credit card. Works like the latter and you
don't have to be an accountholder. Just pay up in full when the bill arrives with the mail.
No outstanding are allowed, in other words, no revolving credit facility either.
American Express and Diners are providers.

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Rebate Card – This is a card that allows the customer to accumulate cash, merchandise
or services based on card usage.
Co-Branded Card – This is a marriage of convenience between two service providers
who want a trade-off with the other's strengths. Specific facilities are made to members
through these tie-ups. So, TimesBank and Citibank have a co-branded card that allows
concessional rates for add-on cards or telephone banking. Stanchart and Hindustan
Lever Limited have a co-branded card to sell Aviance beauty products. SBI-GE Capital
has a co-branded card for retail loans.
Cash Card – Cash cards, similar to pre-paid phone cards, contain a set amount of
value, which can be read by a special cash card reader. Participating retailers will use
the reader to debit the card in increments until the value is gone. The cards are like cash
-- they have no built-in security, so if lost or stolen, they can be used by anyone.
Travel Card – These work mostly as debit cards for the limited purpose of travel.
Citibank Dollar Card, American Express, Bobcard Global and Hongbank Bank Thomas
Cook International Card are among the players in this section.

FINAL RBI GUIDELINES ON CREDIT CARDS

THE credit card user in India has faced several problems, including bills not being
received on time, wrong bills and, worst of all, receiving unsolicited cards. But all this
may soon become history.

Reserve Bank of India has issued guidelines to banks and non-banking finance
companies (NBFCs) on credit card operations, which touch upon issues such as credit
limit, interest rate, wrong billing, sharing of credit information and fair practices, and
code of conduct for the issuers.

The guidelines state that each bank and NBFC must have a Fair Practices Code for
credit card operations, which should be widely displayed on their Web sites before
November 30.

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As per the guidelines, framed by the RBI Working Group on Regulatory Mechanism for
Cards, banks and NBFCs issuing credit cards will now have to ensure that customers
get at least 15 days to make payment before charging interest for delayed payment.

In the case of a wrong bill, the card issuer will have to explain and provide the customer
with documentary evidence within 60 days.

The issuers will have to give at least one-month notice before hiking any charge. Also,
if a customer wishes to surrender his credit card on account of change in charges, the
bank will not charge him extra for such closure.

Banks should also maintain a Do Not Call Registry (DNCR) containing phone numbers
of customers as well as non-customers who have informed the bank they do not wish to
receive unsolicited marketing calls for credit card products. The DNCR should be set up
within two months, the guidelines said.

In case a bank issues an unsolicited card without the consent of the recipient, the bank
should reverse the charge and also pay a penalty amounting to twice the value of the
charges reversed.

The monthly statement sent to customers must carry information such as the annualised
percentage rates, annual fee and late payment charges and the method of calculation of
rates.

RBI has also asked banks or NBFCs who outsource credit operations to ensure
confidentiality of customers' records. Banks can also formulate their own code of
conduct for direct sales agents or use the code formulated by the Indian Banks'
Association and display these on their Web site.

In case the credit card is issued to persons without independent financial means such as
students, the liability will be that of the principal cardholder.

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With regard to multiple credit cards, the issuer should assess the limit on the basis of
self-declaration or credit information, the guidelines said.

Banks must also publicise their grievance redressal machinery and mention the name
and contact number of the officer concerned.

If the complaint is not addressed within 30 days, the customer can approach the
Banking Ombudsman.

RBI said it has the right to impose any penalty on a bank or NBFC for violation of any
of these guidelines.

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 DEBIT CARDS

Debit Cards - How never to be in debt!

A Debit card is a card that has direct access to your bank account. The card is issued by
your bank. Whenever you use your debit card, your bank account is debited
immediately. Unlike credit cards, you don't enjoy any credit period and therefore the
debit card does not have minimum income eligibility criteria.
Today more than 60 million people have debit cards that carry the logos of the two
major payment card companies. That number is expected to grow dramatically as debit
cards become increasingly popular. Many debit cardholders confuse debit cards with
standard ATM cards.
Not all debit cards are equal. Debit cards with the logo of one of the two major payment
card companies are ATM cards with clout. They can be used to obtain cash from ATM
machines, and also to make purchases anywhere the logos on these cards are accepted --
over 16 million merchants worldwide.
Increasingly, debit cards combine the key elements of ATM cards, credit cards and
cheques-- besides giving instant access to cash and worldwide acceptance. The funds
come directly out of our checking account and because purchases and ATM
withdrawals are listed on our monthly statement, we can track our spending
Debit cards are typically used as substitutes for cash and cheques to pay for everyday
items such as groceries, restaurant meals, and department store purchases. We don't
have to carry cash or cheques. And, unless we dip into an overdraft line of credit tied to
our checking account, we don't run up interest charges.

What is a Debit Card?

As it is popularly known, it is an ATM card on the move. The Debit Card gives us the
freedom to access our Savings or Current Account at merchant locations and ATMs.
Whenever we make payments, the amount will be instantly debited to our account.
There are around more than 5.3 lakh Visa/PLUS ATMs and equally strong Mastercard/

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Cirrus ATMs in over 140 countries worldwide. All our purchases and cash withdrawals
will be in the currency of the country we are in, while our account will be debited in
rupees. So we needn't carry traveller's cheques or foreign exchange the next time we
travel.
Debit Card can be used at any merchant location displaying the Visa or Mastercard
logo or at any ATMs displaying the Visa/PLUS or Mastercard/Cirrus logo. Besides that,
one can always use it at any of the bank ATMs as a normal ATM card.
All we need to do is present our card to the merchant who will swipe it through the
electronic terminal and enter the amount of our purchase. We only need to sign the
transaction slip. Our account will be automatically debited for the amount of our
purchase. At merchant locations that have a PIN pad, we may be required to confirm the
transaction by entering our PIN.
Our Debit Card can be used to access our Account from over 5,000 Shops, Department
Stores, Petrol Pumps and Restaurants and over 235 ATMs in India as for HDFC Bank.
We can also use it at over 4 million Visa Electron merchant locations and equally strong
Mastercard outlets. If Debit Card ever gets lost or stolen, card companies protect us
from fraudulent usage the moment we report the loss. After reporting, our liability is
limited to a maximum of around Rs. 500/-as for a HDFC Bank International Debit Card.
There aren't many Debit cards in India as of now. The HDFC International Debit Card
comes at an annual fee of around Rs. 250/-. This charge is waived off on one
additional card taken on our account. There are charges involved on cash withdrawals
and balance queries. Normally the cash withdrawal charges are around Rs 55/- and a
meager charge of Rs.10/- for balance.
If we already have a savings or current account with the debit card issuer, we might just
have to file an application form. The card company then couriers the card across to us in
around a week’s time. If we don’t have an account, we will have to open an account
first and request for the debit card to be issued to our residence.
The Debit card does have a daily limit which could be somewhere around Rs. 15,000 at
ATMs, and Rs. 10,000 at merchant locations. This again is subject to the balance
available in our account.

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Types of Debit Cards

There are two types of debit cards and two types of debit card transactions:
Direct Debit Cards allow only "on-line" transactions, also called point-of-sale. An on-
line transaction works like a straight ATM transaction. It is an immediate electronic
transfer of money from our bank account to the merchant’s account. This requires us to
enter our Personal Identification Number (PIN) at the store’s terminal. The system
checks our account to see if there is enough money to cover the purchase.

Deferred Debit Card looks similar to a credit card, bearing a Visa or MasterCard logo,
and can be used wherever our card’s brand name is displayed. It is NOT a credit card.
Rather, this card allows "off-line" transactions, as well as on-line. Off-line purchases
resemble a credit card transaction. The merchant’s terminal reads our card and creates a
debit against our account. However, instead of debiting our account immediately, the
transaction is stored for processing later -- usually within two to three days. Instead of
using a PIN, the customer signs a receipt as they would with a credit card. Most off-line
transactions are verified immediately to see whether there is enough money in the
account.

Regardless of the type of debit card we have, when we use it, the money is subtracted
from our bank account.

Salient Features

 It is a combination of a Cheque an ATM card. Therefore, there are no fees for

using the ATM for cash withdrawal, or as a debit card for purchase.

 A Debit card is more affordable than a credit card. You just use your bank
account for all your transactions.

 Currently, there are only two issuers in India - Citibank and HDFC bank.

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  No credit period. Your bank account is debited immediately.

 No credit check is required to get a Debit card.

 Spending is limited to your bank balance.

BENEFITS OF DEBIT CARDS

 Obtaining a debit card is often very easy. If we qualify to open a bank account,
we can usually get a debit card.
 When using a debit card, one does not have to show identification papers or give
out personal information at the time of the transaction.
 It frees us from carrying cash or a cheque book.
 In case of international travelers, it can save us from having to stock up on
traveler’s cheques or cash when we travel.
 Debit cards may be more readily accepted than checks, especially in other states
or countries as one need not verify the authenticity of the payment and the
merchant is assured of immediate payment.
 If we return merchandise or cancel services paid for with a debit card, the
transaction will be, generally, treated as if it were made with cash or a check.
Customers usually get cash back for on-line purchases; for off-line transactions,
the amount is credited to our account.
 The bother of making payments at the receipt of the credit card statement is
eliminated.
 In case of credit cards, delayed payments are penalized at 30% p.a. rates. This
penalty situation never arises in debit cards.
 Most importantly, debit cards can be used to make smaller value payments,
avoiding the need to withdraw cash from the bank for such petty expenses. If a
credit card was used for making cash withdrawals a charge is levied and

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 concomitantly interest is charged on the amount such withdrawn from the day of
withdrawal.
The debit card base in India in March 2000 was already at 3,00,000. Moreover the
usage figures are even more impressive. Seven out of 10 card holders use their card on a
regular basis with the average monthly spend on a debit card was Rs 1,400, which puts
total annual spends at over Rs5bn. Bare in mind that only two banks namely HDFC
Bank and Citibank, in India currently offer their customers debit cards.
Both MasterCard and Visa International have already witnessed a huge rise in their
debit card bases in the Asia-Pacific region. After 25 years in the region, MasterCard has
built up a credit card base of 80mn, whereas its debit card base, in just four years, has
touched 37mn. Visa too, in less than 18 months, built up a base of 48mn debit cards.

Drawbacks of Debit Cards

 Unlike a credit card, debit card transactions give we no grace period. They are
an immediate, pay-now deal.
 They can make balancing our account tricky if we are not fastidious about
keeping receipts and recording transactions in a timely fashion. It is easy to
forget, for example, when we pay at the gas pump with a debit card and drive off
without our receipt.
 Using a debit card may mean we have less protection than we would with a
credit card for goods that are never delivered, are defective or oure
misrepresented. But, as with credit cards, we can dispute unauthorized charges
or other mistakes within 60 days.
 Fees -- the debit card could be a costly affair to have, especially when using an
ATM that is not affiliated with our bank.

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 TELEPHONE/MOBILE BANKING

What is Telephone Banking?

Telephone Banking is an automated service that allows us to access our account
information and perform routine transactions from a touch-tone telephone. This
convenient system is available 24 hours a day, 7 days a week. To complete routine
transactions via an Automated Telephone Banking System we need a User
Identification Number and a Personal Identification Number (PIN). The navigation
through Telephone Banking system can guide us through the appropriate prompts. We
will have approximately two prior statements as well as our current statement cycle
available to us. We may choose any 4-digit PIN number when using Telephone Banking
for the first time. The bank can reset it for us. For this we simply call one of the
customer service representatives of the bank. If we use Sovereign’s Online Banking,
this Pin reset will also change our Online PIN. Mobile Banking is a service that allows
you to do banking transactions on your mobile phone without making a call , using the
SMS facility.

Services are available on Telephone Banking

• Account balances
• Account history
• Transfer funds/Make payments
• Stop payments
• Bank Card activation
• Sovereign PIN number changes
• Check reorders
• Branch hours and locations
• Interest earned prior year

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HOW DOES MOBILE BANKING WORK?
MobileBanking works on the 'Text Messaging Facility' also called the SMS that is
available on mobile phones. This facility allows you to send a short text message from
your mobile phone instead of making a phone call.

All you need to do is type out a short text message on your mobile phone and send it out
to a pre-designated number.The response is sent to you as an SMS message, all in the
matter of a few seconds.
This message travels from your mobile phone to the SMS Centre of the Cellular Service
Provider, and from there it travels to the Bank's systems. The information is retrieved
and sent back to your mobile phone via the SMS Centre, all in a matter of a few
seconds.

Transactions that can carry out from the cell phone using the Mobile Banking
service:
 Balance Inquiry of all accounts linked to your Customer Identification Number,
 Other transactions give you information on your primary account,
 Checking the last 3 transactions in your account,
 Placing a Stop Payment on a cheque,
 Requesting a cheque book,
 Requesting an Account Statement,
 Cheque Status inquiry,
 Bill Presentment,
 Bill Payment,
 Fixed Deposit Inquiry, and
 A Help menu, which gives you the transaction codes for the various
transactions.

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 ELECTRONIC FUNDS TRANSFER (EFT), ELECTRONIC
CLEARING SERVICE (ECS) REAL TIME GROSS
SETTLEMENT (RTGS)
The central bank of any country is usually the driving force in the development of
the national payment system. The Reserve Bank of India (RBI) as the central bank
of the country has been playing this developmental role and has taken several
initiatives for a safe, secure, sound and efficient payment system.
A Payment System is a mechanism that facilitates transfer of value between a payer
and a beneficiary by which the payer discharges the payment obligations to the
beneficiary. Payment system enables two-way flow of payments in exchange of
goods and services in the economy.
Payment systems include instruments through which payments can be made, rules,
regulations and procedures that guide these payments, institutions which facilitate
payment mechanisms and legal systems etc. that are established to facilitate transfer
of funds between different participants.
Payment systems are used by individuals, banks, companies, governments, etc. to
make payments to one another. In other words, any body who has to make a
payment to any one else can use one or the other form of payment system to make
such a payment.
Payments can be made in India in the form of cash, cheque, demand drafts, credit
cards, debit cards and also by means of giving electronic instructions to the banker
who will make such a payment on behalf of his customers. Electronic payments can
be made in the form of Electronic Funds Transfer (EFT), Electronic Clearing
Service (ECS) for small value repetitive payments and through Real Time Gross
Settlement (RTGS) System for large value payments. A few banks in India have
begun to offer certain banking services through Internet that facilitate transfer of
funds electronically.

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Electronic Funds Transfer

Electronic Funds Transfer (EFT) is a system whereby anyone who wants to make
payment to another person / company etc. can approach his bank and make cash
payment or give instructions / authorisation to transfer funds directly from his own
account to the bank account of the receiver / beneficiary. Complete details such as
the receiver’s name, bank account number, account type (savings or current
account), bank name, city, branch name etc should be furnished to the bank at the
time of requesting for such transfers so that the amount reaches the beneficiaries
account correctly and faster. RBI is the service provider for EFT.
EFT facility is available for transfer of funds between bank branches in about 15
major cities and towns across the country. Under another special scheme called as
Special EFT, many more select branches (which are on the computer network of the
banks) in over 200 cities have been brought into the fold of funds transfer
electronically. The banks generally charge some processing charges for EFT just as
in the case of other services like demand drafts, pay orders, etc. The actual charges
depend upon the amount and the banker-customer relationship. However, for the
present, the RBI has waived all its charges on EFT that were being recovered from
the banks for processing such funds transfer transactions at the clearing houses run
by RBI. This has certainly reduced the processing cost for the banks also.

Electronic Clearing Service

Electronic Clearing Service (ECS) is a retail payment system that can be used to
make bulk payments / receipts of a similar nature especially where each individual
payment is of a repetitive nature and of relatively smaller amount. This facility is
meant for companies and government departments to make/receive large volumes of
payments rather than for funds transfers by individuals. The ECS facility is available
in 47 centres across India operated by RBI at places where it manages the clearing

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houses and by SBI and its associates in other centre. The ECS is further divided into
two types:
 ECS (Credit) to make bulk payments to individuals/vendors, and
 ECS (Debit) to receive bulk utility payments from individuals.

ECS (Credit)
Under ECS (Credit) one entity / company would make payments from its bank
account to a number of recipients by direct credit to their bank accounts. For
instance, companies make use of ECS (Credit) to make periodic dividend / interest
payments to their investors. Similarly, employers like banks, government
departments, etc make monthly salary payments to their employees through ECS
(Credit).Payments of repetitive nature to be made to vendors can also be made
through this mode. For this purpose, the company or entity making the payment has
to have the bank account details of the individual beneficiaries. The payments are
affected through a sponsor bank of the Company making the payment and such bank
has to ensure that there are enough funds in its accounts on the settlement day to
offset the total amount for which the payment is being made for that particular
settlement. Sponsor bank is generally the bank with whom the company maintains
its account.

ECS (Debit)
ECS (Debit) is mostly used by utility companies like telephone companies,
electricity companies etc. to receive the bill payments directly from the bank
account of their customers. Instead of making electricity bill payment through cash
or by means of cheque, a consumer (individuals as well as companies) can opt to
make bill payments directly into the account of the electricity provider / company /
board from his own bank account. For this purpose, the consumer has to give an
application to the utility company (provided the company has opted for the ECS
(Debit) scheme), providing details of bank account from which the monthly / bi-
monthly bill amount can be directly deducted. Such details have to be authenticated

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by the bank of the customer who opts for making payments through this mode. Once
this option is given, the utility company would advise the consumer’s bank to debit
the bill amount to his account on the due date of the bill and transfer the amount to
the company’s own account. This is done by crediting the account of the sponsor
bank which again is generally the bank with whom the company receiving the
payments maintains the account with. The actual bill would be sent to the consumer
as usual at his address as before.

Real Time Gross Settlement (RTGS)

Real Time Gross Settlement (RTGS) system, introduced in India since March 2004,
is a system through which electronic instructions can be given by banks to transfer
funds from their account to the account of another bank. The RTGS system is
maintained and operated by the RBI and provides a means of efficient and faster
funds transfer among banks facilitating their financial operations. As the name
suggests, funds transfer between banks takes place on a “real time” basis. Therefore,
money can reach the beneficiary instantaneously and the beneficiary’s bank has the
responsibility to credit the beneficiary’s account within two hours.
Individuals can transfer funds through RTGS system through their banks. Though
the system is primarily designed for large value payments, bank customers have the
choice of availing of the RTGS facility for their time critical low value payments as
well. There is no definition of "low value" or "large value" for the purpose of RTGS
transaction. As on 31 July 2005, RTGS facility was available at more than 7500
bank branches at 401 cities and towns in India. RBI plans to make the facility
available at a minimum of 10,000 branches by March 2006. At present, not all bank
branches are enabled to process RTGS system funds transfer. A customer who
desires to use this facility should approach his bank to find out whether his own
bank branch as well as the beneficiary’s bank branch is enabled to transfer funds
through RTGS system. Banks may levy charges for such funds transfers at their
discretion and based on the customer-bank relationship. The customer, in turn, is
entitled to claim interest for delay in credit of funds into the beneficiary’s account.

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 ANALYSIS AND INTERPRETATION

12000
From the above data, it is clear that ICICI Bank can beat his entire competitor in this
section i.e. ICICI Bank can provide the credit cards at minimum income of Rs. 60000.

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From the above chart it is clear that ICICI Bank is also beat his entire competitor in the
section of rate of interest also. Rate of interest of ICICI Bank is 2.5%. So if see all the
aspect we can interpret that ICICI Bank is well ahead in credit card section

3.1
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 Credit card helps the customer to pay the bills without having the cash with
them for the interest free time of 45 days and after that we have to pay little
interest on them of upto3%.
 Credit card helps us to withdraw the cash from any automated teller machine
upto a certain limit. So it also provides the power of cash.
 Credit card provides discounts in certain area such as shopping, travelling etc.
 Credit card covers the personal insurance and also insurance on purchase item
etc.
 Through the online banking the banks can now serve their customers round the
clock, throughout the year and that too in much efficient manner.
 Payment of bills, shopping deposits of fund and transfer of funds etc can bo
done through the online banking.
 Online banking helps in the reduction of administrative cost.
 With the help of Automated Teller Machine the customer can now avoid the
long queues for the deposits of cash, payment of bills, balance inquiry in
throughout the country and that too with the reduced paper works.
 Automated Teller Machine provide the power of instant cash in anywhere of the
country.
 Debit card make us free to carry the cash and it is most commonly used service
of anywhere banking.
 Debit card directly used for the payment of bills as well as withdrawal of cash.
 Telephone banking can be used for the various service like balance enquiry,
payment of bills, stop payment of cheques etc.
 RTGS, EFT, ECS can help in heavy transaction of funds or either in
receipt/payment of amounts.

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 CONCLUSION

Despite the low diffusion of technology in India, the momentum of electronic banking
has picked up recently, led by the Foreign Banks and the Indian Private banks. It is
expected to accelerate in future for three reasons:

 Banks now have a variety of technological means to initiate electronic banking

programs with incurring the investments needed to develop their own systems.
The reach and delivery capability of computer networks such as the internet far
exceeds any proprietary bank network ever built, and makes it continuously
easier for customers to manage their money anytime, anywhere.
 Internet and mobile phone usage has been growing at a very fast pace, which
would remove the last stumbling block in the way of the popular acceptance of
electronic banking.
 Though the Indian consumer at large is still not completely comfortable with
technology as a way to do banking, the affluent middle class is becoming more
familiar. The younger generations have started using computers from a very
early age, and this would be the generation which would be the consumer of the
future. But, it is going to be a long time before this technology becomes the
technology for the masses in India.

Electronic banking will realize its full potential when the following key elements fall in
place:

 Internet access becomes more widespread in the country.

 The emergence of low cost interactive access terminals for home as well as
interactive home information services, e.g. set lop boxes to convert TV sets into
computer terminals
 Security aspects of transactions over the electronic banking improves
 Cyber Laws are implemented to give legal sanction and validity to electronic
signatures.

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 SUGGESTION

 Banks should be allowed to issue debit cards to customers without a bank

account or a history of savings and credit servicing. Such measures allow banks
to reach out to the poorest of customers who - in a majority of cases - would
have no banking history.
 Interest rate of the credit cards should be reduced.
 Automated Teller Machine facility can be provided even in the rural areas so
that the more and more customer should attract to it.
 Safety issues regarding the online banking are to be considered.
 Bills regarding the credit card should be communicated at the right time.
 Bank should design the system in such a manner that the faking of credit or
debit cards can not be possible

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 BIBLIOGRAPHY

Websites:
www.google.com
www.timesofmoney.com
www.indiainfoline.com
www.iba.org

Magazines:
IBA bulletin
IIB bulletin

Newspaper:
Financial express
Economic times
Business standard

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