Internet Banking in India
The banking sector in India has undergone a rapid transformation. Almost a decade ago this area was limited to nationalized banks and cooperative. Then came the multinational banks, but were these limited to serve small elite. One could consider the past as the “Middle Ages” in the banking sector, in which each branch of the same bank acted as independent information silo and multichannel banking (ATMs, Net Banking, tele-banking, etc) was almost nonexistent. The main reason for this first transformation is due to improved methods developed encryption security and Internet. The second reason is that banks do not want to lose a potential market share for banks that are quick to offer their Internet services. The objective of this research is just comparing the modern era banking system with the old one.
The evolution of modern banking technology began with the use of advanced machines shipping Ledger (ALPM) in the 1980s. The Reserve Bank of India, which is a central policy under which several public sector banks, financial institutions, NBFCs etc. working in India had advised then all banks to go massive computerization branch level. Two options were raised i. e. either to automate the front office or office. Many banks opted for ALPM office automation in the first phase. Banks as State Bank of India, a public sector commercial bank, focused on automating back office in branch level.
The Rangarajan Committee 1985 report said the banks had to get computerized. The second wave of development called for Total Bank Automation (TBA) in late 1980. This automated both the front-end and back-end operations within the same branch. TBA compound total automation of a particular branch with its own database. In the third wave, the new private sector banks entered the field. These banks have opted for a different model of having one central database instead of having multiple databases for all branches. This was possible thanks to the availability of good network infrastructure.
In the beginning of the 1990s, the cost of the leased line goes down. The DoT was expanding its capacity and new technologies were being implemented. Earlier, banks were unsure of directing the whole operation through a single data center. However, when a couple of private sector banks implemented efficiently, other banks began to show interest, and also began consolidating their databases in a single database . Banks follow this movement by choosing appropriate application software that supports centralized operations. The fourth wave began with the evolution of ATM delivery channel.
This was the first stage of training the client for their own transactions. The second stage was Suvidha experiment in the city of Bangalore in India. This showed the power of technology and how the scope can be increased at a rate unusually large. Seeing this, all banks began to renew their retail distribution channels. Their main focus became the number of customers they can service at a lower cost. The main channels are chains such as Internet banking and mobile banking. After this came alliances for payment through different gateways.
The third major event happening now is the real time gross settlement system of the RBI. Once this is in place, transactions between banks can be done through the settlement system, online, electronically. So collections will become very fast. Within five years, most transactional services are provided by way of the Internet. Net-based banking takes only 10 percent of the operating costs of conventional banking practices and services. Because banks will play a key role in terms of public services related to electronic money transactions we feel that cooperative banks NET-Banking should consider in a big way.
A cost comparison study by IBM Global Services Consulting Group clearly shows the advantage of using Internet for banking services through another Traditional media. The opening of the Indian banking sector to private players acted as a “turning point” for the transformation. De-regulation efforts led many financial institutions (such as HDFC and ICICI) and non-financial institutions entering the field of banking. With the entry of private players in retail banking and with multinationals focuses on individual consumers in a big way, the banking system experienced a change a phenomenal.
Multi-channel banking gained importance. For the first time consumers have the option conducting transactions in either the traditional way (through the bank branch), through ATMs, by phone or through the network. Technology played a key role in providing this multi-platform service. Input private actors driven patterns combined with new nationalized banks forced to redefine their core banking strategy. And technology is central to this change. Internet Banking is the most effective means of banking.
The bank customers changing relationships significantly, open standards replace property front ends, many-to-many substitution networks single line, links and traditional locking erosion, so that corporations enjoy lower switching costs. Corporations source worldwide and find the best cane. Corporate customers are free to disaggregate their corporate banking shopping, selecting the best genetics for every need, geographic and functionally, and the integrated use of front-end to manage the complexity of multiple vendors. Methodology: Let us now compare the IT journey of two of the leading banks of india i. e. Pnb and hdfc. Punjab National Bank
Punjab National Bank (PNB), a public sector commercial bank, has come a long way since March 2000, when IT systems are deployed only 500-odd branches, and was very uneven. Only 35 percent of the bank business was computerized and a number of small software packages running on independent PCs. Now 2003, GNP had 101 branches in a WAN, deployed core banking infrastructure and network works 175 – ATMs. It has also deployed a reliable security infrastructure that helps make transactions within its carefree branches. The journey does not end here, but along the way banks gathered valuable knowledge and experience.
Some of the preconditions were that the RBI systems must be audited by an independent auditor, and an independent agency should carry authentic out penetration tests. The bank has already had their systems audited by an external agency, and penetration testing process is ongoing. In the process, GNP has developed the skills of its own staff to take charge of security on their own at a later stage. The bank also hire technically trained personnel to provide the necessary knowledge base. With the launch of Internet banking, the bank will also strengthen its security policies.
A private sector bank had a centralized IP-based network right from its inception. All branches throughout the country converge at their respective location zonal center, which in turn connects to the data center Mumbai. Based on the nature of the entity and spoke network architecture, the branches are distributed in different regions and each position has an important regional center. Falling branches under a location connected to the hub in the main area. These hubs then connect to the central site (data center) using a combination of 2 Mbps tubes and 64 Kbps, depending on the total volume of transactions passing through.
A highlight of HDFC Bank Network is the presence of two or more hubs in one place. Pre-Internet banking A security issue during the pre-Internet has more to do with the internal activities of a company. From the early days as technology solutions for banking applications mainframe, AS400 or Unix- had a lot of security built. Transactions that are directed from the branch to the main server is encrypted no individual passwords and many functions have two levels of authorization. Therefore safety banking largely integrated in the software or the application itself.
Today banking in India is not limited to a branch. People have less time to devote to their banking and would like to make use of banking services through other channels. In a competitive market, where services offered command market share, banks are constantly competing for customers. Banking has become a process of choice and convenience. By offering different channels until banks have succeeded in divert their operations from one branch to other channels. The result has been a reduction in the cost per transaction at the branch. An average transaction costs about 100 rupees branch, at an ATM in question Rs. 0, and the Internet is around Rs. 20. But unfortunately a very small percentage of customers out not use the Internet Banking in India. This is due to factors such as low PC penetration, and penetration of Internet itself is low. At present only a few banks (eg HDFC, PNB, etc) have demonstrated the Internet initiative banking and have a strong advantage over other banks through a large number of customers still use ATMs. Typically 55 percent, on average, the operations of these banks are in the ATM, branch 30 percent, 8 percent Phone and 7 percent Internet.
As with any new technology issue new face. There are a number of problems faced by these banks. One of the first problems is that of customer service. Banks need to create a whole new customer relations department to help customers. Banks need to ensure that customers receive help quickly if they need help. The major problems or disasters can destroy bank’s reputation quickly and easily. By showing the customer that the Internet is reliable they are able get the client can trust the online banking more and more. Besides these the first is the main concern of the laws.
While Internet banking has no national or state borders, the law does. Companies will have to make sure you have the software in place that can detect when a law of a state to another is being violated. Security of course, is a big problem with banks. Along with security problems and manage cryptographic a bank also has to worry about becoming a far too cold for the customer. Some think the banks offering Internet banking services our increasingly cold and impersonal with customer. Despite the problems that exist however, are not as bad as you think.
With encryption and security technology to improve in leaps and with banks and financial institutions are allowed to use 128-bit Internet banking is increasingly Code secure. The future of modern banking integration is, as people have less time for banking. My profile revealed that the banks that offer online banking services are rapidly becoming the choice of citizens in the urban areas. People want to process more transactions online. Soon there will be more activity in terms of applications and services on mobile. Geography is not an inhibitor more, since all can run on the network.
Integration will become the next big thing in real. The customer will want a one-stop workshop that will take care of all your needs. For example people will want to buy their mutual funds, redeem his mutual funds, insurance policies buy, renew policies, and buy movie tickets, train tickets and numerous similar transactions through the bank. The ATM still serve as an effective means of dispensing, but the Internet and mobile will be very active. Banks that use the Internet banking have higher rates of return deposits and provide higher interest rates in general, and not have to deal with cashiers, branches, etc. and then in the times ahead and the actual Virtual banks will not dominate the future.