Description
The document describes about Features of Online banking, Risks associated with Online banking, Role of RBI, DOIT.
ONLINE BANKING
Concept Online banking can be referred to a system that allows individuals to perform banking activities through the internet. Some online banks are traditional banks which also offer online banking, while others are online only and have no physical presence. History Online banking took off after the liberalization phase of the Indian Government in the early 1990’s and it was after the Narasimham Committee Report on Banking Reforms that technology actually took up in the banking sector. The boom in affordable PCs, and the fear of being taken over by competition, also spurred the growth of Online banking. The ICICI Bank kicked off online banking in 1996 (under the brand name ‘Infinity’), followed by a host of other banks. But even for the Internet as a whole, 1996 to 1998 marked the adoption phase, while usage increased only in 1999, owing to lower ISP online charges, increased PC penetration and a tech-friendly atmosphere. On the other hand, the Public Sector Banks (PSUs) lagged in the race for adopting Internet banking practices. While, among the PSUs, the State Bank of India took the lead, others are gradually catching up on Internet banking services.
Features of Online banking Online banking is quite similar to traditional banking services except the fact that a customer need not be physically present in the bank to carry out his or her transaction, rather the customer can execute his required transaction through the internet. Online banking allows a customer to access his/her accounts round the clock contradictory to the traditional banking system wherein the customer has to restrict to the bank timings. Moreover the costs incurred through online banking are much lower compared to traditional banking The different transactional services include 1. Electronic bill payment 2. Funds transfer from one customer’s account to another or between a customer’s own accounts 3. Loan applications and repayments
4. Online stock trading using through Demat account Non transactional features include access to account statements, information about new services offered
Risks associated with Online banking. Apart from the risks involved in traditional banking method Online banking faces additional risks such as Operational risks due to malfunction, breakdown or misuse of the system. Security threats such as Phishing, Pharming, Cross site scripting and Trojans are used by hackers to get access to confidential information (namely account login information and password) of online banking customers. In order to minimize such security risks the following precautionary measures can be taken 1. Usage of authentic and reputed websites while making online transactions 2. Usage of firewalls ,filter resources and virus scanners to prevent malwares and intrusion attacks 3. Usage of digital certificates to protect accounts from phishing, pharming etc.
Role of RBI, DOIT Internet banking is an extension of traditional banking services. However, there are several instances, which contradict the legal framework for internet banking in India: Banking Regulations Act, 1949, the Reserve Bank of India Act, 1934 and the Foreign Exchange Management Act, 1999. The IT Act of 2000 did address the need for banks to go online and have laid out security measures to be adopted. The Reserve Bank of India has taken several initiatives in setting guidelines for internet banking, and reviews them at periodic intervals. In June 2001 banks were advised to seek prior approval of Reserve Bank of India before offering transactional services on the Internet. The position has since been reviewed and RBI has advised on 20th July 2005, that while the offering of Internet Banking services will continue to be governed by the provisions of the above circular, no prior approval of the Reserve Bank of India will be required by banks for offering Internet Banking services.
Banks should, however, ensure compliance with the following conditions: a. The Internet Banking policy has been approved by the Bank's Board.
b. The policy fits into the bank's overall Information Technology and Information Security policy and ensures confidentiality of records and security systems. c. The policy takes into account operational risk. d. The policy clearly lays down the procedure to be followed in respect of "Know Your Customer" requirements, and e. The policy broadly meets the parameters laid down in the earlier circular. The RBI had then also set up a knowledge-sharing platform for this purpose.
User Statistics According to IBEF presently there are 49 million internet users in India. According to IAMAI’s Report on Online Banking the number of online banking service users are around 16 million in 2008. This constitutes around 30% of the total internet users in India. In urban areas alone 20% of the total internet users use online banking services. In 2002 the number of online banking users was only around 1 million. Thus we see that the number of users have grown by a huge margin in the past 7 years. However the total number of online banking customers constitutes only 3% of the total population of India, which suggests that there is still a lot of scope for growth of online banking in India.
References http://sify.com/finance/fullstory.php?id=14826432 http://www.ciol.com/content/news/2006/106081005.asp
http://www.iamai.in/Upload/Research/I-Cube_2008_Summary_Report_30.pdf http://en.wikipedia.org/wiki/Online_banking
doc_356678859.docx
The document describes about Features of Online banking, Risks associated with Online banking, Role of RBI, DOIT.
ONLINE BANKING
Concept Online banking can be referred to a system that allows individuals to perform banking activities through the internet. Some online banks are traditional banks which also offer online banking, while others are online only and have no physical presence. History Online banking took off after the liberalization phase of the Indian Government in the early 1990’s and it was after the Narasimham Committee Report on Banking Reforms that technology actually took up in the banking sector. The boom in affordable PCs, and the fear of being taken over by competition, also spurred the growth of Online banking. The ICICI Bank kicked off online banking in 1996 (under the brand name ‘Infinity’), followed by a host of other banks. But even for the Internet as a whole, 1996 to 1998 marked the adoption phase, while usage increased only in 1999, owing to lower ISP online charges, increased PC penetration and a tech-friendly atmosphere. On the other hand, the Public Sector Banks (PSUs) lagged in the race for adopting Internet banking practices. While, among the PSUs, the State Bank of India took the lead, others are gradually catching up on Internet banking services.
Features of Online banking Online banking is quite similar to traditional banking services except the fact that a customer need not be physically present in the bank to carry out his or her transaction, rather the customer can execute his required transaction through the internet. Online banking allows a customer to access his/her accounts round the clock contradictory to the traditional banking system wherein the customer has to restrict to the bank timings. Moreover the costs incurred through online banking are much lower compared to traditional banking The different transactional services include 1. Electronic bill payment 2. Funds transfer from one customer’s account to another or between a customer’s own accounts 3. Loan applications and repayments
4. Online stock trading using through Demat account Non transactional features include access to account statements, information about new services offered
Risks associated with Online banking. Apart from the risks involved in traditional banking method Online banking faces additional risks such as Operational risks due to malfunction, breakdown or misuse of the system. Security threats such as Phishing, Pharming, Cross site scripting and Trojans are used by hackers to get access to confidential information (namely account login information and password) of online banking customers. In order to minimize such security risks the following precautionary measures can be taken 1. Usage of authentic and reputed websites while making online transactions 2. Usage of firewalls ,filter resources and virus scanners to prevent malwares and intrusion attacks 3. Usage of digital certificates to protect accounts from phishing, pharming etc.
Role of RBI, DOIT Internet banking is an extension of traditional banking services. However, there are several instances, which contradict the legal framework for internet banking in India: Banking Regulations Act, 1949, the Reserve Bank of India Act, 1934 and the Foreign Exchange Management Act, 1999. The IT Act of 2000 did address the need for banks to go online and have laid out security measures to be adopted. The Reserve Bank of India has taken several initiatives in setting guidelines for internet banking, and reviews them at periodic intervals. In June 2001 banks were advised to seek prior approval of Reserve Bank of India before offering transactional services on the Internet. The position has since been reviewed and RBI has advised on 20th July 2005, that while the offering of Internet Banking services will continue to be governed by the provisions of the above circular, no prior approval of the Reserve Bank of India will be required by banks for offering Internet Banking services.
Banks should, however, ensure compliance with the following conditions: a. The Internet Banking policy has been approved by the Bank's Board.
b. The policy fits into the bank's overall Information Technology and Information Security policy and ensures confidentiality of records and security systems. c. The policy takes into account operational risk. d. The policy clearly lays down the procedure to be followed in respect of "Know Your Customer" requirements, and e. The policy broadly meets the parameters laid down in the earlier circular. The RBI had then also set up a knowledge-sharing platform for this purpose.
User Statistics According to IBEF presently there are 49 million internet users in India. According to IAMAI’s Report on Online Banking the number of online banking service users are around 16 million in 2008. This constitutes around 30% of the total internet users in India. In urban areas alone 20% of the total internet users use online banking services. In 2002 the number of online banking users was only around 1 million. Thus we see that the number of users have grown by a huge margin in the past 7 years. However the total number of online banking customers constitutes only 3% of the total population of India, which suggests that there is still a lot of scope for growth of online banking in India.
References http://sify.com/finance/fullstory.php?id=14826432 http://www.ciol.com/content/news/2006/106081005.asp
http://www.iamai.in/Upload/Research/I-Cube_2008_Summary_Report_30.pdf http://en.wikipedia.org/wiki/Online_banking
doc_356678859.docx