77530884 internet-banking-a-case-study-final

Internet Banking –A Case Study

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Chpater 1 INTRODUCTION


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1.1 Definition of Banking

As per Section 5 (b) Banking Regulation Act, 1949, Banking means accepting for

the purpose of lending or investment, of deposits of money from the public,

repayable on demand or otherwise and withdrawal by cheque, draft, order or

otherwise.

1.2 History Of Banking

Banking in India originated in the last decades of the 18th century. The first

banks were The General Bank of India which started in 1786, and the Bank of

Hindustan, both of which are now defunct. The oldest bank in existence in India is

the State Bank of India, which originated in the Bank of Calcutta in June 1806,

which almost immediately became the Bank of Bengal. This was one of the three

presidency banks, the other two being the Bank of Bombay and the Bank of

Madras, all three of which were established under charters from the British East

India Company. For many years the Presidency banks acted as quasi-central banks,

as did their successors. The three banks merged in 1921 to form the Imperial Bank

of India, which, upon India's independence, became the State Bank of India.

1.3 Development Of Banks In Post Independence Period:

Post-independence

The partition of India in 1947 adversely impacted the economies

of Punjab and West Bengal, paralyzing banking activities for months. India's

independence marked the end of a regime of the Laissez-faire for the Indian

banking. The Government of India initiated measures to play an active role in the

economic life of the nation, and the Industrial Policy Resolution adopted by the

government in 1948 envisaged a mixed economy. This resulted into greater

involvement of the state in different segments of the economy including banking

and finance. The major steps to regulate banking included:

In 1948, the Reserve Bank of India, India's central banking authority, was

nationalized, and it became an institution owned by the Government of India.

In 1949, the Banking Regulation Act was enacted which empowered the Reserve

Bank of India (RBI) "to regulate, control, and inspect the banks in India."

http://en.wikipedia.org/wiki/Bank_of_Bengal

http://en.wikipedia.org/wiki/Bank_of_Bombay

http://en.wikipedia.org/wiki/Bank_of_Madras

http://en.wikipedia.org/wiki/Bank_of_Madras

http://en.wikipedia.org/wiki/Imperial_Bank_of_India

http://en.wikipedia.org/wiki/Imperial_Bank_of_India

http://en.wikipedia.org/wiki/Partition_of_India

http://en.wikipedia.org/wiki/Punjab,_India

http://en.wikipedia.org/wiki/West_Bengal

http://en.wikipedia.org/w/index.php?title=Indian_independence_eovement&action=edit&redlink=1

http://en.wikipedia.org/wiki/Laissez-faire

http://en.wikipedia.org/wiki/Government_of_India

http://en.wikipedia.org/wiki/Mixed_economy

http://en.wikipedia.org/wiki/Reserve_Bank_of_India


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The Banking Regulation Act also provided that no new bank or branch of an

existing bank could be opened without a license from the RBI, and no two banks

could have common directors.

However, despite these provisions, control and regulations, banks in India except

the State Bank of India, continued to be owned and operated by private persons.

This changed with the nationalization of major banks in India on 19 July 1969.

1.4 Liberalization In Banking:

The banking sector in India remained a regulated one and rigid since the

nationalization of banks in 1969. Up to 1990, the concept of an independent

regulatory authority had no relevance. With the liberalization of the Indian

Economy, the Indian banking system also followed it suit and slowly entered in to

a market driven competitive system.

The economic policy of structural adjustment got a big boost in India in June 1991.

A committee was setup for financial reforms which was to examine exhaustively

all aspects relating to the structure, organization functions and procedures of the

system. The committee recommended entry of foreign banks, new private sector

banks and local area banks. The committee further advocated the introduction of

universal banking, setting up of special recovery tribunals, introduction of banking

ombudsment scheme etc.

The liberalization and economic reforms in 1991 unleashed stiffer competiton

among banks. The financial sector became intensively competitive with several

new competitors like private banks, foreign banks, non-banking financial

companies, merchant bankers mutual fund, and insurance companies.

Besides Banking student need to understand Need, Scope and development of

Internet Banking. I decided to conduct a Micro Level study in which I am studying

Internet Banking facilities adopted by one specific Bank i.e Punjab National Bank.

The broad objectives of my project are:

I. To understand Internet Banking of Punjab National Bank

http://en.wikipedia.org/wiki/State_Bank_of_India


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II. To understand problem faced in Internet Banking

III. To understand problem faced by Punjab National Bank.

Study of project is mainly based on secondary data which is collected through

Internet Site, Periodicals, Magazines etc. To add to my knowledge I have taken

interview from an officials of Punjab National Bank Branch.


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Chpater 2

OVERVIEW OF INTERNET BANKING IN INDIA


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2.1 Origin Of Internet Banking

Internet is often described as “Network of Networks” born in 1970s. It is a number

of computers interconnected. It is an open standard for digital communication used

with World Wide Web Technologies. When two or more computers are connected

a network is created; connecting two or more network creates ‘inter-network’ or

Internet. The advent of the Internet and the popularity of personal computers

presented an opportunity and a challenge for the banking industry for new

development of Internet Banking.

Internet banking dates back to late 1990s. Most banks used a very simple

layout, which allows user to sign in, see their accounts and statements, and make

transfer from one account to other. It is really simple: we do not have to go down

to bank because bank is already in our computer at our desk waiting for us to enter.

Today’s online banking features allows us to do all those previous online banking

activities and also arrange for loan, set up direct debits, and pay bills online-all

with just a few clicks of our mouse.

Internet banking is usually conducted through a personal computer (PC) that

connects to a banking Web site via modem and a phone line or other

telecommunication connection. Now that its customers are connected to the

Internet via personal computers, banks envision similar economic advantages by

adapting those same internal electronic processes to home use.

Most people have heard about Internet banking but probably not tried it. We

still pay our bills by mail and deposit cheque at our bank branch. We might shop

online for loan, life insurance or a home mortgage, but when it comes time to

commit, we feel more comfortable working with banker or agent we know and

trust. Online banking isn’t out to change our money habits. Instead, it used today’s

computer technology to give us option bypassing the time consuming, paper-based

aspects of traditional banking in order to manage our finance more quickly and

efficiently.

Banks view Internet banking as a powerful “Value Added” tool to retain and

attract new customers and to eliminate costly paper handling in a increasingly

competitive banking environment.


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2.2 Definition Of Internet Banking

A system allowing individuals to perform banking activities at home, via the

internet. It is a web-based service that allows the bank authorized customer to

access their account information. In the system, customers are allowed to log on

the bank website with the help of identification issued by the bank and personal

identification number (PIN). Banks replies the user and enables customers to

access the desired services.

2.3 Internet Banking

“Internet Banking” to mean that a bank offering its customers the ability to

transact business with the bank over Internet. Internet banking refers to the use of

the Internet as a remote delivery channel for banking services. Subsequently, dial-

up connections, personal computers, tele-banking and automated teller machines

(ATMs) became the order of the day in most of the developed countries.

Nowadays, all banks provide online banking facility to their customers as an added

advantage. Gone are the days, when one had to transact with a bank which was

only in his local limits. Online banking has opened the doors for all customers, to

operate beyond boundaries. Nowadays, people are so busy in their work lives, that

they don't even have time to go to the bank for conducting their banking

transactions. Internet enable people to carry out most of their banking transactions

using a safe website, which is operated by their respective banks. It provides many

features and functions to their customers, and enables them to view their account

balance, transfer money from their account to another account (be it in their

respective bank or any other bank), view their account summary, etc.

In this procedure, many financial transactions can be carried out by simply

utilizing a computer with an Internet connection. The necessary things that a

person needs for using online banking are, an active bank account with balance in

it for transactions, debit or a credit card number, customer's user ID, bank account

number, the Internet banking PIN number, and a PC with access to the web. People

using Internet banking are certainly benefited by the online services their

respective banks are providing them with. The primary reason why it is so famous

and mostly used is that, customers are allowed to bank at non-working hours.

http://www.buzzle.com/articles/internet-technology/

http://www.buzzle.com/articles/credit-cards/

http://www.buzzle.com/articles/internet-access/


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Banks create their banking interfaces and websites in a viewable and user-

friendly manner, which enable customers to conduct their financial transactions

with ease. If they are stuck in any process while performing their online

transactions, banks have another helpful facility that is 'phone banking', wherein

customers can call the bank's toll-free number and get assistance in completing

their transactions. Electronic bill payment, viewing and downloading financial

records, and money transfers are some of the general transactions which the

customers generally carry out. All online banking services, provided by some

banks, are free of cost.

2.4 Internet Banking Services

The Internet banking sites offers following services:-

2.4.1 Mobile Banking

Mobile Phone banking takes banking one step ahead of internet banking.

One can do banking without even phone call. Mobile banking works through a set

of text messages.

Customer should first register for the facility and then can use wither SMS or

WAP in case he/se subscribes to any of the various carries. Presently two types of

services are available through Mobile Phone viz. Alert Services and Requests. This

service really offers “Any time anywhere Banking”. However, the bank should

have tie-up arrangement with the cellular service provider.

A pre-designated mobile number should be available at the bank. A user

needs to be provided to the customer to acquaint him with Bank’s specific codes

and menus. In case of loss/theft of mobile, the customer is required to inform the

bank immediately to deactivate or disable mobile banking service.

2.4.2 E-commerce and E-banking

E-commerce is the online selling. It is total delivery of products and services

to the customer through Internet to satisfy business objectives. It allows two-way


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communications and it is built around open standards. As a first step it will ensure

the conversion of office it will ensure the conversions of office business

equipment/machines into one digital platform. The interaction/communication

taking place digitally between producers, intermediaries and consumers are

referred to as the electronic market place. The sum total of commercial transaction

taking place in the electronic marketplace in called Digital Economy.

E-banking is an extension or a subset of E-commerce doing its process on

personal computers because of their origin within the Internet, a network of

computers. The first stage of expansion is within the installed base of computer

users. The second wave will come when more people will get access to computers

via lowered computer prices or cheaper devices. The third most important

expansion is predicted to be from those with non-computer access to the global

network through broadcast TVs, Cable TVs, Telephone Networks and new

appliances.

This widespread use of cheaper access media represents the phase of

bringing E-commerce access media represents the phase of bringing E-commerce

including E-banking into the living rooms of common people. It will give banks

like ours a chance to give a run for their money to giant multibillion foreign

banking corporate, both in India and abroad.

2.4.3 E MAIL- Banking

The most common and basic use of Internet is the exchange of E-Mail

(Electronic Mail). It is an extremely powerful and revolutionary result of internet,

which has facilitated almost instantaneous communi-cation with people in any [art

of the globe. With enhancement like attachment of documents, audio, video and

voice mail, this segment of Internet is fast expanding as the most used

communication medium for the whole world. Many websites offer

E-Mail as a free facility to individuals. Many corporate have interfaced their

private network with Internet in order to make their e-mail accessible from outside

their corporate network. In E-Mail security , a digital signature authenticates a


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transmission from a user in an un-trusted network environment. A digital signature

a sequence of bits appended to a digital document. Like a handwritten signature, it

is unique to the document being signed.

Digital signatures are a good method of securing E-Mail transmission in that

the signature. Digital signatures are based on a procedure called message digesting

which computes a short fixed length number called a digest for any message of any

length. Several different messages may have the same digest, but it is extremely

difficult to produce any of them from the digest. A message digest is 128 bit

cryptographically strong one-way hash function of the message. It is very similar

to a checksum in that it completely represents the message and is used to detect

changes in the message. In using digital signature for securing E-Mail messages,

there are two different types of encryption techniques used to ensure secured

messages. Messages can be secured using a (symmetric) secret key management

system using DES or a public key (asymmetric) management using RSA.

2.4.4 Automated Teller Machines (ATMs)

Automated Teller Machine (ATM) is a self-service terminal system. ATM as

the name indicates is a very user-friendly machine that can render 24 hours

services to help the bank customer perform basic bank transactions like depositing

cash or cheques and withdrawing money. It is an extension of “Anywhere,

anytime” concept of banking. When an ATM is connected to a online branch

network, it can additionally provide services such as balance enquires, transfer of

funds between the accounts, etc.

2.4.5 Electronic Data interchange (EDI)

EDI is a transmission in standards syntax of the unambiguous information of

business for strategic significance minimizes human intervention or re-keying. The

sending organization to perform a specific function.


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There is no need to send repetitive input of sender’s address, operational

instructions, authorized signatories which would already in the receiver’s computer

database. There are 3 components of EDI, a generally accepted business format

called DEI standards, translation capability i.e. ensured through EDI software and

mail service called Value Added Network (VAN). The VAN acts as an electronic

post office from where the messages are routed/picked up at regular intervals

facilitating data inter-change between large numbers of organizations and keep the

cost of network resources to the minimum.

2.4.5 Electronic Funds Transfer (EFT)

Electronic Funds Transfer (EFT) is the exchange is the exchange of money

via telecommunication without currency actually changing hands. EFT refers to

any financial transaction that transfers a sum of money from one account to

another, electronically. Usually, transactions originate at a computer at one

institution (location) and are transmitted to a computer at another institution

(location) with monetary amount recorded in the respective organization’s

accounts. Because of the potential high volume of money being exchanged, this

system may be in an extremely high-risk category. Therefore, access security and

authorization of processing are important controls.

Security in an EFT environment is extremely important. Security includes the

methods used by the customer to gain access to the system, the communications

network and the host or application processing site. Individual consumer access to

the EFT system is generally controlled by a plastic card and a personal

identification number (PIN). Both items are required to initiate a transaction.


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2.5 Advantages And Disadvantages Of Internet Banking

2.5.1 Advantages

Advantages of Internet Banking are as follows:

2.5.1.1 Convenience

Unlike our corner bank, Internet banking sites never close; they’re available

24 hours a day, 7 days a week, and they are just a click away. Not only this but all

services that are usually available from the local bank can be found on a single

website. Rather that having to ring a separate number to order a new chequebook

or cancel a bankcard, or even go into the brancg to do so, it is possible to do all this

from our personal home page.

2.5.1.2 Ubiquity/portability

If we are out of states or even out of the country and when a money problem

arises, we can log on instantly to our online bank and take care of business, 24/7.

This is possibly the main advantage of Internet Banking as apposed to branch

based banking. Our account is extremely accesses able with an online account and

all the service which we expect to be provided by a banking service anytime

anywhere.

2.5.1.3 Transaction speed

Internet Banking sites generally executes and confirm transactions at the

same rate or quicker than, ATM processing speeds. This means that if a customer

withdraw or pay in money from/to his accounts then his balance will be updated at

the same speed or often quicker yhan if he had done so at branch bank ATM.


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2.5.1.4 Effectiveness

Many online banking sites now offer sophisticated tools, including account

aggregation, stock quotes, rate alerts and portfolio managing programs which help

us to manage all our assets more effectively. Most are also compatible with money

managing programs such as Quicken and Microsoft Money.

2.5.2 Disadvantages

Disadvantages of Internet Banking are as follows:

2.5.2.1 Start-up may take time

In order to register for our bank’s online program, we have to provide ID

and sign a form at a bank branch. If husband and wife wife to view and manage

their assetd together online, one of them may have to sign a durable power of

attorney before the bank will display all their holding together.

In comparison to opening a branch account this can be done real time

wereby customer goes into branch, give them his personal details, sign some forms

and once the account is activated he can use it almost straight away as the account

is activated within the branch while he is there. Online accounts undergo the same

form filling process but take up a week to be processed and validated before

account can be opened and accessed.

2.5.2.2 Learning Curve

Banking sites can be difficult to navigate at first. Plan to invest some time

and/or read the tutorials in order to become comfortable in the virtual lobby. Time

needs to be taken to understand such things as how to check the balance online or

how to setup a standing order. This alone can prevent some people considering

opening an online bank account even if the rates are much better than bricks and

mortar banks.


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2.5.2.3 Bank sites changes

The largest bank periodically upgrades their online programmes, adding new

features in unfamiliar places. In some cases, one may have to re-enter account

information.

2.5.2.4 The Trust Thing

For many people, the biggest hurdle to online banking is learning to trust it.

Did my transaction go through? Did I put my transaction button once oe twice?

Best bet: always print the transaction receipt and keep it with bank records until it

shows up on the personal site and/or bank statement.

2.5.2.5 Impersonal

Online banking lacks personal service. There is virtually no human contact

involved, and some people could see this as a drawback.

The disadvantages of internet banking can be overcome to a greater extent;

in the long run, the benefits out weight the risk involved. A testimonial to the

utility of online banking is the growing number of customers that are signing up

for it. In one way or another, most people who require some form of banking

services stand to gain from banking over that Internet.

2.6 Risk In Internet Banking

Internet is not an unmixed blessing to the banking sector. Along with

reduction in cost of transactions, it has also brought about a new orientation to

risks and even new forms of risks to which banks conducting Internet banking

expose themselves. Risk is potential that events, expected or unexpected, may have

an adverse impact on the bank’s earning or capital and reputation as well. These

risks are briefly describe as below.


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2.6.1 Strategic Risk

This risk is associated with the introduction of a new products or services. It

is also the current and prospective risk to earning and capital arising from adverse

business decision or improper implementation of business decisions. For reducing

such risk, banks need to conduct proper survey, consult experts from various fields,

establish achievable goals and monitor performance. Also they need to analyze the

availability and cost of additional resources, provision of adequate supporting staff,

proper training of staff and adequate insurance coverage.

2.6.2 Transaction Risk

Transaction risk is the current and prospective risk to earnings and capital

arising from fraud, error, and the inability to deliver product and services, maintain

a competitive position, and manage information. Transaction risk is evident in each

product and service offered and encompasses product development and delivery,

transaction processing, systems development, computing systems, complexity of

products and services, and the internal control environment.

A high level of transaction risk may exist with Internet banking products,

because of the need to have sophisticated internal controls and constant

availability. Most Internet banking platforms are based on new platforms which

use complex interfaces to link with legacy systems, thereby increasing risk of

transaction error.

2.6.3 Compliance Risk

Compliance risk is the risk to earnings or capital arising from violations of,

or nonconformance with, laws, rules, regulations, prescribe practices, or ethical

standards. Thus, the bank may face compliance and regulatory risk if it does not

adhere or follow the guidelines given by the supervisor or the regulator.

Banks need to carefully understand and interpret existing laws as they to

Internet baking and ensure consistency with other channels such as branch

banking. Customers are very concern about the privacy of their data and banks


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need to be consummate transaction immediately may lead to bank relaxing

traditional controls, which aim to reduce compliance.

2.6.4 Reputation Risk

This is current and prospective risk to earnings and capital arising from

negative public opinion. This affects the institutions ability to establish new

relationships or services existing relationships. A bank’s reputation can suffer if it

fails to deliver on marketing claims or to provide accurate, timely services. A

bank’s reputation can be damaged by internet banking services that are poorly

executed.

2.6.5 Information Security Risk

This is the risk to earnings and capital arising out of lax information security

processes, thus exposing the institution to malicious hacker or insider attacks,

viruses, denial-of-services attack, data destruction and fraud. The speed of change

of technology and the fact that the internet channel is accessible universally make

this risk especially critical.

2.7 Bank fraud

Bank fraud is the use of fraudulent means to obtain money, assets, or other

property owned or held by a financial institution. In many instances, bank fraud is

a criminal offense. While the specific elements of a particular banking fraud law

vary between jurisdictions, the term bank fraud applies to actions that employ a

scheme or artifice, as opposed to bank robbery or theft. For this reason, bank fraud

is sometimes considered a white-collar crime.

http://en.wikipedia.org/wiki/White-collar_crime


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2.8 FRAUDS-PREVENTION AND DETECTION

A close study of any fraud in bank reveals many common basic features. There

may have been negligence or dishonesty at some stage, on part of one or more of

the bank employees. One of them may have colluded with the borrower. The bank

official may have been putting up with the borrower's sharp practices for a personal

gain. The proper care which was expected of the staff, as custodians of banks

interest may not have been taken. The bank's rules and procedures laid down in the

Manual instructions and the circulars may not have been observed or may have

been deliberately ignored.

Bank frauds are the failure of the banker. It does not mean that the external frauds

do not defraud banks. But if the banker is upright and knows his job, the task of

defrauder will become extremely difficult, if not possible.

2.8.1 Detection of Frauds

Despite all care and vigilance there may still be some frauds, though their number,

periodicity and intensity may be considerably reduced. The following procedure

would be very helpful if taken into consideration:

1. All relevant data-papers, documents etc. Should be promptly collected. Original

vouchers or other papers forming the basis of the investigation should be kept

under lock and key.

2. All persons in the bank who may be knowing something about the time, place a

modus operandi of the fraud should be examined and their statements should be

recorded.

3. The probable order of events should thereafter be reconstructed by the officer, in

his own mind.

4. It is advisable to keep the central office informed about the fraud and further

developments in regard thereto.

2.8.2 Classification of Frauds and Action Required by Banks

The Reserve Bank of India had set-up a high level committee in 1992 which was

headed by Mr. A. Ghosh, the then Dy. Governor Reserve Bank of India to inquire


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into various aspects relating to frauds malpractice in banks. The committee had

noticed/observed three major causes for perpetration of fraud as given hereunder:

1. Laxity in observance of the laid down system and procedures by operational and

supervising staff.

2. Over confidence reposed in the clients who indulged in breach of trust.

3. Unscrupulous clients by taking advantages of the laxity in observance of

established, time tested safeguards also committed frauds.


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Chapter 3 Punjab National Bank


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3.1 Logic Of The Logo

Established in 1895 at Lahore, then undivided India, Punjab NationalBank (PNB)

has the distinction of being the first Indian bank to have been startedsolely with

Indian capital. The bank was nationalized in July 1969 along with 13other banks.

From its modest beginning, the bank has grown in size and stature tobecome a

front-line banking institution in India at present. It has more than 4000branches

and over 400 extension counters. Strong correspondent bankingrelationship, which

it maintains with over 200 leading international banks all overthe world, enhances

its capabilities to handle transactions worldwide. More than50 renowned

international banks maintain their Rupee Accounts with PNB.

With its presence virtually in all the important centers of the country, PNB offersa

wide variety

of banking services which include corporate and personal banking,industrial

finance, agricultural finance, financing of trade and internationalbanking. The large

presence and vast resource base have helped the bank to buildstrong links with

trade and industry. At the same time, the bank has beenconscious of its social

responsibilities by financing agriculture and allied activitiesand small-scale

industries.

The bank is committed to maintaining the highest standards of service and will be

covering more offices under this quality movement titled 'Alliance with Quality'

3.2 Introduction of Punjab National Bank

Established in 1895 at Lahore, undivided India, Punjab National Bank (PNB) has

the distinction of being the first Indian bank to have been started solely with Indian

capital. The bank was nationalized in July 1969 along with 13 other banks. From

its modest beginning, the bank has grown in size and stature to become a front-line

banking institution in India at present.


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A professionally managed bank with a successful track record of over 110 years.

Largest branch network in India - 4525 Offices including 432 Extension Counters

spread throughout the country.

Strategic business area covers the large Indo-Gangetic belt and the metropolitan

centers

Ranked as 248th biggest bank in the world by Bankers Almanac, London.

Strong correspondent banking relationships with more than 217 international banks

of the world.

More than 50 renowned international banks maintain their Rupee Accounts with

PNB.

Well equipped dealing rooms; 20 different foreign currency accounts are

maintained at major centers all over the globe.

With over 38 million satisfied customers and 4668 offices, PNB has continued to

retain its leadership position among the nationalized banks. The bank enjoys strong

fundamentals, large franchise value and good brand image. Besides being ranked

as one of India's top service brands, PNB has remained fully committed to its

guiding principles of sound and prudent banking. Apart from offering banking

products, the bank has also entered the credit card & debit card business; bullion

business; life and non-life insurance business; Gold coins & asset

management business, etc.

Since its humble beginning in 1895 with the distinction of being the first Indian

bank to have been started with Indian capital, PNB has achieved significant growth

in business which at the end of March 2009 amounted to Rs 3,64,463 crore. Today,

with assets of more than Rs 2,46,900 crore, PNB is ranked as the 3rd largest bank

in the country (after SBI and ICICI Bank) and has the 2nd largest network of

branches (4668 including 238 extension counters and 3 overseas offices).


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PNB has always looked at technology as a key facilitator to provide better

customer service and ensured that its ‘IT strategy’ follows the ‘Business strategy’

so as to arrive at “Best Fit”. The bank has made rapid strides in this direction.

Along with the achievement of 100% branch computerization, one of the major

achievements of the Bank is covering all the branches of the Bank under Core

Banking Solution (CBS), thus covering 100% of its business and providing

‘Anytime Anywhere’ banking facility to all customers including customers of

more than 2000 rural branches. The bank has also been offering Internet banking

services to the customers of CBS branches like booking of tickets, payment of bills

of utilities, purchase of airline tickets etc. Towards developing a cost effective

alternative channels of delivery, the bank with more than 2150 ATMs has the

largest ATM network amongst Nationalized Banks.

With the help of advanced technology, the Bank has been a frontrunner in the

industry so far as the initiatives for Financial Inclusion is concerned. With its

policy of inclusive growth in the Indo-Gangetic belt, the Bank’s mission is

“Banking for Unbanked”. The Bank has launched a drive for biometric smart card

based technology enabled Financial Inclusion with the help of Business

Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile

customer to provide cost effective and transparent services. The Bank has started

several innovative initiatives for marginal groups like rickshaw pullers, vegetable

vendors, diary farmers, construction workers, etc. The Bank has already achieved

100% financial inclusion in 21,408 villages.

Backed by strong domestic performance, the bank is planning to realize its global

aspirations. In order to increase its international presence, the Bank continues its

selective foray in international markets with presence in Hong Kong, Dubai,

Kazakhstan, UK, Shanghai, Singapore, Kabul and Norway. A second branch in

Hong Kong at Kowloon was opened in the first week of April’09. Bank is also in

the process of establishing its presence in China, Bhutan, DIFC Dubai, Canada and

Singapore. The bank also has a joint venture with Everest Bank Ltd. (EBL), Nepal.

Under the long term vision, Bank proposes to start its operation in Fiji Island,

Australia and Indonesia. Bank continues with its goal to become a household brand

with global expertise.


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Amongst Top 1000 Banks in the World, ‘The Banker’ listed PNB at 250th place.

Further, PNB is at the 1166th position among 48 Indian firms making it to a list of

the world’s biggest companies compiled by the US magazine‘Forbes’.

3.3 Punjab National Bank Internet Banking

Punjab National Bank Internet Banking is one of the most convenient services

offered by the bank to its retail as well as corporate customers. A large number of

customers can manage their funds and account more effectively and efficient by

getting the online banking services offered by PNB Bank. In order to enjoy net

banking facilities, customers are required to have an account in one of the net

banking branches of the bank. Then as a customer, you are required to register for

internet banking services by submitting an application form at the bank branch.

After submitting the application form, the user ID and the password will be

delivered to the address provided in the application form.

3.4 PNB Internet Banking Services

The representatives of the bank will call upon the applicants to collect their user -

ID and password to make first time login to http://netpnb.com/index.html. As soon

as a user login to the net banking site, he or she is advised to change the user ID

and the passwords with some other login ID and passwords that no one knows

other than the customer himself. To make online login, visit the login page and

choose the options corporate user or retail user and provide the user ID and

password. The following are some of the convenient services made available by

PNB net banking facility;

3.4.1 Bank account related services

Balance enquiry

Online details

Account details

Online account statement


24

3.4.2 Make Requests online

Make online fund transfer between CBS accounts

Send upto 17 different request to Relationship Manager of the bank branch

Change your password if you fear that someone may have known it

Enjoy fast and safe payment options or air tickets, phone bill payments, etc.

PNB internet banking application form is available on the official website of the

bank and one can download it free of cost. The bank protects its online banking

activities and important information of the customers with 128-bit Secure Socket

Layer encryption technology. However, it is essential for the customers to follow

some simple tips in order to maintain more security.

3.5 Core Banking

Core means "Basic", hence the basic services provided by the inter-networked

branches of bank is called "Core Banking". Core Banking is normally defined as

the business conducted by a banking institution with its retail and small business

customers. Many banks treat the retail customers as their core banking customers,

and have a separate line of business to manage small businesses. Larger businesses

are managed via the Corporate Banking division of the institution. Core banking

basically is depositing and lending of money.

Nowadays, most banks use core banking applications to support their operations

where CORE stands for "Centralized Online Real-time Exchange". This basically

means that all the bank's branches access applications from centralized datacenters.

This means that the deposits made are reflected immediately on the bank's servers

and the customer can withdraw the deposited money from any of the bank's

branches throughout the world. These applications now also have the capability to

address the needs of corporate customers, providing a comprehensive banking

solution. A few decades ago it used to take at least a day for a transaction to reflect

in the account because each branch had their local servers, and the data from the


25

server in each branch was sent in a batch to the servers in the datacenter only at the

end of the day (EoD).

Normal core banking functions will include deposit accounts, loans, mortgages and

payments. Banks make these services available across multiple channels

like ATMs, Internet banking, and branches.

3.6 Core Banking Solutions In Punjab National Bank.

Computerization first started in PNB among the nationalized public sector banks. It

is divided in two parts:

Transactions: uses Finnacle software of Infosys

For transactional purpose most banks use software like Finnacle made by Infosys

as it is more convenient & user friendly from the perspective of customers & staff

members.

http://en.wikipedia.org/wiki/Automated_teller_machine

http://en.wikipedia.org/wiki/Internet_banking


26

3.7 Services offered by CBS in PNB


27

3.7.1 Electronic Clearing Service (ECS)

3.7.1.1ECS – Credit

Is a medium of payment whereby an organization wanting to pay interest,

dividend, salary, pension etc. to a large no. of beneficiaries, can make payment

electronically instead of issuing paper instruments. In this scheme while the

companies have not to print and dispatch paper instruments, reconciliation is easier

for the paying bank.

3.7.1.2 ECS- Debit

ECS Debit is the medium that helps organizations to collect the proceeds of bills,

premium, installments on due date based on mandates received from the users of

their services.

To avail this service a customer has to prepare the payment data and submit it to

the Sponsor bank on magnetic media. The sponsor bank presents the data to local

Banker" clearing house (managed by RBI and SBI) authorizing the clearing house

to debit the sponsor bank's account and credit the accounts of destination banks

where the beneficiaries of transactions maintain their accounts.

The clearing house furnishes the service branches of destination banks, the details

relating to the transactions, which in turn pass on the authorization to concerned

branches of their banks for credit of the amount to the beneficiary's account.

The maximum ceiling amount of Rs.2 crore per transactions fixed earlier by RBI

removed by RBI as per Policy dated Oct 26, 2004.

3.7.1.3 Service Charges

A) ECS: CREDIT CLEARING: Charges (per data entry/record)

SPONSOR BANK: Minimum charges Rs.2000/- + charges payable to RBI

and Destination Bank, if any.

a) Upto 10000 records @Rs.5/- per record + charges payable to RBI and

Destination Bank, if any


28

b) Above 10000 to 100000 records @Rs.3/- per record + charges payable to

RBI and destination Bank, if any. (Subject to a minimum of

Rs.50,000/-).

c) Above 100000 records @Rs.2/- per record + charges payable to RBI and

Destination

Bank, if any. (Subject to a minimum of Rs. 300000/-)

B) ECS: Debit Clearing ( Inclusive of service Tax and Education Cess)

ECS: Debit Clearing: Rs.3/- per transaction charges Minimum charges Rs.2000/- +

charges payable to RBI and destination Bank, if any. SUBJECT TO RECOVERY

OF ALL OUT OF POCKET EXPENSES INCLUDING

PROCESSING CHARGES IN CASE THEY ARE EVER AGAIN LEVIED BY

RESERVE BANK OF INDIA.

C) A sum of Rs.100/- be levied as returning charges on return of ECS (Debit) on

account of Insufficient

Funds

PNB INSTA-REMIT: NOTWITHSTANDING ANYTHING CONTAINED IN

ANY OTHER CIRCULAR, FOLLOWING

SERVICE CHARGES WOULD BE LEVIED FOR TRANSFER OF FUNDS

THROUGH:

REAL TIME GROSS SETTLEMENT (RTGS)

NATIONAL ELECTRONIC FUND TRANSFER(NEFT)

STRUCTURED FINANCIAL MESSAGING SYSTEM (SFMS)


29

RBI charges, if any prescribed, shall be recoverable in all the following:

CATEGORY OF

TRANSACTION

Amount of

transaction

Charges ( Inclusive of

Service Tax &

Education Cess)

A Customer Related RTGS

Transactions

Re.1 to Rs.5 lac

Above Rs.5 lac

Rs.27.50 per transaction

Rs.55/- per transaction

B Inter Banks for clearing

purposes

Only

Re.1 to Rs.5 lac

Above Rs.5 lac



C RTGS: Inward Remittances: Free

SERVICE charges for NEFT

CATEGORY OF

TRANSACTION

Amount of

transaction

Charges ( Inclusive of

Service Tax &

Education Cess)

D OUTWARD NEFT/SFMS-

FOR

CUSTOMER RELATED

TRANSACTIONS:

Upto Rs.1 lac

Above Rs.1 lac



E Inward :NEFT Free

If handling of cash is involved, cash handling charges would be levied @ 30%

extra of normal

charges.


30

3.7.2 Automated Teller Machine (ATM)

The ATM was one of the earliest core banking services, being introduced in the

mid 1970’s. It provided customers with the ability to withdraw or deposit funds,

check account balances, transfer funds and check statement information. As is the

case with any new technology, it took some time before customers became familiar

with the ATM and came to accept it as an alternative way of doing their banking.

ATMs are electronic machines which are operated by a customer himself to

deposit or withdraw cash. It can also be used to deposit cheques, getting balance

information, getting account statement for limited entries, payment of bills, transfer

of funds, etc. ATMs can be interior (ie located in the branch premises) or exterior

(located outside the branch premises such as in a shopping center, airport, railway

station, etc.)

3.7.2.1 Operation:

For using an ATM, a customer requires an ATM card which is a plastic card

magnetically coded & read by the machine. To use an ATM, the customer has to

insert the card in the machine & quote his PIN (Personal Identification Number).

After establishing the authentication of the customer, the ATM permits a customer

to make entries & after processing the transaction, the machine performs the

desired function. On completion of the transaction, the customer’s card is ejected.

3.7.2.2 Security:

In order to provide proper security, the ATMs are provided access locks covering

key board, monitor etc. that could be opened with the help of ATM card.

3.7.3 Personal Identification Number (PIN)

These are secret numbers used for internet banking or written on the plastic money

cards (say a debit card) with magnetic means & on insertion of the card into an

ATM, the machine enquires about PIN. The machine allows the operation only on

typing the correct PIN & it does not permit operation, in case the PIN is incorrect.

These code numbers should be kept secret without disclosing to anyone else, to

avoid misuse. PIN is similar to a password that a computer user has to quote for

operating a computer. It is randomly generated sequence of digits printed on paper


31

& is automatically folded & sealed before it reaches the bank. The seal is required

to be opened by the card holder only & has to be kept secret.

In addition to normal PIN used as a password by the card holder, the PINS facility

could include dynamic signature verification, finger print verification, voice

recognition system, hand geometry, retinal pattern verification, vein recognition,

visual recognition.

A virtual keyboard used for entering PIN during an online transaction.

3.7.4 Charges related to ATM Cards

Sr.

No.

Particulars of Charges Charges

1 ATM/ Debit Card issue charges Free

2 ATM/ Debit Card (including Add on Cards) annual fee on

completion of one year and thereafter to be charged on

yearly

basis.

Rs. 100/-

3 Charges for issue of Add on card Rs. 50/-

per card

4 Charges for issue of duplicate PIN (However, if the card has

not

been used even once due to error in printing of PIN, issue of

duplicate PIN shall be free)

Rs. 25/-

5 Charges for issue of duplicate ATM/Debit card/

Replacement of

ATM/Debit card

Rs. 100/-

6 Issue of ATM/Debit card with photograph of the cardholder Rs. 25/-


32

3.7.5 Plastic Cards (PLASTIC MONEY)

Plastic cards are used as a medium of payment & are of different kinds with

different features. These cards include:

Credit Card.

Debit Card.

Smart Card.

3.7.5.1 Credit Cards

Being an instrument of payment, the card holder can obtain either goods or

services from merchant establishments (called Point of Sale) without prior

payment, where such arrangements exist. At the time of purchase, charge slip is

prepared on the basis of which payment is claimed from the card issuer bank. The

amount is payable by the card holder to the issuer bank during a specified period.

3.7.5.2 Different types of Smart Cards

Stored value card: These are also known as pre-paid cards or value added cards.

Cards have magnetic stripe or a computer chip in which value is stored. On use of

card, funds are directly debited from the card.

3.7.5.3 Magnetic stripe card:

Conventional cards like ATM card, credit card are all magnetic stripe cards. But

smart card in the form of magnetic stripe card can store much more information

3.7.5.4 Re-loadable cards:

These are the cards where the value is replenished once it is used

3.7.5.5 Disposal cards:

These cards have specific value and once the value is used, these are discarded.


33

3.7.5.6 Closed cards:

These are the cards the value of which can be used for a specified purpose like

phone cards.

3.7.5.7 Open Cards:

These can be used for several issuers and called electronic purse or electronic

wallet.

3.7.5.8 Electronic purse:

The electronic cards have the provision for use of different types of accounts of the

user. This facility is known as electronic pulse each having storage of separate

amount. It provides a new method of payment which permits the bank to enter into

transaction market complementary to the credit or debit card transaction market.

The cash in electronic purse cannot be spent if the purse if reported as lost.


34

3.8 ELECTRONIC CASH

The card holder can load the funds into a card for use in the form of cash that could

be used for meeting various kinds of requirements after authorization through PIN.

3.8.1 Cheque Truncation

In cheque truncation, the physical flow of cheque is stopped at some point. In place

of the physical cheque, the image of the cheque moves.

In this process, once a cheque enters the banking system, its electronic image is

obtained and the physical cheque is stored at some point of time, may be the

collecting branch where the customer deposits the cheque or collecting link branch

(branch connected to the clearing house) and the processing of the cheque is done

on the basis of electronic image i.e. paying bank makes payment on the basis of

electronic image.


35

Truncation can be done by using the MICR data or by use of the image processing.

3.8.2 Electronic Cheques

When a cheque is issued in electronic form instead of its normal physical form by

use of digital signature, it is called electronic cheque. It contains exact mirror

image of the paper cheque and is generated, written and signed in a secured system

by ensuring the minimum safety standards with the use of digital signature (with or

without biometrics signatures and asymmetric crypto system). Electronic cheque is

also a valid like a paper cheque, u/s 6 of Negotiable Instrument Act (as per 2002

amendment to NI Act).

For the time being, the Information Technology Act 1999 is applicable to cheques

only and not other negotiable instruments such as Bill of Exchange and promissory

notes.

3.8.3 Faster remittance services

Electronic Funds Transfer (EFT) has accelerated the movement of funds across the

globe. E-Cash or Cyber-Cash plays a predominant role in world commerce. Such

electronic funds movements amounting to a few trillion dollars are settled on a

daily basis at major international financial centers. Society for Worldwide Inter-

bank Financial Telecommunication (SWIFT) is a classic example of EFT among

banks with its own standards for messages, which ensures speed reliability,

security and accuracy. If large banks in India create such infrastructure for their

branches in India, this will lead to more efficient use of funds and contribute to

excellence in customer service in remittance and collection.

3.9 National Electronic Fund Transfer

In PNB NEFT Transactions are meant for public ie individual customers only.

There is no amount limit.

RBI's EFT system is result of the Shere Committee recommendations. EFT has

been defined as the series of transactions beginning with the Remitter's payment

order to the remitting branch made for the purpose of making payment to the

beneficiary. The EFT is completed when the remitting branch receives an

acknowledgement from the destination branch which indicates payment having


36

been made to the beneficiary or a refund made by the destination branch due to

failure to make payment to the beneficiary for any of the valid reasons of non-

payment

It has been introduced by RBI to help banks offering their customers, money

transfer service from one account of a bank branch to another account of any bank

(including same bank's) branch, both inter-city and intra-city. The system is an

improvement over the existing system of demand draft, mail-transfers etc. as funds

are transferred on day2.

Under the scheme, the account of the receiving bank with RBI is credited on Day-2

for all

remittances affected by remitting bank on Day-1, up to prescribed cut-off time

(3.30 pm). The receiving bank can credit beneficiary's account on Day-2. Each

bank has to identify a branch at the respective centre to act as link point for

transmission of outward message and receipt of inward message.

3.9.1 Procedure

Applicant provides particulars of beneficiary and authorizes his banks to remit.

Remitting branch sends duplicate of EFT | application to service/link branch, for

EFT data preparation.

Service branch prepares EF T data file in software of RBI and transmits the same

to local RBI office (National Clearing Cell) by 3.30 pm.

RBI consolidates all files so received, sorts transactions city-wise and transmits to |

destination RBI offices.

At destination centre, RB1 consolidates the files and sorts bank wise, which in turn

are transmitted to concerned bank on Day-1.

On Day-2 the receiving banks credit the beneficiary’s account.

Acknowledgement for receipt is sent on Day-3 along with confirmation for having

credited beneficiary’s account.


37

3.9.2 Ceiling on amount :

The ceiling of Rs.2 crore removed by RBI (Oct 04)

Service charges Rs.25, to be shared between remitting bank, receiving bank and

RBI (Rs.10, Rs.10 and Rs.5)

Under the facility the beneficiary gets the funds credited to his account within 24

hours. The system was introduced during 1996. Currently the scheme is available

across the banks at 15 centers where RBI manages its clearing house the centers

are Ahmadabad, Bangalore, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur,

Kanpur, Kolkata, Mumbai, Nagpur, New Delhi, Patna and Thiruvananatapuram.

3.10 Cash Management Services Of PNB.

Punjab National Bank had taken a major initiative for managing the funds of

Corporates. The services are essentially meant for pooling your funds spread

across the country at a place of your choice with the least time delay, if not

instantaneously in many cases. We shall collect your receivables from your

representative or your business associates at more than 2700 CBS branches spread

across 935 centers all over the country and pool the same at the branch specified by

you. The services can be custom designed to cater to your specific needs.

The Scheme offers the following options for you:

Option I: Instant credit through our CMS to your account, pending clearance of

funds.

Option II: Credit to your account through our CMS after realizations.

Option III: You can choose Option I or II according to your client profile and

indicate to us client-wise.


38

A host of Daily/weekly/monthly reports and special report including center-wise

reports generated at our HUB at Delhi, can be sent you through electronic media as

per requirements of your funds Managers.

The Bank offers the above services at most competitive rates. The charges for the

services are given as under:-

(Charges in paisa/Rs. 1000)

For Metro locations

(metropolitan cities)

25 paisa

For Non-metro locations

(state capitals & District HQs)

50 paisa

For Remote locations

(all other locations)

90 paisa

In case your turnover crosses certain assured level we offer attractive discounts on

the above charges ranging from 20% to over 76%. For example, if your annual

turnover of collection exceeds Rs. 250 crores at Chennai (a metro location), the

charges shall be just 06 paisa per 1000/-.

3.11 SWIFT.

The Society for Worldwide Inter-bank Financial Telecommunications (SWIFT)

was formed during 1973 with its headquarters at Brussels & started functioning in

May 1977. RBI, 27 Public Sector Banks & a number of other private sector banks

obtained its membership.

It provides rapid, reliable & cost-effective mode of transmitting the financial

message worldwide to more than 125000 offices of SWIFT members.


39

SWIFT-II system had been launched by the society to bring improvement in the

SWIFT-I for catering to the high growth in messages. SWIFT provides 24 hour

facilities such as:

Transfer of messages relating to the fixed deposits,

Interest payment,

Debit-Credit card statements,

Foreign exchange, etc.

It bears the liability arising from loss or delay in delivery of messages assumes the

responsibility for proper functioning of the net work & its security. The delivery of

message to other than member branches is responsibility of the user.

3.11.1 Security in SWIFT.

It is taken care of through use of Key Authentication mechanism, Encryption, &

Checksum. It is responsibility of the Regional Processor (in India in Mumbai).

Major message types in SWIFT.

It includes;

Customer transfers & cheques,

Financial institutions’ transfers,

Financial trading,

Collection & cash letters,

Documentary Credits & guarantees,

Securities,

Traveller’s cheque,

Cash management, &

Customer status & supporting system messages.


40


41

3.12 Real Time Gross Settlement System. (RTGS).

This is used as a mode of transactions for corporate & public i.e. Individual

customers. Its limit being 1 lakh and above.

The inter-bank fund transfer system in India can be classified into the

Batch Mode (Net)

Real Time Gross Settlement System. (RTGS).

In Batch Mode (Net), the transmission, processing & settlement is done for a set of

transactions (say cheque clearing or sale or purchase of securities) at a particular

point of time & the settlement on a pre-fixed interval of time (say at the end of the

day).

In Real Time Gross Settlement System. (RTGS) on other hand, the transmission,

processing & settlement of an instruction are done on a continuous basis.

World over, it is used for high value clearing involving inter-bank fund transfers &

treasury related transactions, helping in reducing settlement & systemic risk. In

India it has been implemented wef March 26, 2004 & its implementation places

India at par with the best practices in world in terms of payment systems.

3.13 What is RTGS?

RTGS is a centralized payment system in which, inter-bank payment instructions

are processed & settled, transaction by transaction (one by one) & continuously

(online) throughout the day, as & when the instructions are received & finally

accepted by the system. RTGS uses INFINET & SFMS platform.

3.14 Need for RTGS?

Under the existing system, the settlement of the individual payment takes place on

a net basis (i.e. Difference of payment to be received & payment to be made) &

that too at a designated time. This causes the system participants to be exposed to

the financial risks for the period during which settlement is deferred. Due to such

delays in settlement, a no. of capital market & money market frauds have taken


42

place in India in recent years. Further, the existing payment system is capable to

meet the requirement of the 80s or 90s when the no. & volume of financial

transactions was limited. But, due to change in the economic perspective, its

linkage with the global economies & the role of information technology, need has

been felt for a more accurate, risk free, efficient & effective system. RTGS is an

internationally compatible & transparent system which could be used to the full

advantage of the existing client base without dispensing with the benefits already

available to customers.

3.15 Process of RTGS

In India, the RTGS has been implemented by RBI. It uses Y shaped structure out

of the 4 message flow structures (V, Y, L, and T). In this structure, the following

flow of instructions takes place;

1. Each bank is required to have a single gateway interface called Participant

Interface (PI) for RTGS system. The payment message originates from the

participant’s host system.

2. This message is passed on by the PI to Inter-bank Funds Transfer Processor

(IFTP) acting as broker. Communication between PI & IFTP is through

RTGS only.

3. IFTP stores the message & in case of payment message construct settlement

message containing a core subset of the info required for the settlement &

routed to the RTGS system at RBI.

4. After receipt of this subset, RBI (the settlement agent) carries the settlement

by debit & credit of the accounts of respective banks & conveys the status to

IFTP.

5. On receipt of this confirmation, IFTP reconstructs the message by adding

back other details & sends settlement advice to both the originating &

beneficiary participant. The business info is not known to the settlement

agent i.e. RBI.


43

3.16 RTGS Business Day: It has 4 phases.

1 RTGS Open Phase – all normal transactions are accepted & processed.

2 IDL Shut Phase- All transactions are processed as in RTGS open phase but

no new IDL will be requests.

3 IDL closed Phase- Restrictions on fresh IDl continues. No transaction which

debits a member with an outstanding IDL will be settled.

4 RTGS close phase—Transaction reversing outstanding IDL will only be

permitted. Outstanding multilateral net settlement Batch transactions for

settlement & MNSB return transaction are also permitted.

5

3.17 Present status of RTGS in India.

The system was launched on March 26, 2004 (on pilot basis by involving 4 banks)

by RBI for large value transactions for banks & their client. Majority of the banks

have already joined the system. Nearly 3000 bank branches across 275 cities/

towns in India are expected to go live on this online fund transfer system.

3.18 Structured Financial Messaging System (SFMS)

SFMS is an Electronic Data Interchange (EDI) system (like SWIFT) that permits

the exchange of structured messages (prepared according to the published

standards of Working Group on INFINET).

The system consists of 4 main elements:

Hub – that switches inter-bank message from sending bank’s gateway to receiving

bank’s gateway.

Bank gateway— that switches intra-bank message from one branch server to

another branch server & also out messages.

Branch serve— that receives & sends branch messages using online thin clients.


44

SFMS security— it uses X.509 Digital signatures for access control &

authentication of messages. The outgoing messages are encrypted with the

receiving node’s public key for protection of confidentiality of messages in transit.

3.19 Automated Teller Machine (ATM)

The ATM was one of the earliest core banking services, being introduced in the

mid 1970’s. It provided customers with the ability to withdraw or deposit funds,

check account balances, transfer funds and check statement information. As is the

case with any new technology, it took some time before customers became familiar

with the ATM and came to accept it as an alternative way of doing their banking.

ATMs are electronic machines which are operated by a customer himself to

deposit or withdraw cash. It can also be used to deposit cheques, getting balance

information, getting account statement for limited entries, payment of bills, transfer

of funds, etc. ATMs can be interior (ie located in the branch premises) or exterior

(located outside the branch premises such as in a shopping center, airport, railway

station, etc.)

3.19.1 Operation:

For using an ATM, a customer requires an ATM card which is a plastic card

magnetically coded & read by the machine. To use an ATM, the customer has to

insert the card in the machine & quote his PIN (Personal Identification Number).

After establishing the authentication of the customer, the ATM permits a customer

to make entries & after processing the transaction, the machine performs the

desired function. On completion of the transaction, the customer’s card is ejected.

3.19.2 Security:

In order to provide proper security, the ATMs are provided access locks covering

key board, monitor etc. that could be opened with the help of ATM card.


45

3.19.3 Advantage.

Quick & efficient services.

Provision for uninterrupted services for all days of the week & on any time

(24*7*365).

Any place availability to the customer of the bank amounting to anywhere

banking.

Extended working hours.

Helps in utilizing human resources in more productive functions by taking

over the routine payment functions.

ATMs provide round the clock service with ease & privacy of operations.

It reduces pressure on bank staff & avoids congestion in the bank premises.

3.20 Prepaid PNB World Travel Card

Punjab National Bank has introduce a new product, a Prepaid PNB World Travel

Card. This card is available to for US $, British ₤ and the Euro. This card does

away with the need for carrying Traveler Cheques and Currency. It has several

major advantages over other types of cards.

1. Your exposure to foreign currency is decided on the day the card is issued/

topped up and therefore you are protected against future currency fluctuations in

the currency of issue.

2. You do not need to look around for money changers and pay their transaction

charges in a foreign country.

3. In case of loss of card, you can immediately get it deactivated.

4. In the unlikely event of loss & subsequent misuse of your card, we are

insuring loss up to USD 5000.

5. PNB customers can access their card account on line to check balance,

spending etc.

6. The unspent balance can be surrendered.


46

7. Your card can be reloaded for any number of times within your entitlement.

8. We also have a 24x7 call centre to provide information and hot listing of the

card in case of loss.


47

3.21 CBS Products

.


48

3.21.1 Mobile Banking

Mobile banking (also known as M-Banking, m-banking, SMS Banking etc.) is a

term used for performing balance checks, account transactions, payments etc. via a

mobile device such as a mobile phone. Mobile banking today (2007) is most often

performed via SMS or the Mobile Internet but can also use special programs called

clients downloaded to the mobile device.

A mobile banking conceptual model

In one academic model, mobile banking is defined as:

"Mobile Banking refers to provision and availment of banking- and financial

services with the help of mobile telecommunication devices. The scope of offered

services may include facilities to conduct bank and stock market transactions, to

administer accounts and to access customized information."

According to this model Mobile Banking can be said to consist of three inter-

related concepts:

Mobile Accounting

Mobile Brokerage

Mobile Financial Information Services

Most services in the categories designated Accounting and Brokerage are

transaction-based. The non-transaction-based services of an informational nature

are however essential for conducting transactions - for instance, balance inquiries

might be needed before committing a money remittance. The accounting and

brokerage services are therefore offered invariably in combination with

information services. Information services, on the other hand, may be offered as an

independent module.


49

3.21.2 Challenges for a Mobile Banking Solution

Key challenges in developing a sophisticated mobile banking application are:

3.21.2.1 Handset operability

There are a large number of different mobile phone devices and it is a big

challenge for banks to offer mobile banking solution on any type of device. Some

of these devices support J2ME and others support WAP browser or only SMS.

Initial interoperability issues however have been localized, with countries like

India using portals like R-World to enable the limitations of low end java based

phones, while focus on areas such as South Africa have defaulted to the USSD as a

basis of communication achievable with any phone.

The desire for interoperability is largely dependent on the banks themselves, where

installed applications (Java based or native) provide better security, are easier to

use and allow development of more complex capabilities similar to those of

internet banking while SMS can provide the basics but becomes difficult to operate

with more complex transactions.

There is a myth that there is a challenge of interoperability between mobile

banking applications due to perceived lack of common technology standards for

mobile banking. In practice it is too early in the service lifecycle for

interoperability to be addressed within an individual country, as very few countries

have more than one mobile banking service provider. In practice, banking

interfaces are well defined and money movements between banks follow the IS0-

8583 standard. As mobile banking matures, money movements between service

providers will naturally adopt the same standards as in the banking world.


50

3.21.2.2 Security

Security of financial transactions, being executed from some remote location and

transmission of financial information over the air, are the most complicated

challenges that need to be addressed jointly by mobile application developers,

wireless network service providers and the banks' IT departments.

The following aspects need to be addressed to offer a secure infrastructure for

financial transaction over wireless network:

Physical part of the hand-held device. If the bank is offering smart-card based

security, the physical security of the device is more important.


51

Security of any thick-client application running on the device. In case the device is

stolen, the hacker should require at least an ID/Password to access the application.

Authentication of the device with service provider before initiating a transaction.

This would ensure that unauthorized devices are not connected to perform financial

transactions.

User ID / Password authentication of bank’s customer.

Encryption of the data being transmitted over the air.

Encryption of the data that will be stored in device for later / off-line analysis by

the customer.

3.21.2.3 Scalability & Reliability

Another challenge for the CIOs and CTOs of the banks is to scale-up the mobile

banking infrastructure to handle exponential growth of the customer base. With

mobile banking, the customer may be sitting in any part of the world (true anytime,

anywhere banking) and hence banks need to ensure that the systems are up and

running in a true 24 x 7 fashion. As customers will find mobile banking more and

more useful, their expectations from the solution will increase. Banks unable to

meet the performance and reliability expectations may lose customer confidence.

There are systems such as Mobile Transaction Platform which allow quick and

secure mobile enabling of various banking services. Recently in India there has

been a phenomenal growth in the use of Mobile Banking applications, with leading

banks adopting Mobile Transaction Platform and the Central Bank publishing

guidelines for mobile banking operations.

3.21.2.4 Application distribution

Due to the nature of the connectivity between bank and its customers, it would be

impractical to expect customers to regularly visit banks or connect to a web site for

regular upgrade of their mobile banking application. It will be expected that the

mobile application itself check the upgrades and updates and download necessary

patches (so called "Over The Air" updates). However, there could be many issues


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to implement this approach such as upgrade / synchronization of other dependent

components.

3.21.2.5 Personalization

It would be expected from the mobile application to support personalization such

as:

Preferred Language

Date / Time format

Amount format

Default transactions

Standard Beneficiary list

Alerts

SMS banking

SMS banking is a technology-enabled service permitting banks to operate selected

banking services over the customers' mobile phone using SMS messaging.

SMS banking services are operated using both Push and Pull messages. Push

messages are those that the bank chooses to send out to a customer's mobile phone,

without the customer initiating a request for the information. Typically push

messages could be either Mobile Marketing messages or messages alerting to an

event which happens in the customer's bank account, such as a large withdrawal of

funds from the ATM or a large payment using the customer's credit card, etc.

Another type of push message is a One-time password.

Pull messages are those that are initiated by the customer, using a mobile phone,

for obtaining information or performing a transaction in the bank account.

Examples of pull messages for information include an account balance enquiry or

requests for current information like currency exchange rates and deposit interest

rates.


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The bank’s customer is empowered with the capability to select the list of activities

(or alerts), that he/she needs to be informed. This functionality to choose activities

can be done either by integrating to the Internet Banking channel or through the

bank’s customer service call centre.

3.22 INTERNET BANKING.


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Online banking or e-banking can be defined as online systems which allow

customers to plug into a host of banking services from a personal computer by

connecting with the bank’s computer over the telephone wires. Technology

continues to make online banking easier for the average consumer. Banks are using

a variety of names for online banking services, such as PC banking, home banking,

electronic banking or Internet banking. Regardless of the given name, these

systems certainly offer specific advantages over the traditional banking methods.

E- Banking can be defined as “delivery of bank’s services to a customer at his

office or home using Electronic Technology.” The quality, range and price of these

electronic services decide a bank’s competitive position in the industry.

Technology in banking has been used in four major ways:

To handle a greatly expanded customer base

To reduce substantially the real; cost of handling payments

To liberate the banks from the traditional constraints on time and place

To introduce new products and services.


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3.23 Home Banking:

Under home banking the customer is served at his residence and there is no need

for the customer to visit the bank’s premises for a number of routine transactions.

If the customer needs some information the same can be got by contacting the bank

over the phone as described in the telebanking.

If the customer wants to put through transaction and wishes to see his account or to

get a statement of his account, he may have to use a PC.

This type of facility is available with a town, city or metropolitan area.

Under such a situation the customer should have a:


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PC

Modem

Telephone line

A compatible software for the home PC

The home banking service can be broadly classified under two groups, one without

using the information technology and another using information technology.

When customer contacts the bank o the phone no specific technology is involved

and the service of telebanking are provided to him.


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3.24 Impact of computer technology

Computer technology has impacted the banking system and its various constituents

(customer service, employees and services and products) in different manner as

under:

3.24.1 Impact on customer services.

Availability of 365 days and 24 hour banking services through ATMs, credit and

debit cards.

Networking of Branch-Banking to provide for anywhere Banking.

Client prepares a

Cheque

He goes to bank

Deposits the

Cheque in bank

Next day the

Money is transferred

Client logs on to

Bank’s web site

Keys in the user

Name & password

Gives instructions

Online

Money is transferred

Same day

EELLEECCTTRROONNIICC BBAANNKKIINNGG TTRRAADDIITTIIOONNAALL BBAANNKKIINNGG


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3.24.2 Impact on Employees.

Change in job content with more emphasis on new products, new services and

customer services

Enhanced productivity of the employee

Better working environment

Enhanced Job security for the employee due to better sustainability of the banking

system.

3.24.3 Impact on services.

Faster transactions

Availability of services for 24 hours

Improved quality of services with better features

Higher level of satisfaction to customers.

3.24.4 Impact on organizational structure and orientation.

Reduction in hierarchical tier systems and direct liaison between top management

and field functionaries.

Less dependence on middle tiers for data collection and MIS

Change in the outlook of top management as IT is seen as a functional requirement


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Chpater 4 Conclusion


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Internet Banking has become one of the important services which are provided by

bank. Many services provided by banks like SMS Banking, Online Payments etc

are preferred by the customers as they can do it at any place even sitting at home or

office etc.

Punjab National Bank has been providing Internet Banking Services Since 2002. It

provides all services such as Accounting Opening, Cheque Book Request, DD

Request, FD Breaking, FD Accounting, FD Renewal, Request Of NEFT,

Transaction Password Request, Request For RTGS, Request For Account

Statement etc.

They have a total number of ATM Network as on date 15th August 2010 3796 and

still growing. They are also equipped with Core Banking Solution. Bank provides

different services like Internet Baking, Home Banking, Mobile Banking etc. \

Bank also provide assistance to their customers regarding usage of Internet

Banking. They also educate them regarding Cyber Crime and Hacking. Bank

suggest customers to frequently change their password in order to prevent hacking

of their account.

Punjab National Bank is really old bank working since 1895.it has branch network

of 4525. More than 50 renowned banks keep their INR Account with Punjab

National Bank. With over 38 million satisfied customers and 4668 offices, PNB

has continued to retain its leadership position among the nationalized banks.

Apart from offering banking products, the bank has also entered the credit card &

debit card business; bullion business; life and non-life insurance business; Gold

coins & asset management business, etc.

PNB has always looked at technology as a key facilitator to provide better

customer service and ensured that its ‘IT strategy’ follows the ‘Business strategy’

so as to arrive at “Best Fit”. The bank has made rapid strides in this direction.

Along with the achievement of 100% branch computerization, one of the major

achievements of the Bank is covering all the branches of the Bank under Core

Banking Solution (CBS), thus covering 100% of its business and providing

‘Anytime Anywhere’ banking facility to all customers including customers of


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more than 2000 rural branches. The bank has also been offering Internet banking

services to the customers of CBS branches like booking of tickets, payment of bills

of utilities, purchase of airline tickets etc. Towards developing a cost effective

alternative channels of delivery, the bank with 3796 ATMs which is the largest

ATM network amongst Nationalized Banks.

With the help of advanced technology, the Bank has been a frontrunner in the

industry so far as the initiatives for Financial Inclusion is concerned. With its

policy of inclusive growth in the Indo-Gangetic belt, the Bank’s mission is

“Banking for Unbanked”. The Bank has launched a drive for biometric smart card

based technology enabled Financial Inclusion with the help of Business

Correspondents/Business Facilitators (BC/BF) so as to reach out to the last mile

customer to provide cost effective and transparent services.


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Bibliography

Books

Online Banking In India – A K Upal

Magazine

Indian Banker

Weblography

http://finance.indiamart.com/investment_in_india/punjab_national_bank.htm

l

www.pnbindia.com/

https://netbanking.netpnb.com/

www.pnbindia.in/PNB1063.pdf

www.wikepedia.org

www.netpnb.com

www.onlinebanksguide.com/punjab-national-bank/internet-banking.html

http://en.wikipedia.org/wiki/Banking_in_India#Post-independence

http://finance.indiamart.com/investment_in_india/punjab_national_bank.html

http://finance.indiamart.com/investment_in_india/punjab_national_bank.html

http://www.pnbindia.com/

https://netbanking.netpnb.com/

http://www.pnbindia.in/PNB1063.pdf

http://www.wikepedia.org/

http://www.netpnb.com/

http://en.wikipedia.org/wiki/Banking_in_India#Post-independence


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Annexure


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Sample Questioner

1. When was Internet Banking introduced in Punjab National Bank?

2. Which services are provided through Internet Banking?

3. Is there any time limit for usage of Internet Banking?

4. After introduction of Internet Banking In Punjab National Bank have any

special training or special staff recruited?

5. Is Internet Banking service Chargeable?

6. Which type of customer prefers Internet Banking?

7. How does Bank educate their customers regarding Cyber Crime or

Hacking?

8. Is there any limit for customers regarding usage of Mobile

Banking?

9. Any special facility that Bank provides to its customer?

10. In which currency is this card available?


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