S.NO.

CHAPTER NAME

I.

Introduction to central bank of India

II.

Products of central bank of India

III.

Database & methodology

IV.

Innovations in banking by products

V.

Innovations in banking by branches

VI.

Conclusion, finding & suggestions

Bibliography

This chapter contains the information about Central Bank of India origin,
vision,

Profile:
Established in 1911, Central Bank of India was the first Indian

commercial bank, which was wholly owned and managed by Indians. The
establishment of the Bank was the ultimate realisation of the dream of Sir
Sorabji Pochkhanawala, founder of the Bank. Sir Pherozesha Mehta was the
first Chairman of a truly 'Swadeshi Bank'. In fact, such was the extent of pride
felt by Sir Sorabji Pochkhanawala that he proclaimed Central Bank as the
'property of the nation and the country's asset'. He also added that 'Central
Bank lives on people's faith and regards itself as the people's own bank'.
During the past 95 years of history the Bank has weathered many
storms and faced many challenges. The Bank could successfully transform
every threat into business opportunity and excelled over its peers in the
Banking industry.

A number of innovative and unique banking activities have been

launched by Central Bank of India and a brief mention of some of its
pioneering services are as under:
1921

Introduction to the Home Savings Safe Deposit Scheme to

build saving/thrift habits in all sections of the society.

1924

An Exclusive Ladies Department to cater to the Bank's

women clientele.

1926

Safe Deposit Locker facility and Rupee Travelers' Cheque.

1929

Setting up of the Executor and Trustee Department.

1932

Deposit Insurance Benefit Scheme.

1962

Recurring Deposit Scheme.

Subsequently, even after the nationalization of the Bank in the year 1969,
Central Bank continued to introduce a number of innovative banking services
as under:
1976

The Merchant Banking Cell was established.

1980

Central card, the credit card of the Bank was introduced.

1986

'Platinum Jubilee Money Back Deposit Scheme' was

launched.

1989

The housing subsidiary Cent Bank Home Finance Ltd. was

started with its headquarters at Bhopal in Madhya Pradesh.

1994

Quick Cheque Collection Service (QCC) & Express Service

was set up to enable speedy collection of outstation cheque.

Further in line with the guidelines from Reserve Bank of India as also the
Government of India, Central Bank has been playing an increasingly active
role in promoting the key thrust areas of agriculture, small scale industries as
also medium and large industries. The Bank also introduced a number of Self
Employment Schemes to promote employment among the educated youth.
Among the Public Sector Banks, Central Bank of India can be truly
described as an All India Bank, due to distribution of its large network in 27
out of 28 States as also in 4 out of 7 Union Territories in India. Central Bank of
India holds a very prominent place among the Public Sector Banks on account
of its network of 3194 branches and 267 extension counters at various centers
throughout the length and breadth of the country
In view of its large network of branches as also number of savings
and other innovative services offered, the total customer base of the Bank at
over 25 million account holders is one of the largest in the banking industry.
Customers' confidence in Central Bank of India's wide ranging
services can very well be judged from the list of major corporate clients such as
ICICI, IDBI, UTI, LIC, HDFC as also almost all major corporate houses in the
country.

Vision:
Our vision is to emerge as a strong, vibrant and pro-active bank

and to positively contribute to emerging needs of the economy through

harmonization of human, financial and technological resources and effective
risk control system.

Capital structure:
The authorized Capital of Central Bank of India is

15,000 million equity shares of Rs.10 each & 8,000 million are perpetual noncumulative preference shares. Out of which 324,141,460 equity shares of Rs.10
issued and 80,000,000 equity shares of Rs. 10 fully paid up.
General Managers
Name

Designation

Tel. No.

Shri G Gupta

Priority Sector/ Rajbhasha/ Operation/

Central Card/ Subsidiaries

022-22161091

Shri S Suresh

Credit/ Credit Policy/ Loan

022-22022048

Shri K K
Gupta

Credit Appraisal

022-22021553

Shri R P
Sharma

Zonal Manager - New Delhi

011-23318964

Shri S G
Nadgonde

Zonal Manager - Kolkata

033-22301270

Shri A Ghosh

New Initiative Dept/ Planning &

Development/ Profitability

022-22024601

Shri G P
Chitnis

HRD/ Dept of IT/ Risk Management

022-22022565

Shri N
Natrajan

Audit & Inspection/ House Keeping &

IBR/ General Administration Dept

022-66387777

Shri R N
Vadivelu

International Division/ Treasury/ MBD/

022-22831592
Dept of IT

Shri R
Natarajan

Planning & Development/ Accounts/

Legal/ Recovery

022-22026776

Shri S M

Zonal Manager - Mumbai Metro

022-22043673

Deshpande
Shri V P Sathe

Audit/ Inspection/ Inter Branch

Reconciliation/ Housekeeping

022-27580571

Shri H K
Vesuna

Accounts/ Recovery/ Legal & BIFR/

HRD

022-22023326

Shri K A
Somayajulu

Zonal Manager - Chennai

044-28554792

Corporate Office
Central Bank of India
Chander Mukhi, Narman Point
Mumbai 400 021
Tel: 022 6638 7777
Zonal Offices
AGRA
Block No. 37/2/4, Sanjay
Place
Agra 282 002

Tel.: 0562 2850154/3424

Fax: 0562 2853698/1341
Email: zmagrazo@centralbank.co.in

AHMEDABAD
Central Bank Building
Tel.: 079 25503586
P.O. No. 205, Lal Darwaja Fax: 079 25505995
Ahmedabad 380 001
Email: zmahmezo@centralbank.co.in
BHOPAL
9, Arera Hills, Jail Road
Bhopal 462 011

Tel.: 0755 2674037/36/35/34/33

Fax: 0755 2552019
Email: zmbhopzo@centralbank.co.in

CHANDIGARH
P. B. No. 13, No. 58-59

Tel.: 0172 2702994/98

Bank Square, Sector

17B
Chandigarh 160 017

Fax: 0172 2704047

Email: zmchanzo@centralbank.co.in

CHENNAI
48/49, Monteith Road
Egmore,
Chennai 600 008

Tel.: 044 28554792/4692/4620

Fax: 044 28551260
Email: zmchenzo@centralbank.co.in

GUWAHATI
G. S. Road, Central Bank
Building
Bhangagarh,
Guwahati 781 005

Tel.: 0361 22457651/52

Fax: 0361 22452154 Email:
zmguwazo@centralbank.co.in

HYDERABAD
P. B. No. 522, 710-712
Mahapathram Road, Bank
Street
Hyderabad 500 195

Tel.: 040 24740361/64, 24611402-05

Fax: 040 24742841 Email:
zmhydezo@centralbank.co.in

KOLKATA
Central Bank Building
33, Netaji Subhash Road
Kolkata 700 001

Tel.: 033 22301270/1275/7007

Fax: 033 22309864
Email: zmkolkzo@centralbank.co.in

LUCKNOW
P. B. No. 10, Akash Deep
23, Vidhan Sabha Road
Lucknow 226 001

Tel.: 0522 2611301-4

Fax: 0522 2621213
Email: zmluckzo@centralbank.co.in

MUMBAI METRO ZONAL OFFICE

Standard Building, 1st
Floor

Tel: 022 22047229/7301/7304

Fax: 022 22044720

D. N. Road,
Mumbai 400 023

Email: zmmmzo@centralbank.co.in

MUZAFFARPUR
Pawapuri Vihar Building,
N. H. 28
Near Bhagwanpur Chowk
Muzaffarpur 842 001

Tel: 0621 22251855

Fax: 0621 2251784
Email: zmmuzazo@centralbank.co.in

NAGPUR
Oriental Building, 2nd
Floor
Kamptee Road,
Nagpur 440 001

Tel.: 0712 2520361-63

Fax: 0712 2520365
Email: zmnagpzo@centralbank.co.in

NEW DELHI
P. B. No. 7007, Link
Tel.: 011 23318964, 23319268/69
House
Fax: 011 23311332/237
Press Area, 3 Bahadurshah Email: zmdelhzo@centralbank.co.in
Jafar Road,
New Delhi 110 002
PATNA
2nd Floor, Block B
Maurya Lok Complex
Dak Banglow Road,
Patna 800 001

Tel.: 0612 2226607

Fax: 0612 2221898
Email: zmpatnzo@centralbank.co.in

PUNE
P. B. No. 98, 317
M. G. Road,
Pune 411 001

Tel.: 020 26131611-17

Fax: 020 26131618
Email: zmpunezo@centralbank.co.in

RAIPUR

1st Floor, Block C

Bombay Market, G. E.
Road,
Raipur 492 001

Tel.: 0771 2226756, 2225171

Fax: 0771 2234895
Email: zmraipzo@centralbank.co.in

Directors

Directors of Central Bank of India & their addresses:

1. Ms H. A. Daruwalla
Chairperson & Managing Director
Chander Mukhi
Nariman Point
Mumbai-400 021
Tel.: (O) 022 - 22024393 / 22023942
Fax: 22028122
2. Shri K. Subbaraman
Executive Director
Chander Mukhi
Nariman Point
Mumbai-400 021
Tel: (O) 022 - 22023661 / 66387799 / 66387826
Fax: 22856187
3. Shri Albert Tauro
Executive Director
Chander Mukhi
Nariman Point
Mumbai-400 021

Tel: 022 - 22874143

Fax: 022 22022617
4. Shri P. P. Mitra
Economic Advisor and Joint Secretary
Ministry of Finance
Banking Division
Jeevan Deep Building
New Delhi Tel: 011 23745128
5. Shri M.K. Bhattacharya
RBI Nominee Director
Evershine Millenium Park Apts.
37/601, Thakur Village, Kandivili (East)
Mumbai 400101
6. Shri Kamal Faruqui
A-80, Nizamuddin East,
New Delhi -110013
Tel: 011 23269723
7. Major (Retd) Ved Prakash
204/1 Neb Valley,
Neb Sarainew
Delhi
Tel: 011 - 23018891 / 23014325
Fax: 011 23017047
8. Smt. Satya Bahin

10

89, Sector-4, Vaishali

Ghaziabad (U.P)
Tel: 0120 2774995
9. Shri Harish Chandhok
20-21, Manishpuri,
Saket Ext.
Indore.
Tel: 0731 - 2493152
0731 4064828
10. Shri Romesh Sabharwal
A2/3, M.S. Flats
Peshwa Road, Gole Market,
New Delhi - 110 001
11. Ms. Indu Singh Pawar
Central Bank of India
18A, Shashtri Nagar,
Jammu Tavi
Pin - 180 004
12. Shri C.M. Puri
Central Bank of India,
Janpath Branch,
P.B. 244, 70, 72 Janpath
New Delhi - 110 001
Tel: 011 23321343/23316708
Fax: 011 23357934

11

13. Shri N. K. Pareek

Central Bank of India,
P.B. No. 87, Mirza Ismail Road,
Jaipur - 302 001
Tel: 0141 - 2370333
Fax: 0141 2338900

History of Central Bank of India

Sir Sorabji Pochkhanawala established Central Bank of India in 1911. It
was the first Indian commercial bank, which was wholly owned and managed
by Indians. Sir Pherozeshah Mehta was the first Chairman of the Bank. In
1969, Central Bank of India was nationalized along with 13 other banks.
In its 95 years of history, Central Bank of India has launched a number
of innovative and unique banking activities. Major among them are:
1921: Introduction of the Home Savings Safe Deposit
Scheme to build saving/thrift habits in all sections
of the society.
1924: An Exclusive Ladies Department to cater to the
Bank's women clientele.
1926: Safe Deposit Locker facility and Rupee Travellers'
Cheques.
1929: Setting up of the Executor and Trustee department.
1932: Deposit Insurance Benefit Scheme.
1962: Recurring Deposit Scheme.

12

1976: The Merchant Banking Cell was established.

1980: Centralcard, the credit card of the Bank was
Introduced.
1986: 'Plantinum Jubilee Money Back Deposit Scheme'
Was launched.
1989: The housing subsidiary Cent Bank Home Finance
Ltd. was started with its headquarters at Bhopal in
Madhya Pradesh.
1994: Quick Cheque Collection Service (QCC) & Express
Service were set up to enable speedy collection of
Outstation cheques.
Central Bank of India has a large network of 3161 branches and 270
extension counters spread over 27 States and 4 Union Territories. The Bank has
a total customer base of over 25 million account holders, which is one of the
largest in the banking industry.
URL: http://www.centralbankofindia.co.in/

13

This chapter contains information about different products offered by the

central bank of India for the benefit of its customers.
CBI has offered a choice of various deposit schemes with unique features and
facilities. These schemes suit different kinds of banking needs you might have.

Money multiplier deposit certificate

The interest accrued gets added back to the principal giving you an
effective interest rate that is higher than the contracted interest rate.
Amount of deposit

minimum amount of Rs. 100/- and multiplies of Rs.

Period of deposit

100/-.
minimum period of 6 months and upto a maximum

Rate of interest

of 120 months.
The rate of interest shall be the appropriate rate
prevailing on the date of the deposit for the period

Premature payment

so selected.
Payment before maturity is available as per

Loans/advance

prevailing rules.
Loan/advance facility is available under the scheme

against deposit

as per prevailing rules.

Khazaana deposit scheme

Khazaana deposit scheme offers you the double benefits of easy
liquidity and high returns. It is also a flexible scheme that allows you to
withdraw a part of the deposit amount as and when required.
Amount of deposit

minimum amount of Rs. 5000/- and multiplies of

Rs. 1000/-.

14

Period of deposit

minimum period of 30 days and upto a maximum

Rate of interest

of 120 months.
The rate of interest shall be the appropriate rate
prevailing on the date of the deposit for the period

Premature payment

so selected.
You will be permitted to withdraw upto a maximum

Loans/advance

of 10 times during the entire period of deposit.

Loan/advance facility is available under the scheme

against deposit

as per prevailing rules.

Monthly interest deposit receipt

The MIDR scheme provides you with monthly interest earnings, without
affecting the principal amount.
Amount of deposit

minimum amount of Rs. 5000/- and multiplies of

Period of deposit

Rs. 1000/-.
open an account for periods ranging from 12

Rate of interest

months to 120 months.

The rate of interest shall be the appropriate rate
prevailing on the date of the deposit for the period

Premature payment

so selected.
Payment before maturity is available as per

Loans/advance

prevailing rules.
Loan/advance facility is available under the scheme

against deposit

as per prevailing rules.

Quarterly interest deposit receipt

QIDR provides you quarterly interest without affecting the principal
amount.

15

Amount of deposit

minimum amount of Rs. 5000/- and multiplies of

Period of deposit

Rs. 1000/-.
open an account for periods ranging from 12

Rate of interest

months to 120 months.

The rate of interest shall be the appropriate rate
prevailing on the date of the deposit for the period

Premature payment

so selected.
Payment before maturity is available as per

Loans/advance

prevailing rules.
Loan/advance facility is available under the scheme

against deposit

as per prevailing rules.

Centrals flexi yield deposit scheme

Under this scheme depositors can avail floating rate of interest, which is
higher than the interest rate on normal term deposits.
Amount of deposit
Period of deposit

Single deposit of Rs. 1 lac and above.

One year and above and upto a maximum of 10

Rate of interest

years.
The rate of interest shall be the appropriate rate
prevailing on the date of the deposit for the period

Premature payment

so selected.
In case the deposit will be treated as normal deposit
and interest will be paid as per our prevailing rates

Loans/advance

applicable to normal deposits.

Loan/advance facility is available under the scheme

16

against deposit

as per prevailing rules.

LOANS
You can avail of easy and convenient loan offers for purposes ranging
from housing finance to higher education to purchase of computer. Our loans
enrich life and enhance lifestyles.

Cent buy
Facility &

You can avail of the term loan facility at all branches

purpose

for purchase of consumer durables, two wheelers and

Eligibility

four wheelers.
1)
Permanently employed persons (govt./private
sector)
2)

Others have regular and known sources of

income.
3)
Quantum of loan

For four wheelers, applicant should be income

tax assessee.
80% of the cost of four wheelers. Maximum Rs. 10
lacs. 85% of the cost of two wheelers and other

Security

consumer durables. Maximum Rs.2 lacs.

Hypothecation of articles/vehicles purchased out of
loan. In case f salaried employees, when installments

Rate of interest

are received from salary.

PLR + 2%

Processing

1% of the loan amount. Minimum Rs.100/-.

charges
Repayment

36 to 84 equated monthly installments (EMIs).

17

Cent Vyapari
Objective
Implemented by
Nature of facility
Eligibility

To provide finance to small and medium traders.

Semi-urban and & urban branches.
Cash credit.
Small and medium traders including retailers and

Maximum limit
Margin

distributors.
Rs. 5 lacs per borrower.
Minimum 25% on stocks.

Rate of interest

Upto Rs. 2 lacs PLR

Security

Over Rs.2 lacs and upto Rs. 5 lacs PLR + 4%

1)
Hypothecation of stocks.

Processing fees

2)
E.M. of land and building.
Upto Rs. 25000
Nil
Above Rs.25000 to Rs.1 lac - Rs.250/Above Rs 1 lac Rs.2lacs

- Rs. 500/-

Above Rs.2 lacs Rs.5 lacs - Rs.2500/-

Personal Loan To Employees Of Corporate Clients

Eligibility
Purpose

Permanent employees of large corporate clients.

To meet any personal/domestic expenses of the

Quantum of loan

borrower.
Ten times of gross salary subject to a maximum of Rs.

Rate of interest
Mode of

1 lac.
PLR + 4%
36 months

in

equated

repayment

commencing

one

month

18

monthly
after

the

instalments
month

of

Processing

disbursement.
1% of the loan amount.

charges

Cent mortgage
Facility &

Term loan facility to meet any sort of personal or

purpose
Eligibility

business expenses.
Loan against mortgage of property situated in

Target group

metro/urban/semi-urban areas.
Individual singly or jointly, traders, businessmen,
professionals or self employed persons etc. having
known sources of net income of Rs. 10000/- per month

Quantum of loan

or more.
20 times net monthly income subject to minimum

Security

amount of Rs.1.00 lac and maximum of Rs. 10 lacs.

Residential house/flat, commercial or industrial
property situated in metro/urban/semi-urban centers
only in the name and possession of the borrower. The
property value should be equal to 200% of the loan

Insurance

amount.
The property will be insured against fire, riots and
wherever required against earthquake, flood, lightning
etc. by the borrower with usual bank clause for the full

Rate of interest
Processing

value of the property.

PLR + 4%
1% of the loan amount.

charges
Repayment

Advance Cheque signed by the borrower for repaying

19

monthly instalments along with letter of deposit will be

obtained.

Cent trade
Facility & purpose
Eligibility/Target

Overdraft limit for business requirements.

Traders/retailers/distributors/commission

group
Quantum of loan

agents/arhatiyas.
Equitable mortgage of property situated in
metro/urban/semi-urban with market value of
200% of overdraft limit and in the name and

Insurance

possession of the borrower.

The property will be insured with the usual bank

Rate of interest

clause for full value of the property.

Upto Rs. 2.00 lacs - PLR
Over Rs. 2.00 lacs - PLR + 2%

Processing charges

Upto Rs. 25000

- Nil

Above Rs. 25000 upto Rs. 100000

- Rs.

250/Above Rs. 100000 upto Rs. 200000

- Rs.

500/Above Rs. 200000 upto Rs. 1000000

- Rs.

2500/Above Rs.1000000 upto Rs.2000000

Required details

5000/Application form.

20

- Rs.

Financial statements.
Copy of sales tax registrations.
Copies of sales tax returns.
Credit report from previous bankers/market
report.
Details of property offered as security with its
present valuations.

Central kisan credit card

Objectives

Loan for farmers on the basis of their holdings for

purchasing agricultural inputs including cash

Eligibility

withdrawals for their production needs.

CKCC will be provided to any farmer to

cater to his short-term credit requirements.

Farmers having good track record for past 2

years with our bank as a borrower or depositor and

not being defaulter to any credit institution would
be considered.

CKCC will be issued to farmers in the form

of card-cum-passbook incorporating the name,

address, particulars of land holding, borrowing
limit, validity period which will serve both as an
identity card as well as facilitate recording of
Security margin
Rate of interest

transactions on an ongoing basis.

In conformity with the agriculture loan.
Same rate of interest as are applicable to crop loans

21

and activities allied to agriculture.

SERVICES
Central card
It is a unique credit card offering you innumerable facilities &
convenience. It offers you the freedom to spend at a large number of member
establishments.
Facilities offered by central card:

Our domestic card is accepted all over India and Nepal having more than

110000 merchant outlets.

All retail outlets, petrol pumps, Indian railways, airlines, nursing homes,

hotels, restaurants, departmental stores and grocery stores etc. now accept
central card.

Mail order/telephone order, Internet transactions can also be made through

central card with prior approval/authorization from our system.

Group Accident Insurance Scheme coverage upto Rs. 1 lakh.

Central Card Electronic

Central card electronic is a new entry level credit product for the
emerging, untapped market segments that previously did not have access to
traditional bank card payment products.

22

Features:

It is designed for use only at electronic terminals. Acceptance at non-

terminalised merchants is not allowed.

Account information is printed and not embossed on the card.

24-hour customer call centers are available on India.

There is zero lost card liability.

Card will be replaced in seven days.

You will get free accident insurance cover upto Rs. 100000/-

You will get free lost card insurance cover to the extent of credit limit.

You will be allowed cheque encashment facility, upto Rs. 2500/- at all the

branches of CBI.

There is no fear spending over the limit, as only transactions within the

available limits would be authorized.

Cash withdrawal limit:

- Domestic card

-Rs. 5000/- p.m.

- Global card

-Rs. 15000/- p.m.

Fees and charges:

There is no joining fee.

An annual fee of Rs. 400/- is charged every year in advance.

The card is issued/renewed every two years.

A nominal fee of Rs. 50/- is charged for a photo card.

Debit Card
Features:

Direct online debit to your savings or current account.

23

Completely safe and secure PIN based card.

Globally accepted at merchant establishments displaying the maestro/cirrus

logos.

24-hour customer call centers available in India.

Zero lost card liability.

Replacement card.

Itemized billing on your statement/passbook.

Fees & charges:

There is no transaction charge at the ATMs of CBI.

Transaction charges are levied only at non-central bank maestro.

* Rs. 30 for cash withdrawal
* Rs. 6 for balance enquiry

Cash Management Services

Who can avail cash management services?

Corporate

Public, private and joint sector Cos.

Existing partnership firms

Existing proprietorship firms

Individuals & institutions

Benefits to customers:

Better cash management

Regular computerized MIS/reports

Instant liquidity

Faster and higher turnover

24

Higher income and profitability

Travelers Cheques

Central banks travelers cheque are available in denominations of Rs. 100/-,

Rs. 500/-, Rs. 1000/-, Rs. 2500/- and Rs. 5000/-.

Charges Rs. 1/- per Rs. 100/-.

They are encashable at par at all the branches of central bank and other

leading nationalized banks.

They are valid till encashed.

Gift Cheques

Central bank gift cheques are ideal gifts for all occasions.

They are available in denominations of Rs. 11/-, Rs.25/- Rs.51/- and Rs.

101/-.

Issued free of charge and payable at par, at all the branches of central bank.

25

This chapter contains the information about the objectives of the study and
the information upon which the study for the purpose of project is conducted
and the limitations faced therein.

OBJECTIVES OF THE STUDY

The objectives of the study are based on the concept of Income &
Investment Sources. The researcher has tried to represents the concept of
different sources of Incomes & Investments analysis in this project. The
various objectives are discussed as under:

To understand the issue of Income & Investment Sources as practiced by the

bank.

To know about the different sources Incomes & Investment of the bank.

To discuss about the role of Central Bank of India in banking field.

To know about the benefits of investments to the bank.

SOURCES OF DATA COLLECTION

To collect the data for the purpose of the project, study the following sources
are used:
PRIMARY SOURCE:
The primary data has been based on the response received
from bank manager, bank staff related to the Income & Investment Sources.
SECONDARY DATA:

26

The secondary data has been collected from the various books, journals,
articles, papers and the annual report of the bank and through web sites.

MAIN EMPHASIS OF STUDY:

In this project report the study revealed about Income & Investment Sources of
Central Bank of India consisting of income sources, investment sources.

CHAPTER SCHEME
CHAPTER 1 Introduction Of Central Bank Of India
CHAPTER 2 Products Of Central Bank Of India
CHAPTER 3 Database & Methodology
CHAPTER 4 Innovations In Banking Products
CHAPTER 5 Innovations In Banking Branches
CHAPTER 6 Summary, Findings & Suggestions

PRESENTATION OF PROJECT
For the purpose of presentation of the study the following ways have been
adopted. The presentations are through:
Bar graphs
Tables
Diagrams

LIMITATIONS OF THE STUDY

During the study work a number of limitations have been arisen which
are acknowledged here under. The limitations are:

27

 First of all main problem is that no any bank was ready to give training.
Due to shorter span of time and resources less information has been
considered to analysis the concept of Income & Investment Sources. So the
study cannot be generalized.
The respondents whose opinions are analyzed are not willing to disclose the
quantum of information they have.
The information that is collected in project report is not adequate.

28

This chapter contains the different innovations in banking products such as EBanking, Mobile Banking, Debit Cards, Credit Cards, ATM, Internet
Banking.

Introduction:
With the trend of globalization all over the world, it
is difficult for any nation whether big or small, developed, to remain isolated
from what is happening around. The growth of e-commerce and Internet has
transformed the world into the GLOBAL VILLAGE. Fast development in
electronic technology has concerned the computers to take over the bank
counters and to convert brick banking into electronic banking.
Usage of technology by banks is due to challenge of competition,
rising consumer expectations and shrinking margins of banks, which lead to
reduction in cost, and enhancement of productivity, efficiency and customer
convenience.

Meaning:
E-banking means, application of electronic technology
towards transfer of funds through an electronic terminal, computer or

29

magnetic tape to conduct various transactions like cash receipts, payments,

transfer of funds etc.
It is often known as banking on net. It does not involve any physical
exchange of money, but its all done electronically, from one account to
another, using the Internet. With the advent of e banking, customers are
benefited by unlimited accessibility through the network of Automated Teller
Machines, personal computers or even through mobile phones. Customer can
perform various banking transactions such as balance enquires, bill payments,
and transaction histories, transfer money between accounts, without having to
step to office of the branch.

Features of e banking:

Anywhere any time banking: customers can avail banking

facility while sitting at their home/office.

Globalization of service: E-Banking has a special feature of

globalising banks services all over.

Intense competition: E-Commerce is a product of handling intense

competition among various banks.

Cash less banking: E-Commerce also provides feature of cash less

banking as cash is not require in raw form but electronic
cash like debit or credit cards may serve the purpose.

Promptness: Another feature of E-Commerce is provides

promptness in services.

Process of E-Banking/ procedure of E-Banking

30

E-Banking process can be explained with the help of following diagram and
explanation as under:
Log on to
website

Verification
Of
password

Final
Approval

Credit
Card
request

Processing
Of
information

To make the use of E-Banking user has to go to the World Wide Web and
log on to the website.

Next step follows verification of user ID and password by the website

server.

As soon as password is approved on the server, then processing of

information will start on the web.

In this step, credit card number will be demanded for online transaction.

31

If all security measures are completed then the transaction is approved

accordingly.

Advantages of E-Banking:
Importance of E-Banking can be explained from four aspects:
Advantages

To banks

To
cust
I. Benefits to banks omer

To
Govt.

To merchant
Trader

Reduction in cost: E-Banking is helpful to banks by reducing the cost of

various transactions as compared to traditional cost by way of ATMs
Telephone banking.
Global coverage: E-Banking provides global network coverage of banks
services i.e. through the concept of Anywhere Anytime Banking.
Good customer relationship: E-Banking helps in attracting and retaining
the customer by properly handling their grievances.
Reduction in paper work: E-Banking helps in eliminating endless paper
based bank statements, spreadsheets, bulky books of accounts, ledger
including the use of calculator.
Reduction in frauds and misappropriations: Through E-Banking frauds
and misappropriations can be reduced as inter branch reconciliation is
possible through internet.

II. Benefits to customers

32

Anytime banking: E-banking provides 24 hours, 365 days services to

customers.

Anywhere banking: customers can avail any sort of banking services

from anywhere around the globe from sitting at anyplace.

Prompt services: Customer can avail the services of details regarding

their accounts and transactional details instantly.

On line purchase: Customer can buy product of bank or invest in any

scheme without actually insisting the bank branch but only through online.

Saving in time: With the help of E-banking there is no need for bank

customers to stand in queue for hours to complete financial transactions.

III. Benefits to government

Transparency in transactions: E-Banking provides transparency in
transactions i.e. access to information is possible easily.
Global market: With the help of E-Banking products of our country will
get global market to be popularized properly.
Risk of carrying cash: E-Banking provides the facility of cash less
banking which helps in growth of economy.

IV. Benefits to merchant traders

Promotion of business: with the help of E-Banking business of merchants
traders will be promoted because of increased purchasing power of credit
holder.

Immediate settlement: E-Banking helps settlement, and payment of

cash is possible by the customer.

33

Avoids risks: it helps merchants bankers also as there is no risk of

handling cash.

Limitations of E Banking:

Problems of security: Security and privacy aspects are major issue in

case of E-Banking transaction. Various sites are not properly locked at to

ensure weather customers money is safe in cyber world or not.
High cost: The infrastructural cost of providing E-Banking facility is very
high. The banks not only have to automate front-end services but also back
office services, which involves high cost.
Lack of awareness: Another great hindrance is lack of awareness because
effective and wide media efforts in publishing Internet banking need to be
emphasized.
Lack of computerization: Lack of computerization and low density of
telephone lines is also a bottleneck for online banking. In India, out of 65000
bank branches, only 5000 branches are computerized.
Wrong assumption by people: Many people are away from net banking
on the assumption that it is more expensive than the traditional method of
dealing with bank transactions. They still prefer going to bank to perform
transactions.

Types of E-Banking services

E-banking
Services
ATM

Card

E-cheque

Mobile
Banking
34

Telephone
Banking

EFT

1.Automatic Teller Machine (ATM): ATM facility was started in early

1990s by foreign banks like HSBC, City bank. ATM is made to work 24
Hrs a day. For the purpose of withdrawing cash from ATM machine, plastic
currency and debit cards are used.
2.Credit Cards: Credit card is another facility produced by E-Banking.
Credit card is a product with the help of which a customer can avail various
facilities or buy products/services without making immediate payment and
that payment could be made at later stage of time.
3. Mobile Banking: Mobile banking provides customer to access their
account on mobile phone screen. Routine banking transactions can be
performed by just punching a few buttons on the mobile.
4. Telephone Banking: Tele banking is another main service provide by ebanking Tele banking is a service where banks get various phone calls during
their working hours. It helps the user to transact various transactions while
remaining at home.
5.Electronic Fund Transfer (EFT): E-Banking has given a system of
electronically transferring funds .i.e. EFT which involves transfer of funds
from bank account of one customer to bank account of another customer
electronically. This is done through electronic data interchange (EDI).
6. Electronic Cheques: E-cheque is a system, which provides more security
and reduction in overall cost. E-cheque facilitates on line payment. It needs
no clearance charges. Issue of E-cheque is more familiar in various advanced
countries.

35

Introduction:

36

There are rapid changes in the financial services environment, which

has led to increased competition by few players and product innovations.
Recent innovations in tele communications have opened up an additional
channel for electronic banking.

Meaning:
Banks have noticed and availed the opportunity that exists between
banking and mobile telephony. SMS (short messaging services)
and GSM(global system mobile)of mobile can be used for banking
transactions. The mobile banking enables the customers to bank anywhere
and at any time.

These wireless devices may give services as hand held PCs. Mobile
devices are enabled now days to perform many activities which earlier have
been available only as internet services.

Issues relating to M-Banking

Cost saving: SMS offers revenue opportunities for operators by changing
SMS into higher value added applications. The service offerings in SMS
banking are numerous and highly cost saving.

37

 Simple to operate: The success of M- Banking is due to its user-friendly

interface and range of services it offers.
Market research: Proper understanding of specific market is key in the
success of mobile banking. Research on available payment methods, user
habits and key players is required to be done. Players will have to be creative
to make users perceive it as beneficial.

Services:
Global system mobile (GSM) is not just about voice communications but also
supports wireless personal digital assistant and other devices, just as it
supports telephony. SMS tariffs should be lowered in order to capture the
markets and to exploits the potential for commercial transactions over mobile
device.
Many services and schemes are being piloted and some are already available.
Few are mentioned here under:
Balance enquiry can be made.
Requesting for providing bank statement.
Requesting countermanding cheque payments (stop cheque)
Chequebook request can be made.
Cheque clearance alerts are given to customers.
Sending account balances every time one makes a withdrawal, which helps
in finding out if some one else is using your ATM card.

Limitations /problems in M-Banking:

Possibility of error is higher than in internet banking.
The data transmission is very slow.

38

M-banking services are risky and not secure trials and pilots are still on

World Wide Web to developed enhanced security.

M-banking services are not enough versatile.
The information knowledge available related to M-Banking is not
sufficient. Some non-users of mobile banking perceive it to be complicated
due to lack of guidance available.
M Banking is not just a service reserved for international banks but for any
financial institution wishing to take it. There is a great opportunity to exploit
the combination of fast growing consumer device the mobile phone with the
richness of internet protocols that will surpass a similar revolution imitated by
pc related banking M-Banking has a lot to offer banks and to its customers,
but its success depend upon of variety of services, security and user friendly
interface its make it easy, cheaper it simple to use.

39

Introduction:
ATM facility was started in early 1990s by foreign banks like
HSBC, City bank. ATM is made to work 24 Hrs a day. For the purpose of
withdrawing cash from ATM machine, plastic currency and debit cards are
used. The account number and credit limit of customers are magnetically
embedded on a strip of the tape on the back of card.
ATM enables user to perform banking transactions by actually interacting
with the human teller. This is one of the unattended or unmanned devices
usually located on or off the banks premises. Its function is to receive and
dispense cash and to handle routine financial transactions.
The operation mechanism is that card is inserted into the ATM; the terminal
reads the tape data to processes, which activates the accounts. According to
the instructions, the details are displayed on the screen and by checking a few
keys of the keyboard the user can direct the computer to carry out the
financial transactions.
An automated teller machine (ATM) is a computerized telecommunications
device that provides the customers of a financial institution with access to
financial transactions in a public space without the need for a human clerk or
bank teller. On most modern ATMs, the customer is identified by inserting a
plastic ATM card with a magnetic stripe or a plastic smartcard with a chip, that
contains a unique card number and some security information, such as an
expiration date or CVC (CVV). Security is provided by the customer entering a
personal identification number (PIN).

40

Using an ATM, customers can access their bank accounts in order to make cash
withdrawals (or credit card cash advances) and check their account balances as

41

well as purchasing mobile cell phone prepaid credit. ATMs are known by
various other names including automated banking machine, money machine,
bank machine, cash machine, hole-in-the-wall, cashpoint, Bancomat (in
various countries in Europe and Russia), Multibanco (after a registered trade
mark, in Portugal), and Any Time Money (in India).

Working of ATM
Insertion of
Card into ATM

Actual
Transaction
Operation by user

Transmission of Tape
data to Processor

Clicking of keys
of keyboard

Activation
of account

Display of details
on screen

ATM will give various options on the screen like:

Balance enquiry
Mini statement
Deposits
Cash withdrawals etc.
Banks have launched the operation of accepting payments for utility
services like electricity and telephone bills etc. Banking on the net is only an
extension of the ATM and tele banking services.

42

Various facilities produced by ATMs:

Cash withdrawals
Personal identification number (PIN) change
On line balance enquiry
Transfer of funds between accounts linked to ones card
Request for cheque book
Request for account statement

HISTORY:
The first mechanical cash dispenser was developed and built by
Luther George Simjian and installed in 1939 in New York City by the City
Bank of New York, but removed after 6 months due to the lack of customer
acceptance.
Thereafter, the history of ATMs paused for over 25 years, until De La Rue
developed the first electronic ATM, which was installed first in Enfield Town
in North London, United Kingdom on 27 June 1967 by Barclays Bank. This
instance of the invention is credited to John Shepherd-Barron, although various
other engineers were awarded patents for related technologies at the time.
Shepherd-Barron was awarded an OBE in the 2005 New Year's Honours List.
The first person to use the machine was the British variety artist and actor Reg
Varney.The first ATMs accepted only a single-use token or voucher, which was
retained by the machine. These worked on various principles including
radiation and low-coercivity magnetism that was wiped by the card reader to

43

make fraud more difficult. The machine dispensed pre-packaged envelopes

containing ten pounds sterling. The idea of a PIN stored on the card was
developed by the British engineer James Goodfellow in 1965
In 1968 the networked ATM was pioneered in Dallas, Texas, by Donald Wetzel
who was a department head at an automated baggage-handling company called
Docutel. In 1995 the Smithsonian's National Museum of American History
recognised Docutel and Wetzel as the inventors of the networked ATM.
ATMs first came into wide UK use in 1973; the IBM 2984 was designed at the
request of Lloyds Bank. The 2984 CIT (Cash Issuing Terminal) was the first
true Cashpoint, similar in function to today's machines; Cashpoint is still a
registered trademark of Lloyds TSB in the U.K. All were online and issued a
variable amount which was immediately deducted from the account. A small
number of 2984s were supplied to a USA bank. Notable historical models of
ATMs include the IBM 3624 and 473x series, Diebold 10xx and TABS 9000
series, and NCR 5xxx series.

44

Introduction:
Debit cards combine the functions of ATM cards and checks. When
you pay with a debit card, the money is automatically deducted from your
checking account. Many banks issue a combined ATM/debit card that looks
just like a credit card and can be used in places where credit cards are accepted.
But don't be mistaken -- they are not credit cards. The money you spend comes
out of your checking account immediately.
Debit and check cards, as they have become widespread, have
revealed numerous advantages and disadvantages to the consumer and retailer
alike. Advantages are as follows (most of them applying only to a some
countries, but the countries to which they apply are unspecified):

A consumer who is not credit worthy and may find it difficult or impossible

to obtain a credit card can more easily obtain a debit card, allowing him/her to
make plastic transactions.

Use of a debit card is limited to the existing funds in the account to which it

is linked, thereby preventing the consumer from racking up debt as a result of

its use, or being charged interest, late fees, or fees exclusive to credit cards.

For most transactions, a check card can be used to avoid check writing

altogether. Check cards debit funds from the user's account on the spot, thereby
finalizing the transaction at the time of purchase, and bypassing the

45

requirement to pay a credit card bill at a later date, or to write an insecure

check containing the account holder's personal information.

Like credit cards, debit cards are accepted by merchants with less

identification and scrutiny than personal checks, thereby making transactions

quicker and less intrusive. Unlike personal checks, merchants generally do not
believe that a payment via a debit card may be later dishonored.

Unlike a credit card, which charges higher fees and interest rates when a

cash advance is obtained, a debit card may be used to obtain cash from an ATM
or a PIN-based transaction at no extra charge, other than a foreign ATM fee.
The Debit card has many disadvantages as opposed to cash or credit:

Some banks are now charging over-limit fees or non-sufficient funds fees

based upon pre-authorizations, and even attempted but refused transactions by

the merchant (some of which may not even be known by the client).

Many merchants mistakenly believe that amounts owed can be "taken" from

a customer's account after a debit card (or number) has been presented, without
agreement as to date, payee name, amount and currency, thus causing penalty
fees for overdrafts, over-the-limit, amounts not available causing further
rejections or overdrafts, and rejected transactions by some banks.

In some unspecified countries, debit cards offer lower levels of security

protection than credit cards. Theft of the users PIN using skimming devices can
be accomplished much easier with a PIN input than with a signature-based
credit transaction. However, theft of users' PIN codes using skimming devices
van be equally easily accomplished with a debit transaction PIN input, as with

46

a credit transation PIN input, and theft using a signature-based credit transation
is equally easy as theft using a signature-based debit transaction.

In many places, laws protect the consumer from fraud a lot less than with a

credit card. While the holder of a credit card is legally responsible for only a
minimal amount of a fraudulent transaction made with a credit card, which is
often waived by the bank, the consumer may be held liable for hundreds of
dollars in fraudulent debit transactions. The consumer also has a much shorter
time (usually just two days) to report such fraud to the bank in order to be
eligible for such a waiver with a debit card, whereas with a credit card, this
time may be up to 60 days. A thief who obtains or clones a debit card along
with its PIN may be able to clean out the consumer's bank account, and the
consumer will have no recourse.

When a transaction is made using a credit card, the bank's money is being

spent, and therefore, the bank has a vested interest in claiming its money where
there is fraud or a dispute. The bank may fight to void the charges of a
consumer who is dissatisfied with a purchase, or who has otherwise been
treated unfairly by the merchant. But when a debit purchase is made, the
consumer has spent his/her own money, and the bank has little if any
motivation to collect the funds.

In some unspecified coutriesand for certain types of purchases, such as

gasoline, lodging, or car rental, the bank may place a hold on funds much
greater than the actual purchase for a fixed period of time. However, this isn't
the case in other countries, such as Sweden. Until the hold is released, any
other transactions presented to the account, including checks, may be

47

dishonored, or may be paid at the expense of an overdraft fee if the account

lacks any additional funds to pay those items.

While debit cards bearing the logo of a major credit card are accepted for

virtually all transactions where an equivalent credit card is taken, a major

exception (in some unspecified countries only, is at car rental facilities. In some
unspecified countries, car rental agencies require an actual credit card to be
used, or at the very least, will verify the creditworthiness of the renter using a
debit cardThere are currently two ways that debit card transactions are
processed: online debit (also known as PIN debit) and offline debit (also
known as signature debit). In some countries including the United States and
Australia, they are often referred to at point of sale as "debit" and "credit"
respectively, even though in either case the user's bank account is debited and
no credit is involved.
Some cards are blocked from making either online or offline transactions,
while other cards are enabled for both kinds of transactions.
Online debit ("PIN debit" or "debit")
Online debit cards require electronic authorization of every transaction and the
debits are reflected in the users account immediately. The transaction may be
additionally secured

with the

personal

identification number

(PIN)

authentication system and some online cards require such authentication for
every transaction, essentially becoming enhanced automatic teller machine
(ATM) cards. One difficulty in using online debit cards is the necessity of an
electronic authorization device at the point of sale (POS) and sometimes also a

48

separate PINpad to enter the PIN, although this is becoming commonplace for
all card transactions in many countries. Overall, the online debit card is
generally viewed as superior to the offline debit card because of its more
secure authentication system and live status, which alleviates problems with
processing lag on transactions that may have been forgotten or not authorized
by the owner of the card. Banks in some countries, such as Canada and Brazil,
only issue online debit cards.

49

Introduction:
A credit card is a system of payment named after the small plastic
card issued to users of the system. A credit card is different from a debit card
in that it does not remove money from the user's account after every
transaction. In the case of credit cards, the issuer lends money to the
consumer (or the user). It is also different from a charge card (though this
name is sometimes used by the public to describe credit cards), which
requires the balance to be paid in full each month. In contrast, a credit card
allows the consumer to 'revolve' their balance, at the cost of having interest
charged. Most credit cards are the same shape and size, as specified by the
ISO 7810 standard.
The issuer of the card grants a line of credit to the consumer (or the user)
from which the user can borrow money for payment to a merchant or as a cash
advance to the user. A credit card is different from a charge card, where a
charge card requires the balance to be paid in full each month. In contrast,
credit cards allow the consumers to 'revolve' their balance, at the cost of having
interest charged. Most credit cards are issued by local banks or credit unions.
Credit cards are issued after an account has been approved by the credit
provider, after which cardholders can use it to make purchases at merchants
accepting that card.
When a purchase is made, the credit card user agrees to pay the card issuer.
The cardholder indicates his/her consent to pay, by signing a receipt with a
record of the card details and indicating the amount to be paid or by entering a

50

Personal identification number (PIN). Also, many merchants now accept verbal
authorizations via telephone and electronic authorization using the Internet,
known as a 'Card/Cardholder Not Present' (CNP) transaction.

Electronic verification systems allow merchants to verify that the card is

valid and the credit card customer has sufficient credit to cover the purchase in
a few seconds, allowing the verification to happen at time of purchase. The
verification is performed using a credit card payment terminal or Point of Sale
(POS) system with a communications link to the merchant's acquiring bank.
Data from the card is obtained from a magnetic stripe or chip on the card; the

51

latter system is in the United Kingdom and Ireland commonly known as Chip
and PIN, but is more technically an EMV card.
Other variations of verification systems are used by eCommerce merchants to
determine if the user's account is valid and able to accept the charge. These will
typically involve the cardholder providing additional information, such as the
security code printed on the back of the card, or the address of the cardholder.
Each month, the credit card user is sent a statement indicating the purchases
undertaken with the card, any outstanding fees, and the total amount owed.
After receiving the statement, the cardholder may dispute any charges that he
or she thinks are incorrect (see Fair Credit Billing Act for details of the US
regulations). Otherwise, the cardholder must pay a defined minimum
proportion of the bill by a due date, or may choose to pay a higher amount up
to the entire amount owed. The credit provider charges interest on the amount
owed if the balance is not paid in full (typically at a much higher rate than most
other forms of debt). Some financial institutions can arrange for automatic
payments to be deducted from the user's bank accounts, thus avoiding late
payment altogether as long as the cardholder has sufficient funds.

Interest charges
Credit card issuers usually waive interest charges if the balance is paid in full
each month, but typically will charge full interest on the entire outstanding
balance from the date of each purchase if the total balance is not paid.

52

For example, if a user had a $1,000 transaction and repaid it in full within this
grace period, there would be no interest charged. If, however, even $1.00 of the
total amount remained unpaid, interest would be charged on the $1,000 from
the date of purchase until the payment is received.
The credit card may simply serve as a form of revolving credit, or it may
become a complicated financial instrument with multiple balance segments
each at a different interest rate, possibly with a single umbrella credit limit, or
with separate credit limits applicable to the various balance segments. Usually
this compartmentalization is the result of special incentive offers from the
issuing bank, to encourage balance transfers from cards of other issuers. In the
event that several interest rates apply to various balance segments, payment
allocation is generally at the discretion of the issuing bank, and payments will
therefore usually be allocated towards the lowest rate balances until paid in full
before any money is paid towards higher rate balances. Interest rates can vary
considerably from card to card, and the interest rate on a particular card may
jump dramatically if the card user is late with a payment on that card or any
other credit instrument, or even if the issuing bank decides to raise its revenue.

Advantages: The main advantages are as follows:

Advantages

53

To customers

Grace period

To merchants

Benefits to customers:
Because of intense competition in the credit card industry, credit card
providers often offer incentives such as frequent flyer points, gift certificates,
or cash back (typically up to 1 percent based on total purchases) to try to attract
customers to their programs.
Low interest credit cards or even 0% interest credit cards are available. The
only downside to consumers is that the period of low interest credit cards is
limited to a fixed term, usually between 6 and 12 months after which a higher
rate is charged. However, services are available which alert credit card holders
when their low interest period is due to expire. Most such services charge a
monthly or annual fee.

Grace period
A credit card's grace period is the time the customer has to pay the balance
before interest is charged to the balance. Grace periods vary, but usually range
from 20 to 40 days depending on the type of credit card and the issuing bank.
Some policies allow for reinstatement after certain conditions are met.

54

Usually, if a customer is late paying the balance, finance charges will be

calculated and the grace period does not apply. Finance charges incurred
depend on the grace period and balance; with most credit cards there is no
grace period if there is any outstanding balance from the previous billing cycle
or statement (i.e. interest is applied on both the previous balance and new
transactions). However, there are some credit cards that will only apply finance
charge on the previous or old balance, excluding new transactions.

Benefits to merchants

An example of street markets accepting credit cards

For merchants, a credit card transaction is often more secure than other forms
of payment, such as checks, because the issuing bank commits to pay the
merchant the moment the transaction is authorized, regardless of whether the
consumer defaults on the credit card payment (except for legitimate disputes,
which are discussed below, and can result in charges back to the merchant). In
most cases, cards are even more secure than cash, because they discourage
theft by the merchant's employees and reduce the amount of cash on the
premises. Prior to credit cards, each merchant had to evaluate each customer's
credit history before extending credit. That task is now performed by the banks
which assume the credit risk.

55

For each purchase, the bank charges the merchant a commission (discount fee)
for this service and there may be a certain delay before the agreed payment is
received by the merchant. The commission is often a percentage of the
transaction amount, plus a fixed fee.

Parties involved

Cardholder: The holder of the card used to make a purchase; the

consumer.

Card-issuing bank: The financial institution or other organization that

issued the credit card to the cardholder. This bank bills the consumer for
repayment and bears the risk that the card is used fraudulently. American
Express and Discover were previously the only card-issuing banks for their
respective brands, but as of 2007, this is no longer the case.

Merchant: The individual or business accepting credit card payments for

products or services sold to the cardholder

Acquiring bank: The financial institution accepting payment for the

products or services on behalf of the merchant.

Independent sales organization: Resellers (to merchants) of the services

of the acquiring bank.

Merchant account: This could refer to the acquiring bank or the

independent sales organization, but in general is the organization that the

merchant deals with.

Credit Card association: An association of card-issuing banks such as

Visa, MasterCard, Discover, American Express, etc. that set transaction terms
for merchants, card-issuing banks, and acquiring banks.

56

Transaction network: The system that implements the mechanics of the

electronic transactions. May be operated by an independent company, and one

company may operate multiple networks. Transaction processing networks
include: Cardnet, Nabanco, Omaha, Paymentech, NDC Atlanta, Nova, TSYS,
Concord EFSnet, and VisaNet.

Affinity partner: Some institutions lend their names to an issuer to attract

customers that have a strong relationship with that institution, and get paid a
fee or a percentage of the balance for each card issued using their name.
Examples of typical affinity partners are sports teams, universities, charities,
professional organizations, and major retailers.
The flow of information and money between these parties always through
the card associations is known as the interchange.
Features:
As well as convenient, accessible credit, credit cards offer consumers an
easy way to track expenses, which is necessary for both monitoring personal
expenditures and the tracking of work-related expenses for taxation and
reimbursement purposes. Credit cards are accepted worldwide, and are
available with a large variety of credit limits, repayment arrangement, and
other perks (such as rewards schemes in which points earned by purchasing
goods with the card can be redeemed for further goods and services or credit
card cashback).

57

Some countries, such as the United States, the United Kingdom, and France,
limit the amount for which a consumer can be held liable due to fraudulent
transactions as a result of a consumer's credit card being lost or stolen.

Problems
A smart card, combining credit card and debit card properties. The 3 by 5 mm
security chip embedded in the card is shown enlarged in the inset. The contact
pads on the card enable electronic access to the chip.
The low security of the credit card system presents countless opportunities for
fraud. This opportunity has created a huge black market in stolen credit card
numbers, which are generally used quickly before the cards are reported stolen.
The goal of the credit card companies is not to eliminate fraud, but to "reduce it
to manageable levels". This implies that high-cost low-return fraud prevention
measures will not be used if their cost exceeds the potential gains from fraud
reduction.
Most internet fraud is done through the use of stolen credit card information
which is obtained in many ways, the simplest being copying information from
retailers, either online or offline. Despite efforts to improve security for remote
purchases using credit cards, systems with security holes are usually the result
of poor implementations of card acquisition by merchants.
For example, a website that uses SSL to encrypt card numbers
from a client may simply email the number from the webserver to someone
who manually processes the card details at a card terminal. Naturally,

58

anywhere card details become human-readable before being processed at the

acquiring bank, a security risk is created.

Introduction:

59

Online banking (or Internet banking) allows customers to conduct

financial transactions on a secure website operated by their retail or virtual
bank, credit union or building society.

Features:
Online banking solutions have many features and capabilities in common, but
traditionally also have some that are application specific.
The common features fall broadly into several categories

Transactional (e.g., performing a financial transaction such as an account to

account transfer, paying a bill, wire transfer... and applications... apply for a
loan, new account, etc.)
o

Electronic bill presentment and payment - EBPP

Funds transfer between a customer's own checking and savings accounts, or

to another customer's account

o

Investment purchase or sale

Loan applications and transactions, such as repayments

Non-transactional (e.g., online statements, check links, cobrowsing, chat)

Bank statements

Financial Institution Administration - features allowing the financial

institution to manage the online experience of their end users

ASP/Hosting Administration - features allowing the hosting company to

administer the solution across financial institutions

Security

60

Security token devices

Protection through single password authentication, as is the case in most secure
Internet shopping sites, is not considered secure enough for personal online
banking applications in some countries. Basically there exist two different
security methods for online banking.

The PIN/TAN system where the PIN represents a password, used for the

login and TANs representing one-time passwords to authenticate transactions.

TANs can be distributed in different ways, the most popular one is to send a list
of TANs to the online banking user by postal letter. The most secure way of
using TANs is to generate them by need using a security token. These token
generated TANs depend on the time and a unique secret, stored in the security
token (this is called two-factor authentication or 2FA). Usually online banking
with PIN/TAN is done via a web browser using SSL secured connections, so
that there is no additional encryption needed.

Signature based online banking where all transactions are signed and

encrypted digitally. The Keys for the signature generation and encryption can

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be stored on smartcards or any memory medium, depending on the concrete

implementation.

Attacks
Most of the attacks on online banking used today are based on deceiving the
user to steal login data and valid TANs. Two well known examples for those
attacks are phishing and pharming. Cross-site scripting and keylogger/Trojan
horses can also be used to steal login information.
A recent FDIC Technology Incident Report, compiled from suspicious activity
reports banks file quarterly, lists 536 cases of computer intrusion, with an
average loss per incident of $30,000. That adds up to a nearly $16-million loss
in the second quarter of 2007. Computer intrusions increased by 150 percent
between the first quarter of 2007 and the second. In 80 percent of the cases, the
source of the intrusion is unknown but it occurred during online banking, the
report states.[4]

Countermeasures
There exist several countermeasures which try to avoid attacks. Digital
certificates are used against phishing and pharming, the use of class-3 card
readers is a measure to avoid manipulation of transactions by the software in
signature based online banking variants. To protect their systems against Trojan
horses, users should use virus scanners and be careful with downloaded
software or e-mail attachments.

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63

This

chapter

includes

innovations

in

banking

branches

such

as

Universal banking, offshore banking, retail banking, and wholesale

banking.

Introduction: Universal banking is bank engaged in diverse kind of

banking activities. Under the universal banking system the banks do broad
based and comprehensive activities. R.H.Khan committee had recommended
the concept of universal banking. As per universal banking financial
institutions and banks are allowed to undertake all kinds of activities of
banking, development financing and related activities subject to compliance
of statutory and other requirements prescribed by RBI, Govt. and related legal
acts.

Meaning: Universal banking is a multipurpose and multi functional

financial superstore providing both banking and financial services. A
universal bank may undertake multifarious services under one roof, which
includes:
a)

Receiving money on current or deposit accounts and lending of money

for trade, industries, exports, agriculture etc.

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b)

Mortgage financing; project financing infrastructure lending, asset

securitisation, leasing, factory etc.

c)

Remittance of funds, custodial services, credit/debit cards, collection of

cheque/bills etc.
d)

Corporate advisory services, insurance depository service, merchant

banking (brokerage, underwriting new debt and equity shares) foreign

exchange operations.
Therefore in universal banking under one roof, corporate can get loans and
avail, other financial services, while individuals can bank and borrow.
The few objectives of universal banking are as follows:
To help in bringing harmony in the role of financial institutions and banks.
To offer world-class financial services to the clients by using information
technology and cross selling.
To reduce per customer cost.
To increase per customer revenue.
To take benefit of economies of scale.
To compete with international banks by expanding business beyond the
national boundaries.

RBI Guidelines:

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According to RBI guidelines of April 2001, financial institutions have an

option to convert into a bank provided they ensure compliance with following
provisions.
Reserve provisions (CRR/SLR): A financial institution will have to comply
with CRR and SLR provisions after its conversion into a universal banking.
Permissible activities: In case an activity, which is not permissible for a bank
under section 6(1) of B.R.Act 1949, is presently undertaken by financial
institution, such activity will have to be stopped after its conversion into a
universal banking.
Composition of board: The section 10(A) of B.R. Act 1949 requires that at
least 51% of that total number of directors should have special knowledge and
experience. This provision has to be complied with constituting the board
after transformation from financial institution to a bank.

Benefits of universal banking

The benefits of universal banking are as follows:
Benefits
To Organization

To Customers

To Shareholders

1. To the organization: When a bank diversifies its activities as a universal

bank it can use its existing expertise in one type of financial service in
providing the other types. So, it entails less cost in performing all the
functions by one entity instead of separate specialized bodies. A bank
possesses information on the risk characteristics of its clients, which it can use
to pursue other activities with the same clients.

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A bank has an existing network of branches, which can acts as shops for
selling products like insurance. This way a big bank can reach the remotest
client without having to recourse to an agent. Many financial services are
interlinked activities, e.g. insurance and lending. A bank can use its
instruments in one activity to exploit the other, e.g. in case of project lending
to the same firm which has purchased insurance from the bank.
2. To the customers: Universal banking being a one-stop shops for all varied
services, some a lot of transaction costs and increases the speed of economic
activity. The wide range of financial products and services offered by
universal banks are preferred by the customers than the specialized banks due
to comprehensive service provided by these banks.
3. To the shareholders: One manifestation of universal banking is a bank
holding stakes in a firm. When a lender has a stake in the firm he is in a better
position to monitor the firm to safeguard his interest, which sends a good
signal about the financial health the firm to the investors. This situation is
beneficial from investors point of view.
All these benefits have to be weighed out against the problems. The main

drawbacks are that:

a. Universal banking leads to a loss in economies of specialization.
b. Problem of the bank indulging in too many risky activities. To account for
this, appropriate regulation can be devised, which will ultimately benefit all
the participants in the market, including the banks themselves.
In spite of these problems, there is a lot of interest expressed by banks and
financial institutions in universal banking. In India, too a lot of opportunities
are there to be exploited. Banks mainly the financial institutions are aware of

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it, and most of the groups have plans to diversify in big way. Even though
there might not be profits forthcoming in the short run due to the switching
costs incurred in moving to a new business.

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Introduction: offshore banking refers to the banking business related to

borrowing and lending funds abroad and meeting the special needs of
international investors. An offshore bank is a bank located outside the resident
country of the depositor. These banks are not subject to domestic monetary and
fiscal regulations. Moreover offshore banks are also exempted from the
regulations, which govern the branches of foreign banks. Rather they are
situated in a low tax jurisdiction that provides, financial and legal advantages.
These advantages may include strong privacy, low or no taxation protection
against local political or financial instability.
Services/functions
The important functions or financial services, which offshore banking
units can provide, are:
Deposit taking
Project financing
Syndication of loans
Issuing short-term instruments like negotiable certificates to deposits.
Carry merchant banking activities in foreign currency denominated bonds.
Electronic funds transfer
Foreign exchange
Letter of credit and trade finance
Investment management and investment custody

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 Trustee services
Corporate administration
Although every bank does not provide each service. Banks try to polarize
between retail services (which are low cost) and private banking (which tries to
bring personalized suite of services to the client).

Benefits/advantages
The main advantages of offshore banking are:
Advantages

Tax
Benefits

Economic
And
Political
Stability

Payment of
Higher
Interest
Rates

Special
Banking
Services

Development
Of nation/
Remote areas

Economic and political stability: Offshore banking provides economically

politically stable jurisdictions especially for those resident in areas where there

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is a risk of political turmoil, and who fear their assets may be seized or
disappear. Although, developed economies with regulated banking system offer
same advantages in terms of stability.

Payment of higher interest rates: Some of these banks which function at a

lower cost base provide higher interest rates than the legal rates prevailing in
their home countries due to lack of government intervention and lower
overheads.

Tax benefits: Generally the interest paid by offshore banks is without tax

deduction. This acts as a benefit for individuals who do not pay tax on
worldwide income, or who do not pay tax until the tax return is agreed.

Special banking services: Certain offshore banks offer special banking

services not offered else where such as anonymous bank accounts, higher or
lower rate loans based on risk and investment opportunities.

Development of remote areas/nation: offshore banking helps even

geographically remote nations to generate investment and create growth in their

economies.
Disadvantages
There are some limitations of offshore banking are as follows:

Disadvantages

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Involved in
Crime

Encourages
Tax evasion

Difficult
Physical access

Financial
Disturbance

Involved in crime: Off shore banking has been found associated with the

underground economy and organized crime through money lending. After

September 11,2001 these banks have been accused of helping various organized
crime gangs, terrorist groups.

Encourages tax evasion: Offshore banks encourages tax evasion by giving

people seeking tax evasion an attractive place to deposit their hidden income.

Difficult physical access: As offshore banks are often remotely situated

therefore the physical access is difficult. Access to information can be difficult,

however in a global tele communication networks this does not seen to be a big
problem as information can be set up on line, by phone or by mail.

Developing countries may face financial disturbance: sometimes

developing countries may face problem due to speed at which money can be
transferred in and out of their economy. This hot money coming from
offshore accounts can be definitely increase problems of financial and
economic disturbance in developing countries.

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Introduction: The coming up of middle class with substantial purchasing

power in India during the last decade has given rise to its desire to spend
according to the changing life style. This has offered the Indian banking system,
a ready market, for mobilization and development of their funds. Given the
rising purchasing power of this class, there is huge untapped potential for
business.
Meaning: Retail banking is activity devised in past few years and now used
extensively. It represents any banking, which is not wholesale based. It includes
any business that is conducted through branch network, which is mainly
focused towards personal sector. It encompasses all institutions that provide a
related range of banking servicesmoney deposit, credit services and some
form of financial advice. Retail banking today is characterized by three
areas:
Multiple products (deposits, credit cards, insurance, investment)
Multiple channels of distribution (call center, branch internet)
Multiple customer groups (consumer, small business)
Need for retail banking
Economic prosperity and the consequent increase in the purchasing power of
consumer.
Technological factors also added to the requirement convenience of using
credit cards, internet and phone banking anywhere and any time banking has
also flood customers into banking.

73

 Decline in interest rates have also contributed to increase retail banking.

With the large corporate borrowers having diversified the sources to fund
their financial requirements, frequent reduction in cash reserve ratio resulting in
pumping in of liquidity, declining bank rate leading to decline in spreads unattractive yields on government securities etc. have all forced banks to be in
search of alternative opportunity to deploy their funds.

Segments in retail banking:

There are three segments in retail banking which included:
a. Deposit products (convenient deposit schemes such as flexi deposits)
b. Loan products (such as housing loans, education loans, conveyance loans,
personal loans for diverse purposes such as medical expenses, travel abroad)
c. Other products
Besides there are a number of value added services such as free collection of
outstation instrument, concession in service fee in case of remittances, issue of
free ATM cards, waiver of fee on credit cards and utility services such as
payment of water, electricity and phone bills.
Developments in retail banking in India:
Commercial banks in India are involving more and more in retail banking as it
is now an attractive market segment having lot of opportunities for growth and
profit. Retail banking refers to housing loans for purchasing durables, auto
loans, credit cards and educational loans.
The loan values can average between Rs.20000 to Rs.1 crore. These loans are
of period of 5 to 7 years, with an exception of housing loan being granted up to
15 years. The speed of growth of retail banking can be accelerated by growth in
banking technology and automation of banking processes.

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Although the retail banking offers phenomenal opportunities for growth and
profits but how far it is able to lead to growth will depend on the capacity of
banks to meet these opportunities profitably. There is need for constant
innovation to revalidate and upgrade existing internal systems. Banks can now
use retail as growth trigger. This requires product differentiation, innovation,
product pricing technological up gradation, cost reduction and cross selling.

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Wholesale banking is the provision of services by banks to the like of large

corporate clients, mid-sized companies, real estate developers and investors,
international trade finance businesses, institutional customers (such as pension
funds and government entities/agencies), and services offered to other banks or
other financial institutions. In essence, wholesale banking services usually
involve high value transactions.
Wholesale banking contrasts with retail banking, which is the provision of
banking services to individuals.
(Wholesale finance means financial services, which are conducted between
financial services companies and institutions such as banks, insurers, fund
managers, and stockbrokers.)
Modern wholesale banks are engaged in: finance wholesaling, underwriting,
market making, consultancy, mergers and acquisitions, fund management.

76

This chapter represents a conclusive review of the efforts made since up till
about the different innovations by Central Bank of India in banking sector.
Various innovations of the bank provide benefits to the various
business and Industries in many different ways. The innovations of bank are of
two types: innovations in products & innovations in branches
Innovations in products includes, E-banking, ATM, debit cards, credit
cards & mobile banking whereas innovations in branches includes, universal
banking, offshore banking, retail banking, wholesale banking.
The project report summarizes about the facilities of CBI
accounts and deposits and also provides the different products. This information
is based on the primary and secondary data available from different sources.
FINDINGS
The Project work is done on basis of certain objectives, which are as
follows:

To understand the various innovations in banking sector by the bank.

To know about the different products of the bank.

To discuss about the role of Central Bank of India in banking field.

To know about the benefits of innovations of the bank.

In the light of these objectives the following are the findings that

represent the changing environment of Indian economy in global scenario in the

wake of liberalization and globalization.
The study reveals about the different types of innovations of the bank,
which helps the people in many ways.

77

 The role of board of directors is properly described. Processes are

established in such a manner that allows the board of director to compliance
with the policies of companies.
The study presents the different types of products available in the bank for
the help of its customers.
So, these are the findings, which the project reveals by making an analysis
of the topic. Moreover to making efficient central bank of India, certain
suggestions have to be followed by these banks. These are as follows:

Central bank of India has to provide ATM facility to its customers so that

the people can get benefit of this facility and withdraw money at any time at
any place with this they would not have to face any problem regarding to
money.

Central bank of Indias branch network should be wider as, we have

already discussed about ATM network in each branch.

Central bank of India has to improve its disclosure policies so that everyone
can get easily all information regarding banking policies and other information
related to bank.
Indian market will provide for high growth market so bank should make
strategies to grab such opportunities.
Bank should open their branches in rural area.

www.wikepeadia.com

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www.google.com
www.lycos.com
www.central bank of india.com
Value notes.com
White papers.com
Banknetindia.com
Finance biz.com
Gahoo yoogle.com
Banking Law and Practice by Sharma publications.
Banking theory and practices by kalyani publishers.
Principles of banking by AIBA (All India banking associations)

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