SUPERVISOR CERTIFICATE

This is to certify that ABHAY TRIPATHI, student of b.com(H) IV semester , session 20132016 , Jagannath International Management School , GGSIPU has written a, project titled
IT in Banking under my supervision and guidance for B (.Com H) .

TO WHOM SO EVER IT MAY CONCERN

This is to certify that ABHAY TRIPATHI of B.Com(H), Jagannath International

Management School , GGSIPU has successfully completed the Internship in Project Report
IT in Banking of our bank during 2 june 2015 to july 2015 during his training period
We found his sincere , hard working and having good behaviour and moral character
We wish his all success in him future endeavors.

DECLARATION
I hereby declare that his project report entitled IT in Banking is a bonafide record of work
done by me during the course of summer project work and that it has not previously formed
the basis for the award to me for any degree/diploma , associate ship , fellowship , or other
similar title of any other institute/society

(ABHAY TRIPATHI)
Date:

Signature
(Project Guide)

ACKNOWLEDGEMENT

No task is single mans effort . Any job in this world however trivial or tough cannot be
accomplished without the assistance of others . An assignment puts the knowledge and
experience of an individual to litmus test. There is always a sense of gratitude that one likes
to express towards the persons who helped to change an effort in a success. The opportunity
to express my indebtness to people who have helped me to accomplish this task.
I deem it a proud privilege to extend my greatest sense of gratitude to my project
guide_______ for the keen interest, inspiring , guidance , continuous encouragement ,
valuable suggestions and constructive criticism throughout , valuable suggestions and I would
like also like to thank ___________

for their valuable support in helping me to gain this

opportunity of being associated with an organization of such esteem.

Last but not the least it would be unfair if I dont express my indebtness to my parents and all
my friends fort their active cooperation which was of great help during the course of my
training project.

PREFACE

Finance is the lifeblood of an industry. The subject matter of financial management has
been changing at rapid pace. About a decade ago, the scope of financial management was
circumscribed to the raising of funds, whenever needed, financial decision making, and
problem solving . But now it has become an internal part of any business enterprise and
growth of any business enterprise depend upon their financial strategy and how finance is
being managed.
The summer training program is designed to give the future managers the feel of the
corporate happening and work culture. these real life situation or entirely different from the
stimulated exercise enacted in an artificial environment is inside the classroom and it is
precisely because of this reason that this summer training has been designed so that the
manager of tomorrow does not fill ill that case when the times come to the shoulder
responsibilities the summer training program is a bridge between the institution and
organisation to make us understand how is your theoretical knowledge will be applied in the
practical field.
It was exactly in the construct that I was privileged to draw in Andhra bank as a
summer trainee. The experience that I have gathered over past 2 months has certainly
provided me with an orientation which I believe will help me shoulder any assignment
successfully in future.

INTRODUCTION
Introduction of banking
Definition of banking
Banking means accepting deposits for the purpose of lending or investment of deposits of
money from the public, repayable on demand or otherwise and withdraw by cheques, drafts
or otherwise
Banking companies (regulation) act , 1949

Origin of the word bank

The origin of the word bank is shrouded in mystery . according to one view point the Italian
business house carrying on crude from of banking were called ban Cheri according to another
viewpoint banking is derived from German word branch which mean heap or mound . In
England, the issue of paper money by the government was referred to as a raising a bank.

Origin of banking
The history of banking begins with the first prototype banks of merchants in the ancient
world which made grain loans to farmers and traders who carried goods between cities. This
began around 2000bc in Assyria and Babylonia. Later, in ancient Greece and during the
roman empire , lenders based in temples made loans and added two important innovations
they accepted deposits and changed money . Archaeology from this period in ancient china
and India also shows evidence of money lending activity.
Its origin in the simplest form can be traced to the origin of authentic history . After
recognising the benefit of money as a medium of exchange , the importance of banking was
developed as it provides the safer place to store the money. The safe place ultimately evolved
in to financial institutions that accepts deposits and make loans i.e. modern commercial
banks.

Banking system in India

Without a sound and effective banking system in India it cannot have a healthy economy. The
banking system in India should not on be hassle free but it should be able to meet new

challenges posed by the technology and any other external and internal factors. For the past
three decades Indias banking system has several outstanding achievements to its credit. The
most striking is its extensive reach corners of the country. This is the one of the main reasons
of the Indias growth process.

History of banking in India

Banking in India has its origin as early or Vedic period. It is believed that the transitions from
many lending to banking must have occurred even before Manu, the great Hindu furriest,
who has devoted a section of his work to deposit and advances and laid down rules relating to
the rate of interest. During the mogul period, the indigenous banker played a very important
role in lending money and financing foreign trade and commerce.
During the days of the East India Company it was the turn of agency house to carry on the
banking business. The General Bank of India was the first joint stock bank to be established
in the year 1786. The other which followed was the Bank of Hindustan and Bengal Bank. The
Bank of Hindustan is reported to have continued till 1906. While other two failed in the
meantime. In the first half of the 19th century the East India Company established there
banks, the bank of Bengal in 1809, the Bank of Bombay in 1840 and the Bank of Bombay
in1843. These three banks also known as the Presidency banks were the independent units
and functioned well. These three banks were amalgamated in 1920 and new bank, the
Imperial Bank of India was established on 27th January, 1921.
With the passing of the State Bank of India Act in 1955 the undertaking of the imperial Bank
of India was taken over by the newly constituted SBI. The Reserve Bank of India (RBI)
which is the Central bank was established in April, 1935 by passing Reserve bank of India act
1935. The Central office of RBI is in Mumbai and it controls all the other banks in the
country.
In the wake of Swedish Movement, number of banks with the Indian management were
established in the country namely, Punjab National Bank Ltd., Bank of India Ltd., Bank of
Baroda Ltd., .Canara Bank. Ltd. on 19th July 1969, 14 major banks of the country were
nationalized and on 15th April 1980, 6 more commercial private sector banks were taken over
by the government.

The first bank in India, though conservative, was established in 1786. From 1786 till today,
the journey of Indian Banking System can be segregated into three distinct phases.

They areas mentioned below

Early phase from 1786 to 1969 of Indian Banks.

Nationalization of Indian Banks and up to 1991 prior to Indian banking sector

Reforms.
New phase of Indian Banking System with the advent of Indian Financial & Banking

Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and
Phase III

Phase I
The General Bank of India was set up in the year 1786. Examples are Bank of Hindustan and
Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay
(1840) and Bank of Madras (1843) as independent units and called it Presidency Banks.
These three banks were amalgamated in 1920 and Imperial Bank of India was established
which started as private shareholders banks, mostly Europeans shareholders.
In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab
National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913,
Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank
of Mysore were set up. Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also experienced periodic failures
between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline
the functioning and activities of commercial banks, the Government of India came up with
The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949
as per amending Act of 1965 (Act No. 23 of 1965)., Reserve Bank of India was vested with
extensive powers for the supervision of banking in India as the Central Banking Authority.
During those day's public has lesser confidence in the banks. As an aftermath deposit
mobilization was slow. Abreast of it the savings bank facility, provided, by the postal
department was comparative safer. Moreover, funds were largely given to traders.

Phase II
Government took major steps in this Indian Banking Sector Reform after independence.
In1955, it nationalized Imperial Bank of India with extensive banking facilities on a large
scale especially in rural and semi-urban areas. It formed State Bank of India to act as the
principal agent of RBI and to handle banking transactions of the Union and State
Governments all over the country.
Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July,
1969, major process of nationalization was carried out. It was the effort of the then Prime
Minister of India, Mrs Indira Gandhi. 14 major commercial banks in the country were
nationalized. Second phase of nationalization Indian Banking Sector Reform was carried out
in 1980 with seven more banks. This step brought 80% of the banking segment in India under
Government ownership.
The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country

1949 Enactment of Banking Regulation Act.

1955 Nationalization of State Bank of India.
1959 Nationalization of SBI subsidiaries.
1961 Insurance cover extended to deposits.
1969 Nationalization of 14 major banks.
1971 Creation of credit guarantee corporation.
1975 Creation of regional rural banks.
1980 Nationalization of seven banks with deposits over 200crore.

After the nationalization of banks, the branches of the public sector bank India raised to
approximately 800% in deposits and advances took a huge jump by 11,000%.Banking in the:
sunshine of Government ownership gave the public implicit faith and immense confidence
about the sustainability of these institutions.

Phase lll

This phase has introduced many more products and facilities in the banking sector in its
reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up
by his name which worked for the liberalization of banking practices.
The country is flooded with foreign banks and their ATM stations. Efforts are being put to
give a satisfactory service to customers. Phone banking and net banking is introduced. The
entire system became more convenient and swift. Time is given more importance than
money.
The financial system of India has shown a great deal of resilience. It is sheltered from any
crisis triggered by any external macroeconomics shock as other East Asian Countries
suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the
capital account is not yet fully convertible, and banks and their customers have limited
foreign exchange exposure. The Recovery of Debts Due to Banks and Financial Institutions
Act was enacted in 1993, which provided for the establishment of tribunals for expeditious
adjudication and recovery of non-performing loans. Following the enactment of the act debt
recovery tribunals (DRTs) were established at a number of places.in order to allow public
sector banks to approach the capital market directly to mobilize funds from the public, an
ordinance was promulgated in October 1993 to amends the State bank of India act,1955 so as
to enable the State bank of India to enhance the scope of the provision of partial private
shareholding.

1.3 BANKS IN lNDlA

In India the banks are being segregated in different groups. Each group has their own benets
and limitations in operating in India. Each has their own dedicated target market. Few of
them only work in rural sector while others in both rural as well as urban. Many even are
catering in cities. Some are of Indian origin and some are foreign players. All these details
and many more are discussed over here. The banks and its relation with the customers, their
mode of operation, the names of banks under different groups and other such useful
informations are talked about. One more section has been taken note of is the upcoming
foreign banks in India. The RBI has shown certain interest to involve more of foreign banks
than the existing one recently. This step has paved a way for few more foreign banks to start
business in India.

1.3(a) BANKING STRUCTURE IN lNDIA

SCHEDULED BANKS IN INDIA

NUMBERS

Nationalized Banks

26

Foreign Banks

41

Regional & Rural Banks

62

Private Banks

21

2) Scheduled Cooperative Banks

PUBLIC SECTOR BANK
Public sector banks are those banks which are owned by the Government. The Govt. runs
these Banks. In India 14 banks were nationalized in 1969 & in 1980 another 6 banks were
also nationalized. Therefore in 1980 the number of nationalized bank was 20.
At present there are total 26 Public Sector Banks in India (As on 26-09-2009). Of these
19 are, nationalized banks, 6(STATE BANK OF lNDORE ALSO MERGED RECENTLY)
belong to SBI & associates group and 1 bank (lDBl Bank) is classified as other public sector
bank. Welfare is their primary objective. Before the steps of nationalization of Indian banks,
only State Bank of India (SBI) was nationalized. It took a place in July 1955 under SBl Act of
1955.Nationalization of Seven State Banks of India (formed subsidiary) took place on 19th
July, 1960.
The State Bank of India is Indias largest commercial bank and is ranked one of the top
five banks worldwide. It serves 90 million customers through a network of 9,000 branches
and it offers either directly or through subsidiaries a wide range of banking services.
The second phase of nationalization of Indian banks took place in the year 1980. Seven
more banks were nationalized with deposits over 200crore. Till this year, approximately 80%
of the banking segment in India was under Government ownership.

Indian Banking Sectors-Challenges and Opportunities

The economic reforms initiated by the Government of India roughly about a decade ago have
changed the landscape of several sectors of the Indian economy. The Indian banking sector is
no exception. This sector is going through major changes as a consequence of economic
reforms. The changes affect the ownership pattern of banks, availability of funds, the cost of
funds as well as opportunities to earn, range of services (fee-based and fund-based), and
management of priority sector lending. As a consequence of liberalization in interest rates,
banks are operating on reduced spread. Development financial institutions would have a
lesser impact on the Indian economy. Consumerism is here to stay. Non-banking products
like insurance would be a tremendous opportunity. The economic reforms have also
generated new and powerful customers (huge Indian middle class) and new mix of
players_(public sector units, private banks, and foreign banks).The emerging competition
has generated new expectations from the existing and the new customers. There is an urgent
need to introduce new products. Existing products need to be delivered in an innovative and
cost-effective way by taking full advantage of emerging technologies. The new rules
of/competition require recognition of the importance of consumers and the necessity to
address the needs through innovative products supported by new technology. As a
consequence of competition, the managerial challenges include market segmentation, product
positioning, innovative delivery channels, cross-selling, etc. At an organization level,
elaborate systems need to be evolved to manage, assess, and contain risk (including Portfolio,
client, and exchange rate).The banks may have to reorient their resources in the form of
reorganized branch networks, reduced manpower, dramatic reduction in establishment cost,
honing the skills of the staff, and innovative ways of attracting talented managerial pool. The
Government of India and the Reserve Bank of India (RBI) on their part would strengthen the
existing norms in terms of governing and directing the functioning of these banks. Banks
needs to strengthen their audit function. They would be evaluated based on their performance
in the market place. It is in this context that we have invited the chief executive officers of
Indian banks to respond to the issues mentioned earlier i.es, towns, and Village as improving
communications increases awareness even in small-towns and rural areas. Consumer goods
companies are already tapping this potential it is .for the banks to make the most of the
opportunity to deliver solutions to this market.
The prerequisite for capitalizing on these opportunities is technology. Technology is key to
servicing all customer segments - offering convenience to the retail customer and operating
efficiencies to corporate and government clients. The increasing sophistication, flexibility,

and complexity of product and servicing offerings makes the effective use of technology
critical for managing the risks associated with the business. Developing or acquiring the right
technology, deploying it optimally, and then leveraging it to the maximum extent is essential
to achieve and rnaintain high service and efficiency standards while remaining cost-effective
and delivering sustainable returns to shareholders.
Early adopters of technology acquire significant competitive advantage. Managing
technology is, therefore, a challenge for the Indian banking sector. Wide disparities exist
between "Various banks as far as technology capabilities are concerned; the sector as a whole
needs to make signicant progress on this front. Building knowledged driven, learning
organizations is important in the current scenario of rapidly evolving operating environments.
Knowledge and assimilation of new ideas and trends are essential to keep the organization
ahead on the curve. This is true for banking as it is for all other sectors. Banks must
continuously seek to be aware of cutting edge practices in banking internationally and
institutionalize this learning across the organization. This will prepare them for the future as
Indian markets become more sophisticated and integrated into the global financial markets.
Another critical area for the Indian banking sector is people. The ability to attract and retain
talent is a key success factor for a people-oriented business like banking. Banks have to once.
In fact, the banking industry has undergone a complete transformation. The most distinct
aspect of the financial reforms was that they were in the nature of pre-emptive rather than
crisis-led. In other words, unlike many of the emerging economies which undertook financial
reforms as a result of banking crises, in India? The reform process was initiated with the
recognition that the real sector reforms carried out to mitigate the 1991 balance of payment
crisis cannot be sustained without reforming the financial sector. No doubt, the success of the
reforms was aided to a large extent by the relative macroeconomic stability during the period.
Another distinguishing. Feature of the reforms was the, successful sequencing. Gradualism,
which was the hallmark of the Indian reform process, was indeed the outcome of the
democratic polity where popular consensus is crucial. A review performance of banks by the
RBI (1999) in the deregulated environment has brought out certain important findings:

Reflecting improvement in efficiency, the interest spread for

banks has shown a decline and I
There has been a tendency towards convergence in this respect, across all bank

groups, except foreign banks.

Consequent to decline in operating expenses, particularly staff

Costs, the costs of financial intermediation have fallen.

Banks have, by and large, improved their asset portfolio;
There has been improvement in capital adequacy of Banks as well.
The cost-to-income ratio has shown improvement in respect of SB! group and

nationalized banks.
Non-interest income as per cent of working funds has shown modes
The reform process has been sweeping in its coverage. Banks have already
implemented internationally increase.

1.3(b) Reserve Bank of India

Reserve Bank of India is the central bank of the country. Central banks are a relatively recent
innovation and most central banks, as we know them today, were established around early
twentieth century. The Reserve Bank of India was set up on the basis of the recommendations
of the Hilton Young Commission. The Reserve Bank of India Act, 1934 (II of 1934) provides
the statutory basis of the functioning of the Bank, which commenced operations on April 1,
1935.

The Bank was constituted to

Regulate the issue of banknotes

Maintain reserves with a view to securing monetary stability and
To operate the credit and currency system of the country to its advantage
The Bank began its operations by taking over from the Government the functions so
far being performed by the Controller of Currency and from the Imperial Bank of
India, the management of Government accounts and public debt. The existing
currency offices at: L Calcutta, Bombay, Madras, Rangoon, Karachi, Lahore and
Cawnpore (Kanpur) became branches of the issue Department. Offices of the Banking
department were established in Madras, Delhi and Rangoon.

Burma (Myanmar) seceded from the Indian Union in 1937 but the Reserve Bank continued to
act as the Central Bank for Burma till Japanese Occupation of Burma and later up to April,
1947. After the partition of India, the Reserve Bank served as the central bank of Pakistan up
to June 1948 when the State Bank of Pakistan commenced operations. The Bank, which was
originally set up as a shareholder's bank, was nationalized in 1949.
An interesting feature of the Reserve Bank of India was that at its very inception, the Bank
was seen as playing a special role in the context of development, especially Agriculture.

When India commenced its plan endeavours, the development role of the Bank came into
focus, especially in the sixties when the Reserve Bank, in many ways, pioneered the concept
and practice of using finance to catalyse development. The Bank was also instrumental in
institutional development and helped setup institutions like the Deposit Insurance and Credit
Guarantee Corporation of India, the Unit trust of India, the Industrial Development Bank of
India, the National Bank of Agriculture and Rural Development, the Discount and Finance
House of India etc. to build the financial infrastructure of the country.
With liberalization, the Bank's focus has shifted back to core central banking functions like
monetary Policy, Bank Supervision and Regulation, and Overseeing the Payments System
and onto developing the financial markets.

Supervisory Functions of RBI

The reserve bank also performs many supervisory functions. it has authority to
regulate and administer the entire banking and financial system. Some of its

supervisory functions are given below.

Granting license to banks: The RBI grants license to banks for carrying its business.
License is also given for opening extension counters, new branches, even to close

down existing branches.

Bank inspection: The RBI grants license to banks working as per the directives and in
a prudent manner without undue risk. In addition to this it can ask for periodical

information from banks on various components of assets and liabilities.

Control over NBFls: The Non-Bank Financial institutions are not influenced by the
working of a monitory policy. However RBl has a right to issue directives to the
NBFls from time to time regarding their functioning. Through periodic inspection, it

can control the NBFis.

Implementation of the Deposit insurance Scheme: The RBI has set up the Deposit
insurance Guarantee Corporation in order to protect the deposits of small depositors.
All bank deposits below Rs. One lakh are insured with this corporation. The RBI
work to implement the Deposit insurance Scheme in case of a bank failure.

Policy Rate Controlled by Reserve Bank of India

Bank Rate

RBl lends to the commercial banks through its discount window to help the banks meet:
depositors demands and reserve requirements for long term. The Interest rate the RBI
charges the banks for this purpose is called bank rate. If the RBI wants to increase the
liquidity and money supply in the market, it will decrease the bank rate and if RBI wants to
reduce the liquidity and money supply in the system, it will increase the bank rate. As of 16
July 2013, the bank rate was 10.25%.

Cash Reserve Ratio (CRR)

Every commercial bank has to keep certain minimum cash reserves with RBI. Consequent
upon amendment to sub-Section 42(1), the Reserve Bank, having regard to the needs of
securing the monetary stability in the country, RBl can prescribe Cash Reserve Ratio (CRR)
for scheduled banks without any floor rate or ceiling rate, [Before the enactment of this
amendment, in terms of Section 42(1) of the RBI Act, the Reserve Bank Could prescribe
CRR for scheduled banks between 5% and 20% of total of their demand and time liabilities].
RBl uses this tool to increase or decrease the reserve requirement depending on whether it
wants to- affect a decrease or an increase in the money supply. An increase in Cash Reserve
Ratio (CRR) will make it mandatory on the part of the banks to hold a large proportion of
their deposits the form of deposits with the RBI. This will reduce the size of their deposits
they will lend less. This will in turn decrease the money supply.
Due to a Reduction in CRR by 0.25% (25 basis points cut in Cash Reserve Ratio (CRR)) on
17September 2012, Rs 17,000 crore was released into the system/market. The RBI lowered
the CRR by 25 basis points to 4.25% on 30 October 2012, a move it said would inject about
175 billion rupees into the banking system in order to preempt potentially tightening
liquidity.

Statutory Liquidity ratio (SLR)

Apart from the CRR, banks are required to maintain liquid assets in the form of gold, cash
and approved securities. Higher liquidity ratio forces commercial banks to maintain a larger
proportion of their resources in liquid form and thus reduces their capacity to grant loans and
advances, thus it is an antiinflationary impact. A higher liquidity ratio diverts the bank
funds from loans and advances to investment in government and approved securities. In well

developed economies, central banks use open market operationsbuying and selling of
eligible securities by central bank in the money marketto influence the volume of cash L
reserves with commercial banks and thus influence the volume of loans and advances they
can it make to the commercial and industrial sectors. In the open money market, government
securities are traded at market related rates of interest. The RBI is resorting more to open
market operations in the more recent years. timeank on 10 June penalized three private
sector banks for violating

Generally RBI uses three kinds of selective credit controls:

1. Minimum margins for lending against specific securities.
2. Ceiling on the amounts of credit for certain purposes.
3. Discriminatory rate of interest charged on certain types of advances.

Direct credit controls in India are of three types:

1. Part of the interest rate structure i.e. on small savings and provident funds, are
administratively set.
2. Banks are mandatory required to keep 23% of their deposits in the form of
government securities.
3. Banks are required to lend to the priority sectors to the extent of 40% of their
advances

INTRODUCTION OF THE TOPIC

OVERVEIW
With the globalization trends world over it is difficult for any nation big or small, developed
or developing, to remain isolated from what is happening around. For a country like India,
which is one of the most promising emerging markets, such isolation is nearly impossible.

More particularly in the area of Information technology, where India has definitely an edge
over its competitors, remaining away or uniformity of the world trends is untenable. Financial
sector in general and banking industry in particular is the largest spender and beneficiary
from information technology. This endeavours to relate the international trends in it with the
Indian banking industry. The last lot includes possibly all foreign banks and newly
established Private sector banks, which have fully computerized all the operations. With these
variations in the level of information technology in Indian banks, it is useful to take account
of the trends in Information technology internationally as also to see the comparative position
with Indian banks. The present article starts with the banks perception when they get into IT
up gradation. All the trends in IT sector are then discussed to see their relevance to the status
of Indian banks. Electronic delivery channels, ATMs, variety of cards, web based banking,
and mobile banking are the names of few outcomes of the process of automation and
computerization in Indian banking sector. Technical inventions, automation and IP based
network have amplified bank's productivity and efficiency manifold. This has further led to
the move from brick banking to concept of 'click banking'. The present paper attempts to
analyse the applications of IT in banking sector. The paper describes the evolution of IT in
banking sector. It unfolds the recent usage of IT in banking sector. The paper also attempt to
analyse the obstacles and risks exposed due to application of this technical boon to the sector.
In the concluding section paper suggest some measures to mitigate the risks in order to reap
best benefits from IT applications.

Evolution of IT usage in Banking Industry:

Indian banking sector opened its door for computerised applications and development of
communication network basically due to the sheer compulsion and necessity to cope up
demand from its customers from different countries. Increasing number of bank branches,
growing volume of banking operations, problems inherent in manual system and increasing
incidence of frauds made it imperative for banks to signalise favourable response for the need
of hour. During the first phase of introduction computer applications in banking, around 4776
Advanced Level Posting Machines (ALPMs) and233 minicomputers have been installed. In
1993, employees of banks signed agreement with management regarding computerisation of
banking industry in India. Committees headed by C. Rangarajan have given landmark reports
strongly recommending the IT applications in banking business. In1994 Reserve Bank of
India (RBI) constituted a committee for technical up gradation of the banks. The committee

worked with the representation of different members from banks, technical institutions and
government. Based on the recommendations of the committee the Institute for Development
and Research in Banking Technology (IDRBT) was established in 1996. The core research
areas of the institute include financial network, application architecture, web based
technology, payment system, multimedia, data mining, data warehousing and risk
management. In 1999 the collaborative efforts of IDRBT and RBI developed a satellite based
wide area network known as Indian Financial Network Evolution of IT usage in Banking
Industry: (INFINET). The network is restrictive to be used by the banks and financial
institutions only. Presently, the network consists of over 950 Very Small Aperture Terminal
(VSATs) located in 127 cities of the country and utilises one full transponder on INSAT
3B.Realising the importance of payment system RBI constituted an operational group and
payment system advisory committee in 2000. The prime task assigned to the committee was
to develop an efficient and well-integrated system which could serve the purpose of Real
Time Gross Settlement.

Recent IT applications in Banking Sector:

Information Technology is a concomitant for promoting the growth and development of
economy. Globalisation and liberalisation have fuelled the applicability of IT in banking
sector. Jeevan (2000) pointed out that with rigid controls giving way to deregulation; banks
are gearing up their communications infrastructure to obtain a competitive edge from EBanking, which is fast becoming a reality in India. IT applications in business have bought
tremendous change in cost and access equation. It has made banking products and services
affordable and accessible even to remote areas at no loss of time. The Electronic Banking
Group of the Basel Committee on Banking Supervision (2003) has noted that continuing
technological innovation and competition among existing banking organizations and new
entrants have allowed for a much wider array of banking products andservices to become
accessible and delivered to retail and wholesale customers through an electronic distribution
channel collectively referred to as e-banking. Some of the recent IT devices may be described
as follows:

Electronic Clearing and Settlement System:

The most common media of receipts and payment through banks are negotiable instruments
like cheques. These instruments could be used in place of cash. The inter bank cheques could

be realised through clearing house systems. Initially there was a manual system of clearing
but the growing volume of banking transaction emerged into the necessity of automating the
clearing process. Automated Clearing System (ACS) processed with Magnetic Ink Character
Recognition (MICR) and Optic Character Recognition (OCR). MICR overcomes the
limitation of clearing the cheques within banking hours and thus enables the customer to get
the credit quickly. OCR further eliminates the manual encoding of cheques. Further instead of
presenting the negotiable instrument physically, the presenting banker may also send its
electronic copy through the system known as 'Truncation System'. However, in the lines of
Banker's Book Evidence Act the physical presentation of instrument is also required in case
of any dispute.

Debit and Credit Clearing System:

Debit clearing system is a service commonly used for making payments in lieu of utility
services like telephone bill or payment of electricity bill. Under this system, customer
authorises the service provider to debit his bank account periodically for the units consumed
by him. This authority letter is being submitted by the service provider to the respective bank
which makes payments on due date. Periodical payment to a large number of groups by the
customer is usually made by credit clearing system. Under this system customer hands over
the amount and the list of proposed recipient to the bank who further makes payment on
customer's behalf. This service is mainly used by corporate houses for making periodic
payment of dividend or interest. Such electronic clearing systems bring savings in terms of
efforts as well as cost to all concern parties.

Real Time Gross Settlement (RTGS):

RTGS is a well-accepted international media for transfer of large value interbank funds. The
central banks of the European Union have recommended the linkage of EU member's
domestic RTGS systems to form a pan-EU RTGS system. RTGS facilitates final settlement of
individual funds transfers on a continuous basis and thus serves a purpose of good
mechanism for limiting settlement and systemic risks. First automated RTGS system in G-10
countries was Fed wire.

Bank net:
Bank net is the first communication network established by Reserve Bank of India in 1991.
This network allows the flow of coded messages from one place to another at no loss of time.
It is of great use in foreign exchange dealings and settlement of transactions. Bank net has
two phases viz., Bank net I and Bank net II. It also facilitates the use of SWIFT technology
for transmission of financial information relating to foreign exchange, interest, debit-credit
transactions etc.

Automated Teller Machine (ATM):

ATM is perhaps most revolutionary aspect of virtual banking. It is a self-vendor machine
providing excess of transaction services to the customers of bank around the clock. The
facility to use ATM is provided through plastic cards with magnetic strip containing
information about the customer as well as the bank. In today's world ATMs are the most
useful tool to ensure the concept of "Any Time Banking" and "Any Where Banking". Many
banks are now installing ATMs even off-site for wider reach at lower cost. ATM usually have
shared network which is beneficial for both big as well as small banks. The Indian Bank
Association introduced "Swadhan" (a shared ATM network of public sector and some private
sector banks) for the shared payments.

Tele Banking:
Tele banking is based on voice processing technology provided by specialised software. This
software identifies the voice of the caller and responds back to him. This facility is primarily
used to enquire account balances and summary of transactions. At present this technology is
in nascent stage and under the process of enrichment. Phone Banking and Mobile Banking:
Telephone banking refers to the access of account, transfer funds, summary sheet and other
banking services through dialling one telephone number. In case of mobile banking, the
banking services are provided to the customers having the credit card accounts with bank. In
mobile banking, the services are provided by the association of banks and cellular service
providers through SMS or WAP enabled mobile instruments. HDFC bank, ICICI bank and
Citi banks are offering mobile banking in India in association with cellular service provider
such as Orange Tel, Airtel, Sky Cell and BPL mobile.

OBJECTIVES OF THE STUDY: There are some objectives of the study. Those are given below:
To study the benefits to banking sector after the introduction of IT in
Banking .
To collect the information about the increase in profits of banks with IT.
To find out the change in methods of transaction after the introduction of
IT in banking sector.
To study the benefits to the customer also .

Company Profile

ABOUT ANDHRA BANK

Andhra Bank is an Indian bank based in Hyderabad. The bank was established in the year
1923, and its founder was Dr. Bhogaraju Pattabhi Sitaramayya, a well known freedom fighter
was born on 24th November 1880 in Gundugolanu village, West Godavari District in Andhra
Pradesh. He was a renowned Freedom Fighter and a very illustrious personality. The initial
authorized capital of the bank was Rs. 10.00 lacs, while the paid up capital was Rs. 1.00 lac
at the time of its registration.

Financial Details
Total Business volume of the bank in the third quarter of the 2008-09 financial year stood at
Rs. 95, 822 Crores, while the Total Deposit volume during the same tenure was Rs. 53,795
Crores.

As of 31st of December, 2008, Andhra Bank had a client base of more than 18.5 Million
customers with 2194 Business Delivery Channels. Till the same date, the bank had 1,410
branches spread across 22 states and 2 Union Territories, out of which 1,067 branches have
been enabled with Centralized Core Banking Solution (CBS). While the total number of
ATMs summed up to 685, the bank had a Per Employee Productivity of Rs 6.92 Crore.

Products And Schemes

Apart from regular banking services and solutions, Andhra Bank has introduced some
attractive services such as AB Premium Current Account and AB Privilege Corporate Salary
Savings Bank Account with extra benefits to the customers. Also, the bank has launched AB
Saral Housing Loan scheme featuring housing loans upto Rs. 20 Lacs.

Andhra Bank has also partnered with various financial institutions like Kotak Mahindra,
Reliance, Birla Sun Life Mutual Fund and Fidelity Mutual Fund, assisting them in sales of
their Mutual Fund products. The bank has also signed a Memorandum of Understanding
(MoU) with Maruti Suzuki Ltd. for financing 4 wheeler vehicles.

Pioneering Efforts
Andhra Bank is the first bank in India to have launched mobile biometric ATMs. These ATMs

stop at predestinated sites, and instead of entering the personal identification number (PIN),
the customers have to match their finger prints with their recorded finger prints in the bank
database. This has enabled even the illiterate or uneducated customers of the bank to enjoy
the ATM facility being offered by the bank.

Social Activities
As an initiative to empower the society, the bank has established 10 Rural Training Institutes,
which have provided training to 76,300 candidates for getting successfully self employed.
The institutes offer free training, lodging, boarding facilities coupled with to and fro travel
expenditure to the candidates undergoing the training programmes.

Our vision
To become a significant player, providing full range of banking services through innovative
customer centric products and to maximize stake holders value.

Our mission
To work together towards delivering excellent customer service by leveraging on technology
and human resources to attain world class performance standards.

Our slogan

Corporate identity

The Symbol of Infinity denotes a Bank that is prepared to do any thing, to go to any
lengths, for the customer
The Blue pointer on the top represents the philosophy of a Bank that is always looking for
growth and newer directions.
The Key hole represents Safety and Security
The Chain indicates togetherness
The colours Red and Blue denote dynamism and solidity

Our banks mascot

Training institute
Andhra Bank Staff College is a powerhouse of knowledge lending support to the Bank for
achievement of the corporate goals of our Bank. At the college we strive to improve the
knowledge level, responsiveness and leadership qualities of the employees by providing
quality inputs to them.

Our training philosophy

The need of the hour is technology initiatives and trained manpower. Therefore training in
our Bank is a pro-active and continuous process as an integral part of organisational
development. It aims at imparting knowledge, improving skills and re-orienting attitude for
individual growth and organisational effectiveness.

Objectives

To provide quality training in line with corporate goals.

To improve the competencies of the participants by focusing on job knowledge,
systems and procedures

To make the staff better team players & leaders and help them to contribute to the all

round development of the organization

To make the staff appreciate the need to improve the Bank's market share and ranking

in business
To ensure that the staff handle the branch operations more effectively and confidently
To continually improve the knowledge level, responsiveness and communication

skills of the employees.

To constantly monitor internal processes and work environment.
To maintain safe, clean and healthy environment in the college.

Policy advisory committee

Chairman and Managing Director, Executive Director, General Manager (Personnel) and the
Principal of the Staff College form the Policy advisory Committee, which designs the policy
for training.

Assessment of training needs

Training needs are assessed through Academic council meetings and Zonal Committee
meetings before drafting of calendar of programmes. Academic council consists of the
Principal, Training faculty and Chief officers of various departments of Head office. Zonal
Consultative committee is headed by Zonal Managers, which assesses the training needs of
the Zone.

Training methodology

Class Room Lectures/Discussions

Drafting of Guest faculty from reputed organisations

Providing soft copy of important documents

Conducting Exit Test

Case studies, exercises

Group work & Presentation

In-basket exercise

Arranging interaction with successful Managers, Star performers and Executives

Simulation of branch Software

Practical Problems and Solutions

Hands on sessions

Post training evaluation

In respect of certain identified programmes, the College does survey on effectiveness of
training. Feedback from the Managers is obtained about the trained staff, after a month
from the date of training, on their specific performance at the branch in the post-training
scenario. The information is analysed through a rating system and training effectiveness
index is calculated basing on certain parameters and the information is put up to the top
management.

Board of directors
Shri S K Kalra
Shri A K Rath
Shri Anandrao Vishnu Patil
Shri E E Karthak
Shri A Krishna Kumar
Shri G Sivakumar
Shri K Thamaraiselvan
Dr. Naina Sharma
Shri Amit Goel

Executive Director
Executive Director
Govt. of India Nominee Director
RBI Nominee Director
Shareholder Director
Shareholder Director
Workmen Employee Director
part-time Non-Official Direct
part-time Non-Official Director

RESEARCH METHODOLOGY
METHODOLOGY: The following methodology has been followed by me for this study:

Acquiring information from different printed materials such as articles, journals and

office records.
Obtaining information through discussion with senior officer.
Going through available reports and different employees marked by their officers of

Andhra Bank.
I have also discussed with their staff of Andhra Bank and gained sufficient information
to write the report on the topic

SOURCES OF DATA COLLECTION:The various data regarding the topic were collected in different ways. However, the
data collected can be classified into two broad categories:
Primary data: - These are the data which were collected through questionnaire and by
communicating with the employees of Andhra Bank.
Secondary data: - These are the data which were collected through official documents, from
the data cell of Andhra Bank, and home web page of Andhra Bank. These data include uses of
IT in banking and positive impact after the introduction in banking sector.

ANALYSIS
Estimating total spending on IT by banks
There is only a small amount of official information available on IT expenses in the financial
services sector1. Firms do not have to publish IT expenses in their annual statements, and
figures from official statistics agencies on technology spending are scarce. There are,
however, private-sector estimates available, mostly compiled by consultancies.
Their estimates of banks combined total IT costs differ substantially, though, ranging from
USD 270 bn to USD 460 bn for their 2013 budgets.
These differences are probably explained by different methodologies and definitions used.
Estimates can be based on market knowledge, market surveys of different sizes, or inclusion
of official statistics available. Differences might also stem from the scope of costs factored in
(e.g. staff, telecommunications, business lines). Unfortunately, even with these technical
differences in mind, it is hard to explain the discrepancies.

Banking sector spends more on IT than others

Financial services firms spend more on IT than other industries do. Banks expenses for IT
equal 7.3% of their revenues, as found by Forrester Research Inc. in a large survey covering
firms in the Americas, Europe and Asia. On average, across all sectors polled, IT costs were
equivalent to 3.7% of revenues. Other sources confirm the relatively high IT costs in banking.
McKinsey sees banks IT costs at 4.7% to 9.4% of operating income.2 The reasons for a
higher use of IT in the banking industry are manifold. Financial service firms have to fulfil
exacting regulatory requirements which translate into IT costs that do not contribute to the
firms earnings. Furthermore, banks rely heavily on IT in their back offices as well as their
distribution channels.

LIMITATION OF THE STUDY: The various limitations experienced during the course of the study have been
mentioned below:
The researcher has conducted the entire study. So it was difficult to
collect adequate data from each department and analyse it within a short
span of time.
Being an outsider, various confidential information couldnt be accessed
by the researcher.
There was some statistical or data limitation . It was not possible to
collect every single aspect of the data and some of them were confidential
only accessible by senior officers.
Lack of proper maintenance of the files and data about the topic by the
employees.
The busy schedule of executives did not allow them to do full justice to a
researchers

schedule.

However

despite

these

limitations,

the

overwhelming cooperation and response of the employees in providing

the much needed information enabled the researcher to make the best out
of the available data.

Questionnaire
How long have you been using the WWW?
Less than 1 month
1 to 6 months
6 to 12 months
More than 1 year
How many hours per week do you use your computer for fun/play?
Less than 1
1 to 5 hours
5 to 10 hours
10 to 20 hours
over 20 hours
How many hours per week do you use your computer for work?
Less than 1
1 to 5 hours
5 to 10 hours
10 to 20 hours
over 20 hours
How many hours per week do you use your computer for personal reasons?
Less than 1
1 to 5 hours

5 to 10 hours
10 to 20 hours
over 20 hours
Have you performed any of the following activities on-line? (Please check all that apply)
Tax filing
Purchased/sold financial product (e.g., stock, bonds)
Neither of these

How frequently do you use telephone banking services per month (for example, balance
inquiry, fund transfer between accounts)?
Less than 1
1 to 3 times
3 to 8 times
8 to 12 times
over 12 times
How frequently do you visit your bank branch per month?
Less than 1
1 to 3 times
3 to 8 times
8 to 12 times
over 12 times
How frequently do you use an Automated Teller Machine (ATM) per month?
Less than 1
1 to 3 times

3 to 8 times
8 to 12 times
over 12 times
What is the main reason that you typically visit your bank branch (please choose the
single most important reason)?
to make a deposit
to get advice for investment options
to inquire about a balance
to withdraw cash
other
Have you purchased any product through WWW?
Yes
No

Approximately how many times have you purchased any product through the Internet in
the last 12 months?
Less than 1
1 to 3 times
3 to 8 times
8 to 12 times
over 12 times
In the past five years, other than for geographical relocation, how many times have you
switched to a different bank?
Never
1 to 3 times

3 to 8 times
over 8 times
Have you used (or are currently using) any off-the-shelf personal finance management
software programs (such as Quicken, MS Money, or Meca software)?
Yes
No
If you answered Yes to the previous question, how long have you been a regular user of
such software?
Less than 1 month
1 to 6 months
6 to 12 months
More than 1 year
Not applicable (check here if you answered "No" above)

*1.

What were your reasons for choosing our online banking service? Please select all that
apply.
Convenience
To save time
24 hour access to accounts
Other

*2. How often do you use our online services?

Daily
Weekly

Monthly
Never
*3. Which online features do you use regularly? Please select all that apply.
Pay bills
Make an account inquiry
Transfer funds between accounts
Wire Transfers
Process payroll
Order check books
Other

*4. Please rate the following online features

Excellent
Bill payment
E-alerts
Wire Transfer
Stop Payment
Balance Inquiry
Check Image Retrieval
Ordering Cash
Retrieving Bank Statement

Good

Neutral

Poor

N/A