PROJECT REPORT ON

TABLE OF CONTENTS: INTRODUCTION BANKING HISTORY AND ITS DEVELOPMENT IN INDIA TYPES OF BANKS GROWTH AND DEVELPOMENT OF INDIAN BANKING SECTOR INNOVATIVE BANKING SERVICES E-BANKING IN INDIA: Major Concerns EMERGING ISSUES: M-Banking CHALLENGES AHEAD

 CONCLUSION REFERENCES

INTRODUCTION
For the past three decades Indias banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reason of Indias growth process. A well organized banking system is a pre-requisite for economic growth of any country. Banks play an important role in the functioning of organized money markets. They act as a conduit for mobilizing funds and channelising them for productive purposes. The traditional functions of banking are limited to accept deposits and to give loans and advances. Today banking is known as innovative banking. Information technology has given rise to new innovations in the product designing and their delivery in the banking and finance industries, customer services and customer satisfaction are their prime work. Current banking sector has come up with a lot of initiatives that

oriented to providing a better customer services with the help of new technologies. Banking sector mirrors the larger economy its linkages to all sectors make it proxy for what is happening in the economy as a whole. Indian banking sector today has the same sense of excitement and opportunity that is evidence in the Indian Economy. The going developments in the global markets offers so many opportunities to the banking sector. In the competitive banking word improvement day by day in customer services is the most useful tool for their better growth. Bank offers so many changes to access their banking and other services. Banks plays an important role in the economic development of developing countries. Economic development involves investment in various sectors of the economy. The banks collects savings for investment in various projects. In normal banking the banks perform agency services for their customers and helps economic development of the country. The purchase and sales securities, shares, make payments, receive subscription funds and collect utility bills for the Government department. There for banks save time and energy of busy peoples. Bank arranges foreign exchange for the business transactions with other countries. Banking sector are not simply collecting funds but also serve as a guide to the customer about the investment of their money.

BANKING HISTORY AND ITS DEVELOPMENT IN INDIA

The General Bank of India was set up in the year 1786. Next came 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. the Government of India brought 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). The Reserve Bank of India was set up in the year 1935 with the share capital of Rs 5 Crore which was entirely owned by the private share holders in the beginning. The Reserve Bank of India is acting as central bank in India and it is different from the Central Bank of India. During the period 1955, the Government of India nationalized Imperial Bank of India with extensive banking facilities on a large scale specially 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. In the process of nationalization 14 major banks has been nationalized and six banks later on nationalized. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country: I. 1949 : Enactment of Banking Regulation Act. II. 1955 : Formation of State Bank of India. III. 1959 : Formation of SBI subsidiaries. IV. 1961 : Insurance cover extended to deposits. V. 1969 : Nationalisation of 14 major banks. VI. 1971 : Creation of credit guarantee corporation. VII.1975 : Creation of regional rural banks. VIII1980 : Nationalisation of six banks with deposits over 200 crore.

The Reserve Bank of India acts a centralized body monitoring any discrepancies and shortcoming in the system. Since the nationalization of banks in 1969, the public sector banks or the nationalized banks have acquired a place of prominence and has since then seen tremendous progress. The need to become highly customer focused has forced the slow-moving public sector banks to adopt a fast track approach.

The unleashing of products and services through the net has galvanized players at all levels of the banking and financial institutions market grid to look anew at their existing portfolio offering. Conservative banking practices allowed Indian banks to be insulated partially from the Asian currency crisis. Indian banks are now quoting at higher valuation when compared to banks in other Asian countries (viz. Hong Kong, Singapore, Philippines etc.) that have major problems linked to huge Non Performing Assets (NPAs) and payment defaults. Co-operative banks are nimble footed in approach and armed with efficient branch networks focus primarily on the high revenue niche retail segments. The Indian banking has finally worked up to the competitive dynamics of the new Indian market and is addressing the relevant issues to take on the multifarious challenges of globalization. Banks that employ IT solutions are perceived to be futuristic and proactive players capable of meeting the multifarious requirements of the large customers base. Private banks have been fast on the uptake and are reorienting their strategies using the internet as a medium The Internet has emerged as the new and challenging frontier of marketing with the conventional physical world tenets being just as applicable like in any other marketing medium. The Indian banking has come from a long way from being a sleepy business institution to a highly proactive and dynamic entity. This transformation has been largely brought about by the large dose of liberalization and economic reforms that allowed banks to explore new business opportunities rather than generating revenues from conventional streams (i.e. borrowing and lending). The banking in India is highly fragmented with 30 banking units contributing to almost 50% of deposits and 60% of advances. Indian nationalized banks (banks owned by the government) continue to be the major lenders in the economy due to their sheer size and penetrative networks which assures them high deposit mobilization.

TYPES OF BANKS:(a) Public Sector Banks in India Public Sector Banks are those banks in which Government of India has major share holding. No doubt public sector banks came to occupy dominant role in the banking structure. Before 1969, State Bank of India (SBI) was the only public sector bank in India, since then the following banks joined in the public sector banks list. List of Public Sector Banks in India (1) Indian Bank (2) Bank of India (3) Union Bank (4) Syndicate Bank (5) StateBank of Saurashtra (6) State Bank of Travancore (7) Bank of Maharashtra (8) Vijaya Bank (9) UCO Bank (10) Indian Overseas Bank (11) Punjab National Bank (12) Dena Bank (13) State Bank of Hyderabad (14) State Bank of Bikaner & Jaipur (15) State Bank of India

(16) State Bank of Mysore (17) State Bank of Indore (18) Corporation Bank (19) Allahabad Bank (20) Andhra Bank (21) Canara Bank (22) Bank of Baroda (23) Oriental Bank (24) Punjab & Sind Bank (25) Industrial Development Bank of India (26) Industrial Credit and Investment Corporation of India (27) Unit Trust of India Bank (28) United Bank. (b) Private Sector Banks: Private Banks have played a major role in the development of Indian banking industry.They have made banking more efficient and customer friendly. In the process they have jolted public sector banks out of complacency and forced them to become more competitive. We have the following major private banks in India: (1) Bank of Rajasthan (2) Bharat Overseas Bank (3) Catholic Syrian Bank (4) Centurion Bank of Punjab (5) Dhanalakshmi Bank (6) Federal Bank (7) HDFC Bank (8) ICICI Bank (9) IDBI Bank (10) IndusInd Bank (11) ING Vysya Bank (12) Jammu & Kashmir Bank (13) Karnataka Bank (14) Karur Vysya Bank (15) Kotak Mahindra Bank

(16) SBI Commercial and International Bank (17) South Indian Bank (18) United Western Bank (19) UTI Bank (20) YES Bank (c) Regional Rural Banks: Regional rural banks in India penetrated every corner of the country and extended a helping hand in the growth process of the country. Regional rural banks initially started its business to promote agricultural sector development. The State Bank of India has 30 Regional Rural Banks spread over across 13 states in the country. There are other banks which function for the development of the rural areas in India. These Regional Rural Banks plays a vital role in rural banking in the economy of the country by providing the help and financing farmers, rural artisans, agriculturists, entrepreneurs and so on. They are The Haryana State Co-operative Apex Bank Ltd, The National Bank for Agriculture and Rural Development, The Haryana State Co-operative Apex Bank Ltd. commonly called as HARCOBANK, National Bank for Agriculture and Rural Development (NABARD), United Bank of India and Sindhanur Urban Southarda Co-operative Banks etc.,.Co-operative Banks in India are registered under the Co-operative Societies Act. The cooperative bank is also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965. Cooperative banks in India finance rural sectors in the areas such as farming, Cattle, Milk, personnel finance, consumer finance and so on so forth. By virtue of specialised knowledge, training, ability and professionalism these intermediaries easily mobilise the funds in small denominations from the public at large and invest in various types of investments by diversifying the risk involved in the investments to generate optimum returns on investments which can be distributed by way of dividends or interest to the investors at large. A well developed financial intermediary system promotes the sound financial markets which causes the economical growth in the country. Financial Intermediaries offer the following services namely Issue

Management, Underwriting, Portfolio Management, Corporate Advisory, Stock Broking, Capital Re-structuring, Merger and Acquisitions and so on so forth. e) Foreign Banks in India The presence of foreign banks in India has benefited the financial system by enhancing competition, transfer of technology and specialized skills resulting in higher efficiency and greater customer satisfaction. Foreign banks are enabled large Indian companies to access foreign currency resources from their overseas branches in times of foreign currency constraint. New foreign banks are allowed to conduct business in India after taking into consideration the financial soundness of the bank, international and home country ranking, rating, international presence and political relationship between two countries. Examples of foreign banks-American Express bank Limited, Bank of Ceylon, BNP Paribas, Caylon Bank, Citibank N.A., Chohung Bank, Bank of America NA, Standard Chartered Bank etc.

GROWTH AND DEVELPOMENT OF INDIAN BANKING SECTOR

The last decade has seen many positive developments in the Indian banking sector. The policy makers, which comprise the Reserve Bank of India (RBI), Ministry of Finance and related government and financial sector regulatory entities, have made several notable efforts to improve regulation in the sector. The sector now compares favorably with banking sectors in the region on metrics like growth, profitability and non-performing assets (NPAs). A few banks have established an outstanding track record of innovation, growth and value creation. This is reflected in their market valuation. However, improved regulations, innovation, growth and value creation in the sector remain limited to a small part of it. The cost of banking intermediation in India is higher and bank penetration is far lower than in other markets. Indias banking industry must strengthen itself significantly if it has to support the modern and vibrant economy which India aspires to be. While the onus

for this change lies mainly with bank managements, an enabling policy and regulatory framework will also be critical to their success. The failure to respond to changing market realities has stunted the development of the financial sector in many developing countries. A weak banking structure has been unable to fuel continued growth, which has harmed the long-term health of their economies. In this white paper, we emphasize the need to act both decisively and quickly to build an enabling, rather than a limiting, banking sector in India. Indian banks have compared favorably on growth, asset quality and profitability with other regional banks over the last few years. The banking index has grown at a compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market index for the same period. Policy makers have made some notable changes in policy and regulation to help strengthen the sector. These changes include strengthening prudential norms, enhancing the payments system and integrating regulations between commercial and co-operative banks. However, the cost of intermediation remains high and bank penetration is limited to only a few customer segments and geographies. While bank lending has been a significant driver of GDP growth and employment, periodic instances of the failure of some weak banks have often threatened the stability of the system. Structural weaknesses such as a fragmented industry structure, restrictions on capital availability and deployment, lack of institutional support infrastructure, restrictive labor laws, weak corporate governance and ineffective regulations beyond Scheduled Commercial Banks (SCBs), unless addressed, could seriously weaken the health of the sector. Further, the inability of bank managements (with some notable exceptions) to improve capital allocation, increase the productivity of their service platforms and improve the performance ethic in their organisations could seriously affect future performance.

The latest report by S&P credit rating agency says that Indian banking sector's growth will remain high. Despite intense competition and high inflationary pressures, India's banking sector will continue to show high growth owing to the country's strong economic expansion, credit rating agency Standard & Poor's (S&P) said. "Growth in India's banking sector will remain high, bolstered by sound economic growth prospects... We expect credit growth of about 20 per cent in the next fiscal year. The growth in banking would happen despite high domestic inflation and intense competition in the sector. The ratings agency said that India's banking sector had weathered the global financial slowdown on the back of a robust economy, a stable retail deposit base and a prudent regulatory environment. However, S&P said that the asset quality of the Indian banking sector came under some pressure in the fiscal year ended March 31, 2010. "The gross non-performing loans (NPLs) for our portfolio of rated Indian banks increased to 2.5 per cent as of March 31, 2010, from 2.2 per cent a year ago. This was in line with our expectations, however, that the increase in NPLs was contained by the quick economic recovery, modest leverage and low sectoral concentration in the banks' loan books. Besides this, the banks had low exposure to sensitive sectors. The NLPs were also reined in because of the one-time dispensation by the Reserve Bank to restructure loans without classifying them as NPLs (on meeting certain criteria)

INNOVATIVE BANKING SERVICES

The Indian banks are changing towards modern banking system. Modernization in banking is changing banking services, products and operational methods of banking. Traditional banking system in depends up on man force but modern banking is partially or totally machine and technology based banking. All these developments are lead to facilities to customers delight as well as operational efficiency of banks and reducing operational expenses of banking services. Information technology (IT) revolution in the Indian economy has made steady inroads into the banking institutions and has brought about a significant change in many aspects in the form of computerization of transactions and new delivery channels such as Internet Banking, Phone Banking, ATMs, EFT, ECS and EDI etc. With migration of traditional paper-based funds movements to quicker and more efficient electronic mode, funds transfers have become easy and efficient to perform. After computerisation of banking in India much more of banking services rendered by banks in India these are as follows; A. Wireless Banking, Online Banking or Internet Banking

Wireless banking/ online banking is a delivery channel that can extend the reach and enhance the convenience of Internet banking products and services. Wireless banking occurs when customers access a financial institution's network using cellular phones, pagers, and personal digital assistants through telecommunication companies wireless networks. It uses the Internet as the delivery channel by which to conduct banking activity, e.g. transferring funds, paying bills, viewing checking and savings account balances, paying mortgages, and purchasing financial instruments and certificates of deposit. Online banking usually offers such features as: o import data in a personal finance program such as Quicken or Microsoft Money checking and savings accounts, or to another customer's account Electronically investment purchase or sale of securities by D-Mat Account ts account aggregation to allow the customers to monitor all of their accounts in one place whether they are with their main bank or with other institutions.etc. B. Core Banking or Centralized Banking Core banking is a term used to describe a service provided by a group of networked bank branches. Bank customers may access their funds from any of the member branch offices. Core banking consists of a networking process by which the servers of different branches of a bank are joined to a common server and henceforth an account holder may access, deposit, and withdraw money from his/her account from any of the branches of the bank. In 21st United States, core banking has become common place. Today 67.7 % of public sector bank branches are all branches of private and foreign banks are under core banking solution in India. C. Electronic Authentication and Electronic Signature

The banks are now using technology for the proper identification of customers identity. In the era of technology based banking operation verifying the identities of customers and authorizing e-banking activities are integral parts of e-banking services. Since traditional paper-based and in-person identity authentication methods reduce the speed and efficiency of electronic transactions, financial institutions have adopted alternative authentication methods. The latest option digital (electronic) signatures for generating and identification of customers signature is best option within the electronic banking platform. D. BANKNET BANKNET is a internet based communication network backbone. It provides speed of financial transaction. At present, seven centers viz. Mumbai, Delhi, Calcutta, Madras, Nagpur, Bangalore and Hyderabad. Set up in 1991 by the RBI, this backbone is meant to facilitate transfer of inter-bank (and inter-branch) messages within India by Public Sector banks who are members of this network. More centres (like Pune, Ahmedabad, Kanpur, Lucknow, Chandigarh, Kochi, Jaipur, Bhopal, Patna, Bhubaneshwar, Thiruvananthapuram, Guwahati, Panaji Jammu etc) are being brought on the network. E. INFINET-Indian Financial Network The 'INFINET' - Indian Financial Network is a satellite based wide area network using VSAT (Very Small Aperture Terminal) technology set up by the RBI in June 1999. The hub and the Network Management System of the INFINET are located in the Institute for Development and Research in Banking Technology, (IDRBT) Hyderabad. Among the major applications identified for porting on the INFINET in the initial phase are e-mail, Electronic Clearing Service - Credit and Debit, Electronic Funds Transfer and transmission of Inter-city Cheque Realization advices. Later, other payment system related applications as well as Management Information System (MIS) applications are proposed to be operationalized. F. Indian Banks and S.W.I.F.T

All Indian public sector banks are part of the international financial messages communication network, namely, Society for Worldwide Inter-bank Financial Telecommunication (S.W.I.F.T). The S.W.I.F.T provides reliable and expeditious telecommunication facilities for exchange of financial message all over the world. The gateway is in Mumbai and efforts are on to other cities through leased lines/public data network. G. Electronic Data Interchange (EDI) EDI is a computer-to-computer transfer of details of commercial or administrative transactions using an agreed protocol and standard data structure. EDI standards have been developed in respect of specific messages for transmission of business transactions which are electronic equivalents of commercial invoices, purchase orders, transport bookings and payment instructions etc. H. Telephone banking, Mobile Banking and SMS Banking

Telephone banking is specific provision of banking services over the telephone. It allows customers to perform transactions over the telephone. Most telephone banking use an interactive voice response (IVR). Mobile Banking is the hottest area of development in the banking sector and is expected to replace the credit/debit card system in future. Most of banks are providing SMS alert facility to their customers. Facility of SMS services SMS banking is becomes very much safe and useful in recent days. I. MICR Clearing MICR (Magnetic Ink Character Recognition) is a character recognition technology adopted mainly by the banking industry to facilitate the processing of cheque. The process was demonstrated to the American Bankers Association in July 1956, and it was almost universally

employed by 1963. MICR characters are printed with a magnetic ink or toner. Magnetic printing is used so that the characters can be reliably read into a system, In India MICAR Introduced in 1987 in the four Metros, the MICR Clearing is now in operation in 14 centers (HYDERABAD, BANGLORE, AHMEDABAD, KANPUR, JAIPUR, NAGPUR, BARODA, PUNE, GAUHATI, TRIVANDRUM) and is proposed to be extended to a total of 22 centers where volume of clearing transactions is large. J. Automated Clearing House The Automated Clearing House (ACH) is an electronic banking network operating system. ACH processes large volumes of both credit and debit transactions which are originated in batches. Within the Rules and regulations governing the ACH network are established by the Reserve Bank of India by the help of the State Bank of India. K. Credit card and Debit Cards

A credit card system is a type of retail transaction settlement and credit system, named after the small plastic card issued to users of the system. In the case of credit cards, the issuer lends money to the consumer. Credit cards are become very popular in India with the introduction of foreign banks in the country. A debit card is a plastic card which provides an alternative payment method to cash when making purchases. Debit cards are accepted at many locations, including grocery stores, retail stores, gasoline stations, and restaurants. Its an alternative to carrying a checkbook or cash. There are currently two ways that debit card transactions are processed: online debit cards and offline debit cards. Online debit cards require electronic authorization of every

transaction and the debits are reflected in the users account immediately. Offline debit cards have the logos of major credit cards (e.g. Visa or MasterCard) or major debit cards (e.g. Maestro) and are used at point of sale like a credit card. This type of debit card may be subject to a daily limit, as well as a maximum limit equal to the amount currently deposited in the current/checking account from which it draws funds.

L. RTGS (Real Time Gross Settlement System) Real Time Gross Settlement (RTGS) is a comprehensive secured on line settlement solution, set up, operated and maintained by Reserve Bank of India to enable funds settlement across banks in the country on real time basis to minimize costs and maximize benefits, increase velocity of funds-flow both inter- city and interbank, reduce credit risk, increase transparency of payments and better liquidity management. RTGS is managed by RBI. In India RTGS System has been implemented since March 26, 2004. M. Electronic Clearing Services (ECS) ECS Scheme operated by the RBI since 1996-97, it helps to make payment from a single account at a bank branch to any number of accounts maintained with the branches of the same or other banks. This is the most useful mode of payment of dividend / interest/pension/refund etc. The clearing and settlement activities are dispersed through 1,047 clearing houses managed by RBI, the State Bank of India and its associates, public sector banks and other institutions. N. Electronic Funds Transfer (EFT) & Special Electronic Funds Transfer EFT System hosted and operated by the RBI, permits transfer of funds, unto Rs. 5 lakh from any account at any branch of any member bank in any city to any other account at any branch of any member bank in any other city. This system utilizes the Service Branches of the member banks and the nodal offices of RBI. RBINET is the conduit for the flow

of funds. The Reserve Bank of India acts as the service provider as well as regulator. A special EFT (SEFT) was introduced in April 2003 covering about 3000 branches in 500 cities. This has facilitated same day transfer of funds across accounts of constituents at all these branches.

O. Automated Teller Machine (ATM)

The first bank to introduce the ATM concept in India was the Hong Kong and Shanghai Banking Corporation (HSBC) in the year 1987. Now, almost every commercial bank gives ATM facilities to its customers. SBI is following the concept of 'ATMs in Quantity. The Corporation Bank has the second largest network of ATMs amongst the Public Sector Banks in India. Todays all Public Sector Banks are taking the installation of ATMs seriously for Indian market. They are either setting up their own ATM centers or entering into tie-ups with other banks. Since April 2009 access in any ATM machine is free of charge it is the great opportunity to any ware banking in India. P. Electronic Bill Payment EBP can attract customers due to the faster and efficient bill payment mechanism of the banking in India. Customers can access their financial information more easily and create a more intimate relationship with the customer and promote and deliver other online products and services. Most of Indian banks are trying setups an EBP portal. ICICI has already started a portal called BillJunction.com. Banks are planning to use the Net for payment of utility bills. They are entering into tie-ups with utilities like MTNL, AirTel, Orange, and BPL Mobile etc. Right now, a customer who's received a bill in the physical form logs into the network in order to make an online payment. In the future, these bills will be sent to customers through the Net.

E-banking in India: Major Concerns

1) In India, there is a risk of the emergence of a digital divide as the poor are excluded from the use of the internet and so from the financial system. 2) Even today, the operational environment for public, private and foreign banks in the Indian financial system is quite different. For PSBs, the major problems are in the form of security risks, network downtime, scarcity of trained personnel, expensive system upgrades and recurring costs given the massive scale of their current operations . 3) Confidentiality, integrity and authentication are very important features of the banking sector and were very successfully managed the world over in pre-internet times. Communication across an open and thus insecure channel such as the internet might not be the best base for bank-client relations as trust might partially be lost. 4) E-banking has created many new challenges for bank management and regulatory and supervisory authorities. They originate not just from increased potential for cross border transactions but also for domestic transactions based on technology applications which raise many security related issues. 5) There are some serious implications of international e-banking. It is a common argument that low transaction costs potentially make

it much easier to conduct cross-border banking electronically. For many banks, cross-border operations offer an opportunity to reap economies of scale. But cross-border finance also needs a higher degree of cross-border supervision. Such cooperation may need to extend to similar supervisory rules and disclosure requirements (for efficiency and to avoid regulatory arbitrage) and some harmonising of legal, accounting and taxation arrangements. The real question here is whether India at the present juncture is adequately prepared to face the consequences of cross border ebanking 6) There is no commercial bank in India, which has exclusively specialised in the small business segment. SMEs in India have generic problems like the inability to provide quality data, to exhibit formal systems and practices and the lack of asset cover. This has created unwillingness in banks to undertake large-scale lending to SMEs.

EMERGING ISSUES: M-BANKING

New techniques brings with it some issues, if these issues are resolved efficiently then that technology can prove boon for that area. M-banking is not an exception. It has also bring with it some issues, like awareness regarding M-banking, covering rural and semi-urban area under M-banking, widening the scope of M-banking, transparency and security. These issues must be tackled very carefully and wisely to compete in the emerging global order.

CHALLENGES AHEAD:-

(1) The ability to adopt global technology to local requirements: An adequate level of infrastructure and human capacity building are required before developing countries can adopt the global technology for their local requirements. For example, the review of the migration plan of Society for Worldwide Interbank Financial Telecommunications (SWIFT) to the internet shows that to date full migration has not occurred in many developing countries due to the lack of adequate infrastructure, working capital, and required technical expertise. Broadly accepted e-payment systems are another such example. Many corporates and consumers in some developing countries either do not trust or do not have access to the necessary infrastructure to be able to process epayments.

(2) The ability to strengthen public support for e-finance: Historically, most e-finance initiatives in developing countries have been the result of cooperative efforts between the private and public sectors. For example, Singapores successful Trade Net system was a government-sponsored project. If the public sector does not have the

necessary means to implement the projects it is essential that cooperative efforts between public and private sectors, along with the multilateral agencies like the World Bank, be developed to facilitate public support for e-finance related initiatives. (3) The ability to create a necessary level of regulatory and institutional frameworks: The lack of regulatory frameworks, trust, security and privacy standards, high trade barriers, customer and investor protections impede progress in implementing e-banking initiatives on a larger scale in many developing countries. (4) The ability to mainstream small and medium scale enterprises (SMEs) towards e-banking: The availability of and access to quality data and banking information is required for SMEs in developing countries to move towards e-banking. Similarly, on-line credit information will enhance SMEs ability to secure financing 5) Customer Satisfaction: Today in sector customers are more value oriented in their services because they have alternative choices in it. So that each and every bank have to take care about fulfill of our customers satisfaction. 6) To provide several personnel services: The preset times demanded that banks are to provide several services for which they have to expanse in service, social banking with financial possibilities, selective up gradation, computerization and innovative mechanization, better customer services, effective managerial culture, internal supervision and control, adequate profitability, strong

organization culture etc. Therefore banks must be able to provide complete personal service to the customers who comes with expectations.

7) Nonperforming assets (N.P.A): Nonperforming assets are another challenge to the banking sector. Vehicle loans and unsecured loans increases N.P.A. which terms 50% of banks retail portfolio was also hit due to upward movement in interest rates, restrictions on collection practices and soaring real estate prices so that every bank have to take care about regular repayment of loans. 8) Competition: The nationalize banks and commercial banks have the competition from foreign and new private sector banks. Competition in banking sector brings various challenges before the banks such as product positioning, innovative ideas and channels, new market trends, cross sellings ad at managerial and organizational part this system needs to be manage, assets and contain risk. Banks are restricting their administrative folio by converting manpower into machine power i.e. banks are decreasing manual powers and getting maximum work done through machine power. Skilled and specialized man power is to be utilized and result oriented targeted staff will be appointed. 9) Managing Technology: Developing or acquiring the right technology, deploying it optimally and then leveraging it to the maximum extent is essential to achieve and maintain high service and efficiency standards while remaining cost effective and delivering sustainable return to shareholders. Early

adopters of technology acquire significant competitive advances Managing technology is therefore, a key challenge for the Indian banking sector.

10) Other Challenges: a) Coping with regulatory reforms b) Development of skill of bank personnel c) Customer awareness and satisfaction d) Corporate governance e) Changing needs of customers f) Keeping space with technology up gradation g) Lack of common technology standards for mobile banking h) Sustaining healthy bottom lines and increasing shareholders value i) Structural changes j) Man power planning

CONCLUSION
All these developments in Indian banking are says that, the Indian banks are moving towards modern banking changing a face of traditional banking of Indian economy. Indian banks also trying to Univerlisation of banking products and services to one stop banking shop for customer delight, but comparatively private and foreign banks existing in Indian economy are having a higher level of modernization and those providing numbers of modern services to their customers. In India there is a major risk of the emergence of a digital divide as the poor are excluded from the internet and so from the financial system. Even today, the operational environment for public, private and foreign banks in the Indian financial system is quite different. Though there has been higher acceptance of technology by public sector banks, they are at a different level in the computerisation spectrum as compared to private and foreign banks. This has endangered their position in the immediate period due to the lack of adequate systems for customer and investor protection. PSBs are more susceptible to breaches of security and to disruptions in the systems availability and hence to reputational risk. Ebanking in India has also created many new challenges for bank management and regulatory authorities, which originate from increased potential for cross border transactions and lack of adequate cross border supervision. Given the importance of the SMEs in India, there is a strongly felt need to mainstream this segment towards e-banking. But currently there is no commercial bank in India that has exclusively specialised in this segment and SMEs in India continue to have generic problems like inadequate quality data, asset covers, etc. However, there are ways to overcome these obstacles and exploit trends in e-banking to derive the desired benefits. As regards the problem of a digital divide,

there is a rich international experience from which India can learn many lessons and include the poor within the net of e-banking. As regards the PSB situation, they can rapidly change their work environment by attracting young specialists in critical functional domains and by creating a positive work culture that has all employees supporting organisational goals. For the security issues involved in e-banking, risk management principles recommended by the BIS should be implemented by PSBs on an urgent basis. Their board of directors and senior management should regularly review and approve key aspects of the security control process. The top management should ensure that their staff members have the relevant technological expertise to assess potential changes in risks. For this, they should accord a high priority to investment in staff training and technological infrastructure. As far as possible, PSBs should avoid contracting out operations to service providers, which makes them vulnerable to problems of these service providers. In the process of adoption of new technology, a major role has to be played by the internal banking experts who are not necessarily the technocrats. As regards the problem of selection of appropriate technology, PSBs in India can learn lessons not just from international experience but also from the mistakes made by domestic private players so as to avoid wastage. In the regulatory arena, in addition to aspects like privacy and security, the regulator should also examine banks business plan for e-banking more closely, especially if banks have outsourced critical functions to a third party. To avoid the risks involved in crossborder e-banking, India can make a gradual beginning, first by seeking benefits in the export of remote processing services in which it has a strong comparative advantage. In the case of SME-financing, it is strongly felt that after acquiring the necessary technical capabilities, PSBs are better situated to provide value propositions to SMEs given their comparatively extensive branching networks, close relationship with business clients and a good knowledge of their needs, requirements and cash positions. Finally the banking sector will need to master a new business model by building management and customer services. Banks should contribute

intensive efforts to render better services to their customer, Nationalized and commercial banks should overcome the challenges and to get advantage of opportunities in changing banking scenario.

REFERENCES
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