In the five decades since independence, banking in India has evolved

through four distinct phases. During Fourth phase, also called as

Reform Phase, Recommendations of the Narasimham Committee
(1991) paved the way for the reform phase in the banking.
Important initiatives with regard to the reform of the banking
system were taken in this phase. Important among these have
been introduction of new accounting and prudential norms
relating to income recognition, provisioning and capital adequacy,
deregulation of interest rates & easing of norms for entry in the
field of banking.

Entry of new banks resulted in a paradigm shift in the ways of

banking in India. The growing competition, growing expectations
led to increased awareness amongst banks on the role and
importance of technology in banking. The arrival of foreign and
private banks with their superior state-of-the-art technology-
based services pushed Indian Banks also to follow suit by going in
for the latest technologies so as to meet the threat of competition
and retain their customer base.

Indian banking industry, today is in the midst of an IT revolution.

A combination of regulatory and competitive reasons has led to
increasing importance of total banking automation in the Indian
Banking Industry.

Information Technology has basically been used under two

different avenues in Banking. One is Communication and
Connectivity and other is Business Process Reengineering.
Information technology enables sophisticated product
development, better market infrastructure, implementation of
reliable techniques for control of risks and helps the financial
intermediaries to reach geographically distant and diversified
markets.

In view of this, technology has changed the contours of three

major functions performed by banks, i.e., access to liquidity,
transformation of assets and monitoring of risks. Further,
Information technology and the communication networking
systems have a crucial bearing on the efficiency of money, capital
and foreign exchange markets.
 The Software Packages for Banking Applications in India had
their beginnings in the middle of 80s, when the Banks started
computerizing the branches in a limited manner. The early 90s
saw the plummeting hardware prices and advent of cheap and
inexpensive but high-powered PCs and servers and banks went in
for what was called Total Branch Automation (TBA) Packages.
The middle and late 90s witnessed the tornado of financial
reforms, deregulation, globalization etc coupled with rapid
revolution in communication technologies and evolution of novel
concept of 'convergence' of computer and communication
technologies, like Internet, mobile / cell phones etc.

One of the important functions of Central Banks world over is to

regulate the financial system, ensure financial stability and thus
help economic growth of the nation. Different courntries have
adopted various methods for carrying the work of inspection over
their regulated entities of which two methods adopted by a
majority of nations are On-Site inspection and Off-Site inspection.
In India, a combination of on-site inspection and off-site
surveillance with bias towards the former is the current position.
Currently there are many IT based application systems which facilitate
banks, NBFCs and Urban Co-operative Banks (UCBs)
respectively to submit their periodical returns or statements to the
Reserve Bank. The development of the e-reporting system is at a
rudimentary stage, because its usage for improved decision
making has not yet become part of the work culture. The existing
off-site surveillance systems do not have authentication systems.
Thus, in addition to forwarding returns through electronic means,
a hard copy of the same is also forwarded to the Reserve Bank for
authentication of the same. Moreover the branches of the
regulated entities are not networked which lead to delay in filing
the regulatory returns to the bank concerned and thenceforth to
the Reserve Bank. Many regulated entities prefer to send their
data in magnetic media such as floppies to the Reserve Bank as
there is no mandate or regulatory compulsion about the type of IT
support level at their end. E-filing of the regulatory information
has not been achieved fully. Practicing Risk Management using
IT is also at preliminary stage. Preparedness for implementation
of Anti-Money Laundering and Basel-II norms in terms of IT
technology is at its infancy among the regulated entities. The
Centralised Data Base Management System (CDBMS) was setup
for the Banking sector as a Decision Support System but its use
has not been widespread. The use of CDBMS as a Decision
Support System (DSS) at the banks level can improve only when
the staff utilise empirical evidence for decision making in a big
way or to perform new activities such as Customer Relationship
Management (CRM).
IT spending by large corporates and SMEs (Small and Medium size
Enterprise) in India witnessed a rise during 2006, with average IT
spending being highest amongst Banking Financial services and
Insurance (BFSI) vertical followed by energy and utility
companies.

According to `Tracking of the IT adoption study 2006' released by the

National Association of Software and Services Companies
(NASSCOM) today, the rate of increase in average spending in
each of these verticals is estimated to be in the range of 12-27 per
cent, making them the likely highest spending sectors in 2007 as
well.

The 2006 study, conducted among IT heads and senior IT managers

from about 292 companies in India said the third sector which
was projected to witness a considerable hike in its IT spend was
tourism and hospitality industry.

The sector's Rs 18 crore of IT spends is projected to grow by 13 per

cent, placing it among the highest tech-spenders in India in 2007.

One of four companies in both large-scale and medium-scale

organizations indicated that their IT budgets would increase by
around 10-19 per cent during the current year. IT spends were
driven by hardware followed by application and network
software.

Nasscom also found that business continuity and risk mitigation were
the key priority areas for Chief Information Officers, and that
increasing efficiency and process productivity were the business
goal achieved through IT adoption in 2006.

Awards

The software association also announced eight winners of the

`India IT User Awards 2006'.
 The Railway Minister, Mr. Lalu Prasad, accepted Nasscom's `IT
Transformation Award' on behalf of the Indian Railways for
pioneering use of technology by the Railways.

Suprajit Engineering Ltd has bagged an award in the

Engineering category; Union Bank of India in BFSI category;
Tata Power Company for Energy and Utility category; ITC
Limited in FMCG; IT Department of Andhra Pradesh in the
Government category; Crest Animation Studios Ltd in Media &
Entertainment; Biocon in pharma category; and Indian Airlines
in tourism and hospitality category.

Information technology has

tremendously stimulated expansion of the banking networks and
range of the offered services during recent years. This paper
examines the impact of the progress in information technology on
the profit and cost efficiencies of the U.S. banking sector during
the period of 1992-2003. We test relationships between the level of
implemented technology and the banks efficiency. The research
shows a positive correlation between the levels of implemented IT
and both, assets profitability and cost savings. Although for all US
banks the efficiency has increased, the improvements of the cost
efficiency were relatively much smaller than in the case of profit
efficiency. These results indicate that introduction of the new
range of services at a bank, on one hand, generate additional
revenues, but, on the other hand, imply new, significant cost
charges. This means, broadening the range of the banking
services may lead, at some point, to a very strong increase of cost
of their processing, what put in question possibility to achieve
economy of scale by banks conducting such type of banking.
This section is fully dedicated to the Tech Banking. A decade before, it
was tough to belief that banking sector will be at a finger tip. Now
it’s possible. A mobile hand set with a connection is the only
instrument needed to make a gateway to your banking
transaction, the latest innovation of technology.
Apart from the Mobile Banking, including of SMS Banking, Net
Banking and ATMs are the major steps taken by the banks in
India towards modernisation. With all these devises and systems,
there is a complete freedom to experience.
Check your account, transfer your fund, make payments and
what more, do anything of everything what has been followed in
physical banking since ages. But these time no standing for hours
in front of cash counter and no time boundation in withdrawing
your own money.
 Net Banking is conducting ones banking or bank account online
through a computer and a net connection. The system is updated
immediately after every transaction automatically. In other words it is
said that it is updated 'on-line, real time'. Through net banking one can
check the status of his/her account, place queries and also can be
facilitated with a wide range of transactions simultaneously.

In India, the regulatory body has not yet sanctioned virtual bank, in
abroad there are banks like EGG Bank or NET Bank, which only have
a virtual presence without any physical branches.

Net Banking has three basic features. They are as follows:

The banks offer only relevant information’s about their products and
services to the mass.

Few banks provide interaction facility between the banks and its customers.

Banks are coming up with arrangements of utility payments, like telephone

bills, electricity bills, etc.

The current statistics show that hardly 10 per cent of Indian customers use
the internet for banking. Among all the facilities provided, the
maximum of them uses only for checking balance or requesting for a
Cheque book. Very few customers uses the advance interactive
services provided by the banks.

According to HDFC and ICICI Bank, 17 per cent of ICICI customers

use the Internet for banking and 10 per cent of HDFC customers
prefer it.
 Services provided by Net Banking

Queries

Check queries

See Statement

Inquire about Cheque status

Ask for a Statement

Ask for a Cheque Book

Inquire about Fixed Deposit

Inquire about TDS details

See Demat Account

Update profile

Transactions

Stop a Cheque

Pay Bills

Ask for a Demand Draft

Transfer funds between your accounts

Transfer funds to a third party

Request for a new Fixed Deposit

Shop Online

Pay Bank Credit Card Dues

Advantages of Net Banking

It removes the traditional geographical barriers as it could reach out to

customers of different countries/legal jurisdiction. This has raised the
question of jurisdiction of law/supervisory system to which such
transactions should be subjected.

It has added a new dimension to different kinds of risks traditionally

associated with banking, heightening some of them and throwing new
risk control challenges.

Security of banking transactions, validity of electronic contract, customers'

privacy, etc., which have all along been concerns of both bankers and
supervisors have assumed different dimensions given that Internet is a
public domain, not subject to control by any single authority or group
of users.

It poses a strategic risk of loss of business to those banks who do not

respond in time to this new technology, being the efficient and cost
effective delivery.
 The first bank to introduce the ATM concept in India was the Hong
Kong and Shanghai Banking Corporation (HSBC). It was in the year
1987. Now, almost every commercial banks gives ATM facilities to
its customers.

The first bank to cross 1,000 marks in installing ATMs in India is

ICICI. SBI is following the concept of 'ATMs in Quantity'. But
Private Sector Banks have taken the lead. ICICI, UTI, HDFC and
IDBI counts more than 50% of the total ATMs in India.

Public Sector Banks are also taking the installation of ATMs seriously
for Indian market. They are either setting up their own ATM centres
or entering into tie-ups with other banks. The Corporation Bank has
the second largest network of ATMs amongst the Public Sector Banks
in India.

The Indian banks have also come up with a 'Swadhan' scheme. Under
this scheme, the banks can use each other's ATM at a cost, usually Rs.
35 extra from their customers. The main feature of ‘Swadhan Card’ is
as follows:

No exchange fee charged to change an old ATM card for a Swadhan card.

Rs. 3,000 fixed as the ceiling on withdrawal.

Exception made for select customers who can withdraw up to Rs10,000.

Still, this is lower than the average withdrawal of Rs15,000 by regular
ATMs.

IBA gives banks the discretion to decide a higher maximum amount for
withdrawal.

Transactions conducted through any of the member banks appear on a bank

statement, which is given only by your own bank.

All transactions conducted in any of the member banks appear on the bank
statement, but only your own bank will provide this.
IT Environment risks
This category represents the inherent risks that arise due to the commercial
and business environment within which the computer and
telecommunication systems are operating. They are described briefly
below:

Regulatory risk - Banks must operate within a set regulatory framework.

The design and operation of a bank's computer systems must reflect
and comply with the regulatory framework in place. The greater the
extent of computerization at a bank, the greater the possibility that
changes in banking regulations will affect computer systems.
Regulatory breaches can result in diminished reputation, increased
cost of capital, limited business opportunities and ultimately loss of a
banking license. The lack of a legal framework covering electronic
transactions can increase the likelihood of disputes arising relating to
such transactions.

Strategic risk - Strategic planning in a bank sets out corporate or

departmental objectives, which help to ensure an effective and
efficient organisation now and in the future. The IT department
particularly requires strategic objectives, for without them, IT
management may not be able to produce an effective IT strategy and
deliver IT to meet the business' needs. If a bank is without an IT
strategy, the user management's requirements may not be adequately
communicated to IT Management. As a result the bank's IT resources
may not be deployed appropriately to meet its overall business
strategy.

When a bank adopts inappropriate IT strategies, this may place undue

pressure on the bank's IT resources and systems to adapt to new
business environments as new products and services come on line. A
risk exists that short term fixes may be made to the detriment of
longer term objectives and projects. In addition, business pressures
may result in system changes being implemented too quickly and
before they have been adequately tested.
The failure of IT strategies to take into account the changing needs of the
bank may lead to the current systems becoming obsolete over time,
with competitors gaining a competitive advantage through the
utilization of new more advanced and cost effective technologies
ahead of the bank concerned. A particular strategic risk that will be
present in the next few years is the risk that the banks IT systems will
not cope with the effect of the year 2000.

Organization risk - The organizational structure of a bank can determine

the effectiveness of the bank's use of IT. Where the organizational
structure fails to provide and define reporting lines and
responsibilities for the IT functions, this can lead to
misunderstandings of responsibility and a poor distribution of human
and financial resources. In addition, poor segregation of duties can
increase the risk of error and fraud within a computer and
telecommunication environment.

Location risk - As banks become computerized, they depend increasingly

upon their technology resources to achieve the business' objectives.
The technology resources are susceptible to the risks of unforeseen
and sometimes naturally occurring events. Depending on the location
of a bank's data processing equipment, it can be susceptible to natural
event such as floods and earthquakes or storms and other events such
as riots or sabotage.

Outsourcing risk - It is increasingly common for banks to outsource some

or all of their data processing and IT. While all the other types of risk
still need to be addressed, when outsourcing takes place, there are
some additional risks, which need to be considered. Without proper
management control and documentation, the responsibilities and
liabilities of supplier and customer may not be clear. Over reliance on
a single supplier increases the risks from supplier failure and may lead
to unacceptably high costs.

IT Operations risk

Operations risk relates to those risks arising from day to day transaction
processing on computer systems. The various components of IT
operations risk can be classified under the following headings:
Error risk - Errors in a computerised environment may arise from a number
of sources including errors made during the development and
amendment of computer programs, simple errors in data entry by
terminal operators, and misuse of system housekeeping tools and
sensitive facilities. These errors may affect the completeness and
accuracy of transactions, balances and management information.

Bank computer programs are often highly complex, containing typically

thousands of lines of computer coding any number of which may
contain errors. Whilst these programs may have been well tested, a
risk still exists that errors can remain inactive and dormant for a
number of years, only to appear when a certain set of circumstances
occurs. Standard software packages are also not immune from the
introduction of errors. These may occur when the packages are
"customised" by the vendor and adapted to the particular bank.

Computer fraud risk - A computerised environment provides a number of

new opportunities for fraudsters. This is primarily due to the ease with
which the fraudsters can hide their actions on computer systems and
the speed with which fraudulent activity can take place. Most banking
systems contain control facilities and produce reports designed to
assist in the prevention or detection of fraud. These too however may
be highly vulnerable to personnel with powerful privileges who can
manipulate access to computer terminals or files.

It is imperative that a bank is aware of the vulnerable points within its

system and guards against new opportunities for fraud, which may
materialise, especially during times of business and systems change.
Particular risks are also associated with the implementation of new
systems and all the security requirements of a new system should be
considered prior to a system being specified or designed. If this
exercise does not take place, the bank is at risk of the new systems
being unreliable and difficult to secure against unauthorised access or
activity.

Disclosure risk - Information held on a bank's computer and passed around

its computer network includes very sensitive financial and other data
about the bank's customers. Accidental or intentional disclosure of
this information can have a negative reputational impact on a bank,
increasing the risk of fraud against its customers of leaving the bank
open to legal charges.
Interruption risk - As banks become increasingly computerised, their
ability to be able to operate for any significant length of time without
their computer and telecommunications systems falls. The bank is
ultimately reliant upon a number of different components which
together make up the bank's technical infrastructure any one of which
may bring the system down in the event of an unexpected or planned
event occurring. A particular example will be the ability of IT systems
to cope with year 2000.

The impact of a discontinuity of computer operations can be dramatic.

Processing backlogs may build up which can take hours or even days
to process and where ATMs are being used, the impact on the
customer will be almost immediate. If computer facilities and related
infrastructures are not adequately protected and secured, the result
may be a major impact upon the continuity and even going concern of
banking operations. Inadequate continuity arrangements may result in
a loss of business, damaged reputations and loss of assets.
Product / service risks

Banks may implement technology-based products to improve operational

efficiency and effectiveness. Whilst the operational risks associated
with these products remain fundamentally unchanged, the way in
which management's design and implement a control framework to
mitigate against those risks is different. Examples of areas, which may
require additional and specific control procedures in place, include the
following - (1) Automated teller machines; (2) Money transmissions
and settlements; (3) Computer based dealing activities; (4) Derivatives
trading

There have been debates about the fact whether computerization can help in
preventing frauds. It is the Bank of Baroda which had brought out the
following benefits about how computerization can help check frauds.
As regards the question whether computerization would help Banks in
prevention and early detection of frauds, frauds can be broadly
classified as (a) frauds in non-credit areas and (b) frauds in credit
areas. In non credit areas mainly frauds relate to fraudulent
encashment of cheques, withdrawal slips, refund orders, demand
drafts, bankers cheques, misappropriation as also fraudulent
transactions in the books of branches put through by the bank's own
staff. Existing computerized system and up gradation thereof will help
in prevention as also early detection of frauds which will save bank's
precious funds as also will protect the long term interest of Bank
employees who unwittingly become prey to the design of
unscrupulous elements.

Following are the areas where full-fledged computerization will have

salutary effect in prevention and early detection of frauds.
Fraudulent encashment of cheques bearing forged signatures occur because
the passing officials do not find it convenient to verify the signature
stored in signature card cabinets requiring manual location of the
signature. If specimen signatures are captured in the computer, it will
facilitate easy verification and provide security against tampering.

Stop payment instructions received from account holders with regard to lost
cheques can be put in computer so that a caution signal would be
available whenever a lost cheque is presented for payment.

Manipulation of books by unscrupulous staff inter alia casting of wrong

balance and making wrong credit entries can be either prevented or
detected promptly because the computerization would enable
tallying / balancing of books on daily basis.

The reconciliation of transactions relating to drafts issued and paid through

computerized system would help early detection of fraudulent
payments.

Frauds relating to local clearing operations may be minimized through

prompt reconciliation of number and amount of cheques through
computerized system.

Attempts of unscrupulous staff to perpetrate frauds by raising fake credits

through inter branch accounts may be thwarted through computerized
system for reconciliation of entries between originating branches and
responding branches.

By introduction of pass book writing machines frauds relating to

misappropriation of cash receipts by cash department staff can be
prevented or early detected.

There is increasing trend in payment of lost/fake DDs presented by

fraudulent means. Computerization and continuous updating of data
related to stolen/lost drafts on the system can help in reducing this.
Officer's signatures captured in the computer can be used to verify
whether the DDs are signed by the concerned officer.
As per the guidelines of RBI, MICR clearing and Electronic Clearance
System have been introduced at Metro centers to take care of
corporate clients. The Service Branch or the main branch does the
work of intermediatory between the local branches of the bank and
clearing house. Lack of proper reconciliation of number and amount
of cheques sent by branches to the service branch / main branch and
vice versa on a daily basis has facilitated perpetration of massive
fraud. A software system for daily reconciliation, if introduced, can be
used to avert or detect such frauds.

As regards advances, in credit related frauds, it would help banks if

computerized data base of parties enjoying credit facilities from
different banks in the same centre is available to avoid double
financing, to know the state of affairs of the existing account, and to
ensure that the same persons do not enjoy facilities under different
names or firm.

Database of information of fraudsters, willful defaulters with photographs of

the proprietors / partners / directors etc will help the banking system

Quick exchange of information relating to transactions in corporate

accounts, remittances, clearance of instruments, payment of dividend
warrants, interest warrants, refund orders and reconciliation thereof,
etc. will enhance customer service and help prevent frauds.
INFRASOFT TECHNOLOGIES

PRODUCTS OFFERED

InfraSoft Technologies has banked on distinct client-experiences and global

best practices to build OMNIEnterprise, a comprehensive enterprise
wide, yet modular solution meant for Retail, Trade Finance and
Treasury Back Office automation with fully integrated electronic
delivery channels and a data warehousing based Decision Support
System. Continuous research & development keeps our product
concurrent with evolving competitive pressures banks face and
changing government regulations

SERVICES

InfraSoft Technologies has built a reputation of being a reliable software

house for Financial Institutions that takes complete responsibility of
software design, delivery, implementation and support InfraSoft
Technologies successes include Enterprise Wide Solutions, Modular
System Enhancement, Web Enabling, Specialized Professional
Services with Project Team Supplementation and complete
Application Migration & Integration.InfraSoft Technologies carry
expertise in critical domains including Private Banking, Retail
Banking, Corporate Banking, Investment Banking, Cash
Management, Bill Payments, Anti Money Laundering and Intelligent
Trading

InfraSoft Technologies - Anti Money laundering proposition

InfraSoft Technologies has through its extensive banking technology
product development expertise developed, a complete enterprise-wide
anti money laundering & counter terrorist financing solution -
OMNIEnterprise, for the specific business needs of international
banks, insurance firms, trading firms & investment banks; small,
medium and large. The international banking and financial services
market space, especially UK and USA are under significant pressure
to comply with all the new regulations with regard to AML especially
since 9/11. As you are aware, compliance failure could mean a
possibility of penalties and non-compliance legalities.

InfraSoft Technologies is recognized today as the only Indian

software company to have a global regulations compliant, end-to-end
anti money laundering solution. Our AML implementations in the
European markets with some of the leading banks in the European
Union; National Bank of Greece - the largest bank in Greece, First
International Bank of Israel - one of the top five banks of Israel,
Teachers Building Society U.K. etc., have become a focal point of
addressing how an appropriate software solution enables
comprehensive tracking of money laundering in the financial world.
We have just recently signed on our first aml client in the US banking
industry - United Overseas Bank - New York

Celent Communications Inc., a leading US based research

organization recently released a report on the burgeoning anti money
laundering software solutions market worldwide with a ranking of
global software solutions providing AML solutions titled
"Ranking the Vendors of Anti-Money Laundering Solutions".
InfraSoft Technologies has been ranked amongst the top global
vendors to watch for especially with regard to the transaction
monitoring AML solutions market.
OASys 2.0 Retail & Foreign Trade Finance Banking Solution

CORONet 2.0 On-line Net Banking Solution

CONCORDE 2.0 Cash Management System

GAINS 2.0 Executive Information System

CORal PC Banking System

CRAFT Phone & Fax Banking System

CORal Touch Touch Screen based Service Kiosk

CASH Universal ATM Interfaces & Networks Device

OTHER PRODUCT AND SERVICES

Macrobank4 by Canopus Software Laboratory

Canopus Software is a software supplier and IT service provider to banks,

credit unions, corporate treasuries and payment processing companies.
Our financial software products are built around multi-currency core
banking and comprise back-office applications and a web-based
customer interface. Specialised modules offer advanced functionality
in processing transfers, FX transactions, loans, deposits, e-currency, in
managing payment cards, etc.

Riskpro by IRIS integrated risk management

IRIS delivers unified risk and profitability analysis solutions for the banking,
insurance and corporate sectors. Our riskpro analysis platform covers
a broad scope and depth of historic, static and dynamic financial
analysis for all types of banking and investment products - from
saving accounts to exotic options. Riskpro is an integrated analysis
infrastructure covering all existing and planned financial contracts for
an organization.

Cyberbank by Technisys

CyberBank is an enterprise-class family of solutions that enables financial

institutions to rapidly deploy multi-channel financial services
applications. CyberBank provides end-users with customized
interactions, enabling institutions to forge a unique, enduring and
profitable relationship with each customer. CyberBank's core modular
design runs over SOA (Service Oriented Architecture) and permits the
bank to gradually deploy these modules to attend its customers and
businesses needs.

SWIFT Bank Payments Suite by Payment Components

SWIFT Bank Payments Suite enables any bank to consolidate its existing
fragmented SWIFT messaging systems into one SOA compatible
solution. The efficiency of the banks financial messaging can be
greatly improved by this elimination of system redundancies and
duplications. The utilization of SWIFT Bank Payments Suite to
handle all of a banks SWIFT messaging requirements leads to a
simplification of maintenance tasks, improved control and lower
operational costs.
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