Research Paper

on
Role of Banks and how they emerged after e-commerce

Dhananjay Singh Rana

A3221516231
BBALLB(H)
Amity Law School Noida
Amity University Uttar Pradesh
Abstract

Bank is an institution that accepts deposits of money from the public. Anybody who has an
account in the bank can withdraw money. Bank also lends money. The exact date of existence of
indigenous bank is not known. But, it is certain that the old banking system has been functioning
for centuries. Some people trace the presence of indigenous banks to the Vedic times of 2000-
1400 BC. It has admirably fulfilled the needs of the country in the past. However, with the
coming of the British, its decline started. Despite the fast growth of modern commercial banks,
however, the indigenous banks continue to hold a prominent position in the Indian money market
even in the present times. It includes Shroff’s, Seth’s, Mahajan’s, chettis, etc. The indigenous
bankers lend money; act as money changers and finance internal trade of India by means of
hundis or internal bills of exchange.

The main defects of indigenous banking system is that it is unorganized and do not have any
contact with other sections of the banking world. It combines banking with trading and
commission business and thus have introduced trade risks into their banking business. It does not
distinguish between short term and long term finance and also between the purposes of finance.
It follows vernacular methods of keeping accounts. It does not give receipts in most cases and
interest which they charge is out of proportion to the rate of interest charged by other banking
institutions in the country.

The objective of this paper is to measure the productive efficiency of banks in a developing
country, that is, India. The measurement of efficiency is done using data envelopment analysis.
Two models have been constructed to show how efficiency scores vary with change in inputs
and outputs. The efficiency scores, for three groups of banks, that is, publicly owned, privately
owned and foreign owned, are measured. The study shows that the mean efficiency score of
Indian banks compares well with the world mean efficiency score and the efficiency of private
sector commercial banks as a group is, paradoxically lower than that of public sector banks and
foreign banks in India. The study recommends that the existing policy of reducing non-
performing assets and rationalization of staff and branches may be continued to obtain efficiency
gains and make the Indian banks internationally competitive which is a declared objective of the
Government of India.

Key words: Banking System, Digital payment, E.banking, Risks, Commercial banks,paradox
Review of Literature
The liberalization of India's economy since 1991 has brought with it considerable development
of its financial markets and supporting legal institutions. An influential body of economic
scholarship asserts that a country's “legal origin”—as a civilian or common law jurisdiction—
plays an important part in determining the development of its investor protection regulations, and
consequently its financial development. An alternative theory claims that the determinants of
investor protection are political, rather than legal. We use the case of India to test these theories.
We find little support for the idea that India's legal heritage as a common law country has been
influential in speeding the path of regulatory reforms and financial development.

The research paper also seeks to suggests some improvements like the banking practices need to
be upgraded. Encouraging them to avail of certain facilities from the banking system, including
the RBI. These banks should be linked with commercial banks on the basis of certain
understanding in the respect of interest charged from the borrowers, the verification of the same
by the commercial banks and the passing of the concessions to the priority sectors etc. These
banks should be encouraged to become corporate bodies rather than continuing as family based
enterprises.

The analysis is based on a broad view of economic development, focusing on human well-being
and 'social opportunity' rather than the standard indicators of economic growth. India's success in
reducing deprivation since Independence has been limited. Recent diagnoses of this failure of
policy have concentrated on the counterproductive role of government regulation, and on the
need for economic incentives to accelerate the economy. India's failure to eliminate basic
deprivations has to go beyond this limited focus, and to take note of the role played in that failure
by inadequate public involvement in the provision of basic education, healthcare, social security,
and related fields. Even the fostering of fast and participatory economic growth requires some
basic social change, which is not addressed by liberalization and economic incentives.
This paper tracks the story of Indian financial sector reforms in terms of banking.In this light,
the paper looks at various performance indicators of different segments of the Indian financial
sector. In general, it is found that there has been an improvement in efficiency, competitiveness
and health of all the segments of the Indian financial sector. The paper raises some issues for the
future of this sector.

The economy of India is currently world's fourth largest in terms of real GDP (PPP). The growth
rate of Indian economy was about 7.8 per cent during tenth five year plan. It is set at 9 per cent
for eleventh plan. The industrial sector, agricultural sector and services sector have played very
important role economic development. However, the research paper considers only banking
sector and its impact on development. India is marching towards superpower in the world. In this
mission the role of banking sector is very crucial. The present research paper intends to study the
role of banks in economic development and strengthening the economy to emerge as superpower
in the world.
The methodology adopted has been research tested. Domestic banks in India are provided with a
new dimension to understand and evaluate their performance and benchmark it with global
standards. It reflects the lop‐sided growth of a few sections in the Indian banking segment.

Introduction
Financial sector plays a crucial role in the accumulation of capital and the production of goods
and services. In many developing nations, limited financial markets, instruments, and financial
institutions, as well as poorly defined legal systems, may make it costlier to raise capital and may
lower the return on savings or investments. They also help to facilitate the international flow of
funds between countries. The banking sector and the capital markets are assumed to be the
primary constituents of the financial sector. As per the Reserve Bank of India (RBI), India’s
banking sector is sufficiently capitalised and well-regulated. The financial and economic
conditions in the country are far superior to any other country in the world. Credit, market and
liquidity risk studies suggest that Indian banks are generally resilient and have withstood the
global downturn well.
Indian banking industry has recently witnessed the roll out of innovative banking models like
payments and small finance banks. 'Electronic commerce is sharing business information,
maintaining business relationships and conducting business transactions by means of
telecommunications networks'. E-Commerce is one of the most important facets of the Internet
to have emerged in the recent times. E-commerce or electronic commerce involves carrying out
business over the Internet with the assistance of computers, which are linked to each other
forming a network. To be specific ecommerce would be buying and selling of goods and services
and transfer of funds through digital communications.
At the same time online banks are emerging and seems to offer more convenience. The success
of e-banking depends upon familiarity, acceptability and accessibility of internet services to the
common man. The projected estimates indicate that the worldwide internet user population
would reach 2.6 billion by the end of 2015. Due to the phenomenal growth of IT in the last 15
years, the financial transactions through banks became easier and faster. It has also become an
integral part of people in the country. E-banking or Internet banking has become the order of the
day in reaching bank account holders through internet in office and homes. This paper will
closely deal with the aspects of Banking Sector specifically after E-Commerce.

Background and Motivation

The present research paper focuses on the condition of the banks after the e-commerce. The
motivation to choose this particular topic for our research was primarily to arrive at a consensus
when dealing with traditional banking system and e-banking which arrived with e-commerce.
We wanted to gain knowledge on how the indian population has responded to the e-banking
system and whether they still rely more on traditional banking. At the same time the issue at
hand is to critically analyse whether e-commerce like online banking has solved any economic
problem and boosted the Indian economic development.
Literature Review
In the early 1990s, several theoretical models provided contradictory conclusions on the
relevance of the financial intermediaries for promoting long-run growth1. Prior to this there had
already been discussions on whether stock markets and banks act as substitutes or complements
of each other2. This led to a series of empirical analyses trying to explore the contribution of
capital markets and banks to the economic growth. The studies in the Indian context are
important and interesting as India embarked on economic policy reforms in 1991 and a major
part of these reforms was linked to the financial system. Chakrabarty3 provides a theoretical
framework within which the empirical model is embedded. Clearly, the nature of variables used
in the model though with similar econometric technique shows based on quarterly data that for
the period 1993–2005, stock market development makes no significant contribution while the
reforms in the banking sector, particularly those related to interest rate deregulation plays a
significant role in the economic growth. Therefore from this perspective it is important to
understand the relation between the banking system and economic development.
Methodology

1
Greenwood & Jovanovic, 1990 Greenwood, J., & Jovanovic, B.(1990). Financial development, growth, and the
distribution of income. Journal of Political Economy,98, 1076–1107.10.1086/jpe.1990.98.issue-5 ; Saint-Paul, 1992
Saint-Paul, G. (1992). Technological choice, financial markets and economic development. European Economic
Review, 36, 763–781.10.1016/0014-2921(92)90056-3.
2
Boyd & Prescott, 1986 Boyd, J. H., & Prescott, E. C. (1986). Financial intermediary-coalitions. Journal of
Economic Theory, 38, 211–232.10.1016/0022-0531(86)90115-8; Stiglitz, 1985 Stiglitz, J. E. (1985). Credit markets
and the control of capital. Journal of Money, Credit and Banking, 17, 133–152.10.2307/1992329.
3
Chakrabarty, I. (2013). Financial development and economic growth in India: A post reform analysis. South Asia
Economic Journal, 11, 287–308.
The following research paper followed the interpretative methodology wherein the authors
referred to authentic government sites to obtain data base and statistics that were conducted
originally in the field of banking and finance. Further the authors referred to the previous work
done by scholars in the field. After the data collection was complete, a comparative analysis was
carried out to gauge the performance of the traditional banking system and e commerce.

BANKING SYSTEM IN INDIA

n India the banks and banking have been divided in different groups. Each group has their own
benefits and limitations in their operations. They have their own dedicated target market. Some
are concentrated their work in rural sector while others in both rural as well as urban. Most of
them are only catering in cities and major towns.

The banking system plays an important role in promoting economic growth not only by
channeling savings into investments but also by improving allocative efficiency of
resources. The recent empirical evidence, in fact, suggests that banking system
contributes to economic growth more by improving the allocative efficiency of resources
than by channeling of resources from savers to investors. An efficient banking system is
now regarded as a necessary pre-condition for growth.

The banking system of India consists of the central bank (Reserve Bank of India -
RBI), commercial banks, cooperative banks and development banks (development
finance institutions). These institutions, which provide a meeting ground for the savers
and the investors, form the core of India’s financial sector. Through mobilization of
resources and their better allocation, banks play an important role in the development
process of underdeveloped countries.

Role of Banks
Indigenous Banking:

The exact date of existence of indigenous bank is not known. But, it is certain that the old
banking system has been functioning for centuries. Some people trace the presence of indigenous
banks to the Vedic times of 2000-1400 BC. It has admirably fulfilled the needs of the country in
the past

However, with the coming of the British, its decline started. Despite the fast growth of modern
commercial banks, however, the indigenous banks continue to hold a prominent position in the
Indian money market even in the present times. It includes Shroff’s, Seth’s, Mahajan’s, chettis,
etc. The indigenous bankers lend money; act as money changers and finance internal trade of
India by means of hundis or internal bills of exchange.

Defects:

The main defects of indigenous banking are:

They are unorganized and do not have any contact with other sections of the banking world.
They combine banking with trading and commission business and thus have introduced trade
risks into their banking business. They do not distinguish between short term and long term
finance and also between the purposes of finance. They follow vernacular methods of keeping
accounts. They do not give receipts in most cases and interest which they charge is out of
proportion to the rate of interest charged by other banking institutions in the country.

Suggestions for Improvements:

The banking practices need to be upgraded. Encouraging them to avail of certain facilities from
the banking system, including the RBI. These banks should be linked with commercial banks on
the basis of certain understanding in the respect of interest charged from the borrowers, the
verification of the same by the commercial banks and the passing of the concessions to the
priority sectors etc. These banks should be encouraged to become corporate bodies rather than
continuing as family based enterprises.

What is Ecommerce?
Ecommerce, also known as electronic commerce or internet commerce, refers
to the buying and selling of goods or services using the internet, and the
transfer of money and data to execute these transactions. Ecommerce is often
used to refer to the sale of physical products online, but it can also describe
any kind of commercial transaction that is facilitated through the internet.

Whereas e-business refers to all aspects of operating an online business,

ecommerce refers specifically to the transaction of goods and services.

The history of ecommerce begins with the first ever online sale: on the August
11, 1994 a man sold a CD by the band Sting to his friend through his website
NetMarket, an American retail platform. This is the first example of a
consumer purchasing a product from a business through the World Wide
Web—or “ecommerce” as we commonly know it today

2. Why E-Commerce?
With the improvement of data innovation, the world has turned into a worldwide town and it has
acquired a transformation the managing an account industry. The banks have all the earmarks of
being on quick track for IT based items and administrations. Bank clients are ending up
exceptionally requesting and it is the broad utilization of innovation that empowers banks to
fulfill sufficiently the necessity of clients. Innovation has turned into the fuel for fast change. IT
is never again considered as insignificant exchange handling or restricted to administration data
framework. The breeze of progression, globalization, and privatization has opened new vistas in
the managing an account industry in the age of a strongly focused condition. The post-changed
saving money industry in India has been seeing a perceivable move from the merchants' to the
purchasers' market. Advance the keeping money part changes and presentation of e-saving
money has rolled out exceptionally auxiliary improvements in benefit quality, administrative
choices, operational execution, painfulness and profitability of the banks.
2.1 E-Banking

4
E-keeping money is one of the developing patterns in the Indian managing an account and is
assuming an exceptional part in fortifying the saving money area and enhancing administration
quality. The saving money segment in India has presented E-managing an account in a staged
way. Outside banks are the pioneers in e-keeping money, private banks presented it bigly and
open segment banks are currently change from customary managing an account to E-Banking. E-
managing an account encroaches on operations of keeping money in various diverse ways. It has
empowered the banks to deal with the installments electronically and between bank settlements
quicker and in expansive volumes. There is increment in consumer loyalty level, lessening in
cost of managing an account operations, expanded profitability and in that capacity there is a

4
Image Source: Malhotra and Singh (2006)
colossal extension for Indian banks to augment their E-saving money administrations which
could upgrade their aggressiveness. Further, new innovation has quickly modified the customary
methods for doing keeping money business. Clients can see the records, get account
proclamations, exchange reserves, and buy drafts by simply making a couple of key punches.
Accessibility of ATMs and plastic cards, EFT, electronic clearing administrations, web saving
money, versatile managing an account and telephone keeping money; to a substantial degree stay
away from clients going to branch premises and has given a more extensive scope of
administrations to the clients
2.2 Money Saving and Deregulation
The most recent decade has seen an extraordinary change in the monetary and saving money
condition everywhere throughout the world. With the monetary and money related part changes
presented in the nation since mid-1990s, the working condition for banks in India has
additionally experienced a quick change. The procedure of deregulation and changes in the
Indian managing an account framework brought about the formation of a productive and focused
saving money framework. Deregulation has opened up new vistas for banks to build their
incomes by broadening into all-inclusive managing an account, venture keeping money, bank
affirmation, contract financing, safe administrations, securitization, individual saving money and
so forth. An unavoidable aftereffect of globalization is that it expands the soundness of money
related framework in general and encourages worldwide rivalry. In the meantime, progression
has opened the turf to new players and brought more prominent rivalry among banks. To make
due in this opposition, the data and correspondence innovation fundamentally added to the
exponential development and benefit of money related organizations around the world.

2.3 E-banking over Indigenous Banking

Innovation is the way to move towards giving coordinated managing an account administrations
to clients. Indian banks have been late starter in the selection of innovation for mechanization of
procedures and the incorporated saving money administrations. Be that as it may, with the
worldwide appropriation of innovation, Indian managing an account is additionally at the edge of
change in perspective because of the most recent changes. There are different components which
have assumed crucial part in the Indian managing an account division for appropriation of
innovation.
1) Right off the bat, the monetary changes presented by the legislature just about fifteen
years back which brought about opening up of new vistas for banks outside the world.
Government loose guidelines and directions, and improved the procedures for the FII to
make interest in the managing an account and different areas. This brought about inflow
of expansive finances in the economy along these lines enhancing the economy all in all
and managing an account segment specifically. Because of this reason, banks need to
give such administrations, which fulfill the desire of remote speculators.
 2) Also, as a piece of changes Indian managing an account was opened for private area by
which old and new private part came into spotlight. They gave a major lift to innovation
and made a stage to utilize it for posterior and front-side operations. When they began
embracing it, this put a huge weight on the nationalized and open division banks. With
the aftereffect of such sound and focused condition, general managing an account
framework turned out to be more work inclined, effective and techno-savvy.
3) Thirdly, for the monetary advancement of a nation, framework assumes a crucial part.
Over the most recent couple of years, with the improvement of telecom part,
correspondence framework, BPOs, the whole nation turned into a solitary center point of
transmitting the data and the significant urban communities got associated with each
other, which helped in the decrease of aggregate cost. This has specifically helped banks.
Amid a similar period banks were occupied in interfacing their branches with unified
database and center managing an account arrangement by offering anyplace, whenever
administrations.
4) Fourthly, Indian programming industry has additionally affected the Indian managing an
account segment. To give astounding administrations to the clients, banks need online
entries, wide region organize (WAN), neighborhood, web, and so forth and every one of
these administrations are given by the product business to Indian managing an account at
sensible costs and at the opportune time.
5) Fifthly, a large portion of the banks in broad daylight and additionally private area have
innovation pushed from RBI to receive the adjustments with a specific end goal to
enhance the operational efficiencies, safety efforts, hazard diminishment and quality
upgradation. After progression RBI rolled out a few improvements in the essential
structure of managing an account part and set out various rules on electronic keeping
money, support exchange, center saving money arrangement, installment framework,
clearing administrations, and web saving money. In this way, it ends up plainly vital for
the banks to adjust far reaching developments in innovation.
6) Further, Indian Banking Association (IBA) has helped banks to make a gathering to
examine different issues on computerization and mechanization of procedures which
additionally resolve the issue of adjustment. This change by one means or another
influences the HR of the banks as there is an adjustment in their working hours, preparing
time and IBA made an exceptionally helpful condition to determine the issue specifically.
7) Last yet not the slightest one is the pretended by Central Vigilance Commission for the
help of branch computerization by issuing the mandate measures for speeding the branch
computerization process. This issue was straightforwardly identified with enhance the
cautiousness organization in the banks. This aides in enhancing the automation procedure
and to make strict move for the banks, wherever required.

All the above variables prompted change in the Indian managing an account part, and with the
progression and appropriation of innovation a considerable measure of changes have been made
in installment framework and saving money framework all in all. This development has changed
the way banks convey their administrations utilizing advances and electronic modes. Presently
banks can achieve their clients anyplace, whenever; and clients can get moment access to their
records from any side of the globe whenever. With expanding rivalry the clients are likewise
ending up additionally requesting. To live up to clients' desires banks should offer extensive
variety of administrations like ATMs, phone managing an account, versatile saving money and
so forth by overhauling their branches. The way to draw in and hold the clients lies in productive
operators

2.3.1 Electronic Payment System

The above discussion shows that by early 90s MICR computerized cheque clearing operations
at 4 metropolitan cities were introduced. However, the volume in cheque clearing continued to
follow an upward trend and also creating a pressure on the existing workflow processes. Most of
the items in clearing consist of paying interest/ dividend to the beneficiaries, and real
beneficiaries were not getting that due at all.
So, in all the cases such a system was needed that would
(1) decrease the value of paper instruments in MICR clearing,
(2) improve customer service by ensuring prompt and secure interest/ dividend to the
beneficiaries. Such a system was needed which was to be cost effective, low value, greater
transparency and accuracy in handling the transaction. Further for new electronic payment
system to be attractive for the consumer and business, it should save money and reduce the cost
current system. To make e-payment system more adaptable it should be convenient, reduce the
cost and should increase the confidence of people.
On account of the recent demonetization and increased demand for cashless transactions, we
decided to shed some light on digital currency aka virtual money, digital wallets, mobile wallets
and e-Wallets.
We are already familiar with digital currency and internet based transactions, where money has
no physical form but still serves the purpose. So this trend of the cashless economy has
demanded other easy modes of payment and Reserve Bank of India (RBI) came up with prepaid
payment instruments. These instruments include smart cards, magnetic stripe cards, internet
accounts, internet wallets, mobile accounts, mobile wallets, paper vouchers and any such
instrument which can be used to access the prepaid amount.
According to RBI, the mobile wallets which are a form of prepaid payment instrument falls into
three categories,
(i) Closed
(ii)Semi-closed and
(iii) Open- These vary in their functionalities like cash withdrawal and redemption. A closed
wallet lets you pay at the merchant’s portal, a semi-closed wallet lets you pay and withdraw, and
an open wallet allows you to perform financial transactions in addition to normal functions.
Most of the digital wallets listed above are Semi-closed type and only a few are of an Open type.
The e-Wallets usually come with transaction limits, however, a user can upgrade them after KYC
verification. Most of the wallets now offer Aadhar-based e-KYC verification which is easy
and offers instant account activation/upgrade. To load money to wallets you can use your
existing debit cards, credit cards or net banking. Many wallets companies also offer cash pickups
through agents. To withdraw money or to transfer to a bank account is mostly done via IMPS –
MMID/IFSC and takes one to three days. Wallet providers like Vodafone m-pesa offer cash
withdrawals through Vodafone's M-Pesa outlets across India.

What Is a Mobile Wallet?

A mobile wallet is a virtual wallet that stores payment card information on a
mobile device. Mobile wallets are a convenient way for a user to make in-store
payments and can be used at merchants listed with the mobile wallet service
provider.

Understanding a Mobile Wallet

The business-consumer relationship is swiftly becoming digital. From e-
commerce platforms to robo-advisors, businesses are transforming the way they
operate to meet the ever-changing needs of their clients and the increasing use
of mobile phones and devices. Companies in the financial sector are emerging
that offer digital platforms and solutions and recognized as members of
the Fintech sector. These emerging companies create disruptive tools and
services that are easily accessible at a low cost. One area of the financial
industry that is rife with innovations is the payments sector. Using mobile
technology such as smartphones, tablets or smartwatches, companies and users
are adapting to online and offline transactions using devices such as a mobile
wallet.

The mobile wallet is an app that can be installed on a smartphone or it is an

existing built-in feature of a smartphone. A mobile wallet stores credit card, debit
card, coupons, or reward cards information. Once the app is installed and the
user inputs payment information, the wallet stores this information by linking
a personal identification format such as a number or key, QR code or an image
of the owner to each card that is stored.

When a user makes a payment to a merchant, the mobile app uses a technology
called near-field communication (NFC), which uses radio frequencies to
communicate between devices. NFC uses the personal identification format
created for the user to communicate the payment information to the
merchant’s POS (point-of-service) terminal. The information transfer is usually
triggered when the user waves or holds an NFC-enabled mobile device over the
store’s NFC reader.

Not all smartphones or mobile devices are equipped with NFC technology,
including the iPhone device. For iPhone users, there are alternative ways to use
their mobile wallets to make in-store payments. PayPal’s mobile wallet allows
users to make payments using their mobile phone numbers during checkout. The
phone number has to be linked to the user’s PayPal account for the transaction
to be approved. While PayPal uses phone numbers, other mobile wallets use
other personal features identifiable to the user. The LevelUp mobile wallet
uses QR codes which can be scanned at the checkout. The defunct Square
Wallet used the image of the user which could be easily verified by the teller or
attendant.

Fraudulent activities, such as identity theft, are harder to initiate with mobile
wallets. While a user’s credit card can easily be stolen or duplicated,
smartphones are not that easy to steal. A smartphone that is stolen may be hard
to access if there is an access password or fingerprint check installed. Mobile
wallets may also have encrypted keys. Mobile wallets are also useful for retail
businesses that experience high volumes of transactions per day because mobile
wallets help to reduce wait and payment times. This is a win-win for both the
customers and the business.

Because mobile wallets are a digitized version of physical wallets, almost every
valuable card stored in a physical wallet can also be stored in the mobile wallet
such as driver’s license, social security number, health information cards, loyalty
cards, hotel key cards and bus or train tickets.

Concept of Digital wallets

Digital wallets are often used interchangeably with mobile wallets. However,
while they both store payment information, they are implemented differently.
Digital wallets are mostly used for online transactions and may not necessarily be
used on mobile devices. Mobile wallets are used by people who would rather not
carry a physical wallet when making in-store purchases. For this reason, these
wallets have to be used on mobile and easy to carry platforms. Apple Pay,
Samsung Pay, and Android Pay are examples of mobile wallets that can be
installed on a hand-held or wearable device. A regular PayPal account is a form
of a digital wallet, but when it is used in conjunction with mobile payment services
and mobile devices, it functions as a mobile wallet.

DIGITAL WALLET FEATURES

● Digital wallets can be conveniently and securely used for online shopping, recharge, bill
payment, send and receive money, and offline purchases.
● Shop owners can set-up a merchant account on the wallet provider’s website or app to
accept payments digitally. These accounts have comparatively reduced transaction
charges after KYC verification.
● Wallets come with a limit of Rs 10,000 for non-KYC users (limit increased to Rs 20,000
till 30th December 2016) and up to one lakh for KYC verified users.
 ● Money can be loaded to wallets through Debit cards, Credit cards, net banking, and
receiving money from others, through pickup agents or from company/bank outlets.
● Wallet providers offer virtual and physical cards that can be used like regular bank
debit/credit cards on most online and offline stores.
● Money in a wallet can be withdrawn to one’s bank account for free up to a limit or with a
small transaction charge.
As a way to promote the adoption, wallet providers occasionally issue offers like cash back and
discounts. Using these wallets you can save money during online shopping, recharges, bill
payment and day-to-day purchases. We will now explore some of the popular e-Wallets.

BENEFITS AND OFFERS OF SOME POPULAR E-WALLETS

● Paytm – They started off as a recharge portal, but now is one of the biggest shopping
portals too. You can use Paytm Wallet to shop online, pay for recharges and bills, send
and receive money, withdraw money to a bank account and do other transactions. You
can also use Paytm Wallet to pay for your vehicle fuel, pay tolls on the highway, pay for
your food bill at restaurants and cafes and on purchases from nearby stores
and merchants.
● PayUmoney – PayU launched the e-Wallet service back in 2014. This wallet offers a key
feature, the PayUmoney buyer’s protection, which ensures that the customer gets the
purchased product or service or else we can initiate a dispute to get the refund for the
same.
● Pockets by ICICI – This is an open type e-Wallet which provides added facilities like a
savings account and internet banking. A customer can link his pockets account to other
ICICI savings accounts via the banking portal.
● PhonePe by FX Mart – A Flipkart subsidiary company and its nation’s first UPI-
based mobile payment app powered by YES bank. All you need to do is link your bank
account to the PhonePe app and make hassle-free, secure payments directly from your
bank account 24/7.
● Free Charge – A Snap deal subsidiary company offers a full-fledged digital wallet like
Paytm. You can use the Free Charge wallet to shop online, recharge your mobile and pay
bills. They also provide a virtual credit card for convenient online and offline shopping.
● Future Pay – This is a digital wallet for shopping across Future Group stores such as Big
Bazaar, Ezone and Home Town. You can load money online or offline by paying cash at
Future Group stores. The price match feature in this app helps you to save more.

Table 2.1
Number of Electronic banks

Bank Number of Banks Number of

Electronic Banks
 Private Sector Banks 22 18

New 7 7
Old 15 11

Public Sector Banks 28 27

SBI 8 8
Nationalized 19 18
Other Public Sector 1 1

All 50 45

E-Wallets in general, can be used for shopping, doing recharges, booking tickets, cabs and much
more. Some e-Wallets like Udio, Digi bank, Pockets, etc. provide virtual and physical cards
which can be used like regular bank cards on most online and offline stores. Physical cards from
Pockets, Digi bank can also be used at ATMs to withdraw money, whereas certain cards only let
you get the balance statement from ATMs.
The Centre's ambitious Digital India programmer is facing multiple challenges in successful
implementation due to lack of clarity in policies and infrastructural bottlenecks, according to a
joint report by Ascham-Deloitte. Here are five prominent challenges-

1) Regulatory roadblock
The issues pertaining to taxation and other regulatory guidelines have proved to be roadblocks in
advancing with the programmer, while contracting challenges also played a spoilsport. "Some of
the common policy hurdles include lack of clarity in FDI policies, which have impacted the
growth of e-commerce.
Transport services like Uber have had frequent run-ins with local governments due to legacy
policy frameworks which have not become attuned to the changing business landscape," it said.
2) Idle Government RFPs
Many Request for Proposals (RFPs) issued by the government are not being picked up by
competent private sector organizations since they are not commercially viable, the report added.
"The biggest challenge faced by Digital India programmer is the slow/delayed infrastructure
development. Spectrum availability in Indian metros is about a tenth of the same in cities in
developed countries. This has put a major roadblock in providing high speed data services," it
said.
3) Digital divide
The joint study observed that for Digital India to have a large scale impact on citizens across the
nation, the digital divide needs to be addressed through last mile connectivity in remote rural
areas, as currently, over 55,000 villages remain deprived of mobile connectivity.
"This is largely due to the fact that providing mobile connectivity in such locations is not
commercially viable for service providers," it added.
4) Poor connectivity
The report estimated that India needs over 80 lakh hotspots as against the availability of about
31,000 hotspots at present to reach the global level of one Wi-Fi hotspot penetration for every
150 people.
"For digital technology to be accessible to every citizen, significant efforts are needed to
customize apps and services to cater to local needs. Finding vendors who can provide such
applications has become a challenge," the report pointed out.
With the proliferation of cloud-based services like Digi Locker, data security has emerged as a
major challenge, revealed the report.
5) Proper Policy Making
To enable development of digital infrastructure, it said that a uniform (Right of Way) Row policy
across all states with a reasonable cost structure is required along with a single window
mechanism for granting Row permissions.
PPP models must be explored for sustainable development of digital infrastructure, as has been
the case for civic infrastructure projects like roads and metro.
The government should try to make additional spectrum available to telecom service providers
for deployment of high-speed data networks.
Moreover, startups need to be incentivized for the development of the last mile infrastructure and
localized services and applications, it suggested.

3. Address the spectrum issue

The first and foremost requisite for Digital India is the internet penetration. At present, this
seems to be a challenge as there is a major spectrum crunch in the country. The rate at which call
drops have been registered is disturbing and at this rate, providing seamless high-speed internet
seems to be a distant dream. Telecoms too have been complaining about tower shortages and
spectrum crunch. So, unless this issue is not addressed, it will continue to be a major setback for
PM Modi's dream of digitally empowering every Indian.

3.1 Corruption and red-tapism

Digital India has attracted generous amount of funds-- Rs4.5 lakh crore being pledged by the
companies across sector. However, corruption and lackadaisical approach is seen as a trademark
for the Indian bureaucracy. While, we all know that the initiative is being monitored by a
committee under the chairmanship of Prime Minister Modi, however, it would still be a tedious
task to execute a massive project such as this efficiently.

3.2 Efficient execution of the plan

Digital India means connecting every Indian via internet. The government needs to take care of
the minutest details of the initiative. There has to seamless coordination between different
departments in order to successfully implement the project, which is yet another humongous
task!

3.3 Protection from data hacks and security threats

The US academicians who have urged Silicon Valley leaders to be careful with PM Modi's pitch,
have a valid point to make. With information available online, how does the government ensure
that it is adequately protected from hacks and security threats? This is especially a major area of
concern as cyber experts expect wars to be cyber wars, which makes an average Indian citizen all
the more vulnerable.

"We are concerned that the project's potential for increased transparency in bureaucratic dealings
with people is threatened by its lack of safeguards about privacy of information, and thus its
potential for abuse," they said in their open letter to the technology firms. Besides, the
academicians have also raised questions about one's freedom of speech.

"As it stands, "Digital India" seems to ignore key questions raised in India by critics concerned
about the collection of personal information and the near certainty that such digital systems will
be used to enhance surveillance and repress the constitutionally- protected rights of citizens.
These issues are being discussed energetically in public in India and abroad. Those who live and
work in Silicon Valley have a particular responsibility to demand that the government of India
factor these critical concerns into its planning for digital futures," they added.

Suggestions to Improve Working

I. E-banks should create awareness among people about e-banking products and services.
Customers should be made literate about the use of e-banking products and services.
II. Special arrangements should be made by banks to ensure full security of customer funds.
Technical defaults should be avoided by employing well trained and expert technicians in
field of computers, so that loss of data can be avoided.
III. Employees of banks should be given special technical training for the use of e-banking so
that they can further encourage customers to use the same.
IV. Seminars and workshops should be organized on the healthy usage of e-banking especially
for those who are ATM or computer illiterate.
V. E-banking services should be customised on basis of age, gender, occupation etc so that
needs and requirements of people are met accordingly.

4. Conclusion

The E-banking in India will have its own advantages to both the banks and the customers. As
India is the second largest populous country with three fourth population living in rural areas,
there is a proper need to divert the efforts to the entire areas of cities as well as villages. The use
of information technology will not only reduce the costs of operation but also would be effective,
easy to maintain, speedier and highly competitive. The banks cannot remain unapproachable
from this perception of E-banking, and therefore traditional banking system should bring
appropriate changes to meet the necessities and challenges of E-banking. The challenges posed
by the Internet banking are mostly of procedural nature, which can be easily counterbalanced by
adopting suitable technological and security measures. There can be no doubt about the huge
potential and open opportunities offered by advances in technology. However, there are
prerequisites and preparations, which have to be made before the full benefits of the technology
can be harvested.
Enhanced spending on infrastructure, speedy implementation of projects and continuation of
reforms are expected to provide further impetus to growth. All these factors suggest that India’s
banking sector is also poised for robust growth as the rapidly growing business would turn to
banks for their credit needs. Also, the advancements in technology have brought the mobile and
internet banking services to the fore. The banking sector is laying greater emphasis on providing
improved services to their clients and also upgrading their technology infrastructure, in order to
enhance the customer’s overall experience as well as give banks a competitive edge. Many
banks, including HDFC, ICICI and AXIS are exploring the option to launch contact-less credit
and debit cards in the market shortly. The cards, which use near field communication (NFC)
mechanism, will allow customers to transact without having to insert or swipe.
Mr Bill Gates, Co-founder of Microsoft Corp, has stated that India will move quite rapidly to a
digital payments economy in as little as seven years, based on the introduction of digital payment
banks combined with other things like direct benefit transfers, universal payments interface and
Aadhaar.
The only limitation that the researchers felt was the individual requirement analysis or a survey
to gain sure information on the perspective of the people towards traditional or indigenous and
E-banking. Also its relations to technology, security policy of each organisation should be
studied. The study on the fraud analysis in countries having highest broadband connectivity may
throw light on new challenges in core security issues of global cardholder. To have highest
security in online transactions the research study may be done on adoption of behaviour trait of
user as one of the security metrics.
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