Internet banking represents the ultimate banking convenience. It brings the bank right to the customers desktop. With a PC and an internet connection, a customer can access his accounts, generate statements, make payments and practically perform all the tasks that are possible at a real bank branch. And he can do it anytime -- all 24 hours of the day. With this, technological upgradation of banking services has entered a new phase.

ICICI Bank was the first to launch internet banking in India through its Infinity service (www.icicibank.com) in October 97. Infinity already boasts of 1500 customers who transact their business online. For a one-time registration fee of $20 (Rs 500 for resident individuals) and an annual fee of $40 (Rs 1,000) customers can query on their accounts, generate statements, view payment schedules and also request forcheque books. Online transfer of funds is planned in the next phase. With IndusInd Bank and Citibank also clambering onto the web, public sector banks are drawing up their own plans for internet banking.

Currently a physical signature is mandatory for any transaction of funds under the Negotiable Instruments Act of the Reserve Bank of India. The act is being reviewed by a committee and digital signatures will soon be brought under its scope, according to RBI spokeswoman Alpana Killawala. Until such time, banks are likely to restrict themselves to offering only a fraction of the full gamut of internet banking services.

"We will introduce transfer of funds only when RBI comes out with a clear guideline on the subject of digital signatures," states Gautam Mudbhatakal, Vice-President (Information Systems), IndusInd Bank. The bank plans to go live with its `net.bank' service from April 15. Citibank, which launched internet banking at around the same time, is silent on whether or not it will allow transfer offunds. Citibank branches in the United States already offer internet banking with funds transfer facility. ICICI Bank currently allows request transfer of funds. An Infinity customer can send a request to transfer a certain amount from one of his accounts to another via the messaging system of the bank. Unlike E-mail which can be intercepted and abused by practically anyone, the bank's messaging system ensures confidentiality and authenticity of information. "We follow an elaborate security system with firewalls, filtering routers and encryption software," says Bhai.

This elaborate system verifies the authenticity of the customer sending the message, executes the request and sends a confirmation after the task has been completed. The customer cannot later deny he sent such a request since each customer is identified by a unique code. Although, RBI does not stipulate any guidelines in such cases, in case of dispute the bilateral agreement signed between the customer and bank is taken intoconsideration.

Unlike online transfer funds were the entire process is automated once the customer fills the online form and submits it, a request transfer is done manually. In the next phase, ICICI Bank will introduce online transfer of funds followed by issue of Letter of Credit to corporates, enquiries of bills and bill payments. "The bank will have to safeguard its own position. Where the transfer of funds is between the accounts of the same person, there is not much scope for fraud," says Killawala on RBI's stand on the subject.

Internet banking also pays rich dividends to banks. It means greater accessibility to customers at half the cost and time. A recent survey by a well-known computer magazine rated it as having the least per transaction cost compared to other channels like branch full service, telephone, and ATM-full service. It also means the bank can make a person in Madrid his customer with the same ease with which he would sell his product to someone in Mumbai. The internet means unlimitedaccess to anyone in any part of the world. And internet banking is just an extension of that.

However, it is going to be sometime before this becomes possible and both banks and customers can exploit the full potential of the net. Low PC penetration and fewer still net connections is one the biggest blocks to using internet banking as a full-fledged channel. This is especially true in India where there is one PC for every 1000 people, of which only around 80,000 have a net connection. Even new private banks, perceived to have high net worth customers, admit it is too early to for internet banking to have a significant presence in the domestic market. "No doubt PC popularity is growing in India but it will still take sometime to really catch on," says Tarook Ghosh, Assistant Manager (Planning), IndusInd Bank. Right now, the bank is primarily targetting its overseas customers with the new service.

Banks are also keen to project themselves as quick to adapt to technology and get headstart over rivals inoffering new services. But a bank which jumps onto the internet bandwagon merely to stay ahead in the race, without ensuring all security measures are in place can spell doom not just for itself but for other banks as well, warns Neeraj B Bhai, Vice-President (Information Technology), ICICI Bank.

Banks have been forced to take to technology because of rising customer expectations, and the need to remain dynamic and cost-effective in a competitive environment. "Smaller co-operative banks and private banks are the ones taking the lead in bank automation," says Kurian George of Trilogy Software. Trilogy's banking software, Cibex, has so far been implemented in around 800 bank branches. "A majority of the banks which claim to have computerised have only automated basic savings account, current account, overdraft facilities," says George.

The internet banking module of Cibex was launched a year ago but is finding takers only now. Enquires have been coming in from a whole gamut of banks including nationalisedones. State-owned Central Bank of India has already drawn up a blueprint to implement net banking but with a minor deviation. Keeping in mind the handful of net users in lndia, the bank has executed the application on its own server at its branch instead of on an internet server.

Customers with a PC and a modem but without an internet connection can still access their accounts by dialling into the bank server. The only disadvantage in this case is that the customer would have to cough up extra in STD charges if he dialling into a server in Mumbai from outside the city. "We are now getting enquiries from small co-operative banks and private banks for net banking," reveals George who is overseeing Central Bank's transition online.

Glitches and hazy regulations are apparently not a deterrent to banks racing online. The future is bound to see more of them jumping onto the internet and upgrading their systems and services as when regulations and budgetary constraints permit. Indications are a Made in Indiavirtual bank will not be long in the offing.