ExpertWriter: December 2015

AN INTERNSHIP REPORT

“AN OVERVIEW OF ONLINE BANKING SYSTEM IN BANGLADESH,

A STUDY ON NATIONAL BANK LIMITED”

Dipesh Chandra Barma

Student ID: 1103120

BBA (Major in Finance)

Department of Finance and Banking

Faculty of Business Studies

HSTU, Dinajpur.

Bachelor of Business Administration (BBA)

This report has been prepared for the Faculty of Business Studies, Hajee Mohammad Danesh Science and Technology University, Dinajpur, in partial fulfillment of the requirement for the degree of Bachelor of Business Administration (BBA) program.

Faculty of Business Studies

HAJEE MOHAMMAD DANESH SCIENCE AND TECHNOLOGY UNIVERSITY,

DINAJPUR-5200

December-2015

AN INTERNSHIP REPORT

“AN OVERVIEW OF ONLINE BANKING SYSTEM IN BANGLADESH

A STUDY ON NATIONAL BANK LIMITED (NBL)”

Dipesh Chandra Barma

Student ID: 1103120

BBA (Major in Finance)

Department of Finance and Banking

Faculty of Business Studies

HSTU, Dinajpur.

SUBMITTED TO

Supervisor

Md. Jahangir Alam Siddikee

Assistant Professor

Department of Finance and Banking

Faculty of Business Studies

HSTU, Dinajpur.

Co-Supervisor

Bilkish Banu

Lceturer

Department of Economics

Faculty of Business Studies

HSTU, Dinajpur.

Faculty of Business Studies

HAJEE MOHAMMAD DANESH SCIENCE AND TECHNOLOGY UNIVERSITY,

DINAJPUR-5200

December-2015

Letter of Transmittal

Date: 15^thDecember, 2015

Md. Jahangir Alam Siddikee

Assistant Professor

Department of Finance and Banking

Faculty of Business Studies

HSTU, Dinajpur.

Subject: Submission of Internship Report.

Dear Sir,

I am very glad to inform you that I have finally completed the internship report successfully, which was a partial fulfillment of the requirement of the requirement for the Bachelor of Business Administration program.

The topic of my internship report is “An overview of online banking system in Bangladesh, A study on National Bank Limited”. I enjoyed very much by preparing this study as well as it has increased my knowledge very much about online banking system in Bangladesh. I am undeniably thankful to you & my Department for giving me the opportunity to obtain practical skills as well as to learn how to cope with the practical situations, which is very much valuable for my future career.

Finally I assure you that I have tried my best to make a systematic and informative summary based on my practical work. If you need further clarification, I am always ready to answer your questions.

Dipesh Chandra Barma

Student No. 1103120

B.B.A. (Major in Finance)

Department of Finance and Banking

Faculty of Business Studies,

HSTU, Dinajpur.

Supervisor’s Declaration

This is to declare that Dipesh Chandra Barma, Student ID: 1103120, B.B.A. (Major in Finance), Level-4, Semester-II, Hajee Mohammad Danesh Science and Technology University, Dinajpur, has successfully completed B.B.A. Internship Program entitled on “An overview of online banking system in Bangladesh, A study on National Bank Limited” under my supervision and guidance.

Therefore, he is directed to submit his report for evaluation. I wish him success at every sphere of his life.

Md. Jahangir Alam Siddikee

Supervisor

Assistant Professor

Department of Finance and Banking

Faculty of Business Studies

Hajee Mohammad Danesh Science and Technology University, Dinajpur

Co-supervisor’s Declaration

I hereby declare that Dipesh Chandra Barma, Student ID: 1103120, B.B.A. (Major in Finance), Level-4, Semester-II, Hajee Mohammad Danesh Science and Technology University, Dinajpur, has successfully completed B.B.A. Internship Program entitled on “An overview of online banking system in Bangladesh, A study on National Bank Limited” under my supervision and guidance.

Therefore, he is directed to submit his report for evaluation. I wish him success at every sphere of his life.

Bilkish Banu

Co-supervisor

Lceturer

Department of Economics

Faculty of Business Studies

Hajee Mohammad Danesh Science and Technology University, Dinajpur

ACKNOWLEDGEMENT

Thanks to almighty God for blessing in completing the report within the scheduled time. No noble achievement can be achieved by an individual. In such a way, my report would not have been done without the sincere and utmost co-operation of some individuals to whom I am grateful and thank them the very deep of my heart.

Most of all, I would like to express my deepest sense, love, respect and affection to my honorable teacher Md. Jahangir Alam Siddikee, my respected supervisor for giving his valuable time and sincere guidance during the study period, which has greatly inspired me in preparing his report.

I would like to extend thank to H.R.D. authority of National Bank Limited who allow me to do internship on this bank. I also grateful to all kinds of officers and staffs of National Bank Limited, Dinajpur Branch by giving me time and advice to learn all banking activities and help to prepare this report.

I would like to extend thanks to all my course teachers and the department for sponsoring such an academic work. Also like to give my special thanks and greets to inmates and BBA students and others for giving me good advice, suggestions, inspirations and support.

Finally, I am indebted to my family, a permanent source of inspiration for all my words and achievements.

Dipesh Chandra Barma

Student ID. 1103120

B.B.A. (Major in Finance)

Department of Finance and Banking

Faculty of Business Studies,

Hajee Mohammad Danesh Science & Technology University, Dinajpur.

ABSTRACT

The online banking environment has grown tremendously over the past several years and will continue to grow as financial institutions continue to strive to allow customer to complete money transfer, pay bills, access critical information by online banking. During this same time, online banking has been plagued by internet criminals and fraudsters attempting to steal customer information. Phishing, pharming and other types of attacks have become well known and are widely used as a means for fraudsters to obtain information from customers and access online banking accounts. As a result, authenticating customers logging onto their online banking service has become a crucial concern of financial institution.

This report portrays at first an overview of National Bank Limited conceptual framework of online banking, phenomena of online banking, overall impact of online system, SWOT analysis, findings, recommendation and conclusion that provide clear picture of the need of enhanced authentication in online banking. It presents the main security concerns and criminal activities that are driving the need for stronger authentication, as well as showing the growth of online channel that is being driven by consumer and financial institution. This study simplifies and provides a resource for understanding the many option available when implementing enhanced authentication in the online banking environment. It provides detailed analysis of the many authentication solutions available, as well as a set of guidelines for selecting and implementing enhanced authentication, based on the learning and knowledge of industry experts and the consumer.

Table of Contents

“An overview of online banking in Bangladesh, A study on National Bank Limited”

CHAPTER-01	INTRODUCTION	Page No 01-06
1.1	Introduction of the study	02
1.2	Background of the study	02
1.3	Objectives of the Study	03
1.4	Methodology of the study	04
1.5	Scope of the report	05
1.6	Limitations of the Study	06
CHAPTER-02	AN OVEVIEW OF NATIONAL BANK LIMITED	07-21
2.1	National Bank at a glance	08
2.2	Mission	10
2.3	Vision	11
2.4	Objectives of NBL	11
2.5	Organization structure	11
2.6	Division of NBL	13
2.7	Strategic Priority	13
2.8	Corporate Slogan	14
2.9	Corporate Culture	14
2.10	Schemes	15
2.11	Online offers	15
2.12	Branches and ATMs	16
2.13	Deposits, Investment & Profit of NBL	16
2.14	Highlight of Dinajpur Branch	18
CHAPTER-03	THEORETICAL OVERVIEW OF ONLINE BANKING	22-37
3.1	Online banking	22
3.2	Objectives of Online Banking	24
3.3	Online Banking System	25
3.4	Online Banking Background	27
3.5	Main Features of Online Banking System	28
3.6	Present Scenario of Online Banking System in Bangladesh	39
3.7	Benefits of Online Banking System	33
3.8	Security of Online Banking System	34
3.9	Advantages of Online Banking	35
3.10	Disadvantages of Online Banking	36
CHAPTER-04	ONLINE SERVICES PROVIDED BY NATIONAL BANK TO ITS CUSTOMER	38-51
4.1	List of Online services	39
4.2	NBL ATM Card	39
4.3	NBL Debit Card	42
4.4	NBL Credit Card	43
4.5	NBL Power Card	46
4.6	POINT OF SALE (POS) Service	46
4.7	Check Truncation	47
4.8	Home Banking	48
4.9	RETAIL AUTOMATED CLEARING HOUSE (ACH) Service	49
4.10	NBL SMS Banking	50
4.11	Internet Banking	50
4.12	Tele-banking	51
CHAPTER-05	OVERALL IMPACT OF ONLINE BANKING SYSTEM	53-56
5.1	Traditional banking Vs. Online banking	53
5.2	Impact of Online Banking System on Customer	54
5.3	Impact of Online Banking System in Bank Industry	55
CHAPTER-06	SWOT ANALYSIS	57-59
CHAPTER-07	FINDINGS, RECOMMENDATIONS AND CONCLUSION	61-63
7.1	Findings	61
7.2	Recommendations	62
7.3	Conclusion	63
	ACRONYMS	65
	Reference	66

Chapter-01

Introduction

1.1. Introduction

Generally the word “Bank” refers to the financial institution which deals with money, receiving deposits and providing loans to the customer. “Bank” is a little word but plays a very significant role in each country for the economic development. Even it is become impossible now a day to think about a country’s economical environment excluding banking system. Whatever the countries are standing poor, less develops, developing or developed but all the countries should have the banking system. Banking system is the heart of each country’s economic body. Economic, monetary and fiscal all the policy directly or indirectly depends on banking system for its better implementation.

The commercial bank has one important characteristic that distinguishes it from other kind of financial institutions. This important distinction is that it alone can hold deposits to be drawn upon by check, it has the power to create and destroy money within limit, through the use of loans and demand deposits. Commercial bank lends money by creating demand deposits and retire loan by canceling demand deposits. The objectives of demand deposits and loan management are to maximize the performing assets as well as ensuring the optimal point of loan and advance and their efficient management. The overall success in deposits and loan management depends on the banks deposits and credit policy, portfolio of credit, monitoring, supervision and follow up of the loan and advance.

1.2. Background of the study:

Today’s business world is dynamic and competitive. Organizations are looking for talent, extrovert graduates who belong to high degree of adaptability quality. Internship program has been included to BBA curriculum for providing talent, up-to date and smart, efficient executives. Internship means gaining supervised experience.

Internship program offers an opportunity to know the environment of a particular organization. By doing this program, I have developed and refined my theoretical knowledge gained in the classroom. This program provides exciting experience of planning, culture, behavior of employee and management style of that organization, which helps me to fill the gap between theoretical and real practical world.

Theoretical knowledge does not make a person perfect. To implement the academic knowledge, practical knowledge related to it, is important. A perfect consideration between theory and practice is important in the context of modern business world. In order to resolve the dichotomy between theory and practice, Hajee Mohammad Danesh Science and Technology University arranges internship program as a partial completion of BBA program. This program is necessary for every student to complete his or her academic degree. Internship program brings students closer to the business theory and practical and thereby help them to substantiate their knowledge so that they can prepare themselves to start a successful career.

Under the internship program, every student is assigned to an organization with a view to acquire practical knowledge. After taking practical knowledge, each student is required to prepare a report on the selected organization under the guideline of his/ her assigned teacher.

As a participant in this program, I was place at National Bank Limited, Dinajpur Branch, for a period of 45 days.

1.3. Objectives of the Study:

The main objective of the internship program is to formalize me with the real market situation and help me learn how bookish concepts are used in the real market. Therefore, from the very beginning of the study I have tried my level best to conduct my internship with a view to achieve some specific objectives and I have gone across the various department of the bank to acquire some related information and functioning procedure regarding those department.

The primary objectives of this report are:

1. To acquire knowledge about the online activities of a bank in Bangladesh.

2. To examine the present status of existing online banking in Bangladesh.

3. To know the adoption of online banking in Bangladesh context.

4. To assess the existing internet banking scenario in Bangladesh.

5. To explore the prospects of internet banking in Bangladesh context.

6. To learn how to implement and use Online Banking System.

7. Realizing the importance and use of Telecommunication in Banking Sector.

8. Find out the effects of telecommunication in Banking Sector.

The secondary objectives of this report are:

1. To know the online operation of commercial banks in Bangladesh.

2. To describe the online customer services and products of NBL.

3. To analyze the barriers faced by the banks in Bangladesh

4. To suggest a supportive role in the progress of online banking system in financial sector.

5. To know how the branches are efficiently controlled centrally.

6. To identify whether all process are perfectly and effectively practiced or not.

7. To find out the sectors in which such types of problems exist.

1.4. Methodology of the study:

Methodology is a systematic procedure, which is used to solve a problem easily in a particular area. It starts which problems, makes hypothesis and conclude decision finally. If covers collection, censuring, analyzing and interpreting of data to lead decision, i e. methodology includes why a study we have been undertaken, how the problems have been defined in what way and why the hypothesis has been formulated what data have been collected and what particular method has been adopted, why particular technique of analyzing data has been used and a host of similar other questions are usually answered when we take about methodology concerning a problem or study. This report is based mainly on observations that I experienced during the internship period. Both the Secondary and Primary Sources have been used to collect data for this research paper. Apart from these, helpful information has been collected from online resources. The report is based on research methodology.

1.4.1. Collection of Data:

The study is explanatory in nature. Data have been collected from both primary & secondary sources. More than 70% data collected from bank and articles, different web sites, Wikipedia, workshop and 15% are collected from the books as well as the information provided by the competitive banks.

v Primary Sources

1. Conversation with bank employees.

2. Informal conversation with clients.

3. Personal observation

4. Performance of practical activities

5. Practical deskwork

6. Expert's Opinion

7. Direct Interviews with relevant personnel

v Secondary Sources

1. Annual report of National bank Limited

2. Different relevant text books

3. Various files, balance sheet and various documents

4. Bangladesh bank publications.

5. Web site: www. nblbd.com

1.5. Scope of the report:

This report has been prepared through extensive discussion with bank employees, clients and officers and on the information gathered from the annual report and prospectus of National Bank Limited. I have got the great opportunity to have an in-depth knowledge of the Online Banking of NBL.

1.6. Limitations of the Study:

Although I have got the full co-operation from employees, clients officers of NBL and they also gave me much time to prepare this report properly in the way of my study, I have faced some difficulties, which made my conduction of the program little hazardous.

Some of these are mentioned below:

1. It should be certainly mentioned that the time 45 days is very short to get the total view of the banking functions.

2. The officers were quite busy with their regular activities. For this reasons it was also a little problem to collect detail information from them.

3. In some cases, they could not be able to supply me any information for the reason that they have no printed documents.

4. Office secrecy was one of the most important problems. Disclosing of some information was restricted.

5. In case of secondary data collection, there was very little secondary information. There were few support books, reports, journals, etc. moreover, the branch office had very little of this information. That’s why bulk of it had to be collected from the head office.

6. As the officers were very busy with their day-to-day work, they could provide very little time.

Chapter-02

An overview of National Bank Limited

2.1. An overview of National Bank Ltd

National Bank Limited has its prosperous past, glorious present, prospective future and under processing projects and activities. Established as the first private sector bank fully owned by Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector Bank with the passage of time after facing many stress and strain. The members of the board of directors are creative businessmen and leading industrialists of the country. To keep pace with time and in harmony with national and international economic activities and for rendering all modern services, NBL, as a financial institution, automated all its branches with computer networks in accordance with the competitive commercial demand of time. Moreover, considering its forth-coming future, the infrastructure of the Bank has been rearranging. The expectation of all class businessmen, entrepreneurs and general public is much more to NBL. At present we have 184 branches under our branch network. In addition, our effective and diversified approach to seize the market opportunities is going on as continuous process to accommodate new customers by developing and expanding rural, SME financing and offshore banking facilities.

The emergence of National Bank Limited in the private sector was an important event in the Banking arena of Bangladesh. When the nation was in the grip of severe recession, the government took the farsighted decision to allow the private sector to revive the economy of the country. Several dynamic entrepreneurs came forward for establishing a bank with a motto to revitalize the economy of the country.

National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the private sector. From the very inception, it was the firm determination of National Bank Limited to play a vital role in the national economy. We are determined to bring back the long forgotten taste of banking services and flavors. We want to serve each one promptly and with a sense of dedication and dignity.

The then President of the People's Republic of Bangladesh Justice Ahsanuddin Chowdhury inaugurated the bank formally on March 28, 1983 but the first branch at 48, Dilkusha Commercial Area, Dhaka started commercial operation on March 23, 1983. The 2nd Branch was opened on 11th May 1983 at Khatungonj, Chittagong.

At present, NBL has been carrying on business through its 184 branches & Agri Branches spread all over the country. Since the very beginning, the bank has exerted much emphasis on overseas operations and handled a sizable quantum of home bound foreign remittance. It has drawing arrangements with 415 correspondents in 75 countries of the world, as well as with 37 overseas Exchange Companies located in 13 countries. NBL was the first domestic bank to establish agency arrangements with the world famous Western Union in order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the expatriate Bangladeshi nationals. This has meant that the expatriates can remit their hard-earned money to the country with much ease, confidence, safety and speed.

NBL was also the first among domestic banks to introduce international Master Card in Bangladesh. In the meantime, NBL has also introduced the Visa Card and Power Card. The Bank has in its use the latest information technology services of SWIFT and REUTERS. NBL has been continuing its small credit program for disbursement of collateral free agricultural loans among the poor farmers of Barindra area in Rajshahi district for improving their livelihood.

NBL focused on all key areas covering capital adequacy, maintaining good asset quality, sound management, satisfactory earning and liquidity. As a consequence, it was possible to a record growth of 175.51 percent with Tk. 8,809.40 million pre-tax profit in the year under review over the preceding year. The net profit after tax and provision stood at Tk. 6,860.34 million which was Tk. 2,070.47 million in the previous year registering a 231.34 percent rise. The total deposits increased to Tk. 102,471.83 million being 33.37 percent increase over the preceding year. Loans and advances stood at Tk.92,003.56 million in the year under report which was Tk. 65,129.289 million representing 41.26 percent rise over the preceding year. Foreign trade stood at Tk. 144,255.00 million in 2010 compared to Tk. 115,939.00 million, increased by 24.42 percent compared to that of the previous year. During 2010, the bank handled inward remittance of Tk. 49,145.30 million, 10.73 percent higher than that of the previous year. Return on Equity (ROE) registered a 77.84 percent rise over the preceding year.

National Bank, has now acquired strength and expertise to support the banking needs of the foreign investors. NBL stepped into a new arena of business and opened its Off Shore Banking Unit at Mohakhali to serve the wage earners and the foreign investors better than before.

Since its inception, the bank was aware of complying with Corporate Social Responsibility. In this direction, we have remained associated with the development of education, healthcare and have sponsored sporting and cultural activities. During times of natural disasters like floods, cyclones, landslides, we have extended our hand to mitigate the sufferings of victims. It established the National Bank Foundation in 1989 to remain involved with social welfare activities. The foundation runs the NBL Public School & College at Moghbazar where present enrolment is 1140. Besides awarding scholarship to the meritorious children of the employees, the bank has also extended financial support for their education. It also provided financial assistance to the Asiatic Society of Bangladesh at the time of their publication of Banglapedia and observance of 400 years of Dhaka City.

The Transparency and accountability of a financial institution are reflected in its Annual Report containing its Balance Sheet and Profit & Loss Account. In recognition of this, NBL was awarded Crest in 1999 and 2000, and Certificate of Appreciation in 2001 by the Institute of Chartered Accountants of Bangladesh.

The bank has a strong team of highly qualified and experienced professionals, together with an efficient Board of Directors who play a vital role in formulating and implementing policies.

2.2. Mission

Efforts for expansion of our activities at home and abroad by adding new dimensions to our banking services are being continued unabated. Alongside, we are also putting highest priority in ensuring transparency, account ablility, improved clientele service as well as to our commitment to serve the society through which we want to get closer and closer to the people of all strata. Winning an everlasting seat in the hearts of the people as a caring companion in uplifting the national economic standard through continuous upgradation and diversification of our clientele services in line with national and international requirements is the desired goal we want to reach.

2.3.Vision

Ensuring highest standard of clientele services through best application of latest information technology, making due contribution to the national economy and establishing ourselves firmly at home and abroad as a front ranking bank of the country are our cherished vision.

2.4. Objectives of NBL

1. To provide standard financial services

2. Profit Maximization

3. To ensure better and prompt service to respective clients by applying modern information.

4. To ensure in rising standard of professions by apply efficiency and technical knowledge

5. To ensure maximum benefit by using highest equity of the respective

2.5. Organization structure:

Organization structure plays an important role on the profitability of any organization. National bank limited is a centralized organization and operates in a. That is, its activities are designed on the basis of traditional banking business, such as credit, international division, investment, administration, and operation etc. NBL has a formal organizational structure that is highly specialized and centralized. The whole organizational hierarchy is given below-

CHAIRMAN

Hierarchy of the Bank:

AMD

DMD

SEVP

EVP

SVP

SAVP

SPO

FEO

AVP

Staff

2.6. Division of NBL

Audit & Inspection Division.
ATM Card Division
Board Secretariat
Budget & Monitoring Division.
Credit Division-1.
Credit Division.-2.
Credit Card Division.
Classified Loan Recovery Division.
Financial Administration Division.
General Banking Division.
Human Resources Division.
International Division.
Information System & Technology Division.
Law & Recovery Division.
Marketing Division.
Merchant Banking Division.
Public Relations Division.
Protocol Division.
Reconciliation Division.
System & Operations Division.

2.7. Strategic Priority

National Bank Limited has been developing and maintaining some strategic policies which are given below:

1.      To manage and operate the Bank in the most efficient manner to enhance financial performance and to control cost of fund.
2.      To strive for customer satisfaction through quality control and delivery of timely services.
3.      To identify customers' credit and other banking needs and monitor their perception towards our performance in meeting those requirements.
4.      To review and update policies, procedures and practices to enhance the ability to extend better service to customers.
5.      To train and develop all employees and provide them adequate resources so that customer needs can be reasonably addressed.
6.      To promote organizational effectiveness by openly communicating company plans, policies, practices and procedures to employees in a timely fashion.
7.      To cultivate a working environment that fosters positive motivation for improved performance
8.      To diversify portfolio both in the retail and wholesale marke.
9.      To increase direct contact with customers in order to cultivate a closer relationship between the bank and its customers.

2.8. Corporate Slogan

Their corporate slogan is "A Bank for Performance with Potential".

2.9. Corporate Culture

Corporate culture is the collective behavior of humans that are part of an organization, it is also formed by the organization values, visions, norms, working language, systems, and symbols, it includes beliefs and habits. It is also the pattern of such collective behaviors and assumptions that are taught to new organizational members as a way of perceiving, and even thinking and feeling. Organizational culture affects the way people and groups interact with each other, with clients, and with stakeholders

1. Clients come first

2.      Good sense of professional expertise and ethics
3.      Flexibility
4.      Instant Response and quick decision
5.      Using technology
6.      Train all employees to cope up with IT world

2.10. Schemes

NBL aims to satisfy all clients, regardless of how big or small they may be. Individuals are counseled on the best type of accounts suitable to them such as Current, Savings, Short Term Deposits, Fixed Deposits, Consumer Asset and Liability Products, etc.

i. Saving Deposits

ii. Current s deposits

iii. Team deposits

iv. Foreign currency Deposits

v. Monthly Income Scheme

vi. Monthly Savings Scheme

vii. Double Benefit Scheme

viii. Education Saving Account

ix. Millionaire income Scheme

2.11. Online offers

NBL offers a variety of online services regarding account information and other queries. Most of

them are being given below which will be explained in the next chapter of the report.

i. ATM (Automated Teller Machine)

ii. Credit Card

iii. Debit Card

iv. POS(Point Of Sale)

v. SWIFT(Society for Worldwide Inter-bank Financial Telecommunication)

vi. Online shopping

2.12. Branches and ATMs

NBL has 184 branches and 60 ATMs of its own and another over 1000 ATMs sharing with other banks throughout the country. It is planning to double its ATMs within next year.

2.13. Deposits, Investment & Profit of NBL

Deposits:

Deposit growth continued through expansion of branch network in urban and rural areas within the country and expansion of overseas operations to facilitate the wage-earners, vigorous marketing of innovative competitive deposit products, quality counter services. Deposit growths are shown in figure:

Investment:

The investment portfolio of the bank stood 54,885.52 million in 2014 which was 56,827.52 in 2013. With the aim of realizing the vision, the bank leveraged its business strategy during this year2014 in such a way to consolidate its market position further while the ensuring the sustainability of growth

Operating and Net Profit:

The year 2014 was another challenging year for the banking sector due to various domestic and external factors beyond the control. NBL generated operating profit of Tk. 6,722.39 million in 2014 which was Tk. 3,539.91 million in 2013. Net profit after tax registered stood at Tk. 2,660.29 million in 2014 after making provision for loan loss and taxation, which was Tk. 2,116.59 million in 2013. Increase of net profit is due to higher credit growth, better recovery performance of NBL.

2.14. Highlight of Dinajpur Branch:

National Bank Limited (NBL) Dinajpur Branch was established in 5 june 1988 as 37^th Branch. Mr Md. Abdur Rahim is the Branch manager & Senior Assistant Vice President at Dinajpur Branch and Md. Ahia Kalam, Second Manager & Senior Principal Officer of National Bank Limited in Dinajpur Branch. The respected personnel are Md. Rajib Ali, Executive Officer, Ahsan Haque, senior officer (Cash Incharge); Md. Rezwan Hossain, Junior Officer(General Banking).

General Information:

Branch Name : Dinajpur Branch

Branch Code : 37

Location of the Branch : Modern more, Dinajpur

Date of Opening of the Branch : 5 June 1988.

Branch Premises : First Floor of two storied building.

Name of Present In-charge : Md. Abdur Rahim

Branch Phone : 01819686445

Branch Email : dinajpur@nblbd.com

No of Employees : 20

v Basic Operation of NBL in Dinajpur Branch

The basic operation of NBL in Dinajpur Branch is to collect deposit and give loan. Other than that, for the industrial and business as well as social and economic development bank also perform some other activities. The overall banking functions can be divided into two broad categories, such as-

1. Micro Operation

2. Macro operation

Micro Operation

The banking operation which are directly related to clients:

1. Receiving deposits

2. Paying interest

3. Extension of credit and receiving deposits

4. Creation of credit deposits

5. Issuing cheeks

6. Issuing notes

7. Circulation of money

Macro operation

The operation not limited between the clients and the bank, rather help for the overall development of country are the Macro operation of bank-

1. Investment of capital
2. Role in economic development
3. Transmission of money
4. Safe custody of money
5. Industrial development

v Services of NBL in Dinajpur Branch

Credit card:

National Bank offer Credit Card to the employee & their clients. Through its Credit Card, National Bank Limited has not only initiated a new scheme but also brought a new life style concept in Bangladesh. Now the dangers and the worries of carrying cash money are memories of the past. Credit Card comes in both local and international forms, giving the client power to buy all over the world. Now enjoy the conveniences and advantages of Credit Card as you step into the new millennium.

NBL ATM Service

National Bank Limited has introduced ATM service to its customers in Dinajpur Branch. The card will enable to save our valued customers from any kind of predicament in emergency situation and time consuming formalities. NBL ATM Card will give our distinguished clients the opportunity to withdraw cash at any time, even in holidays, 24 hours a day and 7 days a week.

Western Union Money Transfer

Western Union is a global leader in money transfer and message services.NBL was the first domestic bank to establish agency arrangements with the world famous Western Union in order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the expatriate Bangladeshi nationals. This has meant that the expatriates can remit their hard-earned money to the country with much ease, confidence, safety and speed.

Issuance of DD, TT & PO

This Bank offers DD, TT & PO for transferring the funds from one place to another to our customer. It is called Inland Remittance. It is one kind of sources of income of the branch. Bank can issue DD, TT & PO against cash or Cheque. To issue the above we have to follow some rule & regulations.

Organizational Hierarchy of Dinajpur Branch

Assistant Vice President (AVP)

Computer Operator

Senior Principal Officer (SPO)

Executive Officer (EO)

Junior Officer (JO)

Senior Executive Officer (SEO)

Others Staff

Chapter-3

Theoretical Overview of

Online Banking

3.1 Online banking

Online banking is a system allowing individuals to perform banking activities at home, via the internet. Some online banks are traditional banks which also offer online banking, while others are online only and have no physical presence. Online banking through traditional banks enable customers to perform all routine transactions, such as account transfers, balance inquiries, bill payments, and stop-payment requests, and some even offer online loan and credit card applications. Account information can be accessed anytime, day or night, and can be done from anywhere. A few online banks update information in real-time, while others do it daily. Once information has been entered, it doesn't need to be re-entered for similar subsequent checks, and future payments can be scheduled to occur automatically. Many banks allow for file transfer between their program and popular accounting software packages, to simplify record keeping. Despite the advantages, there are a few drawbacks. It does take some time to set up and get used to an online account. Also, some banks only offer online banking in a limited area. In addition, when an account holder pays online, he/she may have to put in a check request as much as two weeks before the payment is due, but the bank may withdraw the money from the account the day that request is received, meaning the person has lost up to two weeks of interest on that payment. Online-only banks have a few additional drawbacks: an account holder has to mail in deposits (other than direct deposits), and some services that traditional banks offer are difficult or impossible for online-only banks to offer, such as traveler's checks and cashier's checks.

Online Banking is a modern computerized system of providing banking services by the banks to the clients. By using modern technologies, banks have become able to provide their existing services more quickly, more accurately and conveniently. It has created revolution in the service delivery of the banking industry. The electronic banking expert, Mr. Ellen H. Lipis said “Electronic banking systems are electronic systems that transfer money and record data relating to the transfer, electronic banking services are developing tools in the overall banking services delivery system”. Using these electronic banking systems, banks usually provide the following services:

1. Self deposit and withdrawal facilities

2. Quick transfer of fund from one bank to another with the help of Electronic Fund Transfer Systems (FETS)

3. Payment of bills, salaries and opening of Letter of Credit (L/C) and utility services while staying at home or at own chamber,

4. Conducting internal banking activities with the help of electronic systems.

3.2. Objectives of Online Banking:

From Bankers point of view:

1. Provide retail services at reduced cost through branch network

2. Reduction of administrative expenses by reducing the number of workers with the help of electronic banking

3. Reduction of volume of paper work with the help of online banking

4. Increase of income through different types of fees like Debit Card fee, Credit Card fee etc.

5. Strengthening the position in the competitive environment

6. Expanding the service in the remote areas

From Client’s point of view:

1. Receiving timely and instant information, such as:

a. Balance statement

b. Account statement

c. Transaction statement

2. Ability to deposit and withdraw of money flawlessly within short time and at lower cost

3. Advantageously making payment for the goods and services

4. Staying at home or outside, availing the facility like opening L/Cs, making investment, obtaining loan facility and above all making fund transfer with the help of electronic banking.

5. Removing the risk of carrying hand cash by ATM services

6. Securing the advantage of maintaining secrecy of the clients

7. Consumer can pay different types of utility bills without any trouble and at the same time he or she can review current market policies and position.

8. Consumers can apply for credits in case of shortage of balance

9. People can now easily buy things without going marketplace. It is quite possible to buy almost anything from home because of Online Banking System

3.3. Online Banking System:

Online banking is the one that dates back to 1995 when presidential savings bank gave their customers the option of viewing account information and performing certain transactions online. Today, online banking is huge with most every major bank offering it. There is certainly a great benefit associated with banking on the internet. One has the ability to handle finances at any time, not just during regular business hours.

Banks do not have the best hours. Many people are at work when their bank is open and get off work after their bank is closed. This makes it very difficult for these people to take care of their banking. While bank branches do have limited Saturday hours, this is usually and extremely busy time to go to the bank. Rather than waiting in long lines, we can handle our financial transactions online, any time of the day or night. Online transactions take as long as ATM transaction would thanks to the fast speed of the internet. The faster computer is, the faster transaction will be.

Also, online banking can be done anywhere in the world that offers a computer with internet access. This means if we are away from home we can still manage our bank accounts and view information. In addition, we can sign up for alerts that tell when automatic deposits or withdrawals are made, or when our accounts hit a certain balance. These alerts can be sent via email, telephone or mobile phone. Today’s advanced technology makes even makes it possible to connect to our account via mobile phone with internet access. We can even pay our bills online without ever having to write a single check or mail a single envelope.

Security is another important part of online banking history. In the early days, it may have been easy for a skilled hacker to get into bank accounts, but no more. Today’s banks have extremely sophisticated security systems that no one can crack. They use 128 bit encryption and a variety of other security methods to keep information safe. Online banking has certainly come a long way in the past ten years. With so many features and benefits, it’s no wonder so many people these days are turning to online banking as a way to managing their finances.

If we are like most people, we’ve heard a lot about online banking but probably haven’t tried it ourselves. We still pay our bills by mail and deposits checks at our bank branch, much the way parents did. We might shop online for a loan, life insurance or a home mortgage, but when it comes time to commit, we feel more comfortable working with banker or an agent we know and trust.

Online banking isn’t out to change money habits, instead, it uses today’s computer technology to give the option of bypassing the time consuming, paper-based aspects of traditional banking in order to manage finances more quickly and efficiently.

Online banking is a highly profitable channel for financial institutions. It provides customers convenience and flexibility and can be provided at a lower cost than traditional branch banking. Online banking has grown and flourished over the years, but is now facing major challenges due to the risk of phishing, data compromises and other attacks. The rises of this attacks have caused a decline in the use of online banking and has negatively affected consumer confidence in the ability of a financial institution to protect them. Consumers are questioning the safety of their money and information and are looking to banks to fix the problem. The problem has grown to the extent that consumers and the government are demanding a solution. Financial institutions must take necessary steps to protect the online accounts of their customer, the need for enhanced authentication has become evident.

3.4. Online Banking Background:

The unique service Online banking provided by banks is not today’s contribution. It hase along history of evolution and has been updated day by day with new and improved features to serve with greater facilities to the clients. The precursors for the modern home online banking services were the distance banking services over electronic media from the early 1980s. The term online become popular in the late 80s and referred to the use of a terminal keyboard and TV (or monitor) to access the banking system using a phone line. Home banking can also refer to the use of numeric keypad to send tones down a phone line with instructions to the bank. Online services started in New York in 1981 when four of the city’s major banks (City bank, Chase Manhattan, Chemical and Manufacturers Hanover) offered home banking services [1. Hassan, M.K. (2010)].

Because of the commercial failure of videotext these banking services never become popular except in France where the use of videotext was subsidized by the telecom provider and the UK, where the Pestle system was used. The UK’s first home online banking services [2. Hassan, M.K.(2008)] was set up by Bank of Scotland for customers of the Nottingham Building Society(NBS) IN 1983. The system used was based on the UK’s Pestle system and used a computer such as the BBC Micro, or keyboard connected to the telephone system and television set. The system (Known as “Home link”) allowed on-line viewing of statements, bank transfers and bill payments. In order to make bank transfers and bill payments, a written instruction giving details of the intended recipients had to be sent to the NBS who set the details up on the Home link system. Typical recipients were gas, electricity and telephone companies and accounts with other banks. Details of payments to be made were input the NBS system by the account holder via Pestle. A Cheque was then sent by NBS to the payee and an advice giving details of the payment was sent to the account holder. BACS was later used to transfer the payment directly. Stanford Federal Credit Union was the first financial institution to offer online internet banking services to of its members in October 1994.

Today, many banks use internet. Unlike their predecessors, these internet only banks do not maintain brick and mortar bank branches. Instead, they typically differentiate themselves by offering better interest rates and online banking features.

3.5. Main Features of Online Banking System

Online banking solutions have many features and capabilities in common, but traditionally also have some that are application specific. The common features fall broadly into several categories, they are as follows:

1. Transactional (e.g., performing a financial transaction such as an account to account transfer, paying a bill, wire transfer…and applications...apply for a loan, new account etc)

2. Electronic bill presentment and payment-EBPP

3. Fund transfer between a customer’s own checking and saving accounts, or to another customer’s account

4. Investment purchase and sale

5. Loan applications and transactions, such as repayment of enrollments

6. Bank statement

7. Non-transactional (e.g., online statement, check links, co-browsing, chat )

8. Financial institution administration

9. Support of multiple users having varying levels of authority

10. Transactional approval process

11. Wire transfer

12. Personal financial management support, such as importing data into personal accounting software. Some Online banking platforms support account aggregation to allow the customer to monitor all of their accounts in one place whether they are with their main bank or with other institution.

3.6. Present Scenario of Online Banking System in Bangladesh

Online banking at per international standard is yet to develop in Bangladesh. At present, several private commercial banks (PCBs) and foreign commercial banks (FCBs) offer limited services of tele-banking, internet banking, and online banking facilities working within the branches of individual bank in a closed network environment. As a part of stepping towards e-banking, the FCBs have played the pioneering role with adoption of modern technology in retail banking during the early 1990s whereas the state-owned commercial banks (SCBs) and PCBs came forward with such services in a limited scale during the late 1990s. Moreover, the banking industry as a whole, except for the four specialized banks (SBs), rushed to offer technology based banking services during the middle of the current decade. The existing form of e-banking that satisfies customer demand in banking activities electronically throughout the world are PC banking or PC home banking that include online banking, internet banking, mobile banking, and tele-banking.

PC banking or PC home banking:

PC banking refers to use of personal computer in banking activities while under PC home banking customers use their personal computers at home or locations outside bank branches to access accounts for transactions by subscribing to and dialing into the banks' Internet proprietary software system using password. PC banking or PC home banking may be categorized into two types such as online banking and Internet banking.

E- banking:

Transactions in E-banking are performed within closed network for which the customer use specialized software provided by the respective bank. International standard online banking facilities are expanding in Bangladesh. At present, 56 scheduled banks offer any branch banking facilities through their respective bank online network that provides facilities like transaction through any branch under the respective bank online network; payment against pay order or pay order encashment, demand draft encashment, opening or redemption of FDR from any branch of the same bank; remote fund transfer, cash withdrawal, cash deposit, account statement, clearing and balance enquiry within branches of the same bank; and L/C opening, loan repayment facility to and from any branch of respective bank under its own online network. Inter-bank transactions or transaction between inter bank branches are yet to expand.

Internet banking:

Internet banking refers to the use of internet as a remote delivery channel for banking services which permits the customer to conduct transactions from any terminal with access to the internet. It is the WWW through which banks can reach their customers directly with no intermediaries. Internet banking in true sense is still absent in Bangladesh. Only 7 out of 52 banks are providing some banking services via internet that include account balance enquiry, fund transfer among accounts of the same customer, opening or modifying term deposit account, cheque book or pay order request, exchange rate or interest rate enquiry, bills payment, account summary, account details, account activity, standing instructions, loan repayment, loan information, statement request, cheque status enquiry, stop payment cheque, refill prepaid card, password change, L/C application, bank guarantee application, lost card (debit/credit) reporting, pay credit card dues, view credit card statement, or check balance. The core banking activities like fund transfer to third party, cross border transactions and so on are still uncovered by internet banking offered by the scheduled banks in Bangladesh.

Mobile banking:

Mobile banking (also known as M-banking or SMS banking) is a term used for performing balance checks, account transactions, payments etc. via a mobile device such as a mobile phone. Mobile banking is most often performed via SMS or the Mobile Internet but can also use special programs called clients downloaded to the mobile device. The standard package of activities that mobile banking covers are: mini-statements and checking of account history; alerts on account activity or passing of set thresholds; monitoring of term deposits; access to loan statements; access to card statements; mutual funds/equity statements; insurance policy management; pension plan management; status on cheque, stop payment on cheque; ordering check books; balance checking in the account; recent transactions; due date of payment (functionality for stop, change and deleting of payments); PIN provision, change of PIN and reminder over the internet; blocking of (lost/stolen) cards; domestic and international fund transfers; micro-payment handling; mobile recharging; commercial payment processing; bill payment processing; peer to peer payments; withdrawal at banking agent;3 and deposit at banking agent. Despite huge prospects, only a few banks adopted mobile banking in Bangladesh during the last year.

Tele banking:

Tele banking refers to the services provided through phone that requires the customers to dial a particular telephone number to have access to an account which provides several options of services. Despite huge potential, Tele banking services have not been widened enough in daily banking activities in Bangladesh. Only four banks so far provide a few options of Tele-banking services such as detail account information, balance inquiry, information about products or services, ATM card activation, cheque book related service, bills payment, credit card service and so on. Funds transfer between current, savings and credit card account, stock exchange transactions etc are still inaccessible through Tele-banking in Bangladesh.

Prospects of e-Banking

E-banking is now a global phenomenon. Apart from the developed countries, the developing countries are experiencing strong growth in e-banking. The Bank of Thailand has created an industry payment body to involve other stakeholders, in particular from commercial banks which take leading responsibility for the development of e-payment system and technologies. Internet banking in Korea has increased at a rapid pace. Korea is also leading in online brokerage and mobile banking. In Southeast Asia, internet banking is also developing rapidly in Thailand, Malaysia, and Singapore and to a lesser extent in Philippines (Mia et. al. 2007). In Nepal, ATMs are the most popular electronic delivery channel for banking services but only a few customers are using internet banking facilities. Among others, Nepal's commercial banks have adopted Credit card, Tele-banking, and SMS-banking.

Remittance (Electronic Way)

Today’s fast changing electronic banking channels have massively improved the flow of remittance across the world. In Bangladesh, Banks have grown up relations with many international financial agencies, or intermediaries to master the inflow of remittance into the country from the expatriates working in foreign countries. A few such operators working in Bangladesh are: Western Union Money Transfer, Money Gram, and XPress Money.

Call Center

Call center is a streamlined customer interface and offers a range of banking services through its call center agents. Customers are now getting improved services at a reduced cost in an exciting manner. Available services at call center are:

Account related services:

Balance inquiry, transaction inquiry, duplicate statement, cheque book request, ATM/Debit card hot listing, and loan outstanding etc.

Product Information:

Deposit accounts, Personal loan, Savings and current accounts, Debit card, Rates and tariff Inquiry, exchange rates, lending rates, deposit rates, tariff etc.

Other Services: Complaints handling, account opening procedure, Bank Information, change request etc.

From the following figure, we can observe different phases of the banking services---

Traditional Banking

Modern Banking

Electronic Banking

3.7. Benefits of Online Banking System:

In this age of information technology, electronic communication is the cornerstone of a country for its business, every government agency and economy. Modern banks play a pivotal role in promoting economic advancement of a country. Online banking is a modern banking system that delivers the new and traditional banking products and services to the customers electronically. Electronic banking systems allow business parties or individual to pay directly or to debit accounts via telecommunication systems. It provides users, working with a home computer attached by network to their bank, with the ability to authorize payments, reconcile accounts, and access a variety of other banking services with the help of ATM (Automated Teller machine), visa card, master card, Q-cash, E-cash, Ready cash, mobile, internet etc. This paper represents the scenario of online banking in Bangladesh how it is up surging, makes our country with more state of the art facilities and also highlights some drawbacks and recommendations of overcoming the drawbacks of online banking.

In Bangladesh, the expansion of online banking is beset with several infrastructural, institutional, and regulatory constraints such as inadequate availability of reliable and secure telecommunication infrastructure, absence of a backbone network connecting the whole country, poor ICT penetration in the banking sector, lack of skilled manpower and training facilities, absence of supportive policies, guidelines, rules and regulations relating to e-transactions and the like. Despite the constraints, efforts by the Bangladesh Bank in modernizing the country's payment system and commitment by the government in building ‘Digital Bangladesh’ have brought competition among the scheduled banks to improve banking services and rapidly adopt e-banking on a wider scale. This note provides a critical overview on development of e-banking in Bangladesh and future prospects for better understanding the issue that includes concept of e-banking, present status of scheduled banks in adopting e-banking services, and prospects of e-banking in Bangladesh on the basis of current trend in developing the ICT infrastructure in the country as well as ICT penetration in the banking sector that follows some policy suggestions for BB, Govt. of Bangladesh and scheduled banks so that optimum benefit through online-banking may be obtained.

3.8. Security of Online Banking System:

We’ll have a user name and password to access our online account. Just as with any information used to access any other financial account, we should keep access codes secret. Our bank will tell what to look for—usually an icon of a locked padlock—to ensure we’re accessing our account over a secure line.

We should also beware of a scam called phishing where crooks send out e-mails that might look exactly like e-mails from our bank. These e-mails often claim that some account or personal information is needed. We’re asked to click the link and fill the information. As a hard and fast rule, never click on a link in an e-mail and the divulge account information. Whether we bank online or prefer the old fashioned way, we receive a statement every month that details transactions and account status.

3.9. Advantages of Online Banking:

Online banking is a term used to describe the process whereby a client executes banking transactions via electronic means. This kind of banking eradicates the necessity of physical movement to financial positions. This type of banking uses the internet as the chief medium of delivery by which banking activities are executed and provides greatest benefit to us.

Advantages of Online banking are:

1.   Convenience – Banks that offer online banking are open for business transactions anywhere a client might be as long as there is internet connection. Apart from periods of website maintenance, services are available 24 hours a day and 365 days round the year. In a scenario where internet connection is unavailable, customer services are provided round the clock via telephon
2.      At the touch of a button, actual time account balances and information are availed. This hastens the banking processes hence increasing their efficiency and effectiveness.
3.      Online banking allows for easier updating and maintaining of direct accounts. The time for changing mailing address is greatly reduced, ordering of additional checks is availed and provision of actual time interest rates.
4.      Friendlier rates – Lack of substantial support and overhead costs results to direct banks offering higher interest rates on savings and charge lower rates on mortgages and loans.
5.      Some banks offer high yield certificate of deposits and don’t penalize withdrawals on certificate of deposits, opening of accounts without minimum deposits and no minimum balance.
6.      Transfer services – Online banking allows automatic funding of accounts from long established bank accounts via electronic funds transfers.
7.      Ease of monitoring – A client can monitor his/her spending via a virtual wallet through certain banks and applications and enable payments.
8.      Ease of transaction – the speed of transaction is faster relative to use of ATM’s or customary banking.

3.10. Disadvantages of Online Banking:

Online banking has a greatest advantage for its users but it has also some bad sides that can affect online users.

Disadvantages of Online banking are:

Banking relationship – Customary banking allows creation of a personal touch between a bank and its clients. A personal touch with a bank manager for example can enable the manager to change terms in your account since he/she has some discretion in case of any personal circumstantial change. It can include reversal of an undeserved service charge.
Security matters – Direct banks are governed by laws and regulations similar to those of customary banks. Accounts are protected by Central Deposit Insurance Corporation.
Complex encryption software is used to protect account information. However, there are no perfect systems. Accounts are prone to hacking attacks, phishing, malware and illegal activities.
Learning – Banks with complicated sites can be cumbersome to navigate and may require one to read through tutorials to navigate them.
Transaction problems – face to face meeting is better in handling complex transactions and problems. Customary banks may call for meetings and seek expert advice to solve issues.

Chapter-04

Online services provided by National Bank to its customer

4.1. List of Online services:

Following are the online services provided by National Bank to their customers:

1. ATM Card

2.      Debit Card
3.      Credit Card
4.      Internet Banking
5.      SMS Banking
6.      Tele Banking
7.      Call Center
8.      International trade and credit card

4.2. NBL ATM Card

Among the electronic fund transfer services, ATM is the most widely used and popular. With this automated computing machine, clients can deposit or withdraw any time of 24 hours a day. With the help of this machine fund can be transferred from one account to another and loan can be repaid. This automated machine can be established at the bank’s lobby, at the clients business avenues, apartment complex, busy commercial areas, shopping centers, factories etc. through ATM service, bank can render its retail services to the clients door. Thus clients can save their time and the transactions seem to be easy to them. On the other hand, banks earn their profit by providing services at lower cost.

The facilities available at NBL ATMs include:

1. Issuance of ATM Card at the time of opening personal account

2.      Cash withdrawal facility of anytime and anywhere
3.      Cash withdrawal facility per day is BDT 500 to BDT 30,000
4.      Cash withdrawal facility per transaction is BDT 500 to BDT 20,000
5.      Maximum five transactions in a day
6.      Free balance inquiry with printing facility
7.      Free mini statement printing which displays your last 10 transactions
8.      No charge is applicable on NBL customers for transacting through NBL ATM booths

How does a customer operate ATM?

Banks supply plastic cards to their clients. Each card has its distinct number, client’s name, and signature of the client with magnetic stripe. Each client has a PIN (Personal Identification Number). During transaction, client put the card into the card input/ reader. Then ATM instructs its client to input the PIN. PIN is to be input into the machine within a specified time limit (Usually 30 to 90 seconds). If the client fails to input in due time or the PIN is wrong, the machine will take the card inside of it and the card cannot be retrieved at that time. Then clients have to go physically to the bank and get their cards if the authority is satisfied with the cause of failure.

If the PIN is correct, the machine asks the client about the type of the service. If the clients want to withdraw cash, then it asks the amount. The amount needs to be input with the numerical keyboard. After typing the amount, client will press the “Enter key” and within few seconds receive the cash, along with the card and transaction receipt and the machine became prepared for the next transaction. Clients are required to change their transaction types before the enter key. Because once the key is pressed, there is no other alternative to change the transaction mode.

Components of ATM:

An ATM mainly consists of two parts like input devices and output devices.

a) Input devices: the components of input devices of an ATM are as follows:

1. Card reader: The card reader captures the account information stored on the magnetic stripe on the back of an ATM/debit or credit card. The host processor uses this information to route the transaction to the cardholder’s bank.

2. Keypad: The keypad lets the cardholder tell the bank what kind of transaction is required (cash withdrawal, Balance inquiry etc.) and for what amount. Also, the bank requires the cardholders Personal Identification Number (PIN) for verification. Federal law requires that the PIN block be sent to the host processor encrypted form.

b) Output devices:

An ATM has following four output components:

1. Speaker: The speaker provides the cardholder with auditory feedback when a key is pressed.

2. Display Screen: The display screen prompts the cardholder through each step of the transaction process. Leased line machines commonly use a monochrome or color CRT (Cathode Ray Tube) display. Dial-up machines commonly use a monochrome or color LCD.

3. Receipt printer: The receipt printer provides the cardholder with a paper receipt of the transaction.

4. Cash dispenser: The heart of an ATM is the safe and cash-dispensing mechanism. The entire bottom portion of most small ATMs is a safe that contains the cash.

4.3. Debit Card

Debit card is one of the systems of electronic fund transfer. It is called cash card or asset card. Usually, in debit card, funds are directly debited to the clients deposit accounts. Debit cards can be explained in the following ways-

Debit card is one of type of special plastic card issued by the banks or financial institutions to the depositors, which hold magnetic coded number. The transactions can be operated as required on the basis of the recognition of the magnetic coded number by the machine. The holder of the debit card can easily operate Automated Terminal Based payment. Money can be withdrawn from deposit account and fund can be easily transferred in electronic way with this card. NBL also provides this service for its customer greater access.

4.4. Credit Card

Credit card is a popular process in retail electronic banking. Generally, if the clients have creditworthiness or have enough money in the deposit account, then the bank provides this plastic cash to the clients. In spite of having debit balance in the deposit account, a client can use this card. Generally, in a credit card, the loan account of a client is debited to reimburse the transactions conducted through the credit card. This card is used for payment of product or service or for withdrawing cash from some specific instructions.

Features of NBL Credit card:

NBL Credit Card is accepted in many merchant outlet around the world. Our wide range of merchants include hotels, restaurants, airlines, & travel agents, shopping malls and departmental stores, hospitals & diagnostic centers, jewelers, electronics & computer shops and many more.

Benefits of NBL Credit card:

	1. Dual Currency Card Facility.

	2. Lowest Rate of Interest.

	3. Lowest Card Fees. Special Discount of Card Fee *** condition applicable.

	4. You can transfer 80% amount of your Local Card Limit to any NBL A/c or have Pay Order Facility.

	5. No Excess Limit Charge.

	6. No Hidden Charges.

CREDIT CARD FEES

	CARD FEES
TYPES OF CARD	GOLD		SILVER
	OLD	NEW	OLD	NEW
International	$50.00	$35.00	$25.00	$20.00
Local	TK.2,000/-	TK.1,500/-	TK.1,200/-	TK.700/-
Dual	-	$35.00	-	$20.00

LATE PAYMENT FEES:

	LATE PAYMENT FEES
TYPES OF CARD	GOLD		SILVER
	OLD	NEW	OLD	NEW
International	$15.00	$10.00	$15.00	$10.00
Local	TK.500/-	TK.300/-	TK.350/-	TK.200/-
Dual	-	$10.00	-	$10.00

CARD REPLACEMENT FEES:

	LATE PAYMENT FEES
TYPES OF CARD	GOLD		SILVER
	OLD	NEW	OLD	NEW
International	$15.00	$15.00	$15.00	$15.00
Local	TK.500/-	TK.500/-	TK.500/-	TK.500/-
Dual	-	$15.00	-	$15.00

4.5. Power Card

NBL Power Card is the first debit card for which you don’t have to maintain any account with our any branch.

Benefits of NBL Power Card:

1. It is a Pre-paid Card.

2. Annual / Renewal Fee Tk. 200/- only

3. May be issued and refilled from RFCD/FC Account

4. Accepted at all VISA POS merchants

5. Cash withdrawal at all ATM booths bearing VISA and Q-cash logo (Except HSBC in Bangladesh).

6. Drawing of Cash:

a) Free NBL ATMs - Free of charges

b) From ATMs under Q-cash network – Tk. 10.00 per transaction

c) From other ATMs - Tk. 100 per transaction

7. Cash Withdrawal Fee (aboard)-2.00% on the cash drawn amount or US$2.00, whichever is higher.

8. Only 1% loading fee against both International and Local Power Card at the time of Refilling.

9. Yearly Tk.100 for enrollment of SMS service.

4.6. POINT OF SALE (POS) Service

Under POS service, card owner’s accounts became debit and seller’s accounts became credit for the amount of the purchased goods or services.

Taka can be transferred by two ways:

1. Seller is required to make a sales draft like credit card. Then this sales draft would debit the card owner’s account and credit the seller’s account.

2. Respective clients/financial institution/sellers account’s are to be debited or credited by transferring taka from online point of sale terminals.

Main components using in POS from the viewpoint of activities conducting by NBL:

1. Terminates of POS

2. Concentrators terminals

3. Switching centre

4. Bank computer systems

POINT OF SALE (POS) SERVICE

4.7. Check Truncation

Check truncation is a process of service where, financial institutions do not return the rejected and un-honored checks to clients. Financial institutions keep these checks with the monthly statements and provide rejected checks along with monthly statements to the clients.

Financial institutions keep rejected checks till 90 days. If the client finds any inconsistency or difference between the statement provided by the financial institutions and his/her own record, and then he/she can adjust the accounts by communicating with the institution within the “preservation period”.

4.8. Home Banking

Through developed electronic fund transfer system, National Banks can offer its financial services to the doors of customers. Banks at first launch telephone bill payments (TBP) process so that clients can enjoy banking while staying at home. TBP is a fund transfer service by which clients communicate with the financial institutions by phone and authorize them to collect their (clients') bills, because of which financial institutions debit their client's account and transfer the funds to the client directed payee account.

4.9. RETAIL AUTOMATED CLEARING HOUSE (ACH) Service

The Automated Clearing House, another feature of NBL, is the electronic network which transfers and clears funds between banking institutions on behalf of merchants and their customers.

ACH is integrated process of service by which payments of different financial institutions are cleared and exchanged in electronic way. ACH is a computer based integrated system and it is the distribution place of paperless transactions. Electronic payments are the substitutes of papers and are recorded in machine-readable from in magnetic tape and one account is debited and another is credited. The participants of ACH system are the members of Automated Clearing House Association. ACH exchanges electronic transactions within a specific geographical area.

Each transaction takes approximately 48 hours to clear, and we strongly suggest that merchants wait five days from the initial transaction date before shipping any goods. This leaves two days to debit the consumer's account, two days to deposit the funds into the merchant's account, and one day for the bank to post the transaction.

What is ACH?

Funds transfer system governed by the Rules of the National Automated Clearing House Association, which provides for the inter-bank clearing of electronic entries for participating financial institutions.

4.10. NBL SMS Banking:

With National Bank SMS Alerts Service, you can keep track of your transactions 24/7. By subscribing to the service, you can receive real-time SMS updates for transactions conducted on your Debit Card. It also helps you keep track of all your POS, ATM, in-branch and supplementary Card transactions as and when they are conducted. SMS alert for all bank transactions helps prevent fraud.

4.11. Internet Banking

Internet banking would free both bankers and customers of the need for proprietary software to carry on with their online banking transactions. Customer behavior is changing rapidly. Now the financial service is characterized by individuality, independence of time and place and flexibility.

These facts represent huge challenges for the financial service providers. So the Internet is now considered to be a ‘strategic weapon’ for them to satisfy the ever-changing customers’ demand and innovative business needs.

Advantages of National Bank Internet banking:

1. Swift transaction

2. Digital service

3. More security rather than traditional banking service

4. Less time consuming for the transactions

5. Twenty four hours service

6. Less risky to carry cash

4.12. Tele-banking

Tele-banking service is provided by phone, also available in NBL. To access an account it is required to dial a particular telephone number and there are several options of services. Options included-

1. Checking account balance

2. Funds transfer between current, savings and credit card accounts

3. Bill payments

4. Stock exchange transaction

5. Receive statement via fax

6. Loan payment information

Chapter-5

Overall impact of Online Banking system in Bangladesh

5.1. Traditional banking Vs. Online banking:

Traditional banking and online banking are two ways for getting the benefits from bank. Both have benefits and disadvantages. Customer can use both or any of these facilities. Here we are showing the differences between traditional banking and online banking:

Basic introduction of online and traditional banking system:

v Traditional banking:

In traditional banking system, a customer can open any bank account in banks, take the facility of saving his money by depositing money in local bank. He can withdraw his money through check, counter payment and through bank draft. He can meet the bank manager and ask his problem. He can take the physical help for getting loan from bank.

v Online banking:

Online banking means internet banking or modern banking or online bill. In this method, customer gets his bank account ID and password and he can check his account transaction, pay his bills and print his receipt through his home personal computer which is connected with internet. Online banking is development of today banking system. In other words, online banking is electronic banking facility which we can take through our regular broadband internet connection.

Disadvantages of online and traditional banking system:

(a)Traditional banking:

i. Robbery:

Opening our daily newspapers, we will see the new bank robbery case. This is the main disadvantages of traditional banking system. Two or more thieves come and take banks money is general news. It is also difficult in online banking system.

ii. Time limitation:

Banks are opened from 9.00 am to 5.00 pm. Any transaction is not possible beyond the time limit which is possible in online banking.

iii. Waiting in line:

Waiting in line is also another disadvantage of traditional banking. It consumes our time which is valuable to us.

(b) Online banking:

Hacking, spyware program, computer virus breaking online password are the weakness of online banking. Online big hackers are using computer virus and after spreading it, they compromise computer. After this, they know details of your computer and banking password and illegally transfer of all money. Next day, bank account may be zero. Even one can stop this crime by using strong password but one can’t remove it totally.

5.2. Impact of Online Banking System on Customer in Bangladesh:

The main benefit from the bank customers’ point of view was significant saving of time by the automation of banking services processing and introduction of an easy maintenance tools for managing customer’s money. The main benefits of e-banking are: Increased comfort and timesaving-transactions made 24/7.

Despite huge demand from the business community as well as the retail customers particularly the urban customers, electronic banking (e-banking) in Bangladesh is still at a budding state due mainly to a number of constraints such as unavailability of a backbone network connecting the whole country; inadequacy of reliable and secure information infrastructure especially telecommunication infrastructure; sluggish ICT penetration in banking sector; insufficient legal and regulatory support for adopting e-banking and so on.1 In Bangladesh, telephone connectivity is inadequate, cost of PCs are still beyond purchasing capacity of most people, internet connection is costly, IT literacy is yet to reach satisfactory level, banking sector lacks skilled IT personnel, and huge investment requirement for establishing technology based banking services are prime drawbacks. In this backdrop, with high potential of e-banking, Bangladesh Bank as the regulator of banking and financial sector, government of Bangladesh, and the scheduled banks together need to come forward with necessary initiatives for successful introduction of e-banking in Bangladesh. The concept of e-banking includes all types of banking activities performed through electronic networks. It is the most recent delivery channel of banking services which is used for both business-to-business (B2B) and business-to-customer (B2C) transactions.

5.3. Impact of Online Banking System in Bank Industry

Internet technology holds the potential to fundamentally change banks and the banking industry. The vast majority of banks have set very high standards of excellence for themselves in terms of technology, state-of-the-art facilities, customers service and customer orientation with all facets of operations totally computerized. The banks also make extensive use of communication technology to provide off-site banking facilities including ATMs.

The major reasons behind adopting or developing new information systems are:

Rapid geographical expansion has forced banks to replace their off-line systems by an on-line system linking the branches to the head office through the telecommunications network.
Restructuring bank's processes in order to reduce staff expenses which constitute a large part of the operating costs and a heavy burden on its operating profitability.
Incompatibility of the old systems with the strategic necessity of integrating new technologies like ATMs, Tele-banking etc. in order to provide the high quality services to the customers and competing on an equal foot with the foreign banks.

The widespread availability of internet banking is expected to affect the mixtures of financial service produced by banks, the manner in which banks produce these services and the resulting financial performances of these banks. In addition, industry analysis outlining the potential impact of internet banking on cost savings, revenue growth and risk profile of the banks have also generated considerable interest speculation about the impact of the internet on the banking industry. Banking through internet has emerged as a strategic resource for achieving higher efficiency, control of operation and reduction of cost by replacing paper based and labor intensive methods with automated processes thus leading to higher productivity and profitability. Nonetheless, recent empirical studies indicate that internet banking is not having an independent effect on banking profitability, although these findings may change as the use of internet become more widespread. Banks boost technology investment spending strongly to address revenue cost and competitive concerns for some activities banks hope to see a near term impact on profitability.

v Uses of online banking last 5 years in Bangladesh:

Products	2010	2011	2012	2013	2014
Online corporate banking	7%	12%	16%	36%	42%
Fund transfer	10%	12%	18%	26%	38%
Credit card	16%	22%	28%	44%	54%
Debit card	11%	16%	22%	28%	33%
Merchant account service	24%	33%	41%	46%	62%
Internet banking	16%	26%	31%	36%	41%

Chapter-6

SWOT analysis of Online Banking System

6.1. SWOT analysis

SWOT analysis is an important tool for evaluating the performance of an organization. To find out the rationality of a product we must perform a SWOT analysis of this product and services. This wills analysis the strength, weakness, opportunity and threats of the particular services or product. To analysis the performance of online banking of NBL we the following analysis is considered.

Strength

1. Actually online banking service of National Bank is not so aborigine. They are now just providing services of bank transfer, balance check, make payment and especially fund disbursement is not possible now here. These are the simple functions they are now performing. Also they are not using http server to secure this service and they haven’t yet provide customer training for getting the services clearly and easily.

2. It is cheap both for the banks and customers. The bank will be able to lower down the overhead costs and make more profit out of it though we know they are now already getting huge profit from this and we hope if they can minimize cost there mark up will arise. Again the customers will be also able to meet their needs with a short time. Internet banking is convenient as the services are available all the time at just a click away.

Weakness

1. Security breakdown: The system will have a problem with the identifications of the individual who is actually initiating the transactions though from bank there have given an account and password. Actually in Bangladesh the identification of an individual is not yet supported digitally but recently NBL have taking initiatives to ensure it. So there have a problem in moving to the internet era for banking purpose just now. First NBL have to develop a digital database to ensure the service with maintaining security.

2.      No direct customer-seller interaction.
3.      Sometimes, customers prefer transaction by reaching personally to the bank.
4.      No of potential customers who can use internet is still not enough.
5.      The transactions can’t be cancelled via internet. So there have a problem in executing the services with full functionality.

Opportunities

1. NBL offering non branch banking facilities. Now a person can withdraw or deposit money in any branch of the bank that he has accounted with. So moving uses of online banking are becoming very common to all. I also think service offer from bank through the internet will also be widely accept in a neat future.

2. The internet services are becoming very common to us. So a service offered through the internet will be widely accepted in the near future.

3. Internet users rapidly increasing.

4. More are feeling comfortable using internet exclusively.

Threats

1. People have concern about their security and privacy. Most of them like to fall their money with their hand. They actually don’t believe in virtual money transfer.

2. In the field of IT technology is coming everyday. The one which is very popular today might have obsolete tomorrow. So to have a competitive edge over the competitive banks must always update and easy as well as secure their services.

3. The movement towards online services of DBBL, its scope is largely underutilized. The reasons include high service charge, lack of awareness, poor technology system, government policy, low buying power of potential clients and lack of business spend.

4. Dishonest online businesses damage consumer confidence and faith in the entire enterprise of online banking.

Chapter-7

Findings, Recommendations and Conclusion

7.1. Findings:

E-business has created tremendous opportunity all over the globe. Online banking can act as a complementary factor of e-business. Bangladesh Bank has recently argued to introduce automated clearing house system. This pushed upward transition from the manual banking system to the on line banking system. The study has been undertaken to observe present status of the e-business and as its complementary factor on line banking system in Bangladesh. The article analyzes the data that were collected from Bangladeshi banks up to February 2010 and also used snowball sampling techniques to gather answer from the five hundred respondents’ who have already been using on line banking system on the basis of a questionnaire which was prepared for this study purpose. The study found that dealing officials of the banks are not well conversant about their desk work. Authors’ observed that the country can be benefited through successful utilization of e-business as this will help to enhance productivity, monetary gain of both producer and customer may be feasible and positive impact on raising gross domestic product. E –business especially with the help of online banking can manage economy of Bangladesh in a better way as customer will be satisfied.

Numerous findings have been identified online banking system in Bangladesh. Some of them are in the followings:

1. Inadequacy and inadequate knowledge of the bank management about the online banking

2. Lack of proper strategic plan to gain and retain market share of the indigenous banks

3. Lack of international standard communication channel.

4. High cost of establishing online banking system.

5. Inefficient clearing house facilities

7.2. Recommendations:

To improve the e-banking services of NBL, I have the following suggestions for the bank-

1. NBL should provide adequate training and technological support to develop the manpower or personnel working in the e-banking section.

2. NBL should have a strong strategic plan for automated market development.

3. The bank should develop integrated e-banking software within a short period of time. Because I think excess load will be the cause of a big damage for the existing software.

4. A specialized, self-owned organization can be established by the bank so that they can develop the infrastructure of e-banking in Bangladesh that will also be the social responsibility for them.

5. A standard carrier design needs to be formed for the computer experts within the bank so that they do not feel interest to go abroad for lucrative financial offer.

6. Clearinghouse operations are demanded to be fully automated. If it could be implemented, then banks will be motivated to implement in front services counter of electronic bank.

7. To meet the demand of current and prospective clients, banking software to be produced in such that the coordinated effort can supply all information from the front desk. The bank requires systemic and planned budget for expanding e-banking.

8. To provide the nationwide & countrywide services, the bank should expand the number of branches of ATM booth at zonal level so that the most of the people of the country can get the benefit, which live in zonal level, rural level.

9. To take initiative for implementing automated financial sector by coordinate effort of the central bank along with the commercial bank. Credit card services should be implemented rapidly. And the restriction for getting the credit card should reduce.

10. Sometimes I found that the top level officers were so much lazy to do their work, this is a great problem for the officers because without his authorization any transaction will not be completed. If they take much time then the total procedure will be delayed, because the online system is a one channel and step by step procedure. So the lop level managers should have very much conscious about their task.

11. NBL should increase their branch so that they can pick up most of the market share among the other online bank. I found that the interior design is not so attractive that can attract the customers. They should impose their attention about that.

12. NBL have to build up their customer services desk and call center for the betterment of their services.

7.3. Conclusion

Online banking, the latest generation of electronic banking transactions, opened up new window of opportunity to the existing banks and financial institutions, is relatively a new concept for Bangladesh. It is not long ago when people wait in queue for long time with token in hand and collects money. But today the scenario is a little different at least in the urban areas. With the blessing of modern banking facility, people can enjoy 24 hours banking facility without going to the bank physically even from client's residence through Internet Banking or through ATM, POS terminals. At the same we need to be very careful about the fraud. Although online banking fraud in large scale is yet to be reported in Bangladesh we need to take all the necessary measures to prevent it. This can be done through proper education on information technology & sufficient software & hardware support. Proper implementation of online banking will create a positive impact on economy. National Bank Limited is the leader in the Electronic banking among the private banks of Bangladesh. It has employed almost all types of modern day banking facilities to provide convenience to its customers. All automated delivery channels are providing round the clock service through the mentioned hardware and software. Due to its contribution to the society as well as national economy, it has made a clear distinction and has occupied a separate and respected position in the banking sector of Bangladesh. Expanding its business arena and volume, it has also accelerated its contribution to the underprivileged of the society. NBL contributes 5% of its profit for helping the destitute to develop their standard of living and earn a respectable way to keep up with their everyday activity. Considering the issues discussed earlier we may conclude that the National Bank Ltd. is not only a profit making organization, it is also a perfect "Corporate Citizen" who always carry out its duties of corporate social responsibilities. As banking sector is service oriented, therefore, banks of Bangladesh must move towards fully online banking. This will enable them to provide round the clock services through all the service.

ACRONYMS

NBL- National Bank Limited

SWOT- Strength, Weakness, Opportunities, Threats

PC- Personal Computer

IT- Information Technology

VISA- VISA International Service Association

HSBC- Hong Kong and Shanghai Banking Corporation

AMEX- American Stock Exchange

MICR- Magnetic Ink Character Recognition

GDP- Gross Domestic Product

ICT- Information and Communication Technology

ATM- Automatic Teller Machine

SIM- Subscriber Identity Module

PIN- Personal Identification Number

BACH- Bangladesh Automated Clearing House

SMS- Short Message Service

Reference:

1. Hassan, M.K (2010) “Understanding the behavior aspects of online banking system in banks” International Journal of Bank Marketing,Vol.17. pp. 290-314

2.      http://www.nblbd.com/power_card.php
3.      http://www.nblbd.com/credit_card.php
4.      http://www.nblbd.com/history_heritage.php
5.      http://www.bdresearch.org/home/attachments/article/nArt/294.pdf
6.      http://bankinfobd.com/blog/internet-banking-in-bangladesh
7.      http://www.assignmentpoint.com/business/banking/an-internship-report-on-assessment-about-online-banking.html
8.      http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan046046.pdf
9.      www.google.com
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15. http://www.asaub.edu.bd/data/asaubreview/v5n2sl9.pdf
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17. Banking Industry Technology Secretariat . (http://www.bitsinfo.org/ppindustry).
18. www.bb.org.bd
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20. Roy, M. K., Hasan, Sk. K. & Bhuiyan, M. M. (2011). Online Banking in Bangladesh: An Empirical Analysis. ASA University Review  5(2): 112-128

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Wednesday, December 23, 2015

An Internship Report on "An Overview of Online Banking System in Bangladesh,A Study on National Bank Limited"

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