Banking and E-Banking

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Banking is a business activity of safeguarding and accepting other individuals and entities money and loaning out this money to conduct the country's economic activities such as covering operating expenses or making profits. 

A Bank is a financial institution licensed to accept deposits from the public and make loans. Banks help to run the country's economy through the promotion of various activities and help to generate wealth from savings. It collects the public's savings and mobilises them by turning them into capitals for companies and businesses. 

Types of Banks

There are four broad classifications of Banks in India- 

Commercial Banks

Commercial banks accept deposits from the public and make loans to the section of the public that requires finance. Private Commercial Banks emphasis on financial returns and objects. Government-owned Public Banks give preference to their social objectives before their financial objectives.

For example- ICICI Bank, PNB, HDFC Bank, SBI, etc.

Central Bank

The Central bank is the pinnacle bank in the country, the Reserve Bank of India (RBI). The primary function of the central bank is to control and supervise the banks in the country. The RBI is the Government's Banker and plays a vital role in formulating and implementing the Monetary Policy of a country.

Co-operative Bank

The primary function of a co-operative Bank is to provide low-priced or economic credit to the section of the public that does not have ingress to funds. The State Cooperatives Societies Act governs all Co-operative banks in the country. They are the primary source of credit for farmers and peasants. 

Specialised Bank

Specialised banks are set to provide financial services and meet certain unique requirements of an industry or a sector. A few such specialised banks are Development Banks like IDBI, Agricultural Banks like NABARD, Import-Export Banks, etc.


E-Banking is commonly addressed as Online banking, Internet Banking, Electronic banking, or Virtual Banking. E-Banking or Online Banking refers to all the financial transactions undertaken by any financial institutions over the Internet. E-Banking uses telecommunication and electronic networks to deliver numerous banking services and products. A customer can access their account and conduct several transactions through e-banking with a computer or a mobile phone.

Objectives of E-Banking

Here are a few objectives of E-Banking:

  • Attract Customers- E-Banking provides customers with online services and makes the banking system easier. 

  • Boosts Economy- Online Banking maintains cash-flow in the economy, which is the primary source during the economic recession.

  • Provides Liquidity- Due to increasing online transactions, Internet Banking provides liquidity to the Banks. 

Features of E-Banking

The essential features of E-Banking are as follows:

  • E-banking lowers the cost involved in financial transactions.

  • It helps in continuous monitoring of accounts and reduces frauds in transactions.

  • Online Banking helps banks to develop loyalty among customers through better and faster services.

  • E-Banking plays a vital role in expanding the productivity of businesses.

  • With the inception of Internet Banking, the chances of human errors have reduced.

  • Virtual Banking facilitates the instant transfer of funds nationally and internationally, thus breaking all the geographical barriers.

  • The most crucial feature of Online Banking is that customers can access their accounts round the clock from anywhere holding no limitations.

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The above diagram shows a few essential features of E-Banking. These features make life easier and have a significant impact on the economy.

Types of E-Banking

Banks offer different types of Online Banking, but the top three crucial types of E-Banking are as follows-


The Level-one is the necessary level of E-Banking offered by the majority of the banks through their websites. The Level-one service of E-Banking offers its customers all information about its services and products. Some banks may answer queries through emails.


The Level-Two type of E-banking allows customers to submit applications or instructions to check their account balance, provide different services, etc. However, at this level, the banks prohibit fund-based transactions. 


The Level-Three type of E-Banking allows customers to operate their accounts to purchase and redeem securities, for fund transfers, bill payments, etc.

Functions of E-Banking

Here are a few essential functions of E-Banking-

1. Transfer Funds

E-Banking allows customers to transact money transfers between their accounts, or to a third party account. Customers must have enough funds and a recipient or payee information to make the transaction. 

2. Manage and Purchase CD Accounts

Through Online Banking, customers can invest and purchase a certificate of deposit from their respective bank. Internet Banking allows customers to compare the availability of all the offers and their terms, for example, Maturity periods or APY. 

3. Manage all Accounts From One Place

Online Banking is a time saver as it provides customers with the opportunity to handle several bank accounts such as CDs, Checking, IRAs and savings from one location. 

4. Pay Bills

E-Banking fosters electronic bill payment for depositors to send money from their online account to creditors, for example, a departmental store or public utility. 

5. View Images of Checks

Online Banking gives customers the freedom to view their paid checks and even allows them to take a scanned print of images.

FAQ (Frequently Asked Questions)

Q1. Why is E-Banking Important in Today's World?

Ans: Online Banking links customers to business irrespective of their geographical location. It allows companies to test new services and products, conduct market research, make financial calls at minimal costs and build new business contacts. While easy access is an availing feature, E-Banking is convenience guaranteed. Despite the convenience offered, E-Banking holds no hidden fees associated with the online transactions. Online Banking ensures a highly secure platform with resilient encryption that protects the client's details without any security breach like online frauds and account hacking.

Q2. What are a Few Examples of E-Banking Services Available in India?

Ans: ICICI Bank was the first Indian Bank to implement Online Banking system in India, ad with its advancement, all majors banks in India offer Online Banking services as follows:

Electronic Funds Transfer System, Door-Step Banking, Automated Teller Machines, Smart Cards, Telebanking, Internet Banking, Electronic Clearing Cards, Mobile Banking and Telephone Banking.