EBanking an effective tool of Credit Risk Management in Banking sector in Bangladesh

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Faculty of Business Studies
Term Paper Report On
“E-Banking: an effective tool of Credit Risk Management in Banking sector in
Bangladesh”
Submitted in Partial fulfilment of the requirements for the Bachelor of
Business Administration
Submitted to,
Ms. Sharmin Akter Sonia
Department of Finance
Faculty of Business Administration
Premier University
Chittagong
Submitted By,
Session:
Premier University
Submission Date: 20th December, 2013
Premier University
Chittagong City Corporation

Letter of Transmittal
Supervisor of the term paper
Department Of Finance
Faculty of Business studies
Premier University Chittagong
Subject: Submission of Term Paper Report.
Dear Sir/Madam,
I am very glad to submit a Term Paper Report titled as “Lease Companies in Bangladesh-
Process and Function” The qualitative report is submitted as a partial fulfilment as a part of
BBA course. The preparation of the report has give me insightful experience and in-depth
knowledge about Lease financing Bangladesh
I have tried my best to gain practical experience in Lease Financing and also tried to reflect the
same in report with my limited scope and knowledge. I have gathered about realistic awareness
throughout this report preparation. I hope that I have been able to fulfill our academic
necessities.
I wish your hearty consideration, if there is any deviation in my report and also thank you for
your friendly cooperation.
Yours sincerely

Letter of Transmittal
20th
Mr. Rajib Dutta
Internship Supervisor
Faculty of Business administration
Prmier University.
Subject: Submission of the term paper on E-Banking: an effective tool of Credit Risk
Management in Banking sector in Bangladesh.
Dear Sir,
I was being assigned to surface the internship report for the partial fulfillment of the
requirements for the Bachelor of Business Administration. As was assigned, I have prepared the
term paper on E-Banking: an effective tool of Credit Risk Management in banking sector in
Bangladesh.
I found this assignment to be useful and practical where the intent was to incorporate the
knowledge gathered throughout the period of my graduation. I have enjoyed every instant while
preparing this report. The intriguing part was the data collection period where I came to learn
different aspects of E-Banking and its importance in credit risk management. I tried to the
maximum competence to meet all the dimensions required from this report. However some of
the aspects are unintentionally overlooked. It is hoped that you would ignore any discrepancies
considering my limitations.
This report has enlarged my level of knowledge and I truly realize the importance of working
with this assignment. Any sort of clarifications needed regarding this report will be met right
away.
Sincerely Yours,
ID:
Section:A
Major: Finance

Acknowledgements
First and foremost I would like to take this opportunity to convey my heartfelt appreciation to
them whose blessings and cooperation was important to bring this report in light. First, I want to
pay my gratitude to the Almighty Allah for everything. Secondly, I want to express my
thankfulness to my internship supervisor, Mr.Rajib Datta, for his direction, constant and
spontaneous support, efficient supervision and constructive suggestions. Without his help this
report would not have been a complete and comprehensive one.
This report might never have been completed without the necessary practical knowledge,
assistance of many books, articles, websites, and primary data. It enhanced my knowledge on e-
banking activities as well as banking business. Thanks to all those persons, who have assisted me
by providing co-operation, books and articles to prepare this report.
Finally, I thank my parent for supporting me throughout all my studies at the Premier University,
and for providing me a home in which to complete my report and I would like to thank our
respected sir Rajib Datta once more for the opportunity to work with the assigned subject that
has given me the exposure to the banking industry.

E-Banking: an effective tool of Credit Risk Management in banking sector in
Bangladesh
Executive Summary
“Electronic Banking” refers to the systems that enable bank customers’ access to accounts and
general information on bank products and services through a personal computer (PC) or other
intellectual devices. Internet facilities have been introduced in Bangladesh in June 1996
beginning a new era of automated banking and commerce. Nowadays e-commerce, e-business
and financial services industry have increasingly become a necessary component of business
strategy and a strong catalyst for economic development. This study has been done mainly based
on primary and secondary sources of data or information, which included different publications.
This report is aimed at to determine the present scenario of e-banking and banking sectors in
Bangladesh and at the same time it demonstrated the scope and benefits of e-banking compared
with the existing system. This study addressed significant gaps in existing knowledge about the
internet banking and landscape. We tried to present actual situation of e-banking in the
marketing point of view in Bangladesh. The results showed that e-banking serves several
advantages to Bangladeshi banking sector, however, this study also observed that the
Bangladeshi customers have not enough knowledge regarding e-banking which is rendering by
banking sector in Bangladesh. A discussion of the implications of these results and limitations
are provided at the end. This paper represents the painstaking scenario of e-banking services,
offences and how e-banking manage credit risk in banking sector in Bangladesh and tried to
simplify future problems and ultimate possibilities to drawbacks them from E-banking.

1.1Introduction:
Today’s banks are shaking by these technological changes. There are 53 different banks working
together in Bangladesh. Electronic banking is known to us since 1990. Electronic banking has
got tremendous importance in banking sector and banking customer as well. E-banking is a form
of banking where funds are transferred through an exchange of electronic signal between
financial institutions, rather than exchange of cash, checks, or other negotiable instruments.
The way Bill Gates (2008) announced that «banking is essential, banks are not». This quotation
means that the traditional bank branch is going to vanish in order to be surrogated by electronic
banking which continues to attract new users. The banking industry believes that by adopting
new technology, the banks will be able to improve customer service level and tie their customers
closer to the bank. The application of e-banking has been proven as an effective way to reduce
the costs of operation for the financial institutions. For instance, e-banking services will allow
banks to reduce expenditures on physical structures. It is believed that the e-banking will help
banks to cut costs, increase revenue, and become more convenient for customers. Another
important benefit from e-banking is a more effective information collection and management.
Finally, the development of e-banking service has encouraged the adoption of a decentralized
and become an effective tool of credit risk management.
1.2 Objectives:
Main Objective:
The basic objective of this paper is to be acquainted with how electronic banking minimized the
credit risk of bank.
Secondary Objectives:
The study is aimed at knowledge enhancement as well as gathering real life banking environment
in Bangladesh. The objectives of this study are focused
 To shed light on the concept of technological advancement of banking
 To unearth the development of e-banking in Bangladeshi banking sector
 To explore the Structure of electronic banking in Bangladesh
 To explore the electronic services offered by various bank in Bangladesh
 To find out the customer satisfaction level with the advancement of banking technology.
 To give the present status of e banking in banking sector of Bangladesh.
 To identify some constraints area of e banking.
 To take the necessary steps to overcome those constraints of e banking.
 To find out the importance of e banking in credit risk management.

1.3 Scope of the study:
This study has focused upon the e-banking and its impact in the credit risk management in
banking sector of Bangladesh. I hope this study will help me to know more clearly about the e-
banking, its services, credit risk management through e-banking.
At present the total number of different categories of banks is forty eight in Bangladesh. From
the field survey it has been observe that the following banking services are being provided by
different banks: core banking, cluster banking, phone banking, sms banking, internet banking,
various cards, ATM (VISA/MASTER), ATM own (VISA/MASTER), EFT, SWIFT, PC
banking, POS terminal, banking KIOSK, and off-line branch computerization. However, foreign
commercial banks and private commercial banks are relatively in a better position to provide on-
line banking services. These branches of banks deal in e-banking under the overall control of the
central bank Bangladesh Bank (BB) and thus follow the regulations relating to e-banking set by
BB. Due to constrain of time, the study was limited to the banks of Chittagong city only.
1.4 Methodology of the study:
Primary Data:
The study was conducted mainly based on secondary information although some information
relating to has been collected primarily.
 Consultation with bank officials
 Study of relevant documents
 Observing the E-banking operations of different banks
 Discussion with supervisor
Secondary Data:
The study is a descriptive research in nature and thus it is really made on the information from
secondary sources of data. Secondary data were gathered from the
 Office Records, Library, and Different Research Paper regarding E-Banking and credit
risk management, Different Publications on different banks and some websites.
 Private commercial banks, national banks, foreign commercial banks, specialized
development Banks, Grameen bank and the central bank of Bangladesh had been
included in this study.
 Observations through field study were obtained are being reported at the present scenario
of the e banking in banking sector of Bangladesh.
Qualitative Research:

The reports are an exploratory research and for qualitative survey open ended question were ask
to the Bank official. After collecting the data, those data are need to Classified, analyzed,
interpreted and presented in the report.
Findings of the study:
After scrutinizing the data problems of the study are pointed out and they are shown under concerned
heads.Recommendationsaresuggestedthereaftertoovercometheproblems.
Final report preparation:
On the basis of the suggestions of our honorable course teacher some deductions and additions are
made and final report is prepared thereafter.
1.5Limitations:
In preparing the report the following limitations were faced:
 The official websites and the journal of Bangladesh Bank do not contain the much updated
information which was required for the preparation of the report.
 Interviewing banker were another problem because they were busy with their job and
reluctant to give us enough time. Some thinks it is violation of their official confidentiality.
 Difficulties faced to collect the desire information.
 Disclosing the information is very restricted.
 For the lack of practical knowledge, some shortcoming available.
1.6 Data processing and analysis:
The collect data from the secondary sources were analyzed to reveal the nature of financial
statement analysis. Computer generated Word Processing programs, such as; MS Word was used
to generate the report. The main analysis of data was done with the following computer programs
1. The Powerful Spreadsheet Analyzer, MS Office Excel
2. Word Processor MS Office Word.

2. Topic Description:
2.1 Definition of Electronic Banking:
The letter (e) stands for the word electronic. The word banking means a certain financial service
with certain conditions presented by banks to their customers. Customers are either individuals
or corporations.
E-Banking could be defined as follows:
E-banking is defined as the automated delivery of new and traditional banking products and
services directly to customers through electronic, interactive communication channels. E-
banking includes the systems that enable financial institution customers, individuals or
businesses, to access accounts, transact business, or obtain information on financial products and
services through a public or private network, including the Internet. Customers access e-banking
services using an intelligent electronic device, such as a personal computer (PC), personal digital
assistant (PDA), automated teller machine (ATM), kiosk, or Touch Tone telephone.
2.2 Required Physical Infrastructure for E-Banking:
Internet: The Internet is a global system of interconnected computer networks that use the
standard Internet Protocol Suite (TCP/IP) to serve billions of users worldwide. The Internet
carries a vast array of information resources and services, most notably the inter-linked hypertext
documents of the World Wide Web (WWW) and the infrastructure to support electronic mail.
Intranet: An intranet is a private computer network that uses Internet Protocol technologies to
securely share any part of an organization's information or network operating system within that
organization.

Hardware: The essential hardware required to build a complete online banking system includes:
 Personal Computers
 Servers
 Routers
 Firewalls
 Modems
 POS (Point of Sale) Terminals
 ATM (Automated Teller Machines) booths
Software: For conducting online banking operations several software are now available such as
FLEXCUBE, a banking software which enables banks to process and store banking transaction
data and making payments through a dedicated client-server network. Different banks use
different types of software depending on the cost and other factors.
2.3 Basic Components of Electronic Banking:
An electronic banking system requires the following four components—
 Banking system software
 Communication Network
 Delivery Channel
 Switching system
Banking system software: By using computer software package, banks can deal with the
transaction of cash deposit, withdrawals, bill payment, bill collection, salary and settlement of
provident funds, making accounting reports and statements etc. it does not require any use of
papers to prepare journals, ledgers, vouchers or notes.
Communication network: It is an important issue in an online banking. In some cases dial-up
telephone and in other cases radio link is used for communication network.
Delivery channel: These channels are used in corporate and retail banking, as well as to the
individual or family oriented banking. Modern banks and financial institutions are providing
facilities like balance reporting, accounts keeping, domestic and international payments, trade
financing, monitoring, netting, cash withdrawals and factoring and other sorts of services related
to these by using banks, Euroclear, SWIFT etc.
Switching system: To sort the transactions data in due places, e-banking network and various
communication tools in bank host computer requires the use of switching system. It helps to
prepare various reports and monitor the implementation of those.

2.4 Structure of electronic banking:
Electronic banking systems can be divided into two categories by the functional characteristics,
viz. back-office electronic banking, and electronic financial instruments or front-office electronic
services. Electronic banking services can be grouped into three generations of evolution:
Generation of E
Banking
Back office Front office
First Generation  Ledger
 Cash Management
 Head office MIS
Cash dispensers
Second Generation  Transaction Processing offline
ACHs
 Generation Information for
recording keeping
 Fund transfer
 Telephone bill payment
 POS systems
 Check verification
 ATM
 Authorization
Third Generation  On-line transaction processing
 Centralized processing at country
Level
 Internet banking
 Interbank transaction processing.
 Automatic fund Transfers
 On- line banking
 Home Banking
 Electronic Direct Deposit
 Check Transaction
 Lock Box Check
 Electric Fund Transfer
 Internet Banking
2.5 Credit Risk Management – Brief Description of the System:
Credit Risk Management:
Credit risk is the possibility that borrower or counter party will fail to meet its obligations in
accordance with agrees terms. Credit risk, therefore, arises from the bank's dealing with or
lending to corporate, individuals, other banks or financial institutions. A separate credit division
has been formed at head office since the inspection of the bank, which is assigned with the duties
of marketing and assessment of credit products, maintaining effective relationship with the
customer and exploring new business opportunities.
It is absolute responsibility of the Credit Risk Manager / RM to ensure that all the necessary
documents are collected before the proposal is placed for approval. Where

Loans/Advances/Credit facilities are granted against the guarantee of the third party, that
guarantor must be subject to the same credit assessment as made for the principal borrower.
CBL performs the following steps in credit risk management division-
 Loan administration
 Loan disbursement
 Project evaluation
 Processing and approving credit proposals of the branches
 Documentation, CIB (Credit Information Bureau) report etc
 Arranging different credit facilities
 Providing related statements to the Bangladesh Bank and other departments
2.6 Different forms of E-Banking services to minimize credit risk:
There are so many banks in Bangladesh providing banking services. But I choose 8 well reputed
banks to show how e-banking contribute to the credit risk management. The Banks are:
Foreign Commercial Bank  Standard Chartered Bank
 Citi Bank
Private Commercial Bank  Dutch Bangla Bank Limited
 Brac Bank
 Bank Asia
 Islamic Bangladesh Bank Limited
Nationalized Bank  Janata Bank
 Sonali Bank
 Tele-Banking:
Tele-banking service was provided by phone. To access an account it was required to dial a
particular telephone number and there were several options of services. Only 4 banks provided 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
 PC Banking or Home Banking:

The term ‘PC banking’ is used for banking business transacted from a customer’s PC. Using the
PC banking or home banking now customers can use their personal computers at home or at their
office to access their accounts for transactions by subscribing to and dialing into the banks’
Intranet proprietary software system using password.
Video Home Banking: Video home banking services divided into 4 parts:
 Clients can get various information regarding the accounts and product description
 Clients can pay their bills, order the cheques and purchase the instruments.
 Clients can confirm or deny loans, make any complaints or transfer messages.
For Example: With the help of the HSBC’s Mobile Sales Officer (MSO), the customer can open
an account while being in his/her home. Also, MSOs can sell various loan products to them. So,
customers are getting a more customized facility at home, which is the bank has come to
customers’ doorstep instead of customers going to the bank.
Types of PC Banking
 Online Banking
International standard online banking facilities were expanding in Bangladesh. At present, 29
scheduled banks offered any branch banking facilities through their respective bank online
network that provided facilities like transaction through any branch under the respective bank
online network; they provide various services like:
 Encashment of the demand draft
 Opening or redemption of FDR
 Transfer of fund
 Online transaction through any branch with other branch
 Money withdrawal
 Money deposit
 Enquiry of account statement
 Opening of Letter of credit
 Payment of Bank loan interest and principal
Example:
 IBBL has introduced its Online Banking service since 2006. Being the largest in online
connectivity among all the branches are capable of providing the better customer service to
their clients.
 Standard Chartered Bank: Online Banking service allow to bank from anywhere, anytime
with total security and confidentiality. And it’s absolutely free.
 Instant Fund transfer from Standard Chartered account to Standard Chartered account
 Fund transfer from Standard Chartered account to any BEFTN member bank account.

 Online Bill Payment for Standard Chartered Credit Card, Mobile Phones
(GrameenPhone, Robi, Banglalink, Airtel, CityCell), Internet Service Providers
(Qubee, Bangla Lion) and Insurance Premium (Metlife Alico).
 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. So the
Internet is now considered to be a ‘Strategic weapon’ for them to satisfy the ever-changing
customers’ demand and Innovative business needs. In Bangladesh, internet banking services are:
 Account balance update services
 Payment of bills
 Enquiry of the exchange or interest rate
 Checking of the accounts and its activities,
 repayment of the loan
 information regarding loans
 prepaid card refill
 Card reporting
Example:
 Janata Bank provides the following Internet Banking facilities:
 Current/Savings/STD account status
 FDR account status
 Advance account status
 Loan account status
 Allow user to change their PIN code/password
 City Bank launched its new internet banking service named "Citytouch" -- a full fledged
banking solution that can be downloaded onto customers mobile devices. The services of
'Citytouch' include real time transaction of customers' current, fund transfer from City Bank
accounts to the accounts of any bank in the country, payment of mobile phone and credit
card bills online, online shopping etc.

Internet Banking Features for Credit services:
 Account Summary The Customer will be able to view the list of Current, Saving, Term
Deposit and Loan accounts with the current balance.
 Loan Repayments The customer can make payment of the loan installment from his CASA
account.
 Interest Rate Inquiry The customer can query on the interest rates on CASA & Term
Deposit Products.
 Foreign Exchange Rate Inquiry The customer can query on the Foreign Exchange (FX)
Rates using this function.
 Letter of Credit: The customer can initiate the LC application through Internet Banking.
 Bank Guarantee: The customer can initiate the Bank Guarantee through Internet Banking.
 Limits Query: The customer can view his Loan Limits and Limits Utilization through
Internet Banking
 Mobile Banking
Mobile banking is a good example of how the lines between the various forms of e-banking are
becoming gradually blurred. To provide banking and financial services, such as cash-in, cash
out, merchant payment, utility payment, salary disbursement, foreign remittance, government
allowance disbursement, ATM money withdrawal through mobile technology devices, i.e.
Mobile Phone, is called Mobile Banking. The services that are provided by mobile banking are:
 mini-statements and checking of account history
 loan statements
 card statements
 balance checking in the account
 due date of payment
 PIN provision
 domestic and international fund transfers
 micro-payment handling; mobile recharging
 Commercial payment processing etc.
Example:
 Islami Bank mCash is the Mobile Banking of Islami Bank Bangladesh Limited where the
customers of any mobile company take the 24 hours of mobile banking services from
anywhere of the country without going to any branches.
 Dutch Bangla Bank pioneered Mobile Banking in Bangladesh. It was the first bank to offer
banking facilities through a wide range of mobile phones.
Benefits of DBBL Mobile Banking:

 Real time on-line banking
 Available anytime, anywhere throughout the country
 It will make access to banking and advanced payment transactions at affordable cost
 It is much safer, speedy and safeguard against fraudulent transactions
(DBBL) Provides mobile banking facilities:
Fast Track: During the Q1 of 2010, Dutch Bangla Bank Ltd. introduced "Fast Track" in the
country. Along with the generic ATM withdrawal service, it lets the customer deposit small
amounts of money to DBBL account. Moreover, the Fast Track also provides account opening
service and loan information.
BIKASH Mobile banking services:
BIKASH Limited is a joint venture between BRAC Bank Ltd., Bangladesh, and Money in
Motion LLC, USA. BIKASH is dedicated to provide financial services through an extensive
network of community-based agents and existing technology, including mobile phones. The
overall value proposition is simple: a safe, fast & convenient way to send and receive money,
make payments anytime anywhere and store or safekeeping of our hard earned money.

2.7 Modern Technology of E-Banking effective for Credit Risk Management:
E-banking technology is an important tool of credit risk management as because these
technologies do transaction electronically and so that the risk of giving loan or credit and other
services are minimized.
 Retail Electronic Banking:
 Automated Teller Machine (ATM):
Full abbreviation of ATM is “Automated Teller Machine” which acts like a teller point in a bank
who takes and gives money over the counter. This is like a debit card. People can deposit their
money in a bank account and they have entitled withdraw their money through ATM card, which
is applicable for 24 hours a day and 365 days in a year.
ATM has some objectives that make it popular:
 Reducing internal operational expenses and increasing profit by increasing the market
share are the main objectives of establishing ATM program.
 As ATM is an automated system, periodic cost cutting can be possible.
 Create market in the domestic and foreign countries for their banks and to sustain in the
competition.
 To provide highly efficient services in this modern age of connectedness.
For Example:

 Janata Bank Limited, first among the Nationalized Commercial Banks, has introduced ATM
Services. Janata Bank Limited is one of the pioneer members of Shared Q-cash Consortium.
 Dutch Bangla Bank has first transformed the concept of branchless banking in the country
by introducing a huge numbers of ATMs in important places like airports, railway stations,
markets, shopping malls, university campuses, branch premises and important public places.
Now DBBL valued customers can get an ATM within their footsteps.
MobileATMBooth:
DBBL has put its level of innovation and standard of customer support to a new height by setting
Mobile ATM booths to its existing ATM network. The DBBL Mobile ATM Booth, allow
customers to deposit cash / cheque, withdraw cash, inquire account balance, print mini statement,
pay utility bills and to access all other services.
Plastic Money: Plastic money is a plastic card issued by banks or financial institutions with a
magnetic stripe or chip that holds machine readable identification code (account number,

customer’s personal identification number, and other such information readable by ATMs).
Types of plastic money include:
 Credit Cards:
Credit Card can be called as an equivalent of a loan sanctioned by the bank to its customers.
Credit card facilitates and makes it possible to “Use First and Pay Later” the specified amount of
credit as per the agreed terms of sanction. This card facilitates the cardholder to purchase goods
and services from the merchant establishments and shops through the collaborating credit card
companies like VISA, MasterCard, Maestro, and Cirrus.
Example:
A wide range of established banks like SCB, HSBC, Citi Bank and some other private or state
owned bank provide credit card service in the place of cash currency.
 Dutch Bangla Bank has been issuing Visa EMV credit cards since November 2008 and
MasterCard EMV credit cards since April, 2010.
DBBL Credit card products are:
DBBL NEXUS Silver OD card (credit)
DBBL NEXUS Gold OD card (credit)
DBBL NEXUS VISA credit card
 Brac bank provides credit card services in an exclusive manner with different offerings for
the customers. The authority decides the credit limit by analyzing the statement of the
applicant. There are four types of credit card offered by Brac bank.
 Debit Cards:
A Debit Card provides for online electronic payment like Credit Card but from savings or current
accounts of the cardholder for purchases. This card is a deposit access product where cardholder

uses his own money in his bank account through the debit card on the principle of “Pay First and
Use Later”.
Example:
DBBL is the market leader in Debit Cards. All DBBL debit cards give you unlimited and free
access to all DBBL ATMs and POS nationwide. There is no transaction or hidden costs
associated with DBBL cards.
 ATM Cards:
ATM Card can be used to withdraw money, deposit money, balance enquires, deposit bills in the
account. The cardholder must maintain a savings bank account or current account with the bank.
In Bangladesh most of the debit cards issued by banks are also ATM cards.
Example:
Mutual trust bank, Prime Bank ltd. is currently providing individually debit card facilities under
the brand name of VISA. Besides the City bank ltd. is providing another debit card which offers
dual currencies ATM withdrawal facilities.
 ATM Card-cum-Debit Card:
ATM Card-cum-Debit Card can be used both as an ATM card and Debit card as a method of
payment when purchasing goods and services in Bangladesh and Overseas.
For example:
Dhaka Bank Limited, DBBL, SCB, HSBC, BRAC Bank and other banks operating in
Bangladesh provides ATM Card-cum-Debit Card.

 Smart Card:
The smart card is an amazing piece of technology. It is the size of a regular ATM card but is
capable of storing over a 1000 times more data. The data can be encrypted and hence the card is
completely temper-proof. The card can also be personalized to the holder by printing personal
and other details on the card face.

Electronic Money (E-Money):
Electronic money (also known as e-currency, e-money, electronic cash, electronic currency,
digital money, digital cash or digital currency) refers to money or scrip which is only exchanged
electronically.
Electronic Funds Transfer:
Electronic funds transfer or EFT refers to the computer-based systems used to perform financial
transactions electronically. An EFT is the electronic exchange or transfer of money from one
account to another, either within the same financial institution or across multiple institutions.
Example: IFIC bank ltd. Mercantile bank ltd. Pubali bank ltd. AB bank ltd, Agrani bank is
providing electronic fund transfer services on shared basis in the name of Q-cash.
Electronic Payment System:
Electronic payment is an integral part of electronic commerce. Broadly de-fined, electronic
payment is a financial exchange that takes place online between buyers and sellers. The content

of this exchange is usually some form of digital financial instrument (such as encrypted credit
card numbers, electronic checks, or digital cash) that is backed by a bank or an intermediary, or
by legal tender.
 POS Terminal
Point of sale (POS) or checkout is the place where a retail transaction is completed. At the point
of sale the merchant would use any of a range of possible methods to calculate the amount owing
– such as a manual system, weighing machines, scanners or an electronic cash register. In
Bangladesh there are lots of POS terminal for providing customers with facility to buy product
without holding cash money using their bank card.
For Example:
 Dutch Bangla Bank is the first to start EMV acquiring of MasterCard and Visa at POS
terminals in Bangladesh. Merchants are fully secure to accept any type of cards in Dutch
Bangla Bank POS terminals.
 Cardholders of Janata Bank Limited can use their cards at American Express POS Terminals
deployed by the City Bank Ltd. at important shops, stores and malls.
Number of POS terminals in operation in Bangladesh (in year-2013):
Bank/Inst. Name No. of POS POS Brand POS Model
SCB 2500 VeriFone Omni 3750
National Bank 1500 Hypercom T 7, T 7 Plus, Optimum T2100,
Optimum M4230
The City Bank 4200 VeriFone/
Hypercom
Omni 3750, Vx510/ Optimum M
4230
Dutch-Bangla Bank 2600 Hypercom/
Ingenico
T 7 Plus, Optimum T2100 / i5100,
i7910
Brac Bank 1500 Creaon /
Hypercom
Spectra/ Optimum T2100,
Optimum M4230

 Check Truncation:
Check truncation is a process of service where, financial institutions do not return the rejected to
clients. Financial institutions keep these checks with the monthly statements and provide rejected
checks along with monthly statements to the clients. If the client finds any inconsistency then
he/she can adjust the accounts by communicating with the institution within the “preservation
period”.
 Retail Automated Clearing House (ACH) Service
The Automated Clearing House is the electronic network by which payments of different
financial institutions are cleared and exchanged in electronic way. 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.
 Wholesale Electronic Banking
Wholesale electronic banking is such banking systems where banking activities are performed
through interbank networks. Generally, the following activities are performed in wholesale
banking -
 Cash Management
Recently banks and corporations are becoming conscious about cash management to ensure
available funds in response to the increase in money market rate. The Cash Management
Department ensures that funds in transit move safely and on time and maintains an optimum cash
position. The primary duties of the Cash Management Department include:
 Monitoring daily banking activity;
 Managing Automated Clearing House (ACH) transactions and wire transfer activity;
 Reconciling credit card transactions;
 Tracking vouchers and providing backup to Accounts Payable;
 Processing vendor payment and student refund checks;
 Processing manual credit card refunds;
 Wire Transfer:
Wire transfer is a process which ensures fast and appropriate timing of fund transfer from the
sender to the recipient. This kind of transfer of money could be either within the country or
abroad. Funds are transferred under the following network:
 Fed wire (The Federal Reserve Communication System)
 Bank wire
 CHIPS (The Clearing House Inter-bank Payment Service)

 SWIFT (The Society for World Wide Inter-bank Financial Telecommunication)
 Cutting Edge EFT Technologies: SWIFT and ELDORADO
SWIFT:
Recently a number of commercial banks of Bangladesh have become the member of Belgium
based Society for Worldwide Interbank Financial Telecommunication (SWIFT). For
international payment settlement 33 percent of banks are using now SWIFT. With the activation
of the SWIFT system banks enjoy instant, low-cost, speedy and reliable connectivity for L/C
transmission, fund transfers, message communication and worldwide financial activities.
Especially for clients dealing with Imports, Exports and Remittances etc.
Example: Islami Bank Bangladesh Limited has introduced this SWIFT alliance entry system
firstly in October 1999 and introduced SWIFT alliance access in October 2001.
ELDORADO:
ELDORADO is a web based Remittance Processing System for Taka payments, which will be
interfaced with the Bangladesh Bank ACH (Automated Clearing House). In Bangladesh nine
banks are member of ELDORADO. The current member banks are:
 Al-Arafah Islami Bank Limited
 Bank Asia Limited
 BRAC Bank Limited
 Dhaka Bank Limited
 EXIM Bank Limited
 Mutual Trust Bank Ltd.
 Social Islami Bank Ltd.
Example: By BRAC Bank ELDORADO, now you can withdraw money from any of the
Eldorado member banks in addition to BRAC Bank outlets - that too, instantly.
Services via ELDORADO
 Initiate local payment
 Initiate payment or schedule a payment on instruction basis
Branch Name SWIFT Address
Agrabad IBBLBDDH103
Anderkilla IBBLBDDH124
Bangshal IBBLBDDH179
Bogra IBBLBDDH112
Chawk Mugaltully IBBLBDDH105

 Payments are template driven and possible to store for future reference.
 Customer details are populated from customer database maintained in the application.
 Put a payment on hold during initiation or at any stage of the approval cycle.
 Configure payment requests for additional authentication by using transaction password.
2.8 Other E-banking Technology important for managing credit risk:
 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, XPress Money.
Example:
Anyone can now send money directly to the beneficiary’s account from any bank in the world.
Beneficiary’s account will be credited within few hours from the International Division of Head
Office of the Bank. Now beneficiary can go to any branch or ATM of DBBL and withdraw cash;
go to any POS terminal of DBBL and purchase goods & services using DBBL-NEXUS card;
.
 Mobile remittance service:
Foreign resident people can send their money through
mobile phone. As a result money transfer becomes
relatively easy, quick and hassle free .The first ever
remittance service for Bangladesh was jointly launched
by two local banks –Dhaka Bank ltd. and Eastern Bank

ltd. – and the country’s second largest mobile operator, Banglalink.
Example: Now, anyone can send the foreign remittance directly to the mCash mobile account
from the IBBL foreign liaison offices, approved agents and exchange houses.
 Remittance Card Services:
EXIM Remittance Card ensures the Non Residence Bangladeshi of safe and quick hassle free
money transfer to their family. This allows beneficiaries to receive funds straight to their EXIM
Remittance Card within minutes.
 E-Statement Service:
 This is secure and reliable way to receive Credit Card/Account Statement’s anywhere in the
world. An account holder of SCB can receive e-Statements with the help of the Internet. It is
a fast, reliable and efficient service of Standard Chartered to minimize customer’s
convenience.
 NCC Bank brings more convenience for you through e-statement that will enable you to
receive your monthly credit card statement via e-mail without any cost. For enrollment please
call at our credit card customer service center.
 Core Banking:
It refers to a situation where a group of banks provides customer service together or a part of
service. A customer may enjoy any sort of service from any bank under the group. It requires
affiliation among the group.
Example: Micro Credit Core Banking System for Dhaka Mercantile Co-operative Bank Limited:
It mainly covers savings account, deposit Account and micro credit loans for customers.
 Customers Deposit Account Transaction verification,
 Customers’ micro credit loan issue and verification
 Account ledger and reporting system verification
 Database security and data authenticity verification system
 Technology used • .NET, • MS SQL Serve

 Banking KIOSK and MICR:
Bangladeshi customers are familiar with the term ATM booth that also provides KIOSK Banking. It
provides flexibility to the customers to conduct their banking transactions through the KIOSK machine.
For example, account holder of some other banks can use the ATM kiosks of DBBL's.
 MICR (Magnetic Ink Character Recognition) technology has been adopted in Bangladesh in
2009. It is a character recognition technology used mainly by the banking industry to make
easy the processing of cheques.
 SMS Banking Service:
IBBL SMS Banking IBBL has introduced its SMS banking service since 2008. Registration is
required. Services:
 Mulitple Account Registration
 International Push- Pull Facility
 Account Balance (BAL )
 Mini Account Statement (STM)
 Account Information (ACI)
SCB has introduced SMS Banking Service in Bangladesh with Grameen Phone and City Cell
the two biggest mobile companies in the country. Once a customer become a member of SMS
banking, will have 24 hours access to the key financial information of his/her credit
card/account.
 Any branch Banking:
At present Mutual Trust bank ltd. State Bank of India, Habib Bank Ltd. National Bank of Pakistan
are offering any branch banking to all their clients. Mercantile Bank Ltd. IFIC bank ltd. NCC bank
ltd. Offer any branch banking services to only a selected group of clients who are ready to pay an
amount of extra annual fee for the usage of these service.
 E-Commerce:
E-commerce software and service enables individuals to maintain an online business while
performing transactions right from the web. Electronic commerce is a convenient and affordable way
to buy and sell products and services.
For the first time in Bangladesh Brac bank limited has introduced e-commerce program for all VISA
and Master Cardholders.

Bangladesh Bank introduces the online tendering system to facilitate the procurement process of
Bangladesh Bank. The system will help you to participate in the local and international
tender/procurement of Bangladesh Bank.
2.9 HEXAGON_- Global Electronic Banking: to minimize credit risk
Electronic Banking Department (EBD)
The Electronic Banking Department (EBD) Procedure Manual has been prepared to assist EBD
staff to understand their roles and responsibilities for Hexagon and to provide written procedures
covering the day to day functions of the EBD. EBD Procedure Manual now updated with the full
Hexagon Encyclopedia and provides access to it from the internet.
What is Hexagon?
Hexagon is an electronic Banking system through which customers have access to information
about their relationship with the group and may transact their business. All a customer need is
the software, a computer and a modem to be able to operate the organization’s accounts from
anywhere in the world 24 hours a day.
The main features of Hexagon:
The products and services offered by hexagon to customer include:
 Current account information (CA) **CA AI
 Saving account information (SA) SA AI
 Loan account information (LN) LN AI
 Credit card information (CC) CC AI
 Foreign exchange (FX) FX AI
 Trade services
 Imports and exports IM/EX Report writer
 Documentary credits DC import Services
 E-stock trading:
The term “e-trading” in stock stands for “trading in the equity or debt instruments on the stock
exchanges through an electronic communication Network (ECN).” Although on-line trading strictly
refers to the electronic execution of trade, an eco-system of e-stock trading has three dimensions:
 Electronic execution of the trade,
 Payment of the transaction through a payment gateway, and
 Transfer of shares in electronic form.
Example: Bangladesh Bank eTender System

** Account information from non – HSBC group banks may be includes in a customer’s
hexagon portfolio. Not all services are available in both the Dos and Windows system at this
time.
Securities online offline
Order placement (SEIS) SE Securities
Order status equity (SEEN) SE “
Corporate announcement (SECA) SE “
Portfolio valuation (PMPF) PM
Information services
View text (VT) VT
Market information (MI) MI
Electronic messages (EM) EM
Report generation (FP) FP Report writer
Management control
Account control MCAC Utilities
Delegate control MCDC “
Activity query MCAQ “
Password control MCPW “
The main benefits of Hexagon: Hexagon gives customers direct access to their accounts 24 hours
a day, 365 days a year from anywhere in the world.
2.10 Advantages of e-banking in Bangladesh:
 Economical benefits
 Banker’s point of view
 Customer’s point of view
 Economical benefits:
E-banking serves so many benefits not only to the bank itself, but also to the society as a whole.
E-banking makes finance economically possible:

(i) Lower operational costs of banks
(ii) Automated process
(iii) Accelerated credit decisions
(iv) Lowered minimum loan size to be profitable.
Potentially lower margins:
(i) Lower cost of entry
(ii) Expanded financing reach
(iii) Increased transparency.
Expand reach through self-service:
(i) Lower transaction cost
(ii) Make some corporate services economically feasible for society
(iii) Make anytime access to accounts and loan information possible.
 Banks’ point of view
From the banks’ view point, banks are getting some specific benefits or advantages after starting
the e-banking services. These advantages are:
Branding: Banks offering e-banking services was better branding and better responsiveness to
the market. DBBL and BRAC are two market leaders at present in mobile banking services in
Bangladesh, is the result of positive branding of the banks. On the other hand public commercial
bank like Janata, Agrani Bank are not so much popular and have a low market share.
Profit Maximization: The main goal of every company was to maximize profits for its owners
and banks were not any exception. Banks are increasing its profit by reducing the cost of paper,
time etc. by using e-banking. Thus, automated e-banking services offered a perfect opportunity
for maximizing profits.

Increased Services Quality: Features of E-banking services include less time, complete
transaction, no human conflict and presence etc. thus the quality of services of bank is increasing
day by day.
Increased Customer Rate: It is the most noticeable change in bank after starting e-banking
services. Customers are accepting this medium beside a traditional account. Ultimately, the profit
of bank is increasing
Reduce credit risk: Bank can give credit electronically so that fraud and other risk that
manually occurred are reduced.
 Customers’ point of view:
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 were as follows:
Reduced costs: This was in terms of the cost of availing and using the various banking products
and services.
Convenience: All the banking transactions performed from the comfort of the home or office or
from the place a customer wants to.
Example: In this case private commercial bank have greater advantage over public commercial
bank by offering online banking,mobile banking,ATM Booth and Credit card.It’s very simple to
find Standard Chartered Bank locations in Bangladesh using the mobile and computer system.
Speed: The response of the medium was very fast; therefore customers actually waited till the
last minute before concluding a fund transfer.
Fund’s management: Customers downloaded their history of different accounts and do a
“what-if” analysis on their own PC before affecting any transaction on the web.

2.11 Importance of e-banking in Credit Risk Management:
Generally, a financial institution's credit risk is not increased by the mere fact that a loan is
originated through an e-banking channel. However, management should consider additional
precautions when originating and approving loans electronically, including assuring management
information systems effectively track the performance of portfolios originated through e-banking
channels. The following aspects of on-line loan origination and approval tend to make risk
management of the lending process more challenging. If not properly managed, these aspects can
significantly increase credit risk.
 Verifying the customer's identity for on-line credit applications and executing an
enforceable contract;
 Monitoring and controlling the growth, pricing, underwriting standards, and ongoing
credit quality of loans originated through e-banking channels;
 Monitoring and oversight of third-parties doing business as agents or on behalf of the
financial institution (for example, an Internet loan origination site or electronic payments
processor);
 Valuing collateral and perfecting liens over a potentially wider geographic area;
 Collecting loans from individuals over a potentially wider geographic area; and
 Monitoring any increased volume of, and possible concentration in, out-of-area lending.
Online CIB services
To create a disciplined environment for borrowing, the automated CIB service provides credit
related information for prospective and existing borrowers. With this improved and efficient
system, risk management will be more effective. Banks and financial institutions may furnish
credit information to CIB database 24 by 7 around the year; and they can access credit reports
from CIB online.
Open online Letter of Credit: It means that for opening letter of credit the customers need not
to go to the bank physically. They can open the letter of credit with the help of online banking.
Online loan application: Speed up your loan needs by starting a loan application online. Our
system will guide you through many of the beginning processes of getting an auto
loan, consumer loan or mortgage. When you do come into the branch to finalize, we will be
ready with most of the paperwork already prepared, and a decision ready to be made.
Loan Details: Standard Bank Ltd.: Customer easily view Loan details, Outstanding Loan
details, Next Installment date, Principle Balance of Loan
Online loan application form given in Appendix part.

2.12 Problems faced in Electronic Banking for credit risk management :
Along with the benefits, electronic banking and electronic money activities carry risks for
banking organizations, and these risks must be balanced against the benefits”. Following is a
review of some of the risks that are inherent in e banking.
Operational Security Risk:
External and internal security issues pose perhaps the greatest threat to the growth of e banking.
Banks also face the threat of viruses that can be placed in the bank network, or a scenario where
a hacker obtains confidential information and then cyber-exhorts the bank with an offer to sell
the information back to the bank.
Legal Risk:
Legal risks can arise due to violations of laws, rules, and regulations. In the world of electronic
commerce, where technology and business are in a state of constant flux, there is considerable
ambiguity and uncertainty regarding legal rights. Banks involved in electronic payments, such as
stored value cards, must determine whether such transactions impact reserve Requirements.
Reputation Risk:
Reputation risk can range from problems of customer dissatisfaction with online services to
security breaches and fraud. For instance, identity misrepresentation, or “spoofing”, where bank
customer’s arc directed toward a false site, can lead to an irreparable loss of trust between the
customers and the bank.
Traditional banking risks:
The traditional banking risks such as interest rate risk, credit risk, or liquidity risk can be
exacerbated for a bank that has a significant online lending and/or transactions presence.
Contingency/technological risk :
Contingency/technological risks are risks related to any adverse outcome, damage, loss,
disruption, violation, irregularity, or failure arising from the use of or reliance on computer
hardware, software, electronic devices, and online networks and telecommunications systems.
E-Banking Offences – in the scenario of Bangladesh:
Password fraud and Hacking Problem:
Password fraud is the most serious e-banking threat. Here, a hacker can use the hack the online
bank account and can transfer the accounts money to his/her account. Worldwide it is a serious
security issue of e-banking. Hackers breaking into computer systems and releasing lists of

usernames and passwords on the open web—are now regular occurrences.
Hackers get passwords through guessing, customer carelessness and trickery. The most well-
known technique is phishing, which involves mimicking a familiar site and asking users to enter
their login information. Misuse of the password not only use for personal funds transfer but also
knowing the personal in formations.
Risk of debit or credit card counterfeit:
The security of the information, misuse of fund, inappropriate billing of the debit or credit card is
the main phenomena of this issue. Common types of credit card fraud
 Counterfeit: duplicating legitimate credit cards which are then used for fraudulent activities
 Card Not Present: unauthorized usage of credit card information for fraudulent activities over
the internet, phone or mail
 Lost/Stolen: unauthorized usage of a credit card as a result of it being lost or stolen
2.13 Solution of the problem faced by E-Banking:
The risk management controls and policies related to e-banking should also cover, at a minimum,
the following risk mitigating counter measures:

Segregation of duties:
As in any traditional process, segregation of duties is a basic internal control measure designed to
reduce the risk of fraud in operational processes and systems. The credit institution’s
management must identify and mitigate areas where conflicting duties create the opportunity for
insiders to commit fraud, protect the data integrity of e-banking transactions, records, and
information.
Recordkeeping:
All e-banking transactions should generate clear audit trails, which should be archived and kept
for 10 years. Credit institutions should strengthen information security controls to preserve the
confidentiality and integrity of customer data. Firewalls, ethical hacking tests, physical and
logical access controls are some of the methods available.
Dual controls:
Some sensitive transactions necessitate making more than one employee approve the transaction
before authorizing the transaction. Large electronic funds transfers or accesses to encryption keys
are examples of two e-banking activities that should warrant dual controls.
Reconcilements:
E-banking systems should provide sufficient accounting reports to allow employees to reconcile
individual transactions to daily transaction totals.
Monitor suspicious activity:
Credit institutions should establish fraud detection controls that could prompt additional
checking of suspicious activity. Some potential concerns to consider include false or erroneous
application information, large check deposits on new e-banking accounts, unusual volume or size
of funds transfers, multiple new accounts with similar account information or originating from
the same internet address.
Incident response :
Credit institutions should put in place formal incident response and management procedures for
timely reporting and handling of suspected or actual security breaches, fraud, or service
interruptions of their e-banking services.
2.14 The challenges of E-Banking System in Bangladesh
The main objective of this study is to identify the challenges and potentials of e-banking in
Bangladesh from the perspective of employees and bank customers. The present survey has

shown following main challenges for e-banking development in Bangladesh.
Infrastructural Barriers:
Here, there is not enough infrastructural support for providing efficient e-banking services. In our
country, telecommunication services are not strong, communication bandwidth is weak, software
is not available in the country and hardware for establishing ATM booth is costly.
Knowledge Barriers:
E-business is still not very much progressed in Bangladesh. Mass awareness is not feasible. The
country faces problem of developing trained human resources. There are lack of technological
knowledge among the managers, employees, and customers of bank.
Legal and Security Barriers:
In Bangladeshi circumstance lack and limitation of regulation of law is one of the acute obstacle
to e-banking. Technical issues are also highly connected to e-banking, but in our country
technical securities are very weak an in a high risk of hacking in each moment.
Socio-cultural Barriers:
As mentioned earlier, most of the people are not educated in Bangladesh. So, people are not
willing to break the traditional way of conventional banking. On the other hand many traditional
customers prefer paper money and receipts over e-documents for their ignorance and weakness
in English language.
Economic Barriers:
In Bangladesh, for providing e-banking services to the customer, it needs for heavy investment
regarding new infrastructures. Our average per capita income is also very low so that most of the
people does not have the ability to buy the communication equipment like computer, laptops,
smart phone. And for these reason they could not connect to e-banking services even if they want
to.
2.15 Know Your Customer Concept:
The Credit Risk Managers / RM must know their customers and conduct due diligence on new
borrowers, principals and guarantors to ensure such parties are in fact who they represent
themselves to be i.e., Know Your Customer (KYC).

How e-banking help customer to reduce credit risk:
Bank customers' account and transaction information is stored in a database, a specialized
software that can store and process large amounts of data in high speed. The function of the web
server is to interact with online customers and deliver information to users through the Internet.
When the web server receives a request such as an account inquiry from an online customer, it
requires an external web application program to process the request. C, Visual Basic, VBScript,
and Java are some of the languages that can be used to develop web application programs to
process customer requests, interact with the database, and generate dynamic responses. Then, the
web server will forward the response HTML files to e-banking customers. Several banks, such as
NationsBank, also use state-of-the-art imaging systems, allowing customers to view images of
checks and invoices over the Internet.
For Example:
HSBC and SCB use all the channels, according the customer’s needs. They consider face to face
distinguishing features better than other channels because in face to face discussion they gain a
better understanding of the customers’ desires.
In Bangladesh private commercial banks offer a wide range of concepts and Internet-based tools
to support and enhance customer decision-making processes. Their concepts and services are
constantly developed and refined to meet the changing needs of their customers. PCBs offer their
business customers tailor-made solutions, focusing on the customers’ needs.
Figure: user of e-banking
2.17 Present Scenario of E-Banking in Bangladesh:
31%
46%
23%
Sometimes
Yes
No

Online Banking in Bangladesh:
Online Banking in Bangladesh is yet to develop according to international standard. At present,
several private commercial banks (PCBs) and foreign commercial banks (FCBs) offer services of
telephone banking, internet banking, and online banking facilities. Whereas the state-owned
commercial banks (SCBs) offer services in a limited scale.
Various forms of online Banking Services No. of Banks having online services
ATM 30
SMS Banking 19
Electronic Fund Transfer 22
Virtual Banking 7
Internet Banking and WAP 38
SWIFT channel 40
Remittance (electronic way) 31
Any Branch Banking 35
POS 21
Automated Teller Machine: One FCB introduced ATM and POS services for the first time in
Bangladesh in 1992 and 1997 respectively. Other categories of banks, such as PCBs, NCBs, and
one SB gradually adopted both the services. Besides, using the POS terminals, the customers
made payments of BDT 0.02 billion during 1999 against their purchase of goods and services
which increased to BDT 5.58 billion by the end of 2012.
Debit card and Credit card: Presently, the number of debit card and credit card holders was
growing moderately during 2003-2011 period number of debit card holders gave a big jump and
stood at 585,465 by the end of 2006. Besides, the number of credit card holders is recorded
approximately 7, 89,250 as of end December 2010.
Present Status of Electronic Payment System in Bangladesh:
At present several utility service providers along with many banks have started using electronic
payment system in Bangladesh. Nationalized banks like Sonali, Janata, Agrani and private banks

like DBBL, Eastern Bank, Standard Chartered, and HSBC etc are using ATMs and POS for
payment of utility bills electronically. One of the problems for this is that these services are
mostly available in big cities and towns.
Current status of Mobile banking in Bangladesh:
There are 5 banks enlisted themselves to provide the mobile banking services. And their market
condition is given below:
Name of the Banks Operating Partner Number of agents Number of listed
customer
Brac Bank  Grameen phone,
 Airtel,
 Banglalink
 Citycell
3,181 237,423
Dutch Bangla Bank  Banglalink
 Robi
 GrameenPhone
5,383 172,020
Trust Bank Teletalk 329 1,104
Mercantile Bank Grameen Phone 170 1,392
Bank ASIA Not required 30 Unidentified
Source: Mobile Financial Services in Bangladesh: An overview of Market Development
2.18 Potentials of E-Banking in Bangladesh:
The Bangladesh Railway owns a high-speed optical fiber network (1,800 km) parallel to the
railway path that covers most of the important parts of Bangladesh. This optical fiber network
can be used as the backbone network of e-banking in Bangladesh.
For example, FCBs and PCBs are already using this optical fiber network for conducting online
transactions, ATM and POS services. Digital telephone exchanges have been established in 389
upazilas and 17 growth centers. Meanwhile, Bangladesh has joined the information super-
highway by connecting itself with international submarine cable system in2006. A total of 159
Internet Service Providers (ISPs) have now been connected with this system of which 64 are
actively providing services. As a part of government 37decision of building digital Bangladesh,
the existing capabilities of ICT sector is likely to increase rapidly in bringing all upazilas under
internet services and this will contribute in widening the scope of e-banking throughout the
country.

3.1Sample Bank at a glance:
3.1.1 Description of some reputed bank that use e-banking tools for
minimizing credit risk:
Foreign Commercial Bank:
Citibank: Citibank is a leader in e-banking, offering walk-in, face-to-face banking at its
branches throughout many parts of the world as well as e-banking services through the World
Wide Web. Citibank customers can access their bank accounts through the Internet, and in
addition to the core e-banking services such as account balance inquiry, funds transfer, and
electronic bill payment, Citibank also provides premium services including financial calculators,
online stock quotes, brokerage services, and insurance.
HSBC: A person may deposit upto BDT50, 000 cash per transaction and any BDT amount in
cheque 24 h a day, 7 days a week through the ATM Machines, conveniently located Sales and
Service Centers. With easy-pay machines, both HSBC and Non-HSBC customers made deposits
and pay their utility bills, credit card payments and etc.
Private Commercial Bank:
Bank Asia: Bank Asia symbolizes modern banking with innovative services in Bangladesh. It
has centralized Database with online ATM, SMS and Internet query service. Bank Asia has 21
ATMs as a member of ETN along with eleven other banks. Bank Asia is maintaining its
competitiveness by leveraging on its Online Banking Software and modern IT infrastructure.
IFIC Bank: IFIC Bank issues VISA Credit Cards for both local and international use (IFIC
Bank Annual Report, 2009). The International Cards, on the other hand, can be used at any ATM
and POS displaying VISA logo anywhere in the world. IFIC Bank Limited provides also
opportunity for SMS Banking Card Services to its clients. All Account & Card Holder of IFIC
Bank are eligible to apply for SMS Banking and Card Services.
Nationalized Commercial Bank:
Sonali Bank Limited: At present 109 branches of Sonali Banks are included in the Online Any
Branch Banking (ABB) network. Sonali Bank Limited is a member of Q-Cash ATM network. At
present the bank has 53 ATM booths. Sonali Bank's ATM cardholders enjoy the access to the
ATMs and POS of Dutch Bangla Bank Ltd. and Brac Bank Ltd. Sonali Bank recently launched
Credit Card.
Janata Bank Limited: Janata Bank is playing a prominent role in providing the technology driven
banking facilities among the Nationalized Commercial Banks. This bank is providing considerable
technology driven services like SMS banking, Mobile banking, Core banking, several cards, POS
services, ATM etc.

3.1.2 Field Survey result on NCB, PCB and FCB:
Private commercial banks and foreign banks offer a broader E-banking services then state owned
banks. Nationalized banks operate more branches having SWIFT code then foreign and private
commercial banks. All of the banks in our sample tend to have and establish more ATM booth in
metropolitan areas where population density is higher.
Type of
Banks
Total number
of Branches
Number of branches
with e- banking facility
% of branches with e- banking
facility
SCBs 3442 189 5.49%
PCBs 3188 2917 91.50%
FCBs 74 74 100.00%
SDBs 1415 49 3.46%
Total 7998 3042 38.03%
Status of Computerization among PCB, NCB and FCB:
Standard Chartered Bank Ltd., City Bank NA, American Express Bank, HSBC, Dhaka Bank
Limited etc. are completely computerized banks in our country. All private and state owned
banks are partially computerized and not computerized. The overall picture of computerization in
the banking sector of our country is presented in the following table.
Branches with various facilities Availability in Banks
NCBs PCBs FCBs
Computerized Branches 19% 38% 100%
Number of Branches Linked within branches 3% 1% 76%
Number of Branches Linked with other branches 0.86% 22% 76%
The overall computer density in the banking sector is 1.64. For foreign commercial banks
(FCBs) the computer density is 45.34, where as for NCBs the ratio is only 0.41. On the other
hand, private commercial banks have comparatively higher ratio, 4.94. As a whole 81.81 percent
banks do not have any local area network (LAN), 30 percent have WAN (Wide Area Network)
but for some banks many branches are outside of WAN connectivity.
Computerization of Bank Branches by Categories, 2008-2013

Table, provide the overall picture of computerization in the banking system of Bangladesh
during 2008-2013. In 2008, out of 5,860 branches (NCBs 3,619; SBs 1,173; PCBs 1,056; and
FCBs 13), only 539 branches (NCBs, SBs 23; PCBs 407; and FCBs 13) were computerized. By
the end of 2013, a significant improvement in computerization can be observed especially by the
PCBs.
Computerization of branch on e-banking:
2008 2009 2010 2011 2012 2013
NCBs 2.65 8.65 11.89 14.43 16.12 16.38
PCBs 38.54 95.67 97.76 98.45 98.90 98.99
FCBs 100.00 100.00 100.00 100.00 100.00 100.00
SBs 2.06 3.19 4.20 4.20 4.35 4.38
Table: Percentage of Technology used in different banks to minimize credit risk:
Technology
Driven Services
Percentage of Services Provided by
the Different Types of Banks
Nationalized
Commercial
Banks
(NCB) (%)
Private Commercial Banks (PCB) Foreign
Commercial
Banks (FCB)
General
(Non-Islamic)
(%)
Islamic
(%)
Total
PCB (%)
Core Banking 75 78.26 71.42 76.67 100
Internet Banking 25 52.17 28.57 46.67 100
Mobile Banking 25 52.17 0 40 50
Electronic Fund
Transfer
50 73.91 42.86 66.67 50
Any Branch
Banking
100 100 100 100 100
ATM own 100 95.65 100 96.67 100
Point of Sale 50 91.67 42.86 93.33 75
Debit Cards 50 100 100 80 50
Credit Cards 50 91.30 0 6.67 25
SWIFT 50 100 100 100 100
MICR Cheque 100 100 100 100 100
Open Online LC 0 0 25 0 25
3.1.3 Sample Enterprise: Dutch-Bangla Bank Limited (DBBL) at a glance
E-Banking services: Dutch-Bangla Bank Limited (DBBL) was the first bank in Bangladesh to
introduce ATM and e-banking in 2003, with its 113 branches, 2,000 ATMS and 4,000 POS
terminals, 2.3 million debit cards, and an Internet Payment Gateway. All DBBL debit cards give
unlimited and free access to all DBBL ATMs and POS nationwide. With a mobile phone,

customers can perform many banking operations. Using the service of DBBL, Bangladeshi Wage
Earners can send and receive money quickly from over 225,000 Western Union Agent located in
197 countries only by visiting any branches of DBBL in Bangladesh.
Security system: DBBL has an off-site Data Recovery Site (DRS) which ensures that customer
records are safe, backed-up, and up to date in the event of a major catastrophe at the Electronic-
Banking Division headquarters.
Collaborating with other Banks for a Common Goal
Even after servicing the numerous clients, DBBL decided to help member banks in their
automation services. Mutual Trust Bank has signed an agreement to this effect. Many other
banks are in the pipeline to accept this service offered at a very attractive terms and conditions.
This is the real example of DBBL ATM booth. Now many of the banks collaborated with DBBL
for using their ATM network.
The mass people of the country has put their trust, faith and confidence on DBBL, the
technology being one of the most important factors in doing so. The management, officers and
executives are well concerned about it and trying to meet their expectations.

3.2 Analysis:
3.2.1 Comparative Analysis among five banks:
For analytical purpose I pick 5 banks from three different segments. One of the banks is DBBl
which is pioneer in online banking in Bangladesh. From other local commercial banks in
Bangladesh I pick EBL and Dhaka bank. From foreign banks we chose Standard Chartered Bank
Limited and Sonali Bank Limited from the public banks.
E-Banking:
Services DBBL EBL Dhaka
Bank
Standard
Chartered Bank
Sonali Bank
Number of ATM 1295 74 24 48 22
No. of branches
having SWIFT code
12 23 19 17 31
Core Banking
Software
Flexcube Oracle
Flexcube
UBS
Flexcube eBBS
Phone Banking CISCO
System
IVR
SMS Banking Flexcube Flexcube Flexcube O/S WAP
Internet Banking Flexcube Flexcube Flexcube iBanking
Cards and Others:
Bank
Standard
Chartered Bank
Sonali Bank
Limited
0
500
1000
1500
2000
2500
2008 2009 2010 2011 2012 2013 2014
DBBLATM growth
Growth

Debit card     
Credit card     
Visa and master
card
    
Travel card     
Internet banking facilities for CRM:
Bank
Standard
Chartered Bank
Sonali Bank
Account summary     
Account Details     
Transfer funds     
Pay Bills     
Loan Repayments     
Mobile banking     
Fast Track     
3.2.2 SWOT Analysis:
To find out the viability of a particular product we must perform a SWOT Analysis of the
product. For analyzing the performance of E-Banking in Bangladesh we the following SWOT
Analysis are considered.
Strength
 It is cheap both for the banks and the customers. The bank will be able to lower down the
overhead costs and make more profit out of it. Again the customers will be able to save
time as well as money for their transaction needs.
 E-banking is convenient as the service is available all the time at just a click away.
 70% of the bank management noticed that e – banking brings positive aspect for the
bank. After launching E – Banking, the rate of customers increased is about 10 – 20%
believed by the most of the bank management.
 There is a positive sign in liquidity position of the bank and its rate is near 11- 15%
perceived by the bank management and agent of the banks

Weaknesses
 E-banking can face a lot of crimes related hacking of business sites. But there is no
appropriate law to prevent various cyber crimes.
 Interbank transaction is more cumbersome as the clearing-house of the central bank is not
online.
 Though different bank has taken many e banking facility but cost of providing the
service is high like use of ATM to withdraw money,
Opportunities
 Non-branch banking is becoming popular in our country. Many banks are now offering
non-branch banking facilities.
 The e-banking services are becoming very common to us. So a service offered through
the internet will be widely accepted in the near future.
 Govt. has taken different steps, policies to enhance the capacity for doing e –commerce
and banking.
Threats
 People have concern about security and privacy. They like to feel their money with their
hand. They actually don’t believe in virtual money transfer.
 In the field of IT new technology is coming every day. So to have a competitive edge
over the competitors the banks must always update their services.
 Despite the presence of online Internet service in Bangladesh, its scope is largely
underutilized.
3.3 Finding of the study:
Although Bangladesh Bank and other banks have launched Back Office System, other foreign
banks are using both back and front office system, research shows that e-banking services are
negligible in our country. Findings that I observed during research given below:
 E – Banking is still not very much progressed in Bangladesh. Mass awareness is not feasible.
The country faces problem of developing human-ware.
 From the field level study observe that still nationalized commercial banks and specialized
banks are lagging behind off on line banking services.
 Moreover, customers are not satisfied with the quality of the services.
 Local Banking software should be developed properly and must have greater accessibility
within the country and outside the country. Moreover, to produce hardware especially
computer and its accessories, local entrepreneurs are not taking any sort of strategic planning.
 Bangladesh Bank should adopt latest technology but due to lack of vision they are adopting
old technology i.e. introduction of MICR for Bangladesh Bank automation procedure.
 Inefficiency and inadequate knowledge of the bank management about the on line banking.

 High cost of establishing on line banking system.
 Inadequate back and front office management.
 Lack of integrated plan among the banks and the Central Bank authority.
 Inefficient Clearing House Facilities.
 Acute shortages of human resources interested to do online banking business
 Inappropriate software and less trust by the Bank authorities on local software.
Using Internet facility still very costly and people has little knowledge in operating computers. A
few numbers of cyber café is available but for banking purpose customers do not feel safe to use
these facilities. As a result total numbers of customers who are habituated in on line banking
systems are limited. In these circumstances investment for establishing e -banking facilities
seems profitless.
4.1Summarized Overview:
Now Bangladesh is in the beginning of Electronic Banking systems, though the start of
Telephone banking was in the 90s but the process is in dead position. Online Banking started its
different services but speed of internet, user of internet is the main barriers for its prospects. But
Mobile Banking in Bangladesh has started its services from 2011 and now the most promising
banking systems in Bangladesh. Although e-banking has bright prospects, it involves some
financial risks as well. Bank can able to minimize credit risk by providing credit services through
modern e-banking technology discussed in the theoretical part and able to retain more customers.
Banking sector of Bangladesh is playing a vital role in the economy with the number of 48
commercial banks. However, the service of commercial banks is increasing although the overall
banking sector is not yet completely modernized. PCBs and FCBs are focusing more on online
and internet based services as well as use of modernized technologies whereas SCBs are not that
much advanced in taking innovations. However, the level of e-banking service is gradually
improving with the number of internet users. Customers are now using ATMs, mobile banking,
Internet banking, debit card and credit card more than previous. On the other hand, central bank
of Bangladesh is highly inspiring commercial banks to implement more online based banking
service. Banking sector of Bangladesh is now taking different approaches to make the service
easier to the customers.
4.2Recommendations:
In order to ensure a successful practice of e-banking in Bangladesh, I recommend the following.
 The whole country should be connected under fiber optic backbone for electronic
banking infrastructure as soon as possible.
 Electronic banking sector depends on telecommunication and Internet services. So
government should implement the National ICT policy 2002 as quickly as possible.
 We should develop in house software for our banking system. So it will be cost effective.

 Every transaction should have some desirable properties like Authenticity, confidentially,
Unforgivable, Integrity and not reusable.
 E-banking services should be standardized so that wherever the solution is used the
customer is familiar with the procedure followed.
 Greater emphasis should be given on security system and to prevent fraud so that any sort
of financial transactions including on line banking payment or any other electronic fund
transfer can be properly handled.
 Provide adequate training and technological support to develop the manpower.
 Government should implement the cyber laws to ensure proper security about customers
information (i.e. Credit card number)
 Government should establish proper educational institution to create efficient IT
professionals to support e-banking in Bangladesh.
 The clearing house operation in Bangladesh should be fully automated system.
 Banks should have adequate research and technological background in this regard.
 As e-bank users mostly use ATMs and POS in most cases, the banks should emphasize
on providing uninterruptible service.
The Bangladesh Bank may consider the following steps:
 Take steps to orient bank officials on benefits of e-banking. For instance, BB may offer
short courses (e.g. using the Bangladesh Bank Training Academy) on e-banking
including analysis of costs and benefit from the perspectives of customers and the banks,
present status, and opportunities and challenges.
 To avoid risks involved in e-banking, risk mitigation policies and strategies need to be
adopted as a part of the package approach to implementing e-banking.
 Because of convenience, a sizeable share of the unbanked people can be brought under
the network especially in rural areas with flourishing mobile banking. In this context, it is
important to formulate relevant acts, policies, and adopt operative guidelines.
4.3Conclusion:
Trend of technology about banking is soothing for the customer, but there may have some risk
associates with it, since information technology is often hacked by some notorious hacker. So, it
is very much essential for the bank to adopt the right technology with optimum security system..
The flexibility of e-banking offers unprecedented opportunities for the bank to reach out to its
customers. With the rapid expansion of the Internet facilities, e-banking is all set to play a very
important role in the 21st century. Banks have to deal with the sophisticated clientele with the
help of latest technology like e-banking. From this study it is found that customers today
especially in city area are much more dependent on Technology for avoiding hassle and saving

time as a result e- banking , mobile banking, etc becoming more popular media for clientele
satisfaction. Credit risk can minimize by using e-banking technology as there are no manual
work everything is done electronically except sometimes risk of e-banking can increase risk in
providing credit but however proper security measures can handle these risks.
Bangladesh is now giving emphasis on implementing modern technology to get its respective
benefits. If they do so, I believe that Bangladesh will get a significant position in the world using
e-banking technology into banking sector.
 References:
 http://bankinfobd.com/banks/20/EXIM_Bankonline Loan Applications
 http://www.bangladeshbank.org/aboutus/regulationguideline/corerisks/creditrisks.pdfhttp://w
ww.asaub.edu.bd/data/asaubreview/v7n2sl19.pdf
 http://www.arraydev.com/commerce/JIBC/2014-01/BatenSakerav03.pdf
 https://www.google.com/search?tbm=isch&q=ab+bank+atm+card&ei=yHJxVcrBBMvbuQ
TkzILgCw#tbm=isch&q=utility+bill+payment+through+e-banking+in+bangladesh
 http://www.academia.edu/11813730/INTERNSHIP_REPORT_ON_CREDIT_RISK_MANA
GEMENT_OF_JANATA_BANK_LTD
 http://www.dutchbanglabank.com/investorrelations/Annual_Report_2011/PDFs/information-
technology.pdf
 http://www.academicjournals.org/article/article1380721906_Hasan%20et%20al.pdfMS
Service
 http://www.asaub.edu.bd/data/asaubreview/v5n2sl9.pdf
 http://www.eldis.org/go/home&id=63861&type=Document#.VXF6nJPrTIU
 http://www.bth.se/fou/cuppsats.nsf/all/369392f044b060c8c1257c04005928aa/$file/BTH2013
Rana.pdf
 http://bbaworldwide.com/2014/11/25/assignment-current-scenarioof-e-banking-bangladesh/
 http://www.wrbrpapers.com/static/documents/September/2012/8.%20Quazi.pdf
 http://www.wbiconpro.com/602-Kamril.pdf
 http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan039812.pdf
 http://dspace.bracu.ac.bd/bitstream/handle/10361/3352/09204053.pdf?sequence=1
 http://www.slideshare.net/MahfuzTushar/report-final-17236893
Websites
 www.dbresearch.com
 www.dbbl.bd.com
 www.janatabank.com

 www.ibbl.com
 www.scb.com
 www.sonalibank.com
 www.eximbank.com
 www.yahoo.com
 www.google.com
Appendix Part:
Chart: 1
Chart:2

Chart: 3
In chart, the technology driven services are ranked. This ranking is done from the percentage of
banks providing the services. The higher the percentage of banks providing services the higher

the rank. All the banks are providing EFT, SWIFT and MICR cheque facilities so these three
services are numbered one in ranking.
Table:
Bank software used for e-banking to minimize credit risk:
Name of the Banks Present Previous ATM
Sonali Bank Bexibank4000+, Pc
Bank,Kurnel Banking
system,Flora Bank
Bexibank 3000+ No
Janata Bank Bexibank, Flora Bank Bexi Bank No
Agrani Bank Bexi Bank 3000+ N/A No
Rupali Bank Infinity Banking
Soloution(IBS)
IBS NO
PubaliBank PIBS A2z NO
Uttara Bank UIBS A2z NO
Bangladesh Krishi Bank IBS and Flora Bank N/A No
Arab Bangladesh Bank KPATI BEXI Bank Yes
IFIC Bank ltd. Bexi Bank 4000+ Bexi Bank 3000+ Yes
Southest Bank PC Bank Yes

Prime Bank PC Bank N/A NO
Dhaka Bank ltd Flexcube PC Bank Yes
Al Arafa Islami Bank BEXI Bank N/A No
Social Investment Bank PC Bank BEXI Bank Yes
Dutch BanglaBank PC Bank
The Trust Bank Kernel Banking System No
Shahjalal Bank PC Bank 2000 N/A No
Jamuna Bank Flora Bank N/A Yes
BRAC Bank MIillenium Banking
System
N/A No
Standark Charterd Bank EBBS BBS Yes
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