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What Is Net Banking: How It Works, Features and Advantages

BySarah Writer

Feb 5, 2024

Net banking, also known as Internet banking or online banking, refers to the use of the Internet for conducting various banking functions like transferring funds, paying bills, viewing account statements, requesting checkbooks, and more.

It allows customers to carry out banking transactions and avail of other services via the bank’s website, without visiting the bank branch. Net banking has become extremely popular in recent years, with most banks now offering Internet banking facilities.

Here is an in-depth look at what is net banking and everything you need to know about it.

Key Takeaways

• Net banking refers to conducting banking transactions electronically via the Internet. It allows accessing banking services remotely via the bank’s website.

• Key benefits include 24/7 availability, avoiding branch visits, faster transactions, paperless banking, and better interest rates.

• Major net banking features cover account summary, funds transfer, utility bill payment, ticket booking, demat account access, tax payments, etc.

• Banks use multifactor authentication, encryption, anti-keylogging, virtual keyboards, security tokens, etc. to ensure the highest levels of security.

• Customers should follow precautions like using strong passwords, reviewing limits, and alerting banks about changed contacts to stay safe.

• Net banking has transformed banking by enabling 24×7 availability, paperless processing, disintermediation, mobility, and analytics-driven services.

What Is Net Banking?

Net banking can be simply defined as a way of conducting banking transactions electronically via the Internet. The services offered under internet banking include:

• Viewing account balances and statements
• Transferring funds between your accounts
• Paying bills online
• Requesting checkbooks and account statements
• Updating contact information
• Applying for loans, credit cards, or other products
• Tracking fixed deposits and investments
• Availing tax services like Form 16, Form 26AS, etc.
• Managing multiple accounts from a single login
• Raising service requests and complaints

To use net banking services, a customer needs to have an account with the bank along with internet banking enabled for that account. The customer is provided login credentials including a customer ID/user ID and password by the bank to access internet banking. These credentials are used to securely log in to net banking via the bank’s website.

Benefits of Net Banking

Net banking offers various benefits and advantages to both banks and customers. Here are some of the major benefits of Internet banking:

For Customers

24/7 access – Net banking allows customers to access banking services anytime, anywhere at their convenience. This includes holidays, weekends, and late-night hours when bank branches are closed.

Avoid branch visits – Many banking transactions that earlier required branch visits can now be done from home PC/mobile via net banking. This saves time and effort for the customer.

Remote access – Customers can access their accounts and perform transactions remotely via internet banking, even when traveling abroad.

Fast and easy – Internet banking provides a faster way to do banking compared to traditional methods. Transactions are completed instantly.

Paperless – Net banking is paperless with electronic statements and records, eliminating paperwork.

Better rates – Customers can access better interest rates on savings accounts through online banking compared to regular accounts.

For Banks

Increased customer base – Offering net banking helps banks acquire tech-savvy customers and increases customer base.

Cost savings – Net banking reduces operating costs for banks by minimizing paperwork and branch visits.

Faster processing – Online transactions can be processed faster compared to manual processing reducing transaction time.

Cross-selling – Banks can cross-sell and upsell other products to existing customers through Internet banking.

Enhanced customer service – Net banking enables banks to provide services 24×7 improving overall customer experience.

Features and Services offered by Net Banking

Most banks provide a host of services under Internet banking which may include:

Account summary – View real-time account balance, account statements, and transaction history for all your accounts.

Funds transfer – Transfer funds between your accounts or to third-party accounts in the same bank or other banks.

Pay bills – Pay your electricity, telephone, mobile, gas, and credit card bills online. Schedule future dated payments.

Online shopping – Shop online at e-commerce websites directly via net banking using the bank’s payment gateways.

Ticket booking – Book train, flight, and bus tickets directly through net banking.

Demat account – Access your Demat account, and view your portfolio and statements. Place buy or sell orders for shares.

Insurance premium payment – Pay life, health, and vehicle insurance premiums online using net banking.

Tax payments – Pay direct and indirect taxes like income tax, GST, and VAT online.

Donations – Make donations to preferred trusts, NGOs, and religious organizations via online banking.

Fast tag recharge – Recharge your Fastag wallet for toll payments from your net banking account.

Standing instructions – Set up standing instructions for periodical fixed-amount transfers.

Cheque and checkbook request – Request for a checkbook or get a canceled cheque image from net banking.

Fixed and Recurring Deposits – Open a new FD or RD, view existing FDs and modify or close online.

Loan applications – Apply for personal loans, home loans, and car loans through internet banking.

Service requests – Raise complaints, get an IT certificate, and account statement from net banking.

Net Banking Security Features

Security is a major concern when it comes to net banking. Banks use various security measures to ensure safe and secure internet banking. These include:

Secure website with HTTPS – All login pages use HTTPS protocol for secure communication.

Encryption – Uses high-grade encryption like 128-bit SSL for all online transactions.

Password protection – Strong password policies requiring special characters, numbers, and upper and lower case letters.

Transaction authentication – Authentication via OTP over SMS, email, QR code, token, soft token for every transaction.

Timeout – Automatic timeout requiring re-login after a few minutes of inactivity.

Limit transaction value – Per transaction limits to control fraud risks.

Device binding – Option to register your computer/mobile for trusted access.

Security questions – Registering security questions/images as an additional verification step.

Virtual keyboard – Provides an on-screen virtual keyboard while entering login ID and password.

Anti-keylogging – Protects against keystroke logging software used to steal passwords.

Anti-virus protection – Mandatory installation of updated anti-virus software is required for accessing net banking.

Security tips – Provides security tips and advice at every step while carrying out any transaction.

Transaction alert – Immediate SMS/email alert for all transactions and changes to account.

How to Stay Safe on Net Banking

While banks employ multiple measures for safety, customers too need to follow certain precautions for secure Internet banking:

Strong password – Create a strong password with letters, numbers, and special characters. Change it periodically.

Logout – Logout from net banking when not using it. Don’t just close the window.

Don’t save passwords – Avoid saving usernames/passwords on the system for auto login.

Beware of frauds – Exercise caution while responding to any email, or SMS sent to update your personal or banking details.

Review limits – Review and set transaction or transfer limits suiting your requirements.

Note transaction time – The completion time of any online transaction should not exceed 2-3 minutes. The delay could mean technical issues at the bank’s end.

Use security token – If available, use hardware or software security token as an added protection.

Verify payee details – Always re-verify the account number, name, and other details before transferring any funds.

Monitor statements – Review account statements regularly and report discrepancies, if any.

Update computer/mobile – Keep computers, laptops, smartphones, and tablets updated with the latest OS versions and security patches.

Install security software – Must have updated anti-virus, and anti-spyware software on your systems. Avoid using public computers.

Secure internet – Prefer using your own secured Wi-Fi or mobile data for accessing net banking. Avoid cyber cafes or public Wi-Fi.

Alerts – Immediately notify the bank if your registered phone/email is changed to avoid missing any transaction alerts.

Being alert and adhering to all the prescribed safety measures is important for securely enjoying the benefits of net banking.

How Net Banking Is Transforming Banking

Net banking has brought about a significant transformation in banking operations and customer service. Here are some of the major contributions of Internet banking:

Availability – Extended bank’s availability beyond branch timings to 24×7 banking. Customers enjoy uninterrupted access.

Paperless – Significantly reduced paper printing resulting in major cost savings. Statements, records, and communications are now paperless.

Personalization – Net banking with user-specific dashboards allows customized and relevant services to each customer.

Disintermediation – Customers directly connect with the bank’s systems reducing intermediaries. This results in faster processing and improved accuracy.

Analytics – The data from net banking transactions provides insights into customer behavior that aid banks in cross-selling and targeted marketing.

Mobility – Banking is no longer confined to branches. Net banking can be accessed via smartphones and tablets giving full mobile access.

Customer experience – Better UI/UX and real-time services have improved overall customer experience and satisfaction levels.

Competition – Internet banking has intensified competition with customers able to easily switch banks for better services or rates. This has improved competitiveness in the banking sector.

Operational efficiency – Net banking has led to increased operational efficiency in banks resulting in cost optimization.

The Future of Net Banking

Going forward, net banking is expected to evolve further and become even more sophisticated. Here are some likely advancements:

Predictive analytics – Banks will start providing personalized product suggestions based on predictive data analytics. This can be used for customized offers.

AI-enabled services – More AI/ML integration will enable services like digital customer assistants, sentiment analysis, and predictive modeling.

Biometrics – Increased use of biometric logins like fingerprint, and face recognition for net banking in place of passwords.

Blockchain – The decentralized ledger system of blockchain can be used for more secure and transparent transactions.

UPI integration – Unified Payments Interface (UPI) integration into net banking for seamless funds transfer using VPA handles.

Internet of Things – IoT integration may allow more novel connected interfaces like logging into net banking via home assistants, and car dashboards.

Gamification – Net banking apps may incorporate gaming elements for more user engagement like rewards, badges, and levels to make it more fun.

Regional languages – Vernacular language support for net banking will drive further adoption across urban and rural India.

Cloud platforms – Increased use of cloud platforms by banks to enable faster deployment of services and scaling up technology.

Open Banking – Open API-based systems will facilitate more seamless integration of net banking with third-party apps.

The future looks promising for Internet banking as technology continues to rapidly transform this space. While net banking has already become omnipresent, we have only seen the tip of the iceberg when it comes to its full potential. The next generation of digital natives will push innovation even further taking net banking to altogether new realms enabling instant, invisible, and seamless banking.


Net banking has become an indispensable part of modern banking allowing customers to bank from anywhere, anytime. While Internet banking offers multiple benefits, the need for robust security remains paramount. As banks continue to find newer ways of enhancing security and convenience, customers too need to remain vigilant. By adopting all the prescribed safety guidelines, net banking can be used securely to fulfill almost all your banking requirements seamlessly from the comfort of your home. Net banking is also playing a stellar role in transforming traditional banking models into 24×7 personalized services driven by customer convenience.

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