What is Net Banking and How it Works?

What is Net Banking and How it Works?

8 mins read2.2K Views Comment
Chanchal Aggarwal
Senior Executive Content
Updated on Nov 27, 2023 03:07 IST

Net banking, or online banking, enables individuals to access their bank accounts and perform various financial transactions through the internet. This includes activities like checking account balances, transferring funds, paying bills, and even applying for loans or investments. It provides convenience and accessibility to manage one’s finances from anywhere with an internet connection.


The Internet has made it less complicated for banks to facilitate banking for their clients online. Customers can now function their bank accounts, perform balance inquiries, transfer money, or immediately offer status instructions to banks from wherever they like. Access to the internet banking portal of the particular bank will allow you to complete this process through Internet banking or Net banking.

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An account holder can enter some information to log in and perform transactions without handholding the banks. It is accessed using a username and password; sometimes, a different code or OTP is required to authorize a fund transfer. It has made presenting bank offerings cost-effective and data-driven decisions. Let’s understand net banking, its advantages, and how it works.

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Table of Content

What is Net Banking?

Net banking, or online banking or Internet banking, is a service provided by banks and financial institutions that allows individuals to perform various banking transactions and activities through the internet. With net banking, customers can access their bank accounts, check balances, transfer funds, pay bills, view transaction history, and perform other banking tasks using a computer, smartphone, or tablet. It provides convenience, accessibility, and flexibility, as customers can manage their finances anytime and anywhere without the need to visit a physical bank branch. Online banking ensures secure communication and transactions through encryption and authentication protocols, providing peace of mind to users.

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What Services Can Be Availed Using Net Banking?

Net banking offers a wide range of services that can be conveniently accessed and availed online. Some common services include:

  1. Account Management: Users can view their account balances and transaction history and download account statements. They can also update personal information, such as addresses and contact details.
  2. Fund Transfers: It allows users to transfer funds between their own accounts within the same bank or to accounts in other banks through NEFT (National Electronic Funds Transfer), RTGS (Real-Time Gross Settlement), or IMPS (Immediate Payment Service). This enables easy and quick money transfers to family, friends, or businesses.
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  3. Bill Payments: Users can pay utility bills, credit card bills, mobile phone bills, insurance premiums, and other bills directly through online banking. It eliminates the need for writing cheques or visiting payment centres, making bill payments hassle-free.
  4. Online Shopping and Payments: It facilitates secure online shopping by allowing users to make payments directly from their bank accounts. They can also set up virtual debit cards for safer online transactions.
  5. Fixed Deposits and Investments: Users can open fixed deposit accounts, invest in mutual funds, and manage their investment portfolios through net banking. It provides a convenient platform to explore and monitor investment options.
  6. Loan and Credit Card Services: Net banking allows users to apply for loans, track loan status, repay loans, and manage credit card accounts. It provides easy access to loan-related information and enables timely payments.
  7. Mobile Recharge and DTH Payments: Users can recharge mobile phones, DTH (Direct-to-Home) services, and other prepaid services directly through net banking. It offers a quick and convenient way to top up mobile and entertainment services.
  8. Online Tax Payments: Net banking facilitates the payment of income tax, goods and services tax (GST), and other taxes. It simplifies tax-related processes and ensures secure transactions.

Advantages of Net Banking

The benefits of net banking are as follows:

1. Availability

You can use the banking services around the clock throughout the year. Most offerings are flexible; you may look at your account balance and transfer funds without considering the bank opening timings.

2. Easy to Operate

Using the net banking service is straightforward. Many people find transacting online less complicated than visiting bank branches to do the same work.

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3. Convenience

You are no longer required to stand in a queue and delay your work to complete your banking transactions or deposits. From the comfort of your place, you can do transactions. It includes regular deposit account instalments, payments of bills, and a lot more using online banking.

4. Time Efficient

It lets you complete the entire transaction in a few minutes. You can transfer funds to any account within the country and also open a fixed deposit account in no time using Internet banking.

5. Activity Tracking

You’ll receive an acknowledgement receipt when you transact in the bank department. There are chances that you may misplace it. In contrast, all the transactions you carry out on a bank’s net banking portal can be recorded. When required, you can display this as evidence of the transaction. It is possible to record details such as the payee’s name, bank account number, the amount paid, the payment date and time, and feedback, if any.

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How does Net Banking Work?

Having a net banking account is like having a bank account online. However, opening a net banking account allows you to generate particular digital passwords. It permit you to transact over the net. 

You must follow these four steps to open a net banking account,

1. Approach Your Bank for a Netbanking Account

Your first step to starting a net banking account is approaching your bank to permit a web banking facility to your current bank account. Unless you request your bank to begin your banking offerings online, you cannot start using those offerings, given the excessive protection maintained in allowing you to transact digitally.

Let your bank realize your purpose in starting online banking on your account. Once the bank accepts your request, it gives you key codes that assist you in logging in to your account online. 

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2. Collect Your User ID and Password

You must log in using your User ID and password to log into your net banking account for net banking to work. This User ID isn’t like your bank account variety, as it serves as the primary identity of your bank account. 

You should request your bank to generate a User ID and password. In the case of a new account, documents along with a User ID and password are shared at the time of account opening.

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3. Generate New User ID and Password

As part of generating your User ID, the bank gives you a set of unique numbers generated from its end, along with a password in a concealed document. For account security, consumers are usually requested to change this password after logging in for the first time.

Once you authenticate your first login, it is good to extrude your User ID and set a fresh password.

The steps to change both the User ID and password are easy: 

  • Log in on your bank’s site.
  • Enter the User ID and password that the bank has provided to you.

Then log out.

  • Upon logging out, you’ll see a tab at the bank’s site that says “generate new User ID.” 
  • Use that tab to generate a new User ID. 
  • When you request a new User ID, you’ll be requested information, including your date of birth, phone number, and other data the bank has already secured from your KYC documents. 
  • Upon entering your information, a one-time password can be dispatched to your phone number. The second level of security usually makes a customer believe that their online banking is safe.
  • Enter this one-time password to make the new User ID. 
  • Then, you can create a new password by following the same steps.

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4. Begin Transactions Online

It is now possible for you to access your bank account online and to generate a new User ID and password for your account. You can now start your online transactions safely.

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Net banking is a convenient and secure way to manage your finances. It allows you to access a wide range of banking services. Beginning from checking balances to paying bills, all through the internet. With its accessibility, ease of use, and robust security measures, net banking has revolutionized how individuals interact with their banks. It provides flexibility and convenience in managing their financial transactions. Embracing net banking can save time and reduce paperwork. Also, it empowers you to take control of your financial activities from the comfort of your home or on the go.


What is net banking?

Net banking, also known as online banking or internet banking, is a service that allows individuals to conduct various banking activities, such as checking balances, transferring funds, and paying bills, through the internet.

How does net banking work?

Net banking works by securely connecting users to their bank's website or mobile app. Users can access their accounts using personal login credentials, and then perform banking transactions electronically, ensuring convenience and accessibility.

Is net banking safe?

Yes, net banking employs robust security measures such as encryption and authentication protocols to ensure the safety of online transactions. Banks also implement multi-factor authentication and regularly update security features to protect customer information.

How can I register for net banking?

To register for net banking, you need to visit your bank's website or branch and follow the registration process. Typically, you will be required to provide your account details, set up a login ID and password, and complete any additional authentication steps.

Can I access net banking from my mobile device?

Yes, most banks provide mobile banking apps that allow you to access net banking services on your smartphone or tablet. These apps offer a user-friendly interface and provide the convenience of banking on the go.

Are there any charges for using net banking?

Many banks offer net banking services free of charge. However, there may be certain transaction-specific charges or fees associated with specific services. It is advisable to check with your bank regarding any applicable charges.

About the Author
Chanchal Aggarwal
Senior Executive Content

Chanchal is a creative and enthusiastic content creator who enjoys writing research-driven, audience-specific and engaging content. Her curiosity for learning and exploring makes her a suitable writer for a variety ... Read Full Bio