E-banking Final Proojet

8/10/2019 E-banking Final Proojet

1/68

Page | 1

A

PROJECT REPORT

ON

E- BANKING OF SBI BANK

SUBMITTED TO

UNVERSITY OF MUMBAI

IN PARTIAL FULLFILLMENT FOR THE AWARD OF

THE DEGREE OF BACHELOR OF COMMERCE

(BANKING AND INSURANCE)

SEMISTER V, ACADEMIC YEAR: 2014-2015.


2/68

Page | 2

DECLARATION

I hereby declare that the project titled E-BANKING submitted

by me is based on actual work carried out by me under the guidance

& supervision of Prof.

The information submitted in this project work is true and original to the

best of my knowledge and belief.

S.I.A COLLEGE OF HIGHER EDUCATION

SIGNATURE OF THE STUDENT

(BHARAT R. SIRVEE)


3/68

Page | 3

PREFACE

With the rapid globalization of the Indian economy, enterprises are facing withever changing competitive environment. Enterprises are adopting strategies

aimed at developing competitive advantage based on enhanced customer value

in terms of product differentiation, quality, speed, service and costs. In the post

liberalization era, with the deregulation of Indian economy, the financial service

sector witnessing a complete metamorphosis and technology is playing a very

significant role in this record. Over the last decade India has been one of the

fastest adopters of information technology, particularly because of its capability

to provide software solution to organizations around the world. This capability

has provided a tremendous impetuous to the domestic banking industry in Indiato deploy the latest in technology, particularly in the Internet banking and e-

commerce arenas. Banks are growing in size by mergers and acquisitions, which

have been driven by communication and technology. Technology is playing a

major role in increasing the efficiency, courtesy and speed of customer service. It

is said to be the age of E-banking.

An Online Banking user is expected to perform at least one of the following

transactions online:

1. Checking account balance and transaction history

2. Paying bills3. Transferring funds between accounts

4. Requesting credit card advances

5. Ordering checks

6. Managing investments and stocks trading

From a banks perspective, using the Internet is more efficient than using other

distribution mediums because banks are looking for an increased customer base.

Using multiple distribution channels increases effective market coverage by

enabling different products to be targeted at different demographic segments.

Also Banks cannot risk loosing customers to competitors within the aggressivecompetition in the banking industry around the world. Moreover Internet delivery

offers customized service to suit the needs and the likes of each user. Mass

customization happens effectively through Online Banking. It reduces cost and

replaces time spent on routine errands with spending time on business errands.

Online Banking means less staff members, smaller infrastructure demands,


4/68

Page | 4

compared with other banking channels. From the customers perspective, Online

Banking provides a convenient and effective way to manage finances that is easily

accessible 24 hours a day, seven days a week. In addition information is up todate. Nevertheless Online Banking has disadvantages for banks like how to work

the technology, set-up cost, legal issues, and lack of personal contact with

customers. And for customers there are security and privacy issues.


5/68

Page | 5

ACKNOWLEDGEMENT

It is a matter of great pleasure for me in submitting the project report on E-

BANKING for fulfillment of the requirement of my course from THE S.I.A

COLLEGE OF HIGHER EDUCATION, DOMBIVLI (EAST)

I am thankful to and owe a deep gratitude to all those who have helped me in

Preparing this report. Words seem to be inadequate to express my sincere thanks

to Prof. nagaria sir for her valuable guidance, constructive criticism, untriring

efforts and immense encouragement during the entire course of the study due to

which my efforts have been rewarded.

I express my sincere thanks to our principal Dr. Mrs. PadmajaArvind and ourlibrarian Mrs. Bharti Rao for giving me all the facilities during my project and

helping and guiding me during my research work.

I want to thank all who have supported me and gave their timely guidance. Last

but not least I am very grateful to all those who helped in one way or the other

way at every stage of my work.

Signature

(Bharat R .Sirvee)


6/68

Page | 6

About the project

Title of study

The present study titled in E-BANKING. The study is made by reference to E-

BANKING services given to customer

Object of the study

To study the E-banking services in detail.

To study of awareness of E-banking services among the customer of bank.

To study the customer satisfaction relating to the E-banking services.

To study the risk involved in E-banking.

DATA AND METHODOLOGY

For the purpose of the present study, both primary as well as secondary data

were used.

Primary data is collected through questionnaire from 10 customer to

understand the awareness abut the E-banking. Sample was randomly selected.


7/68

Page | 7

INDEX

Chapter

No.

Topic PAGE

NO.1 Declaration

2 Acknowledgement

3 Preface

4 Introduction :

To banking

To HDFC Bank5 E-banking

6 Literature Review

7 Research Methodology

8 Data Analysis AndInterpretation

9 Findings

10 SWOT Analysis

11 Limitations

12 Types or risk

13 Conclusion


8/68

Page | 8

Chapter 1

ntroduction


9/68


10/68

Page | 10

BANKING INDUSTRY PROFILE

BANKING

The word "BANK" is derived from the 'Bancus' or 'Banque', which means a bench. In

the early days the European moneylenders and moneychangers used to sit on thebenches and exhibit coins of different countries in big heaps for the purpose of changingand lending money.

Definition of E-BANKING

Definition:A Banking company is defined as a company, which transacts the business ofbanking in India.

As per Banking Regulation Act 1949 Section 5(b)"Banking means, accepting for the purpose of lending or investment, of deposits of

money from the public, repayable on demand or otherwise, and withdrawal bycheque, draft, or otherwise."

According to Sir John Paget"No person or body, corporate or otherwise can be a banker who does not, (a) takedeposits accounts, (b) take current accounts, (c) issue and pay cheques, (d) collectcheques, crossed and uncrossed, for his customers."In simple words we can say thatbank is a financial institution which deals in money and credit by obtaining deposits frompublic and giving loans and credit to trade and industrial respectively. "


11/68

Page | 11

INTRODUCTIONTO HDFC BANK


12/68

Page | 12

HDFC COMPANY PROFILE

HDFC BANK LTDType PrivateFounded 1994Headquarters HDFC Bank Ltd.,

Mumbai, IndiaIndustry Banking Insurance

Capital Markets and allied industries

Products Loans, Credit Cards, Savings,Investment vehicles Insurance etc.

Website www.hdfcbank.com

HDFC Bank (NYSE: HDB), one amongst the firsts of the new generation, tech-savvycommercial banks of India, was incorporated in August 1994, after the Reserve Bank ofIndia allowed setting up of Banks in the private sector. The Bank was promoted by theHousing Development Finance Corporation Limited, a premier housing financecompany (set up in 1977) of India..


13/68

Page | 13

History

The Housing Development Finance Corporation Limited (HDFC) wasamongst the first to receive an 'in principle' approval from the Reserve

Bank of India (RBI) to set up a bank in the private sector, as part of theRBI's liberalization of the Indian Banking Industry in 1994. The bank wasincorporated in August 1994 in the name of 'HDFC Bank Limited', with itsregistered office in Mumbai, India. HDFC Bank commenced operations asa Scheduled Commercial Bank in January 1995.

Branch network

Currently HDFC Bank has 1416 branches, 3382 ATMs, in 550 cities inIndia, and all branches of the bank are linked on an online real-time basis.The bank offers many innovative products & services to individuals,corporates, trusts, governments, partnerships, financial institutions, mutualfunds, insurance companies. It is a path breaker in the Indian bankingsector. In 2007 HDFC Bank acquired Centurion Bank of Punjab taking itstotal branches to more than 1,000. Though, the official license was given toCenturion Bank of Punjab branches, to continue working as HDFC Bank

branches, on May 23, 2008.


14/68

Page | 14

E-BANKING
http://lh4.googleusercontent.com/_iFIztPmvqg8/TVSUNMgDa0I/AAAAAAAAED0/YP9q4Zo04iI/E-Banking-Online-Banking-Advantages-Ebanking.jpg


15/68

Page | 15

WHAT IS E-BANKING?

Electronic banking is one of the truly widespread avatars of E-commerce the

world over. Various authors define E-Banking differently but the most definitiondepicting the meaning and features of E-Banking are as follows:

a. Banking is a combination of two, Electronic technology and Banking.

b. Electronic Banking is a process by which a customer performs bankingTransactions electronically without visiting a brick-and-mortar institutions.

c. E-Banking denotes the provision of banking and related service through

Extensive use of information technology without direct recourse to the bank bythe customer.

Information

technology

Customer


16/68

Page | 16

NEED FOR E-BANKING

One has to approach the branch in person, to withdraw cash or deposit acheque or request a statement of accounts. In true Internet banking, anyinquiry or transaction is processed online without any reference to thebranch (anywhere banking) at any time. Providing Internet banking isincreasingly becoming a "need to have" than a "nice to have" service. Thenet banking, thus, now is more of a norm rather than an exception in manydeveloped countries due to the fact that it is the cheapest way of providingbanking services.

Banks have traditionally been in the forefront of harnessing

technology to improve their products, services and efficiency. They have,over a long time, been using electronic and telecommunication networks fordelivering a wide range of value added products and services. The deliverychannels include direct dialup connections, private networks, publicnetworks etc and the devices include telephone, Personal Computersincluding the Automated Teller Machines, etc. With the popularity of PCs,easy access to Internet and World Wide Web (WWW), Internet isincreasingly used by banks as a channel for receiving instructions anddelivering their products and services to their customers. This form of

banking is generally referred to as Internet Banking, althoughthe range of products and services offered by different banks vary widelyboth in their content and sophistication.


17/68

Page | 17

EVOLUTION OF E-BANKING

The story of technology in banking started with the use of punched card

machines like Accounting Machines or Ledger Posting Machines. The useof technology, at that time, was limited to keeping books of the bank. Itfurther developed with the birth of online real time system and vastimprovement in telecommunications during late 1970s and 1980s.itresulted in a revolution in the field of banking with convenience bankingas a buzzword. Through Convenience banking, the bank is carried to thedoorstep of the customer.

The 1990s saw the birth of distributed computing technologies andRelational Data Base Management System. The banking industry was

simply waiting for these technologies. Now with distribution technologies,one could configure dedicated machines called front-end machines forcustomer service and risk control while communication in the batch modewithout hampering the response time on the front-end machine.

Intense competition has forced banks to rethink the way they operated theirbusiness. They had to reinvent and improve their products and services tomake them more beneficial and cost effective. Technology in the form of E-banking has made it possible to find alternate banking practices at lowercosts.

More and more people are using electronic banking products and servicesbecause large section of the banks future customer base will be made upof computer literate customer, the banks must be able to offer thesecustomer products and services that allow them to do their banking by

Traditional banking

Gunpowder

Personalized services,time consuming, limitedaccess

Virtual or E-banking

Nuclear charged

Real time transactions,integrated platform, all time

access


18/68

Page | 18

electronic means. If they fail to do this will, simply, not survive. Newproducts and services are emerging that are set to change the way welook at money and the monetary system.


19/68


20/68

Page | 20

E-BANKING PRODUCTS

Automated Teller Machine (ATM )

These are cash dispensing machine, which are frequently seen at banksand other locations such as shopping centers and building societies. Theirmain purpose is to allow customer to draw cash at any time and to providebanking services where it would not have been viable to open anotherbranch e.g. on university campus.

An automated teller machine or automatic teller machine (ATM) is a

computerized telecommunications device that provides a financialinstitution's customers a method of financial\ transactions in a public spacewithout the need for a human clerk or bank teller. On most modern ATMs,the customer identifies him or herself by inserting a plastic ATM card with amagnetic stripe or a plastic smartcard with a chip that contains his or hercard number and some security information, such as an expiration date or

Internet

Banking

ATMs

TELEBanking

Plastic

Money

E -Cheque


21/68

Page | 21

CVC (CVV). Security is provided by the customer entering a personalidentification number (PIN).

Using an ATM, customers can access their bank accounts in order to makecash withdrawals (or credit card cash advances) and check their accountbalances. Many ATMs also allow people to deposit cash or checks, transfermoney between their bank accounts, pay bills, or purchase goods andservices. ATMs are known by various casual terms including cashmachine, hole-in-the-wall, cash point or Bancomat (in Europe and Russia).The occasionally-used ATM Machine is an example of RAS syndrome.

Some of the advantages of ATM to customers are:-

Ability to draw cash after normal banking hours

Quicker than normal cashier service

Complete security as only the card holder knows the PIN

Does not just operate as a medium of obtaining cash.

Telebanking or Phone Banking

Telephone banking is relatively new Electronic Banking Product. However itis fastly becoming one of the most popular products. Customer can performa number of transactions from the convenience of their own home or office;


22/68

Page | 22

in fact from anywhere they have access to phone. Customers can dofollowing:-

Check balances and statement information

Transfer funds from one account to another

Pay certain bills

Order statements or cheque books

Demand draft request

This facility is available with the help of Voice ResponseSystem (VRS). This system basically, accepts only TONE dialed input. Likethe ATM customer has to follow particular process, initially account numberand telephone PIN are fed for the process to start. Also the VRS systemprovides the users within additional facilities such as changing existingpassword with the new desired, information about new products, currentinterest rates etc.


23/68

Page | 23

Mobile Banking

Mobile banking comes in as a part of the banks initiative to offer multiplechannel banking providing convenience for its customer. A versatilemultifunctional, free service that is accessible and viewable on the monitorof mobile phone. Mobile phones are playing great role in Indian banking-both directly and indirectly. They are being used both as banking and other

channels.

Internet Banking

The advent of the Internet and the popularity of personal computerspresented both an opportunity and a challenge for the banking industry. Foryears, financial institutions have used powerful computer networks toautomate million of daily transactions; today,often the only paper record is

the customers receipt at the point of sale. Now that theircustomers areconnected to the Internet via personal computers, banks envision similaradvantages by adopting those same internal electronic processes to homeuse.


24/68

Page | 24

Banks view online banking as a powerful value added tool to attractand retain new customers while helping to eliminate costly paper handlingand teller interactions in an increasingly competitive banking environment.In India first one to move into this area was ICICI Bank. They started webbased banking as early as august 1997.

Smart cards

smart card usually contains an embedded 8-bit microprocessor (a kind ofcomputer chip). The microprocessor is under a contact pad on one side ofthe card. Think of the microprocessor as replacing the usual magneticstripe present on a credit card or debit card. The microprocessor on thesmart card is there for security. The host computer and card reader actually

"talk" to the microprocessor. The microprocessor enforces access to thedata on the card. The chips in these cards are capable of manykinds of transactions. For example, a person could make purchases fromtheir credit account, debit account or from a stored account value that'sreload able. The enhanced memory and processing capacityof the smart card is many times that of traditional magnetic-stripe cards andcan accommodate several different applications on a single card. It can


25/68

Page | 25

also hold identification information, which means no more shuffling throughcards in the wallet to find the right one -- the Smart Card will be the onlyone needed. Smart cards can also be used with a smart card readerattachment to a personal computer to authenticate a user. Smart cards are

much more popular in Europe than in the U.S. In Europe the healthinsurance and banking industries use smart cards extensively. EveryGerman citizen has a smart card for health insurance. Even though smartcards have been around in their modern form for at least a decade, theyare just starting to take off in the U.S.

DEBIT CARD

Debit cards are also known as checkcards. Debit cards look like creditcards or ATM (automated teller machine)cards, but operate like cash or a personal check. Debit cards are differentfrom credit cards. While a credit card is a way to "pay later," a debit card is

a way to "pay now." When you use a debit card, your money is quicklydeducted from your checking or savings account. Debit cards are acceptedat many locations, including grocery stores, retail stores, gasoline stations,and restaurants. You can use your card anywhere merchants display yourcard's brand name or logo. They offer an alternative to carrying acheckbook or cash.


26/68

Page | 26

TYPES OF INTERNET BANKING OR E-BANKING

Understanding the various types of Internet banking will help examiners

assess the risks involved. Currently, the following three basic kinds ofInternet banking are being employed in the marketplace.

Informational- this is the basic level of Internet banking. Typically, thebank has marketing information about the banks products and services ona stand-alone server. The risk is relatively low, as informational systemstypically have no path between the server and the banks internal network.This level of Internet banking can be provided by the banks or outsourced.While the risk to a bank is relatively low, the server or web site may be

vulnerable to alteration. Appropriate controls therefore must be in place toprevent unauthorized alterations to the banksserver or web site.

Communicative-this type of Internet banking systems and the customer.The interaction between the banks system and the customer. Theinteraction may be limited to electronic mail, account enquiry, loanapplications, or static file updates (name and address change). Becausethese servers may have a path to the banks internal networks, the risk is

higher with this configuration than with informational systems. Appropriatecontrols need to be in the place to prevent, monitor, and alert managementof any unauthorized attempt to access the banksinternal networks andcomputer systems. Virus controls also become much more critical in thisenvironment.

Transactional- this level of Internet banking allows customers to executetransactions. Since a path typically exists between the server and the bankor outsourcers internal network, this is the highest risk architecture andmust have the strongest controls. Customer transactions can includeaccessing accounts, paying bills, transferring funds etc.


27/68

Page | 27

ADVANTAGES OF INTERNET BANKING

Convenience- Unlike your corner bank, online banking sites never close;

theyre available 24 hours a day, seven days a week, and theyre only amouse click away.

Ubiquity- If youre out of state or even out of the country when a moneyproblem arises, you can log on instantly to your online bank and take careof business, 24\7.

Transaction speed- Online bank sites generally execute and confirmtransactions at or quicker than ATM processing speeds.

Efficiency-You can access and manage all of your bank accounts,including IRAs, CDs, even securities, from one secure site.

Effectiveness- Many online banking sites now offer sophisticated tools,including account aggregation, stock quotes, rate alert and portfoliomanaging program to help you manage all of your assets more effectively.Most are also compatible with money managing programs such as quickenand Microsoft money.


28/68

Page | 28

DISADVANTAGES OF INTERNET BANKING

Start-up may take time-In order to register for your banks onlineprogram, you will probably have to provide ID and sign a form at a bankbranch. If you and your spouse wish to view and manage their assetstogether online, one of you may have to sign a durable power of attorneybefore the bank will display all of your holdings together.


29/68

Page | 29

Learning curves- Banking sites can be difficult to navigate at first. Planto invest some time and\or read the tutorials in order to becomecomfortable in your virtual lobby.

Bank site changes- Even the largest banks periodically upgrade theironline programs, adding new features in unfamiliar places. In some cases,you may have to re-enter account information.
http://methodofsolutions.com/wp-content/uploads/2010/06/online_banking5.jpghttp://methodofsolutions.com/wp-content/uploads/2010/06/online_banking5.jpg


30/68

Page | 30

E- BANKING SERVICES:

1. Bill payment service

Each bank has tie-ups with various utility companies, service providers andinsurance companies, across the country. It facilitates the payment ofelectricity and telephone bills, mobile phone, credit card and insurancepremium bills.

To pay bills, a simple one-time registration for each biller is tobe completed. Standing instructions can be set, online to pay recurringbills, automatically. One-time standing instruction will ensure that billpayments do not get delayed due to lack of time. Most interestingly, the

bank does not charge customers for online bill payment.

2. Fund transfer

Any amount can be transferred from one account to another of the same orany another bank. Customers can send money anywhere in India. Payees


31/68

Page | 31

account number, his bank and the branch is needed to be mentioned afterlogging in the account. The transfer will take place in a day or so, whereasin a traditional method, it takes about three working days. ICICI Bank saysthat online bill payment service and fund transfer facility have been their

most popular online services.

3. Credit card customers

Credit card users have a lot in store. With Internet banking, customers cannot only pay their credit card bills online but also get a loan on their cards.Not just this, they can also apply for an additional card, request a credit lineincrease and God forbid if you lose your credit card, you can report lostcard online.

4. Railway pass

This is something that would interest all the aam janta. Indian Railways hastied up with ICICI bank and you can now make your railway pass for localtrains online. The pass will be delivered to you at your doorstep. But thefacility is limited to Mumbai, Thane,Nasik, Surat and Pune. The bank would

just charge Rs 10 + 12.24 percent of service tax.


32/68

Page | 32

5. Investing through Internet banking

Opening a fixed deposit account cannot get easier than this. An FD can beopened online through funds transfer. Online banking can also be a greatfriend for lazy investors.

Now investors with interlinked demat account and bank account can easilytrade in the stock market and the amount will be automatically debited fromtheir respective bank accounts and the shares will be credited in theirdemat account.

Moreover, some banks even give the facility to purchase mutual funds

directly from the online banking system.

So it removes the worry about filling those big forms for mutual funds, theywill now be just a few clicks away. Nowadays, most leading banks offerboth online banking and demat account. However if the customer havethere demat account with independent share brokers, then need to sign aspecial form, which will link your two accounts.

6. Recharging your prepaid phone

Now there is no need to rush to the vendor to recharge the prepaid phone,every time the talk time runs out. Just top-up the prepaid mobile cards by

logging in to Internet banking. By just selecting the operator's name,entering the mobile number and the amount for recharge, the phone isagain back in action within few minutes.


33/68

Page | 33

7. Shopping at your fingertips

Leading banks have tie ups with various shopping websites. With a rangeof all kind of products, one can shop online and the payment is also madeconveniently through the account. One can also buy railway and air ticketsthrough Internet banking.


34/68

Page | 34

INTERNET BANKING VERSUS TRADITIONAL BANKING

In spite of so many facilities that Internet banking offers us, we still seem to

trust our traditional method of banking and is reluctant to use onlinebanking. But here are few cases where Internet banking will turn out to be abetter option in terms of saving your money.

'Stop payment' done through Internet banking will not cost any extra feesbut when done through the branch, the bank may charge you Rs 50 percheque plus the service tax.

Through Internet banking, you can check your transactions at any time ofthe day, and as many times as you want to.

On the other hand, in a traditional method, you get quarterly statementsfrom the bank and if you request for a statement at your required time, itmay turn out to be an expensive affair. The branch may charge you Rs 25per page, which includes only 30 transactions. Moreover, the bank branchwould take eight days to deliver it at your doorstep.

If the fund transfer has to be made outstation, where the bank does nothave a branch, the bank would demand outstation charges. Whereas with

the help of online banking, it will be absolutely free for you.

As per the Internet and Mobile Association of India's report on onlinebanking 2006, "There are many advantages of online banking. It isconvenient, it isn't bound by operational timings, there are no geographicalbarriers and the services can be offered at a miniscule cost."


35/68

Page | 35

IMPACT OF E-BANKING ON TRADITIONAL SERVICES

One of the issues currently being addressed is the impact of e-banking ontraditional banking players. After all, if there are risks inherent in going into

e-banking there are other risks in not doing so. It is too early to have a firmview on this yet. Even to practitioners the future of e-banking and itsimplications are unclear. It might be convenient nevertheless to outlinebriefly two views that are prevalent in the market. The view that the Internetis a revolution that will sweep away the old order holds much sway.

Arguments in favor are as follows:

E-banking transactions are much cheaper than branch or even phonetransactions. This could turn yesterdays competitive advantage - a largebranch network - into a comparative disadvantage, allowing e-banks to

undercut bricks-and-mortar banks. This is commonly known as the"beached dinosaur" theory.

E-banks are easy to set up so lots of new entrants will arrive. Old -worldsystems, cultures and structures will not encumber these new entrants.Instead, they will be adaptable and responsive. E-banking gives consumersmuch more choice. Consumers will be less inclined to remain loyal.

E-banking will lead to an erosion of the endowment effect currentlyenjoyed by the major UK banks. Deposits will go elsewhere with theconsequence that these banks will have to fight to regain and retain theircustomer base. This will increase their cost of funds, possibly making theirbusiness less viable. Lost revenue may even result in these banks takingmore risks to breach the gap.

Portal providers are likely to attract the most significant share of bankingprofits. Indeed banks could become glorified marriage brokers. They would

simply bring two parties together.E.g.:- buyer and seller, payer and payee.


36/68

Page | 36

The products will be provided by monolines, experts in their field.Traditional banks may simply be left with payment and settlement business

even this could be cast into doubt.

Traditional banks will find it difficult to evolve. Not only will they be unableto make acquisitions for cash as opposed to being able to offer shares,they will be unable to obtain additional capital from the stock market. This isin contrast to the situation for Internet firms for whom it seems relativelyeasy to attract investment.

There is of course another view which sees e-banking more as an evolutionthan a revolution.

E-banking is just banking offered via a new delivery channel. It simply gives

consumers another service (just as ATMs did).

Like ATMs, e-banking will impact on the nature of branches but will notremove their value.

Experience in Scandinavia (arguably the most advanced e-banking area inthe world) appears to confirm that the future is clicks and mortar banking.Customers want full service banking via a number of delivery channels.The future is therefore MartiniBanking (any time, any place, anywhere,

anyhow).

Traditional banks are starting to fight back. The start-up costs of an e-bankare high. Establishing a trusted brand is very costly as it requires significantadvertising expenditure in addition to the purchase of expensive technology(as security and privacy are key to gaining customer approval).

E-banks have already found that retail banking only becomes profitableonce a large critical mass is achieved. Consequently many e-banks arelimiting themselves to providing a tailored service to the better off.

Nobody really knows which of these versions will triumph. This issomething that the market will determine. However, supervisors will need topay close attention to the impact of e-banks on the traditional banks, forexample by surveillance of:


37/68

Page | 37

strategy

customer levels

earnings and costs

advertising spending

margins

funding costs

Merger opportunities and threats, both in the UK and abroad.


38/68

Page | 38

THE INDIAN SCENARIO

Drivers of change

Advantages previously held by large financial institutions have shrunkconsiderably. The Internet has leveled the playing field and afforded openaccess to customers in the global marketplace. Internet banking is a cost-effective delivery channel for financial institutions. Consumers areembracing the many benefits of Internet banking. Access to one's accountsat anytime and from any location via the World Wide Web is a convenienceunknown a short time ago. Thus, a bank's Internet presence transformsfrom 'brouchreware' status to 'Internet banking' status once the bank goesthrough a technology integration effort to enable the customer to access

information about his or her specific account relationship. The six primarydrivers of Internet banking includes, in order of primacy are:

Improve customer access

Facilitate the offering of more services

Increase customer loyalty

Attract new customers

Provide services offered by competitors

Reduce customer attrition


39/68

Page | 39

INDIAN BANKS ON WEB

The banking industry in India is facing unprecedented competition from

non-traditional banking institutions, which now offer banking and financialservices over the Internet. The deregulation of the banking industry coupledwith the emergence of new technologies, are enabling new competitors toenter the financial services market quickly and efficiently.

Indian banks are going for the retail banking in a big way. However, muchis still to be achieved. This study that was conducted by students of IIMLshows some interesting facts:

Throughout the country, the Internet Banking is in the nascent stage ofDevelopment (more than 50 banks are offering varied kind of Internetbanking services).

In general, these Internet sites offer only the most basic services. 55%are so called 'entry level' sites, offering little more than companyinformation and basic marketing materials. Only 8% offer 'advancedtransactions' such as online funds transfer, transactions & cashmanagement services.

Foreign & Private banks are much advanced in terms of the number ofsites & their level of development.


40/68

Page | 40

EMERGING CHALLENGES

Information technology analyst firm, the Meta Group, recently reported

"financial institutions who don't offer home banking by the year 2000 willbecome marginalized." By the year of 2002, a large sophisticated andhighly competitive Internet Banking Market will develop which will be drivenby:-

Demand side pressure due to increasing access to low cost electronicservices.

Emergence of open standards for banking functionality.

Growing customer awareness and need of transparency.

Global players in the fray

Close integration of bank services with web based E-commerce or evendisintermediation of services through direct electronic payments (E- Cash).

More convenient international transactions due to the fact that the

Internet along with general deregulation trends eliminates geographicboundaries.

Move from one stop shopping to 'Banking Portfolio' i.e. unbundledproduct purchases.

Certainly some existing brick and mortar banks will go out of business. Butthat's because they fail to respond to the challenge of the Internet. The

Internet and its underlying technologies will change and transform not justbanking, but also all aspects of finance and commerce. It represents muchmore than a new distribution opportunity. It will enable nimble players toleverage their brick and mortar presence to improve customer satisfactionand gain share. It will force lethargic players who are struck with legacycost basis, out of business-since they are unable to bring to play in the newcontext.


41/68

Page | 41

E-BANKING WORLD WIDE

Since its inception, Internet banking has experienced strong and sustainedgrowth.

WorldBank report on leapfrogging in e-finance pointed out that the threecountries with impressive progress in information technology in this senseare Estonia, Republic of Korea and Brazil. Creation of the worlds leadingelectronic banking systems has been done at a remarkably low costcompared to other world-class internet banks .

In the European Union, 60 million people, representing 18 per cent of theadult population, use online banking In France, the number of onlinebanking accounts is recording an annual growth rate of 75 per cent.

However, Estonia is a country that has become a leader in Internet banking(which now reaches 18 per cent of the population), not only among EasternEuropean countries but in world rankings, through a combination of easyto-use software, free-of-charge transactions and behavior changes resultingfrom the influence of the Nordic countries IT culture on Estonia.

A sector in which Latin America is seems to be performing better than inother industries is online retail banking. Growth in this area has been drivenby traditional banks, which have used the online channel to generate

customer loyalty and improve their operating margins. Two Brazilian banks,Bradesco and Banco do Brasil, have thus achieved more than 4 milliononline customers each. Mexico is another leader of Internet banking inLatin America. It adopted legislation providing for the development of bothE-Commerce and e-finance. In Mexico, the number of online bank usersmore than tripled from 700,000 in 2000 to 2.4 million in 2001, and it couldreach 4.5 million in 2005 (E-Marketer 2002b). One reason for the successof Latin American banks online ventures seems tobe the attention theyhave paid to providing retail customers with multiple ways to access theiraccounts (Internet, telephone, wireless). However, given that the share of

the total population that actually has a bank account is relatively small, theexpansion of Latin American online banking may be facing a bottleneck.

Compared with overall Internet usage estimated at 4.4 million in Australia,the major banks together have attracted only 1.2 million to online banking.


42/68

Page | 42

The Internet is a global phenomenon and so is e-finance. Its deployment isnot limited to developed countries, and indeed some developing countries

such as India and the Republic of Koreaare experiencing particularlystrong growth in E-Banking. In Asia one of the most impressive records hasbeen achieved by the Republic of Korea. The Republic of Korea is leadingin online brokerage and in mobile banking. In South-East Asia Internetbanking is also developing rapidly in Thailand, Malaysia, and Singaporeand to a lesser extent, in the Philippines.

In Bangladesh there is a large gap between the computerization of foreignbanks and that of local commercial banks and as regards the state of theirintra- and inter-branch online networks. However, 75 per cent of local

banks are planning to introduce E-Banking, which implies very dynamicimprovements.

Apart from North and South Africa the Sub Saharan Africa is the region thatis seriously lagging behind in Internet banking, although it is giving to therest of the world the good example of microfinance developments.


43/68

Page | 43

LITERATUREREVIEW


44/68

Page | 44

Literature Review

Product and Technology group, ICICI Bank, in its paper Corporatebanking using technology in transactions it was inferred that InformationTechnology has revolutionized the services and mode of services offeredby the banks to their corporate clients. The emergence of E-Banking hasenabled the banks to offer real-time transactions and integrate allcustomers related functions. Indian Banksare utilizing the new technologyto provide better technology and convenient access to its customers andIndia is thus poised to for a huge growth in the world of electronic banking.

The Indian Internet Banking Journey In 2001, a Reserve Bank of Indiasurvey revealed that of 46 major banks operating in India, around 50%were either offering Internet banking services at various levels or plannedto in the near future. According to a research report,( India Research, KotakSecurities, May 2000.) while in 2001, India's Internet user base was anestimated 9 lakh; it was expected to reach 90 lakh by 2003. Also, while only1% of these Internet users utilized the Internet banking services in 1998,the Internet banking user base increased to 16.7% by mid- 2000.


45/68

Page | 45

RESEARCHMETHODOLOGY


46/68

Page | 46

RESEARCH METHODOLOGY

Research is defined as human activity based on intellectual application inthe investigation of matter. The primary purpose for applied research isdiscovering, interpreting, and the development of methods and systems forthe advancement of human knowledge on a wide variety of scientificmatters of our world and the universe.

The term research is also used to describe an entire collection ofinformation about a particular subject.

Methodology is the method followed while conducting the study on aparticular project. Through this methodology a systematic study isconducted on the basis of which the basis of a report is produced. It is awritten game plan for conducting Research. Research methodology hasmany dimensions. It includes not only the research methods but alsoconsiders the logic behind the methods used in the context of the study andexplains why only a particular method or technique has been used. It alsohelps to understand the assumptions underlying various techniques and bywhich they can decide that certain techniques will be applicable to certainproblems and other will not. Therefore in order to solve a research problem,it is necessary to design a research methodology for the problem as thesome may differ from problem to problem.

NatureThe methodology adopted to achieve the project objective involvedexploratory research & descriptive research method. The information

required for fulfilling the objective of study was collected from variousprimary and secondary sources.


47/68

Page | 47

OBJECTIVES OF THE STUDY:-

The main objectives of the study are:

To study the awareness level of service class people regarding E-Banking.

To find out the frequency and the factors that influences the adoption ofE-Banking services.

To measure the satisfaction level of people.

To understand the problems encountered in by service class people whileusing

E-Banking services(ATM, Phone banking, etc)


48/68

Page | 48

Type of research

This study is EXPLORATORY and DESCRIPTIVE in nature. It helps inbreaking vague problem into smaller and precise problem and emphasizeson discovering of new ideas and insights. Exploratory research wasconducted during the initial stage of the research process which helped torefine the problem into researchable one. It has progressively narrowed thescope of research topic.

Research design

Research design constitutes the blue print for the collection, measurementand analysis of data. The present study seeks to identify the extent ofpreferences of E-Banking over traditional banking among service class.The research design is exploratory in nature. The research has beenconducted on service class people within Mumbai. For the selection of thesample, convenient sampling method was adopted and an attempt hasbeen made to include all the age groups and gender within the serviceclass.

Sources of data:

Following are the methods of sources of data:

Secondary data:

Articles on E-Banking taken from journals, magazines published fromtime to time.

Through internet.

Primary data:Questionnaire was used to collect primary data from respondents. Thequestionnaire was structured type and contained questions relating todifferent dimensions of e-banking preferences among service class such aslevel of usage, factors influencing the usage of e-banking services, benefitsaccruing to the users of e-banking services, problems encountered. An


49/68

Page | 49

attempt was also made to elicit reasons for its non-usage. The questionsincluded in the questionnaire were open-ended, dichotomous andoffering multiple choices.

Sampling technique: The sampling technique used for judgment isCONVENIENCE AND JUDGEMENT SAMPLING.

Sampling unit: It defines the target population that will be sampled i.e. itanswers who is to be surveyed. In this study, the sampling unit is thepeople of Mumbai.

Sampling size: It indicates the numbers of people to be surveyed. Thoughlarge samples give more reliable results than small samples but due toconstraint of time and money, the sample size was restricted to 100

respondents. The respondents belong to different income group andprofession.

Method of data collection: The survey method is used to collect the data.Various places of Mumbai visited for the purpose of collection of data.

Research instrument:The instrument used for gathering data was questionnaire. To get furtherinsight in to the research problem, interview regarding their buying

practices too was made. This was done to crosscheck the authenticity ofthe data provided. To supplement the primary data and to facilitate theprocess of drawing inference, secondary data was collected from publishedsources like magazines, journals, newspapers etc.

Tools and techniques of analysis:The data so collected will be analyzed through the application of statisticaltechniques, such as bar graphs and pie charts.


50/68

Page | 50

DATAANALYSIS

ANDINTERPRETATION


51/68

Page | 51

?


52/68


53/68

Page | 53

SWOT ANALYSIS

STRENGTHS :

It has an extensive distribution network comprising of 535 branches in312 cities & one international office in Dubai this provides a competitiveedge over the competitors.

The Bank has a strong retail depository base & has more than millioncustomers.

Bank has strong brand equity.

ISO 9001 certification for its depository & custody operations & for itsbackend processing of retail operations & direct banking operation.

The bank is a market leader in cash settlement service for the majorstock exchanges in its country.

HDFC Bank is one of the largest private sector banks working in India.

It has a highly automated environment in terms of information technology& communication system.

Infrastructure is one of the best in the country.

It has many innovative products like kids Advantage scheme, NRIservices.

WEAKNESSES :

Account opening and delivery of cheque book take more time. Lack ofavailability of different credit products like CC Limit, Bill discountingfacilities.

Complicated terms and conditions of products, which is not easilyUnderstandable by the layman.


54/68

Page | 54

OPPORTUNITIES :

Branch expansion Door step services

Greater liberalization is foreign ownership via FDI in Indian Pvt. Sectorbanks.

Infrastructure movements & better systems for trading & settlement in theGovt. securities & foreign exchange markets.

THREATS :

The bank has started facing competition from players like SBI, PNB in thefinance market itself. This may reduce the profit margins in the future.

Some Pvt. Banks have 7 days banking.


55/68

Page | 55

LIMITATIONS


56/68

Page | 56

LIMITATIONS OF THE STUDY

Every research is conducted under some constraints and this research is

not an exception. Limitations of this study are as follows:-

1. There were several time constraints.

2. The study is limited to areas of Mumbai only.

3. The sample size of only 100 was taken from the large population forthe purpose of study, so there can be difference between results ofsample from total population.

4. The study is related to service class people only.

5. People were reluctant to go in to details because of their busyschedules.

6. Merely asking questions and recording answers may not always elicitthe actual information sought.

7. Due to continuous change in environment, what is relevant today may

be irrelevant tomorrow.


57/68

Page | 57

Types of Risks

Operational risk

Operational risk, also referred to as transactional risk is the most commonform of risk associated with i-banking. It takes the form of inaccurateprocessing of transactions, non enforceability of contracts, compromises indata integrity, data privacy and confidentiality, unauthorized access /intrusion to banks systems and transactions etc. Such risks can arise outof weaknesses in design, implementation and monitoring of banksinformation system. Besides inadequacies in technology, human factorslike negligence by customers and employees, fraudulent activity of

employees and crackers / hackers etc. can become potential source ofoperational risk. Often there is thin line of difference between operationalrisk and security risk and both terminologies are used interchangeably.

Security risk

Security risk arises on account of unauthorized access to a banks criticalinformation stores like accounting system, risk management system,

portfolio management system, etc. A breach of security could result indirect financial loss to the bank. For example, hackers operating via theInternet, could access, retrieve and use confidential customer informationand also can implant virus. This may result in loss of data, theft of ortampering with customer information, disabling of a significant portion ofbanks internal computer system thus denying service, cost of repairingthese etc.

Reputational risk

Reputational risk is the risk of getting significant negative public opinion,

which may result in a critical loss of funding or customers. The main

reasons for this risk may be system or product not working to the

expectations of the customers, significant system deficiencies, significant

security breach (both due to internal and external attack), inadequate

information to customers about product use and problem resolution


58/68

Page | 58

procedures, significant problems with communication networks that impair

customers access to their funds or account information especially if there

are no alternative means of account access.

Legal risk

Legal risk arises from violation of, or non-conformance with laws, rules,regulations, or prescribed practices, or when the legal rights andobligations of parties to a transaction are not well established. Given therelatively new nature of Internet banking, rights and obligations in somecases are uncertain and applicability of laws and rules is uncertain orambiguous, thus causing legal risk. Other reasons for legal risks areuncertainty about the validity of some agreements formed via electronicmedia and law regarding customer disclosures and privacy protection. Acustomer, inadequately informed about his rights and obligations, may nottake proper precautions in using Internet banking products or services,leading to disputed transactions, unwanted suits against the bank or otherregulatory sanctions.

Cross border risks

It includes legal and regulatory risks, as there may be uncertainty about

legal requirements in some countries and jurisdiction ambiguities withrespect to the responsibilities of different national authorities. Suchconsiderations may expose banks to legal risks associated with non-compliance of different national laws and regulations, including consumerprotection laws, record-keeping and reporting requirements, privacy rulesand money laundering laws. If a bank uses a service provider located inanother country, it will be more difficult to monitor it thus, causingoperational risk.

Strategic RiskThis risk is associated with the introduction of a new product or service.Degree of this risk depends upon how well the institution has addressedthe various issues related to development of a business plan, availability ofsufficient resources to support this plan, credibility of the vendor (ifoutsourced) and level of the technology used in comparison to the availabletechnology etc.


59/68

Page | 59

CONCLUSION


60/68

Page | 60

CONCLUSION

The usage of E-banking is all set to increase among the service class. Theservice class at the moment is not using the services thoroughly due tovarious hurdling factors like insecurity and fear of hidden costs etc. Sobanks should come forward with measures to reduce the apprehensions oftheir customers through awareness campaigns and more meaningfuladvertisements to make E-banking popular among all the age and incomegroups. Further, with increasing consumer demands, banks have toconstantly think of innovative customized services to remain competitive. E-Banking is an innovative tool that is fast becoming a necessity. It is a

successful strategic weapon for banks to remain profitable in a volatile andcompetitive marketplace of today.

In future, the availability of technology to ensure safety and privacy of e-transactions and the RBI guidelines on various aspects of internet bankingwill definitely help in rapid growth of internet banking in India.


61/68

Page | 61

SUGGESTIONS


62/68

Page | 62

SUGGESTIONS

Internet banking would drive us into an age of creative destruction due tonon-physical exchange, complete transparency giving rise to perfectly

electronic market place and customer supremacy. The question to beasked right now is "What the Indian Banks should do" Whatever is thestrategy chosen and options adopted, certain key parameters woulddetermine the bank's success on web:

For long-term success, a bank may follow:

Adopting a webs mindset

Catching on the first mover's advantage

Recognizing the core competencies Ability to deal multiplicity with simplicity

Senior Management initiative to transform the organization frominward to

outward looking

Aligning roles and value propositions with the customer segments

Redesigning optimal channel portfolio

Acquiring new capabilities through strategic alliances.

The above can be implemented in four steps:

Familiarizing the customer to new environment by demo version ofsoftware on bank's web site. This should contain tour through thefeatures which are to be included. It will enable users to givesuggestions for improvements, which can be incorporated in laterversions wherever feasible.

Second phase provides services such as account information and

balances, statement of account, transaction tracking, mailbox, checkbook issue, stop payment, financial and customized information.


63/68

Page | 63

The third phase may include additional services such as fundtransfers, DD

issue, standing instructions, opening fixed deposits, intimation of lossof ATM

cards. The last step should include advanced corporate banking services

like third party

payments, utility bill payments, establishment of L/Cs, CashManagement

Services etc. Enhanced plan for the customers in future can includerequests for

demand drafts and pay orders and many more to bring in the ultimatein banking

convenience.

Also if proper training should be given to customer by the bank employs toopen an account will be beneficial secondly the website should be madefriendlier from where the first time customers can directly make and accessthere accounts.

We can see the time is changing and we he passage of time people areaccepting technology there is still a lot of perceptual blocking whichhampers the growth its thenormal tendency of a human not to havechanges work on the old track, thats alsoone of the reason for the slowacceptance of internet banking accounts.

Give proper training to customers for using i-banking

Create a trust in mind of customers towards security of there accounts

Provide a platform from where the customers can access different

accounts at single time without extra charge. Make there sites more users friendly.

Customers should be motivated to use I banking facilities more.


64/68

Page | 64

BIBLIOGRAPHY

BOOKS

Malhotra, T. D., Electronic Banking and Information Technology inBanksSultan Chand and Sons, New Delhi,2008.

S.S Kaptan & N.S. Choubey. Indian Banking in Electronic Era

Internet Banking in India-Part I- Dr A. K. Mishra

WEBSITES

www.banknetinda.com

www.hdfcbank.com

www.bharatbbok.com


65/68

Page | 65

Annexure


66/68

Page | 66

QUESTIONAIRE

Dear Respondent,We are conducting a research study of E-banking Preferences among people inMumbai

. We will appreciate your cooperation in this regard by filling up thequestionnaire carefully. All the information provided by you will be kept confidential.

1. In which banks do you have your account?

a. State Bank of India b. HDFCc. Punjab National Bank d. ICICI Banke. State Bank of Patiala f. Canara Bankg. .Bank of India h. Oriental Bank of Commercei. Any other, Please Specify

i. ---------------------ii. ---------------------iii. ---------------------

2. While opening up the account, were you aware of E-banking services provided byyour bank?

a. Fully aware b. Had an idea c. No

3 .how did you get to know about E-banking services of your bank?

a. Personal visit

b. Executive from the bankc. Advertisementsd. Friends/ Relatives

4. which of the following E-banking services are you aware of?

e. ATMf. Debit Card

g. Credit Cardh. Phone bankingi. Mobile banking

j. Internet banking

5. Do you use E-banking services?

a. yes b. No


67/68

Page | 67

6. how frequently do you use each of the following services?

Factors Once in a

day

Once in a

week

Once in a

fortnight

Once in a

month

Infrequently

1 ATM2 Debit card3 Credit card4 Phone banking5 Mobile banking6 Internet banking

7. Which of the following factors influence you the most to use E-banking services?

Factors Strongly More thanaverage

Average Less thanAverage

Not at all

A All time availability

B Ease of use

C Nearness

D Security

E Direct access

F Friends/ Relatives

G Status symbol

8. Which of the following benefits accrue to you, while using E-banking services?a. Time saving b. Inexpensivec. Easy processing d. Easy fund transfer

e. Any other, please specify_________________________________________

9. Rate the problems identified while using E-banking services?

Factors Highlyconsidered

Major Average Minor Ignorable

a Time consuming

b Insecurity

c ATM out of orderd Amount debited butnot withdrawn

e Problem of changeinmobile number

f Password forgotten

g Card misplacedh Misuse of card


68/68

10. Kindly rate the following reasons enlisted for not using the E-banking services?

Factors Highlyimportant

More thanaverage

Average Less thanAverage

LeastAverage

a No need( Satisfied

with traditionalbanking)b It seems like a

botherationc Insecurity

d No access tointernet/mobile

e Lack of operationalknowledge

f Hidden costs

Any other, please specify__________________________________________

11. To what extent are you satisfied with your Banks E-banking services?a. Highly Satisfied ___________b. Satisfied _________c. Neutral ___________d. Dissatisfied ___________e. Highly dissatisfied ___________

12. What other services you would like to have through E-banking?_______________________________________________________

_____________________________________________________

Respondents Profile

Name : ________________ Income level per monthAge : ________________ Less than Rs. 10,000Gender (M/F) : ________________ Rs.10,000 to Rs.20,000Profession : ________________ Rs.20,000 to Rs.30,000Organisation : ________________ More than Rs.30,000

Documents

E-banking Final Proojet