A Study on Role of Information Technology in Banking Industry With reference to ICICI Bank and Bank of India Sectoral Project

Report Submitted in partial fulfillment of the requirement for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION By: AMIT KUMAR (MBA 4564/08) Department of Management Birla Institute Of Technology Noida Campus

BIRLA INSTITUTE OF TECHNOLOGY (Deemed University U/S 3 of UGC Act 1956) Mesra, Ranchi, Jharkhand

Preface
Decision making is a fundamental part of the research process. Decisions regarding that what you want to do, how you want to do, what tools and techniques must be used for the successful completion of the project. In fact it is the researchers efficiency as a decision maker that makes project fruitful for those who concern to the area of study. Basically when we are playing with computer in every part of life, I used it in my project not for the ease of my but for the ease of result explanation to those who will read this project. The project presents the role of financial system in life of persons. I had toiled to achieve the goals desired. Being a neophyte in this highly competitive world of business, I had come across several difficulties to make the objectives a reality. I am presenting this hand carved efforts in black and white. If anywhere something is found not in tandem to the theme then you are welcome with your valuable suggestions.

DECLARATION
This is to certify that the work presented on the topic entitled Role of Information Technology in Banking Industry in partial fulfillment of requirement for the award of degree of Master of Business Administration, Birla Institute of Technology, Mesra , Ranchi is an Authentic Work Carried put under my Supervision. To the best of belief the content of the project does not form a basis for the award of my previous degree to anyone else.

Date

Prof.(Dr)B.K.JHA Dept of Management Birla institute of Technology Noida extension centre

CERTIFICATE OF APPROVAL
The foregoing thesis entitled Role of Information Technology in Banking Industry is hereby approved as creditable study of research topic and has been presented in satisfactory manner to warrant its acceptance as prerequisite to the degree for which it has been submitted. It is understood that by its approval, the undersigned do not necessarily endorse any conclusion drawn or opinion expressed therein, but approve the project for the purpose for which it is submitted.

Dr. Vandna Sharma COORDINATOR(MBA)

Dr.S.L.Gupta ACADEMIC COORDINATOR

DIRECTOR BIT-NOIDA

ACKNOWLEDGEMENT
First and foremost, I extend my deepest thanks to all the Employees of the Banks for giving me this opportunity to work in such a prestigious organization as well as for giving me a wonderful live project. I wish to express my gratitude to our Coordinator Dr. Vandna Sharma and my Mentor Prof.(Dr)B.K.JHA of Birla Institute of Technology, Noida Centre for having offered me an opportunity to work on this project. I also express my sincere thanks to all the faculties of Birla Institute of Technology, Noida and to the Employees of bank who helped me in completing this project work. The acknowledgement would really be incomplete if I dont thank those numerous persons whose priceless inputs and direction have paved the way for the successful completion of the project. And anybody I missed who deserves a mention!

CONCEPTUAL FRAMEWORK INTRODUCTION TO BANKING INDUSTRY

Banking in India

Structure of the organized banking sector in India. Number of banks are in brackets. Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India, a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India, which in 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized

and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980. Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively Early history Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India which started in 1786, and the Bank of Hindustan, both of which are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India. Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India. It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Shimla. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period 7

failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madras and Pondicherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The Bank of Bengal, which later became the State Bank of India. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political

figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. The fervor of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four nationalized banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking". Post-independence The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal, paralyzing banking activities for months. India's independence marked the end of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in different segments of the economy including banking and finance. The major steps to regulate banking included:

In 1948, the Reserve Bank of India, India's central banking authority, was nationalized, and it became an institution owned by the Government of India. In 1949, the Banking Regulation Act was enacted which empowered the Reserve Bank of India (RBI) "to regulate, control, and inspect the banks in India." The Banking Regulation Act also provided that no new bank or branch of an existing bank could be opened without a license from the RBI, and no two banks could have common directors.

However, despite these provisions, control and regulations, banks in India except the State Bank of India, continued to be owned and operated by private persons. This changed with the nationalization of major banks in India on 19 July 1969.

Nationalization By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the possibility to nationalize the banking industry. Indira Gandhi, the-then Prime Minister of India expressed the intention of the GOI in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalization." The paper was received with positive enthusiasm. Thereafter, her move was swift and sudden, and the GOI issued an ordinance and nationalized the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969. A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the GOI controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalised banks from 20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy. The nationalized banks were credited by some, including Home minister P. Chidambaram, to have helped the Indian economy withstand the global financial crisis of 2007-2009.[1][2] Liberalization In the early 1990s, the then Narsimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, 10

Axis Bank(earlier as UTI Bank), ICICI Bank and HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been setup with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%,at present it has gone up to 74% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks.All this led to the retail boom in India. People not just demanded more from their banks but also received more. Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some timeespecially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in ICICIBank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 11

2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. In recent years critics have charged that the non-government owned banks are too aggressive in their loan recovery efforts in connection with housing, vehicle and personal loans. There are press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide. Banks in India In India the banks are being segregated in different groups. Each group has their own benefits and limitations in operating in India. Each has their own dedicated target market. Few of them only work in rural sector while others in both rural as well as urban. Many even are only catering in cities. Some are of Indian origin and some are foreign players. All these details and many more are discussed over here. The banks and its relation with the customers, their mode of operation, the names of banks under different groups and other such useful information are talked about. One more section has been taken note of is the upcoming foreign banks in India. The RBI has shown certain interest to involve more of foreign banks than the existing one recently. This step has paved a way for few more foreign banks to start business in India. Major Banks in India ABN-AMRO Bank American Express Bank Andhra Bank Allahabad Bank Bank of Baroda Bank of India Bank of Maharastra Bank of Punjab Bank of Rajasthan 12

 BNP Paribas Bank Canara Bank Catholic Syrian Bank Central Bank of India Centurion Bank Indian Overseas Bank IndusInd Bank ING Vysya Bank Jammu & Kashmir Bank JPMorgan Chase Bank Karnataka Bank Karur Vysya Bank Oriental Bank of Commerce Punjab National Bank Punjab & Sind Bank Scotia Bank South Indian Bank Standard Chartered Bank State Bank of India (SBI) State Bank of Bikaner & jaipur China Trust Commercial bank Citi Bank City Union Bank Corporation Bank Dena Bank Deutsche Bank Development Credit Bank Dhanalakshmi Bank Federal Bank HDFC Bank HSBC

13

 ICICI Bank IDBI Bank Indian Bank State Bank of Hyderabad State Bank of Indore State Bank of Mysore State Bank of Saurastra State Bank of Travancore Syndicate Bank Taib Bank UCO Bank Union Bank of India United Bank of India United Bank Of India United Western Bank UTI Bank Vijaya Bank

Banking Services in India:With years, banks are also adding services to their customers. The Indian banking industry is passing through a phase of customers market. The customers have more choices in choosing their banks. A competition has been established within the banks operating in India. With stiff competition and advancement of technology, the service provided by banks has become more easy and convenient. The past days are witness to an hour wait before withdrawing cash from accounts or a cheque from north of the country being cleared in one month in the south. This section of banking deals with the latest discovery in the banking instrumentsalong with the polished version of their old systems.

14

CHAPTER-3

COMPANY PROFILE OF ICICI BANK:

15

ICICI Bank is India's second-largest bank with total assets of Rs. 3,562.28 billion (US$ 77 billion) at December 31, 2009 and profit after tax Rs. 30.19 billion (US$ 648.8 million) for the nine months ended December 31, 2009. The Bank has a network of 1,723 branches and about 4,883 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany.

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). ICICI Bank disseminates information on its operations and initiatives on a regular basis. The ICICI Bank website serves as a key investor awareness facility, allowing stakeholders to access information on ICICI Bank at their convenience. ICICI Bank's dedicated investor relations personnel play a proactive role in disseminating information to both analysts and investors and respond to specific queries.

History ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development

16

financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE.

SERVICES: Deposits: Savings Accounts Our Savings Accounts are designed to ensure you receive the benefits of quick & convenient banking transactions along with options for your money to earn high returns. The savings account goes beyond the traditional role of savings, to provide you a range of services from funds transfer options to online payments of bills to attractive returns earned through a comprehensive suite of investment options. Learn more about Savings Accounts: Ace Savings Account Pro Savings Account Edge Savings Account Nova Savings Account Classic Savings Account Easy Savings Account Corporate Salary Account

Term Deposits ICICI Bank brings you Term Deposit at highly attractive interest rates coupled with special facilities like Overdraft and Re-investment option.

Term Deposits 17

Regular Term Deposits Senior Citizen Deposits Ace Deposits Tax Saving Deposits

Safe Deposit Lockers ICICI Bank offers you Safe Deposit Locker facilities which can be utilized to safe keep your important documents, jewellery and other valuables.

Safe Deposit Lockers

Cards Simple, Transparent. Powerful Secure.

Credit Cards Gold Debit Cards Global Debit Card Best Compliments Card netc@rd Access India Debit Card Platinum Debit Card Privy League Platinum Debit Card

Investments 18

At ICICI Bank, we recognize that financial needs vary, not just amongst individuals, but across the different stages of your life. We have years of experience in helping people put together an investment portfolio that works best for them. Learn more about Investments:

Mutual Funds Demat New Pension Scheme Insurance ASBA

Convenience Banking In today's day and age time is money. You work hard and have a busy schedule. Doing your banking should be easy and convenient and not add to your worries. We at ICICI Bank realize this and have specially tailored a wide range of value added products and services to make your money work for you. These, coupled with the highest standard of customer care will make your life simpler and easier.

Net Banking Mobile Banking SMS Banking Alerts Phone Banking ATM Network

Net Banking

19

ICICI Bank's Net Banking service brings you the timeless world of instant banking. It is quick and easy, available to you 24X7 and it's absolutely free! It gives you instant access to your Banking Accounts, Demat Accounts, Investment Accounts, netc@rd and Insurance Accounts. In addition you can transfer money, pay your bills, pay for your online shopping, make subscription payments and more. And all this comes to you on a robust and secure technology platform.

Key Features

Bank 24X7 - anywhere, anytime View details across Accounts, Term Deposits, Investment Accounts and Demat Accounts Invest/Redeem Mutual Funds online Stringent security offers complete peace of mind

ICICI Payment Gateway Instant, convenient and secure way of shopping and making payments online ICICI Payment Gateway enables you to shop online at over 3000 websites, make utility bill payments across more than 60 companies and 42 cities, pay insurance premium, pay for magazine subscriptions, make donations to charitable and religious institutions, transfer money to ICICI Securities for margin money, settlement transfer or IPO funding and use Visa Money Transfer facility to pay your credit card bills or transfer money to any VISA debit card across the country. ICICI Payment Gateway is an Internet based facility using which you can pay online merchants by debiting your selected Bank account.

Key Features

20

Online shopping Pay for Utility bills Make donations Transfer money for online trading Transfer money to any VISA credit/debit card in India

Online Shopping This service enables you to make purchases across various online shopping sites offering gifts, flowers, airline tickets, exclusive designer wear, jewellery, latest electronic gadgets / household items, subscription to books / periodicals, registration to matrimonial / educational sites or astrology services and much more. You can now make Online Payment towards your Utility Bills, Insurance premium, Donations, Mutual Fund Investment. You can also book travel tickets and enjoy entertainment services by visiting the merchant's website. Online Trading This service enables you to transfer money instantly to your account with ICICI Securities, for funding your margin money or funding your IPO account. An account with ICICI Securities enables you to buy/sell securities online. This gives you the power of any where anytime trading. VISA Money Transfer This service enables you to make payments for your VISA credit cards or transfer money to any VISA Debit Card. So no need to write cheques to pay credit card bills or transfer money.

Mobile Banking

21

Welcome to the world of convenience banking on your Mobile phone. Now, you can experience the benefits of online banking anywhere and anytime, without the need for a computer. All this absolutely FREE*! Using the service, you can access your bank accounts and investment accounts at your fingertips, anytime, anywhere. All this convenience comes to you on a secure and user friendly GPRS-based Mobile Banking platform. Key Features

Anytime, anywhere banking Experience online banking - without a pc or internet connection View details across Accounts, Term Deposits and Investments Pay utility bills Invest/Redeem in Mutual Funds - anytime, anywhere Secured platform - encrypted communication

SMS Banking Carry your bank on your phone! ICICIBank's SMS Banking service enables you to access your bank account, investment account and demat account on your Mobile Phone. Now get latest update on your account balance, salary credits, large debits, large credits, holding value and much more, on your mobile anytime. It is quick and easy, available to you 24X7 and it's absolutely free! Simply send an SMS to 9971056767 or 5676788 to get the details for following updates.

Key Features

Access your bank account on your Mobile Phone Get latest update on your account balance, salary credits, and more! FREE service

22

Alerts: You can subscribe for automatic updates for your account on either your mobile or email. These alerts are sent on happening of a particular transaction. For example if your balance falls below the Average Quarterly Balance, or if there is a large credit into your account.

Key Features

Get automatic updates for your account on either your mobile or email Get immediate update on a large debit or large credit in to your account Free service*

Phone Banking Your nearest ICICIBank branch is on your phone We have a 24 hrs Customer Contact Center to offer you personalised service round the clock. Just pick up the phone and call us on at our Toll Free number 1800 102 6022 pan India. If you are calling from abroad, you may call +91 22 6600 6022. Whether it is something as urgent as a stop payment or you simply want to know your balance just give us a call. Our toll free number gives you access to your account, from anywhere... anytime. And what's more, this facility comes to you absolutely free of cost!

Key Features

Quick and easy access from anywhere PIN based security Customer Care Officers available 24 x 7* Free Service

ATM Network Our constantly growing ATM network brings the bank within your easy reach

23

Our strategically located and constantly growing ATM network brings the bank within your easy reach. The state of the art touch screen ICICI Bank ATMs are part of the Visa/Plus and Cashnet ATM network. That means you can withdraw cash from our ATM Network with any International and Domestic Visa/Visa Electron/Plus Credit Cards/Debit Cards.

Key Features

Access your account anytime anywhere State of the art Touch Screen ATMs Affiliated to the VISA network Access any ATM in the country absolutely free.

BANK OF INDIA:
Bank of India (BoI), established on 7 September 1906 is a bank with headquarters in Mumbai. Government-owned since nationalization in 1969, It is one of India's leading banks, with about 3140 branches including 27 branches outside India. BoI is a founder member of SWIFT (Society for Worldwide Inter Bank Financial Telecommunications) in India which facilitates provision of cost-effective financial processing and communication services. The Bank completed its first one hundred years of operations on 7 September 2006.

SERVICES: Mobile Banking

24

Bank of Indias Star Mobile Banking Service, is a state of the art facility, which allows you to do virtually all your banking activities from your mobile device. With StarConnect Mobile Banking you can access all your banking accounts with the Bank, 24 hours a day, 365 days a year, from anywhere. A host of features like your banking transaction details, viewing of Account Balance, Mini Statement, Statement, Self Transfers, Third Party Transfer of funds, Utility Bill payments, Ticket booking features among others will definitely make it the most convenient way for you to conduct your banking activities. StarConnect Internet Banking Services Bank of Indias StarConnect Internet Banking Service, is a state of the art facility, which allows you to do virtually all your banking activities from comforts of your home/ office over a mouse click. With StarConnect Internet Banking Services you can access all your banking accounts with the Bank*, 24 hours a day, 365 days a year, from anywhere in the world. A host of features* like your banking transaction details, viewing/ printing of account statement, transferring funds, third party payments, tax payments, utility bill payments, ticket booking, etc. among others will definitely make it the most convenient way for you to conduct your banking activities.

BOI STAR ePay is a useful service that provides you a single point of contact for all your payment needs. At BOI STAR ePay you can pay your bills and make other payments online. Instead of 25

writing a cheque each time, now you can use any device connected to the Internet (computer, kiosk, etc) and make payments with the click of a mouse. no more late payments no more queues no more hassles of depositing cheques In effect, through BOI STAR ePay you can now make All Your Payments at a Single Location, anytime you wish to see the list of Billers available in your city

Eligibility The following categories of account holders are eligible to enroll for the OLTS facility. 1. Individuals single or joint account; 2. Trusts etc. 3. Body corporates Please note: In case of individuals, Trusts etc. the holders in demat account should be the same as in bank account. The on-line trading clients should have their designated bank account (to which the amounts for buy and sell of shares would be debited/credited) with one of our CBS branches . The clients should have a demat account with our NSDL DPO. Integration of bank account, demat account and trading platform of the stock broker is the essential characteristic of On-line trading. This can be achieved only by electronic

26

networking through CBS channel. Therefore, the On-line trading facility is available to clients of our CBS branches having SB, CD or OD Account with the branch Features:1. Trading with the intention of taking or giving delivery of share 2. Intra day Square off 3. Buy To-day and Sell on T1/ T2 day (BTS-T1T2) 4. Trade Multiple

27

CHAPTER-4

LITERATURE REVIEW:
Iiyas Ur Rahman (2007) Information Technology has basically been used under two different avenues in Banking. One is Communication and Connectivity and other is Business Process
28

Reengineering. Information technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets. In view of this, technology has changed the contours of three major functions performed by banks, i.e., access to liquidity, transformation of assets and monitoring of risks. Further, Information technology and the communication networking systems have a crucial bearing on the efficiency of money, capital and foreign exchange markets. Internet has significantly influenced delivery channels of the banks. Internet has emerged as an important medium for delivery of banking products & services. Detailed guidelines of RBI for Internet Banking has prepared the necessary ground for growth of Internet Banking in India. The Information Technology Act, 2000 has given legal recognition to creation, trans-mission and retention of an electronic (or magnetic) data to be treated as valid proof in a court of law, except in those areas, which continue to be governed by the provisions of the Negotiable Instruments Act, 1881. As stated in RBI's Annual Monetary and Credit Policy 2002-2003: "To reap the full benefits of such electronic message transfers, it is necessary that banks bestow sufficient attention on the computerisation and networking of the branches situated at commercially important centres on a time-bound basis. Intra-city and intra-bank networking would facilitate in addressing the "last mile" problem which would in turn result in quick and efficient funds transfers across the country". From both customer and banking perspectives it shows that the Internet is a convenience tool available whenever and wherever customers need it. It is also found that the Internet has improved the factors in service quality like responsiveness, communication and access. It is concluded that the Internet has an

29

important and positive effect on customer perceived banking services and the service quality has been improved since the Internet has been used in banking sector. It's generally secure. But make sure that the website you're using has a valid security certificate. This lets you know that the site is protected from cyber-thieves looking to steal your personal and financial information. It gives twenty-four-hour access. When the neighborhood bank closes, you can still access your account and make transactions online. It's a very convenient alternative for those that can't get to the bank during normal hours because of their work schedule, health or any other reason. It allows us to access our account from virtually anywhere. If we're on a business trip or vacationing away from home, we can still keep a watchful on our money and financial transactions regardless of our location. Conducting business online is generally faster than going to the bank. Long teller lines can be time-consuming, especially on a Pay Day. But online, there are no lines to contend with. You can access your account instantly and at your leisure. Many features and services are typically available online. For example, with just a few clicks you can apply for loans, check the progress of your investments, review interest rates and gather other important information that may be spread out over several different brochures in the local bank. Technology has opened up new markets, new products, new services and efficient delivery channels for the banking industry. Online electronics banking, mobile banking and internet banking are just a few examples.

30

Information Technology has also provided banking industry with the wherewithal to deal with the challenges the new economy poses. Information technology has been the cornerstone of recent financial sector reforms aimed at increasing the speed and reliability of financial operations and of initiatives to strengthen the banking sector. The IT revolution has set the stage for unprecedented increase in financial activity across the globe. The progress of technology and the development of worldwide networks have significantly reduced the cost and time of global funds transfer. It is information technology which enables banks in meeting such high expectations of the customers who are more demanding and are also more techno-savvy compared to their counterparts of the yester years. They demand instant, anytime and anywhere banking facilities. IT has been providing solutions to banks to take care of their accounting and back office requirements. This has, however, now given way to large scale usage in services aimed at the customer of the banks. IT also facilitates the introduction of new delivery channels--in the form of Automated Teller Machines, Net Banking, Mobile Banking and the like. Use of de-mat account and online trading enables a person to buy and sell shares any time. The share trading companies and AMCs can give improved and faster service with help of technology. There are many useful features and services available online besides for the usual transactions. For example, you can apply for credit cards, manage investments, and pay bills through your online account portal. You can also perform more mundane tasks such as ordering new checks, requesting additional deposit slips, or reporting a lost or stolen debit card.

31

Information Technology contribute significantly to firm level output." In fact, they find that I.T. capital contributes an 81% marginal increase in output, whereas non-IT capital contributes 6%. Similarly they show that IS-labor is more than twice as productive as nonIS labor. Morrison and Berndt (1990) concluded that additional IT investments contributed negatively to productivity, arguing that "estimated marginal benefits of investment [in IT] are less than the estimated marginal costs". Loveman (1994) and Barua (1991), posit that there is no conclusive evidence to refuse the hypothesis that IT investment in inconsequential to productivity. Lichtenberg (1995), on the other hand, concludes that there is significant benefit from investment in Information Technology specially in the Banking Industry. Mario Castelino (2006) suggests that Indian banking industry has provided the leading edge to what is happening to the Indian economy. Banks have equipped themselves with the latest of technology--core Banking. Business Process Reengineering has been introduced to enhance spleen and efficiency of delivery. According to VP Shetty (2006), globalization in banking is based on four important pillars viz. 1) trade in goods and services; 2) flow of capital and movement of human beings across boundaries; 3) harmonization of regulatory framework in different countries; and 4) developments in technology, particularly those in information technology.

32

CHAPTER 5

RESEARCH METHODOLOGY
Marketing research is the systematic and objective identification, collection, analysis, dissemination, and use of information for the purpose of improving decision making related to the identification and solution of a problem. During the course of conducting the study the information were gathered mainly through the primary sources.

33

Conducting field survey by talking to the Employee of Bank who are working in the organization and the methodology used in the survey was personal observation and interview with the Employees with the help of questionnaire.

Research Design:Research design is a frame work or blueprint for conducting the marketing research project. It details the procedure necessary for obtaining the information needed to structure and/or solve marketing research problem. Research Design: Descriptive Research Design Descriptive Research Design: Descriptive Research studies are those studies which are concerned with describing the characteristics of a particular individual or a group. The Researcher must be able to define clearly what he wants to measure and must find adequate methods for measuring it along with a clear cut definition of population he wants to study. The reason behind it is the suitability to get optimum and accurate result. Sources of data: Data requires for the research work can be making available from the different sources, they could be classified in two groups. (a)Primary source: Questionnaire with personal interview. (b) Secondary sources: Business Group history, Companys profile and companies database through related websites and companys intranet.

SAMPLING:
When a small survey is taken as the representative of the whole, the study is called sampling study. Sampling allows us to concentrate our attention upon a relatively smaller 34

number of items and hence, to devote more energy ensure that the information collected by them is accurate. Sample size: 100 Sampling technique: Convinient Sampling Statitical Tool used: SPSS (Factor Analysis) Data collection tools: The collection of data is throughQuestionnaire with Personal interview Questionnaire: It is a set of questions related to the purpose of research, which is presented to the respondent. The questionnaire used in my survey had Close-ended questions. The

35

CHAPTER -6

Data analysis and Interpretation: ICICI Bank:

Analysis of the filled up Questionnaire on the basis of the factor analysis (as per SPSS analysis)

Analysis:

36

KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity Approx. Chi-Square Df Sig. .534 182.106 105 .000

Interpretation:
The Kaiser-Meyer-Olkin Measure of Sampling Adequacy reveals that as KMO measure = .534. i.e, it represents that the above sample is adequate.

Analysis:

37

Rotated Component Matrixa Component 1 VAR00001 VAR00002 VAR00003 VAR00004 VAR00005 VAR00006 VAR00007 VAR00008 VAR00009 VAR00010 VAR00011 VAR00012 VAR00013 VAR00014 VAR00015 -.025 .747 -.195 .495 -.180 -.357 .034 .881 .214 .654 -.287 .082 .111 -.072 -.187 2 .878 -.089 -.357 .195 -.138 -.114 .894 .019 .219 .454 -.418 .370 -.035 .170 .018 3 .018 -.269 .434 -.008 -.571 .573 .032 .100 .566 .079 -.190 .120 -.354 .433 -.275

Interpretation:
On the basis of the Rotated Component Matrix all the 15 variables can be appropriately divided into 3 components. Component 1( New dimension)comprises of the following variables: Variable 2: The role of Information Technology has given a new Dimension to the banking Industry? Variable 4: The enhancement of information technology has helped in meeting the high expectation of the customer. Variable 8: The Information Technology has provided the Banking Industry wherewithal to deal with the new Challenges the new Economy poses. Variable 10: The progress of technology and the development of worldwide networks have significantly reduced the cost and time of global funds transfer Component 2 comprises of the following variables: Variable 1: Information Technology facilitate speedy services to banking sectors. the

38

Variable 5: The role of technology has helped in improving the Quality of Service in the Bank. Variable 7: The IT revolution has set the stage for unprecedented increase in financial activity across the globe. Variable 12: Nowadays SMS are being used as a major tool of promotion and giving great utility to the customers. Variable 15: Impact of Technology is Reducing the Physical Infrastructure Cost of Banks Component 3 comprises of the following variables: Variable 3: Information Technology has played a key role in showing that it is the convenient tool for the bankers Variable 6: The enhancement of Information Technology has significantly influenced the delivery channels of the bank. Variable 9: The adoption and use of smart card technology has helped people a lot Variable 11: The technological changes have forced the bankers to adopt customer-based
approach instead of product-based approach

Variable 14: The Competitive Pressure is one of the Lead Factor Driving towards the implementation of Technology.

Analysis:

39

Component Score Coefficient Matrix Component 1 VAR00001 VAR00002 VAR00003 VAR00004 VAR00005 VAR00006 VAR00007 VAR00008 VAR00009 VAR00010 VAR00011 VAR00012 VAR00013 VAR00014 VAR00015 -.128 .341 -.021 .200 -.090 -.122 -.102 .404 .094 .241 -.084 -.006 .039 -.036 -.100 2 .414 -.118 -.180 .026 .009 -.056 .413 -.117 .025 .119 -.141 .152 .000 .051 .058 3 -.067 -.122 .286 .001 -.344 .343 -.057 .099 .335 .038 -.092 .044 -.207 .245 -.178

Interpretation
On The Basis of calculation of Component Score Coefficient Matrix of all the components i.e(1,2,3,) the component 1 is considered to be the most significance with a value of 3.646 followed with component 3 with a value of 2.262

Data analysis and Interpretation: Bank of India

Analysis of the filled up Questionnaire on the basis of the factor analysis (as per SPSS analysis)

Analysis:

40

KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy. Bartlett's Test of Sphericity Approx. Chi-Square Df Sig. .529 164.506 105 .000

Interpretation:
The Kaiser-Meyer-Olkin Measure of Sampling Adequacy reveals that as KMO measure = .529. i.e, it represents that the above sample is adequate.

Rotated Component Matrixa Component 1 VAR00001 VAR00002 VAR00003 VAR00004 VAR00005 VAR00006 VAR00007 VAR00008 VAR00009 VAR00010 VAR00011 VAR00012 VAR00013 VAR00014 VAR00015 .253 -.199 -.496 -.088 -.068 .334 -.175 -.078 -.501 -.273 -.080 .811 -.077 .526 .736 2 -.194 .508 -.022 .037 .175 -.085 -.077 .813 .061 .318 .761 -.110 -.665 -.053 -.091 3 .589 -.089 -.463 .602 -.526 -.134 .728 .052 -.331 -.029 -.101 .061 .201 .060 -.131

Analysis:

41

Interpretation:
On the basis of the Rotated Component Matrix all the 15 variables can be appropriately divided into 3 components. Component 1 comprises of the following variables: Variable 6: The enhancement of Information Technology has significantly influenced the delivery channels of the bank Variable 12: Nowadays SMS are being used as a major tool of promotion and giving great utility to the customers. Variable 14: The Competitive Pressure is one of the Lead Factor Driving towards the implementation of Technology. Variable 15: Impact of Technology is Reducing the Physical Infrastructure Cost of Banks Component 2 comprises of the following variables: Variable 2: The role of Information Technology has given a new Dimension to the banking Industry.

42

Variable 3: Information Technology has played a key role in showing that it is the convenient tool for the bankers Variable 5: The role of technology has helped in improving the Quality of Service in the Bank. Variable 8: The Information Technology has provided the Banking Industry wherewithal to deal with the new Challenges the new Economy poses Variable 9 : The adoption and use of smart card technology has helped people a lot Variable 10: The progress of technology and the development of worldwide networks have significantly reduced the cost and time of global funds transfer Variable 11: The technological changes have forced the bankers to adopt customer-based
approach instead of product-based approach

the

Component 3 comprises of the following variables: Variable 1: Information Technology facilitate wide and speedy services to banking sectors Variable 4: The enhancement of information technology has helped in meeting the high expectation of the customer. Variable 7: The IT revolution has set the stage for unprecedented increase in financial activity across the globe. Variable 13: Security concerns are the basic hindrance in using Technology related to banking services.

Analysis:
Component Score Coefficient Matrix Component 1 VAR00001 VAR00002 VAR00003 VAR00004 VAR00005 VAR00006 VAR00007 VAR00008 VAR00009 VAR00010 .062 -.034 -.205 -.073 .018 .154 -.133 .046 -.206 -.091 2 -.013 .231 -.110 .071 .029 -.022 .017 .414 -.055 .132 3 .288 .015 -.227 .340 -.267 -.102 .403 .116 -.146 .033

43

Component Score Coefficient Matrix VAR00011 .049 .372 VAR00012 .361 .035 VAR00013 -.117 -.328 VAR00014 .235 .034 VAR00015 .340 .017

.027 -.026 .047 -.004 -.125

Interpretation
On The Basis of calculation of Component Score Coefficient Matrix of all the components i.e(1,2,3,) the component 1 is considered to be the most significance with a value of 5.886 followed with component 2 with a value of 5.667

CHAPTER-7
44

Findings
The component 1 ought to be the most significant in both the banks but different variables comes into picture. The role of Information Technology has given a new Dimension to the banking Industry? The Information Technology has provided the Banking Industry the wherewithal to deal with the new Challenges the new Economy poses. The progress of technology and the development of worldwide networks have significantly reduced the cost and time of global funds transfer in the private banks Security concerns are the basic hindrance in using Technology related to banking services The enhancement of IT in Public Banks has significantly influenced the delivery channels of the bank 45

 Nowadays SMS are being used as a major tool of promotion and giving great utility to the customers in both the Public and Private Banks. The Competitive Pressure is one of the Lead Factor Driving towards the implementation of Technology in the Private and Public sector Banks. Impact of Technology is Reducing the Physical Infrastructure Cost of Banks mostly in the Public sector Bank Significant number of customers (45%) prefer private banks followed by public sector banks (35%) to do their banking operations. Interestingly very few customers (20%) prefers foreign banks.

Employees Perception
1). The study proved that there is a positive relation between implementation of IT and delivery of service. In other words, Banks are moving towards implementing IT enabled services to deliver better service, improve competitive position and also geographical reach. 2). Over 65% of the foreign banks, 20% Private Banks and 9% Public Sector Banks are all through with the implementation of IT enable services in their banks. However, 45% of the Private Banks and 36% of the Public Sector Banks are in the implementation stage of I.T. 3). Almost 57% of the Respondents Strongly Agree that Competitive Pressure is one of the Lead Factor Driving towards the implementation of Technology. 45% of the Bank Respondents Strongly Agree that Operational Efficiency and Business Process Reengineering are the Factors that drives the Implementation of Technology in the Banks.

46

37% of the Respondents remain neutral when asked if the drive towards Implementation of Technology is due to Organizational Restructuring. 4). On criteria "Impact of Technology is Reducing Physical Infrastructure Cost of Bank"-The Impact of Technology on Reduced Physical Infrastructure Cost of Bank is same across all the Banks

CHAPTER-8
47

CONCLUSION:
Significant number of customers (45%) prefer private banks followed by public sector banks (35%) to do their banking operations. Interestingly very few customers (20%) prefers foreign banks. Reasons for preferring a particular bank are Trust in the bank, sense of security and network facilities provided by the banks including flexibility in carrying out transaction. The study proved regression analysis that these is a positive relationship between networking ( 2.2), sense of security ( 1.62), Trust in Bank ( 2.3) and flexibility in carrying out transactions. Majority of the Customers perceive that Technology in Banking Industry has a positive impact on the way the services are rendered to the customers. 57% of the Customers Strongly Agree that it is necessary for banks to implement IT in their operations. 60% of the Respondents Strongly Agree that Technology improves customer services in banks. 3. Nearly 87% of the Private Sector Banks have Respondent that Technology Implementation has resulted in Achieving Economies of Scale of Bank. 57% of the Public Sector Banks have agreed that the Technology has resulted in Achieving Economies of Scale of Bank. On other hand, 90% of the Foreign Banks have said that by Implementing Technology in

48

the Bank, they are able to achieve Data Communication in Achieving Economies of Scale of Bank. Nearly 89% of the Private Sector Banks have Respondent that Technology Implementation has resulted in Efficient Low Cost Data Communication. 78% of the Public Sector Banks have agreed that the Technology has resulted in Efficient Low Cost Data Communication. On other hand, 93% of the Foreign Banks have said that by Implementing Technology in the Bank, they are able to achieve Data Communication in Low Cost and Efficient way. In case of Private Sector Bank, there is a strong association between the drive to implement Technology in the Banks and Impact on Profitability, Competitive Pressure, and Customer Needs.

CHAPTER-9
49

Limitation of the survey

The questionnaires were filled by 100 working in the Bank. So the scope of sample findings was less. The questionnaire was filled by100 comprising 50 of ICICI bank and 50 of bank of India. So the point of view of employees differ. The from whom the questionnaires are filled are in a heavy workload so some of the questionnaires filled by the employees are not reasonable. The responses of the cannot be accurate as the problem of language and understanding arises. (These problems are not in all cases.) One of the other problems of questionnaire is the cost. Some times it may be possible that even by spending so much the result may not be reasonable. Many a times the may not be really conscious or may not be bothered about the questionnaire. This may create a problem in the research. The time constraint was one of the major issue in conducting of the project as 15-20 days time is not a quite enough to complete a project. Another issue that was of most important was the amount to be incurred in the project.

50

BIBLIOGRAPHY
51

BOOKS:
NE WSPAPER:

http://epaper.timesofindia.com http://businessline.com/the hindu/2004/09

http://www.the hindu.com/2008/02/20stroies2008022056430800.htm

WEBSITES:
www.icicibank.com www.bankofindia.com

52

ANNEXURE

53

Hi I am Amit Kumar, Pursuing Masters of Business Administration from Birla Institute of technology, Mesra, Ranchi, Noida Centre. I am Working on a Project Title Role of Information Technology in Banking Industry. I request the employees of the bank to please read up the questionnaire and please fill up the questionnaire which would help me out in reaching to an appropriate result

Name of the employee---Contact no--Designation. Address:

54

55

No Questions 1 2 Information Technology facilitate speedy services to banking sectors. The role of Information Technology has given a new Dimension to the banking Industry. Information Technology has played a key role in showing that it is the convenient tool for the bankers The enhancement of information technology has helped in meeting the high expectation of the customer. The role of technology has helped in improving the Quality of Service in the Bank. The enhancement of Information Technology has significantly influenced the delivery channels of the bank. The IT revolution has set the stage for unprecedented increase in financial activity across the globe. The Information Technology has provided the Banking Industry the wherewithal to deal with the new Challenges the new Economy poses. The adoption and use of smart card technology has helped people a lot The progress of technology and the development of worldwide networks have significantly reduced the cost of global funds transfer
The technological changes have forced the bankers to adopt customer-based approach instead of productbased approach

Strongly disagree Neither agree disagree agree nor disagree

Strongly agree

9 13 10

11

56

12

Nowadays SMS are being used as a major tool of

57