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.

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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)

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PREFACE
With the rapid globalization of the Indian economy, enterprises are facing with
ever 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 India
to deploy the latest in technology, particularly in the Internet banking and ecommerce 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 bills
3. 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 aggressive
competition 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,
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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 to
date. 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.

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ACKNOWLEDGEMENT
It is a matter of great pleasure for me in submitting the project report on EBANKING 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 our
librarian 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)

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About the project

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

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INDEX

Chapter
No.
1
2
3
4

5
6
7
8
9
10
11
12
13

Topic

PAGE
NO.

Declaration
Acknowledgement
Preface
Introduction :
To banking
To HDFC Bank
E-banking
Literature Review
Research Methodology
Data Analysis And
Interpretation
Findings
SWOT Analysis
Limitations
Types or risk
Conclusion

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Chapter 1
Introduction

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INTRODUCTION

A feature of the banking industry across the globe has been that it is increasingly
Becoming. turbulent and competitive, characterized by an increasing trend towards
Internationalization, mergers, takeovers and consolidation of the banking industry.
Moreover a number of non-banking companies are entering the banking industry by
offering financial products and services (e.g., Toyotas credit card, GMs auto financing,
etc). This has given innumerable options to customers in choosing banking services. As
a response and aided by technological developments, banks have attempted to build
customer satisfaction through providing better products and services and at the same
time to reduce operating costs. Thus the banking industry has been constantly
innovating and with the advent of technological developments, particularly in the area of
telecommunications and information technology, one of the latest innovation that took
birth, and quite inevitably, has been the internet

With cyber cafs and kiosks springing up in different cities access to the Net is going to
be easy. Internet banking (also referred as e banking) is the latest in this series of
technological wonders in the recent past involving use of Internet for delivery of banking
products & services. Even the Morgan Stanley Dean Witter Internet research
emphasized that Web is more important for retail financial services than for many other
industries.
Internet banking is changing the banking industry and is having the major effects on
banking relationships. Banking is now no longer confined to the branches were one
has to approach the branch in person, to withdraw cash or deposit a cheque or request
a statement of accounts. In true Internet banking, any inquiry or transaction is
processed online without any reference to the branch (anywhere banking) at any
time. Providing Internet banking is increasingly becoming a "need to have" than a "nice
to have" service. The net banking, thus, now is more of a norm rather than an exception
in many developed countries due to the fact that it is the cheapest way of providing
banking services.

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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 the
benches and exhibit coins of different countries in big heaps for the purpose of changing
and lending money.

Definition of E-BANKING

Definition:
A Banking company is defined as a company, which transacts the business of
banking 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 by
cheque, draft, or otherwise."

According to Sir John Paget

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

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INTRODUCTION
TO HDFC BANK

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HDFC COMPANY PROFILE

HDFC BANK LTD

Type
Private
Founded 1994
Headquarters HDFC Bank Ltd.,
Mumbai, India
Industry
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-savvy
commercial banks of India, was incorporated in August 1994, after the Reserve Bank of
India allowed setting up of Banks in the private sector. The Bank was promoted by the
Housing Development Finance Corporation Limited, a premier housing finance
company (set up in 1977) of India..

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History
The Housing Development Finance Corporation Limited (HDFC) was
amongst 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 the
RBI's liberalization of the Indian Banking Industry in 1994. The bank was
incorporated in August 1994 in the name of 'HDFC Bank Limited', with its
registered office in Mumbai, India. HDFC Bank commenced operations as
a Scheduled Commercial Bank in January 1995.

Branch network
Currently HDFC Bank has 1416 branches, 3382 ATMs, in 550 cities in
India, 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, mutual
funds, insurance companies. It is a path breaker in the Indian banking
sector. In 2007 HDFC Bank acquired Centurion Bank of Punjab taking its
total branches to more than 1,000. Though, the official license was given to
Centurion Bank of Punjab branches, to continue working as HDFC Bank
branches, on May 23, 2008.

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E-BANKING

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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 definition
depicting 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 banking

Transactions 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 by
the customer.

Information
technology

Customer

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NEED FOR E-BANKING

One has to approach the branch in person, to withdraw cash or deposit a

cheque or request a statement of accounts. In true Internet banking, any
inquiry or transaction is processed online without any reference to the
branch (anywhere banking) at any time. Providing Internet banking is
increasingly becoming a "need to have" than a "nice to have" service. The
net banking, thus, now is more of a norm rather than an exception in many
developed countries due to the fact that it is the cheapest way of providing
banking 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 for
delivering a wide range of value added products and services. The delivery
channels include direct dial up connections, private networks, public
networks etc and the devices include telephone, Personal Computers
including the Automated Teller Machines, etc. With the popularity of PCs,
easy access to Internet and World Wide Web (WWW), Internet is
increasingly used by banks as a channel for receiving instructions and
delivering their products and services to their customers. This form of
banking is generally referred to as Internet Banking, although
the range of products and services offered by different banks vary widely
both in their content and sophistication.

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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 use
of technology, at that time, was limited to keeping books of the bank. It
further developed with the birth of online real time system and vast
improvement in telecommunications during late 1970s and 1980s.it
resulted in a revolution in the field of banking with convenience banking
as a buzzword. Through Convenience banking, the bank is carried to the
doorstep of the customer.
The 1990s saw the birth of distributed computing technologies and
Relational 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 for
customer service and risk control while communication in the batch mode
without hampering the response time on the front-end machine.
Traditional banking

Virtual or E-banking

Gunpowder

Nuclear charged

Personalized services,
time consuming, limited
access

Real time transactions,

integrated platform, all time
access

Intense competition has forced banks to rethink the way they operated their
business. They had to reinvent and improve their products and services to
make them more beneficial and cost effective. Technology in the form of Ebanking has made it possible to find alternate banking practices at lower
costs.
More and more people are using electronic banking products and services
because large section of the banks future customer base will be made up
of computer literate customer, the banks must be able to offer these
customer products and services that allow them to do their banking by

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

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E-Banking
Transaction
mechanism

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Internet
Banking

ATMs

TELE
Banking

Plastic
Money

ECheque

E-BANKING PRODUCTS

Automated Teller Machine (ATM )

These are cash dispensing machine, which are frequently seen at banks
and other locations such as shopping centers and building societies. Their
main purpose is to allow customer to draw cash at any time and to provide
banking services where it would not have been viable to open another
branch e.g. on university campus.

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

computerized telecommunications device that provides a financial
institution's customers a method of financial\ transactions in a public space
without 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 a
magnetic stripe or a plastic smartcard with a chip that contains his or her
card number and some security information, such as an expiration date or
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CVC (CVV). Security is provided by the customer entering a personal

identification number (PIN).
Using an ATM, customers can access their bank accounts in order to make
cash withdrawals (or credit card cash advances) and check their account
balances. Many ATMs also allow people to deposit cash or checks, transfer
money between their bank accounts, pay bills, or purchase goods and
services. ATMs are known by various casual terms including cash
machine, 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 it
is fastly becoming one of the most popular products. Customer can perform
a number of transactions from the convenience of their own home or office;
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in fact from anywhere they have access to phone. Customers can do

following: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 Response

System (VRS). This system basically, accepts only TONE dialed input. Like
the ATM customer has to follow particular process, initially account number
and telephone PIN are fed for the process to start. Also the VRS system
provides the users within additional facilities such as changing existing
password with the new desired, information about new products, current
interest rates etc.

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Mobile Banking

Mobile banking comes in as a part of the banks initiative to offer multiple

channel banking providing convenience for its customer. A versatile
multifunctional, free service that is accessible and viewable on the monitor
of mobile phone. Mobile phones are playing great role in Indian bankingboth 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 computers
presented both an opportunity and a challenge for the banking industry. For
years, financial institutions have used powerful computer networks to
automate million of daily transactions; today, often the only paper record is
the customers receipt at the point of sale. Now that their customers are
connected to the Internet via personal computers, banks envision similar
advantages by adopting those same internal electronic processes to home
use.

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Banks view online banking as a powerful value added tool to attract

and retain new customers while helping to eliminate costly paper handling
and teller interactions in an increasingly competitive banking environment.
In India first one to move into this area was ICICI Bank. They started web
based banking as early as august 1997.

Smart cards
smart card usually contains an embedded 8-bit microprocessor (a kind of
computer chip). The microprocessor is under a contact pad on one side of
the card. Think of the microprocessor as replacing the usual magnetic
stripe present on a credit card or debit card. The microprocessor on the
smart card is there for security. The host computer and card reader actually
"talk" to the microprocessor. The microprocessor enforces access to the
data on the card. The chips in these cards are capable of many
kinds of transactions. For example, a person could make purchases from
their credit account, debit account or from a stored account value that's
reload able. The enhanced memory and processing capacity
of the smart card is many times that of traditional magnetic-stripe cards and
can accommodate several different applications on a single card. It can
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also hold identification information, which means no more shuffling through

cards in the wallet to find the right one -- the Smart Card will be the only
one needed. Smart cards can also be used with a smart card reader
attachment to a personal computer to authenticate a user. Smart cards are
much more popular in Europe than in the U.S. In Europe the health
insurance and banking industries use smart cards extensively. Every
German citizen has a smart card for health insurance. Even though smart
cards have been around in their modern form for at least a decade, they
are just starting to take off in the U.S.
DEBIT CARD

Debit cards are also known as check

cards. Debit cards look like creditcards or ATM (automated teller machine)
cards, but operate like cash or a personal check. Debit cards are different
from 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 quickly
deducted from your checking or savings account. Debit cards are accepted
at many locations, including grocery stores, retail stores, gasoline stations,
and restaurants. You can use your card anywhere merchants display your
card's brand name or logo. They offer an alternative to carrying a
checkbook or cash.

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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 of
Internet banking are being employed in the marketplace.
Informational- this is the basic level of Internet banking. Typically, the
bank has marketing information about the banks products and services on
a stand-alone server. The risk is relatively low, as informational systems
typically 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 to
prevent unauthorized alterations to the banks server or web site.
Communicative- this type of Internet banking systems and the customer.
The interaction between the banks system and the customer. The
interaction may be limited to electronic mail, account enquiry, loan
applications, or static file updates (name and address change). Because
these servers may have a path to the banks internal networks, the risk is
higher with this configuration than with informational systems. Appropriate
controls need to be in the place to prevent, monitor, and alert management
of any unauthorized attempt to access the banks internal networks and
computer systems. Virus controls also become much more critical in this
environment.
Transactional- this level of Internet banking allows customers to execute
transactions. Since a path typically exists between the server and the bank
or outsourcers internal network, this is the highest risk architecture and
must have the strongest controls. Customer transactions can include
accessing accounts, paying bills, transferring funds etc.

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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 a
mouse click away.

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

Transaction speed- Online bank sites generally execute and confirm

transactions 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 portfolio
managing program to help you manage all of your assets more effectively.
Most are also compatible with money managing programs such as quicken
and Microsoft money.

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DISADVANTAGES OF INTERNET BANKING

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

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Learning curves- Banking sites can be difficult to navigate at first. Plan

to invest some time and\or read the tutorials in order to become
comfortable in your virtual lobby.

Bank site changes- Even the largest banks periodically upgrade their
online programs, adding new features in unfamiliar places. In some cases,
you may have to re-enter account information.

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E- BANKING SERVICES:

1. Bill payment service

Each bank has tie-ups with various utility companies, service providers and
insurance companies, across the country. It facilitates the payment of
electricity and telephone bills, mobile phone, credit card and insurance
premium bills.
To pay bills, a simple one-time registration for each biller is to
be completed. Standing instructions can be set, online to pay recurring
bills, automatically. One-time standing instruction will ensure that bill
payments 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 or
any another bank. Customers can send money anywhere in India. Payees
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account number, his bank and the branch is needed to be mentioned after
logging in the account. The transfer will take place in a day or so, whereas
in a traditional method, it takes about three working days. ICICI Bank says
that 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 can
not 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 line
increase and God forbid if you lose your credit card, you can report lost
card online.

4. Railway pass

This is something that would interest all the aam janta. Indian Railways has
tied up with ICICI bank and you can now make your railway pass for local
trains online. The pass will be delivered to you at your doorstep. But the
facility is limited to Mumbai, Thane, Nasik, Surat and Pune. The bank would
just charge Rs 10 + 12.24 percent of service tax.
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5. Investing through Internet banking

Opening a fixed deposit account cannot get easier than this. An FD can be
opened online through funds transfer. Online banking can also be a great
friend for lazy investors.
Now investors with interlinked demat account and bank account can easily
trade in the stock market and the amount will be automatically debited from
their respective bank accounts and the shares will be credited in their
demat 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, they
will now be just a few clicks away. Nowadays, most leading banks offer
both online banking and demat account. However if the customer have
there demat account with independent share brokers, then need to sign a
special 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 is
again back in action within few minutes.

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7. Shopping at your fingertips

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

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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 online
banking. But here are few cases where Internet banking will turn out to be a
better option in terms of saving your money.
'Stop payment' done through Internet banking will not cost any extra fees
but when done through the branch, the bank may charge you Rs 50 per
cheque plus the service tax.
Through Internet banking, you can check your transactions at any time of
the day, and as many times as you want to.
On the other hand, in a traditional method, you get quarterly statements
from the bank and if you request for a statement at your required time, it
may turn out to be an expensive affair. The branch may charge you Rs 25
per page, which includes only 30 transactions. Moreover, the bank branch
would take eight days to deliver it at your doorstep.
If the fund transfer has to be made outstation, where the bank does not
have 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 online
banking 2006, "There are many advantages of online banking. It is
convenient, it isn't bound by operational timings, there are no geographical
barriers and the services can be offered at a miniscule cost."

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IMPACT OF E-BANKING ON TRADITIONAL SERVICES

One of the issues currently being addressed is the impact of e-banking on
traditional 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 firm
view on this yet. Even to practitioners the future of e-banking and its
implications are unclear. It might be convenient nevertheless to outline
briefly two views that are prevalent in the market. The view that the Internet
is 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 phone
transactions. This could turn yesterdays competitive advantage - a large
branch 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-world
systems, cultures and structures will not encumber these new entrants.
Instead, they will be adaptable and responsive. E-banking gives consumers
much more choice. Consumers will be less inclined to remain loyal.
E-banking will lead to an erosion of the endowment effect currently
enjoyed by the major UK banks. Deposits will go elsewhere with the
consequence that these banks will have to fight to regain and retain their
customer base. This will increase their cost of funds, possibly making their
business less viable. Lost revenue may even result in these banks taking
more risks to breach the gap.
Portal providers are likely to attract the most significant share of banking
profits. Indeed banks could become glorified marriage brokers. They would
simply bring two parties together.
E.g.:- buyer and seller, payer and payee.

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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 unable
to 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 is
in contrast to the situation for Internet firms for whom it seems relatively
easy to attract investment.
There is of course another view which sees e-banking more as an evolution
than 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 not
remove their value.
Experience in Scandinavia (arguably the most advanced e-banking area in
the 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 Martini Banking (any time, any place, anywhere,
anyhow).
Traditional banks are starting to fight back. The start-up costs of an e-bank
are high. Establishing a trusted brand is very costly as it requires significant
advertising 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 profitable
once a large critical mass is achieved. Consequently many e-banks are
limiting themselves to providing a tailored service to the better off.
Nobody really knows which of these versions will triumph. This is
something that the market will determine. However, supervisors will need to
pay close attention to the impact of e-banks on the traditional banks, for
example by surveillance of:

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strategy
customer levels
earnings and costs
advertising spending
margins
funding costs
Merger opportunities and threats, both in the UK and abroad.

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THE INDIAN SCENARIO

Drivers of change
Advantages previously held by large financial institutions have shrunk
considerably. The Internet has leveled the playing field and afforded open
access to customers in the global marketplace. Internet banking is a costeffective delivery channel for financial institutions. Consumers are
embracing the many benefits of Internet banking. Access to one's accounts
at anytime and from any location via the World Wide Web is a convenience
unknown a short time ago. Thus, a bank's Internet presence transforms
from 'brouchreware' status to 'Internet banking' status once the bank goes
through a technology integration effort to enable the customer to access
information about his or her specific account relationship. The six primary
drivers 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

Page | 38

INDIAN BANKS ON WEB

The banking industry in India is facing unprecedented competition from

non-traditional banking institutions, which now offer banking and financial
services over the Internet. The deregulation of the banking industry coupled
with the emergence of new technologies, are enabling new competitors to
enter the financial services market quickly and efficiently.
Indian banks are going for the retail banking in a big way. However, much
is still to be achieved. This study that was conducted by students of IIML
shows some interesting facts:

Throughout the country, the Internet Banking is in the nascent stage of

Development (more than 50 banks are offering varied kind of Internet
banking services).

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

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

Page | 39

EMERGING CHALLENGES

Information technology analyst firm, the Meta Group, recently reported

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

Demand side pressure due to increasing access to low cost electronic

services.

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 even
disintermediation 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 geographic
boundaries.

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

product purchases.

Certainly some existing brick and mortar banks will go out of business. But
that's because they fail to respond to the challenge of the Internet. The
Internet and its underlying technologies will change and transform not just
banking, but also all aspects of finance and commerce. It represents much
more than a new distribution opportunity. It will enable nimble players to
leverage their brick and mortar presence to improve customer satisfaction
and gain share. It will force lethargic players who are struck with legacy
cost basis, out of business-since they are unable to bring to play in the new
context.
Page | 40

E-BANKING WORLD WIDE

Since its inception, Internet banking has experienced strong and sustained
growth.
WorldBank report on leapfrogging in e-finance pointed out that the three
countries with impressive progress in information technology in this sense
are Estonia, Republic of Korea and Brazil. Creation of the worlds leading
electronic banking systems has been done at a remarkably low cost
compared to other world-class internet banks .
In the European Union, 60 million people, representing 18 per cent of the
adult population, use online banking In France, the number of online
banking 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 Eastern
European countries but in world rankings, through a combination of easytouse software, free-of-charge transactions and behavior changes resulting
from the influence of the Nordic countries IT culture on Estonia.
A sector in which Latin America is seems to be performing better than in
other industries is online retail banking. Growth in this area has been driven
by 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 million
online customers each. Mexico is another leader of Internet banking in
Latin America. It adopted legislation providing for the development of both
E-Commerce and e-finance. In Mexico, the number of online bank users
more than tripled from 700,000 in 2000 to 2.4 million in 2001, and it could
reach 4.5 million in 2005 (E-Marketer 2002b). One reason for the success
of Latin American banks online ventures seems to be the attention they
have paid to providing retail customers with multiple ways to access their
accounts (Internet, telephone, wireless). However, given that the share of
the total population that actually has a bank account is relatively small, the
expansion 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.

Page | 41

The Internet is a global phenomenon and so is e-finance. Its deployment is

not limited to developed countries, and indeed some developing countries
such as India and the Republic of Korea are experiencing particularly
strong growth in E-Banking. In Asia one of the most impressive records has
been achieved by the Republic of Korea. The Republic of Korea is leading
in online brokerage and in mobile banking. In South-East Asia Internet
banking is also developing rapidly in Thailand, Malaysia, and Singapore
and to a lesser extent, in the Philippines.
In Bangladesh there is a large gap between the computerization of foreign
banks and that of local commercial banks and as regards the state of their
intra- and inter-branch online networks. However, 75 per cent of local
banks are planning to introduce E-Banking, which implies very dynamic
improvements.

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

Page | 42

LITERATURE
REVIEW

Page | 43

Literature Review

Product and Technology group, ICICI Bank, in its paper Corporate

banking using technology in transactions it was inferred that Information
Technology has revolutionized the services and mode of services offered
by the banks to their corporate clients. The emergence of E-Banking has
enabled the banks to offer real-time transactions and integrate all
customers related functions. Indian Banks are utilizing the new technology
to provide better technology and convenient access to its customers and
India 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 India

survey revealed that of 46 major banks operating in India, around 50%
were either offering Internet banking services at various levels or planned
to in the near future. According to a research report,( India Research, Kotak
Securities, May 2000.) while in 2001, India's Internet user base was an
estimated 9 lakh; it was expected to reach 90 lakh by 2003. Also, while only
1% of these Internet users utilized the Internet banking services in 1998,
the Internet banking user base increased to 16.7% by mid- 2000.

Page | 44

RESEARCH
METHODOLOGY

Page | 45

RESEARCH METHODOLOGY

Research is defined as human activity based on intellectual application in

the investigation of matter. The primary purpose for applied research is
discovering, interpreting, and the development of methods and systems for
the advancement of human knowledge on a wide variety of scientific
matters of our world and the universe.
The term research is also used to describe an entire collection of
information about a particular subject.

Methodology is the method followed while conducting the study on a

particular project. Through this methodology a systematic study is
conducted on the basis of which the basis of a report is produced. It is a
written game plan for conducting Research. Research methodology has
many dimensions. It includes not only the research methods but also
considers the logic behind the methods used in the context of the study and
explains why only a particular method or technique has been used. It also
helps to understand the assumptions underlying various techniques and by
which they can decide that certain techniques will be applicable to certain
problems and other will not. Therefore in order to solve a research problem,
it is necessary to design a research methodology for the problem as the
some may differ from problem to problem.
Nature
The methodology adopted to achieve the project objective involved
exploratory research & descriptive research method. The information
required for fulfilling the objective of study was collected from various
primary and secondary sources.

Page | 46

OBJECTIVES OF THE STUDY:-

The main objectives of the study are:

To study the awareness level of service class people regarding EBanking.
To find out the frequency and the factors that influences the adoption of
E-Banking services.
To measure the satisfaction level of people.
To understand the problems encountered in by service class people while
using
E-Banking services(ATM, Phone banking, etc)

Page | 47

Type of research
This study is EXPLORATORY and DESCRIPTIVE in nature. It helps in
breaking vague problem into smaller and precise problem and emphasizes
on discovering of new ideas and insights. Exploratory research was
conducted during the initial stage of the research process which helped to
refine the problem into researchable one. It has progressively narrowed the
scope of research topic.

Research design
Research design constitutes the blue print for the collection, measurement
and analysis of data. The present study seeks to identify the extent of
preferences of E-Banking over traditional banking among service class.
The research design is exploratory in nature. The research has been
conducted on service class people within Mumbai. For the selection of the
sample, convenient sampling method was adopted and an attempt has
been made to include all the age groups and gender within the service
class.
Sources of data:
Following are the methods of sources of data:
Secondary data:
Articles on E-Banking taken from journals, magazines published from
time to time.
Through internet.

Primary data:
Questionnaire was used to collect primary data from respondents. The
questionnaire was structured type and contained questions relating to
different dimensions of e-banking preferences among service class such as
level of usage, factors influencing the usage of e-banking services, benefits
accruing to the users of e-banking services, problems encountered. An
Page | 48

attempt was also made to elicit reasons for its non-usage. The questions
included in the questionnaire were open-ended, dichotomous and
offering multiple choices.
Sampling technique: The sampling technique used for judgment is
CONVENIENCE AND JUDGEMENT SAMPLING.
Sampling unit: It defines the target population that will be sampled i.e. it
answers who is to be surveyed. In this study, the sampling unit is the
people of Mumbai.
Sampling size: It indicates the numbers of people to be surveyed. Though
large samples give more reliable results than small samples but due to
constraint of time and money, the sample size was restricted to 100
respondents. The respondents belong to different income group and
profession.
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 further
insight in to the research problem, interview regarding their buying
practices too was made. This was done to crosscheck the authenticity of
the data provided. To supplement the primary data and to facilitate the
process of drawing inference, secondary data was collected from published
sources like magazines, journals, newspapers etc.
Tools and techniques of analysis:
The data so collected will be analyzed through the application of statistical
techniques, such as bar graphs and pie charts.

Page | 49

DATA
ANALYSIS
AND
INTERPRETATION

Page | 50

?
Page | 51

SWOT ANALYSIS

Page | 52

SWOT ANALYSIS
STRENGTHS :

It has an extensive distribution network comprising of 535 branches in

312 cities & one international office in Dubai this provides a competitive
edge over the competitors.
The Bank has a strong retail depository base & has more than million
customers.
Bank has strong brand equity.
ISO 9001 certification for its depository & custody operations & for its
backend processing of retail operations & direct banking operation.
The bank is a market leader in cash settlement service for the major
stock 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, NRI
services.

WEAKNESSES :

Account opening and delivery of cheque book take more time. Lack of
availability of different credit products like CC Limit, Bill discounting
facilities.
Complicated terms and conditions of products, which is not easily
Understandable by the layman.

Page | 53

OPPORTUNITIES :

Branch expansion
Door step services
Greater liberalization is foreign ownership via FDI in Indian Pvt. Sector
banks.
Infrastructure movements & better systems for trading & settlement in the
Govt. securities & foreign exchange markets.

THREATS :

The bank has started facing competition from players like SBI, PNB in the
finance market itself. This may reduce the profit margins in the future.
Some Pvt. Banks have 7 days banking.

Page | 54

LIMITATIONS

Page | 55

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 for
the purpose of study, so there can be difference between results of
sample 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 busy
schedules.
6. Merely asking questions and recording answers may not always elicit
the actual information sought.
7. Due to continuous change in environment, what is relevant today may
be irrelevant tomorrow.

Page | 56

Types of Risks
Operational risk
Operational risk, also referred to as transactional risk is the most common
form of risk associated with i-banking. It takes the form of inaccurate
processing of transactions, non enforceability of contracts, compromises in
data integrity, data privacy and confidentiality, unauthorized access /
intrusion to banks systems and transactions etc. Such risks can arise out
of weaknesses in design, implementation and monitoring of banks
information system. Besides inadequacies in technology, human factors
like negligence by customers and employees, fraudulent activity of
employees and crackers / hackers etc. can become potential source of
operational risk. Often there is thin line of difference between operational
risk and security risk and both terminologies are used interchangeably.

Security risk
Security risk arises on account of unauthorized access to a banks critical
information stores like accounting system, risk management system,
portfolio management system, etc. A breach of security could result in
direct financial loss to the bank. For example, hackers operating via the
Internet, could access, retrieve and use confidential customer information
and also can implant virus. This may result in loss of data, theft of or
tampering with customer information, disabling of a significant portion of
banks internal computer system thus denying service, cost of repairing
these 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
Page | 57

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 and
obligations of parties to a transaction are not well established. Given the
relatively new nature of Internet banking, rights and obligations in some
cases are uncertain and applicability of laws and rules is uncertain or
ambiguous, thus causing legal risk. Other reasons for legal risks are
uncertainty about the validity of some agreements formed via electronic
media and law regarding customer disclosures and privacy protection. A
customer, inadequately informed about his rights and obligations, may not
take proper precautions in using Internet banking products or services,
leading to disputed transactions, unwanted suits against the bank or other
regulatory sanctions.
Cross border risks
It includes legal and regulatory risks, as there may be uncertainty about
legal requirements in some countries and jurisdiction ambiguities with
respect to the responsibilities of different national authorities. Such
considerations may expose banks to legal risks associated with noncompliance of different national laws and regulations, including consumer
protection laws, record-keeping and reporting requirements, privacy rules
and money laundering laws. If a bank uses a service provider located in
another country, it will be more difficult to monitor it thus, causing
operational risk.

Strategic Risk
This risk is associated with the introduction of a new product or service.
Degree of this risk depends upon how well the institution has addressed
the various issues related to development of a business plan, availability of
sufficient resources to support this plan, credibility of the vendor (if
outsourced) and level of the technology used in comparison to the available
technology etc.
Page | 58

CONCLUSION

Page | 59

CONCLUSION

The usage of E-banking is all set to increase among the service class. The
service class at the moment is not using the services thoroughly due to
various hurdling factors like insecurity and fear of hidden costs etc. So
banks should come forward with measures to reduce the apprehensions of
their customers through awareness campaigns and more meaningful
advertisements to make E-banking popular among all the age and income
groups. Further, with increasing consumer demands, banks have to
constantly think of innovative customized services to remain competitive. EBanking is an innovative tool that is fast becoming a necessity. It is a
successful strategic weapon for banks to remain profitable in a volatile and
competitive marketplace of today.
In future, the availability of technology to ensure safety and privacy of etransactions and the RBI guidelines on various aspects of internet banking
will definitely help in rapid growth of internet banking in India.

Page | 60

SUGGESTIONS

Page | 61

SUGGESTIONS
Internet banking would drive us into an age of creative destruction due to
non-physical exchange, complete transparency giving rise to perfectly
electronic market place and customer supremacy. The question to be
asked right now is "What the Indian Banks should do" Whatever is the
strategy chosen and options adopted, certain key parameters would
determine 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 from
inward 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 of
software on bank's web site. This should contain tour through the
features which are to be included. It will enable users to give
suggestions for improvements, which can be incorporated in later
versions wherever feasible.
Second phase provides services such as account information and
balances, statement of account, transaction tracking, mailbox, check
book issue, stop payment, financial and customized information.

Page | 62

 The third phase may include additional services such as fund

transfers, DD
issue, standing instructions, opening fixed deposits, intimation of loss
of ATM
cards.
The last step should include advanced corporate banking services
like third party
payments, utility bill payments, establishment of L/Cs, Cash
Management
Services etc. Enhanced plan for the customers in future can include
requests for
demand drafts and pay orders and many more to bring in the ultimate
in banking
convenience.

Also if proper training should be given to customer by the bank employs to

open an account will be beneficial secondly the website should be made
friendlier from where the first time customers can directly make and access
there accounts.

We can see the time is changing and we he passage of time people are
accepting technology there is still a lot of perceptual blocking which
hampers the growth its the normal tendency of a human not to have
changes work on the old track, thats also one of the reason for the slow
acceptance 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.

Page | 63

BIBLIOGRAPHY

BOOKS
Malhotra, T. D., Electronic Banking and Information Technology in
Banks
Sultan 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

Page | 64

Annexure

Page | 65

QUESTIONAIRE
Dear Respondent,
We are conducting a research study of E-banking Preferences among people in
Mumbai . We will appreciate your cooperation in this regard by filling up the
questionnaire 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
c. Punjab National Bank
e. State Bank of Patiala
g. .Bank of India
i. Any other, Please Specify
i. --------------------ii. --------------------iii. ---------------------

b.
HDFC
d.
ICICI Bank
f. Canara Bank
h.
Oriental Bank of Commerce

2. While opening up the account, were you aware of E-banking services provided by
your 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 bank
c. Advertisements
d. Friends/ Relatives

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

e. ATM
f. Debit Card
g. Credit Card
h. Phone banking
i. Mobile banking
j. Internet banking
5. Do you use E-banking services?
a. yes

b. No
Page | 66

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

Factors
1
2
3
4
5
6

Once in a
day

Once in a
week

Once in a
fortnight

Once in a
month

Infrequently

ATM
Debit card
Credit card
Phone banking
Mobile banking
Internet banking

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

A
B
C
D
E
F
G

Strongly

More than
average

Average

Less than
Average

Not at all

All time availability

Ease of use
Nearness
Security
Direct access
Friends/ Relatives
Status symbol

8. Which of the following benefits accrue to you, while using E-banking services?
a. Time saving
b. Inexpensive
c. Easy processing
d. Easy fund transfer
e. Any other, please specify_________________________________________
9. Rate the problems identified while using E-banking services?
Factors
a
b
c
d
e

f
g
h

Highly
considered

Major

Average

Minor

Ignorable

Time consuming
Insecurity
ATM out of order
Amount debited but
not withdrawn
Problem of change
in
mobile number
Password forgotten
Card misplaced
Misuse of card
Page | 67

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

Highly
important

More than
average

Average

Less than
Average

Least
Average

a No need( Satisfied
with traditional
banking)
b It seems like a
botheration
c Insecurity
d No access to
internet/mobile
e Lack of operational
knowledge
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 : ________________
Age : ________________
Gender (M/F) : ________________
Profession : ________________
Organisation : ________________

Income level per month

Less than Rs. 10,000
Rs.10,000 to Rs.20,000
Rs.20,000 to Rs.30,000
More than Rs.30,000

Page | 68