Abstract

The paper describes the current state of Internet banking in India and
discusses its
implications for the Indian banking industry. Particularly, it seeks to
examine the
impact of Internet banking on banks performance and risk. Using
information
drawn from the survey of 85 scheduled commercial banks websites,
during the
period of June 2007, the results show that nearly 57 percent of the
Indian
commercial banks are providing transactional Internet banking
services. The
univariate analysis indicates that Internet banks are larger banks and
have better
operating efficiency ratios and profitability as compared to nonInternet banks.
Internet banks rely more heavily on core deposits for funding than
non-Internet
banks do. However, the multiple regression results reveal that the
profitability and
offering of Internet banking does not have any significant association,
on the other
hand, Internet banking has a significant and negative association with
risk profile of
the banks.
1. Introduction
Internet banking system and method in which a personal computer is connected
by a network service provider directly to a host computer system of a bank such
that customer service requests can be processed automatically without need for
intervention by customer service representatives. The system is capable of
distinguishing between those customer service requests which are capable of
automated fulfilment and those requests which require handling by a customer
service representative. The system is integrated with the host computer system
of the bank so that the remote banking customer can access other automated
services of the bank. The method of the invention includes the steps of inputting
a customer banking request from among a menu of banking requests at a remote
personnel computer; transmitting the banking requests to a host computer over a
network; receiving the request at the host computer; identifying the type of
customer banking request received; automatic logging of the service request,

comparing the received request to a stored table of request types, each of the
request types having an attribute to indicate whether the request type is capable
of being fulfilled by a customer service representative or by an automated
system; and, depending upon the attribute, directing the request either to a
queue for handling by a customer service representative or to a queue for
processing by an automated system.
Internet Banking lets you handle many banking transactions via your personal
computer. For instance, you may use your computer to view your account
balance, request transfers between accounts, and pay bills electronically.

What is E-Banking?
The following chart exhibits the definition of E-Banking.

E-COMMERCE

E-MONEY

E-FINANCE

E-Banking

ATM Services
Any branch banking
Internet Banking
Virtual Banking
SMS banking

Other on line Financial Services and

Products

Wireless Application Protocols

Telephone Banking
Electronic Fund Transfer (EFT)
SWIFT Channel
Other electronic delivery channels are E-Banking.
E-Commerce:
The Phenomenon of Electronic Commerce has permeated into every aspect of our
life today.
Electronic Commerce has been around for the last two decades in some form or
the other, but the
new force that is driving Electronic Commerce is the Internet, which is
revolutionizing the way
companies around the globe conduct business. Internet based electronic
commerce is playing a
critical role in addressing strategic, mission critical business needs of the
companies and hence
the companies are making it an integral part of their business strategies.
E-Money:
E-money includes electronic debit and credit system, smart card. The smart card
has been
defined many ways, but is generally defined as portable data storage device
with intelligence
(chip memory) and provision for identity and security. In their simplest forms,
these cards are
small microcomputerslacking only external power supply, displays, and
keyboards. One of the
most widely tested stored value cards offered by Mondex has an electric wallet,
available as an
optional accessory, with both of these peripheral devices. The microprocessor
chip in a stored
value card is specialized and custom-designed, generally with specific patented
control and
production circuits.
Various Forms of E-Banking:
Automated Teller Machine (ATM)
An ATM is simply a data terminal with two input and four output devices. Like any
other data
terminal, the ATM has to connect to, and communicate through, a host processor.
The host
processor is analogous to an Internet Service Provider (ISP) in that it is the
gateway through
which all the various ATM networks become available to the cardholder (the
person wanting the
cash). ATM has two input devices- card reader and keypad. An ATM has four
output devicesSpeaker, Display screen, Receipt printer, cash dispenser.
SMS Banking

SMS Banking allows doing some banking enquiries on our mobile phone. SMS
Banking is
developed to provide transactions related to clients card account via SMS.
After having registered the service SMS-Banking, a (mobile Phone) subscriber
should send an
SMS to 611(say) with a request for appropriate transaction. The above SMS must
contain (with
space between commands):
A type transaction
Individual access code for working with SMS-Banking
A sum to be paid (if payment transaction)
Identifier of payment (debt)
Identifier of data.

In reply the subscriber will receive a message reporting the result of the
transaction made.
It is possible to use SMS-Banking abroad provided that international calls and
roaming are
activated. SMS must be written in Latin letters. There is no subscription fee for
the service. The
SMS-s to number 611 is charged in accordance with the company tariffs.The
mobile company
may charge for SMS and Bank may charge for service.
Tele-banking
Tele-banking is a form of remote banking which is essentially the delivery of
branch financial
services via telecommunication devices where the bank customer can perform
retail transactions
by dialing a touch-tone telephone or mobile communication unit, which is
connected to an
automated system of the bank by utilizing Automated Voice Response (AVR)
technology. Telebanking
has been in Bangladesh since 1990s. The use of Tele-banking is easy and
confidential.
All our need is a push button telephone, our account number, and our Personal
Identification
Number (PIN), which we select on our first call and can change at any time. Telebanking will
provide us the following services:
Checking account balance
Interest rates related information etc.
On line Banking
Banks are considering on line 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. On line banking (Internet banking)
is a term

used for performing transactions, payments etc. over the Internet through a
banks secure
website. This is very useful especially outside banking hours. In most cases a web
browser such
as Internet explorer or Netscape Navigator is utilized and any normal Internet
connection is
suitable. No special software or hardware is usually needed.

Objective of E-Banking
From Bankers point of view:
1. Provide retail services at reduced cost through
brace network.
2. Reduction of administrative expenses by
reducing the number workers with the help of
electronic banking.
3. Reduction of the volume of the paper work
with the help of e banking.
4. Increase of income through different types of
fees like debit card fee, credit card fee etc.
5. Strengthening the position of in the
competitive environment.
6. Expanding the services in the remote areas.

From clients point of view:

1. Receiving timely and instant
informations, such as Balance statement,
Account statement,
2. Transaction statement.
3. Ability to deposit and withdraw of money
flawlessly within short time and at lower
cost.
4. Advantageously making payments for the
goods and services.
5.Staying at home or outside, availing the
facility like opening L/C, making investment,
obtaining loan facility and above all making
fund transfer with the help of e-banking.
6. Securing the advantage of maintaining
secrecy of accounts of the clients.
7. Enjoying utmost protection of the
accounts maintained under e-banking.

BACKGROUND OF ELECTRONIC BANKING

In the 1961, the first National City bank of New York introduced successfully the
certificate of
deposit under electronic system for the first time. The primary stages of the e
banking are the

electronic fund transfer system (EFTS). The main elements of the EFTS are the
automated teller
machine (ATM), point of sale (POS), Terminal and Automated Clearing House
(ACH).
In the 1967, the Barclays bank of UK established cash dispenser at first. The
working procedure
of this machine was quite different from the machine used now. In those days,
there were no
magnetic cards. Bank gave paper voucher to its clients and when the clients
insert these vouchers
in the machine 10 pounds will come out. Later one, plastic cards were used.
Within one year of
the establishment of cash dispenser by Barclays bank, France, Sweden and
Switzerland started
National cash dispenser network.
In 1969, Japan and USA started the use of these types of machines produced by
them. The
machines of that time were in off-line; there was no connection with the
computer.
In 1972, Lloyds bank of UK established the very first online Cash Point
machine. They
supplied plastic cards to their clients. There were magnetic stripes on those
cards. As a result,
the clients accounts or the client could be identified. In this online system every
machine was
connected with the central computer.

CHAPTER 2

RESEARCH METHODOLOGY
TITLE

To study the perception of people regarding internet banking

OBJECTIVE
The objective of the research is to determine the perception of people regarding
e-banking and how they are using the latest technologies offered by the bank.
1. Are people aware of net banking services?
2. What is the reason for using e-banking?
3. In which bank do they have their account and are they satisfied with
the e-banking service?
4. The main transactions carried out by the customers.
5. Are they aware of the benefits of e-banking?
6. Are they aware of the methods which can be undertaken to make any
kind of fraud?
7. Are they aware to carry secure transaction?
8. Does the bank educate them about net-banking?
9. Do they prefer visiting the bank or using net-banking?
10. Benefits obtained from e-banking?

LITRATURE REVIEW
The vast majority of the banks that avoided Internet banking
in the beginning did so because they simply did not see
the benefits of using it. According to Tan and Teo (2000) if
customers are given the chance to try the innovation, it will
minimize certain fears, especially when customers found that
mistakes could be rectified and thus providing a predictable SITUATION. India is

still in the middle stage of E-banking growth and development.

Competition and changes in technology and lifestyle in the last five years have
changed the face of banking. The changes that have taken place impose on
banks tough standards of competition and compliance. The issue here is
Where does India stand in the scheme of Ebanking. E-banking is likely to
bring a host of opportunities as well as unprecedented risks to the fundamental
nature of banking in India.
The impact of E- Banking in India is not yet apparent. Many global research
companies believe that Ebanking adoption in India in the near future would be
slow compared to other major Asian countries. Indian E-banking is still nascent,
although it is fast becoming a strategic necessity for most commercial banks, as
competition increases from private banks and non banking financial institutions. Despite the
global economic challenges facing the IT software and services
sector, the outlook for the Indian industry remains optimistic.
The Reserve Bank of India has also set up a "Working Group on E-banking to
examine different aspects of E-banking. The group focused on three major areas
of E-banking i.e. (1) Technology and Security issues (2) Legal issues and (3)
Regulatory and Supervisory issues. RBI has accepted the guidelines of the
group and they provide a good insight into the security requirements of Ebanking.
The importance of the impact of technology and information security cannot be

doubted. However, the rapid growth of the Internet has introduced a completely new level of
security related problems. The problem here is that since the Internet is not a regulated
technology and it is readily accessible to millions of
people, there will always be people who want to use it to make illicit gains. The
security issue can be addressed at three levels. The first is the security of
customer information as it is sent from the customer's PC to the Web server.
The second is the security of the environment in which the Internet banking server and
customer information database reside. Third, security measures must
be in place to prevent unauthorized users from attempting to long into the
online banking section of the website.

SCOPE OF THE STUDY

A big boom has been witnessed in Banking Industry in recent times. A large
number of players are there in the market and are trying to gain market share in
this rapidly improving market. The study then goes on to evaluate and analyze
the findings so as to present a clear picture of trends in the Banking sector
specifically e-banking.

SIGNIFICANCE TO THE INDUSTRY

This is a limited study which takes into consideration the responses of 110
people. This data can be explorated to take in the trends across the industry. The
significance for the industry lies in studying these trends that emerge from the
study. It is a rapidly changing and evolving sector. People are only beginning to
wake up to its vast possibilities. A study like this can attempt to guide the future
of the industry based on current trends.

RESEARCH DESIGN

NON-PROBABILITY
EXPLORATORY & DISCRIPTIVE EXPERIMENTAL RESEARCH

The research is primarily both exploratory as well as descriptive in nature. The

sources of information are both primary & secondary.

A well-structured questionnaire was prepared and personal interviews were

conducted to collect the customers perception about internet banking through
this questionnaire.
SAMPLING METHODOLOGY

Sampling Technique:
Initially, a rough draft was prepared keeping in mind the objective of the
research. A pilot study was done in order to know the accuracy of the
Questionnaire. The final Questionnaire was arrived only after certain important
changes were done. Thus my sampling came out to be judgemental and
convenient.
Sampling Unit:
The respondents who were asked to fill out questionnaires are the sampling
units. These comprise of employees of MNCs, Govt. Employees, and Self
Employed etc.
Sample size:
The sample size was restricted to only 110, which comprised of mainly peoples
from different regions of Bhubaneswar due to time constraints.

LIMITATIONS OF THE RESEARCH

1. The research is confined to certain parts of Bhubaneswar only and
does not necessarily shows a pattern applicable to all of Country.
2. Some respondents were reluctant to divulge personal information
which can affect the validity of all responses.
3. In a rapidly changing industry, analysis on one day or in one segment
can change very quickly. The environmental changes are vital to be considered in order to
assimilate the findings.
4. People were mostly unwilling to talk because of their heavy schedule
or they get annoyed with the phone calls or even if they are asked
about this face to face.