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A Project report submitted to Department of Business Management, UCC&BM, OU campus, In partial fulfillment Of the requirement for the award of


Submitted by: SHAKEER SHAIK

MBA- Technology Management

H. No: 100409675011
Under the guidance of


Professor, DBM, Osmania University



I hereby declare that this Project Report titled IMPORTANCE OF Information Technology IN BANKING submitted by me to the Department of Business Management, O.U., Hyderabad, is a bonafide work undertaken by me and it is not submitted to any other University or Institution for the award of any degree diploma / certificate or published any time before.

Date: Place: Hyderabad



This is to certify that the Project Report title IMPORTANCE OF Information Technology IN BANKING submitted in partial fulfilment for the award of MBA Programme of Department of Business Management, O.U. Hyderabad, was carried out by Shakeer Shaik under my guidance.

Dr. SHAILAJA GAJJALA Professor DBM, Osmania University.

Signature of the Guide

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 e-commerce arenas. Banks are growing in size by mergers and acquisitions, which have been driven by communication and technology. Technology is playing a major role in increasing the efficiency, courtesy and speed of customer service. It is said to be the age of Ebanking. 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. 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, 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.


I would like to acknowledge my sincere gratitude to Prof. Dr. SHAILAJA GAJJALA, Dept. Of Business Management, Osmania University, for her excellent guidance and supervision in the completion of this project successfully. I wish to thank our Principal Prof.V.VENKATESHWARLU, UCCBM, Osmania University for enabling me to do this project. I am deeply indebted to my Parents whove always believed in me and encouraged me in my endeavours.

Shakeer Shaik
H. No. 100409675011

Table of Contents

Sr. No 1 2 3 4 5 6 7 8 9

Topic Introduction Overview of Credit Analysis Lending Process Financial Statement Analysis I Financial Statement Analysis II Non Financial Analysis Credit Models Conclusion Bibliography

Pg. Nos. 7 10 11 14 15 19 20 24 25 30 31 32 33 49 50-51 52


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 7

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.


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: 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. "

1. Primary Functions (a) Acceptance of deposits (b) Making Loans and Advances

Loans Overdrafts Cash Credit Discounting of Bills of Exchange

2. Secondary Functions (a) Agency Functions

Collection of cheques and bills etc Collection of interest and dividend Making payment on behalf of customers .Purchase and sale of securities. 9

Facility of transfer of funds To act as trustee and executor

(b) Utility Functions

Safe custody of customers valuable articles and securities. Underwriting facility Issuing of Traveller's cheque and letter of credit Facility of foreign exchange Providing trade information Providing information regarding credit worthiness of their customers. CLASSIFICATION ON BASIS OF OWNERSHIP

On the basis of ownership banks are of the following types: 1. PUBLIC SECTOR BANK Public sector banks are those banks that are owned by the Government. The Govt. runs these Banks. In India 14 banks were nationalized in 1969 & in 1980 another 6 banks were also nationalized. Therefore in 1980 the number of nationalized bank is 20. But at present there are 9 banks are nationalized. All these banks are belonging to public sector category. Welfare is their principle objective. 2. PRIVATE SECTOR BANKS These banks are owned and run by the private sector. Various banks in the country such as ICICI Bank, HDFC Bank etc. are private sector banks An individual has control over there banks in preparation to the share of the banks held by him. 3. CO-OPERATIVE BANKS Co-operative banks are those financial institutions which provide short term & medium term' loans to there members. Co-operative banks are in every state in India -Its branches at district level are known as the central co-operative bank. The central co-operative bank in turn has its branches both in the urban & rural areas. Every state cooperative bank is an apex bank, which provides credit facilities to the central co-operative bank. It gets funds from RBI.





Type Founded Headquarters

Private 1994 HDFC Bank Ltd., 12

Mumbai, India Industry Banking Insurance Capital Markets and allied industries Products Website Loans, Credit Cards, Savings, Investment vehicles, Insurance etc.

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. 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 liberalisation 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.


BUSINESS FOCUS HDFC Bank's mission is to be a World-Class Indian Bank. The Bank's aim is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services in the segments that the bank operates in and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to maintain the highest level of ethical standards, professional integrity and regulatory compliance. HDFC Bank's business philosophy is based on four core values: Operational Excellence, Customer Focus, Product Leadership and People. BUSINESS PROFILE HDFC Bank caters to a wide range of banking services covering both commercial and investment banking on the wholesale side and transactional/branch banking on the retail side. The bank has three key business areas: (a) Wholesale Banking Services The Bank's target market is primarily large, blue chip manufacturing companies in the Indian corporate sector and to a lesser extent, emerging midsized corporates. For these corporate, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. The bank is also a leading provider of structured solutions that combine cash' management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. (b) Retail Banking Services The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one stop window for all his/her banking requirements. The products are backed by worldclass service and delivered to the customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile Banking. The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have been designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various 14

investment avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. Its also a leading provider of Depository Services to retail customers, offering customers the facility to hold their investments in electronic form. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the MasterCard Maestro debit card as well. The debit card allows the user to directly debit his account at the point of purchase at a merchant establishment, in India and overseas. The Bank launched its credit card in association with VISA in November 2001. The Bank is also one of the leading players in the "merchant acquiring" business with over 25,000 Point-of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. The Bank is well positioned as a leader in various net-based B2C opportunities including a wide range of Internet banking services for Fixed Deposits, Loans, Bill Payments., etc. (c) Treasury Operations Within this business, the bank has three main product areas-Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities With the liberalization of the financial markets in India, corporate need more sophisticated risk management information, advice and product structures, These and fine pricing on various treasury products are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio.




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: 17

1. Banking is a combination of two, Electronic technology and Banking. 2. Electronic Banking is a process by which a customer performs banking transactions electronically without visiting a brick-and-mortar institutions. 3. 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. 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. 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 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.

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 E-banking 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 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.



E-BANKING PRODUCTS Automated Teller Machine (ATM ) 20

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 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. Customer can sometimes use the services of other bank ATMs.

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; 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 21

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. 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 banking- both directly and indirectly. They are being used both as banking and other channels. Internet Banking The advent of the Internet and the popularity of personal 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. 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.



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.



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.

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. 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.


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 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.


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. 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.


List of some banks operating E-Banking in India

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 ebanking 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 eg buyer and seller, payer and payee. 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 raditional banks, for example by surveillance of:

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



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 cost-effective 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 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 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.

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.




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 realtime 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.

Chandana R, Unnithan, Paula M.C., Swatman in their research paper titled EBanking Adaptions and Dot.Com viability: A comparison of Australian and Indian experiences in the Banking sector a comparative study of Australian and Indian experiences in eBusiness was done, which seeks to identify the effectiveness of dot.coms as indicators of eBusiness uptake and success on a sector-by-sector basis was undertaken. It was concluded that the banking industry is now a very mature one and banks are being forced to change rapidly as a result of openmarket forces such as the threat of competition, customer demand, and technological innovations such as the growth of the Internet. E-Banking is a successful strategic weapon for banks to remain profitable in a volatile, and competitive market place of today in both Indian and Australian Economies despite the differences of IT usage.

G. Kannabiran and P.C. Narayan discuss in their article the experiences of a private-sector bank in deploying Internet banking and eCommerce in India. Strategic alignment of business and IT strategies, planning and implementation of e-banking initiatives, and management of benefits have been captured, along with key contributions to development.

Huggins points to the fact that traditional boundaries in banking are disappearing. Using eBusiness methods, major retailers and telecom providers are starting to offer financial services to their clients. Extending the value chain and offering versatile services seems to be the key to retaining competitiveness in the sector. Attitudes are also shifting from direct transactions to savings and investments, as the baby boomers reach their fortis and fifties, and prepare for retirement.

Mario Martinez Guerreroin his paper titled Profiling the adoption of Online banking Services in the European Union offers an empirical investigation on the adoption of online banking services among European citizen. The use of ebanking 33

services is explained on the basis of socio-demographic and Internet specific behavioral indicators. The performed analyses provide support for the influence of country, age, profession and several Internet behaviors on the use of E-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.




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)

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. 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 ebanking 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 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. 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.





Awareness of people regarding e-banking service provided by the bank while opening an account.

Interpretation As seen from Table 1, overall percentage of service class people having complete knowledge about e-banking services provided by the bank while opening an account in it is 37%, those having some idea about it is 46% and the percentage of people having no awareness of e-banking services provided by the bank is 17%. It can reasonably, be concluded that nearly 85% of the population are having awareness about e-banking services.


Table 2.

Sources from which the respondents get the knowledge about the e-banking services

Interpretation Table 2, indicates the percentage distribution of awareness avenues, the major are in favour of advertisements, which score 34% among different avenues such as personal visit, executives of the banks, advertisements and friend/relatives. While the least score is for personal visit and the other sources.


Table 3. Awareness of E-Banking services

Interpretation E-banking constitutes services provided in terms of ATMs, Debit Card, Credit Card, Phone Banking, Mobile Banking, Internet Banking etc, of which the first six have been covered. Amongst these ATM scores the largest used service status (26.03%) as indicated by table 3 figures. Close on the heels is Debit card (17.75%), Credit card (14.79%), while phone banking lags behind by scoring the least ie.,11.83%.


Table 4

Users of E-banking services

Interpretation Table 4 shows that among those aware (which account for 83 in number) about 74 persons use e-banking services, which is 74% of total population studied.


Table 5.

Representation of frequency of usage

Interpretation To find out the level of usage amongst the service class, percentage has been calculated from the total completely filled in questionnaires and the incomplete questionnaires were discarded. The frequency of usage of ATM is highest which is evident from table 5, followed by debit card.

Table 6
Factors influencing the level of usage

A study of the factors, table 6, influencing the usage was made by listing out various factors such as all time availability, ease of use, nearness etc., and from which it came to fore that amongst the various factors all time availability is ranked as the major motivating factor, followed by ease of use, direct access, nearness, security in decreasing order of importance. Quite interestingly friends and relatives, status symbol scored the least motivating factors. 45

Table 7

Various benefits accruing from E-Banking services to its users

Interpretation When asked to list various benefits accruing from the usage of e-banking, time saving received highest percentage score at 42.42% among different benefits such as time saving (42.42%), inexpensive (12.72%), easy processing (24.24%), easy fund transfer(15.75%). Quite interestingly, easy processing feature scored more than the inexpensiveness of the ebanking services. The other benefits accruing to the people include ready availability of funds, removal of middlemen and no rude customer relation executives.

Table 8 46

Problems identified by the users of E-Banking service



Most of the users face the problem of ATM out of order (15.58%), followed by time consuming (14.82%), password forgotten (14.57%) and then otherproblems as card misplaced, card misuse, insecurity, etc



FINDINGS OF THE STUDY The overall percentage of servicemen having complete knowledge about ebanking

services provided by the bank while opening an account in it is 37%, those having some idea about it is 46% and the percentage of people have no awareness of e-banking services provided by the bank is 17%. It can reasonably, be concluded that nearly 85% of the population is having awareness about ebanking services.

The percentage distribution of awareness avenues, the major skewness is in favour of

advertisements, which score 34% among different avenues such as personal visit, executives of the banks, advertisements and friend/relatives. While the least score is for personal visit.. Among those aware (which account for 83 in number) about 74 persons use ebanking

services, which is 74% of total population studied.

E-banking constitutes services provided in terms of ATMs, Debit Card, Credit Card,

Phone Banking, Mobile Banking, Internet Banking etc, of which the first six have been covered. Amongst these ATM scores the largest used service status (26.03%) Close on the heels is Debit card (17.75%), Credit card (14.79%), while phone banking lags behind by scoring the least ie.,11.83 .

To find out the level of usage amongst the service class, percentage has been

calculated from the total completely filled in questionnaires and the incomplete questionnaires were discarded. The frequency of usage of ATM is highest followed by debit card.

A study of the factors, influencing the usage was made by listing out various factors

such as all time availability, ease of use, nearness etc., and amongst the various factors all 49

time availability is ranked as the major motivating factor, followed by ease of use, direct access, nearness in decreasing order of importance. Quite interestingly friends and relatives, status symbol scored the least motivating factors.

When asked to list various benefits accruing from the usage of e-banking, time saving inexpensive (12.72%), easy processing (24.24%), easy fund

received highest percentage score at 42.42% among different benefits such as time saving (42.42%), transfer(15.75%).Quite interestingly, easy processing feature scored more than the inexpensiveness of the e-banking services. The other benefits accruing to the people include ready availability of funds, removal of middlemen and no rude customer relation executives.

Among the users, various problems that are encountered while using e-banking

services. Card misuse and its misplace are major reasons that create hurdles in its usage, while time consumption, accounting mistakes such as amount debited but not withdrawn and change of mobile number seem to be the least bothering problems.

From the non users, an attempt was made to elicit the reasons for its non usage.

Satisfaction with traditional banking was considered as prime de-motivating factor, followed closely by the fear of insecurity, then hidden cost factor, which suggested their resistance to change, which to some extent can be countered by aggressive advertisement and utilizing other modes of awareness dissemination as well.



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 small area 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



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. E-Banking is an innovative tool that is fast becoming a necessity. It is a successful strategic weapon for banks to remain profitable in a volatile and competitive marketplace of today. In future, the availability of technology to ensure safety and privacy of e-transactions and the RBI guidelines on various aspects of internet banking will definitely help in rapid growth of internet banking in India.


Internet banking would drive us into an age of creative destruction due to nonphysical 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.

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. 53

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.



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