A STUDY ON CHANGING TECHNOLOGY OF CUSTOMER NEED IN BANKING

INDUSTRY

INTRODUCTION

Definition of the Bank:- Financial institution whose primary activity is to act as a

payment agent for customers and to borrow and lend money. Banks are important
players of the market and offer services as loans and funds.

 Banking was originated in 18th century

 First bank were General Bank of India and Bank of Hindustan, now defunct.
 Punjab National Bank and Bank of India was the only private bank in 1906.
 Allahabad bank first fully India owned bank in 1865.

Bank of
Bengal

Bank of Imperial State

Bombay Bank of Bank of
India India

Bank of
Madras
TYPES OF BANKING

Commercial bank has two meanings:

 Commercial bank is the term used for a normal bank to distinguish it from an
investment bank. (After the great depression, the U.S. Congress required that
banks only engage in banking activities, whereas investment banks were limited
to capital markets activities. This separation is no longer mandatory.)
 Commercial bank can also refer to a bank or a division of a bank that mostly
deals with deposits and loans from corporations or large businesses, as opposed
to normal individual members of the public (retail banking). It is the most
successful department of banking.

 Community development bank are regulated banks that provide financial

services and credit to underserved markets or populations.

 Private Banks manage the assets of high net worth individuals.

 Offshore banks are banks located in jurisdictions with low taxation and
regulation. Many offshore banks are essentially private banks.
 Savings banks accept savings deposits.
 Postal savings banks are savings banks associated with national postal systems.

There are some examples of banks in India:-

 Private sector bank

• HDFC, ICICI, Axis bank, Yes bank, Kotak Mahindra bank, Bank of Rajasthan
 Rural bank
• United bank of India, Syndicate bank, National bank for agriculture and rural
development (NABARD)
 Commercial bank
 State Bank, Central Bank, Punjab National Bank, HSBC, ICICI, HDFC
etc.
 Retail bank
• BOB, PNB
 Universal bank
• Deutsche bank
Services provided by the bank

Banks provide two types of services

1. Fund Based
2. Non-Fund Based

BANKING IN INDIA

Banking in India originated in the first decade of 18th century with The General
Bank of India coming into existence in 1786. This was followed by Bank of Hindustan.
Both these banks are now defunct. The oldest bank in existence in India is the State Bank
of India being established as "The Bank of Bengal" in Calcutta in June 1806. A couple of
decades later, foreign banks like Credit Lyonnais started their Calcutta operations in the
1850s. At that point of time, Calcutta was the most active trading port, mainly due to the
trade of the British Empire, and due to which banking activity took roots there and
prospered. The first fully Indian owned bank was the Allahabad Bank, which was
established in 1865.

By the 1900s, the market expanded with the establishment of banks such as Punjab
National Bank, in 1895 in Lahore and Bank of India, in 1906, in Mumbai - both of which
were founded under private ownership. The Reserve Bank of India formally took on the
responsibility of regulating the Indian banking sector from 1935. After India's
independence in 1947, the Reserve Bank was nationalized and given broader powers.

HISTORY OF THE BANKING SECTOR

Banking in India originated in the last decades of the 18th century. The first banks were The
General Bank of India which started in 1786, and the Bank of Hindustan, both of which are
now defunct. The oldest bank in existence in India is the State Bank of India, which
originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank
of Bengal. This was one of the three presidency banks, the other two being the Bank of
Bombay and the Bank of Madras, all three of which were established under charters from the
British East India Company. For many years the Presidency banks acted as quasi-central
banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of
India, which, upon India's independence, became the State Bank of India.

Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a
consequence of the economic crisis of 1848-49. The Allahabad Bank, established in 1865 and
still functioning today, is the oldest Joint Stock bank in India. It was not the first though. That
honor belongs to the Bank of Upper India, which was established in 1863, and which
survived until 1913, when it failed, with some of its assets and liabilities being transferred to
the Alliance Bank of Simla.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire
d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862;
branches in Madras and Pondichery, then a French colony, followed. HSBC established itself
in Bengal in 1869. Calcutta was the most active trading port in India, mainly due to the trade
of the British Empire, and so became a banking center.

The Bank of Bengal, which later became the State Bank of India.

The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in
1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in
Lahore in 1895, which has survived to the present and is now one of the largest banks in
India.

The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi
movement. The Swadeshi movement inspired local businessmen and political figures to
found banks of and for the Indian community. A number of banks established then have
survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of
Baroda, Canara Bank and Central Bank of India.

The favour of Swadeshi movement lead to establishing of many private banks in Dakshina
Kannada and Udupi district which were unified earlier and known by the name South
Canara ( South Kanara ) district. Four nationalized banks started in this district and also a
leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle
of Indian Banking".

The State Bank of India (SBI) is the oldest and largest bank in the country. Its origins go
back to the first decade of the 19th century, when the Bank of Calcutta was established on 2
June 1806. The bank got its present name after an Act of Parliament in May 1955 and the
State Bank of India was constituted on 1 July 1955. Today, SBI has a phenomenal 9,559
branches and its ATM network is spread across 6,473 of its own locations& total 8,000ATMs
including of those of its associate banks.
State Bank of India is a successor to Imperial • Bank of India, which was established in
1921.The bank, came into being on 1.7.1955 through • the State Bank of India Act, 1955.
States of India joined the State Bank Group, as subsidiaries under the State Bank of India
(Subsidiaries Banks) Act, 1959.

EMERGING TRENDS IN BANKING SECTOR

The liberalization process initiated by the government about a decade ago has changed the
landscape of several sectors of the Indian economy. The financial sector like other sectors is
also going through major changes as a consequence of economic reforms. The consumption-
led boom in India has fuelled robust demand for financial products especially in the banking
domain. Emerging competition has generated new expectations from existing and new
customers. There is an urgent need to introduce new and more attractive customer-friendly
products and services. The banking sector presently is at an inflexion point. Existing products
need to be delivered in an innovative and cost-effective manner by taking full advantage of
emerging technologies. Technology has swiftly become a business driver rather than a
business enabler. This sector has seen phenomenal growth in terms of technology infusion
and adoption in the recent past such as: Internet and Mobile Banking, CRM, etc. With
increasing competition and tightening of prudential norms by the Reserve Bank, the players
in the banking industry, both Indian and global are taking turns towards mergers and
acquisitions. Only banks having adequate infrastructure, technology, economies of scale and
well connected network of branches will be able to survive and meet the challenges of ever
increasing competition and customer expectations. The book is divided into two sections.
Section-I extensively covers the trends, issues and challenges related to the technology i.e.
ATMs, e-banking, data warehousing and data mining, CRM solutions, etc. Section-II covers
other contemporary issues in the banking sector such as Basel II, financial inclusion, service
quality, risk management, banc assurance, retail banking, universal banking etc. The book
shall serve as a rich reference resource for decision makers in the banking industry,
researchers, academicians and students.

The traditional distinctions between banking and other financial services like insurance on
one side; and between commercial banking, developmental banking and investment banking
are getting blurred. The emergence of universal banking and banc assurance are clearly
pointers. This global convergence of financial services may gather further momentum in the
years to come. The banking and insurance sector reforms have encouraged private sector
players to make forays into the business in collaboration with major international companies.

This new scenario will witness financially sound and experienced players transforming the
industry with best practices in product development, operational efficiency, marketing
capability, service focus, and tech savy orientation. Thus there is a need for intensive,
futuristic and career oriented programs in these two areas: Banking and Insurance. These
developments in Banking and Insurance industry call for competent and professionally
trained managers",

Increasing competition, thinner spreads and introduction of new technology driven products
are some of the trends that the Indian banking system is experiencing. "Recent trends in
Indian banking have reflected the efforts of the major players to adapt to a rapidly liberalizing
and globalizing environment.

While the impact of these changes is possibly a subject of debate, there is one group which is
not complaining the customers, the beneficiaries of the process of liberalization," observed
Amitabh Guha, State Bank of Travancore.

Further, the technology oriented banking has become one of the latest mantras of success in
the market, especially to win over the customers.

To this, says SBI Chairman AK Purwar, "Indian banks need to fuel the market by bringing
new products at par with the international standards, extending ATM facility to rural areas
and vibrant networking countrywide to compete with the new generation and the MNC banks
in India"

As T.S. Anantharaman, Financial Analyst, mentioned, "The savings and investments scenario
in our country has undergone total change in the past decade, since the country embarked on
a course of liberalization and globalization of its economy

With the increasing sophistication of our economy, the variety and type of investments
options available to us today have multiplied. Also, with the economy getting more and more
integrated with the world economy, rapid changes in the options, instruments, rate of return
etc. have become the order of the day." Such a change is visible in respect of shares, mutual
funds, fixed income, bank deposits, life insurance, pension plans etc. since change and
innovation is involved in this process, and one can legitimately expect an exciting and
lucrative career scenario in the banking, finance and insurance sector.

CUSTOMER SATISFACTION

Customer satisfaction, a business term, is a measure of how products and services supplied
by a company meet or surpass customer expectation. It is seen as a key performance indicator
within business and is part of the four perspectives of a Balanced Scorecard.

In a competitive marketplace where businesses compete for customers, customer satisfaction

is seen as a key differentiator and increasingly has become a key element of business
strategy.

Organizations need to retain existing customers while targeting non-customers; Measuring

customer satisfaction provides an indication of how successful the organization is at
providing products and/or services to the marketplace.

Customer satisfaction is an abstract concept and the actual manifestation of the state of
satisfaction will vary from person to person and product/service to product/service. The state
of satisfaction depends on a number of both psychological and physical variables which
correlate with satisfaction behaviors such as return and recommend rate. The level of
satisfaction can also vary depending on other factors the customer, such as other products
against which the customer can compare the organization's products.
Satisfaction with banking services is an area of growing interest to researchers and managers.
The commercial banking industry like many other financial service industries is facing
rapidly changing market. New technologies, economic uncertainties, fierce competition and
more demanding customers and the changing climate have presented an unprecedented set of
challenges. Intangible assets, particularly brands and customers, are critical to any
organization and in today’s competitive environment relationship marketing is critical to
banking corporate success.

Banking is a customer oriented services industry. As we know that customer is the king
therefore customer is the main focus and customer service is the differentiating factor. Banks
have also started realizing that business depends on client service and the satisfaction of the
customer and this is compelling them to improve customer service and build relationship with
customers. With the current change in the functional orientation of banks, the purpose of
banking being redefined. The main driver of this change is changing customer needs and
expectations. Customers look for a relationship with bank when they receive benefits from its
services.

The banking industry like many other financial service industries is facing a rapidly changing
market, new technologies, economic uncertainties, fierce competition and more demanding
customers and the changing climate has presented an unprecedented set of challenges .

The banking industry in India has undergone dramatic change post independence. Banks have
also starts realizing that business depends on client service and the satisfaction of the
customer and this is compelling them to improve customer service and build relationship with
customers.

With the current changes in the functional orientation of banks, the purpose of banking is
being redefined. The main driver of this change is changing customer needs and expectations.
Customers In urban India no longer want to wait in long queues and spend hours in banking
transactions. This change in customer attitude has gone hand in hand with the developments
of ATMs, phone and net banking along with availability of service right at the customer
doorstep. Further the world class banking experience provided by private and multinational
banks with their ever evolving products and services has raised the bar of customer
expectations. With the emergence of universal banking, banks aim to provide all banking
products and service offering under one roof and their Endeavour is to be customer centric.
The Indian banking industry is also embracing technology rapidly. Big players among the
private and public sector banks are reengineering and automating their core banking
processes.

RURAL BANKING

Rural banking in India started since the establishment of banking sector in India. Rural Banks
in those days mainly focused upon the agro sector. The Haryana State Cooperative Apex
Bank Ltd. commonly called as HARCOBANK plays a vital role in rural banking in the
economy of Haryana State and has been providing aids and financing farmers, rural artisans,
agricultural laborers, entrepreneurs, etc. in the state and giving service to its depositors.
National Bank for Agriculture and Rural Development (NABARD) is a development bank in
the sector of Regional Rural Banks in India. It provides and regulates credit and gives service
for the promotion and development of rural sectors mainly agriculture, small scale industries,
cottage and village industries, handicrafts.

FOREIGN BANKS IN INDIA

Foreign Banks in India always brought an explanation about the prompt services to
customers. After the set up foreign banks in India, the banking sector in India also become
competitive and accusative. New policies are introduced by RBI for them–The policy
conveys that foreign banks in India may not acquire Indian ones (except for weak banks
identified by the RBI, on its terms) and their Indian subsidiaries will not be able to open
branches freely, Main competitors for banking sector. Post offices, Mutual fund, Share
market, Insurance, Money lenders, Family and friends, Present scenario banking industry has
been undergoing a rapid transformation, Banks today are market driven and market
responsive. With the entry of new players and multiple channels, customers (both corporate
and retail) have become more discerning and less "loyal" to banks. This makes it imperative
that banks provide best possible products and services to ensure customer satisfaction. They
have been managing a world of information about customers - their profiles, location, needs,
requirements, cash positions, etc. Furthermore, banks have very strong in-house research and
market intelligence units in order to face the future challenges of competition, especially
customer retention.

They are focusing on region-specific campaigns rather than national media campaigns as
effective strategy for a diverse country like India. Customer-centricity also implies increasing
investment in technology. Apart from the Mobile Banking, including of SMS Banking, Net
Banking and ATMs are the major steps taken by the banks in India towards modernization.
Services given by banks D-mat account, Lockers, Cash management Insurance product,
Mutual fund product, Loans, ECS (Electronic clearance system) Taxes.
NATIONALIZATION OF BANKING SECTOR-

The nationalization of banks in India took place in 1969 by Mrs. Indira Gandhi the then
prime minister. It nationalized 14 banks then. These banks were mostly owned by
businessmen and even managed by them. Central Bank of India, Bank of Maharashtra, Dena
Bank Punjab National Bank Syndicate Bank, Canara Bank Indian Bank Indian Overseas
Bank, bank of Baroda, Union Bank, Allahabad Bank United Bank of India UCO Bank.
After that Banks have introduced many more products and facilities in the banking sector in
its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set
up by his name which worked for the liberalization of banking practices. The country is
flooded with foreign banks and their ATM stations. Efforts are being put to give a
satisfactory service to customers. Phone banking and Net banking is introduced. The entire
system became more convenient and swift. Time is given more importance than money.

UPCOMING FOREIGN BANKS IN INDIA

By 2009 few more names is going to be added in the list of foreign banks in India. This is as
an aftermath of the sudden interest shown by Reserve Bank of India paving roadmap for
foreign banks in India greater freedom in India. Among them is the world's best private bank
by Euro Money magazine, Switzerland's UBS. The following are the list of foreign banks
going to set up business in India:-
•Royal Bank of Scotland
•Switzerland's UBS
•US-based GE Capital
•Credit Suisse Group
•Industrial and Commercial Bank of China

OBJECTIVES OF THE STUDY

 To study broad outline of management of credit, market and operational risks

associated with banking sector.
 To understand the importance of banking sector.
 To study the Indian bank scenario and its problem.
 Long Term and Short Term Finances.
 To study the role of bank in Indian Market.
 Different types of services provided by the banks.
 To study various bank, Corporate and Commercial.
 To study the Indian bank scenario and its problem.
 Though the Indian Banking System is very wide and elaborated, still the project
covers whole subject in concise manner.
 The study aims at learning the techniques involved to manage the various types of
Banks, various methodologies undertaken.
 To offer suggestions based upon the findings.

SCOPE OF THE STUDY

 A healthy banking system is essential for any economy striving to achieve good
growth and yet remain stable in an increasingly global business environment.
The Indian banking system, with one of the largest banking networks in the
world, has witnessed a series of reforms over the past few years like the
deregulation of interest rates, dilution of the government stake in public sector
banks (PSBs), and the increased participation of private sector banks. The
growth of the retail financial services sector has been a key development on the
market front. Indian banks (both public and private) have not only been keen to
tap the domestic market but also to compete in the global market place.
 Studying the increasing business scope of the bank.
 Market segmentation to find the potential customers for the bank.
  Customers’ perception on the various products of the bank.
 The corporate sector has stepped up its demand for credit to fund its expansion
plans; there has also been a growth in retail banking.
 The report seeks to present a comprehensive picture of the various types of
bank. The banks can be broadly classified into two categories:-

1. Nationalized Bank
2. Private Bank

 Within each of these broad groups, an attempt has been made to cover as
comprehensively as possible, under the various sub-groups.

LIMITATION OF THE STUDY:

Every work has its own limitation. Limitations are extent to which the process should not
exceed. Limitations of this project are:-

 The project was constrained by time limit of two months.

 The major limitation of this study shall be data availability as the data is proprietary
and not readily shared for dissemination.
 Due to the ongoing process of globalization and increasing competition, no one model
or method will suffice over a long period of time and constant up gradation will be
required. As such the project can be considered as an overview of the various banks
prevailing in Punjab National Bank and in the Banking Industry.
 Each bank, in conforming to the RBI guidelines, may develop its own methods for
measuring and managing risk.
 The project study is restricted to banking sector used in India only.
 The conclusion made is based on a sample study and does not apply to all the
 Individuals.
 In India the banks are being segregated in different groups. Each group has their own
benefits and limitations in operating in India.
 CHAPTER-II
REVIEW OF LITERATURE
1. Dannenberg and Kellner (1998), in their study, overviewed the opportunities for
effective utilization of the Internet with regard to the banking industry. The authors
evaluated that appropriate application of today’s cutting edge technology could
ensure the success of banks in the competitive market. They evaluated the services
of banks via internet as websites provide sophisticated line of products and services
at low price. The authors analyzed that transactions via internet reduce the risk of
data loss to customers, chance to cut down expenses, higher flexibility for bank
employees, re-shaping the banks’ image into an innovative and technologically
leading institutes, etc. The researchers found that banks could move one step further
by entering into a strategic alliance with internet service provider. So, the bank of
tomorrow stands to be feasible with today’s technology.
2. Daniel (1999), in his research paper, described e-banking as the newest delivery
channel offered by the retail banks in many developing countries. The objective of
the study was to analyze the current provision of electronic services of major retail
banking organizations in the UK. The researcher through a questionnaire found that
25% banks in the UK were those already providing e-banking services, 50% banks
were testing or developing such services while 25% were not providing any e-
banking services.
3. Electronic channels, PC, digital TV and all these provide greater accessibility and
services at lower price. To make services more adaptable, customers should be
provided maximum choice and convenience. Restriction and limitation within
organization to operate the services and its market share or strength were viewed as
important to decide and operate the e-banking services.
4. Wenninger (2000) evaluated the emerging role of electronic commerce in banks’-
commerce had created new form of competition and compelled banks to make
choices about the services they offer, the size of their branch network and extent of
their support to inter- bank payments network. The main objective of the study was
to understand the changes that had taken place with the introduction of electronic
commerce. Development of e-banking products such as electronic billing,
establishing internet portals, electronic checks, ATM, etc. had provided additional
services to customers’. The author also emphasized upon the strategic and
 operational risks which arise in banking sector. These could be minimized with a
cost efficient electronic process.
5. Kamesam (2001) studied the changes that took place in the Indian banking industry
which emphasized on technological advancements and profitability in banks.
Technology has helped in centralized data storage with decentralized processing
which has helped in reduction of costs and NPAs. Further, emergence of services
such as electronic data interchange (EDI), usage of smart cards, RTGS, e-
commerce; all resulted in increasing the level of profitability and productivity of
banks. The author concluded that in order to reduce crimes, security audit should be
done which will be helpful in improving customer service, increase systematic
efficiency and thus increased productivity and profitability.
6. Unninthan (2001) described the impact of e-banking adaptation on Australian and
Indian banking sectors with the help of qualitative and quantitative analysis. The
researcher found that Australia had a strong platform for e-banking growth with
37.7 percent of population willing to engage in e-banking mostly in urban areas due
to literate young working population with discretionary income. However, India by
comparison was played by weak infrastructure, low PC penetration and consumer
reluctance in rural sector. But the professionals are compelling the government and
bureaucracy in the country to support and develop new initiatives at a faster speed
of internet banking. However, in both the countries, e-banking was a successful
strategic weapon for banks tore main profitable in a volatile and competitive market
place
7. Yakhlef (2001) evaluated the services provided through internet and website. The
researcher explored the major services of Swedish banks provided via internet. The
objective of the study was to see whether internet banking services were
compliment or competitive to brick and mortar bank branches. The results of the
study indicated that although internet banking provided more safe, convenient and
efficient services to the customers, yet as far as personal contact and direct
information was concerned, brick and mortar was more preferable than internet.
Internet has reduced number of branches of banks, added value to the customers,
attracted new customers and developed more customized services but at the same
time it also requires huge investment, infrastructure and trained employees of bank.
So, internet was not a substitute rather compliment of brick and mortar concept.
8. Aki (2002) highlighted the impact of technology in banking sector. New
technologies cannot replace the branch network but these can support old methods
of delivering the services. The author evaluated the structural change in Finnish
banking sector from the period 1993 to 2002 which showed that 42 per cent of
households have internet connection with banks and 90 per cent have mobile
banking services. ICT hashed both inter-spectral and intra-sectoral impact. The
author concluded that main goals of management of technology were to improve
customer satisfaction, reduce cost and develop new methods to collect and analyze
the customer information.
9. Alu et al. (2002) reviewed that information technology was rapidly changing the
banking industry. The study evaluated the impact of IT on the banking industry in
Nigeria. The analysis was done through a structured questionnaire and out of
260respondents, 86 per cent agreed that IT was really helping the banks, 83.1 per
cent agreed that IT had a great positive impact on services rendered by the banks
and 66.5 per cent disagreed that IT had an effect on services rendered by the banks.
The study revealed that IT had appreciable effect on banks’ productivity, cashier’s
work, banking transactions, bank patronage, bank service delivery and customers’
services. This affects the growth of banking industry because now customers can
withdraw money from any branch of their bank. The study also revealed that
telephones, computer systems, LANs were available and being used by all the
banks, while WANs, EFT and wireless phones were available in some of the banks.
To make an effective use of e-banking, there should be adequate supply of power
and that’s the major deterrent of e-banking technique used in Nigeria.
10. Gurau (2002) analyzed the situation of online banking in USA and Europe. The
author described that there were more than 1500 websites of banks all over the
world. Most of banks in USA had internet presence, while in Europe, most of
banking websites were from UK, Germany, Spain, Italy and France. The author also
found that in 2005,distribution channels used by banks included 10 per cent internet
banking, 65 per centmulti-channel,10 per cent telephone banking and 15 per cent
through bank branches, whereas in 1998, it was only 15 per cent direct banking and
85 per cent in branch banking. The author concluded that successful introduction of
e-banking services proved to be a complex operation which requires the
harmonization of all interacting elements of economic and financial system.
11. Durkin and Howcroft (2003) evaluated that the banker-customer relationship was
improved through mobile, phone and internet banking. The authors found that new
technology has made the banks very competitive and profitable and internet has
played a key role in it. Perception of bankers and customers regarding the use of
internet was examined. They pointed out that as consumer usage of remote bank
delivery channels increases, relationship management will become more important.
Further, the combination of traditional and new delivery channels, if followed, can
help to improve their productivity and profitability.
12. Joseph and Stone (2003), in their paper, explored that customer friendly
technology such as ATM, internet banking and telephone banking has been used by
the banks to reduce the cost of providing services, and to increase the customer
loyalty and market share. Technology plays a vital role in delivery of banking
service. The study highlighted that access, location, security and ease of use of
ATM machines appears to be the most important component for banking customers
for the adoption of e-banking.
13. However, banks should emphasize more on providing speedy and efficient service
to the customers. Further, bank managers should conduct periodic marketing studies
to understand the level of technological services by the customers so that adequate
service could be delivered at the right time.
14. Lustik (2003) analyzed the main criteria for successful inter-bank strategy and
brought out benefits of e-banking from the viewpoint of banks, their clients and the
economy in general. The author explained that banks in Estonia had achieved
significant success in the implementation of electronic banking. The findings of the
paper were helpful to understand the main reasons and factors responsible for the
rapid growth of electronic banking. The author further revealed that making
payment via e-banking creates overall economy savings to the amount of 0.93 per
cent of GDP. Electronic banking was not a small application to computer fans and
innovative adopters, and a profound research was needed to map its customer base
for the enhancement of value creation process.
15. Mattila et al. (2003) evaluated the electronic banking adoption in Finland. The
study showed that the proportion of people in Finland, who have adopted online
banking, was higher than anywhere else in the world. All the Finnish banks offered
a full range of internet banking services. The researchers also found that different
people have different attitude towards new technology. Some were innovators, who
 were interested in new technology and positive towards it. Some were early
adopters and some were late adopters who have negative attitude towards it.
Laggards had extremely negative attitude towards it. The study also found that
matured customers were late adopters of internet banking. However, expensive start
up, security and lack of personal service were main hindrances in the use of
electronic banking. The study brought out that most customers
16. Sureshchander and Rajendran (2003), in their paper, focused on investigating the
important factors of customers’ perceived quality in banks of developing economy
like India. The authors had taken 15 public sector banks, 14 private banks and 14
foreign banks for the period under study. The researchers found that there seems to
be a great variation in respect of services offered by three groups of banks. They
used core services such as human element, systemization of services, tangibility of
services and social responsibility as critical factors. They analyzed that three groups
of banks in India seem to vary significantly in terms of service quality factors but
from the customer perception of service quality, it could be acceptable only if
customers’ need could be satisfied at the right time in a right manner.
17. Yu and Boon (2003), in their study, examined the implications of technological
advances in the banking sector in Malaysia. An empirical study was made through
structured questionnaire. The results highlighted that electronic channels provide
alternatives for faster delivery of banking services to the customers. They described
that prior to adoption of electronic channels like ATMs, kiosks, internet banking;
investment costs must be identified to ensure a more cost-effective and efficient
execution of echannelservices. The authors analyzed the commercial banks in
Malaysia via frequency analysis and factor analysis. The results of the study
indicated that banks’ operation management was the main factor affecting the
success of ATMs, PC and branch banking, while product innovation and knowledge
development factors were found to have most significant effect on the success of
banking kiosks and phone banking respectively.
18. Lustik (2004), in his study, tried to assess the profitability of electronic banking
services for the banks. In order to analyze the cost structure for traditional and
electronic channel transactions, the author explored the implementation techniques
of activity based costing (ABC). The results of the study indicated that electronic
channels provide cost saving for banks and their clients. The study revealed that
with help of ABC technique, banks can reduce and regulate some costs. It was also
 found that the decrease in transaction costs after introduction of electronic channels
was slower than expected as existing traditional channels could not be closed at the
same speed as the new electronic channels were introduced.
19. Lympero and Chaniotakir (2004) evaluated the implication of e-banking adoption
through a survey of the branch employees’ perception. The researchers framed
questionnaire of 527 branch employees and analyzed the existence of four distinct
factors which were hard advantages, soft advantages, market effects and risks. The
authors selected 17 commercial banks for the study. They highlighted the
advantages which influence the employees feel easy to adopt e-banking, i.e., cost
alienation, customers service and foreign competition. They focused that branch
employees ‘perception toward e- banking depends upon their position in branch
hierarchy, qualification, employers’ size and type of ownership. So, in order to
facilitate the promotion of e-banking services, bank managers should make
systematic efforts in exploiting internet marketing processes such as continuous
education, flawless information and an attempt to minimize negative perception.
20. Suleiman et al. (2005) studied the impact of E-banking on Malaysian banking
sector. The study aimed at providing an overview of E-banking adoption in
Malaysia.ut of 53.9 per cent, who used e-banking, 85 per cent used it for savings
bank facility,55.8 per cent for current account facility, 37 per cent for bill payment,
35.3 per cent for visa /master card and 30.8 per cent used for third party transfer.
The researchers analyzed websites of the banks in order to know the impact of e-
banking. Evaluation of websites contained 32 elements, and a survey was conducted
to obtained customers’ perspective of e-banking. The researchers overviewed that
results of the study cannot be generalized to the general population. Nevertheless,
the results provide a fair indication of what services e-banking users find useful and
which group of customers were likely to use the services more.
21. Heng Michael et al. (2006) analyzed the impact of e-banking on brick and mortar
banks through innovation model. The researchers’ analyzed 8 core capabilities to
assist the banks migrated to e-banking environment. Their capabilities fall into two
groups relating to configuration of existing business model. They suggested that
banks need to develop uniquely innovative services and products on the one hand
and innovative business model that changes the way banks operate on the other.
They concluded that eight core capabilities (technical dynamic capabilities and
 business dynamic capabilities)provided a blue print for sustaining a bank’s ability to
exploit e-banking.
22. Siam (2006) evaluated the effects of electronic banking on the profitability of
Jordanian banks. The study investigated the reasons behind providing electronic
banking services through internet, their impact on banking services in general, and
banks profitability in particular. The results of the study revealed that electronic
banking services had a negative impact on the profitability of banks in the short run
because of increased capital costs involved in technical and electronic infrastructure,
cost of training to employees and also the cost involved in creation of environment
where the banks can operate smoothly. However, these services had a positive
impact in the long run on the profitability of banks. The researcher recommended
that banks need to carryout awareness and promotion campaigns to educate clients
and aware them of feasibility through reduced time, cost, effort and also to hold
training courses for employees to understand the e-banking business strategies.
23. Manoharan (2007) highlighted the e-payment system in India and its performance
impact on Indian banking sector. The author described that competition in banking
industry had forced the banks to rethink the way they operate their business. E-
banking has made it possible to find alternate banking practices. In the paper, the
author divided the payment system in India into three parts, i.e., large value
payment system, retail payment system, and retail electronic system. Each one
includes different categories of e-payment. The author studied the performance of
various Indian payment stems in the last three years in which RTGS emerged as the
principal payment system In India for wholesale payment. The study focused that
having a huge opportunity of epaymentsystem in India still 90 per cent of
transactions were cash based. So, an effort should be made to increase the use of e-
payment, and RBI should make efforts to strengthen the legal framework of
electronic banking system
24. .Ramani (2007) studied the impact of e-payment system on Indian banking sector.
E-payment was required for handling large volume of business payment and
remittances for hassle free, quicker and faster payment remittances at low cost, and
paperless transactions. The researcher highlighted various steps taken by RBI for
the epayment.It includes RTGS, deferred net settlement system such as electronic
clearing services debit and credit, electronic fund transfer and NEFT. The researcher
studied that these methods had increased the use of core banking solutions, data
 warehousing and data mining. E-payment had reduced the chances of fraud,
improved customer service by cutting the delay in payment obligation.
25. Singh and Malhotra (2007) made an attempt to discover factors affecting a bank’s
decision to adopt internet banking in India. The study was based on 88 banks
comprising of public, private and foreign banks covering financial years from 1997
to2005. The results of the study showed that large banks having high fixed
expenses, high income and expenditure tend to use more technology. Banks had
used internet banking as complementary channel to existing branch network.
However, the private and foreign banks were quick adopter to internet banking than
public sector banks. The adoption of this innovation by other banks increases the
probability that a decision to adapt will remade as it has increased the profitability
and productivity of banks.
26. Kautish (2008) described the paradigm shift of banking sector from traditional
banking to online banking. The objective of the paper was to discuss the derivation
of value added tool of online banking system which was used to attract new
customers and retain the existing ones. It helped the banks to acquire more business
from existing customers. People preferred to use online banking because of its
availability, better performance, ubiquity, speed and its effectiveness. Further, the
author discussed two bank models integrated banking model where the banks
provide internet banking services as an extension to their basic services like ATM
and phone banking. So, it is a kind of hybrid approach and the other was stand alone
internet banking model, wher
27. Suresh (2008) highlighted that recently developed e-banking technology had
created unpredicted opportunities for the banks to organize their financial products,
profits, service delivery and marketing. The objectives of the study were to evaluate
the difference between traditional and e-banking, and to identify the core
capabilities for Thebes’s use of e-banking. The author analyzed that e-banking will
be an innovation if it preserved both business model and technology knowledge, and
disruptive if it destroys both the model and knowledge. He also differentiated e-
banking from traditional banking in five ways, namely, value proportion, market
scope, cost structure, profit potential and value network. However, in order to
exploit technical and business capabilities of ebanking, banks should generate more
customers inside and outside India so that more revenues could be generated that
lead to better future of Indian economy.
28. Al-Eisa and Alhemoud (2009) studied the most important attributes that influence
customer satisfaction with retail banks in Kuwait. They also measured the level of
overall satisfaction of the customers of the sample banks. The multipleattribute
approach was applied in the analysis of data. A convenient sample was selected
from customers of retail banks in Kuwait. They observe that the most important
factors for predicting customer satisfaction with retail banks in Kuwait are fast
service, availability of self-banking services and courtesy and helpfulness of
employees
29. Herington and Weaven (2009) analysed the factors affecting customer satisfaction
for e-retail banking in Australia. A survey was conducted among the regular users
of online banking by selecting a convenience sample. The factors for customer
satisfaction were ascertained by factor analysis and regression analysis. He
identifies that personal need of the customer, website organization, user-friendliness
of the websites and efficiency as important factors contributing to the satisfaction of
customers.
30. Kanning and Bergmann (2009) studied the “Factors affecting customer
satisfaction in the German retail banking sector”. By applying the field study
method they identified the factors affecting customer satisfaction. They identify
Performance of banks and fulfilment of customer expectations as the major factors
which affect customer satisfaction.
31. Mohammed Hossain and Shirley Leo (2009) in their study find that the perception
of customers changes in accordance with the nature of service. They view that in
this competitive environment, all banks are offering the same or similar products
and the only factor to differentiate them is the service quality. Thus retail banks
must ensure better service to their customers to become successful Pankaj Kumar
(2009) in his article “Customer relationship management in retail banking”
highlights that Customer relationship management is especially useful for large
banks like SBI which are spread across different locations. For CRM to be truly
effective, it requires a well thought out initiative involving strategy, people,
technology and process.
32. Bhaskaran (2010) in the article “Impact of financial crisis on banks in India” views
that the impact of financial crisis is more on private sector banks. Nonperforming
assets have increased in all banking sectors. The increase in NPA preceded the
financial crisis and coincided with the retail boom.
33. Aparna Mishra and Kamini Tandon (2011)who studied “Customer centric
approach towards retail banking services” find that the important factor affecting
customer satisfaction in retail banking is service quality. The customer retention can
be ensured only through the quality of service provided by the banks.
34. Dhara Kothari (2011) views that retail banking offers vast opportunities for growth
and at the same time has challenges which are discouraging. The success of retail
banking depends on the ability of banks to make use of these challenges and
opportunities profitably. The efficiency of operations and use of technology would
provide the competitive strength for success in retail banking.
35. Dilip Kumar and Durga Sankar (2011) compare the performances of new
generation banks in India. During the periods of slow- down in the growth of credit,
the private sector banks have been able to perform better on account of the retail
lending. The competition in the field is very high and the customers are benefitted
Review of Literature 33 by it in the form of better service quality, product
innovations and better bargains. The retail segment has tremendous growth.
36. Ganguli and Roy (2011) also studied the “Factors affecting customer satisfaction in
the Indian retail banking sector”. The factors affecting customer satisfaction were
identified through factor analysis. Their study also shows that the important factors
affecting customer satisfaction are customer service and technology usage, easiness
and reliability.
37. Gupta and Meera (2011) in their study on “Indian banks and Basel II norms” find
that the capital adequacy and risk structure of the banks have improved as a result of
Basel II regulations. The NPA of all banks have declined. The capital adequacy
ratio of banks has increased as a result of capital regulations which in turn lead to
decrease in NPA.
38. Kajal Chaudhary and Monika Sharma (2011) in their article “Performance of
Indian public sector banks and private sector banks: a comparative study” suggests
that banks should take adequate measures to escape from NPA problem. Proper
training should be given in documentation and creation of charge of securities to the
staff involved in loan sanctioning. Care should be exercised in the selection of
borrowers and projects
39. Kalpesh (2011) in his comparative study of financial performance of Indian banks
points out that efficiency and stability of the banking system in India is impacted by
 the reform measures. The profitability and liquidity of both public and private sector
banks have also improved a lot.
40. Siddeshwar and Pradeep (2011) make an interesting observation regarding home
loans. They point out that home loans are beneficial to the banks due to various
reasons. Banks earn huge amount of interest income through home loans. House
loans are sanctioned against most secured asset compared to most other loans. Since
the dream home of the individual is mortgaged for the home loan, the borrower pays
the installments timely, and hence there is little or no chance of such a loan
becoming bad and non-performing asset for the bank.
41. Syed Ibrahim (2011) in his study states that Indian scheduled commercial banks
have improved their operational performance since 2000. There is constant increase
in aggregate deposits. The C-D ratio also shows an increasing trend. The investment
deposit ratio and priority sector advances have also gone up.
42. Uppal (2011) in his study states that as e-channels provide time and cost utility,
customers prefer them. His stance is that public sector banks have least growth in
terms of number of customers. The financial productivity index has decreased in
new private sector banks. The productivity index of employees, branch and bank is
increased in all bank groups.
43. Aashish Shashikant Jani (2012) in his comparative study on the use of technology
in retail banking among public and private sector banks argues that echannels are
preferred by customers because of cost and time utility. Her suggestion is that in this
era of information technology, the public sector banks have to introduce more
technology based products and services to compete with other bank groups
especially new generation banks.
44. Nishit (2012) in her comparative study on private sector banks in India analysed the
performance of six major private sector banks during the period 2008- 09 to 2009-
10. She found that profit maximisation and wealth maximisation are the main
concern for banks. The private sector banks play an important role in the economic
development of the country. The study also contains the profitability Review of
Literature 36 analysis of the sample banks which can be used as a basis for
investment decision by the investors. Examining the macro trends of retail credit in
India,
45. Dinabandhu Bag (2012) observes that the personal credit has increased many times
in India since 1996. But this increase is not significant when compared to the
 increase in per capita income and per household income in India. The demand for
retail credit has increased as a result of the increased employment generation in the
organised sector. He further views that a large portion of households remain
unserved with retail credit and that the gap between retail credit and income is
increasing. Through better credit management tools the banks can improve the
credit eligibility and build a culture of credit.
46. Paritosh and Kavita (2012) in their research paper on “The impact of customer
satisfaction on retail banking” conclude that the ATM, internet and branch office are
the popular channels used by retail banking customers. The financial crisis has not
affected the trust and relationship of customers with their retail banks
47. Raghuwanshi (2012) in his article states that the Indian retail banking has wide
opportunities and challenges. The retail portfolio of banks is subject to frequent
change. Banks should constantly innovate in retail banking through product
diversification, technology up-gradation, cross selling etc.
48. Ashok Kumar (2013) in his study “Opportunities and challenges in the Indian retail
banking industry” concludes that for the development of retail banking in India, a
paradigm shift is required in bank financing through innovative products and
mechanisms involving constant up-gradation of the banks internal systems and
processes. Banks require product development and differentiation, innovation and
business process reengineering, micro-planning, marketing, prudent pricing,
customisation, technology up-gradation, electronic or mobile banking, cost
reduction and cross-selling for their development through retail lending. He says
that retail banking has more scope for generating profit than any other traditional
methods.
49. Phanindra and Parashuramulu (2013) in their article view that the Indian banks have
wide scope for operations but the important obstacle before them is the hard
regulations made by the apex body. The LPG measures have affected the banking
sector. Thus the participants in retail banking in India have to adopt a different
approach in designing products and services in order to retain the market share.
50. Sujatha S. And Arumugam N. (2013) in their study “Customer satisfaction in Indian
banking sector” view that before introducing various services to customers, banks
should take care of their needs. To serve customers with different occupations and
educational backgrounds banks should adopt strategies. There is a correlation
between the satisfaction of the customer and the performance of the banks. So it is
 important for banks to consider satisfaction of the customer as a
relationshipmarketing strategy.
51. Gokilamani, and Natarajan (2014) in their study opine that customers of Indian
commercial banks are positively responding to retail banking. It is important for
banks to focus on service quality for strengthening their competitive edge and to
allocate the limited resources to serve the personal banking division. They further
views that the success of a retail bank will depend on product innovation,
technological developments and strategies to retain the retail customers.

PROBLEMS: --
The corporate sector has stepped up its demand for credit to fund its expansion plans, there
has also been a growth in retail banking. However, even as the opportunities increase, there
are some issues and challenges that Indian banks will have to contend with if they are to
emerge successful in the medium to long term.

RESEARCH METHODOLOGY:-

The first stage included the introduction of Indian Banks and how they work in India.
I choose five criteria Growth, Credit quality, Strength, Profitability, Efficiency / Profitability.
The next stage involved determining the objectives of the study, drafting a questionnaire will
be designed keeping in mind the target audience and objectives of the study. It will non-
disguised in nature and will include a few open-ended questions.

DATA COLLECTIONS

The data from such organization has also been collected.

PRIMARY DATA

The primary data will be collected through the questionnaire designed. In the process of data
collection we went to the respective bank to get the questionnaire filled. The preparation of
the project report required me to visit the various other companies like Punjab National Bank,
ICICI bank, State Bank of India, Central Bank, IDBI bank etc. in order to collect data.

SECONDARY DATA
 The Preparation of the project report also required data from various journals,
newspapers ( like The Economic Times, Times of India etc.) books

SCOPE OF BANKING SECTOR

Banking business has a history of over 200 years. From the times of the Bank of
Bengal (1806) the sector has been witnessing qualitative and quantitative changes. Main
players during the pre-independence period were Credit Lyonnais, Allahabad Bank,
Punjab National Bank and Bank of India.

With 1935 regulation the Reserve Bank of India was proclaimed the Central
Bank of India and was vested with controlling powers over the commercial banks.

With economic liberalization measures many private and foreign banking

companies were allowed to operate in the country. Favorable economic climate and a
variety of other factors such as demand for wide range of financial products from various
sections of the society led to mutually beneficial growth to the banking sector and
economic growth process.

This was coincided by technology development in the banking operations. Today most
of the Indian cities have networked banking facility as well as Internet banking facility.
A customer is empowered to operate his account from any part of the country. UTI Bank,
ICICI, HDFC Bank and Bank of Punjab are the main winners of the race.