INTRODUCTION

INTRODUCTION
A feature of the banking industry across the globe has been that it is increasingly becoming turbulent and competitive, characterized by an increasing trend towards internationalization, mergers, takeovers and consolidation of the banking industry. Moreover a number of nonbanking companies are entering the banking industry by offering financial products and services (e.g., oyota!s credit card, "M!s auto financing, etc#. his 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. hus 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 $uite inevitably, has been the internet %ith cyber caf&s and kiosks springing up in different cities access to the 'et is going to be easy. (nternet banking (also referred as e banking# is the latest in this series of technological wonders in the recent past involving use of (nternet for delivery of banking products ) services. *ven the Morgan +tanley ,ean %itter (nternet research emphasized that %eb is more important for retail financial services than for many other industries. (nternet banking is changing the banking industry and is having the ma-or effects on banking relationships. .anking is now no longer confined to the branches were one has to approach the branch in person, to withdraw cash or deposit a che$ue or re$uest a statement of accounts. (n true (nternet banking, any in$uiry or transaction is processed online without any reference to the branch (anywhere banking# at any time. /roviding (nternet banking is increasingly becoming a 0need to have0 than a 0nice to have0 service. he net banking, thus, now is more of a norm rather than an e1ception in many developed countries due to the fact that it is the cheapest way of providing banking services.

BANKING INDUSTRY PROFILE BANKING he word 0.A'30 is derived from the 4.ancus4 or 4.an$ue4, which means a bench. (n the early days the *uropean moneylenders and moneychangers used to sit on the benches and e1hibit coins of different countries in big heaps for the purpose of changing and lending money, 5 Definition: A .anking company is defined as a company, which transacts the business of banking in (ndia.

As per Bankin Re !"ation A#t $%&% Se#tion '()* 0.anking means, accepting for the purpose of lending or investment, of deposits of money from the public, repayable on demand or otherwise, and withdrawal by che$ue, draft, or otherwise.0

A##or+in to Sir ,o-n Pa et 0'o 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 che$ues, (d# collect che$ues, crossed and uncrossed, for his customers.0 (n 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. 0

FUNCTIONS OF BANKS

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Pri/ar0 F!n#tions (a# (b# Acceptance of deposits Making 7oans and Advances 7oans 8verdrafts 9ash 9redit ,iscounting of .ills of *1change

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Se#on+ar0 F!n#tions (a# Agency :unctions 9ollection of che$ues and bills etc 9ollection of interest and dividend Making payment on behalf of customers ./urchase and sale of securities. :acility of transfer of funds o act as trustee and e1ecutor

(b#

;tility :unctions +afe custody of customers valuable articles and securities. ;nderwriting facility (ssuing of raveller4s che$ue and letter of credit :acility of foreign e1change /roviding trade information /roviding information regarding credit worthiness of their customers.

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CLASSIFICATION ON BASIS OF O2NERS3IP

8n the basis of ownership banks are of the following types: $. PUBLIC SECTOR BANK /ublic sector banks are those banks that are owned by the "overnment. he "ovt. runs these .anks. (n (ndia 1< banks were nationalized in 1=>= ) in 1=?@ another > banks were also nationalized. herefore in 1=?@ the number of nationalized bank 2@. .ut at present there are = banks are nationalized. All these banks are belonging to public sector category. %elfare is their principle ob-ective. 1. PRI4ATE SECTOR BANKS hese banks are owned and run by the private sector. Aarious banks in the country such as (9(9( .ank, B,:9 .ank etc. An individual has control over there banks in preparation to the share of the banks held by him. 5. CO6OPERATI4E BANKS 9o-operative banks are those financial institutions. hey provide short term ) medium term4 loans to there members. 9o-operative banks are in every state in (ndia -(ts branches at district level are known as the central co-operative bank. he central co-operative bank in turn has its branches both in the urban ) rural areas. .*very state cooperative bank is an ape1 bank, which provides credit facilities to the central co-operative bank. (t mobilized financial resources from richer section of urb6n population by accepting deposit and creating the credit like commercial bank and borrowing from the money mkt. (t also gets funds from C.(.

INTRODUCTION TO INDIAN BANKING SECTOR

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INTRODUCTION .anking is the backbone of a modern economy. Bealth of banking industry is one of the most important pre-conditions for sustained economic progress of any country. he world of

banking has assumed a new dimension at the dawn of the 21 st century with the advent of tech banking, thereby lending the industry a stamp of universality. (n general, banking may be classified as retail and corporate banking. Cetail banking, which is designed to meet the re$uirements of individual customers and encourage their savings, includes payment of utility bills, consumer loans, credit cards, checking account balances, A Ms, transferring funds between accounts and the like. 9orporate banking, on the other hand, caters to the needs of corporate customers like bills discounting, opening letters of credit and managing cash. he (ndian banking scene has changed drastically with the private sector making inroads in an area hitherto dominated by large public sector banks. "rowing disinvestment is likely to impact the banking industry as well. here is every possibility of privatization of public sector banks, leading to greater operational autonomy. he development of the (ndian banking sector has been accompanied by the introduction of new norms such as (ncome Cecognition and 9apital Ade$uacy, by the government. he latter implies that banks can lend on the basis of their respective capital base. hese norms have

caused banks to construct e$uity on their own, before going in for debt. ,isintermediation is a real threat for banks. 8f late, banks are adopting the *AA (*conomic Aalue Added# concept wherein revenues are viewed in the conte1t of the risk associated with them. he 'ew %orld order has ensured 0+urvival of the :ittest0. 'ew services are the order of the day, in order to stay ahead in the rat race. .anks are now foraying into net banking, securities, consumer finance, housing finance, treasury market, merchant banking and insurance. E

BANKING STRUCTURE he (ndian banking industry, which has Ceserve .ank of (ndia as its regulatory authority, is a mi1 of the public sector, private sector, and foreign banks. he private sector banks are again split into old banks and new banks. SC3EDULED BANKS +cheduled commercial banks are those that come under the purview of the +econd +chedule of Ceserve .ank of (ndia (C.(# Act, 1=6<. he banks that are included under this

schedule are those that satisfy the criteria laid down vide section <2 (>@ of the Act#. +ome cooperative banks come under the category of scheduled commercial banks though not all cooperative banks.

PUBLIC SECTOR BANKS /ublic sector banks are those in which the "overnment of (ndia or the C.( is a ma-ority shareholder. hese banks include the +tate .ank of (ndia (+.(# and its subsidiaries, other

nationalized banks, and Cegional Cural .anks (CC.s#. 8ver E@F of the aggregate branches in (ndia are those of the public sector banks. +ome of the leading banks in this segment include Allahabad .ank, 9anara .ank, .ank of Maharashtra, 9entral .ank of (ndia, (ndian 8verseas .ank, +tate .ank of (ndia, +tate .ank of /atiala, +tate .ank of .ikaner and Gaipur, +tate .ank of ravancore, .ank of .aroda, .ank of (ndia, 8riental .ank of 9ommerce, ;98 .ank, ;nion .ank of (ndia, ,ena .ank and 9orporation .ank.

PRI4ATE SECTOR BANKS /rivate .anks are essentially comprised of :our types5 the old and the new. he old

private sector banks comprise those, which were operating before .anking 'ationalization Act was passed in 1=>=. 8n account of their small size, and regional operations, these banks were not nationalized. hese banks face intense rivalry from the new private banks and the foreign banks. he banks that are included in this segment include5 .ank of Madura 7td. (now a part of A77ABA.A, .ank#, .harat 8verseas .ank 7td., .ank of Ca-asthan, 3arnataka .ank 7td., 7ord 3rishna .ank 7td., he 9atholic +yrian .ank 7td., he ,hanalakshmi .ank 7td., he

:ederal .ank 7td., he Gammu ) 3ashmir .ank 7td., he 3arur Aysya .ank 7td., he 7akshmi Ailas .ank 7td., he 'edungadi .ank 7td. and Aysya .ank. he new private sector banks were established when the .anking Cegulation Act was amended in 1==6. :inancial institutions promoted several of these banks. After the initial licenses, the C.( has granted no more licenses. hese banks are gearing up to face the foreign banks by focusing on service and technology. 9urrently, these banks are on an e1pansion spree, spreading into semi-urban areas and satellite towns. he leading banks that are included in this segment include .ank of /un-ab 7td., rust .ank 7td., B,:9 .ank 7td., A77ABA.A, .anking

9enturion .ank 7td., "lobal

9orporation 7td., (,.( .ank 7td., (ndus(nd .ank 7td. and A1is .ank 7td. FOREIGN BANKS he operations of foreign banks, though similar to that of other commercial (ndian banks, are mainly confined to metropolitan areas. :oray of foreign banks depends on reciprocity, economic and political bilateral relations. An inter-departmental committee has been set up to endorse applications for entry and e1pansion. :oreign banks, in the wake of the liberalization era, are looking to e1pand and diversify. +ome of the leading foreign banks that operate in (ndia =

are 9itibank, +tandard 9hartered "rindlays .ank, Bong 3ong +hanghai .anking 9orporation, .ank of America, ,eutsche .ank, ,evelopment .ank of +ingapore and .an$ue 'ational ,e /aris. PUBLIC SECTOR BANKING AT A DISADVANTAGE :unctioning of /ublic +ector .anks (/+.s#, which are yet to achieve computerization across the board, is at a relative disadvantage when compared to the private sector, which is offering state-of-the-art facilities such as A Ms, doorstep banking, banking on phone, and net banking. /+.s also suffer from huge costs of labor and low levels of automation. At this rate, it may not be long before new channels devised by private banks effectively surpass the number of branch 'e:ourrks offered by the /+.s. his apart, the problems which have assumed enormous proportion today as far as /ublic +ector banks are concerned are ballooning '/A levels, declining margins, poor credit off-take, high overheads, and lack of good $uality assets. .anks are sticking to reliable borrowers for fear of bad debts. (n fact, banks largely invest in government securities, which have zero risk. %ith "8( being the single largest borrower, the yields on these securities determine the interest rates. he government aims to decrease its shareholding in /+.s to 66F, however, at the same time it also wants to retain the controlling stake. problems which /+.s are coping with now. his, it is feared, is not going to solve the

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PRI4ATE SECTOR BLOO7S 9orporate governance and self-regulation are the ground rules for the private sector. "overnment interference is not preferred. %hile some private banks such as A77ABA.A, .ank, A1is .ank and (,.( .ank have financial institutions .anking them, others are opting for foreign partnerships for technology and monetary resources. /rivate .anks have emerged relatively strong, with about >@F growth reported in net profits in the year ended March 2@@@. %ith a net profit of Cs.12@ crores (H<>F#, B,:9 was the clear leader. (,.( .ank, however took the cake by doubling its net profit, which reached Cs.>@.== crores in March 2@@@. he -ump in profits can mainly be attributed to non-traditional sectors such as commission, e1change, brokerage, and profit on sale of investments. C.( /87(9(*+ he C.( does not interfere in determining the prime lending rates for commercial banks. he onus is on banks to do so. C.( regulates interest rates on savings accounts, e1port credit, and credit for small and tiny sectors. he rates fi1ed by C.( are $uite low at EF, DF, and <F

respectively for .ank Cate, Cepo Cate, and savings account rate. :i1ing rates on bank credit is the discretion of the banks. hough banks are allowed to offer variable interest rates on longerterm deposit rates, they continue to offer fi1ed deposit rates. C!rrent a##o!nt transa#tion nor/s ease+ 'orms on current account transactions were eased, in line with the :oreign *1change Management Act (:*MA#. he .asic ravel Iuota (. I# has been raised from ;+J6,@@@ to ;+JD,@@@, without the need for central bank!s approval. 9apital account restrictions related to dealing in assets with residents and non-residents have also been rela1ed. 11

RBI to "a!n#- "i8!i+it0 a+9!st/ent fa#i"it0 he Ceserve .ank of (ndia (C.(# is launching its new li$uidity ad-ustment facility (7A:#, effective Gune D. he first phase would see the withdrawal of additional collateralised lending facilities, and ier-(( refinance to banks. he DF fi1ed rate Cepo will also be withdrawn. he facilities of collateralised lending and ier-( refinance facilities will continue. he 9entral government has granted approval to banks during the current financial year to make a foray into forward trading in gold by including gold on the list of commodities eligible for hedging under the :orward 9ontract (Cegulation# Act, 1=D2. 7EASURES ADOPTED BY RBI Measures to increase li$uidity and decrease the cost of funds to banks .ank rate cut by 1F from ?F to EF 9CC cut by @.DF, from ?F to E.DF Cepo rate cut by 1F, from >F to DF

+avings deposit rate for scheduled commercial banks cut from <.DF to <.@F

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OB,ECTI4ES OF T3E STUDY:6

he main ob-ectives of the study are5 o study the awareness level of service class people regarding *-.anking. o find out the fre$uency and the factors that influences the adoption of *-.anking services. o measure the satisfaction level of people. o understand the problems encountered in by service class people while using *.anking services(A M, /hone banking, etc#

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A landmark 0. 98M0 ventures in (ndia between (9(9( .A'3 and +(:K for online distribution of retail banking products and services. (n a ma-or development in the (nternet world, (9(9( .ank, the banking subsidiary of (9(9( 7td. ('K+*5 (9 and (9.,# and +atyam (nfoway 7td. ('A+,AI5 +(:K# announced the setting up of a new 0.98M0 company for on-line distribution of retail banking products and services on the (nternet. his landmark agreement marks the coming together of (ndia4s first (nternet .anking provider, (9(9( .ank, and (ndia4s largest private (+/ and mega-/ortal, +atyam (nfoway, to create a uni$ue partnership between a ma-or .ank and a mega-/ortal. he marriage between banking and portals is e1pected to be a win-win potent combination, which is e1pected to result in improved customer orientation, lower distribution cost, long-term customer relationships with ease of banking wherever and whenever the customer wants it and enhanced profitability. he range of retail banking products to be distributed through the portal would include savings accounts, current accounts, fi1ed deposits, bill payments and other retail banking products that (9(9( .ank may offer through this on-line channel. he surge in demand for e-commerce related services stems from the rapid growth in (nternet penetration in the country and a fundamental change in the business paradigm. he two

companies would therefore also e1plore several opportunities to complement each other4s strengths to capitalise on the opportunities in e-commerce. his would include providing a

platform for trade facilitation and payments over the (nternet using innovative banking products of (9(9( .ank. +(:K has a buyer to seller orderingLselling website, +eekand+ource.com, which 1<

is on-line e1cept for the payments that are still physical. (9(9( .ank has developed an (nternet based 4business to business4 payment module for purchasers and sellers to effect payments online. A synergistic offering of these two products would be made so that such customersLusers can complete the entire transaction and payments online. he two companies would e1pect to co-operate wherever feasible to e1tend the reach and channels for distribution of financial products from (9(9( .ank and (nternet products from +(:K. (9(9( .ank, as a part of its 09lick and .rick0 strategic focus would set up A Ms at the +atyam Access /oints and 9yber 9afes, thereby increasing its reach across the country. (t would also offer +atyam (nternet terminals at its branches, enabling visitors to surf the (nternet, thereby attracting new customers to its branches. he two companies shall e1amine further business opportunities, which would effectively synergise the financial services strength of (9(9( .ank and its Affiliates and the technological e1pertise of +atyam (nfoway and its Affiliates. (9(9( .ank and +atyam (nfoway through this partnership will play a strategic role in providing revolutionary e-commerce solutions in (ndia. he memorandum of understanding was signed today between Mr. B.' +inor, Managing ,irector ) 9*8 of (9(9( .ank and Mr. C. Camra-, Managing ,irector of +atyam (nfo way. (9(9( is a diversified financial services company offering a wide range of products and services to corporate and retail customers in (ndia. (9(9( .ank, a subsidiary company has been the pioneer of (nternet banking in (ndia. (9(9( .ank has been gearing itself for the opportunities that would be created from the e-9ommerce revolution.

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+atyam (nfo way 7td. is the leading integrated (nternet and *-commerce 9ompany operating in (ndia. +atyam8nline, the most comprehensive portal site of (ndian origin is one of the key offerings from +(:K in the business to consumer segment. Cecently it entered into an agreement to ac$uire (ndia%orld 9ommunications /rivate 7imited, which would result in the integration of (ndia%orld4s popular websites like samachar.com, khel.com and kho-.com with +(:K4s portals. he combined portal would be the largest (ndia related (nternet portal.

$. Ke0 B!siness O)9e#ti:es 8rganizations are facing tremendous competition word-wide. here is pressure on the he

organisations to improve their profitability and efficiency for their survival and growth.

customer!s e1pectations about the product and services are increasing and they do not hesitate to change their brand loyalty or the loyalty towards the organisations with whom they have been dealing for a long time. he deregularisation, liberalization and globalisation process have given freedom to the organisations in terms of selecting and producing the products and services, selecting the market segment and targeting a customer group at the same time they have to meet more rigid and regulatory re$uirements to satisfy the regulators that the deregulation or liberalization does not work against the interest of the customers and the society. organisations also have to safeguard their resources to protect the interest of shareholders. he

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he changing environment particularly that of competition, customer e1pectations and emerging technology have influenced the banks word-wide. hus, the key business ob-ectives of a bank are to manage increasing competition by improving their product and services, improving efficiency and productivity by restructuring their systems and work procedures and improving employees productivity, ensuring compliance with the regulatory re$uirements and safeguarding the assets. All these issues can be addressed by implementation of the right type of technology for the right purpose. he technology-based solutions have put the banks in a competitive advantage, he

improved the efficiency of the operations and provided e1cellent customer service.

technology has helped the organisations to take strategic decisions based on the on-line data rather than based on the past e1perience and intuitive decisions. he computer assisted audit

techni$ues have helped the banks to ensure safeguarding of resources and to ensure that the banks are operating efficiently and effectively. he e1tensive use of technology has also brought down the transaction cost and the rental cost of the premises. hus, the computerisation of banks operations had tremendous impact on their future prospects. he central bank of any country

though operate in a monopoly situation but has to demonstrate as a role model its efficiency and effectiveness to guide and supervise the whole banking system.

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1. C-an es in IT S#enario: he banks have undergone changes as far as the implementation of ( is concerned. hey have moved from manual systems to batch processing systems, batch processing systems to on-line systems and now striving for real time systems. hey have moved from centralized computing to decentralized computing in which each business unit can now take care of its computing re$uirement. he focus of use of computers has moved from back office to front office where most of the computerized operations are providing customer interface in order to improve customer service. hus, the computerisation has refocused the predominance of its applications from business orientation to customer orientation. he computer operations which were mainly on stand alone environment about a decade back have taken the advantage of data communication and networking technology to share the data and computer resources and provide anywhere and anytime services. he online systems make the data and information available to the decision maker at the press of a button. he M(+, which was predominantly used for performance reporting, is now being e1tensively used for decisionmaking. he ( supported tools like ,ecision +upport +ystems (,++#, *1pert +ystems, ,ata

%arehousing and ,ata Mining, etc play an important role in designing an *1ecutive (nformation +ystem (*(+#.

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5. IT Ena)"ers a. De:e"op/ents in 3;2 Te#-no"o 0: ,uring last decade there has been tremendous improvements in hardware technology in terms of storage capacity and processing speed. he processing speed is getting almost doubled every year and there is no constraint in terms of storage space. oday!s

microprocessors have more speed, processing power and storage capacity than a five years old mainframe. he networked environment and the client server architect have

provided almost an unlimited processing power to microprocessor- based systems. he only limitation is the availability of bandwidth for wide area networks (%A's#. he cost of hardware has drastically come down to make it affordable to organisations and individuals. he spread of 3iosks has facilitated the accessibility of computers and

(nternet to common people. (nvent of smart card technology has come out with many uses in banking and payment systems. he individuals need not carry the cash. he

plastic cards with microchip can store the details of transactions and the balance amount to serve as an electronic purse. b. De:e"op/ents in Soft<are Te#-no"o 0: More than the developments in the hardware technology there have been developments in software technology. 'ewer and newer software systems are implemented to facilitate the users. he software systems are becoming more and more user friendly and interactive to provide on-line help and validation facilities. he "raphic ;ser (nterface (";(#

environment facilitated the users to use the systems by clicking the appropriate icons to 1=

perform various common functions without bothering about the synta1 of commands. he software packages are now supporting multimedia i.e. te1t, audio, video and graphics. he software systems have also been developed to support presentations,

desktop printing, 6, graphics, animations, etc. +oftware has also been developed to support any human activities to improve the efficiency, productivity, housekeeping and customer service. +pecial packages have been developed for facilitation the auditors. he 9omputer Assisted Audit oolsL echni$ues (9AA s# have made the -ob of auditors easy and more effective. #. De:e"op/ents in Co//!ni#ation Te#-no"o 0: he synergy between computer and communication technology has really changed the banking scenario. (t has facilitated the banks to reach to the customers without their physical presence. he technologies available for 7A', %A', (ntranet, (nternet and

"roupware have improved the efficiency of the banks. .anks are able to provide better and innovative services to customers using these technologies. he satellite based

communication systems provide high reliability and scalability. his technology is highly suitable for remote locations. he fibre optic technology has also improved the reliability, $uality and speed of communication besides providing considerably higher bandwidth for the data transfer. &. Iss!es in Co/p!ter Te#-no"o 0 he ma-or problem the ( echnology. users are facing today relates to fast obsolescence in Bardware

he obsolescence is fast because newer and newer software systems with more

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capabilities are developed which re$uire higher processing speed and storage. he other concern of the user of the technology particularly of the banks is the data security and the disaster management as the data in the computerised systems represents financial transactions. (nade$uately secured systems may lead to frauds and other computer related crimes. o provide uninterrupted services to its customers, the banks are also concerned with the proper maintenance of hardware and software systems. he ade$uate and trained manpower is generally not available at different business locations. (t is also a very strategic issue for a bank whether to develop and maintain the systems in-house or to outsource them. here are always some relative advantages and disadvantages for outsourcing the systems depending upon the circumstances. '. Iss!es in Co//!ni#ation Te#-no"o 0: here are varieties of communication media available for networking and data communication. he selection of suitable communication media in terms of its reliability, cost and durability is an important decision. he selection of appropriate topology and the communication protocols are also important considerations for the banks. Another ma-or issue the banks are facing is to ensure network security. he physical security is not considered ade$uate and effective in a networked environment particularly in a wide area network. here is also shortage of communication

infrastructure in developing countries and the infrastructure is costly. here are not many choices as the infrastructure is generally provided by the government agencies and there are always some regulatory hassles. here is also shortage of bandwidth to support data, voice and image. he reliability of the infrastructure is also one of the ma-or issues when it is re$uired to provide services like banking anytime and anywhere.

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=. I/pa#t on Staff: here are number of issues related to the staff while implementing and using ( in banks. hese relate to availability of trained personnel to e1ploit the benefits of technology, continuous up gradation of their skills, retention of trained manpower in the organisation and utilization of staff rendered surplus due to implementation of technology. >. T-e F!t!re Tren+s: Animation software, fusion of computer and communication technology, image processing and video conferencing all will aid and present simulated environment for various business activities including banking. *mergence of electronic commerce, electronic and (nternet banking, electronic payment systems and use of e-cash will bring our drastic changes in the banking activities.

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?BANKING SYSTE7 IN NE2 7ILLENIU7:@

INTRODUCTION: 6 *conomic growth and development of a country depends on the health of its financial sector that includes banking sector. .anking sector provides a very vital input wiz. :inance to all other commercial and scientific fields thusM it should be always one step ahead of all the other fields. (n addition it provides mobiliasation of savings. (t also plays an important role in capital formation of the country.

he 1==1 new economic policy adopted by the government of (ndia is based on the three features 7/" A(N. 7iberalization, /rivatization, "lobalization. (t created a huge improvement in the economy of our country. T-anks to o!r present Pri/e 7inister an+ t-e t-en Finan#e 7inisterA Dr. 7AN7O3AN SING3 <-o is ri -t"0 #a""e+ as Fat-er of E#ono/i# Refor/s. .roadly speaking reforms in the financial sector are aimed at making (ndian banks conform to the international prudential standards and also making the financial system more competitive. he administrate structure of interest rates has been dismantled, with freedom given to banks to fi1 the rates of interest on deposits on loans. 'ew private sector banks have been licensed.

(n the words of 7r. RANGARA,ANA earlier governor of the C.(, the year 1==6-=< in a way marks a turning point in the financial history of (ndia, in the banking system. Be always gave much more importance to improve the technology. 9omputerization in many commercial banks is an account of his president efforts, in this direction. 26

Dr.BI7AL,ALANA the former governor of the C.( was e$ually conscious of the need to improve the banking sector financially and immediately. After assuming the office of the governor, of the C.(, he has accorded priority towards the implementation of some important recommendations of the Narasi/-a/ Co//ittee Report.

(n order to visualize the reforms, it is necessary to trace its development in a historical prospective.

F!t!re Of Bankin Se#tor: /ublic sector banks have en-oyed almost a monopoly situation till the 7iberalization wave begin in 1==1. Cecently, ;nion .ank of (ndia and .ank of (ndia have amalgamated with each other and the other news is that subsidiaries are merging with +.( to form a single merged bank. his will reduce the administrative e1penses. he banks can share the common infrastructure, management etc. it may even happen that one senior manager may look after two or more branches in the city. .ut in the present intensified process of liberalization and globalization a lot of challenges will have to be meet by the banking sector for its survival and growth wiz.

1. (ncrease in competition with a growth of private banks the hitherto protected public sector banks will have to shake off their lethargy to survive in the new liberalized banking sector.

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/rivate sector banks are in a position to offer better customer service on account of being hi-tech. :rom a sellers market, we have moved to a buyers market. (t is a great challenge to keep meeting the ever-growing re$uirements of non-aware, enlightened and demanding customers. hey have better alternative to meet the demands.

2. (nnovative banking process of disinter mediation has begun in the (ndian financial sector. he user of finance, the corporate sector especially, is gradually depending less and less on banks and financial institutions. hey prefer to mobilize funds directly from the

market. his has an adverse effect on the banks income and profitability. .anks now have to constantly lookout for the new ways of earning income 6. 'on-performing assets ('/As# is a one of the serious challenges of banking system is facing. A high level of '/As adversely affects the profitability of our banks. (n future, bank should adopt intensive techni$ues to reduce the '/As.

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echnological changes in a hi-tech ( era customers, e1pect $uick and efficient service. he paper-based payment system is gradually changing into electronic payment system. %ith the growth of computer network in (ndia, some banks have also introduces (nternet .anking, 9ustomers, who are linked to computers, find it very convenient.

Opport!nities: 7et us have a look, at the opportunities that a banking sector has in future.

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1. "rowing banking business, a steady increase in personal income of people an incoming of M'9s has increases the demand for bank loans to buy consumer durables. ,emand for housing loan has also increased. 2. :inancial supper market banks have entered the area of financing and other services like depository, underwriting, gilt trading and even brokering. 9ommercial banks are now operating as a financial supper markets. 6. (nsurance business-now insurance sector is open to the private sector as well. (t is easer for banks with a wide network to capture the widely speared-out market for insurance business. <. 9ash-less system-growth of credit card business in (ndia is another possibility for commercial banks to e1ploit. (t is possible to increase market share of credit card business on account of the increase in middle and higher middle-class population.

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Constraints: he constraints that need to be removed to make our banking sector progressive are5

1.

o remove infle1ibility like lack of users friendly front and environment for bank officialsM

2. ;se of a very technical and proprietary back and software, which cannot be customized easily. 6. ;sers in banks as we know are not ( professionals and though they are trained in various aspects, it really makes impractical for them to covers themselves suddenly to new upcoming systems.

Con#"!+in Re/arks:

%e feel that first of all, innovation is re$uired in banks to render better and efficient customer services. *lectronic banking enables new products and services to be geared for specific customers. %e have variety of customers today and the need of each customer is different and varied. 7ooking to other economies like :rance and ;nited +tates our banking system has also adopted credit cards, debit cards, electronic checks, smart cards, e-cash or cyber cash, automated teller machines, which are being e1tensively practiced in these countries.

(nternet banking is in vogue nowadays. (t is the one of the latest e1ample of ( in banking sector. %e can perform all the banking operations, -ust on the click of a button by sitting at our homes.

2E

:inally, watchword is share informationM money and resources (human, physical, and technological# to improve our banking sector, for better tomorrow.

2?

?BANKING SCENE: INDIA@

B7i+ Ter/ Appraisa" of t-e $Ct- P"an Tar etsD

he Mid

erm Appraisal of

he 1@th /lan conducted by the 'ational ,evelopment 9ouncil

(',9# noted that in some areas of the economy is doing well and these gains need to be consolidated, but there are also important weaknesses, which if not corrected could undermine even the performance of the economy and problems of the economy are assumed as follows5

",/ growth has averaged >.DF in the first three years, which is below the 1@ th plan target of ?.1F. /ositive factor include5

A# (mprovement in private corporate sector investments, .# /ositive international perceptions on (ndia 9# olerant inflation level

,# 9omfortable e1ternal payment position with substantial inflow from abroad lending to comfortable foreign e1change position.

(ndustrial sector also showed signs of improvement. he ultimate aim should be to consolidate the gains in these developments and to overcome the weaknesses in the economy. 3ey weaknesses are identified as follows5

2=

$. A

re ate Gro<t-

hough the plan fi1ed a target of ?.1F, it is difficulty to achieve the target and the likely growth rate e1pected to below EF during the plan period. An important reason for the lower growth is that investment did not increase in line with available investible resources.

1. A ri#!"t!ra" Gro<t-:

Agriculture "rowth is very poor over the last two decades. Agriculture "rowth has decelerated sharply from 6.2F to 1.=F between 1=?@-?1 and 1==D-=>. here is a

need to revamp the entire strategy ad more action is called for to improve the performance in agriculture sector.

5. Infrastr!#t!re Pro)"e/s:

(nade$uate infrastructures in both rural and urban areas are a ma-or factor constraining on (ndia!s growth. he $uality of infrastructure impacts on our ability to compete globally and also to attract :oreign ,irect (nvestment.

6@

&. Internationa" De:e"op/ent:

8wing to high oil prices, our import outgo is $uite high. +ince we have ample foreign e1change reserves at the moment, the impacts of the oil prices are not passed on to the users. .ut if the oil prices remain high, its impact need to be passed on to the consumer, which will lead to inflation or fiscal deficit in the country. Another cause of concern is that the downturn in the world economy, which will affect our e1port growth considerably. (t s estimated that every 1 percentage point reduction in our e1port growth rate will reduce the growth rate of ",/ by @.2F points.

'. So#ia" De:e"op/ents:

8ur social indicators are not only lower then the levels in *ast Asian countries, but they are lower even in comparison with the levels achieved by these countries twentyfive years ago. he social indicators are also show wide disparity in the gender gaps, large rural and urban differences and wide variation across states.

=. E/p"o0/ent:

his is another area of grave concern. +tudies based on data collected from organized and unorganized sectors state that while employment may be increasing in the unorganized sector in response to growth, there is actually a contraction in

61

employment in the organized sector, which is the preferred sector for employment by new entrants to the labour force.

>. Ine8!a"it0 an+ Po:ert0:

hough the poverty has declined the decline was less then targeted.

he moderate

improvement in education ad health indicators implies that access to more productive employment remains limited, especially in backward regions and amongst disadvantaged groups.

E. Ba"an#e Re iona" De:e"op/ent:

Cegional imbalance in the development of different states presents a picture, which re$uires a focused attention. +ome states were able to reap the benefits of the economic reforms, but some others were not able to do so. *ven district backwardness in a well performing state also presents a grim picture.

%. Reso!r#es in t-e P!)"i# Se#tor:

he availability of resources in the public sector to meet targeted levels of plan e1penditure is an area, which deserves attention. 'either the center nor the state have been able to mobelize the resources needed to keep outlays in line with 1@th plan pro-ections and this has led to significant under funding in many sectors. he

62

consolidated public debt of the 9enter and +tates taken together is about ?@F of the ",/, which is among the highest in emerging market economies.

he scope and time for correcting these deficiencies during the 1@ th plan period is very limited. he Mid erm Appraisal suggests various corrective measures could be considered for formulating the 11th :ive Kear /lan targets and policies.

$C. De#"aration of Di:i+en+:

he C.( has decided to grant general permission to banks to declare dividends, provided they comply with the following conditions5

E"i i)i"it0 Criteria

$. 8nly those banks, which comply with the following minimum prudential re$uirements, would be eligible to declare dividends without the Ceserve .anks prior approval5

a# 9apital to risk-weighted assets ratio (9CAC# of at least =F for preceding two completed years and the accounting year for which it proposes to declare dividends b# 'et 'on-performing Assets ('/As# of less then EF.

66

(n case any bank does not meet the above 9CAC norm, but is having a 9CAC of at least =F for the accounting year for which it proposes to declare dividend. (t would be eligible to declare dividend provided, its net '/A ratio is less then DF.

1.

he bank should comply with the provisions of section 1D and 1E of the .anking Cegulations Act, 1=<=.

5.

he bank should comply with the Ceserve .ank!s prevailing regulationsLguidelines, including creating ade$uate provisions for impairment of assets and staff retirement benefits, transfer of profits to statutory reserves, etc.

&.

he proposed dividend should be payable out of the current year!s profit.

'.

he Ceserve .ank of (ndia should not have placed any e1plicit restrictions on the bank for declaration of dividends.

Cegarding the $uantum of dividend, the C.( made the following stipulations.

.anks, which fulfill the eligibility criteria, may declare and pay dividends, provided-

6<

a#

he divined payout ratio does not e1ceed <@ per cent. (,ivined pay out ratio should be calculated as a percentage of Odividend payable in a yearP (e1cluding dividend ta1# to Onet profit during the yearP.

b# (n case the profit for relevant period includes any e1traordinary profitsLincome, the payout ratio should be computed after e1cluding such e1traordinary items for reckoning compliance with the prudential pay out ratio. c# he financial statements pertaining to the financial year to which the dividend is declared, should be free of any $ualification by the statuary auditors, which have an adverse bearing on the profit during that year. (n case of any $ualification to that effect, the net profit should be suitably ad-usted while computing the dividend pay out ratio.

he reserve bank will not entertain any application for a higher dividend payout ratio than the one for which the banks $ualify.

Door6Step Bankin :

he reserve bank has advised all scheduled commercial banks to formulate a scheme for providing services at the premises of a customer within the framework section 26 of the banking regulation Act, 1=<=.

6D

According, the banks have to formulate the scheme with the approval of their respective bank boards and send the same for C.( approval. (n the instruments, etc., from the premises of central and state governments departments.

In+iaDs Tra+e Defi#it:

(ndia!s e1ports recorded an increase of 1=.D percent during the first $uarter of the current fiscal. (mports on the other hand recorded a shaper growth of 6? per cent during the same period. As a result, the deficit doubled to J 11.< billon in the first $uarter of 2@@D-@> compared to J D.= billion in April Gune 2@@<-@D.

6>

?PERFOR7ANCE 3IG3LIG3TS OF PUBLIC SECTOR BANKS IN 1CC&6C'@

(n this note we analyse the performance of public sector banks (e1cept /un-ab and sind bank# on important parameters such as total assets, ,eposits, (nvestments, Advance, 'on-performing Assets ("ross and net#, (nterest (ncome, other (ncome, otal (ncome, (nterest *1penditure, 8perating *1penditure, otal *1penditure, 8perating profit, provisions and 9ontingencies and 'et profit and important ratios like credit-,eposit ratio, (nvestment-,eposit Catio, spared to otal Assets, 8perating e1penses to otal *1penses, Ceturn on Assets, 9apital Ade$uacy Catio, '/A ratio and productivity ratios. +ignificant features of the operations of banks on each of the above-mentioned parameters are given below5

Tota" Assets F As on 61st March 2@@D, total assets of the public sector banks increased to Cs.1E D?,2@E crores from Cs. 1<,E1,<2? crores of the previous financial years recording a growth of 1=.DF during 2@@D as against 1<.<F of the previous year. Bigher growth in total assets is due largely to inclusion of total assets of (,.( 7td. (n 2@@D.*1cluding (,.( 7td., the growth in total assets was marginally lower at 1<.@ per cent during 2@@<-@D. 1@ banks recorded higher growth than the group average. 8riental bank of commerce tops list with a growth of 61.= per cent, closely followed by the Allahabad bank (6@.1per cent# and state bank of (ndore (2=.D per cent#. .ank of Maharashtra recorded lowest growth in assets with 2.1 per cent during 2@@<-@D.

6E

Deposits6 otal deposits mobilized by the public sector banks increased from Cs. 12,2>,?6? crores as on 61st march, 2@@< to Cs. 1<,21,>E2 crores as on 61 st march, 2@@D. ,eposits showed a subdued growth during 2@@<-@D. otal ,eposits recorded a growth of 1D.= per cent during 2@@<-@D,which is higher than 16.E per cent of the previous year. *1cluding (,.( 7td., the total growth was only 1<.> per cent during 2@@<-@D. 1D banks recorded higher growth than the group average. 8riental bank of commerce recorded the highest growth of 6<.1 per cent, closely followed by state bank of indore with 62.D per cent during 2@@<-@D.+.( and Associate as a group recorded a growth of 1>.? per cent as compared to nationalized banks group with a growth of 16.D per cent during 2@@<-@D.

In:est/ents Q .anks investments showed a lower growth of ?.D per cent during 2@@<-@D as against the growth of 1<.E per cent during 2@@6-@<. (n absolute terms, the total investments increased from >,2D,>E? crores as at march 61st 2@@< to Cs. >,E?,>6E crores as on 61st march, 2@@D.*1cluding (,.( 7td., the growth in investment was only <.D per cent during 2@@<-@D. +even banks recorded a higher growth than the group average. Allahabad bank recorded the highest growth in investments with 22.1 per cent, closely followed by /un-ab 'ational .ank with 2@.6 per cent during 2@@<-@D. 'ationalized .anks as a group showed a growth of <.@ per cent during 2@@<-@D, which is much lower than the previous year!s growth of 1E.6 per cent during 2@@6-@<. +.( group as a whole recorded a growth of D.2 per cent during 2@@<-@D as against 1@.= per cent recorded in the previous year.

6?

A+:an#es F he years 2@@<-@D witnessed higher credit off take by the commercial banks. his was reflected in the total disbursement made by the /+.s during 2@@<-@D. otal advances of the banks -umped up from Cs.>, 62,E<@ crores as on 61 st march, 2@@< to Cs.?, <?,6<@ crores as on 61 st march 2@@D showing an impressive growth of 6<.1 per cent as against the previous years growth of 1D.2 per cent. *1cluding the (,.( .ank 7td., the growth was 2>.= per cent during 2@@<-@D. *ight bank recorded higher growth than the group average. ;nited .ank of (ndia showed the ma1imum growth in advances with <6.@2 per cent closely followed by +tate bank of (ndore with <1.1 per cent and state bank of .ikaner ) Gaipur with 6=.E per cent during 2@@<-@D. 'ationalized banks as a group recorded a growth of 2D.E per cent during 2@@<-@D as against the previous year growth of 1<.D per cent. As for +.( group the growth was 2=.1 per cent during 2@@<-@D as against 1>.> per cent recorded in the previous year.

Non6perfor/in Assets (NPA* F ,uring 2@@<-@D, both gross and net-performing assets showed decline in absolute terms as a percentage of advance (nspite of the reduction in the total provisions towards non-performing assets as a compared to the previous year. /resident recovery set up coupled with close monitoring of the assets could be sighted as a reasons for reduction in non-performing assets. "ross '/A of the public sector banks decreased from Cs.D1, D6E crores as on 61 st march 2@@< to Cs.<E, D=> crores as on 61st march, 2@@D shoeing a declined growth of (-# E.> per cent. 'et '/A declined from Cs. 1?,?>@ crores as on 61st march, 2@@< to Cs. 1>,=?6 crores as on 61st march, 2@@D recording a declined growth of (-# 1@.@ per cent. +i1 banks namely .ank 8: (ndia, .ank of Maharashtra, and 8riental bank of commerce, Ai-ay a bank, state bank of indore and state bank

6=

of patiala recorded higher growth in gross '/A during 2@@<-@D as compared to previous year. (n case of net '/A nine banks are recorded higher growth in net '/A than the previous year. +.( "roup recorded higher net '/A than the previous year.

In#o/e F otal income of the public sector bank recorded a growth of 6.? per cent during 2@@<-@D as compared to E.2 per cent of previous year. *1cluding (,.( 7imited. he growth was only 1.< per cent during 2@@<-@D."rowth in income in /+.s was due largely to higher contribution from interest income than the fee based income. 'on-interest income, which was showing a higher growth during a last three years, has recorded a declined growth during 2@@<-@D. his could be due to lower treasury earnings during 2@@<-@D. (nterest income of the banks increased from Cs. 1,@=,DE2 crores during 2@@6-@< to Cs. 1,1=,@=? crores during 2@@<-@D. Cecording a growth of ?.E per cent as against 2.1@ per cent during 2@@6-@<. 8n the other hand, the other income of the banks recorded a declined growth of (-# 1D.D per cent during 2@@<-@D as against the previous years growth of 62.6 per cent. (nterest, the share of fee income in the total income declined to 1>.> per cent during 2@@<-@D as against 2@.< per cent of the previous year. en banks recorded a higher growth in income then the group average. Allhabad banks tops the list with a growth of 11.= per cent, closely followed by state bank of Mysore with 11.2 per cent during 2@@<-@D.

EGpen+it!re: 6 otal e1penditure of the banks increased from Cs. =?,12E crores during 2@@6-@< to Cs. 1,@<,@6? crores during 2@@<-@D showing a growth of >.@ per cent as against previous year!s lower growth of (-# @.> per cent. *1cluding (,.( 7td., the growth in total e1penditure was 6.@ per cent during

<@

2@@<-@D.(ntrest e1penditure recorded a higher growth of 6.D per cent during 2@@<-@D as against the previous years growth of (-# D.= per cent. 8perating e1penditure, on the other hand, recorded a lower growth of 11.1 per cent during 2@@<-@D as compared to 11.= per cent during 2@@6-@<. 'ationalized banks and +.( "roup recorded lower growth in operation e1penditure during 2@@<@D. 1< banks recorded higher growth in total e1penditure then the group e1penditure in 2@@<-@D. Allahabad bank, (ndian bank, +tate bank of +aurashtra were the only three banks, which recorded a decline in operating e1penses then the previous year.

/rofit- the total operating profit if the /+.s declined from Cs. 6=,D6> crores during 2@@6-@< to Cs. 6?,E== crores during 2@@<-@D, recording a decline growth of (-# 1.= per cent during 2@@<-@D as against 66.1 per cent of the previous year. hough the total provisions made by the banks increased from Cs. 22,=2? crores during 2@@6-@< to Cs.26, 2<1 crores during 2@@<-@D, the growth was only marginal at 1.< per cent during 2@@<-@D as against 61.> per cent during 2@@<@D. Ma-ority of the banks have made lower provisions during 2@@<-@D as compared to previous year. 'et profit of the banks also declined from Cs. 1>, D<> crores during 2@@6-@< to Cs. 1D,DD? crores during 2@@<-@D recording a declined growth of (-# >.@ per cent of the previous year. *1cluding (,.( 7td., the decline is even sharper at (-# E.? per cent during 2@@<-@D. en banks recorded higher growth in net profit than the previous year.

Capita" A+e8!a#0 Ratio F All /+.s had achieved the stipulated 9CAC of = per cent as on 61 st march, 2@@D. ;nited bank of (ndia topped the list with a 9CAC of 1?.2 per cent closely followed by 9orporation bank with a 9CAC of 1>.2 per cent. 1@ banks recorded higher 9CAC during 2@@<-@D, than the previous year. <1

Ret!rn on Assets F 'et profit as a percentage to total assets declined marginally from 1.1 per cent during 2@@6-@< to @.= per cent during 2@@<-@D. 1< banks have higher C8A than the group average, of which 1@ banks have C8A of more than 1 per cent. Andhra bank topped the group with an C8A of 1.D= per cent, followed by oriental bank of commerce with 1.<1 per cent.

Cre+it6Deposit Ratio F 9redit-,eposit Catio (9L,# Catio of public sector banks showed considerable improvement during 2@@<-@D. his is largely due to higher deployment of credit and lower resource mobilization during 2@@<-@D. 9L, ratio of the banks improved from D1.> per cent during 2@@6@< to D=.E per cent during 2@@<-oD. *1cluding (,.( 7td., the ratio was DE.1 per cent during 2@@<-@D. (,.( 7td. ops the list with a 9L, ratio of 6@@.E per cent followed by bank of (ndia with E1.1 per cent and corporation bank with >?.1 per cent. he lowest ratio of <<.= per cent was recorded by central bank of (ndia.

In:est/ent6Deposit Ratio F As a noted before, the investments of banks were lower during 2@@<-@D as compared to the previous year. his is reflected in the investment-deposit. ((L,# ratio also during 2@@<-@D. he (L, ratio of the banks declined from D1.@ per cent during 2@@6-@< to <E.E per cent during 2@@<@D. (,.( 7td. %ith a ratio of 1>D.= per cent tops the grouped followed by ;98 bank and united bank of (ndia with D>.? per cent and (ndian bank with D1.D per cent during 2@@<-@D. .ank of (ndia recorded the lowest ratio with 6D.? per cent during 2@@<-@D.

<2

Interest Sprea+ F (nterest spread or net interest income as a percentage of total assets declined marginally from 6.@ per cent during 2@@6-@< to 2.= per cent during the financial year 2@@<-@D. (n the case of nationalized banks, interest spread declined from 6.1 during 2@@6-@< to 6 per cent during 2@@<@D. 8n the other hand, for +.( group, the interest spread ratio moved up from 2.? per cent during 2@@6-@< to 6.1 per cent during 2@@<-@D. 1> banks have the interest spread ratio of more than 6 per cent during 2@@<-@D.

Non6Perfor/in Assets F As mentioned before, both the gross and net non-performing assets showed declined in absolute terms ad as percentage of net advance during 2@@<-@D. :or ma-ority of the banks, this ratio is less than 6 per cent. ,ena bank has the highest ratio with D.2 per cent during 2@@<-@D.

Operatin EGpenses F Catio of operating e1penses to total e1penses increased to 6<.> per cent during 2@@<-@D from 66.@ per cent of the previous financial year. < banks have a ratio of more then <@ per cent during 2@@<-@D. Ma-ority of the banks recorded a higher ratio than the previous year.

B!siness per E/p"o0ee F .usiness per employee of most of the banks was higher than that of the previous year. Bighest per employee business was recorded by (,.( 7td. %ith Cs. 16.D crores. 7owest business

<6

ratio was shown by 9entral .ank of (ndia with 2.1 crores during 2@@<-@D. Ma-ority of the banks recorded a business ratio of Cs.6.@ crores to Cs. <.@ crores during 2@@<-@D.

Profit per E/p"o0ee F Ma-ority of the banks recorded a lower profit per employee ratio than the previous year. Bighest ratio was recorded by the (,.( 7td. %ith Cs. >.?D lacs during 2@@<-@D. ma-ority of the banks ranged from Cs. 1.D lacs to Cs. 6.@ lacs during 2@@<-@D. his ratio for

Con#"!sion F 9ompared to 2@@6-@<, the performance of the /ublic +ector .anks was not impressive during 2@@<-@D. Cesource mobilization and investments were lower during 2@@<-@D as compared to

2@@6-@<. ,isbursement of credit was impressive during this year. otal income and total e1penditure of these banks were higher than the financial year 2@@6-@<. +ince growth in e1penditure were higher than the growth in income, the banks recorded deceleration in operating and net profit during 2@@<-@D. a significant achievement for the banks was reduction in the gross and net non-performing assets of the bans in absolute term and also as percentage of net advances during 2@@<-@D. .anks were able to maintain spread at the same level as that of the previous year. +light deceleration in the 9apital Ade$uacy Catio and Ceturn on Assets were also observed during 2@@<-@D. /roductivity ratio showed improvement than the previous year. Bowever, profitability ratio was lower than the previous year.

<<

E6BANKING

<D

23AT IS E6BANKINGH
*lectronic banking is one of the truly widespread avatars of *-commerce the world over. Aarious authors define *-.anking differently but the most definition depicting the meaning and features of *-.anking are as follows5 1. .anking is a combination of two, Electronic technology and Banking. 2. *lectronic .anking is a process by which a customer performs banking

ransactions electronically without visiting a brick-and-mortar institutions. 6. *-.anking denotes the provision of banking and related service through

*1tensive use of information technology without direct recourse to the bank by the customer.

Bank Infor/ation te#-no"o 0

C!sto/er

<>

NEED FOR E6BANKING

8ne has to approach the branch in person, to withdraw cash or deposit a che$ue or re$uest a statement of accounts. (n true (nternet banking, any in$uiry or transaction is processed online without any reference to the branch (anywhere banking# at any time. /roviding (nternet banking is increasingly becoming a 0need to have0 than a 0nice to have0 service. he net banking, thus, now is more of a norm rather than an e1ception in many developed countries due to the fact that it is the cheapest way of providing banking services. .anks have traditionally been in the forefront of harnessing technology to improve their products, services and efficiency. hey have, over a long time, been using electronic and telecommunication networks for delivering a wide range of value added products and services. he delivery channels include direct dial Q up connections, private networks, public networks etc and the devices include telephone, /ersonal 9omputers including the Automated eller Machines, etc. %ith the popularity of /9s, easy access to (nternet and %orld %ide %eb (%%%#, (nternet is increasingly used by banks as a channel for receiving instructions and delivering their products and services to their customers. banks vary widely both in their content and sophistication. his form of banking is generally referred to as (nternet .anking, although the range of products and services offered by different

<E

E4OLUTION OF E6BANKING
he story of technology in banking started with the use of punched card machines like Accounting Machines or 7edger /osting Machines. he use of technology, at that time, was limited to keeping books of the bank. (t further developed with the birth of online real time system and vast improvement in telecommunications during late 1=E@!s and 1=?@!s.it resulted in a revolution in the field of banking with Oconvenience bankingP as a buzzword. 9onvenience banking, the bank is carried to the doorstep of the customer. he 1==@!s saw the birth of distributed computing technologies and Celational ,ata .ase Management +ystem. he banking industry was simply waiting for these technologies. 'ow 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. Tra+itiona" )ankin "unpowder /ersonalized services, time consuming, limited access 4irt!a" or E6)ankin 'uclear charged Ceal time transactions, integrated platform, all time access hrough

(ntense competition has forced banks to rethink the way they operated their business. hey had to reinvent and improve their products and services to make them more beneficial and cost effective. echnology in the form of *-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. (f they fail to do this will, simply, not survive. 'ew products and services are emerging that are set to change the way we look at money and the monetary system. <?

E6Bankin transa#tion /e#-anis/

<=

E6BANKING PRODUCTS
A!to/ate+ Te""er 7a#-ine (AT7# hese are cash dispensing machine, which are fre$uently seen at banks and other locations such as shopping centers and building societies. heir 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 a!to/ate+ te""er /a#-ine or a!to/ati# te""er /a#-ine (AT7# is a computerized telecommunications device that provides a financial institution4s customers a method of financialR transactions in a public space without the need for a human clerk or bank teller. 8n most modern A Ms, the customer identifies him or herself by inserting a plastic A M 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 e1piration date or 9A9 (9AA#. +ecurity is provided by the customer entering a personal identification number (/('#. ;sing an A M, customers can access their bank accounts in order to make cash withdrawals (or credit card cash advances# and check their account balances. Many A Ms also allow people to deposit cash or checks, transfer money between their bank accounts, pay bills, or purchase goods and services. A Ms are known by various casual terms including cash machine, hole-in-the-wall, cash point or .ancomat (in *urope and Cussia#. CA+ syndrome. +ome of the advantages of A M to customers are5 Ability to draw cash after normal banking hours Iuicker than normal cashier service 9omplete security as only the card holder knows the /(' ,oes not -ust operate as a medium of obtaining cash. 9ustomer can sometimes use the services of other bank A M!s. he occasionally-used A M Machine is an e1ample of

D@

Te"e)ankin or P-one Bankin elephone banking is relatively new *lectronic .anking /roduct. Bowever it is fastly becoming one of the most popular products. 9ustomer can perform a number of transactions from the convenience of their own home or officeM in fact from anywhere they have access to phone. 9ustomers can do following5 9heck balances and statement information ransfer funds from one account to another /ay certain bills 8rder statements or che$ue books ,emand draft re$uest his facility is available with the help of Aoice Cesponse +ystem (AC+#. his system basically, accepts only 8'* dialed input. 7ike the A M customer has to follow particular process, initially account number and telephone /(' are fed for the process to start. Also the AC+ system provides the users within additional facilities such as changing e1isting password with the new desired, information about new products, current interest rates etc. 7o)i"e Bankin 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 (ndian banking- both directly and indirectly. channels. Internet Bankin he advent of the (nternet and the popularity of personal computers presented both an opportunity and a challenge for the banking industry. :or years, financial institutions have used powerful computer networks to automate million of daily transactionsM today, often the only paper record is the customer!s receipt at the point of sale. 'ow that their customers are hey are being used both as banking and other

D1

connected to the (nternet via personal computers, banks envision similar advantages by adopting those same internal electronic processes to home use. .anks view online banking as a powerful Ovalue addedP tool to attract and retain new customers while helping to eliminate costly paper handling and teller interactions in an increasingly competitive banking environment. (n (ndia first one to move into this area was (9(9( .ank. hey started web based banking as early as august 1==E.

D2

D6

TYPES OF INTERNET BANKING OR E6BANKING

;nderstanding the various types of (nternet banking will help e1aminers assess the risks involved. 9urrently, the following three basic kinds of (nternet banking are being employed in the marketplace. Infor/ationa"6 this is the basic level of (nternet banking. ypically, the bank has marketing information about the bank!s products and services on a stand-alone server. he risk is relatively low, as informational systems typically have no path between the server and the bank!s internal network. his level of (nternet banking can be provided by the banks or outsourced. %hile 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 bank!s server or web site. Co//!ni#ati:e6 this type of (nternet banking systems and the customer. he interaction between the bank!s system and the customer. he interaction may be limited to electronic mail, account en$uiry, loan applications, or static file updates (name and address change#. .ecause these servers may have a path to the bank!s 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 bank!s internal networks and computer systems. Airus controls also become much more critical in this environment. Transa#tiona"6 this level of (nternet banking allows customers to e1ecute transactions. +ince a path typically e1ists between the server and the bank or outsourcer!s internal network, this is the highest risk architecture and must have the strongest controls. 9ustomer transactions can include accessing accounts, paying bills, transferring funds etc.

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AD4ANTAGES OF INTERNET BANKING

Con:enien#e- ;nlike your corner bank, online banking sites never closeM they!re available 2< hours a day, seven days a week, and they!re only a mouse click away.

U)i8!it0- (f you!re 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, 2<RE.

Transa#tion spee+- 8nline bank sites generally e1ecute and confirm transactions at or $uicker than A M processing speeds.

Effi#ien#06Kou can access and manage all of your bank accounts, including (CA!s, 9,s, even securities, from one secure site.

Effe#ti:eness6 Many online banking sites now offer sophisticated tools, including account aggregation, stock $uotes, 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 $uicken and Microsoft money.

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DISAD4ANTAGES OF INTERNET BANKING

Start6!p /a0 take ti/e-(n order to register for your bank!s online program, you will probably have to provide (, and sign a form at a bank branch. (f 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.

Learnin #!r:es- .anking sites can be difficult to navigate at first. /lan to invest some time andRor read the tutorials in order to become comfortable in your virtual lobby.

Bank site #-an es6 *ven the largest banks periodically upgrade their online programs, adding new features in unfamiliar places. (n some cases, you may have to re-enter account information.

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E6 BANKING SER4ICES:
$. Bi"" pa0/ent ser:i#e *ach bank has tie-ups with various utility companies, service providers and insurance companies, across the country. (t facilitates the payment of electricity and telephone bills, mobile phone, credit card and insurance premium bills. o pay bills, a simple one-time registration for each biller is to be completed. +tanding

instructions can be set, online to pay recurring bills, automatically. 8ne-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. 1. F!n+ transfer Any amount can be transferred from one account to another of the same or any another bank. 9ustomers can send money anywhere in (ndia. /ayee!s account number, his bank and the branch is needed to be mentioned after logging in the account. he transfer will take place in a day or so, whereas in a traditional method, it takes about three working days. (9(9( .ank says that online bill payment service and fund transfer facility have been their most popular online services. 5. Cre+it #ar+ #!sto/ers 9redit card users have a lot in store. %ith (nternet banking, customers can not only pay their credit card bills online but also get a loan on their cards. 'ot -ust this, they can also apply for an additional card, re$uest a credit line increase and "od forbid if you lose your credit card, you can report lost card online. &. Rai"<a0 pass his is something that would interest all the aam -anta. (ndian Cailways has tied up with (9(9( bank and you can now make your railway pass for local trains online. he pass will be delivered to you at your doorstep. .ut the facility is limited to Mumbai, hane, 'asik, +urat and /une. he bank would -ust charge Cs 1@ H 12.2< percent of service ta1. DE

'. In:estin t-ro! - Internet )ankin 8pening a fi1ed deposit account cannot get easier than this. An :, can be opened online through funds transfer. 8nline banking can also be a great friend for lazy investors. 'ow 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. +o it removes the worry about filling those big forms for mutual funds, they will now be -ust a few clicks away. 'owadays, most leading banks offer both online banking and demat account. Bowever if the customer have there demat account with independent share brokers, then need to sign a special form, which will link your two accounts. =. Re#-ar in 0o!r prepai+ p-one 'ow there is no need to rush to the vendor to recharge the prepaid phone, every time the talk time runs out. Gust top-up the prepaid mobile cards by logging in to (nternet banking. .y -ust selecting the operator4s name, entering the mobile number and the amount for recharge, the phone is again back in action within few minutes. >. S-oppin at 0o!r fin ertips 7eading banks have tie ups with various shopping websites. %ith a range of all kind of products, one can shop online and the payment is also made conveniently through the account. 8ne can also buy railway and air tickets through (nternet banking.

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List of so/e )anks operatin E6Bankin in In+ia

Bank Na/e A.' AMC8 .ank Abu ,habi 9ommercial .ank .ank of (ndia 9itibank 9orporation .ank ,eutsche .ank :ederal .ank "lobal rust .ank B,:9 .ank B+.9 (9(9( .ank (,.( .ank (ndus(nd .ank /un-ab 'ational .ank +tandard 9hartered .ank +tate .ank of (ndia ; ( .ank (nfosys, (9(9( (nfotech (nfosys (.ank Away# 9C2 (nfosys (.ank Away# (n-Bouse +atyamL.roadvision (nfosys (.ank Away# +anchez (nfosys (.ankAway# i-fle1L +atyam Te#-no"o 0 4en+or (nfosys (.ank Away# (nfosys (.ank Away# (-fle1 8rbitech (now /olaris# (-fle1 'et.anking A,9. 'et7ink .8(online 9itibank 8nline 9orp'et db direct :ed'et ibankSgtb 'et.anking 8nlineShsbc (nfinity i-net banking (ndus'et (nternet .anking Me +tandard 9hartered 8nline onlinesbi.com ( connect Ser:i#e offerin

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INTERNET BANKING 4ERSUS TRADITIONAL BANKING

(n spite of so many facilities that (nternet banking offers us, we still seem to trust our traditional method of banking and is reluctant to use online banking. .ut here are few cases where (nternet banking will turn out to be a better option in terms of saving your money. 4+top payment4 done through (nternet banking will not cost any e1tra fees but when done through the branch, the bank may charge you Cs D@ per che$ue plus the service ta1. hrough (nternet banking, you can check your transactions at any time of the day, and as many times as you want to. 8n the other hand, in a traditional method, you get $uarterly statements from the bank and if you re$uest for a statement at your re$uired time, it may turn out to be an e1pensive affair. branch would take eight days to deliver it at your doorstep. (f the fund transfer has to be made outstation, where the bank does not have a branch, the bank would demand outstation charges. %hereas with the help of online banking, it will be absolutely free for you. As per the (nternet and Mobile Association of (ndia4s report on online banking 2@@>, 0 here are many advantages of online banking. (t is convenient, it isn4t bound by operational timings, there are no geographical barriers and the services can be offered at a miniscule cost.0 he branch may charge you Cs 2D per page, which includes only 6@ transactions. Moreover, the bank

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I7PACT OF E6BANKING ON TRADITIONAL SER4ICES

8ne 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. (t is too early to have a firm view on this yet. *ven to practitioners the future of ebanking and its implications are unclear. (t might be convenient nevertheless to outline briefly two views that are prevalent in the market. he view that the (nternet is a revolution that will sweep away the old order holds much sway. Arguments in favor are as follows5 *-banking transactions are much cheaper than branch or even phone transactions. his could turn yesterday!s competitive advantage - a large branch network - into a comparative disadvantage, allowing e-banks to undercut bricks-and-mortar banks. his is commonly known as the 0beached dinosaur0 theory. *-banks are easy to set up so lots of new entrants will arrive. T8ld-world! systems, cultures and structures will not encumber these new entrants. (nstead, they will be adaptable and responsive. *-banking gives consumers much more choice. 9onsumers will be less inclined to remain loyal. *-banking will lead to an erosion of the Tendowment effect! currently en-oyed by the ma-or ;3 banks. ,eposits will go elsewhere with the conse$uence that these banks will have to fight to regain and retain their customer base. his will increase their cost of funds, possibly making their business less viable. 7ost revenue may even result in these banks taking more risks to breach the gap. /ortal providers are likely to attract the most significant share of banking profits. (ndeed banks could become glorified marriage brokers. hey would simply bring two parties together Q eg buyer and seller, payer and payee. he products will be provided by monolines, e1perts in their field. raditional banks may simply be left with payment and settlement business Q even this could be cast into doubt. raditional banks will find it difficult to evolve. 'ot only will they be unable to make ac$uisitions for cash as opposed to being able to offer shares, they will be unable to obtain >1

additional capital from the stock market. his is in contrast to the situation for (nternet firms for whom it seems relatively easy to attract investment. here is of course another view which sees e-banking more as an evolution than a revolution. *-banking is -ust banking offered via a new delivery channel. (t simply gives consumers another service (-ust as A Ms did#. 7ike A Ms, e-banking will impact on the nature of branches but will not remove their value. *1perience in +candinavia (arguably the most advanced e-banking area in the world# appears to confirm that the future is Tclicks and mortar! banking. 9ustomers want full service banking via a number of delivery channels. anywhere, anyhow#. raditional banks are starting to fight back. he start-up costs of an e-bank are high. *stablishing a trusted brand is very costly as it re$uires significant advertising e1penditure in addition to the purchase of e1pensive technology (as security and privacy are key to gaining customer approval#. *-banks have already found that retail banking only becomes profitable once a large critical mass is achieved. 9onse$uently many e-banks are limiting themselves to providing a tailored service to the better off. 'obody really knows which of these versions will triumph. his is something that the market will determine. Bowever, supervisors will need to pay close attention to the impact of e-banks on the traditional banks, for e1ample by surveillance of5

he future is therefore TMartini .anking! (any time, any place,

strategy customer levels earnings and costs advertising spending margins funding costs Merger opportunities and threats, both in the ;3 and abroad.

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T3E INDIAN SCENARIO Dri:ers of #-an e

Advantages previously held by large financial institutions have shrunk considerably. he (nternet has leveled the playing field and afforded open access to customers in the global marketplace. (nternet banking is a cost-effective delivery channel for financial institutions. 9onsumers are embracing the many benefits of (nternet banking. Access to one4s accounts at anytime and from any location via the %orld %ide %eb is a convenience unknown a short time ago. hus, a bank4s (nternet presence transforms from 4brouchreware4 status to 4(nternet banking4 status once the bank goes through a technology integration effort to enable the customer to access information about his or her specific account relationship. he si1 primary drivers of (nternet banking includes, in order of primacy are5 (mprove customer access :acilitate the offering of more services (ncrease customer loyalty Attract new customers /rovide services offered by competitors Ceduce customer attrition

INDIAN BANKS ON 2EB

he banking industry in (ndia is facing unprecedented competition from non-traditional banking institutions, which now offer banking and financial services over the (nternet. he deregulation of the banking industry coupled with the emergence of new technologies, are enabling new competitors to enter the financial services market $uickly and efficiently.

>6

(ndian banks are going for the retail banking in a big way. Bowever, much is still to be achieved. his study that was conducted by students of ((M7 shows some interesting facts5 hroughout the country, the (nternet .anking is in the nascent stage of development (more than D@ banks are offering varied kind of (nternet banking services#. (n general, these (nternet sites offer only the most basic services. DDF are so called 4entry level4 sites, offering little more than company information and basic marketing materials. 8nly ?F offer 4advanced transactions4 such as online funds transfer, transactions ) cash management services. :oreign ) /rivate banks are much advanced in terms of the number of sites ) their level of development.

E7ERGING C3ALLENGES
(nformation technology analyst firm, the Meta "roup, recently reported 0financial institutions who don4t offer home banking by the year 2@@@ will become marginalized.0 .y the year of 2@@2, a large sophisticated and highly competitive (nternet .anking Market will develop which will be driven by ,emand side pressure due to increasing access to low cost electronic services. *mergence of open standards for banking functionality. "rowing customer awareness and need of transparency. "lobal players in the fray 9lose integration of bank services with web based *-commerce or even disintermediation of services through direct electronic payments (*- 9ash#. More convenient international transactions due to the fact that the (nternet along with general deregulation trends eliminates geographic boundaries.

><

Move from one stop shopping to 4.anking /ortfolio4 i.e. unbundled product purchases.

9ertainly some e1isting brick and mortar banks will go out of business. .ut that4s because they fail to respond to the challenge of the (nternet. he (nternet and its underlying technologies will change and transform not -ust banking, but also all aspects of finance and commerce. (t represents much more than a new distribution opportunity. (t will enable nimble players to leverage their brick and mortar presence to improve customer satisfaction and gain share. (t 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 conte1t.

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E6BANKING 2ORLD 2IDE

+ince its inception, (nternet banking has e1perienced strong and sustained growth. %orld .ank report on leapfrogging in e-finance pointed out that the three countries with impressive progress in information technology in this sense are *stonia, Cepublic of 3orea and .razil. 9reation of the world!s leading electronic banking systems has been done at a remarkably low cost compared to other world-class internet banks . (n the *uropean ;nion, >@ million people, representing 1? per cent of the adult population, use online banking (n :rance, the number of online banking accounts is recording an annual growth rate of ED per cent. Bowever, *stonia is a country that has become a leader in (nternet banking (which now reaches 1? per cent of the population#, not only among *astern *uropean countries but in world rankings, through a combination of easyto- use software, free-of-charge transactions and behavior changes resulting from the influence of the 'ordic countries! ( culture on *stonia. A sector in which 7atin America is seems to be performing better than in other industries is online retail banking. "rowth in this area has been driven by traditional banks, which have used the online channel to generate customer loyalty and improve their operating margins. wo .razilian banks, .radesco and .anco do .rasil, have thus achieved more than < million online customers each. Me1ico is another leader of (nternet banking in 7atin America. (t adopted legislation providing for the development of both *-9ommerce and e-finance. (n Me1ico, the number of online bank users more than tripled from E@@,@@@ in 2@@@ to 2.< million in 2@@1, and it could reach <.D million in 2@@D (*-Marketer 2@@2b#. 8ne reason for the success of 7atin American banks! online ventures seems to be the attention they have paid to providing retail customers with multiple ways to access their accounts ((nternet, telephone, wireless#. Bowever, given that the share of the total population that actually has a bank account is relatively small, the e1pansion of 7atin American online banking may be facing a bottleneck. 9ompared with overall (nternet usage estimated at <.< million in Australia, the ma-or banks together have attracted only 1.2 million to online banking. he (nternet is a global phenomenon and so is e-finance. (ts deployment is not limited to developed countries, and indeed some developing countries Q such as (ndia and the Cepublic of >>

3orea Q are e1periencing particularly strong growth in *-.anking. (n Asia one of the most impressive records has been achieved by the Cepublic of 3orea. developing rapidly in /hilippines. (n .angladesh there is a large gap between the computerization of foreign banks and that of local commercial banks and as regards the state of their intra- and inter-branch online networks. Bowever, ED per cent of local banks are planning to introduce *-.anking, which implies very dynamic improvements. Apart from 'orth and +outh Africa the +ub +aharan Africa is the region that is seriously lagging behind in (nternet banking, although it is giving to the rest of the world the good e1ample of microfinance developments. he Cepublic of 3orea is leading in online brokerage and in mobile banking. (n +outh-*ast Asia (nternet banking is also hailand, Malaysia, and +ingapore and to a lesser e1tent, in the

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RESEARC3 7ET3ODOLOGY

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RESEARC3 7ET3ODOLOGY
Resear#- is defined as human activity based on intellectual application in the investigation of matter. he primary purpose for applied research is discovering, interpreting, and the development of methods and systems for the advancement of human knowledge on a wide variety of scientific matters of our world and the universe. he term research is also used to describe an entire collection of information about a particular sub-ect. 7et-o+o"o 0 is the method followed while conducting the study on a particular pro-ect. hrough this methodology a systematic study is conducted on the basis of which the basis of a report is produced. (t is a written game plan for conducting Cesearch. Cesearch methodology has many dimensions. (t includes not only the research methods but also considers the logic behind the methods used in the conte1t of the study and e1plains why only a particular method or techni$ue has been used. (t also helps to understand the assumptions underlying various techni$ues and by which they can decide that certain techni$ues will be applicable to certain problems and other will not. herefore in order to solve a research problem, it is necessary to design a research methodology for the problem as the some may differ from problem to problem. Nat!re he methodology adopted to achieve the pro-ect ob-ective involved e1ploratory research ) descriptive research method. he information re$uired for fulfilling the ob-ective of study was collected from various primary and secondary sources.

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T0pe of resear#his study is *U/78CA 8CK and ,*+9C(/ (A* in nature. (t helps in breaking vague problem into smaller and precise problem and emphasizes on discovering of new ideas and insights. *1ploratory research was conducted during the initial stage of the research process which helped to refine the problem into researchable one. (t has progressively narrowed the scope of research topic. Resear#- +esi n Cesearch design constitutes the blue print for the collection, measurement and analysis of data. he present study seeks to identify the e1tent of preferences of *-.anking over traditional banking among service class. he research design is e1ploratory in nature. he research has been conducted on service class people within yamunanagar. :or 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. So!r#es of +ata: :ollowing are the methods of sources of data5 Se#on+ar0 +ata: Articles on *-.anking taken from -ournals, magazines published from time to time. hrough internet. he $uestionnaire was

Pri/ar0 +ata: Iuestionnaire was used to collect primary data from respondents. structured type and contained $uestions relating to different dimensions of e-banking preferences among service class such as level of usage, factors influencing the usage of e-banking services, benefits accruing to the users of e-banking services, problems encountered. An attempt was also made to elicit reasons for its non-usage. he $uestions included in the $uestionnaire were openended, dichotomous and offering multiple choices.

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Sa/p"in te#-ni8!e:

he sampling techni$ue used for -udgment is CON4ENIENCE AND

,UDGE7ENT SA7PLING. Sa/p"in !nit: (t defines the target population that will be sampled i.e. it answers who is to be surveyed. (n this study, the sampling unit is the people of yamunanagar. Sa/p"in siIe: (t indicates the numbers of people to be surveyed. hough large samples give more reliable results than small samples but due to constraint of time and money, the sample size was restricted to 1@@ respondents. profession. 7et-o+ of +ata #o""e#tion: he survey method is used to collect the data. Aarious places of he respondents belong to different income group and

Kamunanagar visited for the purpose of collection of data. Resear#- instr!/ent: he instrument used for gathering data was $uestionnaire. o get further insight in to the research problem, interview regarding their buying practices too was made. his was done to crosscheck the authenticity of the data provided. o supplement the primary data and to facilitate the process of drawing inference, secondary data was collected from published sources like magazines, -ournals, newspapers etc. Too"s an+ te#-ni8!es of ana"0sis: he data so collected will be analyzed through the application of statistical techni$ues, such as bar graphs and pie charts.

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LITERATURE RE4IE2

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Literat!re Re:ie<
Pro+!#t an+ Te#-no"o 0 ro!pA ICICI Bank, in its paper O9orporate banking using technology in transactionsP it was inferred that (nformation clients. echnology has revolutionized the services and mode of services offered by the banks to their corporate he emergence of *-.anking has enabled the banks to offer real-time transactions and integrate all customers! related functions. (ndian .anks are utilizing the new technology to provide better technology and convenient access to its customers and (ndia is thus poised to for a huge growth in the world of electronic banking. C-an+ana RA Unnit-anA Pa!"a 7.C.A S<at/an in their research paper titled O*.anking Adaptions and ,ot.9om viability5 A comparison of Australian and (ndian e1periences in the .anking sectorP a comparative study of Australian and (ndian e1periences in e.usiness was done, which seeks to identify the effectiveness of dot.coms as indicators of e.usiness uptake and success on a sector-by-sector basis was undertaken. (t was concluded that the banking industry is now a very mature one and banks are being forced to change rapidly as a result of open-market forces such as the threat of competition, customer demand, and technological innovations such as the growth of the (nternet. *-.anking is a successful strategic weapon for banks to remain profitable in a volatile, and competitive market place of today in both (ndian and Australian *conomies despite the differences of ( usage. G. Kanna)iran an+ P.C. Nara0an discuss in their article the e1periences of a privatesector bank in deploying (nternet banking and e9ommerce in (ndia. +trategic alignment of business and ( strategies, planning and implementation of e-banking initiatives, and management of benefits have been captured, along with key contributions to development. 3! ins points to the fact that traditional boundaries in banking are disappearing. ;sing

e.usiness methods, ma-or retailers and telecom providers are starting to offer financial services to their clients. *1tending the value chain and offering versatile services seems to be the key to retaining competitiveness in the sector. Attitudes are also shifting from E6

direct transactions to savings and investments, as the baby boomers reach their fortis and fifties, and prepare for retirement. 7ario 7artineI G!erreroin his paper titled O/rofiling the adoption of 8nline banking +ervices in the *uropean ;nionP offers an empirical investigation on the adoption of online banking services among *uropean citizen. he use of e-banking services is e1plained on the basis of socio-demographic and (nternet Qspecific behavioral indicators. he performed analyses provide support for the influence of country, age, profession and several (nternet behaviors on the use of *-banking.

T-e In+ian Internet Bankin

,o!rne0 (n 2@@1, a Ceserve .ank of (ndia survey

revealed that of <> ma-or banks operating in (ndia, around D@F were either offering (nternet banking services at various levels or planned to in the near future. According to a research report,( (ndia Cesearch, 3otak +ecurities, May 2@@@.# while in 2@@1, (ndia4s (nternet user base was an estimated = lakhM it was e1pected to reach =@ lakh by 2@@6. Also, while only 1F of these (nternet users utilized the (nternet banking services in 1==?, the (nternet banking user base increased to 1>.EF by mid- 2@@@.

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DATA ANALYSIS AND INTERPRETATION

ED

DATA ANALYSIS AND INTERPRETATION

Ta)"e $. A<areness of peop"e re ar+in e6)ankin ser:i#e pro:i+e+ )0 t-e )ank <-i"e openin an a##o!nt
F!""0 a<are 3a+ an i+ea No i+ea otal Fi !re $. No. of Respon+ents 6E <> 1E 1@@ Per#enta e 6EF <>F 1EF 1@@F

Awareness about e-banking services

37% Fully aware 100% 46% Had an idea No idea Total

17%

Interepretation As seen from Ta)"e $, overall percentage of service class people having complete knowledge about e-banking services provided by the bank while opening an account in it is 6EF, those having some idea about it is <>F and the percentage of people having no awareness of e-banking services provided by the bank is 1EF. (t can reasonably, be concluded that nearly ?DF of the population is having awareness about e-banking services

Ta)"e 1. E>

So!r#es fro/ <-i#- t-e respon+ents et t-e kno<"e+ e a)o!t t-e e6)ankin ser:i#es

Persona" 4isit EGe#!ti:e fro/ Bank A+:ertise/ents Frien+s ;Re"ati:es Ot-ers

No. of Respon+ents 1D 21 6< 2> 2

Per#enta e 1DF 21F 6<F 2>F 2F

Fi !re 1

Sources of awareness about e-banking

2% 26%

15% Personal Visit Exe uti!e "ro# $an% 21% &d!ertise#ents Friends '(elati!es )t*ers

34%

Interpretation Ta)"e 1, indicates the percentage distribution of awareness avenues, the ma-or are in favour of advertisements, which score 6<F among different avenues such as personal visit, e1ecutives of the banks, advertisements and friendLrelatives. %hile the least score is for personal visit and that of other sources.

Ta)"e 5.

EE

A<areness of E6Bankin ser:i#es

AT7 De)it Car+ Cre+it Car+ P-one Bankin 7o)i"e Bankin Internet Bankin Tota"

No. of Respon+ents ?? >@ D@ <@ D@ D@ 66?

Per#enta e 2>.@6F 1E.EDF 1<.E=F 11.?6F 1<.E=F 1<.E=F 1@@F

Fi !re 5

Relative awareness about different ebanking services

30+00% 20+00% 10+00% 0+00% P*one $an%in0 1nternet $an%in0 ,o.ile $an%in0 -e.it /ard /redit /ard &T,

2eries1

Interpretation *-banking constitutes services provided in terms of A Ms, ,ebit 9ard, 9redit 9ard, /hone .anking, Mobile .anking, (nternet .anking etc, of which the first si1 have been covered. Amongst these A M scores the largest used service status (2>.@6F# as indicated by ta)"e 5 figures. 9lose on the heels is ,ebit card (1E.EDF#, 9redit card (1<.E=F#, while phone banking lags behind by scoring the least ie.,11.?6F.

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 Ta)"e & Users of E6)ankin ser:i#es

Users Non Users Tota"

No. of Respon+ents E< 2> 1@@

Per#enta e E<F 2>F 1@@F

Fi !re &

Usage of e-banking

26% 3sers Non 3sers 74%

Interpretation Ta)"e & shows that among those aware (which account for ?6 in number# about E< persons use e-banking services, which is E<F of total population studied.

Ta)"e '. E=

Representation of fre8!en#0 of !sa e

Da0 2ise AT7 De)it Car+ Cre+it Car+ P-one Bankin 7o)i"e Bankin Internet Bankin 11 Fi !re ' < 2 1 @ @ <

2eek 6<ise

Fort ni6 -t"0 16 E > 6 < 2 6D

7on6 t-"0

Infre86 !ent"0

6>.6> 1?.1? =.@= @ @ 6>.6> 1@@

61 11 D 2 < 6 D>

DD.6 > 1=.> < ?.=6 6.DE E.1< D.6> 1@@

6E.1 < 2@ 1E.1 < ?.DE 11.< 6 D.E1 1@@

11 1@ > E 2 E <6

2D.D ? 26.2 > 16.= D 1>.2 ? <.>D 1>.2 ? 1@@

= ? 1? 16 = ? >D

16.?D 12.61 2E.>= 2@ 16.?D 12.61 1@@

Frequency of usage of different e-banking services

70 60 50 40 30 20 10 0 4ise -ay 4ee%5wise Fortni50*tly t*ly ,on5 1n"re65 uently 1nternet $an%in0 ,o.ile $an%in0 P*one $an%in0 /redit /ard -e.it /ard &T,

Interpretation o find out the level of usage amongst the service class, percentage has been calculated from the total completely filled in $uestionnaires and the incomplete $uestionnaires were discarded. ?@

he fre$uency of usage of A M is highest which is evident from ta)"e ', followed by debit card.. Ta)"e =. Fa#tors inf"!en#in t-e "e:e" of !sa e

Stron "0 A"" ti/e a:ai"a)i"it0 Ease of !se Nearness Se#!rit0 Dire#t a##ess Frien+s; Re"ati:es Stat!s s0/)o" D> 62 21 12 62 6 E

7ore t-an a:era e ? 22 1? 1@ 12 ? 11

A:era e 11 E 1< 16 E 1< 1<

Less t-an a:era e 1 2 D < 2 E E

Not at a"" 6 1 @ 1 @ ? 1@

Tota" E= >< D? <@ D6 <@ <=

Factors influencing level of usage

80 70 70 60 50 40 30 20 10 0
!a

Not at all 9ess t*an a!era0e &!era0e ,ore t*an a!era0e 2tron0ly

s ss e ti! ta tu s sy u se es s ur it y e rn ea e a 2 t ire nd s' N F

. il i t

ila

i#

se

Fi !re= Interpretation A study of the factors, ta)"e =, 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 ma-or motivating factor, ?1

&

ll t

ri e

la

"

# .

followed by ease of use, direct access, nearness, security in decreasing order of importance. Iuite interestingly friends and relatives, status symbol scored the least motivating factors.

Ta)"e > Aarious benefits accruing from *-.anking services to its users
Ti/e Sa:in IneGpensi:e Eas0 Pro#essin Eas0 F!n+ Transfer Ot-ers Fi !re > No. of Respon+ents E@ 21 <@ 2> ? Per#enta e <2.<2F 12.E2F 2<.2<F 1D.EDF <.?DF

Benefits of e-banking
T1,E 2&V1N: 1NE;PEN21VE E&2< P()/E221N: E&2< F3NT(&N2FE( E,E(:EN/< 2=1N 2&V1N: )THE(2

Interpretation %hen asked to list various benefits accruing from the usage of e-banking, time saving received highest percentage score at <2.<2F among different benefits such as time saving (<2.<2F#, ine1pensive (12.E2F#, easy processing (2<.2<F#, easy fund transfer(1D.EDF#. Iuite interestingly, easy processing feature scored more than the ine1pensiveness of the ebanking services. he other benefits accruing to the people include ready availability of funds, removal of middlemen and no rude customer relation e1ecutives. ?2

 Ta)"e E

Pro)"e/s i+entifie+ )0 t-e !sers of E6Bankin ser:i#e

a b c d e f g h Factors Ti/e #ons!/in Inse#!rit0 AT7 o!t of or+er A/o!nt +e)ite+ )!t not <it-+ra<n Pro)"e/ of #-an e in /o)i"e n!/)er Pass<or+ for otten Car+ /isp"a#e+ Car+ /is!se No. of Respon+ents D= <D >2 6= <2 D< D@ <E Per#enta e 1<.?2F 11.61F 1D.D?F =.?@F 1@.DDD 1<.DEF 12.D>F 11.?1F

Fi !re E

Problems identified by the users of -Banking services

70 60 50 40 30 20 10 0 Ti#e 1nse urity onsu#in0 &T, out o" &#ount Pro.le# o" order de.ited .ut *an0e in not #o.ile wit*drawn nu#.er No+ o" (es>ondents Password "or0otten /ard #is>la ed /ard #isuse

Interpretation Most of the users face the problem of A M out of order (1D.D?F#, followed by time consuming (1<.?2F#, password forgotten (1<.DEF# and then otherproblems as card misplaced, card misuse, insecurity, etc

?6

 Ta)"e % Reasons for not !sin E6Bankin ser:i#es as rate+ )0 t-e non !sers

Factors 2ei -ts No nee+( Satisfie+ A <ittra+itiona" )ankin * It see/s "ike a )ot-eration Inse#!rit0 No a##ess to internet;/o)i"e La#k of operationa" kno<"e+ e 3i++en #osts

3i -"0 i/portant D

7ore t-an a:era e <

A:era e 6

Less t-an a:era e 2

Least i/portant 1

Tota"

1=

22

>

22

EE

. 9 ,

E 1E =

@ 11 D

= 21 16

1> E 1@

6@ 16 1>

>2 >= D6

* :

12 21

E D

12 1<

12 ?

1D 1>

D? ><

Fi !re %

Reasons for not using -Banking services

80 70 70 60 50 40 30 20 10 0 No need? 2atis"ied wit* traditional .an%in0@ 1t see#s li%e a .ot*eration 1nse urity No a ess to internet'#o.ile 9a % o" o>erational %nowled0e Hidden osts 4ei0*ts

Hi0*ly i#>ortant

,ore t*an a!era0e

&!era0e

9ess t*an a!era0e

9east i#>ortant

?<

Interpretation :rom the non users, an attempt was made to elicit the reasons for its non usage. As indicated by table 12, satisfaction with traditional banking was considered as prime de-motivating factor, followed closely by the fear of insecurity, then Thidden cost! factor, which suggested their resistance to change, which to some e1tent can be countered by aggressive advertisement and utilizing other modes of awareness dissemination as well.

?D

FINDINGS

?>

FINDINGS OF T3E STUDY

he overall percentage of servicemen having complete knowledge about e-banking services provided by the bank while opening an account in it is 6EF, those having some idea about it is <>F and the percentage of people have no awareness of e-banking services provided by the bank is 1EF. (t can reasonably, be concluded that nearly ?DF of the population is having awareness about e-banking services. he percentage distribution of awareness avenues, the ma-or skewness is in favour of advertisements, which score 6<F among different avenues such as personal visit, e1ecutives of the banks, advertisements and friendLrelatives. %hile the least score is for personal visit. Among those aware (which account for ?6 in number# about E< persons use e-banking services, which is E<F of total population studied. *-banking constitutes services provided in terms of A Ms, ,ebit 9ard, 9redit 9ard, /hone .anking, Mobile .anking, (nternet .anking etc, of which the first si1 have been covered. Amongst these A M scores the largest used service status (2>.@6F# 9lose on the heels is ,ebit card (1E.EDF#, 9redit card (1<.E=F#, while phone banking lags behind by scoring the least ie.,11.?6 . o find out the level of usage amongst the service class, percentage has been calculated from the total completely filled in $uestionnaires and the incomplete $uestionnaires were discarded. he fre$uency of usage of A M 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 time availability is ranked as the ma-or motivating factor, followed by ease of use, direct access, nearness in decreasing order of importance. Iuite interestingly friends and relatives, status symbol scored the least motivating factors. %hen asked to list various benefits accruing from the usage of e-banking, time saving received highest percentage score at <2.<2F among different benefits such as time saving (<2.<2F#, ine1pensive (12.E2F#, easy processing (2<.2<F#, easy fund transfer(1D.EDF#.Iuite interestingly, easy processing feature scored more than the ?E

ine1pensiveness of the e-banking services. e1ecutives.

he other benefits accruing to the people

include ready availability of funds, removal of middlemen and no rude customer relation Among the users, various problems that are encountered while using e-banking services. 9ard misuse and its misplace are ma-or 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. :rom the non users, an attempt was made to elicit the reasons for its non usage.. +atisfaction with traditional banking was considered as prime de-motivating factor, followed closely by the fear of insecurity, then Thidden cost! factor, which suggested their resistance to change, which to some e1tent can be countered by aggressive advertisement and utilizing other modes of awareness dissemination as well.

??

S2OT ANALYSIS

?=

S2OT ANALYSIS
STRENGT3S : (t has an e1tensive distribution network comprising of D6D branches in 612 cities ) one international office in ,ubai this provides a competitive edge over the competitors. he .ank has a strong retail depository base ) has more than million customers. .ank has strong brand e$uity. (+8 =@@1 certification for its depository ) custody operations ) for its backend processing of retail operations ) direct banking operation. he bank is a market leader in cash settlement service for the ma-or stock e1changes in its country. B,:9 .ank is one of the largest private sector banks working in (ndia. (t has a highly automated environment in terms of information technology ) communication system. (nfrastructure is one of the best in the country. (t has many innovative products like kids Advantage scheme, 'C( services.

2EAKNESSES : Account opening and delivery of che$ue book take more time. 7ack of availability of different credit products like 99 7imit, .ill discounting facilities. 9omplicated terms and conditions of products, which is not easily understandable by the layman.

=@

OPPORTUNITIES : .ranch e1pansion ,oor step services "reater liberalization is foreign ownership via :,( in (ndian /vt. +ector banks. (nfrastructure movements ) better systems for trading ) settlement in the "ovt. securities ) foreign e1change markets.

T3REATS : he bank has started facing competition from players like +.(, /'. in the finance market itself. his may reduce the profit margins in the future. +ome /vt. .anks have E days banking.

=1

LI7ITATIONS

=2

LI7ITATIONS OF T3E STUDY

*very research is conducted under some constraints and this research is not an e1ception. 7imitations of this study are as follows51. 2. 6. <. here were several time constraints. he study is limited to areas of yamunanagar only. he sample size of only 1@@ was taken from the large population for the purpose of study, so there can be difference between results of sample from total population. he study is related to service class people only.

D. /eople were reluctant to go in to details because of their busy schedules. >. Merely asking $uestions and recording answers may not always elicit the actual information sought. E. ,ue to continuous change in environment, what is relevant today may be irrelevant tomorrow.

=6

CONCLUSION

=<

CONCLUSION

he usage of *-banking is all set to increase among the service class. he service class at the moment is not using the services thoroughly due to various hurdling factors like insecurity and fear of hidden costs etc. +o banks should come forward with measures to reduce the apprehensions of their customers through awareness campaigns and more meaningful advertisements to make *-banking popular among all the age and income groups. :urther, with increasing consumer demands, banks have to constantly think of innovative customized services to remain competitive. *-.anking is an innovative tool that is fast becoming a necessity. (t is a successful strategic weapon for banks to remain profitable in a volatile and competitive marketplace of today.

(n future, the availability of technology to ensure safety and privacy of e-transactions and the C.( guidelines on various aspects of internet banking will definitely help in rapid growth of internet banking in (ndia.

=D

SUGGESTIONS

=>

SUGGESTIONS (nternet banking would drive us into an age of creative destruction due to non-physical e1change, complete transparency giving rise to perfectly electronic market place and customer supremacy. he $uestion to be asked right now is 0%hat the (ndian .anks should do0 %hatever is the strategy chosen and options adopted, certain key parameters would determine the bank4s success on web5 :or long-term success, a bank may follow5 Adopting a webs mindset 9atching on the first mover4s advantage Cecognizing the core competencies Ability to deal multiplicity with simplicity +enior Management initiative to transform the organization from inward to outward looking Aligning roles and value propositions with the customer segments Cedesigning optimal channel portfolio Ac$uiring new capabilities through strategic alliances.

he above can be implemented in four steps5 :amiliarizing the customer to new environment by demo version of software on bank4s web site. his should contain tour through the features which are to be included. (t will enable users to give suggestions for improvements, which can be incorporated in later versions wherever feasible.

=E

+econd phase provides services such as account information and balances, statement of account, transaction tracking, mailbo1, check book issue, stop payment, financial and customized information.

he third phase may include additional services such as fund transfers, ,, issue, standing instructions, opening fi1ed deposits, intimation of loss of A M cards.

he last step should include advanced corporate banking services like third party payments, utility bill payments, establishment of 7L9s, 9ash Management +ervices etc. *nhanced plan for the customers in future can include re$uests for demand drafts and pay orders and many more to bring in the ultimate in banking convenience.

Also if proper training should be given to customer by the bank employs to open an account will be beneficial secondly the website should be made friendlier from where the first time customers can directly make and access there accounts. %e 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 it!s the normal tendency of a human not to have changes work on the old track, that!s also one of the reason for the slow acceptance of internet banking accounts. "ive proper training to customers for using i-banking 9reate a trust in mind of customers towards security of there accounts /rovide a platform from where the customers can access different accounts at single time without e1tra charge. Make there sites more users friendly. 9ustomers should be motivated to use ( banking facilities more.

=?

BIBLIOGRAP3Y

BOOKS Malhotra, . ,., O *lectronic .anking and (nformation echnology in .anksP +ultan

9hand and +ons, 'ew ,elhi,2@@?. +.+ 3aptan ) '.+. 9houbey. O(ndian .anking in *lectronic *raP (nternet .anking in (ndia-/art (- ,r A. 3. Mishra

2EBSITES www.banknetindia.com

www.bharatbook.com

www.hdfcbank.com

==

AnneG!re

1@@

KUESTIONAIRE
Dear Respon+entA %e are conducting a research study of OE6)ankin Preferen#es a/on peop"e in Ya/!nana ar@. %e will appreciate your cooperation in this regard by filling up the $uestionnaire carefully. All the information provided by you will be kept confidential. 1. (n which banks do you have your accountV
a. c. e. i. +tate .ank of (ndia /un-ab 'ational .ank +tate .ank of /atiala .ank of (ndia Any other, /lease +pecify i. --------------------ii. --------------------iii. --------------------b. d. f. h. B,:9 .ank (9(9( .ank 9anara .ank 8riental .ank of 9ommerce g.

2. %hile opening up the account, were you aware of *-banking services provided by your bankV a. :ully aware b. Bad an idea c. 'o 6. If ans<er to 8!estion no.1 is #A how did you get to know about *-banking services of your bankV
a. b. c. d. /ersonal visit *1ecutive from the bank Advertisements :riendsL Celatives

<. If ans<er to 8!estion no.1 is a or )A which of the following *-banking services are you aware ofV
e. f. g. h. i. -. A M ,ebit 9ard 9redit 9ard /hone banking Mobile banking (nternet banking

D. ,o you use *-banking servicesV a. Kes b. 'o (If NoA ans<er 8!estion no. $C +ire#t"0#. 1@1

>. (f answer to $uestion no.D is yes, how fre$uently do you use each of the following servicesV
:actors a b c d e f A M ,ebit 9ard 9redit 9ard /hone .anking Mobile .anking (nternet .anking 8nce in a day 8nce in a week 8nce in a fortnight 8nce in a month (nfre$uently

E. %hich of the following factors influence you the most to use *-banking servicesV
:actors a b c d e f g All time availability *ase of use 'earness +ecurity ,irect access :riendsL Celatives +tatus symbol +trongly More than average average 7ess than Average 'ot at all

?. %hich of the following benefits accrue to you, while using *-banking servicesV
a. c.

e. =. Cate the problems identified while using *-banking servicesV

:actors a b c d e f g h ime consuming (nsecurity A M out of order Amount debited but not withdrawn /roblem of change in mobile number /assword forgotten 9ard misplaced Misuse of card Bighly considered Ma-or Average

ime saving b. (ne1pensive *asy processing d. d. *asy fund transfer Any other, please specifyWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWW

Minor

(gnorable

1@. 3indly rate the following reasons enlisted for not using the *-banking servicesV
:actors a b c 'o need( +atisfied with traditional banking# (t seems like a botheration (nsecurity Bighly important More than average Average 7ess than average 7east important

1@2

d e f

'o access to internetLmobile 7ack of operational knowledge Bidden costs

Any other, please specifyWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWW 11. o what e1tent are you satisfied with your .anks! *-banking servicesV
b. Bighly +atisfied WWWWWWWWWWW

c. +atisfied
d. e. f. 'eutral ,issatisfied Bighly dissatisfied

WWWWWWWWW
WWWWWWWWWWW WWWWWWWWWWW WWWWWWWWWWW

12. %hat other services you would like to have through *-bankingV WWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWW WWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWWW Respon+entDs Profi"e
'ame Age "ender (ML:# /rofession 8rganisation 5 WWWWWWWWWWWWWWWW 5 WWWWWWWWWWWWWWWW 5 WWWWWWWWWWWWWWWW 5 WWWWWWWWWWWWWWWW 5 WWWWWWWWWWWWWWWW In#o/e "e:e" per /ont7ess than Cs. 1@,@@@ Cs.1@,@@@ to Cs.2@,@@@ Cs.2@,@@@ to Cs.6@,@@@ More than Cs.6@,@@@

1@6