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 Internet Research
An analysis of Internet banking offerings and its determinants in India
Pooja Malhotra Balwinder Singh
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Pooja Malhotra Balwinder Singh, (2010),"An analysis of Internet banking offerings and its determinants in
India", Internet Research, Vol. 20 Iss 1 pp. 87 - 106
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Milind Sathye, (1999),"Adoption of Internet banking by Australian consumers: an empirical
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Internet banking
An analysis of Internet banking
offerings and its determinants in
India
87
Pooja Malhotra
Department of Business Management, Received 2 December 2008
Geeta Institute of Management and Technology, Kurukshetra, Revised 15 June 2009
Haryana, India, and Accepted 10 October 2009

Balwinder Singh
Department of Commerce and Business Management,
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Guru Nanak Dev University, Amritsar, India

Abstract
Purpose – This exploratory study is an attempt to present the present status of Internet banking in
India and the extent of Internet banking services offered by Internet banks. In addition, it seeks to
examine the factors affecting the extent of Internet banking services.
Design/methodology/approach – The data for this study are based on a survey of bank websites
explored during July 2008. The sample consists of 82 banks operating in India at 31 March 2007.
Multiple regression technique is employed to explore the determinants of the extent of Internet
banking services.
Findings – The results show that the private and foreign Internet banks have performed well in
offering a wider range and more advanced services of Internet banking in comparison with public
sector banks. Among the determinants affecting the extent of Internet banking services, size of the
bank, experience of the bank in offering Internet banking, financing pattern and ownership of the bank
are found to be significant.
Research limitations/implications – The primary limitation of the study is the scope and size of
its sample as well as other variables (e.g. market, environmental, regulatory etc.) which may have an
effect on the decision of the banks to offer a wide range of Internet banking services.
Originality/value – The purpose of the study is to help fill significant gaps in knowledge about the
Internet banking landscape in India. The findings are expected to be of great use to the government,
regulators, commercial banks, other financial institutions, e.g. co-operative banks planning to offer
Internet banking, bank customers and researchers. The bankers as well as society at large will come to
know where the banks lag in terms of adoption of Internet banking and in providing different products
and services. An understanding of the factors affecting the extent of Internet banking services is
essential both for economists studying the determinants of growth and for the creators and producers of
such technologies. Moreover, this paper contributes to the empirical literature on diffusion of financial
innovations, particularly Internet banking, in a developing country, i.e. India.
Keywords Banks, Innovation, Virtual banking, Financial services
Paper type Research paper

1. Introduction Internet Research

Vol. 20 No. 1, 2010
The competitive pressures and the evolving requirements of consumers have required pp. 87-106
the banks to develop new technologies and tools. Internet banking that has q Emerald Group Publishing Limited
1066-2243
revolutionised the banking industry worldwide is a product of this innovation. In DOI 10.1108/10662241011020851
 INTR general, Internet banking refers to the use of Internet as a delivery channel for the
20,1 banking services, including traditional services, such as opening an account or
transferring funds among different accounts, as well as new banking services, such as
electronic bill presentment and payment, which allow the customers to pay and receive
the bills on a bank’s website. In India, slowly but steadily, the Indian customer is
moving towards Internet banking. A number of banks have either adopted Internet
88 banking or are on the threshold of adopting it. The Indian banks started Internet
banking initially with simple functions such as getting information about interest
rates, checking account balances and computing loan eligibility. Then the services
were extended to online bill payment, transfer of funds between accounts and cash
management services for corporate. The banks are using Internet banking technology
to meet the ever-increasing competition. It has also emerged as a strategic resource for
achieving higher efficiency, control of operations and reduction of cost by replacing
paper based and labour intensive methods with automated processes thus leading to
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higher productivity and profitability.

Internet-based electronic banking is one of the newest and least researched but most
promising delivery channel for retail banking services.
No doubt, considerable literature on this phenomenon is available worldwide, but in
Indian context, there are only conceptual papers throwing light over the importance of
Internet banking and its prospects for the Indian banking industry. The present study
aims to quantify the current state and performance of Internet banking in India in
terms of various Internet banking services being offered and the factors that drive the
development of such services.

2. Internet banking: literature review

There are numerous papers that sought to study the present status and services of
Internet banking internationally (see Table I), for instance, Egland et al. (1998), Sathye
(1997), Diniz (1998), Jayawardhena and Foley (2000), Furst et al. (2000a, b, 2002a, b),
Carlson et al. (2001), Sullivan (2000, 2001), Chung and Paynter (2002), Suganthi et al.
(2001), Vijayan and Shanmugam (2003), Guru et al. (2003), Jasimuddin (2001), Awamleh
et al. (2003), Bojinov (2003), Yeap and Cheah (2005), Awamleh and Fernandes (2005),
Ayadi (2006), Hamid et al. (2007), Floros (2008), and Thulani et al. (2009).
These studies investigated the status of Internet banking and banking services
offered by Internet banks in developed countries like the US, the UK, Australia, New
Zealand, Malaysia, United Arab Emirates and developing countries like Bulgaria,
Saudi Arabia, Jordan, Tunisia, Greece and Zimbabwe. Despite the very late adoption of
Internet technology in doing transaction online by banking institutions in developing
countries, they are very fast catching up with the developed banking systems. These
banks have been successful in implementation of introductory phase of Internet
banking. However, the adoption of Internet banking services to a large extent is
dependent on the value added services they can offer. A very little research exists on
the implementation of Internet banking in transition and developing economies. Thus,
there is a need to identify the actual status of Internet banking, i.e. how many banks
offer Internet banking and what services they are offering, because an average
customer will be interested to know whether net banking offers him/her a wide range
of services. This study aims at assessing the extent to which Indian banks have
adopted Internet banking to take advantage of opportunities in delivering banking
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S. no. Study Country and no. of banks analysed Sample period Purpose of study

1 Sathye (1997) Australia, 52 banks Sept. 1997 Status of Internet banking

2 Egland et al. (1998) US, 8,983 banks 1997 Status of Internet banking and its services;
performance of Internet banks
3 Diniz (1998) US, 121 banks Oct./Nov. 1997 Status of Internet banking and its services
4 Jayawardhena and Foley UK, 12 banks 1998-1999 Status of Internet banking and its services
(2000)
5 Furst et al. (2000a, b, US, 2,517 National Banks (out of which Q3, 1999 Status of Internet banking and its services;
2002a, b) 2,334 were FDIC Insured banks) performance of Internet banks;
determinants of adoption and extent of
Internet banking services
6 Sullivan (2000) Tenth Federal Reserve district, 1,618 banks Q1, 2000 Status of Internet banking and its services;
performance of Internet banks
7 Carlson et al. (2001) Based on a survey of national bank Q4, 2000 Status of Internet banking and its services;
charters by OCC examiners performance of Internet banks
8 Sullivan (2001) Tenth Federal Reserve District, 1,337 Year end 2000 Status of Internet banking and its services
banks
9 Suganthi et al. (2001) Malaysia, ten banks 2000 Status of Internet banking and its services
10 Jasimuddin (2001) Saudi Arabia, eight banks 2000 Status of Internet banking
11 Chung and Paynter (2002) New Zealand, seven Internet banks NA Status of Internet banking
12 Vijayan and Shanmugam Malaysia, five Internet banks January 2002 Status of Internet banking and its services
(2003)
13 Awamleh et al. (2003) Jordan, ten banks June and July of 2001 Status of Internet banking and its services
14 Bojinov (2003) Bulgaria, 35 banks NA Status of Internet banking and its services
15 Guru et al. (2003) 37 banks, Malaysia (13), Singapore (one), NA Status of Internet banking and its services
Palestine (one), Bahrain (three), Egypt
(four), Pakistan (one), United Arab
Emirates (one), Jordan (three), Saudi
Arabia (four), Kuwait (two), Iran (one),
Oman (three)
16 Singh and Malhotra India, 66 banks Dec. 2003 Status of Internet banking and its services;
(2004a) performance of Internet banks
(continued)
Internet banking

List of studies on Internet

banking
89

Table I.
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90
20,1
INTR

Table I.
S. no. Study Country and no. of banks analysed Sample period Purpose of study

17 Singh and Malhotra India, 93 banks Q1, 2004 Status of Internet banking and its services;
(2004b) performance of Internet banks
18 Yeap and Cheah (2005) Malaysia, 17 Internet banks (ten domestic At the end of 2002 and Status of Internet banking and its services
banks and seven foreign banks) 2004
19 Awamleh and Fernandes United Arab Emirates, 35 Internet banks Sept. 2004 Status of Internet banking and its services
(2005)
20 Malhotra and Singh (2006) India, 88 banks 1998-2005 Status of Internet banking; performance of
Internet banks
21 Ayadi (2006) Tunisia, eight banks with websites December 2001 and April Status of Internet banking and its services
2002
22 Hamid et al. (2007) Malaysia (five banks) and Thailand June 2006-Dec. 2006 Status of Internet banking and its services
(five banks)
23 Migdadi (2008) Jordan, 16 banks Mar. 2008 Analysis of Internet banking websites
24 Floros (2008) Greece, 15 banks 2008 Performance of Internet banking websites
25 Thulani et al. (2009) Jimbabwe, 12 banks 2008 Analysis of Internet banking services and
determinants of adoption
 products and improving customer relationship. Secondly, it investigates factors that Internet banking
explain which banks choose to offer a relatively wide range of Internet banking
services, given that they offer transactional Internet banking.

3. The data and explanatory variables

To date, it has been difficult to assemble comprehensive information on the Internet
banking activities of banks in India, as there are no special reporting requirements for 91
Internet banks, and hence there is no regularly compiled set of data about banks’
Internet activities. A survey of banks’ websites was executed for the purpose of
exploring the present status of Internet banking and the extent of Internet banking
services offered by Internet banks in India. In addition, bank communication in the
form of phone calls and e-mail was also used to gather information regarding the
adoption dates of Internet banking. The websites of the banks were explored during
the period of July 2008. The sample consists of 82 banks, which were operating in India
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as on 31 March 2007. Sample selection is based on the following criteria:

.
Only public (nationalised and SBI group), private (new and old private) and
foreign banks which were operating in India as on 31 March 2007.
.
Banks whose websites were not found despite best efforts are considered as
banks with no websites, hence non-Internet banks.
.
Banks offering only informational sites are considered as non-Internet banks.

For the purpose of present study, 30 Internet banking services have been considered
for the purpose of making comparative analysis of Internet banks. Table II gives a
brief description of all the 30 Internet banking services and weights (points) attached to
each service.
In order to measure the level of Internet banking services provided by banks, one
point has been given to the bank for an Internet banking service of those shown in
Table II, if it was provided by the bank. Using this rule, a bank can score a maximum
of 30 points on this index and a minimum of zero. Total score has been calculated for
each of the banks by adding the total number of Internet banking services provided by
them. After calculating the total score of Internet banking services for each bank, the
extent of Internet banking for each bank has been calculated as follows:
Extent of IB of a particular bank ¼ {Total score of the bank/Total no. of IB
services considered (i.e. 30 items)} £ 100.
However, it should be noted that the logic behind assigning points to the attributes
does not depend on the importance of the attribute nor on the quality of the information
provided by the bank. Rather, it provides a measure of the quantity of Internet banking
services made available through the Internet to the customers of the banks.

4. Adoption rates of Internet banks

The survey results reveal that, in July 2008, all the banks in India had websites, of
which 51 allowed transactions to be initiated through the Internet, which represents
nearly 62 percent of total banks. However, the adoption rates across individual bank
categories are not uniform. Adoption rates for transactional websites are highest in
public sector and are lowest in foreign banks, thus providing a stiff competition
between the private and public sector Internet banks. Among the private sector banks,
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92
20,1

services
INTR

Table II.
List of Internet banking
Service code Internet banking service Definition Points

1. Balance enquiry One gets to know account balance and can view/download
account statement 1
2. Funds transfer (inter-branch) Transfer one’s money from one branch in a particular city
to any other branch in some other city 1
3. Third-party funds transfer Transfer one’s money from one branch in a particular city
to another person’s account at any other/same branch in
some other/same city 1
4. Bills payment Delivery of bills (or invoices), over the Internet and also
affords consumers the opportunity to review and pay these
items electronically 1
5. Account opening application Apply for a new account online 1
6. Insurance Purchase insurance policies online 1
7. Demat holdings Enables to see the Demat accounts details and transactions 1
8. Brokerage Offer brokerage services online 1
9. Investments Purchase of investments online 1
10. Loan applications Apply for a loan online 1
11. Receive alerts Subscribe for e-mail or SMS alerts, e.g. for minimum
balance etc. 1
12. Monthly statement by e-mail Subscribe for receiving a monthly statement of account by
e-mail 1
13. Requests/standing orders/instructions Requests/orders/instructions for cheque book, demand
draft, stopping payment on a cheque etc. 1
14. Deposit applications Apply for a new deposit online 1
15. Credit card operations/payments The bank can pay for one’s credit card expenses/payments 1
16. Interest rates updates Know rate of interest on deposits and loan schemes in force
in the bank 1
17. Foreign exchange rates updates Know the notional rates of some of the foreign currencies 1
18. Trading online Sale and purchase of securities online 1
19. Online shopping Pay e-shopping bills through Internet banking 1
20. Market watch Provides a commentary on market conditions 1
21. Cheque status inquiry Display status of the cheque as to whether paid/unpaid/
stopped 1
(continued)
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Service code Internet banking service Definition Points

22. TDS enquiry Inquire TDS deducted by the bank for the current financial
year or previous financial year 1
23. One view account View the details of accounts maintained at different banks
through one account 1
24. Charity online Pay charity or donations online 1
25. Online tax payment Online payment of central excise and service tax or direct
tax 1
26. Online ticket booking Book railway tickets online 1
27. Customer correspondence E-mail correspondence between the customer and the bank 1
28. Change password and user profile One can change the passwords and profile anytime 1
29. Demonstration of I-banking Provide demonstration of Internet banking services over
bank’s website 1
30. Corporate Internet banking Internet banking services to corporate customers, i.e. online
corporate cash management 1
Maximum total for Internet banking services 30
Internet banking

93

Table II.
 INTR new private sector banks (100 percent) lead the old private sector banks (61 percent)
20,1 and among the public sector banks, SBI group (100 percent) leads the nationalised
banks (95 percent) in providing Internet banking (Table III).

5. Analysis of Internet banking services

Tables IV show the detailed results of the Internet banking services examination for
94 sample banks during the survey period. The table shows the percentage of Internet
banks offering each of the Internet banking services. The four categories of Internet
banking services, i.e. view-only functions, account control functions, applications for
new banking services and more advanced transactions have been discussed in detail.

5.1 View-only functions

Table IV shows that all the transactional Internet banks irrespective of their category,
offer the view-only function, i.e. account balance enquiry. Egland et al. (1998) showed
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that most Internet banks offered the services of balance inquiry. That generalisation
applies even in case of India. Only 8 percent of Internet banks reviewed provides
monthly statement by e-mail. A total of 16.7 percent of the foreign banks and 17.6
percent of banks in the private sector provide monthly statement by e-mail. While none
of the Internet banks in public sector offer the same.
All the transactional Internet banks provide interest rates upon their websites while
only 24 percent of the banks provide foreign exchange updates. Again public sector
banks lag behind in offering this service. Only 6 percent of private sector Internet
banks provide an overview of bank accounts in different banks at one instance, i.e. one
view account. Only 14 percent of Internet banks provide a commentary upon market
fluctuations. No public sector bank offers this service. 67 percent of the foreign banks
and 47 percent of private banks provide demonstration of Internet banking on their

Internet banks
Number of as a percentage
Number of banks with Number of of banks in
Bank banks websites Internet banks category

Private sector banks 25 25 18 72.0

Newa 7 7 7 100.0
Oldb 18 18 11 61.1
Public sector banks 28 28 27 96.4
SBI Groupc 8 8 8 100.0
Nationalisedd 20 20 19 95.0
Foreign banks 29 29 6 20.7
All banks 82 82 51 62.2
Notes: aIncludes banks established after the liberalisation reforms as recommended by Narsimham
Committee in 1991; bIncludes banks established before the liberalisation reforms as recommended by
Narsimham Committee in 1991; cIncludes State bank of India and its seven subsidiaries; dIncludes
banks nationalised by the government in 1969 and 1980 and also includes IDBI Bank Ltd. Earlier it
was a private sector bank. It has been merged with its parent IDBI Ltd and the latter has been included
Table III. in the Public sector bank category with effect from 11 October 2004
Adoption rates of Internet Source: Websites of the individual banks (accessed during July 2008), annual reports of the respective
banks in India banks and bank communications
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Public sector banks Private sector banks

All banks All SBI group Nationalised banks All New private Old private Foreign banks
View-only functions
1. Balance enquiry 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
2. Monthly statement by e-mail 8.2 0.0 0.0 0.0 17.6 28.6 10.0 16.7
3. Interest rates updates 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
4. Foreign exchange rates updates 24.5 7.7 0.0 11.1 41.2 57.1 30.0 50.0
5. Market watch 14.3 0.0 0.0 0.0 23.5 57.1 0.0 50.0
6. One view account 2.0 0.0 0.0 0.0 5.9 14.3 0.0 0.0
7. Demonstration of I-banking 42.9 42.3 0.0 61.1 47.1 57.1 40.0 33.3
Action/account control functions
8. Funds transfer (self account) 85.7 84.6 100.0 77.8 82.4 100.0 70.0 100.0
9. Third party funds transfer 83.7 80.8 100.0 72.2 82.4 100.0 70.0 100.0
10. Bills payment 59.2 61.5 100.0 44.4 47.1 71.4 30.0 83.3
11. Requests/standing instructions 95.9 100.0 100.0 100.0 88.2 100.0 80.0 100.0
12. Cheque/enquiry status 87.8 96.2 100.0 94.4 70.6 85.7 60.0 100.0
13. Receive alerts 51.0 38.5 75.0 22.2 64.7 85.7 50.0 66.7
14. TDS enquiry 18.4 11.5 0.0 16.7 29.4 42.9 20.0 16.7
15. Customer correspondence 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
16. Change password and user profile 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Applying for new banking services
17. Account opening application 30.6 15.4 0.0 22.2 35.3 57.1 20.0 83.3
18. Loan applications 32.7 19.2 0.0 27.8 35.3 42.9 30.0 83.3
19. Deposit applications 51.0 26.9 12.5 33.3 70.6 71.4 70.0 100.0
More advanced transactions
20. Insurance 4.1 0.0 0.0 0.0 11.8 28.6 0.0 0.0
21. Demat holdings 22.4 11.5 12.5 11.1 29.4 57.1 10.0 50.0
22. Brokerage 4.1 0.0 0.0 0.0 11.8 28.6 0.0 0.0
23. Investments 28.6 15.4 12.5 16.7 35.3 85.7 0.0 66.7
24. Credit card operations/payments 26.5 15.4 37.5 5.6 23.5 57.1 0.0 83.3
25. Trading online 24.5 15.4 12.5 16.7 35.3 71.4 10.0 33.3
26. Online shopping 22.4 7.7 0.0 11.1 41.2 85.7 10.0 33.3
27. Charity online 18.4 7.7 12.5 5.6 29.4 57.1 10.0 33.3
28. Online tax payment 32.7 50.0 37.5 55.6 17.6 42.9 0.0 0.0
29. Online ticket booking 46.9 53.8 100.0 33.3 41.2 57.1 30.0 33.3
30. Corporate Internet banking 77.6 80.8 100.0 72.2 70.6 100.0 50.0 83.3
Privacy statement 93.9 92.3 100.0 88.9 94.1 100.0 90.0 100.0
Basic 59.2 61.5 100.0 44.4 47.1 71.4 30.0 83.3
Premium 49.0 42.3 37.5 44.4 47.1 71.4 30.0 83.3

Source: Websites of the individual banks (accessed during July 2008)

Internet banking

Internet banks)
transactional Internet
banks (percentage of
Key services offered by
95

Table IV.
 INTR websites. In general, foreign and private banks are more likely to offer general view
20,1 functions of Internet banking except the balance enquiry and interest rates updates,
where there is no difference among the categories of the banks.

5.2 Action/account control functions

A total of 85.7 percent of the banks reviewed offer the facility of transferring funds
96 between accounts while 83.7 percent of the banks offer the facility of transferring funds
between third parties accounts. A total of 59 percent of the banks reviewed provided
the opportunity of paying bills to third parties. All the banks irrespective of category
have shown a high performance in offering the services of funds transfer and bill
payments over the survey period.
A look at Internet banking services beyond balance enquiry, funds transfer and bill
payment reveals the pattern of what is offered by banks of different categories. As far as
the services of providing customer correspondence and change of passwords are
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concerned there is no difference among the banks during the period of second survey. A
total of 96 percent allow the creation or amendment of standing orders and request
handlings (cheque book requests etc). A total of 100 percent of foreign and public and 88
percent of banks in private sector offer this service. A total of 51 percent of the banks allow
alerts through e-mails or on mobiles. A total of 65 percent of private banks, 67 percent of
foreign banks and 38.5 percent of public sector offer this service. Among the public sector
banks, poor performance of nationalised banks in offering this service may be attributed to
this lower percentage. A total of 88 percent of the banks allow enquiry about status of
cheque. Banks have shown a poor performance in the provision of online TDS enquiry.
In general, a stiff competition from private and foreign banks has forced the public
sector banks to offer more control functions of Internet banking.

5.3 Applying for new banking services

Relatively few banks offer the facility of making application and enabling new
services. As the RBI does not permit the banks to allow account opening on Internet,
however, at least the customer should be allowed to feed in personal details so that the
process is expedited. Only 30.6 percent of the banks allow the customers to feed in
personal details for applying to open a new account. A total of 83 percent of foreign and
35 percent of the private sector banks (57 percent of new private sector banks) offer this
service. Public sector banks have shown a poor performance in offering this service.
None of the banks in SBI group offer this service. A total of 70.6 percent of the private
banks and 100 percent of the banks in foreign sector allow the customers to apply
online for deposits (fixed deposits, saving deposits etc.). This drops to only 27 percent
for the banks in public sector. A total of 32.7 percent of the banks offer online loan
applications, among these, 83 percent of foreign banks, 35 percent of private sector and
only 19 percent of public sector allows online applications for loans. Thus again
providing a hedge of foreign and private banks over the public sector banks.

5.4 More advanced transactions

Table IV also contains information on the extent to which particular business lines –
brokerage, investments, demat, credit card payments, trading, shopping and insurance
services – were offered online. Private sector banks were more likely to offer insurance
services, brokerage, trading online and shopping online compared with other
 categories. Some of the Internet banks have also started offering certain new services Internet banking
through Internet banking like tax payment, charity payment and railway ticket
booking online. Public sector banks showed a tremendous performance in the
provision of the services of tax payment and railway ticket booking online.

5.5 Corporate Internet banking

Online corporate Internet banking (where businesses use the Internet to manage their 97
bank balances) has been a growth area. This may reflect recognition by banks that
business customers can be particularly active users of online banking services and
may be among the banks’ more profitable customers. The service is available on 77.6
percent of the transactional websites of banks. A total of 100 percent of new private
sector banks and banks in SBI group offer this service. Only old private sector Internet
banks lag behind in offering this service.
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5.6 Website privacy statements

Both banks and their customers stand to benefit substantially from the increased ability
to collect and analyse information obtained over the Internet. In particular, both can
benefit from the collection and integration of large amounts of personal information that
enhance the ability of banks to offer a wide range of products tailored to individual
demands. But the collection, analysis, and distribution of information raise questions
related to protecting personal privacy. A fundamental step many banks are taking to
address online privacy is to post a statement of their policies about the collection and use
of customer information. The database includes information on the number of
transactional banks that had such a statement on their websites (see Table IV).
More than 90 percent of transactional Internet banks included a privacy policy
statement on their websites. Foreign banks were more likely to post an on-line privacy
policy than public and private sector banks. Indeed, 100 percent of the foreign banks
included on their websites a statement about the collection and use of customer
information, and almost 94 percent of private sector banks did so, as compared with 92
percent of the public sector banks. All Internet banks in new private sector and SBI
group included on their websites a privacy statement.
To acquire a clearer picture of the typical range of Internet services available at
banks of different sizes, two categories of Internet banking services were defined.
BASIC Internet banking is defined as the three core Internet banking services: balance
inquiry, funds transfer and bill payment. Premium Internet banking is defined as basic
plus at least three other transactional services. Table IV shows the proportion of banks
by bank categories that offer only basic services to those that offer premium Internet
banking products. Almost 83 percent of Internet banks in foreign sector and nearly 47
percent in new private sector offer basic as well as premium Internet banking services.
On the other hand, 61 percent of Internet banks in public sector offer basic Internet
banking services, while only 42 percent offer premium services. A noteworthy result
emerges in SBI group. All the Internet banks in SBI group offer basic services, while a
very few offer premium services. It means that although public sector banks can
establish an online presence, they remain less likely to compete with foreign and new
private sector banks on the basis of the range of offerings. To the extent that the
variety of products is a key to attracting and maintaining a strong customer base,
public sector banks may be at a disadvantage.
 INTR 6. Extent of Internet banking services
20,1 Table V shows the extent of Internet banking services of 51 Internet banks based on
the information of key Internet banking services, drawn from websites of the banks.
The table shows that ICICI Bank Ltd and HDFC Bank Ltd. offer maximum services
through Internet banking with an extent of nearly 90 percent. After this, come foreign
banks, i.e. ABN Amro and Citi Bank that score around 80 percent. UTI Bank Ltd.
98 stands at third rank with an extent of nearly 77 percent while Kotak Mahindra Bank
Ltd. stands at fourth place with an extent of nearly 73 percent. Thus, the first four
ranks are acquired by new private and foreign Internet banks.
The fifth rank is jointly shared by public sector banks, i.e. State Bank of India and
Union Bank of India, with nearly 67 percent of services. The table shows that new
private and foreign banks show higher levels of Internet banking services. The
remaining banks are in their early stages of development and introduction of Internet
banking services.
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7. Factors affecting the extent of Internet banking services

Depth of adoption is a relatively new construct defined as the extent to which a firm
exploits an innovation’s potential technological capabilities (Cooper and Zmud, 1990;
Ettlie and Reza, 1992). After exploring the various Internet banking services offered by
Internet banks factors, the next step is to investigate factors that explain which banks
choose to offer a relatively wide range of Internet banking services. The purpose of this
section is to explore the factors that affect the extent of Internet banking services being
offered by Internet banks.
The sample consists of 51 banks that are providing Internet banking services in
India in July 2008 (as per the results explored in Table III). Hence, the banks that had
not adopted Internet banking or providing informational websites only were dropped.
The financial data have been compiled as on 31 March 2007.

7.1 Explanatory variables

Multiple regression analysis has been used to find the factors affecting the banks’
extent of Internet banking services. The dependent variable in the regression analysis
is extent that shows the extent of Internet banking services offered by each Internet
bank (see Table V). Definition and hypothesis development for the variables
incorporated in the study are discussed below.
7.1.1 Size. Size is an important variable affecting the banks’ decision to adopt a wide
array of Internet banking services. This is partly because it is relatively easy to
observe and partly because it is typically taken as a proxy for all kinds of things: large
firms are sometimes thought to be more capable (they may have higher quality or more
technically able people on their staff, they may be freer from financial constraints, they
may have market power or be more inclined to strategically pre-empt smaller rivals,
they may have economies of scale and scope in R&D activities and in the application of
their results and being able to take greater risks, the new innovation may be
complementary with other activities they undertake or be capable of being applied to a
wider range of activities than would be the case if the adopting firm were specialised,
and so on) and for this reason, they may use innovations more intensively (i.e. on a
large scale) and so earn more profits from adopting than smaller firms would. Thus,
the expected sign is positive on this coefficient.
 Extent (in
Internet banking
Internet banks percentage)

A. Public sector banks

SBI Group
1 State Bank of India 66.7
2 State Bank of Hyderabad 43.3 99
3 State Bank of Indore 43.3
4 State Bank of Bikaner & Jaipur 43.3
5 State Bank of Mysore 40.0
6 State Bank of Patiala 40.0
7 State Bank of Saurashtra 36.7
8 State Bank of Travancore 40.0
Nationalised banks
9 Allahabad Bank 33.3
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10 Andhra Bank 33.3

11 Bank of Baroda 43.3
12 Bank of India 33.3
13 Bank of Maharashtra 26.7
14 Canara Bank 50.0
15 Central Bank of India 30.0
16 Corporation Bank 53.3
17 Dena Bank 26.7
18 IDBI 60.0
19 Indian Bank 33.3
20 Indian Overseas Bank 23.3
21 Oriental Bank of Commerce 46.7
22 Punjab National Bank 50.0
23 Syndicate Bank 43.3
24 UCO Bank 43.3
25 Union Bank of India 66.7
26 United Bank of India 36.7
27 Vijaya Bank 23.3
B. Private sector banks
New private banks
1 Centurion Bank of Punjab Ltd 46.7
2 HDFC Bank Ltd 90.0
3 ICICI Bank Ltd 90.0
4 IndusInd Bank Ltd 56.7
5 Kotak Mahindra Bank Ltd 73.3
6 UTI Bank Ltd 76.7
7 YES Bank Ltd 43.3
Old private banks
8 The Bank of Rajasthan Ltd 33.3
9 City Union Bank Ltd 23.3
10 Development Credit Bank Ltd 36.7
11 The Dhanklakshmi Bank Ltd 16.7
12 The Federal Bank Ltd 50.0
13 ING Vysya Bank Ltd 46.7
14 The J&K Bank Ltd 16.7 Table V.
15 The Karnataka Bank Ltd 60.0 Extent of Internet
(continued) banking services
 INTR Extent (in
20,1 Internet banks percentage)

16 Lakshmi Vilas Bank Ltd 40.0

17 Karur Vysya Bank Ltd 40.0
18 South Indian Bank Ltd 43.3
100 C. Foreign banks
1 ABN Amro Bank 80.0
2 Abu-dhabi Commercial Bank 43.3
3 Citibank 80.0
4 Deutsche Bank 40.0
5 Hongkong & Shanghai Bank 60.0
6 Standard Chartered Bank 63.3
Note: There are two foreign banks that offer Internet banking to corporate customers only (hence not
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included in survey)
Table V. Source: Websites of the individual banks (accessed July 2008)

7.1.2 Age. The coefficient of age is expected to be negative, because new banks are
more flexible, do not have a legacy system to deal with and face smaller managerial
obstacles to the adoption of the new technology. New banks may find it cheaper to install
Internet banking technology in a package with other computer facilities compared to
older banks that must add Internet banking to legacy computer system (Ang and Koh,
1997; Sullivan and Wang, 2005). Giunta and Trivieri (2004) also propounded that the
younger firms prove more ready to embrace innovative developments.
7.1.3 Experience. It is plausible that banks will expand their services as they gain
experience in offering Internet banking. Hence a variable, experience, has been
included, which represents the number of years since the bank adopted Internet
banking. The variable may be considered a crude proxy for both accumulation of
experience in general and reductions in the perceived risk of investments in Internet
banking in particular. Hence, the Internet banking experienced banks would be
expected to offer a wide array of Internet banking services. The expected sign on this
variable is positive.
7.1.4 Deposits. Sullivan (2000) argued that a bank can generate a large number of
Internet transactions if it has a sizeable customer base. As a proxy for customer base,
deposits of the bank has been chosen. On the other hand, Furst et al. (2002a) have
shown that among Internet banks, those that place less emphasis on traditional
funding tend to offer a wider range of Internet banking services, which is consistent
with a more innovative business approach. Therefore, the sign expected on this
variable is ambiguous.
7.1.5 Type of bank. To account for nature of bank category, dummy variable private
is included which takes the value of 1 if the bank happens to be a private bank (whether
domestic or foreign) and takes a value of zero otherwise. The expected sign on private
is positive as the banks with private ownership are supposed to offer a wide range of
Internet banking services.
The explanatory variables with their labels and expected signs that have been used
to explain the relationship with the extent of Internet banking services are given in the
Table VI.
 Internet banking
Labels Name Definitions Expected sign

Dependent variables
Y1 Extent Percentage of Internet banking services to total
Internet banking services
Independent variables
X1 Size The natural log of the total assets þ 101
X2 Age The natural log of age of banks –
X3 Experience Number of years since the bank adopted Internet
banking as on 2007 þ Table VI.
X4 Deposits The ratio of total deposits to total funds ? Description of variables
X5 Private Dummy for the banks in private sector (both affecting the extent of
domestic and foreign) þ Internet banking services
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7.2 The model

Multiple regression analysis has been used to find the factors affecting the banks’
extent of Internet banking services. The dependent variable in the regression analysis
is extent that shows the extent of Internet banking services offered by each Internet
bank. Following model has been used to examine the relationship between the extent
and the other explanatory variables affecting it:
EXTENTi ¼ b1 þ b2 X 1 þ b3 X 2 þ b4 X 3 þ b5 X 4 þ b6 X 5 þ 1i ð1Þ
where EXTENTi is the measure of range of Internet banking services for banki. In
separate analyses of various bank categories, ownership dummy (private) will not be
included, hence, the regression equation (1) will be modified as:
EXTENTi ¼ b1 þ b2 X 1 þ b3 X 2 þ b4 X 3 þ b5 X 4 þ 1i ð2Þ
The parameters are estimated by the method of ordinary least square (OLS).

7.3 The results

Table VII presents the results of the multiple regression model, both for all banks and
for banks under public (further categorised into nationalised and SBI group), private
(further categorised into new private and old private) and foreign banks.
Looking at results for all banks first, larger banks offer a wider range of Internet
banking services than small banks. As expected, the coefficient on experience is
positive, indicating that banks with greater experience in Internet banking offer a
wider range of services. A very noteworthy result is with regard to deposits. The
statistically significant negative coefficient on deposits indicates that, among Internet
banks, those that place less emphasis on traditional funding offer a wider range of
Internet banking services, which is consistent with a more innovative business
approach. Age did not turn out to be a significant variable affecting expanded Internet
banking services. The statistically significant positive coefficient on private indicates
that private banks including foreign banks offer a wide range of Internet banking
services in comparison to public banks.
However, the results of the regression estimation are not similar for the bank
categories sample to those for the all-bank sample. In case of public sector banks, only
size of the bank is significant variable. All other variables are found to be insignificant.
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20,1

102
INTR

Table VII.

banking services
extent of Internet
Factors affecting the
Public sector banks Private sector banks
Foreign
All banks All Nationalised SBI Group All New Old banks
( b) ( b) ( b) (b) (b) (b) ( b) (b)

Intercept 2 9.903 (0.686) 7.766 (0.844) 2 37.753 (0.573) 86.584 (0.248) 2 7.664 (0.916) 155.626 (0.785) 426.025 (0.334) 2 3.992 (0.953)
Size 17.683 * * * (0.000) 13.528 * (0.053) 20.467 (0.155) 13.263 * * (0.035) 25.112 * * (0.044) 2 22.005 (0.884) 4.384 (0.839) 6.013 (0.776)
Age 2 5.257 (0.275) 1.383 (0.915) 8.238 (0.682) 2 7.587 (0.363) 2 8.731 (0.345) 2 25.538 (0.756) 9.281 (0.695) 37.640 (0.594)
Experience 2.495 * * * (0.008) 1.316 (0.288) 0.848 (0.598) 1.134 (0.284) 1.228 (0.568) 13.203 (0.720) 2 0.145 (0.958) 0.648 (0.951)
Deposits 2 0.336 * * (0.027) 2 0.404 (0.088) 2 0.425 (0.155) 2 0.989 (0.165) 2 0.450 (0.447) 2 0.458 (0.679) 2 4.320 (0.297) 2 0.404 (0.719)
Private 13.128 * * * (0.007)
R-squared 0.651 0.419 0.418 0.971 0.745 0.816 0.313 0.800
Adjusted R-squared 0.612 0.313 0.252 0.931 0.666 0.447 2 0.144 0.000
F-statistics 16.78 * * * 3.96 * * 2.51 * 24.77 * * 9.47 * * * 2.21 0.685 1.00
Number 51 27 18 8 18 7 11 6
Notes: The figure in bracket denotes the probability (p) value; *Significant at the 10 percent level; * *Significant at the 5 percent level; * * *Significant at the 1 percent or
better level
 In the sub-category of nationalised banks, none of the variables turned out to be Internet banking
significant. In case of SBI group banks, banks that are large, are more inclined to offer
a wide range of Internet banking services.
In case of private (domestic) banks, as expected, size of the bank is positive and
significant showing that large banks offer a wide range of Internet banking services
than small banks. All other variables are found to be insignificant. In the sub-category
of private banks, none of the variables is found to be significant. In case of foreign 103
banks, all variables are found to be insignificant.

8. Conclusions
Internet banking has remained a nucleus issue of various studies all over the world.
However there has constantly been a literature gap on the issue in India. The purpose
of this paper is to help fill significant gaps in knowledge about the Internet banking
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landscape in India. The paper presents data, drawn from a survey of commercial
banks’ websites, on the number of banks that offer Internet banking and on the
products and services they offer. The survey results reveal that, during the period of
July 2008, 82 banks in India had websites, of which 51 allowed transactions to be
initiated through the Internet in one form or the other, which represents nearly 62
percent of total sample banks. Most of the market is still untapped in India. The gap
exists due to low adoption of Internet banking by old private sector and foreign banks.
Private sector banks particularly new private banks and foreign Internet banks lead
public sector Internet banks in offering a wide range and more advanced services of
Internet banking. As most of the banking institutions in India have only recently
started to offer Internet banking, there is a lot of scope for these institutions to expand
their Internet banking services to have a more sophisticated customer base. It should
also be remembered that only quantity of services will not serve the purpose, unless it
is accompanied by quality also.
The rate at which innovations are adopted by firms constitutes an important part of
the process of technological change. After adopting a new technology, an important
decision emerges before the firm management, i.e. the extent to which the capabilities
of the new technology will be exploited – labelled as “depth” of adoption. The decision
is impacted by a number of influences, notably individual, organisational,
technological and environmental and being aware of these factors and their
importance is a potential decision opportunity for firm management. Through this
study, an effort has been made to identify various bank characteristics which affect the
extent of Internet banking services offered by Internet banks and being aware of these
factors and their importance is a potential decision opportunity for bank management.
The results of multiple regressions, examining the factors affecting the extent of
Internet banking services, revealed that among banks that offer Internet banking,
larger banks and banks that have offered this service for a longer time offer a wider
range of services over the Internet. Large banks have more aggressive plans to offer
Internet banking services in the future than smaller institutions. Also, banks relying
less on deposits for financing, offer a wide range of services over the Internet, which is
consistent with a more innovative business approach. Private banks offer a wider
range of Internet banking services. Among various bank categories, size of the bank is
the most prominent variable affecting the extent of Internet banking services.
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Agarwal, N., Agarwal, R., Sharma, P. and Sherry, A.M. (2003), “E-banking for comprehensive
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Vol. 8 No. 1.
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option: theory and tests”, The Journal of Multinational Financial Management, Vol. 12 Nos
4/5, pp. 347-63.
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Perspectives, Vol. 25 No. 1, pp. 60-75.
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banking industry”, Journal of Business, Vol. 78 No. 3, pp. 893-947.
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experience”, working paper, Berkeley Research Center, New York University, New York,
NY.
 INTR Hernando, I. and Nieto, M.J. (2005), “Is the Internet delivery channel changing banks’
performance? The case of Spanish banks”, unpublished manuscript, Banco de España,
20,1 Madrid.
Kaushik, M. and Dhunna, M. (2006), “Internet banking: customers’ profile”, Amity Management
Analyst, Vol. 1 No. 1, pp. 61-74.
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106 Nickerson, D. and Sullivan, R.J. (2003), “Financial innovation, strategic real options and
endogenous competition: theory and an application to Internet banking”, working paper
WP 03-01, Payments System Research, Federal Reserve Bank of Kansas City, Kansas City,
MO.
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London, April 11.
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from Australian credit unions”, The Journal of International Banking Regulation, Vol. 6
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No. 2.

Corresponding author
Pooja Malhotra can be contacted at: pkwatra@gmail.com

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