A Project Report On A Study on Customers Responsiveness and Challenges of Internet Banking Services Provided by Selected Banks in Udaipur Submitted

d In Partial fulfillment for the award of degree of Master of Business Administration

2008-2010

Guided by: Dr. Pushpkant Shakhdwipee Associate Professor

Submitted by:Mona Mehta Part - II

PREFACE
With the changing time, the Banking Industry increase in new and innovative technology. There are various regulations, directions, legal section and uniform customs and practices prevalent in the banking sector, which I have tried to assimilate in very small manner in form of project. Banking is very vast subject and there are very frequent changes regularly. This study identifies the awareness and challenges of Internet Banking Services. Chapter one incorporates the introduction, history of Banking Industry in India, Indian Banking Industry, Banking Services in India, Banks in India, Indian banks on web , present scenario of banking industry and major banks in India , retail banking. Chapter two incorporates the meaning, introduction ,services, various mode of communication, technology, advantages, disadvantages , safety measures, challenges, present scenario of Internet Banking and a comparison of internet banking with traditional banking. Chapter three incorporated with the research methodology of the project, objectives of the study, sample design, collection of data required for the project. Chapter four incorporates the analysis and interpretation of the data. Chapter five incorporates the summary of findings, various suggestions which are given on the basis of the conclusions of the project. Attempts have been made to make this report as per availability of data. Suggestions from the faculty and students are always welcomed.

ACKNOWLEDGEMENT
My sincere gratitude to my esteemed supervisor Dr. Pushpkant Shakdwipee, faculty , Pacific Institute of Management under whose guidance and direction, I was able to give shape to my project. His constant review and excellent suggestions throughout the project are highly commendable. I wish to express our grateful respect & thanks towards Prof. B.P. Sharma, Director, Pacific Institute of Management for allowing us to undergo the project. I wish to record our sincere thanks for the assistance received from all of our teachers, who gave us their precious time & invaluable suggestions to make our work presentable. I have no words to express adequately our deep sense of gratitude to each and every one who have directly or indirectly helped us to complete this project successfully.

Mona Mehta

CONTENTS
Preface Acknowledgement Retail banking Chapter 1: Introduction 1.1 History 1.2 Internet banking in India 1.3 Advantages of internet banking 1.4 Disadvantages of internet banking 1.5 Challenges of internet banking 1.6 Traditional v/s internet banking Chapter 2: Introduction to the industry 2.1 Indian banking industry 2.2 History of Indian banking Chapter 3: Research methodology 3.1 Sample size 3.2 Sampling technique 3.3 Data collection method 3.4 Data presentation and analysis Chapter 4: Data interpretation and analysis Chapter 5: Summary of findings , suggestions and conclusion Appendicies

Chapter 1
INTRODUCTION

Bank
A bank is a financial intermediary that accepts deposits and channels those deposits into lending activities. Banks are a fundamental component of the financial system, and are also active players in financial markets. The essential role of a bank is to connect those who have capital (such as investors or depositors), with those who seek capital (such as individuals wanting a loan, or businesses wanting to grow).

Retail banking
The relationship between the bankers and the customers is not the same like before. The market has undergone a big change. The customers have become more demanding today. The transition from sellers market to buyers market has compelled the bankers to understand the pulse and need of the customers. It may not be incorrect to say that the banking products and services today are designed by the customers. The luxury of discretion to design the products and services by the bankers is not any more available to the bankers. Bankers today have no choice except to alter their product mix , delivery channels and corporate structure to serve their functional role. Some of the products which were shunned by the bankers and were treated as inflationary 20 years ago in nature like housing loan , consumer durable finance which otherwise were the prerogative of the bank employees have become targets of bank business and area of fierce competition and the unexpected quarters say cooperative banks too have joined the fray. Retail banking refers to banking in which banking institutions execute transactions directly with consumers , rather than corporations or other banks. Services offered include: savings and checking accounts , mortgages , personal loans , debit cards , credit cards ,and so forth. Retail banking is typical mass market banking where individual customers use local branches of larger commercial banks.

Features of retail banking 1. 24/7 customer access to their accounts via internet . 2. Reduced routine teller visits and calls to the branch. 3. Automated customer service requests with secure e- mail. 4. Automated new account qualification and application process. 5. Inquiry into check balances, histories and search all transactions. 6. Transfer funds between accounts. 7. Pay bills ,order cheques. Types of retail banking products Banks are slowly moving toward becoming one stop shops or financial supermarkets , which cater to all kinds of financial products, ranging from traditional asset and liability products, to complex investment products . Deposits and loans form the traditional products of banks, which most customers are already familiar with. But with the changing demographic and socio-economic situation (ex- increase in income levels and changing spending habits),todays consumers have evolved and are ready to invest in products that have higher risk levels. Increased awareness about different investment avenues and their respective rates of return is another factor that has influenced a shift toward various investment products. To cater to these consumer groups , banks have expanded their product portfolio. Advantages of retail banking Retail banking has inherent advantages outweighing certain disadvantages . advantages are analyzed both from the resource angle and asset angle. Resource Stable and constitute core deposits . Less bargaining for additional interest . Low cost funds. Builds customer base. Increases subsidiary business. 8

A safe and convenient saving avenue . Better yield and improved bottom line. Good avenue for funds deployment. Lower risk. Helps economic revival of the nation through increased production activity. Improves lifestyle and fulfills aspirations of the people through affordable credit. Innovative product development. Minimum marketing efforts in a demand driven economy. Risk weight in certain segments like housing loan.

Asset side

Strategies for increasing retail banking businessConstant product innovation to match the requirements of the customer segments: The customer database available with the banks is the best source of their demographic and financial information and can be used by the banks for targeting certain customer segments for new or modified product. The banks should come out with new product in the areas of securities, mutual fund and insurance. Quality service and quickness in delivery: As most of the banks are offering retail product of similar nature, the customer can easily switchover to the one, which offers better service at comparatively lower costs. The quality of service that bank offers and the experience that client have, matter the most. Hence, to retain the customer, banks have to come up with competitive products satisfying the desire of the customer at the click of a button. Introduction of new delivery channels : Retail customer like to interfere with there bank through multiple channels. Therefore, banks should try to give high quality service across all service channels like branches, internet, ATMs, etc.. Tapping of unexploited potential and Increasing the volume of business: The Indian retail banking market still remains largely untapped giving a scope fro

growth to the banks and financial institution. With changing psyche of Indian consumer, who are now comfortable with the idea of availing loans for their personal needs, banks have tremendous potential lying in this segment. Marketing department of the banks be geared up and special training be imparted to them so that banks are successful in grabbing more and more of retail business in the market. Infrastructure outsourcing: this will help in lowering the cost of service channels combined with the quality and quickness. Detail market research: banks may go for detail market research, which will help them in knowing what their competitors are offering to their client. This will enable them to have an edge over their competitors and increasing their share in retail banking pie by offering better products and services. Cross-selling of products: PSBs have an added advantage of having a wide network of branches, which gives them an opportunity to sell third-party products through these branches. Business process outsourcing: Outsourcing of requirements would not only save cost and time but would help the banks in concentrating on the core business area. Banks can devote more time for marketing, customer service and brand building. For example, Management of ATMs can be outsourced. This will save the banks from dealing with the intricacies of technology. Tie-up arrangements: PSBs with regional concentration can reap the benefit of reaching customer across the country by entering into strategic alliance with other such banks with intensive presence in other regions. In the present regime of falling and stiff competition, banks are aware that it is finally the retail banking which will enable them to hold the head above water. Hence , banks should make out all efforts to boost the retail banking by recognizing the needs of the customers. It is essential that banks would be imaginative in predicting customers expectations in the ever changing tastes and environments. It is the innovative and competitive products coupled with high quality care for clients will only hold the key to success in this area. In short , bankers have to run very fast

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even to stay where they are now. It is the survival of the fastest now and not only the survival of the fittest. Factors contributing to the growth in retail banking : The retail banking sector has grown tremendously in India. There are many factors that have been contributing to this growth. Some of them like banking reforms increase in funding options for corporate ,etc. following are some of other factors that have fueled the growth of the retail business in the Indian banking sector. Economic prosperity : since 1992 , the economy has been growing at a compounded annual growth rate of 6.8%. Economic prosperity has led to an increase in the purchasing power of the consumers. Changing demographics: Changing demographics has also contributed to the growth of retail banking. As of 2006 , nearly 70% of the Indian population is under 35 years of age. The Indian population is ,to a large extent .young and young people are ready to take risks. Technological advancements : Technological advancements in the distribution of banking services have revolutionized the way banking is done. They have brought in comforts like phone banking , ATMs , credit/ debit cards and more recently ,any branch- banking and internet banking. Also technology has helped in the automation of back office processes in banks , thereby saving a lot of time for the employees , which they can use to focus on attending the customers. Lower NPAs : NPAs and impaired assets are relatively lower in retail banking than in corporate banking and this factor is attracting more players to retail banking. Liquidity in the banking system: Liquidity in the banking system increases with some inflow of funds through deposit mobilization , flow of foreign investments or due to regulatory relaxation of provisions such as cash reserve ratio(CRR) and statutory liquidity ratio(SLR). More liquidity reduces the cost of funds , which in turn reduces the interest rates.

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Challenges of retail banking : 1.Customer relation and credit delivery mechanism : customer relation is a major challenge for retail banking in the new era ,even though retail banking customers are generally loyal. With increasing publicities on the services offered by competing banks, it has become tempting for the customers to check for the services in other banks. There has been a rising tendency among the retail customers to have accounts in more than one bank. This has led banks to move away from transaction centric model of business towards a more customer centric model. The innovations that have been part of retail banking all along such as ATM , e- banking , multi product distribution etc. , have been solely aimed at retaining and increasing the customer base. The CRM approaches or the technological innovations are part of this broader orientation in customer satisfaction. The anytime and anywhere banking facilities have been introduced by the banks to increase satisfaction and to retain loyalty of the customers. The bankers will have to take a comprehensive view about their delivery channels. Till now delivery channels were devised focusing mainly on time and place advantage to the customers. However, with the continue advances in wireless technology, flexibility in delivery channels device would be the force of not banks. Successful adoption of wireless technology would help banks to offer not only anytime, anywhere, but also any device banking. Further, banks will have to build integrated delivery channels with both vertical and horizontal integration. 2. Technology barrier: The talk of delivery mechanism brings the discussion of technology into the picture. The increasing use of ATMs and E-banking has placed enormous strain on working of systems and procedure followed. Banks have been forced to strike a fine balance between speed and security the enormous amount of data that are to be fed into the systems call for robust and very modern technology and qualified professionals to man the system. Even

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though there has been a remarkable increasing speed in delivering services and providing facilities across the branch network, this has also increase the dependency of banking operations on IT and separate department to keep the system continuously running, have increased additional responsibilities. 3. Security concerns: security concerns remain an increasingly important challenge to be deal with. Fraud and prevention of it has led many banks to invest in heavy security and identity management and human resources to combat fraud. Such factor include increasing concern regarding regulatory compliance ; vulnerability created by check imaging and the need for new check fraud measure; and continuing attacks against cards at both the POS(pint of sale) and ATM. The security concerns have become a dual requirement in order to protect customer privacy and protect against fraud. 4.KYC norms and regulatory complains: KYC issues and money laundering risks in retail banking is yet another important issue. Retain lending is often regarded as a low risks area for money laundering because of the perception of the sums involved. However, competitions for client may also lead to KYC procedure being walved in the bid for new business. Banks must also consider seriously the type of identification documents they will accept and other processes to be completed. Retail banking does not refer to lending only. In the whole story of retailing one should not forget the role played by retail depositors. The homemaker, the retail shopkeeper, the pensioners, self employed and those employed in unorganized sector all need to get a place in banks. Hence the norms are to be applied in such a way so as not to deny banking facilities to any individual. 5.Credit evaluation and scoring: retail credit differs from commercial credit on the account that there has been no well established appraisal or evaluation procedure or format. The usual data on which banks base their evaluation such as financial statements are not available in retail credit for most of the times and hence bankers have to base their evaluation on factors such as the character of

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the borrower , the sources of income ,purpose of loan ,previous repayment record ,etc. which are more qualitative in nature. 6.Credit information sharing: sharing of customer details will go a long way in ensuring that the potential customer has a good track record. This area has always been clouded because of the reason that banks have traditionally seen the information on customer as confidential and not to be shared with others. This has been overcome with the establishment of credit bureaus to function as a repository of credit information . 7. Recovery : rising indebtedness could turn out to be a cause for concern the future. Indias position of course ,is not comparable to that of developed world where household debt as a proportion of disposal income is much higher. Such a scenario creates high uncertainty. Emerging issues in retail banking : Driven by forces that are often beyond their control, the banking industry in general and retail banking in particular are undergoing a major transformation. Banks are introducing enterprise wide changes ,spanning the dimensions of people , process and technology ,to deal with the challenges and retain their competitive edge. Customers of the future With increasing globalization , converging regulations and consolidation ,banks are witnessing intense competition. Regional banks are becoming national banks , national banks are becoming multinational banks and multinational banks are becoming global banks. Not only will customers of future be more demanding and tech savvy , but will want convenient and efficient baking. With internet penetration increasing even in emerging economies , information will be more readily available and products will be accessed more easily . Customers will require flexible solutions customized to their needs. They will want to purchase products through various channels and access real-time overviews of their accounts and transactions at all times. They demand speed in processing

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transactions ,simplicity when comparing products and convenience when performing day to day banking activities. All this will have to be provided at the best possible cost and through exemplary service. If not , customers will exercise their right to choice and go to another bank. As a result , retail banks have begun to rethink what , where and how to serve an increasingly informed and demanding customer base. Growing demands: The customer demands a one stop shop forfinancial needs non financial advisory services such as extension of financial assistance in services such as travel needs, education planning and so on. The customer of future will also be defined by age and income. While the population is graying in developed markets , the emerging economies will have young customers who readily use technology for transactions. Banks must also concentrate on serving new consumers the next billion. Hence ,while banks traditionally market their products to comparably affluent people , they must also think to address the needs of others as well. Tech driven products and services of future As the customer of the future becomes more demanding, banks have to focus on innovation and efficiency to ensure growth. Technology will be the key enabler in providing innovative products and services that help meet varied customer requirements. Technology will change banking products and services fundamentally. Mobile payments , cashless transactions , online product developments are changing the way financial transactions are carried out. In many emerging economies , the mobile phone has transformed basic financial services. The second key impact of technology on banking products and services will be the proliferation of distribution channels. Channels such as the mobile phone, ATMs and internet have already become common. The global ATM market is expected to reach 2 million installations by 2011.

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INTERNET BANKING
Internet banking (or E-banking) means any user with a personal computer and a browser can get connected to his banks website to perform any of the virtual banking functions. In internet banking system the bank has a centralized database that is web-enabled. All the services that the bank has permitted on the internet are displayed in menu. Any service can be selected and further interaction is dictated by the nature of service. The traditional branch model of bank is now giving place to an alternative delivery channels with ATM network. Once the branch offices of bank are interconnected through terrestrial or satellite links, there would be no physical identity for any branch. It would a borderless entity permitting anytime, anywhere and anyhow banking. The network which connects the various locations and gives connectivity to the central office within the organization is called intranet. These networks are limited to organizations for which they are set up. SWIFT is a live example of intranet application.

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History The precursor for the modern home online banking services were the distance banking services over electronic media from the early '80s. The term online became popular in the late '80s and referred to the use of a terminal, keyboard and TV (or monitor) to access the banking system using a phone line. Home banking can also refer to the use of a numeric keypad to send tones down a phone line with instructions to the bank. Online services started in New York in 1981 when four of the citys major Hanover) banks offered (Citibank, Chase home banking Manhattan, Chemical and Manufacturers

services[1] using the videotex system. Because of the commercial failure of videotex these banking services never became popular except in France where the use of videotex (Minitel) was subsidised by the telecom provider and the UK, where the Prestel system was used. The UKs first home online banking services[2] was set up by Bank of Scotland for customers of the Nottingham Building Society (NBS) in 1983 ("History of the Nottingham". Retrieved 2007-12-14.). The system used was based on the UK's Prestel system and used a computer, such as the BBC Micro, or keyboard (Tandata Td1400) connected to the telephone system and television set. The system (known as 'Homelink') allowed on-line viewing of statements, bank transfers and bill payments. In order to make bank transfers and bill payments, a written instruction giving details of the intended recipient had to be sent to the NBS who set the details up on the Homelink system. Typical recipients were gas, electricity and telephone companies and accounts with other banks. Details of payments to be made were input into the NBS system by the account holder via Prestel. A cheque was then sent by NBS to the payee and an advice giving details of the payment was sent to the account holder. BACS was later used to transfer the payment directly. Stanford Federal Credit Union was the first financial institution to offer online internet banking services to all of its members in Oct, 1994.[3]

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Today, many banks are internet only banks. Unlike their predecessors, these internet only banks do not maintain brick and mortar bank branches. Instead, they typically differentiate themselves by offering better interest rates and online banking features.

Internet

banking

in

India

The Reserve Bank of India constituted a working group on Internet Banking. The group divided the internet banking products in India into 3 types based on the levels of access granted. They are: i) Information Only System: General purpose information like interest rates, branch location, bank products and their features, loan and deposit calculations are provided in the banks website. There exist facilities for downloading various types of application forms. The communication is normally done through e-mail. There is no interaction between the customer and bank's application system. No identification of the customer is done. In this system, there is no possibility of any unauthorized person getting into production systems of the bank through internet. ii) Electronic Information Transfer System: The system provides customerspecific information in the form of account balances, transaction details, and statement of accounts. The information is still largely of the 'read only' format. Identification and authentication of the customer is through password. The information is fetched from the bank's application system either in batch mode or off-line. The application systems cannot directly access through the internet. iii) Fully Electronic Transactional System: This system allows bi-directional capabilities. Transactions can be submitted by the customer for online update. This system requires high degree of security and control. In this environment, web server and application systems are linked over secure infrastructure. It comprises technology covering computerization, networking and security, interbank payment gateway and (ATM): legal infrastructure. iv) Automated Teller Machine

ATM is designed to perform the most important function of bank. It is operated by plastic card with its special features. The plastic card is replacing cheque,

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personal attendance of the customer, banking hours restrictions and paper based verification. There are debit cards. ATMs used as spring board for Electronic v)Fund Transfer: ATM itself can provide information about customers account and also receive instructions from customers - ATM cardholders. An ATM is an Electronic Fund Transfer terminal capable of handling cash deposits, transfer between accounts, balance enquiries, cash withdrawals and pay bills. It may be on-line or 0ff-line. The on-line ATN enables the customer to avail banking facilities from anywhere. In off-line the facilities are confined to that particular ATM assigned. Any customer possessing ATM card issued by the Shared Payment Network System can go to any ATM linked to Shared Payment Networks vi)Credit and Cards/Debit Cards: perform his transactions.

The Credit Card holder is empowered to spend wherever and whenever he wants with his Credit Card within the limits fixed by his bank. Credit Card is a post paid card. Debit Card, on the other hand, is a prepaid card with some stored value. Every time a person uses this card, the Internet Banking house gets money transferred to its account from the bank of the buyer. The buyers account is debited with the exact amount of purchases. An individual has to open an account with the issuing bank which gives debit card with a Personal Identification Number (PIN). When he makes a purchase, he enters his PIN on shops PIN pad. When the card is slurped through the electronic terminal, it dials the acquiring bank system - either Master Card or VISA that validates the PIN and finds out from the issuing bank whether to accept or decline the transactions. The customer can never overspend because the system rejects any transaction which exceeds the balance in his account. The bank never faces a default because the amount spent is debited immediately from the customers account. vii) Smart Card: Banks are adding chips to their current magnetic stripe cards to enhance security and offer new service, called Smart Cards. Smart Cards allow thousands of times of information storable on magnetic stripe cards. In addition, these cards are highly secure, more reliable and perform multiple functions. They

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hold a large amount of personal information, from medical and health history to personal Services Bill banking through and personal preferences.

internet-Banking:

payment

service

You can facilitate payment of electricity and telephone bills, mobile phone, credit card and insurance premium bills as each bank has tie-ups with various utility companies, service providers and insurance companies, across the country. To pay your bills, all you need to do is complete a simple one-time registration for each biller. You can also set up standing instructions online to pay your recurring bills, automatically. Generally, the bank does not charge customers for online bill payment. Fund transfer You can transfer any amount from one account to another of the same or any another bank. Customers can send money anywhere in India. Once you login to your account, you need to mention the payee's account number, his bank and the branch. The transfer will take place in a day or so, whereas in a traditional method, it takes about three working days. ICICI Bank says that online bill payment service and fund transfer facility have been their most popular online services. Credit card customers With Internet banking, customers can not only pay their credit card bills online but also get a loan on their cards. If you lose your credit card, you can report lost card online. Railway pass This is something that would interest all the aam janta. Indian Railways has tied up with ICICI bank and you can now make your railway pass for local trains online. The pass will be delivered to you at your doorstep. But the facility is limited to Mumbai, Thane, Nasik, Surat and Pune. Investing through Internet banking You can now open an FD online through funds transfer. Now investors with

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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 you the facility to purchase mutual funds directly from the online banking system. Nowadays, most leading banks offer both online banking and demat account. However if you have your demat account with independent share brokers, then you need to sign a special form, which will link your two accounts. Recharging your prepaid phone Now just top-up your prepaid mobile cards by logging in to Internet banking. By just selecting your operator's name, entering your mobile number and the amount for recharge, your phone is again back in action within few minutes. Shopping With a range of all kind of products, you can shop online and the payment is also made conveniently through your account. You can also buy railway and air tickets through Internet banking.

Advantages of Internet banking :

Banking around the clock is no longer a remote possibility. But the banks don't have to keep their branches open 24 hours a day to provide this service. This is one of the biggest advantages of Internet banking. One doesn't have to go to the bank's branch to request a financial statement. You can download it from your online bank account, which shows you up-to-the-minute updated figures. Another advantage of Internet banking is that it is cost-effective. Thousands of customers can be dealt with at once. There is no need to have too many clerks and cashiers. The administrative work gets reduced drastically with Internet banking. Expenditures on paper slips, forms and even bank stationery have gone down, which helps raise the profit margin of the bank by a surprisingly large number. As far as customers are concerned, their account information is available round the clock, regardless of their location. They can reschedule their future payments from their bank account while sitting thousands of miles away. They can

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electronically transfer money from their bank accounts or receive money in their bank accounts within seconds. Banking used to be painfully slow, and in some ways, it still is. You still have to wait for a check to clear, and you will find most banks keep the same hours that they did years ago. However, now that you can get on your computer and do some of the things you need, many things in the world of banking can work faster. The advantages of Internet Banking are many, but you do have to think about the few downfalls as well. Overall though, it is a step in the right direction. One of the advantages of Internet banking is that you can see your accounts at any time. Before this type of service, you had to keep meticulous records, but even then, some things would go through and you would not know about it until the next business day. If you get paid on Friday, for example, you may not know when your check clears. That could mean waiting until Monday to get your money. With Internet banking, the advantage is that you can see when it goes through without waiting for the bank to open. Another of the advantages of Internet banking is the ability to move money from one account to the other in a matter of seconds. This used to be something you had to do over the phone, but it was harder to do. When calling on the phone, you have to enter your account information each time, and the menu to get there could be time consuming. With Internet banking, you simply get into your account with your password and do what needs to be done with a few clicks of the mouse. Depending on your bank, many transfers are instant. You can also see what charges have gone through, how much interest you may have earned, and you can view your statement online. Those are all great advantages of Internet banking, but there can be problems as well. Your password should be hard to remember, and you have to change it frequently. Most sites are as secure as they can be, but things do happen. If you sign up for Internet banking based on the advantages, talk with your bank representative about the disadvantages, and how to make sure your accounts are kept safe and secure. Most banks have great security measures in place to protect you, but knowing what you can do to remain safe helps to ensure no one can get in and clean you out.

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The emergence of Internet has opened a wide variety of avenues and information to the common man, which he can access from the comfortable home setting. Along with the facilities like shopping, booking tickets, etc, Internet has also become a mode for banking. Internet banking was introduced in the early 80s and from that time it has been introduced, many people have started availing to its facilities. Now, one does not have to wait in long queues at the bank nor to pay bills at some shopping center or boutique. Internet banking gives a person facilities to view account statements, make money transfers from one account to the other, and also to pay bills like electricity, phone, etc. The best thing about Internet banking is that it is fast and is available to a person in any part of the world, at anytime he or she needs it. In today's busy world, when people do not have much time even for personal work, Internet banking appears as a boon. People who use online banking services believe that as their accounts can be accessed by user name and password that only they know, their money is in safe hands. Whatever information they need about their bank account is only a click away. However, like all good things, even Internet banking has certain disadvantages. Disadvantages of Internet banking:

The reason that not many people have started using Internet banking is because they do not trust the services of the bank through the net. Some human beings prefer to trust others like them and may have some difficulty in trusting a machine, especially in the matters of money. They may always have a doubt about whether their money is safe, while being processed through Internet banking. In addition to this, a few cases of forgery have been reported in online banking. There are some fraud or proxy websites, which can hack information (user name and password) entered by a person for some transaction, and later misuse it. In such cases, people lose their money without knowing and by the time, they get the bill, huge loses may have been incurred.

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Another disadvantage of Internet banking is that it may take some time, to get the Internet account started, as it requires a lot of paper work. Some people avoid using Internet banking services because they find it difficult to understand how it works. Also, the fact that a wrong click can cause monetary losses may be a deterrent. Internet banking can also pose a problem, if the network is down in one's area. This may cause difficulty, if the person has to do an important transaction. One very common disadvantage of online banking is when a person has some problem or query. In a normal bank, if one faces some problem, one can go to some employee of the bank to solve it. However, in the case of Internet banking, one will find oneself making endless calls to the customer service department. There have been cases, where the person is put on hold or has been passed around from one person to another. Though , Internet banking has certain disadvantages, one can avail of its customer-friendly services, if one is a little careful. One should never give away one's password to any unknown person and to make the experience of Internet banking a smooth process, one must use sites that are familiar and reliable. Internet v/s traditional banking Internet banking works in a similar manner to traditional banking, the major difference being the way one is making payments, accessing his account and personal details, and reconciling statements. Rather than visiting the local branch of his bank, the customer uses his computer to complete transactions. Internet and traditional banking have their pros and cons to consider. The choice of online vs. brick-and-mortar banking is often based on one's lifestyle and priorities. As a major advantage of internet banking, the customer can accomplish multiple tasks in the comfort of his home. Efficiency is what makes online banking attractive to customers: they can pay bills, move money between different accounts, check multiple accounts, and much more. Banking is fast and saves customers valuable time. Transactions are completed in seconds and one can print out the receipts for his personal records. The customer may access his account at any given part of the day, even during weekends and holidays. Moreover, the online account 25

may be accessed from any place around the world, provided that internet connection is available. Online bank accounts make banking expedient, convenient, and inexpensive. Many banks charge fewer fees for the online banking services they offer. Furthermore, banks have higher interest rates on savings accounts and certificates of deposit, and offer more financial services and products. Customers don't need to buy envelopes and stamps, run to the post office at the last minute, and risk being late on their payments. Monthly bank statements and bills can be accessed electronically. Finally, online banking employs sophisticated tools that help manage one's money and accounts with ease. Despite increased security measures and the availability of anti-virus and anti-spyware programs, identity theft is still a concern. Other threats associated with online banking include phishing and hacking of online accounts. Time is among the precious commodities, especially for multi-taskers. On the other hand, some people prefer to visit their local bank and interact with the teller in person. Customers can turn to the bank's special account representative or even to the bank manager. Clients are physically present when cash is handed over to them and when they place valuable items in their safety deposit boxes. When customers hold their money in banks, they expect to have them available when required. The Federal Deposit Insurance Corporation offers coverage of up to $100.000 if banks cannot cover their clients' accounts. Most banks have increased the level of security by installing more surveillance cameras and hiring a larger number of security guards. With traditional banking, customers are better protected against identity theft. However, security is still a concern with traditional banking. While criminals cannot hold a gun to one's personal computer, they can rob a bank the traditional way. Inconvenient locations, fixed schedules, and more limited financial services are some of the disadvantages associated with traditional banking. In contrast to internet banking, customers opting for traditional banking services need to draw money before using it. Banking around the clock is no longer a remote possibility. But the banks don't have to keep their branches open 24 hours a day to provide this service. This is one of the biggest advantages of Internet banking. One doesn't have to go to the 26

bank's branch to request a financial statement. You can download it from your online bank account, which shows you up-to-the-minute updated figures. Another advantage of Internet banking is that it is cost-effective. Thousands of customers can be dealt with at once. There is no need to have too many clerks and cashiers. The administrative work gets reduced drastically with Internet banking. Expenditures on paper slips, forms and even bank stationery have gone down, which helps raise the profit margin of the bank by a surprisingly large number. As far as customers are concerned, their account information is available round the clock, regardless of their location. They can reschedule their future payments from their bank account while sitting thousands of miles away. They can electronically transfer money from their bank accounts or receive money in their bank accounts within seconds. You can apply for a loan without visiting the local bank branch and get one easily. You can buy or sell stocks and other securities by using your bank accounts. Even new accounts can be opened; old accounts can be closed without doing tedious paperwork. Especially with the increasing acceptability of digital signatures around the world, Internet banking has made life much easier and banking much faster and more pleasant, for customers as well as bankers. INDIAN BANKS ON WEB The banking industry in India is facing unprecedented competition from non-traditional banking institutions, which now offer banking and financial services over the Internet. The deregulation of the banking industry coupled with the emergence of new technologies, are enabling new competitors to enter the financial services market quickly and efficiently. Indian banks are going for the retail banking in a big way. However, much is still to be achieved. This study which was conducted by students of IIML shows some interesting facts: Throughout the country, the Internet Banking is in the nascent stage of development (only 50 banks are offering varied kind of Internet banking

27

services). In general, these Internet sites offer only the most basic services. 55% are so called 'entry level' sites, offering little more than company information and basic marketing materials. Only 8% offer 'advanced transactions' such as online funds transfer, transactions & cash management services. Foreign & Private banks are much advanced in terms of the number of sites & their level of development. EMERGING CHALLENGES Information technology analyst firm, the Meta Group, recently reported that "financial institutions who don't offer home banking by the year 2000 will become marginalized." By the year of 2002, a large sophisticated and highly competitive Internet Banking Market will develop which will be driven by Demand side pressure due to increasing access to low cost electronic services. Emergence Growing of open standards and in for banking need of the functionality. transparency. fray customer players awareness

Global

Close integration of bank services with web based E-commerce or even disintermediation of services through direct electronic payments (E- Cash). More convenient international transactions due to the fact that the Internet along with general deregulation trends, eliminate geographic boundaries. Move from one stop shopping to 'Banking Portfolio' i.e. unbundled product purchases. Banking is generally a highly regulated industry, and government restrictions on financial activities by banks have varied over time and location. The current set of global standards are called Basel II. In some countries such as Germany, banks have historically owned major stakes in

28

industrial corporations while in other countries such as the United States banks are prohibited from owning non-financial companies. In Japan, banks are usually the nexus of a cross-share holding entity known as the keiretsu. In France, bancassurance is prevalent, as most banks offer insurance services (and now real estate services) to their clients. The most recent trend has been the advance of universal banks, which attempt to offer their customers the full spectrum of financial services under the one roof. The oldest bank still in existence is Monte dei Paschi di Siena, headquartered in Siena, Italy, which has been operating continuously since 1472 .

Origin of the word

The name bank derives from the Italian word banco "desk/bench", used during the Renaissance by Jewish Florentine bankers, who used to make their transactions above a desk covered by a green tablecloth. [6] However, there are traces of banking activity even in times ancient , which indicates that the word 'bank' might not necessarily come from the word 'banco'. In fact, the word traces its origins back to the Ancient Roman Empire, where moneylenders would set up their stalls in the middle of enclosed courtyards called macella on a long bench called a bancu, from which the words banco and bank are derived. As a moneychanger, the merchant at the bancu did not so much invest money as merely convert the foreign currency into the only legal tender in Romethat of the Imperial Mint.[7] The earliest evidence of money-changing activity is depicted on a silver drachm coin from ancient Hellenic colony Trapezus on the Black Sea, modern Trabzon, c. 350325 BC, presented in the British Museum in London. The coin shows a banker's table (trapeza) laden with coins, a pun on the name of the city. In fact, even today in Modern Greek the word Trapeza means both a table and a bank.

29

Bank may be defined as a financial institution which is engaged in the business of keeping money for savings and checking accounts or for exchange or for issuing loans and credit etc. A set of services intended for private customers and characterized by a higher quality than the services offered to retail customers. Based on the notion of tailor-made services, it aims to offer advice on investment, inheritance plans and provide active support for general transactions and the resolution of asset-related problems. The essential function of a bank is to provide services related to the storing of deposits and the Extending of credit. Basic function may include Credit collection, Issuer of banking notes, Depositor of money and lending loans. Now a days banking is not in its traditional way, with the advancement of technology its focusing on more comfort of customer providing services such as:

Standard activities
Banks act as payment agents by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customers' current accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer, EFTPOS, and ATM. Banks borrow money by accepting funds deposited on current accounts, by accepting term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend money by making advances to customers on current accounts, by making installment loans, and by investing in marketable debt securities and other forms of money lending. Banks provide almost all payment services, and a bank account is considered indispensable by most businesses, individuals and governments. Non-banks that provide payment services such as remittance companies are not normally considered an adequate substitute for having a bank account.

30

Banks borrow most funds from households and non-financial businesses, and lend most funds to households and non-financial businesses. Wider commercial role The commercial role of banks is not limited to banking, and includes: Issue of banknotes (promissory notes issued by a banker and payable to bearer on demand) Processing of payments by way of telegraphic transfer, EFTPOS, internet banking or other means Issuing bank drafts and bank cheques Accepting money on term deposit Lending money by way of overdraft, installment loan or otherwise Providing documentary and standby letters of credit (trade finance), guarantees, performance bonds, securities underwriting commitments and other forms of off-balance sheet exposures Safekeeping of documents and other items in safe deposit boxes Currency exchange Acting as a 'financial supermarket' for the sale, distribution or brokerage, with or without advice, of insurance, unit trusts and similar financial products .

Channels
Banks offer many different channels to access their banking and other services: A branch, banking centre or financial centre is a retail location where a bank or financial institution offers a wide array of face-to-face service to its customers. ATM is a computerized telecommunications device that provides a financial institution's customers a method of financial transactions in a public space without the need for a human clerk or bank teller. Most banks now have more ATMs than branches, and ATMs are providing a wider range of services to a 31

wider range of users. For example in Hong Kong, most ATMs enable anyone to deposit cash to any customer of the bank's account by feeding in the notes and entering the account number to be credited. Also, most ATMs enable card holders from other banks to get their account balance and withdraw cash, even if the card is issued by a foreign bank. Mail is part of the postal system which itself is a system wherein written documents typically enclosed in envelopes, and also small packages containing other matter, are delivered to destinations around the world. This can be used to deposit cheques and to send orders to the bank to pay money to third parties. Banks also normally use mail to deliver periodic account statements to customers. Telephone banking is a service provided by a financial institution which allows its customers to perform transactions over the telephone. This normally includes bill payments for bills from major billers (e.g. for electricity). Online banking is a term used for performing transactions, payments etc. over the Internet through a bank, credit union or building society's secure website. Mobile banking is a method of using one's mobile phone to conduct simple banking transactions by remotely linking into a banking network. Video banking is a term used for performing banking transactions or professional banking consultations via a remote video and audio connection. Video banking can be performed via purpose built banking transaction machines (similar to an Automated teller machine), or via a videoconference enabled bank branch. Business model A bank can generate revenue in a variety of different ways including interest, transaction fees and financial advice. The main method is via charging interest

32

on the capital it lends out to customers. The bank profits from the differential between the level of interest it pays for deposits and other sources of funds, and the level of interest it charges in its lending activities. This difference is referred to as the spread between the cost of funds and the loan interest rate. Historically, profitability from lending activities has been cyclical and dependent on the needs and strengths of loan customers and the stage of the economic cycle. Fees and financial advice constitute a more stable revenue stream and banks have therefore placed more emphasis on these revenue lines to smooth their financial performance.

33

Chapter 2 INDIAN BANKING INDUSTRY

34

35

HISTORY OF BANKING IN INDIA

Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India's growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dial a pizza. Money has become the order of the day. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase III.

36

Phase I The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. During those days public has lesser confidence in the banks. As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders. Phase II Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale specially in rural and semi-urban areas. It formed State Bank of India to act as the principal agent of RBI and to handle

37

banking transactions of the Union and State Governments all over the country.
Seven

banks forming subsidiary of State Bank of India was nationalized in 1960

on 19th July, 1969, major process of nationalization was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country were nationalized. Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country:

1949: Enactment of Banking Regulation Act. 1955: Nationalization of State Bank of India. 1959: Nationalization of SBI subsidiaries. 1961: Insurance cover extended to deposits. 1969: Nationalization of 14 major banks. 1971: Creation of credit guarantee corporation. 1975: Creation of regional rural banks. 1980: Nationalization of seven banks with deposits over 200 crore. After the nationalization of banks, the branches of the public sector bank

India rose to approximately 800% in deposits and advances took a huge jump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions. Phase III This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M

38

Narasimham, a committee was set up by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.

39

The growth in the Indian Banking Industry has been more qualitative than quantitative and it is expected to remain the same in the coming years. Based on the projections made in the "India Vision 2020" prepared by the Planning Commission and the Draft 10th Plan, the report forecasts that the pace of expansion in the balance-sheets of banks is likely to decelerate. The total assets of all scheduled commercial banks by end-March 2010 are estimated at Rs. 40, 90,000 crores. That will comprise about 65 per cent of GDP at current market prices as compared to 67 per cent in 2002-03. Bank assets are expected to grow at an annual composite rate of 13.4 per cent during the rest of the decade as against the growth rate of 16.7 per cent that existed between 1994-95 and 200203. It is expected that there will be large additions to the capital base and reserves on the liability side. Banks in India can be categorized into non-scheduled banks and scheduled banks. Scheduled banks constitute of commercial banks and co-operative banks. There are about 67,000 branches of Scheduled banks spread across India. During the first phase of financial reforms, there was a nationalization of 14 major banks in 1969. This crucial step led to a shift from Class banking to Mass banking. Since then the growth of the banking industry in India has been a continuous process. The Public Sector Banks (PSBs), which are the base of the Banking sector in India account for more than 78 per cent of the total banking industry assets. Unfortunately they are burdened with excessive Non Performing assets (NPAs), massive manpower and lack of modern technology. On the other hand the Private Sector Banks are making tremendous progress. They are leaders in Internet banking, mobile banking, phone banking, ATMs. As far as foreign banks are concerned they are likely to succeed in the Indian Banking Industry. Indusland Bank was the first private bank to be set up in India. In the Indian Banking Industry some of the Private Sector Banks operating are IDBI Bank, ING Vyasa Bank, SBI Commercial and International Bank Ltd, Dhanalakshmi Bank Ltd,Karur Vysya Bank Ltd, Bank of Rajasthan Ltd etc are some private sector 40

banks. Banks from the Public Sector include Punjab National bank, Vijaya Bank, UCO Bank, Oriental Bank, Allahabad Bank , Andhra Bank etc. ANZ Grindlays Bank, ABN-AMRO Bank, American Express Bank Ltd, Citibank are some of the foreign banks operating in the Indian Banking Industry. Banks in India In India the banks are being segregated in different groups. Each group has their own benefits and limitations in operating in India. Each has their own dedicated target market. Few of them only work in rural sector while others in both rural as well as urban. Many even are only catering in cities. Some are of Indian origin and some are foreign players. Nationalization of Banks in India The nationalization of banks in India took place in 1969 by Mrs. Indira Gandhi the then prime minister. It nationalized 14 banks then. These banks were mostly owned by businessmen and even managed by them.
1. 2. 3. 4. 5. 6. 7.

Central Bank of India Dena Bank Syndicate Bank Indian Bank Bank of Baroda Allahabad Bank UCO Bank

8. 9. 10. 11. 12. 13. 14.

Bank of Maharashtra Punjab National Bank Canara Bank Indian Overseas Bank Union Bank United Bank of India Bank of India

Before the steps of nationalization of Indian banks, only State Bank of India (SBI) was nationalized. It took place in July 1955 under the SBI Act of 1955. Nationalization of Seven State Banks of India (formed subsidiary) took place on 19th July, 1960.

41

The State Bank of India is India's largest commercial bank and is ranked one of the top five banks worldwide. It serves 90 million customers through a network of 9,000 branches and it offers -- either directly or through subsidiaries -- a wide range of banking services. The second phase of nationalization of Indian banks took place in the year 1980. Seven more banks were nationalized with deposits over 200 crores. Till this year, approximately 80% of the banking segment in India was under Government ownership. After the nationalization of banks in India, the branches of the public sector banks rose to approximately 800% in deposits and advances took a huge jump by 11,000%.

1955 : Nationalization of State Bank of India. 1959 : Nationalization of SBI subsidiaries. 1969 : Nationalization of 14 major banks. 1980 : Nationalization of seven banks with deposits over 200 crores.

Scheduled Commercial Banks In India The commercial banking structure in India consists of:

Scheduled Commercial Banks in India Unscheduled Banks in India

Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the Act. As on 30th June, 1999, there were 300 scheduled banks in India having a total network of 64,918 branches. The scheduled commercial banks in India comprise of State bank of India and its associates (8), nationalized banks (19), foreign banks (45), private sector banks (32), co-operative banks and regional rural banks.

42

"Scheduled banks in India" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934), but does not include a co-operative bank". "Non-scheduled bank in India" means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank". The following are the Scheduled Banks in India (Public Sector):
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13.

State Bank of India State Bank of Mysore Allahabad Bank Bank of India Canara Bank Corporation Bank Indian Overseas Bank Punjab and Sind Bank Union Bank of India UCO Bank

14. 16. 18. 19. 20. 21. 22. 24. 25. 26.

State Bank of Bikaner and Jaipur State Bank of Indore State Bank of Saurashtra Andhra Bank Bank of Baroda Bank of Maharashtra Central Bank of India Dena Bank Indian Bank Punjab National Bank Syndicate Bank United Bank of India Vijaya Bank

State Bank of Hyderabad 15. State Bank of Travancore 17.

Oriental Bank of Commerce23.

The following are the Scheduled Banks in India (Private Sector):

ING Vysya Bank Ltd

Axis Bank Ltd 43

Indusind Bank Ltd South Indian Bank Centurion Bank Ltd IDBI Bank Ltd

ICICI Bank Ltd HDFC Bank Ltd Bank of Punjab Ltd

The following are the Scheduled Foreign Banks in India:

American Express Bank Ltd. Bank of America NT & SA Banquc Nationale de Paris Citi Bank N.C. Standard Chartered Bank.

ANZ Gridlays Bank Plc. Bank of Tokyo Ltd. Barclays Bank Plc Deutsche Bank A.G. The Chase Manhattan Bank Ltd.

Hongkong and Shanghai Banking Corporation

Banking services in India With years, banks are also adding services to their customers. The Indian banking industry is passing through a phase of customers market. The customers have more choices in choosing their banks. A competition has been established within the banks operating in India.

With stiff competition and advancement of technology, the service provided by banks has become more easy and convenient. The past days are witness to an hour wait before withdrawing cash from accounts or a cheque from north of the country being cleared in one month in the south. This section of banking deals with the latest discovery in the banking instruments along with the polished version of their old systems

44

Chapter 3 REASEARCH METHODOLOGY

45

In order to conduct a good research , it is essential that the correct research methodology is adopted so that best results can be obtained. First of all it is very necessary to lay down the objectives to give a proper direction to the research work .

Objectives of study : Objectives of study are: To assess the awareness of Internet Banking Services in Udaipur. To study the challenges of Internet Banking Services. To find out the problems encountered by the customers while using internet banking services. To briefly analyze the growth prospects of internet banking in India. Research Methodology : Type of research Analytical

Sampling Method: For the purpose of conducting the research study , a survey was undertaken by convenient sampling approach which included friends , relatives and social contacts were approached. Sample size : A sample of 50 respondents was taken from Udaipur city. The respondents included people from service class , businesspersons and students also . Data Collection and presentation : Primary data have been collected using questionnaire method. Fieldwork: The questionnaire was prepared and was also filled by the respondents through interviews. 46

The interview method of collecting data involves presentation of verbal and reply in terms of verbal responses. This method was used in some cases for the persons who were not willing to fill the questionnaire for some reason. Questionnaire . The aid of questionnaire was selected as method of obtaining data. The various forms of questions were being used in questionnaire like: 1) Multiple choice questions 2) Open ended questions 3) Close ended questions Scope of the study : This study deals with aspect of awareness regarding Internet Banking. In todays competitive scenario, it is very essential for any bank to know the customers perception and challenges regarding their services. Data presentation and analysis: For knowing the awareness level of the people regarding internet banking services the sample of respondents Banking Services users & non-users. was taken which included businessmen, servicemen, and students .The sample consists of Internet

47

Figure 3.2

10 servicemen businessmen students

8 32

Among the 50 respondents who were approached to fill the questionnaire for the purpose of data collection , 32 were service class people , 8 were businessmen and 10 were students

48

Chapter 4 DATA ANALYSIS AND INTERPRETATION

49

Data analysis and interpretation :

As specified earlier during the sampling collection period 50 respondents were selected according to the convenience and friends, relatives and social contacts were approached and data was collected.

Figure 4.1 : Do you avail internet banking services ?

27

2 21

yes no

Interpretation: In above findings, Out of 50 respondents , 23 were such people who are the users of internet banking services and 27 said that they do not avail these services although they are aware of these services but they do not avail it for some reasons.

50

51

Figure 4.2: Reasons for not availing internet banking services

10 8 6 4 2 0 unawareness risk no utility

Interpretation When the reasons for not using internet banking services were asked from respondents , out of 27 respondents who said that they do not avail internet banking services, 9 stated that reason for not availing these services is unawareness , 10 told that it is risky and the remaining 8 of them said that they feel no utility of it.

52

Figure 4.3: From where do you mostly access these services?

20 15 10 5 0 17 0 cyber caf 6 home

Interpretation : Out of 21 respondents who avail internet banking services , 17 said that they mostly access internet banking from office and 6 said that they access mostly from home. None of them access it from a cyber caf.

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Figure 4.4 : Do you feel internet banking is risky?

yes no

Interpretation : When the respondents who avail internet banking services were asked that do they feel banking through internet is risky ,out of 23 , 15 persons said that they feel internet banking is not risky and 8 said that they do feel it is risky sometimes.

54

Figure 4.5 : Have you ever encountered any problem while using these services ?

8 yes no 15

Interpretation : To find out the problems encountered by individuals while using internet banking services , out of 23 , 15 respondents said that they did not encounter any problem while using internet banking. The rest 8 people said they faced problems like network problem , forgetting password and while doing railway reservations the sum was deducted twice .

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Figure 4.6 : Have you ever changed the password of your bank account?
20 15 10 5 0 yes 5 no 16

Interpretation : Out of 23 , 18 people said that they have changed their password and most of them change it frequently for safety purpose and the rest 5 have never changed their password.

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Figure 4.7: Do you pay any charges for using internet banking
25 20 15 10 5 0 YES NO

Interpretation : All the respondents who avail internet banking services said that they do not pay any charges for it .

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58

Chapter 5 SUMMARY OF FINDINGS , SUGGESTIONS AND CONCLUSIONS

59

Following

findings

are

summarized

as

per

the

analysis

and

interpretation of : All the respondents are aware of the facility of online banking provided by banks. Some of them actively avail these services and some do not use them due to reasons like they do not no how to operate internet , some people feel that there is a risk involved in using it. Generally people use services like checking balance , bill payment and account transactions through internet banking . The factors which are considered as the utility of internet banking were found to be convenience , time saving , cost effectiveness and easy accessibility out of which convenience was ranked as the top factor by most of the individuals. Even though banks have provided internet banking facility to the customers , sometimes the customers face problems like network problem, password locking and sometimes the amount in their balance was deducted twice while making any transaction. Most of the people who avail internet banking services said that they change their password for safety purpose and most of them have changed it at least once. Suggestions : Banks should conduct various awareness programs for people regarding the use and benefits of internet banking services. The problems encountered by the users should be given attention by the banks so that they can be solved and the customers faith in the bank can be strengthen. Efficient soft wares should be used by the banking institutions so that customers dont have to face problems like deduction of amount twice from their account for a single transaction .

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People who use internet banking services should frequently change their password for safety purpose and this should also be advised by the banks to their customers.

Conclusion : Internet has made the life of people much easier than before. Banking through internet is an example of it. Most of the banks provide facility of internet banking which provides convenience to the customers of bank such that they can interact with the bank without being physically present at the bank. From the research , it can be concluded that although people are aware of internet banking services still there is much scope left as many people dont avail these services because they feel it is risky. Also many people do not know how to operate internet and this act as a major barrier in the use of these services. So banks must concentrate on these problems and should work upon it to improve the services and attract more customers towards it.

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APPENDICIES

62

Questionnaire
A Study on customers responsiveness and Challenges of Internet Banking Services provided by selected banks in Udaipur Personal details: 1. Name 2. Contact No. 3. Occupation 4. Age Questions : 1. In which bank do you hold your account? ____________________________________________________ _______________________________ _______________________________ _______________________________ _______________________________

2. Do you avail Internet Banking services? Yes If No, 3. What are the reasons for not using these services? Unawareness Risk No utility If yes, 4. Which services do you avail ? Checking balance () () () () No ()

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Bill payment Account transaction All

() () ()

5. From where do you mostly access your bank account, using internet ? Home Office Cyber caf () () ()

6. Have you encountered any problem while using Internet banking ? Yes ( ) 7. If yes , then specify . ____________________________________________________ 8. State the frequency of using Internet banking ? ____________________________________________________ 9. Rank the factors which you find most useful in Internet banking Cost effectiveness Convenience Time saving Easy accessibility 10. Do you feel using internet banking is risky ? Yes ( ) No ( ) No ( )

11. Have you ever changed your password of your bank account ? Yes ( ) No ( )

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12. If yes , then how many times ? ____________________________________________________ 13. Do you pay any charges for availing the internet banking services ? Yes ( ) No ( )

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BIBLIOGRAPHY

To obtain more information regarding the present study and to substantiate it with the theoretical proof, the following references were made :

List of books and other supplementary material referred : Dave Chaffey, E- business and E- commerce management , United Kingdom , Pearson Education Ltd. Katuri Nageswara Rao, Retail Banking Vol.I, Icfai University Press,2005 Katuri Nageswara Rao, Banking The New Challenges, Icfai University Press,2005 Supplementary material was also taken from internet through search engine Google.

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