A PROJECT REPORT ON

STUDY OF BANKING SERVICES ON-LINE AND OFF-LINE

IN PARTIAL FULFILLMNT OF THE REQUIREMENTS

FOR

MASTER OFMANAGEMENT STUDIES (M.M.S.)

2011-2013

ROLL NO. CHANAKYA-59

SUBMITTED TO

DRVN BEDEKAR INSTITUTE OF MANAGEMENT STUDIES, THANE

STATEMENT BY THE CANDIDATE

I wish to state that the work embodied in this Project titled Study of Banking Services On-line and Off-line forms my own contribution to Management carried out under the guidance of Asst. Prof. Shailaja P. Yadav at the Institute. Wherever references have been made to intellectual properties of any individual / Institution / Government / Private / Public Bodies / Universities, research paper, text books, reference books, research monographs, archives of newspapers, corporate, individuals, business / Government and any other source of intellectual properties viz., speeches, quotations, conference proceedings, extracts from the website, working paper, seminal work et al, they have been clearly indicated, duly acknowledged and included in the Bibliography.

________________________ Signature of Internal Guide Ms. Shailaja P. Yadav Asst. Professor Dr. V.N.BRIMS

_____________________ Signature of Candidate Mr. Abhishek S. Gandhi C-59 M.M.S.-IV

ACKNOWLEDGEMENT

This project bears imprint of all those who have directly or indirectly helped and extended their kind support in completing this project. At the time of making this report I express my sincere gratitude to all of them.

I thank Dr. K. Suryanarayanan, Director, Dr.V.N.BRIMS for giving me a chance to study this subject as my winter project and giving me indirect support during the completion of the project.

I am extremely thankful and obliged to Asst. Prof. Shailaja Yadav (Internal Project Guide) for providing streamed guidelines since inception, till the completion of the project.

At this moment I also thank God for the blessings showed upon me, my parents for their support and care and also my friends for their valuable suggestions. This project report is a collective effort of all and I sincerely remember and acknowledge all of them for their excellent help and assistance throughout the project.

Abhishek S. Gandhi C-59 M.M.S. IV

Meeting with Internal Guide Date Topic Discussed Comment/Remarks Signature of the Guide

Table of Contents

Serial Number 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15 16 17

Topics

Page Number

Introduction Objective of the study Research Methodology Method of Data Collection History of Internet Banking A study on Internet Banking Global Internet Banking Scenario The Indian Scenario Growth in Internet Banking Risks in Internet Banking Mitigating risks in Internet Banking Mobile Banking Analysis & Interpretation of Data Limitations Conclusion Bibliography Appendix

6 7 8 9 10 11-15 16-17 18-19 20 21-23 24-26 27-31 32-33 34 35 36 37-39

INTRODUCTION Banks play a positive role in economic development of a country. Banking environment has become highly competitive today. 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. Now, banks are also adding services to their customers. During the last 39 years since 1969, tremendous changes have taken place in the banking industry. The banks have shed their traditional functions and have been innovating, improving and coming out with new types of the services to cater to the emerging needs of their customers. The banking scenario has changed drastically. The changes, which have taken place in the last ten years, are more than the changes took place in last fifty years because of the institutionalization, liberalization, globalization and automation in the banking industry. With stiff competition and advancement of technology, the services provided by banks have become more easy and convenient. Gone are those days when long lines had to be formed to apply for a new cheque book or to transfer money to another account or to get a bank pass book updated.

There are various banking product available to customer they are as follow: CREDIT CARD DEBIT CARD AUTOMATIC TELLER MACHINE (ATM) E-BANKING TELEBANKING INTERNET BANKING

Welcome to the era of internet banking or online banking or internet banking. Whatever the name, it serves the same purpose. Internet banking is one of the famous banking products available to customer. 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.

Internet Banking is conducting ones banking or bank account online through a computer and an internet connection. Through Internet-banking one can check the status of his/her account, place queries and also can be facilitated with a wide range of transaction services simultaneously. These days, a range of services is provided by banks making it a very wide spectrum, from the very basic services such as fixed deposit enquiries, cheque book application, account statements, etc., to the high end services such as bill payments, fund transfers, payment of credit card dues and much more. Internet has emerged as an important medium for delivery of banking products and services.

OBJECTIVES OF THE STUDY Objectives of a project tell us why project has been taken under study. It helps us to know more about the topic that is being undertaken and helps us to explore future prospects of the topic. The various research objectives of the study are: To study the internet banking facilities offered by the banks to its customers To study as to how much internet banking has penetrated in the minds of the customers To gain insights about functioning of internet banking. To explore the future prospects of internet banking. To study the benefits that are provided to the individual under internet banking

RESEARCH METHODOLOGY This report is based on primary as well secondary data. Research is a process through which we attempt to achieve systematically and with the support of data. The researcher has collected data from two sources they are as follow:1) Primary data :- The sources of Primary data were questionnaires. 2) Secondary data :- The sources of secondary data were internet, books and newspaper articles. This process, which is frequently called research methodology the data is analyzed in proper manner according to the result of customer satisfaction. The researcher analysis the data given by the respondent customer and also calculated in systematic manner. Descriptive research is used in this project report in order to know about online services to clients and determining their level of satisfaction. This is the most popular type of research technique, generally used in survey research design and most useful in describing the characteristics of consumer behavior. The method used was following: Questionnaire method Direct Interaction with the clients.

METHOD OF DATA COLLECTION A. Instruments for data collection: The research instruments used for this survey were structured questionnaires. The questionnaires were designed to find the satisfaction levels of internet banking users.

B. Questionnaire: A questionnaire consists of a set of questions prepared to respondents for their answers. A set of question paper which consist of 10 question based on internet banking were prepared. It is
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multiple-choice question, which have three different alternatives. The researcher is asked to tick the most suitable option according to choice of them.

C. Drafting of a Questionnaire: Closed Ended questionnaire were used in research questionnaire. Valuable advice regarding changes was given by my project guide, Asst.Prof. Shailaja Yadav (Internal Project Guide) has resulted in the formulation of the questionnaire through which responses were collected and analyzed. A copy of the questionnaire has been attached as an annexure to the project. Since my objective was to derive out the maximum information out of the people, I decided to keep questionnaire close-ended. In order to generate and sustain the interest of the respondents, the initial questions pertained to the gathering of simple information like the knowledge of internet banking, the choice of their bank and the main areas of their transactions.

D. ANALYSIS OF DATA There are 8 questions were given related to internet banking. These questions were asked to 30 people that are students of my hostel who are pursuing C.A. The researcher has analyzed the reports in a systematic manner with the help of following formula:i.e. (No of respondents /Total respondents) * 100

E. SAMPLING Sampling procedure :- The sample was selected from the customers who acquire internetbanking facilities from the bank. Sample size :- The sample size of my project is limited to 30 people only, who acquire internet-banking facilities from the bank. Sample design :- Data has been presented with the help of pie charts only
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HISTORY OF INTERNET BANKING

The concept of Internet banking has been simultaneously evolving with the development of the World Wide Web. Programmers working on banking databases came up with ideas for online banking transactions, some time during the 1980's. The creative processes of development of these services were probably sparked off after many companies started the concept of online shopping. The online shopping promoted the use of credit cards through Internet. Many banking organizations had already started creating data ware housing facilities to ease their working staffs. The developments of these databases were widely used during the development of ATM's.

Sometime in 1980's, banking and finance organizations in Europe and United States started suggestive researches and programming experiments on the concept of 'home banking'. Initially in the 80's when computers and Internet were not so well developed, 'home banking made use of fax machines and telephones to facilitate their customers. The wide spread of Internet and programming facilities created further opportunities for development of home banking.

In 1983, the Nottingham Building Society, commonly abbreviated and referred to as the NBS, launched the first Internet banking service in United Kingdom. This service formed the basis for most of the Internet banking facilities that followed. This facility was not very well developed and restricted the number of transactions and functions that account holders could execute. The facility introduced by Nottingham Building Society is said to have been derived from a system known as Prestel that is deployed by the postal service department of United Kingdom. The first online banking service in United States was introduced, in October 1994. The service was developed by Stanford Federal Credit Union, which is a financial institution. The online banking services are becoming more and more prevalent due to the well-developed systems.

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A STUDY ON INTERNET BANKING Internet banking can be defined as a facility provided by banking and financial institutions that enable the user to execute bank related transactions through Internet. The biggest advantage of Internet banking is that people can expend the services sitting at home, to transact business. Due to which, the account holder does not have to personally visit the bank. With the help of Internet, the account holder can execute banking many transactions. When small transactions like balance inquiry, record of recent transaction, etc. are to be processed, the Internet banking facility proves to be very handy. The concept of Internet banking has thus become a revolution in the field of banking and finance. Internet banking system and method in which a network connects a personal computer service provider directly to a host computer system of a bank such that customer service representatives can process customer service requests automatically without need for intervention. The system is capable of distinguishing between those customer service requests, which are capable of automated fulfillment, and those requests, which require handling by a customer service representative. The system is integrated with the host computer system of the bank so that the remote banking customer can access other automated services of the bank. The method of the invention includes the steps of inputting a customer banking request from among a menu of banking requests at a remote personnel computer, transmitting the banking requests to a host computer over a network; receiving the request at the host computer; identifying the type of customer banking request received; automatic logging of the service request, comparing the received request to a stored table of request types, each of the request types having an attribute to indicate whether the request type is capable of being fulfilled by a customer service representative or by an automated system. 1) Features of Internet Banking Internet banking offers a diverse assortment of features. The number one feature used by internet bankers is bill pay service. Some banks offer and unlimited amount of bill pays per month at no cost to you. Additionally some offer the option to send an actual paper check to those unable
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to receive an electronic payment. Even better is some banks dont even charge you for the postage to mail the paper check. In addition, something to look for is the option to setup reoccurring payments. Electronic bill notification is another handy feature. The way it works is that the merchant that needs payment, says your gas company, will send an electronic bill to your bank. You can then set it up to have that bill automatically paid or send you an approval request. It is nice; you do not have to worry about getting paper bills forwarded to you if you are traveling. Online check and deposit slip images is another feature. Banks simply scan the front, back of the actual check, deposit slip, and then upload the image to your account. That way you still have a record, but you do not have to store all of that paper in those under the bed boxes. 2) Services through internet banking Bill 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 payees 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
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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. However, 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 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 made conveniently through your account. You can also buy railway and air tickets through internet banking. 3) Advantages of internet banking 1. The greatest advantage of Internet banking perhaps lies in the fact that customers are no longer required waiting in those long and wearisome queues of the banks to request a financial transaction or statement. 2. Another important advantage of Internet banking is that it has made the opening of an account quite simple and easy and without much paperwork. The same flexibility can be observed even while closing an account. You can also apply for bank loans without personally visiting any local branch of yours bank

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3. Conventional banking has always been slow and time consuming, so much so that sometimes you need to wait several hours to process a simple transaction like clearing a check. 4. Internet banking has tremendously reduced the time required to process banking transactions, thereby making banking faster and convenient. For the bankers this system is cost-effective, as it has considerably reduced the administrative costs and paperwork related to the transactions. Besides, banks can also cater to the needs of thousands of customers at the same time. All these factors have significantly increased the profit margins of commercial banks by lowering their operating costs. This has enabled them acceptable interest rates on savings account and credit cards. 5. With the help of Internet banking, you can access any information regarding your account and transactions, any time of the day. This means that you no longer have to depend on the office hours of your bank to obtain information. Therefore, you can regularly monitor your account as well as keep track of financial transactions, which can be of immense help in detecting any fraudulent transaction. 6. In addition to this, fund transfers, both national and international, have also become faster and convenient with Internet banking. Nowadays, you can transfer funds from one account to another within a few minutes. You can easily carry out stock trading, exchanging bonds and other investments with the help of Internet banking. All these features have made Internet banking ideal for people who make a number of financial transactions each day. 7. In addition to availing banking facilities for 24 hours a day, you can also receive other important information regarding banking policies, rates of interest offered on different types of bank accounts and formalities required in executing various transactions. With such information, you can compare the services of different banks and opt for the one that satisfies your individual needs and requirements. 4) Disadvantage of internet banking However, there are some serious disadvantages of internet banking, out of which the security of your bank account is the most important one. So while availing the facilities of Internet banking, you have to be very careful to ensure the security of your computer and personal
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to offer

information like the password, user name and pin number of your bank account. Otherwise, you may become a victim of computer hacking, which can lead to unauthorized use of your account by computer hackers. Though banks have come up with several security measures, the customers are also required to be a bit careful to ensure security and safety of internet banking. 1) Types of Internet banking 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: 1. 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 banks 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. 2. Electronic Information Transfer System The system provides customer- specific 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 banks application system either in batch mode or offline. The application systems cannot directly access through the internet. 3. Fully Electronic Transactional System This system allows bi-directional capabilities. The customer for online update can submit transactions. This system requires high degree of security and control. In this environment, web server and application systems are linked over secure infrastructure. It
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comprises technology covering computerization, networking and security, inter-bank payment gateway and legal infrastructure.

GLOBAL INTERNET BANKING SCENARIO Internet Banking Internet Banking is one of the few web applications where benefits to customers and banks are already widely proven. It is now no longer a nice to have but an impossible to survive without for all banks. Internet Banking refers to systems that enable bank customers to access accounts and general information on bank products and services through a personal computer (PC) or other intelligent devices. Internet banking means a kind of self-help financial services provided by the bank for its clients by the medium of Internet, including account information inquiry, account transfer & payment, online payment, agency services, etc. Internet Banking products and services at global Internet Banking products and services can include wholesale products for corporate customers as well as retail and fiduciary products for individual customers. Ultimately, the products and services obtained through internet banking may mirror products and services offered through other bank delivery channels. Some examples of wholesale products and services include: Cash management Wire transfer Automated clearinghouse transactions Bill presentment and payment Examples of retail and fiduciary products and services include: Balance inquiry Funds transfer Downloading transaction information Bill presentment and payment Loan applications Investment activity Other value-added services
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Other internet banking services may include providing internet access as an Internet Service provider (ISP). Historically, banks have used information systems technology to process checks (item processing), drive ATM machines (transaction processing), and produce reports (management information systems). In the past, customers rarely noticed the computer systems that made the information systems operate. Today, web sites, electronic bill presentment and payment systems are an important way for banks to reach their customers.

The banking industry is expected to be a leading player in internet-business. While the banks in developed countries are working primarily via Internet as non-branch banks, banks in the developing countries use the Internet as an information delivery tool to improve relationship with customers. Banks have established an Internet presence with various objectives. Most of them are using the Internet as a new distribution channel. Financial services, with the use of Internet, may be offered in an equivalent quantity with lower costs to the potential customers. There may be contacts from each corner of the world at any time of day or night. This means that banks may enlarge their market without opening new branches. The banks in the US are using the Web to reach opportunities in three different categories: to market information, to deliver banking products and services, and to improve customer relationship. However, large banks appeared to have a clear advantage over small banks in the range of services they offered. Some banks in the US were targeting their Internet strategies towards business customers. Apart from affecting the way customers received banking services; internet banking was expected to influence the banking industry structure. The economics of internet banking was expected to favor large banks because of economies of scale and scope, and the ability to advertise heavily. Moreover, internet - banking offered entry and expansion opportunities that small banks traditionally lacked.

The major factor restricting growth of internet - banking is security, in spite of several countries being well connected via Internet. Access to high-quality internet -banking products is an issue as well. Majority of banks in Asia are just offering basic services compared with those of developed countries. Still, internet -banking seems to have a future in Asia. According to
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McKinsey survey, internet -banking will succeed if the basic features, especially bill payment, are handled well. Bill payment was the most popular feature, cited by 40 percent of respondents of the survey.

THE INDIAN SCENARIO The entry of Indian banks into Internet Banking Tremendous growth of Internet during the midnineties prompted banks to utilize Internet as a medium for offering banking services. Using Internet Banking, banks allow their customers to perform banking transactions through their web site in a secure way. However, not many studies have been conduced to evaluate if the customers in India utilize Internet Banking channel properly. Internet banking, both as a medium of delivery of banking services and as a strategic tool for business development, has gained wide acceptance internationally and is fast catching up in India with more and more banks entering the fray. India can be said to be on the threshold of a major banking revolution with net banking having already been unveiled. A recent questionnaire, to which 46 banks responded, has revealed that at present, 11 banks in India are providing Internet banking services at different levels, 22 banks propose to offer Internet banking in near future while the remaining 13 banks have no immediate plans to offer such facility. In India, approximately one percent of high and middle-income group banking customers conducted banking on the Internet in 2000 compared to 5 to 6 percent in Singapore and South Korea. In 2001, a Reserve Bank of India survey revealed that more than 20 major banks either were offering internet-banking services at various levels or planned to do so in the near future. Some of the private banks included ICICI Bank, HDFC Bank, IDBI Bank, Citibank, Global Trust Bank, Bank of Punjab and UTI Bank. In the same year, out of an estimated 0.9 million Internet user base, approximately 17 percent were reported to be banking on the Internet. At present, the total Internet users in the country are estimated at 9lakh. However, this is expected to grow exponentially to 90lakh by 2003. Only about 1% of Internet users did banking online in 1998. This increased to 16.7% in March 2000.* the growth potential is, therefore, immense. Further incentives provided by banks would dissuade customers from visiting physical
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branches, and thus get hooked to the convenience of armchair banking. The facility of accessing their accounts from anywhere in the world by using a home computer with Internet connection, is particularly fascinating to Non-Resident Indians and High Net worth Individuals having multiple bank accounts. Costs of banking service through the Internet form a fraction of costs through conventional methods. Rough estimates assume teller cost at Re.1 per transaction, ATM transaction cost at 45paise, phone banking at 35paise, debit cards at 20paise and Internet banking at 10paise per transaction. The cost-conscious banks in the country have therefore actively considered use of the Internet as a channel for providing services. Fully computerized banks, with better management of their customer base are in a stronger position to cross-sell their products through this channel. The online population has increased from just 500,000 in 1998 to 5 million in 2000. By 2015, the online population is expected to reach 70 million. IT services is a $1.5 billion industry in India growing at a rate of 55% per annum. Banks providing Internet banking services have been entering into agreements with their customers setting out the terms and conditions of the services. The terms and conditions include information on the access through user-id and secret password, minimum balance and charges, authority to the bank for carrying out transactions performed through the service, liability of the user and the bank, disclosure of personal information for statistical analysis and credit scoring also, non-transferability of the facility, notices and termination, etc. These services are being initiated by banks like ICICI Bank Ltd., Citibank, Global Trust Bank Ltd., UTI Bank Ltd., Bank of Citibank Bank of Madura Ltd., Federal Bank Ltd., etc. Indian Government has introduced the Information Technology Bill, which has already been notified in October 2000. Section 72 of the Information Technology Act, 2000 casts an obligation of confidentiality against disclosure of any electronic

record, register, correspondence and information, except for certain purposes and violation of this provision are a criminal offence. Notification for appointment of Authorities to certify digital signatures, ensuring confidentiality of data, is likely to be issued in the coming months. Comprehensive enactments like the Electronic Funds Transfer Act in U.K. and data protection rules and regulations in the developed countries are in place abroad to prevent unauthorized access to data, malafide or otherwise, and to protect the individuals rights of privacy. The legal
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issues are, however, being debated in our country and it is expected that some headway will be made in this respect in the near future.

GROWTH IN INTERNET BANKING

Numerous factors including competitive cost, customer service, and demographic considerations are motivating banks to evaluate their technology and assess their electronic commerce and Internet banking strategies. The challenge is to make sure the savings from internet banking technology more than offset the costs and risks associated with conducting business in cyberspace. Some of the market factors that may drive a banks strategy towards internet banking include the following: Competition The competitive pressure is the chief driving force behind increasing use of internet banking technology, ranking ahead of cost reduction and revenue enhancement. Banks see internet banking as a way to keep existing customers and attract new ones to the bank.

Banks can deliver banking services on the internet at transaction costs far lower than traditional ways. The actual costs to execute a transaction will vary depending on the delivery channel used. These costs are expected to continue to decline. Geographical Reach Internet Banking allows expanded customer contact through increased geographical reach and lower cost of delivery channels. In fact, some banks are doing business exclusively via the internet they do not have traditional banking offices and only reach their customers online. Branding

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Relationship building is a strategic priority for most banks. Internet banking technology and products can provide a means for banks to develop and maintain an ongoing relationship with their customers by offering easy access to a broad array of products and services. By capitalizing on brand identification and by providing a broad array of financial services, banks hope to build customer loyalty, and enhance repeat businesses.

Customer Demographics Internet banking allows banks to offer a wide array of options to their banking customers. Some customers will rely on traditional branches to conduct their banking business. Other customers are early adopters of new technologies that arrive in the marketplace. The challenge to banks is to understand their customer base and find the right mix of delivery channels to deliver products and services profitably to their various market segments. As use of the internet continues to expand, more banks are using the web to offer products and services or otherwise enhance communications with consumers. The internet offers the potential for safe, fast, and convenient new ways to shop for financial services and conduct banking business, any day, any time.

RISKS IN INTERNET BANKING Credit Risk :- Credit risk is the risk to earnings or capital arising from an obligators failure to meet the terms of any contract with the bank or otherwise to perform as agreed. Internet banking provides the opportunity for banks to expand their geographic range. Customers can reach a given institution from literally anywhere in the world. In dealing with customers over the internet, absent any personal contract, it is challenging for institutions to verify the credentials of their customers which is an important element in making sound credit decision. Verifying collateral and perfecting security agreements also can be challenging with out-of-area borrowers. Unless properly managed, internet banking could lead to a concentration in out-ofarea credits.
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. Interest-Rate Risk :- Interest rate risk is the risk to earnings or capital, arising from movements in interest rates. Interest rate risk arises from differences between the timing of rate changes and the timing cash flows. Internet banking can attract deposits, loans and other relationships from a larger pool of possible customers than other forms of marketing. Greater access to customers who primarily seek the best or term reinforces the need for managers to maintain appropriate asset/liability management systems, including the ability to react quickly to changing market conditions.

Liquidity Risk :- Liquidity risk is the risk to earnings or capital arising from a banks inability to meet its obligations than they come due, without incurring unacceptable losses. Liquidity risk includes the inability to manage unplanned changes in funding sources. Internet banking can increase deposit volatility from customers who maintains accounts solely on the basis of rate or terms. Asset/liability and loan portfolio management system should be appropriate for products offered through internet banking. Increased monitoring of liquidity and changes in deposits and loans may be warranted depending on the volume and nature of internet account activities.

Foreign Exchange Risk :- Foreign exchange is present when a loan or portfolio of loans is denominated in a foreign currency or is funded by borrowings in another currency. In some cases, banks will enter into multi-currency credit commitments that permit borrowers to select the currency they prefer to use in each rollover period. Banks may be exposed to foreign exchange risk if they accept deposits from NRIs or create accounts denominated in currencies other than INR on internet banking, although this risk is similar to the real account but internet may provide frequently large number of transactions. Appropriate system should be developed if banks engage in these activities.
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 Compliance Risk :- Compliance risk is the risk to earnings or capital arising from violations of, or non conformance with laws, rules, regulations, prescribed practices or ethical standards. Compliance risk also arises in situations where the laws or rules governing certain banks products or activities of the banks clients may be ambiguous or untested. Most internet banking customers will continue to use other bank delivery channels. Accordingly, banks will need to make certain that their disclosures on internet banking channels, including web sites, remain synchronized with other delivery channels to ensure the delivery of a consistent and accurate message to customers.

Strategic Risk :- Strategic risk is the current and prospective impact on earnings or capital arising from adverse business decisions, improper implementation of decisions or lack of strategic goals, the business strategies developed to achieve those goals, the resources deployed these goals and the quality of implementation. The resources need to carry out business strategies are both tangible and intangible. They include communication channels, operating systems, delivery networks and managerial capacities and capabilities. In some cases, banks may offer new products and services via the internet. Sometimes, management does not understand the risk and ramifications of these decisions which cause a loss in the delivery of their product.

Reputation Risk :- Reputation risk is the current and prospective impact on earnings and capital arising from negative public opinion. This affects the institutions ability to establish new relationships or services or continue servicing existing relationships. This risk may expose the institution to litigation, financial loss or a decline in its customer base. Reputation risk exposure is present throughout the organization and includes the responsibility to exercise an abundance of caution in dealing with customer and community. A banks reputation can suffer if it fails to deliver on marketing claims or to provide accurate timely services. This can include failing to
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adequately meet customer credit needs, providing unreliable or inefficient delivery systems, untimely responses to customer inquiries, or violations of customer privacy expectations. Sometimes internet banking services are poorly executed which cause a damage to banks reputation.

Transaction Risk :- Transaction risk is the current and prospective risk to earnings and capital arising from fraud, errors and inability to deliver products or services, maintain a competitive position and manage information. Transaction risk is evident in each product and service offered and encompasses product development and delivery, transaction processing, system development, computingsystems, complexity of products and services and the internal control environment. A high level of transaction risk may exist with internet banking products, particularly if these lines of business are not adequately planned, implemented and monitored.

Strategies To Mitigate The Risk In Internet Banking Banks should have sound preventive and detective control to protect their internet banking system from exploitation both internally and externally. They should follow the following measures :Access Control Logical access control should be implemented on data, systems, application software, utilities, telecommunications lines, libraries, system software etc. logical access control techniques may include user-ids, passwords or other bio-meteoric technologies. Firewalls At the minimum, banks should use the proxy server type of firewalls so that there is no direct connection between the internet and banks system. It facilitates a high level of control and in depth monitoring using logging and auditing tools. For sensitive systems, inspection firewall
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is recommended which thoroughly inspects all packets of information, and past and present transactions are compared. These generally include a real-time security alerts. .Security Infrastructure PKI is the most favored technology for secure internet banking services. However, it is not yet commonly available. While PKI infrastructure is strongly recommended during the transition period, until government puts in place the PKI infrastructure, the following options are recommended. Usage of SSL, which ensures server authentication and the use of client side certificates issued by the banks themselves using a certificate server. The use of at least 128-bit SSL for securing browser to web server communications and in addition, encryption of sensitive data like passwords in transit within the enterprise itself. Penetration Testing The information security officer and information system auditor should undertake periodic penetration tests of the system, which could include, Attempting to guess passwords using password-cracking tools. Search for back door traps in the programs. Attempt to overload the system using Ddos (Distributed Denial of Service) & Dos (Denial of Service) attacks. Check if commonly known holes in the software, especially the browser and the e-mail software exist.The penetration testing may also be carried out by engaging outside experts. Back Up & Recovery The banks should have proper infrastructure and schedules for backing up data. The backedup data should be periodically tested to ensure recovery without loss of transactions in a time frame as given out in the banks security policy. Business continuity should be ensured by having disaster recovery also be tested periodically. Maintenance Of Infrastructure Security infrastructure should be properly tested before using the systems and applications for normal operations. The bank should upgrade the systems by installing patches released by

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the developers to remove bugs and loopholes and upgrade to newer versions which give better security and control. Other Measures It is important for banks to be familiar with the regulations that permit electronic delivery of disclosures/notices versus those that require traditional hard copy notification. Banks should carefully review and monitor all requirements applicable to electronic products and services and ensure they comply with evolving statutory and regulatory requirement. Before introducing a internet product, management should consider whether the product and technology are consistent with tangible business objectives in the banks strategic plan.The bank should consider whether adequate expertise and resources are available to identify, monitor, control risk in the internet banking business. The planning and decision making process should focus on how a specific business need is met by the internet banking product, rather than focusing on the product as an independent objective. Banks should carefully consider how connections to third party are presented on their web sites. Hypertext links are often used to enable a customer to link to a third party. Such link may reflect an endorsement of the third partys products or services in the eyes of the customer. It should be clear to the customer when they left the banks web site so that there is no confusion about the provider of the specific products and services offered or the security and privacy standards that apply.

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MOBILE BANKING

Mobile banking is a system that allows customers of a financial institution to conduct a number of financial transactions through a mobile device such as a mobile phone or personal digital assistant. Mobile banking differs to mobile payments which involves the use of a mobile device to pay for goods or services either at the point of sale or remotely, analogously to the use of a debit or credit card to effect an EFTPOS payment. The earliest mobile banking services were offered over SMS, a service known as SMS banking. With the introduction of smart phones with WAP support enabling the use of the mobile web in 1999, the first European banks started to offer mobile banking on this platform to their customers. Mobile banking has until recently (2010) most often been performed via SMS or the mobile web. Apple's initial success with iPhone and the rapid growth of phones based on Google's Android (operating system) have led to increasing use of special client programs, called apps, downloaded to the mobile device. With that said, advancements in web technologies such

as HTML5, CSS3 and Java script have seen more banks launching mobile web based services to complement native applications. A recent study (May 2012) by Mapa Research suggests that over a third of banks have mobile device detection upon visiting the banks' main website. A number of things can happen on mobile detection such as redirecting to an app store, redirection to a mobile banking specific website or providing a menu of mobile banking options for the user to choose from.

A MOBILE BANKING CONCEPTUAL MODEL

In one academic model, mobile banking is defined as: Mobile Banking refers to provision and availment of banking and financial services with the help of mobile telecommunication devices. The scope of offered services may include facilities to conduct bank and stock market transactions, to administer accounts and to access customized information."
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According to this model mobile banking can be said to consist of three inter-related concepts:

Mobile accounting Mobile brokerage Mobile financial information services

Most services in the categories designated accounting and brokerage are transaction-based. The non-transaction-based services of an informational nature are however essential for conducting transactions - for instance, balance inquiries might be needed before committing a money remittance. The accounting and brokerage services are therefore offered invariably in combination with information services. Information services, on the other hand, may be offered as an independent module. Mobile banking may also be used to help in business situations as well as financial.

MOBILE BANKING SERVICES Typical mobile banking services may include: Account information 1. Mini-statements and checking of account history 2. Alerts on account activity 3. Monitoring of term deposits 4. Access to loan statements 5. Access to card statements 6. Mutual funds / equity statements 7. Insurance policy management 8. Pension plan management 9. Status on cheque, stop payment on cheque 10. Ordering cheque books 11. Balance checking in the account 12. Recent transactions
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13. Due date of payment (functionality for stop, change and deleting of payments) 14. PIN provision, Change of PIN and reminder over the Internet 15. Blocking of (lost, stolen) cards 16. Locating nearest bank branch, ATMs

Payments, deposits, withdrawals, and transfers 1. Cash-in, cash-out transactions on an ATM 2. Domestic and international fund transfers 3. Micro-payment handling - A micro-payment is a financial transaction involving a very small sum of money and usually one that occurs online. 4. Mobile & Direct to Home package recharging (DTH) 5. Purchasing tickets for travel and entertainment 6. Commercial payment processing - It is usually a third-party service that is actually a system of computer processes that process, verify, and accept or decline credit card transactions on behalf of the merchant through secure Internet connections. 7. Bill payment processing. 8. Peer to Peer payments - Person-to-person payments (P2P) is an online technology that allows customers to transfer funds from their bank account or credit card to another individuals account via the Internet or a mobile phone. 9. Withdrawal at banking agent 10. Deposit at banking agent

Investments 1. Portfolio management services - Portfolio management refers to the professional management of securities and other assets. Also referred to as "asset management" and "wealth management." 2. Real-time stock quotes - This is the actual price of a security at that moment in time. 3. Personalized alerts and notifications on security prices
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 Support 1. Status of requests for credit, including mortgage approval, and insurance coverage 2. Check (cheque) book and card requests 3. Exchange of data messages and email, including complaint submission and tracking 4. ATM Location

Content services 1. General information such as weather updates, news 2. Loyalty-related offers 3. Location-based services A report by the US Federal Reserve (March 2012) found that 21 percent of mobile phone owners had used mobile banking in the past 12 months. Based on a survey conducted by Forrester, mobile banking will be attractive mainly to the younger, more "tech-savvy" customer segment. A third of mobile phone users say that they may consider performing some kind of financial transaction through their mobile phone. But most of the users are interested in performing basic transactions such as querying for account balance and making bill payment.

Future functionalities in mobile banking Based on the 'International Review of Business Research Papers' from World business Institute, Australia, following are the key functional trends possible in world of Mobile Banking. With the advent of technology and increasing use of Smartphone and tablet based devices, the use of Mobile Banking functionality would enable customer connect across entire customer life cycle much comprehensively than before. With this scenario, current mobile banking objectives of say building relationships, reducing cost, achieving new revenue stream will transform to enable new objectives targeting higher level goals such as building brand of the banking organization. Emerging technology and functionalities would enable to create new ways of lead generation,

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prospecting as well as developing deep customer relationship and mobile banking world would achieve superior customer experience with bi-directional communications. Illustration of objective based functionality enrichment in Mobile Banking

Communication enrichment: - Video Interaction with agents, advisors. Pervasive Transactions capabilities: - Comprehensive Mobile wallet Customer Education: - Test drive for demos of banking services Connect with new customer segment: - Connect with Gen Y Gen Z using games and social network ambushed to surrogate banks offerings

Content monetization: - Micro level revenue themes such as music, e-book download Vertical positioning: - Positioning offerings over mobile banking specific industries Horizontal positioning: - Positioning offerings over mobile banking across all the industries Personalization of corporate banking services: - Personalization experience for multiple roles and hierarchies in corporate banking as against the vanilla based segment based enhancements in the current context.

Build Brand: - Built the banks brand while enhancing the Mobile real estate.

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ANALYSIS AND INTERPRETATION OF DATA ACCOUNTS IN THE RESPECTIVE BANK Bank State bank of India HDFC Canara bank Others Total No. of Respondents 10 9 6 5 30

Account in the respectice bank

35% HDFC, 30% 30% 25% 20% 15% 10% 5% , 0% 0% canara bank other HDFC SBI ,0 canara bank, 20% other, 17% SBI, 33%

Analysis of the above diagram Out of 30 samples, 10 customers are from State bank of India, 6 people from canara bank, 9 people from HDFC, and 5 people in other bank It was witnessed that today public sector bank State bank of India has the largest customer base but the private banks are also catching up and after State bank of India HDFC has the highest customer.
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PREFER USING INTERNET BANKING INSTEAD OF VISITING BANK EVERY NOW AND THEN.

Response No. of Respondents

Yes 27

No 3

TOTAL 30

Prefer using net banking

No 10%

Yes 90%

Yes No

Analysis of the above diagram Out of 30 customers, 27 customers prefer using internet banking; only 3% of customers do not prefer using internet banking. It was witnessed that most of the respondents preferred using internet banking to their conventional banking system. Thus, internet banking has a bright future ahead.

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LIMITATIONS OF THE REPORT

The following are the limitations with this report : Some of the persons were not willing to answer the question. Possibility of error in data collection because many customer may have not given actual answers of my questionnaire. Sample size is limited to 30 customers who acquire internet-banking facilities from the bank. The sample size may not adequately represent the whole market. There is a chance of error in data collection because many customers have chosen two option in Question No. 2 in questionnaire. The research is confined to a certain part of area. People were mostly unwilling to talk because of their heavy schedule or they get annoyed with the phone calls or even if they are asked about this face to face. Some of the persons were not so responsive.

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CONCLUSION From this report, it is found that internet banking has empowered customers and businesses with information needed to make better financial service, and it has helped change the banking habits of various individuals. Every day more and more people are turning to the internet banking for their personal banking. Internet banking is a safe, convenient way to shop for financial services, maintain bank accounts and conduct business 24 hours a day Thus; internet banking has a promising future ahead. Internet banking has become a necessary survival weapon and is fundamentally changing the banking industry worldwide. Today, the click of the mouse offers customers banking services at a much lower cost and empowers them with unprecedented freedom in choosing vendors for their financial service needs Internet has created plenty of opportunities for players in the banking sector. Today bank depending on delivering some or all of their banking services on the Internet while continuing to support their traditional infrastructure. It is observed that most of the customer preferred using internet banking to their conventional banking system and it is also witnessed that most of people would like to do all the transactions which one does personally on a visit to the bank Thus; internet banking has a bright future ahead.

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BIBLIOGRAPHY

Ravishankar, D. (2003) Towards Integrated Risk Management, Vol. XXV, No. 9 Sen, P. (2008) Credit Risk Management: Concept and Components, Vinimaya, Vol. XXIX, No. 2, (July-Sep.) http://www.investopedia.com/terms/ http://en.wikipedia.org/wiki/Mobile_banking Newspapers Economic times.

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APPENDIX

Dear Respondent, I am student of Dr V.N. BRIMS; I am doing this research to compare different services provided by bank to its clients.

1. (a) (b) (c) (d)

In which bank do you have your account? HDFC Bank State Bank of India Canara Bank Other bank

2. Would you prefer using internet banking instead of visiting your bank every now and then? (a) (b) Yes No

3. Does your bank educate you about the internet banking services being offered? (a) (b) Yes No

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4. Do you feel safe in disclosing your details on internet? (a) (b) Yes No

5. (a) (b)

Are you satisfied with your bank services? Yes No

6. What are your main transactions you would prefer to do by internet? (a) (b) (c) (d) (e) (f) (g) Money transfers Checking of your current balance Create Fixed Deposits Online Request a Demand Draft Pay Bills Order a Cheque Book Request Stop Payment on a Cheque

7. What benefits do you see in internet banking? (a) Convenience (b) Speed c) Transparency d) Time
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8. Personal Information Name: Sex: ( ) Male ( ) Female Age:

Phone No: Occupation:

Signature of Respondent

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