A STUDY

ON
“CUSTOMER PERCEPTION

TOWARDS

INTERNET BANKING”

Submitted in partial fulfillment for the award of

MASTER OF BUSINESS ADMINISTRATION (MBA)

Submitted by

SONAL ARORA
Enroll no: 13112303909

DELHI INSTITUTE OF ADVANCED STUDIES

Guru Gobind Singh Indraprastha University, Delhi

2009-2011

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 ACKNOWLEDGEMENT

I would like to take this opportunity as a platform to thank various individuals, without the
support of whom, this project would not have been successful.

I would like to thank my Faculty guide Ms. Ruchi Gupta, Lecturer, DIAS for her complete support in
making of the project.

This study could not have completed without the cooperation and enthusiasm of the Customers
which gave us their valuable time and suggestion. The sharing of their opinion and experience
offered me some valuable insight into my study and greatly enhanced the value of this study.

I have put on my best efforts to make this project as informative and understandable as possible.

-------------------------------

SONAL ARORA

ROLL NO. 13112303909

MBA IV B

DIAS

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 DECLARATION

This Project Report is submitted in partial fulfillment of the summer internship program at Delhi
Institute of advanced studies, Guru Gobind Singh Indraprastha University. I declare that this
Project report is my own work and that it does not contravene any academic offence as specified
in the University’s regulations.

I confirm that this Project report does not contain information of a commercial or confidential
nature or include personal information other than that which would normally be in the public
domain unless the relevant permissions have been obtained. In particular any information which
identifies a particular individual’s religious or political beliefs, information relating to their
health, ethnicity, criminal history or personal life has been anonymized.

----------------------------------

SONAL ARORA

ROLL NO. 13112303909

MBA IV B

DIAS

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 EXECUTIVE SUMMARY

This project is undertaken to fulfill the project work component of Delhi Institute of Advanced
Studies, New Delhi in the IV Semester.

The project starts with the Introduction chapter that gives the brief of internet banking in India.
Indian Banks have adopted technology in bank and are at different stages of the web-enabled
banking cycle. Initially, a bank, which is not having a web site, allows its customer to
communicate with it through an e-mail address; communication was limited to a small number of
branches and offices which have access to this e-mail account. Still, many scheduled commercial
banks in India are still in the first stage of Internet banking operations.

Along with this, objectives are mentioned and the research methodology used in this project
which is a descriptive one and the data collected is both primary as well as secondary data.

Next to the above chapter is the Literature Review of internet banking which tells about the
previous researches that were conducted by other researchers.

The next chapter to this is the conceptual framework that deeply tells about internet banking in
India, its evolution, progress, products and services offered and problems associated with it.

After this the findings and analysis is done of the data collected from bank users via
questionnaire and the succeeding chapter includes the conclusions and suggestions to improve
internet banking services in India.

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Certificate I
Acknowledgement II
Declaration III
Executive Summary IV

Chapter Page

No No.
Particulars

1 Introduction 1
2 Research study 10
2 Literature Review 13

3 Conceptual framework 16

4 Analysis of data 33

5 Findings 58

6 Conclusions and Suggestions 61

7 Limitations 65

Annexure i

Bibliography vii

Miscellaneous ix

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 CHAPTER – 1

INTRODUCTION

INTRODUCTION

Indian banks have a chequered history. The British legacy left behind a host of large and small
privately-held banks. The nationalization of banks took place in 1960s, leading to the emergence
of the public sector banks. The 90s saw the banking industry embracing technology in a massive
way, led in particular by the new private banks and MNC banks. Among these plethora of
technology innovations, Internet banking for the retail segment is a recent phenomenon that has

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generated a lot of interest in the Indian banking industry. Private and foreign banks have been the
early adopters while the PSU banks are also beginning to catch on to the opportunity.

The total number of registered users for Internet banking in India is over two million. But this
figure needs to be adjusted for dormant users and multiple accounts (a user having accounts with
more than one bank). India has a little less than a million active Internet banking users. And
though this is just 0.096 percent of the total population, it represents 15 percent of the India’s
Internet user population. Thus indicating that the concept of Internet banking is surely getting
popular by each passing day.

ICICI Bank pioneered internet banking in 1996 and soon other banks followed.1996 to 1998
marked the adoption phase of internet as a whole, though usage increased only in 1999—due to
lower ISP online charges, increased PC penetration and a tech-friendly atmosphere.

After ICICI, Citibank, IndusInd Bank and HDFC Bank and Times bank (now part of HDFC
Bank), were the early ones to adopt the technological innovation in 1999. Initially the Net
banking facility was provided in order to meet the information requirements of the customers and
gradually it ventured into fund transfers and third party transfers.

Though adoption of Internet banking by Indian banks and their customers was not able to get
desired results, but no one can deny the obvious benefits that this service offers. Costs of banking
service through the Internet amount to a fraction of the costs through conventional methods.
Industry estimates assume teller cost at Re 1 per transaction, ATM transaction costs at Re 0.45,
phone banking at Re 0.35, debit cards at Re 0.20 and Internet banking at Re 0.10 per transaction.

In today’s environment besides their physical branches, banks need to grow non-branch delivery
networks as a part of their growth strategy. ATMs are currently the main focus for many banks
for most banks, but Internet banking definitely has the potential to leave the rest behind. Internet
banking, thus, increases operational efficiencies and reduces costs, besides giving a platform for
offering value added services to the customer, thereby fulfilling all the essential prerequisites for
a flourishing banking industry.

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 THE PSU LETHARGY

PSU banks are on the back foot in terms of adopting technological innovations in banking
sector, they have remained laggards in the race for adopting Internet banking practices. There are
very few nationalized banks like State Bank of India, Bank of Baroda, Allahabad Bank,
Syndicate Bank and Bank of India that offer Internet banking services. Some others like Union
Bank of India, Canara Bank and Punjab National Bank are following them. SBI’s Internet
banking initiative, launched in July 2001, is in fact doing quite well and has over 18,000
registered customers across 150 branches. The enthusiastic response has encouraged the SBI
management to extend the service to an additional 500 branches

Internet banking is only an extension of traditional banking services, but there are several
instances which contradict the legal framework for this banking in India provided by a set of
enactments like the Banking Regulations Act, 1949, the Reserve Bank of India Act, 1934 and the
Foreign Exchange Management Act, 1999.However, many analysts are not ready to agree that
lack of regulations that is preventing the PSU banks from taking the Internet plunge.

The average customer profile of PSU banks are resistant to adopt internet banking and are
comfortable with the traditional banking system and are not too keen on adopting an online
model. Mostly PSU banks have the majority of their customer base in the smaller cities or towns

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and even in remote villages. Even in bigger cities, a large proportion of their customers are either
senior citizens or at least 50+ who have a natural aversion towards adopting new technology.
Though this is not the case with private or MNC banks, where the clientele is mostly urban-
based falling in the 20-40 age group and who have a higher exposure to technology.

Even the IDC survey conducted in 2005 seems to confirm this premise. Among the elite Internet
banking users, that is, those customers who belong to Socio-Economic Class A1 (SEC A1) in the
top five cities, it has been found that people access their account through the Internet once every
week. Similarly users visit their ATM centre on an average of two times per week. The
workplace happens to be the most favored place to access Internet for banking purposes. The
home comes a close second while cybercafés take the third place. ATM in the close vicinity to
the office is the most preferred place among users for banking. The users (24 percent) who
access the ATM near their office mostly go during the first half of the day, between 9 AM to 12
PM, but most preferred time by all users (41 percent) is between 6-9 PM.

INTERNET BANKING

Internet banking, also known as online banking, is an outgrowth of PC banking. Internet banking
uses the Internet as the delivery channel by which to conduct banking activity, for example,
transferring funds, paying bills, viewing checking and savings account balances, paying
mortgages, and purchasing financial instruments and certificates of deposit. An Internet banking
customer accesses his or her accounts from a browser— software that runs Internet banking
programs resident on the bank’s World Wide Web server, not on the user’s PC

The Internet banking is changing the banking industry and is having the major effects on
banking relationships. Internet banking involves use of Internet for delivery of banking
products & services. It falls into four main categories, from Level 1 - minimum
functionality sites that offer only access to deposit account data - to Level 4 sites - highly
sophisticated offerings enabling integrated sales of additional products and access to other

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financial services- such as investment and insurance. In other words a successful Internet
banking solution offers

• easy online applications for all accounts, including personal loans and mortgages
• 24 hour account access
• Quality customer service with personal attention

DRIVERS OF CHANGE

The Internet has leveled the playing field and afforded open access to customers in the
global marketplace. Internet banking is a cost-effective delivery channel for financial
institutions. Consumers are embracing the benefits of Internet banking. Access to one's
accounts at anytime and from any location via the World Wide Web is a convenience
unknown two decades ago. A bank’s Internet presence transforms from 'brouchreware'
status to 'Internet banking' status once the bank goes through a technology integration
effort to enable the customer to access information about his or her specific account
relationship. The six primary drivers of Internet banking includes, in order of primacy are:

• Improve customer access

• Facilitate the offering of more services
• Increase customer loyalty
• Attract new customers
• Provide services offered by competitor.
• Reduce customer attrition

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.
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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 in 2009 reveals:

• Throughout the country, the Internet Banking is in the nascent stage of

development (only 50 banks are offering varied kind of Internet banking 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.

THE EFFECTS OF THE INTERNET ON BANKING

The development and growth of the Internet has had a tremendous affect on the banking
industry. Internet banking has changed the way many banks operate and the way consumers
interact with and view banking. Consumers need to understand the importance of privacy and
security when banking online, but many benefits exist for online banking.

BASICS

Online banking offers a marketplace where consumers can more efficiently research the products
and services offered by a given bank, according to the Federal Deposit Insurance Corporation's
(FDIC) "Safe Internet Banking" overview. Companies provide information, overviews, and other
tools online to help customers. Online applications are often available that consumers can use to
quickly apply for loans, savings and other products. Online banking accounts enable consumers
to expand the market of potential banks they work with beyond traditional local banks.
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CONSUMER BENEFITS

Convenience is the most obvious benefit of online banking for consumers. Banking can be done
from home. Applying for new accounts is efficient. Cost benefits to banks allow them to offer
lower-cost loans and higher-rate savings accounts to customers, according to the Internet
Banking website in its "Advantages of Internet Banking" overview. Online account monitoring is
another major convenience for customers.

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 IMPACT OF ONLINE BANKING

Customers who adopt online banking are typically more profitable to the bank, stay with the
bank longer and use more products strengthening the bank customer relationship. Information
Technology and Internet banking has bridged the information gap, which was interestingly
because of human involvement. Banks can make the information of products and services
available on their site, which is, an advantageous proposition.

Prospective customer gathers all the information from the website and visits the branch with
specific queries and will take less time of employee. Customer can get comparative information
and parameters by visiting different banks website. Customer can get all the information, by
saving money and time. The trend thus emerging out is that of virtual corporate system where the
human role is minimized to maximum effect.

The overall banking size and structure has increased considerably. It can also be accredited to the
current market characteristics. More private players and multinational banks are establishing
their base in India. Earlier nationalized bank dominated the scenario. Now after deregulation
private banks have emerged as a powerful force. As a result, there is a fierce competition among
these players for capturing the savings of individuals and current accounts of organisations. This
has been spearheaded by the liberalization in the insurance industry. Insurance industry is giving
fierce competition through their offerings on various policies. This sudden surge has
necessitated the use of technology in offering better services competitively. Most of the banks
have coupled IT with their offering to add value.

Several banks have been positioning themselves as a one-stop shop financial service provider
with a fairly exhaustive range of products, including deposit products, loans, credit cards, debit
cards, depository (custody services), investment advice, bill payments and various transactional
services. These apart, banks have also been entering into the business of selling third-party
products such as mutual funds and insurance to the retail customers. To provide their customers
greater flexibility and convenience as well as to reduce servicing costs, banks have been

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investing to computerize their branches and in new delivery channels such as ATMs, phone
banking, internet banking and mobile banking.

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 CHAPTER – 2

RESEARCH STUDY

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OBJECTIVE OF THE STUDY

• To find the penetration level of internet banking in India.

• To study the reasons behind the popularity of internet banking.
• To make a study on problems faced by the internet banking users.
• To study the reasons that hampers users to adopt internet banking.
• To find out the preferred mode of banking: - online or manual banking.

RESEARCH TYPE

• Descriptive research and exploratory research design is used.

• It has been tried to find out the main cause why there is perceptual blocking of the Indian
customers towards internet banking.

DATA COLLECTION

The research methodology involves collecting both kinds of data which are:

PRIMARY DATA

• Sample size of 100 customers was taken into consideration.

• Data was analyzed using simple percentage method.

• Conclusions and inferences were drawn and interpreted.

SECONDARY DATA

• Magazines

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 • Books

• Internet

• Newspaper

SAMPLING

• Convenience sampling technique has been employed

• Members of the population are chosen based on their relative ease of access.

SAMPLE SIZE
100 respondents were selected to collect primary data.

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 CHAPTER - 3
LITERATURE REVIEW

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• Jhumkee Iyengar and Manisha Belvalkar (2007) “Case Study of Online Banking in
India: User Behaviors and Design Guidelines” says banks view online banking
essentially as a technology solution, it is a relatively new area for Indian consumers and
many of them are yet comfortable using it. Indian consumers are cautious about their
financial assets. They are also relatively recent entrants to internet based services. They
suggested that Design of these systems must therefore be based on an understanding of
these users’ outlook and priorities through task centric, security assured and service
oriented solutions minus the technological challenges.

• Mohammed Sadique Khan and Siba Sankar Mahapatra (2009) “Service quality
evaluation in internet banking: an empirical study in India” evaluates service quality of
internet banking in India from customer’s perspective. Seven quality dimensions, viz.
reliability, accessibility, user-friendliness, privacy/security, efficiency, responsiveness
and fulfillment, are identified based on principal component factor analysis. Customers
are satisfied with quality of service on four dimensions such as reliability, accessibility,
privacy/security, responsiveness and fulfillment, but least satisfied with the ‘user-
friendliness’ dimension..

• Deepshikha Jamwal & Devanand Padha (2009) “Internet Banking Systems in India:
Analysis of Security Issues” emphasizes when customer use the Internet banking, they
expect confidentiality and data integrity. There are various risks issues and Internet fraud
associated with internet banking that can affect the customer’s view of the service quality
provided by the banks. There has been a sharp rise in the Internet banking over the last
decade globally and this trend is also following up in India due to the significant rise in
banks offering various banking services through Internet. The objective of the study is to
analyze the current issues related to .security in our Internet banking systems, like the
data input on the computer can be stolen

• Ali kose (2009) “Determination of reasons affecting the use of internet banking
through logistic regression analysis” determines various reasons that affect the use of
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 internet banking by consumer. It has been found out that there are six important factors
affecting the use of internet banking at the end of the analysis. Those are; income level,
access to internet at home and workplace, ease of communication, insecurity over internet
and difficulties in the access.As per the findings the logistic regression model; there is a
positive relationship between the income level as well as ease of communication and the
rate of superiority..

• Yang and Tanveer Ahmed (2009) “Recent trends and developments in e-banking in
an Underdeveloped nation – an empirical study” found out major issues and challenges
in the development of the electronic banking (e-banking) industry of a relatively
underdeveloped nation. This research showed that even in many less developed nations;
the application of e-banking can help their local banks reduce operating costs and provide
a better and fast service to their customers. It also has been revealed that there is a huge
gap between well developed and new emerging economic powers and those least-
developed nations in terms of development and application of e-banking services.

• Rahmath Safeena, Hema Date and Abdullah Kammani (2011) “Internet Banking
Adoption in an Emerging Economy: Indian Consumer’s Perspective” emphasizes
Information technology Services is considered as the key driver for the changes taking
place around the world. They determines the factors influencing the consumer’s adoption
of internet banking in India and also investigates the influence of perceived usefulness,
perceived ease of use and perceived risk on use of IB. according to them it is an essential
part of a bank’s strategy formulation process in an emerging economy like India.

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CHAPTER 4

CONCEPTUAL
FRAMEWORK

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EVOLUTION OF TECHNOLOGY IN INDIAN BANKING
SECTOR

The technological development in banking can be traced as following:-

1960- Mechanized banking introduced.

1970– Introduction of computer based banking industry.
1980 – Introduction of computer-linked communication based banking.

Advent of computer technology has created a major impact on working of banks. The
computerization and subsequent development in history of Indian banks can be traced back to
1966 when Indian Bankers Association (IBA) along with exchange banks association signed first
wage settlement with the unions, which accounted for the use of IBM or ICT accounting
machines for inter-branch reconciliation etc. committee on computerization and mechanization
was appointed by RBI in 1983 under chairmanship of Dr. C. Rangrajan recommended that
computerization and installation of Advanced Ledger Posting Machines (ALPM) at branch,
regional and head offices of banks will bring around a new era in banking. Narsimhan
Committee in 1991 paved way for reform phase in banking. Saraf Committee was constituted by
RBI in 1994 that recommended the use of Electronic Fund Transfer System (EFT), introduction
of electronic clearing services and extension of Magnetic Ink Character Recognition (MICR)
beyond metropolitan cities and branches.

The rate of adoption of IT by foreign and private sector bank in the country has been significant
over the last five years, which can be attributed to fierce competition and the internet phenomena
worldwide. The arrival of private and multinational banks with their superior state of the art
technology based services pushed the Indian banks to follow the suit by going in for the latest
technologies to meet the threat of competitors and retain their customer base. “The last four years
have seen dramatic changes, making customers’ convenience critical aspect of banking. Indian
metros are surging ahead in online banking usage. Today the delivery channel of banks include
direct dial up connections, private networks, public networks etc. and the devices include
telephone, Personal Computers including Automated Teller Machines, etc.

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 INTERNET BANKING IN INDIA

India had begun to catch on the popularity of internet banking worldwide. A number of banks
have set up banking portals allowing their customers to access facilities like obtaining
information, querying on their accounts, etc. It provides bank with competitive advantage over
other banks who do not offer this facility to their consumers

Indian Banking Scenario

Internet Banking is a product of e-commerce in the field of banking and financial services. In
what can be described as B2C domain for banking industry, Internet Banking offers different
online services like balance enquiry, requests for cheque books, recording stop-payment
instructions, balance transfer instructions, account opening and other forms of traditional
banking services. Mostly, these are traditional services offered through Internet as a new delivery
channel. Banks are also offering payment services on behalf of their customers who shop in
different e-shops, emalls etc. Further, different banks have different levels of such services
offered, starting from level-1 where only information is disseminated through Internet to level-3
where online transactions are put through.

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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.

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 branches, and thus get ‘hooked’ to the convenience of
arm-chair 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 45
paisa, phone banking at 35 paise, debit cards at 20 paise and Internet banking at 10 paise 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.

Internet banking can be categorized in following stages:

Information Kiosks:

The traditional information on banking products and services are available on the website of the
bank.

Basic I-Banking:

Bank sets up infrastructure for internet banking and for accessing basic services like opening an
account, paying utility bills and checking the balance.

Virtual medium:
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The internet is taken as an official medium for financial transactions. Buying and selling
activities can be undertaken through banks payment gateway technology. Today most of the
banks are having their own functional websites through which banks are serving customers.

FEATURES OF INTERNET BANKING

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From the perspective of banking products and services being offered through Internet, Internet
banking is nothing more than traditional banking services delivered through an electronic
communication backbone, viz, Internet. But, in the process it has thrown open issues which have
ramifications beyond what a new delivery channel would normally envisage and, hence, has
compelled regulators world over to take note of this emerging channel. Some of the distinctive
features of I-banking are:

INCREASED COMMUNICATION
It removes the traditional geographical barriers as it could reach out to customers of different
countries / legal jurisdiction. This has raised the question of jurisdiction of law / supervisory
system, to which such transactions should be subjected,

RISK MANAGEMENT
It has added a new dimension to different kinds of risks traditionally associated with banking,
heightening some of them and throwing new risk control challenges,

SECURITY
Security of banking transactions, validity of electronic contract, customers’ privacy, etc., which
have all along been concerns of both bankers and supervisors have assumed different dimensions
given that Internet is a public domain, not subject to control by any single authority or group of
users.

COMPETITIVE ADVANTAGE
It poses a strategic risk of loss of business to those banks who do not respond in time, to this new
technology, being the efficient and cost effective delivery 2 mechanism of banking services,

POPULARITY

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A new form of competition has emerged both from the existing players and new players of the
market who are not strictly banks.

REASON FOR GROWTH

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The reasons for accelerated growth in adoption of internet banking in India are as
following:

• Demand side pressure due to increasing access to low cost electronic services.
• Emergence of open standards for banking functionality.
• Growing customer awareness and need of transparency.
• Global players in the fray.
• 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 eliminates geographic boundaries.
• Move from one stop shopping to 'Banking Portfolio' i.e. unbundled product
purchases.

There is possibility that some existing brick and mortar banks will go out of business if
they fail to respond to the challenge of the Internet. The Internet and its underlying
technologies had changed and transform not just banking, but all aspects of finance and
commerce. It represents much more than a new distribution opportunity.

MAIN CONCERNS IN INTERNET BANKING

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In a survey conducted by the Online Banking Association, member institutions rated
security as the most important issue of online banking. There is a dual requirement to
protect customers' privacy and protect against fraud. Banking Securely: Online Banking
via the World Wide Web provides an overview of Internet commerce and how one
company handles secure banking for its financial institution clients and their customers.
Some basic information on the transmission of confidential data is presented in Security
and Encryption on the Web. PC Magazine Online also offers a primer: How Encryption
Works. A multi-layered security architecture comprising firewalls, filtering routers,
encryption and digital certification ensures that your account information is protected
from unauthorized access:

• Firewalls and filtering routers ensure that only the legitimate Internet users are
allowed to access the system.
• Encryption techniques used by the bank (including the sophisticated public key
encryption) would ensure that privacy of data flowing between the browser and the
Infinity system is protected.
• Digital certification procedures provide the assurance that the data you receive is
from the Infinity system.

PROGRESS IN INDIAN INTERNET BANKING

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Indian Banks have adopted technology in bank and are at different stages of the web-enabled
banking cycle. Initially, a bank, which is not having a web site, allows its customer to
communicate with it through an e-mail address; communication was limited to a small number of
branches and offices which have access to this e-mail account. Still, many scheduled commercial
banks in India are still in the first stage of Internet banking operations.

With gradual adoption of Information Technology, the banks have put up a web-site that
Provides general information on the banks, its location, services available e.g. loan and deposits
products, application forms for downloading and e-mail option for enquiries and feedback.. For
example, Vijaya Bank provides information on its web-site about its NRI and other services.
Customers are required to fill in applications on the Net and can later receive loans or other
products requested for at their local branch. A few banks provide the customer to enquire into his
de mat account (securities/shares) holding details, transaction details and status of instructions
given by him. These web sites still do not allow online transactions for
their customers.

Some of the banks permit customers to interact with them and transact electronically with them.
Such services include request for opening of accounts, requisition for cheque books, stop
payment of cheques, viewing and printing statements of accounts, movement of funds between
accounts within the same bank, querying on status of requests, instructions for opening of Letters
of Credit and Bank Guarantees etc. These services are being initiated by banks like ICICI Bank
Ltd., HDFC Bank Ltd. Citibank, Global Trust Bank Ltd., UTI Bank Ltd., Bank of Madura Ltd.,
Federal Bank Ltd. etc. Certain banks like ICICI Bank Ltd., have gone a step further within the
transactional stage of Internet banking by allowing transfer of funds by an account holder to any
other account holder of the bank.

Some of the more aggressive players in this area such as ICICI Bank Ltd., HDFC Bank Ltd., UTI
Bank Ltd., Citibank, Global Trust Bank Ltd. and Bank of Punjab Ltd. offer the facility of receipt,
review and payment of bills on-line. These banks have tied up with a number of utility
companies. The ‘Infinity’ service of ICICI Bank Ltd. Also allows online real time shopping mall
payments to be made by customers. HDFC Bank Ltd. has made e-shopping online and real time

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with the launch of its payment gateway. It has tied up with a number of portals to offer business-
to-consumer (B2C) ecommerce transactions. The first online real time e-commerce credit card
transaction in the country was carried out on the Easy3shoppe.com shopping mall, enabled by
HDFC Bank Ltd. on a VISA card.

Banks like ICICI Bank Ltd., HDFC Bank Ltd. etc. are thus looking to position themselves as one
stop financial shops. These banks have tied up with computer training companies, computer
manufacturers, Internet Services Providers and portals for expanding their Net banking services,
and widening their customer base. ICICI Bank Ltd. has set up a web based joint venture for on-
line distribution of its retail banking products and services on the Internet, in collaboration with
Satyam Infoway, a private ISP through a portal named as icicisify.com. The customer base of
www.satyamonline.com portal is also available to the bank. Setting up of Internet kiosks and
permeation through the cable television route to widen customer base are other priority areas in
the agendas of the more aggressive players.

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.

The race for market supremacy is compelling banks in India to adopt the latesttechnology on the
Internet in a bid to capture new markets and customers. HDFC Bank Ltd. with its ‘Freedom- the
e-Age Saving Account’ Service, Citibank with ‘Suvidha’ and ICICI Bank Ltd. with its ‘Mobile
Commerce’ service have tied up with cellphone operators to offer Mobile Banking to their
customers. Global Trust Bank Ltd. has also announced that it has tied up with cellular operators
to launch mobile banking services. Under Mobile Banking services, customers can scan their
accounts to seek balance and payments status or instruct banks to issue cheques, pay bills or
deliver statements of accounts. It is estimated that by 2003, cellular phones will have become the

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premier Internet access device, outselling personal computers. Mobile banking will further
minimise the need to visit a bank branch.

PRODUCTS AND SERVICES OFFERED

Bill payment service

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There is facility of 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 bills, all that is needed to do is to
complete a simple one-time registration for each biller. standing instructions online can also be
setup to pay recurring bills, automatically. The bank does not charge customers for online bill
payment.

Fund transfer

We can transfer any amount from one account to another of the same or any another bank. Once
we login to your account, we 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 we lose our credit card, we can report lost card online.

Railway pass

Indian Railways has tied up with ICICI bank and consumer can now make railway pass for local
trains online. The pass will be delivered to consumer at his doorstep. But the facility is limited to
Mumbai, Thane, Nasik, Surat and Pune.

Investing through Internet banking

FD can be open online through funds transfer. 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.
33 | P a g e
Moreover, some banks even give consumer the facility to purchase mutual funds directly from
the online banking system.

Recharging prepaid phone

Consumer can recharge prepaid mobile cards by logging in to Internet banking. By just selecting
operator’s name, entering mobile number and the amount for recharge, phone is recharged within
few minutes.

Shopping

With a range of all kind of products, consumer can shop online and the payment is also
made conveniently through consumer’s account.

RBI CLASSIFICATION OF INTERNET BANKING PRODUCTS

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:

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.

Electronic Information Transfer System

34 | P a g e
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 bank’s application system either in batch mode or off-line. The application systems
cannot directly access through the internet.

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, inter-bank payment gateway and legal
infrastructure.

PROBLEMS RELATED TO NET BANKING IN INDIA

Internet banking in India is not as much popular as compared to foreign countries despite the fact
that India is the IT and tech services outsourcing hotspot of the world, it's surprising that Internet
banking has not really taken off. Despite the advent of a very tech-savvy and vast consumer class
in recent years, a mix of industry issues and unique challenges continue to thwart the expansion

35 | P a g e
of net banking in India. Technology challenges, IT practices, certain cultural issues, industry
lethargy, and workplace constraints have affected widespread acceptance of Internet banking.

Low Broadband Internet Penetration

India has one of the lowest broadband connectivity penetration rates in Asia as compared to
Japan, Taiwan, Korea and Singapore. While the bigger cities such as Mumbai, Delhi, Chennai,
and Bangalore have relatively better broadband penetration rates, PC users in smaller cities and
towns still use dial-up options to connect to the Internet. Slow connectivity speeds often dampen
the online banking experience for many customers eager to use such services.

Banks' Ambivalent Commitment Levels

Internet banking did take off in India at the turn of the millennium but soon faltered due to lack
of takers. Multinational and domestic private banks started offering net banking services as a
competitive differentiator. However, banks' ambivalent commitment levels and their reluctance
to allocate huge budgets for net banking branding initiatives, as well as a lack of industry
advocacy efforts, have resulted in poor acceptance levels of Internet banking by customers.

Customers' Preference for Traditional Branches

There are thousands of highly active traditional bank branches in India's crowded cities and
major towns. Most customers prefer the personal touch and customized service offered by staff
in brick-and-mortar bank branches. Many Indians are also averse to calling call centers and
banks' customer contact lines to address issues related to online bank accounts. Most people are
hesitant to use online banking because of security concerns.

Fear of Online Threats/Scams

Ubiquitous and prevalent online threats about hackers, identity theft, stolen passwords, viruses,
worms and spyware tend to make customers wary. Customers are also not sure about the efficacy
of banks' websites and their commitment to allocate funds for reliable encryption mechanisms
and robust back-end technologies and systems.
36 | P a g e
Other Problems

Workplace constraints and corporate policies about using external websites or pursing personal
activities such as online banking have affected its expected fast-paced acceptance among the
growing affluent class in India. Public sector banks with vast customer bases also don't tend to
invest money in training personnel for e-banking initiatives, resulting in poor customer service
levels.

37 | P a g e
 CHAPTER 4
ANALYSIS OF DATA

38 | P a g e
AGE GROUP (IN YEARS) NUMBER OF RESPONDENTS NUMBER OF
RESPONDENTS IN
PERCENT
18 – 25 24 24
26– 35 34 34
36 – 45 21 21
46 – 60 16 16
Above 60 5 05
TOTAL 100 100

5%

16% 24%

18 -25
26- 35
36- 45
46 -60
21% ABOVE 60

34%

INFERENCE:

Out of 100 respondents, majority of internet banking users belong to age group 26 – 35.

GENDER NUMBER OF RESPONDENTS NUMBER OF

39 | P a g e
 RESPONDENTS IN
PERCENT
Male 57 57
Female 43 43
TOTAL 100 100

43%
MALE
FEMALE
57%

OCCUPATION NUMBER OF NUMBER OF

RESPONDENTS RESPONDENTS IN
PERCENTAGE
Business 15 15
Service 38 38
Profession 12 12
Student 27 27
Others 13 13

40 | P a g e
TOTAL 100 100

12% 14%

BUSINESS
SERVICE
26% PROFESSION
STUDENT
OTHERS
37%

11%

INFERENCE:

Service class people are more inclined towards internet banking. They comprised 38% of
respondents.

NAME OF BANK IN WHICH YOU HAVE ACCOUNT

NAME OF BANK NUMBER OF RESPONDENTS NUMBER OF

RESPONDENTS IN
PERCENTAGE
ICICI Bank 29 29
AXIS Bank 07 07
State Bank Of India 25 25
HDFC Bank 21 21
HSBC 05 05
Union Bank 02 02
Bank Of India 03 03
41 | P a g e
Others 08 08
TOTAL 100 100
8%
3%
2%
29% ICICI BANK
5%
AXISBANK
SBI
HDFCBANK
21% HSBC

7% UNION BANK
BANK OFINDIA
OTHERS
25%

INFERENCE:

ICICI bank being the pioneer of internet banking in India is preferred over other banks. Out of
100 respondents, it comprised of 29% of customer base.

FREQUENCY OF BANK VISIT

FREQUENCY OF BANK NUMBER OF NUMBER OF

VISIT RESPONDENTS RESPONDENTS IN
PERCENTAGE
Less than1 23 23
1 TO 3 times 51 51
3 TO 8 times 17 17
8 TO 12 times 07 07
Over 12 times 02 02
TOTAL 100 100

42 | P a g e
 2%
7%
23%

17%
LESSTHAN 1

1 TO 3 TIMES

3 TO 8 TIMES

8 TO 12 TIMES

OVER 12 TIMES

51%

INFERENCE:

Around 51% visit bank branch on an average between 1 to 3 times monthly.

REASON FOR BANK VISIT

REASON FOR BANK VISIT NUMBER OF RESPONDENTS NUMBER OF

RESPONDENTS IN
PERCENTAGE
To make a deposit 57 57
To get advice for 09 09

investment options
To inquire about a balance 05 05
To withdraw cash 16 16
Others 13 13
TOTAL 100 100

43 | P a g e
 13%

16% TO MAKE DEPOSIT

TO GET INVESTMENT ADVICE
INQUIRE ABOUT BALANCE
57%
WITHDRAW CASH
5%
OTHERS

9%

INFERENCE:

Primarily respondents visit bank branch to make deposit. Nearly 57% of respondents visit bank
branch for making deposits.

INTERNET BANKING FACILTY AVAILED

INTERNET BANKING NUMBER OF RESPONDENTS NUMBER OF

FACILTY AVAILED RESPONDENTS IN
PERCENTAGE
YES 72 72
NO 28 28
TOTAL 100 100

44 | P a g e
 28%

YES
NO

72%

INFERENCE:

Internet banking being the new channel of distribution which provides users with convenience is
adopted by majority of respondents. Almost 72% of respondents has availed this facility.

REASON FOR AVAILING INTERNET BANKING FROM THIS BANK

REASON FOR AVAILING NUMBER OF RESPONDENTS NUMBER OF

INTERNET BANKING RESPONDENTS IN
FROM THIS BANK PERCENTAGE
Bank account with same 38 53

bank
Brand name of the bank 13 18
Excellent service offered 14 19
Others 07 10
TOTAL 72 100

45 | P a g e
 10%
BANKACCOUNT
WITHSAME BANK
19% BRAND NAME OF
BANK
53% EXCELLENT SERVICE
OFFERED
OTHERS
18%

INFERENCE:

Selection of internet bank is driven by the fact that major segment of respondents(53%) choose
the same bank for internet banking in which they have their traditional bank account.

REASON FOR AVAILING INTERNET BANKING

REASON FOR AVAILING NUMBER OF NUMBER OF

INTERNET BANKING RESPONDENTS RESPONDENTS IN
PERCENTAGE
Convenience 27 37.5
Curiosity 08 11.1
Better rates 09 12.5
Safe and secure 04 5.5
Low service charge 06 8.4
Easy to maintain bank 18 25

transaction activity
TOTAL 72 100

46 | P a g e
 25%

37% CONVEINENCE
CURIOUSITY
BETTER RATES
SAFE AND SECURE
8%
LOW SERVICE CHARGE

6% EASY TO MAINTAIN

13% 11%

INFERENCE:

Internet banking provides convenience to users that motivate 27% of respondents to use internet
bank facility.

SERVICE UTILISED THROUGH INTERNET BANKING

SERVICE UTILISED NUMBER OF RESPONDENTS NUMBER OF

THROUGH INTERNET RESPONDENTS IN
BANKING PERCENTAGE
Seeking product and rate 13 18

information
Calculate loan payment 01 1.5

information
Download loan 01 1.5

applications
Download personal bank 18 25

transaction activity
Check balances on-line 15 21
Apply for consumer loans 03 04
47 | P a g e
or credit cards online
Inter-account transfers 08 11
On-line bill payments 11 15
Others 02 03
TOTAL 72 100
3% SEEKING PRODUCT RATE
15% 18% INFORMATION
CALCULATE LOAN PAYMENT
INFORMATION
DOWNLOAD TRANSACTION
2% ACTIVITY
LOAN APPLICATIONS
11%
CHECK BALANCE

APPLY FOR LOANSAND

4% 24% CREDIT CARDS
INTER ACCOUNT TRANSFERS

BILL PAYMENTS
21% 2% OTHERS

INFERENCE:

Customers utilize “basic” internet facilities provided through internet banking. They utilize it
monitoring their transaction activity (25%), checking balances (21%).

48 | P a g e
FREQUENCY OF USING INTERNET BANKING FACILITY

FREQUENCY OF USING NUMBER OF NUMBER OF

INTERNET BANKING RESPONDENTS RESPONDENTS IN
FACILITY PERCENTAGE
Never 02 2.8
Sometimes 26 36
Often 29 40.2
Frequently 15 21
TOTAL 72 100

2%
21%

36% NEVER
SOMETIMES
OFTEN
FREQUENTLY

41%

INFERENCE:

Internet banking services are growing popular with each passing day. They use internet bank
services “often” (40.2%) and “sometimes” (36%) on a monthly basis.

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SECURITY IN DISCLOSING INFORMATION ON INTERNET

SECURE IN DISCLOSING NUMBER OF NUMBER OF

INFORMATION ON RESPONDENTS RESPONDENTS IN
INTERNET PERCENTAGE
Yes 09 12.5
No 63 87.5
TOTAL 72 100

13%

YES
NO

87%

INFERENCE:

Inadequate safety measures on internet make internet bank users reluctant to disclose their
information on net. Around 87% people don’t feel safe in disclosing their information on net.
Hence, emphasizing security concern of people.

50 | P a g e
ISSUES ENCOUNTERED WHILE USING INTERNET BANKING

1. HIGH COST OF IMPEMENTATION

HIGH COST OF NUMBER OF NUMBER OF

IMPEMENTATION RESPONDENTS RESPONDENTS IN
PERCENTAGE
Strongly disagree 01 1.5
Disagree 29 40.5
Normal 37 51
Agree 04 5.5
Strongly agree 01 1.5
TOTAL 72 100

6% 2%
2%
STRONGLYDISAGREE

DISAGREE

NORMAL
50% 40%
AGREE

STRONGLYAGREE

INFERENCE:

Cost of implementation is not consider as high, instead it is consider as “normal” by 51% of

respondents.

2. SECURITY CONCERNS

SECURITY CONCERNS NUMBER OF NUMBER OF

RESPONDENTS RESPONDENTS IN
51 | P a g e
 PERCENTAGE
Strongly disagree 02 03
Disagree 05 07
Normal 15 21
Agree 37 51
Strongly agree 13 18
TOTAL 72 100

3%
7%
18%
STRONGLYDISAGREE

21% DISAGREE

NORMAL

AGREE

STRONGLYAGREE
51%

INFERENCE:

Security is of the prime concern with internet bank users and it hampers the usage of internet
banking by users. Many respondents do not feel secure about internet usage and 51% of
respondents “agree” to this.

3. LACK OF EXPERTISE

LACK OF EXPERTISE NUMBER OF NUMBER OF

RESPONDENTS RESPONDENTS IN
PERCENTAGE
Strongly disagree 02 03
Disagree 03 04

52 | P a g e
Normal 26 36
Agree 37 51.5
Strongly agree 04 5.5
TOTAL 72 100

6% 3% 4%

STRONGLY DISAGREE

DISAGREE

NORMAL
36%

AGREE
51%
STRONGLY AGREE

INFERENCE:

Out of 100 respondents, 51% of respondents stresses that there is lack of expertise in the working
of internet banking and they require guidance from bank.

4. INADEQUATE LEGISLATION

INADEQUATE NUMBER OF NUMBER OF

LEGISLATION RESPONDENTS RESPONDENTS IN
PERCENTAGE
Strongly disagree 02 03
Disagree 04 5.5
Normal 39 54
Agree 24 33.5
Strongly agree 03 04

53 | P a g e
TOTAL 72 100

4% 3% 6%
STRONGLY DISAGREE

DISAGREE
34%
NORMAL

AGREE

53% STRONGLY AGREE

INFERENCE:

Although there are inadequacy in legislation regarding internet banking in India still people do
not consider legal requirements as constraints to use internet banking.

SATISFIED WITH SERVICE QUALITY PROVIDED

SATISFIED WITH NUMBER OF RESPONDENTS NUMBER OF

SERVICE QUALITY RESPONDENTS IN
PROVIDED PERCENTAGE
Yes 61 84.8
No 11 15.2
TOTAL 72 100

54 | P a g e
 15%

YES

NO

85%

INFERENCE:

Internet bank services provided by banks have satisfied most of the users.85% of respondents are
satisfied with bank services provided.

MODE OF PREFERRED BANKING

MODE OF PREFERRED NUMBER OF NUMBER OF

BANKING RESPONDENTS RESPONDENTS IN
PERCENTAGE
Traditional banking 14 19.5
Internet banking 58 80.5
TOTAL 72 100

55 | P a g e
 20%

TRADITIONAL BANKING

INTERNET BANKING

80%

INFERENCE:

Traditional banking causes lot of inconvenience to users and is more time consuming due to
which it is less preferred over online banking. Online banking is preferred because it is more
convenient and less time consuming. Around 80% of respondents preferred internet banking over
traditional banking.

RATING OF INTERNET BANKING

RATING OF INTERNET NUMBER OF RESPONDENTS NUMBER OF

BANKING RESPONDENTS IN
PERCENTAGE
Excellent 02 3
Very good 15 21
Good 45 62
Average 08 11
Poor 02 3
TOTAL 72 100

56 | P a g e
 3% 3%
11%
21%
EXCELLENT

VERY GOOD

GOOD

AVERAGE

POOR
62%

INFERENCE:

Internet bank users are satisfied by the services provided bank. Internet banking services
provided by banks are generally considered good by 62% of respondents.

REASON FOR NOT OPENING INTERNET BANK ACCOUNT

REASON FOR NOT NUMBER OF NUMBER OF

OPENING INTERNET RESPONDENTS RESPONDENTS IN
BANK ACCOUNT PERCENTAGE
Never heard of Internet 01 3.5

banking
Concerned about security 13 46.5
Haven't taken time to 02 07

open an account
Don't see any real value 01 3.5

in having this type of

account

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Too new. I would like to 03 11

see how it works, and

then I may open an
account
Not available through my 06 21.5

bank
Others 02 07
TOTAL 28 100

7% 3% NEVER HEARD OF
INTERNET BANKING
SECURITY CONCERN
22%
TIME CONSTRAINT

NO REAL VALUE IN IB
46% ACCOUNT
NEW CONCEPT

11% UNAVAILABLE THROUGH

BANK
OTHERS
4%
7%

INFERENCE:
58 | P a g e
Lack of adequate security measures on internet bank hampers most of the non- users to avail the
internet bank facility. If internet bank channel has to grow in India proportionately them
adequate security measures are required to be implemented.

FACTORS AFFECTING SELECTION OF INTERNET BANK

FACTORS AFFECTING NUMBER OF NUMBER OF

SELECTION OF INTERNET RESPONDENTS RESPONDENTS IN
BANK PERCENTAGE
Better rate and lower 05 05

service charge
Bank familiarity 09 09
Bank location (geographic) 03 03
The size of bank (in terms 02 02

of asset)
Security of Transaction 37 37
Convenience 17 17
Quick service 14 14
Variety of features and 13 13

services that are offered

TOTAL 100 100

59 | P a g e
 5%
13%
9% BETTER RATE AND
LOWER CHARGES
3% BANKFAMILARITY
2% BANKLOCATION
14%
SIZE OFBANK

SECURITYOF
TRANSACTION
CONVEINENCE

QUICKSERVICE
17%
37% FEATURESAND
SERVICES OFFERED

INFERENCE:

Respondents consider several factors before selecting internet bank out of which security is of
prime importance. Almost 37% of respondents considers it as their priority for selection of
internet banking.

60 | P a g e
CHAPTER - 5
FINDINGS

61 | P a g e
 FINDINGS

• The largest percentage (34%) of the respondents fell within the 26–35 age group
followed by24% in the 18 – 25 group succeeded by 21% in the 36–45 group and 16% in
the 46 – 60% group with the remaining 05% in the 60+ group.
• A significant segment of the respondents belong to service category 38% belong to this
category followed by students with 27%.
• A major segment of respondents have their bank account with private banks leaded by
ICICI bank 29% and HDFC bank. PSUs are leaded by State bank of India (25%).

• In total, 72% of the respondents indicated that they make use of Internet banking services
and products.

• 38 %of the respondents have internet bank account with the same bank with which they
have bank account.

• Respondents have availed internet bank account because it provide them with
convenience (37.5%) and it is easy to maintain bank transaction activity through internet
bank account (25%).

• The results highlighted that the respondents only make use of basic Internet banking
products and services, such as balance enquiries (25%), seeking product rate information
(18%), payments (15%) and transfers (11%).
• Security is of prime concern of respondents while using internet banking. 87.5%
respondents do not feel safe in disclosing their information on internet.

• The cost of using and implementing internet banking but that is not of major concern to
the respondents. 51% of respondents considered that cost is “normal” or they “disagree”
with this issue (40.5%)

• Security in internet banking seems to be of major concern to the respondents, 51% of

respondents “agree” to this problem faced by them.

62 | P a g e
• Respondents agreed to the fact that there is lack of expertise in operating internet banking
account 51.5% “agree” with this issue and need proper help from bank offering this
service.

• Inadequate legislation does not hamper respondents to use internet bank services and
54% of respondents consider this issue to be “normal”.

• 84.8% of respondents were satisfied from the services whereas 15.2% were dissatisfied
from services and their bank.

• Some people do not have internet bank account and the major factor that was encountered
is that of security and 46.5% of respondents voice this concern.

• Factors that influence respondents to select internet bank account is majorly of security,
thus re-emphasizing it as the first and the foremost concern of internet bank account users
and that too of non users.

63 | P a g e
 CHAPTER - 6
CONCLUSION AND
SUGGESTIONS

64 | P a g e
 CONCLUSION

In today’s environment besides their physical branches, banks need to grow non-branch delivery
networks as a part of their growth strategy. Internet banking increases operational efficiencies
and reduces costs, besides giving a platform for offering value added services to the customer,
thereby fulfilling all the essential prerequisites for a flourishing banking industry.

India had begun to catch on the popularity of internet banking worldwide. A number of banks
have set up banking portals allowing their customers to access facilities like obtaining
information, querying on their accounts, etc. It provides bank with competitive advantage over
other banks who do not offer this facility to their consumers

ICICI Bank pioneered internet banking in 1996 and soon other banks followed.1996 to 1998
marked the adoption phase of internet as a whole, though usage increased only in 1999.

As per the study conducted, it was revealed that the popularity of internet banking is
increasing day by day among Indian users. Around 72% of respondents have availed the
facility of internet banking. Its domain is increasing with each passing day. The six
primary drivers of Internet banking includes:

• Improve customer access

• Facilitate the offering of more services
• Increase customer loyalty
• Attract new customers
• Provide services offered by competitor.
• Reduce customer attrition

ICICI bank being the beginner of internet banking in India has a huge customer base and is the
leading bank with which respondents hold account, closely followed by its PSU counterpart SBI.

Internet banking is still in nascent stages in India and is limited to urban cities. There are
thousands of highly active traditional bank branches in India's crowded cities and major towns.
Most customers prefer the personal touch and customized service offered by staff in brick-and-
65 | P a g e
mortar bank branches. Many Indians are also averse to calling call centers and banks' customer
contact lines to address issues related to online bank accounts.

Most people are hesitant to use online banking because of security concerns Lack of adequate
safety measures halts users to stick to traditional mode of banking but majority of users who
wants convenience and adopt technological changes have availed internet banking services.
Results of the research revealed that approximately 80.5% of respondents prefer internet banking
over traditional banking.

Ubiquitous and prevalent online threats about hackers, identity theft, stolen passwords, viruses,
worms and spyware tend to make customers wary. Customers are also not sure about the efficacy
of banks' websites and their commitment to allocate funds for reliable encryption mechanisms
and robust back-end technologies and systems.

Security is of prime concern of respondents while using internet banking. 87.5% respondents do
not feel safe in disclosing their information on internet. Security is hampering the growth of
internet banking in India. The main reason of users not opening internet bank account is security.
Around 46.5% are concerned about security due to which they haven’t opened account. And
those who have internet bank account, 87.5% users do not feel safe in disclosing information on
internet.

66 | P a g e
 SUGGESTIONS AND RECOMMENDATIONS

 Passwords are case sensitive. Change your password regularly. Ensure that you are not
observed while entering the passwords. Never leave your computer unattended while you
are logged.

 Always logoff from internet banking upon completion of your session. Use the logout
button for closing the session. It is preferable not to shut the window to logoff

 Creation of customer awareness and education for technology adoption are imperative.

 Give proper training to customers for using i-banking

 Create a trust in mind of customers towards security of their accounts
 Provide a platform from where the customers can access different
accounts at
single time without extra charge.

67 | P a g e
CHAPTER - 7
LIMITATIONS

68 | P a g e
 LIMITATIONS OF STUDY

• The sample size taken for the study is small.

• The results of the present study are based on perceptions and expectations of the
respondents. Hence it cannot be taken as representation of overall population.
• There were time constraints to conduct the study since it is very vast concept to be
studied.

69 | P a g e
 FUTURE SCENARIO

DRAWBACKS IN INTERNET BANKING

As compared to banks abroad, Indian banks offering online services still have a long way to go.
For online banking to reach a critical mass, there has to be sufficient number of users and the
sufficient infrastructure in place. The ‘Infinity’ product of ICICI Bank Ltd. gets only about
30,000 hits per month, with around 3,000 transactions taking place on the Net per month through
this service.

SECURITY PRIMACY

Though various security options like line encryption, branch connection encryption, firewalls,
digital certificates, automatic signoffs, random pop-ups and disaster recovery sites are in place or
are being looked at, there is as yet no Certification Authority in India offering Public Key
Infrastructure which is absolutely necessary for online banking. The customer can only be
assured of a secured conduit for its online activities if an authority certifying digital signatures is
in place.

SUPERIOR TECHNOLOGY

The communication bandwidth available today in India is also not enough to meet the needs of
high priority services like online banking and trading. Banks offering online facilities need to
have an effective disaster recovery plan along with comprehensive risk management measures.
Banks offering online facilities also need to calculate their downtime losses, because even a few
minutes of downtime in a week could mean substantial losses. Some banks even today do not
have uninterrupted power supply unit or systems to take care of prolonged power breakdown.
Proper encryption of data and effective use of passwords are also matters that leave a lot to be
desired. Systems and processes have to be put in place to ensure that errors do not take place.

70 | P a g e
RELIABILITY

Users of Internet Banking Services are required to fill up the application forms online and send a
copy of the same by mail or fax to the bank. A contractual agreement is entered into by the
customer with the bank for using the Internet banking services. In this way, personal data in the
applications forms is being held by the bank providing the service. The contract details are often
one-sided, with the bank having the absolute discretion to amend or supplement any of the terms
at any time. For these reasons domestic customers for whom other access points such as ATMs,
telebanking, personal contact, etc. are available, are often hesitant to use the Internet banking
services offered by Indian banks. Internet Banking, as an additional delivery channel, may,
therefore, be attractive / appealing as a value added service to domestic customers. Non-resident
Indians for whom it is expensive and time consuming to access their bank accounts maintained
in India find net banking very convenient and useful.

LEGAL ENACTMENTS

The Internet is in the public domain whereby geographical boundaries are eliminated. Cyber-
crimes are therefore difficult to be identified and controlled. In order to promote internet banking
services, it is necessary that the proper legal infrastructure is in place. 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 is 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 individual’s rights
of privacy. The legal 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.

71 | P a g e
REFORMS IN INTERNET BANKING

Notwithstanding the above drawbacks, certain developments taking place at present, and
expected to take place in the near future, would create a conducive environment for online
banking to flourish. For example, Internet usage is expected to grow with cheaper bandwidth
cost. The Department of Telecommunications (DoT) is moving fast to make available additional
bandwidth, with the result that Internet access will become much faster in the future. This is
expected to give a fillip to Internet banking in India.

TECHNOLOGY UPGRADATION

The proposed setting up of a Credit Information Bureau for collecting and sharing credit
information on borrowers of lending institutions online would give a fillip to electronic banking.
The deadline set by the Chief Vigilance Commissioner for computerization of not less than 70
percent of the banks has also given a greater thrust to development of banking technology. The
recommendations of the Vasudevan Committee on Technological Up gradation of Banks in India
have also been circulated to banks for implementation. In this background, banks are moving in
for technological up gradation on large scale. Internet banking is expected to get a boost from
such developments.

RBI INITIATIVES

Reserve Bank of India has taken the initiative for facilitating real time funds transfer through the
Real Time Gross Settlement (RTGS) System. Under the RTGS system, transmission, processing
and settlements of the instructions will be done on a continuous basis. Gross settlement in a real
time mode eliminates credit and liquidity risks. Any member of the system will be able to access
it through only one specified gateway in order to ensure rigorous access control measures at the
user level. The system will have various levels of security, viz., Access security, 128 bit
cryptography, firewall, certification etc. Further, Generic Architecture, both domestic and cross
border, aimed at providing inter-connectivity across banks has been accepted for implementation

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by RBI. Following a reference made this year, in the Monetary and Credit Policy statement of
the Governor, banks have been advised to develop domestic generic model in their
computerization plans to ensure seamless integration. The above mentioned efforts would enable
online banking to become more secure and efficient.

REFORMS IN CAPITAL MARKET

With the process of dematerialization of shares having gained considerable ground in recent
years, banks have assumed the role of depository participants. In addition to customers’ deposit
accounts, they also maintain demat accounts of their clients. Online trading in equities is being
allowed by SEBI. This is another area which banks are keen to get into. HDFC Bank Ltd., has
tied up with about 25 equity brokerages for enabling third party transfer of funds and securities
through its business-to-business (B2B) portal, ‘e-Net’. Demat account holders with the bank can
receive securities directly from the brokers’ accounts. The bank has extended its web interface to
the software vendors of National Stock Exchange through a tie-up with NSE.IT – the InfoTech
arm of the exchange. The bank functions as the payment bank for enabling funds transfer from
its customers’ account to brokers’ accounts. The bank is also setting up a net broking arm, HDFC
Securities, for enabling trading in stocks through the web. The focus on capital market operations
through the web is based on the bank’s strategy on tapping customers interested in trading in
equities through the Internet. Internet banking thus promises to become a popular delivery
channel not only for retail banking products but also for online securities trading.

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 ANNEXURE

Name …………………………………………………………………..

Age:
18-25 ( ) 26-35 ( )
36-45 ( ) 46-60 ( )
60 + ( )

Gender - Male ( ) Female ( )

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Occupation:-

Business ( ) Service ( )

Profession ( ) Others ( )

If others please specify……………………………………………….

1. In which bank do you hold account?

a. ICICI bank ( ) b. SBI ( )

c. Axis bank ( ) d. Union bank ( )
e. HDFC bank ( ) f. HSBC ( )
g. Bank of India Ltd ( ) h. others ( )

If others please specify …………………………………………………

2. Frequency of visiting your bank branch per month?

a) Less than 1 ( )
b) 1 to 3 times ( )
c) 3 to 8 times ( )
d) 8 to 12 times ( )
e) Over 12 times ( )

3. The main reason that you typically visit your bank branch for (please
choose the single most important reason)?

a. to make a deposit
b. to get advice for investment options

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c. to inquire about a balance
d. to withdraw cash
e. other

4. Do you use Internet/Online Banking?

Yes ( ) No ( )

5. What was the single most important reason that you choose this particular
bank as your Internet bank? (Please choose one)

a. I have a bank account with the same bank ( )

b. The brand name of the bank ( )
c. The excellent service offered by this bank ( )
d. Others ( )

If others please specify…………………………………………………..

6. What are the most important reasons you opened an Internet bank
account? (Please prioritize the following list in the order of importance. 1: the
most important 6: the least important) Please use each number only once.

a. Convenience (24 hours service, anywhere connectivity) ( )

b. Curiosity ( )
c. Better rates ( )
d. Safe and secure ( )
e. Low service charge ( )
f. Easy to maintain my banking transaction activity ( )

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7. What banking services do you use which your Internet bank offers? (Please
check all you are currently using)

a. Seeking product and rate information ( )

b. Calculate loan payment information ( )
c. Download loan applications ( )
d. Download personal bank transaction activity ( )
e. Check balances on-line ( )
f. Apply for consumer loans or credit cards online ( )
g. Inter-account transfers ( )
h. On-line bill payments ( )
i. Others ( )

8. How often do you use online banking services?

Never ( ) Sometimes ( )
Often ( ) Frequently ( )

9. Do you feel safe in disclosing your information on internet?

Yes ( ) No ( )

10. What issues did you encounter while using internet banking?
Problems Strongly Disagree Normal Agree Strongly
disagree agree
Cost of
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implementation
Security
concerns
Lack of
expertise
Inadequate
legislation

11. Are you satisfied with your bank services?

Yes ( ) No ( )

12. Which mode of banking do you prefer?

Traditional banking ( ) Internet banking ( )

13. How would you rate the internet banking services provided by bank?
Excellent ( ) Very good ( )
Good ( ) Average ( )
Poor ( )

14. The main reasons that you have not opened an Internet bank account yet?

a. Never heard of Internet banking ( )

b. Concerned about security ( )
c. Haven't taken time to open an account ( )
d. Don't see any real value in having this type of account ( )
e. Too new. I would like to see how it works, and then I may open an account ( )
f. Not available through my bank ( )
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g. Others ( )

if others please specify ……………………………………………………….

15. For your choice of an Internet bank, please indicate how much each of the
following factors (were) is important for you:

a. Better rate and lower service charge ( )

b. Bank familiarity ( )
c. Bank location (geographic) ( )
d. The size of bank (in terms of asset) ( )
e. Security of Transaction ( )
f. Convenience (24 hours service from anywhere) ( )
g. Quick service (transaction completed in seconds instead of minutes) ( )
h. Variety of features and services that are offered (for example; bill payment,
account reconciliation, electronic bill payment) ( )

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BIBLIOGRAPHY

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 Information has been sourced from various books, newspapers, journals,
industry portals, government agencies, industry news .

JOURNALS

• “Service quality evaluation in internet banking: an empirical study in India” Int. J.

Indian Culture and Business Management, Vol. 2, No. 1, 2009,Mohammed Sadique
Khan and Siba Sankar Mahapatra.
• “Determination of reasons affecting the use of internet banking through logistic
regression analysis” Ali kose (2009) retrieved from http://www.sajim.co.za.
• “Internet Banking Systems in India: Analysis of Security Issues” Proceedings of the
3rd National Conference; INDIACom-2009 Computing For Nation Development
(2009) Deepshikha Jamwal & Devanand Padha.
• “Customer’s perception on usage of internet banking” Innovative Marketing, Volume
3, Issue 4, 2007 Rajesh Kumar Srivastava.

BOOKS
• Fundamentals of Financial Management, R.P Rustagi, 2009, Published by Galgotia
Publishing Company
• Marketing Research by Malhotra N.K. , fifth edition published by
Tata McGraw hill

WEBSITES
• http://www.icmrindia.org/free
%20resources/casestudies/banking1.htm#b1
• www.wikipedia.org/wiki/Perceptual_mapping
• www.rocw.raifoundation.org/fashion/BAfashion-
mktg/brandpositioning/lecturenotes/
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lecture-04.pd

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MISCELLANEOUS

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DELHI INSTITUTE OF ADVANCED STUDIES
EVALUATION SHEET FOR PROJECT REPORT

STUDENTS’S NAME :______________________________

ROLL NO. :______________________________

EVALUATOR’S FEEDBACK :______________________________

_______________________________

_______________________________

DID THE STUDENT CONTACT YOU

REGULARLY FOR DISCUSSION? : YES/NO (Please tick)

REPORT IS APPROVED / DISAPPROVED:

(To be ticked by Evaluator)
MARKS AWARDED :_______________________________
(Out of 40)

SIGNATURE OF EVALUATOR

NAME:

DATE:

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DELHI INSTITUTE OF ADVANCED STUDIES

ATTENDANCE FOR FINAL PROJECT REPORT

NAME OF THE STUDENT : SONAL ARORA

CLASS : MBA IV B
ROLL NO : 13112303909
NAME OF THE SUPERVISOR : MS RUCHI GUPTA

S.NO. DATE TIME PROGRESS OF SIGNATURE SIGNATURE

REPORT OF OF
REMARKS STUDENT SUPERVISOR
1

10

Co-ordinator

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