A STUDY ON

INTERNET BANKING
With Reference to

STATE BANK OF INDIA

A Project Report submitted to Andhra University, Visakhapatnam
In partial fulfillment for the award of the Degree
BACHELOR OF COMMERCE

Submitted by
SENAPATHI GYANA SAI PRAVALLIKA

Regd.No: 116128803211
Under the Esteemed guidance of

Mr. B. SRINIVAS REDDY

Lecturer in Commerce

Department of Commerce and Management Studies

Dr. LANKAPALLI BULLAYYA COLLEGE

Affiliated to Andhra University

Visakhapatnam-530013

(2016 - 2019)

1
 ACKNOWLEDGEMENT

It is of great pleasure to take the opportunity to acknowledge and express my gratitude

to all those who helped me throughout my project work.

At the outset we the students has to show our gratitude to the members of Board of
Studies, Andhra University, for including project work in the curriculum of Bachelor of
Commerce. This has widened the scope for the students to excavate the practical situations in
the Banking Industry and to throw the deep insight on the various contents of the Banking
products and services.

I thank the college management at all levels for providing us the platform and
environment to carry out our project and in making us a technical tool to suit the industry
needs of the current market employability.

I would also like to pay my word of gratitude and thankfulness to my project guide Sri.
B. Srinivas Reddy, Lecturer, Department of Commerce and Management Studies, for
hisvaluable guidance, support and timely advice in completion of my project work.

I would like to express my sincere gratitude to the management and staff of ANDHRA BANK
for giving me permission to do my project work in their organization and helping me
meticulously in all the aspects of my project work.

It would be a vacuum if I forget two important personalities on this occasion, I hereby

extend my sincere respect and ton of thanks to my family and friends for their endurance,
motivation and support during all times of my achievements.

S.GYANA SAI PRAVALLIKA

Regd No: 116128803211

2
 DECLARATION

I Muvvala Vinay kumar hereby declare that the project work entitled
“MOBILE BANKING”with reference to “Andhra Bank”, is an authenticated work
done by me for the award of the degree “Bachelor of Commerce”, from Andhra
University, with the guidance of Sri. B.Srinivas Reddy, Lecturer, Department of
Commerce, during the academic year 2018 – 2019 and my work has not been
submitted to any other University or Institution for the award of any Degree or
Diploma.

S.GYANA SAI PRAVALLIKA

Regd No: 116128803211

3
 CERTIFICATE

This is to certify that the project report entitled “Mobile Banking” with

reference to “Andhra Bank”, is a bonafide work done by Muvvala Vinay kumar

bearing 116128803149,the aspirant of B.Com inDr. Lankapalli Bullayya College,

Visakhapatnam, for the award of the degree of “Bachelor of Commerce” from

Andhra University, done under my guidance, for the academic year 2018 – 2019.

Date: B. Srinivas Reddy

Place: Visakhapatnam Lecturer in Commerce

Dr. Lankapalli Bullayya College

4
CHAPTER-1

5
 INTRODUCTION

The financial services industry has recently been open to historic transformation. So-
called e-developments are emerging and advancing rapidly in all areas of financial
intermediation and financial markets: e-finance, e-money, E-banking, e-brokering, e-insurance,
e-exchanges, and even e-supervision. The new information technology (IT) is turning into the
most important factor in the future development of banking, influencing banks‘ marketing and
business strategies.

The driving forces behind the rapid transformation of banks are influential changes in the
economic environment: innovations in information technology, innovations in financial products,
liberalization and consolidation of financial markets, deregulation of financial intermediation etc.
These and other factors make it complicated to design a bank‘s strategy, which process is
threatened by unforeseen developments and changes in the economic environment and therefore
strategies must be flexible to adjust to these changes. The question is not any more whether the
emergence of Internet has been a threat or an opportunity as those who have decided to protect
themselves from the threats instead of using the opportunities are determined to vanish from the
marketplace.

Electronic Banking lets you handle many banking transactions via your own personal
computer. For instance, you may use your computer to view your account balance, request
transfers between accounts and pay outstanding bills electronically

Internet banking system is a method in which a personal computer is connected to

internet by an internet service provider directly to a host computer system of a bank such that
customer service requests can be processed automatically without need for intervention by
customer service representatives.

6
 OBJECTIVES OF THE STUDY

Without a sound and effective banking system in India it cannot have a healthy economy.
The banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors. The information
system is paramount concern to the banks in today’s business environment. The business of
cooperative bank has increased phenomenally in recent years due to the sharp increase in
numbers of urban co-operative banks. This exponential growth of Co operative Banks in India is
attributed mainly to their much better local reach, personal interaction with customers, and their
ability to catch the nerve of the local clientele. A software development methodology refers to
the framework that is used to structure, plan, and control the process of developing an
information system. Each of the available methodologies and techniques are best suited to
specific kinds of projects, based on various technical, organizational and available resources.
With reference to above relevant information the main objective is to study the induction of IT
tools in urban cooperative bank in light of software engineering concept. With the help of this
initial information the followings are some of the objectives of the study -

 To study the Information Technology in view of research study

 To study the use of Information technological means in the system
 To study the feedback of the past transaction system
 To study the existing transaction system
 To study the all dependent parameters
 To study the work culture of customer, employee and management
 To study the feedback of the existing transaction system
 To study the service provided by the system in view of customer relation
 To study the view of management, employee and customers review
 To study the Software Engineering in view of research work
 To study the feedback of implemented technology

7
 SCOPE OF THE STUDY

In the present scenario major economical and technical changes are undergoing in
industrial and financial revolution through the new information-processing technology.
Especially in finance sector it has a significant role for overall development. After identifying the
subject (research area) and referring the relevant literatures, it has been found that in most of the
literature, the information technologies have a wide application area. However, in finance sector
major changes have been made. Due to these drastic changes we have chosen to do the study on
urban cooperative bank system. After completing step by step procedure for automation process,
now it is required to take the review of the system. People used information technological tools
to manage and process the information.

Atomization process use in the financial sector for transaction system. This type of
working methodology is used in the financial Institute since long years. The Urban Co-operative
bank sector is mostly related to all classes of people like businessmen, industry, agriculture,
labor, small entrepreneurs, workers etc. It has been changing complete culture and working
methodology. Therefore, it has a wide scope to study the existing modern transaction system in
the financial sector mainly in urban cooperative bank system. For that purpose we are going to
utilize software engineering model based techniques for theoretical evaluation of atomization
process. In the literature survey it has been found that the software engineering technology has
monopoly for the development of software product and it is observed that such technology is not
used for study purpose in any other different field. So why not this technology be tested on the
external field application intentionally for this study? It requires framework, structure, plan and
controlling parameters for research field. Such type of theory and planning is available in the
software engineering subject.

1. Geographical scope is confined to vizag city.

2. Only four PSBs are selected for the purpose of study.
3. Study pertains to E-banking infrastructure and security measures hence, theoretical scope
covers an overview of PSBs, modern E-banking services and associated risks, e-banking
infrastructure and security measures adopted so far.

8
 NEED OF THE STUDY

Internet banking has emerged as a wireless communication channel for creating value by
customers in banking transactions. Today, the main focus has been the field of modern methods
of banking services, Supply of banking and financial services using mobile phones, it is a few
years the use of mobile phones for banking and financial affairs, but in the short term, significant
progress has been made in this field. It could be a lot of promise in this new way of banking
future .Another definition is a service that will enable customers Information, such as your bank
account balance and be informed of through your cell phone. This is done with high security. As
usual banking services, mobile banking services that are offered through the mobile network.
Factor that the bank has focused heavily on the issue; could unique mobile services at reduce
cost banking services.
Technology has always been used by traditional banks to provide the value-based
services to their customers. With the emergence of internet technology, banks can further
consolidate and effectively manage their diversification portfolio of service offerings on the
World Wide Web (WWW). Traditional banks required to develop into the customer-centric
organizations, integrate their multi-channel delivery systems and use virtual marketplace for
marketing their products and services.
Electronic banking (E-banking), as an alternative delivery channel, offers many
opportunities for the growth and development of the financial institutions. Financial institutions
have begun to realize that though the internet is simply a delivery channel it is customers. Better
branding and better responsiveness is the first benefit for the banks, offering electronic banking
services to the market. Those banks that offer such services would be perceived as leaders in the
implementation of technology. Therefore, they will enjoy a better brand image.
Security is an important issue for E-banking. Now a days, a number of customers fear about their
secrete financial and transactional information. However, new techniques and methods are being
adopted to provide security and privacy

9
 LIMITATIONS

 Lack of primary data

 Time consuming
 As the research mainly depends on secondary data, it may not be hundred percent
accurate.
 I could not get proper information about the topic, so I had prepared my own
notes from different sources and then complete my project. This consumes a lot
of time.

 This is my first project work; I have never done this type of projects till now. So
it became little difficult to me.

 I collect this content as per my knowledge. So there may be some mistakes.

 Basing on the internet information and by reference of few banking books I have
gather the information and prepared this project.

 As the research mainly depends on secondary data, it may not be hundred

percent accurate.

 The study is limited to India only

10
 RESEARCH METHODOLOGY

Data Collection The present study is of analytical and exploratory nature. Accordingly,
the use is made of primary data. The primary data is collected with the help of questionnaires
from a sample of respondents (100 bank officers and 200 customers) from Visakhapatnam City
using the E-banking services provided by the various branches of PSBs. The key intention of the
study is to evaluate the security and infrastructure measures of electronic banking adopted so far.
Therefore main objective of the study is evaluation of E-banking measures adopted in
nationalized banks with reference to vizag City.

Research methodology:

a. Primary data:

This is first hand information is collected from the respondents associated with selected

banks. Structured questionnaire prepared by the researcher and it is filled up by 200 bank

customers and 100 bank officers. Respondents‘responses are collected from Vizag city

b. Secondary data:

This shall be collected by using a verity of sources.

These sources are:

1. Publications of Public sector banks

2. RBI reports

3. Journals Of banking and finance

11
CHAPTER-2

12
 INDUSTRY PROFILE

Evolution of banking in India

The growth of commercial banking in India can be traced back to the early eighteenth
century with the establishment of the three presidency banks.

The first bank in India, called The General Bank of India was established in the year
1786. The East India Company established The Bank of Bengal/Calcutta (1809), Bank of
Bombay (1840) and Bank of Madras (1843). The next bank was Bank of Hindustan which was
established in 1870. These three individual units (Bank of Calcutta, Bank of Bombay, and Bank
of Madras) were called as Presidency Banks. Allahabad Bank which was established in 1865,
was for the first time completely run by Indians. Punjab National Bank Ltd. was set up in 1894
with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India,
Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. In 1921, all
presidency banks were amalgamated to form the Imperial Bank of India which was run by
European Shareholders.

Presidency banks to imperial banks

All presidency banks were amalgamated to form the Imperial Bank of India which was
run by European Shareholders. After that the Reserve Bank of India was established in April
1935. At the time of first phase the growth of banking sector was very slow. Between 1913 and
1948 there were approximately 1100 small banks in India. To streamline the functioning and
activities of commercial banks, the Government of India came up with the Banking Companies
Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of
1965 (Act No.23 of 1965). Reserve Bank of India was vested with extensive powers for the
supervision of banking in India as a Central Banking Authority. After independence,
Government has taken most important steps in regard of Indian Banking Sector reforms. In 1955,
the Imperial Bank of India was nationalized and was given the name "State Bank of India", to act
as the principal agent of RBI and to handle banking transactions all over the country. It was
established under State Bank of India Act, 1955. Seven banks forming subsidiary of State Bank
of India was nationalized in 1960. On 19th July, 1969, major process of nationalization was

13
carried out. At the same time 14 major Indian commercial banks of the country were
nationalized.

Establishment of other private banks in India

The first bank which is exclusively setup by India was Allahabad bank followed by
Punjab national bank Ltd. Set up in 1895 with headquarters at Lahore other private banks were
established during this period were bank of India, central bank of India established in 1911. Bank
of Baroda (1908), Indian bank (1907) and bank of Mysore (1913).

Reserve bank of India

The reserve bank of India is a central bank and was established in April 1, 1935 in
accordance with the provisions of reserve bank of India act 1934. The central office of RBI is
located at Mumbai since inception. Though originally the reserve bank of India was privately
owned, since nationalization in 1949, RBI is fully owned by the Government of India. It was
inaugurated with share capital of Rs. 5 Crores divided into shares of Rs. 100 each fully paid up.

14
Establishment of state bank of India

After independence, Government has taken most important steps in regard of Indian
Banking Sector reforms. In 1955, the Imperial Bank of India was nationalized and was given the
name "State Bank of India", to act as the principal agent of RBI and to handle banking
transactions all over the country. It was established under State Bank of India Act, 1955. Seven
banks forming subsidiary of State Bank of India was nationalized in 1960. On 19th July, 1969,
major process of nationalization was carried out. At the same time 14 major Indian commercial
banks of the country were nationalized. In 1980, another six banks were nationalized, and thus
raising the number of nationalized banks to 20. Seven more banks were nationalized with
deposits over 200 Crores. Till the year 1980 approximately 80% of the banking segment in India
was under government’s ownership. On the suggestions of Narsimhan Committee, the Banking
Regulation Act was amended in 1993 and thus the 26 gates for the new private sector banks were
opened. The following are the major steps taken by the Government of India to Regulate
Banking institutions in the country:-

 1949: Enactment of Banking Regulation Act.

 1955:Nationalization of State Bank of India.
 1959: Nationalization of SBI subsidiaries.
 1961: Insurance cover extended to deposits.
 1969:Nationalization of 14 major Banks.
 1971: Creation of credit guarantee corporation.
 1975: Creation of regional rural banks.
 1980 : Nationalization of seven banks with deposits over 200 Crores

Nationalization of banks

By the 1960s, the Indian banking industry has become an important tool to facilitate the
development of the Indian economy. At the same time, it has emerged as a large employer, and a
debate has ensured about the possibility to nationalize the banking industry. Indira Gandhi, the-
then Prime Minister of India expressed the intention of the Government of India (GOI) in the
annual conference of the All India Congress Meeting the GOI issued an ordinance and

15
nationalized the 14 largest commercial banks with effect from the midnight of July 19, 1969.
Jayaprakash Narayan, a national leader of India, described the step as a "Masterstroke of political
sagacity" Within two weeks of the issue of the ordinance, the Parliament passed the Banking
Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential
approval on 9 August, 1969. A second step of nationalization of 6 more commercial banks
followed in 1980. The stated reason for the nationalization was to give the government more
control of credit delivery. With the second step of nationalization, the GOI controlled around
91% of the banking business in India. Later on, in the year 1993, the government merged New
27 Bank of India with Punjab National Bank. It was the only merger between nationalized banks
and resulted in the reduction of the number of nationalized banks from 20 to 19. After this, until
the 1990s, the nationalized banks grew at a pace of around 4%, closer to the average growth rate
of the Indian economy. The nationalized banks were credited by some; including Home minister
P. Chidambaram, to have helped the Indian economy withstand the global financial crisis of
2007-2009.

Digital revolution in the Indian banking sector

The need for computerization was felt in the Indian banking sector in late 1980s, in order
to improve the customer service, book-keeping and MIS reporting. In 1988, Reserve Bank of
India set up a Committee on computerization in banks headed by Dr. C. Rangarajan.Banks began
using Information Technology initially with the introduction of standalone PCs and migrated to
Local Area Network (LAN) connectivity. With further advancement, banks adopted the Core
Banking platform. Thus branch banking changed to bank banking. Core Banking Solution (CBS)
enabled banks to increase the comfort feature to the customers as a promising step towards
enhancing customer convenience through anywhere and anytimebanking. Different Core banking
platforms such as Finacle designed by Infosys, BaNCS by TCS, FLEXCUBE by I-flex, gained
popularity.

The process of Computerization gained pace with the opening of the economy in 1991-
92. A major driver for this change was propelled by rising competition from private and foreign

16
banks. Several commercial banks started moving towards digital customer services to remain
competitive and relevant in the race.

Banks have benefitted in several ways by adopting newer technologies. E-banking has
resulted in reducing costs drastically and has helped generate revenue through various channels.
As per last available information, the cost of a bank transaction on Branch Banking is estimated
to be in a range of Rs.70 to Rs.75 while it is around Rs.15 to Rs.16 on ATM, Rs.2 or less on
Online Banking and Rs.1 or less on Mobile Banking. The number of customer base has also
increased because of the convenience in 'Anywhere Banking'. Digitization has reduced human
error. It is possible to access and analyze the data anytime enabling a strong reporting system.

RBI has been a guiding force for the banks in forming regulations and giving
recommendations to achieve various objectives. Commercial Banks in India have moved towards
technology by way of Bank Mechanization and Automation with the introduction to MICR based
cheque processing, Electronic Funds transfer, Inter-connectivity among bank Branches and
implementation of ATM (Automated Teller Machine) Channel have resulted in the convenience
of anytime banking. Strong initiatives have been taken by the Reserve Bank of India in
strengthening the Payment and Settlement systems in banks.

Technological Milestones in Indian Banks:

17
Current status in the Digital Space

Indian Government is aggressively promoting digital transactions. The launch of United

Payments Interface (UPI) and Bharat Interface for Money (BHIM) by National Payments
Corporation of India (NPCI) are significant steps for innovation in the Payment Systems domain.
UPI is a mobile interface where people can make instant funds transfer between accounts in
different banks on the basis of virtual address without mentioning the bank account.

Today banks aim to provide fast, accurate and quality banking experience to their
customers. Today, the topmost agenda for all the banks in India is digitization.

According to the RBI Report in 2016-17 there are 2, 22,475 Automated Teller Machines
(ATMs) and 25, 29,141 Point of Sale devices (POS). Implementation of electronic payment
system such as NEFT (National Electronic Fund Transfer), ECS (Electronic Clearing Service),
RTGS (Real Time Gross Settlement), Cheque Truncation System, Mobile banking system, Debit
cards, Credit Cards, Prepaid cards have all gained wide acceptance in Indian banks. These are all
remarkable landmarks in the digital revolution in the banking sector. Online banking has
changed the face of banking and brought about a noteworthy transformation in the banking
operations.

National Electronic Funds Transfer (NEFT) is the most commonly used electronic
payment method for transferring money from any bank branch to another bank in India. It
operates in half hourly batches. At present there are 23 settlements. Real Time Gross Settlement
(RTGS) is primarily used for high-value transactions which are based on 'real time'. The
minimum amount to be remitted through RTGS is Rupees Two Lakhs. There is no upper
limit. Immediate Payment Service (IMPS) is an instant electronic funds transfer facility offered
by National Payments Corporation of India (NPCI) which is available 24 x 7.

The usage of prepaid payment instruments (PPIs) for purchase of goods & services and
funds transfers has increased considerably in recent years. The value of transactions through PPI
Cards (which include mobile prepaid instruments, gift cards, foreign travel cards & corporate
cards) & mobile wallets have jumped drastically from Rs.105 billion and Rs. 82 billion
respectively in 2014-15 to Rs. 277 billion and Rs. 532 billion respectively in 2016-17.

18
Post-Independence
During 1938-46, bank branch offices trebled to 3,469 and deposits quadrupled to ₹962
crore. Nevertheless, the partition of India in 1947 adversely impacted the economies
of Punjab and West Bengal, paralyzing banking activities for months.
India's independence marked the end of a regime of the Laissez-faire for the Indian banking.
The Government of India initiated measures to play an active role in the economic life of the
nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged
a mixed economy. This resulted in greater involvement of the state in different segments of the
economy including banking and finance. The major steps to regulate banking included:

 The Reserve Bank of India, India's central banking authority, was established in April
1935, but was nationalized on 1 January 1949 under the terms of the Reserve Bank of
India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b)
 In 1949, the Banking Regulation Act was enacted, which empowered the Reserve
Bank of India (RBI) to regulate, control, and inspect the banks in India.
 The Banking Regulation Act also provided that no new bank or branch of an existing
bank could be opened without a license from the RBI, and no two banks could have
common directors.

19
 COMPANY PROFILE

INTRODUCTION:

State Bank of India (SBI) is an Indian multinational, public sector banking and financial services

company. It is the largest commercial bank in India in terms of Assets, Deposits, Branches,

Customers and Employees. It is a government owned corporation with its headquarters in

Mumbai, Maharashtra. As on 31 March 2017, Government of India held around 61.23% equity

shares in SBI. Life Insurance Corporation of India is the largest non-promoter shareholder in the

company with 8.82% shareholding.

20
 The roots of the State Bank of India lie in the first decade of the 19th century, when the

Bank of Bengal was established on 2ndJune 1806. The Bank of Bengal was one of three

Presidency banks, the other two being the Bank of Bombay (15th April 1840) and the Bank of

Madras (1st July 1843). The Presidency banks amalgamated on 27 January 1921 into Imperial

Bank of India. Pursuant to the provisions of the State Bank of India Act of 1955, the Reserve

Bank of India, which is India's central bank, acquired a controlling interest in the Imperial Bank

of India. On 1 July 1955, the imperial Bank of India became the State Bank of India. In 2008, the

Government of India acquired the Reserve Bank of India's stake in SBI so as to remove any

conflict of interest because the RBI is the country's banking regulatory author.

The present chapter highlights the Structure and Role of SBI and its

associate Banks in Socio-Economic Development.

The State Bank of India is the biggest commercial bank in whole of Asia. It occupies a

unique place in the Indian money market as it commands more than one third of India’s bank

resources.1 Public have enormous faith in State Bank of India because of its dedicated services.

The State Bank of India plays a pivotal role in the sphere of establishing an egalitarian society.

For this purpose, it has amended its lending policies in such a way as to provide adequate

availability of credit to neglected sectors of the economy and to those who do not have easy

access to credit. The State Bank of India’s contribution to process of economic development is

based upon social justice.

21
 SBI is comparable to world class banks due to strong capital base and expenses-to-

income ratio in liberalized era. The State Bank of India is India’s largest commercial bank and is

ranked one of the top five banks worldwide. It serves 90 million customers through a network of

9000 branches. A wide and diversified range of banking services is offered by SBI and its

associate. SBI bank has 52 foreign offices in 34 countries.

As per socio-economic environment of India, SBI is paying more attention to under-

developed and neglected sector of the economy. It contributes towards removal of large number

of socio-economic problems such as the removal of poverty, creation of more employment

opportunities and removing inequalities in income distribution.

Structure of Balance Sheet Items of SBI and its associates

Table 5.1 indicates that the capital base of the entire banking industry excluding regional rural

banks for the year 2009-10 was Rs. 48647.67 Cr. Foreign Banks has 62.81 percent of the capital

base of entire banking industry. It is followed by Public Sector Banks having 27.84 percent of

capital base. SBI has 1.305 percent and SBG has 2.269 percent of capital base. It can be

concluded that foreign banks are leaders in terms of capital base of the entire banking industry.

In terms of reserves & surplus PSBs are leading with Rs. 227456.18 Cr. which is 59.63 percent

of the entire banking Industry

and are followed by PBs and SBG having 30.26 percent and 21.66 percent of the reserves and

surplus of the banking industry. SBI has 17.12 percent and its associate banks have 4.537 percent

of the reserves and surplus. Deposits from the large financial resource base of the industry. In

terms of deposits PSBs are on the number one position having Rs. 3691801.77 Cr which forms

22
77.68 percent of total deposits of banks. SBG has 23.32 percent in which share of SBI is 16.92

percent and that of its associate banks is 6.396 percent.

Borrowings also form the major chunk of liabilities. PSBs have 59.80 percent

of total borrowings followed by PBs and SBG having 28.36 percent and 23.17 percent. FBs have

meager borrowings of 1.184 percent.

SBI has 0.196 percent whereas associate of SBI has 3.536 percent. Advances and

Investments form the supply side of the banking business. PSBs have 70.14 percent and 77.25

percent of the investments and advances of the entire banking industry. It is followed by PBs and

SBG. SBI has 16.62 percent of investments and 18.07 percent of advances of the banking

industry. The behaviour of investments and advances of the various categories of banks is almost

the same.

Earning structure of SBI and its associates

Table 5.2 indicates that the major items of earnings of banking industry are interest

earned, interest/discount on advances, income on investment, Commission, Exchange &

Brokerage and other income. PSBs have 71.79 percent of the total income followed by PBs

having 20.85 percent. SBI has 17.39 percent and associate of SBI has 6.147 percent of total

income. Among the Associates of SBI, State Bank of Indore (SBIN) has the lowest income that

0.629 percent and State Bank of Hyderabad (SBH) has the highest total income that 1.452

percent. Comparison of interest earned and other income

23
figures reveal that SBI has more of income from other sources that is 19.06 percent and less of

interest earnings that is 17.08 percent. On the other hand Associates of SBI, NBs, PSBs, PBs and

FBs have more of interest earnings and less of income from other sources. SBI has 16.98 percent

of income on investment and it has 23.45 percent from commission, exchange & brokerage.

Associate of SBI has 6.485 percent of interest earnings and 4.363 of other

income. PSBs have 73.72 percent of interest earnings and 61.63 percent of other income. Total

income of the PSBs is 71.79 percent of the entire banking industry.

Expenditure structure of SBI and its associates

Table 5.3 shows that the major items of expenditure of the banking industry are interest

expended, interest on deposits, establishment expenses, operating expenses. Total Expenditure

including provisions and contingencies of the entire banking industry is Rs. 409541.38 Cr for the

period 2009-10. The share of PSBs is 77.07 percent and that of PBs and FBs is 18.04 percent and

4.893 percent respectively. SBI has 18.75 percent of total expenditure whereas Associates of SBI

has 6.662 percent of total expenditure. Share of interest expended by SBI is 17.39 percent and

that of Associates of SBI is

6.949 percent. Share of SBI in total expenditure is more than PBs and FBs.

Establishment expenses relates to expenditure on salaries and other allowances paid to

the staff. Operating expenses includes establishment expenses, rent taxes & Lighting, printing &

stationary, Advertisement &publicity, depreciation, insurance etc. Establishment expenses as

percentage of that of entire banking industry is same for SBI and NBs that is 23.12percent PSBs

incur major share on establishment expenses that is 74.38 percent. Associate of SBI has 5.101

percent, PBs has 17.07 percent and FBs has 8.529 percent of total establishment expenses.

24
Operating expenses of SBI are less than PBs that is 20.37 percent and 22.73 percent respectively.

PSBs incur 66.14 percent of total operating expenses. Among Associates of SBI, share of SBIN

is lowest that 0.509 percent whereas that of SBH is highest that is 0.986 percent. As far as

establishment expenses and operating expenses are concerned same behaviour is observed as in

case of total expenditure among Associates of SBI.

Population wise distribution of branches of SBI and its associates

Structure of market reach is measured by total number of branches of various groups of

banks and is indicated in Table 5.6. PSBs has widespread network of branches having 85.31

percent of total branches of banking industry. SBI has 17.96 percent of total branches of industry

which is higher than that of PBs and FBs. PBs has 14.25 percent whereas FBs has very

meager share that is only 0.435 percent.

On 1st April, 2017, SBI merged its five Associate Banks (State Bank of Bikaner &

Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala and State Bank of

Travancore) and BharatiyaMahila Bank with itself. This is the first ever large scale consolidation

in the Indian Banking Industry. With the merger, State Bank of India has entered the league of

top 50 global banks with a balance sheet size of USD 531billion, Deposits of USD 400 billion,

278,000 employees, 420 million customers, and more than 24,000 branches and 59,000 ATMs. It

has more than 33 billion as capital and reserves. After merger, SBI's commands a market share

of more than 23 percent shares of the domestic banking market. SBI has global presence with

198 offices across 37 countries and 301 correspondents in 72 countries. It is ranked 232nd on the

Fortune Global 500 list of the world's biggest corporations as of 2016.The equity shares of SBI

are listed on the Bombay Stock Exchange, where it is a constituent of the BSE

25
SENSEX index, and the National Stock Exchange of India, where it is a constituent of the CNX

Nifty.Its Global Depository Receipts (GDRs) are listed on the London Stock Exchange.

SBI is one of the largest employers in the country with 209,567 employees as on 31

March 2017, out of which there were 23% female employees and 3,179 (1.5%) employees with

disabilities. On the same date, SBI had 37,875 Scheduled Castes (18%), 17,069 Scheduled Tribes

(8.1%) and 39,709 Other Backward Classes (18.9%) employees. The percentage of Officers,

Associates and Sub-staff was 38.6%, 44.3% and 16.9% respectively on the same date. Around

13,000 employees have joined the Bank in FY 2016-17. Each employee contributed a net profit

of ₹511,000 (US$7,400) during FY 2016-17.

26
CHAPTER-3

27
 THEORITICAL FRAMEWORK

A number of authors and experts have defined e-banking services as a contemporary

facility that provides conventional bank products and services through a new medium i.e. IT.

It is entirely automated facility based on IT delivery mechanism to conventional banking

users’ products and services. It provides online medium of conducting and providing various
banking services, such as, online accessibility of bank account, online fund transfer facility,
online bills paying facility etc. The benefits provided by e-banking medium have resulted into
swift growth of banking sector worldwide.

The internet facility has transformed the business world in terms of managing business.
According to Abu Shanab et al. (2010), internet has transformed the entire business pattern for
people as well as for businesses. Although, technological advancements are happening everyday
but not every advancement has been welcomed and adapted by financial sector; but financial
sector that enjoying advantages of this new mode of service delivery, has adapted the e-banking
phenomenon from its introduction only. Originally it was used for online banking promotional
activities of their products and services; but as the e-banking concept developed, banks have
started enjoying its various other advantages, such as, reduced per transaction cost, enhanced
customer service, raised long term returns by providing ‘anytime anywhere’ banking to the
banking customers.

Advancement in technology provides fast innovative changes in people’s routine life. The
most significant recent technical advancement that drastically transformed the entire scenario of
providing services is the use of internet facility in service delivery. Number of people that are
adapted this technological advancement for online transaction such as, online shopping, is
increasing tremendously. Gradually, more business organizations realised that it can be utilized
to facilitate growth through its advantages of easy accessibility to information and technology
transfer. The cut throat competitive environment and demanding customers compelled banks to
adapt e- banking concept.

28
 Most of the business organizations have swiftly adapting the advancement in technology
and internet facility. Adopting new internet applications have resulted in enhancement of
efficiency and quality of service provided as well as attracting prospecting customers. Thus,
evolution of internet facility had transformed entire business world around the globe and same
happened in banking sector. Banking sector have always been on the top in using ICT in banking
business.

Challenges faced by banking sector such as, increase in competition, catering variety of
demand of heterogeneous customers, decreasing revenue margin and advantages provided by
technology , have compelled banks to process new human resource management system. To
successfully face all these challenges banks have adapted new technological advancements as
earliest possible. Other driving forces that worked for banks to adapt technological
advancements are the challenges of meeting varied customer expectations, new regulation and
entering into new geographical areas and requirement of new products and services.

29
Definitions

Electronic banking can be defined as the use of electronic delivery channels for banking products
and services, and is a subset of electronic finance

(1). The most important electronic delivery channels are the Internet, wireless communication
networks, automatic teller machines (ATMs), and telephone banking. Internet banking is a subset
of e-banking that is primarily carried out by means of the Internet. The term transactional e-
banking is also used to distinguish the use of banking services from the mere provision of
information

(2).Electronic banking services are offered in two main ways

(3).Either traditional brick and mortar banks combine traditional and electronic delivery channels
(brick and click banks) or banks offer their products and services only- or predominantly-
through electronic distribution channels without having a branch network (other than a physical
presence as an administrative head office or non branch facilities such as kiosks or ATMs).
These banks are called “virtually banks”, “branchless” or “Internet- only” banks. Withdrawal and
deposit of funds may be made through ATMs or other remote delivery channels owned by these
virtual banks or other institutions. Setting up licensed virtual banks can, in principle, be done in
three ways.

30
History of E- Banking:

The evolution process of latest service delivery mechanism through internet i.e. e-
banking started from the early 1980s. In late 1980s, the term online got popularised and it was
referred to a banking medium of using a terminal, keyboard and monitor to access the banking
system through a phone line. Another term used for this was ‘Home Banking’ and in it,
customers were using a numeric keypad to send tones down a phone line with instructions to the
bank. In 1981, e- banking has started in New York with offering home banking service using
video tex system by Citi Bank, Chase Manhattan Bank, Chemical bank and manufacturers
Hanover bank. Although due to failure of video tex system, Home Banking was not able to gain
popularity except in France and UK.

In 1983, Bank of Scotland provided UK’s first home online banking service to the
banking customers of Nottingham Building Society. This online banking service was based on
Prestel system of UK and used a computer like BBC Micro or keyboard connected to the
telephone and television system. This system was called Homelink and it enabled customers to
view their bank statements online, online fund transfer and online bill payment. To pay bills or
transfer funds, customers need to send a written instruction having details of intended transaction
to Nottingham Building Society who set the details upon the Homelink system. The usual
recipients of this service were electric company, Gas Company, telephone companies and other
banks. The account holder has to provide details of the payment through Prestel into Nottingham
Building Society system. Then, a cheque of payment amount has to be send by Nottingham
Building Society to the payee and an instruction transfer the payment.

In Oct. 1994, Stanford Federal Credit Union was the first financial institution that

provided internet banking facility to its all members.

Today, a number of banks are functioning as giving details of the payment was send to
the account holder. Later, BACS was used to directly internet only banks. These internet only
banks do not have a physical bank branches like their predecessors. They differentiate
themselves by providing better rate of interest and internet banking facility.

31
Types of Internet banking

Aladwani (2001) categorized online banking in two types, first, web- based banking through
internet and second, dial-up banking consumer uses a modem to dial up to a bank’s server to
access bank account. There is a special type of dial-up banking operated by private banks
between a banking institution and its corporate clients, known as Extranet.

Thulani et al (2009), Yibin (2003) and Diniz (1998) identify three functional kinds of e-banking
that are currently employed in the market place and these are:

Informational Websites - Such services are known as first level of e-banking. Through such
services bank provides marketing information regarding banking products and services on a
standalone server. It has very low degree of risk as there is no connection between server and
bank.

Communicative Websites – In this system there is very less scope of communication between
banking system and e-banking users. This communication is only to the extent of e-mail, account
balance enquiry, loan application or static file updates. This system is not having fund transfer
facility.

Advantages of E- Banking

The prime advantage of e-banking system is reduction in operating cost per transaction.
According to Sarel&Mamorstein, 2003 and Nath et al., 2001, the estimate cost of per e-banking
transaction is $0.01, whereas, estimate cost of per fully service branch transaction is $1.07,
which is very high comparatively to the e-banking transaction cost. Providing e-banking services
is the only way to reduce the operating cost without reducing existing service levels. These
advantages lead to banks to take e-banking as the most preferable mode of service delivery.
Now, banks can deeply analyze all the information gathered from bank customer interactions
with the help of information technology. Therefore, to have effective Customer Relationship
Management (CRM) system is become key issue in internet banking services. The effective
CRM system enables banks to gain better customer intelligence, precision in customization and
better managed customer relationships through their virtual presence.

32
 But from a business point of view, integration of traditional physical branch banking and
modern virtual e-banking system creates win- win situation for the banks. As e-banking enables
banks transfer some of its transaction processing tasks directly to their banking customers. To
enjoy these benefits of e-banking system, banks are encouraging their customers to adapt e-
banking system and manage their own banking through ATMs and online banking.

Technological innovations are having significant importance in human general and

professional life. This era can safely be attributed as technology revolution. The quick expansion
of information technology has imbibed into the lives of millions of people. Rapid technology
advancements have introduced major changes in the worldwide economic and business
atmosphere. Information technology developments in the banking sector have sped up
communication and transactions for clients (Booz et al, 1997). Online banking is also one of the
technologies which are fastest growing banking practices nowadays. It is vital to extend this new
banking feature to clients for maximizing the advantages for both clients and service providers.

To enhance its operating efficiency and providing better banking products and services,
bank has always been the pioneer in adapting the latest technological advancements. Banks
adopted electronic and telecommunication distribution channels for providing various financial
services long back. As banks’ focus has shifted from product centric model, they have developed
their own e-banking system. Now, banks view e-banking which helped in reducing operating
cost as an important value added feature to attract and maintain existing and prospecting banking
clients. In India the number of internet users is increasing with very fast pace that eventually
increase the opportunity to increase the number of e-banking users as well. But the success of e-
banking largely depends on the technological adaptation rate of Indian retail and corporate
banking customers. Therefore, the driving forces that influence the adaptation of e-banking
system in India will definitely be a critical issue to banks as well as to regulators of the banking
industry.

Although the main factor that effect success of e-banking as a delivery medium of
banking services and products is the adaptation rate of the both kind of banking customers by
retail and corporate customers as well to e-banking services.

33
 Therefore, influencing factors to e-banking adoption in India are the prime concern for e-
banking offering banks as well as for policy makers.

a) Benefits to Consumers

 General consumers have been significantly affected in a positive manner by Ebanking.

Many of the ordinary tasks have now been fully automated resulting in greater ease and
comfort.
 Customer’s account is extremely accesses able with an online account.
 Customer can withdraw can at any time through ATMs that are now widely available
throughout the country.
 Besides withdrawing cash customers can also have mini banks statements, balance
inquiry at these ATM.
 Through Internet Banking customer can operate his account while sitting in his office or
home. There is no need to go to the bank in person for such matter.
 E banking has also greatly helped in payment of utility bill. Now there is no need to stand
in long queues outside banks for his purpose.
 All services that are usually available from the local bank can be found on a single
website.
 The Growth of credit card usage also owes greatly to E-banking. Now a customer can
shop worldwide without any need of carrying paper money with him.
 Banks are available 24 hours a day, seven days a week and they are only a mouse click
away.

34
(b) Benefits to Banking Industry:

 Banking industry has also received numerous benefits due to growth of EBanking
infrastructure. There are highlighted below:
 The growth of E-banking has greatly helped the banks in controlling their overheads and
operating cost.
 Many repetitive and tedious tasks have now been fully automated resulting in greater
efficiency, better time usage and enhanced control.
 The rise of E-banking has made banks more competitive. It has also led to expansion of
the banking industry, opening of new avenues for banking operations.
 Electronic banking has greatly helped the banking industry to reduce paper work, thus
helping them to move the paper less environment.
 Electronic banking has also helped bank in proper documentation of their records and
transactions.
 The reach and delivery capabilities of computer networks, such as the Internet, are far
better than any branch network.

(c) Benefits to General Economy:

Electronic Banking as already stated has greatly serviced both the general public and the
banking industry. This has resulted in creation of a better enabling environment that supports
growth, productivity and prosperity. Besides many tangible benefit in form of reduction if cost,
reduced delivery time, increased efficiency, reduced wastage, e-banking electronically controlled
and thoroughly monitored environment discourage many illegal and illegitimate practices
associated with banking industry like money laundering, frauds and embezzlements. Further
Ebanking has helped banks in better monitoring of their customer base. This it is a useful tool in
the hand of the bank to device suitable commercial packages that are in conformity with
customer needs. As e banking provide opportunity to banking sector to enlarge their customer
base, a consequence to increase the of volume of credit creation which results in better economic
condition, Besides all this E-banking has also helped in documentation of the economic activity
of the masses.

35
 Economical benefits E-banking served so many benefits not only to the bank itself, but also
to the society as a whole. E-banking made finance economically possible:

(i) Lower operational costs of banks

(ii) Automated process
(iii) Accelerated credit decisions
(iv) Lowered minimum loan size to be profitable.

Potentially lower margins:

(i) Lower cost of entry

(ii) Expanded financing reach
(iii) Increased transparency.

Expand reached through self-service:

(i) Lower transaction cost

(ii) Make some corporate services economically feasible for society
(iii) Make anytime access to accounts and loan information possible.

Disadvantages of E-Banking :

Although e-banking system provides a numerous advantages to the customers but still
prospecting e-banking users should identify its few disadvantages as well. Even after investing
heavily in e-banking awareness campaign and offering so many benefits through e-banking
system, still it lacks in gaining trust factor among its customers. The disadvantages of e-banking
system are as follows:

1. Impersonal: Absence of face to face interaction makes it very impersonal. Thus, customers
who are more comfortable in dealing with people in physical bank setting that provide those
personalised services rather than mechanical interaction; e-banking is not a good option for them.

36
2. Lack of trust: Still many customers do not trust online mode of service especially for money
related transactions. Users who are not seasoned in ebanking feel very uncomfortable as they
have doubt regarding the correctness of the transaction done by them online. As they require
some kind of proof of transaction as receipt, to verify their transactions.

3. Difficult for first timers: For the beginners, it appears as a complex mode of service as
customer find it complicated to navigate through bank’s website. While opening an account
online, bank’s website requires a number of information and that seems time taking and
inconvenient process to the first

a. If the bank’s server is down, customer can’t use it.

b. To use internet banking, customer is compelled to have computer with internet
access.
c. There is always the possibility of a cracker gaining access to customer’s account.
d. Many banks don’t show customer how to use online banking very well and those
are usually the ones with the non- intuitive interface & cluttered design, which
makes it pretty easy for customer to screw up something.
e. Banks bears heavy costs to install high firewall.
f. It leads to missing of personal services.
g. E-banking promotes lack of socializing or social contact

Risks in E- Banking

As we cannot deny the advantages offered through e-banking, same way we cannot
ignore the risks involved in e-banking. Bank should maintain adequate leverage between the
advantages and risks of e-banking. Although, marketing and advertising campaign initiated by
banks are encouraging a number of customers to adapt e-banking, but for managing such a huge
customer base banks need to prepare their internal system on prior basis. To have a deep
understanding about the risks of ebanking system, it is categorized in various categories, so that
bank can effectively design risk management strategies for e-banking. As now e-banking enabled
banking beyond the geographical boundaries, banks have local as well as international customers
to process their requests or solve their problems. Complexity of e-banking system has increased

37
due to its close network that involves various service delivery mode offered by a bank and open
network, such as internet facility that is subject to security and reputational risks. It also includes
operational risk, legal & regulatory risks, systematic risks, credit risks, market risks and liquidity
risks. To achieve efficiency in e-banking, banks should properly identify, manage and control the
risks involved in it.

4. Strategic Risk

As e-banking is very new phenomenon, for strategic risk, there is possibility that senior
management people would not be known about its prospects & challenges. People, who are good
in technological skills not necessarily good in banking skills, take the initiative toward e-banking
adoption. Initiative taken by internet users originated in unclear pattern and in various stages. E-
initiatives can be expensive and non recoverable. Even more to it, they are mostly viewed as the
loss- leaders to increase market share even it may not encourage those clients that a bank expects
and may have unknown impact on existing business lines.

To face this risk, bank should have a definite strategy at the top level and that should
comprise the effects of e-banking at the relevant areas. This strategy should be properly
communicated across the business and should have a proper and adequate business plan with a
performance review system.

5. Business risks

These risks have great importance in any business. As a e-banking is a contemporary

issue, people are unaware about the fact that whether e-banking users are having same features as
conventional consumers or not. E-banking users not have same features as traditional banking
customers. For example, Customers who are requested some services to be conducted
immediately, lead to inappropriate existing score card model, therefore it resulted into either high
rejection rate or incur inadequate risk covering charges. Furthermore, banks could not assure the
effective credit quality at a distance comparatively to they provide serving in branch in person.
As well as analysing the quality and nature of collateral security from a distance, specifically if it
is of area not familiar to bank. The exact forecast of cash inflow & outflow is very difficult so it

38
pose a challenge to maintain an adequate level of liquidity. Although, these risks are not new and
banking staff have significant experience in facing them but still need to be addressed properly.

6. Operations risk

Operation risks faced by banking institution may be categorised in 3 ways:

(a) volume forecasts

(b) management information systems and

(c) Outsourcing.

Exact anticipation of banking transactions is very difficult. Main risk in ebanking service
environment is the uncertainty to predict the volume and number of banking transactions. When
a bank is not able to manage the demand, bank has to face reputational risk which resulted in
financial loss and sometimes compromising in security if additional system configured to
manage it properly. To overcome these risks bank should

1.undertake market research,

2.adopt systems with adequate capacity and scalability
3.undertake proportionate advertising campaigns and
4.Ensure that they have adequate staff coverage and develop a suitable business continuity
plan.

In other words, this is new unknown area and banks require operating cautiously. The 2nd kind
of operational risk is to manage proper information system. Although, it is not only available to
e-banking, it is common for all service delivery system. Generally, bank faces problem in
generating proper information to analyze its e-banking services due to the difficulty in
configuring new information system which can generate adequate, clear and meaningful data.
FSA provided guidelines to the banks to obtain information needed by them in proper format as
to get an understanding and to differentiate between important and unessential information.

39
 Eventually, most of the banks providing internet banking have outsourced the related
business functions, such as, security. The primary reasons of it are to reduce operating cost and
lack of expertise in home. Although, outsourcing can also pose a challenge i.e. material risk due
to reduction in bank’s control over that particular function that has been outsourced. However,
risk created by outsourcing is manageable but bank should consider FSA,s guidelines regarding
outsourcing that helps in reducing such risk.

7. Security Risks

Another major problem which is attracting attention in recent years is the security of
information collected by banks. With the advent of e-banking the risk of leaking information has
increased considerably. In the past the banks functioned in an environment which was secluded
where there were no security issues but with interconnected banking operations the banks are
exposed to security risks as they function in an open environment. They have to consciously
monitor these risks constantly and manage them whenever necessary.

There are majorly three kinds of security breaches,

(i) Those breaches which have a prior criminal motive (eg. fraud, having access to financial
information which can be used for commercial purposes),
(ii) breaches undertaken by casual hackers (these breaches may lead to a website not
working properly, giving false information or not providing any service at all, may even
ultimately lead to a crash of website) and
(iii) there may be some defect in the design of the website which may lead to leak of
information). All these type of breaches lead to serious financial, legal or reputational
repercussions.

Many banks are finding that these systems are hacked several times a day but the losses
are minor in the nature. However the banks should develop some kind of Burglar Alarm to trace
the number of and the frequency of these unsuccessful attempts to hack the security of inform.

Those computer systems that contain details of high valued payments or which contains
highly sensitive confidential information must be properly guarded. An adequate security system
must protect such information. Generally, therefore the greater is the risk of loss the greater the
possibility that such a loss may occur. Although the banks are trying to secure overall systems

40
but more attention needs to be paid to the separation of internal systems and poor internal
security. One possibility which may lead to hacking of website is gaining entry through a less
guarded less valued website and then it gaining entry into a high value system through banks’
internal network. It is being contemplated that banks erect firewalls (i.e. software that prevents
an unauthorised person from gaining entry into the system) among their different systems. This
would ensure minimisation of damage even if an external breach does occur. The greatest risk to
security however is from internal sources that are the employees of the organisation and the
contractors. Even though there are security risks involved in e-banking, it could also eliminate
some of the mistakes of manual processing of information (customers are directly contacted
through the bank’s system rather than customers contacting the bank first and then bank eliciting
information from them). With the development of ebanking practices and management of
security risks, large gains could be achieved. The banks should proactively concentrate on
addressing the risks involved effectively. They must devise a strategic approach toward safety of
data establishing correct working procedures and security controls into systems and networks. A
focussed approach on information security needs to be developed which should include testing of
systems’ security controls (i.e. penetration testing), monitoring of new competitors and keeping
an eye on the weak spots, reviewing market developments and recruiting adequate staff with
expertise to manage information security and its security control system. The above mentioned
concerns would be taken up by line managers when they supervise banking operations, they
should used reassurances as these accounts.

8. Reputational risks

The reputational risks of banks have increased a great deal with increased use of internet
by them. Through the internet everybody has knowledge of all good or bad incidents that take
place in a quick span of time. Rumours on the net can be exaggerated as forecasts. The
communication with the help of the internet is undertaken at an alarming speed, this give perhaps
no time for anyone to respond or for managers to control such rumours. The crisis management
of the banks must be in place and the PR department should be able to handle such occurrences
(whether they are real or hoax). Last reputational risk involves that the products which are sold
with the help of the net are properly marketed in such a way that the bank may not be charged

41
with using wrong marketing practices, exactly in the same manner as in the physical world.
Banks need to ensure that the rights of the consumers are adequately protected.

9. International developments

E-banking exposes the banks to certain peculiar risks. Supervision of banking activities
has to be conducted at a global level if it has to be done effectively. This is essential because e-
banking is by nature non- territorial customers can very easily access the site and not only elicit
the required information but can also purchase the products of their choice. The regulators have
to understand and efficiently deal with the regulatory problems of global e-banking. Cross border
supervision mechanisms have been established agreements over home or host responsibilities
(within the members), bilateral agreements for sharing of information and setting benchmarks
which all domestic as well as bankers abroad are expected to fulfil. The ultimate purpose is that a
common mechanism of supervision, strong enough is to be developed which matches the
physical banking environment

10. Credit risk

Generally, a financial institution’s credit risk is not increased by the mere fact that a loan
is originated through an e-banking channel. However, management should consider additional
precautions when originating and approving loans electronically, including assuring management
information systems effectively track the performance of portfolios originated through e-banking
channels. The following aspects of on-line loan origination and approval tend to make risk
management of the lending process more challenging. If not properly managed, these aspects can
significantly increase credit risk.

11. Liquidity, interest rate, price or market risks

Funding and investment-related risks could increase with an institution’s ebanking

initiatives depending on the volatility and pricing of the acquired deposits. The Internet provides
institutions with the ability to market their products and services globally. Internet-based
advertising programs can effectively match yield-focused investors with potentially high-
yielding deposits. But Internet-originated deposits have the potential to attract customers who
focus exclusively on rates and may provide a funding source with risk characteristics similar to
brokered deposits. An institution can control this potential volatility and expanded geographic

42
reach through its deposit contract and account opening practices, which might involve face-to-
face meetings or the exchange of paper correspondence. The institution should modify its
policies as necessary to address the following ebanking funding issues:

a. Potential increase in dependence on brokered funds or other highly rate-sensitive deposits;

b. Potential acquisition of funds from markets where the institution is not licensed to engage in
banking, particularly if the institution does not establish, disclose, and enforce geographic
restrictions;
c. Potential impact of loan or deposit growth from an expanded Internet market, including the
impact of such growth on capital ratios;
d. Potential increase in volatility of funds should e-banking security problems negatively impact
customer confidence or the market’s perception of the institution

43
Challenges of E- Banking are as follows:

1. Demand side pressure due to increasing access to low cost electronic services.

2. Emergence of open standards for banking functionality

3. Global players in the fray

4. Dual responsibility, to protect customer’s privacy and protect against fraud.

(a) Proper understanding of customer: Bank should adequately and properly identify customers’
requirements and wants. To identify the customers exact needs bank should conduct a research
survey

(b) Due to significant increase in customers’ awareness, the need of maintaining transparency
has increased significantly.

(c) Breach of privacy: While customers conducting banking transactions online, it directly enters
into banking records that reveal the identity of customers. Therefore, no one can easily transfer
black money.

(d) Bandwidth: Although, internet facility providers claim to provide speedy and high
bandwidth, still the problem of high speed internet prevails. EBanking can popularize more only
with adequate infrastructure comprising telecommunication and bandwidth.

(e) The level of computer literacy is still very low in India and it works as a bottleneck in the fast
acceptance of e-banking.

(f) The attitude of customers is required to be transformed in India.

(g) Bank should have proper security measures to protect its customers against “net – jacked” or
from frauds.

44
CHAPTER-4

45
 DATA ANALYSIS AND I NTERPRETATION

Data Analysis and presentation of the data in quantitative research is usually more
unsophisticated based on the fact that statistical measurements are being used. Tables and charts
are used for the presentation of the data and there port can be structured around these
exhibits...While in qualitative research, it seems to be more difficult... When analyzing
qualitative information, the researcher engages in an in-depth investigation and subjectively
interprets the data, in order to explain much of the variation in the field of study.

In order to examine the views of customers regarding Online Banking Services provided by the
banks, two types of structured questionnaire were designed for collection of the primary data.
The questionnaire was prepared for -

a. The bank’s customers; who are Users of Online Banking Services,

b. The bank’s customers; who are Non – Users of online banking services.

Data has been collected from customers who were users and non – users of electronic
banking. Thus in accordance with the study the data collected was interpreted and analyzed
which include: to establish the relationship between technology and service quality in banking
industry and to determine the factors that lead to customer preference of different electronic
banking channels.

46
1.RTGS TRANSACTION (IN VOLUME)

Year 2013-14 2014-15 2015-16 2016-17 2017-18

Inward(in 126330 144971 182636 172753 226167
million

Outward(in 137714 159908 210944 198101 251507

million

300000

250000

200000

150000

100000

50000

0
2013-14 2014-15 2015-16 2016-17 2017-18

inward(in millions) outward(in millions)

INTERPRETATION:

Total No. of inward transactions of STATE BANK OF INDIA is Rs.126330 in 2014,

Where it increased to 22617 in 2018.

Total No. of outward transactions of STATE BANK OF INDIA is Rs.137714 in 2014,

Where it increased to 251507 in 2018.

47
2.No of Debit card transactions in state bank of india (In Millions)

Particulars 2014 2015 2016 2017 2018

Amount of 32680.70 43496.42 59599.90 76810.64 77331.8

transactions(millions)

Amount of transactions(millions)
90000

80000

70000

60000

50000

40000

30000

20000

10000

0
2014 2015 2016 2017 2018

Amount of transactions(millions)

INTERPRETATION:

Above graph show that

Total No. of transactions of STATE BANK OF INDIA is 12034730 in 2014, where it increased
to 18209171 in 2018.

Total No. of transactions of STATE BANK OF INDIA is 32680.70 in 2014, where it increased
to 77331.8 in 2018.

48
3.No.of ATM’s of STATE BANK OF INDIA Bank

PARTICULARS 2015-16 2016-17 2017-18

METRO 1876 2381 2507

URBAN 1609 2222 2395

SEMI URBAN 1485 2014 2395

CENTERS

RURAL CENTERS 1539 1916 1954

TOTAL 6509 8533 925

9000
8000
7000
6000
5000
4000
3000
2000
1000
0
METRO URBAN SEMI URBAN RURAL URBAN TOTAL
CENTERS CENTERS

2015-16 2016-17 2017-18

49
INTERPRETATION:

The above bar chart shows about number of transaction in STATE BANK OF INDIA Total No.

of transactions of STATE BANK OF INDIA in Metro is 1876 in 2015-16,where it increased to

2507 in 2018.

Total No. of transactions of STATE BANK OF INDIA in urban is 1609 in 2015-16, where it

increased to 2395 in 2018.

Total No. of transactions of STATE BANK OF INDIA in Semi Urban Centers is 1485 in 2015-

16, where it increased to 2395 in 2018.

Total No. of transactions of STATE BANK OF INDIA in Rural Area is 1539 in 2015-16, where
it increased to 1954 in 2018.

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4.EFT/NEFT Transacions(in crores)

YEAR 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

EFT/NEFT 2408.45 36823.94 57093.78 76402.08 122055.33 174088.76

Source: STATE BANK OF INDIA Annual report 2012-13,2013-14,2014-15,2015-16,

2017-18.

EFT/NEFT

180000
160000
140000
120000
100000
80000
60000
40000
20000
0
2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

EFT/NEFT

INTERPRETATION

We observed from the above diagram NEFT transactions are more in the year 2016-17.

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5.No.of credit cards transactions in SBI Bank

Particulars 2013-14 2014-15 2015-16 2016-17 2017-18

No. of 9368 9528 10524 22725 34490

transactions

Amount of 42.20 45.90 50.15 112.38 193.24

transactions

40000

35000

30000

25000

20000

15000

10000

5000

0
2013-14 2014-15 2015-16 2016-17 2017-18

No. of transactions Amount of transactions

INTERPRETATION

The above bar chart shows about the number of credit transaction in STATE BANK OF INDIA .

In the year of 2017-18 the no. of transactions are more and also more.

Total No. of credit transactions of STATE BANK OF INDIA is 9368 in 2013-14,where it

increased to 34490 in 2018.

Total No. of transactions of STATE BANK OF INDIA is 42.20 in 2013-14,where it increased to

193.24 in 2018.

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CHAPTER-5

53
 FINDINGS

The data analysis and its interpretation lead to the following finding

 People are not confident enough to whether to rely completely on online banking.

There is hesitancy in their minds with regards to preference. So they use both the

techniques of banking i.e. Online and Traditional

 Because of the complexity and the unawareness in the people regarding the online

banking, there is less utilization of the online banking services provided by the banks.

 People are not sure whether their account is completely secured in online banking,

Security concern is the main and the core reason why people do not tend to use online

banking

 People in India are not aware of the full utility of online banking and the services that

can be availed of in online banking.

 Most of the Indian population are salaries employees who do not have that volume of

transaction that can be used for online transaction.

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 SUGGESTIONS
 The infrastructure for the development is not being implemented in way that could be

beneficial

 There are various obstacles in the banking scenario with regards to guidelines and issues

for functioning. This has led to decline in the usage of the online banking service of the

banks.

 The people having accounts can be urged to take up an internet banking facility. They

should be motivated rather than just being told that there exists service of online banking.

 There are more people who are not actually aware of all the benefits that they reap out of

the transaction of online banking. They should be proper awareness.

 Most of the people o not count online banking due the problems of security concerns.

Proper security software should be developed and people should be convinced that their

accounts are secured in online transactions.

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 CONCLUSION
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 also empowers them with unprecedented freedom in choosing vendors

for their financial service needs. The rise of Internet banking is redefining business relationship

with the customers.

Telebanking and Internet banking are perceived as important and the use of these services

is associated with socio-economic and demographic characteristics of the respondents. Though,

most of the customers prefer manual banking over e -197 banking, the customers tend to use e-

banking/internet banking and adoption of e-banking and internet banking services among the

bank customers is significantly influenced by the number of times visiting the banks as well as

the number of banking transactions per month.

Most of the services through internet banking performed by both public and private banks are

beyond the expectation of the customers. Similarly the various services provided by both public

and private sector banks are more than adequate for customers. It is concluded finally that there

is significant difference between public and private sector banks in respect of both services

provided and services performed via e-banking/internet banking. From the results regarding

functional psychological barriers and benefits, it is noted that there are four underlying aspects

(dimensions) of functional psychological barriers (two aspects related to barriers such as

"Complications and Difficulties in using IB initially" and "Risk of getting wrong information")

56
and benefits (two benefits namely, "Convenient & Easy to Use and " Good option next to

traditional bankings") are identified using factor analysis.

It is also concluded that there is significant difference in the perceived status of functional

psychological barriers benefits dimensions by socioeconomic characteristics and the perceived

status of functional psychological barriers/benefits is related to importance of using ATM,

internet banking, preferred type of banking, availing e-banking services, period of using e-

banking, number of times visiting banks in a month number of internet transaction in a week and

number of banking transaction in a month. 198

From the evaluation of the customers' opinion with regard to the benefits and usefulness

of e-banking/internet banking in addition to "intention of using e-banking/internet banking in the

future", it is identified that there are four major benefits, namely "Save time & Cost Less",

"Provide accurate, relevant and up-to date information", "Flexible and easily accessible with

convenience" and "Assists to share the experience with bank and other customers more

efficiently" from e-banking/internet banking. It is found that "flexibility and easy accessibility

with convenience" is the most desirable benefit followed by "Providing accurate, relevant and

up-to date information" and "Saving time & Cost Less" and the perceived status of the above

benefits is associated with education and family income of the respondents. Regarding the

usefulness of e-banking internet banking, it may be concluded that "Generating the latest reports

of banking transactions" is the major usefulness followed by "Funds transfer", "Pay bills using

available cash in the accounts" and "Order to buy and sell shares".

57
 BIBLIOGRAPHY
BOOKS AND AUTHORS:

 Amandeep (1983), Profits and Profitability of Commercial Banks, New Delhi: Deep and Deep

Publications.

 Burns A. C. and R. F. Bush (2007), Marketing Research, New Delhi: Pearson Education

 Coakes S. J., L. Steed and P. Dzidic (2007), SPSS Version 13.0 for Windows Analysis Without

Anguish, New Delhi: John Wiley India (P) Ltd.

 Dhar U. and S. Dhar (2006), Strategies of Winning Organizations, New Delhi: Excel Books

WEBSITES VISITED:

http://www.onlinebanking.net/online-banking-services/

http://www.productivity501.com/choosing-online-bank/244/

http://www.thewisdomjournal.com/Blog/pros-and-cons-of-online-banking

http://www.onlinebanking.net/how-does-online-banking-work/

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