CHAPTER 1:

INTRODUCTION

Electronic banking, or e-banking, is the term that describes all transactions that take place among
companies, organizations, and individuals and their banking institutions. First conceptualized in
the mid-1970s, some banks offered customers electronic banking in 1985. However, the lack of
Internet users, and costs associated with using online banking, stunted growth. The Internet
explosion in the late-1990s made people more comfortable with making transactions over the
web. Despite the dot- com crash, e-banking grew alongside the Internet.

 Online banking (or internet banking or E-banking) allows customers of a financial institution
to conduct financial transactions on a secure website operated by the institution, which can
be a retail or virtual bank, credit union or building society.
 Online banking is the practice of making bank transactions or paying bills via the Internet.
Thanks to technology, and the Internet in particular, people no longer have to leave the house
to shop, communicate, or even do their banking. Online banking allows a customer to make
deposits, withdrawals, and pay bills all with the click of a mouse.
 Online banking is an electronic payment system that enables customers of a financial
institution to conduct financial transactions on a website operated by the institution, such as a
retail bank, virtual bank, credit union or building society. Online banking is also referred
As internet banking, e-banking, virtual banking and by other terms.
 Online banking or E-banking is an umbrella term for the process by which a customer may
perform banking transactions electronically without visiting a brick-and-mortar institution.
 Online banking is the practice of making bank transactions or paying bills via the Internet.
Thanks to technology, and the Internet in particular, people no longer have to leave the house
to shop, communicate, or even do their banking.

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While financial institutions took steps to implement e-banking services in the mid-1990s, many
consumers were hesitant to conduct monetary transactions over the web. It took widespread
adoption of electronic commerce, based on trailblazing companies such as America Online,
Amazon.com and eBay, to make the idea of paying for items online widespread. By 2000, 80
percent of U.S. banks offered e-banking. Customer use grew slowly. At Bank of America, for
example, it took 10 years to acquire 2 million e-banking customers. However, a significant
cultural change took place after the Y2K scare ended. In 2001, Bank of America became the first
bank to top 3 million online banking customers, more than 20 percent of its customer base. In
comparison, larger national institutions, such as Citigroup claimed 2.2 million online
relationships globally, while J.P. Morgan Chase estimated it had more than 750,000 online
banking customers. Wells Fargo had 2.5 million online banking customers, including small
businesses. Online customers proved more loyal and profitable than regular customers. In
October 2001, Bank of America customers executed a record 3.1 million electronic bill
payments, totaling more than $1 billion. In 2009, a report by Gartner Group estimated that 47
percent of U.S. adults and 30 percent in the United Kingdom bank online.

First Online Banking in India:

ICICI bank is the first one to have introduced Online-Banking in 1994 for a limited range of
services such as access to account information, correspondence and, recently, funds transfer
between its branches. ICICI is also getting into e-trading, thus offering a broader range of
integrated services to the customer.

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OBJECTIVES OF THE STUDY:

 To analyze the growth of Online-Banking in India

 To analyze the present e-banking scenario concerned with ATM, Internet banking,
Mobile banking, credit card-debit card, fund transfer and other e-banking services.

 To find out the major problems faced by the customers while using e-banking
services.

HISTORICAL DEVOLOPMENT:

• The precursor for the modern home online banking services were the distance banking
services over electronic media from the early 1980s. The term 'Online' became popular in the late
'80s and referred to the use of a terminal, keyboard and TV (or monitor) to access the banking
system using a phone line. 'Home banking' can also refer to the use of a numeric keypad to send
tones down a phone line with instructions to the bank. Online services started in New York in
1981 when four of the city's major banks (Citibank, Chase

Manhattan, Chemical and Manufacturers Hanover) offered home banking services using the
videotext system. Because of the commercial failure of videotext these banking services never
became popular except in France where the use of videotext (Minitel) was subsidized by the
telecom provider and the UK, where the Prestel system was used.

• While financial institutions took steps to implement in e-banking services in the mid-
1990s, many consumers were hesitant to conduct monetary transactions over the web. It took
widespread adoption of electronic commerce, based on trailblazing companies such as America
Online, Amazon.com and eBay, to make the idea of paying for items online widespread. By
2000, 80 percent of U.S. banks offered e-banking. Customer use grew slowly. At Bank of
America, for example, it took 10 years to acquire 2 million e-banking customers. However, a
significant cultural change took place after the Y2K scare ended. In 2001, Bank of America
became the first bank to top 3 million online banking customers, more than 20 percent of its
customer base. In comparison, larger national institutions, such as Citigroup claimed 2.2 million

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online relationships globally, while J.P. Morgan Chase estimated it had more than 750,000
online banking customers. Wells Fargo had 2.5 million online banking customers, including
small businesses. Online customers proved more loyal and profitable than regular customers. In
October 2001, Bank of America customers executed a record 3.1 million electronic bill
payments, totaling more than $1 billion. In 2009, a report by Gartner Group estimated that 47
percent of U.S. adults and 30 percent in the United Kingdom are using bank online.

Today, many banks are internet only banks. Unlike their predecessors, these internet only

Banks do not maintain brick and mortar bank branches. Instead, they typically differentiate
themselves by offering better interest rates and more extensive online banking features.

Internet Banking offers different online services in India. According to a report published by RBI
There are three different levels of banking services offered through internet banking:

The first level i.e. Basic level services: It is basically about websites which disseminate
information about different services and products offered by banks. It generally includes
receiving and replying to customers’ queries through email

The next level i.e. Simple Transactional Websites: It allow customers to submit their
instructions and applications for different services, queries about their account balances, etc. but
do not allow any fund-based transactions on their accounts

The third level i.e. Fully Transactional Websites: It allows customers to manage their
accounts, facility of fund transfer, bills payment, ticket booking, avail facility of other banking
products and services and trading in securities etc.

1-ADVANTAGES OF ONLINE BANKING:

Many banks have begun to offer customers the option of online-internet banking, a practice that
has advantages for both all parties involved. The convenience of being able to access accounts at
any time as well as the ability to perform transactions without visiting a local branch, draw many
people to be involved. Some of these advantages of internet banking but are not limited to,
include:

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  Customer’s convenience

Direct banks are open for business anywhere there is an internet connection. They are also 24
hours a day, 365 days a year open while if internet service is not available, customer services is
normally provided around the clock via telephone. Real-time account balances and information
are available at the touch of a few buttons thus, making banking faster, easier and more efficient.
In addition, updating and maintaining a direct account is easy since it takes only a few minutes to
change the mailing address, order additional checks and be informed for market interest rates.

 More efficient rates

The lack of significant infrastructure and overhead costs allow direct banks to pay higher interest
rates on savings and charge lower mortgage and loan rates. Some offer high-yield checking
accounts, high yield certificate of deposits (CDs), and even no-penalty CDs for early withdrawal.
In addition, some accounts can be opened with no minimum deposits and carry no minimum
balance or service fees.

 Services

Direct banks typically have more robust websites that offer a comprehensive set of features that
may not be found on the websites of traditional banks. These include functional budgeting and
forecasting tools, financial planning capabilities, investment analysis tools, loan calculators and
equity trading platforms. In addition, they offer free online bill payments, online tax forms and
tax preparation.

 Mobility

Internet banking also includes mobile capabilities. New applications are continually being
created to expand and improve this capability or smart-phones and other mobile devices.

 Transfers

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Accounts can be automatically funded from a traditional bank account via electronic transfer.
Most direct banks offer unlimited transfers at no cost, including those destined for outside
financial institutions. They will also accept direct deposits and withdrawals that the customer
authorizes such as payroll deposits and automatic bill payment.

 Ease of use

Online accounts are easy to set up and require no more information than a traditional bank
account. Many offer the option of inputting the customer's data online or downloading the forms
and mailing them in. If the customer runs into a problem, he has the option of calling or e-
mailing the bank directly.

 Environment friendly
Internet banking is also environmentally friendly. Electronic transmissions require no paper,
reduce vehicle traffic and are virtually pollution-free. They also eliminate the need for buildings
and office equipment

2- DISADVANTAGES OF INTERNET BANKING:

Internet banking seems like an obvious choice to leave the hassles of traditional money
management behind in exchange for it. However, there are potential problems associated with
banking over the internet of which customers may not be aware. Consumers need to weigh the
advantages as well as the disadvantages of internet banking before signing up. Some of the
disadvantages of internet banking include:

 Bank relationship

A traditional bank provides the opportunity to develop a personal relationship with that bank.
Getting to know the people at your local branch can be an advantage when a customer needs a
loan or a special service that is not normally offered to the public. A bank manager usually has
some discretion in changing the terms of customer's account if the customer's personal
circumstances change. They can help customers solve problems such as reversing an undeserved
fee. The banker also will get to know the customer and his unique needs. If the customer has a
business account, this personal relationship may help if the customer needs capital to expand. It’s
easier to get the bank’s support if there is someone who understands customer's business and

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vouch for his operating plan.

 Transaction issues

Sometimes a face-to-face meeting is required to complete complex transactions and address

complicated problems. A traditional bank can host meetings and call in experts to solve a
specific issue. Moreover, international transactions may be more difficult (or impossible) with
some direct banks. If a customer deposits cash on a regular basis, a traditional bank with a drive-
through window may be more practical and efficient.

 Service issues

Some direct banks may not offer all the comprehensive financial services such as insurance and
brokerage accounts that traditional banks offer. Traditional banks sometimes offer special
services to loyal customers such as preferred rates and investment advice at no extra charge. In
addition, routine services such as notarization and bank signature guaranteed are not available
online. These services are required for many financial and legal transactions.

 Security

Direct banks are subject to the same laws and regulations as traditional banks and accounts are
protected by the FDIC. Sophisticated encryption software is designed to protect your account
information but no system is perfect. Accounts may be subject to phishing, hacker attacks,
malware and other unauthorized activity. Most banks now make scanned copies of cleared
checks available online which helps to avoid and identify check fraud. It enables verification that
all checks are signed by the customer and that dollar or euro amounts have not been changed.
The timely discovery of discrepancies can be reported and investigated immediately.

 Connectivity

Another issue is that sometimes it becomes difficult to note whether your transaction was
successful or not. It may be due to the loss of net connectivity in between, or due to a slow
connection, or the bank’s server is down.

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3-CHALLENGES IN INTERNET BANKING

The challenges related to e-banking prevail in Indian context are discussed below:

 Security Risk:

The problem related to the security has become one of the major concerns for banks. A large
group of customers refuses to opt for e-banking facilities due to uncertainty and security
concerns According to the IAMAI Report (2006), 43% of internet users are not using internet
banking in India because of security concerns. So it’s a big challenge for marketers and makes
consumers satisfied regarding their security concerns, which may further increase the online
banking use.

 Privacy risk:

The risk of disclosing private information & fear of identity theft is one of the major factors that
inhibit the consumers while opting for internet banking services. Most of the consumers believe
that using online banking services make them vulnerable to identity theft. According to the study
consumers’ worry about their privacy and feel that bank may invade their privacy by utilizing
their information for marketing and other secondary purposes without consent of consumers

 The Trust Factor:

Trust is the biggest hurdle to online banking for most of the customers. Conventional banking is
preferred by the customers because of lack of trust on the online security. They have a perception
that online transaction is risky due to which frauds can take place [35]. While using e-banking
facilities lot of questions arises in the mind of customers such as: Did transaction go through?
Did I push the transfer button once or twice? Trust is among the significant factors which
influence the customers’ willingness to engage in a transaction with web merchants

 Customer Awareness:

Awareness among consumers about the e-banking facilities and procedures is still at lower side
in Indian scenario. Banks are not able to disseminate proper information about the use, benefits
and facility of internet banking. Less awareness of new technologies and their benefits is among

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one of the most ranked barrier in the development of e-banking

 Less Internet Penetration in Indian Context:

The internet banking channel has evolved over the years. In 2011, 60 percent of the times basic
transactions in banks were conducted in North America through online channels, whereas
internet banking usage in India increased from 1 percent in 2006 to 7 percent in 2011 [38]. So
the knowledge and availability of internet is still a one of the biggest challenges that prevails in
Indian context. According to the report of IAMAI 2006 [39] around 22% of internet users do not
have knowledge about transferring online. So the penetration of internet and knowledge related
to internet are major hurdles

FEATUERS OF E-BANKING

 E-Banking provide exceptional rates on Savings, CDs, and IRAs

 Checking with no monthly fee, free bill payment and rebates on ATM surcharges

 credit cards with low rates

 Easy online applications for all accounts, including personal loans and mortgages

 24 hour account access

 It provides Quality customer service with personal attention

 It provides the quick services to their customers.

 Enables transfer of funds from one place to another (banks).

 Exchange of statistical information amongst banks.

 Enables foreign exchange operations.

 Inter-bank applications like settlement of funds between banks.

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4-DIFFERENT FORMS OF ONLINE BANKING

 National Electronic Funds Transfer (NEFT)

NEFT is electronic funds transfer system, which facilitates transfer of funds to other bank
accounts in over 63000 bank branches across the country. This is a simple, secure, safe, fastest
and cost effective way to transfer funds especially for Retail remittances.

FEATURES & BENEFITS

Customers can remit any amount using NEFT Customer intending to remit money through
NEFT has to furnish the following particulars:

• IFSC (Indian Financial System Code) of the beneficiary Bank/Branch

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• Full account number of the beneficiary

• Name of the beneficiary.

The facility is also available through online mode for all internet banking and mobile banking
customers.

For corporate customers, bulk upload facility is also available at branches.

TIMINGS

Customers can use this facility between 8 AM and 7 PM on all weekdays and between 8 AM and
1 PM on Saturday. There are twelve hourly settlements between 8 AM and 7 PM on all
weekdays and six hourly settlements between 8 AM and 1 PM on Saturdays.

The money will be credited to the beneficiary’s account on the same day or at the most next day
in case the message is sent during the last batch of settlement. Union Bank offers NEFT facility
to its customers through all its branches.

CHARGES

Rs. 5/ per transaction if the transaction amount is less than Rs. 1 lakh

Rs. 25/- per transaction if the transaction amount is more than Rs. 1 lakh

NOTE: Charges are waived for customers availing services at our branches in North Eastern
States

 RTGS:

Real Time Gross Settlement (RTGS) is an electronic form of funds transfer where the
transmission takes place on a real time basis.

In India, transfer of funds with RTGS is done for high value transactions, the minimum amount
being Rs 2 lakh. The beneficiary account receives the funds transferred, on a real time basis. The
main difference between RTGS and National Electronic Funds Transfer (NEFT) is that while
transfer via NEFT takes place in batches (with settlements and transactions being netted off), in

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the case of RTGS, the transactions are executed individually and on gross basis.

The customer initiating the funds transfer through RTGS has to have the Indian Financial System
Code (IFSC) of the beneficiary's bank, along with the name of the beneficiary, account number
and name of the bank. The bank branches, both at the initiating and receiving end, have to be
RTGS- enabled for the transaction to be processed. Customers with Internet banking accounts
can do RTGS transactions on their own.

Immediate Payment Service (IMPS)

IMPS offer an instant, 24X7, interbank electronic fund transfer service through mobile
phones. IMPS is an emphatic tool to transfer money instantly within banks across India
through mobile, internet and ATM which is not only safe but also economical both in
financial and non-financial perspectives.

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Objectives of IMPS:
 To enable bank customers to use mobile instruments as a channel for accessing
their banks accounts and remit funds

 Making payment simpler just with the mobile number of the beneficiary

 To sub-serve the goal of Reserve Bank of India (RBI) in electronification of retail

payments

 To facilitate mobile payment systems already introduced in India with the Reserve
Bank of India Mobile Payment Guidelines 2008 to be inter-operable across banks
and mobile operators in a safe and secured manner

 To build the foundation for a full range of mobile based Banking services.

 AUTOMATED TELLER MACHINES (ATM):

An unattended electronic machine in a public place, connected to a data system and related
equipment and activated by a bank customer to obtain cash withdrawals and other banking

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services. Also called automatic teller machine, cash machine; also called money machine.

An automated teller machine or automatic teller machine (ATM) is an electronic computerized

telecommunications device that allows a financial institution's customers to directly use a secure
method of communication to access their bank accounts, order or make cash withdrawals (or
cash advances using a credit card) and check their account balances without the need for a
human bank teller (or cashier in the UK). Many ATMs also allow people to deposit cash or
cheques, transfer money between their bank accounts, top up their mobile phones' pre-paid
accounts or even buy postage stamps.

On most modern ATMs, the customer identifies him or herself by inserting a plastic card with a
magnetic stripe or a plastic smartcard with a chip that contains his or her account number.

If the number is entered incorrectly several times in a row (usually three attempts per card
insertion), some ATMs will attempt retain the card as a security precaution to prevent an
unauthorized user from discovering the PIN by guesswork. Captured cards are often destroyed if
the ATM owner is not the card issuing bank, as noncustomer's identities cannot be reliably
confirmed. The Indian market today has approximately more than 17,000 ATM’s.

 TELE BANKING:

Undertaking a host of banking related services including financial transactions from the
convenience of customers chosen place anywhere across the GLOBE and any time of date and
night has now been made possible by introducing on-line Telebanking services. By dialing the
given Telebanking number through a landline or a mobile from anywhere, the customer can
access his account and by following the user-friendly menu, entire banking can be done through
Interactive Voice Response (IVR) system. With sufficient numbers of hunting lines made
available, customer call will hardly fail. The system is bi-lingual and has following facilities
offered

• Automatic balance voice out for the default account.

• Balance inquiry and transaction inquiry in all

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• Inquiry of all term deposit accounts

• Statement of account by Fax, e-mail or ordinary mail.

 E-CHEQUE:

An e-Cheque is the electronic version or representation of paper cheque.

• The Information and Legal Framework on the E-Cheque is the same as that of the paper
cheques.

• It can now be used in place of paper cheques to do any and all remote transactions.

• An E-cheque work the same way a cheque does, the cheque writer "writes" the e-Cheque using
one of many types of electronic devices and "gives" the e-Cheque to the payee electronically.
The payee "deposits" the Electronic Cheque receives credit, and the payee's bank "clears" the e-
Cheque to 9 E-BANKING the paying bank. The paying bank validates the e-Cheque and then
"charges" the check writer's account for the check

 SMART CARD:

A smart card usually contains an embedded 8-bit microprocessor (a kind of computer chip). The
microprocessor is under a contact pad on one side of the card. Think of the microprocessor as
replacing the usual magnetic stripe present on a credit card or debit card.

The microprocessor on the smart card is there for security. The host computer and card reader
actually "talk" to the microprocessor. The microprocessor enforces access to the data on the card.
The chips in these cards are capable of many kinds of transactions. For example, a person could
make purchases from their credit account, debit account or from a stored account value that's
reload able. The enhanced memory and processing capacity of the smart card is many times that
of traditional magnetic-stripe cards and can accommodate several different applications on a
single card. It can also hold identification information, which means no more shuffling through
cards in the wallet to find the right one -- the Smart Card will be the only one needed.

Smart cards can also be used with a smart card reader attachment to a personal computer to
authenticate a user. Smart cards are much more popular in Europe than in the U.S. In Europe the
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 health insurance and banking industries use smart cards extensively. Every German citizen has a
smart card for health insurance. Even though smart cards have been around in their modern form
for at least a decade, they are just starting to take off in the U.S.

OTHER FORMS OF ELECTRONIC BANKING

 Direct Deposit
 Electronic Bill Payment
 Electronic Check Conversion
 Cash Value Stored, Etc.

5-ONLINE BANKING IN INDIA-GUIDELINES BY RBI

I. Technology and Security Standards:

a. Banks should designate a network and database administrator with clearly defined roles
as indicated in the Group’s report
b. Banks should have a security policy duly approved by the Board of Directors. There
should be a segregation of duty of Security Officer / Group dealing exclusively with information
systems security and Information Technology Division which actually implements the computer
systems. Further, Information Systems Auditor will audit the information systems. (Para 6.3.10,
6.4.1)
c. Banks should introduce logical access controls to data, systems, application software,
utilities, telecommunication lines, libraries, system software, etc. Logical access control
techniques may include user-ids, passwords, smart cards or other biometric technologies. (Para
6.4.2)
d. At the minimum, banks should use the proxy server type of firewall so that there is no
direct connection between the Internet and the bank’s system. It facilitates a high level of control
and in-depth monitoring using logging and auditing tools. For sensitive systems, a stateful

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 inspection firewall is recommended which thoroughly inspects all packets of information, and
past and present transactions are compared. These generally include a real time security alert.
(Para 6.4.3)
e. All the systems supporting dial up services through modem on the same LAN as the
application server should be isolated to prevent intrusions into the network as this may bypass
the proxy server. (Para 6.4.4)
f. PKI (Public Key Infrastructure) is the most favored technology for secure Internet
banking services. However, as it is not yet commonly available, banks should use the following
alternative system during the transition, until the PKI is put in place:
1. Usage of SSL (Secured Socket Layer), which ensures server authentication and
use of client side certificates issued by the banks themselves using a Certificate Server.
2. The use of at least 128-bit SSL for securing browser to web server
communications and, in addition, encryption of sensitive data like passwords in transit within the
enterprise itself.
g. It is also recommended that all unnecessary services on the application server such as
FTP (File Transfer Protocol), telnet should be disabled. The application server should be isolated
from the e-mail server.
h. All computer accesses, including messages received, should be logged. Security
violations (suspected or attempted) should be reported and follow up action taken should be kept
in mind while framing future policy. Banks should acquire tools for monitoring systems and the
networks against intrusions and attacks. These tools should be used regularly to avoid security
breaches. The banks should review their security infrastructure and security policies regularly
and optimize them in the light of their own experiences and changing technologies. They should
educate their security personnel and also the end-users on a continuous basis.
i. The information security officer and the information system auditor should undertake
periodic penetration tests of the system, which should include:
1. Attempting to guess passwords using password-cracking tools.
2. Search for back door traps in the programs.
3. Attempt to overload the system using DDoS (Distributed Denial of Service) &
DoS (Denial of Service) attacks.

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4. Check if commonly known holes in the software, especially the browser and the
e-mail software exist.
5. The penetration testing may also be carried out by engaging outside experts (often
called ‘Ethical Hackers’). (Para 6.4.8)
j. Physical access controls should be strictly enforced. Physical security should cover all the
information systems and sites where they are housed, both against internal and external threats.
(Para 6.4.9)
k. Banks should have proper infrastructure and schedules for backing up data. The backed-
up data should be periodically tested to ensure recovery without loss of transactions in a time
frame as given out in the bank’s security policy. Business continuity should be ensured by setting
up disaster recovery sites. These facilities should also be tested periodically. (Para 6.4.10)
l. All applications of banks should have proper record keeping facilities for legal purposes.
It may be necessary to keep all received and sent messages both in encrypted and decrypted
form. (Para 6.4.13)
m. Security infrastructure should be properly tested before using the systems and
applications for normal operations. Banks should upgrade the systems by installing patches
released by developers to remove bugs and loopholes, and upgrade to newer versions which give
better security and control. (Para 6.4.15)

II. Legal Issues

a. Considering the legal position prevalent, there is an obligation on the part of banks not
only to establish the identity but also to make enquiries about integrity and reputation of the
prospective customer. Therefore, even though request for opening account can be accepted over
Internet, accounts should be opened only after proper introduction and physical verification of
the identity of the customer.
b. From a legal perspective, security procedure adopted by banks for authenticating users
needs to be recognized by law as a substitute for signature. In India, the Information Technology
Act, 2000, in Section 3(2) provides for a particular technology (viz., the asymmetric crypto
system and hash function) as a means of authenticating electronic record. Any other method used
by banks for authentication should be recognized as a source of legal risk. (Para 7.3.1)

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c. Under the present regime there is an obligation on banks to maintain secrecy and
confidentiality of customers‘accounts. In the Internet banking scenario, the risk of banks not
meeting the above obligation is high on account of several factors. Despite all reasonable
precautions, banks may be exposed to enhanced risk of liability to customers on account of
breach of secrecy, denial of service etc., because of hacking/ other technological failures. The
banks should, therefore, institute adequate risk control measures to manage such risks. (Para
7.5.1-7.5.4)
d. In Internet banking scenario there is very little scope for the banks to act on stop-payment
instructions from the customers. Hence, banks should clearly notify to the customers the
timeframe and the circumstances in which any stop-payment instructions could be accepted.
(Para 7.6.1)
e. The Consumer Protection Act, 1986 defines the rights of consumers in India and is
applicable to banking services as well. Currently, the rights and liabilities of customers availing
of Internet banking services are being determined by bilateral agreements between the banks and
customers. Considering the banking practice and rights enjoyed by customers in traditional
banking, banks’ liability to the customers on account of unauthorized transfer through hacking,
denial of service on account of technological failure etc. needs to be assessed and banks
providing Internet ban\king should insure themselves against such risks. (Para 7.11.1)

III. Regulatory and Supervisory Issues:

As recommended by the Group, the existing regulatory framework over banks will be extended
to Internet banking also. In this regard, it is advised that:

1. Only such banks which are licensed and supervised in India and have a physical presence
in India will be permitted to offer Internet banking products to residents of India. Thus, both
banks and virtual banks incorporated outside the country and having no physical presence in
India will not, for the present, be permitted to offer Internet banking services to Indian residents.
2. The products should be restricted to account holders only and should not be offered in
other jurisdictions.
3. The services should only include local currency products.

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4. The ‘in-out’ scenario where customers in cross border jurisdictions are offered banking
services by Indian banks (or branches of foreign banks in India) and the ‘out-in’ scenario where
Indian residents are offered banking services by banks operating in cross-border jurisdictions are
generally not permitted and this approach will apply to Internet banking also. The existing
exceptions for limited purposes under FEMA i.e. where resident Indians have been permitted to
continue to maintain their accounts with overseas banks etc. will, however, are permitted.
5. Overseas branches of Indian banks will be permitted to offer Internet banking services to
their overseas customers subject to their satisfying, in addition to the host supervisor, the home
supervisor.

Given the regulatory approach as above, banks are advised to follow the following instructions:

a. All banks, who propose to offer transactional services on the Internet, should obtain prior
approval from RBI. Bank’s application for such permission should indicate its business plan,
analysis of cost and benefit, operational arrangements like technology adopted, business partners,
third party service providers and systems and control procedures the bank proposes to adopt for
managing risks. The bank should also submit a security policy covering recommendations made
in this circular and a certificate from an independent auditor that the minimum requirements
prescribed have been met. After the initial approval the banks will be obliged to inform RBI any
material changes in the services / products offered by them. (Para 8.4.1, 8.4.2)
b. Banks will report to RBI every breach or failure of security systems and procedure and
the latter, at its discretion, may decide to commission special audit / inspection of such banks.
(Para 8.4.3)
c. The guidelines issued by RBI on ‘Risks and Controls in Computers and
Telecommunications’ vide circular DBS.CO.ITC.BC. 10/ 31.09.001/ 97-98 dated 4 thFebruary
1998 will equally apply to Internet banking. The RBI as supervisor will cover the entire risks
associated with electronic banking as a part of its regular inspections of banks. (Para 8.4.4, 8.4.5)
d. Banks should develop outsourcing guidelines to manage risks arising out of third party
service providers, such as, disruption in service, defective services and personnel of service
providers gaining intimate knowledge of banks’ systems and misutilizing the same, etc.,
effectively. (Para 8.4.7)

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e. With the increasing popularity of e-commerce, it has become necessary to set up ‘Inter-
bank Payment Gateways’ for settlement of such transactions. The protocol for transactions
between the customer, the bank and the portal and the framework for setting up of payment
gateways as recommended by the Group should be adopted. (Para 8.4.7, 8.4.9.1 – 8.4.9.5)
f. Only institutions who are members of the cheque clearing system in the country will be
permitted to participate in Inter-bank payment gateways for Internet payment. Each gateway
must nominate a bank as the clearing bank to settle all transactions. Payments affected using
credit cards, payments arising out of cross border e-commerce transactions and all intra-bank
payments (i.e., transactions involving only one bank) should be excluded for settlement through
an inter-bank payment gateway.
g. Inter-bank payment gateways must have capabilities for both net and gross settlement.
All settlement should be intra-day and as far as possible, in real time.
h. Connectivity between the gateway and the computer system of the member bank should
be achieved using a leased line network (not through Internet) with appropriate data encryption
standard. All transactions must be authenticated. Once, the regulatory framework is in place, the
transactions should be digitally certified by any licensed certifying agency. SSL / 128 bit
encryption must be used as minimum level of security. Reserve Bank may get the security of the
entire infrastructure both at the payment gateway’s end and the participating institutions’ end
certified prior to making the facility available for customers use. (Para 8.4.7 )
i. Bilateral contracts between the payee and payee’s bank, the participating banks and
service provider and the banks themselves will form the legal basis for such transactions. The
rights and obligations of each party must be clearly defined and should be valid in a court of law.
(Para 8.4.7)
j. Banks must make mandatory disclosures of risks, responsibilities and liabilities of the
customers in doing business through Internet through a disclosure template. The banks should
also provide their latest published financial results over the net. (Para 8.4.8)
k. Hyperlinks from banks’ websites often raise the issue of reputational risk. Such links
should not mislead the customers into believing that banks sponsor any particular product or any
business unrelated to banking. Hyperlinks from banks’ websites should be confined to only those
portals with which they have a payment arrangement or sites of their subsidiaries or principals.
Hyperlinks to banks’ websites from other portals are normally meant for passing on information

21
relating to purchases made by banks’ customers in the portal. Banks must follow the minimum
recommended security precautions while dealing with request received from other websites,
relating to customers’ purchases. (Para 8.4.9)

2. The Reserve Bank of India has decided that the Group’s recommendations as detailed in these
circulars should be adopted by all banks offering Internet banking services, with immediate
effect. Even though the recommendations have been made in the context of Internet banking,
these are applicable, in general, to all forms of electronic banking and banks offering any form of
electronic banking should adopt the same to the extent relevant.

3. All banks offering Internet banking are advised to make a review of their systems in the light
of this circular and report to Reserve Bank the types of services offered, extent of their
compliance with the recommendations, deviations and their proposal indicating a time frame for
compliance. The first such report must reach us within one month from the date of this circular.
Banks not offering any kind of I-banking may submit a ‘nil’ report.

4. Banks who are already offering any kind of transactional service are advised to report, in
addition to those mentioned in paragraph above, their business models with projections of cost /
benefits etc. and seek our post-facto approval.

6- Initiatives taken by Indian banks for internet banking

To sustain in the growing competition, commercial banks in India have adopted several
initiatives to improve banking services and to gain competitive advantage. The few of the
initiatives taken by Indian banks for internet banking are mentioned below:

 Bank of India recently launched its card-less cash withdrawal service. This facility helps
customers to send money to anyone using Internet banking or by using ATM, with the help of
receiver’s mobile number.

 The Business Transformation Program is being implemented by the Bank of Baroda which
will provide its customer convenience banking on a 24 X 7 basis in India and abroad with
integrated delivery channels like, Internet, Phone, Mobile, and others

22
 ICICI bank launched 24x7 electronic branches, which is a one-stop shop for all banking
transactions. It offers facilities such as cheque deposit machine and an electronic kiosk through
which customers can be accessed internet banking services. ICICI Bank has also introduced E-
Locker for its customers. It is a virtual locker, which can be accessed through ICICI internet
banking which facilitates customer to store soft copy of their important documents safely such as
legal documents, agreements, policies and various important certificates. ICICI bank is offering
various gifts to customers for start to use internet banking for the first time

 The banks are making their presence on social media like Face book and Twitter for targeting
huge customer base as well as potential customers; there will be round-the-clock tweets and
comments on the banks' products and services. After launching accounts on Face book and
YouTube, SBI took one more step on the social media by launching a twitter handle

7-INITIATIVES TAKEN BY THE GOVERNMENT OF INDIA FOR DEVELOPING

THE INTERNET BANKING

For growth and development and to promote e-banking in India the Indian government and RBI
have been taken several initiatives-

 The Government of India enacted the IT Act, 2000 with effect from October 17, 2000 which
provided legal recognition to electronic transactions and other means of electronic commerce.

 The Reserve Bank monitors and reviews the legal requirements of e-banking on a continuous
basis to ensure that challenges related to e-banking may not pose any threat to financial stability
of the nation.

 Dr. K.C. Chakrabarty Committee including members from IIM, IDRBT, IIT and Reserve Bank
prepared the IT Vision Document- 2011-17, which provides an indicative road map i.e.
guidelines to enhance the usage of IT in the banking sector.

 The Reserve Bank is striving to make the payment systems more secure and efficient. It has
advised banks and other stakeholders to strengthen the security aspects in internet banking by
adopting certain security measures in a timely manner. RBI believes that the growing popularity
of these alternate channels of payments (such as: Internet Banking, Mobile Banking, ATM etc.)
brings an additional responsibility on banks to ensure safe and secure transactions through these

23
channels.

 National Payments Corporation of India (NPCI) was permitted by the RBI to enhance the
number of mobile banking services and widen the IMPS (Immediate Payment Service) channels
like ATMs, internet, mobile etc. Along with this, NPCI is also working to bring more mobile
network operators which can provide mobile banking services through a common platform.

 On the recommendations of the Damodaran Committee, the guidelines were induced by RBI
that provide internet banking as totally secured and protected, zero-liability against loss for any
customer induced transaction & multi-lateral arrangements among banks to deal with internet
banking frauds. To deal with online banking frauds, customer can approach with their complaints
to Banking Ombudsman. Under this Banking Ombudsman Scheme 2006, a customer can file
their complaint against any deficiencies in banking service including internet banking, credit
cards & ATM

 The Basel Committee on Banking Supervision’s (2001) [28] has defined risk management
principles for electronic banking. They primarily focus on how to extend, adapt, and tailor the
existing risk-management framework to the electronic banking setting.

24
 CHAPTER 2

REVIEW OF LITERATURE

 Rakesh H M & Ramya T J (2014)

In their research paper titled “A Study on Factors Influencing Consumer Adoption of Internet
Banking in India” tried to examine the factors that influence internet banking adoption. Using
PLS, a model is successfully proved and it is found that internet banking is influenced by its
perceived reliability, Perceived ease of use and Perceived usefulness. In the marketing process of
internet banking services marketing expert should emphasize these benefits its adoption provides
and awareness can also be improved to attract consumers’ attention to internet banking services.

 Amruth Raj Nippatlapalli (2013)

In his research paper “A Study on Customer Satisfaction of Commercial Banks: Case Study on
State Bank of India”. This paper present Customer satisfaction, a term frequently used in
marketing, is a measure of how products and services supplied by a company meet or surpass
customer expectation. Customer satisfaction is defined as "the number of customers, or
percentage of total customers, whose reported experience with a firm, its products, or its services
(ratings) exceeds specified satisfaction goals."Banking in India originated in the last decades of
the 18th century. The first banks were The General Bank of India, NOW which started in 1786,
and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in
existence in India is the State Bank of India, which originated in the Bank of Calcutta in June
1806, which almost immediately became the Bank of Bengal. This was one of the three
presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of
which were established under charters from the British East India Company. For many years the
Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in

25
1921 to form the Imperial Bank of India.

 Mr. Vijay Prakash Gupta & Dr. P. K. Agarwal (2013)

In their research paper “Comparative Study of Customer Satisfaction in Public Sector and
Private Sector Banks in India”. This paper gives with the introduction of liberalization policy and
RBI's easy norms several private and foreign banks have entered in Indian banking sector which
has given birth to cut throat competition amongst banks for acquiring large customer base and
market share. Banks have to

deal with many customers and render various types of services to its customers and if the
customers are not satisfied with the services provided by the banks then they will defect which
will impact economy as a whole since banking system plays an important role in the economy of
a country, also it is very costly and difficult to recover a dissatisfied customer. Since the
competition has grown manifold in the recent times it has become a herculean task for
organizations to build loyalty, the reason being that the customer of today is spoilt for choice. It
has become imperative for both public and private sector banks to perform to the best of their
abilities to retain their customers by catering to their explicit as well as implicit needs. Many a
times it happens that the banks fail to satisfy their customer which can cause huge losses for
banks and there the need of this study arises. The purpose of this research article is to examine
the customer satisfaction among group of customer towards the public sector& private sector
banking industries in India. Study is cross-sectional and descriptive in nature. The researcher
tries to makes an effort to clarify the Customer Service satisfaction in Indian banking Sector.
Descriptive research design is used for this study, where the data is collected through the
questionnaire. The information is gathered from the different customers of the two banks, viz.,
PNB and HDFC Bank located in the Meerut Region, Uttar Pradesh. Hundred bank respondents
from each bank were contacted personally in order to seek fair and frank responses on quality of
service in banks. The service quality model developed by Zeithamal, Parsuraman and Berry
(1988) has been used in the present study. The analysis clearly shows that there exists wide
perceptual difference among Indian (public sector) banks regarding overall service quality with
their respective customers, when compared to Private sector banks. Whereas the said perceptual
difference in private banks is narrow

 Vijay M. Kumbhar (2011)

26
In his research paper “Factors Affecting the Customer satisfaction In E-Banking: Some
evidences Form Indian Banks”. This study evaluates major factors (i.e. service quality, brand
perception and perceived value) affecting on customers’ satisfaction in e-banking service
settings. This study also evaluates influence of service quality on brand perception, perceived
value and satisfaction in e-banking. Required data was collected through customers’ survey. For
conducting customers’ survey liker scale based questionnaire was developed after review of
literature and discussions with bank managers as well as experts in customer service and
marketing. Collected data was analyzed using principle component (PCA) using SPSS 19.0. A
result indicates that, Perceived Value, Brand Perception, Cost Effectiveness ,Easy to Use,
Convenience, Problem Handling, Security/Assurance and Responsiveness are important factors
in customers satisfaction in e-banking it explains 48.30 per cent of variance. Contact Facilities,
System Availability, Fulfillment, Efficiency and Compensation are comparatively less important
because these dimensions explain 21.70 percent of variance in customers’ satisfaction.
Security/Assurance, Responsiveness, Easy to Use, Cost Effectiveness and Compensation are
predictors of brand perception in e-banking and Fulfillment, Efficiency, Security/Assurance,
Responsiveness, Convenience, Cost Effectiveness, Problem Handling and Compensation are
predictors of perceived value in e-banking.

 Pooja Malhotra & Balwinder SINGH (2009)

In their research paper “The Impact of Internet Banking on Bank Performance and Risk: The
Indian Experience”. The paper describes the current state of Internet banking in India and
discusses its implications for the Indian banking industry. Particularly, it seeks to examine the
impact of Internet banking on banks’ performance and risk. Using information drawn from the
survey of 85 scheduled commercial bank’s websites, during the period of June 2007, the results
show that nearly 57 percent of the Indian commercial banks are providing transactional Internet
banking services. The univariate analysis indicates that Internet banks are larger banks and have
efficiency ratios and profitability as compared to non-Internet banks. Internet banks rely more
heavily on core deposits for funding than non-Internet banks do. However, the multiple
regression results reveal that the profitability and offering of Internet banking does not have any
significant association, on the other hand, Internet banking has a significant and negative
association with risk profile of the banks.

27
 CHAPTER 3

RESEARCH METHODOLOGY –

It is defined as the scientific method or approaches adopted to logically or systematically arrive

at a solution of the problem.

1-Primary Data: It refers to the first hand data gathered by the researcher himself. It involves
surveys, observations, experiments, questionnaire, and personal interview. In this study, I have
used:

 QUESTIONNAIRE-is a set of printed or written questions with a choice of answers,

devised for the purpose of survey.
 RESEARCH DESIGN-is sampling design where some part of aggregate or total
population is studied and inferred of total population is made. Here descriptive research
design is used.
 SAMPLING DESIGN-Here convenience method sampling is used where the sample is
selected as per convenience of location.
 SAMPLE SCOPE: Here respondents using and not using bancassurance have been
found out through telephonic interview and mail responses in residential area of Rohini
 SUMMATED RATING SCALE-In this method, the attitude of people is classified into
specific points. For e.g. rate may be given as per the attitude towards the question:
1- Very poor,2-poor.3-Average,4-good,5-very good

2-Secondary Data: It is the data which has been collected by individual or someone else for the
purpose of other than those of our particular research. The results of analysis conducted can be
used in the present study. In this study, Data is collected from books, websites on internet

28
Chapter:4

Data analysis and interpretation

CURRENT SCENARIO OF INTERNET BANKING/ E-BANKING IN INDIA

Internet Banking has become an integral part of banking system in India. The concept of e-
banking is of fairly recent origin in India. Till the early 90’s traditional model of banking i.e.
branch based banking was prevalent, but after that non-branch banking services were started.
The Indian government enacted the IT Act, 2000, with effect from the 17th October 2000. To
examine different aspects of Internet banking RBI set up a committee on Internet Banking. The
committee had focused on three major areas of Internet banking, Technology and security issues,
legal issues and regulatory and supervisory issues. RBI had accepted the suggestions and
recommendations of the Working committee and accordingly issued guidelines to banks to
implement internet banking in India. The old manual systems which were prevalent in Indian
banking for centuries seem too replaced by modern technologies.

Table no 1, 2 and 3 exhibit a few facts and figures related to internet/electronic banking to
present its current scenario. Table 1 shows evidence for ATM, POS (Point of sale) and electronic
cards (credit and debit cards) deployed and issued by the schedule commercial banks (SCBs) in
India as on December 2014. It also provides evidence of growing statistics of mobile banking
users in India. According to it currently 1,76,410 ATM, 10,58,642 Point of sale devices, 20.36
million credit cards and 500 million debit cards are working in India and 35.5 million bank
customers are using mobile banking. Table also shows growth rate of these banking channels and
it seems to be great in Indian context. Table no. 2 shows current transaction statistics performed
through these banking delivery channels. As high as 6090.98 million transactions are
electronically done through ATMs. Table no 3 shows NEFT and RTGS transactions performed
in the current financial year 2014-15.

29
 TABLE3. 1

VARIOUS INTERNET/ELECTRONIC BANKING DELIVERY CHANNELS.

No. of channels

Type of internet/electronic
channels Year Growth in %

2010* 2016*

No of ATM deployed (In Actual

Figure) 60,153 1,76,410 193.27

No of POS deployed (In Actual

Figure) 5,95,958 10,58,642 77.64

No of CREDIT CARDS issued (In

Millions) 18.33 20.36 11.07

No of DEBIT CARDS issued (In

Millions) 181.97 500.08 174.81

No of MOBILE BANKING Users

(In Millions) 5.96 35.5 495.64

30
Source: Compiled from Bank wise ATM/POS/Card Statistics, Reserve Bank of India and
Report on Trends and Progress of Banking in India 2015-61 and RBI website.

*Data as on April 2010 except from data of POS which is as on April 2011 due to
availability.

TABLE 3. 2

TRANSACTIONS THROUGH INTERNET/ELECTRONIC BANKING DELIVERY

CHANNELS

No. of Transactions (In millions)

Transaction through Year* Growth in %

2011-12 2015-16

ATM 5086.17 6090.98 19.76

POS 645.76 1128.12 74.7

CREDIT CARD 320.42 511.99 59.79

DEBIT CARD 5409.45 6707.1 23.99

MOBILE BANKING 25.55 94.6 270.25

31
Source: Compiled from Bank wise ATM/POS/Card Statistics, Reserve Bank of India and
RBI website.

TABLE 3.3

NEFT AND RTGS TRANSACTIONS

No. of Transactions (In millions)

Growth in
Transaction type Year* %

2010-11 2015-16

NEFT 132 927.55 602.69

RTGS 49 92.75 89.29

Source: Compiled from Bank wise Volumes in ECS/NEFT/RTGS/Mobile Transactions,

Reserve Bank of India.
*Data for whole financial year.

32
 TABLE-3.4

INCREASING INTERNET USERS IN INDIA

Years*

2010 2011 2012 2013 2014

122,970,44 155,575,94 213,339,3

Internet users 90,421,849 1 4 24 243,198,922

57,763,38
New uses 29,486,779 32,548,593 32,605,503 0 29,859,598

Average 36,452,770

Growth 10% 36% 72% 136% 168%

Source: Internet Live Stats (www.InternetLiveStats.com).

Survey analysis
1-Gender basis analysis

33
 Graph3.
PARTICULARS RESPONDENTS NON- TOTAL-
RESPONDENTS RESPONDENTS

MALE 72 6 78

FEMALE 28 8 36

TOTAL 100 14 114

Table-3.5

INTERPRETATION:

Data collected from 114 respondents, out of 100 respondents perform online banking and this is
represented by a column chart with male and female basis analysis. It is good for the banks as
most of the respondents are aware of the internet banking and all the services have enjoyed them
being offered by banks.

34
2-Age Basis Analysis:

Graph3.2.-Age basis analysis

AGE GROUP FREQUENCY PERCENTAGE CUMULATIVE FREQUENCY

BELOW 20 34 30% 34

20-35 44 38% 78

35-50 24 21% 102

11%
ABOVE 50 12 114

Table-3.6- Age basis

INTERPRETATION:

Out of 114 respondents 34 respondents are in below 20 age group, 44 respondents in 20-

35 age group, 24 respondents in 35-50 age group and 12 respondents in above 50 age group. This
shows with the help of a Pie-Chart.
3. OCCUPATION BASIS ANALYSIS:

35
 OCCUPATION BASE ANALYSIS

15
31

47
21

OCCUPATION FREQUENCY CUMULATIVE FREQUENCY PERCENTAGE

STUDENT 31 31 27%

SELF- 21 52 18.00%
EMPLOYED
EMPLOYEE 47 99 41.00%

OTHERS 15 114 14.00%

INTERPRETATION:
Graph3.3
Among 114 respondents 27% are students, 18% are self-employed, 41% are employees and 14%
are others.

4. INCOME BASIS ANALYSIS:

36
Table-3.7-occupation base analysis
 Graph3.4

MONTHLY INCOME FREQUENCY CUMULATIVE FREQUENCY PERCENTAGE

0-10000 32 32 28%

10000-20000 21 53 18%

20000-30000 17 70 15%

30000-40000 14 84 12%

40000-50000 8 92 7%

ABOVE 50000 22 114 20%

Table-3.8-income basis analysis

INTERPRETATION:

Among 114 respondents 28% belong to Rs.0-10000 income group, 18% belong to Rs.10000-
20000 income group, 15% belong to Rs.20000-30000 income group, 12% belong to Rs.30000-
40000 income group, 7% belong to Rs.40000-50000 and 20% belong to above Rs.50000 group.

5. EDUCATIONAL PROFILE:

37
 Graph3.5

EDUCATIONAL FREQUENC PERCENTAG CUMULATIVE

QUALIFICATION Y E FREQUENCY
SECONDARY 26 23% 26
EDUCATION
HIGHER SECONDARY 38 33% 64

GRADUATE 20 18% 84

POST-GRADUATE 11 9% 95

OTHERS 19 17% 114

Table-3.9-educational profile
INTERPRETATION:

Among 114 respondents 23% are SE pass, 33% are HS pass, 18% are graduate, 9% are Post-
Graduate and 17% are others.

38
6. HOW OFTEN DO YOU USE E- BANKING PER WEEK?

Graph3.6

INTERNET USE RATE FREQUENC PERCENTA CUMULATIVE

Y GE FREQUENCY
ONE HOUR 5 4% 5

TWO HOURS 9 8% 14

THREE HOURS 28 25% 42

MORE THAN THREE 72 63% 114

HOURS
Table3.10 -e banking per week
INTERPRETATION:

39
Among 114 respondents 63% use internet more than three hours per week, 25% use internet
three hours per week, 8% use internet two hours per week and 4% use internet one hour in a
week.

7. IN WHICH BANK DO YOU HAVE AN ACCOUNT?

Graph3.7-Acount preference by user

NAME OF BANKS FREQUENCY PERCENTAGE CUMULATIVE FREQUENCY
SBI 27 24% 27
AXIS 21 18% 48
ICICI 13 11% 61
UCO 12 10% 73
HDFC 8 7% 81
UBI 9 8% 90
BOI 6 6% 96
PNB 5 5% 101
STANDARD CHARTERED 3 2% 104
OTHERS 10 9% 114

INTERPRETATION:

Among 114 respondents, 27 respondents have SBI bank a/c, 21 have AXIS bank a/c, 13 have
ICICI bank a/c, 12 have UCO bank a/c, 8 have HDFC bank a/c, 9 have UBI bank a/c, 6 have
40
BOI bank a/c, 5 have PNB bank a/c, 3 have STANDARED CHARTERED bank a/c and 10 have
others bank a/c.

8. DO YOU AVAIL OF BANKING FACILITIES ONLINE?

Graph3.8

PARTICULARS FREQUENCY PERCENTAGE CUMULATIVE FREQUENCY

ONLINE BANKING USERS 100 88.00% 100

OFFLINE BANKING USERS 14 12.00% 114

INTERPRETATION:

Most of the respondents prefer online banking services. About 88% respondents support online
banking services and only 12% respondent’s support offline banking services.

Table-3.12-online
9. IS YOUR BANK OPERATED UNDER CORE-BANKING FACILITY? and offline bank user

41
 CORE BANKING FACILITY FREQUENCY PERCENTAGE CUMULATIVE FREQUENCY

YES 91 91% 91

NO 0 0% 91

CAN'T SAY 9 9% 100

Graph3.9.

INTERPRETATION:

Among 100 respondents 91% say that their bank run under core banking system but only

9% have no clear concept about this and they choose “CAN’T SAY” option

10. HOW FREQUENTLY DO YOU USE ONLINE BANKING SERVICES?

Table-3.13-frequency of e banking user

42
 Graph3.10.
USE OF ONLINE FREQUENC PERCENTAG CUMULATIVE
BANKING Y E FREQUENCY
DAILY 14 14% 14
WEEKLY 21 21% 35
MONTHLY 41 41% 76
OCCASIONALLY 11 11% 87
YEARLY 13 13% 100
NEVER 0 0% 100

Table-3.14-use of online

INTERPRETATION:

Most of the people do not need the services of banks regularly. They may transact with banks on
monthly basis, weekly or occasionally. This chart shows the habits of people in case of use of
online banking.

11. HOW MUCH DO YOU SPEND FOR A SINGLE ONLINE TRANSACTION?

43
 TRANSACTION
FREQUENCY PERCENTAGE CUMULATIVE FREQUENCY
AMOUNT
0-1000 40 40% 40
1000-5000 25 25% 65
5000-10000 15 15% 80
10000-20000 10 10% 90
ABOVE 20000 10 10% 100

Graph3.11.

INTERPRETATION:

Most of the online banking users have a tendency to spend Rs.1000 or below this amount in a
single transaction.

12. WHY DO YOU AVAIL OF ONLINE BANKING?

Table-3.15-money sprnd on e

44
 Graph3.12.

PURPOSE OF ONLINE BANKING FREQUENCY PERCENTAGE CUMULATIVE FREQUENCY

PRIVACY 9 9% 9
24*7 BUSINESS HOURS 36 36% 45
CONVENIENCE 16 16% 61
NOT TO MOVE ANYWHERE 13 13% 74
EASY TO USE 11 11% 85
SAVING TIMES & SPEED 12 12% 97
HARD TO SAY 3 3% 100

Table-3.16- benifts seen by user

INTERPRETATION:

Most of the respondents felt that the “24*7 BUSINESS HOURS” provided by the internet
banking is the highest motivating factor for an individual to use internet banking and rest prefer
“PRIVACY”,”CONVENIENCE”, “NOT TO MOVE” etc.

45
 13. Rating of Main Transaction

TRANSACTIONS EXCELLENT GOOD AVERAGE POOR NOT APPLICABLE

FUND TRANSFER 35 25 15 20 5
ATM BANKING 68 12 10 8 2
BALANCE ENQUIRY 80 10 10 0 0
ONLINE FIXED DEPOSIT 10 15 10 25 40
REQUEST A DEMAND DRAFT 30 20 10 40 0
PAY BILLS 71 14 8 7 0
ONLINE SHOPPING 65 20 7 8 0
ONLINE RECHARGE 60 25 15 0 0

Graph3.13.

INTERPRETATION:

It is interesting to see that most of the respondents give “EXCELLENT” rating to ATM,
Banking, Balance Enquiry, Pay Bills, Online-Shopping and Online Recharge.

14. DOES YOUR BANK EDUCATE YOU ABOUT THE ONLINE BANKING SERVICES
BEING OFFERED?

46
 Graph3.14.

EDUCATING NET BANKING FREQUENCY PERCENTAGE CUMULATIVE FREQUENCY

YES 46 46% 46

NO 54 54% 100

INTERPRETATION:

Among 100 respondents 46 people said that their bank educated them about the several online
banking services and on the other hand 54 people said that their bank did not educate them about
their net banking services.

15. ARE YOU AWARE OF THE SECURITY THREATS AND FRAUDS IN ONLINE
BANKING AND FAMILIAR WTH THE METHODS OF SECURED ONLINE
TRANSACTIONS? Table-3.18-awarness of ebanking

47
 Graph3.15.
AWARENESS OF FRAUDS FREQUENCY PERCENTAGE CUMULATIVE FREQUENCY

YES 58 58% 58

NO 27 27% 75

CAN'T SAY 15 15% 100

INTERPRETATION:

It is good to see that most of the users have knowledge about frauds and security issues of net
banking but even with the increasingly knowledge of internet banking some respondents are
unaware the methods taken up by the bank to secure each and every transaction.

16. DOES YOUR BANK UPGRADE ONLINE SERVICES REGULARLY?

Table-3.19-awarness of fraud

48
 Graph3.16.

UPGRADATION OF FREQUENC PERCENTAG CUMULATIVE

ONLINE SERVICES Y E FREQUENCY

YES 66 66% 66
NO 29 29% 95
CAN’T 5 5% 100
SAY

INTERPRETATION:

This is very interesting to see that most of the online banking users think that their banks upgrade
their services regularly. But some people did not think so and some few did not come to a
conclusion.

17. ARE YOU IN THE OPINION THAT YOU’RE BANK CHARGES UNNECESSARY
FOR ONLINE SERVICES?
Table-3.20-upgradation of net banking

49
 Graph3.17.

VOTE FOR FREQUENC PERCENTAG CUMULATIV

UNNECESSARY Y E E
BANK CHARGES FREQUENC
Y
YES 37 37% 37

NO 51 51% 88

CAN'T 12 12% 100

SAY

INTERPRETATION:

37% users think that their banks charge unnecessary for online services. While 51% people think
that their banks don’t do such and 12% people are unable to answer this question.

18. DO YOU THINK ONLINE BANKING IS BETTER SUBSTITUTE OF

TRADITIONAL BANKING SYSTEM?

Table-3.21-rating of bank charges

50
 Graph3.18.

ONLINE BANKING-
BETTER SUBSTITUE FREQUENC PERCENT CUMULATIVE
Y AGE FREQUENCY

YES 69 69% 69
NO 23 23% 92
CAN'T SAY 8 8% 100

Table-3.22-preference by user
INTERPRETATION:

It was witnessed that most of the respondents preferred using Internet Banking over their
traditional banking system. Thus, Internet Banking has a bright future ahead.

19. WHICH FACTOR DO YOU THINK RESPONSIBLE FOR NON-ACCESSBILITY OF

ONLINE BANKING BY MAJORITY OF PEOPLE IN YOUR AREA?

51
 Graph3.19.

NON-ACCESSBILITY FREQU PERCENTAG CUMULATIVE

ENCY E FREQUENCY
LACK OF AWARNESS 18 18% 18

INADEQUATE ATM SERVICE 12 12% 30

RURAL AREA 8 8% 38
LACK OF COMPUTER FACILITY
22 22% 60
LESS INTERNET
25 25% 85
CONNECTION
LACK OF KNOWLEDGE 15 15% 100

Table-3.23- reasons of not using e banking

INTERPRETATION:

Among 100 respondents 18 choose “LACK OF AWARNESS”, 12 choose “INADEQUATE

ATM SERVICE”, 8 choose “RURAL AREA”, 22 choose “LACK OF COMPUTER
FACILITY”, 25 choose LESS INTERNET CONNECTION” and 15 choose “LACK OF
KNOWLEDGE” option.

52
20. IN YOUR OPINION WHICH ONLINE OPERATION SHOULD BE MODIFIED
PROMPTLY FOR BETTER SERVICES IN FUTURE?

Graph3.20.

MODIFICATION CUMULATIV
OF FREQUENC PERCENTAG E
SERVICES Y E FREQUENC
Y
ATM SERVICE 31 31% 31
ACCOUNTS SERVICE 3 3% 34
FUND TRANSFER 11 11% 45
BILL PAYMENT 13 13% 58
E-TAX PAYMENT 8 8% 66
E-DEPOSIT 2 2% 68
DEMAT SERVICE 7 7% 75
LOANS & CREDIT 2 2% 77
SERVICE
INTERNET
SECURITY 18 18% 95
SERVICE
CUSTOMER
FEEDBACK 5 5% 10
SERVICE 0

Table-3.24-vote for modification of e banking

53
INTERPRETATION:

This chart shows that “ATM SERVICE”, “BILL PAYMENT” and “INTERNET SECURITY
SERVICE” should be modified in near future.

21. RATING OF ONLINE BANKING SERVICES.

Graph3.21.

RATING FREQUENC PERCENTAG CUMULATIV

Y E E
FREQUENC
Y
EXCELLENT 18 18% 18
VERY GOOD 15 15% 33
GOO 35 35% 68
D
AVERAGE 12 12% 80
POO 15 15% 95
R

54
 HARD TO SAY 5 5% 100

Table-3.25- vote for online banking

INTERPRETATION:

The satisfaction level of people with the online banking services of their banks has a mixed

Review. This may due to multiple reasons. Moreover 35 people choose “GOOD” option

55
CHAPTER -5

CONCLUSION AND RECOMMENDATIONS

Conclusion

This study attempted to identify key quality attributes of internet banking services by analyzing
internet banking customers & their comments on banking experience. The findings of this
study show that despite of many advantages of online banking. People still consider it as an
alternative for analyzing their bank records. Although every bank today provides the facility of
online banking but most of people use it only once a month. This reason is that in case of internet
banking interpersonal interaction with customers is seldom possible. Identification & measurement of
customer’s expectations of the internet banking services provide a frame of reference & their
relate d quality dimension. The main factors which persuade people to use online banking are
comfort & convenience & the facility which attracts them most is quality & quantity of information.
Therefore the implementation of quality initiatives should begin with defining customer’s need &
preferences & their related quality dimensions There is still a lot needed for the banking
system to make reforms and train their customers for using internet for their banking
account. Going through the survey the main problem lies that still customer have a fear of
hacking of accounts and thus do not go on for internet banking. Banks are trying their level
best by providing the best security options to the customers but then to there is lot of
factors which betrays a customer from opening an internet bank account. But still there is strong
requirement of customer- awareness regarding e- banking facility prevails in India and it can
served through proper scanning and analysis of the market.

. E-Banking is an innovative tool that is fast becoming a necessity. It is a successful strategic we

upon for banks to remain profitable in a volatile and competitive marketplace of today. If
proper training should be given to customer by the bank employs to open an account will be
beneficial secondly the website should be made friendlier from where the first time

56
customers can directly make and access their accounts. In future, the availability of
technology to ensure safety and privacy of e-transactions and the RBI guide lines on various
aspects of internet banking will definitely help in rapid growth of internet banking in India.

Recommendation

We can see the time is changing and we the passage of time people are accepting

technology there is still a lot of perceptual blocking which hampers the growth it’s the normal
tendency of a human not to have changes work on the old track, that’s also one of the
reason for the slow acceptance of internet banking accounts.
• Banks should obey the RBI norms and provide facilities as per the norms, which are
not being followed by the banks. While the customer must be given the prompt services
and the bank officer should not have any fear on mind to provide the facilities as per RBI
norms to the units going sick.
 Banks should make their sites more user friendly. Customers should be motivated to use internet
banking facilities more..

• Each section of these Banks should be computerized even in rural areas also.

• Personalized banking should be given a thrust as more and more banks a r e achieving
in usual services.
• Covering up the towns in rural areas with ATMs so that the people in those areas can n also
avail better services.
• Prompt dealing with permanent customers and speedy transactions without harassing the
customers.
• Fair dealing with the customers. More contributions from the employees of the bank. The
staff should be co-operative, friendly and must be capable of understanding the problems of the
customers.
• Give proper training to customers for using e -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

57
REFRENCES
 WEB

 http://shodhganga.inflibnet.ac.in/bitstream/10603/89802/4/chapter%202.pdf

 https://www.sapling.com/6706117/advantages-disadvantages-electronic-
banking

 https://budgeting.thenest.com/advantages-ebanking-24063.html

 https://www.rbi.org.in/SCRIPTs/PublicationReportDetails.aspx?
UrlPage=&ID=243

 BOOK

 An Introduction to E-Commerce: - written by Ramit Kumar Roy & Debasri Dey

and published by the Elegant Publications

58
APPENDICES

59
 QUESTIONNAIRE

Dear Respondent,

I am a student of Maharaja Surajmal Institute, and presently doing a project on “E- banking – A
new era in Indian banking system”. I request you to kindly fill the questions stated below and I
assure you that the data generated by you will be kept confidential.

AKUL BHATIA

BBA (B&I) - 3 YEAR

MAHARAJA SURJMAL
INSTITUTE

Personal Information

i. Name………………………………

ii. Gender:-Male Female

iii. Age Group:- Below 20 , 20-35 ,35-50 , Above 50

iv. Occupation……………….. v. Monthly Income……………..

EDUCATIONAL PROFILE:

Secondary education H.S Graduate Others

Question 1: How Often Do You Use Internet Per Week?

One Hour Two Hour Three Hour More Than Three Hour

Question 2: In Which Bank Do You Have An Account?

SBI AXIS ICICI UCO HDFC BOI

PNB OTHERS (specify)……………………..

60
Question 3: Do You Avail Of All Banking Facilities Online?

YES NO

Question 4: Is Your Bank Operated Under Core-Banking Facility?

YES NO CAN’T SAY

Question 5: How Frequently Do You Use Online Banking Services?

Daily Weekly Monthly Occasionally Yearly Never

Question 6: How Much Do You Spend For A Single Online Transaction?

0-100 1000-5000 5 5000-10000 10000-20000 ABOVE 20000

Question 7: Why Do You Avail Of Online Banking?

Privacy 24*7 Business Hours Convenience Not To Move Anywhere

Easy To Use Saving Times & Speed Other.(

Specify)…………….

QUESTIO EXCELLEN GOO AVERAG POOR NOT

NS T D E APPLICA
BLE
FUND TRANSFER
ATM BANKING
BALANCE ENQUIRY
ONLINE FIXED DEPOSIT
REQUEST A DEMAND
DRAFT
PAY BILLS
ONLINE SHOPPING
ONLINE RECHARGE
OTHER
Question 8: Kindly Rate the Followings of Your Online Banking Services:

Question 9: Does Your Bank Educate You About The Online Banking Services Being
Offered?

YES NO CAN’T SAY

61
Question 10: Are You Aware Of The Security Threats And Frauds In Online Banking And
Familiar With The Methods Of Secured Online Transactions?

YES NO CAN’T SAY

Question 13: Are You In The Opinion That You’re Bank Charges Unnecessary for Online
Services?

YES NO CAN’T SAY

Question 14: Do You Think Online Banking Is Better Substitute Of Traditional Banking
System?

YES NO CAN’T SAY

Question 15: Which Factor Do You Think Responsible For Non-Accessibility Of Online
Banking By Majority Of People In Your Area?

Lack of Awareness of People Inadequate Atm Services Rural Area

Lack of Computer Facility less Internet Connection Lack OF Knowledge

Others (Specify)………………….

Question 16: In Your Opinion Which Online Operations Should Be Modified Promptly For
Better Services In Future?

Atm Services Accounts Services Fund Transfer Bill Payment

E-Tax Payment E-Deposit Market Investment & Demit Services

Loans & Credit Services Internet Security Services

Question 17: Give Your Overall Rating in Online Banking Services

. Excellent Very Good Good Average Poor

Hard To Say

62
List of Tables and GRAPH

N.O NAME PAGE NO

TABLE-3. 1 Various Internet/Electronic Banking Delivery Channel 32
TABLE-3. 2 Transactions Through Internet/Electronic Banking Delivery 33
Channels
TABLE-3. 3 NEFT AND RTGS TRANSACTIONS 36
TABLE-3. 4 Increasing Internet Users In India 37
TABLE-3. 5 & Gender Basis Analysis 38
GRAPH-3.1
TABLE-3. 6 & Age Basis Analysis 39
GRAPH-3.2
TABLE-3. 7 & Occupation Basis Analysis: 40
GRAPH-3.3
TABLE-3. 8 & Income Basis Analysis: 41
GRAPH-3.4
TABLE-3. 9 & Educational profile Analysis 42
GRAPH-3.5
TABLE-3. 10 Use E- Banking Per Week 43
& GRAPH-3.6
TABLE-3. 11 Preferable bank by users for e banking service 44
& GRAPH-3.7
TABLE-3. 12 Online and offline bank users 45
& GRAPH-3.8
TABLE-3. 13 Poll for core banking solution 46
& GRAPH-3.9
TABLE-3. 14 Frequency of using e-banking 47
& GRAPH-
3.10
TABLE-3. 15 Money spend in single e-banking transaction 48
GRAPH-3.11
TABLE-3. 16 Benefits seen by customer 49
& GRAPH-
3.12
TABLE-3. 17 Ratings of e-banking transaction 50
& GRAPH-
3.13
TABLE-3. 18 Awareness of e- banking 51
& GRAPH-
3.14
TABLE-3. 19 Awareness of frauds in e banking 52
& GRAPH-
3.15

63
 TABLE-3. 21 Opinion about charges of e banking 54
GRAPH-3.17
TABLE-3. 22 Preference f banking system 55
GRAPH-3.18
TABLE-3. 23 Reason For non-accessibility of online banking by people 56
GRAPH-3.19
TABLE3.24 Modification about online banking 57
GRAPH-3.20
TABLE3.24 Rating of online banking by user 58
GRAPH-3.21

64