Chapter-1

Introduction

E-banking is defined as the automated delivery of new and traditional banking

products and services directly to customers through electronic, interactive
communication channels. Ebanking includes the systems that enable financial
institution customers. Individuals or businesses, to access accounts, transact business,
or obtain information on financial products and services through a public or private
network including the Internet, Customers access e-banking services using an
intelligent electronic device.

The E-banking was firstly introduced in India by the ICICI around 1996. There after
many other banks like HDFC, IndusInd bank, IDBI, Citibank Trust Banks, UTI, etc.
followed the service. As today private and foreign bank had started capturing the
market through ebanking hence “the competition is heating up and the lack of
technology can make a bank loose a customer” so now the public banks are breaking
the shackles of traditional set-up and gearing up to face the competition posed by the
private sector counterparts.

IDBI Bank, Citibank, Global Trust Bank, Bank of Punjab and UTI Bank. In the same
year, out of an estimated 0.9 million Internet user base, approximately 17 percent
were reported to be banking on the Internet. The above statistics reveal that India
does have a high growth potential for e-banking. The banks have already started
focusing on increasing and improving their e-banking services. As a part of this, the
banks have begun to collaborate with various utility companies to enable the
customers to perform various functions online.

1
In 2001, over 50 percent of the banks in the US were offering e-banking services.
However, large banks appeared to have a clear advantage over small banks in the
range of services they offered. Some banks in the US were targeting their Internet
strategies towards business customers. Apart from affecting the way customers
received banking services; e-banking was expected to influence the banking industry
structure. The economics of e-banking was expected to favor large banks because of
economies of scale and scope, and the ability to advertise heavily. Moreover, e-
banking offered entry and expansion opportunities that small banks traditionally
lacked.

2
 NEED OF THE STUDY

• To determining growth direction of online banking service.

• Promoting E-banking services in banking industry.

• Customer perception will be taken into consideration about the internet

banking.

3
 OBJECTIVES

• To study about the factors that affects the customer perception towards e-
banking of ICICI bank.

• To know about the current and future prospects of E-Banking to the

customers.

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

4
 SCOPE OF THE STUDY

• Area is restricted to only Hyderabad

• All the classes of the customers were taken into consideration.

• This study was covered E-Banking service sector.

• This is a realistic source directly collected from the customers of Bank.

5
 Research Methodology

Research Design: Once the findings are finalized by a research, suggestions should
be made for the betterment of enterprise. The data collected from questionnaire will
be tabulated and analyzed so that The result can be presented as simple as possible.
There are a number of ways like o Pie-chart o Graphs

Data Sources

 Primary Data:

In this research with a sample size of nearly 100 customer’s data will be available in
form of questionnaire collected in terms of different questions influencing the use of
internet banking. Internet banking is considered as dependent on awareness among
customers which will be studied with help of different independent variable. Only the
customers of HDFC & ICICI bank are taken as samples for study.

Secondary data:

• Collection of information from different kind of books the data of the company
what they maintained.

Data Collection techniques:

• 1. Structured Questionnaire

• 2. Interview Method

Limitations Of the study:

• Banks are not giving all information about E-banking services .

• They do not permit to meet any of the employees in their bank.

6
 Chapter-2

Literature Review

For this booklet, e-banking is defined as the automated delivery of new and
traditional banking products and services directly to customers through electronic,
interactive communication channels. E-banking includes the systems that enable
financial institution customers, individuals or businesses, to access accounts, transact
business, or obtain information on financial products and services through a public or
private network, including the Internet. Customers access e-banking services using an
intelligent electronic device, such as a personal computer (PC), personal digital
assistant (PDA), automated teller machine (ATM), kiosk, or Touch Tone telephone.
While the risks and controls are similar for the various e-banking access channels,
this booklet focuses specifically on Internet-based services due to the Internet’s
widely accessible public network. Accordingly, this booklet begins with a discussion
of the two primary types of Internet websites: informational and transactional.

Mediums of E-banking

Various products and services

Electronic banking, also known electronic fund transfer (EFT), uses computer and
electronic technology as a substitute for checks and other paper transactions. EFTs is
initiated through devices like cards or codes that let you, or those you authorize,
access your account. Many financial institutions use ATM or debit cards and
Personal Identification Numbers (PINs) for this purpose. Some use other forms of
debit cards and personal Identification Numbers (PINs) for this purpose. Some use
other forms of debit cards such as those that require, at the most, your signature or a
scan.

7
 The federal Electronic Fund Transfer Act (EFT Act) covers some electronic
consumer transactions.

Following are the electronic medium by which services are generally provided by the
banks as a part of e-banking services.

1. Internet Banking
2. ATM (Automatic Teller Machine)
3. Phone Banking
4. Mobile Banking
5. Payment Cards (Debits/Credit Card)

All the above mediums provide services, which can be, also known as “any time
anywhere banking”. This facilitates the customer of the bank to operate their account
from any corner of the world, without visiting local or any subsidiary branch of their
banks. Efforts are made by the bank not only to provide the facility to the customer,
but also to reduce the operational cost of the bank by providing e-banking services.
So with this,

Banks have to employ less staff and still would be able to deliver service to the
customer, round the corner.

Internet Banking

Net banking is a web-based service that enables the banks authorized customers to
access their account information. It allows the customers to log on to the banks
website with the help of bank’s issued identification and personal identification
number (PIN). The banking system verifies the user and provides access to the
requested services, the range of products and service offered by each bank on the
internet differs widely in their content. Most banks offer net banking as a value-added

8
 service. Net banking has also led to the emergent of new banks, which operate only
through the internet and do not exists physically, Such banks are called “virtual”
banks or “Internet Only” banks.

A couple of years ago, there was a belief even among bankers that customers opening
new accounts wanted the online banking facility, just to ‘feel good’ and very few of
them actually used that services. Today, bankers believe that the trend from ‘nice to
have’ is changing to ‘need to have’ .after all it depends on how busy a person is.
Services provided through Internet Banking.
Services provided through Internet Banking

• account information
• E-cheques (Online Fund Transfer)
• Bill Payment Service
• Requests And Intimations
• Demat Account share trading

Account information

Provides summary of all bank accounts, Allow transaction tracking which enables
retrieval of transaction details based on cheque number, transaction amount, and date.

Provide account statement and transaction reports used on userdefined criteria.

Customers can even download and print the statement of accounts.

E-Cheques (Online Fund Transfer)

Customer can transfer funds: Transfer funds between accounts, even if they are in
different branches’ cities Customer can also transfer funds to any person having an
account with the same bank anytime, anywhere, using third party funds transfer
option.

Bill Payment Service

9
 Banks Bill Pa is the easiest way to manage bills. A/c holder can pay their regular
monthly bills i.e. telephone, electricity, mobile phone, insurance etc. at anytime,
anywhere for free. Saves time and effort. Make bill payments at customer’s
convenience form their home or office.

Lets a/c holders check their hill amount before it is debited form their account. No
debits to account without their knowledge. No more missed deadlines, no more loss
of interest – a/c holder can schedule their bills in advance, avoid missing the bill
deadlines as well as earn extra interest on their money

Track payment history – all payments to a biller are stored automatically for future
reference. No queuing up at collection centers or writing cheque anymore! Just a few
clicks and customers account will be debited for the exact amount they ask.

Requests and Intimations

Can electronically submit a request for:

• Cheque-book
• Stop payment instructions
• Opening a fixed deposit
• Opening a recurring deposit
• Intimate for the loss of ATM card
• Register online for phone and mobile banking
• Cheque status
• Online application for debit card

10
• Issue a DD or a Banker’s cheque form account at special rates. Just select the account
to be debited form and give details of the amount, location and beneficiary. The
demand draft will be couriered to a/c holder at their mailing address.

• Customers can get their applications for issuance of Letters of Credit and Bank
• Guarantees processed online Book your Railways Ticket Online

Demat Account and Share Trading

• Demat Account
Demat is commonly used abbreviation of ‘Dematerialization’, which is a process
whereby securities like share, debentures are converted from the ‘material’ (paper
documents)unto electronic data and stored in the computer of an electronic
Depository.

A depository is a security ‘banks,’ where dematerialized physical securities are held

in custody, and form where they can be traded. This facilitates faster, risk-free and
low cost settlement.

Share Trading

In share trading a customer can buy and sell securities online without stepping into a
broker’s office. Once the share are dematerialized then the trading can be done from
Home or office. As Demat a/c are directly linked to the customer’s bank a/c, so there
is no need to write cheque for the payments or to fill up the slips to deposit the
cheque. Amount for the purchase and sale of securities is automatically debited or
credited to their bank a/c. it also brings the same convenience while investing in
Mutual funds also Hassle free and

Paperless
ATMs
11
Automated Teller Machines or 24-hour Tellers are electronic terminals that let you
bank almost anytime. To withdraw cash, make deposits, or transfer funds between
accounts, you generally insert an ATM card and enter your PIN. Some financial
institution and ATM owners charge a fee, particularly to consumers who don’t have
accounts with them or on transactions at remote locations. Generally, ATMs must tell
you they charge a fee and its amount on or at the terminal screen before you complete
the transaction. Check the rules of our institution and ATMs you use to find out when
or whether a fee is charged.

It won’t be just if I start explaining what an ATM is. ATMs and cash dispensers are
by far the largest investment ever made in electronic self-service by financial
institutions. Over US$ 40 billion has been invested in simply buying these machines
and many times that in running them. There are now over 1.1 million machines
operating in over 140countries worldwide.

The banks are losing the cashier’s checks, check cashing and even cash dispensing to
the c-stores and grocery stores. They are asleep at the switch and watching more
transactions walk away to convenience stores and supermarkets that provide 24 hour
access and integrated transactions.

ATMs do provide a larger set of functions, such as check cashing, ticket sales or
money orders. We already know that cash dispensing as a dedicated function is a
sustainable applications, the question is whether that application can be incorporated
successfully into a more complex consumer product that offers multiple applications.

It is worth noting that, due to market saturation, overall ATM usage is increasing
while transaction volume on a per-ATM basis is now in decline.

Cash withdrawal: Withdraw up to Rs.15,000/- per day from your account. Fast cash
options provide the facility of withdrawing prefixed amounts. Ultra Fast Cash option
allows you to withdraw Rs.3000/- in one shot.

12
 Balance Enquiry: Know your ledger balance and available balance
Mini Statement: Get a printout of your last 8 transactions and your current balance.

Deposit Cash / Cheques: available at all full function ATMs. Customers can deposit
both cash and cheques. / Cash deposited in ATMs will be credited to the account on
the same day (provided cash is deposited before the clearing) and cheques are sent for
clearing on the next working day.

Funds Transfer: Transfer funds from one account to another linked account in the
same branch.

PIN Changes: Change the Personal Identification Number (PIN) of ATM or Debit
card.

Payments: The latest feature of our ATMs, this functionality can be used for
payment of bills, making donations to temples / trusts, buying internet packs, airtime
recharges for prepaid mobile phones and much more…

Others: Request for a checkbook from our ATMs and our concerned branch will
dispatch it such that it reaches you within 10 working days.

ATM Advantages

• 24-hour access to cash You can withdraw up to Rs. 40,000/- per day on your
ATM Card. The fast cash option saves your time by providing the cash in
denominations of Rs. 500/-

• Balance inquiry Your updated balance will appear on the screen and will also
be printed on the transaction slip.

• Mini-statement request Get details of the last 9 transactions on your account

with the ministatement, along with your balance.

13
• Cheque book request Send us a request for a cheque book or account
statement it will arrive at your doorstep.

• Funds transfer: Transfer money from one of your accounts to another. It’s
easy, select the account from which you want to transfer, then indicate the
amount and the account to which you want it transferred. Both accounts must
be linked to your ATM card and customer ID. A maximum of 5 saving and 5
Current accounts can be linked.

• PIN change Your can conveniently charge your (PIN) given at the time of
opening your account) whenever you wish. Stay totally in control and ensure
complete security for your ATM Card.

• Bill Pay: Pay your cellular, telephone and electricity bills using your ATM
Card.
• Anytime cash deposits: Your cash or cheques can be deposited into your
account and the ATM will immediately print a receipt for the same.

Phone Banking

Now your bank account is now just a phone call away. Through Phone Banking you can:

• Check your account balance.

• Check the last 5 transactions in your account.
• Enquire on the cheque status.
• Have a mini statement faxed across to you.
• Request for a cheque book / Account statement.
• Enquire on your Fixed deposits / TDS.
• Open a fixed deposit
• Request for Demand Draft / Managers Cheques.
• Transfer funds amongst your linked accounts

• Pay utility and HDFC Bank Credit Card bills.

• Do a stop cheque payments.

• Report loss of your ATM /Debit Card.

14
• Product information.
• Enquire on the interest / Exchange rates.

E-BANKING SUPPORT SERVICES

WEBLINKING:
A large number of financial institutions maintains sites on the World Wide Web.
Some websites are strictly informational, while others also offer customers the ability
to perform financial transactions, such as paying bills or transferring funds between
accounts.

WIRELESSE-BANKING:
Wireless banking is a delivery channel that can extend the reach and enhance the
convenience of Internet banking products and services. Wireless banking occurs
when customers access a financial institution's network(s) using cellular phones,
pagers, and personal digital assistants (or similar devices) through telecommunication
companies’ wireless networks. Wireless banking services in the United States
typically supplement a financial institution's e-banking products and services.

Person-to-Person Payments:

Electronic person-to-person payments, also known as e-mail money, permit

consumers to send “money” to any person or business with an e-mail address. Under
this scenario, a consumer electronically instructs the person-to-person payment
service to transfer funds to another individual. The payment service then sends an e-

15
mail notifying the individual that the funds are available and informs him or her of
the methods available to access the funds including requesting a check, transferring
the funds to an account at an insured financial institution, or retransmitting the funds
to someone else. Person-to-person payments are typically funded by credit card
charges transfer from the consumer’s account at a financial institution. Since neither
the payee nor the payer in the transaction has to have an account with the payment
service, such services may be offered by an insured financial institution, but are
frequently offered by other businesses as well.

Banking Services through Internet:

1. The Basic Level Service is the banks’ web sites which disseminate information
on different products and services offered to customers and members of public in
general. It may receive and reply to customer’s queries through e-mail;

2 .In the next level are Simple Transactional Web sites which allows customers to
submit their instructions, applications for different services, queries in their
account balances, etc. but do not permit any fund-based transactions on their
accounts;

3. The third level of Internet banking service are offered by Fully Transactional
Web sites which allow the customers to operate on their accounts for transfer of
funds, payment of different bills, subscribing to other products of the bank and to
transact purchase and sale of securities, etc. The above forms of Internet banking
service the customer or by new banks, who deliver banking service primarily
through Internet or other electronic delivery channels as the value added services.
Some of these banks are known as ‘Virtual’ banks or ‘Internet only’ banks and may
not have physical presence in a country despite offering different banking services.

16
 The Indian Scenario: Internet banking, both as a medium of delivery of banking
services and as a strategic tool for business development.

• At present, the total internet users in the country are estimated at 9 lakh. However,
this is expected to grow exponentially to 90 lakh by 2003. Only about 1 percent of
Internet users did banking online in 1998. This is increased to 16.7 percent in March
2000.

- (India Research, May 29, 2000, Kotak Securities)

• Cost of banking service through the Internet from a fraction of costs through
conventional methods. Rough estimates assume teller cost at Re.1 per transaction,
ATM transaction cost at 45 paise, phone banking at 35 paise, debit cards at 20 paise
and Internet banking at 10 paise per transaction.

Plastic Cards as Media for Payment: -

There are four types of plastic cards being used as media for making payments. These
are:
1. Credit Card
2. Debit Card
3. Smart Card
4. ATM Card
Credit Cards: -

The credit card enables the cardholders to: Purchase any item like clothes, jewellery,
railway/air tickets, etc.

Pay bills for dining in a restaurant or boarding and lodging in hotel

Avail of any service like car rental, etc.

17
 Debit Cards: -
A debit card is issued on payment of a specified amount by the issuing company like
a telephone company to a customer on cash payment or on debiting his account by a
bank. Thus it is like an electronic purse, which can be read and debited by the
required amount. It may be noted that while through a credit card, the customer first
makes a purchase or avails service and pays later on, but for getting the debit card, a
customer has to first pay the due amount and then make a purchase or avail the
service. For this reason, debit card are not as popular as credit cards.

smart cards
Smart Cards have a built-in microcomputer chip, which can be used for storing and
processing information. For example, a person can have a smart card from a bank
with the specified amount stored electronically on it. As he goes on making
transactions with the help of the card, the balance keeps on reducing electronically.
When the specified amount is utilized by the customer, he can approach the bank to
get his card validated for a further specified amount. Such cards are used for paying
small amounts like telephone calls, petrol bills, etc

3. ATM Cards: -

The card contains a PIN (Personal Identification Number) which is selected by the
customer or conveyed to the customer and enables him to withdraw cash up to the
transaction limit for the day. He can also deposit cash or cheque.

USE OF E-BANKING IN INDIA FROM LAST FEW YEARS

Year 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

18
Incr.% 15 25 30 40 45 53 60 75 78 80

Chapter-3

Industry profile

INDIAN BANKING INDUSTRY

Banks are the most significant players in the Indian financial market. They are the
biggest purveyors of credit, and they also attract most of the savings from the
population. Dominated by public sector, the banking industry has so far acted as an
efficient partner in the growth and the development of the country. Driven by the
socialist ideologies and the welfare state concept, public sector banks have long been
the supporters of agriculture and other priority sectors. They act as crucial channels
of the government in its efforts to ensure equitable economic development.

The Indian banking can be broadly categorized into nationalized (government

owned), private banks and specialized banking institutions. The Reserve Bank of
India acts a centralized body monitoring any discrepancies and shortcoming in the
system. Since the nationalization of banks in 1969, the public sector banks or the
nationalized banks have acquired a place of prominence and has since then seen
19
tremendous progress. The need to become highly customer focused has forced the
slow-moving public sector banks to adopt a fast track approach. The unleashing of
products and services through the net has galvanized players at all levels of the
banking and financial institutions market grid to look anew at their existing portfolio
offering. Conservative banking practices allowed Indian banks to be insulated
partially from the Asian currency crisis. Indian banks are now quoting al higher
valuation when compared to banks in other Asian countries (viz. Hong Kong,
Singapore, Philippines etc.) that have major problems linked to huge Non Performing
Assets (NPAs) and payment defaults. Co-operative banks are nimble footed in
approach and armed with efficient branch networks focus primarily on the ‘high
revenue’ niche retail segments.

The Indian banking has finally worked up to the competitive dynamics of the ‘new’
Indian market and is addressing the relevant issues to take on the multifarious
challenges of globalization. Banks that employ IT solutions are perceived to be
‘futuristic’ and proactive players capable of meeting the multifarious requirements of
the large customer’s base. Private Banks have been fast on the uptake and are
reorienting their strategies using the internet as a medium The Internet has emerged
as the new and challenging frontier of marketing with the conventional physical
world tenets being just as applicable like in any other marketing medium.

The Indian banking has come from a long way from being a sleepy business
institution to a highly proactive and dynamic entity. This transformation has been
largely brought about by the large dose of liberalization and economic reforms that
allowed banks to explore new business opportunities rather than generating revenues
from conventional streams (i.e. borrowing and lending). The banking in India is
highly fragmented with 30 banking units contributing to almost 50% of deposits and
60% of advances. Indian nationalized banks (banks owned by the government)
continue to be the major lenders in the economy due to their sheer size and
penetrative networks which assures them high deposit mobilization. The Indian
banking can be broadly categorized into nationalized, private banks and specialized
banking institutions.

20
The Reserve Bank of India acts as a centralized body monitoring any discrepancies
and shortcoming in the system. It is the foremost monitoring body in the Indian
financial sector. The nationalized banks (i.e. government-owned banks) continue to
dominate the Indian banking arena. Industry estimates indicate that out of 274
commercial banks operating in India, 223 banks are in the public sector and 51 are in
the private sector. The private sector bank grid also includes 24 foreign banks that
have started their operations here.

The liberalize policy of Government of India permitted entry to private sector in the
banking, the industry has witnessed the entry of nine new generation private banks.
The major differentiating parameter that distinguishes these banks from all the other
banks in the Indian banking is the level of service that is offered to the customer.
Their focus has always centered around the customer – understanding his needs,
preempting him and consequently delighting him with various configurations of
benefits and a wide portfolio of products and services.

These banks have generally been established by promoters of repute or by ‘high

value’ domestic financial institutions. The popularity of these banks can be gauged
by the fact that in a short span of time, these banks have gained considerable
customer confidence and consequently have shown impressive growth rates. Today,
the private banks corner almost four per cent share of the total share of deposits.
Most of the banks in this category are concentrated in the high-growth urban areas in
metros (that account for approximately 70% of the total banking business). With
efficiency being the major focus, these banks have leveraged on their strengths and
competencies viz. Management, operational efficiency and flexibility, superior
product positioning and higher employee productivity skills.

The private banks with their focused business and service portfolio have a reputation
of being niche players in the industry. A strategy that has allowed these banks to
concentrate on few reliable high net worth companies and individuals rather than
cater to the mass market. These well-chalked out integrates strategy plans have
allowed most of these banks to deliver superlative levels of personalized services.
With the Reserve Bank of India allowing these banks to operate 70% of their

21
businesses in urban areas, this statutory requirement has translated into lower deposit
mobilization costs and higher margins relative to public sector banks.

PEST ANALYSIS

POLITICAL/ LEGAL ENVIRONMENT

Government and RBI policies affect the banking sector. Sometimes looking into the
political advantage of a particular party, the Government declares some measures to
their benefits like waiver of short-term agricultural loans, to attract the farmer’s
votes. By doing so the profits of the bank get affected. Various banks in the
cooperative sector are open and run by the politicians. They exploit these banks for
their benefits. Sometimes the government appoints various chairmen of the banks.
Various policies are framed by the RBI looking at the present situation of the country
for better control over the banks.

ECONOMICAL ENVIRONMENT

22
Banking is as old as authentic history and the modern commercial banking are
traceable to ancient times. In India, banking has existed in one form or the other from
time to time. The present era in banking may be taken to have commenced with
establishment of bank of Bengal in 1809 under the government charter and with
government participation in share capital. Allahabad bank was started in the year
1865 and Punjab national bank in 1895, and thus, others followed.
Every year RBI declares its 6 monthly policy and accordingly the various measures
and rates are implemented which has an impact on the banking sector. Also the
Union budget affects the banking sector to boost the economy by giving certain
concessions or facilities. If in the Budget savings are encouraged, then more deposits
will be attracted towards the banks and in turn they can lend more money to the
agricultural sector and industrial sector, therefore, booming the economy. If the FDI
limits are relaxed, then more FDI are brought in India through banking channels.

SOCIAL ENVIRONMENT

Before nationalization of the banks, their control was in the hands of the private
parties and only big business houses and the effluent sections of the society were
getting benefits of banking in India. In 1969 government nationalized 14 banks. To
adopt the social development in the banking sector it was necessary for speedy
economic progress, consistent with social justice, in democratic political system,
which is free from domination of law, and in which opportunities are open to all.
Accordingly, keeping in mind both the national and social objectives, bankers were
given direction to help economically weaker section of the society and also provide
need-based finance to all the sectors of the economy with flexible and liberal attitude.
Now the banks provide various types of loans to farmers, working women,
professionals, and traders. They also provide education loan to the students and
housing loans, consumer loans, etc.

23
Banks having big clients or big companies have to provide services like personalized
banking to their clients because these customers do not believe in running about and
waiting in queues for getting their work done. The bankers also have to provide these
customers with special provisions and at times with benefits like food and parties.
But the banks do not mind incurring these costs because of the kind of business these
clients bring for the bank. Banks have changed the culture of human life in India and
have made life much easier for the people.

TECHNOLOGICAL ENVIRONMENT

Technology plays a very important role in bank’s internal control mechanisms as well
as services offered by them. It has in fact given new dimensions to the banks as well
as services that they cater to and the banks are enthusiastically adopting new
technological innovations for devising new products and service.

The latest developments in terms of technology in computer and telecommunication

have encouraged the bankers to change the concept of branch banking to anywhere
banking. The use of ATM and Internet banking has allowed ‘anytime, anywhere
banking’ facilities. Automatic voice recorders now answer simple queries, currency
accounting machines makes the job easier and self-service counters are now
encouraged. Credit card facility has encouraged an era of cashless society. Today
MasterCard and Visa card are the two most popular cards used world over. The banks
have now started issuing smartcards or debit cards to be used for making payments.
These are also called as electronic purse. Some of the banks have also started home
banking through telecommunication facilities and computer technology by using
terminals installed at customers home and they can make the balance inquiry, get the
statement of accounts, give instructions for fund transfers, etc. Through ECS we can

24
receive the dividends and interest directly to our account avoiding the delay or
chance of loosing the post.

Today banks are also using SMS and Internet as major tool of promotions and giving
great utility to its customers. For example SMS functions through simple text
messages sent from your mobile. The messages are then recognized by the bank to
provide you with the required information. All these technological changes have
forced the bankers to adopt customer-based approach instead of product-based
approach.

HISTORY OF BANKING IN INDIA

Without a sound and effective banking system in India it cannot have a healthy
economy. The banking system of India should not only be hassle free but it should be
able to meet new challenges posed by the technology and any other external and
internal factors.

For the past three decades India's banking system has several outstanding
achievements to its credit. The most striking is its extensive reach. It is no longer
confined to only metropolitans or cosmopolitans in India. In fact, Indian banking
system has reached even to the remote corners of the country. This is one of the main
reasons of India’s growth process.

The government's regular policy for Indian bank since 1969 has paid rich dividends
with the nationalization of 14 major private banks of India.

Not long ago, an account holder had to wait for hours at the bank counters for getting
a draft or for withdrawing his own money. Today, he has a choice. Gone are days

25
when the most efficient bank transferred money from one branch to other in two
days. Now it is simple as instant messaging or dials a pizza. Money has become the
order of the day.

From 1786 till today, the journey of Indian Banking System can be segregated into
three distinct phases. They are as mentioned below:

• Early phase from 1786 to 1969 of Indian Banks

• Nationalization of Indian Banks and up to 1991 prior to Indian banking sector

Reforms.

• New phase of Indian Banking System with the advent of Indian Financial &
Banking sector reforms after 1991.

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

Phase I

The General Bank of India was set up in the year 1786. Next came Bank of
Hindustan and Bengal Bank. The East India Company established Bank of Bengal
(1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and
called it Presidency Banks. These three banks were amalgamated in 1920 and
Imperial Bank of India was established which started as private shareholders banks,
mostly European shareholders.

Exclusively by Indians Punjab National Bank Ltd. was set up in 1894 with
headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of
India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up.
Reserve Bank of India came in 1935.

26
During the first phase the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly
small. To streamline the functioning and activities of commercial banks, the
Government of India came up with The Banking Companies Act, 1949 which was
later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No.
23 of 1965). Reserve Bank of India was vested with extensive powers for the
supervision of banking in India as the Central Banking Authority.
During those day’s public has lesser confidence in the banks. As an aftermath deposit
mobilisation was slow. Abreast of it the savings bank facility provided by the Postal
department was comparatively safer. Moreover, funds were largely given to traders.

Phase II

Government took major steps in this Indian Banking Sector Reform after
independence. In 1955, it nationalised Imperial Bank of India with extensive banking
facilities on a large scale especially in rural and semi-urban areas.

It formed State Bank of India to act as the principal agent of RBI and to handle
banking transactions of the Union and State Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on
19th July, 1969, major process of nationalization was carried out. It was the effort of
the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in
the country were nationalized.

Second phase of nationalization Indian Banking Sector Reform was carried out in
1980 with seven more banks. This step brought 80% of the banking segment in India
under Government ownership.

27
The following are the steps taken by the Government of India to Regulate Banking
Institutions in the Country:

• 1949: Enactment of Banking Regulation Act.

• 1955: Nationalisation of State Bank of India.

• 1959: Nationalisation of SBI subsidiaries.

• 1961: Insurance cover extended to deposits.

• 1969: Nationalisation of 14 major banks.

• 1971: Creation of credit guarantee corporation.

• 1975: Creation of regional rural banks.

• 1980: Nationalisation of seven banks with deposits over 200 crore.

After the nationalization of banks, the branches of the public sector bank India rose to
approximately 800% in deposits and advances took a huge jump by 11,000%.
Banking in the sunshine of Government ownership gave the public implicit faith and
immense confidence about the sustainability of institutions.

Phase III

28
This phase has introduced many more products and facilities in the banking sector in
its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee
was set up by his name which worked for the liberisation of banking practices.

Efforts are being put to give a satisfactory service to customers. Phone banking and
net banking is introduced. The entire system became more convenient and swift.
Time is given more importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered from
any crisis triggered by any external macroeconomics shock as other East Asian
Countries suffered. This is all due to a flexible exchange rate regime, the foreign
reserves are high, the capital account is not yet fully convertible, and banks and their
customers have limited foreign exchange exposure.

NATIONALIZATION OF BANKS IN INDIA

The nationalization of banks in India took place in 1969 by Mrs. Indira Gandhi the
then prime minister. It nationalized 14 banks then. These banks were mostly owned
by businessmen and even managed by them.

• Central Bank of India

• Bank of Maharashtra

• Dena Bank

• Punjab National Bank

• Syndicate Bank
• Canara Bank

• Indian Bank

29
 • Indian Overseas Bank

• Bank of Baroda

• Union Bank

• Allahabad Bank

• United Bank of India

• UCO Bank

• Bank of India

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

The State Bank of India is India's largest commercial bank and is ranked one of the
top five banks worldwide. It serves 90 million customers through a network of 9,000
branches and it offers -- either directly or through subsidiaries -- a wide range of
banking services.

The second phase of nationalisation of Indian banks took place in the year 1980.
Seven more banks were nationalised with deposits over 200 crores. Till this year,
approximately 80% of the banking segments in India were under government
ownership.

After the nationalisation of banks in India, the branches of the public sector banks
rose to approximately 800% in deposits and advances took a huge jump by 11,000%.

BANKING STRUCTURE

30
The Indian banking industry, which has Reserve Bank of India as its regulatory
authority, is a mix of the public sector, private sector, and foreign banks. The private
sector banks are again split into old banks and new banks.

SCHEDULED BANKS
Scheduled commercial banks are those that come under the purview of the Second
Schedule of Reserve Bank of India (RBI) Act, 1934. The banks that are included
under this schedule are those that satisfy the criteria laid down vide section 42 (60 of
the Act). Some co-operative banks come under the category of scheduled commercial
banks though not all co-operative banks.

PUBLIC SECTOR BANKS

Public sector banks are those in which the Government of India or the RBI is a
majority shareholder. These banks include the State Bank of India (SBI) and its
subsidiaries, other nationalized banks, and Regional Rural Banks (RRBs). Over 70%
of the aggregate branches in India are those of the public sector banks. Some of the
leading banks in this segment include Allahabad Bank, Canara Bank, Bank of
Maharashtra, Central Bank of India, Indian

Overseas Bank, State Bank of India, State Bank of Patiala, State Bank of Bikaner and
Jaipur, State Bank of Travancore, Bank of Baroda, Bank of India, Oriental Bank of
Commerce, UCO Bank, Union Bank of India, Dena Bank and Corporation Bank.

PRIVATE SECTOR BANKS

Private Banks are essentially comprised of two types: the old and the new. The old
private sector banks comprise those, which were operating before Banking
Nationalization Act was passed in 1969. On account of their small size, and regional
operations, these banks were not nationalized. These banks face intense rivalry from
the new private banks and the foreign banks. The banks that are included in this
segment include: Bank of Madura Ltd. (now a part of ICICI Bank), Bharat Overseas
Bank Ltd., Bank of Rajasthan, Karnataka Bank Ltd., Lord Krishna Bank Ltd., The
Catholic Syrian Bank Ltd., The Dhanalakshmi Bank Ltd., The Federal Bank Ltd.,
The Jammu & Kashmir Bank Ltd., The KarurVysya Bank Ltd., The Lakshmi Vilas

31
Bank Ltd., The Nedungadi Bank Ltd. and Vysya Bank. The new private sector banks
were established when the Banking Regulation Act was amended in 1993. Financial
institutions promoted several of these banks. After the initial licenses, the RBI has
granted no more licenses. These banks are gearing up to face the foreign banks by
focusing on service and technology. Currently, these banks are an expansion spree,
spreading into semi-urban areas and satellite towns. The leading banks that are
included in this segment include Bank of Punjab Ltd., Centurion Bank Ltd., Global
Trust Bank Ltd., HDFC Bank Ltd., ICICI Banking Corporation Ltd., IDBI Bank Ltd.,
IndusInd Bank Ltd. and UTI Bank Ltd.

FOREIGN BANKS
The operations of foreign banks, though similar to that of other commercial Indian
banks, are mainly confined to metropolitan areas. Foray of foreign banks depends on
reciprocity, economic and political bilateral relations. An inter-departmental
committee has been set up to endorse applications for entry and expansion.

Foreign banks, in the wake of the liberalization era, are looking to expand and
diversify. Some of the leading foreign banks that operate in India are Citibank,
Standard Chartered Grindlays Bank, Hong Kong Shanghai Banking Corporation,
Bank of America, Deutsche Bank, Development Bank of Singapore and Banque
National De Paris

INDIAN BANKS AND THE GLOBAL CHALLENGES

The enhanced role of the banking sector in the Indian economy, the increasing levels
of deregulation along with the increasing levels of competition have facilitated
globalisation of the India banking system and placed numerous demands on banks.
Operating in this demanding environment has exposed banks to various challenges.

32
The last decade has witnessed major changes in the financial sector - new banks, new
financial institutions, new instruments, new windows, and new opportunities - and,
along with all this, new challenges. While deregulation has opened up new vistas for
banks to augment revenues, it has entailed greater competition and consequently
greater risks. Demand for new products, particularly derivatives, has required banks
to diversify their product mix and also effect rapid changes in their processes and
operations in order to remain competitive in the globalised environment.

GLOBALISATION – A CHALLENGE AS WELL AS AN OPPORTUNITY

The benefits of globalisation have been well documented and are being increasingly
recognised. Globalisation of domestic banks has also been facilitated by tremendous
advancement in information and communications technology. Globalisation has
thrown up lot of opportunities but accompanied by concomitant risks. There is a
growing realisation that the ability of countries to conduct business across national
borders and the ability to cope with the possible downside risks would depend, inter-
alia, on the soundness of the financial system and the strength of the individual
participants.

Adoption of appropriate prudential, regulatory, supervisory, and technological

framework on par with international best practices enables strengthening of the
domestic banking system, which would help in fortifying it against the risks that
might arise out of globalisation. In India, strengthening of the banking sector for
facing the pressures that may arise out of globalisation by adopting the banking
sector reforms in a calibrated manner, which followed the twin governing principles
of non-disruptive progress and consultative process.

GLOBAL CHALLENGES IN BANKING

33
Few broad challenges faced by the Indian banks in the following areas, viz.,
enhancement of customer service; application of technology; implementation of
Basel II; improvement of risk management systems; implementation of new
accounting standards; enhancement of transparency & disclosures; and compliance
with KYC aspects. If we were to identify a few global challenges which banks face
today, I am sure we would cover some common ground. An overview of the global
challenges would include the following: Basel II implementation; enhancing
corporate governance; alignment of regulatory and accounting requirements;
outsourcing risks; and application of advanced technology. I propose to cover these
aspects now.

BASE II IMPLEMENTATION

Basel II implementation is widely acknowledged as a significant challenge faced by

both banks and the regulators internationally. It is true that Basel II implementation
may be seen as compliance challenge. While it may be so for some banks, Basel II
implementation has another dimension which offers considerable opportunities to
banks.Highlighting two opportunities that are offered to banks, viz., refinement of
risk management systems; and improvement in capital efficiency.

Comprehensive risk management:

Under Basel I banks were focused on credit and market risks. Basel II has brought
into focus a larger number of risks requiring banks to focus on a larger canvas.
Besides the increase in the number of risks, banks are now beginning to focus on
their inter-linkages with a view to achieve a more comprehensive risk management
framework. Basel II implementation, therefore, is being increasingly seen as a
medium through which banks constantly endeavour to upgrade the risk management

34
systems to address the changing environment. Further, in the initial stages, banks
were managing each risk in isolation. It is no longer adequate to manage each risk
independently. Enterprises worldwide are, therefore, now putting in place an
integrated framework for risk management which is proactive, systematic and spans
across the entire organisation. Banks in India are also moving from the individual
silo system to an enterprise wide risk management system. While the first milestone
would be risk integration across the entity, banks are also aware of the desirability of
risk aggregation across the group both in the specific risk areas as also across the
risks. Banks would, therefore, be required to allocate significant resources towards
this endeavour.

Capital efficiency: Basel II prescriptions have ushered in a transition from the

traditional regulatory measure of capital adequacy to an evaluation of whether a bank
has found the most efficient use of its capital to support its business i.e., a transition
from capital adequacy to capital efficiency. In this transition, how effectively capital
is used will determine return on equity and a consequent enhancement of shareholder
value. In effect, banks may adopt a more dynamic approach to use of capital, in
which capital will flow quickly to its most efficient use. This revised efficiency
approach is expected to guide the return-on-equity strategy and influence banks’
business plans. With the extension of capital charge for market risks to the AFS
portfolio this year and the coming into force of Basel II norms in March 2007,

banks would need to shore up the capital levels not only for complying with these
requirements but also for supporting the balance sheet growth. With a view to
enhancing the options available to banks for augmenting their capital levels, the
Reserve Bank has recently permitted banks to issue new capital instruments,
including perpetual instruments. A notable feature of these instruments is that these
are designed to help banks in not only managing their capital effectively but also
efficiently.

35
ENHANCING CORPORATE GOVERNANCE

The issues related to corporate governance have continued to attract considerable

national and international attention in light of a number of high-profile breakdowns in
corporate governance. This becomes all the more relevant for banks since they not
only accept and deploy large amount of uncollateralized public funds in fiduciary
capacity, but also leverage such funds through credit creation. Banks are also
important participants in the payment and settlement systems. In view of the above,
legal prescriptions for ownership and governance of banks in Banking Regulation
Act, 1949 have been supplemented by regulatory prescriptions issued by RBI from
time to time.

In view of the importance of the banking system for financial stability, sound
corporate governance is not only relevant at the level of the individual bank, but is
also a critical ingredient at the system level. Effective risk management systems
determine the health of the financial system and its ability to survive economic
shocks. To a large extent, many risk management failures reflect a breakdown in
corporate governance which arise due to poor management of conflicts of interest,
inadequate understanding of key banking risks, and poor Board oversight of the
mechanisms for risk management and internal audit. Corporate governance is,
therefore, the foundation for effective risk managements in banks and thus the
foundation for a sound financial system2. Therefore, the choices which banks make
when they establish their risk management and corporate governance systems have
important ramifications for financial stability.

A good “governance culture” is crucial for financial stability but since it is an

‘intangible’, rules may not be able to capture its essence effectively. Therefore, banks
may have to cultivate a good governance culture building in appropriate checks and
balances in their operations. There are four important forms of oversight that should
be included in the organisational structure of any bank in order to ensure appropriate
36
checks and balances: (1) oversight by the board of directors or supervisory board; (2)
oversight by individuals not involved in the day-to-day running of the various
business areas; (3) direct line supervision of different business areas; and (4)
independent risk management, compliance and audit functions. In addition, it is
important that key personnel are fit and proper for their jobs. Although some
ownership structures might have the potential to alter the strategies and objectives of
a bank, these banks will also face many of the same risks associated with weak
corporate governance.

COMPLIANCE WITH INTERNATIONAL ACCOUNTING STANDARDS

One of the prime international standards considered relevant for ensuring a safe and
sound banking system is the ‘Core Principles for Effective Banking Supervision’
issued by the Basel Committee on Banking Supervision (BCBS). Accounting
standards are now a part of the set of twelve standards that have been identified by
the Financial Stability Forum as conducive to a robust financial infrastructure.
Financial reporting and prudential supervision have slightly different perspectives.
While the former is oriented towards capturing the historical position, the latter has a
forward looking element particularly with reference to measurement of impairment
and capital. An important challenge, therefore, is to ensure that accounting standards
and prudential frameworks are mutually consistent. While working towards achieving
this consistency between the two sets of standards, it is essential for the regulators to
be in a position to address any implications that the changes in accounting standards
may have for the safety and soundness of banks.

Derivative activity in banks in India has been increasing at a brisk pace. While the
risk management framework for derivative trading, which is a relatively new area for
Indian banks (particularly more in respect of structured products), is an essential pre-
requisite, the absence of clear accounting guidelines in this area is matter of
significant concern. It is widely accepted that as the volume of transactions increases,
which is happening in the Indian banking system, the need to upgrade the accounting
framework needs no emphasis. The World Bank’s ROSC on Accounting and
Auditing in India has commented on the absence of an accounting standard which

37
deals with recognition, measurement, presentation and disclosures pertaining to
financial instruments. The Accounting Standards Board of the Institute of Chartered
Accountants of India (ICAI) is considering issue of Accounting Standards on the
above aspects pertaining to financial Instruments. These will be the Indian parallel to
International Financial Reporting Standard 7, International Accounting Standards 32
and 39. The proposed Accounting Standards will be of considerable significance for
financial entities and could therefore have implications for the financial sector. The
formal introduction of these Accounting Standards by the ICAI is likely to take some
time in view of the processes involved. In the meanwhile, the Reserve Bank is
considering the need for banks and financial entities adopting the broad underlying
principles of IAS 39. Since this is likely to give rise to some regulatory / prudential
issues all relevant aspects are being comprehensively examined. The proposals in this
regard would, as is normal, be discussed with the market participants before
introduction. Adoption and implementation of these principles are likely to pose a
great challenge to both the banks and the Reserve Bank.

OUTSOURCING RISKS

Banks are increasingly using outsourcing for achieving strategic aims leading to
either rationalization of operational costs or tapping specialist expertise which is not
available internally. 'Outsourcing' may be defined as a bank's use of a third party,
including an affiliated entity within a corporate group, to perform activities on a
continuing basis that would normally be undertaken by the bank itself. Typically
outsourced financial services include applications processing (loan origination, credit
card), document processing, investment management, marketing and research,
supervision of loans,data processing and back office related activities etc.

Outsourcing might give rise to several risks including, strategic risk, reputation risk,
compliance risk, operational risk, exit strategy risk, counterparty risk, country risk,
access risk, concentration risk and systemic risk. The failure of a service provider to
provide a specified service, ensure security/ confidentiality, and comply with legal

38
and regulatory requirements can lead to financial losses/ reputational risk for the bank
and could also lead to systemic risks for the entire banking system in a country. It
would therefore be imperative for the bank outsourcing its activitiesto ensure
effective management of these risks.

It is in this background that RBI has issued draft guidelines on outsourcing, which is
intended to provide direction and guidance to banks to effectively manage risks
arising from such outsourcing activities. The underlying principles for any
outsourcing arrangement by a bank are that such arrangements should neither
diminishthe bank’sability to fulfill its obligations to its customers and the RBI nor
impede effective supervision by RBI. Outsourcing banks, therefore, should take steps
to ensure that the service provider employs the same high standard of care in
performing the services as would be employed by the banks if the activities were
conducted within the banks and not outsourced. Accordingly, banks are not expected
to outsource any activity that would result in their internal control, business conduct,
or reputation being compromised or weakened.

APPLICATION OF ADVANCED TECHNOLOGY

Technology is a key driver in the banking industry, which creates new business
models and processes, and also revolutionises distribution channels. Banks which
have made inadequate investment in technology have consequently faced an erosion
of their market shares. The beneficiaries are those banks which have invested in
technology. Adoption of technology also enhances the quality of risk management
systems in banks. Recognising the benefits of modernising their technology
infrastructure banks are taking the right initiatives.

While doing so, banks have four options to choose from: they can build a new system
themselves, or buy best of the modules, or buy a comprehensive solution, or
outsource. In this context banks need to clearly define their core competencies to be
sure that they are investing in areas that will distinguish them from other market
players, and give them a competitive advantage6. A further challenge which banks
39
face in this regard is to ensure that they derive maximum advantage from their
investments in technology and avoid wasteful expenditure which might arise on
account of uncoordinated and piecemeal adoption of technology; adoption of
inappropriate/ inconsistent technology and adoption of obsolete technology

CAPACITY BUILDING

As dictated by the changing environment, banks need to focus on appropriate

capacity building measures to equip their staff to handle advanced risk management
systems and supervisors also need to equally equip themselves with appropriate skills
to have effective supervision of banks adopting those systems. In the likelihood of a
high level of attrition in the system, banks need to focus on motivating their skilled
staff and retaining them7. Skill requirements would be significantly higher for banks
planning to migrate to the advanced approaches under Basel II. Capacity building
gains greater relevance in these banks, so as to equip themselves to take advantage of
the incentives offered under the advanced approaches.

A relevant point in this regard is that capacity building should be across the
institution and not confined to any particular level or any particular area. The demand
for better skills can be met either from within or from outside. It would perhaps be
worthwhile to first glean through the existing resources to identify misplaced or
hidden or forgotten resources and re-position them to boost the bank’s efforts to
capitalise on available skills. This does not undermine the benefits that a bank may
derive by meeting their requirements from the market, but is only intended to
prioritise the process.

CONCLUSION

40
The global challenges which banks face are not confined only to the global banks.
These aspects are also highly relevant for banks which are part of a globalised
banking system. Further, overcoming these challenges by the other banks is expected
to not only stand them in good stead during difficult times but also augurs well for
the banking system to which they belong and will also equip them to launch

themselves as a global bank.

TRANSFORMATION INITIATIVES NEEDED FOR BANKS

41
Strategy

¾ Sales & Marketing strategy for both retail & wholesale banking

¾ Expanding geographies

Brand

¾ Understanding the values of the brand

¾ Repositioning the brand to communicate the values

¾ Organization restructuring

¾ Re organization of the bank in line with the strategic thrust

Re-engineering of the key business processes

¾ Redesign of Sales processes to increase conversion ratio

¾ Six Sigma process improvements for branch channel, Call Center & back
office

¾ processes

¾ Centralization of branch operations and deferred processes to free up resources

Cost efficiency

¾ Reduction in Total cost of acquisition

¾ Reduction in transaction costs

¾ Reduction in fixed and overheads cost Right sizing and matching of skills

42
 Manpower modelling for branch & back office at various volume scenarios

 Productivity improvement for sales & service functions

 Competency Assessments & profiling

 Creating a high performing organization

 Define new roles & responsibilities, KRA

Assessing competencies of people across levels and match the position with
 the
skill-set

¾ Designing and implementing a new PMS for restructured organization.

Change management & creating a new mind set

¾ Developing critical mass of champions and drive ‘Change’ across the

organisation to move from conventional banking to new age banking.

BANKING SERVICES IN INDIA

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

With stiff competition and advancement of technology, the services provided by

banks have become more easy and convenient. The past days are witness to an hour
wait before withdrawing cash from accounts or a cheque from north of the country
being cleared in one month in the south. The following are the major services
provided by the Banks.

BANK ACCOUNT

43
 Open bank account - the most common and first service of the banking sector. There
are different types of bank account in Indian banking sector. The bank accounts are
as follows:

• Bank Savings Account - Bank Savings Account can be opened for eligible person /
persons and certain organisations / agencies (as advised by Reserve Bank of India
(RBI) from time to time)

• Bank Current Account - Bank Current Account can be opened by individuals /

partnership firms / Private and Public Limited Companies / HUFs / Specified
Associates / Societies / Trusts, etc.

• Bank Term Deposits Account - Bank Term Deposits Account can be opened by
individuals / partnership firms / Private and Public Limited Companies / HUFs/
Specified Associates / Societies / Trusts, etc.

• Bank Account Online - With the advancement of technology, the major banks in the
public and private sector has facilitated their customer to open bank account online.
Bank account online is registered through a PC with an internet connection. The
advent in opening an account.

PLASTIC MONEY

Credit card

Credit cards in India are gaining ground. A number of banks in India are encouraging
people to use credit card. The concept of credit card was used in 1950 with the launch
of charge cards in USA by Diners Club and American Express. Credit card however
became more popular with use of magnetic strip in 1970.

44
Credit card in India became popular with the introduction of foreign banks in the
country. Credit cards are financial instruments, which can be used more than once
borrow money or buy products and services on credit. Basically banks, retail stores
and other businesses issue these.

Major Banks issuing Credit Card in India

• State Bank of India credit card (SBI credit card)

• Bank of Baroda credit card or Bob credit card

• ICICI credit card

• HDFC credit card

• IDBI credit card

• ABN AMRO credit card

• Standard Chartered credit card

• HSBC credit card

Global player in credit card market

MasterCard

MasterCard is a product of MasterCard International and along with VISA are

distributed by financial institutions around the world. Cardholders borrow money
against a line of credit and pay it back with interest if the balance is carried over from
month to month. Its products are issued by 23,000 financial institutions in 220

45
countries and territories. In 1998, it had almost 700 million cards in circulation,
whose users spent $650 billion in more than 16.2 million locations.

VISA Card

VISA cards is a product of VISA USA and along with MasterCard is distributed by
financial institutions around the world. A VISA cardholder borrows money against a
credit line and repays the money with interest if the balance is carried over from
month to month in a revolving line of credit. Nearly 600 million cards carry one of
the VISA brands and more than 14 million locations in the world.

AmericanExpress

The world's favorite card is American Express Credit Card. More than 57 million
cards are in circulation and growing and it is still growing further. Around US $ 123
billion was spent last year through American Express Cards and it is poised to be the
world's No. 1 card in the near future. In a regressive US economy last year, the total
amount spent on American Express cards rose by 4 percent. American Express cards
are very popular in the U.S., Canada, Europe and Asia and are used widely in the
retail and everyday expenses segment.

DinersClubInternational

Diners Club is the world's No. 1 Charge Card. Diners Club cardholders reside all over
the world and the Diners Card is a all-time favourite for corporates. There are more
than 8 million Diners Club cardholders. They are affluent and are frequent travelers
in premier businesses and institutions, including Fortune 500 companies and leading
global corporations.

JCBCards

46
The JCB Card has a merchant network of 10.93 million in approximately 189
countries. It is supported by over 320 financial institutions worldwide and serves
more than 48 million cardholders in eighteen countries world wide. The JCB
philosophy of "identify the customer's needs and please the customer with Service
from the Heart" is paying rich dividends as their customers spend US$43 billion
annually on their JCB cards.

The following are some of the varieties of credit cards in India.

• ANZ - Gold

• ANZ - Silver
• Bank Of India - Indiacard

• Bol - Taj Premium

• Bol - Gold

• BoB - Exclusive

• BoB – Premium

• Canara Bank - Cancard

• Citibank - Gold

• Citibank - Silver

• Citibank WWF Card

• Citibank Visa Card for Women

• Citibank Cry Card

• Citibank Silver International Credit

47
 • Citibank Electronic Credit Card

• Citibank Times Card

• Citibank Citi Diners Club Card

• HSBC - Gold

• HSBC - Classic

• ICICI Sterling Silver Credit Card

• ICICI Solid Gold Credit Card

• ICICI True Blue Credit Card

• SBI Card

• Stanchart - Gold
• Stanchart - Executive

• Stanchart - Classic

Debit Card

Debit cards, also known as check cards look like credit cards or ATM cards
(automated teller machine card). It operate like cash or a personal check. Debit cards
are different from credit cards. Credit card is a way to "pay later," whereas debit card
is a way to "pay now." When we use a debit card, our money is quickly deducted
from the bank account. Debit cards are accepted at many locations, including grocery
stores, retail stores, gasoline stations, and restaurants. Its an alternative to carrying a
checkbook or cash.With debit card, we use our own money and not the issuer's
money.In India almost all the banks issue debit card to its account holders

48
 Features of Debit Card

• Obtaining a debit card is often easier than obtaining a credit card.

• Using a debit card instead of writing checks saves you from showing
identification or giving out personal information at the time of the transaction.

• Using a debit card frees you from carrying cash or a checkbook.

• Using a debit card means you no longer have to stock up on traveler's checks
or cash when you travel.

• Debit cards may be more readily accepted by merchants than checks,

especially in other states or countries wherever your card brand is accepted.

• The debit card is a quick, "pay now" product, giving you no grace period.

• Using a debit card may mean you have less protection than with a credit card
purchase for items which are never delivered, are defective, or were
misrepresented. But, as with credit cards, you may dispute unauthorized
charges or other mistakes within 60 days. You should contact the card issuer if
a problem cannot be resolved with the merchant.
• Returning goods or canceling services purchased with a debit card is treated as
if the purchase were made with cash or a check.

LOANS

Banks in India with the way of development have become easy to apply in loan
market.
The following loans are given by almost all the banks in the country:

• Personal Loan

• Car Loan or Auto Loan

• Loan against Shares

49
• Home Loan

• Education Loan or Student Loan

In Personal Loan, one can get a sanctioned loan amount between Rs 25,000 to
10,00,000 depending upon the profile of person applying for the loan. SBI, ICICI,
HDFC, HSBC are some of the leading banks which deals in in personal loan.

Almost all the banks have jumped into the market of car loan which is also
sometimes termed as auto loan. It is one of the fast moving financial products of
banks. Car loan / auto loan are sanctioned to the extent of 85% upon the ex-
showroom price of the car with some simple paper works and a small amount of
processing fee.

Loan against shares is very easy to get because liquid guarantee is involved in it.

Home loan is the latest craze in the banking sector with the development of the
infrastructure. Now people are moving to township outside the city. More number of
townships are coming up to meet the demand of 'house for all'. The RBI has also
liberalised the interest rates of home loan in order to match the repayment capability
of even middle class people. Almost all banks are dealing in home loan. Again SBI ,
ICICI , HDFC , HSBC are leading.

The educational loan, rather to be termed as student loan, is a good banking product
for the mass. Students with certain academic brilliance, studying at recognized
colleges/universities in India and abroad are generally given education loan / student
loan so as to meet the expenses on tuition fee/ maintenance cost/books and other
equipment.

MONEY TRANSFER

Beside lending and depositing money, banks also carry money from one corner of the
globe to another. This act of banks is known as transfer of money. This activity is

50
termed as remittance business. Banks generally issue Demand Drafts, Banker's
Cheques, Money Orders or other such instruments for transferring the money. This is
a type of Telegraphic

Transfer or Tele Cash Orders.

It has been only a couple of years that banks have jumped into the money transfer
businessess in India. The international money transfer market grew 9.3% from 2003
to 2004 i.e. from US$213 bn. to US$233 bn. in 2004. Economists say that the market
of money transfer will further grow at cumulative 10.1% average growth rate
through 2008.

With the use of high technology and varieties of product it seems that "Free" money
transfers will become commonplace. We will see more bundling of tailored money
services by banks and non-traditional entrants that will include "free" money
transfers. Many banks will even use money transfer services as loss-leaders inorder to
generate account openings and cross-sell opportunities. The price evolution of money
transfer products for banks will be similar to that of consumer bill pay-the product is
worth giving away as an account acquisition tool to win overall market share and
establish banking relationships.

ATM money transfer card products have had terrible bank adoption rates since being
introduced in the last three to four years. Remittees who are highly educated and have
been already been exposed to ATM technology in receiving countries tend to have an
interest in this product. Money transfer to India is one of the most important part
played by the banks. This service provide peace of mind to either the NRIs or to the
visitors to India. Many Indian banks have ATM'S (automatic teller machine), enable
to draw foreign currency in India.

By 2007, we will see a good percent of all foreign-born households doing some level
of online banking. First-mover banks will start having a window of opportunity to
include online transfer functionality within the next couple of years, which currently
frequents traditional money transmitters such as Western Union. There is a terrific
opportunity for banks and non-banks to offer more robust global inter-institutional
funds transfer services online. More than half of Western Union's customers today
51
 are already banked, and most do not have an alternative product marketed by their
bank that is painless, quick, and costeffective. That will change as banks offer
transfer services through their online channel.

Visa has recently introduced the 'Visa Money Transfer' option for its savings and
current account holder of any bank with a visa debit card. This facility helps its
customer to transfer funds from his bank account to any visa card, either debit or
credit within India.

A Visa Money Transfer is of similar kind, in many respects, to the third-party fund
transfer option given by some banks to its account holders through e-cheque, but this
is restricted to only visa card holders.

How to transfer money?

• Log on to your bank account through your respective bank websites.

• Fill the beneficiary details like visa card numbers, name, address and then specify the
amount that needs to be transferred. For bank account specify the visa card number
and credit card number for paying credit card bill.

• Click on to VISA Transfer Payments button.

• Transfer immediately or on schedule date. Your account will be debited according to

the date mentioned.

MOBILE BANKING

Mobile Banking is a service that allows customers to do banking transactions on their

mobile phone without making a call , using the SMS facility.

52
 Mobile Banking works on the 'Text Messaging Facility' also called the SMS that is
available on mobile phones. This facility allows sending a short text message from
mobile phone instead of making a phone call.

All that is need to do is, to type out a short text message on mobile phone and send it
out to a specific mobile banking number given by the bank .The response is sent as
an SMS message, all in the matter of a few seconds.

The following transactions are currently available across India -

• Balance Inquiry of all accounts linked to Customer Identification Number
(maximun up to five accounts)

• Following transactions give information on primary account

• Checking the last 3 transactions in your primary account for MobileBanking

• Placing a Stop Payment on a cheque

• Requesting a cheque book

• Requesting an Account Statement

• Cheque Status inquiry

• Bill Presentment

• Fixed Deposit Inquiry

• A Help menu, which gives you the transaction codes for the various

transactions • IPIN Re-generation request

Mobile banking in India is set to explode - approximately 43 million urban Indians

used their mobile phones to access banking services during quarter ending August,
2009, a reach of 15% among urban Indian mobile phone user.
53
 Most Popular Banking Service on Mobile

Checking account balances is the most popular banking service used by urban Indians
with almost 40 million users followed by checking last three transactions, 28 million
and status of cheques with 21 million users.

Usage Unique Users (In millions)

Used mobile banking 43.70

Checking account balance 39.97

View last three transactions 28.15

Status of cheques 21.06

Payment reminders 20.92

Request a cheque book 19.11

Mobile banking is popular among the Rs.1 to 5 lakhs per year income group with
almost 60% of mobile banking users falling in the income bracket, an indicator of
adoption of this service by younger generation.

PHONE BANKING

When one dials in to Phone Banking, a voice prompt will guide him through the
various transactions. He may also talk to a Phone Banker, who will provide him with
the required assistance.

• Check your account balance

• Enquire on the cheque status
• Order a Cheque Book / Account Statement
• Stop Payment

54
• Loan Related queries
• transfer Funds between accounts
• Open a Fixed deposit or Enquire on your Fixed deposits / TDS
• Pay bills
• Report loss of ATM / Debit Card / ForexPlus Card
• Enquire about latest Interest / Exchange rates
• Request a Demand Draft / Manager's Cheque
• Demat Related Queries

INTERNET BANKING

Internet banking is the technology that allows banking customers to do the things
they would normally do at their bank from the comfort of home with a connection to
the Internet. Anything that would normally be done in the offshore bank account,
which is done on the Internet, is considered Internet banking.
With cybercafes and kiosks springing up in different cities access to the Net is going
to be easy. Internet banking (also referred as e banking) is the latest in this series of
technological wonders in the recent past involving use of Internet for delivery of
banking products & services. Even the Morgan Stanley Dean Witter Internet research
emphasised that Web is more important for retail financial services than for many
other industries.

Internet banking is changing the banking industry and is having the major effects on
banking relationships. Banking is now no longer confined to the branches were one
has to approach the branch in person, to withdraw cash or deposit a cheque or request
a statement of accounts. In true Internet banking, any inquiry or transaction is
processed online without any reference to the branch (anywhere banking) at any time.
Providing Internet banking is increasingly becoming a "need to have" than a "nice to
have" service. The net banking, thus, now is more of a norm rather than an exception
in many developed countries due to the fact that it is the cheapest way of providing
banking services.

55
Indian banks are going for the retail banking in a big way. However, much is still to
be achieved. This study which was conducted by students of IIML shows some
interesting facts:

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

development (only 50 banks are offering varied kind of Internet banking
services). In general, these Internet sites offer only the most basic services.
55% are so called 'entry level' sites, offering little more than company
information and basic marketing materials. Only 8% offer 'advanced
transactions' such as online funds transfer, transactions and cash
management services.

Foreign & Private banks are much advanced in terms of the number of sites & their
level of development.

Following services can be availed on the internet:

• Bill Payment

• Funds Transfer

• Special Promotions & Offers

• Ticket Booking
• Online loans and credit cards

• Online Shopping

• Online Tax payment

• Prepaid mobile recharge

56
Company profile

ICICI BANK

57
ICICI Bank is India's second-largest bank with total assets of Rs. 3,562.28 billion
(US$ 77 billion) at December 31, 2009 and profit after tax Rs. 30.19 billion (US$
648.8 million) for the nine months ended December 31, 2009. The Bank has a
network of 1,654 branches and about 4,883 ATMs in India and presence in 18
countries. ICICI Bank offers a wide range of banking products and financial services
to corporate and retail customers through a variety of delivery channels and through
its specialised subsidiaries and affiliates in the areas of investment banking, life and
non-life insurance, venture capital and asset management. The Bank currently has
subsidiaries in the United Kingdom, Russia and Canada, branches in United States,
Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance
Centre and representative offices in United Arab Emirates, China, South Africa,
Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established
branches in Belgium and Germany.

Corporate Profile

ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the
National Stock Exchange of India Limited and its American Depositary Receipts
(ADRs) are listed on the New York Stock Exchange (NYSE).

ICICI Bank is India's second-largest bank with total assets of Rs. 3,562.28 billion
(US$ 77 billion) at December 31, 2009 and profit after tax Rs. 30.19 billion (US$

58
648.8 million) for the nine months ended December 31, 2009. The Bank has a
network of 1,645 branches and about 4,883 ATMs in India and presence in 18
countries. ICICI Bank offers a wide range of banking products and financial services
to corporate and retail customers through a variety of delivery channels and through
its specialised subsidiaries and affiliates in the areas of investment banking, life and
non-life insurance, venture capital and asset management. The Bank currently has
subsidiaries in the United Kingdom, Russia and Canada, branches in United States,
Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance
Centre and representative offices in United Arab Emirates, China, South Africa,
Bangladesh, Thailand, Malaysia and Indonesia. UK subsidiary has established
branches in Belgium and Germany.
Personal banking Services

Mobile Banking Services offered by ICICI Bank

Bank Credit Card Demat Loan Other Services

Account
Funds Transfer* Balance Details Holding Enquiry Provisional Locate Branch
Income
Tax Certificate
Bill Payment+ Last Payment Transaction Final Income Locate ATM
Status Tax
Details
Certificate
Balance Enquiry Payment Due Bill Enquiry Reset Letter Phone Banking
Date Number
Last 5 Reward Point ISIN Enquiry Rescheduled Prepaid Mobile
Transactions Status Letter Recharge*
Cheque Book Loan Agreement Apply for Bank
Request Copy Products
Stop Cheque Status of Service
Request Request Raised
Cheque Status
Enquiry

59
IMOBIL

60
 Benefits of using iMobile:

¾ Secure access to your bank accounts anytime, anywhere

¾ Convenient menu based features designed for easy access

¾ Enjoy financial transactions worth Rs 50,000 per day for funds transfer to any
account, bill payment and prepaid mobile recharge

¾ Continually updated services

¾ Multiple service options with minimal effort

Services available with iMobile:

¾ Payment of utility bills and credit

card bills
¾ Transfer of funds to any bank account
 Payment of insurance premium

Placement of service request such us ordering of cheque books, bank account statements,
cheque status and balance enquiry.

Tv banking at icici bank

At ICICI Bank, we've introduced India to an all new way of banking. TV Banking. This
pioneering initiative now enables you to get information regarding loans, accounts,
deposits and a lot more while you're watching that exciting cricket match or your favorite

61
 sitcom. Quite certainly, TV Banking has revolutionized banking by bringing it right into
your living room.

You can get details and information regarding all our services – everything from loans,
accounts and deposits to additional services like financial counselling, interactive features
like calculators for loans and premiums, and lots more.If your TV service is coming to
you through

Satellite DTH or Digital Cable, you can avail of our TV Banking from anywhere in India
Benefits

¾ It doesn’t require an Internet connection

¾ It's available 24x7

¾ Zero charges

You can obtain all the information you need about the available banking products and
services on the TV screen itself

Chapter-4

Data analysis and interpretation

Users of E-banking

62
 Yes 65%

No 35%

Interpretation: Here only 65% are using E-banking

1. No. of user of the banks

Icici 20%

Sbi 30%

Sbh 20%

Axis 10%

Union 8%

Hdfc 12%

Interpretation: Here only 20% are using E-banking services of ICICI

2. PREFERENCE FOR ONLINE BILL PAYMENT SERVICES

Yes 60%

No 40%

63
Interpretation: Here 60% are preferring online bill payments
3. PREFERENCE FOR ONLINE SHOPPING

Yes 70%

No 30%

Interpretation: Here 70% are using online shopping

64
 4. PREFERENCE FOR ONLINE FUND TRANSFER

Yes 35%

No 65%

Interpretation :only 35% are using online basis

5. SATISFIED CUSTOMERS

Yes 65%

No 35%

65
Interpretation:Here 65% of customers are satisfied

7. PERFERRED MODE OF PAYMENT (TO BANK)

CHEQUE 50

CASH 25

E-BANKING 25

Interpretation: Here 25% are preferring E-banking, 25% are cash mode and
remaining are 50%

8. SPEND PER BILL FOR ON LINE BILL PAYMENT

ABOVE Rs.10 21

66
 BETWEEN RS.5-10 11

BELOW RS.5 32

NOTHING 36

Interpretation: Many are preferring below 5 Rs only

67
 Chapter 5

SUMMARY AND CONCLUTION

Findings

1. In the users ratio of internet banking 65% of customers are using this service.

2. More banks are connecting to the any software co. to running the E-banking service. In
these services the Sbi banks is top in service of E-banking.

3. The services that are mostly used by maximum customers are transactions, online
trading, bill payment, shopping etc.

4. The mode of the cash deposit in bank is for use to online truncation cash, cheque& e-
banking.

5. Different banks different charge for online service.

Suggestions

1. To prevent online banking from remaining customers to prompt this service

through advertising co.

2. After repairing this basic deficiency, banks must ensure that there services is
competitive.

68
3. Banks is not taken more charge from their customer

Conclusion

The basic objective of my research was to analyze the awareness among customers for
internet banking in INDIA. It gives direction to research tools, research types and
techniques. Although the findings reveal that people know about the services but still
many people are unaware and many of them are non – users so the bank should by
promotion try to retain the customers. Banks should look forward to have some tie – ups
with other financial institutions to increase the service base.

69
 BIBLIOGRAPHY

List of web-sites.

1. www.statebankofindia.com
2. www.onlinesbi.com
3. www.icicibank.com
4. www.hdfcbank.com
5. www.hdfcindia.com
6. www.bankofbaroda.com
7. www.bobibanking.com
8. www.business.mapsofindia.com
9. www.rbi.org.in
10. www.indiamart.com

List of books

ƒ Zeithmal V. A., GremblerD.D., BitnerM.j., and PanditA.:Service Marketing Integrated

customer Focus Across The Firm” , Fourth Edition

ƒ Zillur Rahman, “Service Quality: Gap in the Indian Bank Industry” The ICFAI Journal
of Marketing Management.

ƒ NareshK.Malhotra : Marketing Research – An applied orientation, Fifth Edition

ƒ Richard I.Levin,DavidS.Rubin –Statistics For Management, Seventh Edition

Annexure (Questionnaire)

70
Dear sir/madam

I Dodda pradeep Reddy the student of St.Josephs PG College, Presently working on a

project on Analysis of E-Banking services of ICICI bank

We request you to kindly fill the questionnaire below. We assure you that data provided
by you shall be kept confidential.

Questionnaire:-

1. Name of the customer:-

2. Do you like E-banking

a. Yes
b. No

3. Tick which bank you preferred…

a. ICICI
b. SBI
c. SBH
d. Axis
e. Union bank
f. HDFC
g. UTI Bank Ltd
h. Bank of Punjab Ltd
4. Why this bank

a. Service is good
b. They provide security
c. Cheaper service fees.

5. Which type of service mostly you use?

71
 a. Balance and transaction history search

b. Transfer fund online

c. Card to card fund transfer

d. Open FD

e. Lock / activate debit cards /ATM

f. Request a cheque book

g. Stop payment

h. Railway pass / ticket

i. Shopping

j. Share payment

6. Services of the bank are….

1. poor
2. good
3. Very good

7 .Are you satisfied with the using of E-

banking?
a. Yes
b. No
8 What factors affecting customers to E-
banking
a.ATM
b.D-Mat account
c.electronic fund transfer
d.credit/debit cards

72
9. what are the prospects of E-banking to customers
a. mobile banking
b. tele banking
c. others

73