DECLARATION

I hereby declare that this project work entitled “Net banking at HDFC

Bank Bhubaneswar” is my original work, carried out under the guidance

of my faculty guide Prof. (Dr.) Prof. (Dr.) Prof. (Dr.) Prof. (Dr.) S.MahapatraS.MahapatraS.MahapatraS.Mahapatra and has not been submitted

to any other institute/ university or any organization apart from IMIS IMIS IMIS IMIS ––––

BhubaneswarBhubaneswarBhubaneswarBhubaneswar ( INSTITUTE OF MANAGEMENT AND INFORMATION INSTITUTE OF MANAGEMENT AND INFORMATION INSTITUTE OF MANAGEMENT AND INFORMATION INSTITUTE OF MANAGEMENT AND INFORMATION

SCIENCE SCIENCE SCIENCE SCIENCE –––– BHUBBHUBBHUBBHUBAAAANESWARNESWARNESWARNESWAR ).

Signature Vivek kumar

ACKNOWLEDGEMENT

It gives me immense pleasure to express my deep sense of gratitude to

IMIS Bhubaneswar for providing me an opportunity to work on topic “Net

banking at HDFC Bank Bhubaneswar”,

I am extremely thankful to Prof. (Dr.) S.Mahapatra Faculty Guide of IMIS,

for his guidance and support throughout the Final Report work in the

course of carrying out the project work.

Finally I am indebted to my other faculty members, my friends and my

parents who gave their full-fledged co-operation for successful completion

of my project. It was an indeed learning experience for me.

NAME OF THE STUDENT: VIVEK KUMAR

CONTENTS Certificate Declaration Acknowledgement List of Illustrations/Tables Abstract Chapter 1 1.1 Objectives, 1.2 Research Methodology Chapter 2 2.1 Introduction to Banking 2.2 Introduction to HDFC Bank 2.3 An overview of Net Banking in India 2.4 Risk Management in Net Banking Chapter 3 3.1 Interpretation of PIE and BAR chart. Chapter 4 Conclusions 4.1 Findings 4.2 Conclusion References

OBJECTIVE OF THE STUDY

1. To access the present scenario of the services of Internet Banking.

2. To study the scope of Internet Banking in future. 3. To study the problems faced by the consumers in availing the Internet Banking Services.

4. To access the satisfaction level experienced by the users of Internet Banking Services.

RESEARCH METHODOLOGY Problem Defining: The project was mainly concerned with evaluating the performance of Internet Banking Services and finding out the scope of Internet Banking Services by doing a comparative analysis of the Internet Banking Services by ICICI BANK, SBI BANK, HDFC BANK. Sample Unit: Individuals who are availing Internet Banking Services. Sample Size: 60 respondents Sampling Method: Non-Probabilistic convenience sampling. Sampling Area: Bhubaneswar Sources of Data: The data was collected from both primary and secondary sources. Primary Data: The primary data collection was done through the survey method. The survey was conducted using the questionnaire method. Secondary Data: secondary data was collected from the following sources:

a) Books on Internet Banking b) Internet c) journals

Introduction to Banking Customers are broadly classified into two:

Ø Personal Customers: Individuals having accounts singly or jointly (including minors)

Ø Non Personal Customers: Non individual customers like Proprietary

concerns, Partnerships, Companies, Trusts, Associations, Clubs, Societies, Institutions, Govt. Departments, NGOs, SHG etc.

Accounts are broadly classified into two: Ø Customer accounts (external accounts) : Deposit accounts (Savings

Bank, Current Account etc), Loan Accounts (Demand Loan, Term Loan etc) and Contingent accounts (Bank Guarantee etc)

Ø Office accounts. (Internal accounts): Cash Balance accounts, fixed

assets account, Drafts account, Sundry Deposit account, Interest account etc.

Basic Deposits Account:

Ø Savings Bank : Running account for saving with restriction in number of withdrawal

Ø Current Account: Running account without restriction on number of withdrawals

Ø Term Deposit : Deposit of an amount for a fixed period where interest is paid monthly/Quarterly

Ø Special Term Deposit : Deposit of an amount for a fixed period where interest is compounded

(Capitalized) and paid on maturity. Ø Recurring Deposit: Regular (Monthly) deposit of a fixed amount for

a fixed period.

Types of Loan Account:

Ø Overdraft Ø Demand Loan Ø Term Loan Ø Cash Credit

Overdraft:

Ø A Current account when permitted to overdraw (allowing withdrawal more than deposited or without deposits ) becomes an overdraft account

Ø Can be operated by cheque, ATM, INB Ø A type of advance of temporary nature/ to valued clients sometimes

against Term Deposit, NSC etc. Ø A running account where further withdrawals (debits) can be

permitted as and when deposits (credits) come. Demand Loan:

Ø Basically an advance payable on demand. Ø Payment in installments also generally allowed. Ø Given against Bank deposits, NSCs, Insurance policies Ø Gold loans and Pension Loans are given as Demand loans Ø Only one Debit allowed for disbursement. Cannot be operated by

cheque & ATM. Term Loan:

Ø Loan payable as per pre-determined installments over a fixed term. Ø Extended for acquisition of assets like house, car, land, building, Plant

& Machinery etc. Ø Installments are to be paid out of the income of the person in case of

Personal Segment loans Ø Installments are to be paid out of the income of the activity financed

in case of non-personal segment loans.

Cash Credit: Ø An advance facility for financing the working capital needs of

commercial activities. Ø A running account on the lines of Overdraft.

Ø An account where all the receipts and payments of the activity on account of day-to-day operations are expected to be reflected.

Ø Extended against the stocks and receivables of the unit. (Stocks: raw materials, semi finished goods, finished goods etc, Receivable means money to be received towards sales).

Security and Margin:

Ø The physical or financial asset for / against which the advance is made is referred as security. A car is a security for which a car loan is given.

Ø Assets acquired out of bank finance is called primary security. Any additional security offered by the borrower is called collateral. However, in CBS parlance all securities are referred as collaterals.

Ø The amount contributed by the borrower to the project cost / the percentage value of the assets owned by him is referred as margin.

Charge:

Ø An asset offered to the creditor (who lends the money) becomes a security only if a legally enforceable interest is created in his favour. This process is called the creation of Charge.

Ø Lien, Pledge, Hypothecation and Mortgage are different types of charges applicable to different types of securities.

Transaction: There are three types of transactions:

Ø Cash: Where receipt payment of physical cash is involved Ø Transfer: Where funds are transferred from one account to another

account without Ø Clearing: Transfer transactions where funds are exchanged with other

banks through clearing

Introduction to HDFC Bank

HDFC Bank was incorporated in the year of 1994 by Housing Development Finance Corporation Limited (HDFC), India's premier housing finance company. It was among the first companies to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector. The Bank commenced its operations as a Scheduled Commercial Bank in January 1995 with the help of RBI's liberalization policies.

In a milestone transaction in the Indian banking industry, Times Bank Limited (promoted by Bennett, Coleman & Co. / Times Group) was merged with HDFC Bank Ltd., in 2000. This was the first merger of two private banks in India. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank.

In 2008 HDFC Bank acquired Centurion Bank of Punjab taking its total branches to more than 1,000. The amalgamated bank emerged with a strong deposit base of around Rs. 1,22,000 crore and net advances of around Rs. 89,000 crore. The balance sheet size of the combined entity is over Rs. 1, 63,000 crore. The amalgamation added significant value to HDFC Bank in terms of increased branch network, geographic reach, and customer base, and a bigger pool of skilled manpower.

AN OVERVIEW OF E – BANKING IN INDIA The concept of new generation banks owes its origin to the Narasimham Committee recommendations. The new entrants have chosen a different path to woo customers into their fold taking technological support. The new generation banks are different from the traditional ones. For instance, they work in a computerized environment using the latest banking software, onsite ATMs, etc. Wide patronage, especially from the educated youth, young executives and entrepreneurs has also been the reason for success. Technology has also helped these banks to offer new range of products. One of the products which attained an instantaneous success was sweep in saving bank account, where the balance in account over a specified minimum amount is automatically transferred to fixed deposits. There customers earn a higher rate of interest on their idle funds. A similar type of facility was extended to some categories of current accounts. This type of facility would not have been possible without the support of technology. There are also remote terminals at the customer’s location, suitable for corporate clients, with read only facility where the customer can view the transactions, take printouts of the statements and process any query. This is followed by Internet banking, where the customer can actually do transactions from his account like transfer of funds to his own accounts or for third party payments within the same bank or other banks. The revolution in funds management has emerged with the introduction of facilities, such as ECS, NEFT and RTGS. These facilities are a boon to all clientele for early credit of their funds manages their funds position. Once the cheque truncation system is also introduced, it will be a boon to the customers. This tremendous has helped these new generation banks to penetrate the market with ease.

Another classic and instant success is the salary accounts of the employees. With the advent of technology, irrespective of the employee location, if a customer has an account with that bank, the salary is credited on the designated date directly into the account of the employees. This has resulted in tremendous ease for disbursement of salary and other payments. This particular product has increased the share of low cost funds to these banks. It has benefited both customers and banks. Technology-enabled products have increased the market share of the new generation banks crated a dent in the market share of public sector and old generation private sector banks. Technology has enabled banks to move away from the traditional banking from and work in a new environment. It has helped banks to:

v Improve the customer bane, v Easily market their products, v Introduce new innovative, customer friendly products, v Serve their customers with enhanced products and in a

better way, and v Attend to the needs of their customers on 24x7 basis.

Internet banking has revolutionized the banking industry and gave a new definition to banking relationships. Morgan Stanley Dean Witter Internet research emphasized that the Web is more important for retail financial services than other industries. Internet banking falls into four main categories from Level 1- minimum functionality sites that offer access only to deposit account data-to level four sites-highly sophisticated offerings enabling integrated sales of additional products and access to other financial services, like investment and insurance. Successful Internet banking offers the following:

v Exceptional rates on savings, CDs and IRAs. v Checking with no monthly fee, free bill payment

and rebates on ATM surcharges.

v Credit cards with low rates. v Easy online applications for all accounts,

including personal loans and mortgages. v Twenty-four hour account access, and v Quality customer service with personal attention.

E-banking has made the life of everyone easy. This can be illustrated with the help of real life example. Penalty due to non-payment of bills is not new to any one and it is obvious that no one likes the lengthy banking procedures such as writing a cheque, standing a long queue and then ensuring that the particular amount is available in our bank account. But with the advent of internet, not just bill payment, but one can also make investments, shop and even plan a holiday. The Reserve Bank of India (RBI) constituted a working group on Internet banking. The group divided Internet banking products into three types, based on the level of access granted. They are:

v Information Only System: General information, such as interest rates, branch location, bank products and their features, loan and deposit calculations are provided on the bank’s website. Also, facilities for downloading various types of application forms exist. Communication is normally done through e-mail. There is no interaction between the customer and the bank’s application system; there is no possibility of any unauthorized person getting into production systems of the bank through Internet.

v Electronic Information Transfer System: The system provides customer-specific information in the form of account balances, transaction details and statement of accounts. The information is largely in the “read only” format. Identification and authentication of the customer is through password. The information is fetched from the bank’s

application system either in batch mode or offline. The application systems can not directly access through the Internet.

v Fully Electronic Transactional System: This system allows bi-directional capabilities. Transactions can be submitted by the customer for online update. This system requires a high degree of security and control. Here web server and application systems are linked over secure infrastructure. It comprises technology covering computerization, networking and security; inter bank payment gateway and legal infrastructure.

As there are brighter aspects of e-banking, similarly there are some grey areas. Internet is global in nature with no signal territory and jurisdiction. This acts both as a virtue and vice. It is beneficial as it connects people, institutions and assists them to interact efficiently. At the same time, it can be dangerous by allowing cyber criminals to commit fraud. The cyber law of India, as contained in the Information Technology Act, 2000, is also silent on this aspect. Thus, the number of internet banking frauds is increasing alarmingly. As stated by Praveen Dalal (leading Techno-Legal ICT, Cyber law, Cyber Security and Cyber Forensics specialist of India), the problem of ATM frauds is global in nature and its ramifications have been felt in India as well. The lacunae with the IT Act,2000, is that it does not contain any specific provision regarding the same and the traditional law of Indian Penal code (IPC) 1860, also can not be trusted solely and independently to tackle this issue. Technology advancement has proved to be useful. But, however, it is not correct to consider it faultless. Hacking and phising have been a nightmare for most of the banks. The hacking of Bank of India’s site is one such example. Researchers at Sunbelt Software Inc broke the news that the bank (among the largest in India), had been victimized by attackers who had planted rouge

INFRAME code on the site’s homepage. The INFRAME code redirected customers to a malicious server which pushed a huge array of malware to vulnerable windows PCs. That code, actually an INFRAME exploit, redirected users to a hacked server. The Bank of India hack is the latest example of legitimate website being compromised and serving up malware to unwary visitors. Banks have now started educating the customers regarding such threats through all means available to them. Also ensure that the sign ‘https://’ and pad lock appear for safe banking and protection. It is generally believed that computerization of banking system has helped to make the process of banking safe and secure. But one of the incidents that occurred at ICICI on November 29, 2004 shattered the trust of people to great extent in e-banking. Around Rs. 6.95 lakh was fraudulently withdrawn from an account through the system of e-banking. The question that was raised at that moment was how the password leaked? In another case, Surat police arrested a youth from Mumbai who transferred Rs. 1.20 lakh from different account holders of a private bank to one of his friend’s account. The police suspect that international gang was involved in the racket. On January 25, Branch Manager of HDFC bank at Parle Point, Khursheed Mistry lodged a complaint of cheating at Umra Police station alleging that money was illegally transferred from eight HDFC account holders of Mumbai to an account of one Paresh Dhaduk of Surat city through the bank’s online services. However, banks have been advising the users to take some necessary precautions like, changing password frequently, making passwords alphanumeric, and keeping firewalls of their computer systems updated. RBI has set up a ‘working group Internet banking’ to examine various aspects of Internet banking. The group had focused on three major areas, namely those issues related to:

v Technology and security. v Legal, and v Regulatory and supervisory.

RISKS IN INTERNET BANKING Internet has become a very important tool for many organizations. In today’s highly competitive world, to cater to the needs of the customers more effectively, banks are using the latest technology. Internet can be great asset to banks as well as customers. It helps bank to enhance their services, reduce transaction costs, increase the level of customer satisfaction, etc. in the same way, customers can carry out their transactions with case on a 24x7 basis. Banking and financial institutions, being service industries, must provide best services in order to attract new customers and the retain the existing ones. Internet banking is the delivery products and services using the Internet as primary channel. When a customer opts for Internet banking, he need not travel all the way to the bank to carry out his transactions, i.e., banking is not confined to a particular bank’s branch. Internet allows him to make his transactions from anywhere and at any time. Initially, customers could carry out only the basic transactions, like checking their accounts, requesting for cheque book, applying for loans, etc. Transactions that could be made only after personal interaction can now be carried out electronically. Though it is a highly cost-effective delivery channel with many advantages, one can not overlook the risks associated with this kind of banking. Some of the most important risk associated with internet banking are: credit risk, interest rate risk, liquidity risk, price risk, foreign exchange risk, transaction risk, compliance/legal risk, strategic risk, reputation risk, cross-border risk and information security risk.

Risk Associated with E-Banking: Strategic Risk Strategic risk is the risk of unexpected negative developments in results stemming from previous or future fundamental business policy decisions. The flaws in the decision making lead to risks of this kind. E- Banking service is purely a long term strategic decision. So, the bank’s management must consider the risk associated with it and the cost involved for controlling and managing these risks against the potential return from e-banking services. If the planning is poor, it can adversely affect the bank’s profitability. So, before offering e-banking services the bank’s management must consider the following points:

v These should be an adequate MIS in order to track the utilization and profitability out of e-banking.

v The services must be properly designed, priced and delivered to effectively meet the demands of the customers.

v Electronic loan agreements and electronic contracts need to be maintained and stored in a suitable format that is legally accepted, in case any disputes arise in future.

v Services and charges should be at par with those of others.

Transactional/Operational Risk Operational risks refer to those risks that arise during the process of a transaction. They can be the result of errors in processing and system disruptions. The errors may be committed either by the customers or by the bank employee. The risk that arises from the fraud is also known as transactional risks. These kinds of risks are a part of every organization that offers products and services.

Most financial institutions outsource there Internet banking function, & thus do not have full control over their vendors, adding to transaction risk. However, the level of risk depends on the structure of the institution’s processing environment, types of services that are offered, complexity of the processes and the supporting technology. It has been observed in most cases that whenever a non-standardized innovative service is offered, operational /transaction risk increases. Since e-banking is a 24*7 facility, banks must ensure that the infrastructure required is totally foolproof. To control these risks, a bank must adopt effective policies, install proper procedures and have controls to handle the risks involved in e-banking. Credit Risk According to Wikipedia, an online encyclopedia, the ‘credit risk’ is the risk of loss to a debtor’s non-payment of a loan or other line of credit. Credit risk generally does not increase due to the origination of loans through e-banking. However, since any indi8vidual or company having inadequate credit worthiness can originate a loan electronically and the same proposal may be approved resulting in more NPA for the Bank. So, management should take all precautions before and during the process of approving loans through e-banking. The management should take measures, such as the following, to avoid credit risks:

v Customer identity has to be verified properly for every online credit application.

v Loans originated through e-banking channels should be properly monitored.

v Care should be taken so that loan should is concentrated in one particular sector.

v Since loans through e-banking are given to customers scattered in wider geographical areas, banks must make all the arrangements and see to it that loans are repaid on time.

Interest Rate Risk Interest rate risk arises due to the change in interest rates. Internet allows banks to gather deposits and disburse loans to large numbers of customers in a speedy manner. It has now become very easy to compare the interest rate of different banks which are prominently advertised in a bank’s website. This increases the movement of interest rate causing risk to earning or capital of the bank. To minimize interest rate risk, the following steps should be taken:

v The bank should form a high powered and well-qualified asset liabilities committee.

v It should carry out asset liability matching study at regular intervals.

v Scenario analysis must be done in order to identify the interest rate change.

Liquidity Risk This risk is caused due to bank’s inability to meet its obligations. Interest banking has huge potential to increase deposits and at the same time it increases volatility of asset too. This volatility is caused, especially when a customer merely maintains an account only to avail himself of the better interest rate. The moment they get better rate elsewhere, they move out and terminate their relationship with the bank. This immediate termination can cause mismatch in bank’s assets and liabilities – pushing the bank into liquidity risks. In order to check the liquidity risk, the bank should take the following measures:

v It should be vigilant enough to timely recognize and address the changes in the market condition which may affect the bank’s ability to liquidate the assets.

v Liquidity position of the bank should be properly reviewed for ascertaining the matching pattern of asset and liabilities of the bank.

Foreign Exchange Risk This risk is caused when a cross border transaction takes place. With the availability of internet, banking across countries has become possible. As a result, the residents of other countries carry out transactions in their domestic currencies. Due to easy and low transaction costs, customer may take speculative positions in various currencies, which may result in this kind of risk. To minimize foreign exchanges risk, the following steps should be taken:

v Those dealing with foreign exchange business must be trained properly.

v The bank should circulate the information regarding the latest developments among its employees who are involved in foreign exchange business.

v Workshops should be conducted periodically to upgrade the knowledge of the employees dealing with forex business.

Price Risk The risk arises due to change in the value of traded portfolio or financial instruments. Banks may be exposed to price risks if they create or expand deposit brokering loan sales or securitization programs as a result of Internet banking activities. The bank must see to it that adequate policy, procedure and management system is in order to monitor measure and manage the price risk as a preventive measure. Security Risk E-Banking is associated with security risks and a breach of security can cause huge losses to the bank concerned. Internet is a public network which can be accessed by any body from anywhere. So, data and information which flows through it can easily be accessed

even by an unauthorized person with little effort. Programs like Sniffer can be installed at the web server or other critical location to collect any confidential data electronically from the Internet. Fraudsters can get access to any kind of vital information, such as customer’s account number, password, credit and debit card number. With this information, they can hack the victim’s account and cause great loss to the customer as well as bank. Money Laundering Risk As defined by wikipedia, money laundering is the practice of disguising illegally obtained funds so that they seem legal. It is a crime in many jurisdictions with varying definitions. Internet banking allows one to make transactions from anywhere and at any time. However, it is not an easy task for the bank to apply the traditional method of detecting illegal transactions. Though RBI has framed and set Anti-Money Laundering rules, it is difficult to apply the same in the case of certain electronic payments. As a result, the bank is always exposed to these kinds of risks. In some cases, ‘Know Your Customers’ laws can not be adhered to and the bank may face legal sanction from RBI. To avoid money laundering risks, the bank must:

v Design proper customer identification and verification techniques.

v Develop proper audit trials. v Review the compliance system at regular intervals. v Frame policies and procedures to pinpoint and report

suspicious transaction made through Internet banking.

Reputation Risks Reputation risk is the risk of getting negative publicity for the banks. Reputation risk may be cause loss of funds or customers. A bank’s reputation can be damaged by Internet banking services that are poor executed. Once a bank starts losing its reputation,

customers begin to lose their confidence in the bank. Customers are less tolerant of any issues in connection with the customer care and thus there is more performance expectation from the Internet channel. This will certainly impact the bank-customer relationship. If the e-banking system is not up to the customer’s expectation or system fails, the bank’s credibility is lost. Reputation risks may also crop up because of other bank or financial institution’s faulty e-banking system or products. To avoid reputational risk, the bank must:

v Check the entire Internet banking thoroughly before implementation.

v Have enough backup facilities to overcome any system failure.

v Have contingency plans to fix problems in case of system failure.

v Have its own group of expert hackers to find the loopholes of the system.

Legal Risk Legal risks are those that crop up when government guidelines, regulations or prescribed practices are violated. It also arises when the legal right and obligation of a party to his transaction is not well-established. In Internet banking, sometimes, right and obligation are uncertain and no fixed cable to them. These lead to legal risks. The contracts, which are raised electronically, at times, not be informed about the precautionary measures to be taken when using Internet banking, which can lead to disputes and sometime legal suits against the bank. To provide better services, a bank’s site may contain a hyperlink to another site and this may lead to legal risks. Hacker may use such links to gather customer information legally.

Cross-border Risks It refers to the volatility of returns on international investments caused by events associated with a particular country as opposed to events associated solely with a particular economic or financial agent. Since Internet banking operates with the help of World Wide Web, it may be accessed by anyone irrespective of time and place. Rules and regulations vary from country to country and if they are ignored, they may push the bank into legal risks. There is always credit risk for various cross-border transactions as it is very difficult to appraise a loan application from a customer residing in an other country. Cross-border transaction of a bank also increases the foreign exchange risk and the exchange rate always fluctuates. To avoid cross-border risks, the bank should take the following steps:

v It should provide the customer with sufficient disclosure on its website so that a customer can ascertain its identity, the country where the bank is established and the regulatory licenses etc.

v The rules and regulations of different countries should internally be circulated throughout its branches and offices.

Budgeting for E-banking: Many banks have started offering Internet banking as a part of their wide range of services. More banks are in various stages of launching their Net banking services. It is important to learn from the experience of others to launch one’s own service in a shortest possible time in a cost-effective manner. While deciding on net banking budgets. Cost Components of Net Banking: While investment in Net Banking would not be very much different from investments in any technology-intensive project, the net banking investments would broadly encompass the following components:

• Technology - Hardware - System Software - Application Software - Scalability(desirable but optional) - Web Designing.

• Security

- Firewalls - Certification (Server Level, Client Level) - Intrusion Detection System - Advisories.

• Networking

- Isolation from Main Network.

• Hosting

- In-house vs. Outsourced Data Centers.

• Operations

- Back End Process - PIN Generation and Communication

- Customer Service Centers. • Business Costs

- Advertising - Promotions - Ties-ups with other sites for payments - Staff Training - Producer Brochures - Legal Expenses.

Having said this, it is important that cost of each individual IT project needs to be put under microscope; holistic view should never be lost sight of. There is an increased need for both the technology persons and business owners to understand each other’s work.

Successful Computerization in Banks

Today the customers are more demanding than ever before. Customers expect to contact the bank, the way they want and when they want. If the bank can not provide the information and services to the customers that they need, the bank may loss the customers. To meet these demands, banks have gone for computerization to be ‘reliable’, ‘maintainable’, and ‘available’ for all type of customers and its staff. The computerization of banks has thrown up newer and more formidable challenges. The physical boundaries of the branches are not the constrains for the business. With the rise of the Internet and e banking, banks are more empowered and so are the customers. Expectations of the Bank from Computerization: The computerization should:

- Meet the requirements of the bank. - Work and provide correct results. - Have minimum errors and bugs. - Have fast response time. - Be-user friendly. - Provide safe and secured working environment. - Have legal basis. - Have the compatibility with the manual operational systems of

the bank. - Be able to face the competition in the market.

Acceptance Requirements:

- The vendor gives guarantee and warranty for hardware and software.

- The system is delivered as per the accepted time schedule. - The system is within the financial budget. - The vendor gives copyright or ownership of the system. - The vendor has technical support as and when required. - The system provides the reliable and correct results. - The system is easy to use and user friendly.

- The technical support or vendor is available on internet and through e-mail.

- The vendor provides any hands-on training to the bank officials.

- The vendor has online help desk available round the clock for seeking help.

- The proper documentation is done or not for the computerization.

Characteristics of Successful Computerization:

- All the users concerned are satisfied. - The computerization is well-documented. - A very few bugs are existing in the system. - The technical aspect is handled well. - The time schedule is met. - The computerization is completed successfully within the

budget and other constraints. Why computerizations in banks fail?

- Lack of proper directions and guidelines. - The vendor did not understand the bank’s requirements. - The time schedule for completing the computerization was not

real. Therefore, the milestones were not achieved. - There were frequent changes in the top, middle bottom line of

the Bank Management. - The customization was not properly done. - The software system was not tested well. - There was no involvement of operational staff in testing the

software system. - A temporary manager was assigned the task of managing

computerization for a short period of time. - The quality control and standard norms for developing and

designing a system was not followed in the beginning of computerization.

- The budget was exhausted.

- Reusing of hardware and software was not properly communicated to the operational staff of the bank.

- Communication gaps existed at different levels of management, customers and vendors.

- The best practices of computerization followed by other banks were not taken into account.

- Fear psychosis amongst users for using the technology was present.

- The computerization lacked skilled manpower. - In adequate training. - The computerization was not very cost effective. - Changes in chosen hardware and software technology, both

were not compatible. - The system specifications were not frozen before start of the

software development. - There was no proper feed- Back. - The skilled man power for maintenance of hardware and

software was not available in the region. - Coordination with hardware, software and UPS vendors was

not proper. - There was too much dependence on the outside vendors. - Data was quite vulnerable and data management was very poor. - There was hurried implementation.

In the coming days, a great change in the banking system is foreseen and Information Technology will act as a catalyst of change. The method of traditional banking would be more affected by integrating the implementation of innovative computerized systems. No doubt that Information Technology has to serve the banks in enhancing the business and infrastructural developments in coming days, but the burden of computerization is that bank must choose carefully how to apply it.

Internet Banking – Benefits and Threats Benefits:

• Enables new marketing strategies.

- Product differentiation. - Customer-centric models - Core banking applications shifting from ‘branch’ banking to

‘bank’ banking.

• Cost savings through multiple services.

- Over same platform – lesser than branch transactions.

• Improving customer relationships

- Customer satisfaction. - Better transaction experience under common roof. - Customer retention.

• Income generation through new business opportunities

- Cross selling/Up selling

Threats:

• Uncertain return on technology investment.

- Sloe shift from traditional banking. - Customer apprehensions on security. - Lack of connectivity to large area. - Integration with legacy equipment. - Software/operation/infrastructure costs.

The Advantages of E-Banking:

• Speed of operations • Does not require presence of customer • Automated operations; high transparency levels • Control in the hands of the customer • Lower costs • Conveniences:

- Online statements - Online funds transfer - Online applications - Online product information and research.

Analysis of data collected through the questionnaire TABLE 1 The users have used the ATM facility of the following banks:

0

25 25

10

15 15

10

0

5

10

15

20

25

30

NAME OF

THE BANK

HDFC

BANK

BANK OF

BARODA

ICICI BANK

PUNJAB

NATIONAL

SBI

NOT USED

FACILITY

Table 2 The satisfaction level experienced by the ATM users

No. OF USERS IN PERCENTAGE

20

70

000 10HIGHLY STAISFIED

SATISFIED

INDIFFERENT

DISSATISFIED

HIGHLY DISSAISFIED

NOT AVAILING THE FACILITY

LEVEL OF SATISFACTION No. OF USERS IN PERCENTAGE HIGHLY STAISFIED 20 SATISFIED 70 INDIFFERENT 0 DISSATISFIED 0 HIGHLY DISSAISFIED 0 NOT AVAILING THE FACILITY 10

TABLE 3 Flowing number of times in a week the users has use the ATM .

0, 0%

60, 60%20, 20%

5, 5%

5, 5%10, 10% NUMBER OF TIME ATM USED

IN A WEEK

1

2

3

5

No. Facility of ATM

NUMBER OF TIME ATM USED IN A WEEK

NO. OF USERS

1 60 2 20 3 5 5 5

No. Facility of ATM 10

TABLE 4 Preference of the users of ATM card of the benefits of ATM

BENEFIT OF ATM NO.OF USER

TIME - SAVING 20 BENEFICIAL IN EMERGENCY 60 CONVINIENT 20

0% 20%

60%

20%

BENEFIT OF ATM

TIME - SAVING

BENEFICIAL IN EMERGENCY

CONVINIENT

TABLE 5 Weather the users of ATM card has faced any problem while using the ATM card .

0, 0%

40, 40%

60, 60%

USER FACED PROBLEM

YES

NO

USER FACED PROBLEM

NO. OF USER

YES 40 NO 60

TABLE 6 Problem faced by the users

NATURE OF PROBLEM NO. OF USER CARD GOT WITHELD 25 ATM WAS NOT WORKING 63 INSTRUION WERE NOT CLEAR 12

025

63

12 NATURE OF PROBLEM

CARD GOT WITHELD

ATM WAS NOT WORKING

INSTRUION WERE NOTCLEAR

TABLE 7 Other internet banking services availed by the respondent

0 15

5

100

565

NATURE OF SERVICE

CREDIT CARD

TRANSFERING OF MONEY

OPENING FIXED ACCOUNT

INQUIRE ABOUT BALANCE

TAX DEDUCTED

NONE OF THE ABOVE

NATURE OF SERVICE NO. OF USER CREDIT CARD 15 TRANSFERING OF MONEY 5 OPENING FIXED ACCOUNT 10 INQUIRE ABOUT BALANCE 0 TAX DEDUCTED 5 NONE OF THE ABOVE 65

TABLE 8 Respondent’s opinion of the weakness of Internet banking:

0

44

30

26

0 10 20 30 40 50

LACK OF EXPERIENCE

SECURITY OF FLAWLESS

ONE WAY COMMUNICATION

NATURE OF WEAKNESS NO.OF USERS ONE WAY COMMUNICATION 44 SECURITY OF FLAWLESS 30 LACK OF EXPERIENCE 26

TABLE 9 Respondent’s view of security of the Internet Banking Services:

SECURITY OF INTERNET BANKING

NO.OF USER

IT IS SECURE 45 IT IS NOT SECURE 55

0, 0%

45, 45%

55, 55%

IT IS SECURE

IT IS NOT SECURE

FINDINGS EXTRACTED OUT OF THE INFORMATION COLLECTED THROUGH A QUESTIONNAIRE

1. Most of the respondents used ATM facility (90% of them availed this facility.)

2. Respondents were using the ATM facility of private banks more than the public sector banks.

3. Most of the respondents were satisfied by the ATM facility being used by them.

4. Most of the respondents used ATM facility in a week.

5. Most of the respondents feel that the benefit of the ATM card is that it comes handy when cash is needed urgently.

6. 60% of the respondent faced the ATM faced no problem in using the ATM while 40% of the respondents faced a problem while using ATM.

7. A major problem faced by the respondents while availing ATM card facility was that the ATM was not working and the second common problem was that card got withheld in the machine.

8. Most of the respondents used very less Internet Banking facilities other than ATM. Out of the other facilities; credit card was the most commonly used service and the second service used was opening a fixed deposit account via internet.

9. Most of the respondents felt that weakness of internet banking is that it is one way communication and the second most commonly held weakness was that it is not secure.

10 55% of the respondents felt that Internet Banking is not secure and the reason behind this is that hackers may hack the password of one’s account and this may result in huge losses to user of Internet Banking.

CONCLUSION Internet Banking is the need of the hour and private banks are already providing efficient Internet Banking Services to their customers. Although Public sector banks are also providing Internet Banking Services but the number of their branches facilitating such services are less as compared to private banks. So, the public sector banks should concentrate more on providing Internet Banking Services. By taking the above measures Internet Banking will become more competitive and profitable.

QUESTONNAIRE Dear Sir/ Madam, As part of my MBA curriculum, I, Vivek Kumar, am conducting a market research regarding the consumer perception about Internet banking for which I need a few lines of your personal views regarding banking products & services in shape of a questionnaire as designed by me. The data being collected are solely for academic purpose. I request you to kindly extend your co-operation. I am filling this questionnaire so that I am able to conduct this research successfully.

1. Name: 2. Age: 3. Occupation: 4. Do you avail the ATM facility of any bank? a) Yes b) No (If yes, then proceed to Q.5 otherwise move to Q.10) 5. You are using the ATM facility of which bank? ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,

6. What is the satisfaction level experienced by you with the ATM facility being used by you?

a) Highly satisfied b) Satisfied c) Indifferent d) Dissatisfied e) Highly Dissatisfied

7. How many times in a week do you use your ATM card? ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, 8. Rank in order to preference the benefits of ATM card in your opinion:

a. It is time-saving b. It is beneficial when cash is needed urgently c. It is convenient

9. Have you ever faced any problem while using ATM card?

a) Yes b) No

If yes, the select any of the following problems which you have faced: a) The card got withheld in the machine

b) ATM was not working

c) While using it for first time, you faced a problem while understanding the instructions and there was no employee of the bank to help you 10. Which of the following Internet Banking Services are you availing?

a) Credit card b) Transferring one’s money from one city to any

other branch in a city c) Open Fixed Deposit account via the internet d) Inquire about balance in one’s saving, current and

FD account and also on tax Deducted at source on one’s FD account for the current and financial year

e) Giving instructions over the internet for stopping payment on cheques

f) Request for a cheque book via internet g) View all transactions on an account for a specified

period and get a copy via e-mail h) None of the above

11. Did you ever have any grievances against the bank providing you Internet banking service provided by it?

a) Yes b) No

(If yes then answer the next question, if no then move to Q 13) 12. What was the level of satisfaction experienced by you of the grievance handling procedure of the Bank? a) Highly Satisfied b) Satisfied c) Indifferent d) Dissatisfied e) Highly Dissatisfied

13. What is your opinion the weakness of Internet Banking?

a) There is only one way communication b) The security is not flawless c) Lack of first-hand experience gained by a person visiting

a bank is not there 14. Do you think Internet Banking is secure?

a) Yes b) No Give a reason for your answer: ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,.

15. Do you think that all public sector banks in India should start providing Internet Banking service to survive in the market?

a) Yes b) No

If Yes, why? ,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,,, THANK YOU

References: www.hdfc.co.in Banking Law and Practices (S.N.Maheswari) The Economic Times