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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.) S.Mahapatra and has not been submitted
to any other institute/ university or any organization apart from IMIS –
Bhubaneswar ( INSTITUTE OF MANAGEMENT AND INFORMATION
SCIENCE – BHUBA
BHUBANESWAR ).

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:

30
25 25
25

20
15 15
15
10 10
10

5
0
0
ICICI BANK

NATIONAL

NOT USED
THE BANK

SBI
HDFC

BANK OF
BANK

BARODA
NAME OF

FACILITY
PUNJAB
Table 2
The satisfaction level experienced by the ATM users

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

No. OF USERS IN PERCENTAGE

HIGHLY STAISFIED
0 10 20
SATISFIED

INDIFFERENT

DISSATISFIED
70
HIGHLY DISSAISFIED
NOT AVAILING THE FACILITY
TABLE 3
Flowing number of times in a week the users has use the ATM .

NUMBER OF TIME ATM USED IN A NO. OF


WEEK USERS
1 60
2 20
3 5
5 5
No. Facility of ATM 10

10, 10% 0, 0%
NUMBER OF TIME ATM USED
5, 5%
IN A WEEK
5, 5%
1

20, 20% 60, 60%


3

No. Facility of ATM


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

NO.OF
BENEFIT OF ATM USER
TIME - SAVING 20
BENEFICIAL IN
EMERGENCY 60
CONVINIENT 20

20% 0% 20%

BENEFIT OF ATM
60% TIME - SAVING
BENEFICIAL IN EMERGENCY
CONVINIENT
TABLE 5
Weather the users of ATM card has faced any problem while using the ATM card .

USER FACED NO. OF


PROBLEM USER
YES 40
NO 60

0, 0%

40, 40%

60, 60%

USER FACED PROBLEM


YES
NO
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

12 0 NATURE OF PROBLEM
25

CARD GOT WITHELD

ATM WAS NOT WORKING

INSTRUION WERE NOT


63 CLEAR
TABLE 7
Other internet banking services availed by the respondent

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

0 15 NATURE OF SERVICE
5 CREDIT CARD
TRANSFERING OF MONEY
OPENING FIXED ACCOUNT
10 INQUIRE ABOUT BALANCE
0
65 5 TAX DEDUCTED
NONE OF THE ABOVE
TABLE 8 Respondent’s opinion of the weakness of Internet banking:

NATURE OF WEAKNESS NO.OF USERS


ONE WAY
COMMUNICATION 44
SECURITY OF FLAWLESS 30
LACK OF EXPERIENCE 26

26
30
44
0

0 10 20 30 40 50

LACK OF EXPERIENCE
SECURITY OF FLAWLESS
ONE WAY COMMUNICATION
TABLE 9 Respondent’s view of security of the Internet Banking Services:

SECURITY OF INTERNET NO.OF


BANKING USER
IT IS SECURE 45
IT IS NOT SECURE 55

0, 0%

45, 45%
IT IS SECURE
IT IS NOT SECURE
55, 55%
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:


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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?
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THANK YOU
References:

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

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