MANAGEMENT THESIS Final Report

“Internet Banking Services: A Study on its Adoption, Implementation and Usage”
(With reference to Mangalore region)

In the partial fulfillment of the requirements for the degree of MASTERS IN BUSINESS ADMINISTRATION (Affiliated to ICFAI University)

Submitted by MS. DEEPALAXMI 7NBMG077

Under the guidance of MS. CHITRANJALI (FACULTY SUPERVISOR)

ICFAI NATIONAL COLLEGE MANGALORE 2007-2009

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DECLARATION
I hereby declare that this Management Thesis entitled “Internet Banking Services: A Study on its Adoption, Implementation and Usage” is a bonafied work carried out in partial fulfillment for the degree of ‘Masters in Business Administration’ from INC, Mangalore affiliated to ICFAI University during the year 2007-09.

I have not submitted this work to any other University or Institution for the award of any fellowship, degree, diploma or any other similar titles.

Date:

Name and Enrollment Number:

Place:

DEEPALAXMI

7NBMG077

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ACKNOWLEDGEMENT
Any work of excellence requires inspiration, guidance and co-operation. In the Process of completion of this project I had many hands guiding and motivating me.

First and foremost, I would like to express my gratitude to all those who helped me complete this project report directly or otherwise. I would like to thank the INC, Mangalore for giving us the opportunity to commence this project in the first instance. Also, I take the privilege to thank Prof. K. Narayan (The Principal, INC Mangalore) for guiding me and encouraging me to take this Project towards successful presentation.

I am deeply indebted to my Faculty Guide, Ms.Chitranjali whose help, stimulating suggestions and encouragement helped us in drafting the Project Report. I thank her from the depth of my heart for providing her constant support and guidance right from the proposal of the project till the successful completion of the same. Also I thank Ms. Suraksha Korya, Faculty, INC Mangalore, who enlightened me about various Quantitative techniques that could be used for my project.

Again I would like to thank all the Managers of the Banks under study for the cooperation they gave and the knowledge they shared with me during the conversation.

Also I take the pleasure to thank all the respondents who parted with some of their precious time in filling the questionnaire scheduled with them or otherwise, showing their selfless and helpful attitude.

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Again I consider it my Right and Duty to thank my parents and family members who helped me financially as well as in other manners to complete my thesis effectively.

I am also thankful to all the faculty guides of the INC for providing all the necessary information without which it would not be possible to come out with this Report. Also, I would thank all my friends who guided me in conducting my research effectively.

Deepalaxmi

7NBMG077

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ABSTRACT/ EXECUTIVE SUMMARY
India is a Developing Economy. Banks are the major components of any Economy, specifically the Indian economy. Banking Industry in India is undergoing rapid changes with innovative products and innovative technologies making their steps in the Industry. Internet Banking has attracted increased attention since the 2000’s. This has helped Banks reduce their Costs of providing effective services to the customers, reduced the use of Manpower, and also increased the efficiency of services. This study is conducted to see how the Internet banking Service is adopted by Banks, what considerations are made to implement the System and how it is accepted by the customers in Mangalore. The study considered 108 samples from the Customers of various Banks operating in Mangalore and 10 Banks operating in Mangalore was considered. To collect the data required, questionnaire schedule method as well as questionnaire design method was used. The study aims to find out the factors considered by the Banks before implementing the system and the promotional tools adopted by the Bank to increase the usage of Internet banking Service in Mangalore Region.

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Table of Contents
ICFAI NATIONAL COLLEGE ..................................................................................................... 1 DECLARATION ............................................................................................................................ 2 ACKNOWLEDGEMENT .............................................................................................................. 3 ABSTRACT/ EXECUTIVE SUMMARY ..................................................................................... 5 INTRODUCTION .......................................................................................................................... 8
Needs of the Research: ........................................................................................................................ 9 Objectives of the Study: ..................................................................................................................... 10 Hypothesis of the Study: .................................................................................................................... 11 Significance of the Study: .................................................................................................................. 12 Limitations of the Study: ................................................................................................................... 12

LITERATURE REVIEW ............................................................................................................. 13 THE BANKING SECTOR IN INDIA ......................................................................................... 20
Structure of the organized banking sector in India: ............................................................................. 21 History of Banking in India: .............................................................................................................. 24

TECHNOLOGY IN BANKING................................................................................................... 31
Types of Internet Banking: ................................................................................................................ 38 Impact of the Information and Technology Act, 2000: ....................................................................... 39 Reasons for adopting the online banking: ........................................................................................... 39 The provisions for the offences committed:........................................................................................ 40 Advantages of Internet Banking System:............................................................................................ 41 Disadvantages of Internet Banking System: ....................................................................................... 42

PROFILE OF THE TEN BANKS UNDER STUDY ................................................................... 46 RESEARCH METHODOLOGY.................................................................................................. 60
Population: ........................................................................................................................................ 60 Sample Size and Sampling Techniques: ............................................................................................. 60 Scope of the Study: ............................................................................................................................ 60 Data Source: ...................................................................................................................................... 60 Questionnaire Design: ....................................................................................................................... 61 Tools for Data Collection: ................................................................................................................. 61 Tools for Analysis: ............................................................................................................................ 61

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RESEARCH RESULTS ............................................................................................................... 62
Statistical Analysis- Chi Square Analysis:.......................................................................................... 62 Hypothesis Testing I: ..................................................................................................................... 62 Hypothesis Testing II: .................................................................................................................... 64 Hypothesis Testing III: .................................................................................................................. 68 Analysis of Variance: ........................................................................................................................ 71 Hypothesis Testing IV: .................................................................................................................. 71 Likert Scaling: ................................................................................................................................... 76 Other Findings:.................................................................................................................................. 82

CONCLUSIONS........................................................................................................................... 98 APPENDIX ................................................................................................................................... 99
Annexure I: ....................................................................................................................................... 99 Annexure II: .................................................................................................................................... 103 Annexure III: ................................................................................................................................... 105 Annexure IV:................................................................................................................................... 107 Annexure V: .................................................................................................................................... 108

REFERENCES ........................................................................................................................... 111

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INTRODUCTION
India is a Developing Nation. In its initiatives of stepping towards becoming a ‘Developed nation’ India needs to become efficient and effective in all aspects of its economy. Banks are the main constituents of any economy, which help a nation move either towards success or failure in the global scenario. Hence, it is very necessary for Indian Banks to improve their services and provide competitive, effective, efficient and time saving services to its customers and thereby help in creating a ‘Developed Nation’ in India.

Banks and financial institutions in India are in the process of Web-enabling their services in order to offer better banking experience to its customers. The banking industry is facing unprecedented competition from non-traditional banking institutions, which now offer banking and financial services over the Internet. Information technology has immense untapped potential in banking. Strengthening of information technology in banks could improve the effectiveness of asset-liability management in banks. Building up of a related data-base on a real time basis would enhance the forecasting of liquidity greatly even at the branch level. This could contribute to enhancing the risk management capabilities of banks.

It is the new generation of banking in India. Most private and MNC banks have already setup an elaborate Internet banking infrastructure. The Internet banking is changing the banking industry and is having the major effects on banking relationships. In Tier I and II cities almost all are already knowledgeable about Internet Banking Services and other innovations in Banking Sector. But in Mangalore which is categorized as Tier III city, not many people are literate about the Net Banking Services.

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However, this innovation undertaken by the banks has provided them numerous benefits like:

Greater reach to customers Quicker time to market Ability to introduce new products and services quickly and successfully Ability to understand its customers’ needs Customers are given access to information easily across any location Greater customer loyalty

Multi-national and private sector banks in India have been very successful in setting up Internet banking services. They are much advanced in terms of the number of sites & their level of development.

This study deals with the analysis of the factors affecting the Adoption of Internet banking Services, the Implementation of the same and the usage of these services by the Customers. It also analyses the effects of Internet banking Services on the Efficiency and Development of Banks. Needs of the Research:

The Internet Banking Services are of recent arrival in India and not many people are aware of the Banking Services online. The needs of this research can be defined as follows:

The Banking system has to consider many factors before implementing the Internet banking services. So this study helps in understanding the factors affecting the adoption and implementation of IBS.

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This also helps in understanding the usage of IBS in Mangalore and its effect on the performance of the banks as compared to its performance before implementing the IBS. This throws light on the promotional tools adopted by the Banks in order to improve the usage of IBS in Mangalore and assesses the effectiveness of the type of promotional tools adopted by the Banks. As there is high growth of Information Technology usage in Banking Sector, this thesis helps in understanding the uses of IBS in contributing to the effectiveness of services by the banks. Objectives of the Study: The Study mainly concentrates to find the following: Primary Objective: To throw a light on the adoption, implementation and usage of Internet Banking services in Mangalore.

Secondary Objectives:

To know the factors affecting the adoption and Implementation of IBS. To analyze the promotional tools used by the banks to increase the usage of IBS in Mangalore and its effectiveness. To know the role of IBS in improving the Image of the Bank and its services in the minds of its Customers. To analyze the perceptions of the users of IBS regarding the performances of the Banks.

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Hypothesis of the Study: Chi- Square technique: The Study aims to test whether the usage of Internet Banking Services depends on the perception regarding the security level in banking transactions, using Chi- Square Analysis. The hypothesis considered for the same are: Hypothesis I: H0: The usage of Internet Banking Service by the Customer is independent of the perception of Customer regarding Security level in Banking Transactions. H1: The usage of Internet Banking Service by the Customer is dependent on the perception of Customer regarding Security level in Banking Transactions. Hypothesis II: H0: The usage of Internet Banking Service by the Customer is independent of the satisfaction level of the Customers regarding the services offered by their Banks. H1: The usage of Internet Banking Service by the Customer is dependent on the satisfaction level of the Customers regarding the services offered by their Banks. Hypothesis III: H0: The usage of Internet Banking Service by the Customer is independent of the Number of years of association with the Bank. H1: The usage of Internet Banking Service by the Customer is dependent on the Number of years of association with the Bank.

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ANOVA technique: The Study uses ANOVA technique to find whether the maximum amount transacted by different customers through their Bank’s Internet Banking Service are equal or not. Hypothesis IV: H0: The Maximum Amount transacted in each Bank is Equal H1: The Maximum Amount transacted in each Bank is not equal Significance of the Study: The Study deals with the analysis of Adoption, Implementation and Usage of Internet Banking in Mangalore region. The Scope of this study is limited to Mangalore region since the sample selected for the study is from Mangalore. The results of the thesis are tested using various statistical tools and hence it is proved realistic and significant limited to the time period and area under study. Limitations of the Study: The Study had the following limitations during the data Collection stage: The Study needed to contact those people who were using Internet Banking Service of those Banks under study. But the Managers of those banks refused to give the contact details of the Customers using the Internet Banking Service in their Bank. Hence, the Questionnaires had to be scheduled with other individuals who could be perceived as the users of Internet Banking Service. Thus the data could not be collected as scheduled.

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LITERATURE REVIEW
As given by Soutiman Das1, Banks and financial institutions in India are in the process of Webenabling their services in order to offer Internet banking to its customers. The RBI has drafted certain Internet banking guidelines that have to be followed by banks about to venture into online banking. Multi-national and private sector banks in India have been very successful in setting up Internet banking services. This is mainly because these banks already had a robust automated banking environment on which they could build the Internet banking infrastructure. Most multinational banks already have efficient Internet banking infrastructures running in other countries which could be emulated in India. And the private banks, which are relatively young, did not have to carry the burden of legacy systems. They merely invested in best-of-breed Internet banking solutions from the start.

As given by this study, the nationalized banks have been unable to evolve as fast as most private sector and MNC banks. As a result, in many organizations there may be a mix of automated systems and manual systems, with both systems running parallel, and using half-baked applications created by smaller vendors which run in certain departments. This creates a chaotic scenario. Network management is a nightmare, the legacy systems may buckle any moment, new users and locations keep coming up, and there are also issues of security and consolidation. An usual nationalized Bank is affected by the following situation:

A very large network of branches nationwide growing fast Lack of connectivity in remote locations

1

Gupta Soutiman Das, (February 2003): “Towards Online Banking”, Article, Network Magazine issue. Source: http://www.networkmagazineindia.com/200302/feature.shtml

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A very large base of customers increasing fast 75-80 percent automation in main branches with less automation in remote cities and smaller branches Large amount of legacy equipment which doesn't integrate well with other systems Inefficient and outdated applications in some departments which are not flexible and don't integrate well with other applications Slow-to-change mentality of an Indian customer who is used to dealing with a human teller

Web-enabling banks with such infrastructure and number of branches nationwide at one go is a near-impossible task. However each of the challenges can be overcome with good planning, phased implementation, and lots of grit on the part of the CIOs.

The document broadly categorizes levels of Internet banking services into three types:

The basic level service in which the banks' websites disseminate information on different products and services to customers. It may receive and reply to customers' queries through email. Simple transactional websites which allow customers to submit their instructions, applications for different services, and queries on their account balances. They do not permit any fund-based transactions on their accounts. The third level of Internet banking services offered by fully-transactional websites which allow 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.

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The distinctive features of Internet banking as given by the document are:

It removes the traditional geographical barriers as it could reach out to customers of different countries/legal jurisdiction. This has raised the question of jurisdiction of law/supervisory system to which such transactions should be subjected. It has added a new dimension to different kinds of risks traditionally associated with banking, heightening some of them and throwing new risk control challenges. Security of banking transactions, validity of electronic contract, customers' privacy, etc., which have all along been concerns of both bankers and supervisors have assumed different dimensions given that Internet is a public domain, not subject to control by any single authority or group of users. It poses a strategic risk of loss of business to those banks who do not respond in time to this new technology, being the efficient and cost effective delivery.

A general study conducted on the business case of Internet banking opines that security is perhaps the biggest concern for any bank providing Internet banking. ‘Connectivity issues to remote locations’ are also very important, but the need to be secure is far more pressing. The document says that security issues include questions of adopting internationally accepted stateof-the-art minimum technology standards for access control, encryption/decryption (minimum key length), firewalls, verification of digital signature, and Public Key Infrastructure (PKI). The key components of security concerns are: Authentication: The assurance of identity of the person in a deal, Authorization: A party doing a transaction is authorized to do so, Privacy: The confidentiality of data and information relating to any deal, Data integrity: Assurance that the data has not been altered, and Non-repudiation: A party to the deal cannot deny that it originated

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the communication or data. If these areas are not addressed, the bank may suffer operational risk, reputational risk, legal risk, money laundering risk, and strategic risk. Sanmugam2, in his study conducted for Malaysian Banks says that, the rapid changes in Malaysian banking system have created a new dimension in the banking industry with the emergence of Internet banking. The study also explores the consumer’s adoption behaviour driven by the evolution of new, banking technology in Malaysia. The result implies that a social norm effect dominates Internet banking adoption. This paper presents the profile of the internet banking adopter in Malaysia based on a large scale survey. A logistic model is used to estimate the probability of a bank customer adopting internet banking. The profile of the adopter is constructed using demographic, social economic and technological capacity indicators. The method is a very simple one, which can be used by financial institutions to gain better understanding of their own internet banking customers.

As given by him, the Adoption of Internet banking is expected to be positively related to race, gender, education, occupation, income, residential area, language, risk, computer literacy and Internet access but negatively related to age, marital status and frequent visit to the bank branch. All the variables have the expected signs, although not all the variables are statically significant. Income of the respondents is positively correlated with adoption of Internet banking. The relationship between the decision to adopt Internet banking and computer literacy is statistically significant at ‘0.01’ level of significance. The result suggests that the log of odds for computer literate respondents adopting Internet banking is 1.1204 times higher than respondents who are computer illiterate. Those who are computer illiterate significantly have a lower likelihood to

Sanmugam, “Factors determining consumer adoption of Internet Banking”, Binary University College, Puchong, Selangor Malaysia, Source: http://ssrn.com/abstract=1021484

2

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adopt Internet banking. Most of the data on the explanatory variables, such as the demographic and social economic indicators can be readily found in the data base of customers. Equipped with information on the customers who have already adopted internet banking or likely to do so, banks will be able to identify the market segments that should be targeted. They can then introduce banking products and services that better suit the needs and wants of the customers in the segment. The main objective of the research done in Thailand by Ms. Doungratana Sattabusaya3 was to identify the key factors that determine success and move intention of Internet banking users toward their actual behaviour. The research setting was in Bangkok, Thailand. The research design was based on positivistic paradigm with a triangulation approach in the process of collecting and analyzing data. The data was collected through 1,200 survey questionnaires and 9 semi-structured interviews of top managers and senior consultants of the participated banks who involved with Internet banking projects. Its objective came from the fact that Internet banking customers gain more benefits than the traditional banking customers as they can access 24-hours services in everywhere. It is, however, revealed that Internet banking services have been underused by the potential customers in spite of their availability. This demands the need for the research to identify the key factors that determine success and move intention of Internet banking users toward their actual behaviour. The relevant literatures have been reviewed and indicate that The Theory of Planned Behaviour (TPB) (Azjen, 1985, 1991) and The Technology Acceptance Model (TAM) (Davis, 1986) are crucial in predicting Internet banking users’ behaviour. However, other variables such as antecedents and perceived creditability are needed to enhance predicting power. In short, the primary methodology of this research is based on a triangulation
3

Miss Doungratana Sattabusaya, “Keys factors that determine Internet banking adoption in Thailand”, Cardiff Business School, Cardiff University, Aberconway Building, Colum Drive, Cardiff, CF10 3EU, UK, pgs.1-15.

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approach. It consists of several processes which can be depicted in Figure 3. The first phase is a survey questionnaire which is used to explore customers’ perceptions in adopting Internet banking in general. This is enable exploration of a large number of people’s views however, the depth of research is limited because the answers are predetermined and standardized. The second phase, document analysis, helps to clarify understanding of matters raised from the survey. The final phase, semi-structure interviews, is proceeded after data analysis. This helps to add richness to the findings as it provides a wealth of rich data and reflects people’s opinions and attitudes (Bryman, 2004). As Given by Research and Markets4, made to help clients to evaluate the opportunities, challenges and driving forces critical to the growth of banking industry in India, Investment by banking sector in Information Technology is expected to increase at 18% in 2007 from last year. The forecast given in this report is not based on a complex economic model but is intended as a rough guide to the direction in which the market is likely to move. The future projection is done on the basis of the current market scenario, past trends, and rules and regulations laid by the regulator and supervisor of the financial system, Reserve Bank of India (RBI). The report provides detailed overview of the Indian banking industry by contemplating and analyzing various parameters like assets size, and income level. It helps clients to understand various products available in the Indian banking industry and their future scope. The future forecast discusses the future prospects of different arms of banking industry including rural banking, bancassurance, financial cards, mobile banking, role of technology in rural banking, pension funds, and the future course of action and strategies for pension fund industry to be taken at macro level. Key Findings of the Report are as follows:
Research and Markets, (2007), “Opportunities in Indian banking Sector”, Research and Markets, Ireland, source: http://www.researchandmarkets.com/reports/564049/
4

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• •

Pension fund industry in India grew at a CAGR of 122.44% from 1999-00 to 2006-07. Rural and semi-urban India is expected to account for 58.33% of the insurance sector by 2010.

In terms of ownership, debit cards are more in number than credit cards but in terms of transactions, credit cards are used more than debit cards.

The ATM outlets in India increased at a CAGR of 28.09% from March 2006 to March 2007.

• •

Rural and semi-urban centers account for 66% of total bank branches. Indian Mutual Fund industry witnessed a growth of 49.88% from May 2006 to May 2007, and higher growth is recorded in closed ended schemes at 215.61%.

Increasing number of millionaires in India is increasing the scope of Wealth Management Services.

Bankable households in India are anticipated to grow at a CAGR of 28.10% during 20072011.

Investment by banking sector in Information Technology is expected to increase at 18% in 2007 from last year.

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THE BANKING SECTOR IN INDIA
The banking system in India is significantly different from that of other Asian nations because of the country’s unique geographic, social, and economic characteristics. India has a large population and land size, a diverse culture, and extreme disparities in income, which are marked among its regions. There are high levels of illiteracy among a large percentage of its population but, at the same time, the country has a large reservoir of managerial and technologically advanced talents. Between about 30 and 35 percent of the population resides in metro and urban cities and the rest is spread in several semi-urban and rural centers. 5 The country’s economic policy framework combines socialistic and capitalistic features with a heavy bias towards public sector investment. India has followed the path of growth-led exports rather than the “export- led growth” of other Asian economies, with emphasis on self-reliance through import substitution. These features are reflected in the structure, size, and diversity of the country’s banking and financial sector. The banking system has had to serve the goals of economic policies enunciated in successive five year development plans, particularly concerning equitable income distribution, balanced regional economic growth, and the reduction and elimination of private sector monopolies in trade and industry. Banks are among the main participants of the financial system in India. A Bank is a financial institution which primarily deals with the acceptance of deposits from the customers and lending the same to those in need for the funds. Bank is defined as a person who carries on the business of banking. Banks also perform certain activities which are ancillary to this business of accepting

Deolalkar G. H, (2000) “The Indian Banking Sector: On the Road to progress”, A Study of Financial Markets, Pgs. 60-68.

5

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deposits and lending. Since Banking involves dealing directly with money, governments in most countries regulate this sector rather stringently. Banks provide almost all payment services by conducting checking or current accounts for customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to customers' accounts. Banks also enable customer payments via other payment methods such as telegraphic transfer. Banks have added new payment channels like Internet banking, Mobile Banking, ATMs etc. Banks' activities can be divided into retail banking, dealing directly with individuals; business banking, providing services to mid-size business; corporate banking dealing with large business entities; private banking, providing wealth management services to High Networth Individuals; and investment banking, relates to helping customers raise funds in the Capital Markets and advising on mergers and acquisitions. Banks are now moving towards Universal Banking, which is a combination of commercial banking, investment banking and various other activities including insurance. Structure of the organized banking sector in India: Banking Segment in India functions under the umbrella of Reserve Bank of India - the regulatory, central bank. The major participants of the Indian financial system are the commercial banks, the Financial Institutions (FIs), encompassing Term-lending Institutions, Investment Institutions, Specialized Financial Institutions and the State-level Development Banks, Non-Bank Financial Companies (NBFCs) and other market intermediaries such as the Stock Brokers and Money-Lenders. The Commercial Banks and certain variants of NBFCs are

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among the oldest of the market participants. The FIs, on the other hand, are relatively new entities in the financial market place. This segment broadly consists of: 1. Commercial Banks 2. Co-operative Banks Commercial Banks: The commercial banking structure in India consists of: 1. Scheduled Commercial Banks 2. Unscheduled Banks Scheduled commercial Banks constitute those banks which have been included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. Some co-operative banks are scheduled commercial banks although not all co-operative banks are. Being a part of the second schedule confers some benefits to the bank in terms of access to accommodation by RBI during the times of liquidity constraints. At the same time, however, this status also subjects the bank certain conditions and obligation towards the reserve regulations of RBI. For the purpose of assessment of performance of banks, the Reserve Bank of India categorizes them as public sector banks, old private sector banks, new private sector banks and foreign banks. This sub sector can broadly be classified into: 1. Public sector 2. Private sector 3. Foreign banks
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Public sector banks have either the Government of India or Reserve Bank of India as the majority shareholder. About 92 percent of the country’s banking segment is under State control while the balance comprises private sector and foreign banks. The public sector commercial banks are divided into three categories: 1. State bank group (eight banks): This consists of the State Bank of India (SBI) and Associate Banks of SBI. The Reserve Bank of India (RBI) owns the majority share of SBI and some Associate Banks of SBI.1 SBI has 13 head offices governed each by a board of directors under the supervision of a central board. The boards of directors and their committees hold monthly meetings while the executive committee of each central board meets every week. 2. Nationalized banks (19 banks): In 1969, the Government arranged the nationalization of 14 scheduled commercial banks in order to expand the branch network, followed by six more in 1980. A merger reduced the number from 20 to 19. Nationalized banks are wholly owned by the Government, although some of them have made public issues. In contrast to the state bank group, nationalized banks are centrally governed, i.e., by their respective head offices. Thus, there is only one board for each nationalized bank and meetings are less frequent (generally, once a month). The state bank group and nationalized banks are together referred to as the public sector banks (PSBs). 3. Regional Rural Banks (RRBs): In 1975, the state bank group and nationalized banks were required to sponsor and set up RRBs in partnership with individual states to provide low-cost financing and credit facilities to the rural masses. As on March 31, 2008, the PSBs accounted for 69.9 per cent of the aggregate assets and 72.7 per cent of the aggregate advances of the Scheduled commercial banking system.
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The Structure 6can be shown as follows (Number of banks is in brackets):

History of Banking in India: Banking in India flourished even in Vedic times7. In the Rig Veda, there was a mention about indebtedness and the earliest Dharma Shastras lay down rates of interest and regulations governing debts and mortgages. References to money lending business are found in Manu Smrithi too. The literature of Buddhist period, the Jatakas and archeological discoveries contain evidences of existence of “Shreshtis” or Bankers. With the expansion of Trade and Commerce, the concept of Banking gained importance. The handling of Banking gradually transcended from individuals to groups and then to companies. With the Industrial revolution in 18th and 19th Centuries, it attained more significant place in the area of Lending.

6 7

Source: http://en.wikipedia.org/wiki/Banking_in_India Icfai University: (2006) “Commercial banking”, Icfai University Press, Hyderabad, pgs. 2-7.

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Indian banking system, over the years has gone through various phases after establishment of Reserve Bank of India in 1935 during the British rule, to function as Central Bank of the country. The first bank in India, though conservative, was established in 1779. From 1779 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: Phase I: Early phase from 1786 to 1969 of Indian Banks Phase II: Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. Phase III: New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991. The Bank of Hindustan was the first Bank to be set up in India. The General Bank of India was set up in the year 1786. 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 Europeans shareholders. In 1865 Allahabad Bank was established and first time 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. 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. 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

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aftermath deposit mobilization was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders. Banking crisis during 1913 -1917 and failure of 588 banks in various States during the decade ended 1949 underlined the need for regulating and controlling commercial banks. 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). In 1955, Government of India nationalized 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 nationalized in 1960. On 19th July, 1969, major process of nationalization was carried out. With 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. 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: Nationalization of State Bank of India. 1959: Nationalization of SBI subsidiaries. 1961: Insurance cover extended to deposits.

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1969: Nationalization of 14 major banks. 1971: Creation of credit guarantee corporation. 1975: Creation of regional rural banks. 1980: Nationalization of seven banks with deposits over 200 core. 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%. On 14 August 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalization of banking practices in all aspects relating to the structure, organization, functions and procedures of the financial systems. Based on the recommendations of the Committee, a comprehensive reform of the banking system was introduced in 1992-93. In 1993, in recognition of the need to introduce greater competition, new private sector banks were allowed to be set up in the banking system. These new banks had to satisfy certain requirements. Further, revised guidelines for entry of new banks in private sector were issued on 3 January 2001. The applications for setting up new banks received within the stipulated period were scrutinized by RBI and “in principle” approvals were issued to two entities on 7 February 2002. Kotak Mahindra Bank Ltd, on satisfactory completion of other formalities, was granted banking license on 6 February 2003. It was included in the Second Schedule of the Reserve Bank of India Act, 1934 w.e.f 12 April 2003. License was granted to “Yes Bank Ltd” on 24 May 2004, which was included in the second Schedule of the RBI Act, 1934 on 21 August 2004. In consultation with Government of India, RBI issued detailed Guidelines on ownership and governance in private sector banks on 28 February 2005.

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As on 30th June, 1999, there were 300 scheduled banks in India having a total network of 64,918 branches. The Public Sector Banks (PSBs), which are the foundation of the Indian Banking system account for more than 78 per cent of total banking industry assets. On the other hand the Private Sector Banks in India are witnessing immense progress. They are leaders in Internet banking, mobile banking, phone banking, ATMs. Indusland Bank was the first private bank to be set up in India. IDBI, ING Vysya Bank, SBI Commercial and International Bank Ltd, Dhanalakshmi Bank Ltd, Karur Vysya Bank Ltd, Bank of Rajasthan Ltd etc are some Private Sector Banks. Banks from the Public Sector include Punjab National bank, Vijaya Bank, UCO Bank, Oriental Bank, Allahabad Bank, Andhra Bank etc. ANZ Grindlays Bank, ABN-AMRO Bank, American Express Bank Ltd, Citibank etc are some foreign banks operating in India. The implementation of reforms has had an all round salutary impact on the financial health of the banking system, as evidenced by the significant improvements in a number of prudential parameters. The average capital adequacy ratio for the scheduled commercial banks, which was around two per cent in 1997, had increased to 13.08 per cent as on March 31, 2008. The improvement in the capital adequacy ratio has come about despite significant growth in the aggregate asset of the banking system. This level of capital ratio in the Indian banking system compares quite well with the banking system in many other countries – though the capital adequacy of some of the banks in the developed countries has remained under considerable strain in the recent past in the aftermath of the sub-prime crisis. In regard to the asset quality also, the gross NPAs of the scheduled commercial banks, which were as high as 15.7 per cent at endMarch 1997, declined significantly to 2.4 per cent as at end-March 2008. The net NPAs of these banks during the same period declined from 8.1 per cent to 1.08 per cent. These figures too compare favourably with the international trends and have been driven by the improvements in

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loan loss provisioning by the banks as also by the improved recovery climate enabled by the legislative environment. What is noteworthy is that the NPA ratios have recorded remarkable improvements despite progressive tightening of the asset classification norms by the RBI over the years. The reform measures have also resulted in an improvement in the profitability of banks. The Return on Assets (RoA) of scheduled commercial banks increased from 0.4 per cent in the year 1991-92 to 0.99 per cent in 2007-08. The Indian banks would appear well placed in this regard too vis-à-vis the broad range of RoA for the international banks. The banking sector reforms also emphasized the need to improve productivity of the banks through appropriate rationalization measures so as to reduce the operating cost and improve the profitability. A variety of initiatives were taken by the banks, including adoption of modern technology, which has resulted in improved productivity. The Business per Employee (BPE), as a measure of productivity, for the public sector banks has registered considerable improvement. The BPE for the public sector banks, which was Rs. 95 lakh in 1998-99, almost doubled to Rs. 188 lakh in 2002 and more than re-doubled to Rs. 496 lakh in 2007. It needs to be noted that the turnaround in the financial performance of the public sector banks, pursuant to the banking sector reforms, has resulted in the market valuation of government holdings in these banks far exceeding the initial recapitalization cost – which is something unique to the Indian banking system. Thus, the recapitalization of banks by the government has not been merely a “holding out” operation by the majority owner of the banks. The Indian experience has shown that a strong, pragmatic and non-discriminatory regulatory framework coupled with the market discipline effected through the listing of the equity shares and

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operational autonomy provided to the banks, can have a significant positive impact on the functioning of the public sector banks.

The banking system’s international isolation was also due to strict branch licensing controls on foreign banks already operating in the country as well as entry restrictions facing new foreign banks. A criterion of reciprocity is required for any Indian bank to open an office abroad. These features have left the Indian banking sector with weaknesses and strengths. A big challenge facing Indian banks is how, under the current ownership structure, to attain operational efficiency suitable for modern financial intermediation. On the other hand, it has been relatively easy for the public sector banks to recapitalize, given the increases in nonperforming assets (NPAs), as their Government dominated ownership structure has reduced the conflicts of interest that private banks would face.

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TECHNOLOGY IN BANKING
“Banks are increasingly facing sliding margins and fierce competition. It is imperative to increase volumes and reduce operational costs”- K. P. Padmakumar, Chairman, Federal Bank The service industries are mostly customer driven and their survival in competitive environment largely depends on quality of the service provided by them. In this context, quality of service furnished by banking sector is very important and profitability of their business is closely connected to the quality of service they render. Banking Sector is facing tremendous competition since the entry of private players into the sector. Just about a decade back this sector was limited to the Nationalized and co-operative banks. Then came the multi-national banks, but these were confined to serving an elite few. The deregulation of the banking industry coupled with the emergence of new technologies, are enabling new competitors to enter the financial services market quickly and efficiently. The Banking sector in India has experienced a rapid transformation. One could regard the past as the 'medieval ages' in the banking industry, wherein every branch of the same bank acted as an independent information silo, and multi-channel banking (ATMs, Netbanking, tele-banking, etc) was almost non-existent. The two letters, which have changed the way businesses operate has been IT as an acronym for “Information Technology8”. No other facilitating service has resulted in such large scale benefits as Information Technology. IT has become such an essential ingredient of one’s way of life in today’s world that it is difficult to imagine a world without IT. And no other sector has benefited
8

Address by Shri Vepa Kamesam, Chairman, IDRBT and Former Deputy Governor, RBI (2004) at the city Union Bank. Source: www.rbi.gov.in

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to such a large extent as the financial sector, with the Banking sector in particular, from the inroads made by IT.

The 90s saw the banking industry embracing technology in a massive way, led in particular by the new private banks and MNC banks. Among these series of technology innovations, Internet banking for the retail segment is a recent phenomenon that has generated a lot of interest in the Indian banking industry. Private and foreign banks have been the early adopters while the PSU banks are also beginning to latch on to the bandwagon.

With economic liberalization measures many private and foreign banking companies were allowed to operate in the country. Favourable economic climate and a variety of other factors such as demand for wide range of financial products from various sections of the society led to mutually beneficial growth to the banking sector and economic growth process. This was coincided by technology development in the banking operations.

Most of the banks have already started to feel the impact of the operations of the new banks in the country. The single biggest advantage of these banks is the large scale deployment of IT in their business endeavours. Their business processes have necessitated that IT should provide solutions to various bottlenecks and problems and the result has been that IT has transcended well as an integral part of their regular operations.

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. Most of the Internet Banks are so called 'entry level' sites, offering little more than company information and basic marketing materials. Only 8% offer 'advanced

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transactions' such as online funds transfer, transactions & cash management services. Foreign & Private banks are much advanced in terms of the number of sites & their level of development. Information technology analyst firm, the Meta Group, recently reported that "financial institutions who don't offer home banking by the year 2000 will become marginalized." By the year of 2002, a large sophisticated and highly competitive Internet Banking Market will develop which will be driven by: Demand side pressure due to increasing access to low cost electronic services. Emergence of open standards for banking functionality. Growing customer awareness and need of transparency. Global players in the fray Close integration of bank services with web based E-commerce or even disintermediation of services through direct electronic payments (E- Cash). More convenient international transactions due to the fact that the Internet, along with general deregulation trends eliminates geographic boundaries. Move from one stop shopping to 'Banking Portfolio' i.e. unbundled product purchases. The top three concerns in the mind of every bank's CEO are as follows: Customer retention: Customer retention is one of the main priorities for banks today. With the entry of new players and multiple channels, customers have become more discerning and less 'loyal' to banks. Given the various options, it is now possible to open a new account within minutes. Or for that matter shift accounts within a couple of hours. This makes it imperative that banks provide best levels of service to ensure customer satisfaction.

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Cost pressures: Cost pressures come into play when banks are not able to afford the cost of a certain service or initiative although they want to or need to have it in place. This is primarily because the cost structure at the backend is not efficient enough to offer that kind of service to the marketplace. As Gunit Chadha, MD & CEO, IDBI Bank puts it, "In today's world of narrowing margins, a serious look at costs is definitely an imperative." Increased competition: The entry of new players into the banking space is leading to increased competition. A recent example would be of Kotak Mahindra Finance Limited (KMFL)—a financial services company focused on investment consulting, auto finance, insurance, etc—morphing into Kotak Bank. Many other such players are waiting on the sidelines. Technology makes it easier for any company with the right channel infrastructure and money reserves to get into banking. This has been one of the major reasons behind this kind of competition from players who do not have a banking background. Traditionally, banks used their retail outlets to provide services to the individual customer. Now with ATMs, Net banking, and Tele-banking replacing traditional service channels, banks are more focused on enhancing customer value through branches. They are using their existing network of branches to advice on and sell new financial instruments like consumer loans, mutual funds, etc. They are also using branches to inform and educate customers about other, more efficient channels to conduct common transactions like cash withdrawal or balance checks. The concept of online banking was first brought in when the Governor, Reserve Bank of India appointed a Committee under Shri W.S.Saraf, Executive Director to look into technological issues relating to payment system and to make recommendations for widening the use of modern

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technology in the banking industry. The Saraf Committee recommended institution of Electronic Funds Transfer Systems in India. It also reviewed the telecommunication system like use of BANKNET and optimum utilization of SWIFT by the banks in India. The Shere Committee in 1995 had recommended framing of RBI (EFT System) Regulations under Section 58 of the Reserve Bank of India Act 1934 (RBI Act), amendments to the RBI Act and to the Bankers' Books Evidence Act, 1891 as short term measures and enacting of a few new Acts such as the Electronic Funds Transfer Act, the Computer Misuse and Data Protection Act. Today most of the Indian cities have networked banking facility as well as Internet banking facility. A customer is empowered to operate his account from any part of the country. UTI Bank, ICICI, HDFC Bank and Bank of Punjab are the main winners of the race. The Internet banking is changing the banking industry and is having the major effects on banking relationships. Even the Morgan Stanley Dean Witter Internet research emphasized that Web is more important for retail financial services than for many other industries. Internet banking involves use of Internet for delivery of banking products & services. It falls into four main categories, from Level 1 - minimum functionality sites that offer only access to deposit account data - to Level 4 sites - highly sophisticated offerings enabling integrated sales of additional products and access to other financial services- such as investment and insurance. In other words, a successful Internet banking solution offers the following services: Exceptional rates on Savings, CDs, and IRAs Checking with no monthly fee, free bill payment and rebates on ATM surcharges Credit cards with low rates Easy online applications for all accounts, including personal loans and mortgages

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24 hour account access Quality customer service with personal attention Banks are looking at newer ways to make a customer's banking experience more convenient, efficient, and effective. They are using new technology tools and techniques to identify customer needs and are offering tailor-made products to match them. Centralized operations and process automation using core banking applications and IP-based networks improve efficiency and productivity levels tremendously. Core banking applications help a bank to shift from 'branch banking' to 'bank banking.' This basically means that a customer will be treated as a bank's customer than just the customer of a particular branch which was the case earlier. Also, IP-based networks lets a bank offer multiple services over the same network, resulting in costs savings. CRM solutions, if implemented and integrated correctly, can help significantly in improving customer satisfaction levels. Data warehousing can help in providing better transaction experiences for customers over different transaction channels. This is made possible because data warehousing helps bring all the transactions coming from different channels under a common roof. Data mining helps banks analyze and measure customer transaction patterns and behavior. This can help a lot in improving service levels and finding new business opportunities. Risk Assessment is another area where technology can play a major role. "Using technology, banks are able to better assess risks like interest risks, liquidity risks, FOREX risks, etc. The other driver for using IT is that banks can reduce costs and reduce the time to market," says Rangesh Nair, Country Manager-Financial Services Sector, and IBM. The changes staring at the face of bankers all relate to the fundamental way of banking – which is undergoing a rapid transformation in the world of today. It is widely recognized that the core

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banking functions alone do not add to the bottom line of banks – value added services are slowly but steadily emerging as a substantial opportunity for banks to exploit and customers would not hesitate to use such services in view of the convenience they offer. Technology holds the key to the future success of Indian Banks since it is Information technology which has brought in a sea change in the way banking is being conducted today. Concepts such as ‘Anywhere Banking’ or ‘Automated Teller Machines’ are but offshoots of technology implementation by banks, as also Internet Banking and Mobile Banking. Such innovations have had a positive impact on customer service – but the fundamental benefit that is derived by banks relates to reduced costs of operation – such as in handling cash and in servicing customers efficiently and accurately over the counters of branches. With the advent of electronic banking, electronic funds transfer and other similar products, funds transfers across different constituents is now easily possible – within time frames which would have appeared impossible a few years ago. It is this area which is a big challenge to banks. The most prominent challenge among the above relates to the concept of security. With the delivery channels relating to funds based services – such as movement of funds electronically between different accounts of customers – taking place with the use of technology, the requirements relating to security also need to undergo metamorphosis at a rapid pace. Various concepts such as digital signatures, certification, storage of information in a secure and tamper-proof manner like smart cards, all assume significance and have to be part of the practices and procedures in the day-to-day functioning of banks. The Reserve Bank of India has taken upon itself the setting up of a safe, secure and efficient communications network for the exclusive use of the banking sector, named as “INFINET”, i.e.

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Indian Financial Network. The INFINET is one of the very few networks in the world which uses the latest in technology and security called Public key Infrastructure – PKI, which is not only robust but also well within the legal requirements of the Information Technology Act, 2000. The INFINET provides for inter-bank communication – which implies that banks have to now function as a group and at the same time competing with one another too. “Advanced Online Authentication” provides enhanced and additional security for the online banking application. Types of Internet Banking: Currently, there are three basic kinds of Internet banking that are being employed in the marketplace: Information: This is the most basic level of Internet banking. The bank has marketing information about its products and services on a stand-alone server. This level of Internet banking service can be provided by the bank itself or by sourcing it out. Since the server or Web site may be vulnerable to alteration, appropriate controls must therefore be in place to prevent unauthorized alterations to data in the server or web site. Communication: This type of Internet banking allows interaction between the bank’s systems and the customer. It may be limited to electronic mail, account inquiry, loan applications, or static file updates. The risk is higher with this configuration than with the earlier system and therefore appropriate controls need to be in place to prevent, monitor, and alert management of any unauthorized attempt to access bank’s internal network and computer systems. Under this system the client makes a request to which the bank subsequently responds. Transaction: Under this system of Internet banking customers are allowed to execute transactions. Relative to the information and communication types of Internet banking, this
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system possesses the highest level of risk architecture and must have the strongest controls. Customer transactions can include accessing accounts, paying bills, transferring funds, etc. These possibilities demand very stringent security. The six primary drivers of Internet banking includes, in order of primacy are: Improve customer access Facilitate the offering of more services Increase customer loyalty Attract new customers Provide services offered by competitors Reduce customer attrition Impact of the Information and Technology Act, 2000: The information and technology act is an act to provide legal recognition for transactions carried out by means of electronic data interchange and other means of electronic communication commonly referred to as "electronic commerce". Reasons for adopting the online banking: The growth of online banking has been fuelled by broadband availability as well as secures connections over the Internet. Many banks now offer some form of online banking activity, whether it is checking bank balance, paying bills online or even simple cash transfer transactions. As customers gain more confidence in carrying out secure transactions over the Internet, vulnerabilities are present and can be exploited by cyber criminals to obtain a user's personal banking details. In one of the latest developments, FSecure, a leading security provider for Internet and mobile networks, has issued a warning against computer users of an upsurge in
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attacks against banking sites, targeting personal user data. It started with software that was capable of retrieving the data typed into the computer keyboard and then more complex mechanisms arrived on the scene such as Phishing9 and Pharming10. .

A new concept of cell phone banking has taken over the Indians. Basix, an organization that specializes in bringing micro loans and other financial services to India's poor, has teamed up with Axis, an Indian commercial bank, to begin offering accounts to workers in Delhi's slums. Its approach relies on a combination of high technology and old-fashioned shoe leather.

The main risk of online banking is the security concerns. For this the IT Act has a provision, Section 3(2) which, provides for a particular asymmetric crypto system and function as a means of authenticating electronic record. Any other method used by banks for authentication should be recognized as a source of legal risk. The provisions for the offences committed: Under the chapter IX Section 43, the punishments for the offences so caused are defined. By this act under chapter X, Section 48 defines the establishment of a cyber appellate tribunal. But there is one fundamental difficulty in punishing the cyber criminals. It is the matter of jurisdiction. This is because any person who possesses a computer and an internet can commit this crime and it is practically impossible to trace the person out. Even if the person can be traced, there is no geographical border to bring him under the jurisdiction of a particular country. However the banking regulatory body, RBI has issued a guideline dated 14th June, 2001, which discusses

9 Phishing typically involves fraudulent bulk e-mail messages that guide recipients to legitimate-looking but fake Web sites and try to get them to supply personal information like account passwords 10 Pharming tampers with the domain-name server system so that traffic to a Web site is secretly redirected to a different site altogether, even though the browser seems to be displaying the Web address you wanted to visit.

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issues pertaining to his territorial jurisdiction within which the internet banking products can be made available. Advantages of Internet Banking System: The benefits of Internet banking are plentiful as witnessed by the consequential reaction of a tremendous rise in usage and application. The potential appears to be unlimited ranging from virtual banks to e-cash.

Reduced Transaction Costs: It has been repeated shown that as a delivery or distribution channel, the Internet could bring a substantial cost advantage for banks. No doubt the ATM is considerably cheaper than a teller, but even so, the Internet is nearly 3 times cheaper than the ATM usage. In short, replacing a teller with an Internet channel should in theory, show a 10 fold increase in the distribution revenue for the bank. This reason alone should be sufficient for banks to encourage this form of distribution channel. Perfect Information: Internet makes perfect information available to all market participants by bringing about efficiencies in the search process. For buyers of banking services, there are sites that aggregate information on product offerings from different providers at a single location. By merely making information available to customers about multiple providers, the Internet performs the function of dismantling the oligopoly of a few providers and bringing about a structure favorable towards perfect competition. Perfect Competition: This is achieved by two means. The first is through the aggregation of buyers and sellers and also through the provision of a search function platform. The second is by bringing about efficiency in determining price that is enabled by the online auction mechanism which makes pricing transparent and also makes it dynamic since it is driven by near perfect market conditions of demand and supply. Similarly, by creating competition
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among the providers of capital, the Internet helps companies raise money at much finer spreads. Also banks using the Internet have pioneered the use of online auction to price Initial Public Offerings (IPOs). In this manner market forces are given greater prominence thus ensuring conditions for perfect or near perfect competition. Disadvantages of Internet Banking System: There are always two sides to a coin. Similarly Internet banking too has a ‘bane’ side to it. The bane lies in its inexorable slide towards higher risk from various facets of bank operations. Risk is the potential that unexpected events may have an adverse impact on the banks earnings. Internet banking risks consists of risk associated with credit, interest rate, transaction, etc. These risks are not mutually exclusive but invariably all of these are associated with Internet banking.

Credit Risk: Credit risk is the risk to earning and eventually capital, arising from a borrower’s failure to meet the terms of a credit contract with the bank or otherwise to perform as agreed. It is found in all activities where success depends on counterparty, issuer, or borrower performance. It arises any time bank findings are extended, committed, invested, or otherwise exposed through actual or implied contractual agreements, whether on or off the bank’s balance sheet.. Interest Rate Risk: Interest rate risk is the risk to earnings arising from movements in interest rates. From an economic perspective, a bank focuses on the sensitivity of the value of its assets, liabilities and revenues to changes in interest rates. Interest rate risk arises from differences between the timing of rate changes and the timing of cash flows (repricing risk); from changing rate relationships among different yield curves affecting bank activities (basis risk); from changing rate relationships across the spectrum of maturities (yield curve risk);

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and from interest-related options embedded in bank products (options risk) (Comptroller’s Handbook, 1999). Liquidity Risk: Liquidity risk is the uncertainty arising from a bank’s inability to meet its obligations when they are due, without incurring unacceptable losses. Liquidity risk includes the inability to manage unplanned changes in market conditions affecting the ability of the bank to liquidate assets quickly and with minimal loss in value. Transaction Risk: Transaction risk is the current and prospective risk to earnings and capital arising from fraud, error, the inability to deliver products or services, the failure to maintain a competitive position and services, and the inability to manage information properly. This risk is evident in each product and service offered and encompasses product development and delivery, transaction processing, systems development, computing systems, complexity of products and services, and the internal control environment (Comptroller’s Handbook, 1999). A high level of transaction risk may exist with Internet banking products, particularly if those lines of business are not adequately planned, implemented, and monitored. Total Reliability Risk: As with most other Internet ventures, an exclusive reliance on virtual channels is probably not a very wise move. A strategy of combining brick and mortar with click and avatar is probably more viable. There are transactions such as balance enquiry that are ideally suited for the Internet. But transactions such as working capital loan applications are more detailed and personal discussions may be necessary. In the latter, the absence of a physical channel is a problem.

Internet banking is on the rise. When viewed as another channel, its benefits are modest. However, when integrated with other channels, Internet banking becomes a powerful tool for improving customer satisfaction and increasing cross-selling opportunities. But at the same time

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banks must keep in mind that, every electronic channel including the Internet has its short falls which can have major consequences. Keeping track of the ever changing banking industry and the latest update in Internet technology, banks need to equip themselves for the competition. Even though there are enormous opportunities and virtual banks are on the rise ‘brick and mortar’ banks and transactions should not be neglected or relegated to the sidelines. However, Indian internet banking faces following challenges11:

Proper understanding of the customer - i.e. proper identification of their needs and wants. For this a massive survey must be undertaken may be in collaboration with other banks. There is need for transparency in offering services as customers awareness has grown considerably. Breach of privacy: online transactions enter straightaway into the records revealing the identity of customer. Thus black money cannot be transferred with ease. Bandwidth: Though companies claim to offer good speed and high bandwidth, still there are problems in accessing high speed on net. Internet banking can go high only on the wings of proper infrastructure comprising telecommunications and bandwidth. Computer literacy in India is still very low and that is a barrier in fast acceptance of Internet banking. The mindset of the Indian customer need to be changed. Customer has to be protected against being "net-jacked" i.e. he needs to be protected from fraud. Threats19 can be Cracking login and passwords is a common way of fiddling with the data.

11

Srivastava Saurabh, (2008), “Internet Banking: A Global way to Bank.”, BBS Institute of Management and Technology. Source: http://www.indianmba.com/Faculty_Column/FC908/fc908.html

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Denial of services: Directing millions of queries can block computer network. Data Diddling: Data can be modified in an unauthorized manner. A customer can therefore receive bills of higher amounts than the actual transactions Session hijacking: Hijackers become unauthorized intermediaries between the server and the client; they can then hijack the data and prevent it from reaching the destination.

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PROFILE OF THE TEN BANKS UNDER STUDY
1. State Bank of India: State Bank of India (SBI) is the leading commercial bank in India, offering services such as retail banking, commercial banking, international banking and treasury operations. The bank is an integral part of State Bank Group, which includes seven other banks and offers additional services such as mutual funds and insurance. The bank primarily operates in India. It is headquartered in Mumbai, India and employs about 179,205 people. The company recorded revenues of INR902,188.1 million (approximately $22,410.4 million) in the financial year ended March 2008 (FY2008), an increase of 34.4% over 2007. The operating profit of the company was INR183,315.4 million (approximately $4,553.6 million) in the financial year 2008, an increase of 27.4% over 2007. The net profit was INR89, 606.1 million (approximately $2,225.8 million) in the financial year 2008, an increase of 40.8% over 2007. The company primarily operates through four business units, treasury, wholesale banking, mid corporate group, retail banking and other banking business. The retail banking comprises the bank's national banking group (NBG), which consists of business groups, personal banking, small & medium enterprise (SME), government banking. The bank's wholesale banking group consists of strategic business units, corporate accounts group (CAG), project finance & leasing SBU, stressed assets management group and mid corporate group. The mid corporate group (MCG) has been serving the needs of mid corporate units through relationship management and quicker credit processing. 695 new mid corporate clients were added to the MCG during the year 2007.
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In keeping with its integrated approach to all treasury activities in various markets in different time zones i.e., forex, interest rates, bullion, equity and alternative assets, the bank redesignated its treasury operations into ‘global markets’. The other banking businesses include rural business unit serves the financial needs of farmers through different schemes such as adoption of villages for overall development and economic upliftment and so far 237 villages have been adopted and self help groups. International banking has a network of 84 overseas offices spread over 32 countries. The bank offers a range of services such as SBI foreign travel cards, broking services, ATM services, internet banking, bill payments, gift cheques, safe deposit lockers and foreign inward remittances. The bank has a factoring services arm under the name SBI Factors and Commercial Services and Global Trade Finance. Through its subsidiary, SBI Capital Markets, it offers merchant banking services throughout the country. SBI offers life insurance association with BNP Paribas through its subsidiary SBI Life Insurance Company. SBI is the largest (public sector scheduled commercial bank) bank in India on several parameters (number of branches/offices, employees, deposits, loans/advances, assets, and profits etc). The bank has over 10,186 domestic branches and it offers more than 8,460 ATMs (Automated Teller Machines). In fact, SBI has the second largest bank branch network in the world. The dominance of the bank in the Indian banking sector is evident from the fact that it commands around 16.11% market share in total deposits and 16% in advances. Online cash transactions (E-transactions) are gaining popularity, with more people preferring to send and receive money electronically. As more bank branches get interconnected through core banking systems, settlements through the electronic systems have almost tripled since April

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2007. According to RBI’s data, the number of transactions settled through electronic funds transfer (EFT) and the national electronics funds transfer system (NEFT) increased to 1.92 million a month in June 2008 from 0.7 million in April 2007, although the value of transactions have not picked up at the same pace. The total amount settled electronically was INR121.6 billion in April 2007. It went up to INR200.7 billion by May 2008. The substantially lower costs and ease of transaction have been major factors for the increased adoption of electronic fund transfers. The value of these transactions has also grown considerably over the past year. RBI has been promoting the use of electronic funds transfer systems for a while now, and it has made it mandatory for all payments between entities it regulates to be done electronically. In fact, all branches that are on the core-banking network are equipped to carry out NEFT transactions. Since, SBI has the country's largest network of NEFT-enabled branches, it is expected that SBI would gain maximum (in comparison to other banks) from the increasing adoption of E-transactions12. 2. Canara Bank Ltd.: Canara Bank
13

was founded by Shri Ammembal Subba Rao Pai, a great visionary and

philanthropist, in July 1906, at Mangalore, then a small port in Karnataka. The Bank has gone through the various phases of its growth trajectory over hundred years of its existence. Growth of Canara Bank was phenomenal, especially after nationalization in the year 1969, attaining the status of a national level player in terms of geographical reach and clientele segments. Eighties was characterized by business diversification for the Bank. In June 2006, the Bank completed a century of operation in the Indian banking industry. The eventful journey of the Bank was strewn
12 13

Datamonitor, (2008) “Company Profile State Bank of India”, source: www.datamonitor.com Datamonitor, (2008) “Company Profile Canara bank Ltd.”, source: www.datamonitor.com

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with many memorable milestones. Today, Canara Bank occupies a premier position in the comity of Indian banks. With an unbroken record of profits since its inception, Canara Bank has several firsts to its credit. These include: Launching of Inter-City ATM Network Obtaining ISO Certification for a Branch Articulation of ‘Good Banking’ – Bank’s Citizen Charter Commissioning of Exclusive Mahila Banking Branch Launching of Exclusive Subsidiary for IT Consultancy Issuing credit card for farmers Providing Agricultural Consultancy Services Over the years, the Bank has been scaling up its market position to emerge as a major 'Financial Conglomerate' with as many as nine subsidiaries/sponsored institutions/joint ventures in India and abroad. As at September 2008, the Bank has further expanded its domestic presence, with 2710 branches spread across all geographical segments. Keeping customer convenience at the forefront, the Bank provides a wide array of alternative delivery channels that include over 2000 ATMs- the highest among nationalized banks- covering 698 centres, 1351 branches providing Internet and Mobile Banking (IMB) services and 2027 branches offering 'Anywhere Banking' services. Under advanced payment and settlement system, all branches of the Bank have been enabled to offer Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer (NEFT) facilities.

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3. Indian Overseas Bank: Indian Overseas Bank was established in 1937 with the aim to specialize in foreign exchange and overseas banking business in India. It started with simultaneously three branches in Chennai, India; Rangoon, Burma (Now Myanmar) and Penang. On the Independence Day, Indian Overseas Bank had expanded to 38 branches within the country and 7 branches abroad. Before nationalization in 1969, the bank had ventured into consumer credit, had begun computerization of their branch in 1964 and had established an independent department for agricultural finance. In 1969, IOB had 195 branches in India. In 1977, Indian Overseas Bank opened a branch in Seoul followed by a foreign currency-banking unit in Colombo in 1979. In 1997, the bank launched its official website and introduced online Bill Payment Services for MTNL Bills to its New Delhi branch customers in 1999. The IOB presence is marked in key trade centres of the world like Singapore, Seoul, Hong Kong, Bangkok and Germany. Its India presence is well networked branch system spanning the country with multiple branches in major cities like Bangalore, Chennai, Mumbai, Noida, Hyderabad, New Delhi, Coimbatore, Pune, Faridabad, Gurgaon and Kolkata. Indian Overseas Bank currently provides specialized banking services to its retail customers that include Any Branch Banking (ABB), ATM Banking, IOB STARS (Indian Overseas Bank Speedy Transfer And Realization Service) and the most popular and latest one is the 8% Saving (Taxable) Bond Scheme.

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4. Axis Bank: Axis Bank
14

was founded in 1994 as UTI Bank. Axis Bank is a banking corporation offering

retail and corporate banking services, including retail loans, corporate and business credit, forex and trade finance services, investment banking, depository services, and investment advisory services.The bank primarily operates in India, where it is headquartered in Mumbai and employs about 15,000 people. The company recorded revenues of INR88,010 million (approximately $2,186.2 million) in the fiscal year ended March 2008, an increase of 60.9% over 2007. Its net profit was INR10,591.4 million (approximately $263.1 million) in fiscal 2008, an increase of 61.9% over 2007. The business of the bank is divided into four segments: treasury, corporate/wholesale banking, retail banking and other banking business. Treasury operations include investments in sovereign and corporate debt, equity and mutual funds, trading operations, derivative trading and foreign exchange operations on the proprietary account and for customers and central funding corporate. Corporate / Wholesale banking includes corporate relationships not included under retail banking, corporate advisory services, placements and syndication, management of public issue, project appraisals, capital market related services and cash management services Retail banking constitutes lending to individuals/small businesses subject to the orientation, product and granularity criterion and also includes low value individual exposures not exceeding the threshold limit of INR50 million. Retail banking activities also include liability products, card services, internet banking, ATM services, depository, financial advisory services and NRI (non-

14

10.

Datamonitor, (2008) “Company Profile Axis bank Ltd.”, source: www.datamonitor.com

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residence Indian) services. Other banking business includes all banking transactions not covered under any of the above three segments. In 1998, UTI bank went for an initial public offering (IPO). In the following year, the bank’s Cashmanagement services (CMS) were launched. In 2000, the bank launched its internet banking module, and iConnect retail loans was introduced by the bank in the same year. After two years, in 2002, the bank signed memorandum of understanding with BSNL regarding bill collection services across the country through both online and offline channels. UTI bank signed an agreement with Employees Provident Fund Organization (EPFO) for disbursement of pension in 2003. In the same year, the bank launched Travel Currency Card. In 2004, the bank signed a bilateral arrangement with State Bank of India (and its seven associate member banks) for a combined network of over 4,000 ATMs. UTI Bank was listed on the London Stock Exchange in 2005. In the same year, UTI Bank launched Smart Privilege, a special bank account designed for women. In 2006, UTI Bank and UTI Mutual Fund launched a new service for sale and redemption of mutual fund schemes through the Bank's ATMs across the country. In the same year, UTI Bank opened its first international branch in Singapore. UTI Bank along with Geojit Financial Services offered online trading service to its customers in 2006. Moreover in 2006, UTI Bank launched its Credit Card business and operations of UBL Sales, its sales subsidiary, and inaugurated its first office in Bangalore. In February 2007, UTI Bank launched gift card and meal card. In the same month, the bank launched Co-branded credit card exclusively for Small Road Transport Operators (SRTOS). UTI Bank opened a branch in Hong Kong in March 2007. In the same month, UTI Bank formed an agreement with IIFCL to provide

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finance for infrastructural projects in India. In the following month, the Bank opened a branch in Dubai. In July 2007, the bank changed its name from UTI to Axis Bank. In September 2007, Axis Bank made a tie up with Banque Privee Edmond de Rothschild Europe for wealth management. In the following month, Axis Bank decided to incorporate a Public Limited Company, as a wholly owned subsidiary of the Bank to undertake the Trustee Services Business. In the same month, the bank also decided to incorporate an Asset Management Company as a subsidiary of the Bank to carry out the activities of Asset and Fund Management and Advisory and other related activities; and also proposed to establish a Mutual Fund, in the form of a Trust. In June 2008, Axis Bank decided to raise INR65,200 million (approximately $1619.6 million) by way of upper Tier II capital in Indian or foreign currencies and/or lower Tier II capital in the form of sub-ordinate debentures. In the same Month, Axis Private Equity, an operating unit of Axis Bank, decided to invest a total of INR1,420 million (approximately $35.3 million) in two Indian companies namely Neesa Leisure and Corrtech International. In July 2008, Axis Private Equity, a unit of Axis Bank, invested $15 million in Vishwa Infrastructure & Services, a firm involved in water supply and sanitation projects. 5. Dena Bank ltd.: Dena Bank, in July 1969 along with 13 other major banks was nationalized and is now a Public Sector Bank constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970. Under the provisions of the Banking Regulations Act 1949, in addition to the business

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of banking, the Bank can undertake other business as specified in Section 6 of the Banking Regulations Act, 1949. Dena Bank was founded o-n 26th May, 1938 by the family of Devkaran Nanjee under the name Devkaran Nanjee Banking Company Ltd. It became a Public Ltd. Company in December 1939 and later the name was changed to Dena Bank Ltd. In July 1969 Dena Bank Ltd. along with 13 other major banks was nationalized and is now a Public Sector Bank constituted under the Banking Companies (Acquisition & Transfer of Undertakings) Act, 1970. Under the provisions of the Banking Regulations Act 1949, in addition to the business of banking, the Bank can undertake other business as specified in Section 6 of the Banking Regulations Act, 1949. Bank has set up its own network “DENANET” using leased lines, VSATs, dial-up lines and ISDN Backup for ATMs connecting more than 1051 branches and 34 offices spread over 100 centres. Dena m-banking offers customers an easy, hassle free means to access banking information with the help of Mobile phones 24 hours a day, 7 days a week. Now our customers can get the required information regarding their bank account by using SMS facility from their mobile phones. Presently m-banking provides facilities like Balance Inquiry Mini Statement of accounts Status of the cheques issued.

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6. Syndicate Bank: Syndicate Bank was established in 1925 in Udupi, the abode of Lord Krishna in coastal Karnataka with a capital of Rs.8000/- by three visionaries - Sri Upendra Ananth Pai, a businessman, Sri Vaman Kudva, an engineer and Dr.T M A Pai, a physician - who shared a strong commitment to social welfare. Their objective was primarily to extend financial assistance to the local weavers who were crippled by a crisis in the handloom industry through mobilising small savings from the community. The bank collected as low as 2 annas daily at the doorsteps of the depositors through its Agents under its Pigmy Deposit Scheme started in 1928. This scheme is the Bank's brand equity today and the Bank collects around Rs. 2 crore per day under the scheme. The progress of Syndicate Bank has been synonymous with the phase of progressive banking in India. Spanning over 80 years of pioneering expertise, the Bank has created for itself a solid customer base comprising customers of two or three generations. Being firmly rooted in rural India and understanding the grassroot realities, the Bank's perception had vision of future India. It has been propagating innovations in Banking and also has been receptive to new ideas, without however getting uprooted from its distinctive socio-economic and cultural ethos. Its philosophy of growth by mutual sustenance of both the Bank and the people has paid rich dividends. The Bank has been operating as a catalyst of development across the country with particular reference to the common man at the individual level and in rural/semi urban centres at the area level. The Bank is well equipped to meet the challenges of the 21st century in the areas of information technology, knowledge and competition. A comprehensive IT plan is being put in place and the

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skills and knowledge of the Bank's personnel are being upgraded through a variety of training programmes to promote customer delight in every sphere of its activity. The Bank has launched an ambitious technology plan called Centralised Banking Solution (CBS) whereby 500 of our strategic branches with their ATMs are being networked nationwide over a 4 year period. 7. HDFC Bank: HDFC Bank specializes in the provision of banking and other financial services to corporate and institutional clients.The company's services include commercial, transactional and electronic banking products. It also provides treasury services, retail banking and capital markets infrastructure. The company primarily operates in India. HDFC Bank is headquartered in Mumbai, India and employs about 14,900 people. The company recorded revenues of INR124,928 million (approximately $3,131.9 million) during the fiscal year ended March 2008, an increase of 51.9% over 2007. The net profit was INR15901.8 million (approximately $398.7 million) in fiscal year 2008, an increase of 39.3% over 2007. HDFC Bank was incorporated in 1994 and was amongst the first to receive an 'in principle' approval from the Reserve Bank of India, to set up a bank in the private sector. HDFC Bank began operations as a Scheduled Commercial Bank in early 1995. TimesBank (a private sector bank promoted by Bennett, Coleman & Co/Times Group) merged with HDFC Bank in 2000.The amalgamation added significant value to HDFC Bank in terms of increased branch network, expanded geographic reach, enhanced customer base, skilled manpower and the opportunity to cross-sell and leverage alternative delivery channels.

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HDFC Bank was the first bank in India to launch an international debit card (in association with VISA) and also issued the MasterCard Maestro debit card. The bank launched its credit card in association with VISA in the year 2001. In the same year, HDFC became the first private sector bank authorized to collect income tax for Central Government. Following this, the bank listed its stock on NYSE through ADS issue of $172.5 million. The bank also launched credit card business in Chennai during the year. In the following year, the bank's branch network expanded to 200. Also during the year, the bank entered into a joint venture agreement for non-life insurance with Chubb Corporation (a global non-life insurer). In 2003, the bank was named 'Best Local Bank- India' by The Asian Bankers Journal. The bank launched its credit card in over 100 cities, with its credit card base crossing one million by 2004. HDFC's branch network expanded to 400 in the same period. The bank was included in the Forbes Global listing of 'best under a billion', 100 best smaller size enterprises in Asia Pacific and Europe. 8. UCO Bank: Founded in 1943, UCO Bank is a commercial bank and a Government of India Undertaking. Its Board of Directors consists of government representatives from the Government of India and Reserve Bank of India as well as eminent professionals like accountants, management experts, economists, businessmen, etc. UCO Bank, with years of dedicated service to the Nation through active financial participation in all segments of the economy - Agriculture, Industry, Trade & Commerce, Service Sector, Infrastructure Sector etc., is keeping pace with the changing environment. With a countrywide network of more than 2000 service units which includes specialised and computerised branches
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in India and overseas, UCO Bank has marched into the 21st Century matched with dynamism and growth. 9. Punjab National Bank: Punjab National Bank (PNB) is a India based banking corporation. It offers a range of banking services such as corporate and personal banking, industrial finance, agricultural finance, financing of trade and international banking. The bank primarily operates in India. It is headquartered in New Delhi, India and employs about 56,000 people. The company recorded revenues of INR162,625.8 million (approximately $4,039.6 million) in the fiscal year ended March 2008, an increase of 25.4% over 2007.The company's operating profit was INR40,062.4 million (approximately $995.2 million) in fiscal year 2008, an increase of 10.7% over 2007. Its net profit was INR20,487.6 million (approximately $508.9 million) in fiscal year 2008, an increase of 33% over 2007. The bank was nationalised in 1969. In September 2007, PNB partnered with Venture Infotech Global (VIG) and American International Group (AIG) Consortium to form a Joint Venture for credit card business in Bhutan. In the following month, PNB entered into a memorandum of understanding with India Infrastructure Finance Company (IFCL) to finance infrastructure projects in the country. In the same month, PNB launched a pilot project on financial inclusion at Neemrana in Alwar district of Rajasthan as part of a plan to cover 75 million people by 2010. 10. ICICI Bank: ICICI Bank is a diversified financial services company that provides a range of banking and financial services to customers, including retail banking, project and corporate finance, working
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capital finance, insurance, venture capital and private equity, investment banking, broking, and treasury products and services. The company operates in, India, the UK, Canada and Russia. It is headquartered in Mumbai, India and employs about 25, 400 people. The company recorded revenues of INR257.6 billion (approximately $5.8 billion) during the fiscal year ended March 2006, an increase of 52.2% over 2005. The net profit was INR24.2 billion (approximately $0.5 billion) in fiscal year 2006, an increase of 30.7% over 2005. In early 2004, ICICIBank.com, the online banking channel of ICICI Bank, became the first online air booking service in India. Teaming up with India mobile, ICICI launched mobile banking in India in mid-2004. Later in the year, offshore banking unit was opened in Bahrain. The company launched a new remittance service in 2005 in partnership with the US bank Wells Fargo. Following that Lloyds TSB inaugurated an Indian banking service with ICICI. In January 2006, the company opened its first branch in Sri Lanka, establishing a branch presence for the first time outside India in the SAARC region. ICICI Bank signed cooperation agreement with BMW India for offering finance through BMW Financial Services and Raiffeisenlandesbank Oberosterreich for intensifying cooperation between India and Austria in financial sector; in February 2007. It also entered into an agreement with Sarovar Hotels, to launch the ICICI Bank Sarovar Hotels co-branded credit card. The Reserve Bank of India approved the amalgamation of Sangli Bank with ICICI Bank in April 2007. In the same month ICICI Bank received a license to set up a branch in the Qatar Financial Centre, Doha, Qatar.

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RESEARCH METHODOLOGY
Population: All the Branches of Commercial Banks in Mangalore region. Customers having Accounts in Banks in Mangalore, i.e. both users and non users of Internet banking Services. Sample Size and Sampling Techniques: 10 Banks operating in Mangalore that provides Internet Banking Services selected using Simple Random Sampling technique. 100 Customers of banks selected using Stratified Random Sampling from the above selected 10 Banks. Scope of the Study: The Area covered for this study is Mangalore. This study is relevant only to Mangalore Region and the Banks performing in Mangalore. Also, it is relevant only to the time period when this study is conducted since the Technology is fast growing and there might be more advancement in Banking Services. This study also is useful for those who are interested in the Banking sector to know the recent advancements in Banking Industry as of this time period. Data Source: Required data was collected from two main sources:

Primary Source: The primary data is to be collected through distribution of Questionnaires to the Bank Managers and the Customers in Mangalore. Secondary Source: The secondary sources to be availed for the data collection are:

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• • •

Internet/ websites Reference books/ journals Articles from various magazines

Questionnaire Design: The questionnaire mainly consists of both open ended as well as close ended questions. The Questionnaire is designed in such a way that it extracts all the required information from each individual respondent clearly and as the study’s requirements.

Two sets of Questionnaire are devised: One, for the Banks operating in Mangalore to get the information relating to the performance of the Banks before and after implementing the Internet Banking Services. And the Second one, to all the individual Customers selected as respondents to get the information relating to their perception and usage of Internet Banking Services. Tools for Data Collection: The Data is collected from 10 Bankers using Questionnaire Schedule Method. Data from Individuals is collected using “Questionnaire Schedule” method for few respondents and Questionnaire Distribution method due to time constraint. Tools for Analysis: The statistical tools used are:

Chi- Square technique to test whether the usage of Internet Banking Services depends on the perception regarding the security level in Banking transactions. ANOVA technique to find whether the average of the maximum amount transacted by different customers through the Bank’s IBS in 10 different banks are equal or not.

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RESEARCH RESULTS
The Study is conducted using different Statistical Techniques. To analyze the data with the set objectives, Statistical analysis is done as follows: Statistical Analysis- Chi Square Analysis: Hypothesis Testing I: H0: The usage of Internet Banking Service by the Customer is independent of the perception of Customer regarding Security level in Banking Transactions. H1: The usage of Internet Banking Service by the Customer is dependent on the perception of Customer regarding Security level in Banking Transactions. As a result of the Survey conducted for the study, the Usage of the Internet Banking Service as per the perception of the Customers regarding the security level of the transactions in the bank, the following table was revealed:

Observed Frequency (O) Security Level of Transactions Can't Say Bad 17 1 3 1 20 2

Uses IBS Doesn't use IBS Total

Very Good 16 11 27

Good 37 19 56

Very Bad 2 1 3

Total 73 35 108

Considering the above table, we get the Expected Frequency table as follows:

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Expected Frequency (E) Security Level of Transactions Good Can't Say Bad 37.85 13.52 1.35 18.15 6.48 0.65

Uses IBS Doesn't use IBS

Very Good 18.25 8.75

Very Bad 2.03 0.97

Here, the Test Statistic is calculated using the following formula: χ2 Here = √∑ [(O-E) 2/ E] E= Expected Ranks

O= Observed Ranks and

The degree of freedom is

= (number of rows-1)*(number of columns-1) = (2-1)*(5-1) = 4.

The Calculation of the test Statistic is done as below:
O 16 11 37 19 17 3 1 1 2 1 E 18.25 8.75 37.85 18.15 13.52 6.48 1.35 0.65 2.03 0.97 (O-E) -2.25 2.25 -0.85 0.85 3.48 -3.48 -0.35 0.35 -0.03 0.03 (O-E)2 5.0625 5.0625 0.7225 0.7225 12.1104 12.1104 0.1225 0.1225 0.0009 0.0009 (O-E)2/ E 0.27739726 0.578571429 0.019088507 0.039807163 0.895739645 1.868888889 0.090740741 0.188461538 0.00044335 0.000927835 3.960066357

Thus the value of χ2 is 3.96 from the table above. Since the above is a testing of independence, in the Chi- Square it becomes one- tailed test. Therefore, at 5% Level of Significance for degrees of freedom of 4, the critical value of ChiSquare is found to be 9.49. Since the Calculated value of Chi- Square 3.96 is less than the Critical value of Chi- Square, the Null Hypothesis H0 is accepted.

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Thus, it can be concluded that the usage of Internet Banking Service by the Customer is independent of the perception of Customer regarding Security level in Traditional Banking Transactions. So, it is clear that the usage of Internet Banking Service is not driven by the security level of transactions in the traditional Banking provided by the bank. There are other reasons behind the option of using Internet banking Service. It can be clarified through further testing of various factors. Hypothesis Testing II: H0: The usage of Internet Banking Service by the Customer is independent of the satisfaction level of the Customers regarding the services offered by their Banks. H1: The usage of Internet Banking Service by the Customer is dependent on the satisfaction level of the Customers regarding the services offered by their Banks. From the Survey, the Usage of the Internet Banking Service as per the Satisfaction level of the Customers regarding the Efficiency of services offered by the Bank, the following table was revealed:

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Uses IBS Doesn't use IBS Total

Highly satisfied 6 7 13

Rating of factors in their Banks for Efficiency of services Mod Satisfied Can't Say Mod Dissatisfied Highly Dissatisfied 13 29 5 20 11 5 9 3 24 34 14 23

Total 73 35 108

Considering the above table, we get the Expected Frequency table as follows:

Expected Frequency (E) Highly satisfied 8.79 4.21 Rating of factors in their Banks for Efficiency of services Mod Satisfied Can't Say Mod Dissatisfied Highly Dissatisfied 16.22 22.98 9.46 15.55 7.78 11.02 4.54 7.45

Uses IBS Doesn't use IBS

Here, the Test Statistic is calculated using the following formula: χ2 Here = √∑ [(O-E) 2/ E] E= Expected Ranks

O= Observed Ranks and

The degree of freedom is

= (number of rows-1)*(number of columns-1) = (2-1)*(5-1) = 4.

The Calculation of the test Statistic is done as below:

O 6 7 13 11 29 5 5 9 20 3

E 8.79 4.21 16.22 7.78 22.98 11.02 9.46 4.54 15.55 7.45

(O-E) -2.79 2.79 -3.22 3.22 6.02 -6.02 -4.46 4.46 4.45 -4.45

(O-E) 7.7841 7.7841 10.3684 10.3684 36.2404 36.2404 19.8916 19.8916 19.8025 19.8025

2

(O-E) / E 0.88556314 1.848954869 0.639235512 1.332699229 1.577040905 3.288602541 2.102706131 4.381409692 1.273472669 2.658053691 19.98773838

2

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Thus the value of χ2 is 19.988 from the table above. Since the above is a testing of independence, in the Chi- Square it becomes one- tailed test. Therefore, a) At 5% Level of Significance for degrees of freedom of 4, the critical value of Chi- Square is found to be 9.49. Since the Calculated value of Chi- Square 19.988 is more than the Critical value of Chi- Square, the Null Hypothesis H0 is rejected. This is shown in the diagram below:

Thus, it can be concluded that the usage of Internet Banking Service by the Customer is dependent on the satisfaction level of the Customers regarding the services offered by the Bank. b) If a confidence level of 99% is considered, i.e. at 1% level of significance, for a degree of freedom of 4, the critical value of chi square will be 13.28. Since the Calculated value of Chi- Square 19.988 is more than the Critical value of Chi- Square even at this significance level, the Null Hypothesis H0 is rejected.

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Thus, it can be concluded that the usage of Internet Banking Service by the Customer is dependent on the satisfaction level of the Customers regarding the services offered by the Bank. So, it is clear that the usage of Internet Banking Service strongly dependent on the satisfaction level of the Customers regarding the services offered by the Bank. Strength of Association/ Coefficient of Contingency: C = √ [χ2/ (χ2+n)] = √ [19.988 / (19.988+108)] = √ 0.156169166 = 0.3952 Thus, the conclusion is that, the strength of dependency between the usage of Internet Banking Service and the satisfaction level of the Customers regarding the services offered by the Bank is 0.3952. Thus the Usage of Internet banking is moderately and positively dependent on the satisfaction level of Customers.

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Hypothesis Testing III: H0: The usage of Internet Banking Service by the Customer is independent of the Number of years of association with the Bank. H1: The usage of Internet Banking Service by the Customer is dependent on the Number of years of association with the Bank. From the Survey, the following table was revealed when comparing the usage of Internet Banking service as against the number of years since when the respondent became the customer of the bank:
Number of Years of Association with the Bank 1-2 yrs 2-3 yrs 3-4 yrs 7 33 14 9 4 11 16 37 25

Uses IBS Doesn't use IBS Total

< 1 yr 8 5 13

> 4 yrs 11 6 17

Total 73 35 108

Considering the above table, we get the Expected Frequency table as follows:
Number of Years of Association with the Bank 1-2 yrs 2-3 yrs 3-4 yrs 10.81 25.01 16.90 5.19 11.99 8.10

Uses IBS Doesn't use IBS

< 1 yr 8.79 4.21

> 4 yrs 11.49 5.51

Here, the Test Statistic is calculated using the following formula: χ2 Here = √∑ [(O-E) 2/ E] E= Expected Ranks

O= Observed Ranks and

The degree of freedom is

= (number of rows-1)*(number of columns-1) = (2-1)*(5-1) = 4.

The Calculation of the test Statistic is done as below:

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O 8 5 7 9 33 4 14 11 11 6

E 8.79 4.21 10.81 5.19 25.01 11.99 16.9 8.1 11.49 5.51

(O-E) -0.79 0.79 -3.81 3.81 7.99 -7.99 -2.9 2.9 -0.49 0.49

(O-E)2 0.6241 0.6241 14.5161 14.5161 63.8401 63.8401 8.41 8.41 0.2401 0.2401

(O-E)2/ E 0.071001138 0.14824228 1.342839963 2.796936416 2.552582967 5.324445371 0.497633136 1.038271605 0.020896432 0.043575318 13.83642463

Thus the value of χ2 is 13.84 from the table above. Since the above is a testing of independence, in the Chi- Square it becomes one- tailed test. Therefore, a) At 5% Level of Significance for degrees of freedom of 4, the critical value of Chi- Square is found to be 9.49. Since the Calculated value of Chi- Square 13.84 is more than the Critical value of Chi- Square, the Null Hypothesis H0 is rejected. This is shown in the diagram below:

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Thus, it can be concluded that the usage of Internet Banking Service by the Customer is dependent on the Number of years of association with the Bank. b) If a confidence level of 99% is considered, i.e. at 1% level of significance, for a degree of freedom of 4, the critical value of chi square will be 13.28. Since the Calculated value of Chi- Square 13.84 is more than the Critical value of Chi- Square even at this significance level, the Null Hypothesis H0 is rejected.

Thus, it can be concluded that the usage of Internet Banking Service by the Customer is dependent on the Number of years of association with the Bank. Strength of Association/ Coefficient of Contingency: C = √ [χ2 / (χ2+n)] = √ [13.84 /(13.84+108)] = √ 0.11357 = 0.3370.

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Thus, the conclusion is that, the strength of dependency between the usage of Internet Banking Service and the number of years of association of the respondents with the bank is 0.337. Thus the Usage of Internet banking is moderately and positively dependent on the Number of years of association of customers with the Bank. Analysis of Variance: Hypothesis Testing IV: Analysis of Variance is used to analyze the significance among samples taken from 10 different Banks. Here, the Maximum amount transacted through Internet Banking by each respondent in each Bank is compared and tested for the following hypothesis: H0: The Maximum amounts transacted through Internet banking of each Banks under study are equal. (M1= M2= M3= M4= M5= M6= M7= M8= M9= M10) H1: The Maximum amounts transacted through Internet banking of each Banks under study are not equal. (M1≠ M2≠ M3≠ M4≠ M5≠ M6≠ M7≠ M8≠ M9≠ M10) The Maximum amounts transacted through Internet banking Service of each banks as collected from the respondents were as follows:

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SBI 20000 2000 13000 5150 12800 16700 19500 14000 18000 4500 6500 7900 1200 3600 8700 1000 1050 1200 1300 7500 14000

Canara 12000 12600 13400 4500 3500 5700 3200 2600 15700 2700 3500 4100 2500 2400 1600 2100 1700

IOB 3800 14700 12700 1000

Axis Bank 2800 5600 9000 19700 5600 4800

DENA 12600 3600

Syndicate 5780 8900 2700 4890 17800 2800 1800 18700 2700 3800

HDFC 3700 2900

UCO 17900

PNB 3900

ICICI 2800 5900 4790 12500 3800 17800 16700

Step 1: Calculation of the Variance among the Samples/ Between- Column Variance: Firstly, the Mean of each sample is calculated using the Arithmetic mean formula: X’ = ∑X/ n for each of the 10 banks. The Means for each Sample are: X’1= 8552.380952; X’2= 5517.647059; X’3= 8050; X’4= 7916.666667; X’5= 8100; X’6= 6987; X’7= 3300; X’8= 17900; X’9= 3900; and X’10= 9184.285714.

Therefore the Grand Mean for the 10 samples is calculated as follows: Grand Mean (X) = (X’1+ X’2+ X’3+ X’4+ X’5+ X’6+ X’7+ X’8+ X’9+ X’10)/10
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= (8552.380952+ 5517.647059+ 8050+ 7916.666667+ 8100+ 6987+ 3300+ 17900+ 3900+ 9184.285714)/ 10 = (79407.98039)/ 10 = 7940.798039 Again, the sample variance for each sample is calculated using the following formula: S2 (Sample Variance) = ∑ (X-X’) 2 / n The Sample variances for Each Sample as calculated are given below:

(X1-X'1)2 131048003.7 42933683.66 19781323.66 11576189.66 18042275.66 66383711.66 119850383.7 29676563.66 89257523.66 16421783.66 4212263.664 425599.6644 54057491.66 24526067.66 21791.6644 57038443.66 56285705.66 54057491.66 52597015.66 1107503.664 29676563.66 878977381

(X2-X'2)2 42020861.52 50159681.52 62131441.52 1035611.523 4070911.523 33251.5225 5371501.523 8512681.523 103680251.5 7939151.523 4070911.523 2009731.523 9106211.523 9719741.523 15347981.52 11680331.52 14574451.52

(X3-X'3)2 18062500 44222500 21622500 49702500

(X4-X'4)2 (X5-X'5)2 (X6-X'6)2 26180311.89 20250000 1456849 5366959.889 20250000 3659569 1173603.889 18378369 138846865.9 4397409 5366959.889 116920969 9713631.889 17530969 26904969 137194369 18378369 10156969

(X7-X'7)2 160000 160000

(X8-X'8)2 0

(X9-X'9)2 (X10-X'10)2 0 40759158.8 10786560.8 19309784.6 10993932.8 28990578.8 74230458.8 56485896.8

351464705.9 133610000 186648333.3 40500000 354978810

320000

0

0

241556371.4

From the above table using the Sample Variance formula, the following variances are obtained: S12= 41856065.76; S22= 20674394.46;
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S32= 33402500; S42= 31108055.56; S52= 20250000; S62= 35497881;

S72= 160000; S82= 0; S92= 0; and S102= 34508053.06.

Step 2: Calculation of ‘Between- class Sum of Squares’ (BSS): BSS = n1(X’1-X) 2 + n2(X’2-X) 2 + n3(X’3-X) 2 + n4(X’4-X) 2 + n5(X’5-X) 2 + n6(X’6-X) 2 + n7(X’7-X) 2 + n8(X’8-X) 2 + n9(X’9-X) 2 + n10(X’10-X) 2 It is calculated as Follows:
X' 8552.380952 5517.647059 8050 7916.666667 8100 6987 3300 17900 3900 9184.285714 X'-X 611.5829134 -2423.15098 109.201961 -24.1313723 159.201961 -953.798039 -4640.79804 9959.201961 -4040.79804 1243.487675 (X'-X)2 374033.6599 5871660.673 11925.06829 582.3231307 25345.26439 909730.6992 21537006.44 99185703.7 16328048.79 1546261.599 n 21 17 4 6 2 10 2 1 1 7 n*(X'-X)2 7854706.859 99818231.44 47700.27314 3493.938784 50690.52877 9097306.992 43074012.88 99185703.7 16328048.79 10823831.19 286283726.6

Therefore, as the above table suggests, BSS is 286283726.6. Step 3: Calculation of ‘Between Class Mean Sum of Squares’ (MBSS): MBSS = BSS/ k-1.

Here k is the Number of samples, i.e. 10. Therefore, from the above data, the MBSS is calculated as follows: MBSS = 286283726.6/ (10-1) = 31809302.95

Step 4: Calculation of ‘Within Classes Sum of Mean’ (WSS):

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WSS =

n1* S12 + n2* S22 + n3* S32 + n4* S42 + n5* S52 + n6* S62 + n7* S72 + n8* S82

+ n9* S92 + n10* S102 = 21* 41856065.76 +17*20674394.46 + 4*33402500 + 6*31108055.56 +

2*20250000 + 10*35497881 + 2*160000 + 1*0 + 1*0 + 7*34508053.06 = 878977381+ 351464705.9+ 133610000+ 186648333.3+ 40500000+ 354978810+

320000+ 0+ 0+ 241556371.4 = 2188055602

Step 5: Calculation of ‘Within Classes mean Sum of squares’ (MWSS): MWSS = WSS/ (n-k)

Here n= n1+ n2+ n3+ n4+ n5+ n6+ n7+ n8+ n9+ n10. I.e. n= 21+ 17+ 4+ 6+ 2+ 10+ 2+ 1+ 1+ 7 = 71. Therefore, MWSS = = 2188055602/ (71-10) 35869763.96

Step 6: Computation of the test Statistic: The test statistic ‘F’ is the variation ratio and is calculated using the following formula: F = = = MBSS/MWSS 31809302.95/ 35869763.96 0.886799896 = = = (k-1, n-k) (10-1, 71-10) (9, 61).

The Degrees of freedom for this distribution is

Thus using F distribution table,

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At 5% level of Significance, the critical value of F at degrees of freedom of (9, 61) is 2.04. Since the Calculated F i.e. 0.89 is lesser than 2.04, H0 is accepted. Therefore, it can be concluded that, The Maximum amounts transacted through Internet banking of each Banks under study are equal. Thus we can say that the Internet banking Service is used for the same extent in each of the ten banks under study. Likert Scaling: 1. Satisfaction level of the respondents regarding various services offered by the Bank: The respondents were asked to rate the following services provided by the Banks on the basis of their satisfaction level. The scaling allowed was as follows: 1- Highly satisfied. 4. Moderately Dissatisfied. 2- Moderately Satisfied. 5- Highly Dissatisfied. 3- Can’t say.

The respondents rated all the factors and the following table was obtained.
Weights assigned to each level 2 1 0 -1 -2

Satisfaction level Bank’s Services in the premises Convenience of transactions Information services Reliability of services Privacy/ security Responsiveness to complaints Fulfillment of Grievances Efficiency of services provided Amount of innovative services Adaptation to new Technology

1 12 37 34 8 27 7 5 13 20 21

2 26 25 19 43 56 16 15 24 35 28

3 54 39 44 56 20 21 41 34 48 45

4 5 7 9 2 5 9 2 1 0 2 3 43 21 32 15 14 23 4 1 12 2

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After the corresponding weights are multiplied with the number of respondents at each satisfaction level for each factor, the following table is obtained:

Satisfaction level Bank’s Services in the premises Convenience of transactions Information services Reliability of services Privacy/ security Responsiveness to complaints Fulfillment of Grievances Efficiency of services provided Amount of innovative services Adaptation to new Technology
From the above table it can be inferred that:

1 24 74 68 16 54 14 10 26 40 42

2 26 25 19 43 56 16 15 24 35 28

3 0 0 0 0 0 0 0 0 0 0

4 -7 -2 -9 -1 -2 -43 -32 -14 -4 -12

5 -18 -10 -4 0 -6 -42 -30 -46 -2 -4

25 87 74 58 102 -55 -37 -10 69 54

a. Privacy or Security in the Banking transactions provided in traditional banking is highly satisfying. Hence most of the respondents are satisfied with the privacy and the security they obtain in the Banks. b. Many respondents feel that they get high satisfaction levels in their banks for the convenience of transactions. c. It is also clear that the respondents are least satisfied by the responsiveness if the Banks to their complaints and d. It is also proved that the fulfillment of grievances by the Banks is least satisfying.

2. Importance of certain factors with regard to Internet banking Services offered by the Banks:

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The respondents were asked to rate the following services provided by the Banks on the basis of their satisfaction level. The scaling allowed was as follows: 1- Highly Important. 2- Moderately Important. 3- Can’t say.

4. Moderately Unimportant. 5- Least important. The respondents rated the factors as required and the following table is obtained:

Rank as per its Importance Better rates with lower service charges Bank Familiarity Bank’s Location Size of the Bank Security of Transaction Convenience (24hrs) Speed of Service Delivery Varieties of Services offered online Integrated Value added Services (account summary etc.)

1 43 57 0 4 67 73 71 51

2 11 10 2 13 5 0 2 14

3 15 4 7 21 1 0 0 5 2

4 2 1 15 22 0 0 0 3 0

5 2 1 49 13 0 0 0 0 0

65 6

After the corresponding weights are multiplied with the number of respondents at each satisfaction level for each factor, the following table is obtained:

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Rank as perwithImportance Better rates its lower service charges Bank Familiarity Bank’s Location Size of the Bank Security of Transaction Convenience (24hrs) Speed of Service Delivery online Integrated Value added Services (account summary etc.)
From the above table it can be inferred that:

1 86 114 0 8 134 146 142 102

2 11 10 2 13 5 0 2 14

3 0 0 0 0 0 0 0 0 0

4 -2 -1 -15 -22 0 0 0 -3 0

5 -4 -2 -98 -26 0 0 0 0 0

91 121 -111 -27 139 146 144 113 136

130 6

a. Convenience in the Banking transactions through Internet banking is highly important. Also the speed of Delivery is of equal importance to the respondents. b. Many respondents feel that the security of transactions is the next important factor as internet banking is concerned. Again, the integrated value added services received through Internet Banking are also of same level of importance. c. It is also clear that the Banks’ location finds least important as per the Internet Banking is concerned. 3. Level of agreement of various statements by ATM users of 4 banks: Axis Bank, Syndicate bank, SBI and ICICI Bank: The respondents were asked to rate the following services provided by the Banks on the basis of their satisfaction level. The scaling allowed was as follows:

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1- Strongly Agree 4. Disagree.

2- Moderately Agree .

3- Can’t say.

5- Strongly Disagree

The respondents rated the factors as required and the following table is obtained:
Weightsw assigned 2 1 29 2 8 1 3 8 5 7 6 10 4 8 0 -1 -2 4 5 3 0 2 11 8 4 2 7 1 0 3 1 3 0

Agreement level of Respondents ATM is better than personal visit to Banks The amount of Risk in ATM transactions is less compared to Traditional Banking Transactions Internet Banking is more useful than ATMs Internet Banking will replace ATM in the near future Banks are very fast updating itself to latest technologies ATM is always customer friendly ATM is used for time saving

28 12 14 16 20 11 23 10 27 12 23 10

After the corresponding weights are multiplied with the number of respondents at each satisfaction level for each factor, the following table is obtained:

Rate the following ATM is better than personal visit to Banks The amount of Risk in ATM transactions is less compared to Traditional Banking Transactions Internet Banking is more useful than ATMs Internet Banking will replace ATM in the near future Banks are very fast updating itself to latest technologies ATM is always customer friendly ATM is used for time saving
From the above table it can be inferred that:

1 58 56 28 40 46 54 46

2 8 12 16 11 10 12 10

3 0 0 0 0 0 0 0

4 -3 -2 -11 -8 -4 -2 -7

5 0 -2 0 -6 -2 -6 0

63 64 33 37 50 58 49

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a) Customers strongly agree that Amount of Risk in ATM transactions is less compared to traditional Banking. Also they agree that ATM is better than personal visit to the banks. b) But the statement that Internet Banking will replace ATM in the near future was least agreed by the respondents.

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Other Findings: The Study undertook a survey of a sample of 108 respondents. The respondents consisted both users as well as the non- users of Internet Banking Services. I. Classification of Respondents based on Age Group: The Data obtained from the Sample shows that the Highest number of Respondents fall in the Age category of (15- 30). Here, IBS stands for the Users of Internet Banking Services.

All Age group Respondents

IBS 43 21 8 1 73

15-30 31-45 45-60 >60

63 24 18 3 108

From the above chart it can be found that the percentage of respondents using Internet Banking Service under each Age category is as follows: 1. 87.5% under the age group (31- 45) 2. 68.25% under the age group (15- 30) 3. 44.44% under the age group ( 45- 60) 4. 33.33% under the age group of above 60.

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II. Classification of Respondents on the basis of Occupation:

Occupation business employed student other

Others 32 57 13 6 108

IBS users

29 43 0 1 73

In the above chart, it is clear that most of the respondents are employed. The percentage of Internet Banking users under each occupation category is found to be as follows: 1. 90.63% of Business category. Even professionals are categorized as “Business” 2. 75.44% of Employed category. 3. 16.67% of ‘Other’ category. In ‘Others’ category, the occupations covered are: Homemakers, Senior Citizens and Agriculture. The findings also show that no student is using Internet Banking Service. Thus it can be concluded by saying that students, though many are Net- savvy, find less use of Internet banking Service. Or it is also possible that they are still not sure of the uses and advantages of Internet Banking Service. However, the most use of the Internet Banking Service can be to the Business Class people as found by the study. Also Employed people who find Internet banking useful are in good numbers.

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III. Classification of Respondents based on their Income level:

Income level <2 lacs 2-4 lacs 4-6 lacs >6 lacs

Others 23 48 24 13 108

Users of IBS

12 33 17 11 73

The respondents whose income level is 2- 4 lakhs are the maximum. The percentage of respondents using Internet Banking can be shown as follows: 1. 84.62% of people whose income is above Rs.6 lakhs per annum. 2. 70.83% of people whose income is between Rs. 4-6 lakhs per annum. 3. 68.75% of respondents who have income between Rs.2- 4 Lakhs per annum. 4. 52.17% of respondents whose income is lesser than Rs. 2 lakhs per annum. Thus, we can conclude that People with income group above Rs. 6 lakhs have good use of Internet Banking. Following them are the people whose income is between Rs. 4- 6 lakhs. Also we can say that People whose income level is between 2- 4 lakhs have more number of transactions with the bank in any time period. The number of people visiting the Bank is also more compared to the number of People falling in other categories.

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IV. Classification of the respondents based on the type of Account owned by them:

Type of account owned SB Current NRI other

108 34 1 42

Percentage 100 31 1 39

Here, it is clear that all the respondents owned Savings Bank Account in their banks. In addition to that, few of the respondents owned Current Account, Non- resident account as well as other forms of Accounts like Fixed deposit Account, Recurring Deposit Account etc. V. Classification of respondents on the basis of Different Banks they associate:

Name of the Bank State Bank of India Canara Bank Indian Overseas Bank Axis Bank Dena Bank Syndicate Bank HDFC bank UCO Bank Punjab National Bank ICICI Bank Others
Internet Banking Services: A Study on its Adoption, Implementation and Usage

Traditional & IBS Traditional Accounts only

21 17 4 6 2 10 2 1 1 7 2

5 4 2 11 3 8 5 5 7 6 4
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Here, it is clear that most of the respondents associate themselves with State Bank of India. Also, many respondents owned accounts in more than 1 bank. The following is the list of number of respondents who owned accounts in more than 1 Bank: State Bank of India and Axis Bank State Bank of India and Canara Bank Canara Bank and Punjab National Bank State Bank of India , Canara Bank and Axis Bank 8 3 4 1

Syndicate bank, Punjab National Bank and Axis Bank 1 ICICI and Syndicate bank Axis and Syndicate bank State Bank of India and ICICI Bank State Bank of India and Indian Overseas Bank 3 2 1 1

State Bank of India , Syndicate bank and HDFC bank 1

VI. Classification of Customers based on the number of years of association with the Bank and their application to Internet Banking Service:

<1 yr 1-2 yrs 2-3 yrs 3-4 yrs > 4 yrs

13 16 37 25 17 108

IBS 8 7 33 14 11 73

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Here it can be clearly made out that the respondents having 2-3 years of association with the Bank are more than others in number. The percentage of people who applied for Internet Banking System according to the number of years of their association with the bank can be given as follows: 1. 67.59% of the Customers in total have opened an Internet banking Account in their Bank. 2. 89.19% of the people who associate themselves with their Banks from 2-3 years. 3. 64.71% of people who associate themselves with the bank for more than 4 years. 4. 61.53% of the respondents who have associated themselves from less than 1 year. 5. 56% of the respondents associating themselves for 3-4 years. 6. 43.75% of people who have associated themselves from 1-2 years. Also it can be concluded here saying that many customers who have associated themselves with a bank for atleast 2 years have opened a net Banking account with their Bank. So it is necessary to know the bank and also to have good relationship with the Bank before opening the Internet banking Account. VII. Classification of Respondents on the basis of Age group and Number of Years of Association: Cross tabulated Data:
Age group <1 yr 1-2 yrs 2-3 yrs 3-4 yrs > 4 yrs Total 15-30 9 14 23 11 6 63 31-45 3 2 7 9 3 24 45-60 1 0 5 4 8 18 >60 0 0 2 1 0 3 Total 13 16 37 25 17 108

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The above table and chart clearly shows that Respondents falling under 2-3 years of association with the Bank and under age group of 15-30years are the maximum. VIII. Reasons for using the Internet Banking Account:

Reasons for using the net banking Account: 1 Seeking product and rate information 2 To apply for various services offered by the bank 3 To Check your Account Balances 4 To Transfer Funds 5 Payment of different Bills 6 To Calculate Loan Payment Information 7 Download Loan Applications 8 Personal Bank transaction activity 9 Others

21 42 58 73 39 9 27 73 51

Here, it is clear that all the people using Internet banking are using it for the purpose of transferring funds and for personal Banks transaction activities. 79% of them use it for checking account balances.
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IX. Reasons for not opening an Internet Banking Account:

1 2 3 4 5 6 7 8 9

Reasons for not opening IBS Under age Never heard of Internet banking Concerned about security Haven't taken time to open an account Don't see any real value in having this type of account Not Applicable Would like to see how it works, then open an account if found good Not available through my bank Others

0 3 29 6 12 15 2 0 0

From here it can be clearly mentioned that majority of respondents, i.e. 82.86% of respondents have not opened an Internet Banking account due to security reasons. They feel the security is lesser in Internet as compared to traditional banking. X. Out of the 35 people who do not have an Internet banking account: a. 6 feel that they need to open an Internet banking Account, out of whom 2 would open it by next 12 months and 4 sometime in future; and b. 29 still do not want to open an Internet Banking Account. XI. Classification of respondents based on the number of times they use Internet Banking Service per month:

No. of times of using IBS in a month: Less than 1 time. 16 1 - 3 times. 37 3 – 8 times. 11 8 – 12 times. 6 Over 12 times 3 73
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Here it is clear that almost 50% of the respondents are using Internet banking Service for 1-3 times a month. There are only few respondents who use Internet Banking for more than 12 times in a month. XII. i) From the Questionnaires given to ATM users of ICICI Bank ltd.: In 1 hour duration there were 9 visitors, out of whom 2 were in age group (15-30), 3 under the group (30-45) and remaining 4 under the group (45- 60). There were no users from the senior citizens. ii) iii) iv) No users had difficulty in operating the ATM. 5 of them were using the ATM for 3-8 times in a month. All the 9 of them have heard about Internet banking Service and 7 of them wish to avail Internet banking Service sometime in future.
Weights assigned 2 1 4 6 3 4 8 5 3 1 2 2 3 4 3 1 4 3 0 3 3 0 1 2 0 0 2 -1 4 0 0 1 0 0 0 1 -2 5 0 0 0 0 0 0 0 After multiplying with the weights 1 2 3 4 5 8 2 0 0 0 10 12 6 8 16 10 6 3 4 3 1 4 3 0 0 0 0 0 0 0 -1 0 0 0 -1 0 0 0 0 0 0 15 9 11 17 14 8

Rate the following ATM is better than personal visit to Banks The amount of Risk in ATM transactions is less compared to Traditional Banking Transactions Internet Banking is more useful than ATMs Internet Banking will replace ATM in the near future Banks are very fast updating itself to latest technologies ATM is always customer friendly ATM is used for time saving

v)

Using the Likert Scaling, it was found that high rating was given to the fact that their Bank is fast updating itself to the latest technologies.

vi)

Next, they feel that ATM transactions are lesser risky than traditional banking transactions.

vii)

Least approval was given to the statement that ATM is used for time saving.

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XIII. From the Questionnaires given to ATM users of Axis Bank ltd.: i) In 1 hour duration there were 13 visitors, out of whom 3 were in age group (1530), 7 under the group (30-45) and remaining 3 under the group (45- 60). There were no users from the senior citizens. ii) iii) No users had difficulty in operating the ATM. 6 of them were using the ATM for 8-12 times and 5 of them for 3-8 times in a month. iv) 11 of them have heard about Internet banking Service out of which 10 wish to avail Internet banking Service sometime in future.
Weights assigned 2 1 1 2 13 0 6 4 4 5 11 11 5 6 6 3 2 1 0 3 0 2 2 1 2 0 1 -1 -2 After multiplying with the weights 4 5 1 2 3 4 5 0 0 26 0 0 0 0 26 0 1 1 2 0 0 0 0 1 1 0 0 12 8 8 10 22 22 5 6 6 3 2 1 0 0 0 0 0 0 0 -1 -1 -2 0 0 0 0 -2 -2 0 0 17 13 11 9 24 23

Rate the following ATM is better than personal visit to Banks The amount of Risk in ATM transactions is less compared to Traditional Banking Transactions Internet Banking is more useful than ATMs Internet Banking will replace ATM in the near future Banks are very fast updating itself to latest technologies ATM is always customer friendly ATM is used for time saving

v)

Using the Likert Scaling, it was found that high rating was given to the fact that ATM is better than personal visit to the Bank.

vi)

Next, they feel that ATM is always Customer friendly and that it is used for time saving.

vii)

Least approval was given to the statement that Banks are fast updating themselves to the latest technologies.

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XIV. From the Questionnaires given to ATM users of State Bank of India ltd.: i) In 1 hour duration there were 19 visitors, out of whom 5 were in age group (1530), 6 under the group (30-45), 3 under the group (45- 60) and remaining 5 were from above 60 age group. ii) 2 users had difficulty in operating the ATM but rest of the 17 had no difficulty in using the ATM. iii) 6 of them were using the ATM for 1-3 times in a month, 5 of them were using for 3-8 times and 5 more for 8-12 times a month. iv) 14 of them have heard about Internet banking Service out of which 11 wish to avail Internet banking Service sometime in future. 5 of the respondents have not heard about Internet Banking Service.
Weights assigned 2 1 12 14 6 10 7 10 9 1 2 4 3 3 1 4 3 4 0 3 2 2 2 0 7 4 3 -1 4 1 0 8 6 1 0 3 -2 After multiplying with the weights 5 1 2 3 4 5 0 24 4 0 -1 0 27 0 0 2 0 2 0 28 12 20 14 20 18 3 3 1 4 3 4 0 0 0 0 0 0 0 -8 -6 -1 0 -3 0 0 -4 0 -4 0 31 7 11 17 19 19

Rate the following ATM is better than personal visit to Banks The amount of Risk in ATM transactions is less compared to Traditional Banking Transactions Internet Banking is more useful than ATMs Internet Banking will replace ATM in the near future Banks are very fast updating itself to latest ATM is always customer friendly ATM is used for time saving

v)

Using the Likert Scaling, it was found that high rating was given to the fact that the amount of risk in ATM transactions is lesser than traditional Banking transactions.

vi) vii)

Next, they feel that ATM is better than personal visit to banks. Least approval was given to the statement that Internet Banking is more useful than ATMs.

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XV. i)

From the Questionnaires given to ATM users of Syndicate Bank: In 1 hour duration there were 7 visitors, out of whom 1was in age group (15-30), 2 under the group (30-45), 3 under the group (45- 60) and remaining 1 was from above 60 age group.

ii)

3 users had difficulty in operating the ATM but rest of the 4 had no difficulty in using the ATM.

iii) iv)

4 of them were using for 3-8 times. 5 of them have heard about Internet banking Service out of which 3 wish to avail Internet banking Service sometime in future. 2 of the respondents have not heard about Internet Banking Service.

Weights assigned

Rate the following ATM is better than personal visit to Banks The amount of Risk in ATM transactions is less compared to Traditional Banking Transactions Internet Banking is more useful than ATMs Internet Banking will replace ATM in the near future Banks are very fast updating itself to latest technologies ATM is always customer friendly ATM is used for time saving

2 1 0 2 1 2 3 1 0

1 2 2 1 3 1 2 3 2

0 3 3 1 2 3 1 0 2

-1 4 2 2 1 1 1 2 3

-2 5 0 1 0 0 0 1 0

After multiplying with the weights 1 2 3 4 5 0 2 0 -2 0 0 4 2 4 6 2 0 1 3 1 2 3 2 0 0 0 0 0 0 -2 -1 -1 -1 -2 -3 -2 0 0 0 -2 0 1 4 4 7 1 -1

v)

Using the Likert Scaling, it was found that high rating was given to the fact that the Banks are very fast updating themselves to latest technologies.

vi)

Next, they feel that Internet Banking is more useful than ATMs and that IBS will replace ATMs in the near future.

vii) viii)

Least approval was given to the statement that ATMs are used for time saving. The respondents were neutral about the statement that ATM is better than personal visit to the Banks.

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XVI. From the Bankers’ Questionnaires: The Questionnaire for Bankers was scheduled with 10 Bank Branches operating in Mangalore. From the question regarding the reason for adopting Internet banking Service, the following response was received:

Reasons for adopting IBS: For improvising the services to the Customers As competition to other Banks offering IBS For reducing the costs Any other

No. of Banks 10 5 7 0

From the above, it is clear that all the Bankers adopted Internet banking Service to provide improvised service to the Customers. The second main objective behind adoption of Internet banking service was to reduce the costs of providing service to the customers and last objective was as competition to other banks. XVII. Some of the opinions of the Bank Managers: i) The steps/ measures to be taken before implementing Internet banking Services are as follows: a. Signing an agreement with the Internet Service providers b. Getting license to implement the Internet banking Service- although this is done at the Bank as a whole and not at the branch level.
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c. Updating the customer’s name and password in the portal. d. Scanning the customer’s sign and uploading the same in his internet account. ii) Factors considered before adopting Internet banking Service: a. As per the State Bank of India, the factor mainly considered before adopting Internet banking Service is the attitude and the approach of the employees. This is done to ensure that the customers are not ill treated if arrived with a query or a problem. b. All the Banks considered the Infrastructure, Information technology

Infrastructure, connectivity and bandwidth, in-house software and hardware facilities, lease-line or owned network lines, backup network etc. before implementation of internet banking Service. iii) Charges to be borne by the Customers, is very nominal amount and is comparatively invisible. The traditional Banking is costlier to the customer than Internet Banking facility. iv) But, for the banker Internet banking reduces the comparative revenue generated as through traditional banking it is possible to get higher revenue than through Internet banking. v) Compared to total customers, percentage of Customers using the net Banking facility is very low in all the branches under study. However, this may increase as the years pass. vi) Major complaints received from the internet banking users are only related to connectivity. However, there are a few customers who experienced problems like

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account debited with certain amount but the amount not being disposed to the concerned party. vii) There are no specific promotional tools adopted by the banks in order to increase the usage of internet banking service. But, the banks educate the customers who come with queries relating to Internet Banking service. Also newly arrived customers are made to know about the service available in the bank. No external promotional tools are adopted. XVIII. From the Chi square analysis: It was found that the usage of Internet Banking Service is not driven by the security level of transactions in the traditional Banking provided by the bank. There are other reasons behind the option of using Internet banking Service. Also it was found that the usage of Internet Banking Service strongly dependent on the satisfaction level of the Customers regarding the services offered by the Bank. The strength of dependency between the usage of Internet Banking Service and the satisfaction level of the Customers regarding the services offered by the Bank is 0.430199549. Thus the Usage of Internet banking is moderately and positively dependent on the satisfaction level of Customers. Again it was also clear that the usage of Internet Banking Service by the Customer is dependent on the Number of years of association with the Bank. The strength of dependency between the usage of Internet Banking Service and the number of years of association of the respondents with the bank is 0.357931618. Thus the Usage of Internet banking is moderately and positively dependent on the Number of years of association of customers with the Bank.

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XIX. From the Analysis of Variance: The Study considered the maximum amount transacted through Internet Banking System by various respondents in each of the Banks. After analyzing the variance the conclusion was that the Maximum amounts transacted through Internet banking of each Banks under study are equal. XX. From the Likert Scale:

From the Likert Scale technique, the following conclusions can be made: i) Privacy and security in the transactions in traditional Banking are highly satisfactory to all the respondents. ii) However, the responsiveness to the complaints are least satisfactory as far as traditional banking is concerned. iii) Convenience and speed of delivery are highly important for the customers in using Internet Banking Service. iv) Banks’ location is of least importance for the customers using Internet Banking Service. v) The ATM users strongly agree that ATMs are comparatively better than traditional Banking and personal visit to the Banks. vi) ATM users feel that Internet Banking will not replace ATMs in future.

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CONCLUSIONS
Internet Banking Service recently started to gain importance in the Mangalore region. For the study purpose a sample of 108 bank customers were taken. Also the study was conducted in 10 bank branches operating in Mangalore. The main purpose of the study was to throw a light on the Adoption, Implementation and Usage of Internet Banking Service in Mangalore region. It also aimed to analyze the promotional tools adopted by the banks to increase the usage of internet Banking. The Analysis proved that the Usage of Internet banking is not driven by the security level of transactions in traditional banking. But it also is proved in the study that, the usage of internet banking service is strongly driven by the efficiency of services provided in the banks and the number of years of association with the Bank. Also, the Maximum amount that is transacted in each of the ten Banks through Internet banking is equal. Most of the respondents have opined that the convenience and the speed of delivery are most important issues in Internet banking services. The last conclusion is that the Bankers can adopt external promotional tools to increase the usage of Internet Banking Service in Mangalore region. But, until now the Bankers are least bothered about usage of external promotional tools. If they promote externally there will be increased usage of Internet banking in Mangalore.

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APPENDIX
Annexure I: QUESTIONNAIRE FOR USERS Internet Banking Services: A Brand Building Strategy or Effective Service Providing Strategy? Dear Respondent, This Questionnaire is prepared solely for the purpose of my studies as a survey for my Management Thesis titled as above. It is purely for academic purposes and the data given will not be disclosed anywhere. I request you to fill this and help me in my research. Thank you. Name: Contact Number: Age group: 15-30yrs 31-45yrs Employed 46-60yrs Student >60 yrs Any Other (specify)

Occupation: Business ______________

Income Level (per Annum): < 2 lakhs

2- 4 lakhs

4- 6 lakhs

> 6 lakhs

1. In which bank do you have your Account? ____________________________________________

2. Which type of Account do you own in your Bank? Savings Bank Current NRI Any Other (Specify) ______________

3. Since when are you the Customer of this Bank? <1 yr 1-2 yrs 2-3 yrs 3-4 yrs >4 yrs

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4. How do you rate the following aspects with regard to the services offered by your Bank? Tick 1: Highly satisfied; 4: Moderately Dissatisfied; Factor Bank’s Services in the premises Convenience of transactions Information services Reliability of services Privacy/ security Responsiveness to complaints Fulfillment of Grievances Efficiency of services provided Amount of innovative services Adaptation to new Technology 2: Moderately satisfied; 5: Highly Dissatisfied; 1 3: Can’t Say;

S.no. 1 2 3 4 5 6 7 8 9 10

2

3

4

5

5. Have you applied for the Internet Banking Services provided by your Bank? Yes No

If Yes, A) In Which Bank do you have your Internet Bank account? _______________________________ B) Since when are you using the Internet Banking Service? < 1 yr > 1yr

C) For what Purpose/ Reasons are you using the Internet Banking Service? (Tick wherever applicable) Seeking product and rate information To apply for various services offered by the bank To Check your Account Balances To Transfer Funds Payment of different Bills To Calculate Loan Payment Information Download Loan Applications Personal Bank transaction activity
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Others (specify) ____________________________ D) What are the major complaints you had in using IBS? ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------E) What is the Highest amount of rupees you transacted through Internet Banking System? Rs. ___________________________________________ F) Tick wherever you find it appropriate: How much each of the following factors is important for you with regard to Internet Banking system? Tick 1: Highly Important; 4: Moderately unimportant; 2: Moderately Important; 5: Least important. 1 2 3:Can’t Say;

S.no. 1 2 3 4 5 6 7 8 9

Factor Better rates with lower service charges Bank Familiarity Bank’s Location Size of the Bank Security of Transaction Convenience (24hrs) Speed of Service Delivery Varieties of Services offered online Integrated Value added Services (account summary etc.)

3

4

5

If No, A) What are the main reasons that you have not opened an Internet bank account yet? (Check all that apply) Under age Never heard of Internet banking Concerned about security Haven't taken time to open an account Don't see any real value in having this type of account Would like to see how it works, then open an account if found good Not available through my bank Not Applicable Others (Specify) _____________________________
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B) Would you prefer to have an Internet Bank Account in future? Yes No

C) When would you like to open an Internet Bank Account? By Next 12 months Sometime in future Never 6. What do you think is the security level of the transactions in your Bank Account? Very Good Good Average Poor Very poor

7. How many times do you use Internet Banking Services per month? Less than 1 time. 1 - 3 times. 3 – 8 times. 8 – 12 times. Over 12 times.

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Annexure II: QUESTIONNAIRE TO THE BANKER Internet Banking Services: A Brand Building Strategy or Effective Service Providing Strategy? Dear Respondent, This Questionnaire is prepared solely for the purpose of my studies as a survey for my Management Thesis titled as above. It is purely for academic purposes and the data given will not be disclosed anywhere. I request you to fill this and help me in my research. Thank you. Name of the Bank: Contact Number: Branch:

1. In which year was this branch of your Bank Established? 2. What services do you offer to your Customers? 3. Do you offer Internet Banking Service? 4. When was the service of Internet Banking started in this Bank? 5. What factors did you consider before implementing the Internet Banking Service? 6. What are the reasons that you adopted internet Banking System? As competition to other Banks offering IBS. For improvising the services to the Customers. For reducing the costs. Any other, Specify_____________________________ 7. What steps are to be taken for implementing the IBS? 8. Which are the various services provided by the bank through IBS? 9. As per now, in Mangalore, which are the services availed by the Customers through IBS? 10. What are the charges to be borne by the customers for availing services through IBS other than Traditional Banking? 11. After implementing IBS, what are the promotional tools used to educate the customers about the availability of the service? 12. What are the techniques used now to increase the Customers for the IBS service?

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13. Could you give the details regarding the number of customers logged into the IBS since its inception? 14. What are the major risks associated with IBS to the Bank? 15. What are the costs involved in providing IBS to the Customers? Is the cost transferred to the customer in any way? 16. Which are the major Complaints that you receive from your customers regarding the services you offer? 17. As per the ATM facilities are concerned, which are the major problems faced by the customers? 18. What are the major difficulties faced by your Customers in Internet Banking Facilities? 19. Could you give the Balance sheet and Income and Expenditure statement of this branch for the year before and after implementation of IBS? (Following details in two years i.e. the year before implementation of IBS and the current year: • • • • • • • • • • Net operating Income: Total Assets: Shareholder Equity: Interest expense: Earning Assets: Interest income: Reserves: Total Loans: Total Long term debts: Total Liabilities: )

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Annexure III: QUESTIONNAIRE FOR ATM USERS Internet Banking Services: A Brand Building Strategy or Effective Service Providing Strategy? Dear Respondent, This Questionnaire is prepared solely for the purpose of my studies as a survey for my Management Thesis titled as above. It is purely for academic purposes and the data given will not be disclosed anywhere. I request you to fill this and help me in my research. Thank you. Name: Contact Number: Age group: Occupation: 15-30yrs Business 31-45yrs Employed 46-60yrs Student 2- 4 lakhs >60 yrs Any Other (specify) __________ 4- 6 lakhs > 6 lakhs

Income Level (per Annum): < 2 lakhs

1. How many times in an average do you use ATM service in a month? < 1 time 1 - 3 times 3 – 8 times 8 – 12 times > 12 times.

2. Since when are you using ATM Service? < 1 year 1-2 years 2-3 years

3-4 years

4-5 years

>5 years.

3. Have you ever experienced any difficulty in ATM transactions? Yes No

a) If Yes, How many times? ---------------------------b) What are the major Difficulties you experienced in ATM? ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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4. Have you heard about Internet Banking Services (Online 24-hours Banking Service, which provides you to access your account from your place of convenience)? Yes No

5. Do you wish to avail Internet Banking Service in future? Yes No

6. Rank the following services as follows: Tick 1: Strongly Agree; Disagree; 2: Agree; 3: Can’t Say; 4: Disagree; 5: Strongly

S.no. 1 ATM is better than personal visit to Banks 2 The amount of Risk in ATM transactions is less compared to Traditional Banking Transactions 3 Internet Banking is more useful than ATMs 4 Internet Banking will replace ATM in the near future 5 Banks are very fast updating itself to latest technologies 6 ATM is always customer friendly 7 ATM is used for time saving

1

2

3

4

5

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Annexure IV: Table of Chi-square statistics- For one-tailed test:

df 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33

α=0.05 3.84 5.99 7.82 9.49 11.07 12.59 14.07 15.51 16.92 18.31 19.68 21.03 22.36 23.69 25.00 26.30 27.59 28.87 30.14 31.41 32.67 33.92 35.17 36.42 37.65 38.89 40.11 41.34 42.56 43.77 44.99 46.19 47.40

α=0.01 6.64 9.21 11.35 13.28 15.09 16.81 18.48 20.09 21.67 23.21 24.73 26.22 27.69 29.14 30.58 32.00 33.41 34.81 36.19 37.57 38.93 40.29 41.64 42.98 44.31 45.64 46.96 48.28 49.59 50.89 52.19 53.49 54.78

α=0.001 10.83 13.82 16.27 18.47 20.52 22.46 24.32 26.13 27.88 29.59 31.26 32.91 34.53 36.12 37.70 39.25 40.79 42.31 43.82 45.32 46.80 48.27 49.73 51.18 52.62 54.05 55.48 56.89 58.30 59.70 61.10 62.49 63.87

34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67

48.60 49.80 51.00 52.19 53.38 54.57 55.76 56.94 58.12 59.30 60.48 61.66 62.83 64.00 65.17 66.34 67.51 68.67 69.83 70.99 72.15 73.31 74.47 75.62 76.78 77.93 79.08 80.23 81.38 82.53 83.68 84.82 85.97 87.11

56.06 57.34 58.62 59.89 61.16 62.43 63.69 64.95 66.21 67.46 68.71 69.96 71.20 72.44 73.68 74.92 76.15 77.39 78.62 79.84 81.07 82.29 83.52 84.73 85.95 87.17 88.38 89.59 90.80 92.01 93.22 94.42 95.63 96.83

65.25 66.62 67.99 69.35 70.71 72.06 73.41 74.75 76.09 77.42 78.75 80.08 81.40 82.72 84.03 85.35 86.66 87.97 89.27 90.57 91.88 93.17 94.47 95.75 97.03 98.34 99.62 100.88 102.15 103.46 104.72 105.97 107.26 108.54

68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100

88.25 89.39 90.53 91.67 92.81 93.95 95.08 96.22 97.35 98.49 99.62 100.75 101.88 103.01 104.14 105.27 106.40 107.52 108.65 109.77 110.90 112.02 113.15 114.27 115.39 116.51 117.63 118.75 119.87 120.99 122.11 123.23 124.34

98.03 99.23 100.42 101.62 102.82 104.01 105.20 106.39 107.58 108.77 109.96 111.15 112.33 113.51 114.70 115.88 117.06 118.24 119.41 120.59 121.77 122.94 124.12 125.29 126.46 127.63 128.80 129.97 131.14 132.31 133.47 134.64 135.81

109.79 111.06 112.31 113.56 114.84 116.08 117.35 118.60 119.85 121.11 122.36 123.60 124.84 126.09 127.33 128.57 129.80 131.04 132.28 133.51 134.74 135.96 137.19 138.45 139.66 140.90 142.12 143.32 144.55 145.78 146.99 148.21 149.48

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Annexure V: Table of F distribution:
Critical values of F for the 0.05 significance level:
(k-1, n-k) 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 1 161.45 18.51 10.13 7.71 6.61 5.99 5.59 5.32 5.12 4.97 4.84 4.75 4.67 4.60 4.54 4.49 4.45 4.41 4.38 4.35 4.33 4.30 4.28 4.26 4.24 4.23 4.21 4.20 4.18 4.17 4.16 4.15 4.14 2 199.50 19.00 9.55 6.94 5.79 5.14 4.74 4.46 4.26 4.10 3.98 3.89 3.81 3.74 3.68 3.63 3.59 3.56 3.52 3.49 3.47 3.44 3.42 3.40 3.39 3.37 3.35 3.34 3.33 3.32 3.31 3.30 3.29 3 215.71 19.16 9.28 6.59 5.41 4.76 4.35 4.07 3.86 3.71 3.59 3.49 3.41 3.34 3.29 3.24 3.20 3.16 3.13 3.10 3.07 3.05 3.03 3.01 2.99 2.98 2.96 2.95 2.93 2.92 2.91 2.90 2.89 4 224.58 19.25 9.12 6.39 5.19 4.53 4.12 3.84 3.63 3.48 3.36 3.26 3.18 3.11 3.06 3.01 2.97 2.93 2.90 2.87 2.84 2.82 2.80 2.78 2.76 2.74 2.73 2.71 2.70 2.69 2.68 2.67 2.66 5 230.16 19.30 9.01 6.26 5.05 4.39 3.97 3.69 3.48 3.33 3.20 3.11 3.03 2.96 2.90 2.85 2.81 2.77 2.74 2.71 2.69 2.66 2.64 2.62 2.60 2.59 2.57 2.56 2.55 2.53 2.52 2.51 2.50 6 233.99 19.33 8.94 6.16 4.95 4.28 3.87 3.58 3.37 3.22 3.10 3.00 2.92 2.85 2.79 2.74 2.70 2.66 2.63 2.60 2.57 2.55 2.53 2.51 2.49 2.47 2.46 2.45 2.43 2.42 2.41 2.40 2.39 7 236.77 19.35 8.89 6.09 4.88 4.21 3.79 3.50 3.29 3.14 3.01 2.91 2.83 2.76 2.71 2.66 2.61 2.58 2.54 2.51 2.49 2.46 2.44 2.42 2.41 2.39 2.37 2.36 2.35 2.33 2.32 2.31 2.30 8 238.88 19.37 8.85 6.04 4.82 4.15 3.73 3.44 3.23 3.07 2.95 2.85 2.77 2.70 2.64 2.59 2.55 2.51 2.48 2.45 2.42 2.40 2.38 2.36 2.34 2.32 2.31 2.29 2.28 2.27 2.26 2.24 2.24 9 240.54 19.39 8.81 6.00 4.77 4.10 3.68 3.39 3.18 3.02 2.90 2.80 2.71 2.65 2.59 2.54 2.49 2.46 2.42 2.39 2.37 2.34 2.32 2.30 2.28 2.27 2.25 2.24 2.22 2.21 2.20 2.19 2.18 10 241.88 19.40 8.79 5.96 4.74 4.06 3.64 3.35 3.14 2.98 2.85 2.75 2.67 2.60 2.54 2.49 2.45 2.41 2.38 2.35 2.32 2.30 2.28 2.26 2.24 2.22 2.20 2.19 2.18 2.17 2.15 2.14 2.13

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34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 67 68 69 70 71

4.13 4.12 4.11 4.11 4.10 4.09 4.09 4.08 4.07 4.07 4.06 4.06 4.05 4.05 4.04 4.04 4.03 4.03 4.03 4.02 4.02 4.02 4.01 4.01 4.01 4.00 4.00 4.00 4.00 3.99 3.99 3.99 3.99 3.98 3.98 3.98 3.98 3.98

3.28 3.27 3.26 3.25 3.25 3.24 3.23 3.23 3.22 3.21 3.21 3.20 3.20 3.20 3.19 3.19 3.18 3.18 3.18 3.17 3.17 3.17 3.16 3.16 3.16 3.15 3.15 3.15 3.15 3.14 3.14 3.14 3.14 3.13 3.13 3.13 3.13 3.13

2.88 2.87 2.87 2.86 2.85 2.85 2.84 2.83 2.83 2.82 2.82 2.81 2.81 2.80 2.80 2.79 2.79 2.79 2.78 2.78 2.78 2.77 2.77 2.77 2.76 2.76 2.76 2.76 2.75 2.75 2.75 2.75 2.74 2.74 2.74 2.74 2.74 2.73

2.65 2.64 2.63 2.63 2.62 2.61 2.61 2.60 2.59 2.59 2.58 2.58 2.57 2.57 2.57 2.56 2.56 2.55 2.55 2.55 2.54 2.54 2.54 2.53 2.53 2.53 2.53 2.52 2.52 2.52 2.52 2.51 2.51 2.51 2.51 2.51 2.50 2.50

2.49 2.49 2.48 2.47 2.46 2.46 2.45 2.44 2.44 2.43 2.43 2.42 2.42 2.41 2.41 2.40 2.40 2.40 2.39 2.39 2.39 2.38 2.38 2.38 2.37 2.37 2.37 2.37 2.36 2.36 2.36 2.36 2.35 2.35 2.35 2.35 2.35 2.34

2.38 2.37 2.36 2.36 2.35 2.34 2.34 2.33 2.32 2.32 2.31 2.31 2.30 2.30 2.30 2.29 2.29 2.28 2.28 2.28 2.27 2.27 2.27 2.26 2.26 2.26 2.25 2.25 2.25 2.25 2.24 2.24 2.24 2.24 2.24 2.23 2.23 2.23

2.29 2.29 2.28 2.27 2.26 2.26 2.25 2.24 2.24 2.23 2.23 2.22 2.22 2.21 2.21 2.20 2.20 2.20 2.19 2.19 2.19 2.18 2.18 2.18 2.17 2.17 2.17 2.16 2.16 2.16 2.16 2.15 2.15 2.15 2.15 2.15 2.14 2.14

2.23 2.22 2.21 2.20 2.19 2.19 2.18 2.17 2.17 2.16 2.16 2.15 2.15 2.14 2.14 2.13 2.13 2.13 2.12 2.12 2.12 2.11 2.11 2.11 2.10 2.10 2.10 2.09 2.09 2.09 2.09 2.08 2.08 2.08 2.08 2.08 2.07 2.07

2.17 2.16 2.15 2.15 2.14 2.13 2.12 2.12 2.11 2.11 2.10 2.10 2.09 2.09 2.08 2.08 2.07 2.07 2.07 2.06 2.06 2.06 2.05 2.05 2.05 2.04 2.04 2.04 2.04 2.03 2.03 2.03 2.03 2.02 2.02 2.02 2.02 2.02

2.12 2.11 2.11 2.10 2.09 2.08 2.08 2.07 2.07 2.06 2.05 2.05 2.04 2.04 2.04 2.03 2.03 2.02 2.02 2.02 2.01 2.01 2.01 2.00 2.00 2.00 1.99 1.99 1.99 1.99 1.98 1.98 1.98 1.98 1.97 1.97 1.97 1.97

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72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 100

3.97 3.97 3.97 3.97 3.97 3.97 3.96 3.96 3.96 3.96 3.96 3.96 3.96 3.95 3.95 3.95 3.95 3.95 3.95 3.95 3.95 3.94 3.94 3.94 3.94 3.94 3.94 3.94 3.94

3.12 3.12 3.12 3.12 3.12 3.12 3.11 3.11 3.11 3.11 3.11 3.11 3.11 3.10 3.10 3.10 3.10 3.10 3.10 3.10 3.10 3.09 3.09 3.09 3.09 3.09 3.09 3.09 3.09

2.73 2.73 2.73 2.73 2.73 2.72 2.72 2.72 2.72 2.72 2.72 2.72 2.71 2.71 2.71 2.71 2.71 2.71 2.71 2.71 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70 2.70

2.50 2.50 2.50 2.49 2.49 2.49 2.49 2.49 2.49 2.48 2.48 2.48 2.48 2.48 2.48 2.48 2.48 2.47 2.47 2.47 2.47 2.47 2.47 2.47 2.47 2.47 2.47 2.46 2.46

2.34 2.34 2.34 2.34 2.34 2.33 2.33 2.33 2.33 2.33 2.33 2.32 2.32 2.32 2.32 2.32 2.32 2.32 2.32 2.32 2.31 2.31 2.31 2.31 2.31 2.31 2.31 2.31 2.31

2.23 2.23 2.22 2.22 2.22 2.22 2.22 2.22 2.21 2.21 2.21 2.21 2.21 2.21 2.21 2.21 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.20 2.19 2.19 2.19 2.19

2.14 2.14 2.14 2.13 2.13 2.13 2.13 2.13 2.13 2.13 2.12 2.12 2.12 2.12 2.12 2.12 2.12 2.11 2.11 2.11 2.11 2.11 2.11 2.11 2.11 2.11 2.10 2.10 2.10

2.07 2.07 2.07 2.06 2.06 2.06 2.06 2.06 2.06 2.06 2.05 2.05 2.05 2.05 2.05 2.05 2.05 2.04 2.04 2.04 2.04 2.04 2.04 2.04 2.04 2.04 2.03 2.03 2.03

2.01 2.01 2.01 2.01 2.01 2.00 2.00 2.00 2.00 2.00 2.00 2.00 1.99 1.99 1.99 1.99 1.99 1.99 1.99 1.98 1.98 1.98 1.98 1.98 1.98 1.98 1.98 1.98 1.98

1.97 1.96 1.96 1.96 1.96 1.96 1.95 1.95 1.95 1.95 1.95 1.95 1.95 1.94 1.94 1.94 1.94 1.94 1.94 1.94 1.94 1.93 1.93 1.93 1.93 1.93 1.93 1.93 1.93

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REFERENCES
Articles, Journals and Books: 1. Gupta Soutiman Das, (February 2003): “Towards Online Banking”, Article, Network Magazine issue. (Source: http://www.networkmagazineindia.com/200302/feature.shtml) 2. Sanmugam, “Factors determining consumer adoption of Internet Banking”, Binary University College, Puchong, Selangor Malaysia, (Source: http://ssrn.com/abstract=1021484) 3. Miss Doungratana Sattabusaya, “Keys factors that determine Internet banking adoption in Thailand”, Cardiff Business School, Cardiff University, Aberconway Building, Colum Drive, Cardiff, CF10 3EU, UK, pgs.1-15. 4. Research and Markets, (2007), “Opportunities in Indian banking Sector”, Research and Markets, Ireland, (source: http://www.researchandmarkets.com/reports/564049/) 5. Deolalkar G. H, (2000) “The Indian Banking Sector: On the Road to progress”, A Study of Financial Markets, Pgs. 60-68. 6. Icfai University: (2006) “Commercial banking”, Icfai University Press, Hyderabad, pgs. 2-7. 7. Address by Shri Vepa Kamesam, Chairman, IDRBT and Former Deputy Governor, RBI (2004) at the city Union Bank. (Source: www.rbi.gov.in) 8. Srivastava Saurabh, (2008), “Internet Banking: A Global way to Bank.”, BBS Institute of Management and Technology.(Source:http://www.indianmba.com/Faculty_Column/FC908/fc908.html) 9. Datamonitor, (2008) “Company Profile State Bank of India”, source: www.datamonitor.com
10.

Datamonitor, (2008) “Company Profile Axis bank Ltd.”, source: www.datamonitor.com

11. Datamonitor, (2008) “Company Profile Punjab National bank”, source: www.datamonitor.com 12. Datamonitor, (2008) “Company Profile ICICI Bank Ltd.”, source: www.datamonitor.com

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Websites: 1. http://www.gdrc.org/icm/icm-documents.html 2. http://www.geocities.com/kstability/inbank2/finub/universal.html 3. http://www.citefin.com/1405-history-banking-india.html 4. http://www.bankingindiaupdate.com/general.htmls

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