“To study the impact of technology on selected private

and public banks”

Submitted

By

Chitresh Menon

University Roll No. 100372244478

Submitted

To

Prof. Navdeep Kaur

G.N.D.E.C. Ludhiana
 CONTENT

CHAPTER 1- INTRODUCTION TO TOPIC

 Banking system

 Technological Revolution and banking

 Technological channels use by banks

 Introduction to the organization

CHAPTER 2- REVIEW OF LITERATURE

CHAPTER 3- RESEARCH METHODOLOGY

 Objectives of study

 Scope of the study

 Research plan

 Data Collection Methods

 Sampling Plan

 Tools of analysis

 Limitations of study

CHAPTER 4- DATA ANALYSIS AND INTERPRETATION

 On the view point of customers

CHAPTER5- FINDINGS AND SUGGESSTIONS

CHAPTER 1
INTRODUCTION TO TOPIC

BANKING SYSTEM

A banker or bank is a financial institution that acts as a payment agent for customers,
and borrows and lends money. In some countries such as Germany and Japan banks are
the primary owners of industrial corporations while in other countries such as the United
States banks are prohibited from owning non-financial companies.

The first modern bank was founded in Italy in Genoa in 1406, its name was Banco di San
Giorgio (Bank of St. George).Banks act as payment agents by conducting checking or
current accounts for customers, paying cheques drawn by customers on the bank, and
collecting cheques deposited to customers' current accounts. Banks also enable customer
payments via other payment methods such as telegraphic transfer, EFTPOS, and ATM.

Banks borrow money by accepting funds deposited on current account, accepting term
deposits and by issuing debt securities such as banknotes and bonds. Banks lend money
by making advances to customers on current account, by making instalment loans, and by
investing in marketable debt securities and other forms of lending.

Banks provide almost all payment services, and a bank account is considered
indispensable by most businesses, individuals and governments. Non-banks that provide
payment services such as remittance companies are not normally considered an adequate
substitute for having a bank account.

Banks borrow most funds borrowed from households and non-financial businesses, and
lend most funds lent to households and non-financial businesses, but non-bank lenders
provide a significant and in many cases adequate substitute for bank loans, and money
market funds, cash management trusts and other non-bank financial institutions in many
cases provide an adequate substitute to banks for lending savings to.
DEFINATION OF BANKING:- "Banking Business" means the business of either or
both of the following:

1. receiving from the general public money on current, deposit, savings or other
similar account repayable on demand or within less than [3 months] ... or with a
period of call or notice of less than that period;
2. paying or collecting cheques drawn by or paid in by customers.

History Of Banking In India

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

For the past three decades India's banking system has several outstanding achievements
to its credit. The most striking is its extensive reach. It is no longer confined to only
metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even
to the remote corners of the country. This is one of the main reason of India's growth
process.The government's regular policy for Indian bank since 1969 has paid rich
dividends with the nationalisation of 14 major private banks of India

The first bank in India, though conservative, was established in 1786. From 1786 till
today, the journey of Indian Banking System can be segregated into three distinct phases.
They are as mentioned below:

 Early phase from 1786 to 1969 of Indian Banks

 Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector
Reforms.
 New phase of Indian Banking System with the advent of Indian Financial &
Banking Sector Reforms after 1991.
Phase I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan
and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of
Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency
Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was
established which started as private shareholders banks, mostly 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. Reserve Bank of India came in 1935.
During the first phase the growth was very slow and banks also experienced periodic
failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To
streamline the functioning and activities of commercial banks, the Government of India
came up with The Banking Companies Act, 1949 which was later changed to Banking
Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of
India was vested with extensive powers for the supervision of banking in india as the
Central Banking Authority.

Phase II

Government took major steps in this Indian Banking Sector Reform after independence.
In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a large
scale specially in rural and semi-urban areas. It formed State Bank of india to act as the
principal agent of RBI and to handle banking transactions of the Union and State
Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th
July, 1969, major process of nationalisation was carried out. It was the effort of the then
Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country
was nationalised. Second phase of nationalisation 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 : Nationalisation of State Bank of India.
 1959 : Nationalisation of SBI subsidiaries.
 1961 : Insurance cover extended to deposits.
 1969 : Nationalisation of 14 major banks.
 1971 : Creation of credit guarantee corporation.
 1975 : Creation of regional rural banks.
 1980 : Nationalisation of seven banks with deposits over 200 crore.

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

Phase III
This phase has introduced many more products and facilities in the banking sector in its
reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was
set up by his name which worked for the liberalisation of banking practices
The country is flooded with foreign banks and their ATM stations. Efforts are being put to
give a satisfactory service to customers. Phone banking and net banking is introduced.
The entire system became more convenient and swift. Time is given more importance
than money.
Current situation
Currently (2008), banking in India is generally fairly mature in terms of supply, product
range and reach-even though reach in rural India still remains a challenge for the private
sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks
are considered to have clean, strong and transparent balance sheets relative to other banks
in comparable economies in its region. The Reserve Bank of India is an autonomous
body, with minimal pressure from the government. The stated policy of the Bank on the
Indian Rupee is to manage volatility but without any fixed exchange rate-and this has
mostly been true.
With the growth in the Indian economy expected to be strong for quite some time-
especially in its services sector-the demand for banking services, especially retail
banking, mortgages and investment services are expected to be strong. One may also
expect M&As, takeovers, and asset sales.
In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in
Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor
has been allowed to hold more than 5% in a private sector bank since the RBI announced
norms in 2005 that any stake exceeding 5% in the private sector banks would need to be
vetted by them.
The Reserve Bank of India act as a centralized body monitoring any discrepancies and
shortcoming in the system. It is the foremost monitoring body in the Indian financial
sector. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector
banks (that is with the Government of India holding a stake), 29 private banks (these do
not have government stake; they may be publicly listed and traded on stock exchanges)
and 31 foreign banks. They have a combined network of over 53,000 branches and
17,000 ATMs.
TECHNOLOGICAL REVOLUTION AND BANKING

We have been witnessing since early 1980s the phenomenon of widespread use of
computers and communication technology in the industrial, as well as emerging market
economies. This has resulted in faster funds movement across nations and borders.
Globalisations of economies and financial liberalisation within the economies have
opened new opportunities of growth for techno-savvy institutions, while for the others
these have resulted in shrinkage of revenues. The use of IT in the banking industry in
India has however been somewhat limited and has, as a result, restricted our presence in
international operations. Even in critical spheres such as those involving funds transfer,
and MIS based decision-making, there has been little evidence of proactive movement
towards wholesale computerisation up to the middle of the 1990s.

However, Indian Banks have come to start this process after a decade or so. It is only
with the growing recognition of the need for having in place financial reforms, has the
interest in IT application in the banking sector in India increased. But though the process
started late, computerising the vast network of branches of several banks is planned and
being executed methodically and the benefit is expected to be fully perceived by the year
2010.

EVOLUTION OF TECHNOLOGY IN BANKS:- The Rangarajan Committee report in

early 1980s was the first step towards computerization of banks. Banks started exploring
the idea of 'Total Bank Automation (TBA)'. Although titled 'Total Bank Automation,'
TBA was in most cases confined to branch automation. It was only in the early 1990s that
banks started thinking about tying-up disparate branches together to facilitate information
sharing.

At the same time, private banks entered the banking arena with radically different
strategies. Given the huge IT budgets at their disposal and with almost no legacy IT
equipment to worry about; private banks hastened the adoption of technology. The
philosophy for private banks was very clear: to provide a whole new range of financial
products and services at minimal costs. And technology made this possible.
Says K.N.C. Nair, Head (IT), Federal Bank,"The new generation banks showed the way
and others had no option but to follow the tech infusion to retain and attract profitable
customers."

The improved connectivity and falling costs offered by leased lines and VSATs provided
a booster to inter-branch automation.

Confirms Naresh Wadhwa, Vice President-West, Cisco Systems (India), "With the
improved services and lowered costs of service providers such as DoT and VSNL, it
became more feasible for banks to network their branches. This gave banks an impetus to
network all the branches and set up centralized databases. With these developments it
became possible for operations such as MIS to be truly automated and centralized."

Core matters

After the turn of consolidated databases and networks come core banking applications.
Core banking applications help provide complete front and backend automation of banks.
These applications also help banks achieve centralized processing and provide 24-hour
customer service. "Core banking applications provide anywhere, anytime 24 by 7 non-
stop services, which is not possible with traditional localized branch automation systems
that are available only between 10 am to 2 pm," says V. Chandrasekhar.

Core banking applications help integrate the enterprise to existing in-house applications
to offer a single customer view. These applications provide automation across multiple
delivery channels.

A happy customer

Managing customers is one of the main issues that banks face in today's hypercompetitive
environment. If the service levels are not up to customer expectations, in all likelihood
the customer might take his business elsewhere. This is where Customer Relationship
Management (CRM) practices (most important) and software (on the technology side)
play an important role. Before banks go for a CRM solution, they need to ask themselves
one question: How well do they know their customer?

For that matter how many customers have moved in the past? Or how existing customers
use various services that the bank provides.

"In banking, being the first to market alone is not enough since products can be copied
very fast. It is the customer service levels which matter," says Neeraj Bhai, CTO, IDBI
Bank.

This is where CRM techniques and tools come into place. While a foremost part of CRM
strategy is all about treating your customer right, technology does make a major
difference. "CRM is a tool that allows you to emote and relate with your customers.
Increasingly, all banks will require it as they get centralized," says P. K. Vohra.

CRM Tools

CRM tools can be broadly classified into two categories: Operational and Analytical.

Operational CRM provides the software support for businesses that require customer
contact. These tools are largely workflow based to provide information to employees and
document customer interactions. This includes collaborative CRM type of tools used to
provide enterprise/customer interaction across all contact channels such as face-to-face,
telephonic, electronic, and wireless. Operational CRM types are the major CRM tools
being used nowadays for customer support in India. For example, say a premium
customer dials your call center from his home. Operational CRM can alert the call center
executive of his account status and other details by his home telephone. This will help the
employee in extending him the kind of service extended to a premium customer.

Analytical CRM helps you make sense of the information. It helps you target customers
and utilize their potential to the maximum. For example, say an account holder withdraws
Rs 10,000 every month from his account and deposits it in another bank as EMI for a
loan. Analytical CRM tools can help you track this activity. Techniques such as data
warehousing and data mining are prominent tools used for this. Your bank could offer a
loan to the customer at a lower rate than what the other bank offers. This will keep the
customer happy since he knows that you are giving him better service. This translates to
gains for your bank as well. .

Mining for intelligence

Another important issue banks face is in proper analysis of financial data to identify
business potential. This helps a bank identify cross- sell and up-sell potentials.
Technologies such as data warehousing/mining come into play here.

Indian banking industry, today is in the midst of an IT revolution. A combination of

regulatory and competitive reasons have led to increasing importance of total banking
automation in the Indian Banking Industry.

The core issues faced by banks today are on the fronts of customer's service expectations,
cutting operational costs, and managing competition. Technology can help banks in
meeting these objectives

Information Technology has basically been used under two different avenues in
Banking. One is Communication and Connectivity and other is Business Process
Reengineering. Information technology enables sophisticated product development,
better market infrastructure, implementation of reliable techniques for control of risks and
helps the financial intermediaries to reach geographically distant and diversified markets.

In view of this, technology has changed the contours of three major functions performed
by banks, i.e., access to liquidity, transformation of assets and monitoring of risks.
Further, Information technology and the communication networking systems have a
crucial bearing on the efficiency of money, capital and foreign exchange markets.
Payment and Settlement Systems

As part of restructuring of the banking sector, special emphasis has been accorded to
improvements in payment and settlement systems. Prominent among the measures
initiated in these areas include introduction of Electronic Funds Transfer (EFT), Real
Time Gross Settlement System (RTGS), Centralised Funds Management System
(CFMS), the NDS and the Structured Financial Messaging Solution (SFMS). The SFMS
would be the backbone for all message-based communication over the Indian Financial
Network (INFINET).

Electronic Funds Transfer (EFT)

The EFT scheme enables transfer of funds within and across cities and between branches
of a bank and across banks. The scheme, which is operated by the Reserve Bank, is
available for funds transfer across thirteen major cities in the country, as on September
30, 2001. The facility is being extended to two more centres. The scheme was originally
intended for small value transactions. However, with effect from October 1, 2001, even
large value transactions (as high as Rs. 2 crore) have also been permitted.

Real Time Gross Settlement System (RTGS)

The work on operationalisation of RTGS system continued during the year. The major
project components completed during the year included the finalisation of the design for
RTGS system, issue of the tender for the development of the software, evaluation of the
technical components of the bids received, site visits and evaluation of the commercial
proposals. The implementation of RTGS is targeted to be accomplished within 12 to 15
months of award of the contract for software development and implementation.
Centralised Funds Management System (CFMS)

The CFMS would enable the funds and treasury managers of commercial banks to obtain
the consolidated account-wise, centre-wise position of their balances with all the 17
Deposit Accounts Departments (DAD) of the Reserve Bank. The system has been tested
prior to installation and phase-wise implementation commenced from November 2001.
The CFMS would enable better funds management by constituent current account holders
of the Reserve Bank.

Mechanised Cheque Processing System using MICR Technology

The term "MICR" stands for Magnetic Ink Character Recognition, and is used to describe
the line of numbers and special characters that appear at the bottom of every check. Since
the 1940s, banks have speeded check processing with special devices that " read" the
MICR encoding and translate the characters into the account number and other pertinent
information.

The Magnetic Ink Character Recognition (MICR) technology based cheque processing
was first introduced in Mumbai and Chennai in 1987 by the Reserve Bank of India and
gradually extended to Delhi in 1988 followed by Kolkata in 1989.

Electronic Data Interchange (EDI)

The Ministry of Commerce, Government of India has identified 114 centers as major
export / import intensive centers in the country. The Ministry desired that, at all these
centers, the bank branches should be fully computerised, inter-connected and networked
and there should be inter-bank connectivity so that on-line banking facility could be made
available to the exporter-importer customers.

The Department of Commerce in the Ministry of Commerce & Industry, Government of

India, New Delhi is the nodal agency for overseeing implementation of Electronic
Commerce (EC)/ Electronic Data Interchange (EDI) in the various organisations in the
country.
Imaging of Instruments

A process of capturing the images of the instruments as they are being processed was
introduced during the year at the four metropolitan National Clearing Cells managed by
the Reserve Bank. Imaging facilitates in quicker balancing during the cheque-processing
cycle and also in reducing clearing reconciliation differences.

Electronic Clearing Services

Emphasis on widespread usage of Electronic Clearing Service (ECS) is being prescribed

by the Reserve Bank to encourage non-paper based funds movement. The prime thrust
areas forming part of this vital activity include the extension of ECS to more centres,
inclusion of more customers under the ambit of the scheme and provision of a centralised
facility for affording payments.

Computerisation in Public Sector Banks

The progress in implementation of the directive of the Central Vigilance Commission

(CVC) on the need to computerise 70 per cent of the banking business by public sector
banks before January 1, 2001 revealed that as on December 31, 2000, 13 banks had
achieved the desired level. Figures as at end of March 2001, indicated that 23 banks have
achieved the target, while two banks have computerisation levels ranging between 60 per
cent and 70 per cent and two others were at a level below 60 per cent.

Cheque Clearing

Magnetic Ink Character Recognition (MICR) based cheque-clearing accounts for about
65 per cent of the value of cheques processed in the country. In addition, Magnetic Media
Based Clearing Systems account for about 10 per cent of the remaining value while
claim-based processes cover the rest of clearing. It may be pertinent to note that growth
in cheque volumes has decelerated to 10 per cent in 2000-01 from 12 per cent during the
previous year. This is reflective of general trends the world over, indicating the migration
towards electronic funds transfer mechanisms.
Computerisation of Banks India - Issues & Events

In the Eighteenth and Nineteenth Centuries the Industrial revolution brought profound
changes in the life style of man. Many activities that were hitherto performed by man
employing his hands and his finger skill came to be carried at great speed and efficiency
by machines. Man continued to carry out only those functions that needed his thinking
process to be involved.

The Industrial Revolution on account of mass production of goods and services brought
large commercial and business organizations, transcending national boundaries that
employed several thousands of persons for performing routine, repetitive clerical tasks,
relating to record keeping, maintaining accounts, attending/answering correspondence,
preparing vouchers, invoices, bills and multiple of such other functions. This created
white-collar employment for educated persons by leaps and bounds.

Clerical task is defined as a routine and repetitive performance involving, adding,

subtracting, multiplying, dividing numbers, and duplicating data/information from one
source to another. The tools employed are "a pen, ink and paper", the knowledge of
arithmetic tables, the basic knowledge of a language and minimum acquaintance with
rules & procedures of the organisation that are followed day in day out and relevant to the
job of the particular employee. Two plus two is four. It is always four. Should we need an
educated worker to compute this task again and again? A business needed human agents
to attend to production, marketing, finance etc. depicting high-level tasks. But more and
more people were employed for performing low-level tasks.

The advent of mechanical calculating devices and later electronic computing in the West
heralded a new age, that dispensed with this white collar and white-elephant employment
progressively. This evolved in the west three decades before, but the advent of this
evolution in India is only now taking place.

The per employee turnover for ICICI bank is Rs.2.3 Crores, that for SBI is Rs.1.56
Lakhs. The gap accounts for the difference between manual operations and high-tech
banking.
Computerisation brings transparency, improves customer care and customer-service
tremendously and reduces substantially scope for corruption or extending undue favour to
particular constituents and uneven service to others.

Challenges Faced in Computerisation

Computerisation is expensive and needs huge investment in hardware and software and
subsequent maintenance. The National Stock Exchange, India's No.1 user in
computerised service has spent Rs.180 Crores to enable investors and brokers across the
country to trade securities online. The rate of obsolescence in respect of both hardware
and software is considerable. New and better products are emerging in the market, whose
use would enable a rival organization to throw a challenge.

Computer crimes are committed widely in the West. India is no less potentially exposed
to this risk, when turnover under Internet banking increases. It is easier to enforce
security of information and accountability of performers in a manual system. But it needs
elaborate steps to incorporate these features in the electronic system.

Role of RBI in Computerisation of Banks in India

Computerisation became popular in the western countries right from the Sixties. Main
Frames were extensively used both by the Public Institutions and Major Private
Organizations. In the Seventies Mini Computer became popular and Personal Computers
in early Eighties, followed by introduction of several software products in high level
language and simultaneous advancement in networking technology. This enabled the use
of personal computers extensively in offices & commercial organisations for processing
different kinds of data.

However in India organised Trade Unions were against introduction of computers in

Public Offices. Computerisation was restricted to major scientific research organizations
and Technical Institutes and defence organizations. Indian Railways first accepted
computerisation for operational efficiency.
The Electronics Corporation of India Ltd. was set up in 1967 with the objective of
research & development in the fields of Electronic Communication, Control,
instrumentation, automation and Information Technology. CMC Ltd (Computer
Maintenance Corporation of India Ltd.) was established in 1976 to look after
maintenance operations of Main Frame Computers installed in several organisations in
India, to serve the gap, when IBM left India, due to the directive of the then Central
Government.

In the Private Sector the first major venture was TCS (Tata Consultancy Services) which
started functioning from 1968. In the year 1980 a few batch-mates of IIT Delhi pioneered
the effort to start a major education centre in India to impart training in Information
Technology and their efforts resulted in the setting up of NIIT in 1981. Aptech Computer
Education was established in 1986 following the experiment of NIIT.

Before large scale computerisation, computer education became popular in India and
coveted by bright students, when several Engineering Colleges and Technical Institutes
introducing Post Graduate Degree courses in Computer Engineering. The booming
hardware and software industry in the West attracted Indian students and many of them
migrated for better opportunities to the U.S.A. and settled there. We have today the
paradox of India being one of the major powers possessing diverse talents in fields of
software development, but at the same time, we are still a decade back to the using
computerised service extensively in the country and bringing the facility to the realms of
the common man.

Rapid development of business and industry brought manual operations of data, a

saturation point. This acted as a overload on the growing banking operations.
Government owned banks in general found the "house-keeping" unmanageable. Several
heads of accounts in particular inter-bank clearing and inter-branch reconciliation of
accounts went totally out of control.

In the year 1993, the Employees' Unions of Banks signed an agreement with Bank
Managements under the auspices of Indian Banks' Association (IBA). This agreement
was a major break through in the introduction of computerised applications and
development of communication networks in Banks.

The first initiatives in the area of bank computerisation, however, stemmed out of the
landmark report of the two committees headed by the former Governor of the Reserve
Bank of India and currently Governor of Andhra Pradesh, His Excellency, Dr. C.
Rangarajan. Both the reports had strongly recommended computerisation of banking
operations at various levels and suggested appropriate architecture.

Internet Banking in India - Guidelines Issued by RBI

Reserve Bank of India had set up a 'Working Group on Internet Banking' to examine
different aspects of Internet Banking (I-banking). The Group had focussed on three major
areas of I-banking, i.e,

i. technology and security issues,

ii. legal issues and

iii. regulatory and supervisory issues.

RBI has accepted the recommendations of the Group to be implemented in a phased

manner. Accordingly, the following guidelines are issued for implementation by banks.
Banks are also advised that they may be guided by the original report, for a detailed
guidance on different issues.

Technology and Security Standards

a. Banks should designate a network and database administrator with clearly defined
roles as indicated in the Group's report
b. Banks should have a security policy duly approved by the Board of Directors.
There should be a segregation of duty of Security Officer / Group dealing
exclusively with information systems security and Information Technology
Division which actually implements the computer systems. Further, Information
Systems Auditor will audit the information systems.
c. Banks should introduce logical access controls to data, systems, application
software, utilities, telecommunication lines, libraries, system software, etc.
Logical access control techniques may include user-ids, passwords, smart cards or
other biometric technologies.

d. At the minimum, banks should use the proxy server type of firewall so that there
is no direct connection between the Internet and the bank's system. It facilitates a
high level of control and in-depth monitoring using logging and auditing tools.
For sensitive systems, a stateful inspection firewall is recommended which
thoroughly inspects all packets of information, and past and present transactions
are compared. These generally include a real time security alert.

e. All the systems supporting dial up services through modem on the same LAN as
the application server should be isolated to prevent intrusions into the network as
this may bypass the proxy server.

f. . The application server should be isolated from the e-mail server.

Legal Issues

a. Considering the legal position prevalent, there is an obligation on the part of

banks not only to establish the identity but also to make enquiries about integrity
and reputation of the prospective customer. Therefore even though request for
opening account can be accepted over Internet,accounts should be opened only
after proper introduction and physical verification of the identity of the customer.
b. From a legal perspective, security procedure adopted by banks for authenticating
users needs to be recognized by law as a substitute for signature. In India, the
Information Technology Act, 2000, in Section 3(2) provides for a particular
technology (viz., the asymmetric crypto system and hash function) as a means of
authenticating electronic record. Any other method used by banks for
authentication should be recognized as a source of legal risk.
 c. Under the present regime there is an obligation on banks to maintain secrecy and
confidentiality of customers' accounts. In the Internet banking scenario, the risk of
banks not meeting the above obligation is high on account of several factors.
Despite all reasonable precautions, banks may be exposed to enhanced risk of
liability to customers on account of breach of secrecy, denial of service etc.,
because of hacking/ other technological failures. The banks should, therefore,
institute adequate risk control measures to manage such risks.

d. In Internet banking scenario there is very little scope for the banks to act on stop-
payment instructions from the customers. Hence, banks should clearly notify to
the customers the timeframe and the circumstances in which any stop-payment
instructions could be accepted.

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

TECHNOLOGICAL CHANNELS USED BY BANKS

Banking Industry has revolutionized the transaction and financial services system
worldwide. Through the development in technology banking services has been availed to
the customers at all times, even after the normal banking hours, on a 24x7 basis. Banking
Industry services is nothing but the access of most of the banking related services (such
as verification of account details, going with the transactions, etc.). In todays world,
progress of online services is available to all customers of the concerned bank and can be
accessed at any point of time and from anywhere provided the place is equipped with the
Internet facility. Now-a-days, almost all the banks all over the world, especially the
multinational ones, provide their customers with Online Banking facility.

From the staid over-the-counter delivery mode to ATMs, tele banking, Net banking, and
now mobile banking—the number of delivery channels deployed by banks has increased
by leaps and bounds. Srikanth R P & Chitra Padmanabhan look at the evolution and
impact of various delivery channels in the Indian banking scenario and forecast which
delivery channel could be the next killer app for banking players

While today each and every bank touts ‘The customer is King’ mantra, it was a quite a
different story not so long ago. Customers patronising PSU banks were greeted with the
typical ‘babu’ culture, where getting even a cheque encashed used to take ages.
Customers had to adjust their schedule to the bank and very rarely was it the other way
around. A person in a city like Bombay usually had to wait for a weekend to deposit a
cheque, because by the time he reached home, the bank would have closed. Today, while
the timings of banks have not changed drastically—banks have become more customer-
friendly. Now, power has shifted into the hands of the customer.
Indian banks are investing heavily in the technologies such as telebanking, mobile
banking,net banking, automated teller machine (ATMs), credit cards, debit cards, smart
cards, call centers,CRM, data warehousing etc.

1. Automated teller machine (ATM) :-An automated teller machine (ATM) is a

computerized telecommunications device that provides the customers of a financial
institution with access to financial transactions in a public space without the need for a
human clerk or bank teller. On most modern ATMs, the customer is identified by
inserting a plastic ATM card with a magnetic stripe or a plastic smartcard with a chip,
that contains a unique card number and some security information, such as an expiration
date or CVC (CVV). Security is provided by the customer entering a personal
identification number (PIN).

Using an ATM, customers can access their bank accounts in order to make cash
withdrawals (or credit card cash advances) and check their account balances. ATMs are
known by various casual terms including automated banking machine, money machine,
bank machine, cash machine, hole-in-the-wall, cashpoint or Bancomat (in Europe and
Russia).

An ATM is typically made up of the following devices:

  CPU (to control the user interface and transaction devices)
 Magnetic and/or Chip card reader (to identify the customer)
 PIN Pad (similar in layout to a Touch tone or Calculator keypad), often
manufactured as part of a secure enclosure.
 Secure cryptoprocessor, generally within a secure enclosure.
 Display (used by the customer for performing the transaction)
 Function key buttons (usually close to the display) or a Touchscreen (used to
select the various aspects of the transaction)
 Record Printer (to provide the customer with a record of their transaction)
 Vault (to store the parts of the machinery requiring restricted access)
 Housing (for aesthetics and to attach signage to)

Alternative uses
Although ATMs were originally developed as just cash dispensers, they have evolved to
include many other bank-related functions. In some countries, especially those which
benefit from a fully integrated cross-bank ATM network (e.g.: Multibanco in Portugal),
ATMs include many functions which are not directly related to the management of one's
own bank account, such as:
 Deposit currency recognition, acceptance, and recycling
 Paying routine bills, fees, and taxes (utilities, phone bills, social security, legal
fees, taxes, etc.)
 Printing bank statements
 Updating passbooks
 Loading monetary value into stored value cards
 Purchasing
o postage stamps.
o lottery tickets
o train tickets
o concert tickets
o shopping mall gift certificates.
 Games and promotional features[47]
  Donating to charities[48]
 Cheque Processing Module.

2. Debit card

A debit card is very similar to a cash card, but it allows you to do a lot more than use an
ATM machine.A debit card is like an electronic cheque that you can use to pay for goods
and services. There are different types of debit card and not all outlets will accept them as
payment. The main types of debit card are Visa delta, Solo, and Switch.

 Many people prefer debit cards over checks for two reasons:

 You don't have to carry your checkbook and present identification, but are still able
to make purchases directly from your checking account.
 You pay your bills immediately, unlike when you use a credit card and get the bill
later. Although you have to be aged at least 11 before you are allowed to own a debit
card, most types of debit card are not available to under 18s.

 When you use a debit card to pay for something, the money will normally be taken
from your account within three working days. As the money is automatically taken
from your account, it means that you can only spend the amount that’s available in
your account at the time.Like the cheque guarantee card, there is a limit to how much
you can spend on your debit card, and this will differ depending on who you bank
with and the type of card you hold.
 Like a cash card, a debit card can be used at an ATM machine. You will be issued
with a Personal Identification Number (PIN number) shortly after you receive your
card.
 This is normally a four-digit number, which you will need to key in to the ATM
machine every time you wish to use your card.
You should always keep your PIN number safe. It is best to memorise it,and
destroy the paper on which is sent to you on. If someone else knows what your PIN
number is, and they can get access to your card, they can also get access to your
 money. By keeping your PIN number memorised, you can prevent anyone else
finding out what it is, and therefore, prevent someone from stealing your cash.

3. Telephone banking

Telephone banking is a service provided by a financial institution which allows its

customers to perform transactions over the telephone.Most telephone banking use an
automated phone answering system with phone keypad response or voice recognition
capability. To guarantee security, the customer must first authenticate through a numeric
or verbal password or through security questions asked by a live representative (see
below). With the obvious exception of cash withdrawals and deposits, it offers virtually
all the features of an automated teller machine: account balance information and list of
latest transactions, electronic bill payments, funds transfers between a customer's
accounts, etc.

Usually, customers can also speak to a live representative located in a call centre or a
branch, although this feature is not guaranteed to be offered 24/7. In addition to the self-
service transactions listed earlier, telephone banking representatives are usually trained to
do what was traditionally available only at the branch: loan applications, investment
purchases and redemptions, chequebook orders, debit card replacements, change of
address, etc.

The Benefits of Telephone Banking :-

 Check the balance of your accounts
 Review withdrawals and deposits
 Transfer funds between your accounts
 Order statements
 Pay selected bills

4. Smart Card

A smart card, chip card, or integrated circuit card (ICC), is defined as any pocket-
sized card with embedded integrated circuits which can process information. This implies
that it can receive input which is processed - by way of the ICC applications - and
delivered as an output. There are two broad categories of ICCs. Memory cards contain
only non-volatile memory storage components, and perhaps some specific security logic.
Microprocessor cards contain volatile memory and microprocessor components. The card
is made of plastic, generally PVC, but sometimes ABS. The card may embed a hologram
to avoid counterfeiting.

Overview
A "smart card" is also characterized as follows:
 Dimensions are normally credit card size. The ID-1 of ISO/IEC 7810 standard
defines them as 85.60 × 53.98 mm. Another popular size is ID-000 which is 25 x
15 mm. Both are .76 mm thick.
 Contains a security system - tamper-resistant properties (e.g. a secure
cryptoprocessor, secure file system, human-readable features) and is capable of
providing security services (e.g. confidentiality of information in the memory).
 Asset managed by way of a central administration system which interchanges
information and configuration settings with the card through the security system.
The latter includes card hotlisting, updates for application data.
 Card data is transferred to the central administration system through card reading
devices, such as ticket readers, ATMs etc.

5. Online banking

Online banking (or Internet banking) Online banking (or Internet banking) is a term
used for performing transactions, payments etc. over the Internet through a bank, credit
union or building society's secure website. This allows customers to do their banking
outside of bank hours and from anywhere where Internet access is available.

Online banking solutions have many features and capabilities in common, but
traditionally also have some that are application specific.

The common features fall broadly into several categories

  Transactional (e.g., performing a financial transaction such as an account to
account transfer, paying a bill, wire transfer... and applications... apply for a loan,
new account, etc.)
o Electronic bill presentment and payment - EBPP
o Funds transfer between a customer's own checking and savings accounts,
or to another customer's account
o Investment purchase or sale
o Loan applications and transactions, such as repayments

 Non-transactional (e.g., online statements, check links, cobrowsing, chat)

o Bank statements
 Financial Institution Administration - features allowing the financial institution to
manage the online experience of their end users
 ASP/Hosting Administration - features allowing the hosting company to
administer the solution across financial institutions

Features commonly unique to business banking include

 Support of multiple users having varying levels of authority
 Transaction approval process
 Wire transfer

Features commonly unique to Internet banking include

 Personal financial management support, such as importing data into a personal
finance program such as Quicken, Microsoft Money or TurboTax. Some online
banking platforms support account aggregation to allow the customers to monitor
all of their accounts in one place whether they are with their main bank or with
other institutions.

6. Credit Card:-A credit card is a system of payment named after the small plastic
card issued to users of the system. A credit card is different from a debit card in that it
does not remove money from the user's account after every transaction. In the case of
credit cards, the issuer lends money to the consumer (or the user) to be paid to the
 merchant. It is different from a charge card (although this name is sometimes used to
describe credit cards), which requires the balance to be paid in full each month. In
contrast, a credit card allows the consumer to 'revolve' their balance, at the cost of
having interest charged. Most credit cards are the same shape and size, as specified by
the ISO 7810 standard. The most common credit card size, known as ID-1, is 85.60 ×
53.98 mm.

Types of Credit Cards

 Secured Credit Cards

 Travel Credit Cards
 Rewards Credit Cards
 Bad Credit Credit Cards
 Airline Credit Cards
 Business Credit Cards
 Cash Back Credit Cards
 Instant Approval Credit Cards
 Low Interest Credit Cards
 Student Credit Cards

7. Mobile banking :-Mobile banking (also known as M-Banking, mbanking, SMS

Banking etc.) is a term used for performing balance checks, account transactions,
payments etc. via a mobile device such as a mobile phone. Mobile banking today (2007)
is most often performed via SMS or the Mobile Internet but can also use special
programs downloaded to the mobile device.

Mobile Banking Services

Mobile banking can offer services such as the following:
 Account Information
1. Mini-statements and checking of account history
2. Alerts on account activity or passing of set thresholds
3. Monitoring of term deposits
4. Access to loan statements
5. Access to card statements
6. Mutual funds / equity statements
7. Insurance policy management
8. Pension plan management
9. Status on cheque, stop payment on cheque
 Payments & Transfers
1. Domestic and international fund transfers
2. Micro-payment handling
3. Mobile recharging
4. Commercial payment processing
5. Bill payment processing
6. Peer to Peer payments
 Investments
1. Portfolio management services
2. Real-time stock quotes
3. Personalized alerts and notifications on security prices

 Support

1. Status of requests for credit, including mortgage approval, and insurance coverage
2. Check (cheque) book and card requests
3. Exchange of data messages and email, including complaint submission and
tracking
4. ATM Location
 Content Services
1. General information such as weather updates, news
2. Loyalty-related offers
3. Location-based services

Based on a survey conducted by Forrester, mobile banking will be attractive mainly

to the younger, more "tech-savvy" customer segment. A third of mobile phone users
 say that they may consider performing some kind of financial transaction through
their mobile phone. But most of the users are interested in performing basic
transactions such as querying for account balance and making bill payment

INTRODUCTION TO THE ORGANISATION

ICICI BANK

Overview
ICICI Bank is India's second-largest bank with total assets of Rs. 3,744.10 billion (US$
77 billion) at December 31, 2008 and profit after tax Rs. 30.14 billion for the nine months
ended December 31, 2008. The Bank has a network of 1,416 branches and about 4,644
ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking
products and financial services to corporate and retail customers through a variety of
delivery channels and through its specialised subsidiaries and affiliates in the areas of
investment banking, life and non-life insurance, venture capital and asset management.
The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches
in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai
International Finance Centre and representative offices in United Arab Emirates, China,
South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has
established branches in Belgium and Germany.

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

History

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial
institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was
reduced to 46% through a public offering of shares in India in fiscal 1998, an equity
offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition
of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary
market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was
formed in 1955 at the initiative of the World Bank, the Government of India and
representatives of Indian industry. The principal objective was to create a development
financial institution for providing medium-term and long-term project financing to Indian
businesses. In the 1990s, ICICI transformed its business from a development financial
institution offering only project finance to a diversified financial services group offering a
wide variety of products and services, both directly and through a number of subsidiaries
and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the
first bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the

emerging competitive scenario in the Indian banking industry, and the move towards
universal banking, the managements of ICICI and ICICI Bank formed the view that the
merger of ICICI with ICICI Bank would be the optimal strategic alternative for both
entities, and would create the optimal legal structure for the ICICI group's universal
banking strategy. The merger would enhance value for ICICI shareholders through the
merged entity's access to low-cost deposits, greater opportunities for earning fee-based
income and the ability to participate in the payments system and provide transaction-
banking services. The merger would enhance value for ICICI Bank shareholders through
a large capital base and scale of operations, seamless access to ICICI's strong corporate
relationships built up over five decades, entry into new business segments, higher market
share in various business segments, particularly fee-based services, and access to the vast
talent pool of ICICI and its subsidiaries. In October 2001, the Boards of Directors of
ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail
finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital
Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI
and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March
2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in
April 2002

HDFC BANK

The Housing Development Finance Corporation Limited (HDFC) was amongst the first
to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a
bank in the private sector, as part of the RBI's liberalisation of the Indian Banking
Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank
Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations
as a Scheduled Commercial Bank in January 1995. HDFC Bank has an nationwide
network of 1412 branches and 2890 ATM’s IN 528 indian towns and cities.

Consolidated list of services

Personal banking

Accounts & Deposits

Savings Accounts

− Regular Savings Account

− Savings Plus Account

−SavingsMax Account

−Senior Citizens Account

−No Frills Account

− Institutional Savings Account

− Payroll Salary Account

− Classic Salary Account

− Regular Salary Account

− Premium Salary Account

− Kid's Advantage Account

− Family Savings Group

− Pension Savings Account

− Plan Current Account

− Trade Current Account

− Demat Account

Cards

− Credit Card

− Debit Card

− ForexPlus Card

−GiftPlus Card

Loans

− Personal Loan (PL)

−Gold Loan (Term Loan)

− Two Wheelers Loans

−Express Loans

−New Car Loans

Forex Services

−Trade Services

− Forex Limits

Investments & Insurance

− Investment Services Account (Online MF a/c)

PUNJAB NATIONAL BANK

Profile
With over 37 million satisfied customers and over 4589 offices, PNB has continued to
retain its leadership position among the nationalized banks. The bank enjoys strong
fundamentals, large franchise value and good brand image. Besides being ranked as one
of India's top service brands, PNB has remained fully committed to its guiding principles
of sound and prudent banking. Apart from offering banking products, the bank has also
entered the credit card & debit card business; bullion business; insurance business; Gold
coins & asset management business, etc.

Since its humble beginning in 1895 with the distinction of being the first Indian bank to
have been started with Indian capital, PNB has achieved significant growth in business
which at the end of March 2008 amounted to Rs 2,85959 crore. Today, with assets of
more than Rs 1,99,000 crore, PNB is ranked as the 3rd largest bank in the country (after
SBI and ICICI Bank) and has the 2nd largest network of branches (4589 including 322
extension counters).During the FY 2007-08, with 43% share of low cost deposits, the
bank achieved a net profit of Rs 2,049 crore, maintaining its number ONE position
amongst its peers. The bank’s Return on Assets at 1.15% was also the highest. During the
FY 2007-08,its’ ratio of priority sector credit to net bank credit at 44.11% & agriculture
credit to net bank credit at 18.94% was also higher than the respective national goals of
40% & 18%.

PNB has always looked at technology as a key facilitator to provide better customer
service and ensured that its ‘IT strategy’ follows the ‘Business strategy’ so as to arrive at
“Best Fit”. The bank has made rapid strides in this direction and achieved 100% branch
computerisation. A pioneering effort of the bank in the use of IT is the implementation of
Core Banking Solution (CBS) which facilitates “any time, any where” banking. PNB has
implemented CBS in 3503 service outlets at around centers to facilitate "anytime,
anywhere" banking to its clients. The bank has also been offering Internet banking
services to the customers of CBS branches like booking of tickets, payment of bills of
utilities, purchase of airline tickets etc.
Towards developing a cost effective alternative channels of delivery, the bank has
installed more than 1516 ATMs and entered into ATM sharing arrangement with other
banks & IDRBT, making available a pool of additional 21,500 ATMs throughout the
country to its customers.

Backed by strong domestic performance, the bank is planning to realize its global
aspirations. In order to increase its international presence, the bank has already set up
representative offices at Almaty (Kazakhstan), Dubai (UAE) & Shanghai (China) ; a
branch at Kabul (Afghanistan) and a subsidiary at London (UK) and a branch at
Hongkong. Work on assessing potential at other international centers is progressing. The
bank also has a joint venture with Everest Bank Ltd. (EBL), Nepal, with 20 per cent
equity participation. With PNB’s management, EBL has become one of the leading banks
in Nepal. As a tribute to its consistent business growth, improved assets & attractive
returns to shareholders in the joint venture, PNB has won ‘Bank of the Year’ Award in
Nepal (2006) by ‘The Banker’, a publication of the London based Financial Times.

Amongst Top 1000 Banks in the World, ‘The Banker’ listed PNB at 255th place. Further
the leading international Credit Rating index provider, Standard & Poor’s (2006) listed
PNB, amongst the 300 World companies & 7 Indian companies, which are expected to
emerge as challengers to the world’s leading blue chip companies.

Heritage

Established in 1895 at Lahore, undivided India, Punjab National Bank (PNB) has the
distinction of being the first Indian bank to have been started solely with Indian
capital.The bank was nationalised in July 1969 along with 13 other banks. From its
modest beginning, the bank has grown in size and stature to become a front-line banking
institution in India at present.
A professionally managed bank with a successful track record of over 110 years

Largest branch network in India - 4525 Offices including 432 Extension Counters spread
throughout the country.
Strategic business area covers the large Indo-Gangetic belt and the metropolitan centres
Ranked as 248th biggest bank in the world by Bankers Almanac , London.
Strong correspondent banking relationships with more than 217 international banks of the
world.
More than 50 renowned international banks maintain their Rupee Accounts with PNB.
Well equipped dealing rooms; 20 different foreign currency accounts are maintained at
major centres all over the globe.
Rupee drawing arrangements with M/s UAE Exchange Centre, UAE, M/s Al Fardan
Exchange Co. Doha, Qatar,M/s Bahrain Exchange Co, Kuwait, M/s Bahrain Finance
Co, Bahrain,M/s Thomas Cook Al Rostamani Exchange Co. Dubai,UAE, and M/s
Musandam Exchange, Ruwi, Sultanate of Oman.

STATE BANK OF INDIA

Evolution
 The origin of the State Bank of India goes back to the first decade of the nineteenth
century with the establishment of the Bank of Calcutta in Calcutta on 2 June 1806.
Three years later the bank received its charter and was re-designed as the Bank of
Bengal (2 January 1809). A unique institution, it was the first joint-stock bank of
British India sponsored by the Government of Bengal. The Bank of Bombay (15 April
1840) and the Bank of Madras (1 July 1843) followed the Bank of Bengal. These
three banks remained at the apex of modern banking in India till their amalgamation
as the Imperial Bank of India on 27 January 1921.

Primarily Anglo-Indian creations, the three presidency banks came into existence
either as a result of the compulsions of imperial finance or by the felt needs of local
European commerce and were not imposed from outside in an arbitrary manner to
modernise India's economy. Their evolution was, however, shaped by ideas culled
from similar developments in Europe and England, and was influenced by changes
occurring in the structure of both the local trading environment and those in the
relations of the Indian economy to the economy of Europe and the global economic
framework.

Establishment

The establishment of the Bank of Bengal marked the advent of limited liability, joint-
stock banking in India. So was the associated innovation in banking, viz. the decision to
allow the Bank of Bengal to issue notes, which would be accepted for payment of public
revenues within a restricted geographical area. This right of note issue was very valuable
not only for the Bank of Bengal but also its two siblings, the Banks of Bombay and
Madras. It meant an accretion to the capital of the banks, a capital on which the
proprietors did not have to pay any interest. The concept of deposit banking was also an
innovation because the practice of accepting money for safekeeping (and in some cases,
even investment on behalf of the clients) by the indigenous bankers had not spread as a
general habit in most parts of India. But, for a long time, and especially upto the time that
the three presidency banks had a right of note issue, bank notes and government balances
made up the bulk of the investible resources of the banks.
The three banks were governed by royal charters, which were revised from time to time.
Each charter provided for a share capital, four-fifth of which were privately subscribed
and the rest owned by the provincial government. The members of the board of directors,
which managed the affairs of each bank, were mostly proprietary directors representing
the large European managing agency houses in India. The rest were government
nominees, invariably civil servants, one of whom was elected as the president of the
board.

SBI is India’s largest commercial bank. SBI has a vast domestic network of over 9000
branches and commands one- fifth of deposits and loans of all scheduled commercial
banks in india

CHAPTER 2

REVIEW OF LITERATURE
1. Sullivan A. Charlene & Worden Dercnik Debra Debra.(1995) The value of the
option to default on unsecured credit contracts is estimated and found to be
significantly impacted by state and federal laws governing creditors' collection
practices and bankruptcy. The data suggest that the expected value of the
option to default influences debtors' choices in default and is correlated with
their use of their credit cards before default. Cardholders who use their lines
of credit very intensely before default are significantly more likely to make
choices in default which allow them to realize a greater benefit from default.
Furthermore, these results offer a possible explanation for consumers' seeming
insensitivity to interest rates charged on revolving lines of credit.

2. Rogers A Wendy, Gilbert Kristen D., Cabrera Fraser Elizabeth.(1997)said that

It is often assumed that automatic teller machines (ATMs) are inherently easy
to use and require no training. However, there is evidence to suggest that ATM
users do experience difficulty when learning to use the system. The purpose of
the present study was to conduct an in-depth analysis of ATM usage by older
adults. Our approach consisted of telephone interviews followed by structured
individual interviews. The goals were to understand the problems encountered
by ATM users, to determine how ATMs might be better designed and to assess
the training needs of older individuals. The phone interview data provide
information about the relationships between age, sex and ATM usage within
the adult sample, as well as information about why some people choose not to
use ATMs. The structured interview data provide a more in-depth view of the
concerns of both users and non-users, and information about training needs.
The training and design implications of the results are discussed.

3. Coley Kimberly, Wright Samantha,Park Eui, Ntuen Celestine.(1997)

discussed that This research provides relevant information for the redesign of
automated teller machines (ATMs) to better accommodate older adults, with
hopes of aiding financial institutions in their trend toward a tellerless bank.
Forty subjects, ranging from 18 to 65 years of age, interacted with three
 different ATM simulations. The level of detail was little, high and little with
on screen help available. The font color was varied: red, green, or white with
each participant. Font color and level of detail were investigated to determine
preferences of younger and older adults. The preferred level of detail was
found to vary by sex and age. A majority of the subjects, approximately 53%,
favored the simulation with the optional help button which accommodated
both first time and frequent ATM users. There were no significant interactions
between age, sex, and color.

4. Carow A Kenneth , Staten E Michael.(1999) said that We analyzed the

consumer’s payment option to use debit, general purpose credit cards,
gasoline credit cards, or cash. Based on the results from a nested multinomial
logit model, we found consumers are more likely to use cash when they have
less education, lower incomes, are middle-aged, and own fewer credit cards.
Debit and credit card users are younger, more educated, and hold more credit
cards. Respondents who use their debit card are less likely to use their
gasoline credit card. The results suggest that greater debit card usage will
place the greatest competitive pressure on the gasoline credit card program.

5. Aladwani M.Adel.(2001)presented that Online banking is the newest and least

understood delivery channel for retail banking services. Yet, few, if any,
studies were reported quantifying the issues relevant to this cutting-edge
technology. This paper reports the results of a quantitative study of the
perceptions of banks’ executive and IT managers and potential customers with
regard to the drivers, development challenges, and expectations of online
banking. The findings will be useful for both researchers and practitioners
who seek to understand the issues relevant to online banking.

6. Spivack Joseph, CFA.(2001) examined that In theory, pure play Internet

banking offers advantages both for the banks and their customers, but whether
these benefits can be realized in practice is unclear. The author systematically
 analyzes the financial performance of pure Internet banks. He finds that, as
with nonfinancial dot-coms, Internet banks grow rapidly but produce little or
no profits. Regulators have recognized this problem by requiring new Internet
banks to have more initial equity capital than traditional banks.

CHAPTER 3

RESEARCH METHODOLOGY

OBJECTIVES OF THE STUDY

The present study will be undertaken in respect of banking sector with view of four banks
– ICICI, HDFC, PNB, and SBI Banks. The main motive of the study is to analyze the
impact of technology on Indian banks, based on this main motive the objectives of study
are as follows: -

 To explore the technological advancement in Indian banking sector.

 To analyze the customer perceptions regarding the use of technology in

banks.

 To analyze the bank employees perception regarding the use of technology

in banks

SCOPE OF THE STUDY

The scope of the study entitled “Impact of technology on Indian banks with view of
ICICI, HDFC, PNB, SBI Banks” is limited to Ludhiana region only. Only those
customers are taken for the study who resides in Ludhiana.

NEED OF THE STUDY

The study on impact of technology on banking can help organizations better understand
the real impact of their IT investments. This study will also be helpful to know that at
what extent banks are providing technological services to their customer and how
customers perceive the usage of technology in banks. And also it includes bank
employees perception regarding the use of technology. At some extent this study also
provides data in the form of problems faced by customers and employees while using
banking technology, which can become the area for improvement for banks.

Research Plan
The research study is exploratory and descriptive in nature. The establish objectives
were kept in mind during the study, however no hypothesis was formed as the study was
more in the form of descriptive design attempting to analyze the attitude of respondents
towards the project which is new in the region can be considered at the fledging level as
far as the awareness among the respondents is concerned.

Data collection
The data, which is collected for the purpose of study, is divided into 2 bases:
Primary source: The primary data comprises information survey of “Impact of
technology on Indian banks with view of ICICI, HDFC, PNB, and SBI Banks”. The data
has been collected directly from respondents with the help of structured questionnaires.
Secondary Source: The secondary data has been collected from internet, references from
the banks .The information brochures of certain banks, informal links with the concerned
person in this line have also been consulted as a secondary source of information.

Sampling Plan
Universe: The respondents are those who have bank accounts in those particular banks
as well as employees were also contacted for the completion of project.
Area of study: Area of Study will be limited to Ludhiana City only.
Sampling Procedure: In this study, the respondents were chosen through convenience
sampling.
Sample Size: About 50 customers for the study of project.
Contact Method: The respondents were contacted personally and a structured
questionnaire was get filled and also interviews of some respondents were conducted.
Technique of Analysis: Bar graphs. Pie charts, Percentage method.

LIMITATIONS OF THE STUDY

In attempt to make this project authentic and reliable, every possible aspect of the topic

was kept in mind. Neverthless, despite of fact constraints were at play during the

formulation of this project. The main limitations are as follows:

 Some respondents did not have serious attitude towards the questionnaire and

hence their responses may not reflect the real picture.

 Some of the respondents were not ready enough to reveal all the required

information. They might have given inflated or wrong data.

 Because of the diversity of nature of the respondents the findings of the survey

could not be generalized.

 Also some personal bias might have crept into the information provided by the

respondents in scope of this study.

 The method of data collection was slow procedure as an considerable amount of

the time was lost in filling up the questionnaire.

 Some of the respondents hide the real information as they think a particular Bank

has status symbol, which also have effect on the result of the study.
 CHAPTER 4

DATA ANALYSIS

AND

INTERPRETATION
ON THE VIEW POINT OF CUSTOMERS

1) Which of the following technological channels do you prefer? Please rank as your
preference

TECHNOLOGICAL CHANNELS RANKING

ATM 1st
ONLINE BANKING 2nd
CREDIT CARDS 4th
SMART CARDS 7th
DEBIT CARDS 3rd
TELE BANKING 6th
MOBILE BANKING 5th

RANKING FOR TECHNOLOGICAL CHANNELS

8
7
6
RANKS

5
4 RANKING
3
2
1
0
G

G
G
S

S
S
M

N
N
D
D
AT

KI

KI
KI
AR

AR
AR
N

N
N
C

C
C
BA

BA
BA
IT

IT
T
AR
E

ED

LE
EB

LE
N

SM

BI
TE
LI

D
C

O
N
O

TECHNOLOGICAL CHANNELS

Interpretation:-
From the above it is concluded that ATM is ranked first as per customers preferences
followed by online banking and least preference is given to smart cards
Note:-rank 1 is given for highly preferred channel and 7 for least preferred.
2. Which of the following problems do you usually face while using technological
channels of a bank? Please rank as per your experience
PROBLEMS RANKING

Lack of knowledge and know-how on your part 1

Credit/Debit/Smart Card not working 9
Bank’s web site not working 6
Unsuitable location of ATMs 3
Bank’s computers not working 11
No problem at all 8
Less number of ATMs 2
Time delays 5
ATM not working 4
Connectivity problem 7
System failure 10

Interpretation:-
The above analysis shows that the lack of knowledge and know how is the major
problem faced by customers while system failure and Banks computer not working are
rarely faced by customers.
Note: - Rank 1 is given for major problem and 11 for rarely faced problem.

3. How much the IT channels have improved the quality of customer services in
banks?
PARTICULARS PERCENTAGE OF RESPONDENTS
STRONGLY AGREE 70%
AGREE 20%
NEUTRAL 6%
DISAGREE 4%
STRONGLY DISAGREE 0

Interpretation:-
The above analysis shows that 70% respondents are strongly agree and 20% are agree that
technological channels have improved the quality of customer services and very less
percent people has said no regarding this question

4. How much the technology has reduced the risk of theft and frauds in banks?

PARTICULARS PERCENTAGE OF RESPONDENTS

STRONGLY AGREE 26%
AGREE 38%
NEUTRAL 7%
DISAGREE 25%
STRONGLY DISAGREE 4%

Interpretation:-
From the graph and table, it is clear that maximum people(38%) are agree that technology
has reduced the risk of fraud and theft, but 25% customer are having view that it has not
reduced such type of risk,7% people are having neutral views.

5. How much the customer services by automated banks is faster as compared to non
IT banks?

PARTICULARS PERCENTAGE OF RESPONDENTS

STRONGLY AGREE 22%

AGREE 32%
NEUTRAL 40%
DISAGREE 6%
STRONGLY DISAGREE 0%

Interpretation:-
The above analysis shows that 22% respondents are strongly agree and 32% are agree
that customer services by automated banks is faster as compared to non IT banks while 6%
are disagree ,maximum customers are having neutral response.

6. Are the staff members of automated banks fully skilled and trained?

PARTICULARS PERCENTAGE OF RESPONDENTS

STRONGLY AGREE 5%
AGREE 25%
NEUTRAL 12%
DISAGREE 46%
STRONGLY DISAGREE 12%
Interpretation:-
The analysis shows that 46% people are disagree to this fact that staff members of
automated banks are fully skilled and trained ,25% are agree while 12% are strongly
disagree with this statement.

7. Has the technology made working with banks easy and comfortable?

PARTICULARS PERCENTAGE OF
RESPONDENTS
70%
STRONGLY AGREE
20%
AGREE
6%
NEUTRAL
 4%
DISAGREE
0
STRONGLY DISAGREE

Interpretation:-

From the above analysis it is clear that 70% people are strongly agree to this fact that
technology based system has made working with banks easy and comfortable, 20% are
agree while 6% customers have no ideas regarding this they are having neutral views, no
one among the customers is that who give negative response or said strongly disagree,only
4% respondents are disagree from above statement.

8. Is the transparency in banks is more as compared to non IT banks?

PARTICULARS PERCENTAGE OF
RESPONDENTS
67%
STRONGLY AGREE
19%
AGREE
10%
NEUTRAL
 2%
DISAGREE
2%
STRONGLY DISAGREE

Interpretation:

From the above analysis, it is concluded that almost 67% customers strongly agree,19%
agree to the above that transparency in banks is more as compared to non IT banks while
10% are neutral to the above.

9. How customers foresee the future of technology in Indian banks?

PARTICULARS PERCENTAGE

VERY BRIGHT 90%

AVERAGE 10%
UNDECIDED 0%
POOR 0%
VERY POOR 0%

Interpretation:-
From the above analysis, it is concluded that maximum respondents The graph represents
the views of customers regarding the future of technology in Indian banks,90%
respondents foresee the future of technology very bright.

CHAPTER 5

FINDINGS AND SUGGESTIONS

FINDINGS

CUSTOMERS
 Most of the respondents (70%) feel that the use of technology has improved the
quality customer services in banks.
  Almost 60% respondents feel that technology has reduced the risk of thefts and
frauds in banks.
 Most of the respondents (more than 70%) feel that technology has made
working with banks easy and comfortable.
 Customers which are included in survey are more from the age group of 30-40
and the less number of customers are from the age group of below 20.
 In the present survey males are 63%, and females are 37%
 ATM is ranked 1st as per customer’s preference followed by online banking but
mobile banking and smart cards are least preferred.
 Lack of knowledge is the major problem faced by customers while system
failure is rarely faced by customers.
 Only few respondents strongly feel, 25% respondents agree with the statement
that staff of the banks are skilled and trained.
 22% respondents strongly feel,32% respondents agree that customer services by
automated banks is faster as compared to non IT banks
 Almost 70% feel that transparency is more banks as compared to non IT banks..
 Mostly customers feel that future of technology in banks is very bright.

EMPLOYEES
 Most of the employees fall in the category of 30-40 age groups.
 ATM is the most preferred facility while Smart card is the least preferred facility
by customers.
 Most of the employees of ICICI bank use technology a lot.
 Most of the employees of HDFC bank use technology a lot.
  Only 40% employees feels that technology is used approximately 40-60% which
is of major concern for the Punjab national bank.
 70% respondents use 60-80% technology in routine.
 Lack of knowledge and training are the major problems faced by employees
while system failure is rarely faced by employee.
 Employee’s efficiency and productivity has been increased by the use of
technology.
 Employees foresees the future of technology as very bright
 Bank customer relationship has improved due to introduction of technology.
 Overall workload and job burden has reduced due to the introduction of
technology.

SUGGESTIONS

FOR CUSTOMERS
 All banks should be interconnected so that any customer can use bank facility
in any bank at any time.
 Proper knowledge regarding the use of technology should be imparted to the
customers.
  Core banking should be introduced in banks so that it makes easy for the
customers to make transactions.

FOR EMPLOYEES
 There should be interconnection between banks to make the work more
flexible.
 Bank should have versatile enough to make the bank more competitive.
 All banks should provide sufficient training to staff members then they will
be capable to deal with computer system as well as consumer problem.
 All public sector banks should have fully computerized system.

BIBLIOGRAPHY

BOOKS
BANKING AND FOREIGN TRADE R.K.SHARMA
SHASHI K. GUPTA
JAGWANT SINGH
WEBSITES
 www.google.com
 www.pnbindia.com
 www.hdfcbank.com
 www.icicibank.com

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QUESTIONNAIRE

FOR BANK CUSTOMERS

PERSONEL PROFILE

Name: ___________________________________________
Age: ____________________________________

Gender: ____________________________________

What is your Annual Income?Please tick the appropriate box below:

Less than Rs 1 Lakh [ ] Rs1-3 Lakhs [ ] Rs3-5 Lakhs [ ] Above Rs 5 Lakhs [ ]

Please indicate the highest level of Education completed.

Matric [ ] Under graduate [ ] Graduate [ ] Post graduate [ ] Other [ ]

Please indicate your occupation

Service Class [ ] Business Class [ ] Professional [ ] Agriculturist [ ] Other [ ]

Please mention the name(s) of banks in which you hold an account…………………….

Since when do you have an account in this bank?

For the last year [ ] 2-3 years [ ] More than 3 years [ ]

1) Which of the following technological channels do you prefer? Please give your
preference in numbers , for example 1 for highly preferred then 2,3 and so on.

Technological Channels Ranking

 ATM
Online Banking
Credit Cards
Smart Cards
Debit Cards
Tele Banking
Mobile Banking

2) Which of the following problems do you usually face while using technological
channels of a bank? Please rank as pr your experience, for example,1 for major
problem then 2,3 and so on.

Problems Ranking

Lack of knowledge and know-how on your part

Credit/Debit/Smart Card not working
Bank’s web site not working
Unsuitable location of ATMs
Bank’s computers not working
No problem at all
Less number of ATMs
Time delays
ATM not working
Connectivity problem
System failure
3) How much that IT channels have improved the quality of customer services in
banks?

□ Strongly Agree □ Agree □ Neutral

□ Disagree □ Strongly Disagree

4.) How much the technology has reduced the risk of thefts and frauds in banks?

□ Strongly Agree □ Agree □ Neutral

□ Disagree □ Strongly Disagree

5.) How much the customer services by automated banks is faster as compared to non
IT banks?

□ Strongly Agree □ Agree □ Neutral

□ Disagree □ Strongly Disagree

6.) Are the staff members of automated banks skilled and trained?

□ Strongly Agree □ Agree □ Neutral

□ Disagree □ Strongly Disagree

7.) Has the technology made working with banks easy and comfortable?

□ Strongly Agree □ Agree □ Neutral

□ Disagree □ Strongly Disagree

8.) Is the transparency in banks is more as compared to non IT banks?

□ Strongly Agree □ Agree □ Neutral

□ Disagree □ Strongly Disagree

9.) How you forsee the future of technology in indian banks?

□ Very Bright □ Average □ Undecided □ Poor □ Very Poor