COMPARATIVE STUDY BETWEEN TRADITIONAL BANKING AND E-

BANKING

A PROJECT SUBMITTED TO:

UNIVERSITY OF MUMBAI

FOR

BACHELOR OF ACCOUNTING AND FINANCE

UNDER THE GUIDANCE OF

PROF. MANISHA MANDAPELI

VALIA COLLEGE OF COMMERCE

D.N. NAGAR, ANDHERI (WEST), MUMBAI-400053

ACADEMIC YEAR

2018-2019

SUBMITTED BY: TANMAY GAWANKAR

ROLL NO: 14
 DECLARATION

I, the undersigned Mr .Tanmay Gawankar here by, declare that the

work embodied in this project work on “Comparative study between
Traditional banking and E-banking.” From my own contribution to the
research work carried out under the guidance of Mrs Manisha
Mandapeli is a result of my own other Degree/Diploma to this or any
other university.

Wherever reference has been made to previous works of others, it has

been clearly indicated as such and included in the bibliography.

I, here by further declare that all information of this document has been
obtained and presented in accordance with academic rules and ethical
conduct.

Name and Signature of the learner

Certified by

Name and Signature of the Guiding Teacher

CERTIFICATE
 ACKNOWLEDGEMENT

To list who all have helped me is difficult because they are so numerous
and the depth is so enormous.

I would like to acknowledge the following as being idealistic channels and

fresh dimensions in the completion of this project.

I take this opportunity to thank the University of Mumbai for giving me

chance to do this project.

I would like to thank my Principal, Dr. Shobha Menon for providing the
necessary facilities required for completion of this project.

I take this opportunity to thank our Co-ordinator Prof. Siddhita

Walavalkar, for her moral support and guidance.

I would also like to express my sincere gratitude towards my project guide

Prof. Manisha Mandapeli whose guidance and care made the project
successful.

I would like to thank my College Library, for having provided various

reference books and magazines related to my project.

Lastly, I would like to thank each and every person who directly or
indirectly helped me in the completion of the project especially my Parents
and Peers who supported me throughout my project.
 INDEX

SR PARTICULARS PAGE
NO NO

Introduction
1 1

Research methodology
2 48

Literature review
3 52

Data analysis
4 68

Conclusion and Suggestions

5 74

Bibliography

6 77

7 Appendix 78
 ABSTRACT

In the last three decades, the banking sector has seen a profound
transformation owing to the changes in the global financial environment.
The major change witnessed in the banking sector has been great advances
in financial innovations and technologies, which are a result of turmoil in
the global financial environment. The improvement in financial
innovations and technologies has made E-banking an intense part of the
banking sector. E-banking has revolutionized the lives of all individuals of
present times and is considered to be a wave of information revolution
after the agricultural and industrial revolution. Earlier banking customers
were required to personally visit a bank branch in order to transact through
their saving accounts but with the arrival of Internet banking the manner in
which financial transactions are carried out have changed. Although E-
banking has been popular among computer literates for many years, its
popularity is growing exponentially as Internet usage grows and people
discover the numerous benefits that are provided by online banking. In
today’s increasingly integrated financial systems facing higher volatilities,
more competition and higher time constraints, E-banking has become an
integral part of the global financial environment in order to meet different
requirements of customers of banking sector, thereby meeting the
increased expectations of the participants in Indian banking system. This
study makes an attempt to analyse the impact of E-banking and
information technology on the employees of banking sector.
 Chapter 1

INTRODUCTION

 Meaning of a Bank :

A bank is a financial institution licensed to receive deposits and make loans. Banks
may also provide financial services, such as wealth management, currency exchange,
and safe deposit boxes. There are two types of banks: commercial/retail banks and
investment banks. In most countries, banks are regulated by the national government
or central bank.

Section 5(B) of Banking Regulation Act defines Banking as “Accepting, for the
purpose of investing or lending, deposits of money from the public, repayable on
demand or otherwise”

The term bank is derived from an Italian word „banca‟ and from a French word
„banque‟ both meaning a Bench or Money exchange tables.
A bank is a financial institution which deals with deposits and advances and other
related services. It receives money from those who want to save money in the form of
deposits and lends to those who need it.

The Oxford Dictionary defines a bank as “A establishment for custody of money

which it pays out on customer`s order”

A bank is a financial institution that accepts deposits from the public and creates
credit. Lending activities can be performed either directly or indirectly through capital
markets. Due to their importance in the financial stability of a country, banks are
highly regulated in most countries. Most nations have institutionalized a system
known as fractional reserve banking under which banks hold liquid assets equal to
only a portion of their current liabilities. In addition to other regulations intended to
ensure liquidity, banks are generally subject to minimum capital requirements based
on an international set of capital standards, known as the Basel Accords.
"banking business" means the business of either or both of the following:

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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.

 Definition of a Bank:

 Oxford Dictionary defines bank as “an establishment for custody of money,

which is paid out on customer’s order.”
 "banking business" means the business of receiving money on current or
deposit account, paying and collecting cheques drawn by or paid in by
customers, the making of advances to customers, and includes such other
business as the Authority may prescribe for the purposes of this Act; (Banking
Act (Singapore), Section 2, Interpretation).
 "banking business" means the business of either or both of the following:
 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;
 paying or collecting cheques drawn by or paid in by customers.

 Services offered by a bank :

1. Advancing of Loans:

Banks are profit-oriented business organizations.

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So they have to advance a loan to the public and generate interest from
them as profit.

After keeping certain cash reserves, banks provide short-term, medium-

term and long-term loans to needy borrowers.

2. Overdraft:

Sometimes, the bank provides overdraft facilities to its customers through

which they are allowed to withdraw more than their deposits.

Interest is charged from the customers on the overdrawn amount.

3. Discounting of Bills of Exchange:

This is another popular type of lending by modern banks.

Through this method, a holder of a bill of exchange can get it discounted

by the bank, in a bill of exchange, the debtor accepts the bill drawn upon
him by the creditor (i.e., holder of the bill) and agrees to pay the amount
mentioned on maturity.

After making some marginal deductions (in the form of commission), the
bank pays the value of the bill to the holder.

When the bill of exchange matures, the bank gets its payment from the
party, which had accepted the bill.

4. Check/Cheque Payment:

Banks provide cheque pads to the account holders. Account holders can
draw cheque upon the bank to pay money.

Banks pay for cheques of customers after formal verification and official
procedures.

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5. Collection and Payment Of Credit Instruments:

In modern business, different types of credit instruments such as the bill of

exchange, promissory notes, cheques etc. are used.

Banks deal with such instruments. Modern banks collect and pay different
types of credit instruments as the representative of the customers.

6. Foreign Currency Exchange:

Banks deal with foreign currencies. As the requirement of customers,

banks exchange foreign currencies with local currencies, which is essential
to settle down the dues in the international trade.

7. Consultancy:

Modern commercial banks are large organizations.

They can expand their function to a consultancy business. In this function,

banks hire financial, legal and market experts who provide advice to
customers regarding investment, industry, trade, income, tax etc.

8. Bank Guarantee:

Customers are provided the facility of bank guarantee by modern

commercial banks.

When customers have to deposit certain fund in governmental offices or

courts for a specific purpose, a bank can present itself as the guarantee for
the customer, instead of depositing fund by customers.

9. Remittance of Funds:

Banks help their customers in transferring funds from one place to another
through cheques, drafts, etc.

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 10. Credit cards:

A credit card is cards that allow their holders to make purchases of goods
and services in exchange for the credit card’s provider immediately paying
for the goods or service, and the cardholder promising to pay back the
amount of the purchase to the card provider over a period of time, and with
interest.

11. ATMs Services:

ATMs replace human bank tellers in performing giving banking functions

such as deposits, withdrawals, account inquiries. Key advantages of ATMs
include:

 24-hour availability

 Elimination of labor cost

 Convenience of location

12. Debit cards:

Debit cards are used to electronically withdraw funds directly from the
cardholders’ accounts.

Most debit cards require a Personal Identification Number (PIN) to be

used to verify the transaction.

13. Home banking:

Home banking is the process of completing the financial transaction from

one’s own home as opposed to utilizing a branch of a bank.

It includes actions such as making account inquiries, transferring money,

paying bills, applying for loans, directing deposits.

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14. Online banking:

Online banking is a service offered by banks that allows account holders to

access their account data via the internet. Online banking is also known as
“Internet banking” or “Web banking.”

Online banking through traditional banks enable customers to perform all

routine transactions, such as account transfers, balance inquiries, bill
payments, and stop-payment requests, and some even offer online loan and
credit card applications.

Account information can be accessed anytime, day or night, and can be

done from anywhere.

15. Mobile Banking:

Mobile banking (also known as M-Banking) is a term used for performing

balance checks, account transactions, payments, credit applications and
other banking transactions through a mobile device such as a mobile phone
or Personal Digital Assistant (PDA)

16. Accepting Deposit:

Accepting deposit from savers or account holders is the primary function

of a bank. Banks accept deposit from those who can save money but
cannot utilize in profitable sectors.

People prefer to deposit their savings in a bank because by doing so, they
earn interest.

17. Priority banking:

Priority banking can include a number of various services, but some of the
popular ones include free checking, online bill pay, financial consultation,
and information.

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 18. Private banking:

Personalized financial and banking services that are traditionally offered to

a bank’s digital, high net worth individuals (HNWIs). For wealth
management purposes,

HNWIs have accrued far more wealth than the average person, and
therefore have the means to access a larger variety of conventional and
alternative investments.

Private Banks aim to match such individuals with the most appropriate
options.

 Characteristics of a Bank / Features of Banking :

 It may be an Individual/Firm/Company

 It is a profit and service oriented institution

 It acts as a connecting link between borrowers and lenders

 It deals with money

 It accepts deposits from public

 It provides Advances/Loans/Credit to customers

 It provides Payment and Withdrawal facilities

 It provides Agency and Utility Services

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  Types of Bank :

Some of the most common banks are listed below, but the dividing lines are not
always clean cut. Some banks work in multiple areas (for example, a bank might offer
personal accounts, business accounts, and even help large enterprises raise money in
the financial markets)

Central banks manage the monetary system for a government. For example, the
Reserve Bank is the Indian central bank responsible for managing economic activity
and supervising banks.

Retail banksare probably the banks people are most familiar with: checking and
savings accounts are held at a retail bank, which focuses on consumers (or the general
public) as customers. These banks give credit cards, offer loans, and they‟re the ones
with numerous branch locations in populated areas.

Commercial banksfocus on business customers. Businesses need checking and

savings accounts just like individuals do. But they also need more complex services,
and the dollar amounts (or the number of transactions) can be much larger. They
might need to accept payments from customers, rely heavily on lines of credit to
manage cash flow, and they might use letters of credit to do business overseas.

Investment banks help businesses work in financial markets. If a business wants to

go public or sell debt to investors, they often use an investment bank.

 Classification of Banking Industry in India

Indian banking industry has been divided into two parts, organized and
unorganised sectors. The organized sector consists of Reserve Bank of India,
Commercial Banks and Co-operative Banks, and Specialized Financial Institutions
(IDBI, ICICI, IFC etc.). The 28unorganized sector, which is not homogeneous, is
largely made up of money lenders and indigenous bankers.

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  Standard business of a bank

Banks act as payment agents by conducting checking or current accounts for

customers, paying cheques drawn by customers in the bank, and collecting cheques
deposited to customers' current accounts. Banks also enable customer payments via
other payment methods such as Automated Clearing House (ACH), Wire transfers or
telegraphic transfer, and automated teller machines (ATMs).
Banks borrow money by accepting funds deposited on current accounts, by accepting
term deposits, and by issuing debt securities such as banknotes and bonds. Banks lend
money by making advances to customers on current accounts, by making installment
loans, and by investing in marketable debt securities and other forms of money
lending.
Banks provide different payment services, and a bank account is considered
indispensable by most businesses and individuals. Non-banks that provide payment
services such as remittance companies are normally not considered as an adequate
substitute for a bank account.
Banks can create new money when they make a loan. New loans throughout the
banking system generate new deposits elsewhere in the system. The money supply is
usually increased by the act of lending, and reduced when loans are repaid faster than
new ones are generated.

 Channels

 Banks offer many different channels to access their banking and other
services:
 Branch, in-person banking in a retail location
 Automated teller machine banking adjacent to or remote from the bank
 Bank by mail: Most banks accept cheque deposits via mail and use mail to
communicate to their customers
 Online banking over the Internet to perform multiple types of transactions
 Mobile banking is using one's mobile phone to conduct banking transactions

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  Telephone banking allows customers to conduct transactions over the
telephone with an automated attendant, or when requested, with a telephone
operator
 Video banking performs banking transactions or professional banking
consultations via a remote video and audio connection. Video banking can be
performed via purpose built banking transaction machines (similar to an
Automated teller machine) or via a video conference enabled bank branch
clarification
 Relationship manager, mostly for private banking or business banking, who
visits customers at their homes or businesses
 Direct Selling Agent, who works for the bank based on a contract, whose main
job is to increase the customer base for the bank.

 Need for Banks

Before the establishment of banks, the financial activities were handled by money
lenders and individuals. At that time the interest rates were very high. Again there
were no security of public savings and no uniformity regarding loans. So as to
overcome such problems the organized banking sector was established, which was
fully regulated by the government. The organized banking sector works within the
financial system to provide loans, accept deposits and provide other services to their
customers. The following functions of the bank explain the need of the bank and its
importance:
 To provide the security to the savings of customers.
 To control the supply of money and credit
 To encourage public confidence in the working of the financial system,
increase savings speedily and efficiently.
 To avoid focus of financial powers in the hands of a few individuals and
institutions.
 To set equal norms and conditions (i.e. rate of interest, period of lending etc.)
to all types of customers.

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  Challenges to Indian Banking:

Deregulation:This continuous deregulation has given rise to extreme competition

with greater autonomy, operational flexibility, and decontrolled interest rate and
liberalized norms and policies for foreign exchange in banking market. The
deregulation of the industry coupled with decontrol in the interest rates has led to
entry of a number of players in the banking industry. Thereby reduced corporate
credit off which has resulted in large number of competitors battling for the same pie.

Modified New rules:As a result, the market place has been redefined with new rules
of the game. Banks are transforming to universal banking, adding new channels with
lucrative pricing and freebees to offer. New channels squeezed spreads, demanding
customers‟ better service, marketing skills heightened competition, defined new rules
of the game pressure on efficiency. Need for new orientation diffused customer
loyalty. Bank has led to a series of innovative product offerings catering to various
customer segments, specifically retail credit.

Efficiency:Excellent efficiencies are required at banker's end to establish a balance

between the commercial and social considerations Bank need to access low cost funds
and simultaneously improve the efficiency and efficacy. Owing to cutthroat
competition in the industry, banks are facing pricing pressure; have to give thrust on
retail assets.

Diffused customer loyalty:Attractive offers by MNC and other nationalized banks,

customers have become more demanding and the loyalties are diffused. Value added
offerings bound customers to change their preferences and perspective. These are
multiple choices; the wallet share is reduced per bank with demand on flexibility and
customization. Given the relatively low switching costs; customer retention calls for
customized service and hassle free, flawless service delivery.

Misaligned mindset:These changes are creating challenges, as employees are made

to adapt to changing conditions. The employees are resisting to change and the seller
market mind set is yet to be changed. These problems coupled with fear of uncertainty

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and control orientation. Moreover banking industry is accepting the latest technology
but utilization is far below from satisfactory level.

Competency gap:The competency gap needs to be addressed simultaneously

otherwise there will be missed opportunities. Placing the right skill at the right place
will determine success. The focus of people will be doing work but not providing
solutions, on escalating problems rather than solving them and on disposing
customers instead of using the opportunity to cross sell.

Strategic options to cope with the challenges:

 Dominant players in the industry have embarked on a series of strategic and

 Tactical initiatives to sustain leadership. The major initiatives incorporate:

 Focus on ensuring reliable service delivery through Investing on and

 Implementing right technology.

 Leveraging the branch networks and sales structure to mobilize low cost
current and savings deposits.

 Making aggressive forays in the retail advances segments of home and

personal loans.

 Implementing initiatives involving people, process and technology to reduce

the fixed costs and the cost per transaction.

 Focusing on fee based income to compensate foe squeezed spread.

 Innovating products to capture customer 'mind share' to begin with and later
the wallet share.

 Improving the asset quality.

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 Traditional banking :
The first financial intermediaries to function as depository institutions,
maintain deposits, make loans, and directly control the checkable deposits
portion of the economy's money supply. Traditional banks were THE
original banks, the financial depository institutions first to offer checkable
deposits. Traditional banks invariably have the word "bank" in their names
and are charted by either the Comptroller of the Currency or one of the
fifty state corporation commissions. Three other types of banks, as a group
commonly termed thrift institutions, are credit unions, savings and loan
associations, and mutual savings banks.

 Meaning :

Traditional banks are the checking-account-issuing financial

intermediaries that most often come to mind when the term "bank" is used.
Like other depository institutions that accept deposits and make loans,
traditional banks are also responsible for maintaining liquid checkable
deposits that are used as money for the economy.

In traditional banking system, a customer can open any bank account in

banks, take the facility of saving his money by depositing money in local
bank. He can withdraw his money through check, counter payment and
through bank draft. He can meet the bank manager and ask his problem.
He can take the physical help for getting loan from bank.

 Traditional Banking facilities :

 Offering savings deposits

 Currency exchange transactions
 Providing business or personal loans
 Providing car and home loans to retail customers
 Safe keeping of Valuables

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  Supporting government activities with credit by purchasing
government bonds
 Offering trust services, other property and financial
management related services for a fee.

 Advantages of Traditional Banking :

 In traditional banking transaction, you do not need any type of security. The
only mattersthat you have to keep your bank papers of bank book safe.
 If you are having any problem related to bank, you can immediately go to the
bank and solve your doubts.
 You get any information related to bank and still have any doubts, you can
immediately ask.
 You do not worry about your bank papers till you yourself give it to anybody
else.

 More options: Whether you want a personal savings or checking account, trust
fund, certificate of deposit, Roth IRA, or business checking account, most
major financial institutions can provide all these services in one place. Many
traditional banks offer wealth management and investment services, too.

 Convenience: The leading banks, like Chase, Wells Fargo and Bank of
America, have brick-and-mortar locations and ATMs — which are free to
customers — all over the country.

 Best of both worlds: Many banks offer customers the flexibility of being able
to walk into a branch to deposit cash or to transfer money via a smartphone.
Chase Bank, for example, offers QuickPay — a free online service to send or
receive money by email — which competes with fintech apps likeVenmo and
Square Cash. With online banks, you only have the electronic transfer option.

 Cash deposits: Despite all the progress that fintech has made, the industry still
has to contend with a traditional form of currency: cash. For banking
customers who deal with cash frequently, a traditional bank is an attractive
and convenient option.

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  Disadvantages of Traditional Banking:
 In Traditional banking, your work remain incomplete which is wastage of
time.
 If the papers of the banks are lost, you may also loss the right of your bank
properties.
 In Traditional Banking, if employees are busy with their bank, it may possible
that they may not give you the proper answer.
 Your bank papers are not secured through traditional banking.
 In case of having any problem, every time you have to rush to the bank.

 Low or no interest rates: Brick-and-mortar banks are notorious for their lower
interest rates on savings accounts, compared with online banks. In fact, in a
recent survey by GOBankingRates, the best savings accounts were all with
online banks: MySavingsDirect, Ally Bank, Barclays, I GObanking and CIT
offered the top five highest interest rates.

 Wide range of fees: When you think of a traditional bank, you might also
think of bank fees. Bank of America, for example, charges a $35
nonsufficient funds fee, whereas Alliant Credit Union — one of the largest
credit unions open to the public — charges just $25 for an NSF fee.

 Poor customer service: A 2015 study by Consumer Reports suggested that

one of the major downfalls of big banks is that they don’t understand
customers’ needs or and don’t provide personalized service. According to the
survey, the four mega banks — Bank of America, Chase, Citibank and Wells
Fargo — which hold approximately 40 percent of all U.S. commercial bank
assets, landed in the bottom fifth of the customer satisfaction rankings.
Smaller financial institutions have a smaller demographic, but this seems to
help them gain insight into who’s banking with them and what those
customers want.

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 E-Banking or Online banking :

Online banking, also known as internet banking, is an electronic payment

system that enables customers of a bank or other financial institution to
conduct a range of financial transactions through the financial institution's
website. The online banking system will typically connect to or be part of
the core banking system operated by a bank and is in contrast to branch
banking which was the traditional way customers accessed banking
services.

Some banks operate as a "direct bank" (or “virtual bank”), where they rely
completely on internet banking.

Internet banking software provides personal and corporate banking

services offering features such as viewing account balances, obtaining
statements, checking recent transaction and making payments. Access is
usually through a secure web site using a username and password, but
security is a key consideration in internet banking and many banks also
offer two factor authentication using a (security token).

E-banking means Internet banking or modern banking or online bill. In

this method, customer gets his bank account ID and password and he can
check his account, pay his bill and print his receipt through his home
personal computer which is connected with Internet. E-banking is
development of today banking system. In other words, e-banking is
electronic banking whose facility, you can take through your regular
broadband Internet connect.

Online banking:

Online banking also called as internet banking, allows the customers to use
all the banking services from a computer which has internet acess.The
customer can perform financial transactions on a secure website operated
by the bank. Online banking offers features such as bank statements, loan
applications, funds transfer, e-bill payments and account aggregation
allows customers to monitor all their accounts in one place.

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Telephone Banking:

Telephone banking is a service provided by the banks which provides

customers to perform transactions on phone.All the telephone banking
systems uses automated answering system with keypad response or voice
recognition capabilities. To prove their identity customers must provide a
numeric or verbal password or answering the questions asked by the call
center representative.In telephone banking customer can’t withdraws and
deposits cash but can do all the other transactions.

Sms Banking:

SMS banking is a service permitting banks to do selected banking services

from the users mobile by the sms messaging.SMS banking services have
push and pull messages.Push messages are sent by the banks for alerting
coustomer about new offers,marketingmessages,alerts to events happening
in coustomers account such as large amount of withdrawals from ATM or
credit card etc.

Pull messages are those that are sent by the coustomer to bank for having
some information or to perform a transaction in their account.Examples
include account balance enquiry,requesting for current exchange rates and
for new offers that are launched.

The customer has a choice to select the list of services he need to be

informed.This can be done by integrating to internet banking or speaking
to the customer care representative of the bank call centre.

Interactive -TV banking:

Interactive TV is a sevice that allows users to interact with TV content as

they view it.It is also called as iTV or idTV.If the coustomer subscribes to
a cable television service some banking facilities like balance
enquiry,funds transfer between accounts ,bills payment are made available

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 all the way through TV.Most of the major banks in UK have experimented
banking services through cable and satellite TV companies.

 Definition of E-Banking :

The use of computers to carry out banking transactions such as

withdrawals through cash dispensers or transfer of funds at point of sale.

 Functions of E-banking :

At present, the personal e-banksystem provides the

following services: -

A. INQUIRY ABOUT THE INFORMATION OFACCOUNT:

The client inquire about the details of his own account the card / account
balance and the detailed historical records of the account and downloads
the report list.

B. CARD ACCOUNT’S TRANSFER:

The client can achieve the fund to another person’s Credit Card in the
same city.

C. BANK-SECURITIES ACCOUNTS TRANSFER :

The client can achieve the fund transfer between his own bank savings
accounts of his own Credit Card account and his owncapital account in the

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 securities company. Moreover, the client can inquire about the present
balance at real time.

D. THE TRANSACTION OF FOREIGN EXCHANGE :

The client can trade the foreign exchange, cancel orders and inquire about
the information of the transaction of foreign exchange according to the
exchange rate given by our bank on net.

E. THE B2C DISBURSEMENT ON NET :

The client can do the real-time transfer and get the feedback
information about payment from our bank when the client does shopping
in the appointed web-site.

F. CLIENT SERVICE :

The client can modify the login password, information of the Credit Card
and the client information in e-bank on net.

G. ACCOUNT MANAGEMENT :

The client can modify his own limits of right and state of the registered
account in the personal e-bank, such as modifyinghis own login
password, freezing or deleting some cards and so on.

H. REPORTING THE LOSS IF THE ACCOUNT :

The client can report the loss in the local area (not nationwide) when
the client’s Credit Card or passbook is missing or stolen.

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 VARIOUS FORMS OF E-BANKING:
 INTERNET BANKING:
Internet Banking helps you manage many banking transactions online via your
PC.
 AUTOMATED TELLER MACHINES (ATM):
An automated teller machine or automatic teller machine (ATM) is an
electronic computerized telecommunications device that allows a financial
institution’s customers to directly use a secure method of communication to
access their bank accounts, order or make cash withdrawals (or cash advances
using a credit card) and check their account balances without the need for a
human bank teller.

 TELE BANKING:
By dialing the given Telebanking number through a landline or a mobile from
anywhere, the customer can access his account and by following the user-
friendly menu, entire banking can be done through Interactive Voice Response
(IVR) system.
 SMART CARD:
A smart card usually contains an embedded 8-bit microprocessor (a kind of
computer chip). The microprocessor is under a contact pad on one side of the
card. Think of the microprocessor as replacing the usual magnetic stripe
present on a credit card or debit card.
The microprocessor on the smart card is there for security. The host computer
and card reader actually “talk” to the microprocessor. The microprocessor
enforces access to the data on the card.
The chips in these cards are capable of many kinds of transactions.
 DEBIT CARD:
Debit cards are also known as check cards. Debit cards look like credit cards
or ATM (automated teller machine) cards, but operate like cash or a personal
check. Debit cards are different from credit cards. While a credit card is a way

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 to “pay later,” a debit card is a way to “pay now.” When you use a debit card,
your money is quickly deducted from your checking or savings account.

 E-CHEQUE:
An e-Cheque is the electronic version or representation of paper cheque.

 OTHER FORMS OF ELECTRONIC BANKING

Direct Deposit
Electronic Bill Payment
Electronic Check Conversion
Cash valued stored, Etc.

 The services offered by e-banking are as follows :

ATM (Automated Teller Machine) : It is a self-service terminal which can

be operated at any time i.e. 24 hours a day. To use an ATM, a client has to
insert a plastic card in the machine and enter his identification code. If the
code is appropriate, the machine would respond by providing cash,
accepting deposits, etc.

 EFT (Electronic Fund Transfer): Under this system,

the fund is directly transferred from one account to another. It is generally
used to transfer salaries of an employees by an employer. It saves time and
the inconvenience of handling large funds.
 Debit card : Debit card facility is offered to
the account holders to make payment upto the amount of credit balance
available in their account. It is generally located in sale terminals
(shop/store) which are tied up electronically to the bank computer. When
the customer presents the debit card, the amount is automatically
transferred from the customer’s bank account to the seller’s account.
 Credit card : It refers to a card which permits overdraft facility to the
clients depending upon their credit worthiness. Through this the customer
can purchase products by presenting the credit card. It is an important type
of support service provided by the banks.

21
  On-line payment : It also offers the facility of
making online payment of bills, taxes, etc.
 Real Time Gross Settlement (RTGS) : It allows transfer of funds without
any waiting period. RTGS is the fastest possible money transfer services
for any amount exceeding 2 lakh.

 Features of E-Banking :

Online banking facilities typically have many features and capabilities in

common, but also have some that are application specific. The common
features fall broadly into several categories:

 A bank customer can perform non-transactional tasks through online

banking, including:

 Viewing account balances

 Viewing recent transactions

 Downloading bank statements, for example in PDF format

 Viewing images of paid cheques

 Ordering cheque books

 Download periodic account statements

 Downloading applications for M-banking, E-banking etc.

 Bank customers can transact banking tasks through online banking,

including:

 Funds transfers between the customer's linked accounts

 Paying third parties, including bill payments (see, e.g., BPAY) and third
party fund transfers (see, e.g., FAST)

 Investment purchase or sale

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 Loan applications and transactions, such as repayments of enrollments

 Credit card applications

 Register utility billers and make bill payments

 Financial institution administration

 Management of multiple users having varying levels of authority

 Transaction approval process

Some financial institutions offer special internet banking services, for

example:

 Personal financial management support, such as importing data into

personal accounting software. 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.

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 Importance of E-banking ;

We will look at the importance of electronic banking for banks, individual

customers, and businesses separately.

 Banks

1. Lesser transaction costs – electronic transactions are the cheapest modes of

transaction

2. A reduced margin for human error – since the information is relayed

electronically, there is no room for human error

3. Lesser paperwork – digital records reduce paperwork and make the process
easier to handle. Also, it is environment-friendly.

4. Reduced fixed costs – A lesser need for branches which translates into a
lower fixed cost.

5. More loyal customers – since e-banking services are customer-friendly,

banks experience higher loyalty from its customers.

 Customers

1. Convenience – a customer can access his account and transact from

anywhere 24x7x365.

2. Lower cost per transaction – since the customer does not have to visit the
branch for every transaction, it saves him both time and money.

3. No geographical barriers – In traditional banking systems, geographical

distances could hamper certain banking transactions. However, with e-
banking, geographical barriers are reduced.

 Businesses

1. Account reviews – Business owners and designated staff members can

access the accounts quickly using an online banking interface. This allows
them to review the account activity and also ensure the smooth functioning
of the account.

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2. Better productivity – Electronic banking improves productivity. It allows
the automation of regular monthly payments and a host of other features to
enhance the productivity of the business.

3. Lower costs – Usually, costs in banking relationships are based on the

resources utilized. If a certain business requires more assistance with wire
transfers, deposits, etc., then the bank charges it higher fees. With online
banking, these expenses are minimized.

4. Lesser errors – Electronic banking helps reduce errors in regular banking

transactions. Bad handwriting, mistaken information, etc. can cause errors
which can prove costly. Also, easy review of the account activity enhances
the accuracy of financial transactions.

5. Reduced fraud – Electronic banking provides a digital footprint for all

employees who have the right to modify banking activities. Therefore, the
business has better visibility into its transactions making it difficult for any
fraudsters to play mischief.

 E-banking in India

In India, since 1997, when the ICICI Bank first offered internet banking
services, today, most new-generation banks offer the same to their
customers. In fact, all major banks provide e-banking services to their
customers.

Popular services under e-banking in India

 ATMs (Automated Teller Machines)

 Telephone Banking

 Electronic Clearing Cards

 Smart Cards

 EFT (Electronic Funds Transfer) System

 ECS (Electronic Clearing Services)

 Mobile Banking

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 Internet Banking

 Telebanking

 Door-step Banking

Further, under Internet banking, the following services are available in India:

1. Bill payment – Every bank has a tie-up with different utility companies,
service providers, insurance companies, etc. across the country. The banks
use these tie-ups to offer online payment of bills (electricity, telephone,
mobile phone, etc.). Also, most banks charge a nominal one-time
registration fee for this service. Further, the customer can create a standing
instruction to pay recurring bills automatically every month.

2. Funds transfer – A customer can transfer funds from his account to another
with the same bank or even a different bank, anywhere in India. He needs
to log in to his account, specify the payee’s name, account number, his
bank, and branch along with the transfer amount. The transfer is effected
within a day or so.

3. Investing – Through electronic banking, a customer can open a fixed

deposit with the bank online through funds transfer. Further, if a customer
has a demat account and a linked bank account and trading account, he can
buy or sell shares online too. Additionally, some banks allow customers to
purchase and redeem mutual fund units from their online platforms as well.

4. Shopping – With an e-banking service, a customer can purchase goods or

services online and also pay for them using his account. Shopping at his
fingertips.

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 Advantages of E-Banking :

 The banks that offer the internet banking are open for the business
transactions anywhere a client might be as long as there
is Internet connection , Apart from the periods of website maintenance ,
The services are available 24 hours a day and 365 days round the year .

 If the internet connection is unavailable , The customer services are

provided round the clock via the telephone , where the actual time account
balances and the information are availed , This hastens the banking
processes hence increasing their efficiency and effectiveness .

 The online banking allows the automatic funding of accounts from the
long established bank accounts via the electronic funds transfers , And
the client can monitor his spending via a virtual wallet through the certain
banks and the applications and enable the payments .

 The speed of transaction is faster relative to use of ATM’s or the

customary banking , The online banking allows for easier updating and
maintaining of direct accounts , The time for changing mailing address is
greatly reduced , ordering of additional checks is availed and provision of
actual time interest rates .

 The accounts can be automatically funded from a traditional bank account

via the electronic transfer , Most direct banks offer unlimited transfers at
no cost , including those destined for outside financial institutions , They
will also accept the direct deposits and withdrawals that you authorize
such as the payroll deposits and the automatic bill payment .

 The online accounts are easy to set up and require no more information
than a traditional bank account , Many offer option of inputting your data
online or downloading the forms and mailing them in .

 If you run into a problem , you have the option of calling or emailing the
bank directly , One advantage of using online checks is that the payee’s
information is retained , which eliminates having to reenter the
information on the subsequent checks to the same payee .

27
 The online banking is also environmentally friendly , The electronic
transmissions require no paper , So , They reduce the vehicle traffic and
they are virtually pollution free , And they also eliminate the need for the
buildings and the office equipment .

 It is available all the time , You can perform your tasks from anywhere and
at any time , even in night when the bank is closed or on holidays , The
only thing you need to have is an active internet connection .

 It is fast and efficient , The funds get transferred from one account to the
other very fast , And you can also manage several accounts easily
through the internet banking .

 You can control your transactions and the account balance all the time ,
This facility also keeps your account safe , You can monitor your account
at anytime , you can know about any fraudulent activity or threat to your
account before it can pose your account to severe damage .

 It's generally secure. But make sure that the website you're using has a
valid security certificate. This let's you know that the site is protected from
cyber-thieves looking to steal your personal and financial information.

 You have twenty-four-hour access. When your neighborhood bank closes,

you can still access your account and make transactions online. It's a very
convenient alternative for those that can't get to the bank during normal
hours because of their work schedule, health or any other reason.

 You can access your account from virtually anywhere. If you're on a

business trip or vacationing away from home, you can still keep a watchful
on your money and financial transactions - regardless of your location.

 Conducting business online is generally faster than going to the bank.

Long teller lines can be time-consuming, especially on a Pay Day. But
online, there are no lines to contend with. You can access your account
instantly and at your leisure.

 Many features and services are typically available online. For example,
with just a few clicks you can apply for loans, check the progress of

28
 your investments, review interest rates and gather other important
information that may be spread out over several different brochures in the
local bank.

 Disadvantages of E-banking :

 The complex encryption software is used to protect the account information ,

There are no perfect systems , So , The accounts are prone to the hacking
attacks , the phishing , the malware and the illegal activities .
 The online banking is generally secure but it isn’t always secure , The identity
theft is running rampant , and the banks are by no means immune . And when
your information is compromised , It can take months or even years to correct
the damage , And it can cost you thousands of dollars .
 The customer service can be below the quality that you’re used to , Some
people take comfort in being able to talk to another human being face-to-face
if they experience a problem , Although most major banks employ a dedicated
customer service department specifically foronline users , going through the
dreaded telephone menu can still be quite irritating to many .
 Not all the online transactions are immediate , The online banking is subject to
the same business day parameters as the traditional banking , So , printing out
and keeping the receipts is still very important , even when banking online .
 Identity theft is a significant concern but some online banks take this risk
more seriously than others , Before opening an online account , thoroughly
investigate the bank’s security policies and protections to ensure they meet
your expectations .
 The security is the biggest concern surrounding internet banks , with the
consumers worrying that the hackers will get into their account and spend their
money .

 Yes, online banking is generally secure, but it certainly

isn't always secure. Identity theft is running rampant, and banks are by no
means immune. And once your information is compromised, it can take

29
 months or even years to correct the damage, not to mention possibly costing
you thousands of dollars, as well.

 Some online banks are more stable than others. Not all online setups are an
extension of a brick-and-mortar bank. Some operate completely in cyberspace,
without the benefit of an branch that you can actually visit if need be. With no
way to physically check out the operation, you must be sure to thoroughly do
your homework about the bank's background before giving them any of your
money.

 Before using a banking site that you aren't familiar with, check to make sure
that their deposits are FDIC-insured. If not, you could possibly lose all of your
deposits if the bank goes under, or its major shareholders decide to take an
extended vacation in Switzerland.

 Customer service can be below the quality that you're used to. Some people
simply take comfort in being able to talk to another human being face-to-face
if they experience a problem. Although most major banks employ a dedicated
customer service department specifically for online users, going through the
dreaded telephone menu can still be quite irritating to many. Again, some are
considerably better (or worse) than others.

 Not all online transactions are immediate. Online banking is subject to the
same business-day parameters as traditional banking. Therefore, printing out
and keeping receipts is still very important, even when banking online.

 Challenges faced by E-Banking :

Major Challenges in India are: E-banking in India is in its emerging stage

of development. Most of them are basic services only the deregulation of
e-banking industry coupled with the emergence of new banking
technology is enabling new competitors to enter the financial services
markets quickly and efficiently. However it needs to be recognized that
perception norms and an improvement in functioning of e-banking
services.

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 ACCEPTANCE OF CUSTOMER: Proper understanding of the
customer is the major aspect of the E-banking. It is known that
computer literacy in India is yet very low and is problems in fast
acceptance of internet. Attitude of the Indian customer needs to be
changed by giving awareness about technical terms in internet
banking. However, it supports in the fast changing technical scenario,
the obsolesce of technology fast. Hence there is always lack of skilled
personal and fear of technology.

 COSTLY TECHNOLOGY: In connection with Start up cost e-

banking is huge at initial level for acquiring personal computer and
other equipments; oneself to do online banking is still not with reach
of the middle class & upper middle class customers. The cost of
maintenance of all equipments like, modem, routers, bridges and
network management systems is very high. The cost of sophisticated
hardware and software and skill level of people needed. In Internet
banking there is need of skilled employees or knowledgeable
professionals to route the banking transactions via internet. Banks can
employ software application developers, database administrators and
training to existing bank staff on the changing systems and
procedures who can handle Internet banking applications under
proper supervision.

 ISSUES IN SECURITY: In a paper less transactions, many

problems of security are involved. A secrecy threat as circumstensive
decision to cause the economic hardship to data, destruction of
network resources disclosure, modification of data or fraud, denial in
services and distortion of information. Providing appropriate security
of using encryption techniques, implementation of firewalls and virus
protection software etc.

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 LEGAL ISSUES: In today’s banking world, legal framework for
recognizing the validity of banking transactions. Conducted through
the internet is still being put in place? Information technology act
provides security &legal framework for e-commerce transactions as
well as e-banking. Information technology act or RBI suggested that
criterion of Digital Signature Certification Board for authentication of
electric records and communication with digital signatures.

 OTHER BUSINESS RELATED RESTRICTIONS: Not all

transactions can be carried electronically; many deposits and some
withdrawals require the use of physical services. Some banks have
automated to their customers (front end) but still largely depend upon
manual process (back end).It result, most of clientele or customers
were restricted by lack and awareness and due to technical problems.

 TRANSPARENCY IN OFFERING : Banks will strive to adopt best

practices in corporate governance and Corporate Social
Responsibility (CSR) this will build brand image and can help them
to enhance their confidence of international investors. Banks much
towards better corporate governance standards and adoption of
uniform accounting standards and disclosure requirements.

 ADOPTION OF PROPER ORGANIZATION

STRUCTURE: Banks may required to adopt flatter organization
structure for judicious blending of needs foe greater delegation of
power, decentralization, customer centric business models, quickly
reaction of customer needs, learn constantly from customers, provide
customer access, whatever and however they want to transact and
interact especially for catering younger Information Technology
survey population.

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 Mobile Banking
Mobile banking is a service provided by a bank or other financial
institution that allows its customers to conduct financial transactions remotely
using a mobile device such as a smartphone or tablet. Unlike the
related internet banking it uses software, usually called an app, provided by
the financial institution for the purpose. Mobile banking is usually available on
a 24-hour basis. Some financial institutions have restrictions on which
accounts may be accessed through mobile banking, as well as a limit on the
amount that can be transacted. Mobile banking is dependent on the availability
of an internet or data connection to the mobile device.
 Transactions through mobile banking depend on the features of the mobile
banking app provided and typically includes obtaining account balances and
lists of latest transactions, electronic bill payments, remote check
deposits, P2P payments, and funds transfers between a customer's or
another's accounts. Some apps also enable copies of statements to be
downloaded and sometimes printed at the customer's premises.
From the bank's point of view, mobile banking reduces the cost of handling
transactions by reducing the need for customers to visit a bank branch for non-
cash withdrawal and deposit transactions. Mobile banking does not handle
transactions involving cash, and a customer needs to visit an ATM or bank
branch for cash withdrawals or deposits. Many apps now have a remote
deposit option; using the device's camera to digitally transmit cheques to their
financial institution.
Mobile banking differs from mobile payments, which involves the use of a
mobile device to pay for goods or services either at the point of sale or
remotely, analogously to the use of a debit or credit card to effect
an EFTPOS payment.
According to this model mobile banking can be said to consist of three inter-
related concepts:

Mobile accounting

Mobile brokerage

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 Mobile financial information services

Most services in the categories designated accounting and brokerage are

transaction-based. The non-transaction-based services of an informational
nature are however essential for conducting transactions - for instance, balance
inquiries might be needed before committing a money remittance. The
accounting and brokerage services are therefore offered invariably in
combination with information services. Information services, on the other
hand, may be offered as an independent module.
Mobile banking may also be used to help in business situations as well as
financial

 Introduction of E-Banking
The earliest mobile banking services used SMS, a service known as SMS
banking. With the introduction of smart phones with WAP support enabling
the use of the mobile web in 1999, the first European banks started to offer
mobile banking on this platform to their customers.
Mobile banking before 2010 was most often performed via SMS or the mobile
web. Apple’s initial success with iPhone and the rapid growth of phones based
on Google’s Android (operating System) have led to increasing use of special
mobile apps, downloaded to the mobile device. With that said, advancements
in web technologies such as HTML5, CSS3 and java Script have seen more
banks launching mobile web-based services to complement native
applications. These applications are consisted of a web application module in
JSP such as J2EE and functions of another module J2ME
A recent study (May 2012) by Mapa Research suggests that over a third of
bank have mobile device detection upon visiting the banks' main website. A
number of things can happen on mobile detection such as redirecting to an app
store, redirection to a mobile banking specific website or providing a menu of
mobile banking options for the user to choose from.

34
 Typical mobile banking services may include:
 Account information
 Mini-statements and checking of account history
 Alerts on account activity or passing of set thresholds
 Monitoring of term deposits
 Access to loan statements
 Access to card system
 Mutual Funds/ equity statements
 Insurance Policy management

 Transaction
Fund transfer between the customer's linked accounts
Paying third parties, including bill payments and third-party fund transfer (see,
e.g., FAST)
Check Remote Deposit
 Investments
Portfolio management services
Real-time stock
 Support
Status of requests for credit, including mortgage approval, and insurance
coverage
Check (cheque) book and card requests
Exchange of data messages and email, including complaint submission and
tracking
ATM Location
 Content services
General information such as weather updates, news
Loyalty-related offers
Location-based services
A report by the US Federal Reserve (March 2012) found that 21 percent of
mobile phone owners had used mobile banking in the past 12 months. Based
on a survey conducted by Forrester, mobile banking will be attractive mainly

35
 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.
 Future functionalities in mobile banking
Based on the 'International Review of Business Research Papers' from World
business Institute, Australia, following are the key functional trends possible
in world of Mobile Banking. With the advent of technology and increasing use
of smartphone and tablet-based devices, the use of Mobile Banking
functionality would enable customer connect across entire customer life cycle
much comprehensively than before.
 Illustration of objective based functionality enrichment In Mobile
Banking:
 Communication enrichment: - Video Interaction with agents, advisors.
 Pervasive Transactions capabilities: - Comprehensive “Mobile wallet”
 Customer Education: - “Test drive” for demos of banking services
 Connect with new customer segment: - Connect with Gen Y – Gen Z using
games and social network ambushed to surrogate bank's offerings
 Content monetization: - Micro level revenue themes such as music, e-book
download
 Vertical positioning: - Positioning offerings over mobile banking specific
industries
 Horizontal positioning: - Positioning offerings over mobile banking across all
the industries
 Personalization of corporate banking services: - Personalization experience for
multiple roles and hierarchies in corporate banking as against the vanilla based
segment-based enhancements in the current context.
 Build Brand: - Built the bank's brand while enhancing the “Mobile real
estate”.

Key challenges in developing a sophisticated mobile banking application

are:
 Handset accessibility:

36
 There are a large number of different mobile phone devices and it is a big
challenge for banks to offer a mobile banking solution on any type of device.
Some of these devices support Java ME and others support SIM Application
Toolkit, a WAP browser, or only SMS.
Initial interoperability issues however have been localized, with countries like
India using portals like "R-World" to enable the limitations of low end java
based phones, while focus on areas such as South Africa have defaulted to
the USSD as a basis of communication achievable with any phone.
The desire for interoperability is largely dependent on the banks themselves,
where installed applications (Java based or native) provide better security, are
easier to use and allow development of more complex capabilities similar to
those of internet banking while SMS can provide the basics but becomes
difficult to operate with more complex transactions.
There is a myth that there is a challenge of interoperability between mobile
banking applications due to perceived lack of common technology standards
for mobile banking. In practice it is too early in the service lifecycle for
interoperability to be addressed within an individual country, as very few
countries have more than one mobile banking service provider. In practice,
banking interfaces are well defined and money movements between banks
follow the IS0-8583 standard. As mobile banking matures, money movements
between service providers will naturally adopt the same standards as in the
banking world.
In January 2009, Mobile Marketing Association (MMA) Banking Sub-
Committee, chaired by Cell Trust and VeriSign Inc., published the Mobile
Banking Overview for financial institutions in which it discussed the
advantages and disadvantages of Mobile Channel Platforms such as Short
Message Services (SMS), Mobile Web, Mobile Client Applications, SMS with
Mobile Web and Secure SMS.

 Security:
As with most internet-connected devices, as well as mobile-telephony
devices, cybercrime rates are escalating year-on-year. The types of
cybercrimes which may affect mobile-banking might range from unauthorized
use while the owner is using the mobile banking, to remote-hacking, or even
37
jamming or interference via the internet or telephone network data streams.
This is demonstrated by the malware called SMSZombie.A, which infected
Chinese Android devices. It was embedded in wallpaper apps and installed
itself so it can exploit the weaknesses of China Mobile SMS Payment system,
stealing banks credit card numbers and information linked to financial
transactions. One of the most advanced malwares discovered recently was
the Trojan called Bankbot. It went past Google's protections in its Android app
marketplace and targeted Wells Fargo, Chase, and Citibank customers on
Android devices worldwide before its removal by Google in September 2017.
This malicious app was activated when users opened a banking app,
overlaying it so it can steal banking credentials.
In the banking world, currency rates may change by the millisecond.
Security of financial transactions, being executed from some remote location
and transmission of financial information over the air, are the most
complicated challenges that need to be addressed jointly by mobile application
developers, wireless network service providers and the banks' IT departments.
The following aspects need to be addressed to offer a secure infrastructure for
financial transaction over wireless network:
1. Physical part of the hand-held device. If the bank is offering smart-card
based security, the physical security of the device is more important.
2. Security of any thick-client application running on the device. In case
the device is stolen, the hacker should require at least an ID/Password
to access the application.
3. Authentication of the device with service provider before initiating a
transaction. This would ensure that unauthorized devices are not
connected to perform financial transactions.
4. User ID / Password authentication of bank's customer.
5. Encryption of the data being transmitted over the air.
6. Encryption of the data that will be stored in device for later / off-line
analysis by the customer.
One-time password (OTPs) are the latest tool used by financial and banking
service providers in the fight against cyber fraud. Instead of relying on
traditional memorized passwords, OTPs are requested by consumers each time
they want to perform transactions using the online or mobile banking
38
 interface. When the request is received the password is sent to the consumer's
phone via SMS. The password is expired once it has been used or once its
scheduled life-cycle has expired.
Because of the concerns made explicit above, it is extremely important
that SMS gateway providers can provide a decent quality of service for banks
and financial institutions in regards to SMS services. Therefore, the provision
of service level agreements (SLAs) is a requirement for this industry; it is
necessary to give the bank customer delivery guarantees of all messages, as
well as measurements on the speed of delivery, throughput, etc. SLAs give the
service parameters in which a messaging solution is guaranteed to perform.
 Scalability and reliability:
Another challenge for the CIOs and CTOs of the banks is to scale-up the
mobile banking infrastructure to handle exponential growth of the customer
base. With mobile banking, the customer may be sitting in any part of the
world (true anytime, anywhere banking) and hence banks need to ensure that
the systems are up and running in a true 24 x 7 fashion. As customers will find
mobile banking more and more useful, their expectations from the solution
will increase. Banks unable to meet the performance and reliability
expectations may lose customer confidence. There are systems such as Mobile
Transaction Platform which allow quick and secure mobile enabling of various
banking services. Recently in India there has been a phenomenal growth in the
use of Mobile Banking applications, with leading banks adopting Mobile
Transaction Platform and the Central Bank publishing guidelines for mobile
banking operations.
 Application distribution:
Due to the nature of the connectivity between bank and its customers, it would
be impractical to expect customers to regularly visit banks or connect to a web
site for regular upgrade of their mobile banking application. It will be
expected that the mobile application itself check the upgrades and updates and
download necessary patches (so called "Over the Air" updates). However,
there could be many issues to implement this approach such as upgrade /
synchronization of other dependent components.
 User adoption:

39
 It should be noted that studies have shown that a huge concerning factor of
having mobile banking more widely used, is a banking customer's
unwillingness to adapt. Many consumers, whether they are misinformed or
not, do not want to begin using mobile banking for several reasons. These can
include the learning curve associated with new technology, having fears about
possible security compromises, just simply not wanting to start using
technology, etc.

 Personalization:
 It would be expected from the mobile application to support personalization
such as:

 Preferred Language

 Date / Time format

 Amount format

 Default transactions

 Standard Beneficiary list

 Alerts

 THE INDIAN EXPERIENCE of E-Banking

India is still in the early stages of E-banking growth and development.
Competition and changes in technology and lifestyle in the last five years have
changed the face of banking. The changes that have taken place impose on
banks tough standards of competition and compliance. The issue here is –
‘Where does India stand in the scheme of E-banking.’ E-banking is likely to
bring a host of opportunities as well as unprecedented risks to the fundamental
nature of banking in India.
The impact of E- Banking in India is not yet apparent. Many global research
companies believe that E-banking adoption in India in the near future would
be slow compared to other major Asian countries. Indian E-banking is still
nascent, although it is fast becoming a strategic necessity for most commercial

40
banks, as competition increases from private banks and non-banking financial
institutions.
Despite the global economic challenges facing the IT software and services
sector, the outlook for the Indian industry remains optimistic.
The Reserve Bank of India has also set up a “Working Group on E-banking to
examine different aspects of E-banking. The group focused on three major
areas of E-banking i.e. (1) Technology and Security issues (2) Legal issues
and (3) Regulatory and Supervisory issues. RBI has accepted the guidelines of
the group and they provide a good insight into the security requirements of E-
banking.
The importance of the impact of technology and information security cannot
be doubted. Technological developments have been one of the key drivers of
the global economy and represent an instrument that if exploited well can
boost the efficiency and competitively of the banking sector. However, the
rapid growth of the Internet has introduced a completely new level of security
related problems. The problem here is that since the Internet is not a regulated
technology and it is readily accessible to millions of people, there will always
be people who want to use it to make illicit gains. The security issue can be
addressed at three levels. The first is the security of customer information as it
is sent from the customer’s PC to the Web server. The second is the security of
the environment in which the Internet banking server and customer
information database reside. Third, security measures must be in place to
prevent unauthorized users from attempting to long into the online banking
section of the website.
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.
Regarding the regulatory and supervisory issues, only such banks which are
licensed and supervised and have a physical presence in India will be
permitted to offer E-banking products to residents of India. With institutions
41
becoming more and more global and complex, the nature of risks in the
international financial system has changed. The Regulators themselves who
will now be paying much more attention to the qualitative aspects of risk
management have recognized this.
Though the Indian Government has announced cyber laws, most corporate are
not clear about them, and feel they are insufficient for the growth of E-
commerce. Lack of consumer protection laws is another issue that needs to be
tackled, if people have to feel more comfortable about transacting online.
Taxation of E-commerce transaction has been one of the most debated issues
that are yet to be resolved by India and most other countries. The explosive
growth of e-commerce has led many executives to question how their
companies can properly administer taxes on Internet sales. Without sales tax,
online sellers get a price advantage over brick and mortar companies. While e-
commerce has been causing loss of tax revenues to the Government, many
politicians continue to insist that the Net must remain tax-free to ensure
continued growth, and that collecting sales taxes on Net commerce could
restrict its expansion.
A permanent ban on custom duties on electronic transmissions, international
tax rules that are neutral, simple and certain and simplification of state and
local sales taxes. The Central Board of Direct Taxes, which submitted its
report in September 2001, recommended that e-commerce transaction should
be taxed just like traditional commerce.
Also RBI is about to become the first Government owned digital signature
certifying Authority (CA) in India. The move is expected to initiate the
electronic transaction process in the banking sector and will have far-reaching
results in terms of cost and speed of transactions between government- owned
banks.
Thus efficiency, growth and the need to satisfy a growing tech-survey
consumer base are three clear rationales for implementing E-banking in India.
The four forces-customers, technology, convergence and globalization have
the most important effect on the Indian financial sector and these changes are
forcing banks to
Redefine their business models and integrate technology into all aspect of
operation.
42
 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
organization 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.
However as time went on the internal chorus of record keeping multiplied
geometrically as commerce and industry grew in size and volume. The civil
services of the Government and service-based organizations came in the fore-
front to inherit this overload of white-collar employment. To quote a concrete
example a major nationalized bank in India, which employed merely 3000
workers in the Fifties (around the time I entered its service in 1957), came to
engage over 70,000 employees towards the end of the century, i.e. year 1996-
97,when I retired from service from that bank.
43
The Government of India and the States including government owned bodies
employed as many as 100 lakh junior employees at the clerical and
subordinate level. Such employees by virtue of their strength of numbers
organize themselves into powerful trade unions, and aggressively utilize the
bargaining power without reference to the input benefit the organization is
deriving from them and the productivity they are providing.
In this world of human beings necessity is the mother of inventions. After 15
years of educational studies, an individual should not be employed for routine
repetitive tasks. This makes him dull and feels the work monotonous without
job satisfaction. He turns back and diverts his loyalty to an informal group i.e.
the trade union. He feels happy once in a month on pay day, but on other days
his work leaves him nothing to rejoice. There are neither opportunities nor
challenges to bring in his innovative or creative genius. As years passes the
clerical employment results in the individual losing efficiency and
productivity to progressively depict a trend of progress in reverse.
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.
To quote again a concrete example- the statistics of two banking institutions in
India, the largest and the next large in size can be fruitfully compared. These
are the State Bank of India, that was until recently employing 2.3 Lakh
workers, for a turnover of Rs.36, 000 Crores (Deposit 25000 + Advances
11000 Crores – latest).
ICICI bank has at present less than 1000 branches and around 10000
employees. It has a turnover of Rs.23000 Crores (Deposits 16 + Advances 7
thousand Crores). The bank started functioning from the year 1997 and has
gained the No.2 position in status in India after SBI in volume of business
turnover within 5 years of its operation. It will be interesting to know that
CMD of ICICI Bank draws annual emoluments of Rs.150 Lakhs, while CMD
of SBI around Rs.4 to 5 Lacs. ICICI is a new age high-tech and fully
computerized bank, while SBI retained its manual operations in totality up to

44
 1993 and maintained the work force of that time up to 2001, though it is
partially computerized starting from the year 1993.
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.
If we project the future in respect of State owned banks, which employ
presently nearly 10 Lakh employees, computerization is destined to bring
about rapid changes. By about the year 2010 the present turnover of
commercial banks in India may double or even treble to around Rs.30 to 40
Lakh Crores, but these Banks will have no need of 75 percent (today 25
percent of the work force is subordinate staff, 50 percent is clerical staff and
25 percent is the officers) of the existing workforce by 2010. Only in very
little hinterland rural pockets there may be a possibility of a need of the
present structure of workforce. The objective of the recently administered
VRS is to prepare for this reality of the first decade of the New Millennium,
where banking will be more tech based and less people based.
Computerization brings transparency, improves customer care and customer-
service tremendously and reduces substantially scope for corruption or
extending undue favor to particular constituents and uneven service to others.

 RISKS IN E-BANKING

There are risks involved in e-banking. They are as follows:

1)Strategic risk

A financial institution’s board and management should understand the risks associated
with e-banking services and evaluate the resulting risk management costs against the
potential return on investment prior to offering e-banking service.poor e-banking
plans and investment decisions can increase a financialinstitution’s strategic risk. On
strategic risk E-banking is relatively new and, as a result, there can be a lack of
understanding among senior management about its potential and implications. People
withtechnological, but not banking, skills can end up driving theinitiatives. E-
initiatives can spring up in an incoherent and piecemeal manner in firms. They can be
expensive and can fail to recoup

45
theircost. Furthermore, they are often positioned as loss leaders (tocapture market
share), but may not attract the types of customers
that banks want or expect and may have unexpected implications onexisting business
lines. Banks should respond to these risks by having a clear strategy driven from the
top and should ensure that this strategy takes account of the effects of e-banking,
wherever relevant. Such a strategy should be clearly disseminated across the business,
and supported by a
clear business plan with an effective means of monitoring performanceagainst it. On
strategic risk E-banking is relatively new and, as
aresult, there can be a lack of understanding among seniormanagement about its poten
tial and implications. People withtechnological, but not banking, skills can end up dri
ving theinitiatives. E-initiatives can spring up in an incoherent and piecemeal manner
in firms.

2)Legal risk-

Electronic banking carries heightened legal risks for banks. Banks can
potentially expand the geographical scope of their services faster through electronic
banking than through traditional banks. In some cases, however, they might not be
fully versed in a jurisdiction's local laws and regulations before they begin to offer
services there, either with a license or without a license if one is not required. When a
license is not required, a virtual bank--lacking contact with its host country
supervisor--may find it even more difficult to stay abreast
of regulatory changes. As a consequence, virtual banks couldunknowingly violate cust
omer protection laws, including on datacollection and privacy, and regulations on
soliciting. In doing so, they expose themselves to losses through lawsuits or crimes
that are not prosecuted because of jurisdictional disputes.

3)Reputational risk-

Breaches of security and disruptions to the system's availability can damage a bank's
reputation. The more a bank relies on electronic delivery channels, the greater the
potential for reputational risks. If one electronic bank encounters problems that cause
customers to lose confidence in electronic delivery channels as a whole or to view

46
bank failures as system wide supervisory deficiencies, these problems can potentially
affect other providers of electronic banking services. Inman countries where
electronic banking is becoming the trend, bank supervisors have put in place internal
guidance notes for examiners, and many have released risk-management guidelines
for banks. Thesis considerably heightened for banks using the Internet. For example,
the Internet allows for the rapid dissemination of information which means that any
incident, either good or bad, is common knowledge within a short space of time.

47
 Chapter 2

Research Methodology

Research

Research is one of the most important parts of any study and pertains to
the collection of information and knowledge. Designing a research plan
calls for decisions on the data sources, research approaches, research
instruments, sampling plan. My project has been developed on the basis of
both exploratory and descriptive research.

The research is descriptive as the study has been completed based on the
data collected from the internet and secondary sources like news,
magazines, database BOB, reports, etc.

It is also analytical in nature as the data collected from questionnaire is

analysed and necessary findings and conclusion is derived based on the
data collected from questionnaire.

Data Source

For this project both primary and secondary data were valuable sources of
information.

Primary data

Primary data is the data freshly gathered for a specific purpose. For my
project work, the study has been done using an exploratory research
process and a structured questionnaire was developed for this purpose. For
the collection of primary data this was the only method used. The filled up
information is later analysed to obtain the required interpretation and
findings.

48
Secondary data

Secondary data provides a starting point for any research and offers
valuable sources of already existing information. Secondary data are the
easiest to gather and the cost of collecting this data is also very low. For
my project work, study of banking industry, Bank of Baroda was done
using secondary data sources. This secondary information has been
sourced from the internet and from business related magazines and
newspapers.

Sampling Units

For the purpose of research, people from different age group using
traditional banking or E-banking from city Mumbai were surveyed.

Sampling Technique used :

Since the information required was not of a very technical nature and also
looking at the scope of the project and the extent of the target segment, the
sampling technique employed was convenience sampling. I administered
the questionnaires.

Research Instrument :

Structured Questionnaire method was used to carry out the survey.

Questionnaire was framed and designed in such a manner that it could be
filled up within 5 minutes by the person thus saving time of interviewee.

49
 Research Objectives :

 To know about the activities being provided by Traditional Banking

System
 To know about the activities being provided by E-banking system
 To know how Online banking concept defers from Traditional banking
concept
 To know what is the role of internet in banking sector
 To know what are the challenges of E-banking.
 To know how many peopleare aware of E-banking.

Hypothesis :

 E-banking services as a strategy for improving customer satisfaction as

adopted by selected banks are perceived as important by customers.
 Customers prefer electronic banking to traditional banking.
 Customers are generally happy and satisfied regarding e-banking services
as a whole provided by selected banks.
 There is a positive relationship between the younger age group and
preferences of electronic banking.
 The preferences for e banking is greatest for the business occupation type.

 Scope of the Study:

Traditional Banking based retail banking remains the most wide spread
method for banking transaction. However the internet technology is
rapidly changing the way of designing and delivering the personal
services. Now commercial banking are introduced internet based E-
Banking to improve their operation and to reduce the cost. Despite all their
efforts at developing better and easier banking system, these system

50
 remain unnoticed by the customers. Therefore there is a need to
understand user's acceptance of internet banking and a need to identify the
factors that can affect their intention to use internet banking.

Functional scope: Research is related with e-banking services only, i.e.

it considers only awareness of e-banking services.

Geographical Scope: This research is related with students in Mumbai

City.

 LIMITATION OF THE STUDY :

 Respondents may give biased answers for the required data. Some of the
respondents did not like to respond.

 The conclusion arrived at are based on very less experience of researcher

in this field.

 In my study I have included 80 individuals because of time limit.

 Accuracy of the primary data collected depends upon on the authenticity

of the information filed by the respondents of the questionnaire.

51
 Chapter 3

Literature Review

 History of Traditional banking :

The history of banking began with the first prototype banks which were
the merchants of the world, who made grain loans to farmers and traders
who carried goods between cities. This was around 2000 BC in Assyria,
India and Sumeria. Later, in ancient Greece and during the Roman Empire,
lenders based in temples made loans, while accepting deposits and
performing the change of money. Archaeology from this period in ancient
China and India also shows evidence of money lending.

Many histories position the crucial historical development of

a banking system to medieval and Renaissance Italy and particularly the
affluent cities of Florence, Venice and Genoa.
The Bardi and Peruzzi Families dominated banking in 14th century
Florence, establishing branches in many other parts of Europe.[1] The most
famous Italian bank was the Medici bank, established by Giovanni
Medici in 1397.[2] The oldest bank still in existence is Banca Monte
deiPaschi di Siena, headquartered in Siena, Italy, which has been operating
continuously since 1472.[3]

The development of banking spread from northern Italy throughout

the Holy Roman Empire, and in the 15th and 16th century to northern
Europe. This was followed by a number of important innovations that took
place in Amsterdam during the Dutch Republic in the 17th century, and in
London since the 18th century. During the 20th century, developments in
telecommunications and computing caused major changes to banks'
operations and let banks dramatically increase in size and geographic
spread. The financial crisis of 2007–2008 caused many bank failures,

52
including some of the world's largest banks, and provoked much debate
about bank regulation.

 BANKING IN INDIA :

Banking in India, in the modern sense, originated in the last decade of the
18th century. Among the first banks were the Bank of Hindustan, which
was established in 1770 and liquidated in 1829–32; and the General Bank
of India, established in 1786 but failed in 1791.

The largest bank, and the oldest still in existence, is the State Bank of
India (S.B.I). It originated and started working as the Bank of Calcutta in
mid-June 1806. In 1809, it was renamed as the Bank of Bengal. This was
one of the three banks founded by a presidency government, the other two
were the Bank of Bombay in 1840 and the Bank of Madras in 1843. The
three banks were merged in 1921 to form the Imperial Bank of India,
which upon India's independence, became the State Bank of India in 1955.
For many years the presidency banks had acted as quasi-central banks, as
did their successors, until the Reserve Bank of India was established in
1935, under the Reserve Bank of India Act, 1934.

In 1960, the State Banks of India was given control of eight state-
associated banks under the State Bank of India (Subsidiary Banks) Act,
1959. These are now called its associate banks. In 1969 the Indian
government nationalised 14 major private banks, one of the big bank
was Bank of India. In 1980, 6 more private banks were nationalised. These
nationalised banks are the majority of lenders in the Indian economy. They
dominate the banking sector because of their large size and widespread
networks.

The Indian banking sector is broadly classified into scheduled and non-
scheduled banks. The scheduled banks are those included under the 2nd
Schedule of the Reserve Bank of India Act, 1934. The scheduled banks are
further classified into: nationalised banks; State Bank of India and its

53
 associates; Regional Rural Banks (RRBs); foreign banks; and other Indian
private sector banks. The term commercial banks refers to both scheduled
and non-scheduled commercial banks regulated under the Banking
Regulation Act, 1949.

Generally the supply, product range and reach of banking in India is fairly
mature-even though reach in rural India and to the poor still remains a
challenge. The government has developed initiatives to address this
through the State Bank of India expanding its branch network and through
the National Bank for Agriculture and Rural Development
(NABARD) with facilities like microfinance.

Ancient India :

 The Vedas (2000–1400 BCE) are the earliest Indian texts to mention the
concept of usury, with the word kusidin translated as "usurer".
The Sutras (700–100 BCE) and the Jatakas (600–400 BCE) also mention
usury. Texts of this period also condemnedusury: Vasishtha for
bade Brahmin and Kshatriya varnas from participating in usury. By the
2nd century CE, usury became more acceptable. The Manusmriti
considered usury an acceptable means of acquiring wealth or leading a
livelihood. It also considered money lending above a certain rate and
different ceiling rates for different castes a grave sin.

 The Jatakas, Dharmashastras and Kautilya also mention the existence of

loan deeds, called rnapatra, rnapanna, or rnalekhaya.

 Later during the Mauryan period (321–185 BCE), an instrument

called adesha was in use, which was an order on a banker directing him to
pay the sum on the note to a third person, which corresponds to the
definition of a modern bill of exchange. The considerable use of these
instruments has been recorded[. In large towns, merchants also gave letters
of credit to one another.

54
  Medieval Era :
 The use of loan deeds continued into the Mughal era and were
called dastawez. Two types of loans deeds have been recorded.
The dastawez-e-indultalab was payable on demand and dastawez-e-
miadi was payable after a stipulated time. The use of payment orders by
royal treasuries, called barattes, have been also recorded.
 There are also records of Indian bankers using issuing bills of exchange on
foreign countries. The evolution of hundis, a type of credit instrument, also
occurred during this period and remain in use.

 Colonial Era :

 During the period of British rule merchants established the Union Bank of
Calcutta in 1829, first as a private joint stock association, then partnership.
Its proprietors were the owners of the earlier Commercial Bank and the
Calcutta Bank, who by mutual consent created Union Bank to replace
these two banks.
 The Allahabad Bank, established in 1865 and still functioning today, is the
oldest Joint Stock bank in India, it was not the first though. That honour
belongs to the Bank of Upper India, which was established in 1863 and
survived until 1913, when it failed, with some of its assets and liabilities
being transferred to the Alliance Bank of Shimla.

 Foreign banks too started to appear, particularly in Calcutta, in the

1860s. Grindlays Bank opened its first branch in Calcutta in
1864. The Comptoird'Escompte de Paris opened a branch in Calcutta in
1860, and another in Bombay in 1862; branches followed
in Madras and Pondicherry, then a French possession. HSBC established
itself in Bengal in 1869. Calcutta was the most active trading port in India,
mainly due to the trade of the British Empire, and so became a banking
centre.

 The first entirely Indian joint stock bank was the Oudh Commercial Bank,
established in 1881 in Faizabad. It failed in 1958. The next was the Punjab

55
 National Bank, established in Lahore in 1894, which has survived to the
present and is now one of the largest banks in India.
 Around the turn of the 20th Century, the Indian economy was passing
through a relative period of stability. Around five decades had elapsed
since the Indian rebellion, and the social, industrial and other infrastructure
had improved. Indians had established small banks, most of which served
particular ethnic and religious communities.
 The presidency banks dominated banking in India but there were also
some exchange banks and a number of Indian joint stock banks. All these
banks operated in different segments of the economy. The exchange
banks, mostly owned by Europeans, concentrated on financing foreign
trade. Indian joint stock banks were generally under capitalised and lacked
the experience and maturity to compete with the presidency and exchange
banks. This segmentation let Lord Curzon to observe, "In respect of
banking it seems we are behind the times. We are like some old fashioned
sailing ship, divided by solid wooden bulkheads into separate and
cumbersome compartments."
 The period between 1906 and 1911 saw the establishment of banks
inspired by the Swadeshi movement. The Swadeshi movement inspired
local businessmen and political figures to found banks of and for the
Indian community. A number of banks established then have survived to
the present such as Catholic Syrian Bank, The South Indian Bank, Bank of
India, Corporation Bank, Indian Bank, Bank of Baroda, Canara
Bank and Central Bank of India.
 The fervour of Swadeshi movement led to the establishment of many
private banks in Dakshina Kannada and Udupi district, which were unified
earlier and known by the name South Canara (South Kanara) district. Four
nationalised banks started in this district and also a leading private sector
bank. Hence undivided Dakshina Kannada district is known as "Cradle of
Indian Banking".

 Post-Independence :

56
 During 1938-46, bank branch offices trebled to 3,469 and deposits
quadrupled to 962 crore. Nevertheless, the partition of India in 1947
adversely impacted the economies of Punjab and West Bengal, paralysing
banking activities for months. India's independence marked the end of a
regime of the Laissez-faire for the Indian banking. The Government of
India initiated measures to play an active role in the economic life of the
nation, and the Industrial Policy Resolution adopted by the government in
1948 envisaged a mixed economy. This resulted in greater involvement of
the state in different segments of the economy including banking and
finance. The major steps to regulate banking included:

 The Reserve Bank of India, India's central banking authority, was

established in April 1935, but was nationalized on 1 January 1949 under
the terms of the Reserve Bank of India (Transfer to Public Ownership)
Act, 1948 (RBI, 2005b).

 In 1949, the Banking Regulation Act was enacted, which empowered

the Reserve Bank of India (RBI) to regulate, control, and inspect the banks
in India.

 The Banking Regulation Act also provided that no new bank or branch of
an existing bank could be opened without a license from the RBI, and no
two banks could have common directors.

 Nationalisation in 1969 and 1980 :

 Despite the provisions, control and regulations of the Reserve Bank of

India, banks in India except the State Bank of India (SBI), remain owned
and operated by private persons. By the 1960s, the Indian banking industry
had become an important tool to facilitate the development of the Indian
economy. At the same time, it had emerged as a large employer, and a
debate had ensued about the nationalization of the banking industry. Indira
Gandhi, the then Prime Minister of India, expressed the intention of
the Government of India in the annual conference of the All India

57
 Congress Meeting in a paper entitled Stray thoughts on Bank
Nationalization.

 Thereafter, the Government of India issued the Banking Companies

(Acquisition and Transfer of Undertakings) Ordinance, 1969
and nationalised the 14 largest commercial banks with effect from the
midnight of 19 July 1969. These banks contained 85 percent of bank
deposits in the country. Within two weeks of the issue of the ordinance,
the Parliament passed the Banking Companies (Acquisition and Transfer
of Undertaking) Bill, and it received presidential approval on 9 August
1969.

The following banks were nationalised in 1969:

 Allahabad Bank

 Bank of Baroda

 Bank of India

 Bank of Maharashtra

 Central Bank of India

 Canara Bank

 Dena Bank

 Indian Bank

 Indian Overseas Bank

 Punjab National Bank

 Syndicate Bank

 UCO Bank

 Union Bank

 United Bank of India

58
 A second round of nationalisations of six more commercial banks
followed in 1980. The stated reason for the nationalisation was to give the
government more control of credit delivery. With the second round of
nationalisations, the Government of India controlled around 91% of the
banking business of India.

The following banks were nationalised in 1980:

 Punjab and Sind Bank

 Vijaya Bank

 Oriental Bank of India

 Corporate Bank

 Andhra Bank

 New Bank of India

 Later on, in the year 1993, the government merged New Bank of
India with Punjab National Bank. It was the only merger between
nationalised banks and resulted in the reduction of the number of
nationalised banks from 20 to 19. Until the 1990s, the nationalised banks
grew at a pace of around 4%, closer to the average growth rate of the
Indian economy.

 Liberalisation in the 1990s:

59
 In the early 1990s, the then government embarked on a policy
of liberalisation, licensing a small number of private banks. These came to
be known as New Generation tech-savvy banks, and included Global Trust
Bank (the first of such new generation banks to be set up), which later
amalgamated with Oriental Bank of Commerce, UTI Bank (since
renamed Axis Bank), ICICI Bank and HDFC Bank. This move, along with
the rapid growth in the economy of India, revitalised the banking sector in
India, which has seen rapid growth with strong contribution from all the
three sectors of banks, namely, government banks, private banks and
foreign banks.

 The next stage for the Indian banking has been set up, with proposed
relaxation of norms for foreign direct investment. All foreign investors in
banks may be given voting rights that could exceed the present cap of 10%
at present. It has gone up to 74% with some restrictions.

 The new policy shook the Banking sector in India completely. Bankers, till
this time, were used to the 4–6–4 method (borrow at 4%; lend at 6%; go
home at 4) of functioning. The new wave ushered in a modern outlook and
tech-savvy methods of working for traditional banks. All this led to the
retail boom in India. People demanded more from their banks and received
more.

60
  Current Period:

 The Indian banking sector is broadly classified into scheduled banks and
non-scheduled banks.All banks included in the Second Schedule to
the Reserve Bank of India Act, 1934 are Scheduled Banks. These banks
comprise Scheduled Commercial Banks and Scheduled Co-operative
Banks. Scheduled Co-operative Banks consist of Scheduled State Co-
operative Banks and Scheduled Urban Cooperative Banks.

 By 2010, the supply, product range and reach of banking in India was
generally fairly mature-even though reach in rural India still remains a
challenge for the private sector and foreign banks. In 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.

 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.

 In recent years critics have charged that the non-government owned banks
are too aggressive in their loan recovery efforts in connexion with housing,
vehicle and personal loans. There are press reports that the banks' loan
recovery efforts have driven defaulting borrowers to suicide.

 By 2013 the Indian Banking Industry employed 1,175,149 employees and

had a total of 109,811 branches in India and 171 branches abroad and

61
 manages an aggregate deposit of ₹67,504.54 billion(US$940 billion or
€820 billion) and bank credit of ₹52,604.59 billion (US$730 billion or
€640 billion). The net profit of the banks operating in India was 1,027.51
billion (US$14 billion or €13 billion) against a turnover of 9,148.59
billion (US$130 billion or €110 billion) for the financial year 2012–13.

 PradhanMantri Jan DhanYojana ( English: Prime Minister's People Money

Scheme) is a scheme for comprehensive financial inclusionlaunched by
the Prime Minister of India, NarendraModi, in 2014. Run by Department
of Financial Services, Ministry of Finance, on the inauguration day, 1.5
Crore (15 million) bank accounts were opened under this scheme. By 15
July 2015, 16.92 crore accounts were opened, with around 20,288.37
crore (US$2.8 billion) were deposited under the scheme, which also has an
option for opening new bank accounts with zero balance.

 Future of Banking sector and initiated reforms

Financial sector reforms were initiated as part of overall economic reforms in
the country and wide ranging reforms covering industry, trade, taxation,
external sector, banking and financial markets have been carried out since
mid-1991. A decade of economic and financial sector reforms has
strengthened the fundamentals of the Indian economy and transformed the
operating environment for banks and financial institutions of the country. The
sustained and gradual pace of reforms has helped to avoid crisis and has
actually fuelled growth. The most significant achievement of the financial
sector reforms has been marked as improvement in the financial health of
commercial banks in terms of capital adequacy, profitability and asset quality
as also greater attention to risk management. Further, deregulation has opened
to new opportunities for banks to increase revenues by diversifying into
investment banking, insurance banking, credit cards, depository services,
mortgage financing, etc. at the same time liberalization has brought greater
competition among banks, both domestic and foreign, as well as competition
from mutual funds, NBFC‟s, post office, etc. increasing competition is
squeezing the profitability and forcing the banks to work efficiently on
shrinking spreads. Positive fallout of competition is the greater choice
available to customers, and increased level of sophistication and technology in

62
 banks. As banks benchmark themselves against global standards, there has
been a marked increase in disclosures and transparency in bank balance sheets
as aslo greater focus on corporate governance.

 Major reforms in banking sector

 Some of the major reform initiatives in the last decade that have changed the
face of the Indian banking and financial sector are:
 Interest rate deregulation. Interest rates on deposits and lending have been
deregulated with banks enjoying greater freedom to determine their rates.

 Adoption of prudential norms in terms of capital adequacy, asset

classification, income recognition, provisioning, and exposure limits,
investment fluctuation reserve, etc.
 Reduction in pre-exemptions – lowering of reserve requirements (SLR and
CRR), thus releasing more lendable resources which banks can deploy
profitably. Government equity in banks has been reduced and strong banks
have been allowed to access the capital market for raising additional capital.
 Banks now enjoy greater operational freedom in terms of opening and
swapping of branches, and banks with a good track record of profitability have
greater flexibility in recruitment.
 New private sector banks have been set up and foreign banks permitted to
expand their operations in India including through subsidiaries. Banks have
also been allowed to set up Offshore Banking Units in Special Economic
Zones.
 New areas have been opened up for bank financing: insurance, credit cards,
infrastructure financing, leasing, gold banking, besides of course investment
banking, asset management, factoring, etc.

 New instruments have been introduced for greater flexibility and better risk
management: e.g. interest rate swaps, forward rate agreements, cross currency
forward contracts, forward cover to hedge inflows under foreign direct

63
investment, liquidity adjustment facility for meeting day-to-day liquidity
mismatch.

 Electronic Banking and Its Evolution

Online banking was first started in 80’s. The term online became famous
in the late ‘80s. Online banking during the formative years included usage
at terminal, keyboard and TV (or monitor) with an intention to approach
the banking system using a phone line. Online services started in New
York in 1981 when four of the city’s major banks (Citibank, Chase
Manhattan, Chemical and Manufacturers Hanover) offered home banking
services using the videotext system. Later on, the concept of videotext
became popular in France. In UK, first home online banking services were
set up by the Nottingham Building Society (NBS) in the year 1983. It was
based on the UK’s Prestel system and used a computer, such as the BBC
Micro, or keyboard (Tandata) connected to the telephone system and
television set. It provided customer an option to make bill payment for gas,
electricity and telephone companies and accounts with other banks. It was
Stanford Federal Credit Union which offered online internet banking
services to all of its customers.

Internet banking refers to the use of Internet as a remote delivery channel

for banking services such as opening a deposit account or transferring
funds at different accounts etc. Further, it is a desirable opportunity for
banks where the key to success is customer adoption. There is evolution in
development of internet banking. At the basic level, Internet banking
includes the setting up of a web page by a bank to give information about
its product and services . At an advance level, it involves provision of
facilities such as accessing accounts, funds transfer, enabling integrated
sales of additional process and access to other financial services such as

64
investment and insurance .[There is advantage for customers as it provides
opportunity to handle their banking transactions without visiting bank
tellers. [The services through Internet banking are e-tax payment; access
the account to check balance, online trading of shares, online remittance of
money,electronic bill payment system, railway reservation, transfer of
funds from one customer’s account to other, application of loan, etc.
Internet banking channel is convenient compared to bank branch system
because stakeholders can access their account at any time . Banks
leveraged the advantage of the Internet by offering online services in
recent years.

Thulani et al.[identified three functional levels of Internet banking which

are informational, communicative and transactional. Under informational
level, it has been identified that banks have the marketing information
about the bank’s products and services on a standalone server. The risk is
very low as informational systems have no path between the server and the
bank’s internal network. Communicative level of Internet banking allows
some interaction between the bank’s systems and the customer. This level
of interaction is limited to e-mail, account inquiry, loan application, static
file updates and it permits no fund transfer. Transactional level Internet
banking allows bank customers to electronically transfer funds to/from
their accounts, pay bills and conduct other banking transactions online.
There are higher risk levels in transaction levels as compared to that of
other two levels.

 Progress of Electronic Banking in India

In India, Reserve Bank of India outlined the mission to ensure that

payment and settlement systems are safe, efficient, interoperable,
authorized, accessible, inclusive and compliant with international
standards. The Vision is to proactively encourage electronic payment
system for ushering in a less cash society in India. Regulation is keen to
promote innovation and competition with an intention to help payment

65
system achieve international standards. Various initiatives by Reserve
Bank of India, in mid-eighties and early-nineties, resulted in offering
technology based solutions. The need evolved to provide costeffective
alternative system.

Electronic Clearing Service (ECS) was launched in 1990s to cater to bulk

and repetitive payments. By September 2008, a new avatar in the form of
National Electronic Clearing cell was launched to handle multiple credits
to beneficiary accounts. National Electronic Clearing Service (NECS)
rides on core banking solution of member banks. The retail funds transfer
system was introduced in 1990s to allow electronic transfer of fund for
people to people payment. In November 2005, a robust system was
launched to allow one to one funds transfer requirement of individuals and
corporates. Prepaid instruments allow transaction for goods and services
against the value stored on payment instrument. It may be in the form of
smart cards, magnetic stripe cards, internet wallets, mobile accounts,
mobile wallets and paper vouchers. Consequent to the guidelines in mobile
banking, selected banks were permitted to offer the service after receipt of
necessary permission from Reserve Bank of India. Indian Retail payments
pose significant challenges and opportunities. Based on Payment system
vision document released by Reserve Bank of India, the number of non-
cash transactions, at 6 per person, is low in India. It is estimated that
Government subsidies alone constitute more than Rs.2.93 trillion and
electronification has a potential to translate 4.13 billion electronic
transactions in a year. Based on the report of Internet and Mobile
Association of India (IAMAI), internet commerce is expected to reach
Rs.465 billion by the year 2012.

To facilitate electronification, Reserve Bank of India established the

umbrella organization, National Payment Corporation of India [30]. Many
researches in the past have laid importance on the significant
developments that are taking place in the banking industry due to the surge
in information technology. Sahai and Machiraju discussed how new
technologies addressed different requirements and how these technologies

66
fit together to provide a ubiquitous e-market place and e-service vision.
While many new products are offered in the area of electronic payment
products, banks need to track the usage of these products. Concerns have
been raised over the great ‘digital divide’ between the rich and the poor on
the demand side and different operational environments in the private and
public sector banks at the supply side. Dutta and Roy studied internet
growth from a developing country’s perspective and developed a causal
model using System Dynamics (SD) method that will help a developing
country like India to identify the pattern of Internet diffusion as a result of
various policy alternatives taken up to nurture internet diffusion in the
country.

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 Chapter 4

Data Analysis and Interpretation

Analysis for Comparative study between Traditional Banking and E-

Banking was carried out using a survey. The purpose of Analysing was to
know what customer prefer as their banking method and their views on it.

Questionnaire method was used to carry out the survey. The survey was
carried out in the city Mumbai. Different types of account holders like
current account holder, saving account and fixed account holders were
interviewed. A set of 10 questions used in questionnaire. Questionnaire
was framed and designed in such a manner that it could be filled up within
5 minutes by the person thus saving time of interviewee.

The sample Size taken was 80.

Out of 80 people who have interviewed the questionnaire, 97.5% have a

bank account in different banks.

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From the above pie chart, 81.3% respondents use e-banking over
traditional banking and rest 17.5% respondents still prefer traditional
banking.

From the above pie chart, account holder do not use E-banking facility
because they are concerned about security.

69
From the above graph, account holder who do not use E-banking is
because there is no face to face conversation between the customer and
bank employee. Also customers are highly concerned about their bank
security. Some people also have lack of Internet access because of which
they are unable to use E-banking.

70
From the above pie chart, Most of the respondents agrees that internet
banking is very risky. They are concerned about their security and thus
uses traditional banking.

From the above chart, more than 50% people agrees that e-banking will
replace traditional banking because customer find I very convenient to use
and helps to save their time.

71
From the above pie chart, more than 50% people do not find using
internet banking difficult. But around 30% people still find it difficult.

From above graph respondents find e-banking convenient because it saves

time. Also it makes banking transaction easy.

72
From the above pie chart, 65% respondents are satisfied by E-banking
method. It is because E-banking helps customer to save their time and it is
very convenient for them to use it without going to the bank. 25% people
still uses traditional banking as they are concerned about their bank
security and also to get a face to face advice from the banker.

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 Chapter 5

Conclusions and Suggestion :

Conclusions :

The study attempted to identify key quality attributes of traditional

banking and e-banking services by analyzing bank customers and their
comments on banking experience. The findings of this study show that
despite of many advantages of internet banking, people still consider it is
an alternative for analyzing their bank records. The main factors which
persuade people to use e-banking are comfort and convenience.

Based on this study, the opinion of the sample respondents among the
bank customers the various aspects of e-banking and traditional banking
services provided by banks are evaluated using appropriate statistical
techniques. It is concluded from the results of the study that the usage of
ATM, Telebanking and Internet banking are perceived as important and
the use of these services is associated with socio-economic and
demographic characteristics of the respondents.

Though, most of the customers prefer manual banking over e- banking, the
customers tend to use e-banking / internet banking and adoption of e-
banking and internet banking services among the bank customers is
significantly influenced by the number of times visiting the banks as well
as the number of banking transactions per month. Most of the services
through e-banking / internet banking performed by both public and private
banks are beyond the expectation of the customers. Similarly the various
services provided by both public and private sector banks are more than
adequate for customers.

It is concluded finally that there is significant difference between public

and private sector banks in respect of both services provided and services
performed via e-banking / internet banking. From the results regarding
functional / psychological barriers and benefits, it is noted that there are
four underlying aspects (dimensions) of functional / psychological barriers
(two aspects related to barriers such as “Complications and Difficulties in

74
using IB initially” and “Risk of getting wrong information”) and benefits
(two benefits namely, “Convenient & Easy to Use” and “Good option next
to traditional banking”) are identified.

From the evaluation of the customers’ opinion with regard to the benefits
and usefulness of e-banking / internet banking in addition to “intention of
using e-banking / internet banking in the future”, it is identified that there
are four major benefits, namely “Save time & Cost Less”, “Provide
accurate, relevant and up-to date information”, “Flexible and easily
accessible with convenience” and “Assists to share the experience with
bank and other customers more efficiently” from e-banking / internet
banking.

It is found that “flexibility and easy accessibility with convenience” is the

most desirable benefit followed by “Providing accurate, relevant and up-to
date information” and “Saving time & Cost Less” and the perceived status
of the above benefits is associated with education and family income of
the respondents. From this, it is apparent that there is significant difference
in the perceived level of benefits of e-banking / IB between public and
private sector banks as well as between non-users and users of e-banking /
IB.

With regard to the “intention to use e-banking / internet banking in the

future”, all respondents have expressed positive opinion that they have
intention of using these services in the future. It is identified that “time
saving and less cost” tend to influence the bank customers’ “intention to
continue using this Internet banking site in the future” whereas “providing
accurate, relevant and upto date information”, “flexibility and easy
accessibility with convenience” and “assisting to share the experience with
bank and other customers more efficiently” tend to influence the bank
customers to strongly recommend to others to use e-banking / internet
banking in the future”.

75
 Suggestions :

 Banks should take necessary steps to create awareness among rural people
about the advantages of e-banking / internet banking services available in
the banks.

 The e-banking / internet banking system should be enhanced to make the

online enquiry and online payment much more easier to the customers.

 Public sector banks should improve their e-banking / internet banking

services to compete with their private sector counterparts.

 Most of the customers have not availed of the e-banking / internet banking
services because they do not trust the internet channel presuming it as
complicated. So banks may set up a team of personnel to train the
customers to get acquainted with internet channel.

 The bank customers have perceived the risk of getting wrong information
from e-banking / internet banking services. These illusions should be
removed from the minds of the customers by bank people as these factors
are the barriers for most of the customers for not adopting these services.

 Though e-banking / internet banking is convenient and easy to use,

customers are afraid of adopting these services because they think that
using these “services are difficult and complicated”. So, on-site training
can be provided to the bank customers who intend to use e-banking /
internet banking services.

76
 Bibliography

http://www.allresearchjournal.com/archives/2016/vol2issue7/PartE/2-6-
146-742.pdf

https://www.researchgate.net/publication/258726999_Impact_of_E-
Banking_on_Traditional_Banking_Services

http://www.svtuition.org/2010/06/traditional-banking-vs-e-banking.html

https://www.toptenreviews.com/money/articles/online-banking-vs.-
traditional-banking/

https://smallbusiness.chron.com/online-banking-vs-traditional-banking-
5001.html

https://keydifferences.com/difference-between-mobile-banking-and-
internet-banking.html

https://www.ijert.org/research/e-banking-services-comparative-analysis-
of-nationalized-banks-IJERTV1IS8364.pdf

https://kontomatik.com/post/online-banks-will-different-online-banking-
systems

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 Appendix

1) Do you have a bank account?

a) Yes

b) No

2) Do you use E-Banking? (if your answer is yes, then skip the 3rd
question)

a) Yes

b) No

3) What are the main reasons that you don not have an E-banking
account?

a) Under age

b) Never heard of E-banking

c) Concerned about security

d) Don’t see any real value in having this type of account

e) Other

4) What are the most important reasons for you to use E-banking?

a) Convenience

b) Better rates

c) Safe and secure

d) Low service charge

e) Easy to maintain my banking transaction activity

f) Other

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5) What would put you off banking over the Internet?

a) Lack of face to face advice

b) Reluctance to change

c) Security concern

d) Lack of Internet access

e) Other

6) Is Internet Banking/E-banking risky?

a) Strongly agree

b) Agree

c) Neutral

d) Disagree

e) Strongly disagree

7) Do you think E-banking will replace traditional banking?

a) Strongly agree

b) Agree

c) Neutral

d) Disagree

e) Strongly disagree

8) Do you think E-banking is a bit complicated?

a) Strongly agree

b) Agree

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 c) Neutral

d) Disagree

e) Strongly disagree

9) What banking method are you satisfied with?

a) E-banking

b) Traditional Banking

80