A STUDY OF ONLINE BANKING WITH REFERENCE TO STATE BANK OF INDIA, KAKINADA A PROJECT REPORT IS SUBMITTED TO ANDHRA UNIVERSITY VISKAHAPATNAM

IN DISTANCE ED UCATION FOR THE AWARD OF DEGREE OF MASTER OF BUSINESS ADMINISTRATION SUBMITTED BY T. CHINNAIAH SEKHAR UNDER THE GUIDANCE OF MRS. V.S.D. HIMA BINDU FACULTY IN MANAGEMENT, AU MSM,PG CAMPUS ,KAKINADA MBA PROGRAMME SDE, AU 2008-2011

ON STATE BANK OF INDIA LETTER HEAD CERTIFICATE FROM STATE BANK OF INDIA This is to certify that T. Chinnaiah Sekhar, A student of M.B.A studying at A.U. M.S.N.P.G Center, has done a project work title. A Study on Online Banking with reference to State Bank of India, Kakinada. He has taken guidance and completed project work. He has done the project during the period 01st Apr11 to 31st May 11 under the guid ance of Mr. State Bank of India. He has completed the taken up project well within the stipulated time frame. We wish them all the best in this endeavour.

CERTIFICATE This is to certify that the project work entitled A Study on Online Banking with reference to State Bank of India, Kakinada, being submitted by T.CHINNAIAH SEKHA R in Andhra University Visakhapatnam in Distance Education for the Award of Degr ee of Master of Business Administration is a record of bonafide work carried out by him under guidance and supervision. V.S.D. HIMA BINDU, MBA, M.Phil., (PhD) FACULTY MEMBER

DECLARATION I here by declare that this project work A Study on Online Banking with reference to State Bank of India, Kakinada in partial fulfilment for the award of Degree of Master in Business Administration submitted to School of Distance Education, Andhra University, Visakhapatnam is an original work done by me. This work has n ot been previously Submitted by me for the award of any another degree or diplom a in any other institute or university. T.CHINNAIAH SEKHAR

ACKNOWLEDGEMENT I have great pleasure to express my sincere thanks to Dr. B. Kuberudu, course co ordinator, Andhra University, Kakinada for encouraging me by providing all the f acilities to complete project successfully. I express my sincere thanks to Mrs. V.S.D. Hima Bindu, Faculty, A.U.M.S.N.P.G ce nter, Kakinada for who has been a source of inspiration for me throughout my pro ject and for her valuable advices in making my project a success. My sincere thanks to Mr. Branch Manager, State Bank of India, for assisting and providing me valuable inputs in completing my project work.

INDEX 1. 1.1 1.2 1.3 1.4 1.5 1.6 2. 2.1 2.2 3.

CHAPTER 1 - INTRODUCTION Topic Banking Scenario Need for the Study Objectives for the Study Methodology of the Study Limitation of the Study CHAPTER II INDUSTRY PROFILE History of Online Banking General Importance of Banking in Indian Economy CHAPTER III - COMPANY PROFILE

3.1 3.2 3.3 3.4 4. DY OF 4.1 4.2 4.3 5. 6.

OVERVIEW MISSION VISION ORGANISATION STRUCTURE CHAPTER - IV ONLINE BANKING WITH REFERENCE TO STATE BANK OF INDIA. A STU STATE BANK OF INDIA, KAKINADA. DEFINATION OF ONLINE BANKING CUSTOMER SATISFACTION & EDUCATIONS MANAGEMENT PRATICES ADOPTED CHAPTER V - DATA ANALYSIS & INTERPRETATION CHAPTER VI - FINDING & SUGGESSTION

1. INTRODUCTION TO ONLINE BANKING Online Banking in India and its features available with different bank across In dia. If you look into the modern age of banking, Online Banking or Net Banking m ade things much easier for the people and saves lot of time. The traditional way of standing in the queue and filling up all the forms, now its no hassle for mak ing any transaction with the banks. Every Bank has their own features and some banks still not having the more advanced features like transferring money to any banks across India, easy registration for net banking. Etc. Banks have traditionally been in the forefront of harnessing technology to impro ve their products, services and efficiency. They have, over a long time, been us ing electronic and telecommunication networks for delivering a wide range of val ue added products and services. The delivery channels include direct dial up con nections, private networks, public networks etc. and the devices include telepho ne, Personal Computers including the Automated Teller Machines, etc. With the po pularity of PCs, easy access to Internet and World Wide Web (WWW), Internet is i ncreasingly used by banks as a channel for receiving instructions and delivering their products and services to their customers. This form of banking is general ly referred to as Online Banking or Internet Banking. The range of products and services offered by different banks vary widely both in their content and sophis tication. The levels of banking services offered through Internet can be categorized into three types: 1. The Basic Level Service is the banks websites which disseminate informati on on different products and services offered to customers and members of public in general general. It may receive and reply to customers queries through e-mail . 2. In the next level are Simple Transactional Websites which allow custome rs to submit their instructions, applications for different services, queries on their account balances, etc. but do not permit any fund-based transactions on t heir accounts. 3. The third level of Internet banking services are offered by Fully Transa ctional Websites which allow the customers to operate on their accounts for tran sfer of funds, payment of different bills, subscribing to other products of the bank and to transact purchase and sale of securities, etc. The above forms of Internet banking services are offered by traditional banks, a s an additional method of serving the customer or by new banks, who deliver bank ing services primarily through Internet or other electronic delivery channels as the value added services. Some of these banks are known as virtual banks or Intern et only. Banks and may not have any physical presence in a country despite offeri ng different banking services.

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COMPANY PROFILE

State Bank of India (SBI) is that country s largest commercial bank. The governm ent-controlled bank--the Indian government maintains a stake of nearly 60 per ce nt in SBI through the central Reserve Bank of India--also operates the world s l argest branch network, with more than 16,000 branch offices throughout India, st affed by nearly 2,00,299 employees. SBI is also present worldwide, with seven in ternational subsidiaries in the United States, Canada, Nepal, Bhutan, Nigeria, M auritius, and the United Kingdom, and more than 50 branch offices in 30 countrie s. Long an arm of the Indian government s infrastructure, agricultural, and indu strial development policies, SBI has been forced to revamp its operations since competition was introduced into the country s commercial banking system. As part of that effort, SBI has been rolling out its own network of automated teller ma chines, as well as developing anytime-anywhere banking services through Internet and other technologies. SBI also has taken advantage of the deregulation of the Indian banking sector to enter the bank assurance, assets management, and secur ities brokering sectors. In addition, SBI has been working on reigning in its br anch network, reducing its payroll, and strengthening its loan portfolio. In 201 0, SBI reported revenue of $29.728 billion and total assets of $322.077 billion. Colonial Banking Origins in the 19th Century The establishment of the British colonial government in India brought with it ca lls for the formation of a Western-style banking system, if only to serve the ne eds and interests of the British imperial government and of the European trading houses doing business there. The creation of a national banking system began at the beginning of the 19th century. The first component of what was later to bec ome the State Bank of India was created in 1806, in Calcutta. Called the Bank of Calcutta, it was also the country s first joint stock company. Originally estab lished to serve the city s interests, the bank was granted a charter to serve al l of Bengal in 1809, becoming the Bank of Bengal. The introduction of Western-st yle banking instituted deposit savings accounts and investment services. The Ban k of Bengal also received the right to issue its own notes, which became legal c urrency within the Bengali region. This right enabled the bank to establish a so lid financial foundation, building an interest-free capital base. The spread of colonial influence also extended the scope of government and comme rcial financial influence. Toward the middle of the century, the imperial govern ment created two more regional banks. The Bank of Bombay was created in 1840, an d was soon joined by the Bank of Madras in 1843. Together with the Bank of Benga l, they became known as the "presidency" banks. All three banks were operated as joint stock companies, with the imperial government holding a one-fifth share o f each bank. The remaining shares were sold to private subscribers and, typicall y, were claimed by the Western European trading firms. These firms were represen ted on each bank s board of directors, which was presided over by a nominee from the government. While the banks performed typical banking functions, for both t he Western firms and population and members of Indian society, their main role w as to act as a lever for raising loan capital, as well as help stabilize governm ent securities. The charters backing the establishment of the presidency banks g ranted them the right to establish branch offices. Into the second half of the c entury, however, the banks remained single-office concerns. It was only after th e passage of the Paper Currency Act in 1861 that the banks began their first exp ansion effort. That legislation had taken away the presidency banks authority t o issue currency, instead placing the issuing of paper currency under direct con trol of the British government in India, starting in 1862.

The same legislation included two key features that stimulated the growth of a n ational banking network. On the one hand, the presidency banks were given the re sponsibility for the new currency s management and circulation. On the other, th e government agreed to transfer treasury capital backing the currency to the ban ks--and especially to their branch offices. This latter feature encouraged the t hree banks to begin building the country s first banking network. The three bank s then launched an expansion effort, establishing a system of branch offices, ag encies, and sub-agencies throughout the most populated regions of the Indian coa st, and into the inland areas as well. By the end of the 1870s, the three presid ency banks operated nearly 50 branches among them. Funding National Development in the 20th Century The rapid growth of the presidency banks came to an abrupt halt in 1876, when a new piece of legislation, the Presidency Banks Act, placed all three banks under a common charter--and a common set of restrictions. As part of the legislation, the British imperial government gave up its ownership stakes in the banks, alth ough they continued to provide a number of services to the government, and retai ned some of the government s treasury capital. The majority of that, however, wa s transferred to the three newly created Reserve Treasuries, located in Calcutta , Bombay, and Madras. The Reserve Treasuries continued to lend capital to the pr esidency banks, but on a more restrictive basis. The minimum balance now guarant eed under the Presidency Banks Act was applicable only to the banks central off ices. With branch offices no longer guaranteed a minimum balance backed by gover nment funds, the banks ended development of their networks. Only the Bank of Mad ras continued to grow for some time, supplied as it was by the influx of capital from development of trade among the region s port cities. The loss of the government-backed balances was soon compensated by India s rapid economic development at the end of the 19th century. The building of a national railroad network launched the country into a new era, seeing the rise of cash-c rop farming, a mining industry, and widespread industrial development. The three presidency banks took active roles in financing this development. The banks als o extended their range of services and operations in India, although for the tim e being was excluded from the foreign exchange market. By the beginning of the 20th century, India s banking industry boasted a host of new arrivals, and particularly foreign banks authorized to exchange currency. T he growth of the banking sector, and the development of indigenous banks, in tur n created a need for a larger "bankers bank." At the same time, the Indian gove rnment had outgrown its colonial background and now required a more centralized banking institution. These factors led to the decision to merge the three presid ency banks into a new, single and centralized banking institution, the Imperial Bank of India. Created in 1921, the Imperial Bank of India appeared to inaugurate a new era in India s history--culminating in its declaration of independence from the British Empire. The Imperial Bank took on the role of central bank for the Indian gover nment, while acting as a bankers bank for the growing Indian banking sector. At the same time, the Imperial Bank, which, despite its role in the government fin ancial structure remained independent of the government, carried on its own comm ercial banking operations. In 1926, a government commission recommended the creation of a true central bank . While some proposed converting the Imperial Bank into a central banking organi zation for the country, the commission rejected this idea and instead recommende d that the Imperial Bank be transformed into a purely commercial banking institu tion. The government took up the commission s recommendations, drafting a new bi ll in 1927. Passage of the new legislation did not occur until 1935, however, wi

th the creation of the Reserve Bank of India. That bank took over all central ba nking functions. The Imperial Bank then converted to full commercial status, which accordingly al lowed it to enter a number of banking areas, such as currency exchange and trust ee and estate management, from which it had previously been restricted. Despite the loss of its role as a government banking office, the Imperial Bank continued to provide banking services to the Reserve Bank, particularly in areas where th e Reserve Bank had not yet established offices. At the same time, the Imperial B ank retained its position as a bankers bank. In the early 1950s, the Imperial Bank grew steadily, dominating the Indian comme rcial banking industry. The bank continued to build up its assets and capital ba se, and also entered a new phase of national expansion. By the middle of the 195 0s, the Imperial Bank operated more than 170 branch offices, as well as 200 suboffices. Yet the bank, like most of the colonial government, focused primarily o n the country s urban regions. In 1951, the new government launched its first Five Year Plan, targeting in par ticular the development of the country s rural areas. The lack of a banking infr astructure in these regions led the government to develop a state-owned banking entity to fill the gap. As part of that process, the Imperial Bank was nationali zed and then integrated with other existing government-owned banking components. The result was the creation of the State Bank of India, or SBI, in 1955. The new state-owned bank now controlled more than one-fourth of India s total ba nking industry. That position was expanded at the end of the decade, when new le gislation was passed providing for the takeover by the State Bank of eight regio nally based, government-controlled banks. As such the Banks of Bikaner, Jaipur, Indore, Mysore, Patiala, Hyderabad, Saurashtra, and Travancore became subsidiari es of the State Bank. Following the 1963 merger of the Bikaner and Jaipur banks, their seven remaining subsidiaries were converted into associate banks. In the early 1960s, the State Bank s network already contained nearly 500 branch es and sub- offices, as well as the three original head offices inherited from t he presidency bank era. Yet the State Bank now began an era of expansion, acting as a motor for India s industrial and agricultural development that was to tran sform it into one of the world s largest financial networks. Indeed, by the earl y 1990s, the State Bank counted nearly 15,000 branches and offices throughout In dia, giving it the world s single largest branch network. SBI played an extremely important role in developing India s rural regions, prov iding the financing needed to modernize the country s agricultural industry and develop new irrigation methods and cattle breeding techniques, and backing the c reation of dairy farming, as well as pork and poultry industries. The bank also provided backing for the development of the country s infrastructure, particular ly on a local level, where it provided credit coverage and development assistanc e to villages. The nationalization of the banking sector itself, an event that o ccurred in 1969 under the government led by Indira Gandhi, gave SBI new prominen ce as the country s leading bank. Even as it played a primary role in the Indian government s industrial and agric ultural development policies, SBI continued to develop its commercial banking op erations. In 1972, for example, the bank began offering merchant banking service s. By the mid-1980s, the bank s merchant banking operations had grown sufficient ly to support the creation of a dedicated subsidiary, SBI Capital Markets, in 19 86. The following year, the company launched another subsidiary, SBI Home Financ e, in a collaboration with the Housing Development Finance Corporation. Then in the early 1990s, SBI added subsidiaries SBI Factors and Commercial Services, and then launched institutional investor services.

Competitor in the 21st Century SBI was allowed to dominate the Indian banking sector for more than two decades. In the early 1990s, the Indian government kicked off a series of reforms aimed at deregulating the banking and financial industries. SBI was now forced to brac e itself for the arrival of a new wave of competitors eager to enter the fast-gr owing Indian economy s commercial banking sector. Yet years as a government-run institution had left SBI bloated--the civil-servant status of its employees had encouraged its payroll to swell to more than 2,00,299. The bureaucratic nature o f the bank s management left little room for personal initiative, nor incentive for controlling costs. The bank also had been encouraged to increase its branch network, with little co ncern for profitability. As former Chairman Dipankar Baku told the Banker in the early 1990s: "In the aftermath of bank nationalisation everyone lost sight of t he fact that banks had to be profitable. Banking was more to do with social poli cy and perhaps that was relevant at the time. For the last two decades the empha sis was on physical expansion." Under Baku, SBI began retooling for the new competitive environment. In 1994, th e bank hired consulting group McKinsey & Co. to help it restructure its operatio ns. McKinsey then led SBI through a massive restructuring effort that lasted thr ough much of the decade and into the beginning of the next, an effort that helpe d SBI develop a new corporate culture focused more on profitability than on soci al and political policy. SBI also stepped up its international trade operations, such as foreign exchange trading, as well as corporate finance, export credit, and international banking . SBI had long been present overseas, operating some 134 offices in 34 countries, including full-fledged subsidiaries in the United Kingdom, the United States, an d elsewhere. In 1995 the bank set up a new subsidiary, SBI Commercial and Intern ational Bank Ltd., to back its corporate and international banking services. The bank also extended its international network into new markets such as Russia, C hina, and South Africa. Back home, in the meantime, SBI began addressing the technology gap that existed between it and its foreign-backed competitors. Into the 1990s, SBI had yet to e stablish an automated teller network; indeed, it had not even automated its info rmation systems. SBI responded by launching an ambitious technology drive, rolli ng out its own ATM network, then teaming up with GE Capital to issue its own cre dit card. In the early 2000s, the bank began cross-linking its banking network w ith its ATM network and Internet and telephone access, rolling out "anytime, any where" banking access. By 2002, the bank had succeeded in networking its 3,000 m ost profitable branches. The implementation of new technology helped the bank achieve strong profit gains into the early years of the new century. SBI also adopted new human resources a nd retirement policies, helping trim its payroll by some 20,000, almost entirely through voluntary retirement in a country where joblessness remained a decided problem. By the beginning of 2004, SBI appeared to be well on its way to meeting the chal lenges aggressor into new territories, launching its own line of bank assurance products, and also initiating securities brokering services. In the meantime, SB I continued its technology rollout, boosting the number of networked branches to more than 20,000 at the end of 2010. SBI promised to remain a central figure in the Indian banking sector as it entered its third century.

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ONLINE BANKING IN INDIAN SCENARIO