Growth of E-Banking Modes in India-

A Comparative Study

Rajni Aggarwal1, Dr. Shallu Aggarwal2

1
Commerce, 2Mgt. and commerce, Baba Mastnath University, Asthal Bohar (Rohtak)
1
rajni1619802@gmail.com
2
shaluaggr@gmail.com

Abstract—Financial sector is essential for development of every country. Indian banking sector is also playing a vital role to enhance
financial growth and economic development of the country. IT revolution is experienced in every field of operations and banking
sector is not an exception to it. Banks are adopting various techniques and electronic modes to facilitate more quality service to their
customers. Technology in banking transactions is supported by banks as well as customers. A number of e-banking options such as
ATM, Debit/Credit cards, e-wallets, USSD, NEFT, RTGS, IMPS, and UPI and ECS etc. are available to complete the banking
transactions very conveniently and promptly. Government of India has taken various effective steps to promote electronic banking.
RBI has also set the objectives to raise cashless transactions and use of electric modes of banking in society. The present study is set
out to analyze the growth and trend of e-banking modes particularly related to the period of 2015 – 2019.This study has also included
challenges faced by Indian banks in adoption of e-banking system and recommendations are given to look out on the problems.

Keywords—e-banking modes, cashless transactions, trend of e-banking, RBI, CAGS

I. INTRODUCTION
In the present era technology is developing rapidly. In the changing technical environment it is really a big challenge for
every organization to maintain their status in the competitive market. In the banking industry new trends of banking in
electronic mode are developing day by day. In competitive world and increasing requirements of customers pressurize banks to
adopt the technology in providing various services. Internet banking is one of the most revolutionary services that provide
worldwide growth to the banking sector. E-banking is an emerging trend among the bank customers. In the present era for
more security and expert financial services customers are going for internet banking. E-Banking is a very vast term that
includes many services provided to customers and it is a developed form of traditional banking. Many options and facilities are
available in e-banking that save time and efforts of customers and also of bank employees/officials.
II. HISTORY OF E-BANKING IN INDIA
In India e-banking is recent origin. In early 1990s, non branch banking services were started. During 1991, foreign banks
entered in economy. The working of banks became more and more competitive and complicated. Various banking products
and services were in great demand. In that situation internet banking was required to deal with these problems. In 1997, ICICI
bank has firstly launched internet banking in India. In 1999, HDFC and Citibank followed with the use of internet banking. A
lot of initiatives were taken by public and private sector banks to develop online and cashless banking system. The Government
of India enacted the IT Act 2000 with effect from 17 October 2002 to regulate the electronic banking transactions. RBI
constituted an operating group for internet banking. This group divided other banking products in three levels:
A. Information only system
This system was developed to provide basic information‟s as branch location, different bank products, interest rates, loan
features, various deposit features via website. Various recent updates are provided by bank to email and personal contact is not
necessary for getting different valuable and required information‟s. By use of IOS there is no chance of any ambiguous
information and any unauthorized person can't involve in the banking procedure.

B. Electronic information transfer system

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 This system provides information to customer about recent products, account status, loan information, transaction details etc.
in „read only‟ format. Customer can access the information by using password. This is an automatic system in which
information can‟t directly receive through internet.
C. Fully electronic transactional system
The system of transaction allows bi-directional abilities. It contains technology covering networking, security,
computerization interbank payment and legal infrastructure. In this system transactions can be submitted by customer for
online update. The system requires a high degree of security.

III. REVIEW OF LITERATURE

[1]Studied and identified various e- banking services adopted by Indian banks and also studied the satisfaction level of
customers about e-banking. The study was based on secondary data collected from various books, journals, articles and
websites. After study it was revealed that e-banking service was more effective in urban areas in comparison to rural areas. It
was also found that less time and less cost of e-banking influenced customers to adopt it and its use was significantly related to
age, education, occupation and income of customer.

[2] Described about awareness about e-banking development. It also described various e-banking modes of online payments
and explained online payment gateway model. The comparative study between various online payment modes was also
conducted through previous review of literature. A comparison between online and traditional payment modes was also
described through bar charts. The parameter of study was credit cards, debit cards, mobile wallets, electronic cash etc. After
study it was found that various payment gateways were used according to need and situation. It could be fluctuated according
to the processor. It was also revealed that in present time digital payments were more popular than traditional payments.
[3]Studied about the usage of various mobile banking applications. Data was collected from about 500 respondents of different
age, cash limit, occupation etc. Online Google forms were used to collect information‟s from respondents and after study it was
revealed that about 50% respondents were using debit card but paytm was most popular digital payment mode as it was offered
with various services. Maximum users were private employees and students.
[4] Described about various e- banking modes. The author also analyzed the progress made by banking industry in India and
studied the various challenges faced by Indian banks in adoption of e-banking system. Data was taken from secondary sources
as journals, internet articles and reports of RBI. Various modes as ATM, NEFT, ECS (debit and credit) and ICC etc. were
taken as parameter of study. Many statistical and mathematical tools like simple growth rate, percentage, average etc. were
used to analyze the data. After study it was revealed that E-Banking was adopted by banks with tremendous efforts. E-Banking
was not only acceptable mode but developed as a preferred mode.
[5] Evaluated the awareness towards modernized services in banking sector. It also identified various e-banking services and
analyzed the opinion of customers regarding sustainability of modern banking services. Data was collected from 100 customers
and various secondary sources were also adopted to collect informations regarding e-banking options. After study it was
revealed that customers were less aware about e-banking modes but they preferred modern banking services. The study also
recommended educating and motivating the customers about e-banking options and awareness programs could be provided for
it.
[6] Identified the group of technical services in Indian banks. It studied the recent changes in IT based banking services and
analyzed the motivational factors influencing customer adaptation behavior. The study was based on secondary data and
information was collected from various articles, books and particularly from RBI website and reports. After study various
factors were found that positively influenced the behavior of customers. The identified factors were banking services, easy
access factors, reliability factors and security factors.
[7] Studied the changes the adaptation of e-banking post demonetization. It also studied the awareness and uses of e-banking in
India. The study was based on primary and secondary data. It was a descriptive research. To collect secondary data various
books, journals, websites etc were used and primary data was collected from 406 respondents of different age, income,
occupation etc. after study it was found that e-banking adoption rate was increasing drastically but in rural areas it was not
adopted properly due to internet illiteracy.
[8] studied the concept of e-banking, its advantages and disadvantages. This paper studied the comparative analysis on use of
ATM, net banking and mobile banking. Primary data was collected through observation and oral interview method and for
secondary information summary reports, books, circulars, RBI notifications and annual reports of banks were used. Scope of
study was Bank of Baroda, Central Bank of India, State Bank of India, Bank of Maharashtra and Union Bank of India in Satara

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region. After analysis it was revealed that in all nationalized bank internet banking, ATM, mobile banking services were
increased every year except Central Bank of India.
[9] Described about the concept of e-banking, its advantages, threats and various opportunities. Primary data was collected
through observation and secondary data was collected from various books, journals and websites of banks. The systems of
traditional and e-banking were compared by using 6c's model and found e-banking system more popular. It also explained
various advantages and threats of e-banking system.
[10] Described about the current status of e-banking in India. It studied the extent of internet banking services offered by
different banks and also examined the factors affecting use of internet banking. The study was based on secondary data. 82
bank websites were taken as source of information. Multiple regression analysis technique was adopted for analysis of data.
After analysis it was found that various e-banking services were provided by banks but private and foreign banks were
facilitating more services in comparison to public sector banks.

IV. OBJECTIVES OF THE STUDY

1. To identify the various modes and options provided by Indian banks.
2. To study the trend of growth of e-banking modes in India.
3. To study the challenges faced by Indian banks due to adoption of innovative techniques and some
recommendations are given to overcome these challenges.

V. RESEARCH METHODOLOGY
This paper is based on secondary informations. Informations are collected from various research papers, internet articles,
RBI website and reports of RBI of last 5 years. The period of study is 2015-2019. To study the trend & growth of various e-
banking modes annual growth rate (AGR) and compound annual growth rate (CAGR) is calculated. The parameters of study
are ATMs, debit/credit cards, e-wallets, NEFT, RTGS, IMPS, UPI etc. A comparative study is conducted to analyze the
progress made by Indian banks in cashless transactions.

VI. MODES AND OPTIONS AVAILABLE IN E-BANKING

A. Core banking services (CBS)
CBS uses a perfect IT infrastructure to maintain proper networking between different bank branches. In case of many
branches, customers can access only to their nearby branch but CBS makes it possible to access every branch without visiting
there. In CBS transactions are performed individually on branches but with a centralized server. So, information is available at
every branch at a single click. By using CBS all banks are able to control all the electronic services.
B. ATM(Automated teller machine)
ATM is an electronic machine that facilitates the customer to perform banking transactions without visiting Bank branch.
Many transactions such as withdraw and deposit cash, bill payments, access account, receiving transaction statements, change
personal identification number (PIN) and update the personal information. Most of the ATMs have two inputs and four output
parts. Input parts are card reader and keypad and output parts are screen, receipt printer, cash dispenser and the speaker.
C. Debit card/Credit card
Debit card is a plastic card that is used as alternative payment method at the time of purchases. It is like an electronic cheque
that is used to withdraw funds from account. Debit card can also used to withdraw money from ATM. PIN number is used to
secure the transaction done by debit card. Debit card can easily acquire from Bank by every customer and limit the transactions
up to the account balance. It is easily acceptable by third party and no extra charges are charged for debit card transactions. On
the other hand credit card is also a plastic card issued by bank to account holder for doing payments for goods and services
beyond the account balance. The issuing bank grants a limit of credit to the customer. It is like a cash advance to the customer.
It is used as a debit card for every payment but it allows the customer to revolve their account balance. The bank charges
interest for amount paid beyond the account balance. At the time of purchase card holder gives the consent to pay by sign on
the receipt with card details and pays the amount by using pin number. Electronic verification system provides information to
merchants about validity of card. Customer has to pay credit card bills on to me to take all advantages of credit card. Grace
days are also allowed to customers for payment of bills.

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D. BHIM App
Bhim app is used for „Bharat Interface for Money‟. It is an app that is based on UPI. National payment Corporation of India
has developed it. It is used for simple, easy and prompt transfers of funds from one bank account to another. By using this
application, funds can be transferred without loading the amount in any wallet. Debit card is linked with this app to start the
service. It is user friendly and easy interface of fund transfer.
E. NEFT(National electronic fund transfer)
It is an electronic fund transfer system that is maintained by RBI. It is established on November 2005. By use of NEFT
customer can be able to transfer funds from one bank to another in electronic way, but both banks must have NEFT facility. It
facilitates the fund transfer in half yearly batches. There is no maximum or minimum limit for fund transfer. Transfer is done
via an electronic message.
F. RTGS (Real time gross settlement)
Real time gross settlement is defined as real time means to execute the transaction at the time of receiving instructions rather
than later hours. Gross settlement stands for the settlement of funds transfer on the basis of individual instructions. Funds
transferred by RTGS are recorded by RBI so it is considered as final transfer and can't revoke by transferor. The minimum
limit of RTGS is rupees 200000 and no maximum limit is fixed for transfer. RTGS service is provided by bank in all working
days and working hours. In RTGS as per instructions of RBI the account of beneficiary must be credited within 30 minutes of
receiving message for funds transfer. So, it transfers the funds as soon as the remitting Bank deliver message for the transfer. It
is really a fast mode of fund transfer.
G. IMPS (Immediate payment service)
It is an instant real-time-interbank electronic fund transfer system in India. IMPS are regulated by National payment
Corporation of India (NPCI). This service is used through mobile phones and 24*7 services are available. This service is
available throughout the year and even on public holidays. IMPS are also done through internet banking using account number
and IFSC code. The maximum amount limit of transfer is rupees 200000.
H. USSD
USSD means unstructured supplementary service data. It is a protocol that is used to communicate with service provider‟s
computer by GSM cell phones. This can be used for prepaid services, mobile money services, menu based information services
for solving problems in network of phone. For USSD application request number is dialed and response displayed on phone
display or voice message sent by computer. This process is completed in few seconds and for solving other problems it is done
in few minutes.
I. ECS
ECS means electronic clearing services. It is an electronic mode of transfer of funds from one bank account to another by
using the services of clearing house.
ECS can be performed by two types:
 ECS debit: Amount collected from many accounts to one account as House Tax, water tax, bills etc.
 ECS credit: Amount transferred from one account to another account as dividend interest salary pension
accepted by use of ECS organizations can perform their bulk transactions without forget and missed the dates.
J. Electronic Fund transfer (EFT)
Fund transfer means to transfer amount from one account to another account of same bank or another bank. Customers can
transfer money to any other account situated in India and also outside India. Customers have to mention payee‟s account
number, name of bank and branch. Payments are also received from any other person directly in bank account of customers. It
is very secure and speedy way of transfer of money.
K. Paytm
Paytm is an E-Commerce company which provides services of payments, recharges and shopping. Paytm has a mobile
wallet which is loaded from user‟s bank account. Funds can be transferred from one Paytm wallet to other Paytm wallet. Paytm
also uses the UPI platform for providing service of fund transfer. Paytm Wallet service is paid if funds are transferred from
wallet to bank account.

VII. TRENDS OF E-BANKING MODES IN INDIA

This is a time of digital revolution. In all areas technology is developing tremendously. In banking sector computerization of
banks have completely changed the mode of banking activities. All banks whether public of private are providing a number of
4

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electronic banking services to their customers. Customers now have a lot of options in banking sector to complete their
transactions electronically. They can choose the particular option of E-banking according to the requirement and suitability. In
this changing scenario the place of cash in transactions is decreasing day by day and digital modes are in great demand. In
some areas digital transactions are not used properly and cash is preferred as mode of transactions, but still people are using
electronic form of banking in other ways as cash withdrawals from ATM, USSD services, NEFT & RTGS services etc.
A. ATM cash withdrawals
The cash withdrawals from ATM‟s in past 5 years is increasing year by year but due to digitization this growth is less than
cashless payment modes. It indicates the developing trend of E-banking. ATMs have grown at a low pace (CAGR of 4%
during the past 5 years).

Table 1- Cash withdrawals at ATM [11]

B. Trends of payment methods in India
The world pay global payment report 2018 explained about changing trends of Payment in India. Digital methods of
payments replaced cash. This report also observed that technology and digitization in Indian economy is tremendously
increasing. In last 5 years cash transactions are decreased in comparison to other modes of payments.

Table 2 Payment Methods in India [11]

C. Debit and Credit cards
The Issuance of debit and credit cards is increasing in outstanding manner. During last 5 years the issue of credit cards
increased about 150% and in the same duration a tremendous increase in issuance of debit cards from 5535 lakhs to more than
8000 lakhs. Due to increase in number of debit/credit cards, online payments and point of sale (POS) are also growing and
outstanding increase in digital transactions make banking more convenient.

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 Table 3- Debit and Credit cards outstanding[11]
D. Digital Payments Trends
The volume and value of cash payments can‟t be measured accurately. But, digital payments are properly recorded in
electronic way and can be accurately measured. There is a tremendous growth in digital payment modes over the last five
years. Various e-banking modes as IMPS, NEFT, RTGS, UPI, etc. have shown a rapid growth at a CAGR (compound annual
growth rate) of 65% and 42% in terms of volume and value respectively. Stored valued cards and digital wallets are showing
an increase with a CAGR of 96% and 78% in terms of volume and value respectively.

Table 4- Digital payments trend in India[11]

E. Card usage trends in India
The adoption of debit and credit cards shows the innovation of cashless transactions. During last 5 years card usage for
payment is increasing as well as the card usage for money withdrawn is decreasing. This trend shows the growth of technology
in banking sector. As per the analysis, payment made by debit and credit cards recorded a CAGR of 44% in terms of volume
and 40% in terms of value.

Table 5- card usage trend in India[11]

F. Position of number of ATM’s and POS in India
As per analysis position of number of ATMs and POS there were about 50 lakhs POS and 232000 ATMs in Dec.2019. The
number is increased in very high rate in case of POS and growth rate of number of ATMs is very low. The result shows an
outstanding growth of digitization. During last 5 years ATMs and POS across India have grown at a CAGR of 4% and 35%
respectively.
6

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 Table 6- No. of ATMs and POS[11]
G. Digital Payment System in India
Digital payments facilitate the customers to make their routine transactions in very convenient and hassle free manner. Due
to computerization of banks, customers have a lot of e-banking modes and options for doing banking transactions. E-banking
provides 24*7 banking service without visiting bank branch. In India many options such as NEFT, RTGS, NACH, IMPS etc.
are available for money transfer and UPI, Card payments, e-money, e-wallets etc. are used for routine payments. Table-7
described about individual growth of these options in terms of volume and Table-8 in terms of value. After analysis UPI and e-
money are showing outstanding growth in comparison to other modes.

Table 7- Digital payments in volume [11]

Table 8-Digital payments in value[11]

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 VIII. CHALLENGES FACED BY INDIAN BANKS IN ADOPTION OF E-BANKING
There are many variables which affect the adoption of internet banking like security, privacy, usability, ease, trust,
educational level, computer literacy, reliability, convenience, bank website design, social norms, internet knowledge and
availability etc. Many conceptual issues from the side of customers come across the practice of internet banking. Sometimes
demographic, gender and age factors make difference in the use of online banking. A lot of challenges as difficult for learners,
inconvenience, trust and responsibility, technical issues, complex transactions, security issues, complicated websites, virtual
assistance etc. have to face by banks in adoption of e-banking.
IX. RECOMMENDATIONS
Banks have to take initiative to aware customers as well as bank employees about internet banking. They can do it by
organizing workshops, seminars, training programs and by personal contact with non-users of internet banking and should
motivate them to use it for more convenience. Government has already taken many steps to promote and secure e-banking
transactions but it should invest more funds on infrastructure and technical assistance for more development of e-banking
sectors. E-banking services should be customized according to age, gender, occupation and area as all type of users can take
benefit of these services.
X. CONCLUSION
E-banking is very much growing concept in banking sector. Technological advancement in banking industry has given a
drastic positive turn to this sector. It enables the world wide access to make financial transactions at any time. E-banking is also
called „anytime‟ and „anywhere‟ banking. It facilitates multiple options for doing banking transactions in a few minutes and
even on a holiday. It saves time and efforts of the user and ensures accuracy of the transaction. User is now able to pay and
collect money with a single click from anywhere. In this era of globalization, global business transactions become possible
only due to e-banking. A number of options such as debit/credit cards, digital cash, mobile banking, EFT, UPI, e-wallet, NEFT,
RTGS, IMPS etc. are available for routine transactions as well as fund transfers. It provides convenience, mobility, speed,
security and ease of use to customers and also for banks. In the field of taxation and securities business, e-tax and DEMAT
account provide easy access to the transactions. As per the previous studies conducted by [2], [4], [8] among various modes of
e-banking ATM, Paytm and mobile banking were very popular and e-banking was preferred by most of the users . According
to RBI reports[11] the use of UPI, debit card payments and e-money is increasing highly in comparison to other e-banking
options every year. E-banking is now promoted by govt. and proper regulations are formed for security of financial
transactions. Due to all these advantages trend of e-banking in India is showing a lot of growth. It has replaced the cash rapidly
with digital transactions.
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