Acknowledgement

I would like to thank the respected Branch Manager of Federal Bank, for their

cooperation and assistance in conducting the survey over their Branch. I would also like

to thank the customers of the respective branch to share their views, opinions and

feedback on Online Banking.

I would like to thank my principal Dr.Aditi Dey for encouraging the students in doing the project work and providing all the necessary help.

I would also like to express my gratitude to my H.O.D Dr. Kajal Gandhi for allotting various supervisors to help us out with the project work and to make our work more easy.

Further, I would like to thank my supervisor, Mrs. Sutapa Roy, who motivated me to take up this challenging topic.

I would be failing in my duty if I fail to acknowledge the moral support I received from

my family members and friends.

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Introduction

Online banking (or Internet banking or E-banking) allows customers of a financial

institution to conduct financial transactions on a secure website operated by the

institution, which can be a retail or virtual bank, credit union or building society. It may

include of any transactions related to online usage.

The main purpose that banks have been serving since their inception is keeping our

money safe for us. While keeping our money safe, they also let us earn a certain amount

of interest on the money deposited with them. Traditional banks have been doing this,

and internet banks continue the same function. The only difference is in the way the

transactions are made.

To access a financial institution's online banking facility, a customer having personal

Internet access must register with the institution for the service, and set up some

password (under various names) for customer verification. The password for online

banking is normally not the same as for telephone banking. Financial institutions now

routinely allocate customer numbers (also under various names), whether or not

customers intend to access their online banking facility. Customer numbers are normally

not the same as account numbers, because a number of accounts can be linked to the one

customer number. The customer will link to the customer number any of those accounts

which the customer controls, which may be cheque, savings, loan, credit card and other

accounts. To access online banking, the customer would go to the financial institution's

website, and enter the online banking facility using the customer number and password.

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Some financial institutions have set up additional security steps for access, but there is no

consistency to the approach adopted.

Since bills are paid online, the need to writing checks, affix postage, and post the

payment in the mail is eliminated. Once the amount is entered and the payee is checked

off, the funds are automatically deducted from the payer's choice of account.

Background

Banking in India originated in the last decades of the 18th century. The IT revolution

influenced the Indian banking system a lot. The use of computers had led to existence of

online banking in India. The use of modern innovation and computerization of the

banking sector of India has increased many folds after the economic liberalization of

1991 as the country's banking sector has been exposed to the world's market. The Indian

banks were finding it hard to compete with the international banks in terms of the

customer service without the use of the information technology and computers. Internet

banking as a medium of delivery of banking services and as a strategic tool for business

development, has gained wide acceptance internationally and is fast catching up in India

with more and more banks entering the fray. In the light of this background, the objective

of this paper is to study the perceived usefulness of Internet Banking. This paper tries to

know the level of awareness among customers. This paper also tries to check the

perception of risks closely connected with Internet Banking and study the scope of

Internet Banking, so that companies can fulfill their duty in an appropriate and suitable

manner.

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Literature Review

Divya Singhal & V.Padhmanabhan (2008) this study has successfully examined the

major factors responsible for IB based on respondent’s perception on various internet

applications. This study also examined whether there is any relation with the

demographic variable (gender) & respondent’s perception about IB; whether the users &

non-users perceptions are different.

Neha Dixit & Dr. Saroj K.Datta (2010) investigated the factors which are affecting the

acceptance of i-banking services among adult customers and also indicate level of

concern regarding security and privacy issues in Indian context. The finding depicts

many factors like security &privacy, trust, innovativeness, familiarity, awareness level

increase the acceptance of i-banking services among Indian customers. The finding

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shows that in spite of their security and privacy concern, adult customers are willing to

adopt online banking if banks provide him necessary guidance.

Rahmath Safeena, Abdulla & Hema Date (2010) concluded that perceived usefulness,

perceived ease of use, consumer awareness and perceived risk are the important

determinants of online banking adoption. They concludes that majority of customers are

accepting online banking because of many favorable factors. Analysis concluded that

usefulness, ease of use of the system awareness about online banking and risks related to

it are the main perusing factors to accept online banking system. These factors have a

strong and positive effect on customers to accept online banking system.

David D. VanHoose (2009) this paper reviews what economists have learned about

internet banking. The paper begins by surveying evidence regarding the fundamental

motivations for banks to offer services via the internet and for their customers to utilize

the services. The paper next evaluates the current evidence on how internet banking has

affected the performances of traditional banking institutions. Furthermore, it examines

recent concerns about the possibility that deposits raised through internet channels are

potentially more susceptible to sudden withdrawals that could result in runs on banks.

The paper concludes by summarizing the main points and considering future directions

for research on this topic.

Balachandher (2001) concluded that the specific things that delight the customer vary

from industry to industry and from product to product. But most customers want the same

things.

1. Customers are interested in quality

2. They desire good and effective service delivery

3. They want flexibility so that the specific product or service be obtained

4. They covet value by not wanting to pay a price that exceeds the value received

from the product.

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The objective of the study

The objectives of this report are the following:-

1. To analyze the usefulness of Online Banking.

2. To know the level of awareness among customers.

3. To examine the reach of Online Banking.

4. To analyze the risk involved in Online Banking

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Research Methodology

Area of the study :- The scope of the study is restricted to the various districts of West

Bengal. For the collection of the primary data the study is confined to Kolkata region of

West Bengal state only.

Sampling Unit :- In this study, the sampling unit was the people of West Bengal.

Sample Size :- The sample size was so selected that it could be adequate enough to

represent the fair number of population, and also give the true picture. The total sample

size was restricted to 30.

Data Type :- In the present study the primary data has been collected through

questionnaire. Information available on web-portals have also been used.

Questionnaire Method :- The primary data was collected by administering structured

questionnaire to the people who have a bank account.

Nature of the Study :- The “Descriptive Research Study” has been used. The basic aim

is to gain familiarity and to achieve new insights along with describing the existing facts.

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Statistical Tools and Techniques :- Statistical tool of percentage analysis has been used

for the analysis of the data and to draw a meaningful conclusion there from.

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CHAPTER PLANNING

Henceforth, a brief history about Online Banking is going to be provided, its types and

their advantages and disadvantages

After this step, the data analysis and interpretation would be presented which came from

primary and secondary data collection.

After the completion of data analysis , there would be simple conclusions and

recommendations best on the given topic as far as my knowledge.

And in the completion of the project I have included the references and the questionare

prepared by me for the manager of The Federal Bank.

The design is as such:

Chapter1- Conceptual framework.

Chapter 2-Analysis and findings.

Chapter 3-Conclusion and Recommendation.

Chapter 4-Bibliography & Annexure

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CHAPTER-1

Online Banking –Indian Scenario

Compared to banks abroad, Indian banks offering online services still have a long way to

go. For online banking to reach a critical mass, there has to be sufficient number of users

and the sufficient infrastructure in place. The 'Infinity' product of ICICI Bank Ltd. gets

only about 30,000 hits per month, with around 3,000 transactions taking place on the Net

per month through this service. Though various security options like line encryption,

branch connection encryption, firewalls, digital certificates, automatic signoffs, random

pop-ups and disaster recovery sites are in place or are being looked at, there is as yet no

Certification Authority in India offering Public Key Infrastructure which is absolutely

necessary for online banking. The customer can only be assured of a secured conduit for

its online activities if an authority certifying digital signatures is in place. Users of

Internet Banking Services are required to fill up the application forms online and send a

copy of the same by mail or fax to the bank. A contractual agreement is entered into by

the customer with the bank for using the Internet banking services. In this way, personal

data in the applications forms is being held by the bank providing the service. The

contract details are often one-sided, with the bank having the absolute discretion to

amend or supplement any of the terms at any time. For these reasons domestic customers

for whom other access points such as ATMs, tele-banking, personal contact, etc. are

available, are often hesitant to use the Internet banking services offered by Indian banks.

Internet Banking, as an additional delivery channel, may, therefore, be attractive /

appealing as a value added service to domestic customers. Non-resident Indians for

whom it is expensive and time consuming to access their bank accounts maintained in

India find net banking very convenient and useful. The Internet is in the public domain

whereby geographical boundaries are eliminated. Cyber crimes are therefore difficult to

be identified and controlled. In order to promote Internet banking services, it is necessary

that the proper legal infrastructure is in place. Government has introduced the

Information Technology Bill, which has already been notified in October 2000. Section

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72 of the Information Technology Act, 2000 casts an obligation of confidentiality against

disclosure of any electronic record, register, correspondence and information, except for

certain purposes and violation of this provision is a criminal offence.

The Department of Telecommunications (DoT) is moving fast to make available

additional bandwidth, with the result that Internet access will become much faster in the

future. This is expected to give a fillip to Internet banking in India. The proposed setting

up of a Credit Information Bureau for collecting and sharing credit information on

borrowers of lending institutions online would give a fillip to electronic banking. The

recommendations of the Vasudevan Committee on Technological Upgradation of Banks

in India have also been circulated to banks for implementation. In this background, banks

are moving in for technological upgradation on a large scale. Internet banking is expected

to get a boost from such developments. Reserve Bank of India has taken the initiative for

facilitating real time funds transfer through the Real Time Gross Settlement (RTGS)

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System. Under the RTGS system, transmission, processing and settlements of the

instructions will be done on a continuous basis. Gross settlement in a real time mode

eliminates credit and liquidity risks. Any member of the system will be able to access it

through only one specified gateway in order to ensure rigorous access control measures at

the user level. Generic Architecture both domestic and cross border, aimed at providing

interconnectivity across banks has been accepted for implementation by RBI. Following a

reference made this year, in the Monetary and Credit Policy statement of the Governor,

banks have been advised to develop domestic generic model in their computerization

plans to ensure seamless integration. The above mentioned efforts would enable online

banking to become more secure and efficient. With the process of dematerialization of

shares having gained considerable ground in recent years, banks have assumed the role of

depository participants. In addition to customers' deposit accounts, they also maintain

demat accounts of their clients. Online trading in equities is being allowed by SEBI. This

is another area which banks are keen to get into. HDFC Bank Ltd., has tied up with about

25 equity brokerages for enabling third party transfer of funds and securities through its

business-to-business (B2B) portal, 'eNet'. Demat account holders with the bank can

receive securities directly from the brokers' accounts. The bank has extended its web

interface to the software vendors of National Stock Exchange through a tie-up with NSE.

IT – the InfoTech arm of the exchange. The bank functions as the payment bank for

enabling funds transfer.

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Advantages

Very convenient.  Online banking is very convenient and comfortable.  In the

comfort of ones home or offices, one can do whatever monetary transactions one

wishes to do with his bank.

Unlimited service day and night. The services and various features of banks are

always available seven days a week and 24 hours daily. The most interesting thing

here is that, everything can happen at just one click of mouse.

No time constraint. Online banking is also stress free because it never closes

unlike the traditional banking that has cut-off time.

Easy to access via PC. Using personal computer, one can easily do various

transactions with bank in view of business or any other personal or financial matters.

Easy way of payment. Bill payments can also be handled properly and smartly. 

Instead of waiting in queues, one can easily pay all the transactions at a click of a

button.

Smart.  Online banking is also ubiquitous or simply put smart.  This enables to do

troubleshooting regarding any problem that may arise in business.

Lower banking cost. With online banking facility one can reduce its bank

charges like cheque book charges etc.

Easy transaction. Another advantage is the speed of every transaction.  Online

transactions, compared to ATM or traditional banking, works faster.  Thus business

matters could benefit so much from this speed feature.

Banking online is both efficient and effective.  With just one secure site, all

financial transactions can be managed orderly.

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Disadvantages

First is the slow processing from the moment you entered a financial transaction

with your bank via the computer.  Usually the bank will require you to submit certain

documents like an identification card, signature and the like.  Not only will the bank

online require you to submit documents but also to provide special power of attorney

in cases where you want to do transactions together with your spouse.  A concrete

example is when you want to manage all your wealth and resources together as a

couple and you wish to view it online.  Certain technical procedures regarding online

banking may be taxing too and complicated.

Another disadvantage is the so-called learning curve.  This means, banking

online especially in locating the sites may be complicated and hard to find.

Another disadvantage is bank site changes.  If this occurs, the bank will require

you to re-enter all your information again and other related data.

Finally is the trust aspect.  Online banking should be entered very carefully if

you wish to enjoy your financial life.

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Indian Banking Industry - A Brief Profile

A large chunk of the Indian banking industry still belongs to the public sector banks

having the most extensive network of physical branches. These are followed by large

private banks and lastly by multinational banks (MNC) who have the smallest physical

network and therefore their online banking needs to be the most developed and able to

address user needs without requiring human intervention. The fact that most government

organisations have their payroll accounts with public sector banks contributes

significantly to the large customer bases of these banks. Traditional public sector banks

have existed for many years and have serviced diverse income groups. This has resulted

in their customer base being huge as well as belonging to a wider demographic

representation, given India’s heterogenous population as well. However, most of the

traditional customers prefer to bank with a ‘bank with a human touch’ and prefer public

sector banks as they form an emotional relationship with their bank personnel, which is

not really encouraged by private sector or multi-national banks.

- 15 -

Indian Banking Scenario Indian Internet Banking

Landscape

The new generation which has been banking for less than a decade prefers faster

transactions and more professional relationships as compared to the traditional customer.

For them, opening a bank account is incidental and connected to their direct deposit

salary accounts. The private sector bank has captured the corporates and IT sector as

compared to the public sector bank. As a result, banks in the public sector tend to have a

huge user base, but very few of their customers have the technology orientation or the

inclination to use electronic media for banking. Therefore, the awareness of customers of

public sector banks about online banking as an active banking tool is relatively lower. To

tap this type of user base that has an inherent barrier to and not an obvious need for

internet usage, just adding an internet banking channel to a bank’s lists of services may

not be enough of an incentive. A streamlined, simple and customer satisfaction oriented

approach to service novice users only can help banks achieve better internet banking

penetration.

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CHAPTER-2

Analysis and Discussion

This chapter deals with the results which came from analysis of primary and secondary

data.

OBJECTIVE_-To Analyze the Purpose of using Internet

The various Customers have used internet for different purposes the following graph

represents the statistics about those purposes. Majority of the peoples (44%) are using

internet for entertainment, 13% are use for banking 12% for shopping 11% for research

and 18% for combination of all.

Purpose No of Persons Percentage%

Banking

Shopping

4

3

13

12

Entertainment 13 44

Research 3 11

Combination 5 18

Others

Total

2 2

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Purpose of using Internet

Objective-To analyze the time since Internet is being used

The various Customers have used internet from different span of times and the following

chart represents the statistics about those time intervals.74% customers are using internet

from less than 3 years and 5% are using from 5-10 years.

Years No of Persons Percentage %

< 3 years

3<5 years

5<10 years

>10years

22

6

2

0

74

21

5

0

Total

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Time since using Internet

Objective- Analyze the Gender of respondents:-

The following graph represents that the majority of respondents are male (77%) and

females are 23%.

Particulars No of Persons Percentage%

Male 23 77

Female 7 23

Total

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Gender of respondents

Objective-To analyze the age group of respondents:-

The following graph represents that the majority of respondents are of age range 25-35

(i.e. 45%) and lower range is above 60.

Age Group No of Persons Percentage%

16-25 years 11 37

25-35 years 13 45

35-50 years 3 11

50-60 years 2 6

Above 60

years

Total

1 1

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Age range of respondents

Objective-To analyze the awareness about e-banking:-

The following graph represents that the majority of respondents are not aware about e-

banking (59%) on the other hand 41% respondents know about e-banking.

Awareness about

e-banking

No of Persons Percentage%

Yes 12 41

No

Total

18 59

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Awareness about e-banking

E-banking saves time:-

The following graph represents that 100% respondent said e-banking saves the time.

E-banking saves time

E-banking has increased the pace of transactions:-

The following graph represents that 92% respondent said e-banking saves the time while

other 8% said no.

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E-banking has increased the pace of transactions

E-banking has makes your life easy:-

The following graph represents that 100% respondent said e-banking made the life very

easy.

E-banking has makes your life easy

Objective- To analyze the Satisfaction from E-banking facilities from their banks:-

The following graph represents that 87% respondent said they are satisfied from their

banks regarding e-banking facilities while other 13% said not satisfied.

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Particulars No of persons Percentage

Satisfied 26 87

Dissatisfied 4 13

Total

Satisfaction from E-banking facilities from their banks

CHAPTER-3

Summary of the Observations

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While investigating all the variables and the responses by consumers, this study reveals

that the perception of the consumers can be changed and can be made positive by

awareness program, friendly usage, fewer charges, proper security, and the best response

to the services offered.

In case of the consumers who don’t use Internet banking services, having all facilities at

their disposal, technology was not the biggest issue. The first thing that all bankers should

concern about is the requirement of awareness. Even though these people are inclined

towards the manual banking, these can be turned to potential customers, it is well proven

thing, which says the surrounding influences the individual’s behaviour or in our region

only environment that surrounds the public determines the behaviour and decisions of the

individuals. So if a consumer sees most of his colleagues or friends who surround

him/her using Internet banking then it may influence his/her decision to follow Internet

banking option.

Limitations of Study

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1. The present study is based on the data collected from sample areas of Kolkata only and

the result may vary from other states or the national average.

2. The result of this study shows that perceived ease of usefulness, reach of Online

Banking, risks associated with this and customers attitude are the important determinants

of online banking adoption.

3. The replication of this study on a wider scale with more Online Banking customers and

with different national cultures is essential for the further generalization of the findings.

4. The time limit is also an important factor which acts as a barrier in the whole research

process. The shortage of time period forces to do research on small size of sample.

5. Most of the respondents due to lack of awareness and security factor fear to use Online

Banking, so fair conclusion is not done as per the responses of few ones only. So there is

scope for further investigation at larger scale & by taking more respondents who use

Online Banking.

- 26 -

Suggestions

This study confirmed that one way to shift people from non users segment to users

segment can be educating them and making them aware about the services provided and

benefits of using these services. If banks arrange workshops in Financial Institutions and

other places, where knowledge about the benefits of Online Banking and training is

imparted to use Online Banking and also open Internet Bank Accounts simultaneously

then this will act as boon for Banks. By making Online Banking operations more easy,

the Banks can enhance the level of users & can also give more satisfaction to existing

ones as they face numerous problems while using Online Banking. The security for their

funds is the main factor due to which people fear to open an Internet Bank Account.

Thus, by giving them assurance that their funds are secured even if they resort to Online

Banking could assist Banks to increase their customer’s percentage. The Government can

also play a vital role in the promotion of Online Banking by making strict rules &

regulations in case any fraud arises. No doubt IT Act plays an important role but there is

need of more Government enrolment because it is good for Indian economy to accelerate

their growth rate.

If people associate themselves with technology & its upcoming features, they can avail

lots of benefits from new technology and it can play significant role in the promotion of

Online Banking. It is well proved that activities in which people show keen interest, they

use those activities at their best as compared to those where pumping is done to do so.

The instructions to use Online Banking services should be made available in different

languages so that it will be more convenient for the customers to use Online Banking

services.

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CHAPTER-4

BibliographyTo complete this project report I have taken help of the following :-

Rajesh Kumar Srivastava; “Customer’s Perception on Usage of Internet

Banking” Innovative Marketing, volume 3; issue 4, 2007.

Dr.A Vinaya Gamoorthy & K. Senthilumar; “Role of reach of Internet

Banking in India” Journal of Business Research. 2008.

Srivastava, Dr. Saurabh Internet Banking - A Global Way to Bank !

Divya Singhal & V.Padhmanabhan (2008), “The Journal of Nepalese

Business Studies Vol. V, No. 1, 2008, December Page: 101-111”

Neha Dixit & Dr. Saroj K.Datta (2010) “Acceptance of E-banking among

Adult Customers: An Empirical Investigation in India”, Journal of Internet

Banking and Commerce, Vol. 15 no. 2.

Rahmath Safeena, Hema Date & Abdullah Kammani; “Internet Banking

adoption in an emerging economy” International Arab Journal of E-

Technology, volume 2; no.1, January 2011.

David D. VanHoose (2009) “Two-sided markets, bank card payment

networks, and public policy, Networks Financial Institute Policy Brief No.

2008-PB-06, Indianapolis.”

Balachandher (2001) Electronic Banking in Malaysia: A Note on Evolution of

Services and Consumer Reactions, Multimedia University, Malaysia

www.indianmba.com/Faculty_Column/FC908/fc908.html

www.banknetindia.com

www.google.com

www.federal-bank.com

- 28 -

Annexure

QuestionnaireThe following questionnaire is prepared by me for the Manger of Federal bank of C R

Avenue.

1. In which year your bank started online services ?

 __________________ 

2. Does Your Competitiors also provides similar services with respect to you ?

○ Yes ○ No

3. Does your bank sell a product or service that is time-constrained? For example, do you work for a

financial firm offering online trading or payment services, or a travel or entertainment business offering

online booking ?

○ Yes ○ No

4. Are your customers prone to use the latest gadgets, such as PDAs, two-way pagers and

mobile phones ?

○ Yes ○ No

5. Does online banking provide more revenue than traditional banking ?

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○ Yes ○ No

6. What percentage of your customers using online banking services provided by you ?

 

0-20%_____ 21-40%_____ 41-60%_____ 61-80%_____ 81-100%_____

7. Does online banking provides more reach and frequency than traditional banking?

○ Yes ○ No

8. Does online banking helps you to retain your customer and helps in to discover new

customers ? 

○ Yes ○ No

9. Does the revenue coming from the online banking crosses the expenses made on online

banking ? 

○ Yes ○ No

10. Do you provide and kind of training programme to your employees so they promote more online

banking? 

○ Yes ○ No

11. What kind of services are you providing in online banking ?

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○ Online bill payment ○ Online fund/money transfer ○ Online Bookings

○ Online payroll direct deposit ○ Mobile Recharge ○ International Payments

○ Online Purchase

12. Do you advertise your bank on other websites ?

○ Yes ○ No

if yes which _______________________ 

 

13. How does your bank connected to internet ?

○ DSL ○ Dial-up ○ BroadBand ○ Cable

14. Is the security always updated to protect any theft or fraudulent ?

○ Yes ○ No

15. Did online banking done well according to you expectations?

○ Yes ○ No

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