internet banking services: a study on its adoption, implementation and usage

Internet Banking Services: A Study on its Adoption, Implementation and Usage

MANAGEMENT THESIS

Final Report

“Internet Banking Services: A Study on its Adoption, Implementation and Usage”

(With reference to Mangalore region)

In the partial fulfillment of the requirements for the degree of

MASTERS IN BUSINESS ADMINISTRATION

(Affiliated to ICFAI University)

Submitted by

MS. DEEPALAXMI

7NBMG077

Under the guidance of

MS. CHITRANJALI

(FACULTY SUPERVISOR)

ICFAI NATIONAL COLLEGE

MANGALORE

2007-2009


DECLARATION

I hereby declare that this Management Thesis entitled “Internet Banking Services: A Study on its

Adoption, Implementation and Usage” is a bonafied work carried out in partial fulfillment for the

degree of ‘Masters in Business Administration’ from INC, Mangalore affiliated to ICFAI

University during the year 2007-09.

I have not submitted this work to any other University or Institution for the award of any

fellowship, degree, diploma or any other similar titles.

Date: Name and Enrollment Number:

Place: DEEPALAXMI

7NBMG077


ACKNOWLEDGEMENT

Any work of excellence requires inspiration, guidance and co-operation. In the Process of

completion of this project I had many hands guiding and motivating me.

First and foremost, I would like to express my gratitude to all those who helped me complete this

project report directly or otherwise. I would like to thank the INC, Mangalore for giving us the

opportunity to commence this project in the first instance. Also, I take the privilege to thank

Prof. K. Narayan (The Principal, INC Mangalore) for guiding me and encouraging me to take

this Project towards successful presentation.

I am deeply indebted to my Faculty Guide, Ms.Chitranjali whose help, stimulating suggestions

and encouragement helped us in drafting the Project Report. I thank her from the depth of my

heart for providing her constant support and guidance right from the proposal of the project till

the successful completion of the same. Also I thank Ms. Suraksha Korya, Faculty, INC

Mangalore, who enlightened me about various Quantitative techniques that could be used for my

project.

Again I would like to thank all the Managers of the Banks under study for the cooperation they

gave and the knowledge they shared with me during the conversation.

Also I take the pleasure to thank all the respondents who parted with some of their precious time

in filling the questionnaire scheduled with them or otherwise, showing their selfless and helpful

attitude.


Again I consider it my Right and Duty to thank my parents and family members who helped me

financially as well as in other manners to complete my thesis effectively.

I am also thankful to all the faculty guides of the INC for providing all the necessary information

without which it would not be possible to come out with this Report. Also, I would thank all my

friends who guided me in conducting my research effectively.

Deepalaxmi

7NBMG077


ABSTRACT/ EXECUTIVE SUMMARY

India is a Developing Economy. Banks are the major components of any Economy, specifically

the Indian economy. Banking Industry in India is undergoing rapid changes with innovative

products and innovative technologies making their steps in the Industry. Internet Banking has

attracted increased attention since the 2000’s. This has helped Banks reduce their Costs of

providing effective services to the customers, reduced the use of Manpower, and also increased

the efficiency of services.

This study is conducted to see how the Internet banking Service is adopted by Banks, what

considerations are made to implement the System and how it is accepted by the customers in

Mangalore. The study considered 108 samples from the Customers of various Banks operating in

Mangalore and 10 Banks operating in Mangalore was considered. To collect the data required,

questionnaire schedule method as well as questionnaire design method was used.

The study aims to find out the factors considered by the Banks before implementing the system

and the promotional tools adopted by the Bank to increase the usage of Internet banking Service

in Mangalore Region.


Table of Contents

ICFAI NATIONAL COLLEGE ..................................................................................................... 1

DECLARATION ............................................................................................................................ 2

ACKNOWLEDGEMENT .............................................................................................................. 3

ABSTRACT/ EXECUTIVE SUMMARY ..................................................................................... 5

INTRODUCTION .......................................................................................................................... 8

Needs of the Research: ........................................................................................................................ 9

Objectives of the Study: ..................................................................................................................... 10

Hypothesis of the Study: .................................................................................................................... 11

Significance of the Study: .................................................................................................................. 12

Limitations of the Study: ................................................................................................................... 12

LITERATURE REVIEW ............................................................................................................. 13

THE BANKING SECTOR IN INDIA ......................................................................................... 20

Structure of the organized banking sector in India: ............................................................................. 21

History of Banking in India: .............................................................................................................. 24

TECHNOLOGY IN BANKING................................................................................................... 31

Types of Internet Banking: ................................................................................................................ 38

Impact of the Information and Technology Act, 2000: ....................................................................... 39

Reasons for adopting the online banking: ........................................................................................... 39

The provisions for the offences committed: ........................................................................................ 40

Advantages of Internet Banking System:............................................................................................ 41

Disadvantages of Internet Banking System: ....................................................................................... 42

PROFILE OF THE TEN BANKS UNDER STUDY ................................................................... 46

RESEARCH METHODOLOGY.................................................................................................. 60

Population: ........................................................................................................................................ 60

Sample Size and Sampling Techniques: ............................................................................................. 60

Scope of the Study: ............................................................................................................................ 60

Data Source: ...................................................................................................................................... 60

Questionnaire Design: ....................................................................................................................... 61

Tools for Data Collection: ................................................................................................................. 61

Tools for Analysis: ............................................................................................................................ 61


RESEARCH RESULTS ............................................................................................................... 62

Statistical Analysis- Chi Square Analysis: .......................................................................................... 62

Hypothesis Testing I: ..................................................................................................................... 62

Hypothesis Testing II: .................................................................................................................... 64

Hypothesis Testing III: .................................................................................................................. 68

Analysis of Variance: ........................................................................................................................ 71

Hypothesis Testing IV: .................................................................................................................. 71

Likert Scaling: ................................................................................................................................... 76

Other Findings: .................................................................................................................................. 82

CONCLUSIONS........................................................................................................................... 98

APPENDIX ................................................................................................................................... 99

Annexure I: ....................................................................................................................................... 99

Annexure II: .................................................................................................................................... 103

Annexure III: ................................................................................................................................... 105

Annexure IV: ................................................................................................................................... 107

Annexure V: .................................................................................................................................... 108

REFERENCES ........................................................................................................................... 111


INTRODUCTION

India is a Developing Nation. In its initiatives of stepping towards becoming a ‘Developed

nation’ India needs to become efficient and effective in all aspects of its economy. Banks are the

main constituents of any economy, which help a nation move either towards success or failure in

the global scenario. Hence, it is very necessary for Indian Banks to improve their services and

provide competitive, effective, efficient and time saving services to its customers and thereby

help in creating a ‘Developed Nation’ in India.

Banks and financial institutions in India are in the process of Web-enabling their services in

order to offer better banking experience to its customers. The banking industry is facing

unprecedented competition from non-traditional banking institutions, which now offer banking

and financial services over the Internet. Information technology has immense untapped potential

in banking. Strengthening of information technology in banks could improve the effectiveness of

asset-liability management in banks. Building up of a related data-base on a real time basis

would enhance the forecasting of liquidity greatly even at the branch level. This could contribute

to enhancing the risk management capabilities of banks.

It is the new generation of banking in India. Most private and MNC banks have already setup an

elaborate Internet banking infrastructure. The Internet banking is changing the banking industry

and is having the major effects on banking relationships. In Tier I and II cities almost all are

already knowledgeable about Internet Banking Services and other innovations in Banking Sector.

But in Mangalore which is categorized as Tier III city, not many people are literate about the Net

Banking Services.


However, this innovation undertaken by the banks has provided them numerous benefits like:

� Greater reach to customers

� Quicker time to market

� Ability to introduce new products and services quickly and successfully

� Ability to understand its customers’ needs

� Customers are given access to information easily across any location

� Greater customer loyalty

Multi-national and private sector banks in India have been very successful in setting up Internet

banking services. They are much advanced in terms of the number of sites & their level of

development.

This study deals with the analysis of the factors affecting the Adoption of Internet banking

Services, the Implementation of the same and the usage of these services by the Customers. It

also analyses the effects of Internet banking Services on the Efficiency and Development of

Banks.

Needs of the Research:

The Internet Banking Services are of recent arrival in India and not many people are aware of the

Banking Services online. The needs of this research can be defined as follows:

� The Banking system has to consider many factors before implementing the Internet banking

services. So this study helps in understanding the factors affecting the adoption and

implementation of IBS.


� This also helps in understanding the usage of IBS in Mangalore and its effect on the

performance of the banks as compared to its performance before implementing the IBS.

� This throws light on the promotional tools adopted by the Banks in order to improve the

usage of IBS in Mangalore and assesses the effectiveness of the type of promotional tools

adopted by the Banks.

� As there is high growth of Information Technology usage in Banking Sector, this thesis helps

in understanding the uses of IBS in contributing to the effectiveness of services by the banks.

Objectives of the Study:

The Study mainly concentrates to find the following:

Primary Objective:

� To throw a light on the adoption, implementation and usage of Internet Banking services in

Mangalore.

Secondary Objectives:

� To know the factors affecting the adoption and Implementation of IBS.

� To analyze the promotional tools used by the banks to increase the usage of IBS in

Mangalore and its effectiveness.

� To know the role of IBS in improving the Image of the Bank and its services in the minds of

its Customers.

� To analyze the perceptions of the users of IBS regarding the performances of the Banks.


Hypothesis of the Study:

Chi- Square technique: The Study aims to test whether the usage of Internet Banking Services

depends on the perception regarding the security level in banking transactions, using Chi- Square

Analysis. The hypothesis considered for the same are:

Hypothesis I:

H0: The usage of Internet Banking Service by the Customer is independent of the perception of

Customer regarding Security level in Banking Transactions.

H1: The usage of Internet Banking Service by the Customer is dependent on the perception of


Hypothesis II:

H0: The usage of Internet Banking Service by the Customer is independent of the satisfaction

level of the Customers regarding the services offered by their Banks.

H1: The usage of Internet Banking Service by the Customer is dependent on the satisfaction


Hypothesis III:

H0: The usage of Internet Banking Service by the Customer is independent of the Number of

years of association with the Bank.

H1: The usage of Internet Banking Service by the Customer is dependent on the Number of



ANOVA technique: The Study uses ANOVA technique to find whether the maximum amount

transacted by different customers through their Bank’s Internet Banking Service are equal or not.

Hypothesis IV:

H0: The Maximum Amount transacted in each Bank is Equal

H1: The Maximum Amount transacted in each Bank is not equal

Significance of the Study:

The Study deals with the analysis of Adoption, Implementation and Usage of Internet Banking in

Mangalore region. The Scope of this study is limited to Mangalore region since the sample

selected for the study is from Mangalore. The results of the thesis are tested using various

statistical tools and hence it is proved realistic and significant limited to the time period and area

under study.

Limitations of the Study:

The Study had the following limitations during the data Collection stage:

� The Study needed to contact those people who were using Internet Banking Service of those

Banks under study. But the Managers of those banks refused to give the contact details of the

Customers using the Internet Banking Service in their Bank. Hence, the Questionnaires had

to be scheduled with other individuals who could be perceived as the users of Internet

Banking Service. Thus the data could not be collected as scheduled.


LITERATURE REVIEW

As given by Soutiman Das1, Banks and financial institutions in India are in the process of Web-

enabling their services in order to offer Internet banking to its customers. The RBI has drafted

certain Internet banking guidelines that have to be followed by banks about to venture into online

banking. Multi-national and private sector banks in India have been very successful in setting up

Internet banking services. This is mainly because these banks already had a robust automated

banking environment on which they could build the Internet banking infrastructure. Most multi-

national banks already have efficient Internet banking infrastructures running in other countries

which could be emulated in India. And the private banks, which are relatively young, did not

have to carry the burden of legacy systems. They merely invested in best-of-breed Internet

banking solutions from the start.

As given by this study, the nationalized banks have been unable to evolve as fast as most private

sector and MNC banks. As a result, in many organizations there may be a mix of automated

systems and manual systems, with both systems running parallel, and using half-baked

applications created by smaller vendors which run in certain departments. This creates a chaotic

scenario. Network management is a nightmare, the legacy systems may buckle any moment, new

users and locations keep coming up, and there are also issues of security and consolidation. An

usual nationalized Bank is affected by the following situation:

� A very large network of branches nationwide growing fast

� Lack of connectivity in remote locations

1 Gupta Soutiman Das, (February 2003): “Towards Online Banking”, Article, Network Magazine issue. Source: http://www.networkmagazineindia.com/200302/feature.shtml


� A very large base of customers increasing fast

� 75-80 percent automation in main branches with less automation in remote cities and smaller

branches

� Large amount of legacy equipment which doesn't integrate well with other systems

� Inefficient and outdated applications in some departments which are not flexible and don't

integrate well with other applications

� Slow-to-change mentality of an Indian customer who is used to dealing with a human teller

Web-enabling banks with such infrastructure and number of branches nationwide at one go is a

near-impossible task. However each of the challenges can be overcome with good planning,

phased implementation, and lots of grit on the part of the CIOs.

The document broadly categorizes levels of Internet banking services into three types:

� The basic level service in which the banks' websites disseminate information on different

products and services to customers. It may receive and reply to customers' queries through e-

mail.

� Simple transactional websites which allow customers to submit their instructions,

applications for different services, and queries on their account balances. They do not permit

any fund-based transactions on their accounts.

� The third level of Internet banking services offered by fully-transactional websites which

allow customers to operate on their accounts for transfer of funds, payment of different bills,

subscribing to other products of the bank, and to transact purchase and sale of securities.


The distinctive features of Internet banking as given by the document are:

� It removes the traditional geographical barriers as it could reach out to customers of different

countries/legal jurisdiction. This has raised the question of jurisdiction of law/supervisory

system to which such transactions should be subjected.

� It has added a new dimension to different kinds of risks traditionally associated with banking,

heightening some of them and throwing new risk control challenges.

� Security of banking transactions, validity of electronic contract, customers' privacy, etc.,

which have all along been concerns of both bankers and supervisors have assumed different

dimensions given that Internet is a public domain, not subject to control by any single

authority or group of users.

� It poses a strategic risk of loss of business to those banks who do not respond in time to this

new technology, being the efficient and cost effective delivery.

A general study conducted on the business case of Internet banking opines that security is

perhaps the biggest concern for any bank providing Internet banking. ‘Connectivity issues to

remote locations’ are also very important, but the need to be secure is far more pressing. The

document says that security issues include questions of adopting internationally accepted state-

of-the-art minimum technology standards for access control, encryption/decryption (minimum

key length), firewalls, verification of digital signature, and Public Key Infrastructure (PKI). The

key components of security concerns are: Authentication: The assurance of identity of the person

in a deal, Authorization: A party doing a transaction is authorized to do so, Privacy: The

confidentiality of data and information relating to any deal, Data integrity: Assurance that the

data has not been altered, and Non-repudiation: A party to the deal cannot deny that it originated


the communication or data. If these areas are not addressed, the bank may suffer operational risk,

reputational risk, legal risk, money laundering risk, and strategic risk.

Sanmugam2, in his study conducted for Malaysian Banks says that, the rapid changes in

Malaysian banking system have created a new dimension in the banking industry with the

emergence of Internet banking. The study also explores the consumer’s adoption behaviour

driven by the evolution of new, banking technology in Malaysia. The result implies that a social

norm effect dominates Internet banking adoption. This paper presents the profile of the internet

banking adopter in Malaysia based on a large scale survey. A logistic model is used to estimate

the probability of a bank customer adopting internet banking. The profile of the adopter is

constructed using demographic, social economic and technological capacity indicators. The

method is a very simple one, which can be used by financial institutions to gain better

understanding of their own internet banking customers.

As given by him, the Adoption of Internet banking is expected to be positively related to race,

gender, education, occupation, income, residential area, language, risk, computer literacy and

Internet access but negatively related to age, marital status and frequent visit to the bank branch.

All the variables have the expected signs, although not all the variables are statically significant.

Income of the respondents is positively correlated with adoption of Internet banking. The

relationship between the decision to adopt Internet banking and computer literacy is statistically

significant at ‘0.01’ level of significance. The result suggests that the log of odds for computer

literate respondents adopting Internet banking is 1.1204 times higher than respondents who are

computer illiterate. Those who are computer illiterate significantly have a lower likelihood to

2 Sanmugam, “Factors determining consumer adoption of Internet Banking”, Binary University College, Puchong, Selangor Malaysia, Source: http://ssrn.com/abstract=1021484


adopt Internet banking. Most of the data on the explanatory variables, such as the demographic

and social economic indicators can be readily found in the data base of customers. Equipped with

information on the customers who have already adopted internet banking or likely to do so,

banks will be able to identify the market segments that should be targeted. They can then

introduce banking products and services that better suit the needs and wants of the customers in

the segment.

The main objective of the research done in Thailand by Ms. Doungratana Sattabusaya3 was to

identify the key factors that determine success and move intention of Internet banking users

toward their actual behaviour. The research setting was in Bangkok, Thailand. The research

design was based on positivistic paradigm with a triangulation approach in the process of

collecting and analyzing data. The data was collected through 1,200 survey questionnaires and 9

semi-structured interviews of top managers and senior consultants of the participated banks who

involved with Internet banking projects. Its objective came from the fact that Internet banking

customers gain more benefits than the traditional banking customers as they can access 24-hours

services in everywhere. It is, however, revealed that Internet banking services have been

underused by the potential customers in spite of their availability. This demands the need for the

research to identify the key factors that determine success and move intention of Internet banking

users toward their actual behaviour. The relevant literatures have been reviewed and indicate that

The Theory of Planned Behaviour (TPB) (Azjen, 1985, 1991) and The Technology Acceptance

Model (TAM) (Davis, 1986) are crucial in predicting Internet banking users’ behaviour.

However, other variables such as antecedents and perceived creditability are needed to enhance

predicting power. In short, the primary methodology of this research is based on a triangulation

3 Miss Doungratana Sattabusaya, “Keys factors that determine Internet banking adoption in Thailand”, Cardiff Business School, Cardiff University, Aberconway Building, Colum Drive, Cardiff, CF10 3EU, UK, pgs.1-15.


approach. It consists of several processes which can be depicted in Figure 3. The first phase is a

survey questionnaire which is used to explore customers’ perceptions in adopting Internet

banking in general. This is enable exploration of a large number of people’s views however, the

depth of research is limited because the answers are predetermined and standardized. The second

phase, document analysis, helps to clarify understanding of matters raised from the survey. The

final phase, semi-structure interviews, is proceeded after data analysis. This helps to add richness

to the findings as it provides a wealth of rich data and reflects people’s opinions and attitudes

(Bryman, 2004).

As Given by Research and Markets4, made to help clients to evaluate the opportunities,

challenges and driving forces critical to the growth of banking industry in India, Investment by

banking sector in Information Technology is expected to increase at 18% in 2007 from last year.

The forecast given in this report is not based on a complex economic model but is intended as a

rough guide to the direction in which the market is likely to move. The future projection is done

on the basis of the current market scenario, past trends, and rules and regulations laid by the

regulator and supervisor of the financial system, Reserve Bank of India (RBI). The report

provides detailed overview of the Indian banking industry by contemplating and analyzing

various parameters like assets size, and income level. It helps clients to understand various

products available in the Indian banking industry and their future scope. The future forecast

discusses the future prospects of different arms of banking industry including rural banking,

bancassurance, financial cards, mobile banking, role of technology in rural banking, pension

funds, and the future course of action and strategies for pension fund industry to be taken at

macro level. Key Findings of the Report are as follows:

4 Research and Markets, (2007), “Opportunities in Indian banking Sector”, Research and Markets, Ireland, source: http://www.researchandmarkets.com/reports/564049/


• Pension fund industry in India grew at a CAGR of 122.44% from 1999-00 to 2006-07.

• Rural and semi-urban India is expected to account for 58.33% of the insurance sector by

2010.

• In terms of ownership, debit cards are more in number than credit cards but in terms of

transactions, credit cards are used more than debit cards.

• The ATM outlets in India increased at a CAGR of 28.09% from March 2006 to March

2007.

• Rural and semi-urban centers account for 66% of total bank branches.

• Indian Mutual Fund industry witnessed a growth of 49.88% from May 2006 to May

2007, and higher growth is recorded in closed ended schemes at 215.61%.

• Increasing number of millionaires in India is increasing the scope of Wealth Management

Services.

• Bankable households in India are anticipated to grow at a CAGR of 28.10% during 2007-

2011.

• Investment by banking sector in Information Technology is expected to increase at 18%

in 2007 from last year.


THE BANKING SECTOR IN INDIA

The banking system in India is significantly different from that of other Asian nations because of

the country’s unique geographic, social, and economic characteristics. India has a large

population and land size, a diverse culture, and extreme disparities in income, which are marked

among its regions. There are high levels of illiteracy among a large percentage of its population

but, at the same time, the country has a large reservoir of managerial and technologically

advanced talents. Between about 30 and 35 percent of the population resides in metro and urban

cities and the rest is spread in several semi-urban and rural centers. 5

The country’s economic policy framework combines socialistic and capitalistic features with a

heavy bias towards public sector investment. India has followed the path of growth-led exports

rather than the “export- led growth” of other Asian economies, with emphasis on self-reliance

through import substitution. These features are reflected in the structure, size, and diversity of

the country’s banking and financial sector. The banking system has had to serve the goals of

economic policies enunciated in successive five year development plans, particularly concerning

equitable income distribution, balanced regional economic growth, and the reduction and

elimination of private sector monopolies in trade and industry.

Banks are among the main participants of the financial system in India. A Bank is a financial

institution which primarily deals with the acceptance of deposits from the customers and lending

the same to those in need for the funds. Bank is defined as a person who carries on the business

of banking. Banks also perform certain activities which are ancillary to this business of accepting

5 Deolalkar G. H, (2000) “The Indian Banking Sector: On the Road to progress”, A Study of Financial Markets, Pgs. 60-68.


deposits and lending. Since Banking involves dealing directly with money, governments in most

countries regulate this sector rather stringently.

Banks provide almost all payment services by conducting checking or current accounts for

customers, paying cheques drawn by customers on the bank, and collecting cheques deposited to

customers' accounts. Banks also enable customer payments via other payment methods such as

telegraphic transfer. Banks have added new payment channels like Internet banking, Mobile

Banking, ATMs etc.

Banks' activities can be divided into retail banking, dealing directly with individuals; business

banking, providing services to mid-size business; corporate banking dealing with large business

entities; private banking, providing wealth management services to High Networth Individuals;

and investment banking, relates to helping customers raise funds in the Capital Markets and

advising on mergers and acquisitions. Banks are now moving towards Universal Banking, which

is a combination of commercial banking, investment banking and various other activities

including insurance.

Structure of the organized banking sector in India:

Banking Segment in India functions under the umbrella of Reserve Bank of India - the

regulatory, central bank. The major participants of the Indian financial system are the

commercial banks, the Financial Institutions (FIs), encompassing Term-lending Institutions,

Investment Institutions, Specialized Financial Institutions and the State-level Development

Banks, Non-Bank Financial Companies (NBFCs) and other market intermediaries such as the

Stock Brokers and Money-Lenders. The Commercial Banks and certain variants of NBFCs are


among the oldest of the market participants. The FIs, on the other hand, are relatively new

entities in the financial market place.

This segment broadly consists of:

1. Commercial Banks

2. Co-operative Banks

Commercial Banks: The commercial banking structure in India consists of:

1. Scheduled Commercial Banks

2. Unscheduled Banks

Scheduled commercial Banks constitute those banks which have been included in the Second

Schedule of Reserve Bank of India (RBI) Act, 1934. Some co-operative banks are scheduled

commercial banks although not all co-operative banks are. Being a part of the second schedule

confers some benefits to the bank in terms of access to accommodation by RBI during the times

of liquidity constraints. At the same time, however, this status also subjects the bank certain

conditions and obligation towards the reserve regulations of RBI.

For the purpose of assessment of performance of banks, the Reserve Bank of India categorizes

them as public sector banks, old private sector banks, new private sector banks and foreign

banks.

This sub sector can broadly be classified into:

1. Public sector

2. Private sector

3. Foreign banks


Public sector banks have either the Government of India or Reserve Bank of India as the

majority shareholder. About 92 percent of the country’s banking segment is under State control

while the balance comprises private sector and foreign banks. The public sector commercial

banks are divided into three categories:

1. State bank group (eight banks): This consists of the State Bank of India (SBI) and

Associate Banks of SBI. The Reserve Bank of India (RBI) owns the majority share of

SBI and some Associate Banks of SBI.1 SBI has 13 head offices governed each by a

board of directors under the supervision of a central board. The boards of directors and

their committees hold monthly meetings while the executive committee of each central

board meets every week.

2. Nationalized banks (19 banks): In 1969, the Government arranged the nationalization

of 14 scheduled commercial banks in order to expand the branch network, followed by

six more in 1980. A merger reduced the number from 20 to 19. Nationalized banks are

wholly owned by the Government, although some of them have made public issues. In

contrast to the state bank group, nationalized banks are centrally governed, i.e., by their

respective head offices. Thus, there is only one board for each nationalized bank and

meetings are less frequent (generally, once a month). The state bank group and

nationalized banks are together referred to as the public sector banks (PSBs).

3. Regional Rural Banks (RRBs): In 1975, the state bank group and nationalized banks

were required to sponsor and set up RRBs in partnership with individual states to provide

low-cost financing and credit facilities to the rural masses.

As on March 31, 2008, the PSBs accounted for 69.9 per cent of the aggregate assets and 72.7 per

cent of the aggregate advances of the Scheduled commercial banking system.


The Structure 6can be shown as follows (Number of banks is in brackets):

History of Banking in India:

Banking in India flourished even in Vedic times7. In the Rig Veda, there was a mention about

indebtedness and the earliest Dharma Shastras lay down rates of interest and regulations

governing debts and mortgages. References to money lending business are found in Manu

Smrithi too. The literature of Buddhist period, the Jatakas and archeological discoveries contain

evidences of existence of “Shreshtis” or Bankers. With the expansion of Trade and Commerce,

the concept of Banking gained importance. The handling of Banking gradually transcended from

individuals to groups and then to companies. With the Industrial revolution in 18th and 19th

Centuries, it attained more significant place in the area of Lending.

6 Source: http://en.wikipedia.org/wiki/Banking_in_India 7 Icfai University: (2006) “Commercial banking”, Icfai University Press, Hyderabad, pgs. 2-7.


Indian banking system, over the years has gone through various phases after establishment of

Reserve Bank of India in 1935 during the British rule, to function as Central Bank of the country.

The first bank in India, though conservative, was established in 1779. From 1779 till today, the

journey of Indian Banking System can be segregated into three distinct phases. They are as

mentioned below:

� Phase I: Early phase from 1786 to 1969 of Indian Banks

� Phase II: Nationalization of Indian Banks and up to 1991 prior to Indian banking sector

Reforms.

� Phase III: New phase of Indian Banking System with the advent of Indian Financial &

Banking Sector Reforms after 1991.

The Bank of Hindustan was the first Bank to be set up in India. The General Bank of India was

set up in the year 1786. The East India Company established Bank of Bengal (1809), Bank of

Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks.

These three banks were amalgamated in 1920 and Imperial Bank of India was established which

started as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank

was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in

1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of

India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up.

During the first phase the growth was very slow and banks also experienced periodic failures

between 1913 and 1948. There were approximately 1100 banks, mostly small. Reserve Bank of

India was vested with extensive powers for the supervision of banking in India as the Central

Banking Authority. During those day’s public has lesser confidence in the banks. As an


aftermath deposit mobilization was slow. Abreast of it the savings bank facility provided by the

Postal department was comparatively safer. Moreover, funds were largely given to traders.

Banking crisis during 1913 -1917 and failure of 588 banks in various States during the decade

ended 1949 underlined the need for regulating and controlling commercial banks. To streamline

the functioning and activities of commercial banks, the Government of India came up with The

Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per

amending Act of 1965 (Act No. 23 of 1965).

In 1955, Government of India nationalized Imperial Bank of India with extensive banking

facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of India

to act as the principal agent of RBI and to handle banking transactions of the Union and State

Governments all over the country. Seven banks forming subsidiary of State Bank of India was

nationalized in 1960. On 19th July, 1969, major process of nationalization was carried out. With

the effort of the then Prime Minister of India, Mrs. Indira Gandhi, 14 major commercial banks in

the country were nationalized.

Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with

seven more banks. This step brought 80% of the banking segment in India under Government

ownership. The following are the steps taken by the Government of India to Regulate Banking

Institutions in the Country:

� 1949: Enactment of Banking Regulation Act.

� 1955: Nationalization of State Bank of India.

� 1959: Nationalization of SBI subsidiaries.

� 1961: Insurance cover extended to deposits.


� 1969: Nationalization of 14 major banks.

� 1971: Creation of credit guarantee corporation.

� 1975: Creation of regional rural banks.

� 1980: Nationalization of seven banks with deposits over 200 core.

After the nationalization of banks, the branches of the public sector bank India rose to

approximately 800% in deposits and advances took a huge jump by 11,000%.

On 14 August 1991, under the chairmanship of M Narasimham, a committee was set up by his

name which worked for the liberalization of banking practices in all aspects relating to the

structure, organization, functions and procedures of the financial systems. Based on the

recommendations of the Committee, a comprehensive reform of the banking system was

introduced in 1992-93.

In 1993, in recognition of the need to introduce greater competition, new private sector banks

were allowed to be set up in the banking system. These new banks had to satisfy certain

requirements. Further, revised guidelines for entry of new banks in private sector were issued on

3 January 2001. The applications for setting up new banks received within the stipulated period

were scrutinized by RBI and “in principle” approvals were issued to two entities on 7 February

2002. Kotak Mahindra Bank Ltd, on satisfactory completion of other formalities, was granted

banking license on 6 February 2003. It was included in the Second Schedule of the Reserve Bank

of India Act, 1934 w.e.f 12 April 2003. License was granted to “Yes Bank Ltd” on 24 May 2004,

which was included in the second Schedule of the RBI Act, 1934 on 21 August 2004.

In consultation with Government of India, RBI issued detailed Guidelines on ownership and

governance in private sector banks on 28 February 2005.


As on 30th June, 1999, there were 300 scheduled banks in India having a total network of 64,918

branches. The Public Sector Banks (PSBs), which are the foundation of the Indian Banking

system account for more than 78 per cent of total banking industry assets. On the other hand the

Private Sector Banks in India are witnessing immense progress. They are leaders in Internet

banking, mobile banking, phone banking, ATMs. Indusland Bank was the first private bank to be

set up in India. IDBI, ING Vysya Bank, SBI Commercial and International Bank Ltd,

Dhanalakshmi Bank Ltd, Karur Vysya Bank Ltd, Bank of Rajasthan Ltd etc are some Private

Sector Banks. Banks from the Public Sector include Punjab National bank, Vijaya Bank, UCO

Bank, Oriental Bank, Allahabad Bank, Andhra Bank etc. ANZ Grindlays Bank, ABN-AMRO

Bank, American Express Bank Ltd, Citibank etc are some foreign banks operating in India.

The implementation of reforms has had an all round salutary impact on the financial health of the

banking system, as evidenced by the significant improvements in a number of prudential

parameters. The average capital adequacy ratio for the scheduled commercial banks, which was

around two per cent in 1997, had increased to 13.08 per cent as on March 31, 2008. The

improvement in the capital adequacy ratio has come about despite significant growth in the

aggregate asset of the banking system. This level of capital ratio in the Indian banking system

compares quite well with the banking system in many other countries – though the capital

adequacy of some of the banks in the developed countries has remained under considerable strain

in the recent past in the aftermath of the sub-prime crisis. In regard to the asset quality also, the

gross NPAs of the scheduled commercial banks, which were as high as 15.7 per cent at end-

March 1997, declined significantly to 2.4 per cent as at end-March 2008. The net NPAs of these

banks during the same period declined from 8.1 per cent to 1.08 per cent. These figures too

compare favourably with the international trends and have been driven by the improvements in


loan loss provisioning by the banks as also by the improved recovery climate enabled by the

legislative environment. What is noteworthy is that the NPA ratios have recorded remarkable

improvements despite progressive tightening of the asset classification norms by the RBI over

the years.

The reform measures have also resulted in an improvement in the profitability of banks. The

Return on Assets (RoA) of scheduled commercial banks increased from 0.4 per cent in the year

1991-92 to 0.99 per cent in 2007-08. The Indian banks would appear well placed in this regard

too vis-à-vis the broad range of RoA for the international banks. The banking sector reforms also

emphasized the need to improve productivity of the banks through appropriate rationalization

measures so as to reduce the operating cost and improve the profitability. A variety of initiatives

were taken by the banks, including adoption of modern technology, which has resulted in

improved productivity. The Business per Employee (BPE), as a measure of productivity, for the

public sector banks has registered considerable improvement. The BPE for the public sector

banks, which was Rs. 95 lakh in 1998-99, almost doubled to Rs. 188 lakh in 2002 and more than

re-doubled to Rs. 496 lakh in 2007.

It needs to be noted that the turnaround in the financial performance of the public sector banks,

pursuant to the banking sector reforms, has resulted in the market valuation of government

holdings in these banks far exceeding the initial recapitalization cost – which is something

unique to the Indian banking system. Thus, the recapitalization of banks by the government has

not been merely a “holding out” operation by the majority owner of the banks. The Indian

experience has shown that a strong, pragmatic and non-discriminatory regulatory framework

coupled with the market discipline effected through the listing of the equity shares and


operational autonomy provided to the banks, can have a significant positive impact on the

functioning of the public sector banks.

The banking system’s international isolation was also due to strict branch licensing controls on

foreign banks already operating in the country as well as entry restrictions facing new foreign

banks. A criterion of reciprocity is required for any Indian bank to open an office abroad. These

features have left the Indian banking sector with weaknesses and strengths. A big challenge

facing Indian banks is how, under the current ownership structure, to attain operational

efficiency suitable for modern financial intermediation. On the other hand, it has been relatively

easy for the public sector banks to recapitalize, given the increases in nonperforming assets

(NPAs), as their Government dominated ownership structure has reduced the conflicts of interest

that private banks would face.


TECHNOLOGY IN BANKING

“Banks are increasingly facing sliding margins and fierce competition. It is imperative to

increase volumes and reduce operational costs”- K. P. Padmakumar, Chairman, Federal Bank

The service industries are mostly customer driven and their survival in competitive environment

largely depends on quality of the service provided by them. In this context, quality of service

furnished by banking sector is very important and profitability of their business is closely

connected to the quality of service they render.

Banking Sector is facing tremendous competition since the entry of private players into the

sector. Just about a decade back this sector was limited to the Nationalized and co-operative

banks. Then came the multi-national banks, but these were confined to serving an elite few. The

deregulation of the banking industry coupled with the emergence of new technologies, are

enabling new competitors to enter the financial services market quickly and efficiently. The

Banking sector in India has experienced a rapid transformation. One could regard the past as the

'medieval ages' in the banking industry, wherein every branch of the same bank acted as an

independent information silo, and multi-channel banking (ATMs, Netbanking, tele-banking, etc)

was almost non-existent.

The two letters, which have changed the way businesses operate has been IT as an acronym for

“Information Technology8”. No other facilitating service has resulted in such large scale benefits

as Information Technology. IT has become such an essential ingredient of one’s way of life in

today’s world that it is difficult to imagine a world without IT. And no other sector has benefited

8 Address by Shri Vepa Kamesam, Chairman, IDRBT and Former Deputy Governor, RBI (2004) at the city Union Bank. Source: www.rbi.gov.in


to such a large extent as the financial sector, with the Banking sector in particular, from the

inroads made by IT.

The 90s saw the banking industry embracing technology in a massive way, led in particular by

the new private banks and MNC banks. Among these series of technology innovations, Internet

banking for the retail segment is a recent phenomenon that has generated a lot of interest in the

Indian banking industry. Private and foreign banks have been the early adopters while the PSU

banks are also beginning to latch on to the bandwagon.

With economic liberalization measures many private and foreign banking companies were

allowed to operate in the country. Favourable economic climate and a variety of other factors

such as demand for wide range of financial products from various sections of the society led to

mutually beneficial growth to the banking sector and economic growth process. This was

coincided by technology development in the banking operations.

Most of the banks have already started to feel the impact of the operations of the new banks in

the country. The single biggest advantage of these banks is the large scale deployment of IT in

their business endeavours. Their business processes have necessitated that IT should provide

solutions to various bottlenecks and problems and the result has been that IT has transcended

well as an integral part of their regular operations.

Throughout the country, the Internet Banking is in the nascent stage of development (only 50

banks are offering varied kind of Internet banking services). In general, these Internet sites offer

only the most basic services. Most of the Internet Banks are so called 'entry level' sites, offering

little more than company information and basic marketing materials. Only 8% offer 'advanced


transactions' such as online funds transfer, transactions & cash management services. Foreign &

Private banks are much advanced in terms of the number of sites & their level of development.

Information technology analyst firm, the Meta Group, recently reported that "financial

institutions who don't offer home banking by the year 2000 will become marginalized." By the

year of 2002, a large sophisticated and highly competitive Internet Banking Market will develop

which will be driven by:

� Demand side pressure due to increasing access to low cost electronic services.

� Emergence of open standards for banking functionality.

� Growing customer awareness and need of transparency.

� Global players in the fray

� Close integration of bank services with web based E-commerce or even disintermediation of

services through direct electronic payments (E- Cash).

� More convenient international transactions due to the fact that the Internet, along with

general deregulation trends eliminates geographic boundaries.

� Move from one stop shopping to 'Banking Portfolio' i.e. unbundled product purchases.

The top three concerns in the mind of every bank's CEO are as follows:

� Customer retention: Customer retention is one of the main priorities for banks today. With

the entry of new players and multiple channels, customers have become more discerning and

less 'loyal' to banks. Given the various options, it is now possible to open a new account

within minutes. Or for that matter shift accounts within a couple of hours. This makes it

imperative that banks provide best levels of service to ensure customer satisfaction.


� Cost pressures: Cost pressures come into play when banks are not able to afford the cost of

a certain service or initiative although they want to or need to have it in place. This is

primarily because the cost structure at the backend is not efficient enough to offer that kind

of service to the marketplace. As Gunit Chadha, MD & CEO, IDBI Bank puts it, "In today's

world of narrowing margins, a serious look at costs is definitely an imperative."

� Increased competition: The entry of new players into the banking space is leading to

increased competition. A recent example would be of Kotak Mahindra Finance Limited

(KMFL)—a financial services company focused on investment consulting, auto finance,

insurance, etc—morphing into Kotak Bank. Many other such players are waiting on the

sidelines.

Technology makes it easier for any company with the right channel infrastructure and money

reserves to get into banking. This has been one of the major reasons behind this kind of

competition from players who do not have a banking background.

Traditionally, banks used their retail outlets to provide services to the individual customer. Now

with ATMs, Net banking, and Tele-banking replacing traditional service channels, banks are

more focused on enhancing customer value through branches. They are using their existing

network of branches to advice on and sell new financial instruments like consumer loans, mutual

funds, etc. They are also using branches to inform and educate customers about other, more

efficient channels to conduct common transactions like cash withdrawal or balance checks.

The concept of online banking was first brought in when the Governor, Reserve Bank of India

appointed a Committee under Shri W.S.Saraf, Executive Director to look into technological

issues relating to payment system and to make recommendations for widening the use of modern


technology in the banking industry. The Saraf Committee recommended institution of Electronic

Funds Transfer Systems in India. It also reviewed the telecommunication system like use of

BANKNET and optimum utilization of SWIFT by the banks in India. The Shere Committee in

1995 had recommended framing of RBI (EFT System) Regulations under Section 58 of the

Reserve Bank of India Act 1934 (RBI Act), amendments to the RBI Act and to the Bankers'

Books Evidence Act, 1891 as short term measures and enacting of a few new Acts such as the

Electronic Funds Transfer Act, the Computer Misuse and Data Protection Act.

Today most of the Indian cities have networked banking facility as well as Internet banking

facility. A customer is empowered to operate his account from any part of the country. UTI

Bank, ICICI, HDFC Bank and Bank of Punjab are the main winners of the race.

The Internet banking is changing the banking industry and is having the major effects on banking

relationships. Even the Morgan Stanley Dean Witter Internet research emphasized that Web is

more important for retail financial services than for many other industries. Internet banking

involves use of Internet for delivery of banking products & services. It falls into four main

categories, from Level 1 - minimum functionality sites that offer only access to deposit account

data - to Level 4 sites - highly sophisticated offerings enabling integrated sales of additional

products and access to other financial services- such as investment and insurance.

In other words, a successful Internet banking solution offers the following services:

� Exceptional rates on Savings, CDs, and IRAs

� Checking with no monthly fee, free bill payment and rebates on ATM surcharges

� Credit cards with low rates

� Easy online applications for all accounts, including personal loans and mortgages


� 24 hour account access

� Quality customer service with personal attention

Banks are looking at newer ways to make a customer's banking experience more convenient,

efficient, and effective. They are using new technology tools and techniques to identify customer

needs and are offering tailor-made products to match them. Centralized operations and process

automation using core banking applications and IP-based networks improve efficiency and

productivity levels tremendously. Core banking applications help a bank to shift from 'branch

banking' to 'bank banking.' This basically means that a customer will be treated as a bank's

customer than just the customer of a particular branch which was the case earlier. Also, IP-based

networks lets a bank offer multiple services over the same network, resulting in costs savings.

CRM solutions, if implemented and integrated correctly, can help significantly in improving

customer satisfaction levels. Data warehousing can help in providing better transaction

experiences for customers over different transaction channels. This is made possible because

data warehousing helps bring all the transactions coming from different channels under a

common roof. Data mining helps banks analyze and measure customer transaction patterns and

behavior. This can help a lot in improving service levels and finding new business opportunities.

Risk Assessment is another area where technology can play a major role. "Using technology,

banks are able to better assess risks like interest risks, liquidity risks, FOREX risks, etc. The

other driver for using IT is that banks can reduce costs and reduce the time to market," says

Rangesh Nair, Country Manager-Financial Services Sector, and IBM.

The changes staring at the face of bankers all relate to the fundamental way of banking – which

is undergoing a rapid transformation in the world of today. It is widely recognized that the core


banking functions alone do not add to the bottom line of banks – value added services are slowly

but steadily emerging as a substantial opportunity for banks to exploit and customers would not

hesitate to use such services in view of the convenience they offer.

Technology holds the key to the future success of Indian Banks since it is Information

technology which has brought in a sea change in the way banking is being conducted today.

Concepts such as ‘Anywhere Banking’ or ‘Automated Teller Machines’ are but offshoots of

technology implementation by banks, as also Internet Banking and Mobile Banking. Such

innovations have had a positive impact on customer service – but the fundamental benefit that is

derived by banks relates to reduced costs of operation – such as in handling cash and in servicing

customers efficiently and accurately over the counters of branches.

With the advent of electronic banking, electronic funds transfer and other similar products, funds

transfers across different constituents is now easily possible – within time frames which would

have appeared impossible a few years ago. It is this area which is a big challenge to banks. The

most prominent challenge among the above relates to the concept of security. With the delivery

channels relating to funds based services – such as movement of funds electronically between

different accounts of customers – taking place with the use of technology, the requirements

relating to security also need to undergo metamorphosis at a rapid pace. Various concepts such

as digital signatures, certification, storage of information in a secure and tamper-proof manner

like smart cards, all assume significance and have to be part of the practices and procedures in

the day-to-day functioning of banks.

The Reserve Bank of India has taken upon itself the setting up of a safe, secure and efficient

communications network for the exclusive use of the banking sector, named as “INFINET”, i.e.


Indian Financial Network. The INFINET is one of the very few networks in the world which

uses the latest in technology and security called Public key Infrastructure – PKI, which is not

only robust but also well within the legal requirements of the Information Technology Act, 2000.

The INFINET provides for inter-bank communication – which implies that banks have to now

function as a group and at the same time competing with one another too. “Advanced Online

Authentication” provides enhanced and additional security for the online banking application.

Types of Internet Banking:

Currently, there are three basic kinds of Internet banking that are being employed in the

marketplace:

� Information: This is the most basic level of Internet banking. The bank has marketing

information about its products and services on a stand-alone server. This level of Internet

banking service can be provided by the bank itself or by sourcing it out. Since the server or

Web site may be vulnerable to alteration, appropriate controls must therefore be in place to

prevent unauthorized alterations to data in the server or web site.

� Communication: This type of Internet banking allows interaction between the bank’s

systems and the customer. It may be limited to electronic mail, account inquiry, loan

applications, or static file updates. The risk is higher with this configuration than with the

earlier system and therefore appropriate controls need to be in place to prevent, monitor, and

alert management of any unauthorized attempt to access bank’s internal network and

computer systems. Under this system the client makes a request to which the bank

subsequently responds.

� Transaction: Under this system of Internet banking customers are allowed to execute

transactions. Relative to the information and communication types of Internet banking, this


system possesses the highest level of risk architecture and must have the strongest controls.

Customer transactions can include accessing accounts, paying bills, transferring funds, etc.

These possibilities demand very stringent security.

The six primary drivers of Internet banking includes, in order of primacy are:

� Improve customer access

� Facilitate the offering of more services

� Increase customer loyalty

� Attract new customers

� Provide services offered by competitors

� Reduce customer attrition

Impact of the Information and Technology Act, 2000:

The information and technology act is an act to provide legal recognition for transactions carried

out by means of electronic data interchange and other means of electronic communication

commonly referred to as "electronic commerce".

Reasons for adopting the online banking:

The growth of online banking has been fuelled by broadband availability as well as secures

connections over the Internet. Many banks now offer some form of online banking activity,

whether it is checking bank balance, paying bills online or even simple cash transfer transactions.

As customers gain more confidence in carrying out secure transactions over the Internet,

vulnerabilities are present and can be exploited by cyber criminals to obtain a user's personal

banking details. In one of the latest developments, FSecure, a leading security provider for

Internet and mobile networks, has issued a warning against computer users of an upsurge in


attacks against banking sites, targeting personal user data. It started with software that was

capable of retrieving the data typed into the computer keyboard and then more complex

mechanisms arrived on the scene such as Phishing9 and Pharming10. .

A new concept of cell phone banking has taken over the Indians. Basix, an organization that

specializes in bringing micro loans and other financial services to India's poor, has teamed up

with Axis, an Indian commercial bank, to begin offering accounts to workers in Delhi's slums. Its

approach relies on a combination of high technology and old-fashioned shoe leather.

The main risk of online banking is the security concerns. For this the IT Act has a provision,

Section 3(2) which, provides for a particular asymmetric crypto system and 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.

The provisions for the offences committed:

Under the chapter IX Section 43, the punishments for the offences so caused are defined. By this

act under chapter X, Section 48 defines the establishment of a cyber appellate tribunal. But there

is one fundamental difficulty in punishing the cyber criminals. It is the matter of jurisdiction.

This is because any person who possesses a computer and an internet can commit this crime and

it is practically impossible to trace the person out. Even if the person can be traced, there is no

geographical border to bring him under the jurisdiction of a particular country. However the

banking regulatory body, RBI has issued a guideline dated 14th June, 2001, which discusses

9 Phishing typically involves fraudulent bulk e-mail messages that guide recipients to legitimate-looking but fake Web sites and try to get them to supply personal information like account passwords 10 Pharming tampers with the domain-name server system so that traffic to a Web site is secretly redirected to a different site altogether, even though the browser seems to be displaying the Web address you wanted to visit.


issues pertaining to his territorial jurisdiction within which the internet banking products can be

made available.

Advantages of Internet Banking System:

The benefits of Internet banking are plentiful as witnessed by the consequential reaction of a

tremendous rise in usage and application. The potential appears to be unlimited ranging from

virtual banks to e-cash.

� Reduced Transaction Costs: It has been repeated shown that as a delivery or distribution

channel, the Internet could bring a substantial cost advantage for banks. No doubt the ATM

is considerably cheaper than a teller, but even so, the Internet is nearly 3 times cheaper than

the ATM usage. In short, replacing a teller with an Internet channel should in theory, show a

10 fold increase in the distribution revenue for the bank. This reason alone should be

sufficient for banks to encourage this form of distribution channel.

� Perfect Information: Internet makes perfect information available to all market participants

by bringing about efficiencies in the search process. For buyers of banking services, there are

sites that aggregate information on product offerings from different providers at a single

location. By merely making information available to customers about multiple providers, the

Internet performs the function of dismantling the oligopoly of a few providers and bringing

about a structure favorable towards perfect competition.

� Perfect Competition: This is achieved by two means. The first is through the aggregation of

buyers and sellers and also through the provision of a search function platform. The second is

by bringing about efficiency in determining price that is enabled by the online auction

mechanism which makes pricing transparent and also makes it dynamic since it is driven by

near perfect market conditions of demand and supply. Similarly, by creating competition


among the providers of capital, the Internet helps companies raise money at much finer

spreads. Also banks using the Internet have pioneered the use of online auction to price

Initial Public Offerings (IPOs). In this manner market forces are given greater prominence

thus ensuring conditions for perfect or near perfect competition.

Disadvantages of Internet Banking System:

There are always two sides to a coin. Similarly Internet banking too has a ‘bane’ side to it. The

bane lies in its inexorable slide towards higher risk from various facets of bank operations. Risk

is the potential that unexpected events may have an adverse impact on the banks earnings.

Internet banking risks consists of risk associated with credit, interest rate, transaction, etc. These

risks are not mutually exclusive but invariably all of these are associated with Internet banking.

� Credit Risk: Credit risk is the risk to earning and eventually capital, arising from a

borrower’s failure to meet the terms of a credit contract with the bank or otherwise to

perform as agreed. It is found in all activities where success depends on counterparty, issuer,

or borrower performance. It arises any time bank findings are extended, committed, invested,

or otherwise exposed through actual or implied contractual agreements, whether on or off the

bank’s balance sheet..

� Interest Rate Risk: Interest rate risk is the risk to earnings arising from movements in

interest rates. From an economic perspective, a bank focuses on the sensitivity of the value of

its assets, liabilities and revenues to changes in interest rates. Interest rate risk arises from

differences between the timing of rate changes and the timing of cash flows (repricing risk);

from changing rate relationships among different yield curves affecting bank activities (basis

risk); from changing rate relationships across the spectrum of maturities (yield curve risk);


and from interest-related options embedded in bank products (options risk) (Comptroller’s

Handbook, 1999).

� Liquidity Risk: Liquidity risk is the uncertainty arising from a bank’s inability to meet its

obligations when they are due, without incurring unacceptable losses. Liquidity risk includes

the inability to manage unplanned changes in market conditions affecting the ability of the

bank to liquidate assets quickly and with minimal loss in value.

� Transaction Risk: Transaction risk is the current and prospective risk to earnings and capital

arising from fraud, error, the inability to deliver products or services, the failure to maintain a

competitive position and services, and the inability to manage information properly. This risk

is evident in each product and service offered and encompasses product development and

delivery, transaction processing, systems development, computing systems, complexity of

products and services, and the internal control environment (Comptroller’s Handbook, 1999).

A high level of transaction risk may exist with Internet banking products, particularly if those

lines of business are not adequately planned, implemented, and monitored.

� Total Reliability Risk: As with most other Internet ventures, an exclusive reliance on virtual

channels is probably not a very wise move. A strategy of combining brick and mortar with

click and avatar is probably more viable. There are transactions such as balance enquiry that

are ideally suited for the Internet. But transactions such as working capital loan applications

are more detailed and personal discussions may be necessary. In the latter, the absence of a

physical channel is a problem.

Internet banking is on the rise. When viewed as another channel, its benefits are modest.

However, when integrated with other channels, Internet banking becomes a powerful tool for

improving customer satisfaction and increasing cross-selling opportunities. But at the same time


banks must keep in mind that, every electronic channel including the Internet has its short falls

which can have major consequences. Keeping track of the ever changing banking industry and

the latest update in Internet technology, banks need to equip themselves for the competition.

Even though there are enormous opportunities and virtual banks are on the rise ‘brick and

mortar’ banks and transactions should not be neglected or relegated to the sidelines.

However, Indian internet banking faces following challenges11:

� Proper understanding of the customer - i.e. proper identification of their needs and wants.

For this a massive survey must be undertaken may be in collaboration with other banks.

� There is need for transparency in offering services as customers awareness has grown

considerably.

� Breach of privacy: online transactions enter straightaway into the records revealing the

identity of customer. Thus black money cannot be transferred with ease.

� Bandwidth: Though companies claim to offer good speed and high bandwidth, still there are

problems in accessing high speed on net. Internet banking can go high only on the wings of

proper infrastructure comprising telecommunications and bandwidth.

� Computer literacy in India is still very low and that is a barrier in fast acceptance of Internet

banking.

� The mindset of the Indian customer need to be changed.

� Customer has to be protected against being "net-jacked" i.e. he needs to be protected from

fraud. Threats19 can be

� Cracking login and passwords is a common way of fiddling with the data.

11 Srivastava Saurabh, (2008), “Internet Banking: A Global way to Bank.”, BBS Institute of Management and Technology. Source: http://www.indianmba.com/Faculty_Column/FC908/fc908.html


� Denial of services: Directing millions of queries can block computer network.

� Data Diddling: Data can be modified in an unauthorized manner. A customer can therefore

receive bills of higher amounts than the actual transactions

� Session hijacking: Hijackers become unauthorized intermediaries between the server and the

client; they can then hijack the data and prevent it from reaching the destination.


PROFILE OF THE TEN BANKS UNDER STUDY

1. State Bank of India:

State Bank of India (SBI) is the leading commercial bank in India, offering services such as retail

banking, commercial banking, international banking and treasury operations. The bank is an

integral part of State Bank Group, which includes seven other banks and offers additional

services such as mutual funds and insurance. The bank primarily operates in India. It is

headquartered in Mumbai, India and employs about 179,205 people.

The company recorded revenues of INR902,188.1 million (approximately $22,410.4 million) in

the financial year ended March 2008 (FY2008), an increase of 34.4% over 2007. The operating

profit of the company was INR183,315.4 million (approximately $4,553.6 million) in the

financial year 2008, an increase of 27.4% over 2007. The net profit was INR89, 606.1 million

(approximately $2,225.8 million) in the financial year 2008, an increase of 40.8% over 2007.

The company primarily operates through four business units, treasury, wholesale banking, mid

corporate group, retail banking and other banking business.

The retail banking comprises the bank's national banking group (NBG), which consists of

business groups, personal banking, small & medium enterprise (SME), government banking. The

bank's wholesale banking group consists of strategic business units, corporate accounts group

(CAG), project finance & leasing SBU, stressed assets management group and mid corporate

group. The mid corporate group (MCG) has been serving the needs of mid corporate units

through relationship management and quicker credit processing. 695 new mid corporate clients

were added to the MCG during the year 2007.


In keeping with its integrated approach to all treasury activities in various markets in different

time zones i.e., forex, interest rates, bullion, equity and alternative assets, the bank redesignated

its treasury operations into ‘global markets’. The other banking businesses include rural business

unit serves the financial needs of farmers through different schemes such as adoption of villages

for overall development and economic upliftment and so far 237 villages have been adopted and

self help groups. International banking has a network of 84 overseas offices spread over 32

countries.

The bank offers a range of services such as SBI foreign travel cards, broking services, ATM

services, internet banking, bill payments, gift cheques, safe deposit lockers and foreign inward

remittances. The bank has a factoring services arm under the name SBI Factors and Commercial

Services and Global Trade Finance. Through its subsidiary, SBI Capital Markets, it offers

merchant banking services throughout the country. SBI offers life insurance association with

BNP Paribas through its subsidiary SBI Life Insurance Company.

SBI is the largest (public sector scheduled commercial bank) bank in India on several parameters

(number of branches/offices, employees, deposits, loans/advances, assets, and profits etc). The

bank has over 10,186 domestic branches and it offers more than 8,460 ATMs (Automated Teller

Machines). In fact, SBI has the second largest bank branch network in the world. The dominance

of the bank in the Indian banking sector is evident from the fact that it commands around 16.11%

market share in total deposits and 16% in advances.

Online cash transactions (E-transactions) are gaining popularity, with more people preferring to

send and receive money electronically. As more bank branches get interconnected through core

banking systems, settlements through the electronic systems have almost tripled since April


2007. According to RBI’s data, the number of transactions settled through electronic funds

transfer (EFT) and the national electronics funds transfer system (NEFT) increased to 1.92

million a month in June 2008 from 0.7 million in April 2007, although the value of transactions

have not picked up at the same pace. The total amount settled electronically was INR121.6

billion in April 2007. It went up to INR200.7 billion by May 2008. The substantially lower costs

and ease of transaction have been major factors for the increased adoption of electronic fund

transfers. The value of these transactions has also grown considerably over the past year.

RBI has been promoting the use of electronic funds transfer systems for a while now, and it has

made it mandatory for all payments between entities it regulates to be done electronically. In

fact, all branches that are on the core-banking network are equipped to carry out NEFT

transactions. Since, SBI has the country's largest network of NEFT-enabled branches, it is

expected that SBI would gain maximum (in comparison to other banks) from the increasing

adoption of E-transactions12.

2. Canara Bank Ltd.:

Canara Bank 13was founded by Shri Ammembal Subba Rao Pai, a great visionary and

philanthropist, in July 1906, at Mangalore, then a small port in Karnataka. The Bank has gone

through the various phases of its growth trajectory over hundred years of its existence. Growth of

Canara Bank was phenomenal, especially after nationalization in the year 1969, attaining the

status of a national level player in terms of geographical reach and clientele segments. Eighties

was characterized by business diversification for the Bank. In June 2006, the Bank completed a

century of operation in the Indian banking industry. The eventful journey of the Bank was strewn

12 Datamonitor, (2008) “Company Profile State Bank of India”, source: www.datamonitor.com 13 Datamonitor, (2008) “Company Profile Canara bank Ltd.”, source: www.datamonitor.com


with many memorable milestones. Today, Canara Bank occupies a premier position in the

comity of Indian banks. With an unbroken record of profits since its inception, Canara Bank has

several firsts to its credit. These include:

� Launching of Inter-City ATM Network

� Obtaining ISO Certification for a Branch

� Articulation of ‘Good Banking’ – Bank’s Citizen Charter

� Commissioning of Exclusive Mahila Banking Branch

� Launching of Exclusive Subsidiary for IT Consultancy

� Issuing credit card for farmers

� Providing Agricultural Consultancy Services

Over the years, the Bank has been scaling up its market position to emerge as a major 'Financial

Conglomerate' with as many as nine subsidiaries/sponsored institutions/joint ventures in India

and abroad. As at September 2008, the Bank has further expanded its domestic presence, with

2710 branches spread across all geographical segments. Keeping customer convenience at the

forefront, the Bank provides a wide array of alternative delivery channels that include over 2000

ATMs- the highest among nationalized banks- covering 698 centres, 1351 branches providing

Internet and Mobile Banking (IMB) services and 2027 branches offering 'Anywhere Banking'

services. Under advanced payment and settlement system, all branches of the Bank have been

enabled to offer Real Time Gross Settlement (RTGS) and National Electronic Funds Transfer

(NEFT) facilities.


3. Indian Overseas Bank:

Indian Overseas Bank was established in 1937 with the aim to specialize in foreign exchange and

overseas banking business in India. It started with simultaneously three branches in Chennai,

India; Rangoon, Burma (Now Myanmar) and Penang. On the Independence Day, Indian

Overseas Bank had expanded to 38 branches within the country and 7 branches abroad.

Before nationalization in 1969, the bank had ventured into consumer credit, had begun

computerization of their branch in 1964 and had established an independent department for

agricultural finance. In 1969, IOB had 195 branches in India. In 1977, Indian Overseas Bank

opened a branch in Seoul followed by a foreign currency-banking unit in Colombo in 1979. In

1997, the bank launched its official website and introduced online Bill Payment Services for

MTNL Bills to its New Delhi branch customers in 1999.

The IOB presence is marked in key trade centres of the world like Singapore, Seoul, Hong Kong,

Bangkok and Germany. Its India presence is well networked branch system spanning the country

with multiple branches in major cities like Bangalore, Chennai, Mumbai, Noida, Hyderabad,

New Delhi, Coimbatore, Pune, Faridabad, Gurgaon and Kolkata.

Indian Overseas Bank currently provides specialized banking services to its retail customers that

include Any Branch Banking (ABB), ATM Banking, IOB STARS (Indian Overseas Bank -

Speedy Transfer And Realization Service) and the most popular and latest one is the 8% Saving

(Taxable) Bond Scheme.


4. Axis Bank:

Axis Bank 14was founded in 1994 as UTI Bank. Axis Bank is a banking corporation offering

retail and corporate banking services, including retail loans, corporate and business credit, forex

and trade finance services, investment banking, depository services, and investment advisory

services.The bank primarily operates in India, where it is headquartered in Mumbai and employs

about 15,000 people.

The company recorded revenues of INR88,010 million (approximately $2,186.2 million) in the

fiscal year ended March 2008, an increase of 60.9% over 2007. Its net profit was INR10,591.4

million (approximately $263.1 million) in fiscal 2008, an increase of 61.9% over 2007.

The business of the bank is divided into four segments: treasury, corporate/wholesale banking,

retail banking and other banking business. Treasury operations include investments in sovereign

and corporate debt, equity and mutual funds, trading operations, derivative trading and foreign

exchange operations on the proprietary account and for customers and central funding corporate.

Corporate / Wholesale banking includes corporate relationships not included under retail

banking, corporate advisory services, placements and syndication, management of public issue,

project appraisals, capital market related services and cash management services Retail banking

constitutes lending to individuals/small businesses subject to the orientation, product and

granularity criterion and also includes low value individual exposures not exceeding the

threshold limit of INR50 million. Retail banking activities also include liability products, card

services, internet banking, ATM services, depository, financial advisory services and NRI (non-

14 10. Datamonitor, (2008) “Company Profile Axis bank Ltd.”, source: www.datamonitor.com


residence Indian) services. Other banking business includes all banking transactions not covered

under any of the above three segments.

In 1998, UTI bank went for an initial public offering (IPO). In the following year, the bank’s

Cashmanagement services (CMS) were launched. In 2000, the bank launched its internet banking

module, and iConnect retail loans was introduced by the bank in the same year. After two years,

in 2002, the bank signed memorandum of understanding with BSNL regarding bill collection

services across the country through both online and offline channels.

UTI bank signed an agreement with Employees Provident Fund Organization (EPFO) for

disbursement of pension in 2003. In the same year, the bank launched Travel Currency Card. In

2004, the bank signed a bilateral arrangement with State Bank of India (and its seven associate

member banks) for a combined network of over 4,000 ATMs. UTI Bank was listed on the

London Stock Exchange in 2005. In the same year, UTI Bank launched Smart Privilege, a

special bank account designed for women. In 2006, UTI Bank and UTI Mutual Fund launched a

new service for sale and redemption of mutual fund schemes through the Bank's ATMs across

the country. In the same year, UTI Bank opened its first international branch in Singapore. UTI

Bank along with Geojit Financial Services offered online trading service to its customers in

2006.

Moreover in 2006, UTI Bank launched its Credit Card business and operations of UBL Sales, its

sales subsidiary, and inaugurated its first office in Bangalore. In February 2007, UTI Bank

launched gift card and meal card. In the same month, the bank launched Co-branded credit card

exclusively for Small Road Transport Operators (SRTOS). UTI Bank opened a branch in Hong

Kong in March 2007. In the same month, UTI Bank formed an agreement with IIFCL to provide


finance for infrastructural projects in India. In the following month, the Bank opened a branch in

Dubai. In July 2007, the bank changed its name from UTI to Axis Bank.

In September 2007, Axis Bank made a tie up with Banque Privee Edmond de Rothschild Europe

for wealth management. In the following month, Axis Bank decided to incorporate a Public

Limited Company, as a wholly owned subsidiary of the Bank to undertake the Trustee Services

Business. In the same month, the bank also decided to incorporate an Asset Management

Company as a subsidiary of the Bank to carry out the activities of Asset and Fund Management

and Advisory and other related activities; and also proposed to establish a Mutual Fund, in the

form of a Trust.

In June 2008, Axis Bank decided to raise INR65,200 million (approximately $1619.6 million) by

way of upper Tier II capital in Indian or foreign currencies and/or lower Tier II capital in the

form of sub-ordinate debentures. In the same Month, Axis Private Equity, an operating unit of

Axis Bank, decided to invest a total of INR1,420 million (approximately $35.3 million) in two

Indian companies namely Neesa Leisure and Corrtech International.

In July 2008, Axis Private Equity, a unit of Axis Bank, invested $15 million in Vishwa

Infrastructure & Services, a firm involved in water supply and sanitation projects.

5. Dena Bank ltd.:

Dena Bank, in July 1969 along with 13 other major banks was nationalized and is now a Public

Sector Bank constituted under the Banking Companies (Acquisition & Transfer of Undertakings)

Act, 1970. Under the provisions of the Banking Regulations Act 1949, in addition to the business


of banking, the Bank can undertake other business as specified in Section 6 of the Banking

Regulations Act, 1949.

Dena Bank was founded o-n 26th May, 1938 by the family of Devkaran Nanjee under the name

Devkaran Nanjee Banking Company Ltd. It became a Public Ltd. Company in December 1939

and later the name was changed to Dena Bank Ltd.

In July 1969 Dena Bank Ltd. along with 13 other major banks was nationalized and is now a

Public Sector Bank constituted under the Banking Companies (Acquisition & Transfer of

Undertakings) Act, 1970. Under the provisions of the Banking Regulations Act 1949, in addition

to the business of banking, the Bank can undertake other business as specified in Section 6 of the

Banking Regulations Act, 1949.

Bank has set up its own network “DENANET” using leased lines, VSATs, dial-up lines and

ISDN Backup for ATMs connecting more than 1051 branches and 34 offices spread over 100

centres. Dena m-banking offers customers an easy, hassle free means to access banking

information with the help of Mobile phones 24 hours a day, 7 days a week. Now our customers

can get the required information regarding their bank account by using SMS facility from their

mobile phones. Presently m-banking provides facilities like

� Balance Inquiry

� Mini Statement of accounts

� Status of the cheques issued.


6. Syndicate Bank:

Syndicate Bank was established in 1925 in Udupi, the abode of Lord Krishna in coastal

Karnataka with a capital of Rs.8000/- by three visionaries - Sri Upendra Ananth Pai, a

businessman, Sri Vaman Kudva, an engineer and Dr.T M A Pai, a physician - who shared a

strong commitment to social welfare. Their objective was primarily to extend financial assistance

to the local weavers who were crippled by a crisis in the handloom industry through mobilising

small savings from the community. The bank collected as low as 2 annas daily at the doorsteps

of the depositors through its Agents under its Pigmy Deposit Scheme started in 1928. This

scheme is the Bank's brand equity today and the Bank collects around Rs. 2 crore per day under

the scheme.

The progress of Syndicate Bank has been synonymous with the phase of progressive banking in

India. Spanning over 80 years of pioneering expertise, the Bank has created for itself a solid

customer base comprising customers of two or three generations. Being firmly rooted in rural

India and understanding the grassroot realities, the Bank's perception had vision of future India.

It has been propagating innovations in Banking and also has been receptive to new ideas, without

however getting uprooted from its distinctive socio-economic and cultural ethos. Its philosophy

of growth by mutual sustenance of both the Bank and the people has paid rich dividends. The

Bank has been operating as a catalyst of development across the country with particular

reference to the common man at the individual level and in rural/semi urban centres at the area

level.

The Bank is well equipped to meet the challenges of the 21st century in the areas of information

technology, knowledge and competition. A comprehensive IT plan is being put in place and the


skills and knowledge of the Bank's personnel are being upgraded through a variety of training

programmes to promote customer delight in every sphere of its activity. The Bank has launched

an ambitious technology plan called Centralised Banking Solution (CBS) whereby 500 of our

strategic branches with their ATMs are being networked nationwide over a 4 year period.

7. HDFC Bank:

HDFC Bank specializes in the provision of banking and other financial services to corporate and

institutional clients.The company's services include commercial, transactional and electronic

banking products. It also provides treasury services, retail banking and capital markets

infrastructure. The company primarily operates in India. HDFC Bank is headquartered in

Mumbai, India and employs about 14,900 people.

The company recorded revenues of INR124,928 million (approximately $3,131.9 million) during

the fiscal year ended March 2008, an increase of 51.9% over 2007. The net profit was

INR15901.8 million (approximately $398.7 million) in fiscal year 2008, an increase of 39.3%

over 2007.

HDFC Bank was incorporated in 1994 and was amongst the first to receive an 'in principle'

approval from the Reserve Bank of India, to set up a bank in the private sector. HDFC Bank

began operations as a Scheduled Commercial Bank in early 1995.

TimesBank (a private sector bank promoted by Bennett, Coleman & Co/Times Group) merged

with HDFC Bank in 2000.The amalgamation added significant value to HDFC Bank in terms of

increased branch network, expanded geographic reach, enhanced customer base, skilled

manpower and the opportunity to cross-sell and leverage alternative delivery channels.


HDFC Bank was the first bank in India to launch an international debit card (in association with

VISA) and also issued the MasterCard Maestro debit card. The bank launched its credit card in

association with VISA in the year 2001. In the same year, HDFC became the first private sector

bank authorized to collect income tax for Central Government. Following this, the bank listed its

stock on NYSE through ADS issue of $172.5 million. The bank also launched credit card

business in Chennai during the year.

In the following year, the bank's branch network expanded to 200. Also during the year, the bank

entered into a joint venture agreement for non-life insurance with Chubb Corporation (a global

non-life insurer). In 2003, the bank was named 'Best Local Bank- India' by The Asian Bankers

Journal. The bank launched its credit card in over 100 cities, with its credit card base crossing

one million by 2004. HDFC's branch network expanded to 400 in the same period. The bank was

included in the Forbes Global listing of 'best under a billion', 100 best smaller size enterprises in

Asia Pacific and Europe.

8. UCO Bank:

Founded in 1943, UCO Bank is a commercial bank and a Government of India Undertaking. Its

Board of Directors consists of government representatives from the Government of India and

Reserve Bank of India as well as eminent professionals like accountants, management experts,

economists, businessmen, etc.

UCO Bank, with years of dedicated service to the Nation through active financial participation in

all segments of the economy - Agriculture, Industry, Trade & Commerce, Service Sector,

Infrastructure Sector etc., is keeping pace with the changing environment. With a countrywide

network of more than 2000 service units which includes specialised and computerised branches


in India and overseas, UCO Bank has marched into the 21st Century matched with dynamism

and growth.

9. Punjab National Bank:

Punjab National Bank (PNB) is a India based banking corporation. It offers a range of banking

services such as corporate and personal banking, industrial finance, agricultural finance,

financing of trade and international banking. The bank primarily operates in India. It is

headquartered in New Delhi, India and employs about 56,000 people.

The company recorded revenues of INR162,625.8 million (approximately $4,039.6 million) in

the fiscal year ended March 2008, an increase of 25.4% over 2007.The company's operating

profit was INR40,062.4 million (approximately $995.2 million) in fiscal year 2008, an increase

of 10.7% over 2007. Its net profit was INR20,487.6 million (approximately $508.9 million) in

fiscal year 2008, an increase of 33% over 2007.

The bank was nationalised in 1969. In September 2007, PNB partnered with Venture Infotech

Global (VIG) and American International Group (AIG) Consortium to form a Joint Venture for

credit card business in Bhutan. In the following month, PNB entered into a memorandum of

understanding with India Infrastructure Finance Company (IFCL) to finance infrastructure

projects in the country. In the same month, PNB launched a pilot project on financial inclusion at

Neemrana in Alwar district of Rajasthan as part of a plan to cover 75 million people by 2010.

10. ICICI Bank:

ICICI Bank is a diversified financial services company that provides a range of banking and

financial services to customers, including retail banking, project and corporate finance, working


capital finance, insurance, venture capital and private equity, investment banking, broking, and

treasury products and services. The company operates in, India, the UK, Canada and Russia. It is

headquartered in Mumbai, India and employs about 25, 400 people.

The company recorded revenues of INR257.6 billion (approximately $5.8 billion) during the

fiscal year ended March 2006, an increase of 52.2% over 2005. The net profit was INR24.2

billion (approximately $0.5 billion) in fiscal year 2006, an increase of 30.7% over 2005.

In early 2004, ICICIBank.com, the online banking channel of ICICI Bank, became the first

online air booking service in India. Teaming up with India mobile, ICICI launched mobile

banking in India in mid-2004. Later in the year, offshore banking unit was opened in Bahrain.

The company launched a new remittance service in 2005 in partnership with the US bank Wells

Fargo. Following that Lloyds TSB inaugurated an Indian banking service with ICICI.

In January 2006, the company opened its first branch in Sri Lanka, establishing a branch

presence for the first time outside India in the SAARC region. ICICI Bank signed cooperation

agreement with BMW India for offering finance through BMW Financial Services and

Raiffeisenlandesbank Oberosterreich for intensifying cooperation between India and Austria in

financial sector; in February 2007. It also entered into an agreement with Sarovar Hotels, to

launch the ICICI Bank Sarovar Hotels co-branded credit card.

The Reserve Bank of India approved the amalgamation of Sangli Bank with ICICI Bank in April

2007. In the same month ICICI Bank received a license to set up a branch in the Qatar Financial

Centre, Doha, Qatar.


RESEARCH METHODOLOGY

Population:

� All the Branches of Commercial Banks in Mangalore region.

� Customers having Accounts in Banks in Mangalore, i.e. both users and non users of Internet

banking Services.

Sample Size and Sampling Techniques:

� 10 Banks operating in Mangalore that provides Internet Banking Services selected using

Simple Random Sampling technique.

� 100 Customers of banks selected using Stratified Random Sampling from the above selected

10 Banks.

Scope of the Study:

The Area covered for this study is Mangalore. This study is relevant only to Mangalore Region

and the Banks performing in Mangalore. Also, it is relevant only to the time period when this

study is conducted since the Technology is fast growing and there might be more advancement

in Banking Services. This study also is useful for those who are interested in the Banking sector

to know the recent advancements in Banking Industry as of this time period.

Data Source:

Required data was collected from two main sources:

� Primary Source: The primary data is to be collected through distribution of Questionnaires

to the Bank Managers and the Customers in Mangalore.

� Secondary Source: The secondary sources to be availed for the data collection are:


• Internet/ websites

• Reference books/ journals

• Articles from various magazines

Questionnaire Design:

The questionnaire mainly consists of both open ended as well as close ended questions. The

Questionnaire is designed in such a way that it extracts all the required information from each

individual respondent clearly and as the study’s requirements.

Two sets of Questionnaire are devised: One, for the Banks operating in Mangalore to get the

information relating to the performance of the Banks before and after implementing the Internet

Banking Services. And the Second one, to all the individual Customers selected as respondents

to get the information relating to their perception and usage of Internet Banking Services.

Tools for Data Collection:

The Data is collected from 10 Bankers using Questionnaire Schedule Method. Data from

Individuals is collected using “Questionnaire Schedule” method for few respondents and

Questionnaire Distribution method due to time constraint.

Tools for Analysis:

The statistical tools used are:

� Chi- Square technique to test whether the usage of Internet Banking Services depends on the

perception regarding the security level in Banking transactions.

� ANOVA technique to find whether the average of the maximum amount transacted by

different customers through the Bank’s IBS in 10 different banks are equal or not.


RESEARCH RESULTS

The Study is conducted using different Statistical Techniques. To analyze the data with the set

objectives, Statistical analysis is done as follows:

Statistical Analysis- Chi Square Analysis:

Hypothesis Testing I:

H0: The usage of Internet Banking Service by the Customer is independent of the perception of


H1: The usage of Internet Banking Service by the Customer is dependent on the perception of


As a result of the Survey conducted for the study, the Usage of the Internet Banking Service as

per the perception of the Customers regarding the security level of the transactions in the bank,

the following table was revealed:

Observed Frequency (O)

Very Good Good Can't Say Bad Very Bad TotalUses IBS 16 37 17 1 2 73

Doesn't use IBS 11 19 3 1 1 35Total 27 56 20 2 3 108

Security Level of Transactions

Considering the above table, we get the Expected Frequency table as follows:


Expected Frequency (E)

Very Good Good Can't Say Bad Very BadUses IBS 18.25 37.85 13.52 1.35 2.03

Doesn't use IBS 8.75 18.15 6.48 0.65 0.97

Security Level of Transactions

Here, the Test Statistic is calculated using the following formula:

χ2 = √∑ [(O-E) 2/ E]

Here O= Observed Ranks and E= Expected Ranks

The degree of freedom is = (number of rows-1)*(number of columns-1) = (2-1)*(5-1) = 4.

The Calculation of the test Statistic is done as below:

O E (O-E) (O-E)2 (O-E)2/ E16 18.25 -2.25 5.0625 0.2773972611 8.75 2.25 5.0625 0.57857142937 37.85 -0.85 0.7225 0.01908850719 18.15 0.85 0.7225 0.03980716317 13.52 3.48 12.1104 0.8957396453 6.48 -3.48 12.1104 1.8688888891 1.35 -0.35 0.1225 0.0907407411 0.65 0.35 0.1225 0.1884615382 2.03 -0.03 0.0009 0.000443351 0.97 0.03 0.0009 0.000927835

3.960066357

Thus the value of χ2 is 3.96 from the table above. Since the above is a testing of independence, in

the Chi- Square it becomes one- tailed test.

Therefore, at 5% Level of Significance for degrees of freedom of 4, the critical value of Chi-

Square is found to be 9.49. Since the Calculated value of Chi- Square 3.96 is less than the

Critical value of Chi- Square, the Null Hypothesis H0 is accepted.


Thus, it can be concluded that the usage of Internet Banking Service by the Customer is

independent of the perception of Customer regarding Security level in Traditional Banking

Transactions.

So, it is clear that the usage of Internet Banking Service is not driven by the security level of

transactions in the traditional Banking provided by the bank. There are other reasons behind the

option of using Internet banking Service. It can be clarified through further testing of various

factors.

Hypothesis Testing II:

H0: The usage of Internet Banking Service by the Customer is independent of the satisfaction


H1: The usage of Internet Banking Service by the Customer is dependent on the satisfaction


From the Survey, the Usage of the Internet Banking Service as per the Satisfaction level of the

Customers regarding the Efficiency of services offered by the Bank, the following table was

revealed:


Highly satisfied Mod Satisfied Can't Say Mod Dissatisfied Highly Dissatisfied TotalUses IBS 6 13 29 5 20 73


Rating of factors in their Banks for Efficiency of services


Expected Frequency (E)

Highly satisfied Mod Satisfied Can't Say Mod Dissatisfied Highly DissatisfiedUses IBS 8.79 16.22 22.98 9.46 15.55

Doesn't use IBS 4.21 7.78 11.02 4.54 7.45

Rating of factors in their Banks for Efficiency of services


χ2 = √∑ [(O-E) 2/ E]




O E (O-E) (O-E)2 (O-E)2/ E6 8.79 -2.79 7.7841 0.885563147 4.21 2.79 7.7841 1.84895486913 16.22 -3.22 10.3684 0.63923551211 7.78 3.22 10.3684 1.33269922929 22.98 6.02 36.2404 1.5770409055 11.02 -6.02 36.2404 3.2886025415 9.46 -4.46 19.8916 2.1027061319 4.54 4.46 19.8916 4.38140969220 15.55 4.45 19.8025 1.2734726693 7.45 -4.45 19.8025 2.658053691

19.98773838


Thus the value of χ2 is 19.988 from the table above. Since the above is a testing of

independence, in the Chi- Square it becomes one- tailed test.

Therefore,

a) At 5% Level of Significance for degrees of freedom of 4, the critical value of Chi- Square

is found to be 9.49. Since the Calculated value of Chi- Square 19.988 is more than the

Critical value of Chi- Square, the Null Hypothesis H0 is rejected. This is shown in the

diagram below:


dependent on the satisfaction level of the Customers regarding the services offered by the Bank.

b) If a confidence level of 99% is considered, i.e. at 1% level of significance, for a degree of

freedom of 4, the critical value of chi square will be 13.28. Since the Calculated value of

Chi- Square 19.988 is more than the Critical value of Chi- Square even at this

significance level, the Null Hypothesis H0 is rejected.



dependent on the satisfaction level of the Customers regarding the services offered by the Bank.

So, it is clear that the usage of Internet Banking Service strongly dependent on the

satisfaction level of the Customers regarding the services offered by the Bank.

Strength of Association/ Coefficient of Contingency:

C = √ [χ2/ (χ2+n)]

= √ [19.988 / (19.988+108)]

= √ 0.156169166

= 0.3952

Thus, the conclusion is that, the strength of dependency between the usage of Internet Banking

Service and the satisfaction level of the Customers regarding the services offered by the Bank is

0.3952. Thus the Usage of Internet banking is moderately and positively dependent on the

satisfaction level of Customers.


Hypothesis Testing III:

H0: The usage of Internet Banking Service by the Customer is independent of the Number of


H1: The usage of Internet Banking Service by the Customer is dependent on the Number of


From the Survey, the following table was revealed when comparing the usage of Internet

Banking service as against the number of years since when the respondent became the customer

of the bank:

< 1 yr 1-2 yrs 2-3 yrs 3-4 yrs > 4 yrs TotalUses IBS 8 7 33 14 11 73


Number of Years of Association with the Bank


< 1 yr 1-2 yrs 2-3 yrs 3-4 yrs > 4 yrsUses IBS 8.79 10.81 25.01 16.90 11.49

Doesn't use IBS 4.21 5.19 11.99 8.10 5.51

Number of Years of Association with the Bank


χ2 = √∑ [(O-E) 2/ E]





O E (O-E) (O-E)2 (O-E)2/ E8 8.79 -0.79 0.6241 0.0710011385 4.21 0.79 0.6241 0.148242287 10.81 -3.81 14.5161 1.3428399639 5.19 3.81 14.5161 2.79693641633 25.01 7.99 63.8401 2.5525829674 11.99 -7.99 63.8401 5.32444537114 16.9 -2.9 8.41 0.49763313611 8.1 2.9 8.41 1.03827160511 11.49 -0.49 0.2401 0.0208964326 5.51 0.49 0.2401 0.043575318

13.83642463

Thus the value of χ2 is 13.84 from the table above. Since the above is a testing of independence,

in the Chi- Square it becomes one- tailed test.

Therefore,

a) At 5% Level of Significance for degrees of freedom of 4, the critical value of Chi- Square

is found to be 9.49. Since the Calculated value of Chi- Square 13.84 is more than the

Critical value of Chi- Square, the Null Hypothesis H0 is rejected. This is shown in the

diagram below:



dependent on the Number of years of association with the Bank.

b) If a confidence level of 99% is considered, i.e. at 1% level of significance, for a degree of

freedom of 4, the critical value of chi square will be 13.28. Since the Calculated value of

Chi- Square 13.84 is more than the Critical value of Chi- Square even at this significance

level, the Null Hypothesis H0 is rejected.


dependent on the Number of years of association with the Bank.

Strength of Association/ Coefficient of Contingency:

C = √ [χ2 / (χ2+n)]

= √ [13.84 /(13.84+108)]

= √ 0.11357

= 0.3370.


Thus, the conclusion is that, the strength of dependency between the usage of Internet Banking

Service and the number of years of association of the respondents with the bank is 0.337. Thus

the Usage of Internet banking is moderately and positively dependent on the Number of years

of association of customers with the Bank.

Analysis of Variance:

Hypothesis Testing IV:

Analysis of Variance is used to analyze the significance among samples taken from 10 different

Banks. Here, the Maximum amount transacted through Internet Banking by each respondent in

each Bank is compared and tested for the following hypothesis:

H0: The Maximum amounts transacted through Internet banking of each Banks under study are

equal. (M1= M2= M3= M4= M5= M6= M7= M8= M9= M10)

H1: The Maximum amounts transacted through Internet banking of each Banks under study are

not equal. (M1≠ M2≠ M3≠ M4≠ M5≠ M6≠ M7≠ M8≠ M9≠ M10)

The Maximum amounts transacted through Internet banking Service of each banks as collected

from the respondents were as follows:


SBI Canara IOB Axis Bank DENA Syndicate HDFC UCO PNB ICICI

20000 12000 3800 2800 12600 5780 3700 17900 3900 2800

2000 12600 14700 5600 3600 8900 2900 5900

13000 13400 12700 9000 2700 4790

5150 4500 1000 19700 4890 12500

12800 3500 5600 17800 3800

16700 5700 4800 2800 17800

19500 3200 1800 16700

14000 2600 18700

18000 15700 2700

4500 2700 3800

6500 3500

7900 4100

1200 2500

3600 2400

8700 1600

1000 2100

1050 1700

1200

1300

7500

14000

Step 1: Calculation of the Variance among the Samples/ Between- Column Variance:

Firstly, the Mean of each sample is calculated using the Arithmetic mean formula:

X’ = ∑X/ n for each of the 10 banks. The Means for each Sample are:

� X’1= 8552.380952;

� X’2= 5517.647059;

� X’3= 8050;

� X’4= 7916.666667;

� X’5= 8100;

� X’6= 6987;

� X’7= 3300;

� X’8= 17900;

� X’9= 3900; and

� X’10= 9184.285714.

Therefore the Grand Mean for the 10 samples is calculated as follows:

Grand Mean (X) = (X’1+ X’2+ X’3+ X’4+ X’5+ X’6+ X’7+ X’8+ X’9+ X’10)/10


= (8552.380952+ 5517.647059+ 8050+ 7916.666667+ 8100+ 6987+

3300+ 17900+ 3900+ 9184.285714)/ 10

= (79407.98039)/ 10

= 7940.798039

Again, the sample variance for each sample is calculated using the following formula:

S2 (Sample Variance) = ∑ (X-X’) 2 / n

The Sample variances for Each Sample as calculated are given below:

(X1-X'1)2 (X2-X'2)2 (X3-X'3)2 (X4-X'4)2 (X5-X'5)2 (X6-X'6)2 (X7-X'7)2 (X8-X'8)2 (X9-X'9)2 (X10-X'10)2

131048003.7 42020861.52 18062500 26180311.89 20250000 1456849 160000 0 0 40759158.8

42933683.66 50159681.52 44222500 5366959.889 20250000 3659569 160000 10786560.8

19781323.66 62131441.52 21622500 1173603.889 18378369 19309784.6

11576189.66 1035611.523 49702500 138846865.9 4397409 10993932.8

18042275.66 4070911.523 5366959.889 116920969 28990578.8

66383711.66 33251.5225 9713631.889 17530969 74230458.8

119850383.7 5371501.523 26904969 56485896.8

29676563.66 8512681.523 137194369

89257523.66 103680251.5 18378369

16421783.66 7939151.523 10156969

4212263.664 4070911.523

425599.6644 2009731.523

54057491.66 9106211.523

24526067.66 9719741.523

21791.6644 15347981.52

57038443.66 11680331.52

56285705.66 14574451.52

54057491.66

52597015.66

1107503.664

29676563.66

878977381 351464705.9 133610000 186648333.3 40500000 354978810 320000 0 0 241556371.4

From the above table using the Sample Variance formula, the following variances are obtained:

� S12= 41856065.76; � S22= 20674394.46;


� S32= 33402500;

� S42= 31108055.56;

� S52= 20250000;

� S62= 35497881;

� S72= 160000;

� S82= 0;

� S92= 0; and

� S102= 34508053.06.

Step 2: Calculation of ‘Between- class Sum of Squares’ (BSS):

BSS = n1(X’1-X) 2 + n2(X’2-X) 2 + n3(X’3-X) 2 + n4(X’4-X) 2 + n5(X’5-X) 2 + n6(X’6-X) 2 +

n7(X’7-X) 2 + n8(X’8-X) 2 + n9(X’9-X) 2 + n10(X’10-X) 2

It is calculated as Follows:

X' X'-X (X'-X)2 n n*(X'-X)2

8552.380952 611.5829134 374033.6599 21 7854706.859

5517.647059 -2423.15098 5871660.673 17 99818231.44

8050 109.201961 11925.06829 4 47700.27314

7916.666667 -24.1313723 582.3231307 6 3493.938784

8100 159.201961 25345.26439 2 50690.52877

6987 -953.798039 909730.6992 10 9097306.992

3300 -4640.79804 21537006.44 2 43074012.88

17900 9959.201961 99185703.7 1 99185703.7

3900 -4040.79804 16328048.79 1 16328048.79

9184.285714 1243.487675 1546261.599 7 10823831.19

286283726.6

Therefore, as the above table suggests, BSS is 286283726.6.

Step 3: Calculation of ‘Between Class Mean Sum of Squares’ (MBSS):

MBSS = BSS/ k-1.

Here k is the Number of samples, i.e. 10.

Therefore, from the above data, the MBSS is calculated as follows:

MBSS = 286283726.6/ (10-1) = 31809302.95

Step 4: Calculation of ‘Within Classes Sum of Mean’ (WSS):


WSS = n1* S12 + n2* S22 + n3* S32 + n4* S42 + n5* S52 + n6* S62 + n7* S72 + n8* S82

+ n9* S92 + n10* S102

= 21* 41856065.76 +17*20674394.46 + 4*33402500 + 6*31108055.56 +

2*20250000 + 10*35497881 + 2*160000 + 1*0 + 1*0 + 7*34508053.06

= 878977381+ 351464705.9+ 133610000+ 186648333.3+ 40500000+ 354978810+

320000+ 0+ 0+ 241556371.4

= 2188055602

Step 5: Calculation of ‘Within Classes mean Sum of squares’ (MWSS):

MWSS = WSS/ (n-k)

Here n= n1+ n2+ n3+ n4+ n5+ n6+ n7+ n8+ n9+ n10.

I.e. n= 21+ 17+ 4+ 6+ 2+ 10+ 2+ 1+ 1+ 7 = 71.

Therefore, MWSS = 2188055602/ (71-10)

= 35869763.96

Step 6: Computation of the test Statistic:

The test statistic ‘F’ is the variation ratio and is calculated using the following formula:

F = MBSS/MWSS

= 31809302.95/ 35869763.96

= 0.886799896

The Degrees of freedom for this distribution is = (k-1, n-k)

= (10-1, 71-10)

= (9, 61).

Thus using F distribution table,


At 5% level of Significance, the critical value of F at degrees of freedom of (9, 61) is 2.04. Since

the Calculated F i.e. 0.89 is lesser than 2.04, H0 is accepted. Therefore, it can be concluded that,

The Maximum amounts transacted through Internet banking of each Banks under study

are equal.

Thus we can say that the Internet banking Service is used for the same extent in each of the ten

banks under study.

Likert Scaling:

1. Satisfaction level of the respondents regarding various services offered by the Bank:

The respondents were asked to rate the following services provided by the Banks on the basis of

their satisfaction level. The scaling allowed was as follows:

1- Highly satisfied. 2- Moderately Satisfied. 3- Can’t say.

4. Moderately Dissatisfied. 5- Highly Dissatisfied.

The respondents rated all the factors and the following table was obtained.

Weights assigned to each level 2 1 0 -1 -2

Satisfaction level 1 2 3 4 5Bank’s Services in the premises12 26 54 7 9Convenience of transactions 37 25 39 2 5Information services 34 19 44 9 2Reliability of services 8 43 56 1 0Privacy/ security 27 56 20 2 3Responsiveness to complaints 7 16 21 43 21Fulfillment of Grievances 5 15 41 32 15Efficiency of services provided 13 24 34 14 23Amount of innovative services 20 35 48 4 1Adaptation to new Technology 21 28 45 12 2


After the corresponding weights are multiplied with the number of respondents at each

satisfaction level for each factor, the following table is obtained:

Satisfaction level 1 2 3 4 5Bank’s Services in the premises 24 26 0 -7 -18 25

Convenience of transactions 74 25 0 -2 -10 87

Information services 68 19 0 -9 -4 74

Reliability of services 16 43 0 -1 0 58

Privacy/ security 54 56 0 -2 -6 102

Responsiveness to complaints 14 16 0 -43 -42 -55

Fulfillment of Grievances 10 15 0 -32 -30 -37

Efficiency of services provided 26 24 0 -14 -46 -10

Amount of innovative services 40 35 0 -4 -2 69

Adaptation to new Technology 42 28 0 -12 -4 54

From the above table it can be inferred that:

a. Privacy or Security in the Banking transactions provided in traditional banking is

highly satisfying. Hence most of the respondents are satisfied with the privacy

and the security they obtain in the Banks.

b. Many respondents feel that they get high satisfaction levels in their banks for the

convenience of transactions.

c. It is also clear that the respondents are least satisfied by the responsiveness if the

Banks to their complaints and

d. It is also proved that the fulfillment of grievances by the Banks is least satisfying.

2. Importance of certain factors with regard to Internet banking Services offered by

the Banks:




1- Highly Important. 2- Moderately Important. 3- Can’t say.

4. Moderately Unimportant. 5- Least important.

The respondents rated the factors as required and the following table is obtained:

Rank as per its Importance 1 2 3 4 5

Better rates with lower service charges 43 11 15 2 2Bank Familiarity 57 10 4 1 1Bank’s Location 0 2 7 15 49Size of the Bank 4 13 21 22 13Security of Transaction 67 5 1 0 0Convenience (24hrs) 73 0 0 0 0Speed of Service Delivery 71 2 0 0 0Varieties of Services offered online 51 14 5 3 0Integrated Value added Services (account summary etc.) 65 6 2 0 0




Rank as per its Importance 1 2 3 4 5Better rates with lower service charges 86 11 0 -2 -4 91

Bank Familiarity 114 10 0 -1 -2 121

Bank’s Location 0 2 0 -15 -98 -111

Size of the Bank 8 13 0 -22 -26 -27

Security of Transaction 134 5 0 0 0 139

Convenience (24hrs) 146 0 0 0 0 146

Speed of Service Delivery 142 2 0 0 0 144

online 102 14 0 -3 0 113

Integrated Value added Services (account summary etc.) 130 6 0 0 0 136


a. Convenience in the Banking transactions through Internet banking is highly

important. Also the speed of Delivery is of equal importance to the respondents.

b. Many respondents feel that the security of transactions is the next important factor

as internet banking is concerned. Again, the integrated value added services

received through Internet Banking are also of same level of importance.

c. It is also clear that the Banks’ location finds least important as per the Internet

Banking is concerned.

3. Level of agreement of various statements by ATM users of 4 banks: Axis Bank,

Syndicate bank, SBI and ICICI Bank:




1- Strongly Agree 2- Moderately Agree . 3- Can’t say.

4. Disagree. 5- Strongly Disagree

The respondents rated the factors as required and the following table is obtained:

Weightsw assigned 2 1 0 -1 -2

Agreement level of Respondents 1 2 3 4 5

ATM is better than personal visit to Banks 29 8 8 3 0

The amount of Risk in ATM transactions isless compared to Traditional Banking Transactions28 12 5 2 1

Internet Banking is more useful than ATMs 14 16 7 11 0

Internet Banking will replace ATM in the nearfuture 20 11 6 8 3

Banks are very fast updating itself to latesttechnologies 23 10 10 4 1

ATM is always customer friendly 27 12 4 2 3

ATM is used for time saving 23 10 8 7 0



Rate the following 1 2 3 4 5

ATM is better than personal visit to Banks 58 8 0 -3 0 63

The amount of Risk in ATM transactions isless compared to Traditional Banking Transactions56 12 0 -2 -2 64

Internet Banking is more useful than ATMs 28 16 0 -11 0 33

Internet Banking will replace ATM in the nearfuture 40 11 0 -8 -6 37

Banks are very fast updating itself to latesttechnologies 46 10 0 -4 -2 50

ATM is always customer friendly 54 12 0 -2 -6 58

ATM is used for time saving 46 10 0 -7 0 49



a) Customers strongly agree that Amount of Risk in ATM transactions is less compared to

traditional Banking. Also they agree that ATM is better than personal visit to the banks.

b) But the statement that Internet Banking will replace ATM in the near future was least

agreed by the respondents.


Age groupAll

Respondents IBS

15-30 63 43

31-45 24 21

45-60 18 8

>60 3 1

108 73

Other Findings:

The Study undertook a survey of a sample of 108 respondents. The respondents consisted both

users as well as the non- users of Internet Banking Services.

I. Classification of Respondents based on Age Group:

The Data obtained from the Sample shows that the Highest number of Respondents fall in the

Age category of (15- 30). Here, IBS stands for the Users of Internet Banking Services.

From the above chart it can be found that the percentage of respondents using Internet Banking

Service under each Age category is as follows:

1. 87.5% under the age group (31- 45)

2. 68.25% under the age group (15- 30)

3. 44.44% under the age group ( 45- 60)

4. 33.33% under the age group of above 60.


Occupation Others IBS users

business 32 29

employed 57 43

student 13 0

other 6 1

108 73

II. Classification of Respondents on the basis of Occupation:

In the above chart, it is clear that most of the respondents are employed. The percentage of

Internet Banking users under each occupation category is found to be as follows:

1. 90.63% of Business category. Even professionals are categorized as “Business”

2. 75.44% of Employed category.

3. 16.67% of ‘Other’ category. In ‘Others’ category, the occupations covered are: Home-

makers, Senior Citizens and Agriculture.

The findings also show that no student is using Internet Banking Service. Thus it can be

concluded by saying that students, though many are Net- savvy, find less use of Internet banking

Service. Or it is also possible that they are still not sure of the uses and advantages of Internet

Banking Service.

However, the most use of the Internet Banking Service can be to the Business Class people as

found by the study. Also Employed people who find Internet banking useful are in good

numbers.


Income level Others Users of IBS

<2 lacs 23 12

2-4 lacs 48 33

4-6 lacs 24 17

>6 lacs 13 11

108 73

III. Classification of Respondents based on their Income level:

The respondents whose income level is 2- 4 lakhs are the maximum. The percentage of

respondents using Internet Banking can be shown as follows:

1. 84.62% of people whose income is above Rs.6 lakhs per annum.

2. 70.83% of people whose income is between Rs. 4-6 lakhs per annum.

3. 68.75% of respondents who have income between Rs.2- 4 Lakhs per annum.

4. 52.17% of respondents whose income is lesser than Rs. 2 lakhs per annum.

Thus, we can conclude that People with income group above Rs. 6 lakhs have good use of

Internet Banking. Following them are the people whose income is between Rs. 4- 6 lakhs.

Also we can say that People whose income level is between 2- 4 lakhs have more number of

transactions with the bank in any time period. The number of people visiting the Bank is also

more compared to the number of People falling in other categories.


Type of account owned Percentage

SB 108 100

Current 34 31

NRI 1 1

other 42 39

Name of the Bank

Traditional & IBS Accounts

Traditional only

State Bank of India 21 5

Canara Bank 17 4

Indian Overseas Bank 4 2

Axis Bank 6 11

Dena Bank 2 3

Syndicate Bank 10 8

HDFC bank 2 5

UCO Bank 1 5

Punjab National Bank 1 7

ICICI Bank 7 6

Others 2 4

IV. Classification of the respondents based on the type of Account owned by them:

Here, it is clear that all the respondents owned Savings Bank Account in their banks. In addition

to that, few of the respondents owned Current Account, Non- resident account as well as other

forms of Accounts like Fixed deposit Account, Recurring Deposit Account etc.

V. Classification of respondents on the basis of Different Banks they associate:


IBS<1 yr 13 8

1-2 yrs 16 72-3 yrs 37 333-4 yrs 25 14> 4 yrs 17 11

108 73

Here, it is clear that most of the respondents associate themselves with State Bank of India. Also,

many respondents owned accounts in more than 1 bank. The following is the list of number of

respondents who owned accounts in more than 1 Bank:

State Bank of India and Axis Bank 8

State Bank of India and Canara Bank 3

Canara Bank and Punjab National Bank 4

State Bank of India , Canara Bank and Axis Bank 1

Syndicate bank, Punjab National Bank and Axis Bank 1

ICICI and Syndicate bank 3

Axis and Syndicate bank 2

State Bank of India and ICICI Bank 1

State Bank of India and Indian Overseas Bank 1

State Bank of India , Syndicate bank and HDFC bank 1

VI. Classification of Customers based on the number of years of association with the

Bank and their application to Internet Banking Service:


Here it can be clearly made out that the respondents having 2-3 years of association with the

Bank are more than others in number. The percentage of people who applied for Internet

Banking System according to the number of years of their association with the bank can be given

as follows:

1. 67.59% of the Customers in total have opened an Internet banking Account in their Bank.

2. 89.19% of the people who associate themselves with their Banks from 2-3 years.

3. 64.71% of people who associate themselves with the bank for more than 4 years.

4. 61.53% of the respondents who have associated themselves from less than 1 year.

5. 56% of the respondents associating themselves for 3-4 years.

6. 43.75% of people who have associated themselves from 1-2 years.

Also it can be concluded here saying that many customers who have associated themselves with

a bank for atleast 2 years have opened a net Banking account with their Bank. So it is necessary

to know the bank and also to have good relationship with the Bank before opening the Internet

banking Account.

VII. Classification of Respondents on the basis of Age group and Number of Years of

Association: Cross tabulated Data:

Age group 15-30 31-45 45-60 >60 Total<1 yr 9 3 1 0 13

1-2 yrs 14 2 0 0 162-3 yrs 23 7 5 2 373-4 yrs 11 9 4 1 25> 4 yrs 6 3 8 0 17Total 63 24 18 3 108


The above table and chart clearly shows that Respondents falling under 2-3 years of association

with the Bank and under age group of 15-30years are the maximum.

VIII. Reasons for using the Internet Banking Account:

Here, it is clear that all the people using Internet banking are using it for the purpose of

transferring funds and for personal Banks transaction activities. 79% of them use it for checking

account balances.

Reasons for using the net banking Account:1 Seeking product and rate information 212 To apply for various services offered by the bank 423 To Check your Account Balances 584 To Transfer Funds 735 Payment of different Bills 396 To Calculate Loan Payment Information 97 Download Loan Applications 278 Personal Bank transaction activity 739 Others 51


Reasons for not opening IBS1 Under age 02 Never heard of Internet banking 33 Concerned about security 294 Haven't taken time to open an account 65 Don't see any real value in having this type of account 126 Not Applicable 157 Would like to see how it works, then open an account if found good 28 Not available through my bank 09 Others 0

No. of times of using IBS in a month:Less than 1 time. 161 - 3 times. 373 – 8 times. 118 – 12 times. 6Over 12 times 3

73

IX. Reasons for not opening an Internet Banking Account:

From here it can be clearly mentioned that majority of respondents, i.e. 82.86% of respondents

have not opened an Internet Banking account due to security reasons. They feel the security is

lesser in Internet as compared to traditional banking.

X. Out of the 35 people who do not have an Internet banking account:

a. 6 feel that they need to open an Internet banking Account, out of whom 2 would

open it by next 12 months and 4 sometime in future; and

b. 29 still do not want to open an Internet Banking Account.

XI. Classification of respondents based on the number of times they use Internet

Banking Service per month:


Here it is clear that almost 50% of the respondents are using Internet banking Service for 1-3

times a month. There are only few respondents who use Internet Banking for more than 12 times

in a month.

XII. From the Questionnaires given to ATM users of ICICI Bank ltd.:

i) In 1 hour duration there were 9 visitors, out of whom 2 were in age group (15-30),

3 under the group (30-45) and remaining 4 under the group (45- 60). There were

no users from the senior citizens.

ii) No users had difficulty in operating the ATM.

iii) 5 of them were using the ATM for 3-8 times in a month.

iv) All the 9 of them have heard about Internet banking Service and 7 of them wish to

avail Internet banking Service sometime in future.

Weights assigned 2 1 0 -1 -2



The amount of Risk in ATM transactions isless compared to Traditional Banking Transactions 6 3 0 0 0


Internet Banking will replace ATM in the near future 4 3 2 0 0

Banks are very fast updating itself to latest technologies 8 1 0 0 0



After multiplying with the weights

1 2 3 4 5

8 2 0 0 0 10

12 3 0 0 0 15

6 4 0 -1 0 9

8 3 0 0 0 11

16 1 0 0 0 17

10 4 0 0 0 14

6 3 0 -1 0 8

v) Using the Likert Scaling, it was found that high rating was given to the fact that

their Bank is fast updating itself to the latest technologies.

vi) Next, they feel that ATM transactions are lesser risky than traditional banking

transactions.

vii) Least approval was given to the statement that ATM is used for time saving.


XIII. From the Questionnaires given to ATM users of Axis Bank ltd.:

i) In 1 hour duration there were 13 visitors, out of whom 3 were in age group (15-

30), 7 under the group (30-45) and remaining 3 under the group (45- 60). There

were no users from the senior citizens.

ii) No users had difficulty in operating the ATM.

iii) 6 of them were using the ATM for 8-12 times and 5 of them for 3-8 times in a

month.

iv) 11 of them have heard about Internet banking Service out of which 10 wish to

avail Internet banking Service sometime in future.




The amount of Risk in ATM transactions is less compared to Traditional Banking Transactions 6 5 2 0 0







1 2 3 4 5

26 0 0 0 0 26

12 5 0 0 0 17

8 6 0 -1 0 13

8 6 0 -1 -2 11

10 3 0 -2 -2 9

22 2 0 0 0 24

22 1 0 0 0 23


ATM is better than personal visit to the Bank.

vi) Next, they feel that ATM is always Customer friendly and that it is used for time

saving.

vii) Least approval was given to the statement that Banks are fast updating themselves

to the latest technologies.


XIV. From the Questionnaires given to ATM users of State Bank of India ltd.:

i) In 1 hour duration there were 19 visitors, out of whom 5 were in age group (15-

30), 6 under the group (30-45), 3 under the group (45- 60) and remaining 5 were

from above 60 age group.

ii) 2 users had difficulty in operating the ATM but rest of the 17 had no difficulty in

using the ATM.

iii) 6 of them were using the ATM for 1-3 times in a month, 5 of them were using for

3-8 times and 5 more for 8-12 times a month.

iv) 14 of them have heard about Internet banking Service out of which 11 wish to

avail Internet banking Service sometime in future. 5 of the respondents have not

heard about Internet Banking Service.




The amount of Risk in ATM transactions is less compared to Traditional Banking Transactions 14 3 2 0 0



Banks are very fast updating itself to latest 7 4 7 1 0




1 2 3 4 5

24 4 0 -1 0 27

28 3 0 0 0 31

12 3 0 -8 0 7

20 1 0 -6 -4 11

14 4 0 -1 0 17

20 3 0 0 -4 19

18 4 0 -3 0 19


the amount of risk in ATM transactions is lesser than traditional Banking

transactions.

vi) Next, they feel that ATM is better than personal visit to banks.

vii) Least approval was given to the statement that Internet Banking is more useful

than ATMs.


XV. From the Questionnaires given to ATM users of Syndicate Bank:

i) In 1 hour duration there were 7 visitors, out of whom 1was in age group (15-30),

2 under the group (30-45), 3 under the group (45- 60) and remaining 1 was from

above 60 age group.

ii) 3 users had difficulty in operating the ATM but rest of the 4 had no difficulty in

using the ATM.

iii) 4 of them were using for 3-8 times.

iv) 5 of them have heard about Internet banking Service out of which 3 wish to avail

Internet banking Service sometime in future. 2 of the respondents have not heard

about Internet Banking Service.




The amount of Risk in ATM transactions islesscomparedto Traditional Banking Transactions 2 1 1 2 1







1 2 3 4 5

0 2 0 -2 0 0

4 1 0 -2 -2 1

2 3 0 -1 0 4

4 1 0 -1 0 4

6 2 0 -1 0 7

2 3 0 -2 -2 1

0 2 0 -3 0 -1


the Banks are very fast updating themselves to latest technologies.

vi) Next, they feel that Internet Banking is more useful than ATMs and that IBS will

replace ATMs in the near future.

vii) Least approval was given to the statement that ATMs are used for time saving.

viii) The respondents were neutral about the statement that ATM is better than

personal visit to the Banks.


Reasons for adopting IBS: No. of Banks

For improvising the services to the Customers 10

As competition to other Banks offering IBS 5

For reducing the costs 7

Any other 0

XVI. From the Bankers’ Questionnaires:

The Questionnaire for Bankers was scheduled with 10 Bank Branches operating in Mangalore.

From the question regarding the reason for adopting Internet banking Service, the following

response was received:

From the above, it is clear that all the Bankers adopted Internet banking Service to provide

improvised service to the Customers. The second main objective behind adoption of Internet

banking service was to reduce the costs of providing service to the customers and last objective

was as competition to other banks.

XVII. Some of the opinions of the Bank Managers:

i) The steps/ measures to be taken before implementing Internet banking Services are as

follows:

a. Signing an agreement with the Internet Service providers

b. Getting license to implement the Internet banking Service- although this is done at

the Bank as a whole and not at the branch level.


c. Updating the customer’s name and password in the portal.

d. Scanning the customer’s sign and uploading the same in his internet account.

ii) Factors considered before adopting Internet banking Service:

a. As per the State Bank of India, the factor mainly considered before adopting

Internet banking Service is the attitude and the approach of the employees. This is

done to ensure that the customers are not ill treated if arrived with a query or a

problem.

b. All the Banks considered the Infrastructure, Information technology

Infrastructure, connectivity and bandwidth, in-house software and hardware

facilities, lease-line or owned network lines, backup network etc. before

implementation of internet banking Service.

iii) Charges to be borne by the Customers, is very nominal amount and is comparatively

invisible. The traditional Banking is costlier to the customer than Internet Banking

facility.

iv) But, for the banker Internet banking reduces the comparative revenue generated as

through traditional banking it is possible to get higher revenue than through Internet

banking.

v) Compared to total customers, percentage of Customers using the net Banking facility is

very low in all the branches under study. However, this may increase as the years

pass.

vi) Major complaints received from the internet banking users are only related to

connectivity. However, there are a few customers who experienced problems like


account debited with certain amount but the amount not being disposed to the

concerned party.

vii) There are no specific promotional tools adopted by the banks in order to increase the

usage of internet banking service. But, the banks educate the customers who come

with queries relating to Internet Banking service. Also newly arrived customers are

made to know about the service available in the bank. No external promotional tools

are adopted.

XVIII. From the Chi square analysis:

It was found that the usage of Internet Banking Service is not driven by the security level of

transactions in the traditional Banking provided by the bank. There are other reasons behind the

option of using Internet banking Service.

Also it was found that the usage of Internet Banking Service strongly dependent on the

satisfaction level of the Customers regarding the services offered by the Bank. The strength of

dependency between the usage of Internet Banking Service and the satisfaction level of the

Customers regarding the services offered by the Bank is 0.430199549. Thus the Usage of

Internet banking is moderately and positively dependent on the satisfaction level of Customers.

Again it was also clear that the usage of Internet Banking Service by the Customer is dependent

on the Number of years of association with the Bank. The strength of dependency between the

usage of Internet Banking Service and the number of years of association of the respondents with

the bank is 0.357931618. Thus the Usage of Internet banking is moderately and positively

dependent on the Number of years of association of customers with the Bank.


XIX. From the Analysis of Variance:

The Study considered the maximum amount transacted through Internet Banking System by

various respondents in each of the Banks. After analyzing the variance the conclusion was that

the Maximum amounts transacted through Internet banking of each Banks under study are equal.

XX. From the Likert Scale:

From the Likert Scale technique, the following conclusions can be made:

i) Privacy and security in the transactions in traditional Banking are highly

satisfactory to all the respondents.

ii) However, the responsiveness to the complaints are least satisfactory as far as

traditional banking is concerned.

iii) Convenience and speed of delivery are highly important for the customers in

using Internet Banking Service.

iv) Banks’ location is of least importance for the customers using Internet Banking

Service.

v) The ATM users strongly agree that ATMs are comparatively better than

traditional Banking and personal visit to the Banks.

vi) ATM users feel that Internet Banking will not replace ATMs in future.


CONCLUSIONS

Internet Banking Service recently started to gain importance in the Mangalore region. For the

study purpose a sample of 108 bank customers were taken. Also the study was conducted in 10

bank branches operating in Mangalore. The main purpose of the study was to throw a light on the

Adoption, Implementation and Usage of Internet Banking Service in Mangalore region. It also

aimed to analyze the promotional tools adopted by the banks to increase the usage of internet

Banking.

The Analysis proved that the Usage of Internet banking is not driven by the security level of

transactions in traditional banking. But it also is proved in the study that, the usage of internet

banking service is strongly driven by the efficiency of services provided in the banks and the

number of years of association with the Bank. Also, the Maximum amount that is transacted in

each of the ten Banks through Internet banking is equal.

Most of the respondents have opined that the convenience and the speed of delivery are most

important issues in Internet banking services.

The last conclusion is that the Bankers can adopt external promotional tools to increase the usage

of Internet Banking Service in Mangalore region. But, until now the Bankers are least bothered

about usage of external promotional tools. If they promote externally there will be increased

usage of Internet banking in Mangalore.


APPENDIX

Annexure I:

QUESTIONNAIRE FOR USERS

Internet Banking Services: A Brand Building Strategy or Effective Service Providing Strategy?

Dear Respondent,

This Questionnaire is prepared solely for the purpose of my studies as a survey for my Management Thesis titled as above. It is purely for academic purposes and the data given will not be disclosed anywhere. I request you to fill this and help me in my research.

Thank you.

Name:

Contact Number:

Age group: � 15-30yrs � 31-45yrs � 46-60yrs � >60 yrs

Occupation: � Business � Employed � Student � Any Other (specify) ______________

Income Level (per Annum): � < 2 lakhs � 2- 4 lakhs � 4- 6 lakhs � > 6 lakhs

1. In which bank do you have your Account? ____________________________________________

2. Which type of Account do you own in your Bank?

� Savings Bank � Current � NRI � Any Other (Specify) ______________

3. Since when are you the Customer of this Bank?

� <1 yr � 1-2 yrs � 2-3 yrs � 3-4 yrs � >4 yrs


4. How do you rate the following aspects with regard to the services offered by your Bank?

Tick 1: Highly satisfied; 2: Moderately satisfied; 3: Can’t Say; 4: Moderately Dissatisfied; 5: Highly Dissatisfied;

S.no. Factor 1 2 3 4 5 1 Bank’s Services in the premises 2 Convenience of transactions 3 Information services 4 Reliability of services 5 Privacy/ security 6 Responsiveness to complaints 7 Fulfillment of Grievances 8 Efficiency of services provided 9 Amount of innovative services 10 Adaptation to new Technology

5. Have you applied for the Internet Banking Services provided by your Bank?

� Yes � No

If Yes,

A) In Which Bank do you have your Internet Bank account? _______________________________

B) Since when are you using the Internet Banking Service?

� < 1 yr � > 1yr

C) For what Purpose/ Reasons are you using the Internet Banking Service? (Tick wherever applicable) � Seeking product and rate information

� To apply for various services offered by the bank

� To Check your Account Balances

� To Transfer Funds

� Payment of different Bills

� To Calculate Loan Payment Information

� Download Loan Applications

� Personal Bank transaction activity


� Others (specify) ____________________________

D) What are the major complaints you had in using IBS?

--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

E) What is the Highest amount of rupees you transacted through Internet Banking System? Rs. ___________________________________________

F) Tick wherever you find it appropriate: How much each of the following factors is important for you with regard to Internet Banking system?

Tick 1: Highly Important; 2: Moderately Importan t; 3:Can’t Say; 4: Moderately unimportant; 5: Least important.

S.no. Factor 1 2 3 4 5 1 Better rates with lower service charges 2 Bank Familiarity 3 Bank’s Location 4 Size of the Bank 5 Security of Transaction 6 Convenience (24hrs) 7 Speed of Service Delivery 8 Varieties of Services offered online 9 Integrated Value added Services (account summary etc.)

If No,

A) What are the main reasons that you have not opened an Internet bank account yet? (Check all that apply)

� Under age

� Never heard of Internet banking

� Concerned about security

� Haven't taken time to open an account

� Don't see any real value in having this type of account

� Would like to see how it works, then open an account if found good

� Not available through my bank

� Not Applicable

� Others (Specify) _____________________________


B) Would you prefer to have an Internet Bank Account in future?

� Yes � No

C) When would you like to open an Internet Bank Account?

� By Next 12 months

� Sometime in future

� Never

6. What do you think is the security level of the transactions in your Bank Account?

� Very Good � Good � Average � Poor � Very poor

7. How many times do you use Internet Banking Services per month?

� Less than 1 time.

� 1 - 3 times.

� 3 – 8 times.

� 8 – 12 times.

� Over 12 times.


Annexure II:

QUESTIONNAIRE TO THE BANKER

Internet Banking Services: A Brand Building Strategy or Effective Service Providing

Strategy?

Dear Respondent,

This Questionnaire is prepared solely for the purpose of my studies as a survey for my

Management Thesis titled as above. It is purely for academic purposes and the data given will

not be disclosed anywhere. I request you to fill this and help me in my research.

Thank you.

Name of the Bank: Branch:

Contact Number:

1. In which year was this branch of your Bank Established?

2. What services do you offer to your Customers?

3. Do you offer Internet Banking Service?

4. When was the service of Internet Banking started in this Bank?

5. What factors did you consider before implementing the Internet Banking Service?

6. What are the reasons that you adopted internet Banking System?

� As competition to other Banks offering IBS.

� For improvising the services to the Customers.

� For reducing the costs.

� Any other, Specify_____________________________

7. What steps are to be taken for implementing the IBS?

8. Which are the various services provided by the bank through IBS?

9. As per now, in Mangalore, which are the services availed by the Customers through IBS?

10. What are the charges to be borne by the customers for availing services through IBS other

than Traditional Banking?

11. After implementing IBS, what are the promotional tools used to educate the customers about

the availability of the service?

12. What are the techniques used now to increase the Customers for the IBS service?


13. Could you give the details regarding the number of customers logged into the IBS since its

inception?

14. What are the major risks associated with IBS to the Bank?

15. What are the costs involved in providing IBS to the Customers? Is the cost transferred to the

customer in any way?

16. Which are the major Complaints that you receive from your customers regarding the services

you offer?

17. As per the ATM facilities are concerned, which are the major problems faced by the

customers?

18. What are the major difficulties faced by your Customers in Internet Banking Facilities?

19. Could you give the Balance sheet and Income and Expenditure statement of this branch for

the year before and after implementation of IBS?

(Following details in two years i.e. the year before implementation of IBS and the current

year:

• Net operating Income:

• Total Assets:

• Shareholder Equity:

• Interest expense:

• Earning Assets:

• Interest income:

• Reserves:

• Total Loans:

• Total Long term debts:

• Total Liabilities: )


Annexure III:

QUESTIONNAIRE FOR ATM USERS

Internet Banking Services: A Brand Building Strategy or Effective Service Providing Strategy?

Dear Respondent,

This Questionnaire is prepared solely for the purpose of my studies as a survey for my Management Thesis titled as above. It is purely for academic purposes and the data given will not be disclosed anywhere. I request you to fill this and help me in my research.

Thank you.

Name:

Contact Number:

Age group: � 15-30yrs � 31-45yrs � 46-60yrs � >60 yrs

Occupation: � Business � Employed � Student � Any Other (specify) __________

Income Level (per Annum): � < 2 lakhs � 2- 4 lakhs � 4- 6 lakhs � > 6 lakhs

1. How many times in an average do you use ATM service in a month?

� < 1 time � 1 - 3 times � 3 – 8 times � 8 – 12 times � > 12 times.

2. Since when are you using ATM Service? < 1 year 1-2 years 2-3 years 3-4 years 4-5 years >5 years.

3. Have you ever experienced any difficulty in ATM transactions?

Yes No

a) If Yes, How many times?

----------------------------

b) What are the major Difficulties you experienced in ATM?

------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------


4. Have you heard about Internet Banking Services (Online 24-hours Banking Service, which provides you to access your account from your place of convenience)?

Yes No

5. Do you wish to avail Internet Banking Service in future?

Yes No

6. Rank the following services as follows:

Tick 1: Strongly Agree; 2: Agree; 3: Can’t Say; 4: Disagree; 5: Strongly Disagree;

S.no. 1 2 3 4 5 1 ATM is better than personal visit to Banks 2 The amount of Risk in ATM transactions is less compared to

Traditional Banking Transactions

3 Internet Banking is more useful than ATMs 4 Internet Banking will replace ATM in the near future 5 Banks are very fast updating itself to latest technologies 6 ATM is always customer friendly 7 ATM is used for time saving


Annexure IV:

Table of Chi-square statistics- For one-tailed test:

df α=0.05 α=0.01 α=0.001

1 3.84 6.64 10.83

2 5.99 9.21 13.82

3 7.82 11.35 16.27

4 9.49 13.28 18.47

5 11.07 15.09 20.52

6 12.59 16.81 22.46

7 14.07 18.48 24.32

8 15.51 20.09 26.13

9 16.92 21.67 27.88

10 18.31 23.21 29.59

11 19.68 24.73 31.26

12 21.03 26.22 32.91

13 22.36 27.69 34.53

14 23.69 29.14 36.12

15 25.00 30.58 37.70

16 26.30 32.00 39.25

17 27.59 33.41 40.79

18 28.87 34.81 42.31

19 30.14 36.19 43.82

20 31.41 37.57 45.32

21 32.67 38.93 46.80

22 33.92 40.29 48.27

23 35.17 41.64 49.73

24 36.42 42.98 51.18

25 37.65 44.31 52.62

26 38.89 45.64 54.05

27 40.11 46.96 55.48

28 41.34 48.28 56.89

29 42.56 49.59 58.30

30 43.77 50.89 59.70

31 44.99 52.19 61.10

32 46.19 53.49 62.49

33 47.40 54.78 63.87

34 48.60 56.06 65.25

35 49.80 57.34 66.62

36 51.00 58.62 67.99

37 52.19 59.89 69.35

38 53.38 61.16 70.71

39 54.57 62.43 72.06

40 55.76 63.69 73.41

41 56.94 64.95 74.75

42 58.12 66.21 76.09

43 59.30 67.46 77.42

44 60.48 68.71 78.75

45 61.66 69.96 80.08

46 62.83 71.20 81.40

47 64.00 72.44 82.72

48 65.17 73.68 84.03

49 66.34 74.92 85.35

50 67.51 76.15 86.66

51 68.67 77.39 87.97

52 69.83 78.62 89.27

53 70.99 79.84 90.57

54 72.15 81.07 91.88

55 73.31 82.29 93.17

56 74.47 83.52 94.47

57 75.62 84.73 95.75

58 76.78 85.95 97.03

59 77.93 87.17 98.34

60 79.08 88.38 99.62

61 80.23 89.59 100.88

62 81.38 90.80 102.15

63 82.53 92.01 103.46

64 83.68 93.22 104.72

65 84.82 94.42 105.97

66 85.97 95.63 107.26

67 87.11 96.83 108.54

68 88.25 98.03 109.79

69 89.39 99.23 111.06

70 90.53 100.42 112.31

71 91.67 101.62 113.56

72 92.81 102.82 114.84

73 93.95 104.01 116.08

74 95.08 105.20 117.35

75 96.22 106.39 118.60

76 97.35 107.58 119.85

77 98.49 108.77 121.11

78 99.62 109.96 122.36

79 100.75 111.15 123.60

80 101.88 112.33 124.84

81 103.01 113.51 126.09

82 104.14 114.70 127.33

83 105.27 115.88 128.57

84 106.40 117.06 129.80

85 107.52 118.24 131.04

86 108.65 119.41 132.28

87 109.77 120.59 133.51

88 110.90 121.77 134.74

89 112.02 122.94 135.96

90 113.15 124.12 137.19

91 114.27 125.29 138.45

92 115.39 126.46 139.66

93 116.51 127.63 140.90

94 117.63 128.80 142.12

95 118.75 129.97 143.32

96 119.87 131.14 144.55

97 120.99 132.31 145.78

98 122.11 133.47 146.99

99 123.23 134.64 148.21

100 124.34 135.81 149.48


Annexure V:

Table of F distribution:

Critical values of F for the 0.05 significance level:

(k-1, n-k) 1 2 3 4 5 6 7 8 9 10

1 161.45 199.50 215.71 224.58 230.16 233.99 236.77 238.88 240.54 241.88

2 18.51 19.00 19.16 19.25 19.30 19.33 19.35 19.37 19.39 19.40

3 10.13 9.55 9.28 9.12 9.01 8.94 8.89 8.85 8.81 8.79

4 7.71 6.94 6.59 6.39 6.26 6.16 6.09 6.04 6.00 5.96

5 6.61 5.79 5.41 5.19 5.05 4.95 4.88 4.82 4.77 4.74

6 5.99 5.14 4.76 4.53 4.39 4.28 4.21 4.15 4.10 4.06

7 5.59 4.74 4.35 4.12 3.97 3.87 3.79 3.73 3.68 3.64

8 5.32 4.46 4.07 3.84 3.69 3.58 3.50 3.44 3.39 3.35

9 5.12 4.26 3.86 3.63 3.48 3.37 3.29 3.23 3.18 3.14

10 4.97 4.10 3.71 3.48 3.33 3.22 3.14 3.07 3.02 2.98

11 4.84 3.98 3.59 3.36 3.20 3.10 3.01 2.95 2.90 2.85

12 4.75 3.89 3.49 3.26 3.11 3.00 2.91 2.85 2.80 2.75

13 4.67 3.81 3.41 3.18 3.03 2.92 2.83 2.77 2.71 2.67

14 4.60 3.74 3.34 3.11 2.96 2.85 2.76 2.70 2.65 2.60

15 4.54 3.68 3.29 3.06 2.90 2.79 2.71 2.64 2.59 2.54

16 4.49 3.63 3.24 3.01 2.85 2.74 2.66 2.59 2.54 2.49

17 4.45 3.59 3.20 2.97 2.81 2.70 2.61 2.55 2.49 2.45

18 4.41 3.56 3.16 2.93 2.77 2.66 2.58 2.51 2.46 2.41

19 4.38 3.52 3.13 2.90 2.74 2.63 2.54 2.48 2.42 2.38

20 4.35 3.49 3.10 2.87 2.71 2.60 2.51 2.45 2.39 2.35

21 4.33 3.47 3.07 2.84 2.69 2.57 2.49 2.42 2.37 2.32

22 4.30 3.44 3.05 2.82 2.66 2.55 2.46 2.40 2.34 2.30

23 4.28 3.42 3.03 2.80 2.64 2.53 2.44 2.38 2.32 2.28

24 4.26 3.40 3.01 2.78 2.62 2.51 2.42 2.36 2.30 2.26

25 4.24 3.39 2.99 2.76 2.60 2.49 2.41 2.34 2.28 2.24

26 4.23 3.37 2.98 2.74 2.59 2.47 2.39 2.32 2.27 2.22

27 4.21 3.35 2.96 2.73 2.57 2.46 2.37 2.31 2.25 2.20

28 4.20 3.34 2.95 2.71 2.56 2.45 2.36 2.29 2.24 2.19

29 4.18 3.33 2.93 2.70 2.55 2.43 2.35 2.28 2.22 2.18

30 4.17 3.32 2.92 2.69 2.53 2.42 2.33 2.27 2.21 2.17

31 4.16 3.31 2.91 2.68 2.52 2.41 2.32 2.26 2.20 2.15

32 4.15 3.30 2.90 2.67 2.51 2.40 2.31 2.24 2.19 2.14

33 4.14 3.29 2.89 2.66 2.50 2.39 2.30 2.24 2.18 2.13


34 4.13 3.28 2.88 2.65 2.49 2.38 2.29 2.23 2.17 2.12

35 4.12 3.27 2.87 2.64 2.49 2.37 2.29 2.22 2.16 2.11

36 4.11 3.26 2.87 2.63 2.48 2.36 2.28 2.21 2.15 2.11

37 4.11 3.25 2.86 2.63 2.47 2.36 2.27 2.20 2.15 2.10

38 4.10 3.25 2.85 2.62 2.46 2.35 2.26 2.19 2.14 2.09

39 4.09 3.24 2.85 2.61 2.46 2.34 2.26 2.19 2.13 2.08

40 4.09 3.23 2.84 2.61 2.45 2.34 2.25 2.18 2.12 2.08

41 4.08 3.23 2.83 2.60 2.44 2.33 2.24 2.17 2.12 2.07

42 4.07 3.22 2.83 2.59 2.44 2.32 2.24 2.17 2.11 2.07

43 4.07 3.21 2.82 2.59 2.43 2.32 2.23 2.16 2.11 2.06

44 4.06 3.21 2.82 2.58 2.43 2.31 2.23 2.16 2.10 2.05

45 4.06 3.20 2.81 2.58 2.42 2.31 2.22 2.15 2.10 2.05

46 4.05 3.20 2.81 2.57 2.42 2.30 2.22 2.15 2.09 2.04

47 4.05 3.20 2.80 2.57 2.41 2.30 2.21 2.14 2.09 2.04

48 4.04 3.19 2.80 2.57 2.41 2.30 2.21 2.14 2.08 2.04

49 4.04 3.19 2.79 2.56 2.40 2.29 2.20 2.13 2.08 2.03

50 4.03 3.18 2.79 2.56 2.40 2.29 2.20 2.13 2.07 2.03

51 4.03 3.18 2.79 2.55 2.40 2.28 2.20 2.13 2.07 2.02

52 4.03 3.18 2.78 2.55 2.39 2.28 2.19 2.12 2.07 2.02

53 4.02 3.17 2.78 2.55 2.39 2.28 2.19 2.12 2.06 2.02

54 4.02 3.17 2.78 2.54 2.39 2.27 2.19 2.12 2.06 2.01

55 4.02 3.17 2.77 2.54 2.38 2.27 2.18 2.11 2.06 2.01

56 4.01 3.16 2.77 2.54 2.38 2.27 2.18 2.11 2.05 2.01

57 4.01 3.16 2.77 2.53 2.38 2.26 2.18 2.11 2.05 2.00

58 4.01 3.16 2.76 2.53 2.37 2.26 2.17 2.10 2.05 2.00

59 4.00 3.15 2.76 2.53 2.37 2.26 2.17 2.10 2.04 2.00

60 4.00 3.15 2.76 2.53 2.37 2.25 2.17 2.10 2.04 1.99

61 4.00 3.15 2.76 2.52 2.37 2.25 2.16 2.09 2.04 1.99

62 4.00 3.15 2.75 2.52 2.36 2.25 2.16 2.09 2.04 1.99

63 3.99 3.14 2.75 2.52 2.36 2.25 2.16 2.09 2.03 1.99

64 3.99 3.14 2.75 2.52 2.36 2.24 2.16 2.09 2.03 1.98

65 3.99 3.14 2.75 2.51 2.36 2.24 2.15 2.08 2.03 1.98

66 3.99 3.14 2.74 2.51 2.35 2.24 2.15 2.08 2.03 1.98

67 3.98 3.13 2.74 2.51 2.35 2.24 2.15 2.08 2.02 1.98

68 3.98 3.13 2.74 2.51 2.35 2.24 2.15 2.08 2.02 1.97

69 3.98 3.13 2.74 2.51 2.35 2.23 2.15 2.08 2.02 1.97

70 3.98 3.13 2.74 2.50 2.35 2.23 2.14 2.07 2.02 1.97

71 3.98 3.13 2.73 2.50 2.34 2.23 2.14 2.07 2.02 1.97


72 3.97 3.12 2.73 2.50 2.34 2.23 2.14 2.07 2.01 1.97

73 3.97 3.12 2.73 2.50 2.34 2.23 2.14 2.07 2.01 1.96

74 3.97 3.12 2.73 2.50 2.34 2.22 2.14 2.07 2.01 1.96

75 3.97 3.12 2.73 2.49 2.34 2.22 2.13 2.06 2.01 1.96

76 3.97 3.12 2.73 2.49 2.34 2.22 2.13 2.06 2.01 1.96

77 3.97 3.12 2.72 2.49 2.33 2.22 2.13 2.06 2.00 1.96

78 3.96 3.11 2.72 2.49 2.33 2.22 2.13 2.06 2.00 1.95

79 3.96 3.11 2.72 2.49 2.33 2.22 2.13 2.06 2.00 1.95

80 3.96 3.11 2.72 2.49 2.33 2.21 2.13 2.06 2.00 1.95

81 3.96 3.11 2.72 2.48 2.33 2.21 2.13 2.06 2.00 1.95

82 3.96 3.11 2.72 2.48 2.33 2.21 2.12 2.05 2.00 1.95

83 3.96 3.11 2.72 2.48 2.32 2.21 2.12 2.05 2.00 1.95

84 3.96 3.11 2.71 2.48 2.32 2.21 2.12 2.05 1.99 1.95

85 3.95 3.10 2.71 2.48 2.32 2.21 2.12 2.05 1.99 1.94

86 3.95 3.10 2.71 2.48 2.32 2.21 2.12 2.05 1.99 1.94

87 3.95 3.10 2.71 2.48 2.32 2.21 2.12 2.05 1.99 1.94

88 3.95 3.10 2.71 2.48 2.32 2.20 2.12 2.05 1.99 1.94

89 3.95 3.10 2.71 2.47 2.32 2.20 2.11 2.04 1.99 1.94

90 3.95 3.10 2.71 2.47 2.32 2.20 2.11 2.04 1.99 1.94

91 3.95 3.10 2.71 2.47 2.32 2.20 2.11 2.04 1.98 1.94

92 3.95 3.10 2.70 2.47 2.31 2.20 2.11 2.04 1.98 1.94

93 3.94 3.09 2.70 2.47 2.31 2.20 2.11 2.04 1.98 1.93

94 3.94 3.09 2.70 2.47 2.31 2.20 2.11 2.04 1.98 1.93

95 3.94 3.09 2.70 2.47 2.31 2.20 2.11 2.04 1.98 1.93

96 3.94 3.09 2.70 2.47 2.31 2.20 2.11 2.04 1.98 1.93

97 3.94 3.09 2.70 2.47 2.31 2.19 2.11 2.04 1.98 1.93

98 3.94 3.09 2.70 2.47 2.31 2.19 2.10 2.03 1.98 1.93

99 3.94 3.09 2.70 2.46 2.31 2.19 2.10 2.03 1.98 1.93

100 3.94 3.09 2.70 2.46 2.31 2.19 2.10 2.03 1.98 1.93


REFERENCES

Articles, Journals and Books:

1. Gupta Soutiman Das, (February 2003): “Towards Online Banking”, Article, Network

Magazine issue. (Source: http://www.networkmagazineindia.com/200302/feature.shtml)

2. Sanmugam, “Factors determining consumer adoption of Internet Banking”, Binary

University College, Puchong, Selangor Malaysia, (Source: http://ssrn.com/abstract=1021484)

3. Miss Doungratana Sattabusaya, “Keys factors that determine Internet banking adoption in

Thailand”, Cardiff Business School, Cardiff University, Aberconway Building, Colum Drive,

Cardiff, CF10 3EU, UK, pgs.1-15.

4. Research and Markets, (2007), “Opportunities in Indian banking Sector”, Research and

Markets, Ireland, (source: http://www.researchandmarkets.com/reports/564049/)

5. Deolalkar G. H, (2000) “The Indian Banking Sector: On the Road to progress”, A Study of

Financial Markets, Pgs. 60-68.

6. Icfai University: (2006) “Commercial banking”, Icfai University Press, Hyderabad, pgs. 2-7.

7. Address by Shri Vepa Kamesam, Chairman, IDRBT and Former Deputy Governor, RBI

(2004) at the city Union Bank. (Source: www.rbi.gov.in)

8. Srivastava Saurabh, (2008), “Internet Banking: A Global way to Bank.”, BBS Institute of

Management and Technology.(Source:http://www.indianmba.com/Faculty_Column/FC908/fc908.html)

9. Datamonitor, (2008) “Company Profile State Bank of India”, source: www.datamonitor.com

10. Datamonitor, (2008) “Company Profile Axis bank Ltd.”, source: www.datamonitor.com

11. Datamonitor, (2008) “Company Profile Punjab National bank”, source: www.datamonitor.com

12. Datamonitor, (2008) “Company Profile ICICI Bank Ltd.”, source: www.datamonitor.com


Websites:

1. http://www.gdrc.org/icm/icm-documents.html

2. http://www.geocities.com/kstability/inbank2/finub/universal.html

3. http://www.citefin.com/1405-history-banking-india.html

4. http://www.bankingindiaupdate.com/general.htmls

internet banking services: a study on its adoption, implementation and usage

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