EXECUTIVE

SUMMARY

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 EXECUTIVE SUMMARY
Over the last decade India has been one of the fastest adopters of information technology,
particularly because of its capability to provide software solution to organizations around the
world. This capability has provided a tremendous impetuous to the domestic banking industry in
India to deploy the latest in technology, particularly in the Internet banking and e-commerce
arenas. Banks are growing in size by mergers and acquisitions, which have been driven by
communication and technology. Technology is playing a major role in increasing the efficiency,
courtesy and speed of customer service. It is said to be the age of E-banking. An Online Banking
user is expected to perform at least one of the following transactions online:
1. Checking account balance and transaction history

2. Paying bills

3. Transferring funds between accounts

4. Requesting credit card advances

5. Ordering checks

6. Managing investments and stocks trading

From a bank’s perspective, using the Internet is more efficient than using other distribution
mediums because banks are looking for an increased customer base. Using multiple distribution
channels increases effective market coverage by enabling different products to be targeted at
different demographic segments. Also Banks cannot risk loosing customers to competitors within
the aggressive competition in the banking industry around the world. Moreover Internet delivery
offers customized service to suit the needs and the likes of each user. Mass customization
happens effectively through Online Banking. It reduces cost and replaces time spent on routine
errands with spending time on business errands. Online Banking means less staff members,
smaller infrastructure demands, compared with other banking channels. From the customers’
perspective, Online Banking provides a convenient and effective way to manage finances that is
easily accessible 24 hours a day, seven days a week. In addition information is up to date.

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Nevertheless Online Banking has disadvantages for banks like how to work the technology, set-
up cost, legal issues, and lack of personal contact with customers. And for customers there are
security and privacy issues.

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INTRODUCTION

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WHAT IS E-BANKING?

Electronic banking is one of the truly widespread avatars of E-commerce the world over.
Various authors define E-Banking differently but the most definition depicting the meaning and
features of E-Banking are as follows:

1. Banking is a combination of two, Electronic technology and Banking.

2. Electronic Banking is a process by which a customer performs banking

Transactions electronically without visiting a brick-and-mortar institutions.

3. E-Banking denotes the provision of banking and related service through

Extensive use of information technology without direct recourse to the bank by
the customer.

Bank

Information
technology

Customer

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 NEED FOR E-BANKING

One has to approach the branch in person, to withdraw cash or deposit a cheque or request a
statement of accounts. In true Internet banking, any inquiry or transaction is processed online
without any reference to the branch (anywhere banking) at any time. Providing Internet banking
is increasingly becoming a "need to have" than a "nice to have" service. The net banking, thus,
now is more of a norm rather than an exception in many developed countries due to the fact that
it is the cheapest way of providing banking services.

Banks have traditionally been in the forefront of harnessing technology to improve their
products, services and efficiency. They have, over a long time, been using electronic and
telecommunication networks for delivering a wide range of value added products and services.
The delivery channels include direct dial – up connections, private networks, public networks etc
and the devices include telephone, Personal Computers including the Automated Teller
Machines, etc. With the popularity of PCs, easy access to Internet and World Wide Web
(WWW), Internet is increasingly used by banks as a channel for receiving instructions and
delivering their products and services to their customers. This form of banking is generally
referred to as Internet Banking, although the range of products and services offered by different
banks vary widely both in their content and sophistication.

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 EVOLUTION OF E-BANKING

The story of technology in banking started with the use of punched card machines like
Accounting Machines or Ledger Posting Machines. The use of technology, at that time, was
limited to keeping books of the bank. It further developed with the birth of online real time
system and vast improvement in telecommunications during late 1970’s and 1980’s.it resulted in
a revolution in the field of banking with “convenience banking” as a buzzword. Through
Convenience banking, the bank is carried to the doorstep of the customer.

The 1990’s saw the birth of distributed computing technologies and Relational Data Base
Management System. The banking industry was simply waiting for these technologies. Now with
distribution technologies, one could configure dedicated machines called front-end machines for
customer service and risk control while communication in the batch mode without hampering the
response time on the front-end machine.

Traditional banking Virtual or E-banking

Gunpowder Nuclear charged

Personalized services, time Real time transactions,

consuming, limited access integrated platform, all time
access

Intense competition has forced banks to rethink the way they operated their business. They had
to reinvent and improve their products and services to make them more beneficial and cost
effective. Technology in the form of E-banking has made it possible to find alternate banking
practices at lower costs.

More and more people are using electronic banking products and services because large section
of the banks future customer base will be made up of computer literate customer, the banks must
be able to offer these customer products and services that allow them to do their banking by
electronic means. If they fail to do this will, simply, not survive. New products and services are
emerging that are set to change the way we look at money and the monetary system.

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E-Banking transaction mechanism

Fig-1

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 E-BANKING PRODUCTS

Automated Teller Machine (ATM)

These are cash dispensing machine, which are frequently seen at banks and other locations such
as shopping centers and building societies. Their main purpose is to allow customer to draw cash
at any time and to provide banking services where it would not have been viable to open another
branch e.g. on university campus.

An automated teller machine or automatic teller machine (ATM) is a computerized

telecommunications device that provides a financial institution's customers a method of
financial\ transactions in a public space without the need for a human clerk or bank teller. On
most modern ATMs, the customer identifies him or herself by inserting a plastic ATM card with a
magnetic stripe or a plastic smartcard with a chip that contains his or her card number and some
security information, such as an expiration date or CVC (CVV). Security is provided by the
customer entering a personal identification number (PIN).

Using an ATM, customers can access their bank accounts in order to make cash withdrawals (or
credit card cash advances) and check their account balances. Many ATMs also allow people to
deposit cash or checks, transfer money between their bank accounts, pay bills, or purchase goods
and services.

ATMs are known by various casual terms including cash machine, hole-in-the-wall, cash point or
Banc mat (in Europe and Russia). The occasionally-used ATM Machine is an example of RAS
syndrome.

Some of the advantages of ATM to customers are:-

 Ability to draw cash after normal banking hours
 Quicker than normal cashier service
 Complete security as only the card holder knows the PIN
 Does not just operate as a medium of obtaining cash.
 Customer can sometimes use the services of other bank ATM’s.

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Tele Ban king or Phone Banking
Telephone banking is relatively new Electronic Banking Product. However it is becoming one of
the most popular products. Customer can perform a number of transactions from the convenience
of their own home or office; in fact from anywhere they have access to phone. Customers can do
following:-
 Check balances and statement information
 Transfer funds from one account to another
 Pay certain bills
 Order statements or cheque books
 Demand draft request
This facility is available with the help of Voice Response System (VRS). This
system basically, accepts only TONE dialed input. Like the ATM customer has to follow
particular process, initially account number and telephone PIN are fed for the process to start.
Also the VRS system provides the users within additional facilities such as changing existing
password with the new desired, information about new products, current interest rates etc.

Mobile Banking
Mobile banking comes in as a part of the banks initiative to offer multiple channel banking
providing convenience for its customer. A versatile multifunctional, free service that is accessible
and viewable on the monitor of mobile phone. Mobile phones are playing great role in Indian
banking- both directly and indirectly. They are being used both as banking and other channels.

Internet Banking
The advent of the Internet and the popularity of personal computers presented both an
opportunity and a challenge for the banking industry. For years, financial institutions have used
powerful computer networks to automate million of daily transactions; today, often the only
paper record is the customer’s receipt at the point of sale. Now that their customers are connected
to the Internet via personal computers, banks envision similar advantages by adopting those same
internal electronic processes to home use.

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Banks view online banking as a powerful “value added” tool to attract and retain new customers
while helping to eliminate costly paper handling and teller interactions in an increasingly
competitive banking environment. In India first one to move into this area was ICICI Bank. They
started web based banking as early as august 1997.

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 TYPES OF INTERNET BANKING OR E-BANKING

Understanding the various types of Internet banking will help examiners assess the risks
involved. Currently, the following three basic kinds of Internet banking are being employed in
the marketplace.
 Informational- this is the basic level of Internet banking. Typically, the bank has
marketing information about the bank’s products and services on a stand-alone server.
The risk is relatively low, as informational systems typically have no path between the
server and the bank’s internal network. This level of Internet banking can be provided by
the banks or outsourced. While the risk to a bank is relatively low, the server or web site
may be vulnerable to alteration. Appropriate controls therefore must be in place to
prevent unauthorized alterations to the bank’s server or web site.

 Communicative- this type of Internet banking systems and the customer. The interaction
between the bank’s system and the customer. The interaction may be limited to electronic
mail, account enquiry, loan applications, or static file updates (name and address change).
Because these servers may have a path to the bank’s internal networks, the risk is higher
with this configuration than with informational systems. Appropriate controls need to be
in the place to prevent, monitor, and alert management of any unauthorized attempt to
access the bank’s internal networks and computer systems. Virus controls also become
much more critical in this environment.

 Transactional- this level of Internet banking allows customers to execute transactions.

Since a path typically exists between the server and the bank or outsourcer’s internal
network, this is the highest risk architecture and must have the strongest controls.
Customer transactions can include accessing accounts, paying bills, transferring funds
etc.

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 ADVANTAGES OF INTERNET BANKING

 Convenience- Unlike your corner bank, online banking sites never close; they’re
available 24 hours a day, seven days a week, and they’re only a mouse click away.

 Ubiquity- If you’re out of state or even out of the country when a money problem
arises, you can log on instantly to your online bank and take care of business, 24\7.

 Transaction speed- Online bank sites generally execute and confirm transactions at or
quicker than ATM processing speeds.

 Efficiency-You can access and manage all of your bank accounts, including IRA’s, CDs,
even securities, from one secure site.

 Effectiveness- Many online banking sites now offer sophisticated tools, including
account aggregation, stock quotes, rate alert and portfolio managing program to help you
manage all of your assets more effectively. Most are also compatible with money
managing programs such as quicken and Microsoft money.

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 DISADVANTAGES OF INTERNET BANKING

 Start-up may take time-In order to register for your bank’s online program, you will
probably have to provide ID and sign a form at a bank branch. If you and your spouse
wish to view and manage their assets together online, one of you may have to sign a
durable power of attorney before the bank will display all of your holdings together.

 Learning curves- Banking sites can be difficult to navigate at first. Plan to invest some
time and\or read the tutorials in order to become comfortable in your virtual lobby.

 Bank site changes- Even the largest banks periodically upgrade their online programs,
adding new features in unfamiliar places. In some cases, you may have to re-enter
account information.

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 E- BANKING SERVICES

1. Bill payment service

Each bank has tie-ups with various utility companies, service providers and insurance
companies, across the country. It facilitates the payment of electricity and telephone bills, mobile
phone, credit card and insurance premium bills.

To pay bills, a simple one-time registration for each biller is to be completed. Standing
instructions can be set, online to pay recurring bills, automatically. One-time standing instruction
will ensure that bill payments do not get delayed due to lack of time. Most interestingly, the bank
does not charge customers for online bill payment.

2. Fund transfer

Any amount can be transferred from one account to another of the same or any another bank.
Customers can send money anywhere in India. Payee’s account number, his bank and the branch
is needed to be mentioned after logging in the account. The transfer will take place in a day or so,
whereas in a traditional method, it takes about three working days. ICICI Bank says that online
bill payment service and fund transfer facility have been their most popular online services.

3. Credit card customers

Credit card users have a lot in store. With Internet banking, customers can not only pay their
credit card bills online but also get a loan on their cards. Not just this, they can also apply for an
additional card, request a credit line increase and God forbid if you lose your credit card, you can
report lost card online.

4. Railway pass

This is something that would interest all the aam janta. Indian Railways has tied up with ICICI
bank and you can now make your railway pass for local trains online. The pass will be delivered

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to you at your doorstep. But the facility is limited to Mumbai, Thane, Nasik, Surat and Pune. The
bank would just charge Rs 10 + 12.24 percent of service tax.

5. Investing through Internet banking

Opening a fixed deposit account cannot get easier than this. An FD can be opened online
through funds transfer. Online banking can also be a great friend for lazy investors.

Now investors with interlinked demat account and bank account can easily trade in the stock
market and the amount will be automatically debited from their respective bank accounts and the
shares will be credited in their de mat account.

Moreover, some banks even give the facility to purchase mutual funds directly from the online
banking system.

So it removes the worry about filling those big forms for mutual funds, they will now be just a
few clicks away. Nowadays, most leading banks offer both online banking and demat account.
However if the customer have there de mat account with independent share brokers, then need to
sign a special form, which will link your two accounts.

6. Recharging your prepaid phone

Now there is no need to rush to the vendor to recharge the prepaid phone, every time the talk
time runs out. Just top-up the prepaid mobile cards by logging in to Internet banking. By just
selecting the operator's name, entering the mobile number and the amount for recharge, the
phone is again back in action within few minutes.

7. Shopping at your fingertips

Leading banks have tie ups with various shopping websites. With a range of all kind of products,
one can shop online and the payment is also made conveniently through the account. One can
also buy railway and air tickets through Internet banking.

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 List of some banks operating E-Banking in India

Bank Name Technology Vendor Service offering

ABN AMRO Bank Infosys (Bank Away) Net Banking
Abu Dhabi Commercial Bank Infosys (Bank Away) ADCB Net Link
Bank of India I-flex BOIonline
Citibank Orbitech (now Polaris) Citibank Online
Corporation Bank I-flex CorpNet
Deutsche Bank db direct
Federal Bank Sanchez FedNet
Global Trust Bank Infosys (Bank Away) ibank@gtb
HDFC Bank i-flex/ Satyam Net Banking
HSBC Online@hsbc
ICICI Bank Infosys, ICICI InfoTech Infinity
IDBI Bank Infosys (Bank Away) i-net banking
IndusInd Bank CR2 Indus Net
Punjab National Bank Infosys (Bank Away) Internet Banking
Standard Chartered Bank In-House Me Standard Chartered Online
State Bank of India Satyam/Broad vision onlinesbi.com
UTI Bank Infosys (Bank Away) I connect

Table-1

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 INTERNET BANKING VERSUS TRADITIONAL BANKING

In spite of so many facilities that Internet banking offers us, we still seem to trust our traditional
method of banking and is reluctant to use online banking. But here are few cases where Internet
banking will turn out to be a better option in terms of saving your money.

'Stop payment' done through Internet banking will not cost any extra fees but when done through
the branch, the bank may charge you Rs 50 per cheque plus the service tax.

Through Internet banking, you can check your transactions at any time of the day, and as many
times as you want to.

On the other hand, in a traditional method, you get quarterly statements from the bank and if you
request for a statement at your required time, it may turn out to be an expensive affair. The
branch may charge you Rs 25 per page, which includes only 30 transactions. Moreover, the bank
branch would take eight days to deliver it at your doorstep.

If the fund transfer has to be made outstation, where the bank does not have a branch, the bank
would demand outstation charges. Whereas with the help of online banking, it will be absolutely
free for you.

As per the Internet and Mobile Association of India's report on online banking 2006, "There are
many advantages of online banking. It is convenient, it isn't bound by operational timings, there
are no geographical barriers and the services can be offered at a miniscule cost."

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 IMPACT OF E-BANKING ON TRADITIONAL SERVICES

One of the issues currently being addressed is the impact of e-banking on traditional banking
players. After all, if there are risks inherent in going into e-banking there are other risks in not
doing so. It is too early to have a firm view on this yet. Even to practitioners the future of e-
banking and its implications are unclear. It might be convenient nevertheless to outline briefly
two views that are prevalent in the market. The view that the Internet is a revolution that will
sweep away the old order holds much sway. Arguments in favor are as follows:

E-banking transactions are much cheaper than branch or even phone transactions. This could turn
yesterday’s competitive advantage - a large branch network - into a comparative disadvantage,
allowing e-banks to undercut bricks-and-mortar banks. This is commonly known as the "beached
dinosaur" theory.

E-banks are easy to set up so lots of new entrants will arrive. ‘Old-world’ systems, cultures and
structures will not encumber these new entrants. Instead, they will be adaptable and responsive.
E-banking gives consumers much more choice. Consumers will be less inclined to remain loyal.

E-banking will lead to an erosion of the ‘endowment effect’ currently enjoyed by the major UK
banks. Deposits will go elsewhere with the consequence that these banks will have to fight to
regain and retain their customer base. This will increase their cost of funds, possibly making their
business less viable. Lost revenue may even result in these banks taking more risks to breach the
gap.

Portal providers are likely to attract the most significant share of banking profits. Indeed banks
could become glorified marriage brokers. They would simply bring two parties together – eg
buyer and seller, payer and payee.

The products will be provided by monoclines, experts in their field. Traditional banks may
simply be left with payment and settlement business – even this could be cast into doubt.

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Traditional banks will find it difficult to evolve. Not only will they be unable to make
acquisitions for cash as opposed to being able to offer shares, they will be unable to obtain
additional capital from the stock market. This is in contrast to the situation for Internet firms for
whom it seems relatively easy to attract investment.
There is of course another view which sees e-banking more as an evolution than a revolution.
E-banking is just banking offered via a new delivery channel. It simply gives consumers another
service (just as ATMs did).
Like ATMs, e-banking will impact on the nature of branches but will not remove their value.
Experience in Scandinavia (arguably the most advanced e-banking area in the world) appears to
confirm that the future is ‘clicks and mortar’ banking. Customers want full service banking via a
number of delivery channels. The future is therefore ‘Martini Banking’ (any time, any place,
anywhere, anyhow).
Traditional banks are starting to fight back. The start-up costs of an e-bank are high. Establishing
a trusted brand is very costly as it requires significant advertising expenditure in addition to the
purchase of expensive technology (as security and privacy are key to gaining customer
approval).
E-banks have already found that retail banking only becomes profitable once a large critical mass
is achieved. Consequently many e-banks are limiting themselves to providing a tailored service
to the better off.
Nobody really knows which of these versions will triumph. This is something that the market
will determine. However, supervisors will need to pay close attention to the impact of e-banks on
the traditional banks, for example by surveillance of:
 strategy
 customer levels
 earnings and costs
 advertising spending
 margins
 funding costs
 Merger opportunities and threats, both in the UK and abroad.

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 THE INDIAN SCENARIO

Drivers of change

Advantages previously held by large financial institutions have shrunk considerably. The Internet
has leveled the playing field and afforded open access to customers in the global marketplace.
Internet banking is a cost-effective delivery channel for financial institutions. Consumers are
embracing the many benefits of Internet banking. Access to one's accounts at anytime and from
any location via the World Wide Web is a convenience unknown a short time ago. Thus, a bank's
Internet presence transforms from 'brochure ware' status to 'Internet banking' status once the
bank goes through a technology integration effort to enable the customer to access information
about his or her specific account relationship. 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

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 INDIAN BANKS ON WEB

The banking industry in India is facing unprecedented competition from non-traditional banking
institutions, which now offer banking and financial services over the Internet. 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.

Indian banks are going for the retail banking in a big way. However, much is still to be achieved.
This study that was conducted by students of IIML shows some interesting facts:

 Throughout the country, the Internet Banking is in the nascent stage of development
(more than 50 banks are offering varied kind of Internet banking services).
 In general, these Internet sites offer only the most basic services. 55% 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.

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 EMERGING CHALLENGES

Information technology analyst firm, the Meta Group, recently reported "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.

Certainly some existing brick and mortar banks will go out of business. But that's because they
fail to respond to the challenge of the Internet. The Internet and its underlying technologies will
change and transform not just banking, but also all aspects of finance and commerce. It
represents much more than a new distribution opportunity. It will enable nimble players to
leverage their brick and mortar presence to improve customer satisfaction and gain share. It will
force lethargic players who are struck with legacy cost basis, out of business-since they are
unable to bring to play in the new context.

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 E-BANKING WORLD WIDE

Since its inception, Internet banking has experienced strong and sustained growth. World Bank
report on leapfrogging in e-finance pointed out that the three countries with impressive progress
in information technology in this sense are Estonia, Republic of Korea and Brazil. Creation of
the world’s leading electronic banking systems has been done at a remarkably low cost compared
to other world-class internet banks .
In the European Union, 60 million people, representing 18 per cent of the adult population, use
online banking In France, the number of online banking accounts is recording an annual growth
rate of 75 per cent. However, Estonia is a country that has become a leader in Internet banking
(which now reaches 18 per cent of the population), not only among Eastern European countries
but in world rankings, through a combination of easy to- use software, free-of-charge
transactions and behavior changes resulting from the influence of the Nordic countries’ IT
culture on Estonia.

A sector in which Latin America is seems to be performing better than in other industries is
online retail banking. Growth in this area has been driven by traditional banks, which have used
the online channel to generate customer loyalty and improve their operating margins. Two
Brazilian banks, Bradesco and Banco do Brasil, have thus achieved more than 4 million online
customers each. Mexico is another leader of Internet banking in Latin America. It adopted
legislation providing for the development of both E-Commerce and e-finance. In Mexico, the
number of online bank users more than tripled from 700,000 in 2000 to 2.4 million in 2001, and
it could reach 4.5 million in 2005 (E-Marketer 2002b). One reason for the success of Latin
American banks’ online ventures seems to be the attention they have paid to providing retail
customers with multiple ways to access their accounts (Internet, telephone, wireless). However,
given that the share of the total population that actually has a bank account is relatively small,
the expansion of Latin American online banking may be facing a bottleneck.

Compared with overall Internet usage estimated at 4.4 million in Australia, the major banks
together have attracted only 1.2 million to online banking.

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The Internet is a global phenomenon and so is e-finance. Its deployment is not limited to
developed countries, and indeed some developing countries – such as India and the Republic of
Korea – are experiencing particularly strong growth in E-Banking. In Asia one of the most
impressive records has been achieved by the Republic of Korea. The Republic of Korea is
leading in online brokerage and in mobile banking. In South-East Asia Internet banking is also
developing rapidly in Thailand, Malaysia, and Singapore and to a lesser extent, in the
Philippines.

In Bangladesh there is a large gap between the computerization of foreign banks and that of local
commercial banks and as regards the state of their intra- and inter-branch online networks.
However, 75 per cent of local banks are planning to introduce E-Banking, which implies very
dynamic improvements.

Apart from North and South Africa the Sub Saharan Africa is the region that is seriously lagging
behind in Internet banking, although it is giving to the rest of the world the good example of
microfinance developments.

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 OBJECTIVES OF THE STUDY

The main objectives of the study are:

 To study the awareness level of service class people regarding E-Banking.

 To find out the frequency and the factors that influences the adoption of E-Banking
services.

 To measure the satisfaction level of people.

 To understand the problems encountered in by service class people while using E-

Banking services(ATM, Phone banking, etc)

PUNJAB NATIONAL BANK

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Punjab National Bank was registered on 19 May 1894 under the Indian Companies Act with its

office in Anarkali Bazaar LAHORE. The founding board was drawn from different parts of

India professing different faiths and a varied back-ground with, however, the common objective

of providing country with a truly national bank which would further the economic interest of the

country. PNB's founders included several leaders of the Swadeshi movement such as Dyal Singh

Majitha and Lala Harkishan Lal, Lala Lalchand, Shri Kali Prosanna Roy, Shri E.C. Jessawala,

Shri Prabhu Dayal, Bakshi Jaishi Ram, and Lala Dholan Dass. Lala Lajpat Rai was actively

associated with the management of the Bank in its early years. The board first met on 23 May

1894. Ironically, the PNB Website now claims Lala Lajpat Rai to be the founding father,

surpassing Rai Mul Raj and Dyal Singh Majithia.

PNB has the distinction of being the first Indian bank to have been started solely with Indian

capital that has survived to the present.

Punjab National Bank (PNB) (BSE: 532461, NSE: PNB) is an Indian financial services

company based in New Delhi, India. PNB is the third largest bank in India by assets. It was

founded in 1894 and is currently the second largest state-owned commercial bank in India ahead

of Bank of Baroda with about 5000 branches across 764 cities. It serves over 37 million

customers. The bank has been ranked 248th biggest bank in the world by the Bankers Almanac,

London. The bank's total assets for financial year 2007 were about US$60 billion. PNB has a

banking subsidiary in the UK, as well as branches in Hong Kong, Dubai and Kabul, and

representative offices in Almaty, Dubai, Oslo, and Shanghai.

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 Status of IT Implementation in The Bank

As on 24.11.2011 As on 28.12.2011

1. CBS Implementation

- Total CBS SOLs 5593 5642

- No of CBS Centers 2929 2939
- No of Customers- CBS (lacs) 522 526
FI (lacs) 40.81 41.20

- No of Accounts - CBS (lacs) 653 658

FI (lacs) 40.81 41.20

2. ATMs
No of ATMs 5741 5804
Average daily txns/ATM -
- on site (24 x 7) 152 146
- lobby 74 68
- Off-site 164 152

3. Internet Banking System Retail Corp Retail Corp

- No of Users ( in lacks ) 13.11 1.93 13.57 1.97
- Average Logins per day [ Hits ] 46600 48404 47582 49832

4. Mobile Banking SMS Mobile SMS Mobile

- No of users-(lacks) 56.12 0.32 63.21 0.40

5. RTGS Implementation
- RTGS enabled branches 5354 5371
6. NEFT Implementation
- NEFT enabled branches 5367 5411

Table-2

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LITERATURE
REVIEW

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 Literature Review

 Product and Technology group, PNB Bank, in its paper “Corporate banking using
technology in transactions” it was inferred that Information Technology has
revolutionized the services and mode of services offered by the banks to their corporate
clients. The emergence of E-Banking has enabled the banks to offer real-time transactions
and integrate all customers’ related functions. Indian Banks are utilizing the new
technology to provide better technology and convenient access to its customers and India
is thus poised to for a huge growth in the world of electronic banking.

 Chandana R, Unnithan, Paula M.C., Swatman in their research paper titled “E-
Banking Adaptions and Dot.Com viability: A comparison of Australian and Indian
experiences in the Banking sector” a comparative study of Australian and Indian
experiences in e Business was done, which seeks to identify the effectiveness of dotcoms
as indicators of e Business uptake and success on a sector-by-sector basis was
undertaken. It was concluded that the banking industry is now a very mature one and
banks are being forced to change rapidly as a result of open-market forces such as the
threat of competition, customer demand, and technological innovations such as the
growth of the Internet. E-Banking is a successful strategic weapon for banks to remain
profitable in a volatile, and competitive market place of today in both Indian and
Australian Economies despite the differences of IT usage.

 G. Kannabiran and P.C. Narayan discuss in their article the experiences of a private-
sector bank in deploying Internet banking and e Commerce in India. Strategic alignment
of business and IT strategies, planning and implementation of e-banking initiatives, and
management of benefits have been captured, along with key contributions to
development.
 Huggins points to the fact that traditional boundaries in banking are disappearing. Using
e Business methods, major retailers and telecom providers are starting to offer financial
services to their clients. Extending the value chain and offering versatile services seems
to be the key to retaining competitiveness in the sector. Attitudes are also shifting from
direct transactions to savings and investments, as the baby boomers reach their forties and
fifties, and prepare for retirement.

30
 Mario Martinez Guerreroin his paper titled “Profiling the adoption of Online banking
Services in the European Union” offers an empirical investigation on the adoption of
online banking services among European citizen. The use of e-banking services is
explained on the basis of socio-demographic and Internet –specific behavioral indicators.
The performed analyses provide support for the influence of country, age, profession and
several Internet behaviors on the use of E-banking.

 The Indian Internet Banking Journey In 2001, a Reserve Bank of India survey
revealed that of 46 major banks operating in India, around 50% were either offering
Internet banking services at various levels or planned to in the near future. According to a
research report,( India Research, Kotak Securities, May 2000.) while in 2001, India's
Internet user base was an estimated 9 lakh; it was expected to reach 90 lakh by 2003.
Also, while only 1% of these Internet users utilized the Internet banking services in 1998,
the Internet banking user base increased to 16.7% by mid- 2000.

31
 RESEARCH
METHODOLOGY

32
 RESEARCH METHODOLOGY

Research is defined as human activity based on intellectual application in the investigation of

matter. The primary purpose for applied research is discovering, interpreting, and the
development of methods and systems for the advancement of human knowledge on a wide
variety of scientific matters of our world and the universe.

The term research is also used to describe an entire collection of information about a particular
subject.

Methodology is the method followed while conducting the study on a particular project.
Through this methodology a systematic study is conducted on the basis of which the basis of a
report is produced.
It is a written game plan for conducting Research. Research methodology has many dimensions.
It includes not only the research methods but also considers the logic behind the methods used in
the context of the study and explains why only a particular method or technique has been used. It
also helps to understand the assumptions underlying various techniques and by which they can
decide that certain techniques will be applicable to certain problems and other will not. Therefore
in order to solve a research problem, it is necessary to design a research methodology for the
problem as the some may differ from problem to problem.

Nature
The methodology adopted to achieve the project objective involved exploratory research &
descriptive research method. The information required for fulfilling the objective of study was
collected from various primary and secondary sources.

33
Type of research

This study is EXPLORATORY and DESCRIPTIVE in nature. It helps in breaking vague

problem into smaller and precise problem and emphasizes on discovering of new ideas and
insights. Exploratory research was conducted during the initial stage of the research process
which helped to refine the problem into researchable one. It has progressively narrowed the
scope of research topic.

Research design
Research design constitutes the blue print for the collection, measurement and analysis of data.
The present study seeks to identify the extent of preferences of E-Banking over traditional
banking among service class. The research design is exploratory in nature. The research has been
conducted on service class people within Lucknow. For the selection of the sample, convenient
sampling method was adopted and an attempt has been made to include all the age groups and
gender within the service class.

Sources of data:
Following are the methods of sources of data:
Secondary data:
 Articles on E-Banking taken from journals, magazines published from time to time.
 Through internet.
Primary data:
Questionnaire was used to collect primary data from respondents. The questionnaire was
structured type and contained questions relating to different dimensions of e-banking preferences
among service class such as level of usage, factors influencing the usage of e-banking services,
benefits accruing to the users of e-banking services, problems encountered. An attempt was also

34
made to elicit reasons for its non-usage. The questions included in the questionnaire were open-
ended, dichotomous and offering multiple choices.

Sampling technique: The sampling technique used for judgment is CONVENIENCE AND
JUDGEMENT SAMPLING.

Sampling unit: It defines the target population that will be sampled i.e. it answers who is to be
surveyed. In this study, the sampling unit is the people of Lucknow.

Sampling size: It indicates the numbers of people to be surveyed. Though large samples give
more reliable results than small samples but due to constraint of time and money, the sample size
was restricted to 100 respondents. The respondents belong to different income group and
profession.

Method of data collection: The survey method is used to collect the data. Various places of
Lucknow visited for the purpose of collection of data.

Research instrument:
The instrument used for gathering data was questionnaire. To get further insight in to the
research problem, interview regarding their buying practices too was made. This was done to
crosscheck the authenticity of the data provided. To supplement the primary data and to facilitate
the process of drawing inference, secondary data was collected from published sources like
magazines, journals, newspapers etc.

Tools and techniques of analysis:

The data so collected will be analyzed through the application of statistical techniques, such as
bar graphs and pie charts.

35
 DATA
ANALYSIS
AND
INTERPRETATIO
N

36
 DATA ANALYSIS AND INTERPRETATION

Table 3.
Awareness of people regarding e-banking service provided by the bank while opening an account

No. of Respondents Percentage

Fully aware 37 37%
Had an idea 46 46%
No idea 17 17%
Total 100 100%
Figure 2.

Interpretation
As seen from Table 3, overall percentage of service class people having complete knowledge
about e-banking services provided by the bank while opening an account in it is 37%, those
having some idea about it is 46% and the percentage of people having no awareness of e-banking
services provided by the bank is 17%. It can reasonably, be concluded that nearly 85% of the
population is having awareness about e-banking services

Table 4.

37
Sources from which the respondents get the knowledge about the e-banking services

No. of Respondents Percentage

Personal Visit 15 15%
Executive from Bank 21 21%
Advertisements 34 34%
Friends /Relatives 26 26%
Others 2 2%

Figure 3

Sources of awareness about e-banking

2%
15%

26%
Personal Visit
Executive from Bank
21% Advertisements
Friends /Relatives
Others

34%

Interpretation

Table 4, indicates the percentage distribution of awareness avenues, the major are in favour of
advertisements, which score 34% among different avenues such as personal visit, executives of
the banks, advertisements and friend/relatives. While the least score is for personal visit and that
of other sources.

Table 5.

38
Awareness of E-Banking services

No. of Respondents Percentage

ATM 88 26.03%
Debit Card 60 17.75%
Credit Card 50 14.79%
Phone Banking 40 11.83%
Mobile Banking 50 14.79%
Internet Banking 50 14.79%
Total 338 100%

Figure 4

Interpretation
E-banking constitutes services provided in terms of ATMs, Debit Card, Credit Card, Phone
Banking, Mobile Banking, Internet Banking etc, of which the first six have been covered.
Amongst these ATM scores the largest used service status (26.03%) as indicated by table 5
figures. Close on the heels is Debit card (17.75%), Credit card (14.79%), while phone banking
lags behind by scoring the least ie.,11.83%.

39
 Table 6

Users of E-banking services

No. of Respondents Percentage

Users 74 74%
Non Users 26 26%
Total 100 100%

Figure 5

Interpretation
Table 6 shows that among those aware (which account for 83 in number) about 74 persons use e-
banking services, which is 74% of total population studied.

Table 7.

40
Representation of frequency of usage

Day % Wee % Fort % Mon % Infreq %

Wise k- ni- - -
wise ghtl thly uently
y
ATM 4 36.36 31 55.3 13 37.1 11 25.5 9 13.8
6 4 8 5
Debit 2 18.18 11 19.6 7 20 10 23.2 8 12.3
Card 4 6 1
Credit 1 9.09 5 8.93 6 17.1 6 13.9 18 27.6
Card 4 5 9
Phone 0 0 2 3.57 3 8.57 7 16.2 13 20
Bankin 8
g
Mobile 0 0 4 7.14 4 11.4 2 4.65 9 13.8
Bankin 3 5
g
Interne 4 36.36 3 5.36 2 5.71 7 16.2 8 12.3
t 8 1
Bankin
g
11 100 56 100 35 100 43 100 65 100
Figure 6

41
Interpretation
To find out the level of usage amongst the service class, percentage has been calculated from the
total completely filled in questionnaires and the incomplete questionnaires were discarded.
The frequency of usage of ATM is highest which is evident from table 7, followed by debit card..
Table 8.

Factors influencing the level of usage

Less
Strongl More than Averag Not
than Total
y average e at all
average
All time
56 8 11 1 3 79
availability
Ease of use 32 22 7 2 1 64
Nearness 21 18 14 5 0 58
Security 12 10 13 4 1 40
Direct access 32 12 7 2 0 53
Friends/ Relatives 3 8 14 7 8 40
Status symbol 7 11 14 7 10 49

Figure 7

42
Interpretation
A study of the factors, table 8, influencing the usage was made by listing out various factors
such as all time availability, ease of use, nearness etc., and from which it came to fore that
amongst the various factors all time availability is ranked as the major motivating factor,
followed by ease of use, direct access, nearness, security in decreasing order of importance.
Quite interestingly friends and relatives, status symbol scored the least motivating factors.

Table 9

Various benefits accruing from E-Banking services to its users

No. of Respondents Percentage

Time Saving 70 42.42%
Inexpensive 21 12.72%
Easy Processing 40 24.24%
Easy Fund Transfer 26 15.75%
Others 8 4.85%

43
Figure 8

Interpretation
When asked to list various benefits accruing from the usage of e-banking, time saving received
highest percentage score at 42.42% among different benefits such as time saving (42.42%),
inexpensive (12.72%), easy processing (24.24%), easy fund transfer(15.75%).
Quite interestingly, easy processing feature scored more than the inexpensiveness of the e-
banking services. The other benefits accruing to the people include ready availability of funds,
removal of middlemen and no rude customer relation executives.
Table 10

Problems identified by the users of E-Banking service

No. of
Factors Percentage
Respondents
a Time consuming 59 14.82%
b Insecurity 45 11.31%
c ATM out of order 62 15.58%
Amount debited
d 39 9.80%
but not withdrawn
Problem of
e change in mobile 42 10.555
number

44
 Password
f 54 14.57%
forgotten
g Card misplaced 50 12.56%
h Card misuse 47 11.81%

Figure 9

Interpretation
Most of the users face the problem of ATM out of order (15.58%), followed by time consuming
(14.82%), password forgotten (14.57%) and then other problems as card misplaced, card misuse,
insecurity, etc

Table 11

Reasons for not using E-Banking services as rated by the non users

Factors Highly More Averag Less Least Total

45
 than than
importan importan
averag e averag
t t
e e
Weights 5 4 3 2 1
No
need( Satisfie
A d with 19 8 22 6 22 77
traditional
banking)
It seems like
B 7 0 9 16 30 62
a botheration
C Insecurity 17 11 21 7 13 69
No access to
D internet/mobi 9 5 13 10 16 53
le
Lack of
E operational 12 7 12 12 15 58
knowledge
F Hidden costs 21 5 14 8 16 64

Figure 10

46
Interpretation
From the non users, an attempt was made to elicit the reasons for its non usage. As indicated by
table 12, satisfaction with traditional banking was considered as prime de-motivating factor,
followed closely by the fear of insecurity, then ‘hidden cost’ factor, which suggested their
resistance to change, which to some extent can be countered by aggressive advertisement and
utilizing other modes of awareness dissemination as well.

47
FINDINGS

48
 FINDINGS OF THE STUDY

 The overall percentage of servicemen having complete knowledge about e-banking

services provided by the bank while opening an account in it is 37%, those having some
idea about it is 46% and the percentage of people have no awareness of e-banking
services provided by the bank is 17%. It can reasonably, be concluded that nearly 85% of
the population is having awareness about e-banking services.
 The percentage distribution of awareness avenues, the major skewness is in favor of
advertisements, which score 34% among different avenues such as personal visit,
executives of the banks, advertisements and friend/relatives. While the least score is for
personal visit.
 Among those aware (which account for 83 in number) about 74 persons use e-banking
services, which is 74% of total population studied.
 E-banking constitutes services provided in terms of ATMs, Debit Card, Credit Card,
Phone Banking, Mobile Banking, Internet Banking etc, of which the first six have been
covered. Amongst these ATM scores the largest used service status (26.03%) Close on the
heels is Debit card (17.75%), Credit card (14.79%), while phone banking lags behind by
scoring the least ie.,11.83 .
 To find out the level of usage amongst the service class, percentage has been calculated
from the total completely filled in questionnaires and the incomplete questionnaires were
discarded. The frequency of usage of ATM is highest followed by debit card..
 A study of the factors, influencing the usage was made by listing out various factors such
as all time availability, ease of use, nearness etc., and amongst the various factors all
time availability is ranked as the major motivating factor, followed by ease of use, direct
access, nearness in decreasing order of importance. Quite interestingly friends and
relatives, status symbol scored the least motivating factors.
 When asked to list various benefits accruing from the usage of e-banking, time saving
received highest percentage score at 42.42% among different benefits such as time saving
(42.42%), inexpensive (12.72%), easy processing (24.24%), easy fund
transfer(15.75%).Quite interestingly, easy processing feature scored more than the
inexpensiveness of the e-banking services. The other benefits accruing to the people
49
 include ready availability of funds, removal of middlemen and no rude customer relation
executives.
 Among the users, various problems that are encountered while using e-banking services.
Card misuse and its misplace are major reasons that create hurdles in its usage, while
time consumption, accounting mistakes such as amount debited but not withdrawn and
change of mobile number seem to be the least bothering problems.
 From the non users, an attempt was made to elicit the reasons for its non usage..
Satisfaction with traditional banking was considered as prime de-motivating factor,
followed closely by the fear of insecurity, then ‘hidden cost’ factor, which suggested
their resistance to change, which to some extent can be countered by aggressive
advertisement and utilizing other modes of awareness dissemination as well.

50
SWOT ANALYSIS

51
 SWOT ANALYSIS

STRENGTHS :

 It has an extensive distribution network comprising of 5000 branches in 746 cities & 4
international office in this provides a competitive edge over the competitors.
 The Bank has a strong retail depository base & has more than million customers.
 Bank has strong brand equity.
 ISO 9001 certification for its depository & custody operations & for its backend
processing of retail operations & direct banking operation.
 The bank is a market leader in cash settlement service for the major stock exchanges in
its country.
 PNB Bank is one of the largest public sector banks working in India.
 It has a highly automated environment in terms of information technology &
communication system.
 Infrastructure is one of the best in the country.
 It has many innovative products like kids Advantage scheme, NRI services.

WEAKNESSES :

 Account opening and delivery of cheque book take more time. Lack of availability of
different credit products like CC Limit, Bill discounting facilities.
 Complicated terms and conditions of products, which is not easily understandable by the
layman.

52
OPPORTUNITIES :

 Branch expansion
 Door step services
 Infrastructure movements & better systems for trading & settlement in the Govt.
securities & foreign exchange markets.

THREATS :

 The bank has started facing competition from players like SBI, ICICI,HDFC in the
finance market itself. This may reduce the profit margins in the future.
 Some Banks have 7 days banking.

53
LIMITATIONS

54
 LIMITATIONS OF THE STUDY

Every research is conducted under some constraints and this research is not an exception.
Limitations of this study are as follows:-

1. There were several time constraints.

2. The study is limited to areas of lucknow only.

3. The sample size of only 100 was taken from the large population for the purpose of study,
so there can be difference between results of sample from total population.
4. The study is related to service class people only.

5. People were reluctant to go in to details because of their busy schedules.

6. Merely asking questions and recording answers may not always elicit the actual
information sought.

7. Due to continuous change in environment, what is relevant today may be irrelevant

tomorrow.

55
CONCLUSION

56
 CONCLUSION

The usage of E-banking is all set to increase among the service class. The service class at the
moment is not using the services thoroughly due to various hurdling factors like insecurity and
fear of hidden costs etc. So banks should come forward with measures to reduce the
apprehensions of their customers through awareness campaigns and more meaningful
advertisements to make E-banking popular among all the age and income groups. Further, with
increasing consumer demands, banks have to constantly think of innovative customized services
to remain competitive. E-Banking is an innovative tool that is fast becoming a necessity. It is a
successful strategic weapon for banks to remain profitable in a volatile and competitive
marketplace of today.

In future, the availability of technology to ensure safety and privacy of e-transactions and the
RBI guidelines on various aspects of internet banking will definitely help in rapid growth of
internet banking in India.

57
SUGGESTIONS

58
 SUGGESTIONS

Internet banking would drive us into an age of creative destruction due to non-physical
exchange, complete transparency giving rise to perfectly electronic market place and customer
supremacy. The question to be asked right now is "What the Indian Banks should do" Whatever
is the strategy chosen and options adopted, certain key parameters would determine the bank's
success on web:

For long-term success, a bank may follow:

 Adopting a webs mindset

 Catching on the first mover's advantage

 Recognizing the core competencies

 Ability to deal multiplicity with simplicity

 Senior Management initiative to transform the organization from inward to

outward looking

 Aligning roles and value propositions with the customer segments

 Redesigning optimal channel portfolio

 Acquiring new capabilities through strategic alliances.

The above can be implemented in four steps:

 Familiarizing the customer to new environment by demo version of software on bank's

web site. This should contain tour through the features which are to be included. It will
enable users to give suggestions for improvements, which can be incorporated in later
versions wherever feasible.

59
 Second phase provides services such as account information and balances, statement of
account, transaction tracking, mailbox, check book issue, stop payment, financial and
customized information.

 The third phase may include additional services such as fund transfers, DD issue,
standing instructions, opening fixed deposits, intimation of loss of ATM cards.

 The last step should include advanced corporate banking services like third party
payments, utility bill payments, establishment of L/Cs, Cash Management Services etc.
Enhanced plan for the customers in future can include requests for demand drafts and pay
orders and many more to bring in the ultimate in banking convenience.

Also if proper training should be given to customer by the bank employs to open an account
will be beneficial secondly the website should be made friendlier from where the first time
customers can directly make and access there accounts.

We can see the time is changing and we he passage of time people are accepting technology
there is still a lot of perceptual blocking which hampers the growth it’s the normal tendency
of a human not to have changes work on the old track, that’s also one of the reason for the
slow acceptance of internet banking accounts.
 Give proper training to customers for using i-banking
 Create a trust in mind of customers towards security of there accounts
 Provide a platform from where the customers can access different accounts at single
time without extra charge.
 Make there sites more users friendly.
 Customers should be motivated to use I banking facilities more.

60
 BIBLIOGRAPHY

BOOKS

 Malhotra, T. D., “ Electronic Banking and Information Technology in Banks” Sultan

Chand and Sons, New Delhi,2008.

 S.S Kaptan & N.S. Choubey. “Indian Banking in Electronic Era”

 Internet Banking in India-Part I- Dr A. K. Mishra

 IDBRT report on “Technology insight and foresight in Banking”

WEBSITES

 www.banknetindia.com

 www.bharatbook.com

 www.pnbindia.com

 www.rbi.com

 www.allbankingsolution.com

61
Annexure

62
 QUESTIONAIRE
Dear Respondent,
We are conducting a research study of “E-banking Preferences among people in Lucknow”. We will
appreciate your cooperation in this regard by filling up the questionnaire carefully. All the information
provided by you will be kept confidential.

1. In which banks do you have your account?

a. State Bank of India b. HDFC Bank
c. Punjab National Bank d. ICICI Bank
e. State Bank of Patiala f. Canara Bank g.
Bank of India h. Oriental Bank of Commerce
i. Any other, Please Specify
i. ---------------------
ii. ---------------------
iii. ---------------------

2. While opening up the account, were you aware of E-banking services provided by your bank?
a. Fully aware b. Had an idea c. No

3. If answer to question no.2 is c, how did you get to know about E-banking services of your bank?
a. Personal visit
b. Executive from the bank
c. Advertisements
d. Friends/ Relatives

4. If answer to question no.2 is a or b, which of the following E-banking services are you aware of?
e. ATM
f. Debit Card
g. Credit Card
h. Phone banking
i. Mobile banking
j. Internet banking

5. Do you use E-banking services?

a. Yes b. No
(If No, answer question no. 10 directly).

6. If answer to question no.5 is yes, how frequently do you use each of the following services?

63
 Once in a Once in a Once in a Once in a Infrequentl
Factors
day week fortnight month y
a ATM
b Debit Card
c Credit Card
d Phone Banking
e Mobile Banking
f Internet Banking

7. Which of the following factors influence you the most to use E-banking services?

More than Less than

Factors Strongly average Not at all
average Average
a All time availability
b Ease of use
c Nearness
d Security
e Direct access
f Friends/ Relatives
g Status symbol

8. Which of the following benefits accrue to you, while using E-banking services?
a. Time saving b. Inexpensive
c. Easy processing d. d. Easy fund transfer
e. Any other, please specify__________________________________________
9. Rate the problems identified while using E-banking services?

Highly
Factors considere Major Average Minor Ignorable
d
a Time consuming
b Insecurity
c ATM out of order
d Amount debited but not
withdrawn
e Problem of change in
mobile number
f Password forgotten
g Card misplaced
h Misuse of card

10. Kindly rate the following reasons enlisted for not using the E-banking services?

Highly More than Less than Least

Factors Average
important average average important
a No need( Satisfied with

64
 traditional banking)
b It seems like a botheration
c Insecurity
d No access to
internet/mobile
e Lack of operational
knowledge
f Hidden costs
Any other, please specify__________________________________________
11. To what extent are you satisfied with your Banks’ E-banking services?

b. Highly Satisfied ___________

c. Satisfied _________

d. Neutral ___________

e. Dissatisfied ___________

f. Highly dissatisfied ___________

12. What other services you would like to have through E-banking?
____________________________________________________________

____________________________________________________________

Respondent’s Profile

Name : ________________ Income level per month

Age : ________________ Less than Rs. 10,000

Gender (M/F) : ________________ Rs.10,000 to Rs.20,000

Profession : ________________ Rs.20,000 to Rs.30,000

Organization : ________________ More than Rs.30,000

65