PROJECT ON POPULARITY OF INTERNET BANKING

1. SHRI RAM COLLEGE OF COMMERCE
TOPIC
A PROJECT SUBMITTED IN PARTIAL FULFILMENT
OF THE REQUIREMENT FOR DEGREE OF B.COM (H)
UNIVERSITY OF DELHI
PAPER – CH6.3 (B)
BY
NAOREM BORIS SINGH
14BC263
14072204344
M-64
POPULARITY OF INTERNET BANKING
2016-17
UNDER THE SUPERVISION OF
SUDHANSHU

2. DECLARATION
This is to cerify that the material embodied in this study entitled
“Popularity of Internet banking” is based on my own research
work and my indebtedness to other work/publications has been
acknowlwdged at the revelant places.
This study has been submitted elsewhere either wholly or in
part for award of any degree.
Naorem Boris Singh
This is to cerify that the project titled “popularity of internet
banking” done by “Naorem Boris Singh” is a part of his/her
academic curriculum for the degree of B.Com(H). It has no
commercial implication and is done only for academic purpose.
SUDHANSHU
Dept. of Commerce

3. Index
Executive Summary
ResearchMethodology
1. History of Banking inIndia
2. Internet Bankng
2.1 Introduction
2.2 Features
2.3 Role and Significance
3. Internet Banking inIndia
3.1 The Indian Scenario
3.2 Projects andServices Offered
3.2.1 Internet Banking
3.2.2 Bill Payment
3.2.3 Business banking
3.2.4 Lending
3.2.5 Imaging
3.2.6 Account Alerts
3.2.7 Account toAccount Transfers
3.2.8 Account Opening and Funding
3.2.9 Secure Messaging
3.3 Future Scenario
4. Pros and cons of Internet Banking
4.1 Pros of Internet Banking
4.2 Cons of Internet Banking
5. Case Study on State Bank of India
5.1 SBI Bank
5.2 E-Mail fraud

4. 5.3 Online fruad
5.4 Suggestions
6. Banking in the Next Century
7. Conlusion
8. Bibliography

6. Executive Summary
Internet is increasingly used by banks as a channel for receiving instructions and delivering their
products and services to their customers. Different banks follow deiiferent levels of providing
services on internet. Compared to banks abroad, India banks offering online services still have a
long way to go in terms of number of users and sufficient infrastructure in place.
Various security options are in place or are being looked at; however, Certification Authority is
still misssing in India. Also there are various risks associated with internet banking such as
Operational Risk, Security Risk, Cross Border Risks, Legal Risk, etc.
The Basel Committee’s Electronic Banking Group (EBG) in late 1999, tried to delelop risk
management guidance for internet banking that will guide bankers and promote effective and
consistent bank supervision around the world.
The use of Information Technology in banking enables the banks to provide Any Time Banking,
Customer Service, Telebanking, Home Banking, Plastic Card Services, etc., facilities. However,
these facilities along with certain advantages these facilities along with certain advantages
these have certain disadvantages too.
A successful internet banking solution offers:-
 Exceptional rates on saving, cash deposits, free bill payments and rebates on ATM
surcharges.
 Credit cards with low rates.
 Easy online application for all accounts,including personal loans and mortages
 24 hours account access.
Concluding this, India is on threshold of a major banking revolution with the invasion of net
banking and with the concept of payment gateway coming in; banks are vying with one another
for the lion’s share in the market.
In this report, I attempt to enlist the various products and services offered by different banks in
India, risks and challenges involved in internet banking, different uses of information
technology such as Shared Payment Network System (SPNS). ATM, Any Time Banking,
Electronic Funds Transfer, Telebanking etc., banks controls, main issues concerning online
banking and the scope for online banking in the near future

7. ResearchMethodology
Primary Data
Case study on State Bank of India
Visiting internet banking services websites
Secondary Data
College Library
Internet Website
1. History of Banking inIndia
Without a sound and effective banking systemin India it cannot have a healthy economy. The
banking system of India should not only be hassle free but it should be able to meet new
challenges posed by the technology and any other external and internal factors.
For the past three decades India’s banking systemhas several outstanding achievements to its
credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or
cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners
of the country. This is one of the main reasons of India’s growth process.

8. The government’s regular policy for Indian bank since 1969 has paid rich dividends with the
nationalisation of 14 major privade banks of India. Not long ago, an account holder had to wait
for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he
has a choice. Gone are days when the most efficient bank transferred money from one branch
to other in two days. Now it is simple as instant messaging or dial a pizza. Money has become
the order of the day.
The first bank in India, though conservative, was established in 1786. From 1786 till today, the
journey of internet banking systemcan be segregated into three distinct phases. They are as
mentioned below:
Early phase from 1786 to 1969 of Indian Banks.
Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms.
New phase of Indian Banking System with the advent of Indian Financial and Banking Sector
reforms after 1991.
1. Internet Banking
2.1 Introduction
The precursor for the modern home online baking services were the distance banking service
over electronic media from the early ‘80s and referred to the use of a terminal, keyboard and
TV( or monitor) to access the banking system using a phone line. “Home banking” can also refer
to the use of a numeric keypad to send tones down a phone line with instructions to the banks.
Online services started in New York in 1981 when four of the city’s major banks (Citibanks,
Chase Manhattan, Chemical and Manufactures Hanover) offered home banking services using
the videotext system. Because of the commercial failure of videotext these banking services

9. never became popular except in France where the use of videotext (Minitel) was subsidized by
the telecom provider and the UK, where the Prestel systemwas used.
With cybercafe’s and kiosks springing up in different cities access to the Net is going to be easy.
Internet banking (also referred as e-banking) is the latest in this series of technological wonders
in the recent past involving use of Internet for banking products and services.
Internet banking is changing the banking industry and is having the major effects on banking
relationships. Banking is no longer confined to the branches were 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 to “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 is the cheapest way
of providing banking services.
Online banking ( or Internet banking) allows customers to conduct financial transactions on a
secure websites operated by their retial or virtual bank, credit union or building society.
2.2 Features
Online banking solutions have many features and capabiities in common, but traditionally also
have some that are application specific.
The common features fall broadly into several categories
 Transactional
 Electronic bill presentment and payment.
 Funds transfer between a customer’s own checking and saving accounts, or to
another customer’s account.
 Investment purchase or sale.
 Loan application and transactions, such as repayment.
 Non-transactional
 Bank statements.
 Financial Institution Administration.
 Support of multiple users having varying levels of authority.
 Transacton approval process.
 Wire transfer.
A feature commonly unique to Internet banking is Personal financial management support,
such as importing data into personal accounting software. Some online banking platforms
support account aggregation to allow the customers to monitor all of their accounts in one
place whether they are with their main bank or with other institutions.
2.3 Role and Significance

10. Internet banking has transformed the financial industry. Banking customers can perform most
transactions by themselves on their own computer at hours that work for them. No longer do
customers have to wait in lines at the bank or rush to get to their bank before it closes. They
can withdraw cash, perform transfers and make ppayments with the click of a mouse.
Internet banking is convenient for those who are working from home, have limited time or
want to keep track of their finances 24 hours a day. Internet banking allows account holders to
transfer funds, pay bills, keep a more accurate balance ledger, and report fruadulent
transactions and more. Anyone who has a laptop or desktop computer with Internet access
may do their banking from anywhere in the world.
Banks now have come under great pressure to reduce operational costs to safeguard their
bottom lines. With banking tuning more and more customer-centric with every passing day,
technology as an enabler has helped banks to launch a whole arrey of customer-centric
products such as ATMs, Debit Cards, 24 hour Anywhere Banking. Customer Relations
Management is now a very potential concept. Internet Banking also has a role to play in
ensuring a fair return to shareholders, by facilitating in ensuring greater profits to the banking
sector. The recent emerging trends in self-service channels, namely ATMs, Call-centers, Internet
and Mobile Banking would increase the use of E-banking as this offer the twin benefit i.e.
convenience to the customers and reduction and cost of operation to the banks. The popularity
of internet banking likely depends upon inclucating in customers about their security and
personal privacy of their money and assets.
2. Internet Banking inIndia
3.1 The Indian Scenario
The Interenet banking is changing the banking industry and is having the major effects on
banking relationships. Internet banking involves use of Internet for delivery of banking products
and services. A successful Inetrnet banking solution offers
 Exceptional rates on savings, CDs and IRAs
 Checking with no monthly fee, free bill payment and rebates of ATM surcharges
 Credit cards with low rates
 Easy online applications for all accounts, including personal loadns and mortages’24
hour account access
 Quality customer service with personal attention

11. Internet banking, both as a medium of delivery of banking services and as a strategic tool for
business development. At present, the total internet users in the country are estimated at 9
lakh. However, this is expected to grow exponentially to 90 lakh by 2030. Only about I percent
of internet users did banking in 1998. This is increased to 16.7 percent in march 2000.
-(india Reserce, May 29, 2000, Kotak Securities)
Cost of banking service through the internet from a fraction of costs tthrough conventional
methods. Rough estimates assume teller cost at Re 1 per transaction. ATM transaction cost at
45 paisa, phone banking at 35 paisa, debit cards at 20 paisa and internet banking at 10 paisa per
transaction. The banking industry in India is facing unprecendented 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 compititors to enter the financial services market quikly and
efficiently.
Indian banks are going for the retial banking is a big way. However, much is still to be achieved.
This study which was conducted by students of IIML shows some interesting facts:
 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. 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 and cash management services.
 Foreign and Private Banks are much advanced in trems of the number of sites and their
level of development.
2.2 Products and Services offered
Meet customer demands for both convenience and financial independence. Every online
transaction drives more traffic to your websites. By integreting the website and online services,
customers will see important news and promotions they may have otherwise missed. Internet
Banking solutions include:
2.2.1 Internet Banking
Show customers you are there for them anytime, anyplace. Make it easy to give customers 24/7
access to their accounts and other valued information.
2.2.2 Bill Payment
Give customers convenient, safe, and reliable, access to pay their bills online – 24/7. Bill
Payment can be integreted with Internet Banking platform, providing a seamless single-sign-on

12. user experience, or it can be offered independent of any Internet banking product or data host.
Choose to offer customers good funds or risk-based settlement from a variety of third-party
disbursement partners.
2.2.3 Business Banking
Provide a wide range of online tools specially designed for your customer’s small business
needs.
2.2.4 Lending
Offer customers the ability to apply for loans online.
2.2.5 Imaging
Provide customers, fast, easy and secure electronic access to their check images ans staements
when it is convenient for them from home or office.
2.2.6 Account Alerts
Give the financial institution the opportitunity to notify customers with real-time email account
alerts.
2.2.7 Account to Account Transfer
With Account to Account Transfer solution, one can offer account holders the ability to move
money between any institution and accounts at other financial institution.
2.2.8 Account Opening and Funding
Provide an automated online account opening and funding process for new accounts.
2.2.9 Secure Messaging
Customers can send a secure SSL-encrypted message that can be stored and answered in your
Internet Banking administrative site, enabling customers to send a financial institution
questions and other communications containing sensitive data, such as account number and
balances.
2.3 Future Scenario
These is no doubt that potential for net banking in India is immense considering the rising
penetration levels of the World Wide Web in Indian homes and offices. When one takes a look
at what is available worldwide, one sees that net banking is more of a norm rather than an
exception in many developed countries. In India, however, there may arise problems with

13. nationalized banks, which have in the past opposed computerization. However, the fact
remains that given a choice, customers would like to bank via the net and the next decade
could well see virtual banking becoming a reality.
Compared to banks abroad, India banks offering online services still have a long way to go. For
online banking to reach a critical mass, there has to be sufficient number of users and the
sufficient infrastructure in place.
Reserve Bank of India has constituted a group to examine different issues relating to I-banking
and recommend technology, security legal standards and operational standards keeping in view
the international best practics. In the following paragraphs a generic set of risks discusssed as
the basis for formulating general risk control guidelines.
The future of banking would be in terms of integretion. This is already becoming a reality with
new-age banks such YES Bank, and others too adopting a single-PIN. Geography will no longer
be an inhibitor. Technology will prove to be the differentiate or in the short-term but the
dynamic environment will soon lead to its saturation and what will ultimately be the key to
success will be a better relationship management.
3. Pros and Cons of Internet Banking
Many people are turning to online banking to meet their banking needs. Online banking is less
expensive for the banks because of the lack of paper and postage involved, so they encourage
their customers to transition to online banking. Many customers continue to resist this push,
feeling uncomfortable with handling their banking needs over a computer.Online banking
comes with both advantages and disadvantages, which are outlined below.
4.1 Pros of Internet Banking
24/7 availability of banking services and flexibility are the acknowledged advantages pf online
banking. Better interest rates on CDs and saving accounts that are opened online, wider array
of financial products and services for customers are other attractive features of online banking.
The advantages of online banking are obvious. Business people can access their personal and
business account information while saving a trip to the bank. You can check your balance
whenever you need to, even if the bank is closed. Not only that, but you can pay bills online as
well, which saves both time and money on poatage.
Another advantages of Internet banking is the ability to easily compare services offered by
different banks. You can buy financial products and apply for loan online, and in doing so, you
can compare your options to ensure that you get the best posssible services. You can even buy
insurance online through Internet banking services. Stocks and bonds and other investment can
be managed with online banking from your home or office independent of a financial
intermediary like a stockbroker.
3.2 Cons of Internet Banking

14. Intrenet banking or electronic banking allows customers to access their accounts at any time
from any computer or smart phone. This banking style has a lot of advantages,including 24-
hour account monitoring, the ability to bank from anywhere and fast transaction. However, this
system has some distinct disadvantages, too.
 Limited Access
 Fees
 Security Concerns
 Identity Confirmation
 Customer service
 Accessibility
4. Case Study: State Bank of India
5.1 SBI Bank
The State Bank of India is the oldest and largest bank in India, with more than $250 billion (USD)
in assets. It is the second-largest bank in the world in number of branches; it opened its
10,000th branch in 2008. The bank has 84 international branches located in 32 countries and
approximately 8,500 ATMs. Additionally, SBI has controlling or complete interest in a number of
affiliate banks, resulting in the availability of banking services at more than 14,600 branches
and nearly 10,000 ATMs.
SBI traces its heritage to the 1806 formation of the Bank of Calcutta. The bank was renamed the
Bank of Bengal in 1809 and operated as one of the three premier "presidency" banks (the
presidency banks had the exclusive rights to manage and circulate currency and were provided
capital to establish branch networks). In 1921, the government consolidated the three
presidency banks into the Imperial Bank of India. The Imperial Bank of India continued until
1955, when India's central bank, the Reserve Bank of India, acquired the majority interest in the
bank and changed its name to the State Bank of India (SBI).
In 1959, the Indian government passed the State Bank of India Act, resulting in the acquisition
(majority shareholding) of eight state-affiliated banks and the creation of the State Bank of
India Group (SBI Group). The SBI itself is now majority owned by the Indian government, which
purchased the shares held by the Reserve Bank of India. The State Bank of India and its affiliate
banks are profiled in Exhibit 1.

15. Exhibit 1
Profile of the State Bank of India and Associate Banks (May 2008)
Source: State Bank of India Group
Unlike private-sector banks, SBI has a dual role of earning a profit and expanding banking
services to the population throughout India. Therefore, the bank built an extensive branch
network in India that included many branches in low-income rural areas that were unprofitable
to the bank. Nonetheless, the branches in these rural areas bought banking services to tens of
millions of Indians who otherwise would have lacked access to financial services. This tradition
of "banking inclusion" recently led India's Finance Minister P. Chidambaram to comment, "The
State Bank of India is owned by the people of India."
A lack of reliable communications and power (particularly in rural areas) hindered the
implementation of computerization at Indian banks throughout the 1970s and 1980s. During
this period, account information was typically maintained at the local branches with either
semiautomated or manual ledger card processing. During the 1990s, the Indian economy began
a period of rapid growth as the country's low labor costs, intellectual capital, and improving
telecommunications technology allowed India to offer its commercial services on a global basis.
This growth was also aided by the government's decision to allow the creation of private-sector
banks (they had been nationalized in the 1960s). The private-sector banks, such as ICICI Bank
and HDFC Bank, altered the banking landscape in India. They implemented modern centralized
core banking systems and electronic delivery channels that allowed them to introduce new

16. products and provide greater convenience to customers. As a result, the private-sector banks
attracted middle and upper-class customers at the expense of the public-sector banks.
Additionally, foreign banks such as Standard Chartered Bank and Citigroup used their advanced
automation capabilities to gain market share in the corporate and high-net-worth markets.
The SBI Internet Banking is one of its kind is many regards. The login and transaction on the
website is so easy that even first-time users can access their account and perform the
transaction functions with ease. The value added service enable us to make the payments of
our telephone Bills, Electricity Bills etc online and this reflects the reach of the State Bank of
India to make our daily chores easy.
Availing the Internet banking services, you can do the following normal banking transactions
online:
 Self-account funds transfer across India.
 Third party transfers in the same branch.
 New account opening.
 Demand draft requests.
 Standing instruction.
 New Cheque-book request and much more.
Apart from these, the other salient value-added features available are:
 Railway tickets booking.
 Utility bill payments.
 LIC and other insurance premia payments.
 SBI Mutual funds investments.
 Remit Subscription to PPF account.
 Credit card dues payments.
 Deposits your taxes.
 Donations to your religious inspirations.
 Donations to Red Cross and such other organisation.
 Setting up SMS alerts for transaction information.
4.2 E-Mail Fraud
Online fruadsters targeted SBI customers through spam mail that asked them to disclose
passwords and other information, but the bank said no financial loss was reported so far.
E-mails with the subject ‘Important information from State Bank of India’ and ‘Official
information from State Bank of India’ started circulating from Monday. Once opened, the mail
asked customers to click on a link.
“For security purposes your account has been rendomly chosen for verification. To verify your
account information we are asking you to provide us with all the data we are requesting.
Otherwise we will not be able to verify your identity and access to your account will be denied.
Please click on the link below to get to the SBI secure page and verify your account details.
Thank you” the e-mail said.

17. The ingenuity of the e-mail is striking as when clicked on the link, it opens a Web page that is an
exact replica of SBI’s and simultaneously open the bank Web site.
Customers were asked to key in their identification number, login and fund transfer passwords.
The link, however, did not work on Wednesday. An SBI spokesman said so far no financial loss
was reported because of the fruad. “It’s not easy to say how many of our customers have got it.
First, we felt it will be a large number. But now our assesment is it’s a small number,” the
spokesman said.
4.3Online fruad
CBD Belapur resident Vishal Sharma suffered a loss of Rs 95,000, which was transferred through
19 phone bank transactions in just two minutes.
The police have so far booked Bhavin Thakur of Chira Bazaar Mumbai. That is because Sharma’s
money was transferred into Thakur’s account on june 2. But Sharma has alleged that the loss
occurred because SBI Bank failed to protect his account.
4.4Suggestions
 To prevent online banking from remaining an expensive additional channel that does
little to retain footloose customers, banks must act quickly.
 The first and most obvious step they should take is to see to it that the basic problem
fuelling dissatisfaction has been addressed.
 After repairing these basic deficiency, banks must ensure that their services are
compititive.
 Obviously, it should include checking, savings and brokerage services, which anchor
customers to the institution.
 In addition, to meet the challenge of online brokerage and other new entrants, banks
would need to add “supermarkets” selling products such as mortage funds and
insurance.
5. Banking in the next century
More and more non banking institutions are going to provide the banking functions than the
designated banks in the coming century. Banks are going to be vanished from its existing strong
positions. Financial liberalization, internationalization, and technological advancement are
going to further pressurize the banks to make their struggle for existence. If a bank overcome
all these pressures survival of the fittest comes again because of the technological innovation
and the type of compitition in the banking industry.

18. Banks also need to revitalize their fee income flows to supplement and supplant is necessary
their net interest margin for which they are required to reemphasis risk management on a daily
basis. Banks are focused to give up isolated approaches to the challenges of compitition
profitably and risks management. Strategic planning has superseded the isolated approaches.
The need for sound conceptual and technical skills has been seared into every bankers mind.
For banks to survive profitable they have to improve the operational methods with latest hi-
tech financial modeling content.
6. Conclusion
Technology innovation and fierce compitition among existing banks have enable a wide array of
banking productrs and services, being made available to retial and wholesale customer through
an electronic distribution channel, collectively referred to as e-banking. The integretion of e-
banking application with legacy systemimplies an integreted risk management approach for all
banking activitiesof a banking institution. Latest recommendations of Basel Committee
recognize that each bank’s risk profile is different and required a tailored risk mitigation
approach appropriate for the scale of e-banking operations, the materiality of the risks present
and the willingness and ability of the institution to manage their risks. This implies that a “one
scale fits all” approach to e-banking risk management issues may not be appropriate.
Banks have traditionally been in the forefront of hamessing technology to improve product and
efficiency. Technology is altering the relationships between banks and its internal and external
customers. Technology has also eroded the entry barriers faced by many industries. With one
time investment, technology has brought about superior products and channel management
with a special focus on customer relationship. The incremental costs incurred for expansion and
diversification are also more beneficial.
The major driving force behind the rapid spread of e-banking is its acceptance as a extremely
cost effective delivery channel. But on the flipside, it is associated with risks such as reputation
risk, security risk, cross-border risk and strategic risk, which are unique to e-banking. Banks
need to have an effective disaster recovery plan along with comprehensive risk management
tool is significant not only to the bank but also to the banking systemas a whole. All these
issues underscore the importance of sound supervisory policies and high level of international
co-operation among the bank regulators. The Basel Committee on banking Supervision has
taken the lead in this area through the creation of its Electronic Banking Group – a group
comprising of 17 central banks and bank supervisory agencies in the late 1999. The main focus
of this group has been to develop sound risk management practices.
Internet has created plenty of opportunities for players in the banking sector. While the new
entrants have the advantage of latest technology, the goodwill of the established banks gives
them a special opportunity to lead the online world. By merely putting existing service online
won’t help the banks in holding their customer close. Instead, banks must learn to capitalize
their customer’s different online financial-services relationships. The article “Will Banks Control

19. Online Banking?” focuses on how banks have to reinvent their to remain as their customers’
preferred bank.
Coming home, India is on threshold of a mojor banking revolution with the invasion of net
banking. With the concept of payment gateway coming in, banks are vying with one another for
the lion’s share in the market.
Highlighting the benefits of payment gateway over the open-loop payment mechanism, the
article “Banking in the Cyber worlds” gives a brief report of the tug of war between the major
Indian e-banking players.

20. 6. Bibliography
Primary Data
 Case study through Questionnaire
 Visiting internet banking services websites
 http/www.tcs.com/sitecollectiondocuments/case%20studies/bancs_case_sbi.pdf
Secondary Data
 College Library
 Internet Websites