Page |1

PROJECT REPORT

A STUDY ON ONLINE BANKING IN INDIA

Submitted to: Submitted By

Nishant Chand Arya

Ms. Stuti Tiwari

1505C00079

BBALLB (Hons.)

ICFAI LAW SCHOOL, THE ICFAI UNIVERSITY, DEHRADUN

 Page |2

TABLE OF CONTENTS:
1. Background of Study on Online Banking In India

2. Drivers of Change

3. Indian Banks on Web

4. Emerging Challenges

❖ Main Concerns in Online Banking

❖ Current Scenario
❖ Technology in Online Banking
❖ Industry Profile

5. Problem Identified
6. Need Of Study
Conclusion
 Page |3

INTRODUCTION

The Internet banking is changing the banking industry and is having the major effects on banking
relationships. Even the Morgan Stanley Dean Witter Internet research emphasized that Web is more
important for retail financial services than for many other industries. Internet banking involves
use of Internet for delivery of banking products & services. It falls into four main categories, from
Level 1 - minimum functionality sites that offer only access to deposit account data - to Level 4 sites -
highly sophisticated offerings enabling integrated sales of additional products and access to other
financial services - such as investment and insurance. In other words a successful Internet
Banking solution offers -

• Exceptional rates on Savings, CDs, and IRAs

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

• Credit cards with low rates

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

• 24 hour account access

• Quality customer service with personal attention.

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 market place.
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 'brouchreware' 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 :
 Page |4

• Improve customer access

• Facilitate the offering of more services

• Increase customer loyalty

• Attract new customers

• Provide services offered by competitors

• Reduce customer attrition.

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 which was conducted by students of IIML shows some interesting facts.

• Foreign & Private Banks are much advanced in terms of the number of sites & their level
of development.

Emerging Challenges :

Information technology analyst firm, the Meta Group, recently reported that "financial institutions who
don't offer home banking by the year 2000 will become marginalized." By the year of 2002, a large sophisticated
and highly competitive Internet Banking Market will develop which will be driven by Demand side pressure
due to increasing access to low cost electronic services.

• Emergence of Open standards for banking functionality.

• Growing customer awareness and need of transparency.

• Global players in the fray.

 Page |5

• 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.

Main Concerns In Internet Banking :

In a survey conducted by the Online Banking Association , member institutions rated security as the
most important issue of Online banking. There is a dual requirement to protect customer's
privacy and protect against fraud. Banking Securely : Online banking via the World Wide Web provides
an overview of Internet commerce and how one company secure banking for its financial institution
clients and their customers. Some basic information on the transmission of confidential data is
presented in Security and Encryption on the Web. PC Magazine Online also offer a primer : How
Encryption Works. A multilayered security architecture comprising firewalls , filtering routers,
encryption and digital certification ensure that your account information is protected from
unauthorised access :

• Firewalls and filtering routers ensure that only the legitimate Internet users are allowed to
access the system.

• Encryption techniques used by the bank (including the sophisticated public key
encryption) would ensure that privacy of data flowing between the browser and the Infinity
system is protected.

• Digital certification procedures provide the assurance that the data you receive is from the
Infinity system.

Current Scenario :
 Page |6

The Indian has finally worked up to the competitive dynamics of new Indian market and is addressing
the relevant issues take on the multifarious challenges of globalization. Banks that employ IT
solutions are perceived to be futuristic and proactive players capable of meeting the multifarious
requirements of large customer base. Private banks have been fast on the uptake and are reorienting
their strategies using the Internet as a medium.

The India banking has come from a long from being a sleepy business institution to a highly proactive
and dynamic entity this transformation has been largely brought by the large doses of liberalization and
economic reforms that allowed exploring new business opportunities rather than generating
revenues from conventional streams. The Indian industry has confidently hit the growth trial that
pick in activity is best reflected in the banking sector which after all is as candid a mirror of a country's
economy as you could ever find.

Most of the Indian Financial intermediaries have been keeping pace with the deepening market
economy , riding the opportunity that come along with reforms even as they brace themselves for
increased competition both foreign and private by strengthening prudential norms and
leveraging technology to ensure that growth engine hums smoothly along the essential function of a
bank is to provide services related to the storing value of value and the extending credit.

The evolution of banking dates back to the earliest writing , and continues in the present where a bank
is a financial institution that provides banking and other financial services. Currently the term bank is
generally understood an institution that holds a banking license. Banking licenses are granted by
financial supervision authorities and provide rights to conduct the most fundamental banking
services such as accepting deposits and making loans. There are also financial institutions that provide
certain banking services without meeting the legal definition of a bank ,a so called non-bank. Banks are
a subset of the financial services industry.

Industry Profile :
 Page |7

Without a sound and effective banking system in 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 system has 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.The government regular policy for Indian banks since
1969 has paid rich dividends with the nationalization of 14 major private banks of India.

Not a long ago, an account holder had to wait for hours at the bank countries for getting a draft or for
withdrawing his own money. Today,, he has a choice. Gone are days when 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 have become the order of the day.

The first bank in India , though conservative, was established in 1786. From 1786 till today, the journey of
Indian Banking System can 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 & Banking Sector
Reforms after 1991.
 Page |8

Problem Identified :

Even though the technology updation has been adopted in Internet banking, still the customers are
unaware about the updation of technology and the reason for the technology updation. Some of the
customers are not using the branch networks, and ATM facilities. Only educated people are aware about the
internet banking facilities and the procedures to access their account online. Even among the educated people,
some of them are still feeling insecure about performing the transactions through net banking facilities
provided by the banks. The bank doesn't take any actions to make aware their customers to use the internet
banking facility or to increase the satisfaction level among their customers.

Need Of Study :

This study analyses about the need for internet banking facility offered by banks to their customers. The
specific online facilities include fund transfer, online bill payment, balance enquiry and the most of the other
activities related to the customer's bank account. These were implemented to overcome the problems
associated with traditional banking system, which includes time delay in transactions, need of physical
presence of customers, and more paper work for bankers and so on.

This study has been mainly carried out to intimate the changes, updations in internet banking facility. This
study makes contributions by showing how the current internet banking facilities contribute in increasing
the efficiency of the banking operations and also focuses on the acceptance level among the Customers for
Internet banking. Hence, it is necessary to conduct a study to know whether the implementation of Internet
Banking has served the purpose or not.
 Page |9

CONCLUSION
Analysis shows that even though the Online Banking facility is having many advantages, it is not utilized
by many people. It shows that the younger generation people are more likely to use the Internet
banking facilities when compared to the middle age and old age people. It is due to the unawareness of
the customers towards the internet banking facility. Also, the people are finding difficulties in using the
Internet banking websites which had created an aversion in them towards net banking. This can be
overcome if the banks conduct sessions on the various features provided in their Online banking web
sites. Even the younger generation people are feeling insecure to use the online transaction facilities
provided by the banks. The internet banking technology should be made more secure so as it to eliminate
the constraint among the customers.
P a g e | 10