AbstractThe paper describes the current state of Internet banking in India and discusses itsimplications for the Indian banking industry. Particularly, it seeks to examine theimpact of Internet banking on banks performance and risk. Using informationdrawn from the survey of 85 scheduled commercial banks websites, during theperiod of June 2007, the results show that nearly 57 percent of the Indiancommercial banks are providing transactional Internet banking services. Theunivariate analysis indicates that Internet banks are larger banks and have betteroperating efficiency ratios and profitability as compared to non-Internet banks.Internet banks rely more heavily on core deposits for funding than non-Internetbanks do. However, the multiple regression results reveal that the profitability andoffering of Internet banking does not have any significant association, on the otherhand, Internet banking has a significant and negative association with risk profile ofthe banks.

1. Introduction

Internet banking system and method in which a personal computer is connectedby a network service provider directly to a host computer system of a bank suchthat customer service requests can be processed automatically without need forintervention by customer service representatives. The system is capable ofdistinguishing between those customer service requests which are capable ofautomated fulfilment and those requests which require handling by a customerservice representative. The system is integrated with the host computer systemof the bank so that the remote banking customer can access other automatedservices of the bank. The method of the invention includes the steps of inputtinga customer banking request from among a menu of banking requests at a remotepersonnel computer; transmitting the banking requests to a host computer over anetwork; receiving the request at the host computer; identifying the type ofcustomer banking request received; automatic logging of the service request,comparing the received request to a stored table of request types, each of therequest types having an attribute to indicate whether the request type is capableof being fulfilled by a customer service representative or by an automatedsystem; and, depending upon the attribute, directing the request either to aqueue for handling by a customer service representative or to a queue forprocessing by an automated system.Internet Banking lets you handle many banking transactions via your personalcomputer. For instance, you may use your computer to view your accountbalance, request transfers between accounts, and pay bills electronically.

What is E-Banking?The following chart exhibits the definition of E-Banking.E-BankingOther on line Financial Services andProductsE-MONEYE-FINANCEE-COMMERCE

ATM ServicesAny branch bankingInternet BankingVirtual BankingSMS bankingWireless Application ProtocolsTelephone BankingElectronic Fund Transfer (EFT)SWIFT ChannelOther electronic delivery channels are E-Banking.E-Commerce:The Phenomenon of Electronic Commerce has permeated into every aspect of our life today.Electronic Commerce has been around for the last two decades in some form or the other, but thenew force that is driving Electronic Commerce is the Internet, which is revolutionizing the waycompanies around the globe conduct business. Internet based electronic commerce is playing acritical role in addressing strategic, mission critical business needs of the companies and hencethe companies are making it an integral part of their business strategies.E-Money:E-money includes electronic debit and credit system, smart card. The smart card has beendefined many ways, but is generally defined as portable data storage device with intelligence(chip memory) and provision for identity and security. In their simplest forms, these cards aresmall microcomputerslacking only external power supply, displays, and keyboards. One of themost widely tested stored value cards offered by Mondex has an electric wallet, available as anoptional accessory, with both of these peripheral devices. The microprocessor chip in a storedvalue card is specialized and custom-designed, generally with specific patented control andproduction circuits.

Various Forms of E-Banking:Automated Teller Machine (ATM)An ATM is simply a data terminal with two input and four output devices. Like any other dataterminal, the ATM has to connect to, and communicate through, a host processor. The hostprocessor is analogous to an Internet Service Provider (ISP) in that it is the gateway throughwhich all the various ATM networks become available to the cardholder (the person wanting thecash). ATM has two input devices- card reader and keypad. An ATM has four output devices-Speaker, Display screen, Receipt printer, cash dispenser.SMS BankingSMS Banking allows doing some banking enquiries on our mobile phone. SMS Banking isdeveloped to provide transactions related to clients card account via SMS.After having registered the service SMS-Banking, a (mobile Phone) subscriber should send anSMS to 611(say) with a request for appropriate transaction. The above SMS must contain (withspace between commands):A type transaction Individual access code for working with SMS-Banking A sum to be paid (if payment transaction) Identifier of payment (debt) Identifier of data.

In reply the subscriber will receive a message reporting the result of the transaction made.It is possible to use SMS-Banking abroad provided that international calls and roaming areactivated. SMS must be written in Latin letters. There is no subscription fee for the service. TheSMS-s to number 611 is charged in accordance with the company tariffs.The mobile companymay charge for SMS and Bank may charge for service.Tele-bankingTele-banking is a form of remote banking which is essentially the delivery of branch financialservices via telecommunication devices where the bank customer can perform retail transactionsby dialing a touch-tone telephone or mobile communication unit, which is connected to anautomated system of the bank by utilizing Automated Voice Response (AVR) technology. Telebankinghas been in Bangladesh since 1990s. The use of Tele-banking is easy and confidential.All our need is a push button telephone, our account number, and our Personal IdentificationNumber (PIN), which we select on our first call and can change at any time. Tele-banking willprovide us the following services: Checking account balance Interest rates related information etc.On line BankingBanks are considering on line banking as a powerful value added tool to attract and retainnew customers while helping to eliminate costly paper handling and teller interactions in anincreasingly competitive banking environment. On line banking (Internet banking) is a termused for performing transactions, payments etc. over the Internet through a banks securewebsite. This is very useful especially outside banking hours. In most cases a web browser suchas Internet explorer or Netscape Navigator is utilized and any normal Internet connection issuitable. No special software or hardware is usually needed.

Objective of E-BankingFrom Bankers point of view:1. Provide retail services at reduced cost throughbrace network.2. Reduction of administrative expenses byreducing the number workers with the help ofelectronic banking.3. Reduction of the volume of the paper workwith the help of e banking.4. Increase of income through different types offees like debit card fee, credit card fee etc.5. Strengthening the position of in thecompetitive environment.6. Expanding the services in the remote areas.

From clients point of view:1. Receiving timely and instantinformations, such as Balance statement,Account statement,2. Transaction statement.3. Ability to deposit and withdraw of moneyflawlessly within short time and at lowercost.4. Advantageously making payments for thegoods and services.5.Staying at home or outside, availing thefacility like opening L/C, making investment,obtaining loan facility and above all makingfund transfer with the help of e-banking.6. Securing the advantage of maintainingsecrecy of accounts of the clients.7. Enjoying utmost protection of theaccounts maintained under e-banking.

BACKGROUND OF ELECTRONIC BANKINGIn the 1961, the first National City bank of New York introduced successfully the certificate ofdeposit under electronic system for the first time. The primary stages of the e banking are theelectronic fund transfer system (EFTS). The main elements of the EFTS are the automated tellermachine (ATM), point of sale (POS), Terminal and Automated Clearing House (ACH).In the 1967, the Barclays bank of UK established cash dispenser at first. The working procedureof this machine was quite different from the machine used now. In those days, there were nomagnetic cards. Bank gave paper voucher to its clients and when the clients insert these vouchersin the machine 10 pounds will come out. Later one, plastic cards were used. Within one year ofthe establishment of cash dispenser by Barclays bank, France, Sweden and Switzerland startedNational cash dispenser network.In 1969, Japan and USA started the use of these types of machines produced by them. Themachines of that time were in off-line; there was no connection with the computer.In 1972, Lloyds bank of UK established the very first online Cash Point machine. Theysupplied plastic cards to their clients. There were magnetic stripes on those cards. As a result,the clients accounts or the client could be identified. In this online system every machine wasconnected with the central computer.

CHAPTER 2

RESEARCH METHODOLOGYTITLETo study the perception of people regarding internet bankingOBJECTIVEThe objective of the research is to determine the perception of people regardinge-banking and how they are using the latest technologies offered by the bank.1. Are people aware of net banking services?2. What is the reason for using e-banking?3. In which bank do they have their account and are they satisfied withthe e-banking service?4. The main transactions carried out by the customers.5. Are they aware of the benefits of e-banking?6. Are they aware of the methods which can be undertaken to make anykind of fraud?7. Are they aware to carry secure transaction?8. Does the bank educate them about net-banking?9. Do they prefer visiting the bank or using net-banking?10. Benefits obtained from e-banking?LITRATURE REVIEWThe vast majority of the banks that avoided Internet bankingin the beginning did so because they simply did not seethe benefits of using it. According to Tan and Teo (2000) ifcustomers are given the chance to try the innovation, it willminimize certain fears, especially when customers found thatmistakes could be rectified and thus providing a predictable SITUATION. India is still in the middle stage of E-banking growth and development.Competition and changes in technology and lifestyle in the last five years havechanged the face of banking. The changes that have taken place impose onbanks tough standards of competition and compliance. The issue here is Where does India stand in the scheme of Ebanking. E-banking is likely tobring a host of opportunities as well as unprecedented risks to the fundamentalnature of banking in India.The impact of E- Banking in India is not yet apparent. Many global researchcompanies believe that Ebanking adoption in India in the near future would beslow compared to other major Asian countries. Indian E-banking is still nascent,although it is fast becoming a strategic necessity for most commercial banks, ascompetition increases from private banks and non banking financial institutions. Despite the global economic challenges facing the IT software and servicessector, the outlook for the Indian industry remains optimistic.The Reserve Bank of India has also set up a "Working Group on E-banking toexamine different aspects of E-banking. The group focused on three major areasof E-banking i.e. (1) Technology and Security issues (2) Legal issues and (3)Regulatory and Supervisory issues. RBI has accepted the guidelines of thegroup and they provide a good insight into the security requirements of Ebanking.The importance of the impact of technology and information security cannot bedoubted. However, the rapid growth of the Internet has introduced a completely new level of security related problems. The problem here is that since the Internet is not a regulated technology and it is readily accessible to millions ofpeople, there will always be people who want to use it to make illicit gains. Thesecurity issue can be addressed at three levels. The first is the security ofcustomer information as it is sent from the customer's PC to the Web server.The second is the security of the environment in which the Internet banking server and customer information database reside. Third, security measures mustbe in place to prevent unauthorized users from attempting to long into theonline banking section of the website.

SCOPE OF THE STUDYA big boom has been witnessed in Banking Industry in recent times. A largenumber of players are there in the market and are trying to gain market share inthis rapidly improving market. The study then goes on to evaluate and analyzethe findings so as to present a clear picture of trends in the Banking sectorspecifically e-banking.

SIGNIFICANCE TO THE INDUSTRYThis is a limited study which takes into consideration the responses of 110people. This data can be explorated to take in the trends across the industry. Thesignificance for the industry lies in studying these trends that emerge from thestudy. It is a rapidly changing and evolving sector. People are only beginning towake up to its vast possibilities. A study like this can attempt to guide the futureof the industry based on current trends.

RESEARCH DESIGN NON-PROBABILITY EXPLORATORY & DISCRIPTIVE EXPERIMENTAL RESEARCHThe research is primarily both exploratory as well as descriptive in nature. Thesources of information are both primary & secondary.

A well-structured questionnaire was prepared and personal interviews wereconducted to collect the customers perception about internet banking throughthis questionnaire.SAMPLING METHODOLOGYSampling Technique:Initially, a rough draft was prepared keeping in mind the objective of theresearch. A pilot study was done in order to know the accuracy of theQuestionnaire. The final Questionnaire was arrived only after certain importantchanges were done. Thus my sampling came out to be judgemental andconvenient.Sampling Unit:The respondents who were asked to fill out questionnaires are the samplingunits. These comprise of employees of MNCs, Govt. Employees, and SelfEmployed etc.Sample size:The sample size was restricted to only 110, which comprised of mainly peoplesfrom different regions of Bhubaneswar due to time constraints.

LIMITATIONS OF THE RESEARCH1. The research is confined to certain parts of Bhubaneswar only anddoes not necessarily shows a pattern applicable to all of Country.2. Some respondents were reluctant to divulge personal informationwhich can affect the validity of all responses.3. In a rapidly changing industry, analysis on one day or in one segmentcan change very quickly. The environmental changes are vital to be considered in order to assimilate the findings.4. People were mostly unwilling to talk because of their heavy scheduleor they get annoyed with the phone calls or even if they are askedabout this face to face.