neft project

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A study

On

IMPACT OF IMPLEMENTATION OF ELECTRONIC FUND TRANSFER

(EFT) ON BANKS AND ITS USERS

Submitted in Partial Fulfillment of the Requirements of

Bangalore University for the Award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

By

Under the Guidance of

EMPOWERING MINDS

ACHARYA INSTITUTE OF MANAGEMENT & SCIENCES

1st Cross, 1st Stage, Peenya Industrial Area

Bangalore 560 058

2008 2010


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DECLARATION

I, , hereby declare that this dissertation titled, The Role of, is based on the original project study

conducted by me under the guidance ofProf. KIRAN K S.

This has not been submitted earlier for the award of any other degree / diploma by Bangalore

University or any other University.

Date:

Place: ()


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Acharya Institute of Management and Sciences

1st Cross, I stage Peenya Industrial Area

Bangalore - 560058

CERTIFICATE

Certified that this dissertation titled Impact of Implementation of Electronic Fund

Transfer (EFT) on Banks and Its Users is based on the study conducted by of IV

Semester MBA under the guidance ofProf KIRAN K S.

This dissertation is based on the original project study undergone and has not formed the basis

for the award of any other degree/diploma by Bangalore University or any other University.

Prof Kiran K S Dr. Kerron G Reddy

Department of Management Studies CEO and Principal, AIMS

Date: Date:

Place: Place:


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CERTIFICATE FROM THE GUIDE

Certified that this dissertation titled Impact of Implementation of Electronic Fund

Transfer (EFT) on Banks and Its Users is based on an original project study conducted

by Mr. of IV Semester MBA under my guidance.

This dissertation has not formed the basis for the award of any other degree / diploma by

Bangalore University or any other University.

Date:

Place: (Prof. KIRAN K S)


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ACKNOWLEDGEMENT

I would like to convey my deep gratitude to Prof. KIRAN K S for his valuable guidance

imparted, which has enabled me to complete this dissertation in accordance with Bangalore

University norms.

I am thankful to Dr. KERRON G REDDY, Principal and CEO of AIMS, who had provided all

the required facilities to carry out the report work and nurturing my skills to execute the

requirement.

Last but not least, my gratitude goes to my family members and peers, who showered upon me

with their best of good wishes and help, towards the successful completion of my dissertation.

()


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CONTENTS

Chapter No. Name of the Chapter Page No.

1 Introduction1.1 Indian Bank Profile1.2 National Electronic Fund Transfer (NEFT)1.3 Real Time Gross Settlement (RTGS)1.4 Electronic Clearing Service (ECS)

1-17

2 Research Methodology2.1 Introduction2.2 Statement of the Problem2.3 Review of Literature2.4 Objectives of the Study

2.5 Scope of the Study2.6 Research Design2.7 Sampling Method2.8 Sample Size2.9 Sources of Data2.10 Limitations2.11 Tool of Analysis

18-22

3 Industry Profile3.1 History of Banking in India3.2 Nationalization of Banks in India3.3 Scheduled Commercial Banks in India

3.4 Banking Structure in India3.5 Major Reforms and Initiatives

23-30

4 Analysis and Interpretation of Data 31-53

5 Findings, Suggestions and Conclusion5.1 Findings from the Secondary Data5.2 Findings from the Questionnaire5.3 Suggestions

54-61

6 Conclusion 62

LIST OF FIGURES


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Serial No. Name of the Figure Page No.

1 3.1 Banking Structure in India 30

2 4.1 Transferred Funds without EFT 31

3 4.2 Means of Non-EFT Transfer 33

4 4.3 Reason for using Non-EFT 34

5 4.4 Awareness of EFT 36

6 4.5 Source of Information 37

7 4.6 Use EFT 39

8 4.7 EFT Means of Fund Transfer 40

9 4.8 Why Prefer EFT 42

10 4.9 Technical Know How 43

11 4.10 Preference for EFT/Non-EFT 45

12 4.11 Change in Frequency of Transfer of Funds 46

13 4.12 EFT Convenient than Non-EFT 48

LIST OF TABLES


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Serial No. Name of the Table Page No.

1 4.1 Transferred Funds without EFT 31

2 4.2 Means of Non-EFT Transfer 32

3 4.3 Reason for using Non-EFT 34

4 4.4 Awareness of EFT 35

5 4.5 Source of Information 37

6 4.6 Use EFT 38

7 4.7 EFT Means of Fund Transfer 40

8 4.8 Why Prefer EFT 41

9 4.9 Technical Know How 43

10 4.10 Preference for EFT/Non-EFT 44

11 4.11 Change in Frequency of Transfer of Funds 46

12 4.12 EFT Convenient than Non-EFT 47

13 4.13 Income(INR)*Use EFT Crosstabulation 49

14 4.14 Chi-Square Test 49

15 4.15 Income (INR)*Change in Frequency of Transfer of Funds Crosstabulation

50

16 4.16 Chi- Square Test 50

17 4.17 Age (Years)*Use EFT Crosstabulation 51


19 4.19 Gender*Use EFT 52


21 5.1 Indian Bank (Non-EFT Charges) 55

22 5.2 ING Vysya Bank (Non-EFT Charges) 55

23 5.3 Indian Bank (Cheque Collection Charges) 56

24 5.4 NEFT Charges 57

25 5.5 RTGS Charges 57

EXECUTIVE SUMMARY


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The purpose of this dissertation was to study the impact of implementation of Electronic

Fund Transfer (EFT) on the banks and their customers. As we all know that how in 21 st

century, we all have become so addicted to technology and machines that without them

we become helpless. This is the impact of Science and Technology. So when each and

every nation, organization and even individual is using the benefits of technology to their

fullest how can banks stay behind? Banks too have implemented various technologies

to help themselves serve their customers better and ultimately make profits. That is

reason for selecting this particular topic.

During the course of this project I got an opportunity to learn a lot of new things. The

secondary data required for the project is collected to know the changes in the funds

transfer system from the banks staff and various books, magazines and internet of

course. The primary data is collected to understand the customers perception regarding

this facility from the customers of various banks through a well designed questionnaire.

The research design for study is descriptive research. The sampling technique used is

convenience sampling. The result of the questionnaire is analysed by using statistical

tools such as percentage and cross tabulation. SPSS is used for analyses of corected

data.

The suggestions revolve around the findings collected through both the secondary data

and the primary data. The banks can maintain a striking balance between the number ofEFT transactions and the Non-EFT transactions. Banks can take an initiative to educate

people about the EFT, because many are aware of this system but many do not use this

system fearing it is not secured enough.

INTRODUCTION


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In this modern era due to the various inventions and technological advancements, our

life has become very smooth and easy. Today we all can do most of our day to day

work at the click of a button. Thanks to technology. Many organizations too have

applied latest technology to operate efficiently. The advanced technologies have not

only helped the organizations to operate efficiently, but also to benefit the society. The

new advanced technology is not only limited to any one particular industry or sector, but

to all the industries and sectors.

Then in such a scenario how can banks stay away? These days even the banks have

adopted latest technologies to operate better and serve its clients in a better way. One

of such technologies is Electronic Fund Transfer (EFT). In India EFT can be classified

into:

NEFT

RTGS

ECS

In the further chapters lets discuss about the above mentioned technologies in detail so

that we can get to know more about the above mentioned systems and a brief overview

about the Indian bank.

1.1 Indian Bank Profile

1.1.1 A premier bank owned by the Government of India

Indian bank was established on 15th August 1907 as part of the Swadeshi movement.

Since then it is now serving the nation with a team of over 22, 000 dedicated staff. It is a

premier bank owned by the Government of India. Indian bank head office is situated in

Chennai. Its total business as on 31.03.2009 crossed Rs. 1, 24, 413 Crores. Banks

Operating Profit increased to Rs. 2, 228.83 Crores as on 31.03.2009. The Net Profit

increased to Rs. 1, 245.32 Crores as on 31.03.2009. The Indian Bank has successfully

implemented Core Banking Solution (CBS) in all 1750 branches.

International Presence


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Indian bank has branches not only in India, but also outside India. Its overseas

branches are in Singapore and Colombo including a Foreign Currency Banking Unit

which is situated in Colombo. In addition to that Indian bank has 240 Overseas

Correspondent banks in 70 countries.

1.1.2 Diversified banking activities- 3 Subsidiary companies

Along with the normal banking functions Indian bank has also diversified in various

banking activities. It has incorporated 3 subsidiary companies namely:

Indbank Merchant Banking Services Ltd.

Indbank Housing Ltd.

Indfund Management Ltd.

1.1.3 Indbank Merchant Banking Services Ltd: Indbank Merchant Banking Services

Limited (Indbank) was incorporated in the year 1989 as a subsidiary of Indian Bank.

Indbank is engaged in

Merchant Banking: Indbank is a Category 1 Merchant Banker registered with

Securities Exchange Board of India (SEBI) undertaking assignments under

various capacities like Lead Manager, Co-Manager, Advisor, Arranger etc. for

public issues and private placement. It also takes assignments for acquisition of

shares & takeovers under SEBI (Substantial Acquisition of shares and

Takeovers) Regulations, 1997, SEBI (Buyback of Securities) Regulations, 1998

and SEBI (De-listing of Securities) Guidelines, 2003. Also takes assignments for

Employee Stock Option Scheme/Stock Purchase Scheme by Corporate under

the SEBI (Employee Stock Option Scheme and Employee Stock Purchase

Scheme), Guidelines, 1999.

Advisory Services: Advisory services include valuation of shares & other financial

instruments, syndication of loans, acquisitions, mergers & amalgamations and

project counseling, appraisal & feasibility studies.


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Stock Broking: Indbank is a SEBI registered member of National Stock Exchange

of India (NSE), Bombay Stock Exchange (BSE), Madras Stock Exchange (MSE)

and Over The Counter Exchange of India (OTCEI). Indbank currently operates in

the Cash, Derivatives & Wholesale Debt Market Segments of NSE for both retail

and institutional investors and in cash segment of BSE.

Depository Participant Activities: Indbank is a SEBI registered Depository

Participant with National Securities & Depository Limited (NSDL) and is governed

by the Depositories Act 1996, SEBI (Depositories & Participants) Regulations,

1996 and circulars issued by SEBI and NSDL from time to time.

Distribution of Mutual Fund and other Investment products: As a part of broking,

Indbank distributes Mutual Fund and investment products and is registered with

the Association of Mutual Funds of India (AMFI) for distribution of Mutual Fund

products.

Online Trading: To enable the customer to trade from anywhere under Internet

based trading system, Indbank has launched a powerful and user friendly online

trading facility which is completely safe and secure. The facility is designed to

provide you an expedient and paperless trading experience.

1.1.4 IndFund Management Ltd: Indian Bank Mutual Fund (IBMF) was formed as a

trust during 1990 sponsored by Indian Bank with a corpus of Rs. 25 lakhs. The schemes

of IBMF were managed by trust during the years 1990-1994. To comply with the

SEBI (MF) Regulations, 1993, Indfund Management Ltd. (IFML), the Asset

Management Company was formed during January 1994 as a wholly owned subsidiary

of Indian Bank with a paid up capital of Rs.5 crores. Since January 1994, the schemes

of IBMF are being managed by IFML. IBMF launched 12 close-ended schemes and

raised Rs.627.10 crore. Out of the 12 schemes 9 schemes were redeemed on maturity

dates. Three schemes, i.e., Ind Navratna, Ind Shelter and Ind Tax Shield schemes

were transferred to Tata Mutual Fund during November 2001.


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1.1.5 A front runner in specialised banking

Indian is a front runner in specialised banking. It has 90 Forex Authorised branches

inclusive of 1 Specialised Overseas Branch at Chennai exclusively for handling forex

transactions arising out of Export, Import, Remittances and Non Resident Indian

business. Apart from that Indian bank has 1 Small Scale Industries Branch, extending

finance exclusively to SSI units.

1.1.6 Leadership in Rural Development

Indian bank being a responsible bank is not only focusing on the urban parts of the

country but also extending an immense support to the rural parts of the country to help

them develop. Indian bank is pioneer in introducing Self Help Groups and Financial

Inclusion Project in the country. It is Award winner for Excellence in Agricultural Lending

from Honorable Union Minister of Finance. Indian bank has also bagged the Best

Performer Award for Micro-Finance activities in Tamil Nadu and Union Territory of

Puducherry from NABARD. Apart from these it has established 7 specialized exclusive

Microfinance branches called Microsate across the country to cater the needs of the

urban poor through SHG (Self Help Group)/JLG (Joint Liability Group) concepts. It has a

special window for Micro finance viz., Micro Credit Kendras are functioning in 44

Rural/Semi Urban branches. Indian bank is harnessing ICT (Information and

Communication Technology) for Rural Development and Inclusive Banking. Indian bank

has a provision of technical assistance and project reports in Agriculture to

entrepreneurs through Agricultural Consultancy and Technical Services (ACTS).

1.1.7A pioneer in introducing the latest technology in Banking

Indian bank has been a pioneer in introducing the latest technology. Indian bank has

100% Core Banking Solution (CBS) Branches. Its business is 100% Business

Computerized. That is the reason it works operates efficiently. Indian bank has 168

Centers throughout the country covered under Anywhere Banking. It has 966

connected Automated Teller Machines (ATM) in 260 cities/towns. Indian bank provides

a 24*7 service through 40000 ATMs under shared network. It is leader in Internet and


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Tele Banking Services to all Core Banking customers. It provides E-payment facility for

corporate customers. The other services provided by Indian Bank are Cash

Management Services, Depository Services, Reuter Screen, Telerate, Reuter Monitors,

Dealing System provided at Overseas Branch, Chennai. Indian bank has launched IB

Credit Card.

1.1.8 Vision: To take banking technology to the common man

1.1.9 Mission:To be a common mans bank to provide all financial services

under one roof

at an affordable cost

in a fair and transparent manner to all our customers

1.1.10 Logo:

1.2 National Electronic Fund Transfer (NEFT)

1.2.1 Introduction:

National Electronic Fund Transfer (NEFT) is an online system for transferring funds of

Indian financial institutions (especially banks). This facility is used mainly to transfer

funds below Rs. 1, 00, 000.The Reserve Bank of India has instructed banks that they should not use Real Time

Gross Settlement (RTGS) for amounts below Rs. 1 lakh (100 thousand). The new rule

came into effect on 1 January 2007. For small transactions, RBI has asked banks to

offer National Electronic Fund Transfer (NEFT) which provided T+0 and T+1 settlement


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system (depending on the time a customer gives instruction to the bank for transferring

the fund).

Individuals, firms or Corporates maintaining accounts with a bank branch can transfer

funds using NEFT. Even such individuals, firms or Corporates who do not have a bank

account (walk in customers) can also deposit cash at the branch with instructions totransferfundsusing NEFT.A separate Transaction Code (No. 50) has been allotted inthe NEFT system to facilitate walk-in customers to deposit cash and transfer funds to a

beneficiary. Such customers have to furnish full details including complete address,

telephone number etc.NEFT, thus, facilitates originators or remitters to initiate fundstransfer transactions even without the need for having a bank account. NEFT is a credit-

push system i.e. transactions can be originated only to transfer funds to the beneficiary.

So a transaction cannot be originated to receive funds from another account.

NEFT can also be used to transfer funds from or to a Non-Resident Indian (NRI) or

Non-Resident External (NRE) accounts in the country. This, however, is subject to

applicability of provisions of the Foreign Exchange Management Act, 2000 (FEMA).

NEFT system can be used only for remitting Indian Rupees between the participating

bank branches in the country.

NEFT is on net settlement basis. It involves 6 settlement cycles a day 9:00 am, 11:00

am, 12 noon, 1:00 pm, 3.00 pm and 5:00 pm. Thus if a customer has given instructionto its bank to transfer money through NEFT to another bank in the morning hours,

money would be transferred the same day, but if the instruction is given later during the

day, money would be transferred next day.

NEFT is available in 62, 000 branches of 94 banks in India (out of 75, 000 bank

branches). NEFT is available only in 15 locations where RBI has its clearing house.

There is no minimum value for NEFT.

1.2.2 Working of NEFT system:

Step1: An individual/firm/corporate intending to originate or transfer funds

through NEFT has to fill an application form giving details of the beneficiary (like,

name of the beneficiary, name of the bank branch where the beneficiary has an

account, IFSC of the beneficiary bank branch, account type and account


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number). The application form will be available at the originating bank branch.

The originator authorizes the branch to debit hi/her account and remit specified

amount to the beneficiary. Customers enjoying net banking facility offered by

their bankers can initiate the funds transfer request online.Some banks offer the

NEFT facility even through the ATMs. Walk-in customers will, however, have to

give their contact details (complete address and telephone no. etc.,) to the

branch. This will help the branch to refund the money to the customer in case

credit could not be afforded to the beneficiarys bank account or the transaction is

rejected or returned for any reason.

Step 2: The originating bank branch prepares a message and sends the

message to its pooling center (also called the NEFT Service Center).

Step 3: The pooling centre forwards the message to the NEFT Clearing Centre

(operated by National Clearing Cell, Reserve Bank of India, Mumbai) to be

included for the next available batch.

Step 4: The Clearing Centre sorts the funds transfer transactions destination

bank-wise and prepares accounting entries to receive funds from (debit) the

originating banks and give the funds to (credit) the destination banks. Thereafter,

bank-wise remittance messages are forwarded to the destination banks through

their pooling centre (NEFT Service Center).Step 5: The destination banks receive the remittance messages received from

the Clearing Centre and pass on the credit to the beneficiary accounts.

The beneficiary can expect to get credit for the first four batches on week days (i.e.,

transactions from 9 am to 1 pm from Monday to Friday) and the first two batches on

Saturdays (i.e., transactions from 9 to 11 am) on the same day. For transactions settled

in the last two batches on week days (i.e., transactions settled in the 3 and 5 pm

batches) and the last batch on Saturdays (i.e., transactions handled in the 12 noon

batch) beneficiaries can expect to get credit either on the same day or on the next

working day morning (depending on the type of facility enjoyed by the beneficiary with

his/her bank).


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In case of non-credit or delay in credit to the beneficiary account, the NEFT Customer

Facilitation Centre (CFC) of the respective bank can be contacted (the originator can

contact his banks CFC; the beneficiary may contact the CFC of his bank). Details of

NEFT Customer Facilitation Centers of banks are available on the websites of the

respective banks. The details are also available on the website of Reserve Bank of India

at http://www.rbi.org.in/scripts/neft.aspx .

If the issue is not resolved satisfactorily, the NEFT Help Desk (or Customer Facilitation

Centre of Reserve Bank of India) at National Clearing Cell, Reserve Bank of India,

Mumbai may be contacted through e-mailor by addressing correspondence to the

General Manager, Reserve Bank of India, National Clearing Centre, First Floor, Free

Press House, Nariman Point, Mumbai-400021.

1.2.3 Processing or Services charges for NEFT transactions:

Reserve Bank of India had waived the processing or service charges for member banks

till March 31, 2010. Accordingly, member banks participating in NEFT need not pay any

processing or service charges to Reserve Bank of India. Further, processing or service

charges to be levied by the member banks from their customers have also been

rationalized by Reserve Bank of India as under:

a) Inward transactions at destination bank branches (for credit to beneficiaryaccounts)

- Free, no charges to be levied from beneficiaries.

b) Outward transactions at originating bank branches (charges for the remitter)

- For transactions up to Rs. 1 lakh charges not exceeding Rs. 5.

- For transactions of Rs. 1 lakh and above charges not exceeding Rs. 25.

There is no value limit for individual transactions. The receiving branch acknowledges

every transaction it receives after crediting the beneficiarys account. The

acknowledgement particulars reach the remitting branch as an inward message on Day
http://www.rbi.org.in/scripts/neft.aspxhttp://rbi.org.in/scripts/Bs_RbiEmailMaster.aspx?name=nefthelphttp://rbi.org.in/scripts/Bs_RbiEmailMaster.aspx?name=nefthelphttp://www.rbi.org.in/scripts/neft.aspxhttp://rbi.org.in/scripts/Bs_RbiEmailMaster.aspx?name=nefthelp


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3 of the EFT processing cycle. The remitting branch will, therefore, have precise

information as to when the beneficiarys account was credit.

It is not necessary for all branches to have computer systems. Branches can send the

remittance details to their service branch in paper format (the copies of the EFT

Application Forms submitted by the remitting customers accompanied by a Remittance

Scroll). The service branch will make data entry and transmit the funds transfer

information electronically to local NCC. But, if a branch has computer facility, it can

transmit funds transfer information electronically to its service branch either on a floppy

or through a network. This would minimize the data entry work at service branch.

Each participating bank has to identify a branch at the respective center to act as the

link point for transmitting all outward messages and receiving all inward messages. The

Service Branch/Main Branches of banks who have been coordinating the cheque-

clearing are in the best position to discharge this role. So no additional organizational

infrastructure is required to be created.

1.3 Real Time Gross Settlement (RTGS)

The acronym RTGS stands for Real Time Gross Settlement. RTGS system is a funds

transfermechanism where transfer of money takes place from one bank to another on a

'real time' and on 'gross' basis. It came into effect from March 2004. This is the fastestpossible money transfer system through the banking channel. Settlement in 'real time'

means payment transaction is not subjected to any waiting period. The transactions are

settled as soon as they are processed. 'Gross settlement' means the transaction is

settled on one to one basis without bunching with any other transaction. Considering

that money transfer takes place in the books of the Reserve Bank of India, the payment

is taken as final and irrevocable.

The RTGS system is primarily for large value transactions. The minimum amount to be

remitted through RTGS is Rs.1 lakh. There is no upper ceiling for RTGS transactions.

No minimum or maximum stipulation has been fixed for NEFT transactions.

In RTGS system, under normal circumstances the beneficiary branches are expected to

receive the funds in real time as soon as funds are transferred by the remitting bank.

The beneficiary bank has to credit the beneficiary's account within two hours of


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receiving the funds transfer message. The remitting bank receives a message from the

Reserve Bank that money has been credited to the receiving bank. Based on this the

remitting bank can advise the remitting customer that money has been delivered to the

receiving bank.

If the money is not credited to the beneficiarys account then it is expected that the

receiving bank will credit the account of the beneficiary instantly. If the money cannot be

credited for any reason, the receiving bank would have to return the money to the

remitting bank within 2 hours. Once the money is received back by the remitting bank,

the original debit entry in the customer's account is reversed.

The RTGS service window for customer's transactions is available from 09:00 hours to

18:00 hours on week days and from 09:00 hours to 14:30 hours on Saturdays for

settlement at the RBI end. However, the timings that the banks follow may vary

depending on the customer timings of the bank branches.

The Processing Charges/Service Charges for RTGS transactions are as follows:

a. Inward transactions: Free, no charge is levied.

b. Outward Transactions:

Rs. 1lakh to Rs. 5lakh: Rs. 25/- per transaction

Rs. 5lakh and above: Rs. 50/- per transaction.

The remitting customer has to furnish the following information to a bank for affecting a

RTGS remittance:

1. Amount to be remitted.

2. His/her account number which is to be debited.

3. Name of the beneficiary account.

4. Name of the beneficiary customer.

5. Account number of the beneficiary customer.

6. Sender to receiver information, if any.


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7. The IFSC number of the receiving branch.

Since India is such a huge country and the banks in India have such a wide network, so

all the bank branches in India are not RTGS enabled. As on December 31, 2008, more

than 52, 000 bank branches are RTGS enabled. The list of such branches is available

on RBI website www.rbi.org.in/Scripts/Bs_viewRTGS.aspx

Some banks with internet banking facility provide remittance transaction tracking

service. Once the funds are credited to the account of the beneficiary bank, the

remitting customer gets a confirmation from his bank either by an e-mail or by a short

message on the mobile. In case of non-credit or delay in credit to the beneficiary

account, the remitter can contact his/her bank/branch. If the issue is not resolved

satisfactorily, the Customer Service Department of RBI may be contacted at -

The Chief General Manager,

Reserve Bank of India,

Customer Service Department,

1st Floor, Amar Building, Fort, Mumbai- 400 001.

On a typical day, RTGS handles about 60, 000 transactions a day for an approximate

value of Rs. 2, 700 billion.

1.4 Electronic Clearing Service (ECS)

1.4.1 Introduction:

Electronic Clearing Service (ECS) is a mode of electronic funds transfer from one bank

account to another bank account using the services of a Clearing House. This is

normally for bulk transfers from one account to many accounts or vice-versa. This can

be used both for making payments like distribution of dividend, interest, salary, pension,

etc. by institutions or for collection of amounts for purposes such as payments to utility

companies like telephone, electricity, or charges such as house tax, water tax, etc or for

loan installments of financial institutions/banks or regular investments of persons.
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1.4.2 Types of ECS:

There are two types of ECS called ECS (Credit) and ECS (Debit). ECS (Credit) is used

for affording credit to a large number of beneficiaries by raising a single debit to an

account, such as dividend, interest or salary payment. ECS (Debit) is used for raising

debits to a number of accounts of customers/account holders for crediting a particular

institution.

1.4.3 Working of ECS Credit System:

ECS payments can be initiated by any institution (called ECS user) that have to make

bulk or repetitive payments to a number of beneficiaries. They can initiate the

transactions after registering themselves with an approved clearing house. ECS users

also have to obtain the consent as also the account particulars of the beneficiary for

participating in the ECS clearings. The ECS user's bank is called as the sponsor bank

under the scheme and the ECS beneficiary account holder is called the destination

account holder. The destination account holder's bank or the beneficiary's bank is called

the destination bank. The beneficiaries of the regular or repetitive payments can also

request the paying institution to make use of the ECS (Credit) mechanism for effecting

payment.

The ECS users intending to effect payments have to submit the data in a specified

format to one of the approved clearing houses. The list of the approved clearing houses

or the list of centers where the ECS facility has been provided is available at

www.rbi.org.in. The clearing house would debit the account of the ECS user through the

account of the sponsor bank on the appointed day and credit the accounts of the

recipient banks, for affording onward credit to the accounts of the ultimate beneficiaries.

At present ECS facility is available at more than 60 centers and the full list is available

at the web-site of RBI. The beneficiaries need to maintain an account with one of the

banks at these centers in order to avail of the benefit of ECS.

The beneficiary has to furnish a mandate giving his consent to avail of the ECS facility.

He should also communicate to the ECS user the details of his bank branch and

account particulars. Such authorization form is called a mandate. In case the

information/account particulars undergo change, then the beneficiary has to notify the
http://www.rbi.org.in/http://www.rbi.org.in/


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ECS user to carryout changes in order to ensure continued benefits from the ECS user.

In case the account particulars at the destination branch do not match, the destination

branches would return the credit through their service branch to the clearing house. It is

the responsibility of the ECS user to communicate to the beneficiary the details of credit

that is being afforded to his account, indicating the proposed date of credit, amount and

the relative particulars of the payment, so that the beneficiary can match the same with

the details furnished by the bank in the account statement/passbook.

No value limit on the amount of individual transactions has been prescribed under the

scheme. RBI has deregulated Service Charges to be levied by sponsor banks.

1.4.4 Advantages of ECS Credit System:

1) Advantages to the ultimate beneficiary:

a) The end beneficiary need not make frequent visits to his bank for depositing

the physical paper instruments.

b) He need not apprehend loss of instrument and fraudulent encashment.

c) The delay in realization of proceeds after receipt of paper instrument.

2) Advantages to the corporate bodies/institutions:

a) The ECS user saves on administrative machinery for printing, dispatch andreconciliation.

b) Avoids chances of loss of instruments in postal transit.

c) Avoids chances of frauds due to fraudulent access to the paper instruments

and encashment.

d) Ability to make payment and ensure that the beneficiaries' account gets

credited on a designated date.

3) Advantages to Banks:

a) Banks handling ECS get freed of paper handling.

b) Paper handling also creates lot of pressure on banks as they have to encode

the instruments, present them in clearing, monitor their return and follow up

with the concerned bank and customers.


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c) In ECS banks simply get the payment particulars relating to their customers.

All they need to do is to match the account particulars like name, a/c number

and credit the proceeds.

d) Wherever the details do not match, they have to return it back, as per the

procedure.

1.4.5 Working of ECS Debit System:

It is a scheme under which an account holder with a bank can authorize an ECS user to

recover an amount at a prescribed frequency by raising a debit in his account. The ECS

user has to collect an authorization which is called ECS mandate for raising such debits.

These mandates have to be endorsed by the bank branch maintaining the account.

Any ECS user desirous of participating in the scheme has to register with an approved

clearing house. The list of approved clearing houses is available at RBI web-site

www.rbi.org.in. He should also collect the mandate forms from the participating

destination account holders, with bank's acknowledgement. A copy of the mandate

should be available with the drawee bank. The ECS user has to submit the data in

specified form through the sponsor bank to the clearing house. The clearing house

would pass on the debit to the destination account holder through the clearing system

and credit the sponsor bank's account for onward crediting the ECS user. All the

unprocessed debits have to be returned to the sponsor bank within the time frame

specified. Banks will treat the electronic instructions received through the clearing

system on par with the physical cheques. RBI has deregulated Service Charges to be

levied by sponsor banks.

1.4.6 Advantages of ECS Debit System:1) Advantage to the ultimate beneficiary:

a) Trouble free- Eliminates the need to go to the collection centers/banks by the

customers and no need to stand in long Qs for payment.

b) Peace of mind- Customers also need not track down payments by last dates.
http://www.rbi.org.in/http://www.rbi.org.in/


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c) The debits would be monitored by the ECS users.

2) Advantages to the corporate bodies/institutions:

a) The ECS user saves on administrative machinery for collecting the cheques,

monitoring their realization and reconciliation.

b) Better cash management.

c) Avoids chances of frauds due to fraudulent access to the paper instruments

and encashment.

d) Realize the payments on a single date instead of fractured receipt of

payments.

3) Advantages to Banks:

a) Banks handling ECS get freed of paper handling.

b) Paper handling also creates lot of pressure on banks as they have to encode

the instruments, present them in clearing, monitor their return and follow up

with the concerned bank and customers.c) In ECS banks simply get the mandate particulars relating to their customers.

All they need to do is to match the account particulars like name, a/c number

and debit the accounts.

d) Wherever the details do not match, they have to return it back, as per the

procedure.


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RESEARCH METHODOLOGY

2.1 Introduction

A research design is a logical and systematic plan prepared for directing a research

study. It specifies the objectives of the study, the methodology and techniques to beadopted for achieving the objectives. It constitutes the blueprint for the collection,

measurement and analysis of data. It is the plan, structure and strategy of investigation

conceived so as to obtain answers to research questions. The plan is the overall

scheme or program of research. A research design is the program that guides the

investigator in the process of collecting, analyzing and interpreting observations. The

preparation of a research plan for a study aids in establishing direction to the study and

in knowing exactly what has to be done and how and when it has to be done at every

stage.

Without a research plan or research design, research work becomes unfocussed and

aimless empirical wandering. The use of research design prevents such a blind search

and indiscriminate gathering of data and guides him to proceed in the right direction.

The design also enables the researcher to anticipate potential problems of data

gathering, operations of concepts, measurement, etc.

2.2 Statement of the Problem

Prior to implementation of EFT system people used to transfer money from one bank

account to another bank account through the means of Demand Draft (DD), Mail

Transfer (MT), Telegraphic Transfer (TT), Pay Order (PO) and checks etc. For each

such transaction, the bank used to charge some commission. It was a means of

revenue generation to bank. After EFT systems implementation the commission

charges for the transactions were reduced. Along with this a customers view is also

taken regarding their behavior towards implementation of EFT through a questionnaire.

Thus, this project will help us in knowing the changes in commission for the transfer of

money and revenue generated through money transfer post implementation of EFT

system and the behavior of customers towards EFT.


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2.3 Review of Literature

In this modern era due to the various inventions and technological advancements, our

life has become very smooth and easy. Today we all can do most of our day to daywork at the click of a button. Thanks to technology. Many organizations too have

applied latest technology to operate efficiently. The advanced technologies have not

only helped the organizations to operate efficiently, but also to benefit the society. The

new advanced technology is not only limited to any one particular industry or sector, but

to all the industries and sectors.

Then in such a scenario how can banks stay away? These days even the banks have

adopted latest technologies to operate better and serve its clients in a better way. One

of such technologies is Electronic Fund Transfer (EFT). My degree being BCA

encouraged me to take up implementation of EFT as the dissertation topic.

The article The Liability of Banks in electronic fund transfer transaction authored by

Algudah and Fayyad inspired me to select this topic for my dissertation. Their thesis

discusses the liability of banks in electronic fund transfer (EFT) transactions under the

British and the United States law. It covers banks liability in Electronic Fund Transfer at

the Point Of Sale (EFTPOS), Automatic Teller Machines (ATM) and home and office

banking. In the absence of British legislation in this area, an analogy is made with the

traditional methods of payment. An attempt is also made to extract the applicable rules

from the general principles of law and the banking practice. The discussion, under the

United States law, relies on analyzing the Electronic Fund Transfer Act of 1978 and

Article 4A of the Uniform Commercial Code, which concern banks liability in consumer

and commercially based EFT transactions.

Analyzing consumer preference is perceived as cornerstone of a successful marketing

strategy. Consumer preference is the mental and emotional processes and the

observable behaviour of consumers during searching purchasing and post consumption

of a product and service (Batra & Kazmi, 2004). Similarly Engel (et al, 1990) refers


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consumer behaviour as the action and decision process of people who purchase goods

and services for personal consumption.

Now this suggested me to also include the customers perception towards this system of

funds transfer implemented by banks, so that it will help the funds transfer quicker and

also it will lessen the burden of charges which the customers had to pay. The other

important reason is in todays competitive world, for any organization making profits is

not really easy. They have think twice before taking any action and any action taken

should satisfy the customers. Else all that is done is a waste. So I thought of making a

questionnaire and taking customers views.

2.4 Objectives of the Study

This research is based on the comparative study of revenue generation of banks

through funds transfer before and after implementation of EFT and to study the behavior

of customers towards EFT. The objectives of the study are:

To know the working of the EFT system.

To calculate the revenue generated under this system.

To compare the revenues generated prior to implementation of EFT and post

implementation of EFT.

To study the behavior of customers towards EFT.

2.5 Scope of the Study

The scope of this study is very huge. Keeping in mind this aspect total care is taken that

no point is missed. The main objective of this research is to compare the revenue

generation of banks prior to and after implementation of EFT. Along with this keeping

customers behavior in mind, a questionnaire was designed to know what the customers

have to say about the change and how this change has impacted them.


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2.6 Research Design

The research design followed in the present research is descriptive in nature.

2.7 Sampling Method

The present research has used convenient sampling method to collect data through a

pre-tested questionnaire.

2.8 Sample Size

A sample of 50 respondents representing different age, gender, income group and

family size was taken for the present research. Also a few banks were visited.

2.9 Sources of Data

The data to be collected for the purpose of study is divided into two bases:

Primary Source: The data has been collected directly from respondent with the

help of structured questionnaires.

Secondary Source: The secondary data has been collected from books, journals,

government publications, a few banks and other information sources.

2.10 Limitations

The research may suffer through the following problems -

The research is purely done for academic purpose and covers only the city of

Bangalore.

The research has constraint of funds as the research is not funded by any

organizations and solely depends on the researchers funds.

The sample size of 50 is taken due to the constraint of duration of time and to meet

the research deadline.

Since it is a finance project and

2.11 Tool of Analysis


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Standard techniques like graph, chi-square test, simple percentage method are used

using SPSS software to analyze and interpret the raw data. The analyzed and

interpreted data are presented in the form of tables, charts and graphs.

INDUSTRY PROFILE

3.1 History of Banking in India

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 Indias growth process.

The government's regular policy for Indian bank since 1969 has paid rich dividends with

the nationalization of 14 major private 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 dialing 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 Indian Banking System can be segregated into three distinct

phases. They are as mentioned below:

Early phase from 1786 to 1969 of Indian Banks

Nationalization 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.


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To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and

Phase III.

3.1.1 Phase I

The General Bank of India was set up in the year 1786. Next came Bank of Hindustan

and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of

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

Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of

India was established which started as private shareholders banks, mostly Europeans

shareholders.

In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab

National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and

1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank,

and Bank of Mysore were set up. Reserve Bank of India came in 1935.

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

failures between 1913 and 1948. There were approximately 1100 banks, mostly small.

To streamline the functioning and activities of commercial banks, the Government of

India came up with The Banking Companies Act, 1949 which was later changed toBanking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965).

Reserve Bank of India was vested with extensive powers for the supervision of banking

in India as the Central Banking Authority.

During those days, public had lesser confidence in the banks. As an aftermath deposit

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

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

3.1.2 Phase II

Government took major steps in this Indian Banking Sector Reform after independence.

In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large

scale especially in rural and semi-urban areas. It formed State Bank of India to act as


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

Governments all over the country.

Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th

July, 1969, major process of nationalization was carried out. It was the effort of the then

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

were nationalized.

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

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

Government ownership.

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

Institutions in the Country:

1949: Enactment of Banking Regulation Act.

1955: Nationalization of State Bank of India.

1959: Nationalization of SBI subsidiaries.

1961: Insurance cover extended to deposits.

1969: Nationalization of 14 major banks.

1971: Creation of credit guarantee corporation.

1975: Creation of regional rural banks.

1980: Nationalization of seven banks with deposits over 200 crore.

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

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

in the sunshine of Government ownership gave the public implicit faith and immense

confidence about the sustainability of these institutions.

3.1.3 Phase III

This phase has introduced many more products and facilities in the banking sector in its

reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was

set up by his name which worked for the liberalization of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put

to give a satisfactory service to customers. Phone banking and net banking is


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introduced. The entire system became more convenient and swift. Time is given more

importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered from

any crisis triggered by any external macroeconomics shock as other East Asian

Countries suffered. This is all due to a flexible exchange rate regime, the foreign

reserves are high, the capital account is not yet fully convertible, and banks and their

customers have limited foreign exchange exposure.

3.2 Nationalization of Banks in India

The nationalization of banks in India took place in 1969 by Mrs. Indira Gandhi, the then

prime minister. She nationalized 14 banks then. These banks were mostly owned by

businessmen and even managed by them. The banks that were nationalized then were:

Central Bank of India

Bank of Maharashtra

Dena Bank

Punjab National Bank

Syndicate Bank

Canara Bank

Indian Bank

Indian Overseas Bank

Bank of Baroda

Union Bank

Allahabad Bank

United Bank of India

UCO Bank

Bank of India

Before the steps of nationalization of Indian Banks, only State Bank of India (SBI) was

nationalized. It took place in July 1955 under the SBI Act of 1955. Nationalization of

Seven State Banks of India (formed subsidiary) took place on 19 th July, 1960.


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The State Bank of India is India's largest commercial bank and is ranked one of the top

five banks worldwide. It serves 90 million customers through a network of 9,000

branches and it offers -- either directly or through subsidiaries -- a wide range

of banking services.

The second phase of nationalization of Indian banks took place in the year 1980. Seven

more banks were nationalized with deposits over 200 crores. Till this year,

approximately 80% of the banking segments in India were under Government

ownership.

3.3 Scheduled Commercial Banks in India

The commercial banking structure in India consists of:

Scheduled Commercial Banks in India

Unscheduled Banks in India

Scheduled Banks in India constitute those banks which have been included in the

Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only

those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a)

of the Act. The scheduled commercial banks in India comprise of State bank of India

and its associates (8), nationalized banks (19), foreign banks (45), private sector banks

(32), co-operative banks and regional rural banks.

"Scheduled banks in India" means the State Bank of India constituted under the State

Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of

India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted

under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings)

Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and

Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bankincluded in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934),

but does not include a co-operative bank".

3.4 Banking Structure in India


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The banking institutions in India can be broadly categorized into two types i.e.

scheduled banks, non scheduled banks and specialized institutions. Scheduled banks

are again categorized as public sector banks and private sector banks. Foreign banks

are part of private sector banks.The major differentiating parameter that distinguishesbanks from each other banks in the Indian banking is the level of service that is offered

to the customer. Currently, India has 96 scheduled commercial banks (SCBs) - 27

public sector banks (that is with the Government of India holding a stake), 31 private

banks (these do not have government stake; they may be publicly listed and traded on

stock exchanges) and 38 foreign banks. They have a combined network of over 53,000

branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the

public sector banks hold over 75 percent of total assets of the banking industry, with the

private and foreign banks holding 18.2% and 6.5% respectively.

3.5 Major Reforms and Initiatives

Some of the major reform initiatives in the last decade that have changed the face of the

Indian banking are:

Interest Rate Deregulation-Interest rates on deposits and lending have been

deregulated with banks enjoying greater freedom to determine their rates.

Government equity in banks has been reduced and strong banks have been

allowed to access the capital market for raising additional capital.

New private sector banks have been set up and foreign banks permitted to

expand their operations in India including through subsidiaries.

New areas have been opened up for bank financing like- insurance, credit cards,

infrastructure financing, leasing, gold banking, besides of course investment

banking, asset management, factoring, etc. Banks have specialized committees to measure and monitor various risks and

have been upgrading their risk management skills and systems.

Adoption of prudential norms in terms of capital adequacy, asset classification,

income recognition, provisioning, exposure limits, investment fluctuation reserve,

etc.


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Figure 3.1 Banking structure in India

Reserve bank of India

Scheduled banks

Commercial banks Co-operative banks

RRBForeignbanks

UrbanCB

RuralCB

Public sectorbanks

Private sectorbanks


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ANALYSIS AND INTERPRETATION OF DATA

Analysis:

1. Number of respondents who have transferred funds to other accounts prior to

implementation of EFT system or without using EFT system.

Table 4.1 Transferred funds without using EFT

Frequency Percent Valid Percent

Cumulative

Percent

Valid yes 34 68.0 68.0 68.0

no 16 32.0 32.0 100.0

Total 50 100.0 100.0

Analysis: The above table 4.1 and figure 4.1 clearly shows:

Figure 4.1


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68% of the respondents have transferred funds prior to EFT system or without

using EFT system.

32% of the respondents have not transferred funds using Non-EFT method.

Interpretation: From the table 4.1 and figure 4.1 it is evident that 68% people have

transferred funds prior to implementation of EFT method or use Non-EFT method of

funds transfer.

2. Most preferred means of transfer of funds by Non-EFT method.

Table 4.2 Means of Non-EFT Transfer


Cumulative

Percent

Valid Demand Draft 25 50.0 50.0 50.0

Mail Transfer 3 6.0 6.0 56.0

Telegraphic Transfer 3 6.0 6.0 62.0

Cheque 18 36.0 36.0 98.0

NA 1 2.0 2.0 100.0

Total 50 100.0 100.0


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Analysis: From the table 4.2 and figure 4.2, we can say:

50% of the respondents prefer Demand Draft (DD) mode of funds transfer whilw

using Non-EFT method.

Next most preffered method is Cheque, which is used by 38% respondents.

Hardly anybody uses the other 2 modes of funds transfers (TT & MT).

Interpretation: From the table 4.2 and figure 4.2 we can interpret that the most preferred

means of Non-EFT method of funds transfer is Demand Draft (50%) followed by

Cheque (36%). There are hardly any bank account holders who use Telegraphic

Transfer or Mail Transfer or who dont transfer at all.

3. Reason for using Non-EFT

Figure 4.2


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Table 4.3 Reason for using Non-EFT


Cumulative

Percent

Valid User Friendly 17 34.0 34.0 34.0

Easily Accessible 24 48.0 48.0 82.0

Charges 1 2.0 2.0 84.0

Others 7 14.0 14.0 98.0

NA 1 2.0 2.0 100.0

Total 50 100.0 100.0

Aalysis: From the table 4.3 and figure 4.3, we can say:

48% respondents said Non-EFT is easily available or accessible.

34% feel it is user friendly.

Figure 4.3


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Interpretation: From the table 4.3 and figure 4.3 it is clearly evident that 48% of the

respondents use Non-EFT means for funds transfer because it is accessible them. Then

34% said it is user friendly. Only 2% said they used Non-EFT means for its charges.

4. Awareness of EFT

Table 4.4 Awareness of EFT


Cumulative

Percent

Valid yes 48 96.0 96.0 96.0

no 2 4.0 4.0 100.0

Total 50 100.0 100.0

Figure 4.4


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Analysis: Table 4.4 and figure 4.4 shows the awareness level of EFT among the

respondents:

The study shows that a whooping 96% of the respondents are aware about the

EFT.

Only 4% of the respondents are not aware about it.

Interpretation: One good news for the technology inventors is that a whooping 96%

respondents responded positively when they were asked, whether they were of this

technology. Only 2 respondents said that they are not aware of this system.

5. Information about EFT

Table 4.5 Source of Information


Cumulative

Percent

Valid Newspapers & Magazines 8 16.0 16.0 16.0

Internet 20 40.0 40.0 56.0

Your bank staff 13 26.0 26.0 82.0

Others 8 16.0 16.0 98.0

NA 1 2.0 2.0 100.0

Total 50 100.0 100.0


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Analysis: Table 4.5 and figure 4.5 shows how the respondents got to know about the

EFT:

40% of the respondents say they got to know about the EFT through internet.

26% of the respondents were assissted by their respective bank staff.

Interpretation: From the table 4.5 and figure 4.5 we can easily interpret that most of the

respondents (40%) got to know about the EFT from the internet followed by their

respective bank staff (26%). Internet is obvious as technology rules in this 21st century.

Figure 4.5


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6. Use of EFT

Table 4.6 Use EFT


Cumulative

Percent

Valid yes 29 58.0 58.0 58.0

no 21 42.0 42.0 100.0

Total 50 100.0 100.0

Analysis: Table 4.6 and figure 4.6 shows how many people use EFT: 58% of the respondents still dont use EFT or are not willing to use EFT.

This means 42% people still use the conventional method of funds transfering.

Figure 4.6


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Interpretation: though there was a tremendous response when it came to awareness

level of EFT among the respondents, but when it comes to usage of this facility, the

number is very low. Only 58% of the respondents use this facility.

7. EFT means of Fund Transfer

Table 4.7 EFT Means of Fund Transfer


Cumulative

Percent

Valid NEFT 23 46.0 46.0 46.0

RTGS 6 12.0 12.0 58.0

NA 21 42.0 42.0 100.0

Total 50 100.0 100.0


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Analysis: Table 4.7 and figure 4.7 shows the most preferred EFT means of funds

transfer:

46% of the respondents use NEFT for EFT funds transfer.

RTGS users are still less.

Interpretation: Now the table 4.7 and the figure 4.7 shows that among the 58% EFT

users, 46% respondents use the NEFT facility and only 12% respondents use the

RTGS facility.

Figure 4.7


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8. Reason for using EFT system for funds transfer

Table 4.8 Why prefer EFT


Cumulative

Percent

Valid Time Saving 22 44.0 44.0 44.0

Advanced Technology 6 12.0 12.0 56.0

User Friendly 2 4.0 4.0 60.0

NA 20 40.0 40.0 100.0

Total 50 100.0 100.0

Analysis: Table 4.8 and figure 4.8 shows that:

Figure 4.8


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44% of the respondents use EFT because it saves time.

12% use it becausr of advanced technology.

Only 4% feel its user friendly

Interpretation: From the table 4.8 and figure 4.8 it is evident that 44% of the

respondents, who value time, use EFT facility because it saves their time. The 12%

respondents, who are tech savvy, use this facility simply because of its advanced

technology. Hardly anybody said they said use it for its charges, though it being lower

than the Non-EFT means

9. Technical Knowledge of EFT

Table 4.9 Technical know how


Cumulative

Percent

Valid yes 34 68.0 68.0 68.0

no 16 32.0 32.0 100.0

Total 50 100.0 100.0


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Analysis: Table 4.9 and figure 4.9 shows the technical knowledge or awareness about

the EFT

68% know how the EFT system works technically.

32% dont know how thw EFT system works technically.

Interpretation: From the table 4.9 and figure 4.9 it can be interpreted that 68% of the

respondents know how the EFT system works technically. Though 96% respondents

had said that they are aware about the EFT system earlier

Figure 4.9


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10.Preference for EFT or Non-EFT

Table 4.10 Preference for EFT/Non-EFT


Cumulative

Percent

Valid EFT 42 84.0 84.0 84.0

Non-EFT 8 16.0 16.0 100.0

Total 50 100.0 100.0

Analysis: The table 4.10 and figure 4.10 shows:

84% of the respondents prefer to use EFT for funds transfer.

16% of them prefer Non-EFT fund transfer.

Figure 4.10


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Interpretation: From the table 4.10 and figure 4.10 we can say that majority of the

people (84% respondents) are willing to use EFT system of funds transfer in future.

Though many still dont know about it, but they all are willing to learn and use this

technology.

11.Frequency of transfer of funds after implementation of EFT

Table 4.11 Frequency of Transfer of Funds after Implementation of EFT


Cumulative

Percent

Valid Strongly Agree 3 6.0 6.0 6.0

Agree 18 36.0 36.0 42.0

Can't Say 14 28.0 28.0 70.0

Disagree 12 24.0 24.0 94.0

Strongly Disagree 3 6.0 6.0 100.0

Total 50 100.0 100.0


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Analysis: Table 4.11 and 4.11 shows:

36% of the respondents agreed that their frequency of transferring funds to other

accounts has increased.

26% respondents said cant say.

24% disagreed.

Interpretation: From the table 4.11 and figure 4.11 we can interpret that 36% of the

respondents said that ever since they started using EFT, their frequency of transferring

funds has increased. Whereas 24% said cant say or its at same level. There were also

24% respondents who denied to the statement.

Figure 4.11


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12. Convenience

Table 4.12 EFT convenient than Non-EFT


Cumulative

Percent

Valid Strongly Agree 11 22.0 22.0 22.0

Agree 22 44.0 44.0 66.0

Can't Say 15 30.0 30.0 96.0

Disagree 2 4.0 4.0 100.0

Total 50 100.0 100.0

Analysis:Table 4.12 shows the convenience of respondents with EFT and Non-EFT

22% Strongly Agree to the statement that EFT is convenient than Non-EFT.

Figure 4.12


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44% agreed to this ststement.

30% said cant say or its same.

Nobdy Strongly Disagreed with this statement.

Interpretation: the table 4.12 and the figure 4.12 shows that 44% of the respondents feel

that the EFT system of funds transfer is more convenient than the Non-EFT system.

22% of the respondents strongly agreed to this statement. Not a single respondent

strongly disagreed to this though 4% of the respondents disagreed.

13.Annual Income and use of EFT

Table 4.13 Income (INR) * Use EFT Crosstabulation

Count

Use EFT

TotalYes no

Income (INR) below 1 lakh 8 14 22

1 lakh-2 lakh 4 4 8

2 lakh-4 lakh 9 3 12

more than 4 lakh 8 0 8Total 29 21 50


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Table 4.14 Chi-Square Tests

Value df

Asymp. Sig. (2-

sided)

Pearson Chi-Square 11.655a 3 .009

Likelihood Ratio 14.602 3 .002

N of Valid Cases 50

a. 4 cells (50.0%) have expected count less than 5. The minimum

expected count is 3.36.

Analysis: From the table 4.13 we can say that

Very few people use EFT whose income is less than Rs. 1lakh per annum.

People with higher income use EFT more often.

Interpretation: From the table 4.13 and the Chi-Square Test above, it is evident that as

of now usage of EFT depends on the income the respondents. The respondents whose

income is more than Rs. 2lakh use EFT more often for transfer of funds.

14.Income and frequency of fund transfer after implementation of EFT

Table 4.15 Income (INR) * Change in Frequency of Transfer of Funds Crosstabulation

Count

Change in Frequency of Transfer of Funds

TotalStrongly Agree Agree Can't Say Disagree

Strongly

Disagree

Income (INR) below 1 lakh 2 5 4 9 2 2

1 lakh-2 lakh 0 5 1 1 1

2 lakh-4 lakh 1 4 5 2 0 1

more than 4 lakh 0 4 4 0 0

Total 3 18 14 12 3 5


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Value df

Asymp. Sig. (2-

sided)



N of Valid Cases 50


expected count is .48.

Analysis: From the table 4.15 and the Chi-Square table we can say that:

Majority of the respondents (41%) in the income group of below 1lakh have not

increased their EFT transactions.

Majority of the respondents (50%) in the income group of above 4lakh said that

their transactions have increased after the implementation of EFT.

Interpretation: From the table 4.15 and Chi-Sqaure Tests table 4.16 it can be interpreted

that the respondents who have higher income prefer to EFT transfer of funds and their

transfer of funds have increased after implementation of EFT.

15.Age and Usage of EFT

Table 4.17 Age (Yrs) * Use EFT Crosstabulation

Count

Use EFT

Totalyes no

Age (Yrs) less than 20 0 7 7

21-40 17 10 27

41-60 9 2 11

more than 60 3 2 5

Total 29 21 50


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Value df

Asymp. Sig. (2-

sided)



N of Valid Cases 50


expected count is 2.10.

Analysis: Table 4.17 shows that 63% of the respondents in the age group of 21-40

years use EFT and in the age group of 41-60 years, 82% of the respondents use EFT.

Whereas in less than 20 years age group nobody uses EFT.

Interpretation: From the table 4.17 and the table 4.18 we can say that the majority of

the EFT users are in the age group of 21-60 years. As of now most of the people in theage group of less than 20 years and above 60 years are not using EFT. Therefore

usage of EFT is dependent on age.

16.Gender and Usage of EFT

Table 4.19 Gender * Use EFT Crosstabulation

Count

Use EFT

Totalyes no

Gender Male 17 12 29

female 12 9 21

Total 29 21 50


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Value Df

Asymp. Sig. (2-

sided)

Exact Sig. (2-

sided)

Exact Sig. (1-

sided)

Pearson Chi-Square .011a 1 .917

Continuity Correctionb .000 1 1.000

Likelihood Ratio .011 1 .917

Fisher's Exact Test 1.000 .573

N of Valid Cases 50

a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 8.82.

b. Computed only for a 2x2 table

Analysis: Table 4.19 shows that:

59% of the male respondents use EFT and

57% of the female respondents use EFT

Interpretation: From the table 4.19 and 4.20 we can say that the usage of EFT is not

dependent on gender of the respondents. Both male and female use it equally.

FINDINGS AND SUGGESTIONS

5.1 Findings from the Secondary Data:


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Doing something new which we have not done earlier, like taking up a new project,

reading a new book or experimenting something new gives us a lot to learn. We get to

know many new things which we did not know earlier. Thus this time I too got to learn

many things during my project. My findings are as given below.

Charges for the funds transfer prior to implementation of EFT system or when the funds

are transferred without using EFT:

Non-EFT means of transfer are as follows:

Demand Transfer (DD).

Mail Transfer (Mail Transfer).

Telegraphic Transfer (TT).

Cheque.

Now let us look at the charges for using these means to transfer funds. Since India has

27 public sector banks and 30 private sector banks, the charges for the non electronic

means of funds transfer is almost same in all the public sector banks. The charges in

private sector banks differ from those of nationalized banks. The following two tables,

table 5.1 and table 5.2 gives us the breakup of charges of two banks. One is Indian

Bank (nationalized bank) and the other is ING Vysya Bank (private bank).

Table 5.1 (Indian Bank)

Amount (INR) Outstation

DD/MT/TT (INR)

BPO

(Pay Order) (INR)

Up to 500/- 30/- 30/-


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501 1, 000 30/- 30/-

1, 001 5, 000 30/- 30/-

5, 001 10, 000 30/- 30/-

10, 001 1, 00, 000 Rs. 3 per thousand with a

minimum of Rs. 30/-

Rs. 3 per thousand with a

minimum of Rs. 30/-

Above Rs. 1,00 ,000 Rs. 2.60/- per thousand

with a minimum of Rs. 300/-

Rs. 1.50/- per thousand

with a minimum of Rs. 300/-

Table 5.2 (ING Vysya Bank)

Amount (INR) Outstation

DD/PO/TT (INR)

Up to 10, 000/- 50/-

10,001 50, 000/- Rs. 2.50/- per Rs. 1,000/- or part thereof

subject to a minimum of Rs. 50/-.

50, 001 2,00,000/- Rs. 2/- per Rs. 1,000/- or part thereof subject

to the minimum of Rs.125/-

Above Rs. 2,00,000 Re 1/- per Rs. 1,000/- or part thereof subject

to the minimum of Rs. 400/- & max Rs. 600/-

The above charges in the table is applicable only to the account holders of those banks.Those who do not have account in those banks, are charged 1.5 times of the charges

mentioned above in the public sector banks and private banks it varies from bank to

bank.

Another method of funds transferring is through cheques. Here the person who is

issuing cheque is not charged, but the person who is collecting is charged if the

collector is having bank account in another bank or the cheque issued to him is of

another bank. This charge is known as collection charge. The following charges are

charge by the Indian Bank:

Table 5.3 (Indian Bank)

Amount (INR) Charges (INR)


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Up to 10, 000/- 50/- per cheque

10,000 1,00,000/- 100/- per cheque

Above 1,00,000/- 150/- per cheque

In private sector banks, the charges differ from bank to bank. The charges are higher in

the private sector banks when compared to the nationalized banks.

Now let us look at the charges aplplicable when the EFT mode of funds transfer is used

to transfer funds. The EFT funds transfer is classifed into NEFT and RTGS.

Table 5.4 (NEFT Charges)


Up to 1,00,000/- 5/- per transactionAbove 1,00,000/- 25/- per transaction

Table 5.5 (RTGS Charges)


1,00,001 5,00,00 25/- per transaction

Above 5,00,000/- 50/- per transaction

According to RBI guidelines, an electronic funds transfer up to Rs. 1,00,000 is

considered as NEFT. Any amount above Rs. 1,00,000 is considered as RTGS.

Now from the above information it clearly noticable that charges collected through EFT

is very much less when compared to Non-EFT mode of transfer. So EFT has been a

boon to the customers when it comes to the charges of the funds transfer. Now this

leaves a question, whether banks have lost their revenue by implementing EFT?

Answer is no, because this EFT facility has increased the volume of transaction. Even

from the analysis of the questionnaire it is visible that people have increased their

volume of transactions after the implementation of EFT. Since the data required was

very much confidential so we could not get the exact figures. But from the bank staff we

got the information that compared to earlier transactions the volume of transactions has

increased.


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5.2 Findings from the questionnaire:

There are as many as 32% people who have not transferred funds prior to

implementation of EFT or have still not used EFT.

50% of the respondents use Demand Draft to transfer funds while using Non-

EFT method. Followed by Cheque, which is used by 36%. Rarely anybody uses

the other 2 means like Mail Transfer and Telegraphic Transfer to transfer funds.

The reason why people use Non-EFT method of transfer is that it is easily

accessible. It can be done through any branch. Whereas NEFT and RTGS is

available in limited number of branches.

When it came to awareness level of EFT, whopping 96% respondents said that

they are aware of EFT. And majority of them (40%) said that they got to know

about EFT through internet followed 26% respondents who said they got to know

about it from their bank staff.

When it comes to usage of EFT, 58% said that they are using EFT and the most

preferred means of EFT is NEFT.

44% respondents feel that using EFT saves their time, and that is reason why

they use it. While 12% said that they use it for its advanced technology.

68% of the respondents said that they know how the EFT system works

technically.

When it came to preference of EFT and Non-EFT, 84% respondents said that

they prefer EFT.

42% of the respondents agreed and strongly agreed to the statement that they

have increased their transfer of funds post implementation of EFT. 24% of the

respondents disagreed to this statement.


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22% of the respondents strongly agreed and 44% agreed to the statement EFT is

more convenient than the Non-EFT means of transfer.

When cross tabulation was done for income group and use of EFT, it showed

that EFT usage is dependent on the income group of the respondents. More

respondents whose income is above Rs. 2lakh per annum use EFT than those

whose is below Rs. 2lakh.

50% of the respondents in the income group of above Rs. 4lakh agreed to that

their frequency of transfer of funds has increased after implementation of EFT.

While 41% in the income group of less than Rs. 1 lakh did not agree to this

statement.

More respondents in the age group of 21-60 years use EFT than in the age

group of less than 20 years and more than 60 years. Therefore EFT usage is

dependent on the age group.

EFT usage is not dependent on the gender of the respondents. Both male and

female use it equally.

5.3 Suggestions

After looking at the various aspects earlier in this research, the following are the

suggestions:


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Maintain a striking balance between the volumes of transfer of funds through

Non-EFT and EFT methods. The reason is, as we have seen the difference

between the commission charges charged by the banks for the funds transfer by

both the methods is huge. The commission charged for Non-EFT method is

almost 6 times than that of EFT.

Banks can take an initiatve to educate people about the EFT systyem, because

from the questionnaire we could see that 96% respondents were aware of EFT

system but among those 96% only 58% use EFT. And also very few know how

the system works technically. So this may be the reason that people hesitate yo

use it. When more people start using EFT then it will the volume of transactions

and thus help the bank to generate revenue.

Banks can make sure that all their branches are 100% computerised and this

facility is available in all the branches. From the questionnaire we can make out

that people use Non-EFT methods because it is easily accessible and user

friendly.

We have seen that people in the low income group prefer not to visit bank for

payments such as telephone bills, electric bill etc due high charges charged by

banks. If banks can convert this group to EFT customers then it will be profitable

to both bank and the customers.

A notable point was that only 42% of the respondents said that their fund transfer

transactions have increased after the implementation. In a country of 1.1 billion

population, this number is quite small. So if the banks can think of some

schemes wherein the the customers who are depositing funds to other accounts

by directly visiting to that particlucar bank branch, which is free of cost, can be

encouraged to use EFT. As the charges of EFT is very low the customers would

not mind if the process is made simpler. The banks can thionk of doing the same

thing using SMS service. As mobile phonis are very popular.


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CONCLUSION


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Any project is incomplete without a successful and meaningful conclusion. An ideal

conclusion should be brief yet informative. The research conducted by me has the

following conclusion:

The implementation of EFT system has been a boon to the customers and bankers. For

customers, it has saved their valuable time and also the charges which they had to pay

to transfer their own money. When the amount was high the charges were also very

high. Thus the implementation of EFT has brought a great relief to the customers. For

bankers it has reduced their manual work and also has helped them to work quickly and

efficiently without much error. Since it uses the computer system, the error rate has

dropped significantly.

From the analysis of the questionnaire it is quite evident that 96% of the respondents

were aware of EFT system but only 58% use this system and 68% known how the

system works technically. Also people in the age group of 21-40 years are more prone

to use this system. This is a good sign as in the coming years the younger generation,

who, now are below 20 years will follow their elders footsteps and use this EFT system

to a great extent. Thus, once again technology is proving to be an integral part of 21 st

century.

Bibliography


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Books Referred:

Mohammed Arif Pasha: Financial Markets and Intermediaries, First Edition,

Published by Kalyani Publications, 2008

Cooper Donald R: Schindler Pamela S. (2004). Business Research Methods,

4th Edition,Tata McGraw-Hill Publication Company Limited, New Delhi.

Barney Warf: E-Business Development and Management in the Global

Economy 2009 edition.

Sites Referred:

www.indianbank.org

www.rbi.org

http://www.nlm.nih.gov/services/doc_efts.html

http://www.ofm.wa.gov/policy/glossary.asp
http://www.indianbank.org/http://www.rbi.org/http://www.nlm.nih.gov/services/doc_efts.htmlhttp://www.ofm.wa.gov/policy/glossary.asphttp://www.indianbank.org/http://www.rbi.org/http://www.nlm.nih.gov/services/doc_efts.htmlhttp://www.ofm.wa.gov/policy/glossary.asp


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ANNEXURE 1Questionnaire

I am Nikhil Barge, a final year MBA student of Acharya Institute of Management andSciences, conducting a study on Impact of EFT (Electronic Fund Transfer) on banks

and its users, for the partial fulfillment of my course. Please help me by filling in thequestionnaire completely. The information you provide is purely for academic purposeand hence will be kept confidential.

1. Name:

2. Age (yrs):

Less than 20 20-40 41-60 more than 60

3. Gender:

Male female

4. Qualification:

Illiterate SSLC PUC Graduate

Post Graduate Others __________________________ (Please Specify)

5. Occupation:

Student Private Employee Govt. Employee

Self Employed Others ___________________________ (Please Specify)

6. Income per annum (INR):

Below 1 lakh 1 lakh-2 lakh2 lakh-4 lakh Above 4 lakh

7. Do you have a bank account?

Yes No

8. If yes, how frequently you visit your bank?

Daily Once in a week Once in a fortnight

Once in a month Once in a year rarely

9. Do you transfer funds to other accounts?

Yes No

10.Have you transferred funds to other accounts prior to implementation of EFT

system?

Yes No


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11.Which means of transfer of funds you prefer most to use for transferring funds

without EFT?

Demand Draft Mail Transfer

Telegraphic Transfer Cheque

12.What is the reason for using the preferred means marked above?

User friendly easily accessible

Charges Others ________________________ (Please Specify)

13.Are you aware of the EFT system? (If no skip the next question)

Yes No

14.How did you get to about EFT?

Newspapers & Magazines Internet

Your bank staff Others _________________ (Please Specify)

15.Do you use EFT system for transferring funds? (If no, skip the next 2 questions)

Yes No

16.If yes, which means of EFT funds transfer you use?

NEFT RTGS

17.Why do you prefer to use EFT system?

Time saving Advanced technology

User friendly Charges18.Do you know how the EFT system works technically?

Yes No

19.If both EFT system and non-EFT system is available for transfer of funds, which

one will you prefer?

EFT Non-EFT

20.Implementation of EFT has made me transfer funds more often than earlier.

Strongly Agree Agree Cant Say

Disagree Strongly Disagree

21.I find EFT more convenient than Non-EFT system of fund transfer

Strongly Agree Agree Cant Say

Disagree Strongly Disagree


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neft project

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