1

A

SUMMER TRAINING REPORT

ON

“CUSTOMER PERCEPTION TOWARDS E-BANKING”

IN HDFC BANK

SUBMITTED IN PARTIAL FULFILLMENT OF

DEGREE OF

MASTERS OF BUSINESS ADMINISTRATION

SESSION (2013-2015)

PAPER CODE (CP-303)

SUBMITTED TO: SUBMITTED By:

MRS.MEENAKSHI OBEROI KANIKA JAIN

(ASSISTANT PROFESSOR) MBA 3rd Sem.

ROLL NO. -3010673

EMAX GROUP OF INTITUTIONS, BADHAULI, AMBALA

(KURUKSHETRA UNIVERSITY, KURUKSHETRA)

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DECLARATION

I hereby declare that, the project entitled “CUSTOMER PERCEPTION TOWARDS E-

BANKING” assigned to me for the partial fulfillment of MBA degree from Kurukshetra

University, Kurukshetra. The work is originally completed by me and the information provided

in the study is authentic to the best of my knowledge.

This study has not been submitted to any other institution or university for the award of any other

degree.

KANIKA JAIN

MBA 3rd SEM.

University Roll No. -3010673

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CERTIFICATE BY FACULTY

This is to certify that KANIKA JAIN has completed the project entitled “CUSTOMER

PERCEPTION TOWARDS E-BANKING” under my supervision. To the best of my

knowledge, the report consists of result of the empirical study conducted by the student. In my

opinion, the work is of requisite standard expected of an MBA student. Therefore, I recommend

the same to be sent for evaluation.

Meenakshi Oberoi

(Assistant Professor)

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ACKNOWLEDGEMENT

“Gratitude is the hardest of emotions to express and one often does not find adequate words to

convey what one feels and trying to express it”

The present project file is an amalgamated of various thoughts and experiences .The successful

completion of this project report would have not been possible without the help and guidance of

number of people and especially to my project guide in HDFC BANK. I take this opportunity to

thank all those who have directly and indirectly inspired, directed and helped me towards

successful completion of this project report.

I am also immensely indebted to my project guide, MRS.MEENAKSHI OBEROI, Assistant

Professor, EMAX GROUP OF INSTITUTIONS, for her illumining observation and encouraging

suggestion and constructive criticisms, which have helped me in completing this research project

successfully.

There are several other people who also deserve much more than a mere

acknowledgement at their exemplary help. I also acknowledge with deep sense of

gratitude and wholehearted help and cooperation intended to me by them.

KANIKA JAIN

MBA-3RD SEM.

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PREFACE

Summer Training is the bridge for a student that takes him from his theoretical knowledge world

to practical industry world. The main purpose of industrial visit is to expose for industrial and

business environment, which cannot be possible in the classroom.

The advantages if this sort of integration, which promote guide to corporate culture, functional,

social and norms along with formal teaching are numerous.

1. To bridge the gap between theory and practical.

2. To install the filling of belongingness and acceptance.

3. To help the student to develop the better understanding of the concept and questions already

raised subsequently during their research period.

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CONTENTS

SR.NO. CONTENT

Industry Certificate

Declaration

Certificate

Acknowledgement

Preface

Chapter-1 INTRODUCTION TO TOPIC

Chapter-2. INDUSTRY/COMPANY PROFILE

Chapter-3. RESEARCH METHODOLOGY

Chapter-4. DATA ANALYSIS &

INTERPRETATION

Chapter-5. Findings, Suggestions and

Conclusion

Bibliography

Annexure

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CHAPTER 1

INTRODUCTION

TO THE

TOPIC

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INTRODUCTION

The new information technology is becoming an important factor in the future development of

financial services industry, and especially banking industry. Banks are faced with a number of

important questions, for examples how to take full advantage of new technology opportunities,

how e-developments change the ways customers interact with the financial services provider, etc.

In paper author analyzes the main criteria for successful internet-bank strategy and brings out

benefits of e-banking from the point of view of banks, their clients and the economy in general.

Information technology is fast becoming an important factor in the development of financial

services industry, particularly the banking sector. Banks have traditionally been in the forefront

of harnessing technology to improve their products, services and efficiency.

They have, over a long time, been using electronic and telecommunication networks for

delivering a wide range of value added products and services. The delivery channels include

direct dial – up connections, private networks, public networks etc. and the devices include

telephone, Personal Computers including the Automated Teller Machines, etc. With the

popularity of PCs, easy access to Internet and World Wide Ib (WWW), Internet is increasingly

used by banks as a channel for receiving instructions and delivering their products and services

to their customers. This form of banking is generally referred to as Internet Banking, although

the range of products and services offered by different banks vary widely both in their content

and sophistication. E - Banking involves consumers using the Internet to access their bank

account and to undertake banking transactions. At the basic level, Internet banking can mean the

setting up of a Ib page by a bank to give information about its products and services. At an

advanced level, it involves provision of facilities such as accessing accounts, transferring funds,

and buying financial products or services online. In the 1990s, banks realized that the rising

popularity of the World Wide Ib gave them an added opportunity to advertise their services.

Initially, they used the IB as another brochure, without interaction with the customer. Early sites

featured pictures of the bank's officers or buildings, and provided customers with maps of

branches and ATM locations, phone numbers to call for further information and simple listings

of products.

Today, banks are facing a number of important issues like how to take full advantage of the new

technologies, how e-banking changes the way customers relate with the service provider, etc.

The financial services industry has recently been open to historic transformation. So-called e

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developments are emerging and advancing rapidly in all areas of financial intermediation and

financial markets: e-finance, e-money, e-banking, e-brokering, e-insurance, e-exchanges, and

even e-supervision. The new information technology (IT) is turning into the most important

factor in the future development of banking, influencing banks’ marketing and business

strategies. The driving forces behind the rapid transformation of banks are influential changes in

the economic environment: innovations in information technology, innovations in financial

products, liberalization and consolidation of financial markets, deregulation of financial inter-

mediation etc. These and other factors make it complicated to design a bank’s strategy, which

process is threatened by unforeseen developments and changes in the economic environment and

therefore, strategies must be flexible to adjust to these changes. The question is not any more

whether the emergence of Internet has been a threat or an opportunity as those who have decided

to protect themselves from the threats instead of using the opportunities are determined to vanish

from the marketplace.

MEANING OF CUSTOMER PERCEPTION:

A marketing concept that encompasses a customer's impression, awareness and/or consciousness

about a company or its offerings. Customer perception is typically affected by advertising,

reviews, public relations, social media, personal experiences and other channels.

DEFINITION OF E-BANKING:

E-banking is defined as the automated delivery of new and traditional banking products and

services directly to customers through electronic, interactive communication channels. Electronic

Banking is an umbrella term for the process by which a customer may perform banking

transactions electronically without visiting a brick-and-mortar institution. Therefore, transaction

related to bank activities via Electronic Mean and Medium is called Electronic Banking. E-

banking includes the systems that enable financial institution customers, individuals or

businesses, to access accounts, transact business, or obtain information on financial products and

services through a public or private network, including the Internet. Customers access e-banking

services using an intelligent electronic device, such as a personal computer (PC), personal digital

assistant (PDA), automated teller machine (ATM), kiosk, or Touch Tone telephone. While the

risks and controls are similar for the various e-banking access channels, this booklet focuses

specifically on Internet-based services due to the Internet’s widely accessible public network.

With technology having played a significant role in the development of modes of payment and

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settlement, many banks have introduced innovative products such as e-banking and e-payments.

Simply put, e-banking is the process of conduct of banking with the use of electronic tools and

facilities. The service-based areas of activity of banks have perhaps been the largest beneficiary

of e-banking. Internet banking has been the predominant mode of e-banking in India with the

Internet offering itself as a new delivery mechanism for the banks in reaching the customer.

Commencing with simple transactions such as enquiry facilities, today messages sent through the

internet to banks perform tasks such as funds transfer and account opening. Internet banking

necessitates that banks have a secure Ib server and a centralized data base of their customers to

facilitate information flow from customers to the bank and vice versa. While some banks already

have systems to meet this requirement, others are at various stages of implementation .Effecting

payments through electronic means constitute e-payments. Various forms of e-payment are in

existence such as E-cheque, card based payments (credit, debit and smart cards) and EFT. All

these are available in the country and the large scale usages of these are dependent on the levels

of technology at banks and their ready acceptance by the constituents of banks.

INTERNET BANKING SYSTEM:

Internet Banking System is a system that has been developed in order to help clients with the

daily day-to-day transactions. Internet banking systems means that clients can now do banking at

the leisure of their homes. Also known as online banking, the system allows both transactional

and non-transactional features. Online banking or internet banking allows customers to conduct

financial transactions on a secure Ibsite operated by the retail or virtual bank.

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HISTORY OF INTERNET BANKING:

The concept of Internet banking has been simultaneously evolving with the development of the

World Wide Web. Programmers working on banking data bases came up with ideas for online

banking transactions, sometime during the 1980s. The creative process of development of these

services was probably sparked off after many companies started the concept of online shopping.

The online shopping promoted the use of credit cards through Internet. Many banking

organizations had already started creating data ware housing facilities to ease their working

staffs. The development of these databases was widely used during the development of ATM's.

Sometime in 1980s, banking and finance organizations in Europe and United States started

suggestive researches and programming experiments on the concept of 'home banking'. Initially

in the 80's when computers and Internet were not so well-developed, 'home banking' basically

made use of fax machines and telephones to facilitate their customers. The widespread of

Internet and programming facilities created further opportunities for development of home

banking.

In 1983, the Nottingham Building Society, commonly abbreviated and referred to as the NBS,

launched the first Internet banking service in United Kingdom. This service formed the basis for

most of the Internet banking facilities that followed. This facility was not very well-developed

and restricted the number of transactions and functions that account holders could execute. The

facility introduced by Nottingham Building Society is said to have been derived from a system

known as Prestel that is deployed by the postal service department of United Kingdom.

The first online banking service in United States was introduced, in October 1994. The service

was developed by Stanford Federal Credit Union, which is a financial institution. The online

banking services are becoming more and more prevalent due to the well-developed systems.

Though there are pros and cons of electronic cash, it has become a revolution that is enhancing

the banking sector.

Internet banking is used widely by masses, and has numerous benefits to offer. Nowadays, all

banks provide online banking facility to their customers as an added advantage. Gone are the

days, when one had to transact with a bank which was only in his local limits. Online banking

has opened the doors for all customers, to operate beyond boundaries. Nowadays, people are so

busy in their work lives, that they don't even have time to go to the bank for conducting their

banking transactions. Internet banking enables people to carry out most of their banking

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transactions using a safe website, which is operated by their respective banks. It provides many

features and functions to their customers, and enables them to view their account balance,

transfer money from their account to another account (be it in their respective bank or any other

bank), view their account summary, etc.

With the popularity of the Internet increasing steadily, most of the industries are finding new and

interesting ways to make use of this new and equally interesting medium so as to keep up with

the constantly changing preferences of clients all over. Nowadays, you can do almost anything

over the Internet - from shopping for groceries to making a free call to a friend in New Zealand

through your computer! Yes, the Internet has seemingly endless possibilities and the banking

industry in turn has decided that it won't be left behind the rest of the pack.

While most of us have heard about online banking services, more than a majority of us have

probably not even tried it out yet. It could possibly be because we are more comfortable working

with real people; paper and money instead of its virtual counterpart, as performing transactions

over the Internet can be very impersonal. Whatever may be the reason; there are a number of

advantages and disadvantages to online banking services. This article will outline the good side

as well as the bad side to online banking so that you can either feel that online banking is a safe

way to manage your finances, or you could possibly be justified in your fears.

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FACTORS TO BE CONSIDERED:

E-banking systems can vary significantly in their configuration depending on a number of

factors. Financial institutions should choose their e-banking system configuration, including

outsourcing relationships, based on four factors:

Strategic objectives for e-banking

Scope, scale, and complexity of equipment, systems, and activities

Expertise

Security and internal control requirements

Financial institutions may choose to support their e-banking services internally.

Alternatively, financial institutions can outsource any aspect of their e-banking systems

to third parties.

Evolution of e-banking:

E-banking came into being in UK and USA in 1920s. It became prominently popular during

1960s through electronic funds transfers and credit cards. The concept of Ib-based banking came

into existence in Europe and USA in the beginning of 1980s. It has been estimated that around

40 percent of banking transaction would be done through Net.

E-Banking in India:

In India e-banking is of fairly recent origin. The traditional model for banking has been through

branch banking. Only in the early 1990s there has been start of non-branch banking services. The

good old manual systems on which Indian Banking depended upon for centuries seem to have no

place today. The credit of launching internet banking in India goes to ICICI Bank. Citibank and

HDFC Bank followed with internet banking services in 1999. Several initiatives have been taken

by the Government of India as Ill as the Reserve Bank to facilitate the development of e-banking

in India. The Government of India enacted the IT Act, 2000 with effect from October 17, 2000

which provided legal recognition to electronic transactions and other means of electronic

commerce. The Reserve Bank is monitoring and reviewing the legal and other requirements of e-

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banking on a continuous basis to ensure that e-banking would develop on sound lines and e-

banking related challenges would not pose a threat to financial stability. A high level Committee

under chairmanship of Dr. K.C. Chakrabarty and members from IIT, IIM, IDRBT, Banks and the

Reserve Bank prepared the „IT Vision Document- 2011-17‟, for the Reserve Bank and banks

which provides an indicative road map for enhanced usage of IT in the banking sector. Indian

banks offer to their customers following e-banking products and services:

Banking

The three broad facilities that e-banking offers are:

- Complete your banking at your convenience in the comfort of your home.

- There are no queues at an online bank.

- Bank online services is provided 24 hours a day.

Classification of E - Banking:

Electronic banking can be classified into 3 narrow sections:-

1. Telephone Banking ( The oldest and poorest one )

2. Internet Banking (or Online Banking )

3. Mobile Banking ( Including SMS Banking )

4. Phone Banking ( Including ATS and client advisor )

5. WAP (Wireless Application Protocol )

6. E-Banking using personal computers

7. Home Banking

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8. Debit Card

9. Credit card

These can be explained as:

1. Telephone Banking :

Telephone banking and the first banking services using classic telephone lines for

communication date back to the turn of the sixties and seventies of the last century. These

services grew very rapidly and at the close of the 20th century mobile phones also started

to be used in banking with the development of information and communication

technologies. In this period banks quickly responded to the dawning of a new era in using

mobile telephones world-wide and began communicating with their clients by SMS

messages, with GSM banking later becoming a natural component of electronic banking.

Each financial institution offers this under a different name, but the essential product

remains the same. A mobile phone can be used to communicate with a so-called

telephone banker or an automated telephone system, just as Ill as a fixed line.

Opportunities for mobile phone usage in communication with a bank are much greater.

Mobile phone use represents a direct communication channel that spread on a massive

scale through which clients have immediate access to typing a bank operation, ordering

services or working with accounts. Electronic banking using a telephone connection can

be divided into phone banking

Telephone Banking is a service provided by financial institutions that enables customers

of the financial institution to perform financial transactions over the telephone, without

the need to visit a bank branch or automated teller machine. Telephone banking times can

be longer than the Branch opening times and some financial institutions offer the service

on a 24 hour basis. From the Bank point of view, Telephone Banking reduces the cost of

handling transactions by reducing the need for customers to visit a bank branch for non-

cash withdrawal and deposit transactions.

Process of servicing:

To access Telephone Banking:

The customers would call the special phone number set up by the financial

institution.

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Enter the keypad the customer number and password.

There could be more steps for security and or automated systems to secure

customers accounts or specific question to answer pre-determined by customers.

2. Internet Banking:

Online banking (or Internet Banking) allows customers of a financial institution to

conduct financial transactions on a secure Ibsite operated by the institution, which can be

a retail or virtual bank, credit union or society. It may include of any transactions related

to online usage.

Process of servicing:

To access online banking:

Enter financial institution Ibsite.

Enter the online banking facility using the customer number and password.

There may be additional security steps for access.

3. Mobile banking:

Mobile Banking ( also known as M-Banking, mbanking ) is a term used for performing

balance, checks, accounts transactions, payment, credit application and other banking

transactions through a mobile device such as a mobile phone or Personal Digital

Assistant ( PDA ).

It includes:

SMS Banking:

SMS Banking is a type of mobile banking, a technology enable service offering from

bank to its customers, permitting them to operate selecting banking service over their

mobile phones using SMS messaging.

SMS banking uses short text messages sent through the client’s mobile phone. SMS text

messages can be used for both passive and active operations similarly as with classic

telephone banking. A client can automatically receive information about his account

balance: an SMS is sent to the client immediately after a certain operation is performed,

or on request: a client sends the bank a correctly formatted message which processes it

and answers the client’s request by SMS. Information sent on request mostly concerns

current interest rates or currency exchange rates. Providing these is simple for the bank

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because this is publicly accessible information that needs no protection. A client hoIver

can request information about the balance in his account.

4. Phone Banking:

Phone Banking is the provision of banking services using a classic telephone line. A bank

client can obtain the necessary information on dialing a telephone number specified in

advance. Before the requested banking service information is provided, the client’s

identity is determined using contractually agreed terms. Using this banking service

enables bank clients to obtain information concerning active and passive banking

products, but a client can also actively use the bank payment system and request.

For example, a payment order or a collection order, open or cancel a term deposit or a

current account. In this case a fax connected to the telephone serves as an output

communication channel.

The client advisor or so-called telephone banker is a bank employee capable of providing

any information about products and services and, following verification that he is

speaking with an authorized person, can also perform any passive or active operation. He

can provide advice to the client and offer further banking products.

One advantage of this service is that it requires no additional technical equipment apart

from a telephone. As rule bank telephone center (call center) operators work 24 hours a

day nonstop and it is thus possible to use their services from any client advisor is a bank

employee; the bank pays his salary thus increasing its costs and fees for this service.

Banks therefore sometimes establish automated telephone systems.

Automated Telephone System

The technical means necessary to use this system are the same as for communication with

a client advisor. A telephone is required, which must have tone dialing1 or be equipped

with an accessory adaptor (tone dialer). An automated telephone system works on the

basis of a menu through which clients can move around using buttons on the telephone.

The service menu tree is usually designed to be simple so that a choice does not take too

long. More extensive information is sent to the client by fax either to a telephone number

agreed in advance or to a number requested by the client. Cost efficiency is the

advantage. Some banks offer this service to client’s free-of-charge because costs are

negligible and comfort is significant. One disadvantage is that problems can sometimes

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arise when the client cannot choose a menu item that corresponds with his wishes or the

computer responds to an instruction in a way that differs from what the client wanted. It

is then appropriate to connect to an automated telephone system with a telephone banker

who can resolve the problem. Secure communication for this system can be arranged in

two elementary ways:

1. END-TO-END security – the whole communication chain is secured by a verbal code.

This is very secure but also expensive and only used in public administration and the

army,

2. Using so-called access rights – at the start the client must document his authorization

to communicate with the bank.

A client’s personal number (e.g. account number) and PIN as a numerical password are

often used for passive operations. Here, the risk of misuse is relatively great because

everyone who gets to know the personal number and password will be able to enter the

system. The following methods are safer:

• When an account is open the client selects several keywords. An operator stores them in

the information system. During client authorization in the course of the next call the

system generates a request for specific letters from these words. The operator rewrites

them into the information system terminal which then confirms or rejects the client’s

authorization. Hence not even the operator ever sees the whole keywords. One exception

to this is when the account is initially open.

• using a so-called authorization code – on the principle of a tear-off notebook. Each

authorization code is used for one day only and then becomes invalid.

• Electronic key – a special device similar to a calculator. The bank’s information system

gives the client a random number; the client types it into his key and the key answers with the

authorization code. The authorization code is activated by the system and the system either

confirms or rejects the authorization. The key itself is protected against misuse by a PIN

which

The client can change at will. No password is repeated twice.

• A two-level system of protection is often used. During entry a client types his personal

number and a password. If he wants to perform an active operation he must enter a

nonrecurring password. When the client

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Signs a contract on using telephone banking services he receives a set of several

passwords, whereby for every active operation with an account he uses one, by which he

authorizes the given operation. Once used the password cannot be used repeatedly.

Changing the numerical password after some time further increases safety. When an

incorrect password is repeatedly

Entered the system blocks access to the given user.

5. WAP (Wireless Application Protocol):

WAP is often compared to IB pages, although this is a simplification. Unlike pages

appearing on a computer monitor, WAP presents its output on a small mobile phone

display, therefore concentrating on text information. It is a form of gateway to various

services prepared by a mobile network operator or another firm. One condition for using

the service is that the client must have a mobile phone supporting WAP technology.

Security is again provided by an electronic key. WAP banking has not caught on very Ill

so far, some banks have to continue to offer it despite the relatively low number of users.

5. Electronic Banking using Personal Computers:

Along with significant growth in the usage of mobile phones in banking practice, personal

computers have also come to the fore, which to an even greater extent facilitate and modernize

banking service provision. In an information society this communication instrument plays an

irreplaceable role and is indispensable for the present day banking sphere. The area of electronic

banking realized through personal computers can be divided into home banking, internet banking

and mail banking.

6. Home Banking:

Home banking is a service that enables a bank client to handle his accounts from a

computer from a place selected in advance, at home or in the office. The main features of

home banking systems are the high level of security, comfort, simplicity of use, openness

of the system, wide communication possibilities, networking, definition of users and their

rights, automated data transmission and the option to define a combined signature

specimen. A home banking system usually consists of two parts: a bank computer

program and a program in the client’s computer. The bank program works as a

communication server. It receives calls from clients, verifies their identity, receives data

from them, authenticates digital signatures, generates digital receipts and sends data to

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clients. A home banking computer system is a multi user application, meaning that

several of the client’s employees can work with it, in particular:

a) Administrator – can define new employees, change rights,

b) Sender – ensures communication with the bank and transmission of prepared data,

c) Accountant – can type payment orders and orders for collection,.

b) VieIr – can browse through statements and announcements received.

7. Debit card:

A debit card (also known as a bank card or check card) is a plastic payment card that

provides the cardholder electronic access to his or her bank account(s) at a financial

institution. Some cards may bear a stored value with which a payment is made, while most

relay a message to the cardholder's bank to withdraw funds from a payer's designated bank

account. The card, where accepted, can be used instead of cash when making purchases. In

some cases, the primary account number is assigned exclusively for use on the Internet and

there is no physical card.

In many countries, the use of debit cards has become so widespread that their volume has

overtaken or entirely replaced cheques and, in some instances, cash transactions. The

development of debit cards, unlike credit cards and charge cards, has generally been country

specific resulting in a number of different systems around the world, which were often

incompatible. Since the mid-2000s, a number of initiatives have allowed debit cards issued in

one country to be used in other countries and allowed their use for internet and phone

purchases. Unlike credit and charge cards, payments using a debit card are immediately

transferred from the cardholder's designated bank account, instead of them paying the money

back at a later date.

Debit cards usually also allow for instant withdrawal of cash, acting as the ATM card for

withdrawing cash. Merchants may also offer cash back facilities to customers, where a

customer can withdraw cash along with their purchase.

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TYPES OF DEBIT CARDS:

1. Online debit service:

Online debit cards require electronic authorization of every transaction and the debits are

reflected in the user’s account immediately. The transaction may be additionally secured

with the personal identification number (PIN) authentication system; some online cards

require such authentication for every transaction, essentially becoming enhanced

automatic teller machine (ATM) cards.

One difficulty with using online debit cards is the necessity of an electronic authorization

device at the point of sale (POS) and sometimes also a separate PIN pad to enter the PIN,

although this is becoming commonplace for all card transactions in many countries.

Overall, the online debit card is generally viewed as superior to the offline debit card

because of its more secure authentication system and live status, which alleviates

problems with processing lag on transactions that may only issue online debit cards.

Some on-line debit systems are using the normal authentication processes of Internet

banking to provide real-time on-line debit transactions.

2. Offline debit system:

Offline debit cards have the logos of major credit cards (for example, Visa or

MasterCard) or major debit cards (for example, Maestro in the United Kingdom and other

countries, but not the United States) and are used at the point of sale like a credit card

(with payer's signature). This type of debit card may be subject to a daily limit, and/or a

maximum limit equal to the current/checking account balance from which it draws funds.

Transactions conducted with offline debit cards require 2–3 days to be reflected on users’

account balances.

In some countries and with some banks and merchant service organizations, a "credit" or

offline debit transaction is without cost to the purchaser beyond the face value of the

transaction, while a fee may be charged for a "debit" or online debit transaction (although

it is often absorbed by the retailer). Other differences are that online debit purchasers may

opt to withdraw cash in addition to the amount of the debit purchase (if the merchant

22

supports that functionality); also, from the merchant's standpoint, the merchant pays

lower fees on online debit transaction as compared to "credit" (offline).

3. Electronic purse card system:

Smart-card-based electronic purse systems (in which value is stored on the card chip, not

in an externally recorded account, so that machines accepting the card need no network

connectivity) are in use throughout Europe since the mid-1990s, most notably in

Germany (Geldkarte), Austria (Quick Wertkarte), the Netherlands (Chipknip), Belgium

(Proton), Switzerland (CASH) and France (Moneo, which is usually carried by a debit

card). In Austria and Germany, all current bank cards now include electronic purses.

4. Prepaid debit card:

Prepaid debit cards, also called reloadable debit cards, appeal to a variety of users. The

primary market for prepaid cards are unbanked people, that is, people who do not use

banks or credit unions for their financial transactions, possibly because of poor credit

ratings.

The advantages of prepaid debit cards include being safer than carrying cash, worldwide

functionality due to Visa and MasterCard merchant acceptance, not having to worry

about paying a credit card bill or going into debt, the opportunity for anyone over the age

of 18 to apply and be accepted without regard to credit quality and the option to direct

deposit paychecks and government benefits onto the card for free. The prepaid bank card,

called "Bank Gift Card" too, has been invented in 2001 by a French, Laurent GRANIER

who has two patents and copyrights (2001 and 2002), under the commercial name

"SPIDERCUARD" (Trade Mark).

8. Credit card:

A credit card is a payment card issued to users as a system of payment. It allows the

cardholder to pay for goods and services based on the holder's promise to pay for them.[1]

The issuer of the card creates a revolving account and grants a line of credit to the

consumer (or the user) from which the user can borrow money for payment to a merchant

or as a cash advance to the user. A credit card is different from a charge card: a charge

card requires the balance to be paid in full each month. In contrast, credit cards allow the

consumers a continuing balance of debt, subject to interest being charged. A credit card

also differs from a cash card, which can be used like currency by the owner of the card. A

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credit card differs from a charge card also in that a credit card typically involves a third-

party entity that pays the seller and is reimbursed by the buyer, whereas a charge card

simply defers payment by the buyer until a later date.

The size of most credit cards is 3 3⁄8 × 2 1⁄8 in (85.60 × 53.98 mm),[3] conforming to the

ISO/IEC 7810 ID-1 standard. Credit cards have a printed [4] or embossed bank card

number complying with the ISO/IEC 7812 numbering standard. Both of these standards

are maintained and further developed by ISO/IEC JTC 1/SC 17/WG 1. Before magnetic

stripe readers came into widespread use, plastic credit cards issued by many department

stores were produced on stock ("Princess" or "CR-50") slightly longer and narrower than

7810.

CHALLENGES IN E-BANKING:

The information technology in itself is not a solution and it has to be effectively utilized. The

concept of e-banking cannot work unless and until have a centralized body or institution, which

can formulate guidelines, regulate, and monitor effectively the functioning of Internet banking.

The most important requirement for the successful working of Internet banking is the adoption of

the best security methods. This presupposes the existence of a uniform and the best available

technological devices and methods to protect electronic banking transactions. In order for

computerization to take care of the emerging needs, the recommendations of the Committee on

Technology Upgradation in the Banking Sector (1999) may be considered. These are:

(1) Need for standardization of hardware, operating systems, system software, and application

software to facilitate interconnectivity of systems across branches

(2) Need for high levels of security

(3) Communication and networking - use of networks which would facilitate centralized

databases and distributed processing

(4) Technology plan with periodical up gradation

(5) Business process re-engineering

(6) Address the issue of human relations in a computerized environment

24

(7) Sharing of technology experiences

(8) Payment systems which use information technology tools. The Reserve Bank of India has

played a lead role in this sphere of activity - with the introduction of cheque clearing using the

MICR (Magnetic Ink Character Recognition) technology in the late eighties.

RBI GUIDELINES on E Banking:

The Reserve Bank of India constituted a "Working Group on Internet Banking" which focused

on three major areas of E-Banking.

(i) Technology and security issues

(ii) Legal issues

(iii) Regulatory and supervisory issues

These areas are selected in such a manner that the problems faced by banks and their customers

can be minimized to the maximum possible extent. The Group recommended certain guidelines

for the smooth and proper working of Internet banking. These centralized guidelines would bring

uniformity in the selection and adoption of security measures, with special emphasis on a

uniform procedure. The security of Internet banking transactions would not be endangered if

these security mechanisms are adopted. This is because the success of Internet banking

ultimately depends upon a uniform, secure and safe technological base, with the most advanced

features. The RBI has accepted the recommendations of the Group, to be implemented in a

phased manner.

The RBI has issued the following guidelines through a Circular for implementation by banks in

this regard:

(i) Technology and Security Issues: The technology and security issues are of prime

importance as the entire base of Internet banking rests on it. If the technology and security

standards are inadequate, then Internet banking will not provide the desired results and will

collapse ultimately. The RBI realizing this crucial requirement issued the following guidelines in

this regard:

25

a. Banks should designate a network and database administrator with clearly defined roles.

b. Banks should have a security policy duly approved by the Board of Directors. There should be

a segregation of duty of Security Officer / Group dealing exclusively with information systems

security and Information Technology Division, which actually implements the computer

systems. Further, Information Systems Auditor will audit the information systems.

c. Banks should introduce logical access controls to data, systems, application software, utilities,

telecommunication lines, libraries, system software, etc. Logical access control techniques may

include user-ids, passwords, smart cards or other biometric technologies.

d. At the minimum, banks should use the proxy server type of firewall so that there is no direct

connection between the Internet and the bank's system.

e. All the systems supporting dial up services through modem on the same LAN as the

application server should be isolated to prevent intrusions into the network as this may bypass

the proxy server.

f. All computer accesses, including messages received, should be logged. Security violations

(suspected or attempted) should be reported and follow up action taken should be kept in mind

while framing future policy.

g. All applications of banks should have proper record keeping facilities for legal purposes. It

may be necessary to keep all received and sent messages both in encrypted and decrypted form.

108(ii) Legal Issues:

The adoption and switch over to Internet banking will also raise certain legal issues and disputes

in the future which have to be anticipated and remedial measures for the same need to be

adopted. Further, these issues should also be compatible with the existing laws, particularly the

Information Technology Act, 2000. The RBI, keeping in mind these factors, has issued the

following guideline

26

a. There is an obligation on the part of banks not only to establish the identity but also to make

enquiries about integrity and reputation of the prospective customer. Therefore, even though

request for opening account can be accepted over Internet, accounts should be opened only after

proper introduction and physical verification of the identity of the customer.

b. Security procedure adopted by banks for authenticating users needs to be recognized by law as

a substitute for signature. In India, the Information Technology Act, 2000, provides for a

particular technology as a means of authenticating electronic record.

c. Under the present regime there is an obligation on banks to maintain secrecy and

confidentiality of customers' accounts. In the Internet banking scenario, the risk of banks not

meeting the above obligation is high on account of several factors. Despite all reasonable

precautions, banks may be exposed to enhanced risk of liability to customers on account of

breach of secrecy, denial of service etc., because of hacking/ other technological failures.

d. In Internet banking scenario there is very little scope for the banks to act on stop-payment

instructions from the customers. Hence, banks should clearly notify to the customers the

timeframe and the circumstances in which any stop-payment instructions could be accepted.

e. The Consumer Protection Act, 1986 defines the rights of consumers in India and is applicable

to banking services as well. Currently, the rights and liabilities of customers availing of Internet

banking services are being determined by bilateral agreements between the banks and customers

(iii) Regulatory and Supervisory Issues:

The banks operating in real space are regulated and supervised by the RBI on regular basis. This

regulation and supervision is required to be extended to Internet banking as well. Thus, the RBI

has issued the following guidelines in this regard:

a. Only such banks which are licensed and supervised in India and have a physical presence in

India will be permitted to offer Internet banking products to residents of India. Thus, both banks

and virtual banks incorporated outside the country and having no physical presence in India will

not, for the present, be permitted to offer Internet banking services to Indian residents.

27

b. The products should be restricted to account holders only and should not be offered in other

jurisdictions.

c. The services should only include local currency products.

d. Overseas branches of Indian banks will be permitted to offer Internet banking services to their

overseas customers subject to their satisfying, in addition to the host supervisor, the home

supervisor.

The Importance of E-banking in Business:

Businesses rely on efficient and rapid access to banking information for cash flow reviews,

auditing and daily financial transaction processing. E-banking offers ease of access, secure

transactions and 24-hour banking options. From small start-up companies to more established

entities, small businesses rely on e-banking to eliminate runs to the bank and to make financial

decisions with updated information. In an information-driven business climate, companies who

do not use e-banking are at a competitive disadvantage.

Business owners, accounting staff and other approved employees can access routine banking

activity such as deposits, cleared checks and wired funds quickly through an online banking

interface. This ease of review helps ensure the smooth processing of all banking transactions on a

daily basis, rather than waiting for monthly statements. Errors or delays can be noted and

resolved quicker, potentially before any business impact is felt.

1. Productivity

E-banking leads to productivity gains. Automating routine bill payments, minimizing the

need to physically visit the bank and the ability to work as needed rather than on banking

hours may decrease the time involved in performing routine banking activities.

Additionally, online search tools, banking actions and other programs can allow staff

members to research transactions and resolve banking problems on their own, without

interacting with bank employees. In some cases, month-end reconciliations for credit card

transactions and bank accounts can be automated by using e-banking files.

28

2. Lowers Banking Costs

Banking relationships and costs are often based on resource requirements. Businesses that place

more demands on banking employees and need more physical assistance with wire transfers,

deposits, research requests and other banking activities often incur higher banking fees. Opting

for e-banking minimizes business overhead and banking expenses.

3. Reduced Errors

Utilizing e-banking reduces banking errors. Automation of payments, wires or other

consistent financial activities ensures payments are made on time and may prevent errors

caused by keyboard slips or user error. Additionally, opting for electronic banking

eliminates errors due to poor handwriting or mistaken information. In many cases,

electronic files and daily reviews of banking data can be used to double or triple check

vital accounting data, which increases the accuracy of financial statements.

4. Reduced Fraud

Increased scrutiny of corporate finances through audits and anti-fraud measures requires

a high level of visibility for all financial transactions. Relying on e-banking provides an

electronic footprint for all accounting personnel, managers and business owners who

modify banking activities. E-banking offers visibility into banking activities, which

makes it harder for under-the-table or fraudulent activities to occur.

E- BANKING SERVICES

1. Bill payment service

Each bank has tie-ups with various utility companies, service providers and insurance

companies, across the country. It facilitates the payment of electricity and telephone bills, mobile

phone, credit card and insurance premium bills. To pay bills, a simple one-time registration for

each biller is to be completed. Standing instructions can be set, online to pay recurring bills,

automatically. One-time standing instruction will ensure that bill payments do not get delayed

due to lack of time. Most interestingly, the bank does not charge customers for online bill

payment.

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2. Fund transfer

Any amount can be transferred from one account to another of the same or any another bank.

Customers can send money anywhere in India. Payee’s account number, his bank and the branch

is needed to be mentioned after logging in the account. The transfer will take place in a day or

so, whereas in a traditional method, it takes about three working days. ICICI Bank says that

online bill payment service and fund transfer facility have been their most popular online

services.

3. Credit card customers

Credit card users have a lot in store. With Internet banking, customers can not only pay their

credit card bills online but also get a loan on their cards. Not just this, they can also apply for an

additional card, request a credit line increase and God forbid if you lose your credit card, you can

report lost card online.

4. Railway pass

This is something that would interest all the common people. Indian Railways has tied up with

ICICI bank and you can now make your railway pass for local trains online. The pass will be

delivered to you at your doorstep. But the facility is limited to Mumbai, Thane, Nasik, Surat and

Pune. The bank would just charge Rs 10 + 12.24 percent of service tax.

5. Investing through Internet banking

Opening a fixed deposit account cannot get easier than this. An FD can be opened online through

funds transfer. Online banking can also be a great friend for lazy investors.

Now investors with interlinked demat account and bank account can easily trade in the stock

market and the amount will be automatically debited from their respective bank accounts and the

shares will be credited in their demat account. Moreover, some banks even give the facility to

purchase mutual funds directly from the online banking system. So it removes the worry about

filling those big forms for mutual funds, they will now be just a few clicks away. Nowadays,

most leading banks offer both online banking and demat account. However if the customer have

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there demat account with independent share brokers, then need to sign a special form, which will

link your two accounts.

6. Recharging your prepaid phone

Now there is no need to rush to the vendor to recharge the prepaid phone, every time the talk

time runs out. Just top-up the prepaid mobile cards by logging in to Internet banking. By just

selecting the operator's name, entering the mobile number and the amount for recharge, the

phone is again back in action within few minutes.

7. Shopping at your fingertips

Leading banks have tie ups with various shopping websites. With a range of all kind of products,

one can shop online and the payment is also made conveniently through the account. One can

also buy railway and air tickets through Internet banking.

ADVANTAGES OF INTERNET BANKING

Convenience- Unlike your corner bank, online banking sites never close; they’re

available 24 hours a day, seven days a week, and they’re only a mouse click away.

Ubiquity- If you’re out of state or even out of the country when a money problem arises,

you can log on instantly to your online bank and take care of business, 24\7.

Transaction speed- Online bank sites generally execute and confirm transactions at or

quicker than ATM processing speeds.

Efficiency-You can access and manage all of your bank accounts, including IRA’s, CDs,

even securities, from one secure site.

Effectiveness- Many online banking sites now offer sophisticated tools, including

account aggregation, stock quotes, rate alert and portfolio managing program to help you

manage all of your assets more effectively. Most are also compatible with money

managing programs such as quicken and Microsoft money.

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DISADVANTAGES OF INTERNET BANKING

Start-up may take time-In order to register for your bank’s online program, you will

probably have to provide ID and sign a form at a bank branch. If you and your spouse

wish to view and manage their assets together online, one of you may have to sign a

durable power of attorney before the bank will display all of your holdings together.

Learning curves- Banking sites can be difficult to navigate at first. Plan to invest some

time and\or read the tutorials in order to become comfortable in your virtual lobby.

Bank site changes- Even the largest banks periodically upgrade their online programs,

adding new features in unfamiliar places. In some cases you may have to re-enter account

information.

Online Banking Safety Measures:

When you bank online, you trust that Square 1 Bank is aggressively protecting your funds and

confidential information through the use of industry-standard technology and techniques. We

strive to provide the most secure environment possible for our online banking service by utilizing

the following methods:

Firewalls Square 1 Bank uses firewalls to create a security barrier between the Internet and the

Bank’s internal systems. This barrier helps to protect information stored on Square 1’s internal

systems. Appropriate system information is monitored and recorded, which helps us to quickly

identify suspicious activity.

Encryption Our online banking system uses current industry standard encryption methods to

protect your information (especially information in transit) from being read by unauthorized

parties.

Monitoring Online banking activity is regularly monitored, including all system login activity.

Too many incorrect login attempts will “lock out” a user until appropriate verification can be

made to reactivate the online banking account.

Multifactor Authentication To guard against unauthorized access to the system, Square 1

Bank’s online banking system requires several layers of identification that only those authorized

can provide. Square 1 strives to provide this protection in a manner that maintains both ease of

use and security.

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We recommend that you consider the following safeguards when using online banking:

Safeguard and do not share your login ID and/or password information with anyone else.

Never write down your login credentials to any system where others may easily find this

information.

Do not access the Square 1 or other financial services websites from Internet cafes or

other public Internet access locations, where Internet security parameters are unknown.

Monitor your account activity on a regular basis, daily if possible.

Never leave your computer unattended when conducting online banking transactions.

Close your Internet browser once you have concluded your visit to the Square 1 Bank

online banking website.

Designate a computer to be used by properly-authorized individuals when accessing

Square 1 online banking and other financial services websites. Prohibit all other Internet

traffic and email access on the designated computer to reduce the vulnerability of attacks.

Utilize multi-user (dual) control approval settings and establish user limits to initiate,

approve and send ACH, wire transfers and other financial transactions.

Keep your employee(s) online banking system access rights current, i.e., remove access

of terminated employees immediately.

When selecting passwords and challenge questions and answers, don’t use the most

obvious information that could be easily linked to you, such as your date of birth, your

pet’s name or your social security number.

Have your employees use complex passwords of 8 to 12 characters, which include a

combination of alpha and numeric characters, and at least one special character.

The more frequently you change your password, the less likely it could be compromised.

If your security software identifies malware on your computer, remove the malware

immediately, and change your online banking password.

Create a list of fraud-related risks that may be unique to your organization and create

mitigation strategies for each to reduce the overall risk exposure.

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CHAPTER 2

COMPANY PROFILE

34

PROFILE OF HDFC BANK:

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to

receive an 'in-principle' approval from the Reserve Bank of India (RBI) to set up a bank in the

private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The

bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered

office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank

in January 1995. The bank is committed to maintain the highest level of ethical standards,

professional integrity, corporate governance and regulatory compliance. HDFC Bank’s business

philosophy is based on five core values: Operational Excellence, Customer Focus, Product

Leadership, People and Sustainability.

HDFC is India's premier housing finance company and enjoys an impeccable track record in

India as well as in international markets. Since its inception in 1977, the Corporation has

maintained a consistent and healthy growth in its operations to remain the market leader in

mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has

developed significant expertise in retail mortgage loans to different market segments and also

has a large corporate client base for its housing related credit facilities. With its experience in the

financial markets, strong market reputation, large shareholder base and unique consumer

franchise, HDFC was ideally positioned to promote a bank in the Indian environment.HDFC

Bank Limited is an Indian banking and financial services company headquartered in Mumbai,

Maharashtra. It is the fifth largest bank in India by assets, incorporated in 1994 . It is the largest

private sector bank in India by market capitalization as of 24 February 2014. As on Jan 2 2014,

the market cap value of HDFC was around US$26.88 billion, as compared to Credit Suisse

Group with US$47.63 billion. The bank was promoted by the Housing Development Finance

Corporation, a premier housing finance company (set up in 1977) of India.

As of 31 March 2013, the bank had assets of INR 4.08 trillion. For the fiscal year 2012-13, the

bank has reported and profit of INR 69 billion, up 31% from the previous fiscal year. Its

customer base stood at 28.7 million customers on 31 March 2013.

35

Founder:

Hasmukhbhai Parekh (March 10, 1911 – 1994) was an Indian financial entrepreneur, writer, and

philanthropist. He played a role in the development of Industrial Credit & Investment

Corporation of India, now ICICI Bank, founded the Housing Development Finance Corporation,

and in 1992 was awarded the Padma Bhushan for his contribution to the finance industry in

India. The London School of Economics also conferred on him an honorary fellowship

Promoter

HDFC is India’s premier housing finance company and enjoys an impeccable track record in

India as in international markets. Since its inception in 1977, the Corporation has maintained a

consistent and healthy growth in its operations to remain a market leader in mortgages. Its

outstanding loan portfolio covers Ill over a million units. HDFC has developed significant

expertise in retail mortgage loans of different market segments and also has a large corporate

client base for its housing related credit facilities. With its experience in the financial markets, a

strong market reputation, large shareholder base and unique consumer franchise, HDFC was

ideally positioned to promote a bank in the Indian environment.

MANAGEMENT:

MR. C.M. Vasudev has been appointed as the chairman of the bank with effect from 6 th July.

2010. MR. Vasudev has been a Director of the bank since October 2006. A retired IAS Officer,

Mr. Vasudev has had an illustrious career in the civil services and has held several key positions

in India and overseas, including finance secretary, government of India, Executive Director,

World Bank and government nominee on the Boards of many companies in the financial sector.

The Managing Director, Mr. Aditya Puri, has been a professional banker for over 25 years and

before joining HDFC Bank in 1994 was heading Citibank’s operations in Malaysia.

The Bank’s Board of Directors is composed of eminent individuals with a wealth of experience

in public policy, administrations, industry and commercial banking.

Senior Executives representing HDFC are also on the Board Senior Banking professionals with

substantial experiences in India and abroad head various businesses and functions and report to

the Managing Director. Given the professional expertise of the management team and the overall

36

focus on recruiting and retaining the best talent in the Industry, the bank believes that its people

are a significant competitive strength.

ORGANISATIONAL SRTUCTURE OF HDFC BANK:

37

NETWORK:

As of June 30, 2014, the Bank's distribution network was at 3,488 branches in 2,231 cities. All

branches are linked on an online real-time basis. Customers across India are also serviced

through multiple delivery channels such as Phone Banking, Net Banking, Mobile Banking and

SMS based banking. The Bank's expansion plans take into account the need to have a presence in

all major industrial and commercial centres, where its corporate customers are located, as well as

the need to build a strong retail customer base for both deposits and loan products. Being a

clearing / settlement bank to various leading stock exchanges, the Bank has branches in centres

where the NSE / BSE have a strong and active member base.

The Bank also has a network of 11,426 ATMs across India. HDFC Bank's ATM network can be

accessed by all domestic and international Visa / MasterCard, Visa Electron / Maestro, Plus /

Cirrus and American Express Credit / Charge cardholders. HDFC Bank operates in a highly

automated environment in terms of information technology and communication systems. All the

bank's branches have online connectivity, which enables the bank to offer speedy funds transfer

facilities to its customers. Multi-branch access is also provided to retail customers through the

branch network and Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology available

internationally, to build the infrastructure for a world class bank. In terms of core banking

software, the Corporate Banking business is supported by Flexcube, while the Retail Banking

business by Finware, both from i-flex Solutions Ltd. The systems are open, scaleable and web-

enabled.

The Bank has prioritized its engagement in technology and the internet as one of its key goals

and has already made significant progress in web-enabling its core businesses. In each of its

businesses, the Bank has succeeded in leveraging its market position, expertise and technology to

create a competitive advantage and build market share.

38

BUSINESS FOCUS:

The Bank's aim is to build sound customer franchises across distinct business so as to be the

preferred provider of banking services in the segments that the bank operates in and to achieve

healthy growth in profitability, consistent with the bank's risk appetite. The bank is committed to

maintain the highest level of ethical standards professional integrity and regulatory compliance.

HDFC Bank's business philosophy is based on four core values:

1. Operational Excellence,

2. Customer Focus,

3. Product Leadership

4. People Capital Structure

5. ATM Network Technology

HDFC Bank operates in a highly automated environment in terms of information technology and

communication systems. The entire bank's branches have connectivity which enables the bank to

offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to

retail customers through the branch network and Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology available

internationally to build the infrastructure for a world-class bank. In terms of software, the

Corporate Banking business is supported by Flex cube, while the Retail Banking business by Fin

ware, both from i-flex Solutions Ltd. The systems are open, scaleable and Ib-enabled.

The Bank has prioritized its engagement in technology and the internet as one of its key goals

and has already made significant progress in Ib-enabling its core businesses. In each of its

businesses, the Bank has succeeded in leveraging its market position, expertise and technology to

create a competitive advantage and build market share.

Vision:

To be customer driven best managed enterprise that enjoys market leadership in providing

housing related finance.

39

Mission:

To provide a package of attractive financial services for housing purposes through a competent

and motivated team of employees using the state of the art technology to maintain financial

stability and growth of the organization whilst contributing to the national goal of providing

decent housing to all.

SERVICES OF HDFC BANK

HDFC Bank caters to a wide range of banking services covering commercial and investment

banking on the wholesale side and transactional / branch banking on the retail side.

a) Wholesale Banking Services: The Bank's target market is primarily large, blue-chip

manufacturing companies in the Indian corporate sector and to a lesser extent, emerging mid-

sized corporates. For these corporates, the Bank provides a wide range of commercial and

transactional banking services, including working capital finance, trade services, transactional

services, cash management, etc. The bank is also a leading provider of structured solutions which

combine cash management services with vendor and distributor finance for facilitating superior

supply chain management for its corporate customers. Based on its superior product delivery /

service levels and strong customer orientation, the Bank has made significant inroads into the

banking consortia of a number of leading Indian corporates including multinationals, companies

from the domestic business houses and prime Public Sector companies. It is recognized as a

leading provider of cash management and transactional banking solutions to corporate

customers.

b) Retail Banking Services : The objective of the Retail Bank is to provide its target market

customers a full range of financial products and banking services, giving the customer a one-stop

window for all his/her banking requirements. The products are backed by world-class service and

delivered to the customers through the growing branch network, as Ill as through alternative

delivery channels like ATMs, Phone Banking, Net Banking and Mobile Banking.

The HDFC Bank preferred program for high net worth individuals, the HDFC Bank Plus and the

Investment Advisory Services programs have been designed keeping in mind needs of customers

who seek distinct financial solutions, information and advice on various investment avenues. The

Bank also has a wide array of retail loan products including Auto Loans, Loans against

40

marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider

of Depository Services to retail customers, offering customers the facility to hold their

investments in electronic form. HDFC Bank was the first bank in India to launch an International

Debit Card in association with VISA (VISA Electron) and issues the Master card Maestro debit

card as Ill. The debit card allows the user to directly debit his account at the point of purchase at

a merchant establishment, in India and overseas. The Bank launched its credit card in association

with VISA in November 2001.

c) Treasury: The bank has three main product areas - Foreign Exchange and Derivatives,

Local Currency Money Market & Debt Securities, and Equities. These services are provided

through the bank's Treasury team. To comply with statutory reserve requirements, the bank is

required to hold 25% of its deposits in government securities. The Treasury business is

responsible for managing the returns and market risk on this investment portfolio

TECHNOLOGY:

HDFC Bank operates in a highly automated environment in terms of information technology and

communication systems. All the bank's branches have online connectivity, which enables the

bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also

provided to retail customers through the branch network and Automated Teller Machines

(ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology available

internationally, to build the infrastructure for a world class bank. In terms of core banking

software, the Corporate Banking business is supported by Flexcube, while the Retail Banking

business by Finware, both from I-flex Solutions Ltd. The systems are open, scaleable and web-

enabled.

The Bank has prioritised its engagement in technology and the internet as one of its key goals

and has already made significant progress in web-enabling its core businesses. In each of its

businesses, the Bank has succeeded in leveraging its market position, expertise and technology to

create a competitive advantage and build market share.

41

SWOT ANALYSIS

Strengths:

HDFC bank is the second largest private banking sector in India having 2,201 branches and

7,110 ATM’s

HDFC bank is located in 1,174 cities in India and has more than 800 locations to serve customers

through Telephone banking

The bank’s ATM card is compatible with all domestic and international Visa/Master card, Visa

Electron/ Maestro, Plus/cirus and American Express. This is one reason for HDFC cards to be

the most preferred card for shopping and online transactions

HDFC bank has the high degree of customer satisfaction when compared to other private banks

The attrition rate in HDFC is low and it is one of the best places to work in private banking

sector

HDFC has lots of awards and recognition, it has received ‘Best Bank’ award from various

financial rating institutions like Dun and Bradstreet, Financial express, Euro money awards for

excellence, Finance Asia country awards etc

HDFC has good financial advisors in terms of guiding customers towards right investments

Weakness:

HDFC bank doesn’t have strong presence in Rural areas, where as ICICI bank its direct

competitor is expanding in rural market

HDFC cannot enjoy first mover advantage in rural areas. Rural people are hard core loyals in

terms of banking services.

HDFC lacks in aggressive marketing strategies like ICICI

The bank focuses mostly on high end clients

Some of the bank’s product categories lack in performance and doesn’t have reach in the market

The share prices of HDFC are often fluctuating causing uncertainty for the

investors

42

Opportunities:

HDFC bank has better asset quality parameters over government banks, hence the profit growth

is likely to increase

The companies in large and SME are growing at very fast pace. HDFC has good reputation in

terms of maintaining corporate salary accounts

HDFC bank has improved it’s bad debts portfolio and the recovery of bad debts are high when

compared to government banks

HDFC has very good opportunities in abroad

Greater scope for acquisitions and strategic alliances due to strong financial position

Threats:

HDFC’s nonperforming assets (NPA) increased from 0.18 % to 0.20%. Though it is a slight

variation it’s not a good sign for the financial health of the bank

The non banking financial companies and new age banks are increasing in India

The HDFC is not able to expand its market share as ICICI imposes major threat

The government banks are trying to modernize to compete with private banks

RBI has opened up to 74% for foreign banks to invest in Indian market

43

Chapter-3

Research methodology

44

What is Research Methodology?

Research is an original contribution to the existing stock of knowledge making for its

advancements. It is the pursuit of truth with the help of study, observation, comparison and

experiment. Research is a systematic approach towards a purposeful investigation. Hence,

Research is the systematic process of collecting and analyzing information in order to increase

our understanding of the phenomenon about which I are concerned or interested.

Significance of Research:

The role of research in several fields of applied economics, whether related to business or to the

economy as a whole, has greatly increased in modern times. The increasingly complies nature of

business and government has focused attention on the use of research in solving operational

problems.

OBJECTIVES OF THE STUDY

1. To analyze the awareness of customers towards the E- Banking facilities.

2. To analyze the level of satisfaction about E- Banking Services.

3. To identify the factors that influences the customers on using the E- Banking

Services.

4. To offer suggestions to improve the quality of E- Banking Services.

Research Design:

Exploratory Research design

These_designs_are_the_first_step_to_start_any_research_&_is_absolutely_essential_to_

obtain_the_proper_definition_of_the_problem._It_helps_in_classifying_the_concepts_of

_the_study._The_major_emphasis_is_the_discovery of_ideas and_insights_by_studying_

the_available_information.

Descriptive Research Design

These_are_concerned_with_describing_the_characteristics_of_a_particulars_

phenomenon_in_detail_the_descriptive_study_requires_a_clear_specifications_of_who,

what, when, where, why & how aspects_of_research.

45

Experimental Research Design

Experimental research is conducted to study the cause and effect relationship between

variables under study.

The methodology adopted to achieve the project objective involved Exploratory research

design.

3.1 Sample Size:

The Sample Size is 100 respondents.

3.1 Sample Area:

The first criterion to get the targeted sample was the bank customer, whose bank

provides E-Banking services, who has access to Internet and who knows how to

use the Internet. The Sample for conducting surveys contains customers from

Ambala Cantt.

3.2 Sample Technique:

The Sampling technique is Judgment Sampling.

3.3 Data collection:

The relevant data for the research project is hybrid of primary and secondary data.

1. Primary data:-

Using personal interview technique, survey, questionnaire & observation method the data has

been collected from targeted focus groups, which are customers. The primary data collection

for judgment sampling has done. This purpose has been formatted with both open & close

ended structured questions.

2. Secondary data:-

In addition to the reactions of the selected consumers segments, the factual information

historic background of banks has been collected with the help of various trade/business

journals, company magazines, brochures, and company reports and concern trade

association reports.

3.4 Statistical Tool:

Here, the Graphic representation is like bar diagram, charts, pie charts were used

for the purpose of visual analysis.

46

Limitations of the study:

1. It is not possible to understand thoroughly about E-Banking as it is vast area in

such a short span of time.

2. The primary data collected is restricted.

3. Behaviour of the customer keeps on changing as they are continuously in linked

with the external environment happening.

4. Consumer tastes and preferences are hard to judge, so it can be change frequently.

5. People were hard pressed with time so most of them were reluctant to answer.

47

CHAPTER 4

DATA ANALYSIS

&

INTERPRETATION

48

Q1. What kind of banking do you prefer?

TABLE 4.1

Title Respondents Percentage

Traditional 20 20%

Online 32 32%

Both 48 48%

Total 100

FIG. 4.1

INTERPRETATION: From the above table, we can conclude that 48% of the total

respondents prefers both type of banking and 20% respondents are in favour of the Traditional

Banking.

Respondent

Traditional

Online

Both

49

Q2. Do you think E-Banking is better than Traditional Banking?

TABLE 4.2

Title Respondents Percentage

Strongly Agree 42 42%

Agree 24 24%

Disagree 20 20%

Strongly Disagree 14 14%

TOTAL 100

FIG. 4.2

INTERPRETATION: 42% of respondents feel that online banking is better than traditional

banking and then 24% are agreed and 20% are disagreed and 14% strongly discharge.

Respondent

Strongly Agree

Agree

Disagree

Strongly Disagree

50

Q3. Are you aware of the E-Banking services provided by your bank?

TABLE 4.3

Title No. of respondents

Fully aware 30

Had an idea 63

No 7

Total 100

FIG. 4.3

Interpretation: As we observed from the table while opening account 30% of respondents

are fully aware about e-banking services, 63% of respondents have an idea, and 7% respondents

had no idea about such e-banking services.

0

10

20

30

40

50

60

70

Fully aware Had an idea No

No.of respondents

No.of respondents

51

Q4. Do you think that E-Banking is secure?

TABLE 4.4

Parameters No. of respondent Percentage

Yes 25 25%

No 45 45%

Can’t say 30 30%

FIG. 4.4

Interpretation: 45% of the respondent thinks that E-Banking is not secure whereas 30% of

the respondents have no views regarding it and 25% of the respondents thinks that E-Banking is

secure.

No. of respondents

Yes

No

Can't say

52

Q5. Which of the following E-Banking services are you aware of?

TABLE 4.5

SERVICES NO. OF

RESPONDENTS

PERCENTAGE OF

RESPONDENTS

ATM 50 50%

Online Banking 20 20%

Telephone Banking 20 20%

Mobile Banking 10 10%

SMS Banking 0 0%

TOTAL 100

FIG.4.5

INTERPRETATION: This shows that ATM is most popular and most frequently used

services and hence it means ATM is the most properly utilized E-Banking facility.

0

10

20

30

40

50

60

ATM Online

Banking

Telephone

Banking

Mobile

Banking

SMS Banking

No. of Respondents

No. of Respondents

53

Q6. How frequently do you use each of the above services?

TABLE 4.6

Title Respondent Percentage of the

Respondents Weekly 40 40%

Monthly 30 30%

Quarterly 14 14%

Rarely 16 16%

Total 100

FIG. 4.6

INTERPRETATION: Most of the banking customers use banking services weekly I.e. 40%

and monthly using people are 30% and 16% use quarterly and 16% of rarely.

0

5

10

15

20

25

30

35

40

45

Weekly Monthly Quarterly Rarely

Respondent

Respondent

54

Q7. What type of transaction you made in Internet Banking?

TABLE 4.7

Title Respondent Percentage of

Respondents

Bill Payment 24 24%

Fund Transfer 18 18%

Investment 10 10%

Recharging 12 12%

Shopping 36 36%

Total 100

FIG.4.7

INTERPRETATION: People use debit cards mainly for shopping purposes and secondary

for bill payment 24% and then for fund transfer 18% and then for recharging 12% and investing

10% and 36% of shopping.

0

5

10

15

20

25

30

35

40

Bill Payment Fund Transfer Investment Recharging Shopping

Respondent

Respondent

55

Q8. What are the problems faced while E-Banking?

TABLE 4.8

Title Respondent Percentage of

Respondents

Slow Processing Speed 14 14%

Learning curves 26 26%

Security Fear 40 40%

Less Online Enquiry 20 20%

Bank Site Charges 0 0%

TOTAL 100

FIG. 4.8

INTERPRETATION: Major problems which are faced by online banking are they have

fear of security and there are 26% who feel learning curves. 20% feel less online enquiry and

14% feel slow proceeding process 40% security fear.

0

5

10

15

20

25

30

35

40

Slow Processing

Speed

Learning Curves Security Fear Bank Site

Charges

Respondents

Respondents

56

Q9. What factors influence you for not opening the E-Banking services?

TABLE 4.9

FACTORS NO. OF

RESPONDENTS

PERCENTAGE OF

RESPONDENTS

Time consuming 30 30%

Insecurity 10 10%

ATM cut of order 10 10%

Amount debited but not

withdrawn

20 20%

Card misplaced 20 20%

Misuse of card 10 10%

TOTAL 100

FIG. 4.9

INTERPRETATION: From the above table, 30 respondents agree that e-banking is time

consuming.

0

5

10

15

20

25

30

35

Time

consumingInsecurity ATM cut

off orderAmount

debited

but not

withdrawn

Card

MisplacedMisuse of

Card

No. of Respondent

No. of Respondent

57

Q10. Are you satisfied with the services of E-banking?

TABLE 4.10

Response No. of Respondents Percentage of

Respondents

Yes 80 80%

No 20 20%

TOTAL 100

FIG. 4.10

INTERPRETATION:- Most of the customers are satisfied with the services of HDFC

Bank and the percentage is 80 but 20% customers are yet there who are not satisfied.

Series1YES80%

Series1NO

20%

YES

NO

58

Q11. Do you have any grievances against the banks providing E-Banking

Services?

TABLE 4.11

Parameters No. of respondent Percentage of respondents

Yes 32 0.32

No 48 0.48

Can’t say 20 0.2

TOTAL 100

FIG. 4.11

Interpretation: Most of the people i.e. 0.2% can’t say, 0.48% say no and 0.32% think

grievances against the bank providing Internet service.

59

Q12. Do you think that E-Banking has simplified work process leading to

reduced workload and paper-work and physical movement?

TABLE 4.12

Parameters No. of respondents Percentage

No 20 20%

More than 50% 30 30%

By 25-50% 10 10%

Less than 25% 40 40%

TOTAL 100

FIG. 4.12

Interpretation: The above table and figure shows that 40% respondents are highly satisfied

with the usage of Internet Facility and20% respondents are highly dissatisfied.

0

5

10

15

20

25

30

35

40

45

No More than 50% By 25-50% Less than 25%

No. of Respondents

No. of Respondents

60

CHAPTER 5

FINDINGS, SUGGESTIONS

AND

CONCLUSION

61

Findings:

1. Many respondents are aware of the E-Banking services.

2. Most of the respondents use to prefer e-banking as they think it is convenient.

3. Among various modes of E-banking, the customers use ATM as more.

4. Most of the respondents think that E-Banking has simplified work process and has

reduced workload and paperwork and physical movement.

5. The respondents think that there are many factors that influences E-banking in which

mostly thinks that E-Banking is time consuming.

6. Maximum numbers of Respondents have the security fear with regards to use of E-

banking facilities.

7. 0.32% of the respondents think that they have grievances against the banks providing

E-Banking services.

8. Most of the respondents are satisfied with the services of E-Banking.

9. ATM is one of the modes of E-Banking that is frequently used among other services

of E-banking which includes Online Banking, Mobile Banking, Telephone Banking

and SMS Banking.

62

Suggestions:

1. Awareness level about E-Banking is very less among customers. So banks

have to conduct customer meet regularly to educate customers on E-Banking.

The bank can also distribute booklets contain information about the new

schemes and it can be distributed directly to the customer.

2. Introduction about Core Banking should be speeded up because of the size of

the bank considered an important factor in choosing E- Banking.

3. Organization structure has to be changed in order to accommodate IT experts

to give training in computer to the employees.

4. An exclusive TV channels have to be opened to educate customers in

regarding Internet services and their utilization.

63

Recommendations

After analyzing the entire study on online banking with respect to both the primary and

the secondary data, the following recommendations can be put forth:

The infrastructure for the development is not being implemented in the way that could be

beneficial.

There are various obstacles in the banking scenario with regard to guidelines and issues

for functioning. This has led to decline in the usage of online banking service of the

banks.

The people having accounts can be urged to take up an E-Banking facility. They should

be motivated rather than just being told that there exists a service of e-banking.

There are more people who are not actually aware of the all benefits that they reap out of the

transaction of e-banking. They should be proper awareness.

64

Conclusion:

There is no one commonly agreed definition of e-business or e-business. Thus, there is a need to

clarify terms being used and explain the context in which they are being applied. E-business has

an impact on three major stakeholders, namely society, organizations and customers (or

consumers). There are a number of advantages, which include cost savings, increased Efficiency,

customization and global marketplaces. There are also limitations arising from e-business which

apply to each of the stakeholders. These include information overload, reliability and security

issues, and cost of access, social divisions and difficulties in policing the Internet. Successful e-

business involves understanding the limitations and minimizing the

Negative impact while at the same time maximizing the benefits. In order to aid general

understanding of e-business a number of frameworks have been introduced to explore it from

different perspectives: the macro-environment, which identifies the interaction of technology,

people, organizations, policy and technical standards working together to enable e-business; the

different participants and the kind of e-business transactions that occur between them; and the

degree of digitization that analyses product, processes and delivery agents in an organization.

These frameworks help identify the elements of e-business and how businesses can better

understand e-business and its practical applicability. The issues raised in this chapter will be

dealt with in more detail in the remainder of this book.

People are not confident enough to whether to rely on online banking. There is hesitancy

in their minds With regard to preference. So they use both the techniques of banking i.e

online and traditional.

Because of the complexity and the unawareness in the people regarding the online

banking, there is utilization of the online banking services provided by banks

People are not sure whether their acc is completely secured in online banking. Security

Concern is the main and the core reason why people do not tend to use online banking.

People in India are not aware of the full utility of online banking and the services that can

be availed of in online banking.

65

BIBLIOGRAPHY

AND

ANNEXURE

66

WEBSITES

1. www.google.com

2. www.hdfcbank.com

3. www.wikipedia.org/wiki/Internet Banking

BOOKS:

1. Business Research Methodology; Kothari C.R

67

ANNEXTURE

QUESTIONAIRE:

Dear Respondent,

We are conducting a research study of “CUSTOMER PERCEPTION TOWARDS E-

BANKING”. We will appreciate your cooperation in this regard by filling up the

questionnaire carefully. All the information provided by you will be kept confidential.

1. What kind of e-banking do you prefer?

Traditional

Online

Both

2. Do you think E-Banking is better than Traditional Banking?

Strongly Agree

Agree

Disagree

Strongly Disagree

3. Are you aware of the E-Banking services provided by your Bank?

Fully Aware

Have an idea

no

4. Do you think that E-Banking is secure?

Yes

No

5. Which of the E-Banking Services are you aware of?

ATM

Online Banking

Telephone Banking

Mobile Banking

SMS Banking

6. How frequently do you use each of the above services?

Weekly

Monthly

Quarterly

Rarely

68

7. What type of transaction you made in Internet Banking?

Bill Payment

Fund transfer

Investment

Recharging

Shopping

8. What are the Problems faced with E-Banking?

Slow processing speed

Learning curves

Security fear

Less online enquiry

Bank site charges

9. What are the factors influence you for not opening the E-Banking services?

Time consuming

Insecurity

ATM out of order

Amount debited but not withdrawn

Card misplaced

Misuse of card

10. Do you satisfy with the services of E-Banking?

Yes

No

11. Do you have any grievances against the banks providing Internet services?

Yes

No

Can’t say

12. Do you think that E-Banking has simplified work processes leading to reduced

workloads and paper work and physical movements?

No

More than 50%

By 25-50%

Less than 50%

69