MINOR PROJECT REPORT

ON
DIGITAL BANKING

SESSION : 2019 - 2022

MAHARAJA SURAJMAL INSTITUTE

(Affiliated to Guru Gobind Singh Indraprastha University)

SUPERVISOR: SUBMITTED BY :
DR. JASBIR SINGH MISS ANJALI
BBA ( B&I )
04114901819
 CERTIFICATE

This is to certify that the project titled “DIGITAL BANKING” is an academic work done by “Anjali”

submitted in the partial fulfillment of the requirement for the award of the degree of Bachelor Of

Business Administration ( banking & insurance ) Maharaja Surajmal Institute , New Delhi., under my

guidance & direction. To the best of my knowledge and belief the data & information presented by

him/her in the project has not been submitted earlier.

DR JASBIR SINGH

ASST. PROFESSOR
DEPARTMENT OF BUSINESS ADMINISTRATION

ACKNOWLEDGEMENT

I express my sincere gratitude and thanks to Mr. Jasbir Deswal for giving me an opportunity to enhance
my skill in my project. I am thankful for her guidance, patience and consummate support. I extend my
heartiest thanks to her for enlightening my path. Without her sincere advice, this project has been
impossible.

Moreover, I would also like to thank the various people who were involved with this project and gave me
invaluable guidance in this regard. Without their help, this project would not have been as comprehensive
and detailed as it is.

MISS ANJALI
04114901819
BBA (B&I)
 TABLE OF CONTENTS

CHAPTER 1

INTRODUCTION :
-Objective of the study..............................................................................................................................................10
-Role of digitization in banking …………………………………………………………………………………..
11
-Changing face of the indian banking sector.........................................................................................................13
-Benefits of digital banking.......................................................................................................................................14
-Methodology..............................................................................................................................................................16
-Limitation...................................................................................................................................................................16

CHAPTER 2

BACKGROUND:
-History of digital banking.......................................................................................................................................18
-Impact of digital banking on indian economy.....................................................................................................20

CHAPTER 3

LITERATURE REVIEW:
-Introduction of literature review..............................................................................................................................35
-Review related to impact of reforms......................................................................................................................40

CHAPTER 4

ANALYSIS & INTERPRETATION OF DATA:

-Primary data..............................................................................................................................................................47
-Secondary data........................................................................................................................................................54

CHAPTER 5

RECOMMENDATION & FINDING..........................................................................................................................60

-BIBLIOGRAPHY......................................................................................................................................................65
CHAPTER 1

INTRODUCTION
Introduction:

“E-banking”- The execution of financial services via the internet, reducing cost, and increasing
inconvenience for the customer to access the transaction. e-banking is an umbrella term for the
process by which a customer may perform banking transactions electronically without visiting a
brick-and-mortar inconvenience following terms all refer to one form or another of electronic
banking: personal computer (PC) banking, Internet banking, virtual banking, online banking,
home banking, remote electronic banking, and phone banking. PC banking and Internet or online
banking are the most frequently used designations. It should be noted, however, that the terms
used to describe the various types of electronic banking are often used interchangeably.

E-banking is the wave of the future. It provides enormous benefits to consumers in terms of ease
and cost of transactions, either through the Internet, telephone, or other electronic delivery.
Electronic finance (E-Finance) has become one of the most essential technological changes in
the financial industry. E-finance as the provision of financial services and markets using
electronic communication and computation. In practice, e-finance includes e-payment, e-trading,
and e-banking.

According to the definitions from the Bank for International Settlement (BIS-EBG, 2003b), e-
payment creates considerable efficiencies and is superior to the traditional paper-based solution.
E-trading is referred to as a wide variety of systems that provide electronic order routing,
automated trade execution, and electronic dissemination of pre-trade and post-trade information.
With the help of the e-trading systems, the transactions can be executed at a remote server, and
information can be conveyed to a remote location. And e-banking means the provision of retail
and small value banking products and services through electronic channels and large value
electronic payments and other wholesale banking services delivered electronically. Although
clients have enjoyed great convenience of e-banking and bankers have improved the cost-
efficiency of banks (Lin and Lin, 2006, 2007), e-banking may lead to unstable financial
environments. In other words, e-banking could make the financial markets less manageable by
the regulators. Internet banking refers to the deployment over the Internet of
retail and wholesale banking services. It involves individual and corporate clients and includes
bank transfers, payments and settlements, documentary collections and credits, corporate and
household lending, card business, and some others. Since its inception Internet banking has
experienced strong and sustained growth. According to Jupiter Media, Internet traffic for all
United States banks which grew by 77.6 percent between July 2000 and July 2001,

compared with overall World Wide Web traffic growth of 19.8 percent over the same period.
Another source estimated that the share of United States households using Internet banking will
increase from 20 percent in 2001 to 33 percent in 2005 and that by 2010 there might be 55
million users.

Digital banking is part of the broader context for the move to online banking, where banking
services are delivered over the internet. A digital bank represents a virtual process that includes
online banking and beyond. As an end-to-end platform, digital banking must encompass the front
end that consumers see, the back end that bankers see through their servers and admin control
panels, and the middleware that connects these nodes. Ultimately, a digital bank should facilitate
all functional levels of banking on all service delivery platforms. In other words, it should have
all the same functions as a head office, branch office, online service, bank cards, ATM and point
of sale machines.

Digitalization is the process of converting information into a digital (i.e. computer-readable)

format, in which the information is organized into bits. The result is the representation of an
object, image, sound, document, or signal (usually an analog signal) by generating a series of
numbers that describe a discrete set of its points or samples. The result is called digital
representation or, more specifically, a digital image, for the object, and digital form, for the
signal. In modern practice, the digitized data is in the form of binary numbers, which facilitate
computer processing and other operations, but, strictly speaking, digitizing simply means the
conversion of analog source material into a numerical format; the decimal or any other number
system that can be used instead.
Digitalization is of crucial importance to data processing, storage, and transmission because it
"allows information of all kinds in all formats to be carried with the same efficiency and also
intermingled". Unlike analog data, which typically suffers some loss of quality each time it is
copied or transmitted, digital data can, in theory, be propagated indefinitely with absolutely no
degradation. This is why it is a favored way of preserving information for many organizations
around the world.

Digital banking is the move to online banking where banking services are delivered over the
internet. The advantages for banks and customers are providing more convenient and faster
banking services. The shift from traditional to digital banking has been gradual and should be
rather described in degrees of service digitization than through a categorization into yes and no.
It involves high levels of process automation and web-based services and may include APIs
enabling cross-institutional service composition to deliver banking products and provide
transactions. It provides the ability for users to access financial data through
desktop, mobile, and ATM services.
A digital bank represents a virtual process that includes online banking and beyond. As an end-
to-end platform, digital banking must encompass the front end that consumers see, the back end
that bankers see through their servers and admin control panels, and the middleware that
connects these nodes. Ultimately, a digital bank should facilitate all functional levels of banking
on all service delivery platforms. In other words, it should have all the same functions as a head
office, branch office, online service, bank cards, ATM and point of sale machines. The reason
digital banking is more than just a mobile or online platform is that it includes middleware
solutions. Middleware is software that bridges operating systems or databases with other
applications. Financial industry departments such as risk management, product development, and
marketing must also be included in the middle and back end to truly be considered a completely
digital bank. Financial institutions must be at the forefront of the latest technology to ensure
security and compliance with government regulations.
The reason digital banking is more than just a mobile or online platform is that it includes
middleware solutions. Middleware is software that bridges operating systems or databases with
other applications. Financial industry departments such as risk management, product
development, and marketing must also be included in the middle and back end to truly be
considered a completely digital bank. Financial institutions must be at the forefront of the latest
technology to ensure security and compliance with government regulations.

Digital banking involves high levels of process automation and web-based services and may
include APIs enabling cross-institutional service composition to deliver banking products and
provide transactions. It provides the ability for users to access financial data through desktop,
mobile, and ATM services. Digital banking is the digitization (or moving online) of all the
traditional banking activities and programs services that were historically only available to
customers when physically inside of a bank branch. This includes activities like
■ Money Deposits, Withdrawals, and Transfers
■ Checking/Saving Account Management
■ Applying for Financial Products
■ Loan Management
■ Bill Pay
■ Account Services
The objective of the study:

The objective of the study plays the most important part in making the project as it tells the
reason for forming the project report and it also makes reason for the formation of the report.

Digital banking is a very broad topic , so that's why objectives are very particular to the topic.
These are the various objectives of my project:
Role of digitization in banking
Financial services sector analysis
Various Means of Contribution to the Indian Economy
Changing face of the Indian Banking Sector
Benefit of digital banking
Growth rate of digital banking
How many people are using digital banking services
Roles of digital baking on banking business

These are the reasons why I am making this project as I want to cover the study on these
objectives with the help of primary and secondary data .
Role of Digitization in Banking:
Banks in India as a whole were very reluctant to adopt the changes brought about by
technological advancement. A number of factors brought about mechanization and digitization in
the banking industry in India. The putting in place standard cheque encoders was the first step
forward in digital transformation in banking. Magnetic Ink Character Recognition (MICR) helps
in the sorting and processing of cheques with each bank branch having a MICR code.

The next step was more of a necessity than an innovation. Banking is a respective job and
therefore a labor-intensive one where the worker is prone to making mistakes. In order to
minimize errors and speed up the process, banks began using computer technology with standard
personal computers and then set up their own local area networks (LAN). As the networks grew
and banks began to connect together, Core banking came into being. Centralized Online Real-
time Exchange (CORE) banking thus allowed customers to perform financial transactions and
access their accounts from any of the participating bank branches. These services made it easier
for customers to operate their accounts and slowly led to the coining of the phrase: Anytime,
Anywhere Banking”. Then Automated Teller Machine (ATMs) arrived on the scene and
electronic fund transfers were made possible. Online banking and Telebanking made their
appearance in the 2000s and different modes of online fund transfers were instituted like Real
Time Gross Settlement (RTGS), Immediate Payment System (IMPS). National Electronic Fund
Transfer (NEFT) and National Electronic Clearing Service (NECS). Recent years have seen the
growth in mobile banking services and other innovative services online. The role of digitization
of banking in India that began in the 1080s has certainly come a long way.
Various Means of Contribution to the Indian Economy

The banking sector plays a significant role in lending financial support to the various
components of our economy – individuals and organizations alike. Without the banking
structure, the financial growth experienced by the Indian economy could have been
inconceivable.

Banks contribute to economic growth in more ways than one. They are significant credit
generators for the economy and work in interesting ways. People deposit their savings in banks,
which are then channelized to entities/individuals in need of funds in the form of different types
of loans. Further, people use the loan amount to make investments, which in turn generates more
income for the economy.

Apart from income produced through credit-creation techniques, banks also generate revenue for
the economy in other ways. One example could be the income earned for lending services to the
people of the country. The income earned by bank employees in this case in the form of wages
and the like also contributes to the larger GDP pool. Besides, any expenditure incurred by banks
in the name of various bills, rent, stationery, internet cost, etc., also invariably contributes to the
country’s GDP.

Changing Face of the Indian Banking Sector

Banks in India have been in existence for decades now, and they surely have witnessed
numerous opportunities and challenges along the way. But one thing that has remained consistent
is the progressive, rather rapid, growth of the Indian banking sector over the years in light of
various technological advancements. The boom of technology from the 1990s onward succeeded
in impacting the banking sector as well. We need not go that far either. The very recent
demonetization move in India was ostensibly aimed at eradicating corruption, exercising restraint
on the flow of “black money” within and outside the country, and doing away with the concept
of fake currencies. Besides, of course, the movement brought about a cashless Indian economy in
place, which is a feather in its cap indeed.

Not to forget, those sections of the society that had remained untouched all these years by the
banking community slowly came under the wide umbrella of banking services. And this directly
means more cash flow in the country, which is always good news for the economy.

Today, there’s a dire need to educate more people in India on the vital place our banks hold in
the national economy. Also, since the banking industry has advanced to a whole new level, it has
become all the more necessary that individuals aspiring to make a career in the same remain
updated with its fundamentals. We, at times, through our PGDM program, intend to deliver the
aspirants with an industry-centric professional education that can help them gain a clear insight
into the working of the banking industry. The postgraduate diploma in banking program at
TimesPro has been designed to not only make the candidates job-ready but also enable them to
start off their career right away upon course completion. Students are equipped with the qualities,
skills, and know-how that smoothen out their path to becoming a truly successful banking
professional in the future.

Benefits of Digital Banking

Digital banking is the digitization of all traditional banking activities and programs that
historically were only available to customers when physically inside of a bank branch. Most
banks offer online banking, and you can pay your bills, transfer money, and access a record of
your checking account transactions, all from your web browser.

This includes activities like:

● Money Deposits, withdrawals, and transfers
● Checking/saving account management
● Applying for financial products
● Loan management
● Bill pay
● Account services

The technological revolution over the years has transformed the expectation level of customers
and the way of functioning of organizations. First impact was felt in improving operational ease,
but it was just the beginning. The next stage of digital banking was to meet increased customer
expectation levels. This compelled banks to come out with better innovations, products and
services to ensure customer satisfaction and delight. Digital Banking redefined the style of
banking. Today, customers manage their banking transactions at the comfort of their own
drawing-room without the involvement of banking staff. By the end of last century, banks began
offering 24 x 7 service to customers by harnessing technology, but now customers carry 24 x 7
banking facilities with them, in their smartphones. Digitization is a paradigm shift for most
legacy banks. Digital transformation is a near-top priority for every bank today with investments
soaring on technology, up-skilling staff, and innovation. With thinning margins on deposits, stiff
competition across a myriad of products and evolving consumer psychology, digitization is no
longer a choice. This huge revolution in the banking world has benefited one and all. From the
employee working in a small office to a businessman running a million-dollar business, digital
banking has proved to be important in their success. With so many benefits offered for us, it is
highly impossible for us to think of a world without digital banking.

Methodology
PRIMARY DATA
Primary data is the data which is collected or we can say that it is based on the one's observation.
The source of primary data are usually chosen and tailored to meet the demands or requirements
of a particular research. This project is mainly based on the primary data as a medium of
questionnaire is selected to collect the data. This is based on 28 respondents who have a bank
account. The questionnaire contains six questions which reflect how frequently they use digital
banking services and in which sector they use the most.

SECONDARY DATA
Secondary data means the data which is collected by someone other than the user. Source for
secondary data in this project is based on the government analysis and the data available
regarding digital banking on the internet. Various secondary sources are being used to make this
project as for literature review already published papers are being used. Various sources which
are being used:
● Official website of RBI
● books , journal articles , magazines
● Articles from various websites like wikipedia, google etc

Limitations
● Time factor was the main limitation for the study as the project was restricted to a small
period.
● Since the project must be completed within a short period of time the information
collected could be biased.
● The questionnaire only represents a very small amount of the whole population.
 ● Due to the COVID-19, demographic areas potentially could be a reason for biases and
not being able to cover a larger number of population.

CHAPTER 2

BACKGROUND
History of Digital Banking

The earliest forms of digital banking trace back to the advent of ATM machines and cards
launched in the 1960s. As the internet emerged in the 1980s with early broadband, digital
networks began to connect retailers with suppliers and consumers to develop needs for early
online catalogues and inventory software systems. The earliest forms of digital banking trace
back to the advent of ATM machines and cards launched in the 1960s. As the internet emerged
in the 1980s with early broadband, digital networks began to connect retailers with suppliers and
consumers to develop needs for early online catalogues and inventory software systems.

The history of digital banking began with the branch-based banking model. This was largely
unchanged and unchallenged for 500 years until banks began to digitise in the early 1990s. Since
then, there has been a steady increase in the number of new digital banks the world over. The
shift from traditional to digital banking has been gradual and remains ongoing, and is constituted
by differing degrees of banking service digitization. The earliest forms of digital banking trace
back to the advent of ATMs and cards launched in the 1960s. As the internet emerged in the
1980s with early broadband, digital networks began to connect retailers with suppliers and
consumers to develop needs for early online catalogues and inventory software systems.[2]

By the 1990s the Internet became widely available and online banking started becoming the
norm. The improvement of broadband and ecommerce systems in the early 2000s led to what
resembled the modern digital banking world today. The proliferation of smartphones through the
next decade opened the door for transactions on the go beyond ATM machines. Over 60% of
consumers now use their smartphones as the preferred method for digital banking.

The challenge for banks is now to facilitate demands that connect vendors with money through
channels determined by the consumer. This dynamic shapes the basis of customer satisfaction,
which can be nurtured with Customer Relationship Management (CRM) software. Therefore,
CRM must be integrated into a digital banking system, since it provides means for banks to
directly communicate with their customers.
There is a demand for end-to-end consistency and for services, optimized on convenience and
user experience. The market provides cross platform front ends, enabling purchase decisions
based on available technology such as mobile devices, with a desktop or Smart TV at home. In
order for banks to meet consumer demands, they need to keep focusing on improving digital
technology that provides agility, scalability and efficiency.

Timeline of digital banking

1472 – The world’s oldest bank, Monte dei Paschi di Siena, was founded, defining a model of
banking consisting of branches, cheques, and paper currency that functioned largely unchanged
for 500 years.
1953 – The first bank mainframe was built by the Stanford Research Institute to process cheques
for customers of Bank of America.
1966 – Barclays in the UK launches the first debit card.
1989 – Call centre focused direct bank, First Direct launched by Midland Bank.
1994 – Banque Direct and ING Direct launch in France. Stanford Federal Credit Union became
the first financial institution in the US to offer internet banking to all of its customers.
1995 – Boursorama Banque launches in France.
1997 – ING Direct Canada launches.
1998 – Egg credit card launches in the UK using client-side aggregation technology from
vendor, eWise.
1999 – Fineco Bank in Italy, ING Spain, and Smile in the UK, launch.
2000 – Discover Financial Services and ING Direct launch in the US and in France.
Skandiabanken launches across the Nordics.
2001 – Yodlee launches first account aggregation in the US using server-side technology. Bank
of America reports over three million customers now use online banking.
2005 – Rabobank launches Rabo-direct in the Netherlands.
2007 – Apple launches first iPhone.
2008 – Jibun Bank, a joint venture between Bank of Tokyo-Mitsubishi and wireless operator
KODI, launches in Japan. NAB launches Ubank in Australia.
2009 – Fidor launches in Germany, original ‘bank as a marketplace’ business model. Simple and
Ally launch in the US.
2010 – Rakuten Bank launches in Japan.
2011 – First Direct launches first smartphone banking app in the UK, shortly followed by
Natwest.
2012 – Alior Sync launches in Poland. Knab in the Netherlands.
2013 – N26 gets its banking license. Hello Bank (France), Instabank (Russia) and mBank
(Poland) launch.
2014 – Tencent launched WEBank and Ant Financial launches MYBank.
2016 – Monzo and Revolut launch in the UK using the Bank of England’s two-step licensing
process.
2017 – Atom and Starling launch in the UK.
2018 – Monzo raises a record £1m in one min 36 seconds funding round.
2019 – First series of open banking propositions hit UK market resulting in sharp spike in API
calls across incumbent banks., amazon pay
2020 – Facebook launches Facebook Bank, offering anonymised spending comparisons across
social networks, backed by its down cryptocurrency.

Impact of Digital Banking on Indian economy

Financial sector plays an important role in the development of the country's economy. The
financial support required by the economy to grow and develop has been supported by a strong
and sustainable banking system. The banks in India have started computer-based technology in
late 1980s, in order to improve the customer services, book-keeping and MIS reporting. In 1988,
the Reserve Bank of India set up a committee on computerization in banks headed by Dr.
C.Rangarajan. Development in the area of digital technology is imperative and inevitable to the
Indian banks to embrace new innovations and remarkable changes in the banking sector. The
information technology transformed modern ways of banking into digitalization.
The country’s economic growth is supported by a robust and sustainable banking system. Most
of the banks are digital and have introduced innovative technologies to strengthen customer
service, recording and MIS reporting. Indian banks have begun to use information technology
with key models of independent computers and migrate to the LAN. In addition, the Bank has
adopted a core banking platform for digitization of information. This core banking solution
(CBS) provides greater convenience for more customers to increase service delivery anywhere
and anytime to banking services. The process of computerization was gaining momentum with
the opening of the economy in 1991-92. A big step for the move is driven by growing
competition from private banks and foreign banks. Many commercial banks have started toward
digital banking to remain competitive. The banking sector is introduced with micro technologies
that are used to process and coordinate control, oversight and other financial documents. Further
development of the banking system has introduced an Electronic Fund Transfer (EFT)
technology to facilitate the transfer of funds from one place to another through the electronically
using the password. This technology is used as payment, receipt, withdrawal and deposits. In the
1990s, banks established an Automated Teller Machine (ATM) that opened cash for customers at
any time and everywhere, without having to enter the bank. During the 2000s, Internet banking
was approved by all banks in India. In 2007, the Reserve Bank of India introduced the payments
and settlement system Act (PSS Act.) for multiple payment systems, make payment for multiple
payment methods, such as RTGS, Immediate Payment System (IMPS), National Electronic Fund
Transfer (NEFT), and National Electronic Clearing Service (NECS). In recent years, there has
been a boom in mobile banking and many new services. These technologies are designed to
make it easier for customers to carry out banking operations once they have access to the bank.
Information technology in the banking industry has led the banking industry to concentrate,
collect and process information electronically. The Bank uses the latest technology to survive
and grow in a market environment. In this way, banks can provide the necessary conditions for
customers and offer the best solutions for their products or services. Technology advances in the
banking sector such as banking, electronic banking, mobile banking, telecommunications, ATMs
and credit cards have led to improvements in payment and settlement systems.
The Indian government is strongly pushing for digital operations. (i) The United Payments
Interface (UPI), launched by the National Corporation of India, allows transfers between two
bank accounts via a smartphone. (ii) Unstructured Supplementary Service Data (USSD)
developed by NPCI which operates through sim cards. It is working with GSM communication
technology and not necessarily using the internet. (iii) Bharat Interface for Money (BHIM)
launched by Government of India on 30th December, 2016. It is working with an Aadhar based
mobile payment system and linked to the customer’s bank account. Modern banking technology
eliminates the effort by hand in all banking operations and focuses on automation. The most
salient feature in technology is that the bank is more convenient and convenient for current
business and operating customers. Internet banking services are available at all times. The whole
bank process is transparent and corruption can be captured and automatically reduced. Better
transparency can be achieved in financial transactions by providing a valid credit card to the
bank for exchange of money. A systematic record of financial transactions facilitates and
minimizes the transfer of cash. With more digital or internet transactions, the country can access
less cash or cashless digital economy. Digital banking promotes financial inclusion through the
introduction of banking services within the scope of financial services. Through digital
transactions, a lot of money is put in and the government can use the means of economic
development.
All Indian banks are eager to provide a fast, accurate and quality banking experience to its
customers. Banks not only reduce the digital system, human error and save time, but also lead to
transactions that reduce the cashless circulation of the counterfeit currency on the market. This
poses a positive impact on our economy. After the announcement of demonetization, non-cash
payments in October 2016, up 22% compared to October 2015, digital payments were driven by
the rapid expansion of the UPI platform which recorded 482 million transactions in October
2018 as against 0.2 million in November 2016. Also, transactions with debit cards in sales
increased by 105% in 2017, until December 2018, while the debit card transaction increased
37.5% over the previous year. The Bank has benefited in many ways through the use of new
technologies and resulting in significant spending cuts and revenue generation through various
channels. The bank's operating costs are estimated at between Rs.70 and Rs.75 while it is around
Rs.15 or Rs.16 on ATM, Rs.2 or less for online banking and Rs.1 or less for Mobile Banking.
The number of subscriber base has also increased for convenience 'Anywhere Banking'.
Digitization minimizes human error. It can access and analyze data at any time by providing a
robust report system.

Digital banking is completely transparent and it fuels the growth of the economy as well. With
the rise in online transactions, one can notice how people are becoming more inclined to use
digital payment services instead of cash. Digital payments can be taxed easily as they stay on
record. The customer also gets better offers and deals and their offers get better over time as their
service providers gain more data about customer’s behaviors. The popularity of mobile banking
and digital banking solutions is increasing rapidly. The current signs show that these solutions
are going to become more popular in the future. As you can see the impact of digital banking
services can be felt in the Indian economy. The approximately 30 to 35 percent population of the
country are using digital banking services, and the remaining population is still learning banking
services. The Government of India coming out with new initiations to boost and motivate digital
program and also should definitely take some measures like waive off the charges and taxes
pertaining to digital transactions certain period and control of the cyber crimes, outline fraud,
hacking by connectivity and data protection, then the transactions will aggressively grow and
people will be addicted to digital transactions; there will be less demand for cash and it will lead
to more deposits in the banking system. The funds accumulated by the banks can be used for
development, and it leads the country’s economy.

E-Banking has become an integral part of the global financial environment. Improvement in
technologies and financial innovations has made E-banking an intense part of the banking sector.
“As day by day the technologies are also increasing”. Technology has become the fuel for rapid
change.
In earlier times, the banking customers were required to visit a bank in order to transact their
accounts in the bank but now by the help of E-Banking the customers do not need to visit a bank
and with the help of the internet, customers can easily transact their accounts from anywhere.
E- Banking is playing a major role that it’s improving the service quality and strengthens the
banking sector because of the electronic payment there is increase in customer satisfaction level,
increased productivity, reduction in cost of banking operations, settlement faster and in large
volumes.The world has become a global village and it has brought a revolution in the banking
industry because of increasing in the development of information technology. The key trends are
discussed for their impact on future E-Banking services.

In simple terms, E- banking means it does not involve any physical exchange of money, but it’s
all done electronically through the internet. E-banking provides faster delivery of banking
services to customers and it provides a lot of benefits and banking facilities to customers that by
sitting at home customers can access their account through the internet. In today’s organization
information technology has become a necessary tool. It has introduced a new business paradigm;
E-banking has emerged from such an innovative development. As day by day increasing the
competition in the market is also increasing so to cope up with the pressure of growing
competition the banks are adopting many initiatives and also from them there is one of them is
E- banking. Electronic banking is a combination of electronic technology with a banking sector.
E-banking involves providing banking services to customers through various electronic delivery
channels.

Finance is the life blood of any economy for growth and development. The financial support
required by the economy to grow and develop is supported by strong and sustainable banking
system. The Banks in India have started adopting and embracing technology since from 1980s. It
was imperative and inevitable to the Indian banks to embrace new innovations to meet the
challenges of changing trends in banking sectors and to meet the expectations of the customers.
Developments in the field of information technology have contributed to remarkable changes in
banking sector. The modern information technology have altered and replaced the traditional
ways of banking into digitalization. The demonetization announcement was to restrain the black
money, to check the corruption, eliminate the flow of fake currency etc., but, this declaration led
to a cashless economy and grabbed the unbanked community of the nation under the ambit of
formal banking services.
The economy to grow and develop is supported by a strong and sustainable banking system. The
Banks and financial institutions have to adopt and adapt new technological innovations to
provide more customer-friendly banking services. Banks in India have started adopting and
embracing technology since the 1980s. It was imperative and inevitable to the Indian banks to
embrace new innovations to meet the challenges of changing trends in banking sectors and to
meet the expectations of the customers. Developments in the field of information technology
have contributed to remarkable changes in the banking sector. The demonetization has motivated
the entire economy to adapt to the digital banking system and use of cashless or less cash.
The banks in India have embraced and started adopting technology for decades. Modern
information technology has altered and replaced the traditional ways of banking. After
announcing Demonetization by the Prime Minister, varieties of technologies were introduced to
make India less cash economy. Financial inclusion has promoted banking sectors to launch new
technology to bring the informal business activities and unbanked under the ambit of banking
services. The demonetization has motivated the entire economy to adopt a digital banking system
and use of cashless or less cash. Now, the customers transact with banks by their figure tips
using smartphones. Some of the technological innovation adopted over the decades by Indian
banks are-
1980s
MICR (Magnetic ink character recognition): MICR was implemented, a character recognition
technology which was used by the banking sectors to process and clear the cheques and other
documents in a more easier way. This technology eliminated manual work of processing and
clearance of negotiable instruments.

1990s
In this decade all banks in India were computerized and expanded their products and services to
their customers. EFT (electronic fund transfer) was introduced in this decade which was a great
achievement. EFT facilitates transfer of funds from one place to another electronically by using a
secured password. Transactions such as payment, receivables, withdrawals and deposits can be
made through EFT. In this decade, ATMs were also introduced which witnessed drastic change
in banking services and also in customers' experience in banking transactions.

New Millennium (2000)

During this decade internet banking was embraced by all the banks in India. Payment and
Settlement System Act 2007 (PSS Act) and regulated by RBI and the Board for Regulation and
Supervision of Payment and settlement Systems introduced multiple payment and settlement
systems like ECS, NEFT, RTGS, IMPS, UPI USSD etc.,. These technologies made customers sit
at home and perform banking transactions by a click of a button rather than visiting the bank.
ECS (Electronic Clearing Service): This technology is used to transfer funds from one bank
account to another periodically. ECS is used by institutions for both debit and credit purposes.
ECS credit through banks. ECS credit is when an institution makes a credit to customers’ savings
account such as salary, distribution of dividend and interest, pension etc.,. ECS debit is when an
institution pays bills such as telephone bill, electricity bill, water bill, equated monthly loan
installments etc.,.
NEFT (National electronic fund transfer): NEFT facilitates the electronic transfer of funds from
one bank to another having a core banking solution. NEFT has no limit both minimum and
maximum on the amount of funds to be transferred.
RTGS (Real Time Gross Settlement): RTGS is an electronic form of funds transfer where the
transmission takes place on a real time basis. It is an interbank payment through interfacing core
banking solutions with a minimum transaction limit of Rs. 2,00,000. The customer needs to
know the IFSC (Indian Financial Service Code) of the beneficiary’s bank while transferring
funds using RTGS.

Decade 2010
IMPS (Immediate payment service): Immediate Payment Service was introduced by National
Payments Corporation of India in the year 2010. Through this service, funds are transferred
instantly on real time interbank using mobile phones on 24X7 bases.
UPI (Unified Payment Interface): National Payments Corporation of India launched UPI app for
banks which allows money transfer between any two bank accounts by using smartphones. Both
the sender and receiver banks need UPI identity which helps in transferring funds.
USSD (Unstructured Supplementary Service data): This was developed by NPCI which operates
by the sim card. It is a Global System for Mobile (GSM) communication technology that is used
to send text messages. By dialing *99# USSD links customers’ mobile number to the bank
accounts to check the customer's bank balance, mini statement, internet pack balance, fund
transfer via IFSC code etc., without internet connection.
BHIM (Bharat Interface for Money): Government of India launched on 30th December 2016. It
is Aadhar based mobile payment which is linked to the customer’s account. BHIM enables
online payments simpler, easier and quicker using a unified payments interface. A study reveals
that BHIM app has been downloaded 17 million times, and 19.37 lakh transactions worth Rs.
950 crore have been carried out by February 2017.
Rupay: It was launched by National Payment Corporation of India under the Jan Dhan scheme
for lower income class which works on three paths viz ATMs, point of sale and online sale.
Rupay is similar to a visa or Mastercard and an Indian version of a credit or debit card. The
banks provide a Rupay debit card to every account holder with Rs. 1 Lakh accident insurance.
Other than these technologies, the Government of India has launched a number of new digital
innovations focusing on financial inclusion and demonetization. After announcing
demonetization GOI introduced a variety of digital apps to motivate and attract the people to
adopt these new digital modes like Lucky Grahak Yojana, Aadhar payment app, Digi Dhan
Abhiyaan, Digilocker, e-wallets etc.,. And now, to empower Indian society digitally the GOI has
defined nine pillars of digital India for uninterrupted success of the programme viz…
1) Broadband Highway 2) Universal Access to Mobile Connectivity 3). Public Internet Access
Programme 4) e-Governance-Reforming Government through technology 5) e-Kranti– electronic
Delivery of Services 6) Information for All 7) Electronics Manufacturing 8) IT for Jobs and 9)
Early Harvest Programmes.

The modern banking technology has eliminated manual efforts in all banking transactions and
has moved towards automation. The biggest gain from the technology is that banking has
become increasingly easy and comfortable for the customers in doing business and day today
transactions. Online banking services are universally available to everyone. Entire banking
process becomes transparent and corruption can be automatically caught and reduced. More
transparency can be achieved in financial transactions by producing valid identity cards to the
banks for exchanging the money. It helps to eliminate black money and corruption to a larger
extent by implementing PAN card requirements for cash transactions beyond Rs. 2, 00,000. The
systematic records of financial transactions are made easier and substantially reduce the need to
carry cash. With more digital or online transactions the nation can achieve less cash or cashless
economy or digital economy. Digital banking promotes financial inclusion by bringing unbanked
under the ambit of financial services. Through digital transactions more money is deposited and
the Government can utilize the funds for economic development.
On the other side, alone with many opportunities, threats have also developed overtime causing
threat and damage to the system. Since, a large portion of the population is computer illiterate
and cannot use digital banking services. The rural and poor people find it difficult to go for
digitization. Server problem, computer virus, uninterrupted power supply, difficulty in finding
ATMs, fast and reliable internet connections are not available easily at many places. The most
dangerous threats are cybercrime, cyber theft, online fraud, hacking etc., which may cause
damage to the whole economic system. According to the study made by Shane Harris an
American noted journalist and author, alongside land, air, sea and space, cyberspace has become
the fifth domain of warfare.

Though there are more than 50 banks in India, approximately only 15 to 20 percent of the
population of the country are using digital banking services. Other parts of the population are
still unbanked which indicates slow progress in adapting the technology. Government is coming
out with new initiatives to boost and motivate Digital programmes. Though banks are under the
pressure of rules and regulations, they are making efforts to launch new technologies, whereas,
customers are not ready to embrace this technology to a larger extent. Post demonetization has
given push to digital transactions and made banking services more customers friendly. The new
programmes launched by the Government should be effectively implemented and succeed. The
Government of India should definitely take some measures to address cybercrimes, cyber theft,
online fraud, hacking etc. followed by connectivity and data protection. Once people get addicted
to digital transactions; there will be less demand for cash.
The banking sector is nothing less than the backbone of any economy. This pertains to the Indian
economy as well, where the banking sector is displaying the potential for becoming the 5th
largest banking industry globally by 2020. With a continued boost in banking performance
bolstered by numerous technological advancements, the Indian banking sector is likely to assume
the 3rd largest position in the world by 2025.
Not just globally, the Indian banking sector has proved its true worth back home as well. This
can be inferred from the valuable contribution of our banks, both nationalised and private, for
boosting up the national economy. Currently, the banking industry holds pride in contributing
nearly 7.7% to the national GDP. Besides that, our banks are the prime employment generators
for almost 1.5 million people in the country.
All this goes on to prove the fundamental, almost indispensable, role the banking sector plays in
shaping the Indian economy’s progress graph every year. In this article, we will present to you a
clearer picture of how the Indian banking sector contributes to the progressive growth of the
national economy.
Various Means of Contribution to the Indian Economy
The banking sector plays a significant role in lending financial support to the various
components of our economy – individuals and organisations alike. Without the banking
structure, the financial growth experienced by the Indian economy could have been
inconceivable.
Banks contribute to economic growth in more ways than one. They are significant credit
generators for the economy and work in interesting ways. People deposit their savings in banks,
which are then channelised to entities/individuals in need of funds in the form of different types
of loans. Further, people use the loan amount to make investments, which in turn generates more
income for the economy.
Apart from income produced through credit-creation techniques, banks also generate revenue for
the economy in other ways. One example could be the income earned for lending services to the
people of the country. The income earned by bank employees in this case in the form of wages
and the like also contributes to the larger GDP pool. Besides, any expenditure incurred by banks
in the name of various bills, rent, stationery, internet cost, etc., also invariably contributes to the
country’s GDP.
Changing Face of the Indian Banking Sector
Banks in India have been in existence since decades now, and they surely have witnessed
numerous opportunities and challenges along the way. But one thing that has remained consistent
is the progressive, rather rapid, growth of the Indian banking sector over the years in light of
various technological advancements. The boom of technology from the 1990s onward succeeded
in impacting the banking sector as well. We need not go that far either. The very recent
demonetisation move in India was ostensibly aimed at eradicating corruption, exercising restraint
on the flow of “black money” within and outside the country, and doing away with the concept
of fake currencies. Besides, of course, the movement brought about a cashless Indian economy in
place, which is a feather in its cap indeed.
Not to forget, those sections of the society that had remained untouched all these years by the
banking community slowly came under the wide umbrella of banking services. And this directly
means more cash flow in the country, which is always good news for the economy.
Online-only banks offer a number of advantages over traditional retail banks, including lower
fees and higher rates on average. If you don't use cash often, feel comfortable banking online and
rarely visit your local bank branch, you may want to consider opening an online-only bank
account. Online banks are also a good place to park rainy-day funds, as they may offer
significantly higher interest rates than traditional retail banks.
While many customers are attracted to the high yields and low fees offered by online banks,
these advantages are tempered by the lack of branch locations and limited services that some
provide. Depending on your personal banking habits, these trade-offs below may play a factor in
whether you decide to deposit your funds with an online bank.
Based on savings account rates we obtained from several popular banks, we concluded that the
majority of online-only banks offer significantly higher interest rates for both online savings
accounts and high-yield CDs. We also found that online-only banks generally featured no
monthly fees or minimum balance requirements.
Two of the biggest advantages to online-only banking are the high interest rates and low fees.
Online-only banks don't pay overhead for physical branches or the employees to staff them.
Instead, they pass those cost savings on to customers in the form of higher interest rates and
lower fees.
After evaluating our survey of savings account rates, we found a clear distinction between the
APYs offered: interest rates at online banks were higher by over 100 basis points when
compared to a number of major retail banks. In comparison to the FDIC-reported national
average, the online banks we surveyed featured a consolidated savings rate that was 141 basis
points higher.
In terms of fees, almost every major retail bank charged monthly maintenance fees for account
balances under $300. The fees we saw ranged from $4.50 to $6 per month, although most of
these can be avoided by setting up automatic monthly deposits, maintaining a minimum balance
amount or meeting a monthly deposit requirement. By contrast, none of the online-only banks we
surveyed charged monthly maintenance fees, and most did not require a minimum account
balance.
One of the frequently cited benefits of online banking is its relative convenience. Borrowers can
access their balances, transfer funds and set up monthly payments from their computers without
ever having to leave their homes. Additionally, the majority of online banks offer mobile
applications for your smartphone, although these are also offered by many retail banks as well.
Another increasingly popular feature is the ability to deposit checks through an app. Many online
banks will allow you to do this, including Ally eCheck Deposit and CIT Bank's mobile app.
Although this was previously limited to more tech-savvy banks, it has also been adopted by
many retail banks in recent years.
Rewards programs are another feature that we don't typically see offered by retail banks outside
of credit cards. Discover's Cashback Checking account allows customers to earn cash rewards on
qualifying debit card transactions. Certain online institutions like MemoryBank provide special
promotional rates for accounts that meet direct deposit, monthly purchase or balance
requirements, which stands in contrast to many retail banks that often require you to meet certain
requirements just to avoid fees.
Finally, online banks are almost always open. While most retail banks will be closed on
weekends or holidays, online banks allow you to access your account 24/7 and have customer
service representatives available around the clock. Online banks also offer many of the same
account protections as traditional banks, including FDIC-insurance and account alerts.
The lack of physical locations seems like it could make withdrawing funds from an online bank
difficult. Many online banks have recognized this issue and devised creative ways to make up for
this. While this will be less of a concern if you conduct all your transactions electronically, being
able to access your cash is still important to many consumers.
Some online banks partner with third-party ATM providers to provide easy access to cash. For
example, Synchrony Bank relies on the Plus and Accel ATM networks to provide ready access to
customers, while Ally Bank partners with the Allpoint network to provide free ATM access for
their clients. Third-party ATM networks often cover more communities than many retail banks.
For instance, the Allpoint network of ATMs covers almost the entire continental United States.
By contrast, Citibank is only concentrated in major metropolitan areas, while TD Bank is
focused on the eastern seaboard. Depending on where you live or how much you travel, it may
be easier for you to withdraw money through a network ATM than a regional bank branch.
Many online banks have resorted to ATM fee reimbursements to circumvent the lack of physical
locations. Ally Bank provides its customers with a $10 monthly allowance to cover any ATM
fees, while Axos Bank reimburses its customers for an unlimited number of ATM withdrawals.
As a basis of comparison, we've included a list of ATM fees charged by some of the major retail
banks here.
Some banks provide other ways access to cash quickly and efficiently. For example, the Marcus
Online Savings Account by Goldman Sachs Bank U.S.A. provides customers with free wire
transfers. Being able to rapidly transfer funds into and out of your account in a cost-effective
manner is useful to customers who maintain multiple accounts at a variety of banks. It's also
helpful in this instance, because Marcus does not currently have a relationship with any ATM
networks.
If you prefer face-to-face customer service or handle large amounts of cash, you may prefer a
retail bank instead of an online-only bank. Additionally, while online banks offer more
competitive rates and lower fees, they typically don't have the same breadth of offerings as most
retail banks.
With some exceptions, online banks offer a limited scope of banking products. Many online-only
banks including Marcus by Goldman Sachs and CIT Bank offer savings accounts with
competitive rates but no checking accounts, which can be frustrating for people who prefer to
conduct all their banking in the same place.
Many retail banks provide special promotions for mortgages, auto loans and credit cards to their
existing customers. As seen in the chart above, all three retail banks provide a variety of lending
services in addition to banking. The ability to visit a local bank and obtain financial advice, often
free of charge, is not something that many online banks can offer. The local branch office of
your retail bank can also be more lenient when waiving overage charges and other fees,
particularly if you've been a loyal customer for a long time.
Finally, many retail banks now offer their own mobile apps, which feature the same convenient
features offered by online-only banks such as mobile banking and e-deposits. Chase, TD Bank
and Citibank all have comprehensive mobile apps which allow you to access your bank account
on the go. Wells Fargo's mobile app even allows you to access an ATM if you've forgotten your
debit card. This gives you the flexibility to bank online or at a branch, depending on what
services you need.
CHAPTER 3
LITERATURE REVIEW
INTRODUCTION OF LITERATURE REVIEW:
Review of literature has vital relevance with any research work due to literature review. The
possibility of repetition of study can be eliminated and another dimension can be selected for the
study. The literature review helps researchers to remove limitations of existing work or may
assist to extend prevailing study.

Review related to policy framework and regulatory measures:-

Anantha Swami made an attempt in his paper, ‘in the context of financial sector reforms, to
identify the factors which could have led to changes in the position of four bank groups, i.e.
Public Sector Banks, Old Private Sector Banks, New Private Sector Banks and Foreign
Banks in terms of their share in the overall banking industry during the period 1995-96 to
1999-2000. For analytical examination of the impact of reforms on the banks' performance, the
very performance of a bank has to be evaluated as per appropriate criteria by choosing selected
parameters like share of different bank-groups in total assets, share of rural branches, Average
branch size, trends in banks' profitability, share of priority sector advances, share of wages in
expenditure, provision and contingencies as percentage to total assets, ratio of NPAs to Net
advances, ratio of contingent liabilities to total liabilities, spread as a percentage to total assets,
Intermediation costs, etc.
By using these parameters, Swami made an in-depth analysis and came out with interesting
conclusion like:
(i) The setting up of a new competitive environment has resulted in new challenges for the PSBs
and the share of PSBs in the total assets of the banking sector has shown a steady decline while
new private sector banks have succeeded in enhancing their position,
(ii) He further observed that foreign banks too have been facing stiff competition from the new
private banks,
(iii) The profit performance has been quite varied among different bank groups and within each
group in respect of individual banks as well,
(iv) In the face of new competition and recognizing the need to undertake cost reduction, PSBs
have brought about reduction in the wage bill component while this has shown an increase in the
case of foreign banks and ne\v private sector banks during the period of study,
(v) Foreign banks as well as the new private banks had the advantage of large-sized branches
when compared to public sector and old private banks,
(vi) Level of NPAs of PSBs remain high, a noteworthy development has been their significant
reduction in relation to net advances in recent years.
Nair KNC (2006) in his paper ‘Banking and Technology to meet 21st Century challenges’,
published in Bank net India, has discussed the future challenges of technology in banking. The
author also points out how IT possesses a bright future in rural banking, but is neglected as it is
traditionally considered viable in the rural segment. A successful bank has to be nimble and agile
enough to respond to the new market paradigm and ineffectively controlling risks. Innovation
will be the key extending the banking services to the untapped vast potential at the bottom of the
pyramid.

Shroff FT (2007) in his paper, Modern Banking Technology, - Bank net Publications has
given a summary of how Indian banking system has evolved over the years. The paper discusses
some issues faced by these systems. The author also gives examples of comparable banking
systems for other countries and the lesson learnt. Indian banking is at the threshold of the
paradigm shift. The application of technology and product innovations is bringing about
structure change in the Indian banking system.

ICRA (2003),In a the paper titled “comparative study on Indian banking”, tried to analyze
the fast-changing environment, the Indian Bank's Association (IBA) has Commissioned ICRA
Advisory Services (ICRA) to carry out a study to benchmark the strengths and weaknesses of
Indian Banks against those of select international banks. The scope of work for the study is to
benchmark the performance of Indian Banks vis-à-vis select global banks along three
dimensions-structural factors, operational factors and efficiency factors. As suggested by IBA,
21 Indian Banks (those with assets over Rs. 20,000 Crore as on 31st March, 2003) and Seven
International Banks have been selected for the study. The parameters, which have been used for
benchmarking, are Risk weighted capital norms, Income Recognition norms, asset classification
norms, provisioning norms, which come under "Structural Parameters". Return on Assets, Return
on Equity, Net interest margin, Operating expense ratio and Asset quality are concerned with
"Operational Parameters". Business per employee, Business per branch, Operating expenses per
Branch, Establishment expenses per employee, profitability per employee, profitability per
Branch are 'Efficient Parameters'.
ICRA Limited, in this study, found that the profitability of Indian Banks in recent years
compares well with that of the global benchmark banks primarily because of the higher share of
profit on the sale of investments, higher leverage and higher net interest margins. However,
many of these drivers of higher profits of Indian Banks may not be sustainable. To ensure Long-
term profitability, ICRA Ltd. suggest that Indian Banks should diversify their loans across
several customer segments; they should introduce robust risk scoring techniques to ensure better
quality of loans; they should reduce their operating expenses by upgrading banking technology
and they should improve the management of market risk.

Patel has highlighted the problem of bad loans and growing level of Non-Performing Assets
in commercial banks in the post-reform period. It was observed that it is important for the
banks and' supervisory authorities to adopt more effective lending practices. At the same time, it
was also emphasized that corporate entities should be made more accountable through following
more stringent disclosure and transparency practices and corporate governance principles.
Efficient legal machinery, the larger number of Debt Recovery Tribunals and Settlement
Advisory Committees and Credit Information Bureau in banks can prove effective in quick
recovery of dues.
Mathur's paper examines the arguments usually extended to build a case for privatization of
public sector banks in India. An examination of the main arguments usually extended to build a
case for privatization of Public Sector Banks (PSBs) in India reveals that the arguments are
based on
(a) Perceptions, rather than factual analysis,
(b) The use of partial information,
(c) Evidence on international experience which is not unambiguous.
Broadly, four main arguments are made by the proponents of privatization of PSBs in India:
(a) Frequent recapitalization of state-owned banks is a huge burden on the government budget;
(b) State ownership of banks reduces competition and thus breeds inefficiency,
(c) There is no evidence that state Ownership lowers the profitability of banking crisis; and
(d) Private and foreign banks stimulate efficiency, innovation and economic growth.
Examination of these arguments reveals that the case for privatization of PSBs in India is not
strong enough at least on the grounds usually proposed by the advocates of privatization. Private
Sector Banking would have a larger probability of crisis if the supporting legal and regulatory
framework were not sound enough to insulate the systems from extraneous pressures. It may,
therefore, be safe to maintain the public sector characters of the banks for privatization are
conducive enough.

Nagarajan and Khannan made an attempt to identify the factors influencing spread of SCBs in
India. The study is carried out for the period 1995-96 to 1999-2000 by covering 27 PSBs, 31 PBs
and 28 FBs. Pooled data lode and Generalized Least Square approach was used for carrying the
analysis. The researchers in this study found that size of the bank does not necessarily imply
higher spreads. Further, they found that non-interest income as a share of total assets enable
banks to tolerate low spread. With regard to regulatory requirements variables, it was found that
capital plays an important role in affecting spreads of PSBs.

Mukhopadhyay, K.K.threw light on the challenges that the public Sector bank has to face
on the initiation of reform measures. The author expressed that Indian Banking system is
passing through a metamorphosis due to the impact of the revolutionary reform process initiated
since 1992. The author felt that PSBs today have already started feeling the pinch and are
definitely going to confront stiffer challenges in the next millennium. Challenges like
competition especially from the new private sector banks and foreign banks, low staff
productivity, changing lifestyles of the customers; technological progress, non-performing assets,
etc. definitely put the PSBs in a very tight position. So, it is up to the PSBs to welcome them or
choose for extinction.
Shroff (2007) gives a summary of how Indian banking system has evolved over the years.
The paper discusses some issues faced by these systems. The author also gives examples of
comparable banking systems for other countries and the lesson learnt. Indian banking is at the
threshold of the paradigm shift. The application of technology and product innovations is
bringing about structure change in the Indian banking system.

Kumar (2006) studied the bank nationalization in India marked a paradigm shift in the
focus of banking as it was intended to shift the focus from class banking to mass banking.
Internationally also efforts are being made to study causes of financial inclusion and designing
strategies to ensure financial inclusion of the poor disadvantaged. The banks also need to
redesign their business strategies to incorporate specific plans to promote financial inclusion of
low income groups treating it both a business opportunity as well as a corporate social
responsibilities. Financial inclusion can emerge as a commercially profitable business.

Madhavankutty (2007) concludes the banking system in India has attained enough maturity and
is ready to address prudential management practices as comprehensively as possible, which an
integral part of policy is making. Banking in India is poised to enter yet another phase of
reforms once the door opens further to foreign players in 2009. This requires further
improvement in technology management, human resource management and the ability to foresee
rapid changes in the financial landscape and adopt quickly. At present, there is a huge hiatus
between the top management earnings of state owned banks and private, as well as foreign
banks. Banks have to lay down sound risk management strategies and internal capital adequacy
assessment committees to ensure that they do not diverge from the prudential requirements.

Review related to impact of reforms:-

Singh, Sultan (2001) made an attempt in his Ph.D. Thesis titled “An appraisal of banking
sector reforms in India” in Guru Jambheshwar University Haryana, to Access the impact of the
reforms on the operational performance and efficiency of the Commercial Banks in India. Ratio
analysis has been used as a major tool for assessing the performance of the selected Commercial
Banks. The study revealed that total income as a percentage of working funds and/or total Assets
and Spread as a percentage of total Income/Working fund/total advances/ total deposits have
improved in the reform period against the pre-reform period in most of the banks. Total Income,
interest earned other income, spread, total expenses, interest expended, operating expenses and
establishment expenses are comparatively more consistent in the reform period. The hypothesis
that the profitability position has improved in the reform period may be accepted to some extent.
It was observed that in the PSBs the size of NPAs has also been reduced to some extent and
quality of service has improved in the reform period. The priority sector lending has registered a
decline in the deregulation era.

The focal point of the study made by RadhaT. (2002), in her Ph D Thesis, titled, “Impact of
banking sector reforms on the performance of commercial banks in India, in Andhra
University, Visakhapattanam, was to critically evaluate the impact of Banking Sector Reforms
on the performance of Commercial Banks in India. In this Study, Radha analyzed the magnitude
of deposits and borrowings, and trends in branch expansion, advances and investments, trends
income and expenditure and also studied the magnitude of achievements in priority sector
advances, capital adequacy, CD ratio, staff position in different bank groups and individual
banks within the group. This study covered the period 1989-90 to 1998-99. Simple statistical
techniques like percentages and growth rates were used in this study. Major findings of the study
are..: (i) Total Deposits of all Commercial Banks put together may be divided as SBI (21.5 per
cent), Associate Banks (6.6 per cent), Nationalized Banks (58.6 per cent), Private Banks (6.9 per
cent) and Foreign Banks (6.3 per cent) respectively, (ii) In the total borrowings of SCBs,
Nationalized banks, on an average, accounted for 39.42 per cent followed with 22.77 per cent by
Foreign Banks, 23.54 per cent by SBI, 7.76 per cent by Private Banks and 3.47 percent by
associate banks, (iii) In Branch expansion, Indian Private Sector Banks, registered 21.36 per cent
growth rate which is highest amongst SCBs, during the study period, followed by Foreign Banks
with 16.96 per cent, Associate Banks with 12.77 per cent, Nationalized Banks with 11.36 per
cent, SBI with 6.23 per cent, (iv) Total investments of Commercial Banks in India increased to
Rs. 346271 Crore in 1998-99 from Rs. 97,199 Crore in 1989-90, (v) Priority Sector advances as
proportion of net bank credit after exceeding the target of 40 percent in 1991 has been
continuously falling short of target up to 1999, (vi) Foreign Banks in India as a group achieved
highest capital adequacy ratio among all groups of SCBs, (vii) Among all Indian banking groups,
Indian private sector banks recorded highest CD ratio with 67.06 'per cent.

Padwal S.M. in his paper made an attempt to assess the impact of liberalization on Indian
Banking. Padwal came to a conclusion that high cost of branch expansion, growing percentage
of credit portfolio to low yielding assets; increasing operating and establishment expenses have
adversely affected banks' profitability. The scholar in this paper strongly felt that deregulation in
the banking sector is expected to help to widen the credit market, enhance saving mobilization
and stimulate competition but there is a need to prepare the banking industry to face the
consequence of liberalization.

Muniappan (2002) studied paradigm shift in banks from a regulator point of view in Indian
Banking: Paradigm Shift, IBA Bulletin, and No 24 3. He concluded the positive effect of
banking sector reforms on the performance of banks. He suggested many effective measures to
strengthen the Indian banking system. The reduction of NPAs, more provisions for standards of
the banks, IT, sound capital bear are the positive measures for a paradigm shift. A regulatory
change is required in the Indian banking system. Madhavankutty (2007) concludes the banking
system in India has attained enough maturity and is ready to address prudential management
practices as comprehensively as possible, which an integral part of policy is making. Banking in
India is poised to enter yet another phase of reforms once the door opens further to foreign
players in 2009. This requires further improvement in technology management, human resource
management and the ability to foresee rapid changes in the financial landscape and adopt
quickly. At present, there is a huge hiatus between the top management earnings of state owned
banks and private, as well as foreign banks. Banks have to lay down sound risk management
strategies and internal capital adequacy assessment committees to ensure that they do not diverge
from the prudential requirements.

Subbaroo PS (2007), in his paper Changing Paradigm in Indian Banking- Gyan

Management, has concluded that the Indian banking system has undergone transformation itself
from domestic banking to international banking. However, the system requires a combination of
new technologies, well regulated risk and credit appraisal, treasury management, product
diversification, internal control, external regulations and professional as well as skilled human
resource to achieve the heights of international excellence to play its role critically in meeting the
global challenge. This paper mainly concentrates on the major trends that change the banking
industry world over, viz. consolidation of players through mergers and acquisitions globalization
of players, development of new technology, universal banking and human resources in banking,
profitability, rural banking and risk management. Banks will have to gear up to meet stringent
prudential capital adequacy norms under Basel I and II, the free trade agreements. Banks will
also have to cope with challenges posed by technological innovations in banking.

Tiwari S (2005) in his paper “ Development of Financial Institutions in Indian Banking- A

paradigm Shift, Punjab Journal of Business Studies, has proposed a view that among the
financial intermediaries banks and financial institutions are vital players in running the funding
activities of the industries. In the bank based system the financial institutions dominate in the
aggregate assets of the financial system while in the market based system, the equity market has
the largest share of assets in the aggregate assets of the financial system.

Uppal and Kaur (2007), in their paper titled, “Analysis of the efficiency of all the bank
groups in the post banking sector reforms era”. Their time period of study was related to
second post banking sector reforms (1999-2000 to 2004-05). The paper concludes that the
efficiency of all the bank groups has increased in the second post banking sector reforms period
but these banking sector reforms are more beneficial for new private sector banks and foreign
banks. This paper also suggests some measures for the improvement of efficiency of Indian
nationalized banks. The sample of the study in Indian banking industry which comprises five
different ownership groups and the ratio method is used to calculate the efficiency of different
bank groups. New private sector banks are compelling with foreign banks for continuous
improvement in their performance.

Vashisht A K (2004), studied commercial banking in the globalized environment, published in

Political Economy Journal of India, has presented the recent global developments, which has
transformed the environment in which commercial banks operate. Globalization has expanded
economic interdependence and interaction of countries greatly. Under the regime of a globalized
environment, the financial performance of the commercial banks has changed and the
commercial banks will face new challenges and also new opportunities in the coming years.

Wahab A (2001)in his book “Commercial Banks under reforms-performance and issues”,
book edited by Deep and Deep Publications New Delhi, has tried to analyze the performance of
the commercial banks under reforms. He also highlighted the major issues that need to be
considered for further improvement. He concluded that reforms have produced favorable effects
on performance of commercial banks in general but still there are some distortions like low
priority sector advances, low profitability etc. that need to be reformed again.
The RBI (1999) through its study Report on Currency and Finance, provides the Central Bank's
perspective on how deregulation had impacted on bank performance. The RBI's review covers all
categories of banks, not just PSBs. The principal findings of this review are worth highlighting:

I. There has been a decline in spreads, a widely used measure of efficiency in banking, and a
tendency towards their convergence across all bank-groups, except foreign banks.
II. Intermediation costs as a percentage of total assets had also declined, especially for PSBs and
new private sector banks, largely to a decline in their wage costs.
III. Capital adequacy and asset quality (measured by the net NPAs as a percentage of net
advances) have both improved over the period 1995-96 to 1999-2000.
IV. Median Profit per employee of PSBs witnessed a significant rise between 1996-97 and
1999-2000, due largely to a rise in the same in the case of the SBI Group.
V. Non-Interest income to working funds rose moderately for the median PSBs.
VI. The ratio of wage bill to total expenses remained at a high level of PSBs.
VII. The cost to income ratio declined both at the SBI Group and the Nationalized Banks.

Joshi, P.N. has made an attempt to analyze the impact of financial sector reforms on the weaker
sections of society. Joshi in this article felt that Financial Sector reforms may have encouraged
banks to go in for innovative measures, develop business, earn profit and benefit the
shareholders; however, the social content of banking has suffered continuous neglect. The social
objectives before banks were sidetracked and the emphasis today in a financial strength, capital
adequacy and profitability. The banking philosophy in the country changed mercilessly against
the poor. Today, 60 percent of India's population including the weaker sections of society is
without banking facilities. At one stage, Josh (emphasized that rural branches accounted for 576
per cent of the total branch network but at present, it forms only 50 per cent of total branch
network. Between 1992 and 1999, the number of borrower accounts declined by exactly 13
million. Credit-Deposit ratio which was 47.32 per cent in March 1996 declined to 39.35 per cent
in March, 2000 and in Semi-urban areas it was 40 per cent in 1996 declined to 34.38 per cent in
March, 2000.

Joshi Vijaya and Little observed that on the eve of banking reforms Indian Banking Sector was
financially unsound, unprofitable and inefficient. They made a critical examination of the
changes that have taken place in the banking sector after reforms. Further, what remains to be
done with respect to pre-emption of bank resources, directed credit, deregulation of interest rates,
etc. in the field of banking sector were also elaborately discussed.
CONCLUSION:
In all the above review of literature various reviews made by various researchers, authors have
made evaluation of the performance of commercial banks the earlier studies differed from one
another in the selection of period, selection of banks, selection of indicators and selection of
statistical tools and techniques. In contrast, the present study focuses its attention on the impact
of reforms on Indian banking system in the post liberalization era. The period therefore starts
from the year 1991-92 i.e. the year from which reform measures were initiated up to 2010-11
twenty-year period for which data are available. The study, instead of taking a large number of
parameters, of which some are alternative specifications, took six parameters to evaluate the
efficiency of banks, five to assess profitability and health parameters, i.e. Non-performing assets
and capital adequacy. Apart from quantitative aspects, this study has taken qualitative aspects,
i.e., customer perceptions on service quality of selected public and private banks as ancillary to
the main study.
CHAPTER 4

ANALYSIS & INTERPRETATION OF DATA

PRIMARY DATA ANALYSIS

I have used questionnaires for my research study, where I have collected this data through
personal interviews with my respondents. I have been taking data from the people nearby me.

I am conducting a research study on “Digital Banking”. I am very pleased to have the great
response from my respondent & really appreciate their contribution to this academic exercise.
Their inputs will provide the most valuable information in disseminating findings for my
research project. The information collected will be treated as private & confidential & will only
be used for the purpose of this research only.

The data has been collected from 28 account holders. The data after collection is to be processed
and analysed in accordance with the outline and down for the purpose at the time of developing
the research plan. Technically speaking, processing implies editing, coding, classification and
tabulation collected data, so that they are amenable to analysis. The term analysis refers to the
computation of certain measures along with searching for pattern groups. Thus in the process of
analysis, relationship or differences should be subjected to statistical test of significance to
determine with what validity data can be said to indicate any conclusion. The analysis of data in
general involves a number of closely related operations, which are performed with the purpose of
summarising the collected data and organising them in such a manner that they answer the
research questions.

In this study, the above process is carefully followed and it is presented in this chapter. Statistical
methods like graphs, percentages and ratios have been used to analyse the data that was collected
through interviews.
1

How many people have already heard of digital banking before?

I have 25

I haven't 3

From the above diagram it is found that 89.3% of the respondents have used digital banking
before in some sector or the other whereas, 10.7% have not used the digital banking service
before.
2

If the responder have used then how often they have used the digital banking
services ?

Daily 2
2-3 times a week 7
Once a week 5
Once in a month 4
Rarely 10

From the above diagram we can conclude that the majority of the respondents use digital
banking services rarely which is 35.7%, then 25% people use 2-3 times a week , whereas 17.9%
use it once a week , 14.3% use it once a month and only 7.1% use them daily .
3

Where do the responders use digital banking?

Bill payments 10
Money Transfer 11
Shopping 5
Don't know 1
Not used 1

From the above diagram we can conclude that the majority of the respondents use digital
banking for money transfer service that is 39.3% , whereas 35.7% use it for bill payments and
they left over use in different services.
4

What is the main reason for the use of the responders of digital banking?

Better performance 14
Saves time 6
Simplification of processes 6
24 hour service 1
From the above diagram we can conclude that 51.9% of the respondents use digital banking as it
saves their time and other remaining use it as its simplification of processes and it provides 24 hr
service unlike banking do.

Necessity of digital banking in the current scenario?

Yes 23
No 1
Maybe 4

From the above diagram we can conclude that the 82.1% of the respondents believe that digital
banking is necessary in the current scenario, whereas 14.3% say maybe and only 3.6% of the
responders say no.
6

Are the responders satisfied with the distal banking experience?

Yes 24
No 4

From the above diagram we can conclude that the 85.7% of the respondents are satisfied with
their experience of using digital banking and 14.3% are not satisfied and are looking forward for
the betterment in future.
SECONDARY DATA ANALYSIS

NEFT ( March 2015 - March 2020)

1. Allahabad Bank

No. of outward Amount of No. of inward Amount of

transactions outward transactions inward
transactions (in transactions (in
lacs) lacs)

2019-20 15301932 1005932 43552104 1836855

2018-19 18422712 1522492 48458004 1938876

2017-18 17591124 1183909 36778380 2297002

2016-17 13333800 728732 26147628 1209204

2015-16 10825752 583499 36631488 9655752

From the above graph we can conclude that there is a constant rise and fall in the number of the
outward transactions we can see that in 2018-2019 they remained highest in the last five years.
The amount of outward transactions took a great shot in the 2019-2020 year, whereas we can see
that in the previous years there was slight change only. And when we talk about the inward
transactions we can see that the graph is not constantly increasing either decreasing but in 2018-
2019 the tractions remained the highest. Whereas we can see that the amount of inward
transactions took a great fall after 2016.

2. Andhra Bank

No. of outward Amount of No. of inward Amount of

transactions outward transactions inward
transactions (in transactions (in
lacs) lacs)

2019-20 10814688 11122594 44380308 1950428

2018-19 12273696 1543350 44528340 2270532

2017-18 10950336 1299800 36120036 1800576

2016-17 7658484 957374 25291464 1245816

2015-16 6626292 608596 21423972 1013428

From the above graphs we can conclude that the number of outward transactions keeps on
increasing but in 2018-19 it remains the constant . The amount of outward transactions took a
great hit in 2019-20 it almost took 8 times as compared to 2018-19. The number of inward
transactions also kept on increasing and also in the last five years took a stop after 2018 it
remained constant in the last two years. The amount of inward transactions alo kept on
increasing but it remained highest in 2018-19.
RTGS (March2015 - March2020)

1. Allahabad Bank

No. of outward Amount of No. of inward Amount of

transactions outward transactions inward
transactions (in transactions (in
lacs) lacs)

2019-20 1148832 42582 1812144 69773

2018-19 1282980 47303 2076612 64314

2017-18 1070064 50184 1711080 59264

2016-17 926832 39242 1201152 21742

2015-16 843360 52769 1358160 52761

 From the help of the above graph we can see that the number of outward transactions
increased in the last 4 years and finally after 2019 it dropped in the 2019-20. Whereas the
case of the amount of outward transactions kept on increasing and decreasing in the
alternative years. Number of inward transactions remained the highest in 2018-19 and the
dropped in 2019-20. Amount of inward transactions only increased in the past five years.

2. Andhra Bank

No. of outward Amount of No. of inward Amount of

transactions outward transactions inward
transactions (in transactions (in
lacs) lacs)

2019-20 1374144 44197 1758876 45541

2018-19 1440840 54042 1796292 57235

2017-18 1194108 44529 1423140 44153

2016-17 938544 56598 1475769 55080

2015-16 832380 38366 1047864 39125

With the help of the above graph we can say that in 2018-19 in number of inward and outward
transactions remained the highest, in 2019-20 there was a slight decrease in amount of inward as
well as outward transactions. In 2015-2019 there was a continuous increase in number of
outward transactions.
CHAPTER 5

CONCLUSION & FINDING

FINDING

With the help on the research it has been concluded that :

● It is found that 89.3% of the respondents have used digital banking before in some sector
or the other whereas, 10.7% have not used the digital banking service before.

● The majority of the respondents use digital banking services rarely which is 35.7%, then
25% people use 2-3 times a week , whereas 17.9% use it once a week , 14.3% use it once
a month and only 7.1% use them daily .

● the respondents use digital banking for money transfer service that is 39.3% , whereas
35.7% use it for bill payments and they left over use in different services.

● 51.9% of the respondents use digital banking as it saves their time and other remaining
use it as its simplification of processes and it provides 24 hr service unlike banking do.

● 82.1% of the respondents believe that digital banking is necessary in the current
scenario, whereas 14.3% say maybe and only 3.6% of the responders say no.

● 85.7% of the respondents are satisfied with their experience of using digital banking and
14.3% are not satisfied and are looking forward for the betterment in future.
There are a number of recommendations that can be suggested to banks and also to the customers
for increasing the use of online banking systems.

RECOMMENDATION FOR BANK

· It is recommended to banks that they should spread awareness about the proper use of the
e-banking system.

· Banks should organize awareness programs which include a demonstration about the
usage of e- banking systems in their branches.

· Banks should also collaborate with internet services more and more so that it would be
easy for the customers to engage in an online banking system.

· The bank should increase their ATM services more and more.

· Also the bank should pay proper attention to the feedback given by the customers so that
they would be able to understand the grievances of the customers.

RECOMMENDATION TO THE CUSTOMER

· It is recommended to customers to gain more and more information about the newly
developed banking system.

· It is also recommended to customers to adopt new technological advancement in the

banking system.

· Also they should increase doing more and more e-banking transactions so that they get
used to doing this.
 · Also the customer should take risk for learning something and also the customer should
have knowledge of increasing cybercrime.

· Also the customer should install only those online banking applications that are
recognized by the RBI and should always do transactions as per the guidelines and
regulations of the RBI.

· Also the customer should always verify each and every SMS received by them by the
name of the bank or by online banking application for enclosing any OTP ad PIN, so that
they would not get cheated by anyone.

Conclusions

It is concluded that different types of people have different choices and they face problems
accordingly. It is very necessary to spread awareness more and more so that people will know
more and more about this concept and will be keen to gather information about this kind of
banking system.

It is also concluded that people usually use to be in their comfort zone only. Hence they are not
able to learn more and more about new things which are coming their way and they stick to their
old system and old methods no matter that the new technology is easy to operate or not but some
people will only use their old systems.

· It is concluded that some people do not accept technological advancement in the

banking area because they are resistant to change.
 · Also the people do not use this system of banking because they find it a little unsafe
and insecure to enter their banking details on the internet and this is because of
increasing cybercrime.

· And the business people are more involved in e –banking because they get
knowledge of it regularly and they are quite used to this system of banking.

· Also it is found that youngsters are more involved in this banking system because it
is for them to operate from home and hence they can devote more time in their career
and whereas senior citizens find it a complex system and hence they prefer less e-
banking.

· It is also found that the people do online banking transactions more because of the
discount offered by many online banking applications like cashback , discount in
payment through credit card and so on.

Hence there can be many more conclusions according to the changing choices and preferences of
the people.
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Questionnaire Link :
https://docs.google.com/forms/d/e/1FAIpQLSfGO7iI-XWOQasz8AyAxLSvaljtP8cUbQM_ggP
Ogyo0u2jEcA/viewform?usp=sf_link