A Study Of Netbanking Provided By Hdfc Bank

CHAPTER 1 INTRODUCTION

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INTRODUCTION

1.1 AN INTRODUCTION TO THE COMPANY 1.1.1

FORMATION OF THE COMPANY

The Housing Development Finance Corporation Limited (HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI) to set up a bank in the private sector, as part of the RBI's liberalization of the Indian Banking Industry in 1994. The bank was incorporated in August 1994 in the name of 'HDFC Bank Limited', with its registered office in Mumbai, India. HDFC Bank commenced operations as a Scheduled Commercial Bank in January 1995. 1.1.2

PROMOTER

HDFC is India's premier housing finance company and enjoys an impeccable track record in India as well as in international markets. Since its inception in 1977, the Corporation has maintained a consistent and healthy growth in its operations to remain the market leader in mortgages. Its outstanding loan portfolio covers well over a million dwelling units. HDFC has developed significant expertise in retail mortgage loans to different market segments and also has a large corporate client base for its housing related credit facilities. With its experience in the financial markets, a strong market reputation, large shareholder base and unique consumer franchise, HDFC was ideally positioned to promote a bank in the Indian environment. 1.1.3

BUSINESS FOCUS

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build sound customer franchises across distinct businesses so as to be the preferred provider of banking services for target retail and wholesale customer segments, and to achieve healthy growth in profitability, consistent with the bank's risk appetite. The bank is 2

committed to maintain the highest level of ethical standards, professional integrity, corporate governance and regulatory compliance. HDFC Bank's business philosophy is based on four core values – Operational Excellence, Customer Focus, Product Leadership and People. 1.1.4 CAPITAL STRUCTURE As on 31st March, 2009 the authorised share capital of HDFC Bank is Rs. 550 crore. The paid-up capital as on the said date is Rs. 425,38,41,090/- ( 42,53,84,109 equity shares of Rs 10/- each). The HDFC Group holds 19.38% of the Bank's equity and about 17.70 % of the equity is held by the ADS Depository (in respect of the bank's American Depository Shares (ADS) Issue). 27.69 % of the equity is held by Foreign Institutional Investors (FIIs) and the Bank has about 5,48,774 shareholders. The shares are listed on the Bombay Stock Exchange Limited and The National Stock Exchange of India Limited. The Bank's American Depository Shares ( ADS ) are listed on the New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No US40415F2002. 1.1.5 TIMES BANK AMALGAMATION In a milestone transaction in the Indian banking industry, Times Bank Limited (another new private sector bank promoted by Bennett, Coleman & Co./Times Group) was merged with HDFC Bank Ltd., effective February 26, 2000. As per the scheme of amalgamation approved by the shareholders of both banks and the Reserve Bank of India, shareholders of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank. The acquisition added significant value to HDFC Bank in terms of increased branch network, expanded geographic reach, enhanced customer base, skilled manpower and the opportunity to cross-sell and leverage alternative delivery channels.

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1.1.6 DISTRIBUTION NETWORK HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network of over 1229 branches spread over 444 cities across India. All branches are linked on an online real-time basis. Customers in over 120 locations are also serviced through Telephone Banking. The Bank's expansion plans take into account the need to have a presence in all major industrial and commercial centers where its corporate customers are located as well as the need to build a strong retail customer base for both deposits and loan products. Being a clearing/settlement bank to various leading stock exchanges, the Bank has branches in the centers where the NSE/BSE has a strong and active member base. The Bank also has a network of about over 2526 networked ATMs across these cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express Credit/Charge cardholders. 1.1.7 BOARD OF DIRECTORS The Composition of the Board of Directors of the Bank is governed by the Companies Act, 1956, the Banking Regulation Act, 1949 and the listing requirements of the Indian Stock Exchanges where securities issued by the Bank are listed. The Board has strength of 12 Directors as on March 31, 2008. All Directors other than Mr. Aditya Puri, Mr. Harish Engineer and Mr. Paresh Sukthankar are non-executive directors. The Bank has five independent directors and six non-independent directors. The Board consists of eminent persons with considerable professional expertise and experience in banking, finance, agriculture, small scale industries and other related fields. None of the Directors on the Board is a member of more than 10 Committees and Chairman of more than 5 Committees across all the companies in which he/she is a Director. All the Directors have made necessary disclosures regarding Committee positions occupied by them in other companies.

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Mr. Jagdish Capoor, Mr. Keki Mistry, Mrs. Renu Karnad, Mr. Aditya Puri, Mr. Harish Engineer and Mr. Paresh Sukthankar are non-independent Directors on the Board.

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Mr. Arvind Pande, Mr. Ashim Samanta, Mr. Gautam Divan, Mr. C. M. Vasudev and Dr. Pandit Palande are independent directors on the Board.

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Mr. Keki Mistry and Mrs. Renu Karnad represent HDFC Limited on the Board of the Bank.

The Bank has not entered into any materially significant transactions during the year, which could have a potential conflict of interest between the Bank and its promoters, directors, management and/or their relatives, etc. other than the transactions entered into in the normal course of business. The Senior Management have made disclosures to the Board confirming that there are no material, financial and/or commercial transactions between them and the Bank which could have potential conflict of interest with the Bank at large. 1.1.8 TECHNOLOGY HDFC Bank operates in a highly automated environment in terms of information technology and communication systems. All the bank's branches have online connectivity, which enables the bank to offer speedy funds transfer facilities to its customers. Multi-branch access is also provided to retail customers through the branch network and Automated Teller Machines (ATMs). The Bank has made substantial efforts and investments in acquiring the best technology available internationally, to build the infrastructure for a world class bank. The Bank's business is supported by scalable and robust systems which ensure that our clients always get the finest services we offer. The Bank has prioritized its engagement in technology and the internet as one of its key goals and has already made significant progress in web-enabling its core businesses. In

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each of its businesses, the Bank has succeeded in leveraging its market position, expertise and technology to create a competitive advantage and build market share. 1.1.9 RATING Credit rating The Bank has its deposit programs rated by two rating agencies - Credit Analysis & Research Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which represents instruments considered to be "of the best quality, carrying negligible investment risk". CARE has also rated the bank's Certificate of Deposit (CD) programme "PR 1+" which represents "superior capacity for repayment of short term promissory obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned the "tAAA ( ind )" rating to the Bank's deposit programme, with the outlook on the rating as "stable". This rating indicates "highest credit quality" where "protection factors are very high". The Bank also has its long term unsecured, subordinated (Tier II) Bonds rated by CARE and Fitch Ratings India Private Limited and its Tier I perpetual Bonds and Upper Tier II Bonds rated by CARE and CRISIL Ltd. CARE has assigned the rating of "CARE AAA" for the subordinated Tier II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the rating "AAA (ind)" with the outlook on the rating as "stable". CARE has also assigned "CARE AAA [Triple A]" for the Banks Perpetual bond and Upper Tier II bond issues. CRISIL has assigned the rating "AAAStable" for the Bank's Perpetual Debt programme and Upper Tier II Bond issue. In each of the cases referred to above, the ratings awarded were the highest assigned by the rating agency for those instruments. Corporate governance rating The bank was one of the first four companies, which subjected itself to a Corporate Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating Information Services of India Limited (CRISIL). The rating provides an independent 6

assessment of an entity's current performance and an expectation on its "balanced value creation and corporate governance practices" in future. The bank has been assigned a 'CRISIL GVC Level 1' rating which indicates that the bank's capability with respect to wealth creation for all its stakeholders while adopting sound corporate governance practices is the highest.

1.1.10 PRODUCT SCOPE HDFC Bank offers a bunch of products and services to meet the every need of the people. The company cares for both, individuals as well as corporate and small and medium enterprises. For individuals, the company has a range accounts, investment, and pension scheme, different types of loans and cards that assist the customers. The customers can choose the suitable one from a range of products which will suit their life-stage and needs. For organizations the company has a host of customized solutions that range from Funded services, Non-funded services, Value addition services, Mutual fund etc. These affordable plans apart from providing long term value to the employees help in enhancing goodwill of the company. The products of the company are categorized into various sections which are as follows: •

Accounts and deposits.

•

Loans.

•

Investments and Insurance.

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Forex and payment services.

•

Cards.

•

Customer center.

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1.1.11 BUSINESS SEGMENTS HDFC Bank offers a wide range of commercial and transactional banking services and treasury products to wholesale and retail customers. The bank has three key business segments: (i) Wholesale Banking Services The Bank's target market ranges from large, blue-chip manufacturing companies in the Indian corporate to small & mid-sized corporate and agro-based businesses. For these customers, the Bank provides a wide range of commercial and transactional banking services, including working capital finance, trade services, transactional services, cash management, etc. The bank is also a leading provider of structured solutions, which combine cash management services with vendor and distributor finance for facilitating superior supply chain management for its corporate customers. Based on its superior product delivery / service levels and strong customer orientation, the Bank has made significant inroads into the banking consortia of a number of leading Indian corporates including multinationals, companies from the domestic business houses and prime public sector companies. It is recognized as a leading provider of cash management and transactional banking solutions to corporate customers, mutual funds, stock exchange members and banks. (ii) Retail Banking Services The objective of the Retail Bank is to provide its target market customers a full range of financial products and banking services, giving the customer a one-stop window for all his/her banking requirements. The products are backed by world-class service and delivered to the customers through the growing branch network, as well as through alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile Banking.

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The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus and the Investment Advisory Services programs have been designed keeping in mind needs of customers who seek distinct financial solutions, information and advice on various investment avenues. The Bank also has a wide array of retail loan products including Auto Loans, Loans against marketable securities, Personal Loans and Loans for Two-wheelers. It is also a leading provider of Depository Participant (DP) services for retail customers, providing customers the facility to hold their investments in electronic form. HDFC Bank was the first bank in India to launch an International Debit Card in association with VISA (VISA Electron) and issues the MasterCard Maestro debit card as well. The Bank launched its credit card business in late 2001. By September 30, 2005, the bank had a total card base (debit and credit cards) of 5.2 million cards. The Bank is also one of the leading players in the "merchant acquiring" business with over 50,000 Pointof-sale (POS) terminals for debit / credit cards acceptance at merchant establishments. (iii) Treasury Within this business, the bank has three main product areas - Foreign Exchange and Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the liberalization of the financial markets in India, corporates need more sophisticated risk management information, advice and product structures. These and fine pricing on various treasury products are provided through the bank's Treasury team. To comply with statutory reserve requirements, the bank is required to hold 25% of its deposits in government securities. The Treasury business is responsible for managing the returns and market risk on this investment portfolio. The following tables summarizes the products and services and customer segments offered by HDFC Bank:.

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Table 1.1: Personal banking Loan Product

• • • • • • • • • • • • • • •

Auto Loan Loan Against Security Loan Against Property Personal loan Credit card 2-wheeler loan Commercial vehicles finance Home loans Retail business banking Tractor loan Working Capital Finance Construction Equipment Finance Health Care Finance Education Loan Gold Loan Cards

Investment & Insurance

Deposit Product • • • • •

Saving a/c Current a/c Fixed deposit Demat a/c Safe Deposit Lockers

• • • • • • •

Payment Services

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Mutual Fund Bonds Knowledge Centre Insurance General and Health Insurance Equity and Derivatives Mudra Gold Bar

Access To Bank

• • •

• • • •

• • • • • • • •

Credit Card Debit Card Prepaid Card

------------------------------Forex Services ------------------------------Product & Services Trade Services Forex service Branch Locater RBI Guidelines

• •

NetSafe Merchant Prepaid Refill Billpay Visa Billpay InstaPay DirectPay VisaMoney Transfer e–Monies Electronic Funds Transfer Online Payment of Direct Tax

• • • • • • •

NetBanking OneView InstaAlert MobileBanking ATM Phone Banking Email Statements Branch Network

Source: http://www.hdfcbank.com/personal/prd_glance.htm

Table 1.2: Wholesale banking

Corporate

Small and Medium

Government

Enterprises

Sector

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Financial Institutions and Trusts

Large Corporates • Funded Services • Non Funded Services • Value Added Services • Internet Banking

• • • • •

Funded Services Non Funded Services Specialized Services Value added services Internet Banking

Supply Chain Partners • Dealer Financing • Vendor Financing

• • • • • •

•

Tax Collection E- Ticketing Booking of L/C’s Collection of Stamp Duty Disbursement of Pension Electronic Collection of fees Collection of property tax

Agricultural Lending

Source : http://www.hdfcbank.com/wholesale/prd_glance.htm

Table 1.3: NRI services Accounts

&

Deposits

• Rupee Saving a/c • Rupee Current a/c • Rupee Fixed Deposits • Foreign Currency Deposits

Remittances • • • • •

North America UK Europe South East Asia Middle East 12

• • • • • •

Financial Institutions Mutual Funds Stock Brokers Insurance Companies Commodities Business Trusts

•

Accounts for Returning Indians

• •

Africa Others Quick remit IndiaLink Cheque LockBox Telegraphic/ Wire Transfer Funds Transfer Cheques/DDs/TCs

Investment & Insurances • • •

Mutual Funds Private Banking Portfolio Investment Scheme

Loans • • • •

Home Loans Loans Against Securities Loans Against Deposits Gold Credit Card

Payment Services • • • • • •

NetSafe BillPay InstaPay DirectPay Visa Money Online Donation

Access To Bank • • • • • • •

NetBanking OneView InstaAlert ATM PhoneBanking Email Statements Branch Network

Source: http://www.hdfcbank.com/nri/prd_glance.htm

1.1.12 BUSINESS STRATEGY HDFC BANK mission is to be "a World Class Indian Bank", benchmarking themselves against

international standards and best practices in terms of product offerings,

technology, service levels, risk management and audit & compliance. The objective is to build sound customer franchises across distinct businesses so as to be a preferred provider of banking services for target retail and wholesale customer segments, and to 13

achieve a healthy growth in profitability, consistent with the Bank's risk appetite. Bank is committed to do this while ensuring the highest levels of ethical standards, professional integrity, corporate governance and regulatory compliance. Continue to develop new product and technology is the main business strategy of the bank. Maintain good relation with the customers is the main and prime objective of the bank. HDFC BANK business strategy emphasizes the following: •

Increase market share in India’s expanding banking and financial services industry by following a disciplined growth strategy focusing on quality and not on quantity and delivering high quality customer service.

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Leverage our technology platform and open scaleable systems to deliver more products to more customers and to control operating costs.

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Maintain current high standards for asset quality through disciplined credit risk management.

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Develop innovative products and services that attract the targeted customers and address inefficiencies in the Indian financial sector.

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Continue to develop products and services that reduce bank’s cost of funds.

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Focus on high earnings growth with low volatility.

1.1.13 RECENT DEVELOPMENT The Reserve Bank of India had approved the scheme of amalgamation of Centurion Bank of Punjab Ltd. with HDFC Bank Ltd. with effect from May 23, 2008. All the branches of Centurion Bank of Punjab will function as branches of HDFC Bank with effect from May 23, 2008. With RBI’s approval, all requisite statutory and regulatory approvals for the merger have been obtained.

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The combined entity would have a nationwide network of

1167 branches; a strong

deposit base of around Rs.1,22,000 crores and net advances of around Rs.89,000 crores. The balance sheet size of the combined entity would be over Rs.1, 63,000 crores. On March 27, 2008, the shareholders of the Bank accorded their consent to a scheme of amalgamation of Centurion Bank of Punjab Limited with HDFC Bank Limited.

The

shareholders of the Bank approved the issuance of one equity share of Rs.10/- each of HDFC Bank Limited for every 29 equity shares of Re. 1/- each held in Centurion Bank of Punjab Limited. This is subject to receipt of Approvals from the Reserve Bank of India, stock exchanges and other requisite statutory and regulatory authorities. The shareholders also accorded

their consent to

convertible into equity shares at the rate of

issue

equity shares and/or warrants

Rs.1,530.13 each to HDFC Limited

and/or other promoter group companies on preferential basis, subject to final regulatory approvals in this regard. The Shareholders of the Bank have also approved an increase in the authorized capital from Rs.450 crores to Rs.550 crores. Promoted in 1995 by Housing Development

Finance

Corporation (HDFC), India's

leading housing finance company, HDFC Bank is one of India's premier banks providing a wide range of financial products and services to its over 11 million customers across hundreds of Indian cities using multiple distribution channels including a pan-India network of branches, ATMs, phone banking, net banking and mobile banking. Within a relatively short span of time, the bank has emerged as a leading player in retail banking, wholesale banking, and treasury operations, its three principal business segments. The bank's competitive strength clearly lies in the use of technology and the ability to deliver world-class service with rapid response time. Over the last 13 years, the bank has successfully gained market share in its

target customer franchises while maintaining

healthy profitability and asset quality. As on March 31, 2008, the Bank had a network of 761 branches and 1,977 ATMs in 327 cities. For the year ended March 31, 2008, the Bank reported a net profit of INR 15.90 billion (Rs.1590.2crore), up 39.3%, over the corresponding year ended March 31, 2007. As of March 31, 2008 total deposits were INR 1007.69 billion, (Rs.100,769 crore) up 47.5% over the corresponding year ended 15

March 31, 2007. Total balance sheet size too grew by 46.0% to INR 1,331.77 billion (133177 crore). Leading Indian and international Publications have recognized the bank for its performance and quality. Centurion Bank of Punjab is one of the leading new generation private sector banks in India. The bank serves individual consumers, small and medium businesses and large corporations with a full range of financial products and services for investing, lending and advice on financial planning. The bank offers its customers an array of wealth management products such as mutual funds, life and general insurance and has established a leadership 'position'. The bank is also a strong player in foreign exchange services, personal loans, mortgages and agricultural loans. Additionally the bank offers a full suite of NRI banking products to Overseas Indians. On 29th August 2007, Centurion Bank of Punjab merged with Lord Krishna Bank (LKB), post obtaining all requisite statutory and regulator approvals. This merger has further strengthened the geographical reach of the Bank in major towns and cities across the country, especially in the State of Kerala, in addition to its existing dominance in the northern part of the country. Centurion Bank of Punjab now operates on a strong nationwide franchise of 404 branches and 452 ATMs in 190 locations across the country, supported by employee base of over 7,500 employees. In addition to being listed on the major Indian stock exchanges, the Bank’s shares are also listed on the Luxembourg Stock Exchange.

1.1.14 AWARDS AND ACHIEVEMENTS HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian Bank". We realized that only a single-minded focus on product quality and service excellence would help us get there. Today, we are proud to say that we are well on our way towards that goal. It is extremely gratifying that our efforts towards providing customer convenience have been appreciated both nationally and internationally.

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Awards In 2009 Table 1.4: Awards in 2009 Euromoney Awards 2009

'Best Bank in India'

Economic Times Brand Equity & Nielsen Research

Most Trusted Brand - Runner Up

annual survey 2009 Asia Money 2009 Awards

'Best Domestic Bank in India'

IBA Banking Technology

'Best IT Governance Award - Runner up'

Awards 2009

'Best Trade Finance Bank in India for

Global Finance Award

2009

IDRBT Banking Technology Excellence

'Best IT Governance and Value Delivery'

Award 2008 Asian Banker Excellence in

'Asian Banker Best Retail Bank in India

Retail

Award 2009 '

Financial Services

Source: http://www.hdfcbank.com/aboutus/awards/default.htm

Awards In 2008 Table 1.5: Awards in 2008 Finance Asia Country Awards for Achievement 2008

'Best Bank and Best Cash Management Bank'

CNN-IBN

'Indian of the Year (Business)' 17

Nasscom IT User Award 2008

'Best IT Adoption in the Banking Sector'

Business India

'Best Bank 2008'

Forbes Asia

Fab 50 companies in Asia Pacific

Asian Banker Excellence in Retail Financial Services

Best Retail Bank 2008

Asiamoney

Best local Cash Management Bank Award voted by Corporates

Microsoft & Indian Express Group

Security Strategist Award 2008

World Trade Center Award of honour

For outstanding contribution to international trade services.

Business TodayMonitor Group survey

One of India's "Most Innovative Companies"

Financial Express-Ernst & Young Award

Best Bank Award in the Private Sector category

Global HR Excellence Awards - Asia Pacific HRM Congress:

'Employer Brand of the Year 2007 -2008' Award - First Runner up, & many more

Business Today

'Best Bank' Award

Source: http://www.hdfcbank.com/aboutus/awards/default.htm

1.1.15 QUALITY POLICY OF HDFC BANK •

Security: The bank provides long term financial security to their policy. The bank does this by offering life insurance and pension products.

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Trust: The bank appreciates the trust placed by their policy holders in the bank. Hence, it will aim to manage their investments very carefully and live up to this trust.

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Innovation: Recognizing the different needs of our customers, the bank offers a range of innovative products to meet these needs. 18

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Integrity

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Customer centric

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People care “one for all and all for one”

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Team work

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Joy and simplicity.

1.2 AN INTRODUCTION TO THE PROJECT 1.2.1 AN INTRODUCTION TO NET BANKING With cyber cafes and kiosks springing up in different cities access to the Net is going to be easy. Net banking (also referred as e banking) is the latest in this series of technological wonders in the recent past involving use of Internet for delivery of banking products & services. Even the Morgan Stanley Dean Witter Internet research emphasized that Web is more important for retail financial services than for many other industries. Internet banking is changing the banking industry and is having the major effects on banking relationships. Banking is now no longer confined to the branches were one has to approach the branch in person, to withdraw cash or deposit a cheque or request a statement of accounts. In true Internet banking, any inquiry or transaction is processed online without any reference to the branch (anywhere banking) at any time. Providing Internet banking is increasingly becoming a "need to have" than a "nice to have" service. The net banking, thus, now is more of a norm rather than an exception in many developed countries due to the fact that it is the cheapest way of providing banking services.

1.2.1.1 MEANING OF NET BANKING

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Net banking is a concept which enables everyone to conduct business with a bank from the comfort of home or office. Net banking means “application of electronic technology towards transfer of funds through an electronic terminal, computer or magnetic tape to conduct various transactions like cash receipts, payments, transfer of funds, etc.” It is often known as banking on net or e banking.

1.2.1.2 DEVELOPMENT OF NET BANKING IN INDIA The financial reforms that were initiated in the early 1990s and the globalization and liberalization measures brought in a completely new operating environment to the banks. The bankers are now offering innovative and attractive technology-based services and products such as ‘Anywhere Anytime Banking’, ‘Tele-Banking’, ‘Internet Banking’, ‘Web Banking’, ‘Net Banking’, ‘Mobile Banking’, etc. to their customers to cope with the competition. The process started in the early 1980s when Reserve Bank of India (RBI) set up two committees in quick succession to accelerate the pace of automation of operations in the banking sector. A high-level committee was formed under the chairmanship of Dr. C. Rangarajan, then Governor of RBI, to draw up a phased plan for computerization and mechanisation in the banking industry over a five-year time frame of 1985–1989. The focus by this time was on customer service and two models of branch automation were developed and implemented. Having gained experience in the earlier mode of computerization, the second Rangarajan committee constituted in 1988 drew up a detailed perspective plan for computerization of banks and for extension of automation to other areas such as funds transfer, e-mail, BANKNET, SWIFT, ATMs, net banking, etc. The Government of India enacted the Information Technology Act, 2000 (generally known as IT Act, 2000), with effect from 17 October 2000 to provide legal recognition to electronic transactions and other means of electronic commerce. RBI had set up a ‘Working Group’ on net banking to examine different aspects of net banking. The Group had focused on three major areas of net banking such as 20

(1) technology and security issues, (2) legal issues and (3) regulatory and supervisory issues. RBI had accepted the recommendations of the ‘Working Group’, and accordingly issued guidelines on ‘internet banking in India’ for implementation by banks. The ‘Working Group’ has also issued a report on net banking covering different aspects of net banking. Internet banking in India is currently at a nascent stage. While there are scores of companies specialising in developing internet banking software, security software and website designing and maintenance, there are few online financial service providers. ICICI bank is the first one to have introduced net banking for a limited range of services such as access to account information, correspondence and, recently, funds transfer between its branches. ICICI is also getting into e-trading, thus offering a broader range of integrated services to the customer. Several finance portals for provision of non-banking financial services, e-trading and ebroking have come up. Commercial applications such as Electronic Bill Presentment (EBP) and Procurement systems may not be introduced in India immediately, but are likely to have a greater impact than the retail applications. The corporate sector is adequately computerized and has already recognized the important role of e-commerce in future. Increasingly, companies are setting up websites even where there are no immediate tangible benefits to them from doing so. 1.2.1.3 NET BANKING IN INDIA – RBI GUIDELINES In India, internet banking or net banking is in rudimentary stage. In order to promote safety and soundness of internet banking activities, the RBI constituted a Working Group on Internet Banking. The Group issued guidelines in June 2001. The Group divided the internet banking products in India into 3 types based on the levels of access granted. They are 21

•

Information Only System

•

Electronic Information Transfer System

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Fully Electronic Transactional System.

1.2.1.4 ADVANTAGES AND DISADVANTAGES OF NET BANKING Internet Banking also has its advantages and disadvantages. Below are mentioned the most popular advantages of using Internet Banking along with some unavoidable disadvantages. The advantages include •

Convenience - online banking sites never close; they're available 24 hours a day, seven days a week, and they're only a mouse click away;

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Portability – you now have access to money whenever there is an emergency, whether or not you are in the country;

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Transaction speed - online bank sites generally execute and confirm transactions at the same rate or quicker than, ATM processing speeds;

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Effectiveness – they offer sophisticated tools, including account aggregation, stock quotes and rate alerts to help you manage all of your assets more effectively.

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Reduction in workload - No more standing in long lines at the bank, eliminating endless paper based bank statements.

The disadvantages include •

Lack of Computerization - which relates to virtual banks, revolves around the lack of ATMs;

•

Start-up may take time - In order to register for your bank's online program, you will probably have to provide ID and sign a form at a bank branch which can be time consuming; 22

•

Learning curve - Banking sites can be difficult to navigate at first;

•

Distrust of the User - the possibility of frauds, making errors etc.

•

Problem of Security – Various sites are not properly looked at to ensure whether customers money is safe in cyber world or not.

1.2.1.5 TRADITIONAL BANKING VS NET BANKING Net banking or internet banking works much like traditional banking. The primary difference is that in net banking account and information is accessed, payments are made and statements reconciled using computer rather than paper or the phone to complete transactions. Instead of going down to local branch office when one bank online he/she can accomplish multiple tasks at once with the click of a button. Online banking is rapidly becoming more and more popular as consumers recognize the advantages online banking has to offer. For one most banks charge fewer fees if you take advantage of their online banking services. You can also stop receiving paper statements if you like in many cases and conduct 95% of your business over the Web when you take advantage of Internet banking. What to Internet Banks do? The same things traditional banks do. They hold onto our money and lend it out to others respectively. The manage loans and help us keep track of our finances. Chances are if you own a bank account at a traditional bank they offer some type of Internet banking or online services. The next time you stop into your branch office you should ask them about online banking. You may find once you start you have no desire to go back to traditional banking. For those that have a hard time keeping track of paper statements, Internet banking is a life saver. Internet banking is also advantageous for frequent travelers that need to keep a close eye on their finances from abroad.

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1.2.3 NETBANKING SERVICE AT HDFC BANK Net banking is HDFC Bank's Internet Banking service. It provides up-to-the-second account information. Net banking lets the customer manage his/her account from the comfort of his/her mouse - anytime, anywhere. Net Banking services provides access to account information, products and other services (including transactions of non-financial and financial in nature) as advised by the Bank from time to time to the customers through the website of the Bank. Net Banking Services also include the services for Demat account, Credit Cards and loan on the website of the Bank. The HDFC Bank web site (www.hdfcbank.com) also features two versions of a demo facility - one "interactive" and the other "guided" - making it possible for even Internet illiterates to get comfortable with its services. On the downside, however, 'registration' for the service involves downloading of a form that needs to be posted/delivered to any of its branches - not exactly "web savvy" as we would call it. Also, the form itself requires Adobe Acrobat Reader to be installed and the file size will exceed 5.5 MB, which translates roughly into an hour or more of on-line time. Its 3-question FAQ page also assumes a high level of computer knowledge from users ... not consistent with the rest of the website. Net Banking service provides a host of features at the finger-tips:

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CHAPTER 2 REVIEW OF LITERATURE

REVIEW OF LITERATURE . A number of researches have been conducted on net banking and its adoption, development and its perils. Due to shortage of time and resources, a review of all the past researches done could not be mentioned in this research project. So, a snapshot of some of the reviews have been presented. Nath et.al (2001) in their study found that in every industry, E-commerce is revolutionizing the way business is conducted. New business models are replacing outdated ones and organizations are rethinking business process designs and customer 26

relationship management strategies. Banks are no exception to this transformation. This study examines bankers' views on providing banking services to customers using the web. Specifically, it addresses issues such as the strategic need for Internet banking, its effect on customer-bank relationships, and customers' experiences in Internet banking. Data collected from 75 banks show that most banks do not yet offer full-fledged Internet banking. However, most have plans to do so. Furthermore, bankers see Internet banking as a strategic opportunity that can reduce transaction costs, enhance customer service, increase the customer base and improve cross-selling opportunities. Also, Internet banking is perceived more favorably by banks that offer it compared to those that do not. Corrocher (2002) in his study examined the drivers of the adoption of the Internet banking, in order to understand its role with respect to the traditional banking activity and to offer a comprehensive picture of the diffusion of such a technology within the sector. In doing so, it analyses the role of firm-specific and non firm-specific (technology, market, environment) characteristics in influencing the decision to adopt the new technological platforms to perform on-line banking transactions within the retail segment of the financial sector. The main purpose of this paper is to investigate the relationship between the Internet banking and the traditional banking activity, in order to understand if these two systems of financial services delivery are perceived as substitutes or complements by the banks.

Leary (2002) in his study examined how Internet or electronic banking is slowly but surely reviving itself after numerous attempts by various financial institutions and financial intermediaries in the 1970 and 1980s. The standardization in technologies and the public's familiarity with the use of personal computers and the Internet have made the Internet bank or Internet banking site easier, cheaper and more cost effective than ever before. This paper discusses the coming of age of Internet banking, the opportunity for Internet banking and some of the obstacles and procedures that must be followed in order to develop a sound Internet banking presence.

27

Bradley & Stewart (2003) conducted a research in which they studied the factors driving the adoption of internet banking. The financial services environment has been subject to changes on many fronts. Technological change and the advent of the Internet are among the most dramatic and challenging areas of change for the sector. This paper looks at retail banking and its adoption of online banking, in particular the factors driving and inhibiting adoption by banks. An international Delphi study confirms the high level of importance of the Internet for retail banking. By 2011, it is expected that bank adoption of the Internet will be near universal. The key factors that are driving banks to adopt online banking are the adoption by other banks, competitive forces, consumer demand and the availability of technology. Working against adoption are banks' perceptions that the Internet does not offer enhanced ability to deal with customers as well as bank resistance to change, their existing legacy systems and the resources required to adopt. Singh & Malhotra (2004) in their study found that the tremendous advances in technology and the aggressive infusion of information technology had brought in a paradigm shift in banking operations. The purpose of this paper is to help fill significant gaps in knowledge about the Internet banking landscape in India. The paper presents data, drawn from a survey of commercial banks websites, on the number of commercial banks that offer Internet banking and on the products and services they offer. It investigates the profile of commercial banks that offer Internet banking, using univariate statistical analysis, relative to other commercial banks with respect to profitability, cost efficiency, and other characteristics. By the end of first quarter, 2004, differences between Internet and non-Internet banks had begun to emerge in funding, in sources of income and expenditures and in measures of performance. It was also found that the profitability and offering of Internet banking does not have any significant correlation. Laukkanen & Tommi (2007) in their research aimed to compare customer perceived value and value creation between internet and mobile bill paying service. A qualitative indepth interviewing design was applied in order to ascertain the factors that create value perceptions in fund transfer service via personal computer and mobile phone. The 28

findings suggest that efficiency, convenience and safety are salient in determining the differences in customer value perceptions between internet and mobile banking. The findings of the qualitative study, being more depth than wide in nature, deserve to be quantitatively measured in future studies in order to provide more generalized results. The paper provides enhanced information for business managers about both positive and negative customer value perceptions in internet and mobile banking. By understanding how and what kind of value different service channels provide for customers service providers are better enabled to create actions to enhance internet and mobile banking adoption. The contribution of the paper lies in achieving a more profound understanding on consumer value perceptions to internet and mobile banking. It expands the literature on electronic and mobile commerce and on electronic banking especially. Nandan et.al (2008) in his paper discusses the concept of Internet Banking, perception of Internet bank customers, non-customers and issues of major concern in Internet banking. The state of Internet banking in India has been explored using various concepts like Ebanking continuum, and gap analysis related to the various services and the security features offered. In order to have a clear and focussed insight about the perceptions of users (and non-users) about Internet banking a survey was conducted. The findings of the survey provide valuable insights into concern for security, reasons for lower penetration, and likeliness of adoption, which have been used to make useful recommendations. Mishra & Kiranmai (2009) in their study found that information technology is considered as the key driver for the changes taking place around the world. According to Heikki, the transformation from the traditional banking to e-banking has been a 'leap' change. The evolution of e-banking started from the use of Automatic Teller Machines (ATMs) and telephone banking (tele-banking), direct bill payment, electronic fund transfer and the revolutionary online banking. The future of electronic banking would be more interactive i.e., TV banking. Finland is the first country in the world to have taken a lead in e-banking. In India, ICICI Bank initiated e-banking services during 1997 under the brand name 'Infinity'. It has been forecasted that among all categories, online banking is the future of electronic financial transactions. The rise in e-commerce and internet in 29

enhancing online security transformation and sensitive information has been the core reason for the penetration of online banking in everyday life. The shift towards the involvement of the customers in the financial service with the help of technology, especially internet, has helped in reducing costs of financial institutions as well as clients/customers who use the service at anytime and from virtually anywhere with access to an internet connection. Uppal (2009) in his study found that in the post-LPG (Liberalization, Privatization and Globalization) era and Information Technology (IT) era, transformation in Indian banks is taking place with different parameters and the contours of banking services are dynamically altering the face of banking, as banks are stepping towards e-banking from traditional banking. On the basis of five-point likert-type scale, this paper empirically analyzes the quality of e-banking services in the changing environment. With different statistical tools such as weighted average method and ranking, the paper concludes that most of the customers of e-banks are satisfied with the different e-channels and their services, but the lack of awareness is a major obstacle in the spread of e-banking services. The paper also suggests some measures to make e-banking services more effective in the future. Kuisma et.al (2006) conducted a research to identify the reasons for consumer resistance to Internet banking. The special interest is to explore resistance among those bank customers who already have valid contracts for Internet banking but prefer to pay their bills via ATM. The objective is to identify those characteristics generating resistance to Internet banking and their connections to values of individuals. In order to achieve the objective, 30 Finnish bank customers were interviewed in-depth using the means-end approach and the laddering interviewing technique. The findings indicate both functional and

psychological

barriers

arising

from

service-,

channel-,

consumer-

and

communication-related means-end chains inhibiting Internet banking adoption. The contribution of the paper lies in achieving a more profound understanding of consumer resistance to Internet banking, and further, in offering suggestions and practical advice for service providers' decision-making. 30

The perusal of review of literature revealed that the internet banking had been studied in relation to various aspects like its adoption, growth, development and expectations of the customers. But no study has been conducted in relation to the Net Banking service provided by HDFC Bank.

31

CHAPTER 3 NEED, SCOPE AND OBJECTIVES OF THE STUDY

NEED, SCOPE AND OBJECTIVES OF THE STUDY

3.1 NEED OF THE STUDY After conducting a review of researches done by various professionals a gap have been identified. The researchers had studied the aspects of internet banking, its introduction, its development, adoption by the customers, consumers perception about this service, its success and security related issues. But a very few researchers had studied the net banking service with respect to the HDFC Bank. This gap had been identified and it had led to the present research being undertaken. 32

3.2 SCOPE OF THE STUDY The area where the study has been conducted was Jalandhar. 3.3 OBJECTIVES OF THE STUDY The current study was undertaken to achieve the following stated objectives: 1. To analyze awareness among customers using Net banking service. 2. To know about the Net Banking service provided by HDFC Bank. 3. To know the cause why customers are using or not using Net banking service. 4. To the confidence of the customers of HDFC Bank in using these services. 5. To study the popularity of the Net banking service among the customers of HDFC Bank.

33

CHAPTER 4 RESEARCH METHODOLOGY

RESEARCH METHODOLOGY Research is a common parlance which refers to search for knowledge. It is a procedure of logical and systematic application of the fundamentals of science to the general and overall questions of a study and scientific technique, which provide precise tools, specific procedures, and technical rather philosophical means for getting and ordering the data prior to their logical analysis and manipulating different type of research designs is available depending upon the nature of research project, availability of manpower and circumstances.

34

According to D. Slesinger

and M. Stephenson research may be defined as “the

manipulation of things, concepts or symbols for the purpose of generalizing to extend, correct or verify knowledge, whether that knowledge aids in the construction of theory or in the practice of an art”. Thus it is original contribution to the existing stock of knowledge of making for its advancement. In short, the search of knowledge through objective and systematic method of finding solution to a problem is research.

4.1 RESEARCH DESIGN A research design is the arrangement of conditions for collection and analysis of data in a manner that aims to combine relevance to the research purpose with economy in procedure. In fact, the research design is the conceptual structure within which research is conducted. This research was descriptive in nature. Descriptive research: The research undertaken was a descriptive research as it was concerned with specific predictions, with narration of facts and characteristics concerning net banking service provided by HDFC Bank.

4.2. SAMPLING DESIGN The following factors have been decided within the scope of sample design: 4.2.1 Universe of study: Universe of the study means all the persons who are the

customers of HDFC Bank in the world.  Theoretical: It covered all the individuals who are the customers of HDFC Bank

in the world.  Accessible: It covered all the individuals who are the customers of HDFC Bank

in India who are within our reach. In this study accessible population was customers of HDFC Bank in India. 35

4.2.2 Sample Size: A sample of minimum respondents was selected from various areas

of Jalandhar. An effort was made to select respondents evenly. The survey was carried out on 100 respondents. 4.2.3 Sample Unit: In this project sampling unit consisted of the various individuals

who had their bank accounts with HDFC Bank. 4.2.4 Sampling Technique: For the purpose of research convenient sampling techinque

was used. 4.2.5 Sampling Frame: It consisted of various sources from where information about

the respondent is extracted. Mainly personal links and employees of HDFC Bank, Jalandhar are used for getting information about the respondents.

4.3 DATA COLLECTION AND ANALYSIS 4.3.1 DATA COLLECTION There were two types of data sources used in this research. These were

4.3.1.1. Secondary data Secondary data is the data collected from already been use or published information like journals, diaries, books, etc .In this research project, secondary source used were various journals, and website of various online journals. 4.3.1.2. Primary data Primary data is the data collected for the first time from the source and never have been used earlier. The data can be collected through interviews, observations and questionnaires. In this project, an appropriate questionnaire was designed which was filled by the customers of HDFC Bank to know their opinions regarding the Net Banking service provided by HDFC Bank. 36

4.3.2 DATA ANALYSIS 4.3.2.1 Tools Of Presentation: It means what all tools are used to present the data in a meaningful way so that it becomes easily understandable. In this research tables and graphs were used for presenting the data. 4.3.2.2 Tools Of Analysis In this research the tools of analysis used were percentages. SPSS software were used to conduct Friedman Anova, Reliability analysis and Factor Analysis. 4.4 LIMITATIONS OF THE STUDY The following were the limitations of the study: 1. Non representative sample: In this research project a sample survey was conducted. A sample of 100 respondents was selected. So such sample size cannot be said to be the true representative of the universe. 2. Shortage of time: The time period of study was very limited. It is very difficult to have in detail study on project work due to limited time period. The period of 4 to 6 weeks is not enough for the proper study of the project. 3. Inadequate data: The data provided was not up to the mark due to which we faced problems in our research. 4. Lack of scientific method: The lack of scientific training in methodology of research was great impediment in our research program, which led to the delay of research.

37

5. Biasness in the responses: The answers provided by the respondents suffer from biasness. 6. Cost Factor: It was not possible to conduct extensive research due to paucity of funds.

CHAPTER 5 38

DATA ANALYSIS AND INTERPRETATION

DATA ANALYSIS AND INTERPRETATION Statement 5.a Demographic Profile Of The Respondents Table 5.a Demographic Profile of the Respondents

39

Number of

Percentage Of

Respondents

Respondents

Below 20 yrs

1

1%

20 – 35 yrs

33

33 %

35 – 50 yrs

40

40 %

50 – 65 yrs

17

17 %

65 yrs and above TOTAL Qualification:

9 100

9% 100 %

Undergraduate

5

5%

Graduate

65

65 %

Post Graduate TOTAL Occupation:

30 100

30 % 100 %

Businessman

32

32 %

Housewife

7

7%

Self Employed

17

17 %

Service

27

27 %

Student

4

4%

Professional TOTAL Annual Income:

13 100

13 % 100 %

Less than Rs 2 Lakhs

12

12 %

Rs. 2 – 6 Lakhs

27

27 %

Rs. 6 – 10 Lakhs

39

39 %

Rs. 10 – 15 Lakhs

17

17 %

Rs. 15 – 20 Lakhs

5

5%

0 100

0% 100 %

Demographics

Age:

Rs. 20 Lakhs and above TOTAL

40

Analysis and interpretation: From the data collected it was found majority of respondents that is 40% belonged to the age of 35 to 50 years, followed by the age group of 20 to 35 years. It was found that the majority of the respondents were graduates. It was found that the majority of the respondents were from the business class followed by the service class and self employed people. It was found that the majority of the respondents fell between the income group of Rs 6 to Rs 10 lakhs, followed by income group between Rs 2 to Rs 6 lakhs. Thus it can be concluded that the majority of the respondents were knowledgeable and were well informed about the banking services.

Statement 1: Time period since the HDFC Bank’s services are being availed 41

Table 5.1 Time period since the HDFC Bank’s services are being availed Time Period

Percentage of

Number of respondents

respondents

Less Than 2 years

9

9%

2 – 5 years

18

18 %

5 – 10 years

31

31 %

More Than 10 years Total

42 100

42 % 100 %

Figure 5.1 Time period since the HDFC Bank’s services are being availed

Analysis and interpretation: From the data collected, it can be that the majority of the respondents that is 42% of the respondents have been HDFC Bank’s customer for more than 10 years, followed by 5 to 10 years with 31% of respondents. It can be concluded that the majority of the respondents have been HDFC Bank’s customer for more than 10 years. Statement 2: Products and services of HDFC Bank availed by the customers

42

Table 5.2: Products and services of HDFC Bank availed by the customers Products and services

Number of respondents

Percentage of respondents

Loans

49

22.58 %

Deposit Accounts

63

29.03 %

Credit Cards

27

12.44 %

Debit Cards

19

8.75 %

Forex Services

22

10.13 %

ATM

24

11.05 %

13 217*

6.00 % 100 %

NRI Services Total

Figure 5.2: Products and services of HDFC Bank availed by the customers

Analysis and interpretation It was found that majority of the respondents that is 29% availed deposit accounts, followed by loans, credit cards, ATM’s and forex services with 23%, 12%, 11% and 10% respectively. It can be inferred that that majority of the respondents availed the deposit accounts among the various products and services offered by the HDFC Bank.

43

* The total is more than sample size because of multiple responses. Statement 3: Perception about the products and services offered by HDFC Bank Table 5.3: Perception about the products and services offered by HDFC Bank Perception

Number of respondents 44

Percentage of respondents

Lucrative

80

80 %

Non lucrative

5

5%

Can’t say Total

15 100

15 % 100 %

Figure 5.3: Perception about the products and services offered by HDFC Bank

Analysis and interpretation From the data collected, it was found that the majority of the respondents that is 85% said that the products and services offered by HDFC Bank were lucrative. While just 5% of the respondents said that the products and services offered were non lucrative and the remaining 15% were not able form any opinion. It can be inferred that the majority of the felt that the products and services offered by HDFC Bank were lucrative.

Statement 4: Ways to access to HDFC Bank Table 5.4: Ways to access to HDFC Bank Ways

Number of Respondents 45

Percentage of Respondents

Net Banking

53

23.05 %

Phone Banking

28

12.18 %

One View

7

3.05 %

ATM

29

12.60 %

Branch Network

76

33.04 %

Email Statement

34

14.78 %

3 230*

1.30 % 100 %

Insta Alert Total

Table 5.4: Ways to access to HDFC Bank

Analysis and interpretation: It was found from the data collected that 33% of the respondents accessed the bank through Branch network. About 23% of the respondents accessed the bank through net banking followed by email statements with about 15%. Marginally 1% and 3% of the respondents used insta alert and one view to access the bank. It was inferred that majority of the respondents accessed the bank through branch network.

46

* The total is more than sample size because of multiple responses. Statement 5: Awareness regarding Net Banking Service provided by HDFC Bank Table 5.5: Awareness regarding Net Banking Service provided by HDFC Bank Awareness Yes

Number of respondents 96

Percentage of respondents 96 %

No Total

4 100

4% 100 %

47

Table 5.5: Awareness regarding Net Banking Service provided by HDFC Bank

Analysis and interpretation: From the data collected it was found that majority of the respondents that is 96% were aware of the net banking service provided by HDFC Bank while just 4% of the respondents were not aware of the same service. It was concluded that majority of the respondents of the respondents were aware of the net banking service.

Statement 6: Accessibility of Net Banking Facility provided by HDFC Bank Table 5.6: Accessibility of Net Banking Facility provided by HDFC Bank Yes

Accessibility

Number of respondents 81

Percentage of respondents 81 %

No Total

19 100

19 % 100 %

Figure 5.6: Accessibility of Net Banking Facility provided by HDFC Bank 48

Analysis and interpretation: Of the data collected it was found that about 81% of the respondents had accessed the net banking service provided by the HDFC Bank while 19% of the respondents said that they had not accessed the same. It can be inferred that the majority of the respondents had availed the net banking service.

Statement 7: Net Banking services of HDFC Bank availed Table 5.7: Net Banking services of HDFC Bank availed Number of

Percentage of

respondents 44

respondents 30.39 %

Transfer funds between accounts

32

22.07 %

Create Fixed Deposit online

8

5.51 %

Request a demand draft

5

3.44 %

Pay bills

29

20.00 %

Services View accounts balances & statements

49

Order a cheque book Request stop payment on a cheque Total

16

11.03 %

11 145*

7.56 % 100 %

Figure 5.7: Net Banking services of HDFC Bank availed

Analysis and interpretation: It was found that the majority of the respondents that is 30% of the respondents used the net banking service for viewing accounts and balances, followed by 22% and 20% of the respondents who availed the same for transferring the funds between accounts and for paying the bills respectively. Marginally 3% of the respondents used the same service to request a demand draft. It can be inferred that the majority of the respondents used the net banking service provided by HDFC Bank to view their accounts and balances.

50

* The total is more than sample size because of multiple responses. Statement 8: Reasons for which Net Banking service should be availed Table 5.8: Reasons for which Net Banking service should be availed Reasons

Mean Rank

Ranks

Convenience

3.12

1

Curiosity

5.07

7

Low cost

4.41

5

Quick service

3.33

2

Maintenance

3.46

3

Safety

4.48

6

User friendly

4.13

4

51

1 being the most important and 7 being the least important Analysis and interpretation: Scores are significantly different on The Friedman two way ANOVA test (p<0.001) for the listed 7 reasons due to which Net Banking service should be availed. The first rank being the most important was given to convenience and the last rank that is 7 was given to curiosity. It can be concluded that majority of the respondents regarded convenience as the most important reason for which Net Banking service should be availed and curiosity as the least important reason for the same.

Statement 9: Frequency of using the Net Banking service in a month Table 5.9: Frequency of using the Net Banking service in a month Frequency

Number of respondents

Percentage of respondents

Less than once

28

34.56 %

1 to 3 times

39

48.14 %

3 to 8 times

10

12.34 %

8 to 15 times

4

4.96 %

More than 15 times Total

0 81

0% 100 %

52

Figure 5.9: Frequency of using the Net Banking service in a month

Analysis and interpretation: It was found that the majority of the respondents that is 48 % used the Net Banking service one to three times in a month while 35 % said that they used the same service less than once in a month. None of the respondents said that they availed the same facility more than 15 times in a month. It can be inferred that the majority of the respondents availed the Net Banking service one to three times in a month.

53

Statement 10 : Difficulties faced while using the Net Banking service of HDFC Bank Table 5.10 : Difficulties faced while using the Net Banking service of HDFC Bank Number of

Percentage of

respondents 9

respondents 11.11 %

Making transactions

27

33.33 %

Safety issues

32

39.50 %

Unable to understand webpages

6

7.40 %

Regularly changing the IPIN and Password Total

7 81

8.64 % 100 %

Difficulties Logging in to your account

Figure 5.10 : Difficulties faced while using the Net Banking service of HDFC Bank

54

Analysis and interpretation: It was found that the majority of the respondents that is 40% said that safety issues was the major difficulty that they faced while using the Net Banking service, followed by 34% of the respondents who felt that making transactions with the bank through Net Banking was difficult. However, 8% of the respondents faced difficulty in understanding the webpages and 7% of the respondents felt that changing the IPIN and Password regularly was difficult. It was inferred that the majority of the respondents regarded the safety issues as the major difficulty that they faced while using the Net Banking service.

55

Statement 11: Frequency of visiting the HDFC Bank branch Table 5.11: Frequency of visiting the HDFC Bank branch Frequency

Number of respondents

Percentage of respondents

Everyday

21

21 %

Alternate days

26

26 %

Once in a week

18

18 %

Twice in a month

9

9%

Thrice in a month

5

5%

Twice in a week

14

14 %

Once in a week Total

7 100

7% 100 %

Figure 5.11 Frequency of visiting the HDFC Bank branch 56

Analysis and interpretation: It was found that the majority of the respondents that is 26% said that they visited the bank branch every alternate day, followed by 21% of the respondents who visited the bank everyday. Only 5% of the respondents visited the bank branch thrice in a month. It can be inferred that the majority of the respondents said that they visited the bank branch every alternate day. Statement 12: The main reason for which the bank branch is typically visited Table 5.12: The main reason for which the bank branch is typically visited Number of

Percentage of

respondents 31

respondents 31 %

To get a advice for investment purpose

13

13 %

To inquire about a balance

7

7%

To withdraw a cheque

23

23 %

To order a cheque book

15

15 %

To transfer funds between accounts Total

11 100

11 % 100 %

Reasons To make a deposit

Figure 5.12: The main reason for which the bank branch is typically visited

57

Analysis and interpretation: It was found that the majority of the respondents that is 31% said that the main reason of visiting the bank is to make a deposit, followed by 23% who said that they visited the bank branch typically to withdraw a cheque. Of the total only 7% and 11% of the respondents visited the bank to inquire about a balance and to transfer funds between accounts respectively. It can be inferred that the majority of the respondents said that the main reason of visiting the bank is to make a deposit.

58

Statement 13: Agreement regarding Net Banking service being better than traditional banking Table 5.13: Agreement regarding Net Banking service being better than traditional banking Agreement

Number of respondents

Percentage of respondents

64

64 %

36 100

36 % 100 %

Yes No Total

Figure 5.13: Agreement regarding Net Banking service being better than traditional banking

59

Analysis and interpretation: Of the data collected it was found that the majority of the respondents that is 64% respondents agreed that net banking is better than the traditional banking while 36% of the respondents disagreed with the statement. It can be inferred that the majority of the respondents felt that the net banking service was better than traditional banking. Statement 14: Reasons due which Net Banking service is not popularly used Table 5.14: Reasons due which Net Banking service is not popularly used Reasons

Mean Rank

Net banking web pages are confusing 4.40 Use of computer or internet is difficult 4.53 Neither friends nor relatives use internet 4.03 Net banking facility is not secured 3.43 It is more expensive than going to a branch 4.76 Net banking offers no receipts on payments 3.28 Net banking is not reliable 3.57 1 being the most important and 7 being the least important Analysis and interpretation: 60

Rank 5 6 4 2 7 1 3

Scores are significantly different on The Friedman two way ANOVA test (p<0.001) for the listed 7 reasons due to which Net Banking service is not popularly being used. The Net banking offers no receipts on payments was ranked first that is the most important reason while it is more expensive than going to a branch was given the last rank that is seven. It can be concluded that the majority of the respondents regarded that the most important reason for which Net Banking service is not being used popularly was that it does not offer receipts on payments and the least important reason was that it is more expensive than going to a branch.

Statement 15: Raters agreement Reliability Statistics Table 5.20.1: Cronbach's Alpha Cronbach's Alpha

N of items

0.716

10 Table 5.20.2: KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy Bartlett's Test of Sphericity

Approx. Chi-Square Df Sig.

Table 5.15.3: Total Variance Explained 61

.725 248.386 45 .000

Component

Initial Eigenvalues % of Variance 31.157

1

Total 3.116

Cumulative % 31.157

2

1.723

17.226

48.382

3

1.080

10.798

59.181

4

.992

9.922

69.103

5

.783

7.827

76.930

6

.686

6.859

83.788

7

.525

5.254

89.043

8

.465

4.648

93.691

9

.369

3.690

97.381

10

.262

2.619

100.000

Table 5.15.4: Component Matrix COMPONENT 2 .822 -.294 .748 -.369 .685 .781 -.193 .461 .383 .396 .499 .556 -.061 .190 .345 .207 .677 .210 .695

1 Convenience Safety Functionality Necessity Language Physical Access Trans_costs Service Safety_feature Extraction Method: Principal Component Analysis. a. 3 components extracted.

Table 5.15.5: Rotated Component Matrix

62

3 .050 -.069 -.375 -.207 -.163 .467 .649 .219 -.419

COMPONENT 1

2

3

Convenience

.836

-.079

.242

Safety

.826

-.100

.086

Functionality

.712

.317

-.065

Necessity

.820

.123

.050

Language

.302

.509

.188

Physical

.054

.280

.737

Access

.371

-.241

.734

Trans_costs

.226

.390

Service

.823

Safety_feature

-.085

.622

.366

Extraction Method: Principal Component Analysis. Rotation Method: Varimax with Kaiser Normalization.

Table 5.14.6: Factor Analysis Variables Convenience

Safety

Functionality Necessity

Language

Statements Net Banking is easy and convenient to use. Transactions conducted through Net Banking are safe and secure. The web pages function properly. Net Banking service is a necessity. The website pages are available in the languages you

Factor Loadings .836

.826

.712 .820

.509

understand. Net Banking facility reduces Physical

the frequency of customer’s

.737

Access

visit to a physical bank. Access to accounts 24x7 is

.734

63

Trans_costs

Service

important to you. The transaction costs are lesser in case of Net Banking service. Net Banking service provided by HDFC Bank is better than the online services provided by

.390

.823

others banks. HDFC Bank is taking adequate Safety_feature

steps to check the security of its

.622

customers.

Table 5.15.7 Service Quality Factor Label

Statements Net Banking is easy and convenient to use. Transactions conducted through Net Banking are safe and secure.

Service Quality

The web pages function properly. Net Banking service is a necessity.

Factor Loadings .836

.826

.712

.820

Table 5.15.8: Adequate Mechanism Factor Label

Statements

64

Factor Loadings

The website pages are available in the languages you understand.

.509

Net Banking service provided by HDFC Bank is better than the Adequate Mechanism

online services provided by

.823

others banks. HDFC Bank is taking adequate steps to check the security of its

.622

customers.

Table 5.15.9 Accessibility Factor Label

Statements

Factor Loadings

Net Banking facility reduces the frequency of customer’s visit to a Accessibility

physical bank. Access to accounts 24x7 is important to you. The transaction costs are lesser in case of Net

.737

.734

.390

Banking service. Analysis and interpretation: The factor analytic methodology had been used to analyze the net banking service based on responses received from the 100 respondents to the survey questionnaire. The cache of factor analytic methods is quite a rich and rigorous one. The Principal Components

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Analysis (PCA) had been used to explore and confirm the inter-relatedness between the occurrences of variables pertaining to net banking. The correlation matrix of the ten variables on net banking had been subjected to the PCA. It provided a set of components, which explained variances in descending order of total variance of a set of variables pertaining to a domain of variables under study. Theoretically, it extracted as many components as is the number of variables. The number of principal components to be retained has been decided based on Kaiser’s criterion of Eigen value>1 and Bartlett’s test. The Bartlett’s test of significance led to acceptance of ten significant principal components. The PCA with varimax rotation method has been used to maximize the sum of squared loading of each factor extracted in turn. It explained more variance than the loadings obtained from any other method of factoring. The factors loaded by variables having significant loadings of the magnitude of 0.40 and above have been interpreted. The scales of measurement were tested using Cronbach α reliability test. Cronbach α was 0.5, which is satisfactory level of construct validity. The correlations between the factors were then examined which revealed the existence of correlation between certain factors. This perusal suggested the use of factor analysis to investigate any distinct underlying factors and to reduce the redundancy of certain barriers indicated in the correlation matrices. Principal Component Analysis was chosen as the method of extraction in order to account for maximum variance in the data using minimum number of factors. The default solution (eigen values>1) resulted in extraction of four factors. The factor 1 variables, convenience, safety, functionality, necessity are labeled as “Service Quality”. Factor 2 was named as “Adequate Mechanism” including: language, service and safety feature variables. Factor 3 was named as “Usability” including physical, access and trans cost. 66

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CHAPTER 5 FINDINGS OF THE STUDY

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FINDINGS OF THE STUDY The findings of the study were as follows: 1. The majority of the respondents have been HDFC Bank’s customer for more than 10 years. 2. The majority of the respondents availed the deposit accounts among the various products and services offered by the HDFC Bank. 3. The majority of the felt that the products and services offered by HDFC Bank were lucrative. 4. The majority of the respondents accessed the bank through branch network. 5. The majority of the respondents of the respondents were aware of the net banking service. 6. The majority of the respondents have availed the net banking service. 7. The majority of the respondents used the net banking service provided by HDFC Bank to view their accounts and balances. 8. The majority of the respondents regarded convenience as the most important reason for which Net Banking service should be availed and curiosity as the least important reason for the same. 9. The majority of the respondents availed the Net Banking service one to three times in a month. 10. The majority of the respondents faced the safety issues was the major difficulty that they faced while using the Net Banking service. 11. The majority of the respondents said that they visited the bank branch every alternate day. 12. The majority of the respondents said that the main reason of visiting the bank is to make a deposit. 13. The majority of the respondents felt that the net banking service was better than traditional banking. 14. The majority of the respondents regarded that the most important reason for which Net Banking service is not being used popularly was that it does not offer

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receipts on payments and the least important reason was that it is more expensive than going to a branch. 15. The majority of the respondents agreed that net banking is convenient and safe to use and felt that transaction costs are lesser in case of net banking service. While majority of the respondents disagreed that net banking facility reduces the frequency of customer visits to a physical bank.

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CHAPTER 7 CONCLUSION

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CONCLUSION 7.1 CONCLUSION The introduction of new technology has been changing the attire of banking. The brick and mortar banking is slowly giving place to click of the mouse banking. Technology is aiding globalization and integration of financial markets across the globe. Customer’s expectations for new products and alternatives delivery channels have been rising. Banks are under pressure to offer today, what customers would be expecting tomorrow. Thanks to innovations and spread of new technology, banks today offer the customer a choice to conduct his business across the counter, over phone or via a computer. The Rangarajan Committee (1988) report is the first step for the introduction of computers. The Saraf Committee (1994) on Technology issues relating to payments, cheques clearing and securities settlements made several recommendations to improve the quality of service. The introduction of new instruments such as ATM, retail Electronic Funds Transfer (EFT) and Electronic Clearing Services (ECS) have all helped in developing an effective, efficient and speedy payment and settlement systems. In literature, the major emphasis have laid on significant innovation and investment is under way that could lead to very rapid expansion in fully electronic business to business and consumer to consumer payments in near time. While the pace of change in these market makes it difficult to determine, eventually these innovations will generate substantial effeciencies in retail payment system. Bank regulators are paying significant attention to appropriate risk management of new technology. Evidence reveals a sense of urgency about the adoption of new technology and reflects substantial competitive pressure to act quickly. The objective of the study was to study was to comprehend the Net Banking service provided by HDFC Bank. The research was descriptive in nature. The universe of the study was the customers of the HDFC Bank. The survey was carried out on 100 respondents. In this research for data analysis tools used were tables and graphs. Majority 72

of the respondents were aware of the Net Banking service provided by the bank and availed the various services offered through net banking. Majority of the respondents felt that net banking facility have enabled the customers to perform various banking transactions online. It is hoped that the survey findings will have some useful applications. 7.2 RECOMMENDATIONS Following are the recommendations of the study: 1. The bank should make some efforts to familiarize the customers to various services through demonstrations. 2. The bank should adopt more upgraded techniques to make their customer feel more secure while accessing their accounts. 3. Effective awareness campaigns should be undertaken by the banks to make their customers more aware of net banking service. 4. The bank should make a effort to provide a platform from where the customers can access different accounts at single time without extra charge. 5. The bank should take steps to create a trust in mind of customers towards security of their accounts. 6. The HDFC bank should introduce more services which can be accessed through Net Banking like advice on investment, TDS, etc.

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