DISSERTATION REPORT

ON

Detailed Analysis on E-Banking with respect to ICICI

Bank

Submitted in Partial Fulfillment of the requirements for

Master of Business Administration (MBA)

By

Sumandeep Kaur

2009-2011

ARMY INSTITUTE OF MANAGEMENT & TECHNOLOGY,

PLOT NO M-1, POCKET P-5, GREATER NOIDA

201306(UP)

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 Acknowledgement

To undertake such an important project and to accomplish it, one needs a lot of guidance and
support.

I would like to express my deep sense of gratitude to my Faculty Mentor Mrs Surabhi Pandey
whose continuous support and guidance helped me in converting my conception into
visualization and also for the continuous guidance throughout the Dissertation report.

Student Name __________________________ Signature_______________________

Date _______________________

SUPERVISOR CERTIFICATE
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This is to certify that Ms SUMANDEEP KAUR, a student of Master of Business Administration, Army
Institute of Management and Technology, Greater Noida, has successfully completed his project under
my supervision.

During this period, she worked on the project title “Detailed Analysis on E-Banking with respect to
ICICI Bank” in partial fulfillment for the award of the degree of Master of Business Administration of
GGSIP University, Delhi.

To the best of my knowledge the project work done by the candidate has not been submitted to any
university for award of any degree.

Her performance and conduct has been good.

Date:

FACULTY:

Certificate of Originality

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I_________________________________ Roll No. ____________________ a fulltime bonafide
student of Second year of master of business administration (MBA) Programme of Army
Institute of Management & Technology, Greater Noida. I hereby certify that this work carried
out by me

The report submitted in partial fulfilment of the requirement of the programme is an original
work of mine under the guidance of the faculty mentor
___________________________________, and is not based or reproduced from any existing
work of any other person or on any earlier work undertaken at any other time or for any other
purpose, and has not been submitted anywhere else at any time.

(Student’s Signature)

(Faculty Mentor’s Signature)

CONTENTS

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 Sr. No. TOPIC PAGE No

1 Executive Summary 6
2 Objectives 7
3 Literature Review 8-25

 E-Banking

 Need and Growth for E-Banking

 E-Banking products & services

 Issues and Risks in E-Banking

4 ICICI Bank – Introduction 26-33

 Porter’s 5 Forces Analysis of Indian Banking Industry

 SWOT Analysis of ICICI Bank

5 Research Methodology 34

 Data collection

 Research design

6 Findings 37
7 Conclusion 39
8 Recommendations 40
9 References 41

Executive summary

“E-banking”- The execution of financial services via internet, reducing cost and increase in convenience
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
institution. The 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
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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.

The ever increasing speed of internet enabled phones & personal assistant, made the transformation
of banking application to mobile devices, this creative a new subset of electronic banking i.e. mobile
banking. In 1999 & 2000 mobile banking as an established channels, is the most attractive in today’s
fast world.

The internet is revolutionizing the way the financial industry conducts business online, has
created new players who offer personalize services through the web portals. This increase to find new
ways and increase customer loyalty to add the value to this product and services.

Banks also enables customers lifestyle needs by changing and increasing preference for speed
and convenience are eroding the traditional affinity between customer and branch offices as a new
technology disinter mediates traditional channels, delivering the value proposition hinges on owing or
earning the customer interface and bringing the customer a complete solution which satisfies their
needs. Smart card is a new trend which provides the opportunity to build an incremental revenue stream
by providing an ideal platform for extended application and services. Banks are well positioned to play
central role unit in future M-commerce market. Banks have strong relationships with corporate and
business customers and a wide experience in providing them with corporate banking services. Bank
provides a multimedia of small and large retailers with acquiring functionality in credit card
transactions. Customers have trusted relationships with banks and a lower propensity to switch banking
providers.

Objectives of study

 To study the concept of E-banking in India

 To study the Readiness of E-Banking in Indian scenario
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 Detailed analysis of E-Banking in ICICI Bank
 Future and Growth prospects of E-Banking in India

LITERATURE REVIEW

3.1 E-BANKING

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 Electronic banking, also known as electronic funds transfer (EFT),is simply the use of electronic means
to transfer funds directly from one account to another, rather than by cheque or cash.
E-banking means any user with a personal computer and a browser can get connected to his banks
website to perform any of the virtual banking functions. In internet banking system the bank has a
centralized database that is web-enabled. All the services that the bank has permitted on the internet are
displayed in menu. Any service can be selected and further interaction is dictated by the nature of
service. The traditional branch model of bank is now giving place to an alternative delivery channels
with ATM network. Once the branch offices of bank are interconnected through terrestrial or satellite
links, there would be no physical identity for any branch. It would a borderless entity
permitting anytime, anywhere and anyhow banking.
The network which connects the various locations and gives connectivity to the central office within the
organization is called intranet. These networks are limited to organizations for which they are set up.

Meaning and features of E-Banking are as follows:

1. Banking is a combination of two, Electronic technology and Banking.
2. Electronic Banking is a process by which a customer performs banking transactions electronically
without visiting a brick-and-mortar institution.
3.E-Banking denotes the provision of banking and related service through extensive use of information
technology without direct recourse to the bank by the customer.

3.2 NEED FOR E-BANKING

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.

Banks have traditionally been in the forefront of harnessing technology to improve their products,
services and efficiency. They have, over a long time, been using electronic and telecommunication
networks for delivering a wide range of value added products and services. The delivery channels
include direct dial – up connections, private networks, public networks etc and the devices include
telephone, Personal Computers including the Automated Teller Machines, etc. With the popularity of

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PCs, easy access to Internet and World Wide Web (WWW), Internet is increasingly used by banks as a
channel for receiving instructions and delivering their products and services to their customers. This
form of banking is generally referred to as Internet Banking, although the range of products and services
offered by different banks vary widely both in their content and sophistication.

India’s banking sector is growing at a fast pace. India has become one of the most preferred banking
destinations in the world. The reasons are numerous: the economy is growing at a rate of 8%, Bank
credit is growing at 30% per annum and there is an ever expanding middle class of between 250 and 300
million people (larger than the population of the US) in need of financial services. All this enables
double-digit returns on most asset classes which is not so in a majority of other countries. Foreign banks
in India achieving a return on assets (ROA) of 3%, their keen interest in expanding their businesses is
understandable – even more so when compared with the merely 1% average ROA for the Top 1000
banks in the world.

Growth in E-Banking
Numerous factors — including competitive cost, customer service, and demographic considerations —
are motivating banks to evaluate their technology and assess their electronic commerce and Internet
banking strategies. Many researchers expect rapid growth in customers using online banking products
and services. The challenge for national banks is to make sure the savings from Internet banking
technology more than offset the costs and risks associated with conducting business in cyberspace.
Marketing strategies will vary as national banks seek to expand their markets and employ lower cost
delivery channels. Examiners will need to understand the strategies used and technologies employed on
a bank-by-bank basis to assess the risk. Evaluating a bank’s data on the use of their Web sites, may help
examiners determine the bank’s strategic objectives, how well the bank is meeting its Internet banking
product plan, and whether the business is expected to be profitable.

Some of the market factors that may drive a bank’s strategy include the following:
Competition — Studies show that competitive pressure is the chief driving force behind increasing use
of Internet banking technology, ranking ahead of cost reduction and revenue enhancement, in second
and third place respectively. Banks see Internet banking as a way to keep existing customers and attract
new ones to the bank.
Cost Efficiencies — National banks can deliver banking services on the Internet at transaction costs far
lower than traditional brick-and-mortar branches. The actual costs to execute a transaction will vary
depending on the delivery channel used. For example, according to Booz, Allen & Hamilton, as of mid-
1999, the cost to deliver manual transactions at a branch was typically more than a dollar, ATM and call

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center transactions cost about 25 cents, and Internet transactions cost about a penny. These costs are
expected to continue to decline.
National banks have significant reasons to develop the technologies that will help them deliver banking
products and services by the most cost-effective channels. Many bankers believe that shifting only a
small portion of the estimated 19-billion payments mailed annually in the U.S. to electronic delivery
channels could save banks and other businesses substantial sums of money. However, national banks
should use care in making product decisions. Management should include in their decision making the
development and ongoing costs associated with a new product or service, including the technology,
marketing, maintenance, and customer support functions. This will help management exercise due
diligence, make more informed decisions, and measure the success of their business venture.
Geographical Reach — Internet banking allows expanded customer contact through increased
geographical reach and lower cost delivery channels. In fact some banks are doing business exclusively
via the Internet — they do not have traditional banking offices and only reach their customers online.
Other financial institutions are using the Internet as an alternative delivery channel to reach existing
customers and attract new customers.
Branding — Relationship building is a strategic priority for many national banks. Internet banking
technology and products can provide a means for national banks to develop and maintain an ongoing
relationship with their customers by offering easy access to a broad array of products and services. By
capitalizing on brand identification and by providing a broad array of financial services, banks hope to
build customer loyalty, cross-sell, and enhance repeat business.
Customer Demographics — Internet banking allows national banks to offer a wide array of options to
their banking customers. Some customers will rely on traditional branches to conduct their banking
business. For many, this is the most comfortable way for them to transact their banking business. Those
customers place a premium on person-to-person contact. Other customers are early adopters of new
technologies that arrive in the marketplace. These customers were the first to obtain PCs and the first to
employ them in
conducting their banking business. The demographics of banking customers will continue to change.
The challenge to national banks is to understand their customer base and find the right mix of delivery
channels to deliver products and services profitably to their various market segments.

3.3 E-banking products

Automated Teller Machine (ATM)

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These are cash dispensing machine, which are frequently seen at banks and other locations such as
shopping centers and building societies. Their main purpose is to allow customer to draw cash at any
time and to provide banking services where it would not have been viable to open another branch e.g. on
university campus.

An automated teller machine or automatic teller machine (ATM) is a computerized

telecommunications device that provides a financial institution's customers a method of financial\
transactions in a public space without the need for a human clerk or bank teller. On most modern ATMs,
the customer identifies him or herself by inserting a plastic ATM card with a magnetic stripe or a plastic
smartcard with a chip that contains his or her card number and some security information, such as an
expiration date or CVC (CVV). Security is provided by the customer entering a personal identification
number (PIN).

Using an ATM, customers can access their bank accounts in order to make cash withdrawals (or credit
card cash advances) and check their account balances. Many ATMs also allow people to deposit cash or
checks, transfer money between their bank accounts, pay bills, or purchase goods and services.

ATMs are known by various casual terms including cash machine, hole-in-the-wall, cash point or
Bancomat (in Europe and Russia). The occasionally-used ATM Machine is an example of RAS
syndrome.

Some of the advantages of ATM to customers are:-

• Ability to draw cash after normal banking hours

• Quicker than normal cashier service
• Complete security as only the card holder knows the PIN
• Does not just operate as a medium of obtaining cash.
• Customer can sometimes use the services of other bank ATM’s.

Telebanking or Phone Banking

Telephone banking is relatively new Electronic Banking Product. However it is fastly becoming one of
the most popular products. Customer can perform a number of transactions from the convenience of

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their own home or office; in fact from anywhere they have access to phone. Customers can do
following:-

• Check balances and statement information

• Transfer funds from one account to another

• Pay certain bills

• Order statements or cheque books

• Demand draft request

This facility is available with the help of Voice Response System (VRS). This system basically, accepts
only TONE dialed input. Like the ATM customer has to follow particular process, initially account
number and telephone PIN are fed for the process to start. Also the VRS system provides the users
within additional facilities such as changing existing password with the new desired, information about
new products, current interest rates etc.

Mobile Banking

Mobile banking comes in as a part of the banks initiative to offer multiple channel banking providing
convenience for its customer. A versatile multifunctional, free service that is accessible and viewable on
the monitor of mobile phone. Mobile phones are playing great role in Indian banking- both directly and
indirectly. They are being used both as banking and other channels.

Internet Banking

The advent of the Internet and the popularity of personal computers presented both an opportunity and a
challenge for the banking industry. For years, financial institutions have used powerful computer
networks to automate million of daily transactions; today, often the only paper record is the customer’s
receipt at the point of sale. Now that their customers are connected to the Internet via personal
computers, banks envision similar advantages by adopting those same internal electronic processes to
home use.

Banks view online banking as a powerful “value added” tool to attract and retain new customers while
helping to eliminate costly paper handling and teller interactions in an increasingly competitive banking
environment. In India first one to move into this area was ICICI Bank. They started web based banking
as early as august 1997.
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 E-banking services

1. Bill payment service

Each bank has tie-ups with various utility companies, service providers and insurance companies, across
the country. It facilitates the payment of electricity and telephone bills, mobile phone, credit card and
insurance premium bills.

To pay bills, a simple one-time registration for each biller is to be completed. Standing instructions can
be set, online to pay recurring bills, automatically. One-time standing instruction will ensure that bill
payments do not get delayed due to lack of time. Most interestingly, the bank does not charge customers
for online bill payment.

2. Fund transfer

Any amount can be transferred from one account to another of the same or any another bank.
Customers can send money anywhere in India. Payee’s account number, his bank and the branch is
needed to be mentioned after logging in the account. The transfer will take place in a day or so, whereas
in a traditional method, it takes about three working days. ICICI Bank says that online bill payment
service and fund transfer facility have been their most popular online services.

3. Credit card customers

Credit card users have a lot in store. With Internet banking, customers can not only pay their credit card
bills online but also get a loan on their cards. Not just this, they can also apply for an additional card,
request a credit line increase and God forbid if you lose your credit card, you can report lost card online.

4. Railway pass

This is something that would interest all the aam janta. Indian Railways has tied up with ICICI bank and
you can now make your railway pass for local trains online. The pass will be delivered to you at your
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doorstep. But the facility is limited to Mumbai, Thane, Nasik, Surat and Pune. The bank would just
charge Rs 10 + 12.24 percent of service tax.

5. Investing through Internet banking

Opening a fixed deposit account cannot get easier than this. An FD can be opened online through funds
transfer. Online banking can also be a great friend for lazy investors.

Now investors with interlinked demat account and bank account can easily trade in the stock market and
the amount will be automatically debited from their respective bank accounts and the shares will be
credited in their demat account.

Moreover, some banks even give the facility to purchase mutual funds directly from the online banking
system.

So it removes the worry about filling those big forms for mutual funds, they will now be just a few
clicks away. Nowadays, most leading banks offer both online banking and demat account. However if
the customer have there demat account with independent share brokers, then need to sign a special form,
which will link your two accounts.

6. Recharging your prepaid phone

Now there is no need to rush to the vendor to recharge the prepaid phone, every time the talk time runs
out. Just top-up the prepaid mobile cards by logging in to Internet banking. By just selecting the
operator's name, entering the mobile number and the amount for recharge, the phone is again back in
action within few minutes.

7. Shopping at your fingertips

Leading banks have tie ups with various shopping websites. With a range of all kind of products, one
can shop online and the payment is also made conveniently through the account. One can also buy
railway and air tickets through Internet banking.

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List of some banks operating E-Banking in India

Bank Name Technology Vendor Service offering

ABN AMRO Bank Infosys (Bank Away) NetBanking

Abu Dhabi Commercial

Bank Infosys (Bank Away) ADCB NetLink

Bank of India I-flex BOIonline

Citibank Orbitech (now Polaris) Citibank Online

Corporation Bank I-flex CorpNet

Deutsche Bank db direct

Federal Bank Sanchez FedNet

Global Trust Bank Infosys (BankAway) ibank@gtb

HDFC Bank i-flex/ Satyam NetBanking

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HSBC Online@hsbc

ICICI Bank Infosys, ICICI Infotech Infinity

IDBI Bank Infosys (Bank Away) i-net banking

IndusInd Bank CR2 IndusNet

Punjab National Bank Infosys (Bank Away) Internet Banking

Standard Chartered Bank In-House Me Standard Chartered Online

State Bank of India Satyam/Broadvision onlinesbi.com

UTI Bank Infosys (Bank Away) I connect

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ADVANTAGES OF INTERNET BANKING

• Convenience- Unlike your corner bank, online banking sites never close; they’re available 24
hours a day, seven days a week, and they’re only a mouse click away.

• Availability- If you’re out of state or even out of the country when a money problem arises, you
can log on instantly to your online bank and take care of business, 24\7.

• Transaction speed- Online bank sites generally execute and confirm transactions at or quicker
than ATM processing speeds.

• Efficiency-You can access and manage all of your bank accounts, including IRA’s, CDs, even
securities, from one secure site.

• Effectiveness- Many online banking sites now offer sophisticated tools, including account
aggregation, stock quotes, rate alert and portfolio managing program to help you manage all of
your assets more effectively. Most are also compatible with money managing programs such as
quicken and Microsoft money.

DISADVANTAGES OF INTERNET BANKING

• Start-up may take time-In order to register for your bank’s online program, you will probably
have to provide ID and sign a form at a bank branch. If you and your spouse wish to view and
manage their assets together online, one of you may have to sign a durable power of attorney
before the bank will display all of your holdings together.

• Learning curves- Banking sites can be difficult to navigate at first. Plan to invest some time
and\or read the tutorials in order to become comfortable in your virtual lobby.

• Bank site changes- Even the largest banks periodically upgrade their online programs, adding new
features in unfamiliar places. In some cases, you may have to re-enter account information.

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How an Online Credit Transaction Works

3.4 Issues in E Banking

Financial institutions, their card associations, and vendors are working to develop an Internet payment
infrastructure to help make electronic commerce secure. Many in the banking industry expect significant
growth in the use of the Internet for the purchase of goods and services and electronic data interchange.
The banking industry also recognizes that the Internet must be secure to achieve a high level of
confidence with both consumers and businesses.
Sound management of banking products and services, especially those provided over the Internet, is
fundamental to maintaining a high level of public confidence not only in the individual bank and its
brand name but also in the banking system as a whole. Key components that will help maintain a high
level of public confidence in an open network environment include:
• Security
• Authentication
• Trust
• Nonrepudiation
• Privacy
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 • Availability

Security is an issue in Internet banking systems. The OCC expects national banks to provide a level of
logical and physical security commensurate with the sensitivity of the information and the individual
bank’s risk tolerance.
Firewalls are frequently used on Internet banking systems as a security measure to protect internal
systems and should be considered for any system connected to an outside network. Firewalls are a
combination of hardware and software placed between two networks through which all traffic must
pass, regardless of the direction of flow. They provide a gateway to guard against unauthorized
individuals gaining access to the bank’s network.

Authentication is another issue in a Internet banking system. Transactions on the Internet or any other
telecommunication network must be secure to achieve a high level of public confidence. In cyberspace,
as in the physical world, customers, banks, and merchants need assurances that they will receive the
service as ordered or the merchandise as requested, and that they know the identity of the person they
are dealing with.

Trust is another issue in Internet banking systems. As noted in the previous discussion, public and
private key cryptographic systems can be used to secure information and authenticate parties in
transactions in cyberspace. A trusted third party is a necessary part of the process. That third party is the
certificate authority.
A certificate authority is a trusted third party that verifies identities in cyberspace. Some people think of
the certificate authority functioning like an online notary. The basic concept is that a bank, or other third
party, uses its good name to validate parties in transactions. This is similar to the historic role banks
have played with letters of credit, where neither the buyer nor seller knew each other but both parties
were known to the bank. Thus the bank uses its good name to facilitate the transaction, for a fee.

Nonrepudiation is the undeniable proof of participation by both the sender and receiver in a
transaction. It is the reason public key encryption was developed, i.e., to authenticate electronic
messages and prevent denial or repudiation by the sender or receiver. Although technology has provided
an answer to nonrepudiation, state laws are not uniform in the treatment of electronic authentication and
digital signatures. The application of state laws to these activities is a new and emerging area of the law.

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Privacy is a consumer issue of increasing importance. National banks that recognize and respond to
privacy issues in a proactive way make this a positive attribute for the bank and a benefit for its
customers. Public concerns over the proper versus improper accumulation and use of personal
information are likely to increase with the continued growth of electronic commerce and the Internet.
Providers who are sensitive to these concerns have an advantage over those who do not.

Availability is another component in maintaining a high level of public confidence in a network

environment. All of the previous components are of little value if the network is not available and
convenient to customers. Users of a network expect access to systems 24 hours per day, seven days a
week. Among the considerations associated with system availability are capacity, performance
monitoring, redundance, and business resumption. National banks and their vendors who provide
Internet banking products and services need to make certain they have the capacity in terms of hardware
and software to consistently deliver a high level of service.
In addition, performance monitoring techniques will provide management with information such as the
volume of traffic, the duration of transactions, and the amount of time customers must wait for service.
Monitoring capacity, downtime, and performance on a regular basis will help management assure a high
level of availability for their Internet banking system.

Risks in E-Banking
Continuing technological innovation and competition among existing banking organizations and new
entrants have allowed for a much wider array of banking products and services to become accessible
and delivered to retail and wholesale customers through an electronic distribution channel collectively
referred to as ebanking. However, the rapid development of e-banking capabilities carries risks as well
as benefits.

Without a doubt, the technological growth has considerably affected the profile of Bank risks and
financial institution formation more generally. Some of these risks are increased, while others on the
contrary are possible to be decreased. In any case, the growth of electronic banking has created a new
basis with regard to the degree of exposure to the risk and therefore consequently the need of not only a
differentiated regulating frame, but also mechanisms of monitoring to be formed, which has already
begun to be shaped in the fields of Basle Committee of Banking Supervision. The degree of exposing to
risks, which are related to the electronic banking, depends mainly on the degree of adopting new
alternative electronic means of distribution of services and products.

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Transactional/Operational risk
It is defined as the risk of loss as a consequence of the actions, the processes, the infrastructure, the
technology or other factors that practise functional effect, including the false activities that include
fraud. The Basle Committee of Banking Supervision defines as operational risk the risk of occurring
damage, either from insufficient, inadequate internal processes and systems, or from human factor, or
other external reasons. Operational risk differs from the traditional banking risks in that it does not come
from the effort to achieve profit but it is an innate characteristic of banking activity. The operational risk
is the risk of damage that is owed, in insufficient or unsuccessful processes (insufficiencies of systems
and internal inspection), individuals (human faults, failures of administration) or systems (risk of
damage or insufficiency of computer systems) or in exterior incidents (e.g. natural destruction, fires,
legislative changes, lawful requirements, etc). The operational risks are directly related with the bad
operation of information systems, the processes of reports and the applied internal rules of observing the
management of potential risk.

SECURITY RISK
Internet is a public network of computers which facilitates flow of data information and to which there
is unrestricted access. Banks using this medium for financial transactions must, therefore, have proper
technology and systems in place to build a secured environment for such transactions. Security risk
arises on account of unauthorized access to a bank’s critical
information stores like accounting system, risk management system, portfolio management system, etc.
A breach of security could result in direct financial loss to the bank. For example, hackers operating via
the Internet could access, retrieve and use confidential customer information and also can implant virus.
This may result in loss of data, theft of or tampering with customer information, disabling of a
significant portion of bank’s internal computer system thus denying service, cost of repairing these etc.
Identity of the person making a request for a service or a transaction as a customer is crucial to legal
validity of a transaction and is a source of risk to a bank. A computer connected to Internet is identified
by its IP (Internet Protocol) address. There are methods available to masquerade one computer as
another, commonly known as ‘IP Spoofing’. Likewise user identity can be misrepresented. Hence,
authentication control is an essential security step in any e-banking system.
System Architecture and Design
Appropriate system architecture and control is an important factor in managing various Kinds of
operational and security risks. Banks face the risk of wrong choice of technology, improper system
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design and inadequate control processes. For example, if access to a system is based on only an IP
address, any user can gain access by masquerading as a legitimate user by spoofing IP address of a
genuine user. Numerous protocols are used for communication across Internet. Each protocol is
designed for specific types of data transfer. A system allowing communication with all protocols, say
HTTP (Hyper Text Transfer Protocol), FTP (File Transfer Protocol), telnet etc. is more prone to attack
than one designed to permit say, only HTTP. Choice of appropriate technology is a potential risk banks
face. Technology which is outdated, not scalable or not proven could land the bank in investment loss, a
vulnerable system and inefficient service with attendant operational and security risks and also risk of
loss of business.
Reputational risk
Reputational risk is the risk of getting significant negative public opinion, which may result in a critical
loss of funding or customers. Such risks arise from actions which cause major loss of the public
confidence in the banks' ability to perform critical functions or impair bank-customer relationship.
An institution’s decision to offer e-banking services, especially the more complex transactional services,
significantly increases its level of reputation risk. Some of the ways in which e-banking can influence an
institution’s reputation include:
• Loss of trust due to unauthorized activity on customer accounts,
• Disclosure or theft of confidential customer information to unauthorized parties (e.g., hackers),
• Failure to deliver on marketing claims,
• Failure to provide reliable service due to the frequency or duration of service disruptions,
• Customer complaints about the difficulty in using e-banking services and the inability of the
institution’s help desk to resolve problems, and
• Confusion between services provided by the financial institution and services provided by other
businesses linked from the website.

Legal risk
Legal risk is the risk of non-compliance with legal or regulatory requirements. A big part of the legal
framework is general and it is in effect for all the enterprises, in certain cases, however, a legislative
framework that covers specific services exists. The individual regulations will be specific and they will
be published by the regulating organizations that have legal competence for the particular sector. The
legal risks are directly related to the electronic banking and they increased as its use is extended. They
mainly stem from the uncertainty that exists in the legal – regulative framework concerning the
electronic banking.

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The systemic risk
It is the risk that a small incident will cause unexpected consequences in local, regional or international
systems that are not connected immediately with the source of disturbance. The systemic risk is likely to
influence a small or big number of companies of the same sector or to concern exclusively one single
company. The rapid adoption of information technology from the banks and its negative aspects, are
very much likely to increase the systemic risks.
The systemic risk can be increased since many participants in the particular market can use the same or
similar software or equipment for the confrontation of the same problems. Because of their widespread
application, the risk management models may create risks in cases of likely weaknesses and deficiencies
that arise in periods of extreme conditions in the market. The dependence on exterior collaborators or
suppliers is possible to lead to the gathering of certain administrative system operations and as a result
the burden of risks of ensuring the proper operation of the electronic system of financial services,
becomes the
responsibility of certain specialised suppliers or even only one from whom all the financial institutions
will be depended.

Money Laundering
Money laundering is the practice of engaging in financial transactions in order to conceal the identity,
source, and/or destination of money, and is a main operation of the underground economy Money
laundering is called what it is because that perfectly describes what takes place - illegal, or dirty, money
is put through a cycle of transactions, or washed, so that it comes out the other end as legal, or clean,
money. In other words, the source of illegally obtained funds is obscured through a succession of
transfers and deals in order that those same funds can eventually be made to appear as legitimate
income.

Strategic Risk
A financial institution’s board and management should understand the risks associated with e-banking
services and evaluate the resulting risk management costs against the potential return on investment
prior to offering e-banking services. Poor e-banking planning and investment decisions can increase a
financial institution’s strategic risk. Early adopters of new e-banking services can establish themselves
as innovators who anticipate the needs of their customers, but may do so by incurring higher costs and

24
increased complexity in their operations. Conversely, late adopters may be able to avoid the higher
expense and added
complexity, but do so at the risk of not meeting customer demand for additional products and services.

E- Banking Simplified With a Glimpse of Future (An Article)

Consumers have the ability to swipe with their hands or arms over a designated reader as they handle
bank transactions with these implants. This is the new way of doing banking, as the ATM machine
becomes a distant memory.

When it comes to the future of banking, there is an assortment of predictions. The majority of
individuals envision consumers with imbedded chip implants. Consumers have the ability to swipe with
their hands or arms over a designated reader as they handle bank transactions with these implants. This
is the new way of doing banking, as the ATM machine becomes a distant memory. The customer simply
walks into the store, swipes and views his balance instantaneously.
Several individuals believe the paper dollar and coin will become extinct. Everything is expected to be
electronic in a society without paper. E-banking allows bank customers to simply access banking
information via the access of the Internet. Whether home or in the workplace, customers can access the
banking information 24 hours a day, seven days a week.

Executed between two parties, such as business to business or business to consumer, e-commerce is an
electronic financial business activity. E-banking, which is bank to business or bank to consumer, has
actually been around since the 1990s. The popular features of e-banking are funds transfers, automatic
payment options, electronic bill pay, view account balances, account history accessibility and schedule
future transfers.

Virtual banking is another alternative to traditional banking. Virtual account customers do not have to
endure the inconvenience of stepping foot into a building or an actual financial institution. Customers
have the option of mailing their deposits or even setting up direct deposit. E-bank customers enjoy the
advantages, such as 24-hour, seven days a week access to their bank accounts. The passé method of
standing in line and filling out tedious paperwork seems like forever for many bank institutes. Bankers
do not have to concern themselves with the thankless task of speaking on telephones to a customer
service representative to find out banking history, wait for a bank statement in the mail that could easily
get lost and wind up in the possession of a prying neighbor. A secure site is accessible to the online
25
banking consumer.
As in everything in life, there are disadvantages. It can be arduous to navigate and learn online banking,
although many companies try very hard to utilize navigation around their site user friendly. In addition,
many consumers are also concerned about viruses and privacy issues that can cause glitches in the e-
banking system, which can cause delays and mass confusion. Nevertheless, there are constant
improvements in online banking, such as the bill pay option. This allows customers to set up accounts
online as they schedule their bills to be paid at various times to different companies such as telephone
companies, cable television, insurance and mortgage payments. The funds come directly out of the bank
account and allocated to the company of choice.

ICICI Bank
26
ICICI Bank Online Banking Services provide the largest private bank in India. Banking becomes a
pleasure as the transactions and services become instant with ICICI Bank online Internet banking. The
services provided are totally secure and unique. These cover online account transactions and operations,
credit card and account applications and payments, share trading and investments through mutual funds,
bill payments, statement generation and a virtual demo of each service.

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67
USE OF E-BANKING IN INDIA FROM LAST FEW YEARS

Year 2002 2003 2004 2005 2006 2007 2008 2009

Incr 9 12 15 20 25 32 40 50
%

Finding
In 2002-2009 the user of the E-banking is increasing more in every year.

68
Porter’s FIVE-FORCE analysis for Indian banking industry

BARGAINING POWER OF SUPPLIERS

-Low supplier bargaining power
Like
-Few alternatives available

-Subject to RBI Rules Like

and Regulations
-Not concentrated

-Forward integration

-Nature of suppliers
THREAT OF
SUBSTITUT
THREAT OF NEW ES
ENTRANT High threat from
INDUSTRY
-Low barriers to RIVARLY substitutes
entry Intense Like
competition
-Government
Mutual
policies are Many private,
funds,,Governm
public,
supportive BARGAINING POWER OF ent securities
CUSTOMERS
-Globalization and
-High bargaining power
liberalization
policy -Low switching cost
69
-Large no. of alternatives

-Homogeneous service by
banks
Key Points:
Supply
Liquidity is controlled by the Reserve Bank of India (RBI).
Demand
India is a growing economy and demand for credit is high though it could be cyclical.
Barriers to entry
Licensing requirement, investment in technology and branch network.
Bargaining power of suppliers
High during period of tight liquidity. Trade unions in public sector banks can be anti reforms.
Depositors may invest elsewhere if interest rates fall.
Bargaining power of customers
For good creditworthy borrowers bargaining power is high due to the availability of large number of
banks
Competition - High
There are public sector banks, private sector and foreign banks along with non banking finance
companies competing in similar business lines.

 RIVALRY AMONG THE INDUSTRY

Rivalry in banking industry is very high. There are so many private, public, co-operative and non-
financial institutions operating in the industry. They are fighting for same customers. Due to
government liberalization and globalization policy, banking sector became open for everybody. So,

70
newer and newer private and foreign firms are opening their branches in India. This has intensified the
competition. The no. of factors have contributed to increase rivalry those are:

1. A large no. Of banks

There are so many banks and non-financial institutions fighting for same pie, which has intensified
competition.

2. High market growth rate

India is seen as one of the biggest market place and growth rate in Indian banking industry is also very
high. This has ignited the competition.

3. Low switching cost

Customer switching cost is very low. They can easily switch from one bank to another bank and very
little loyalty exists.

4. In differentiate services

Almost every bank provides similar services. No differentiation exists. Every bank tries to copy each
other services and technology, which increases the level of competition.

5. High exit barrier

High exist barriers humiliate banks to earn profit and retain customers by providing world-class
services.

 BARGAINING POWER OF SUPPLIERS

Suppliers of banks are depositors. These are those people who have excess money and prefer regular
income and safety. In banking industry Suppliers have low bargaining power. Following are the reasons
for low bargaining power of suppliers.

1. Nature of suppliers

Suppliers of banks are generally those people who prefer low risk and those who need regular income
and safety as well. Bank is best place for them to deposit their surplus money. They believe that banks
are very safe than other investment alternatives. So, they do not consider other alternatives very
seriously, which lower their bargaining power.

71
 2. Few alternatives

Suppliers are risk averters and want regular income. So, they have few alternatives available with them
to invest like Treasury bills, government bonds. So, few alternatives lower their bargaining power.

3. RBI Rules and Regulations

Banks are subject to RBI rules and regulations. Banks have to behave in the way that RBI wants. So,
RBI takes all decisions relating to interest rates. This reduces suppliers bargaining power.

4. Suppliers are not concentrated

Banking industry’s suppliers are not concentrated. There are numerous suppliers with negligible portion
to offer. So, this reduces their bargaining power. If they were concentrated then they can bargain with
banks or can collectively invest in other no-risky projects.

5. Forward integration

Forward integration is possible like mutual funds, but only few people now about this. Only educated
people can forwardly integrate where as large no. Of suppliers are unaware about these alternatives.

 BARGAINING POWER OF CUSTOMERS

Customers of the banks are those who take loans, advances and use services of banks. Customers have
high bargaining power. Following are the reasons for high bargaining power of customers.

1. Large no. Of alternatives

Customers have very large no. of alternatives. There are so many banks, which fight for same pie. There
are many non-financial institutions like ICICI, HDFC, IFCI etc., which has also jumped into this
business. There are foreign banks, private banks, cooperative banks and development banks together
with the specialized financial companies that provide finance to customers. These all increase
preferences for customers.

2. Low switching cost

72
Cost of switching from one bank to another is low. Banks are also providing zero balance account and
other types of facilities. They are free to select any bank‘s service. Switching costs are becoming lower
with Internet Banking gaining momentum and as a result consumers’ loyalties are harder to retain.

3. Undifferentiated service

Banks provide merely similar services. There is no much difference in services provided by different
banks. So, bargaining power of customers increases. They cannot be charged for differentiation.

4. Full information about the market

Customers have full information about the market due to globalization and digitization consumers have
become advance and sophisticated. They are aware with each market conditions. So, banks have to be
more competitive and customer friendly to serve them.

 THREAT OF NEW ENTRANTS

Barriers to an entry in banking industry no longer exist. So, lots of private and foreign banks are
entering in the market. Competitors can come from any industry to “ disintermediate” banks. Product
differentiation is very difficult for banks and exit is difficult. So, every bank strives to survive in highly
competitive market. So, we see intense competition and mergers and acquisition.

Government policies are supportive to start a new bank. There are less statutory requirements needed to
start a new venture. Every bank tries to achieve economies of scale through use of technology and
selecting and training manpower.

THREAT OF SUBSTITUTES
Competition from the non-banking financial sector is increasing rapidly. Sony and Software giants such
as Microsoft are attempting to replace the banks as intermediaries. The threat of substitute products is
very high. These new products include credit unions and investment houses. One feature of using an
investment house is that the fees that the investment house charges are tax deductible, where as a bank it
is considered a personal expense, which is not tax deductible. The rate of return with using investment
houses is greater than a bank. There are other substitutes as well for banks like mutual funds, stocks
(shares), government securities, debentures, gold, real estate etc. so, there is a high threat from
substitute.

73
ICICI Bank - A SWOT Analysis

Strengths

 ICICI Bank has today emerged as the SECOND largest bank in India and is among the top 250
banks in the world within a decade of its operation.

 Currently it has an asset of worth around USD 81 Billion*, with a profit after tax of USD 896
million*.

 ICICI Bank is now a global player in the arena of International Banking through its operations in
18 countries all over the world.

 ICICI Bank has expanded its market capitalization through enlistment not only in NSE and BSE,
but also in becoming the first non-Japanese Asian bank to get enlisted in NYSE.

 ICICI has successfully diversified its operations to a number of financial spheres, starting from
general banking activities to general insurance, credit card services, mutual funds, stock trading,
loans etc.

 It has a massive customer pool of 14 million (and counting...), and the same is served through
2016 branches*, and 5219 ATMs* in India.

74
  ICICI is considered as the pioneer in usage of Internet services for Online Banking from the
comforts of home and offices. Much of its success is attributed to aggressive and innovative
marketing strategies for its diversified range of products and services.

Weakness

 It primarily targets upper middle class and upper class of the society, thereby losing the business
opportunities concentrated at middle and bottom sections of the economical pyramid.

 ICICI levies higher services charges for various transactions making it expensive to afford by the
major sections of the society.

* Figures as on 31st March, 2010.

Opportunities

 Expanding business to the middle and lower income groups of the society by introducing
economical version of its services and hence making it affordable.

Threats

 More and more banks are coming up, both in private and public sector, with Online Banking
Systems (which no longer is the exclusive domain of ICICI), competitive service charges and
interest rates, lucrative loan schemes and insurance policies etc.

 In view of above, ICICI has to re-model its business strategies to cope with stiff competition from
the fast growing pool of players in the Indian Banking Sector.

* Figures as on 31st March, 2010.

75
Research Methodology

Research is defined as human activity based on intellectual application in the investigation of matter.
The primary purpose for applied research is discovering, interpreting, and the development of methods
and systems for the advancement of human knowledge on a wide variety of scientific matters of our
world and the universe.

The term research is also used to describe an entire collection of information about a particular subject.

Methodology is the method followed while conducting the study on a particular project. Through this
methodology a systematic study is conducted on the basis of which the basis of a report is produced.

It is a written game plan for conducting Research. Research methodology has many dimensions. It
includes not only the research methods but also considers the logic behind the methods used in the
context of the study and explains why only a particular method or technique has been used. It also helps
to understand the assumptions underlying various techniques and by which they can decide that certain
techniques will be applicable to certain problems and other will not. Therefore in order to solve a
research problem, it is necessary to design a research methodology for the problem as the some may
differ from problem to problem.

The research designed followed in this project report is descriptive since thorough study of various information

sources were used for this project

Data collection

76
Secondary data:

• Articles on E-Banking taken from journals, various Books magazines published from time to time.
• Through internet

Findings

 Online Services: ICICI Bank provides online services of all its banking facilities. It also provides
D-Mart account facilities on-line, so a person can access his account from anywhere he is.

[D-Mart is a dematerialized account opened by a salaried person for purchase & sale of shares of
different companies.]

 Advanced Infrastructure: Branches of ICICI Bank are well equipped with advanced technology to
provide the customers with taster banking services. All the computerized machines are located in
suitable manner & are very useful to the customers & staff of the bank.

 Friendly Staff: The staff of ICICI Bank in all branches is very friendly & help the customers in all
cases. They provide faster services along with bonding & personal relationship with the customers.

 Late night ATM services: ICICI bank provides late night ATM services to the customers.
The ATM centres of ICICI bank works even after 11:00pm at night in certain branches.

 High Bank Service Charges: ICICI bank charges highly from their customers for the services
provided to them when compared to other banks & that is why it is only in the reach of higher class
of society.

 Less Credit Period: ICICI bank provides credit facilities but only upto limited period. Even when
the credit period is not over it sends reminder letters to the customers which may annoy them.

77
 Increase in percentage of Returns on increase: The bank should provide higher returns on deposits
in comparison of the present situation. This will also upto large extent helps the bank to earn profits
& popularity.

 Competition: ICICI Bank is facing tight competition locally as well as internationally. Bank like
CITI Bank, HSBC, ABM, Standered Chartered, HDFC also provide equivalent facilities like ICICI
do and also ICICI do not have consistency in its international operation.

 Net Services: ICICI Bank provides all kind of services on-line. There can be easy access to the e-
mail ids of the customers through wrong people. The confidential information of the customers can
be leaked easily through the e-mail ids.

 Decentralized Management: Each branch manager is given the authority of taking decisions in their
respective branches. The decisions made by different managers are diverse and any one wrong
decision can laid to heavy losses to the bank.

 No Proper Facilities to Uneducated customers: ICICI Bank provides all services through electronic
computerized machines. This creates problems to the less educated people. The company can avoid
this threat.

78
Conclusion

Thus, ICICI has been able to use technology to provide value-added service to its customers during the
last few years. For ICICI, technology is an integral part of their business. However, their overall
progress could have been smoother but for certain internal and extraneous factors and also a pressure on
spreads due to a competitive market (Annual report, 2000 –01).

E-banking has become a necessary survival weapon and is fundamentally changing the banking industry
worldwide. Today, the click of the mouse offers customers banking services at a much lower cost and
also empowers them with unprecedented freedom in choosing vendors for their financial service needs.
No country today has a choice- whether to implement E-banking or not given the global and competitive
nature of the economy.

ICICI have to upgrade and constantly think of new innovative customized packages and services to
remain competitive. The invasion of banking by technology has created an information age and
commoditization of banking services. ICICI have come to realize that survival in the new e-economy
depends on delivering some or all of their banking services on the Internet while continuing to support
their traditional infrastructure.

The rise of E-banking is redefining business relationships and the most successful banks will be those
that can truly strengthen their relationship with their customers. Without any doubt, the international
scope of E-banking provides new growth perspectives and Internet business is a catalyst for new
technologies and new business processes.

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Suggestions

 The first and most obvious step they should take is to see to it that the basic problem fuelling
dissatisfaction has been addressed.
 After repairing this basic deficiency, banks must ensure that their services are competitive.
 Online banking should be promoted through advertising co.
 The bank should provide higher returns on deposits in comparison of the present situation. This
will also upto large extent helps the bank to earn profits & popularity.
 ICICI Bank provides all services through electronic computerized machines. This creates problems
to the less educated people. The company should avoid this threat.
 Bank should expand business to the middle and lower income groups of the society by introducing
economical version of its services and hence making it affordable.
 The bank should associate itself with social causes like providing relief aid patients, funding
towards natural calamities.
 Bank & Insurance is a special non-aid course where the students specialize in the functioning &
services of the bank & also are knowledge about various tax policies. The bank can recruit these
students through tie-ups with colleges. Such students will surely prove as an asset to the bank.

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 BIBLIOGRAHY

Books:-

 E-banking: the global perspective –Gupta Vivek

 2. E-Commerce in Indian banking – Bhasin
 3. Banking and Finance – C.M.Chaudhary
 Lucae, Management Information System
 Management Information System
 E-commerce –Kamlesh K Bajaj

Links Visited

www.google.com

www.icici.com

www.wikipedia.com

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www.buzzle.com

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