CHAPTER I

Introduction

1.1 Banking in India

1.2 Transformation of Banking Industry

1.3 Evolution of Information Technology in Banking sector

1.4 Growth and Development of E-Banking in India

1.5 Present Scenario of E-Banking Services in India

1.6 Design and Execution of the study

 CHAPTER I
INTRODUCTION

The banking sector is the lifeline of any modern economy. An efficient banking structure can
promote greater amount of investment which can help to achieve a faster growth rate of
economy, worldwide experience confirms countries with well-developed and market oriented
banking systems grow faster and more consistently than those with weaker and strictly
regulated system. The banking system reflects the economic health of the country.

The development and the increasing progress experienced in the Information &
Communication Technology coupled with the expansion of the global economy paved the way
for the transformation of the Indian banking system’s role from traditional trade financing to
mobilizing and channeling financial resources more effectively in almost all facets of life.
Intense competitive environment, changing business environments, globalization and the
advancement of Information and Communications Technology (ICT) are the important factors
that have forced Banking and Financial services to change. Customers are also demanding
greater convenience and accessibility as reflected in longer branch opening hours and an
increase in the choice of delivery mechanism. Therefore, with the passing of the traditional
banking sector to electronic banking, new strategies have become essential in order to attract
new and retain existing customers. Banks are the main stimulus of the economic progress to
play a vital role in spearheading the economic development of the nation.

Banking through electronic channels has gained increasing popularity in recent years. This
system, popularly known as ‘e-banking’, provides alternatives for faster delivery of banking
services i.e. offering, supplying and delivering banking products and services to a wide range
of customers at their office or home through various electronic delivery channels via electronic
devices. It is a generic term encompassing internet banking, telephone banking, mobile banking
etc. It provides lot of benefits which add value to customer’s satisfaction and to reach out
consumers through many routes in terms of better quality of service offerings such as ATMs,
telephone, internet and wireless channels which are now available to the consumers to perform
their banking transactions in addition to the traditional branch banking and at the same time
enables the banks gain more advantage over other competitors.

Information Technology has therefore is playing a significant role in improving the services in
banking industry. In the above backdrop it becomes imperative to dwell on the evolution of
information technology in banks before embarking on the various aspects of e-banking.

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1.1 THE BANKING IN INDIA

In India, the banking practice has been originated in 18th Century to meet the needs of the
British when they established their colony in India. An important milestone in the banking
system i.e. the nationalization of major private sector banks in 1969 enabled the unbanked
population in India to have access to the banking facilities and thus resulted in a shift from
class banking to mass banking and the next wave of reforms note the nationalization of 6 more
commercial banks in 1980 result in increase in the number of banks and bank branches into
four and eight fold respectively. This, in turn, resulted in the wide geographical coverage of
banks. It was further accompanied in 1990s with the privatization of banks on account of
implementation of economic liberalization.

1.2 TRANSFORMATION OF BANKING INDUSTRY

During 1990s, the new generation ‘tech-savvy’ banks are launched. A few foreign banks
commenced their operations in India. All these banks, with their state-of-art technology, are in
a position to leverage emerging technology and become competitive in encouraging customers
and winning them over by providing professional services. This filled a sense of urgency in
public sector banks and older private sector banks to mend their ways to revitalize their banking
operations in India. Thus, the banking industry is going through a period of rapid change to
meet competition and the demands of the customers. The information technology has come in
hand to meet the needs of the banking industry.

1.3 EVOLUTION OF INFORMATION TECHNOLOGY IN BANKING SECTOR

Indian banking sector opened its door for computerized applications and development of
communication network basically due to the absolute compulsion and necessity to cope up
demand from its customers from different countries. Increasing number of bank branches,
growing volume of banking operations, problems inherent in manual system and increasing
incidence of frauds made it imperative for banks to signal favourable response for the need of
hour. During the first phase of introduction of computer applications in banking, around 4776
Advanced Level Posting Machines (ALPMs) and 233 minicomputers have been installed. In
1993, employees of banks signed agreement with management regarding computerisation of
banking industry in India. Committee headed by C. Rangarajan had given landmark reports
strongly recommending the Information Technology applications in banking business. In 1994,
Reserve Bank of India (RBI) constituted a committee for technical upgradation of the banks.
The committee worked with the representation of different members from banks, technical

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institutions and government. Based on the recommendations of the committee, the Institute for
Development and Research in Banking Technology (IDRBT) was established in 1996. The
core research areas of the institute include financial network, application architecture, web
based technology, payment system, multi-media, data mining, data warehousing and risk
management.

In 1999, the collaborative efforts of IDRBT and RBI developed a satellite based wide area
network known as Indian Financial Network (INFINET). The network is restrictive to be used
by the banks and financial institutions only. Presently, the network consists of over 950 Very
Small Aperture Terminal (VSATs) located in 127 cities of the country and utilises one full
transponder on INSAT-3B (Indian Communication Network). RBI constituted an operational
group and payment system advisory committee in 2000, to fulfil the needs of the required
payment system. The prime task assigned to the committee is to develop the well-integrated
system which could serve the purpose of Real Time Gross Settlement. This Information
Technology revolution has set the stage for unprecedented increase in financial activities across
the globe and have also led to improvements in the ways in which banks process information.

Technology has opened up new markets, new products, new services and efficient delivery
channels for the banking industry. It is information technology which enables banks in meeting
such high expectations of the customers who are more demanding and are also more techno-
savvy compared to their counterparts of the yester years. Customers demand instant, anytime
and anywhere banking facilities. Banks are increasingly interconnecting their computer
systems not only across the branches in a city but also to other geographic locations with high-
speed network infrastructure, and setting up local area and wide area networks and connecting
them to the Internet. Rapid growth of Information Technology (IT) in the post-liberalisation
era has revolutionized almost every aspect of life, by making things easier, faster, cheaper and
more efficient. It is not only changing the way of life, but also the face of business. It opens up
vast business avenues and transforms the whole business world into a global village. Banks
were among the first large organisation to invest heavily in Information Technology and today
banking is almost totally dependent on Information Technology. The banking sector, which is
one of the largest users of Information Technology, has reaped immense benefits out of the
developments in the technology. In most instances, the Information Technology is cited
centrally. Branches are equipped with terminals giving them an online accounting facility and
enabling to access the central system for information on such things as current balances,
deposits, overdrafts, interest, charges, share and trustee records.

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Thus, IT applications in business have brought tremendous change in cost and access equation.
It has made banking services and products affordable and accessible even to remote areas at no
loss of time. The Electronic Banking Group of the Basel Committee on Banking Supervision
(2003) has noted that 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 e-banking. [1]

1.4 GROWTH AND DEVELOPMENT OF E-BANKING IN INDIA

E-banking involves consumers using the Internet to access their bank account and for
undertaking banking transactions anywhere in the world. At the basic level, internet banking
can mean setting up of a web page by a bank to provide information about its product and
services. At an advanced level, it may involve provision of facilities like accessing accounts,
transfer of funds, buying of financial products or services online. This is known as
‘transactional’ online banking (Sathye, 1999).
Opening up of economy in 1991 marked the entry of foreign banks. They brought new
technology with them. Banking products became more and more competitive. Need for
differentiation of products and services was felt. Evolution of e-banking in India can be traced
to 1996. ICICI Bank was the first bank in India to introduce Internet banking for a limited range
of services, such as access to account information and correspondence for the first time way
back in 1996 and later started funds transfer between its branches (Rajneesh and Padmanabhan,
2002). Later on ICICI also got into E-trading, hence offering a broader range of integrated
products and services to the customer. Though 1996-98 is the period of Internet banking
adoption in India, its usage gained importance in 1999 after ICICI Bank, HDFC Bank,
Citibank, IndusInd Bank adopted the technology. Nationalized banks initially viewed online
banking as insecure and counterintuitive and were therefore hesitant. But eventually, SBI,
Canara Bank, Allahabad Bank, Punjab National Bank, Bank of Baroda, Syndicate Bank and
others introduced it. SBI launched internet banking in 2001 and experienced good response.
Today, banks encourage their customers to use online banking because they also recognize that
self-control transactions have greater potential for customer satisfaction and retention.

In India there are 27 public sector banks (State Bank of India and its 5 associates including
Bharatiya Mahila Bank, 19 nationalized banks and IDBI Bank Ltd.), 22 private sector banks,
1. Retrieved from Chapter III - Overview of Information Technology in Banking Industry by V.
Jayaprakash (2013) page no. 63-68

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and 44 foreign sector banks. Presently all branches of public sector ones are fully computerized
and these branches are on CORE (Centralized online real time exchange) banking platform
(RBI, 2016). Core banking solution enables the banks to integrate all customer channels
seamlessly, and aids in the implementation of internet banking.

In due course of time, considerable progress has been made in consolidating existing payment
systems and in upgrading technology with a view to establish an efficient, integrated and more
secure system functioning in a real-time environment. Major projects implemented have been
electronic clearing, centralized funds management, structured financial messaging solutions
and Indian Financial Network (INFINET). Facilities under Electronic Funds Transfer (EFT)
have been upgraded and spatial reach expanded with multiple settlements possible in a day.
Foreign exchange clearing has been carried out through Clearing Corporation of India Limited
(CCIL). Adequate security features are being incorporated into the Electronic Funds Transfer.
Real time gross settlement (RTGS) has also been functioning effectively (RBI, 2001).
Traditionally, banks always maintained a close relationship with their customers. They know
them as individuals and have generally satisfied their needs through customized or tailor made
services. There has been tremendous increase in the competition within banking industry due
to enormous growth of e-banking services. These day’s e-banking customers are just ‘a click
away’ from the competition. Recent trends show that most banks are shifting from a ‘product-
centric’ model to a ‘customer-centric’ model as they develop their new e-banking capabilities
by putting more focus on investment in information and technology. The delivery channels
include direct dial-up connections, private networks, public networks etc. The devices
generally include computers, ATMs, telephone, etc. With the ever increasing attractiveness of
personal computers and easier access over internet, banks are increasingly using internet as a
channel for receiving instructions from their customers and then delivering their services to
them online. This form of banking is referred to as e-banking, though the range of services and
products offered by various banks differ extensively, both in content as well as in technology.

E-banking is subject to various laws, rules and regulations in India viz. Banking Regulations
Act, 1949, the Reserve Bank of India Act, 1934, Information Technology Act, 2000, Indian
Contract Act, 1872, Indian Evidence Act, 1872, Foreign Exchange Management Act, 1999, the
Negotiable Instruments Act, 1881 etc. These laws and regulations are meant for safe and secure
e-transactions. [2]

2. Retrieved from the thesis named “Customer Retention and Customer Satisfaction in relation to E-
Banking” by Navneet Kaur page no. 2-4

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1.5 PRESENT SCENARIO OF E-BANKING SERVICES IN INDIA

India is still in the early stages of E-banking growth and development. Competition and
changes in technology and lifestyle in the last five years have changed the face of banking. The
changes that have taken place impose on banks tough standards of competition and compliance.
The impact of E- Banking in India is not yet apparent. Many global research companies believe
that E-banking adoption in India in the near future would be slow compared to other major
Asian countries. Indian E-banking is still emerging, although it is fast becoming a strategic
necessity for most commercial banks, as competition increases from private banks and non-
banking financial institutions. Despite the global economic challenges facing the IT software
and services sector, the outlook for the Indian industry remains optimistic.

The Reserve Bank of India has also set up a “Working Group on E-banking to examine different
aspects of E-banking. The group focused on three major areas of E-banking i.e. (1) Technology
and Security issues (2) Legal issues and (3) Regulatory and Supervisory issues. RBI has
accepted the guidelines of the group and they provide a good insight into the security
requirements of E-banking.

The importance of the impact of technology and information security cannot be doubted.
Technological developments have been one of the key drivers of the global economy and
represent an instrument that if exploited well can boost the efficiency and competitivity of the
banking sector. However, the rapid growth of the Internet has introduced a completely new
level of security related problems. The problem here is that since the Internet is not a regulated
technology and it is readily accessible to millions of people, there will always be people who
want to use it to make unlawful gains. The security issue can be addressed at three levels. The
first is the security of customer information as it is sent from the customer’s PC to the Web
server. The second is the security of the environment in which the Internet banking server and
customer information database reside. Third, security measures must be in place to prevent
unauthorized users from attempting to long into the online banking section of the website.

From a legal perspective, security procedure adopted by banks for authenticating user’s needs
to be recognized by law as a substitute for signature. In India, the Information Technology Act,
2000, in section 3(2) provides for a particular technology (viz., the asymmetric crypto system
and hash function) as a means of authenticating electronic record. Any other method used by
banks for authentication should be recognized as a source of legal risk..

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Regarding the regulatory and supervisory issues, only such banks which are licensed and
supervised and have a physical presence in India will be permitted to offer E-banking products
to residents of India. With institutions becoming more and more global and complex, the nature
of risks in the international financial system has changed. The Regulators themselves who will
now be paying much more attention to the qualitative aspects of risk management have
recognized this. Though the Indian Government has announced cyber laws, most corporate are
not clear about them, and feel they are insufficient for the growth of E-commerce. Lack of
consumer protection laws is another issue that needs to be tackled, if people have to feel more
comfortable about transacting online.

Taxation of E-commerce transaction has been one of the most debated issues that are yet to be
resolved by India and most other countries. The explosive growth of e-commerce has led many
executives to question how their companies can properly administer taxes on Internet sales.
Without sales tax, online sellers get a price advantage over brick and mortar companies. While
e-commerce has been causing loss of tax revenues to the Government, many politicians
continue to insist that the Net must remain tax-free to ensure continued growth, and that
collecting sales taxes on Net commerce could restrict its expansion. A permanent ban on
custom duties on electronic transmissions, international tax rules that are neutral, simple and
certain and simplification of state and local sales taxes. The Central Board of Direct Taxes,
which submitted its report in September 2001, recommended that e-commerce transaction
should be taxed just like traditional commerce.

Also RBI is about to become the first Government owned digital signature Certifying Authority
(CA) in India. The move is expected to initiate the electronic transaction process in the banking
sector and will have far reaching results in terms of cost and speed of transactions between
government- owned banks.

Thus efficiency, growth and the need to satisfy a growing tech-survey consumer base are three
clear rationales for implementing E-banking in India. The four forces-customers, technology,
convergence and globalization have the most important effect on the Indian financial sector
and these changes are forcing banks to redefine their business models and integrate technology
into all aspect of operation. [3]

3. Retrieved from “The various forms of E Banking Information Technology” Essay (November 2018)
https://www.ukessays.com/essays/information-technology/the-various-forms-of-e-banking-
information-technology-essay.php?vref=1

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1.6 DESIGN AND EXECUTION OF RESEARCH

Nowadays e-banking is the popular technology used by banks. E-Banking is spreading rapidly
in public and private sector banks of India. They are delivering their traditional products as
well as designing and developing new products to encourage customer participation in e-
commerce. E-banking is the outcome of technological innovations and competition. The
customer’s satisfaction is also very important to face the challenges for the banks to cope up
with other banks. The main purpose of the study is to compare the performance of public sector
bank and private sector bank in terms of service quality and also measure current customer
satisfaction level regarding services of both the banks. Public sector banks are those banks
whose complete or maximum ownership lies with the government while private sector bank
refers to the banks whose majority of stake is held by the individuals and corporations. Hence
to fulfil the research purpose we are comparing the online banking services provided by Public
Sector Bank (SBI) and Private Sector Bank (ICICI) to their customer and how much the
employees of this bank find it helpful. Customers and employees of selected branches of SBI
& ICICI banks were taken for this study. To evaluate the satisfaction of customers,
SERVQUAL a model proposed Parasuram et al. is used to measure the serve quality perceived
by the customers of the SBI and ICICI of Raipur city. And employees perception are helpful
in evaluating the benefits of E-banking over traditional banking.

Customer Satisfaction
Before proceeding further, it is best that one fully understands the importance of the ‘Customer
Satisfaction’. Customer satisfaction is one of the most important factors in business. When it
comes to commercial banks, customer satisfaction level differentiates one bank from another,
thus measuring customer satisfaction is exceedingly important. (Zopounidis, 2012, 37.) This is
the reason why banks listen to customer requirements and complains. Profitable business
cannot exist without satisfied customers, especially in service-oriented industries.

Customer Satisfaction and Electronic Banking

The concept of “Customer or User Satisfaction” as a key performance indicator within the
businesses has been in use since the early 1980s (Bailey & Pearson 1983; Ives, Olson, &
Baroudi 1983). Similarly, the end user computing satisfactions have been studied since the
1980 (Bailey & Pearson 1983; Chin, Diehl, & Norman 1988; Ives et al., 1983; Rivard & Huff
1988). The user satisfaction can be seen as the sum of the user’s feeling and attitudes toward
several factors that affect the usage situation (Bailey et al., 1983). End user experience has

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become an important factor in internet-based businesses because the end user often pays for
the majority of new products and services. Therefore, new product characteristics such as
perceived ease of use, quality, aesthetics, appeal and value for money must be matched or
exceeded with customer expectations toward the product (Wilson & Sasse 2004). Therefore,
assessing customer satisfaction has become very important, especially for high tech products
and services. In general, customer satisfaction has been measured using questionnaire scales
for which either a Likert or a semantic differential scale have been used.
As customers become more sophisticated, therefore, it becomes essential to consider the use of
technology to respond to their continuously change. Banking is an industry highly which is
highly involved with the customers. Customers in developing economies seems to keep the
“technological factors” of services as the yardstick in differentiating good and bad services and
the human factor – the employees seem to play a lesser role in discriminating the quality of
service for banks. The variation in services offered by the banks develops the excellence for
service quality. As electronic banking is becoming more prevalent, so level of customer
satisfaction is also changing the scenario of technological environment.
Informational technology in form of e-banking plays a significant role in providing better
services at lower cost. Several innovative IT based service such as Automated Teller Machine
(ATM), Internet banking, Smart cards, Credit Cards, Mobile banking, Phone banking,
Anywhere-Anytime banking have provided number of convenient services to the customer So
as the service quality improves, the probability of customer satisfaction increases. Increase
satisfaction in turn increase the mutual understanding, customer retention and a bond of trust
between customer and bank. The banks which are providing these services at large extent to
customers are more reputed in the eyes of customers. But at the same time technology based
product is different in public and private sector banks. Bank automation and electronic banking
is fast in private sector comparative to public sector.

E-Banking and Traditional Banking

E-banking is an improvement over traditional banking system because it has reduced the cost
of transaction processing, improve the payment efficiency, financial services and improve the
banker-customer relationship. E-banking plays a pivotal role in giving satisfaction to the
customers because e-banking fills the gap between the expected and perceived service quality.
So in order to fill this gap, banks should find ways of making electronic services more
accessible and by allowing the customer to verify the accuracy of the e-banking transactions.
In another view, traditional banks are struggling in adopting the latest technologies. The start-

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up cost for an e-bank is high, establishing a trusted brand is also very expensive then as it
requires a good amount of promotion in addition to the purchase of expensive technology (as
security and privacy are key to gaining customer approval). E-Banks have already found that
retail banking only becomes profitable once a large critical mass is achieved.

Electronic Banking and Service Quality

The service quality attributes that banks must offer to encourage consumers to switch to online
banking are perceived usefulness, ease of use, reliability, security, and continuous
improvement (Liao and Cheung 2008). In another study (2002), they also found that individual
expectations regarding accuracy, security, user involvement and convenience were the most
important quality attributes in the perceived usefulness of Internet based e-retail banking. A
study by (Ibrahim et al, 2006), revealed six composite dimensions of electronic service quality,
including the provision of convenient/accurate electronic banking operations; the accessibility
and reliability of service provision; good queue management; service personalization; the
provision of friendly and responsive customer service; and the provision of targeted customer
service. Perceived usefulness, security and privacy are the most influencing factors to accept
online banking (Qureshi et al, 2008). There are number of reasons due to which customer
satisfaction due to e-banking has improved.

1. Customer can withdraw funds, transfer funds anytime, anywhere they want.
2. Accessibility has been extended through technological development as it allows
customers to do business from their home and office.
3. It makes the banking activities and transaction very simpler to understand
4. There is no requirement of direct control with bank, as services can be operated
wherever customer wants.
5. It has reduced the waiting time of the customer; no long queue standing is required.
6. Availability of employees at all times is not required as these services are provided 24
hours a day, seven days a week.
7. Internet based services has enabled the corporate and retail customers to transact from
home, office and traveling.
8. Online fund transfer enabled the customer to transfer funds from one bank to another
or within the same bank at same time.
9. Communication, interaction between the bank and customer has been improved due to
e-banking. On the whole we can say that e-banking has become pre-imminent method
of carrying the banking transaction and to increase the customer satisfaction.

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Service Quality Dimensions Used in the Study
The aim of this work is to analyse customer satisfaction concerning banking services provided
by both the banks . The thesis purpose is to unveil customer expectations by approaching them
with a questionnaire. This thesis will also focus on reasons and factors that influence customer
satisfaction. The research is combined with a questionnaire about customer satisfaction to find
a logical solution and give suggestions that can help improve the current situation. The
theoretical framework of the study is concentrated on factors that influence customer
satisfaction in both the banks." SERVQUAL dimensions and six dimensions are reviewed to
measure service quality. This study applied six dimensions of service quality that are explained
as under:

• Tangibles: It shows the physical aspects of the services as physical facilities, appearance of
personnel and tools & equipment used for provision of services.
• Reliability: This dimension shows the consistency of services towards performance and
dependability.
• Efficiency : This dimension shows the accessibility of bank website. It mainly indicates the
speed of service to the customers using online banking.
• Responsiveness: It reflects the willingness or readiness of employees to provide quick
services to customers.
• Assurance: This dimension indicates the employees’ knowledge, courtesy and their ability
to incorporate trust and confidence.
• Empathy: This dimensions shows the magnitude of caring and individual attention given
to customers.

Employees Attitude and Technology Adoption

Employees are benefited on e-banking because of its time saving and easy handling
transactions. The customers generally use e-Banking services on persuasion of bankers. Bank
staff perception of and expectations towards banking technologies are a crucial element in the
development of successful e-banking implementation projects (Lymperopoulos and
Chaniotakis, 2004). If bank staff primarily consider e-banking as a self-service and convenient
channel that decrease costs and if its adoption will not affect their positions, then they will
adopt it (Nath et al., 2001). However, if they perceive e-banking as a threat to their job
prospects and a way to lose customers, then they will be likely to resist its adoption to keep
customers in the branches and their jobs (Mols, 2001). Bank staff resistance to technology

11
adoption is a common problem in the banking sector (Chan and Lu, 2004; Constantine and
Chaniotakis, 2005). Davis et al. (1989) argue that the introduction of new technology is bound
to cause a disturbance within organizations and to individuals within those organizations as
older technologies and systems are displaced by new ones. Davis et al. (1989) also state that
the successful implementation/adoption of any new technology are principally determined by
organizational users’ attitudes: employees and managers build up an attitude and feeling about
the new technology, and that feeling could direct them to the adoption or rejection of the
proposed technology.

Factors affecting adoption of E-banking service [4]

Finally, turning to the literature dealing directly with influences on consumer adoption of
internet banking services, we discovered a fragmented and inconclusive theoretical base:

• Demographics may be relevant. In the uptake of electronic banking - which includes ATMs,
phone banking, internet banking and other electronic banking forms - Kolodinsky, Hogarth
and Shue (2000) found that the likelihood of adoption rose with higher levels of financial
assets and education, but that individual consumer attitudes and beliefs were stronger
influences than demographics. In addition, recent studies confirm earlier reports of
difficulties attracting the 65+ age group to internet banking (Ilett, 2005; Perumal and
Shanmugam, 2004). Gender issues may also be relevant. Shergill and Li’s (2005) study of
internet banking consumers found that women regarded privacy protection and ethical
standards more seriously than men did. Nevertheless, in some countries such as the UK,
women now equal men in numbers using internet banking (Ilett, 2005) raising new
questions about the nature of gender differences found in internet banking adoption.

• The relevance of internet banking as an innovation has been found significant. Tan and
Teo’s (2000) survey of (mostly male) internet users employed Ajzen’s (1985) theory of
planned behaviour and Rogers’ theory of innovation diffusion, and identified the main
influences as: perceptions of relative advantage, compatibility, trialability and risk. All but
risk are known constructs in Rogers’ theory of innovations diffusion. Also supporting the
importance of trialability, Chung and Paynter (2002) found that lack of prior use of internet
banking inhibited consumer adoption. Their survey further found that consumers who did
not use the internet channel did not feel a need to do so, suggesting the importance of
relative advantage. In a related finding, Sathye’s (1999) study highlighted that many
consumers were simply unaware of internet banking and its unique benefits.

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• Security, privacy, trust and risk concerns may impact on consumer internet banking
choices. It was found that 80% of global phishing attacks in the first quarter of 2005
targeted the financial services sector (IDC, 2005). One survey by Chung and Paynter (2002)
identified consumer fears regarding transaction security as an inhibitor to the adoption of
internet banking. Security has also been identified as a key consumer concern in other
internet banking adoption studies (e.g. Black et al., 2002; Siu and Mou, 2005). In Australia,
Sathye’s (1999) study highlighted consumer security fears while Ramsay and Smith (1999)
found privacy to be a key consumer concern. Hain et al (2003) observed that non-internet
banking consumers were more concerned about security and privacy issues than internet
banking consumers. The security concern has also been recently associated more with
female than male non-users (ACNielsen, 2005). In the context of consumer attitudes toward
internet banking systems, trust may be related to consumer judgement on security and
privacy issues (Wang et al., 2003). Suh and Han (2002) found trust an important factor in
consumer adoption of internet banking using a Web-based survey, while Rexha et al (2003)
obtained similar results in Singapore.

• Convenience has been identified by a number of studies as an important adoption factor

(ACNielsen, 2005; Pew, 2003; Ramsay and Smith, 1999; Thornton and White, 2001). A
US survey found convenience to be the main motivator for internet banking in terms of
24/7 access and time savings (Pew, 2003) Accessibility, which may be related to
convenience, has also been found important (Ramsay and Smith, 1999). High levels of
workplace internet use have also been associated with the uptake of internet banking
(Durkin, 2004).

• Adaptability, technical self-efficacy and knowledge of the internet banking application

have been found influential, suggesting that individual characteristics affect the adoption
decision (Thornton and White, 2001). The desire for control of service delivery was found
important by Ramsay and Smith (1999) while habit may also play a role (Wan et al., 2005).
The information provided on the banking web site may help provide needed knowledge
and thus help to motivate adoption (Waite and Harrison, 2004). Some researchers have
organised internet banking adoption factors into categories (e.g. consumer, product,
organisation and channel, Black et al., 2002).Suki (2010) :

4. Retrieved from International Institute for Special Education (IISE), “ Factors Affecting E-Banking Usage
in India: an Empirical Analysis” by Shariq Mohammed Vol. II (LXV) No. 1/2013

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Statement of Problem

The Banks (Public and Private) have been facing fierce competition due to the entry of foreign
banks. The application or use of technology for the qualitative transformation in the process of
banking service is necessary and quite natural, since the market is competitive and the
customers are receptive. The needs and requirements of the customers are developing and
expanding very fast. In this complex and fast changing environment, the only sustainable
competitive advantage for banks (Both public and private sector) is to give the customer an
optimum blend of technology and traditional services. Hence meeting the competition and the
customer requirements are the priorities of both public and private sector banks. This thesis
compares the E-banking services of the two competitors in banking sector i.e. SBI and ICICI.

Customer satisfaction is a complicated mix of “hardware” (technology, product, price, quality

etc.) and “software” (attitude, responsiveness, deliverance, communication etc.). Today’s
customers are not satisfied with care and courtesy alone, they expect concern and commitment.
In this competition environment not the oldest, not the strongest and not the first can survive,
but only the “best” can survive. The success of Internet Banking not only depends on the
technology but also on the large extend the attitude, commitment and involvement of the
operating at all levels and how far the customers reap the benefits from Internet banking
services. It is crucial for banks that offer IB services to periodically and consistently measure
the satisfaction of their customers. The purpose of this study is to examine the customer
satisfaction with various service quality dimensions.

The success of every bank is highly depending upon its employees. The technology enabled
banking services reduced the paper work. It improves the efficiency, and it improved the
database management with lesser strain of work load. The employees feel free to provide
services through e-channels and can spend their saved time on other improvement activities. If
the employees are not clear in their job, working conditions, work culture, knowledge they can
never make the customers satisfaction with better quality services. So it is important to study
the perception of employees towards technology enabled banking services. It has become
imperative for both public and private sector banks to perform to the best of their abilities to
retain their customers by catering to their explicit as well as implicit needs. The banks which
fails to satisfy their customer, suffer huge losses . Therefore, the main purpose of the study is
to know the e-banking services provided by the banks in the study area and this research study
makes an attempt to analyse the overall satisfaction of the customer regarding the e-banking
transactions in the public and private sector banks in Raipur city.

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Scope of the Study

In India, there is less number of studies being conducted to identify how effectively the online
channels are used by banking industry to increase customer satisfaction. The scope of the
current study is to examine perception of customers and bankers. From the customer’s
perspective, this study focus on perception of users towards e-banking services, such study will
help in enhancing their satisfaction level and thereby making them loyal with their prime bank.
From the banker’s perspective, they will be able to retain more number of customers with
improved customer satisfaction, enhanced loyalty and, also which in turn will help in
addressing security issues of customers for transacting online and thus building a firmer
foundation for customer retention. Hence, this study throws light on the e-banking services
provided by the banks in the study area and this research study makes an attempt to analyse
how banks are attracting the various customers and how the customers are satisfied with the e-
banking services provided by the banks. This study will be helpful to draw up further policy
for improving customer satisfaction with e-banking practices and act as a secondary data for
further research. Therefore, this study proposes to bridge the research gap by studying customer
expectations and perceptions of public and private sector banks separately and comparatively.
Thus present study focus on finding the determinants of customer satisfaction and employees
perception about e-banking and examining the impact of E-banking over traditional banking
system. In order to reap the benefits of long lasting relations with customers and gaining
competitive advantage online, banks need to develop a thorough understanding of the
antecedents of retaining customers on the internet. The importance of e-retention can be
evaluated by identification of variables influencing repeat purchasing behaviour, the level of
technology invasion and security aspects which are the critical area of research. The
widespread adoption of online banking services also calls for research investigating those
factors that are responsible for keeping customers satisfied and focusing on measures to retain
them.

Significance of the Study

“All progress is born of inquiry. Doubt is often better than overconfidence, for it leads to
inquiry, and inquiry leads to invention” is a popular statement given by Hudson Maxim that
suits totally to significance of conducting a research study. The significant increment in the
number of research studies conducted always lead to development and advancement of the
social system. This research focuses on comparing the performance of public sector bank and
private sector bank with respect to E- banking services. This study can be extensively used by

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banks for developing a strategy to enhance customer satisfaction and thereby retain customers.
Through this research banks would know how to provide better e- banking services & increase
customer satisfaction and banking business and customer base. The study in entirety will be
useful for bankers and banking customers and will help in enhancing relationship between the
two for building long lasting sustained associations. This study will be helpful to draw up
further policy for improving customer satisfaction with e-banking practices and act as a
secondary data for further research.

Objectives of the Study

The initial phase of every research process is defining the objectives of the study. Review of
literature helped in identifying the research gaps and indicates a need for research in current
area. The following objectives have been defined for the present study:

1. To study public sector banks v/s private sector banks from the e-banking perspective.

2. To assess the customer’s and bank employees satisfaction level with the current banking
facilities.
3. To find the most important factor that is inducing people towards e-banking.

4. To understand the benefits of e-banking as compared to traditional banking, in terms of

cost, efficiency, time, secrecy, speed, convenience and quality of service and from both
the customer’s and the employees perspective.
5. To investigate whether e-banking is cost effective for both the banks and the customers or
not.
6. To compare that whether e-banking vis-a-vis traditional banking, which is more secured,
from both the bank employee’s and the customer’s perspective.

Research Hypothesis
The following hypotheses have been framed to achieve the Objectives:

Ha 1 : There is a significant association between the category of bank and opinion of the
customers towards satisfaction of using E-banking services.

Ha 2 : There is a significant association between category of bank and opinion of the customers
towards Security of E-banking Transaction.

Ha 3 : There is a significant association between the frequency level of using e-banking

facilities in the selected public and private sector banks.

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Ha 4 : There is a significant association between the category of bank and opinion of the
customers towards the comparison of Manual banking with E-banking.

Ha 5 : There is a significant association between category of bank and opinion of the

customer towards the service charges of E-banking.

Ha 6 : There is a significant difference between the responses of the Employees of public and
private sector bank on various parameter for the comparison of E-banking with
traditional banking.

Ha 7 : There is a significant difference in the perception of the customers on service quality

dimension of Tangibility in public and private sector bank.

Ha 8 : There is a significant difference in the perception of the customers on service quality

dimension of Reliability in public and private sector bank.

Ha 9 : There is a significant difference in the perception of the customers on service quality

dimension of Efficiency in public and private sector bank.

Ha 10 : There is a significant difference in the perception of the customers on service quality

dimension of Responsiveness in public and private sector bank.

Ha 11 : There is a significant difference in the perception of the customers on service quality

dimension of Assurance in public and private sector bank.

Ha 12 : There is a significant difference in the perception of the customers on service quality

dimension of Empathy in public and private sector bank.

Research and Methodology

Research Methodology is a way, through which researchers can find the solution or solve the
research problem. In other words, research methodology is understood as the science of
studying how research is done scientifically. Research methodology is the process of solving
research problem systematically. Generally, in research methodology research proceed through
various step procedures to study research problem with having proper and adequate logical and
rationale background. This section reveals how the present study was conducted. It explains
research methods, techniques and logic behind the study. In a view to precede the research in
a systematic way the following research methodology has been used.

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Research Design and Research Methods

This section covers research design, sampling design, sources of data collection, details of
questionnaire, validity and reliability and research methods used for data analysis in the study.

Research Design
A research design is the overall plan for obtaining answers to the questions being studied and
for handling some of the difficulties encountered during the research process. The research is
primarily both exploratory as well as descriptive in nature. After analysing the research need,
a well-structured questionnaire was prepared and personal interviews were conducted to collect
the customer’s perception about internet banking. By means of obtaining detailed opinion of
the customers and bankers, this research falls under the category of descriptive research. This
study was conducted as a survey that examined customer’s satisfaction with e-banking
practices in public and private sector banks located in Raipur city (Chhattisgarh) and along
with that the opinion of the bankers regarding implementation of E-banking services in banks.

Period of the Study:

The study covers a period of three years commencing from 1st March 2016 to 30th April 2019.

Area of the Study

Raipur is the Capital City of Chhattisgarh state in central India, due to vast amount of potential
growth, more number of public and private sector banks are established their branches in this
city and there is intense competition prevailed between public and private sector banks to
enhance their customer base. This research compares the service quality of State bank of India
and ICICI bank in Raipur city by obtaining the opinion of the customers of the particular banks.
Along with the customer perception bankers reviews was also taken to fulfil the research need.

Sampling Design
In Raipur city almost, all the major banks have branches in this district. As it was felt that it
would useful to attempt a comparative study among public and private sector banks. One public
and one private sector bank having the largest network of branches in the district were
identified. In Raipur city, SBI has large number branches (95 branches) as compared to other
public sector banks. Similarly, among private sector banks located in the city, ICICI bank has
limited number of Branches (10 branches). A sample of 400 respondents, 200 respondents from
each bank, who actually use online banking were selected by using convenience sampling
technique. The respondents are chosen from the customers coming out of the private or public
banks, where it would be easy to invite them to take part in the research. In case of bankers, a

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sample of 110 respondents were taken, 60 employees from public sector bank (SBI) and 50
employees from the private sector bank ( ICICI Bank) was taken for study. These samples are
selected on the basis of Convenience sampling method. The reasons of using this sampling type
are twofold. First, it offers an easy way to obtain the raw data for the further analysis. Second,
it saves times and costs since the respondents can be randomly selected.

Questionnaire Design
• Customer Questionnaire:- The present study has focused on assessing the e-banking
services of the both the public sector bank (SBI) and private sector bank (ICICI Bank).
Questionnaire is designed to know the customer’s perception about internet banking
including SERVQUAL dimensions i.e. reliability, responsiveness, privacy, efficiency,
assurance and empathy. Data is collected using a structured questionnaire with twenty four
questions based on efficiency, tangibility, reliability, efficiency, responsiveness, and
empathy. A five point Likert scale ranging from strongly agree to strongly disagree was
adopted as the scale for the statements in the questionnaire and method of data collection
was through personal mode. Respondents has to choose on option of each statement
measured on five point scale, where strongly disagree =1, disagree =2, neutral =3, agree=4,
strongly agree =5. The survey questionnaire measured six dimensions of e-banking service
quality and its effect on customer satisfaction.

• Employees Questionnaire :- The data was collected from the employees of different
branches of each selected bank of public and private sector bank from Raipur city. To fulfil
the research need only general questions were asked to employees, as they restricted me on
asking any question related to the confidential matters such as security issues and complaint
redressal policy of banks as they had to follow RBI guidelines. So I have to design my
questionnaire, according to the convenience of bankers. Questionnaire is designed to know
the bankers perception about internet banking including the comparison of E-banking
services with the Traditional banking. A Five point Likert scale ranging from strongly agree
to strongly disagree was adopted as the scale for the statements is used to elicit responses
on the questionnaire.

Pilot Testing of Instrument

A sample of 100 customers was used, in the pilot testing, to validate the instrument. To validate
the results empirically, appropriate reliability and validity tests of the measurement were taken.
Indeed, reliability refers to the instrument’s ability to prove consistent results in repeated uses,

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whereas validity refers to the degree to which the instrument measures the concept the
researcher wants to do. This provides confidence that the empirical findings accurately reflect
the proposed constructs (Flynn et al., 1994). The Cronbach’s alpha (α) values of the 24 items
are narrated into six dimensions of service quality namely Tangibles (.716), Reliability (.741),
Efficiency (.741), Responsiveness (.718), Assurance (.755) and Empathy (.726) and in case of
employees questionnaire , Cronbach alpha of 110 employees is (.774) were found to be within
limits for further analysis. None of the reliability alphas is below the cut-off point of 0.70,
which is generally considered to be the criterion for demonstrating internal consistency of new
scales (Nunnally and Bernstein, 1994).

Data Collection

• Primary Data:-
Primary data means original data that has been collected specifically for the purpose in
mind. In this study, Primary data was collected from internet banking users and bankers of
Raipur City, who are using the internet banking services of either State Bank of India a
leading public sector bank or ICICI Bank a leading private sector bank. The branches and
respondents are selected with the help of convenience sampling method. A structured
questionnaire was constructed taking into account service quality dimensions and the
analysis was considerably based on primary data. Due care was taken during the collection
of information from the customers. Only those customers of the bank were requested to fill
the questionnaire that had sufficient time and knowledge about the product and services
offered by their banks. The questionnaires were distributed among customers who had
their accounts with two major banks of Raipur city. One bank from public sector i.e. SBI,
and one bank from private sector i.e. ICICI bank - were selected. Both the banks have a
strong presence in the banking industry. In case of employees, the branches and employees
were selected with the help of convenience sampling method. A structured questionnaire
was constructed taking into account the benefits of E-banking over traditional banking.

• Secondary Data:-
Secondary data refers to data which is collected by someone who is someone other than
user. The sources of the secondary data included books, websites, NEWS bulletin,
magazines, newspapers, journals and bank’s annual reports (SBI, ICICI, and RBI Annual
Reports). Secondary data was also collected from the websites of the sample banks. The
secondary data which were collected from existing literature formed the literature review
of this study.

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Statistical Analysis:
Present study aims at studying and comparing the quality of services by public and private
banks of Raipur city in the view of customers and bankers both. This is an applied study and
it is a descriptive survey in terms of data collection method. Its population consists of customers
of public and private banks, SERVQUAL standard model is used in present study. It includes
six aspects: Tangibility, Reliability, Efficiency, Responsiveness, Assurance and Empathy. The
data so collected has been analysed through the application of statistical techniques, such as
Chi Square test and Z test. Chi-square test for independence is applied to evaluate the
differences between different bank customer perception towards the adoption of banking
services. It is used to determine whether there is a significant association between the two
variables. While Z test was applied to evaluate the differences between the Service Quality
dimensions of public sector bank and private sector bank. In case of employees questionnaire
hypothesis related to comparison of employees perception with respect to E-banking with
traditional banking, Kolmogorov-Smirnov test (K-S test) was used to check the normality of
data. and Mann Whitney test was used to test the difference. . Statistical Software SPSS version
20 and MS Excel was used to carry out the analysis work and testing the hypothesis of research.

Limitations of the Study

The study has some limitations, these limitations that need to be acknowledged and addressed
regarding the present study.

1. The study is restricted to commercial banks located in Raipur district only.

2. The study is limited to the comparison of SBI & ICICI online banking services.

3. The study is based on the opinion survey of customers. But, the opinion expressed may
differ according to time and situation. It means Customer’s preferences and opinions are
supposed to change from time to time.

4. The findings of the study can’t be generalized as the study is made covering a limited area
namely, Raipur district of Chhattisgarh.

5. Because of time and other constraints in this survey it would not be possible to contact each
and every branch of SBI and ICICI whose responses would have provided a better insight
regarding customer’s preferences regarding bank services.

6. Respondents may be biased. So the collected data may not be reliable.

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