CHAPTER 1

INTRODUCTION

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 INTRODUCTION

1.1 AN INTRODUCTION TO THE COMPANY

1.1.1 FORMATION OF THE COMPANY

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

1.1.2 PROMOTER

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

1.1.3 BUSINESS FOCUS

HDFC Bank's mission is to be a World-Class Indian Bank. The objective is to build

sound customer franchises across distinct businesses so as to be the preferred provider of
banking services for target retail and wholesale customer segments, and to achieve
healthy growth in profitability, consistent with the bank's risk appetite. The bank is
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committed to maintain the highest level of ethical standards, professional integrity,
corporate governance and regulatory compliance. HDFC Bank's business philosophy is
based on four core values – Operational Excellence, Customer Focus, Product Leadership
and People.

1.1.4 CAPITAL STRUCTURE

As on 31st March, 2009 the authorised share capital of HDFC Bank is Rs. 550 crore. The
paid-up capital as on the said date is Rs. 425,38,41,090/- ( 42,53,84,109 equity shares of
Rs 10/- each). The HDFC Group holds 19.38% of the Bank's equity and about 17.70 % of
the equity is held by the ADS Depository (in respect of the bank's American Depository
Shares (ADS) Issue). 27.69 % of the equity is held by Foreign Institutional Investors
(FIIs) and the Bank has about 5,48,774 shareholders.

The shares are listed on the Bombay Stock Exchange Limited and The National Stock
Exchange of India Limited. The Bank's American Depository Shares ( ADS ) are listed on
the New York Stock Exchange (NYSE) under the symbol 'HDB' and the Bank's Global
Depository Receipts (GDRs) are listed on Luxembourg Stock Exchange under ISIN No
US40415F2002.

1.1.5 TIMES BANK AMALGAMATION

In a milestone transaction in the Indian banking industry, Times Bank Limited (another
new private sector bank promoted by Bennett, Coleman & Co./Times Group) was merged
with HDFC Bank Ltd., effective February 26, 2000. As per the scheme of amalgamation
approved by the shareholders of both banks and the Reserve Bank of India, shareholders
of Times Bank received 1 share of HDFC Bank for every 5.75 shares of Times Bank. The
acquisition added significant value to HDFC Bank in terms of increased branch network,
expanded geographic reach, enhanced customer base, skilled manpower and the
opportunity to cross-sell and leverage alternative delivery channels.

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1.1.6 DISTRIBUTION NETWORK

HDFC Bank is headquartered in Mumbai. The Bank at present has an enviable network
of over 1229 branches spread over 444 cities across India. All branches are linked on an
online real-time basis. Customers in over 120 locations are also serviced through
Telephone Banking. The Bank's expansion plans take into account the need to have a
presence in all major industrial and commercial centers where its corporate customers are
located as well as the need to build a strong retail customer base for both deposits and
loan products. Being a clearing/settlement bank to various leading stock exchanges, the
Bank has branches in the centers where the NSE/BSE has a strong and active member
base. The Bank also has a network of about over 2526 networked ATMs across these
cities. Moreover, HDFC Bank's ATM network can be accessed by all domestic and
international Visa/MasterCard, Visa Electron/Maestro, Plus/Cirrus and American Express
Credit/Charge cardholders.

1.1.7 BOARD OF DIRECTORS

The Composition of the Board of Directors of the Bank is governed by the Companies
Act, 1956, the Banking Regulation Act, 1949 and the listing requirements of the Indian
Stock Exchanges where securities issued by the Bank are listed. The Board has strength
of 12 Directors as on March 31, 2008. All Directors other than Mr. Aditya Puri, Mr.
Harish Engineer and Mr. Paresh Sukthankar are non-executive directors. The Bank has
five independent directors and six non-independent directors. The Board consists of
eminent persons with considerable professional expertise and experience in banking,
finance, agriculture, small scale industries and other related fields.

None of the Directors on the Board is a member of more than 10 Committees and
Chairman of more than 5 Committees across all the companies in which he/she is a
Director. All the Directors have made necessary disclosures regarding Committee
positions occupied by them in other companies.

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 • Mr. Jagdish Capoor, Mr. Keki Mistry, Mrs. Renu Karnad, Mr. Aditya Puri, Mr.
Harish Engineer and Mr. Paresh Sukthankar are non-independent Directors on
the Board.
• Mr. Arvind Pande, Mr. Ashim Samanta, Mr. Gautam Divan, Mr. C. M.
Vasudev and Dr. Pandit Palande are independent directors on the Board.
• Mr. Keki Mistry and Mrs. Renu Karnad represent HDFC Limited on the
Board of the Bank.
The Bank has not entered into any materially significant transactions during the year,
which could have a potential conflict of interest between the Bank and its promoters,
directors, management and/or their relatives, etc. other than the transactions entered into
in the normal course of business. The Senior Management have made disclosures to the
Board confirming that there are no material, financial and/or commercial transactions
between them and the Bank which could have potential conflict of interest with the Bank
at large.

1.1.8 TECHNOLOGY

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

technology and communication systems. All the bank's branches have online
connectivity, which enables the bank to offer speedy funds transfer facilities to its
customers. Multi-branch access is also provided to retail customers through the branch
network and Automated Teller Machines (ATMs).

The Bank has made substantial efforts and investments in acquiring the best technology
available internationally, to build the infrastructure for a world class bank. The Bank's
business is supported by scalable and robust systems which ensure that our clients always
get the finest services we offer.

The Bank has prioritized its engagement in technology and the internet as one of its key
goals and has already made significant progress in web-enabling its core businesses. In

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each of its businesses, the Bank has succeeded in leveraging its market position, expertise
and technology to create a competitive advantage and build market share.

1.1.9 RATING

Credit rating
The Bank has its deposit programs rated by two rating agencies - Credit Analysis &
Research Limited (CARE) and Fitch Ratings India Private Limited. The Bank's Fixed
Deposit programme has been rated 'CARE AAA (FD)' [Triple A] by CARE, which
represents instruments considered to be "of the best quality, carrying negligible
investment risk". CARE has also rated the bank's Certificate of Deposit (CD) programme
"PR 1+" which represents "superior capacity for repayment of short term promissory
obligations". Fitch Ratings India Pvt. Ltd. (100% subsidiary of Fitch Inc.) has assigned
the "tAAA ( ind )" rating to the Bank's deposit programme, with the outlook on the rating
as "stable". This rating indicates "highest credit quality" where "protection factors are
very high".

The Bank also has its long term unsecured, subordinated (Tier II) Bonds rated by CARE
and Fitch Ratings India Private Limited and its Tier I perpetual Bonds and Upper Tier II
Bonds rated by CARE and CRISIL Ltd. CARE has assigned the rating of "CARE AAA"
for the subordinated Tier II Bonds while Fitch Ratings India Pvt. Ltd. has assigned the
rating "AAA (ind)" with the outlook on the rating as "stable". CARE has also assigned
"CARE AAA [Triple A]" for the Banks Perpetual bond and Upper Tier II bond issues.
CRISIL has assigned the rating "AAAStable" for the Bank's Perpetual Debt programme
and Upper Tier II Bond issue. In each of the cases referred to above, the ratings awarded
were the highest assigned by the rating agency for those instruments.

Corporate governance rating

The bank was one of the first four companies, which subjected itself to a Corporate
Governance and Value Creation (GVC) rating by the rating agency, The Credit Rating
Information Services of India Limited (CRISIL). The rating provides an independent

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

1.1.10 PRODUCT SCOPE

HDFC Bank offers a bunch of products and services to meet the every need of the people.
The company cares for both, individuals as well as corporate and small and medium
enterprises. For individuals, the company has a range accounts, investment, and pension
scheme, different types of loans and cards that assist the customers. The customers can
choose the suitable one from a range of products which will suit their life-stage and
needs.

For organizations the company has a host of customized solutions that range from
Funded services, Non-funded services, Value addition services, Mutual fund etc. These
affordable plans apart from providing long term value to the employees help in enhancing
goodwill of the company.

The products of the company are categorized into various sections which are as follows:
• Accounts and deposits.
• Loans.
• Investments and Insurance.
• Forex and payment services.
• Cards.
• Customer center.

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1.1.11 BUSINESS SEGMENTS

HDFC Bank offers a wide range of commercial and transactional banking services and
treasury products to wholesale and retail customers. The bank has three key business
segments:

(i) Wholesale Banking Services

The Bank's target market ranges from large, blue-chip manufacturing companies in the
Indian corporate to small & mid-sized corporate and agro-based businesses. For these
customers, the Bank provides a wide range of commercial and transactional banking
services, including working capital finance, trade services, transactional services, cash
management, etc. The bank is also a leading provider of structured solutions, which
combine cash management services with vendor and distributor finance for facilitating
superior supply chain management for its corporate customers. Based on its superior
product delivery / service levels and strong customer orientation, the Bank has made
significant inroads into the banking consortia of a number of leading Indian corporates
including multinationals, companies from the domestic business houses and prime public
sector companies. It is recognized as a leading provider of cash management and
transactional banking solutions to corporate customers, mutual funds, stock exchange
members and banks.

(ii) Retail Banking Services

The objective of the Retail Bank is to provide its target market customers a full range of
financial products and banking services, giving the customer a one-stop window for all
his/her banking requirements. The products are backed by world-class service and
delivered to the customers through the growing branch network, as well as through
alternative delivery channels like ATMs, Phone Banking, Net Banking and Mobile
Banking.

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The HDFC Bank Preferred program for high net worth individuals, the HDFC Bank Plus
and the Investment Advisory Services programs have been designed keeping in mind
needs of customers who seek distinct financial solutions, information and advice on
various investment avenues. The Bank also has a wide array of retail loan products
including Auto Loans, Loans against marketable securities, Personal Loans and Loans for
Two-wheelers. It is also a leading provider of Depository Participant (DP) services for
retail customers, providing customers the facility to hold their investments in electronic
form.

HDFC Bank was the first bank in India to launch an International Debit Card in
association with VISA (VISA Electron) and issues the MasterCard Maestro debit card as
well. The Bank launched its credit card business in late 2001. By September 30, 2005, the
bank had a total card base (debit and credit cards) of 5.2 million cards. The Bank is also
one of the leading players in the "merchant acquiring" business with over 50,000 Point-
of-sale (POS) terminals for debit / credit cards acceptance at merchant establishments.

(iii) Treasury

Within this business, the bank has three main product areas - Foreign Exchange and
Derivatives, Local Currency Money Market & Debt Securities, and Equities. With the
liberalization of the financial markets in India, corporates need more sophisticated risk
management information, advice and product structures. These and fine pricing on
various treasury products are provided through the bank's Treasury team. To comply with
statutory reserve requirements, the bank is required to hold 25% of its deposits in
government securities. The Treasury business is responsible for managing the returns and
market risk on this investment portfolio.

The following tables summarizes the products and services and customer segments
offered by HDFC Bank:.

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 Table 1.1: Personal banking

Loan Product Investment &

Deposit Product
Insurance

• Auto Loan • Saving a/c • Mutual Fund

• Loan Against Security • Current a/c • Bonds
• Loan Against Property • Fixed deposit • Knowledge
• Personal loan • Demat a/c Centre
• Credit card • Safe Deposit • Insurance
• 2-wheeler loan Lockers • General and
• Commercial vehicles Health
finance Insurance
• Home loans • Equity and
• Retail business banking Derivatives
• Tractor loan • Mudra Gold
Bar
• Working Capital Finance
• Construction Equipment
Finance
• Health Care Finance
• Education Loan
• Gold Loan

Cards Payment Services Access To Bank

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 • Credit Card • NetSafe • NetBanking
• Debit Card • Merchant • OneView
• Prepaid Card • Prepaid Refill • InstaAlert
• Billpay MobileBanking
• Visa Billpay • ATM
• InstaPay • Phone Banking
------------------------------- • Email
• DirectPay
- Statements
Forex Services • VisaMoney
Transfer • Branch
-------------------------------
• e–Monies Network
-
• Product & Services Electronic Funds
• Trade Services Transfer
• Online Payment
• Forex service Branch
of Direct Tax
Locater
• RBI Guidelines
Source: http://www.hdfcbank.com/personal/prd_glance.htm

Table 1.2: Wholesale banking

Financial
Corporate Small and Medium Government
Institutions and
Enterprises Sector
Trusts

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 Large Corporates • Funded • Tax Collection • Financial
• Funded Services • E- Ticketing Institutions
Services • Non Funded • Booking of • Mutual Funds
• Non Funded Services L/C’s • Stock Brokers
Services • Specialized • Collection of • Insurance
• Value Added Services Stamp Duty Companies
Services • Value added • Disbursement • Commodities
• Internet services of Pension Business
Banking • Internet • Electronic • Trusts
Banking Collection of
fees
Supply Chain • Collection of
Partners property tax
• Dealer
Financing
• Vendor
Financing

Agricultural
Lending

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

Table 1.3: NRI services

Accounts & Deposits Remittances

• Rupee Saving a/c • North America

• Rupee Current a/c • UK
• Rupee Fixed • Europe
Deposits • South East Asia
• Foreign Currency • Middle East
Deposits
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 • Accounts for • Africa
Returning Indians • Others
Quick remit
IndiaLink
Cheque LockBox
Telegraphic/ Wire Transfer
Funds Transfer Cheques/DDs/TCs

Investment & Insurances Loans

• Mutual Funds • Home Loans

• Private Banking • Loans Against Securities
• Portfolio Investment • Loans Against Deposits
Scheme • Gold Credit Card

Payment Services
Access To Bank

• NetSafe • NetBanking
• BillPay • OneView
• InstaPay • InstaAlert
• DirectPay • ATM
• Visa Money • PhoneBanking
• Online Donation • Email Statements
• Branch Network

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

1.1.12 BUSINESS STRATEGY

HDFC BANK mission is to be "a World Class Indian Bank", benchmarking themselves
against international standards and best practices in terms of product offerings,
technology, service levels, risk management and audit & compliance. The objective is to
build sound customer franchises across distinct businesses so as to be a preferred
provider of banking services for target retail and wholesale customer segments, and to

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

HDFC BANK business strategy emphasizes the following:

• Increase market share in India’s expanding banking and financial services
industry by following a disciplined growth strategy focusing on quality and not on
quantity and delivering high quality customer service.
• Leverage our technology platform and open scaleable systems to deliver more
products to more customers and to control operating costs.
• Maintain current high standards for asset quality through disciplined credit risk
management.
• Develop innovative products and services that attract the targeted customers
and address inefficiencies in the Indian financial sector.
• Continue to develop products and services that reduce bank’s cost of funds.
• Focus on high earnings growth with low volatility.

1.1.13 RECENT DEVELOPMENT

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

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The combined entity would have a nationwide network of 1167 branches; a strong
deposit base of around Rs.1,22,000 crores and net advances of around Rs.89,000 crores.
The balance sheet size of the combined entity would be over Rs.1, 63,000 crores.

On March 27, 2008, the shareholders of the Bank accorded their consent to a scheme of
amalgamation of Centurion Bank of Punjab Limited with HDFC Bank Limited. The
shareholders of the Bank approved the issuance of one equity share of Rs.10/- each of
HDFC Bank Limited for every 29 equity shares of Re. 1/- each held in Centurion Bank
of Punjab Limited. This is subject to receipt of Approvals from the Reserve Bank of
India, stock exchanges and other requisite statutory and regulatory authorities. The
shareholders also accorded their consent to issue equity shares and/or warrants
convertible into equity shares at the rate of Rs.1,530.13 each to HDFC Limited
and/or other promoter group companies on preferential basis, subject to final regulatory
approvals in this regard. The Shareholders of the Bank have also approved an increase
in the authorized capital from Rs.450 crores to Rs.550 crores.

Promoted in 1995 by Housing Development Finance Corporation (HDFC), India's

leading housing finance company, HDFC Bank is one of India's premier banks providing
a wide range of financial products and services to its over 11 million customers across
hundreds of Indian cities using multiple distribution channels including a pan-India
network of branches, ATMs, phone banking, net banking and mobile banking. Within a
relatively short span of time, the bank has emerged as a leading player in retail banking,
wholesale banking, and treasury operations, its three principal business segments. The
bank's competitive strength clearly lies in the use of technology and the ability to deliver
world-class service with rapid response time. Over the last 13 years, the bank has
successfully gained market share in its target customer franchises while maintaining
healthy profitability and asset quality. As on March 31, 2008, the Bank had a network of
761 branches and 1,977 ATMs in 327 cities. For the year ended March 31, 2008, the Bank
reported a net profit of INR 15.90 billion (Rs.1590.2crore), up 39.3%, over the
corresponding year ended March 31, 2007. As of March 31, 2008 total deposits were
INR 1007.69 billion, (Rs.100,769 crore) up 47.5% over the corresponding year ended

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March 31, 2007. Total balance sheet size too grew by 46.0% to INR 1,331.77 billion
(133177 crore). Leading Indian and international Publications have recognized the bank
for its performance and quality.

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

1.1.14 AWARDS AND ACHIEVEMENTS

HDFC Bank began operations in 1995 with a simple mission: to be a "World-class Indian
Bank". We realized that only a single-minded focus on product quality and service
excellence would help us get there. Today, we are proud to say that we are well on our
way towards that goal.

It is extremely gratifying that our efforts towards providing customer convenience have
been appreciated both nationally and internationally.

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Awards In 2009

Table 1.4: Awards in 2009

Euromoney Awards 2009 'Best Bank in India'

Economic Times Brand
Equity & Nielsen Research Most Trusted Brand - Runner Up
annual survey 2009
Asia Money 2009 Awards 'Best Domestic Bank in India'
IBA Banking Technology
'Best IT Governance Award - Runner up'
Awards 2009
'Best Trade Finance Bank in India for
Global Finance Award
2009
IDRBT Banking
Technology Excellence 'Best IT Governance and Value Delivery'
Award 2008
Asian Banker Excellence in
'Asian Banker Best Retail Bank in India
Retail
Award 2009 '
Financial Services
Source: http://www.hdfcbank.com/aboutus/awards/default.htm

Awards In 2008

Table 1.5: Awards in 2008

Finance Asia Country

Awards for 'Best Bank and Best Cash Management Bank'
Achievement 2008
CNN-IBN 'Indian of the Year (Business)'

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 Nasscom IT User Award
'Best IT Adoption in the Banking Sector'
2008
Business India 'Best Bank 2008'
Forbes Asia Fab 50 companies in Asia Pacific
Asian Banker
Excellence in Retail Best Retail Bank 2008
Financial Services
Best local Cash Management Bank Award
Asiamoney
voted by Corporates
Microsoft & Indian
Security Strategist Award 2008
Express Group
World Trade Center For outstanding contribution to international
Award of honour trade services.
Business Today-
One of India's "Most Innovative Companies"
Monitor Group survey
Financial Express-Ernst Best Bank Award in the Private Sector
& Young Award category
Global HR Excellence
'Employer Brand of the Year 2007 -2008'
Awards - Asia Pacific
Award - First Runner up, & many more
HRM Congress:
Business Today 'Best Bank' Award
Source: http://www.hdfcbank.com/aboutus/awards/default.htm

1.1.15 QUALITY POLICY OF HDFC BANK

• Security: The bank provides long term financial security to their policy. The bank
does this by offering life insurance and pension products.
• Trust: The bank appreciates the trust placed by their policy holders in the bank.
Hence, it will aim to manage their investments very carefully and live up to this
trust.
• Innovation: Recognizing the different needs of our customers, the bank offers a
range of innovative products to meet these needs.

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 • Integrity
• Customer centric
• People care “one for all and all for one”
• Team work
• Joy and simplicity.

1.2 AN INTRODUCTION TO THE PROJECT

1.2.1 AN INTRODUCTION TO NET BANKING

With cyber cafes and kiosks springing up in different cities access to the Net is going to
be easy. Net banking (also referred as e banking) is the latest in this series of
technological wonders in the recent past involving use of Internet for delivery of banking
products & services. Even the Morgan Stanley Dean Witter Internet research emphasized
that Web is more important for retail financial services than for many other industries.

Internet banking is changing the banking industry and is having the major effects on
banking relationships. Banking is now no longer confined to the branches were one has to
approach the branch in person, to withdraw cash or deposit a cheque or request a
statement of accounts. In true Internet banking, any inquiry or transaction is processed
online without any reference to the branch (anywhere banking) at any time. Providing
Internet banking is increasingly becoming a "need to have" than a "nice to have" service.
The net banking, thus, now is more of a norm rather than an exception in many developed
countries due to the fact that it is the cheapest way of providing banking services.

1.2.1.1 MEANING OF NET BANKING

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Net banking is a concept which enables everyone to conduct business with a bank from
the comfort of home or office.

Net banking means “application of electronic technology towards transfer of funds

through an electronic terminal, computer or magnetic tape to conduct various transactions
like cash receipts, payments, transfer of funds, etc.” It is often known as banking on net
or e banking.

1.2.1.2 DEVELOPMENT OF NET BANKING IN INDIA

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

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(1) technology and security issues,
(2) legal issues and
(3) regulatory and supervisory issues.

RBI had accepted the recommendations of the ‘Working Group’, and accordingly issued
guidelines on ‘internet banking in India’ for implementation by banks. The ‘Working
Group’ has also issued a report on net banking covering different aspects of net banking.

Internet banking in India is currently at a nascent stage. While there are scores of
companies specialising in developing internet banking software, security software and
website designing and maintenance, there are few online financial service providers.
ICICI bank is the first one to have introduced net banking for a limited range of services
such as access to account information, correspondence and, recently, funds transfer
between its branches. ICICI is also getting into e-trading, thus offering a broader range of
integrated services to the customer.

Several finance portals for provision of non-banking financial services, e-trading and e-
broking have come up. Commercial applications such as Electronic Bill Presentment
(EBP) and Procurement systems may not be introduced in India immediately, but are
likely to have a greater impact than the retail applications. The corporate sector is
adequately computerized and has already recognized the important role of e-commerce in
future. Increasingly, companies are setting up websites even where there are no
immediate tangible benefits to them from doing so.

1.2.1.3 NET BANKING IN INDIA – RBI GUIDELINES

In India, internet banking or net banking is in rudimentary stage. In order to promote

safety and soundness of internet banking activities, the RBI constituted a Working Group
on Internet Banking. The Group issued guidelines in June 2001. The Group divided the
internet banking products in India into 3 types based on the levels of access granted. They
are

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 • Information Only System
• Electronic Information Transfer System
• Fully Electronic Transactional System.

1.2.1.4 ADVANTAGES AND DISADVANTAGES OF NET BANKING

Internet Banking also has its advantages and disadvantages. Below are mentioned the
most popular advantages of using Internet Banking along with some unavoidable
disadvantages.

The advantages include

• Convenience - online banking sites never close; they're available 24 hours a day,
seven days a week, and they're only a mouse click away;
• Portability – you now have access to money whenever there is an emergency,
whether or not you are in the country;
• Transaction speed - online bank sites generally execute and confirm transactions
at the same rate or quicker than, ATM processing speeds;
• Effectiveness – they offer sophisticated tools, including account aggregation,
stock quotes and rate alerts to help you manage all of your assets more effectively.
• Reduction in workload - No more standing in long lines at the bank, eliminating
endless paper based bank statements.

The disadvantages include

• Lack of Computerization - which relates to virtual banks, revolves around the

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

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 • Learning curve - Banking sites can be difficult to navigate at first;
• Distrust of the User - the possibility of frauds, making errors etc.
• Problem of Security – Various sites are not properly looked at to ensure whether
customers money is safe in cyber world or not.

1.2.1.5 TRADITIONAL BANKING VS NET BANKING

Net banking or internet banking works much like traditional banking. The primary
difference is that in net banking account and information is accessed, payments are made
and statements reconciled using computer rather than paper or the phone to complete
transactions. Instead of going down to local branch office when one bank online he/she
can accomplish multiple tasks at once with the click of a button.

Online banking is rapidly becoming more and more popular as consumers recognize the
advantages online banking has to offer. For one most banks charge fewer fees if you take
advantage of their online banking services. You can also stop receiving paper statements
if you like in many cases and conduct 95% of your business over the Web when you take
advantage of Internet banking.

What to Internet Banks do? The same things traditional banks do. They hold onto our
money and lend it out to others respectively. The manage loans and help us keep track of
our finances. Chances are if you own a bank account at a traditional bank they offer some
type of Internet banking or online services. The next time you stop into your branch
office you should ask them about online banking. You may find once you start you have
no desire to go back to traditional banking.

For those that have a hard time keeping track of paper statements, Internet banking is a
life saver. Internet banking is also advantageous for frequent travelers that need to keep a
close eye on their finances from abroad.

23
1.2.3 NETBANKING SERVICE AT HDFC BANK

Net banking is HDFC Bank's Internet Banking service. It provides up-to-the-second

account information. Net banking lets the customer manage his/her account from the
comfort of his/her mouse - anytime, anywhere. Net Banking services provides access to
account information, products and other services (including transactions of non-financial
and financial in nature) as advised by the Bank from time to time to the customers
through the website of the Bank. Net Banking Services also include the services for
Demat account, Credit Cards and loan on the website of the Bank.

The HDFC Bank web site (www.hdfcbank.com) also features two versions of a demo
facility - one "interactive" and the other "guided" - making it possible for even Internet
illiterates to get comfortable with its services.

On the downside, however, 'registration' for the service involves downloading of a form
that needs to be posted/delivered to any of its branches - not exactly "web savvy" as we
would call it. Also, the form itself requires Adobe Acrobat Reader to be installed and the
file size will exceed 5.5 MB, which translates roughly into an hour or more of on-line
time. Its 3-question FAQ page also assumes a high level of computer knowledge from
users ... not consistent with the rest of the website.

Net Banking service provides a host of features at the finger-tips:

24
25
 CHAPTER 2

REVIEW OF
LITERATURE

REVIEW OF LITERATURE
.
A number of researches have been conducted on net banking and its adoption,
development and its perils. Due to shortage of time and resources, a review of all the past
researches done could not be mentioned in this research project. So, a snapshot of some
of the reviews have been presented.

Nath et.al (2001) in their study found that in every industry, E-commerce is
revolutionizing the way business is conducted. New business models are replacing
outdated ones and organizations are rethinking business process designs and customer

26
relationship management strategies. Banks are no exception to this transformation. This
study examines bankers' views on providing banking services to customers using the
web. Specifically, it addresses issues such as the strategic need for Internet banking, its
effect on customer-bank relationships, and customers' experiences in Internet banking.
Data collected from 75 banks show that most banks do not yet offer full-fledged Internet
banking. However, most have plans to do so. Furthermore, bankers see Internet banking
as a strategic opportunity that can reduce transaction costs, enhance customer service,
increase the customer base and improve cross-selling opportunities. Also, Internet
banking is perceived more favorably by banks that offer it compared to those that do not.

Corrocher (2002) in his study examined the drivers of the adoption of the Internet
banking, in order to understand its role with respect to the traditional banking activity and
to offer a comprehensive picture of the diffusion of such a technology within the sector.
In doing so, it analyses the role of firm-specific and non firm-specific (technology,
market, environment) characteristics in influencing the decision to adopt the new
technological platforms to perform on-line banking transactions within the retail segment
of the financial sector. The main purpose of this paper is to investigate the relationship
between the Internet banking and the traditional banking activity, in order to understand if
these two systems of financial services delivery are perceived as substitutes or
complements by the banks.

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

27
Bradley & Stewart (2003) conducted a research in which they studied the factors
driving the adoption of internet banking. The financial services environment has been
subject to changes on many fronts. Technological change and the advent of the Internet
are among the most dramatic and challenging areas of change for the sector. This paper
looks at retail banking and its adoption of online banking, in particular the factors driving
and inhibiting adoption by banks. An international Delphi study confirms the high level
of importance of the Internet for retail banking. By 2011, it is expected that bank
adoption of the Internet will be near universal. The key factors that are driving banks to
adopt online banking are the adoption by other banks, competitive forces, consumer
demand and the availability of technology. Working against adoption are banks'
perceptions that the Internet does not offer enhanced ability to deal with customers as
well as bank resistance to change, their existing legacy systems and the resources
required to adopt.

Singh & Malhotra (2004) in their study found that the tremendous advances in
technology and the aggressive infusion of information technology had brought in a
paradigm shift in banking operations. The purpose of this paper is to help fill significant
gaps in knowledge about the Internet banking landscape in India. The paper presents data,
drawn from a survey of commercial banks websites, on the number of commercial banks
that offer Internet banking and on the products and services they offer. It investigates the
profile of commercial banks that offer Internet banking, using univariate statistical
analysis, relative to other commercial banks with respect to profitability, cost efficiency,
and other characteristics. By the end of first quarter, 2004, differences between Internet
and non-Internet banks had begun to emerge in funding, in sources of income and
expenditures and in measures of performance. It was also found that the profitability and
offering of Internet banking does not have any significant correlation.

Laukkanen & Tommi (2007) in their research aimed to compare customer perceived
value and value creation between internet and mobile bill paying service. A qualitative in-
depth interviewing design was applied in order to ascertain the factors that create value
perceptions in fund transfer service via personal computer and mobile phone. The

28
findings suggest that efficiency, convenience and safety are salient in determining the
differences in customer value perceptions between internet and mobile banking. The
findings of the qualitative study, being more depth than wide in nature, deserve to be
quantitatively measured in future studies in order to provide more generalized results.
The paper provides enhanced information for business managers about both positive and
negative customer value perceptions in internet and mobile banking. By understanding
how and what kind of value different service channels provide for customers service
providers are better enabled to create actions to enhance internet and mobile banking
adoption. The contribution of the paper lies in achieving a more profound understanding
on consumer value perceptions to internet and mobile banking. It expands the literature
on electronic and mobile commerce and on electronic banking especially.

Nandan et.al (2008) in his paper discusses the concept of Internet Banking, perception of
Internet bank customers, non-customers and issues of major concern in Internet banking.
The state of Internet banking in India has been explored using various concepts like E-
banking continuum, and gap analysis related to the various services and the security
features offered. In order to have a clear and focussed insight about the perceptions of
users (and non-users) about Internet banking a survey was conducted. The findings of the
survey provide valuable insights into concern for security, reasons for lower penetration,
and likeliness of adoption, which have been used to make useful recommendations.

Mishra & Kiranmai (2009) in their study found that information technology is
considered as the key driver for the changes taking place around the world. According to
Heikki, the transformation from the traditional banking to e-banking has been a 'leap'
change. The evolution of e-banking started from the use of Automatic Teller Machines
(ATMs) and telephone banking (tele-banking), direct bill payment, electronic fund
transfer and the revolutionary online banking. The future of electronic banking would be
more interactive i.e., TV banking. Finland is the first country in the world to have taken a
lead in e-banking. In India, ICICI Bank initiated e-banking services during 1997 under
the brand name 'Infinity'. It has been forecasted that among all categories, online banking
is the future of electronic financial transactions. The rise in e-commerce and internet in

29
enhancing online security transformation and sensitive information has been the core
reason for the penetration of online banking in everyday life. The shift towards the
involvement of the customers in the financial service with the help of technology,
especially internet, has helped in reducing costs of financial institutions as well as
clients/customers who use the service at anytime and from virtually anywhere with access
to an internet connection.

Uppal (2009) in his study found that in the post-LPG (Liberalization, Privatization and
Globalization) era and Information Technology (IT) era, transformation in Indian banks is
taking place with different parameters and the contours of banking services are
dynamically altering the face of banking, as banks are stepping towards e-banking from
traditional banking. On the basis of five-point likert-type scale, this paper empirically
analyzes the quality of e-banking services in the changing environment. With different
statistical tools such as weighted average method and ranking, the paper concludes that
most of the customers of e-banks are satisfied with the different e-channels and their
services, but the lack of awareness is a major obstacle in the spread of e-banking services.
The paper also suggests some measures to make e-banking services more effective in the
future.

Kuisma et.al (2006) conducted a research to identify the reasons for consumer resistance
to Internet banking. The special interest is to explore resistance among those bank
customers who already have valid contracts for Internet banking but prefer to pay their
bills via ATM. The objective is to identify those characteristics generating resistance to
Internet banking and their connections to values of individuals. In order to achieve the
objective, 30 Finnish bank customers were interviewed in-depth using the means-end
approach and the laddering interviewing technique. The findings indicate both functional
and psychological barriers arising from service-, channel-, consumer- and
communication-related means-end chains inhibiting Internet banking adoption. The
contribution of the paper lies in achieving a more profound understanding of consumer
resistance to Internet banking, and further, in offering suggestions and practical advice for
service providers' decision-making.

30
The perusal of review of literature revealed that the internet banking had been studied in
relation to various aspects like its adoption, growth, development and expectations of the
customers. But no study has been conducted in relation to the Net Banking service
provided by HDFC Bank.

31
 CHAPTER 3

NEED, SCOPE AND OBJECTIVES OF

THE STUDY

NEED, SCOPE AND OBJECTIVES OF THE STUDY

3.1 NEED OF THE STUDY

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

32
3.2 SCOPE OF THE STUDY

The area where the study has been conducted was Jalandhar.

3.3 OBJECTIVES OF THE STUDY

The current study was undertaken to achieve the following stated objectives:

1. To analyze awareness among customers using Net banking service.

2. To know about the Net Banking service provided by HDFC Bank.
3. To know the cause why customers are using or not using Net banking service.
4. To the confidence of the customers of HDFC Bank in using these services.
5. To study the popularity of the Net banking service among the customers of HDFC
Bank.

33
 CHAPTER 4
RESEARCH
METHODOLOGY

RESEARCH METHODOLOGY

Research is a common parlance which refers to search for knowledge. It is a procedure of

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

34
According to D. Slesinger and M. Stephenson research may be defined as “the
manipulation of things, concepts or symbols for the purpose of generalizing to extend,
correct or verify knowledge, whether that knowledge aids in the construction of theory or
in the practice of an art”. Thus it is original contribution to the existing stock of
knowledge of making for its advancement. In short, the search of knowledge through
objective and systematic method of finding solution to a problem is research.

4.1 RESEARCH DESIGN

A research design is the arrangement of conditions for collection and analysis of data in a
manner that aims to combine relevance to the research purpose with economy in
procedure. In fact, the research design is the conceptual structure within which research is
conducted. This research was descriptive in nature.

Descriptive research:
The research undertaken was a descriptive research as it was concerned with specific
predictions, with narration of facts and characteristics concerning net banking service
provided by HDFC Bank.

4.2. SAMPLING DESIGN

The following factors have been decided within the scope of sample design:

4.2.1 Universe of study: Universe of the study means all the persons who are the
customers of HDFC Bank in the world.

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

 Accessible: It covered all the individuals who are the customers of HDFC Bank
in India who are within our reach. In this study accessible population was
customers of HDFC Bank in India.
35
4.2.2 Sample Size: A sample of minimum respondents was selected from various areas
of Jalandhar. An effort was made to select respondents evenly. The survey was
carried out on 100 respondents.

4.2.3 Sample Unit: In this project sampling unit consisted of the various individuals
who had their bank accounts with HDFC Bank.

4.2.4 Sampling Technique: For the purpose of research convenient sampling techinque
was used.

4.2.5 Sampling Frame: It consisted of various sources from where information about
the respondent is extracted. Mainly personal links and employees of HDFC Bank,
Jalandhar are used for getting information about the respondents.

4.3 DATA COLLECTION AND ANALYSIS

4.3.1 DATA COLLECTION

There were two types of data sources used in this research. These were

4.3.1.1. Secondary data

Secondary data is the data collected from already been use or published information like
journals, diaries, books, etc .In this research project, secondary source used were various
journals, and website of various online journals.

4.3.1.2. Primary data

Primary data is the data collected for the first time from the source and never have been
used earlier. The data can be collected through interviews, observations and
questionnaires. In this project, an appropriate questionnaire was designed which was
filled by the customers of HDFC Bank to know their opinions regarding the Net Banking
service provided by HDFC Bank.

36
4.3.2 DATA ANALYSIS

4.3.2.1 Tools Of Presentation:

It means what all tools are used to present the data in a meaningful way so that it
becomes easily understandable. In this research tables and graphs were used for
presenting the data.

4.3.2.2 Tools Of Analysis

In this research the tools of analysis used were percentages. SPSS software were used to
conduct Friedman Anova, Reliability analysis and Factor Analysis.

4.4 LIMITATIONS OF THE STUDY

The following were the limitations of the study:

1. Non representative sample: In this research project a sample survey was

conducted. A sample of 100 respondents was selected. So such sample size cannot
be said to be the true representative of the universe.

2. Shortage of time: The time period of study was very limited. It is very difficult to
have in detail study on project work due to limited time period. The period of 4 to
6 weeks is not enough for the proper study of the project.

3. Inadequate data: The data provided was not up to the mark due to which we
faced problems in our research.

4. Lack of scientific method: The lack of scientific training in methodology of

research was great impediment in our research program, which led to the delay of
research.

37
5. Biasness in the responses: The answers provided by the respondents suffer from
biasness.

6. Cost Factor: It was not possible to conduct extensive research due to paucity of
funds.

CHAPTER 5
38
 DATA ANALYSIS AND
INTERPRETATION

DATA ANALYSIS AND INTERPRETATION

Statement 5.a Demographic Profile Of The Respondents

Table 5.a Demographic Profile of the Respondents

39
 Number of Percentage Of
Demographics
Respondents Respondents

Age:
Below 20 yrs 1 1%
20 – 35 yrs 33 33 %
35 – 50 yrs 40 40 %
50 – 65 yrs 17 17 %
65 yrs and above 9 9%
TOTAL 100 100 %
Qualification:
Undergraduate 5 5%
Graduate 65 65 %
Post Graduate 30 30 %
TOTAL 100 100 %
Occupation:
Businessman 32 32 %
Housewife 7 7%
Self Employed 17 17 %
Service 27 27 %
Student 4 4%
Professional 13 13 %
TOTAL 100 100 %
Annual Income:
Less than Rs 2 Lakhs 12 12 %
Rs. 2 – 6 Lakhs 27 27 %
Rs. 6 – 10 Lakhs 39 39 %
Rs. 10 – 15 Lakhs 17 17 %
Rs. 15 – 20 Lakhs 5 5%
Rs. 20 Lakhs and above 0 0%
TOTAL 100 100 %

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

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

41
 Table 5.1 Time period since the HDFC Bank’s services are being availed
Percentage of
Time Period Number of respondents
respondents
Less Than 2 years 9 9%
2 – 5 years 18 18 %
5 – 10 years 31 31 %
More Than 10 years 42 42 %
Total 100 100 %

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

Analysis and interpretation:

From the data collected, it can be that the majority of the respondents that is 42% of the
respondents have been HDFC Bank’s customer for more than 10 years, followed by 5 to
10 years with 31% of respondents.
It can be concluded that the majority of the respondents have been HDFC Bank’s
customer for more than 10 years.

Statement 2: Products and services of HDFC Bank availed by the customers

42
 Table 5.2: Products and services of HDFC Bank availed by the customers

Products and services Number of respondents Percentage of respondents

Loans 49 22.58 %
Deposit Accounts 63 29.03 %
Credit Cards 27 12.44 %
Debit Cards 19 8.75 %
Forex Services 22 10.13 %
ATM 24 11.05 %
NRI Services 13 6.00 %
Total 217* 100 %

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

Analysis and interpretation

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

43
* The total is more than sample size because of multiple responses.
Statement 3: Perception about the products and services offered by HDFC Bank

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

Perception Number of respondents Percentage of respondents

44
Lucrative 80 80 %
Non lucrative 5 5%
Can’t say 15 15 %
Total 100 100 %

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

Analysis and interpretation

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

Statement 4: Ways to access to HDFC Bank

Table 5.4: Ways to access to HDFC Bank

Ways Number of Respondents Percentage of Respondents

45
Net Banking 53 23.05 %
Phone Banking 28 12.18 %
One View 7 3.05 %
ATM 29 12.60 %
Branch Network 76 33.04 %
Email Statement 34 14.78 %
Insta Alert 3 1.30 %
Total 230* 100 %

Table 5.4: Ways to access to HDFC Bank

Analysis and interpretation:

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

46
* The total is more than sample size because of multiple responses.
Statement 5: Awareness regarding Net Banking Service provided by HDFC Bank

Table 5.5: Awareness regarding Net Banking Service provided by HDFC Bank
Awareness Number of respondents Percentage of respondents
Yes 96 96 %
No 4 4%
Total 100 100 %

47
 Table 5.5: Awareness regarding Net Banking Service provided by HDFC Bank

Analysis and interpretation:

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

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

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

Accessibility Number of respondents Percentage of respondents
Yes 81 81 %
No 19 19 %
Total 100 100 %

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

48
Analysis and interpretation:
Of the data collected it was found that about 81% of the respondents had accessed the net
banking service provided by the HDFC Bank while 19% of the respondents said that they
had not accessed the same.
It can be inferred that the majority of the respondents had availed the net banking service.

Statement 7: Net Banking services of HDFC Bank availed

Table 5.7: Net Banking services of HDFC Bank availed

Number of Percentage of
Services
respondents respondents
View accounts balances & statements 44 30.39 %
Transfer funds between accounts 32 22.07 %
Create Fixed Deposit online 8 5.51 %
Request a demand draft 5 3.44 %
Pay bills 29 20.00 %

49
Order a cheque book 16 11.03 %
Request stop payment on a cheque 11 7.56 %
Total 145* 100 %

Figure 5.7: Net Banking services of HDFC Bank availed

Analysis and interpretation:

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

50
* The total is more than sample size because of multiple responses.
Statement 8: Reasons for which Net Banking service should be availed

Table 5.8: Reasons for which Net Banking service should be availed

Reasons Mean Rank Ranks

Convenience 3.12 1
Curiosity 5.07 7
Low cost 4.41 5
Quick service 3.33 2
Maintenance 3.46 3
Safety 4.48 6
User friendly 4.13 4

51
1 being the most important and 7 being the least important

Analysis and interpretation:

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

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

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

Frequency Number of respondents Percentage of respondents

Less than once 28 34.56 %
1 to 3 times 39 48.14 %
3 to 8 times 10 12.34 %
8 to 15 times 4 4.96 %
More than 15 times 0 0%
Total 81 100 %

52
 Figure 5.9: Frequency of using the Net Banking service in a month

Analysis and interpretation:

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

53
Statement 10 : Difficulties faced while using the Net Banking service of HDFC Bank

Table 5.10 : Difficulties faced while using the Net Banking service of HDFC Bank
Number of Percentage of
Difficulties
respondents respondents
Logging in to your account 9 11.11 %
Making transactions 27 33.33 %
Safety issues 32 39.50 %
Unable to understand webpages 6 7.40 %
Regularly changing the IPIN and Password 7 8.64 %
Total 81 100 %

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

54
Analysis and interpretation:
It was found that the majority of the respondents that is 40% said that safety issues was
the major difficulty that they faced while using the Net Banking service, followed by
34% of the respondents who felt that making transactions with the bank through Net
Banking was difficult. However, 8% of the respondents faced difficulty in understanding
the webpages and 7% of the respondents felt that changing the IPIN and Password
regularly was difficult.
It was inferred that the majority of the respondents regarded the safety issues as the major
difficulty that they faced while using the Net Banking service.

55
Statement 11: Frequency of visiting the HDFC Bank branch

Table 5.11: Frequency of visiting the HDFC Bank branch

Frequency Number of respondents Percentage of respondents

Everyday 21 21 %
Alternate days 26 26 %
Once in a week 18 18 %
Twice in a month 9 9%
Thrice in a month 5 5%
Twice in a week 14 14 %
Once in a week 7 7%
Total 100 100 %

Figure 5.11 Frequency of visiting the HDFC Bank branch

56
Analysis and interpretation:
It was found that the majority of the respondents that is 26% said that they visited the
bank branch every alternate day, followed by 21% of the respondents who visited the
bank everyday. Only 5% of the respondents visited the bank branch thrice in a month.
It can be inferred that the majority of the respondents said that they visited the bank
branch every alternate day.
Statement 12: The main reason for which the bank branch is typically visited

Table 5.12: The main reason for which the bank branch is typically visited
Number of Percentage of
Reasons
respondents respondents
To make a deposit 31 31 %
To get a advice for investment purpose 13 13 %
To inquire about a balance 7 7%
To withdraw a cheque 23 23 %
To order a cheque book 15 15 %
To transfer funds between accounts 11 11 %
Total 100 100 %

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

57
Analysis and interpretation:
It was found that the majority of the respondents that is 31% said that the main reason of
visiting the bank is to make a deposit, followed by 23% who said that they visited the
bank branch typically to withdraw a cheque. Of the total only 7% and 11% of the
respondents visited the bank to inquire about a balance and to transfer funds between
accounts respectively.
It can be inferred that the majority of the respondents said that the main reason of visiting
the bank is to make a deposit.

58
Statement 13: Agreement regarding Net Banking service being better than traditional
banking

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

Agreement Number of respondents Percentage of respondents

Yes 64 64 %
No 36 36 %
Total 100 100 %

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

59
Analysis and interpretation:
Of the data collected it was found that the majority of the respondents that is 64%
respondents agreed that net banking is better than the traditional banking while 36% of
the respondents disagreed with the statement.
It can be inferred that the majority of the respondents felt that the net banking service was
better than traditional banking.

Statement 14: Reasons due which Net Banking service is not popularly used

Table 5.14: Reasons due which Net Banking service is not popularly used

Reasons Mean Rank Rank

Net banking web pages are confusing 4.40 5
Use of computer or internet is difficult 4.53 6
Neither friends nor relatives use internet 4.03 4
Net banking facility is not secured 3.43 2
It is more expensive than going to a branch 4.76 7
Net banking offers no receipts on payments 3.28 1
Net banking is not reliable 3.57 3
1 being the most important and 7 being the least important

Analysis and interpretation:

60
Scores are significantly different on The Friedman two way ANOVA test (p<0.001) for
the listed 7 reasons due to which Net Banking service is not popularly being used. The
Net banking offers no receipts on payments was ranked first that is the most important
reason while it is more expensive than going to a branch was given the last rank that is
seven.
It can be concluded that the majority of the respondents regarded that the most important
reason for which Net Banking service is not being used popularly was that it does not
offer receipts on payments and the least important reason was that it is more expensive
than going to a branch.

Statement 15: Raters agreement

Reliability Statistics

Table 5.20.1: Cronbach's Alpha

Cronbach's Alpha N of items

0.716 10

Table 5.20.2: KMO and Bartlett's Test

Kaiser-Meyer-Olkin Measure of Sampling Adequacy .725

Bartlett's Test of Approx. Chi-Square 248.386
Sphericity Df 45
Sig. .000

Table 5.15.3: Total Variance Explained

61
 Initial Eigenvalues
Component
Total % of Variance Cumulative %
1 3.116 31.157 31.157
2 1.723 17.226 48.382
3 1.080 10.798 59.181
4 .992 9.922 69.103
5 .783 7.827 76.930
6 .686 6.859 83.788
7 .525 5.254 89.043
8 .465 4.648 93.691
9 .369 3.690 97.381
10 .262 2.619 100.000

Table 5.15.4: Component Matrix

COMPONENT
1 2 3
Convenience .822 -.294 .050
Safety .748 -.369 -.069
Functionality .685 -.375
Necessity .781 -.193 -.207
Language .461 .383 -.163
Physical .396 .499 .467
Access .556 -.061 .649
Trans_costs .190 .345 .219
Service .207 .677 -.419
Safety_feature .210 .695
Extraction Method: Principal Component Analysis.
a. 3 components extracted.

Table 5.15.5: Rotated Component Matrix

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 COMPONENT

1 2 3
Convenience .836 -.079 .242
Safety .826 -.100 .086
Functionality .712 .317 -.065
Necessity .820 .123 .050
Language .302 .509 .188
Physical .054 .280 .737
Access .371 -.241 .734
Trans_costs .226 .390
Service .823
Safety_feature -.085 .622 .366
Extraction Method: Principal Component Analysis.
Rotation Method: Varimax with Kaiser Normalization.

Table 5.14.6: Factor Analysis

Variables Statements Factor Loadings

Net Banking is easy and

Convenience .836
convenient to use.
Transactions conducted through
Safety Net Banking are safe and .826
secure.
The web pages function
Functionality .712
properly.
Net Banking service is a
Necessity .820
necessity.
The website pages are available
Language in the languages you .509
understand.
Net Banking facility reduces
Physical the frequency of customer’s .737
visit to a physical bank.
Access Access to accounts 24x7 is .734

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 important to you.
The transaction costs are lesser
Trans_costs .390
in case of Net Banking service.
Net Banking service provided
by HDFC Bank is better than
Service .823
the online services provided by
others banks.
HDFC Bank is taking adequate
Safety_feature steps to check the security of its .622
customers.

Table 5.15.7 Service Quality

Factor Label Statements Factor Loadings

Net Banking is easy and

.836
convenient to use.
Transactions conducted through
.826
Net Banking are safe and secure.
Service Quality
The web pages function
.712
properly.

Net Banking service is a

.820
necessity.

Table 5.15.8: Adequate Mechanism

Factor Label Statements Factor Loadings

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 The website pages are available
.509
in the languages you understand.

Net Banking service provided by

HDFC Bank is better than the
.823
Adequate Mechanism online services provided by
others banks.

HDFC Bank is taking adequate

steps to check the security of its .622
customers.

Table 5.15.9 Accessibility

Factor Label Statements Factor Loadings

Net Banking facility
reduces the frequency of
.737
customer’s visit to a
physical bank.
Accessibility Access to accounts 24x7 is
.734
important to you.
The transaction costs are
lesser in case of Net .390
Banking service.

Analysis and interpretation:

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

65
Analysis (PCA) had been used to explore and confirm the inter-relatedness between the
occurrences of variables pertaining to net banking.

The correlation matrix of the ten variables on net banking had been subjected to the PCA.
It provided a set of components, which explained variances in descending order of total
variance of a set of variables pertaining to a domain of variables under study.
Theoretically, it extracted as many components as is the number of variables.

The number of principal components to be retained has been decided based on Kaiser’s
criterion of Eigen value>1 and Bartlett’s test. The Bartlett’s test of significance led to
acceptance of ten significant principal components.

The PCA with varimax rotation method has been used to maximize the sum of squared
loading of each factor extracted in turn. It explained more variance than the loadings
obtained from any other method of factoring. The factors loaded by variables having
significant loadings of the magnitude of 0.40 and above have been interpreted.

The scales of measurement were tested using Cronbach α reliability test. Cronbach α was
0.5, which is satisfactory level of construct validity. The correlations between the factors
were then examined which revealed the existence of correlation between certain factors.
This perusal suggested the use of factor analysis to investigate any distinct underlying
factors and to reduce the redundancy of certain barriers indicated in the correlation
matrices. Principal Component Analysis was chosen as the method of extraction in order
to account for maximum variance in the data using minimum number of factors.

The default solution (eigen values>1) resulted in extraction of four factors.

The factor 1 variables, convenience, safety, functionality, necessity are labeled as

“Service Quality”. Factor 2 was named as “Adequate Mechanism” including: language,
service and safety feature variables. Factor 3 was named as “Usability” including
physical, access and trans cost.

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67
 CHAPTER 5
FINDINGS OF THE
STUDY

68
 FINDINGS OF THE STUDY

The findings of the study were as follows:

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

69
 receipts on payments and the least important reason was that it is more expensive
than going to a branch.
15. The majority of the respondents agreed that net banking is convenient and safe to
use and felt that transaction costs are lesser in case of net banking service. While
majority of the respondents disagreed that net banking facility reduces the
frequency of customer visits to a physical bank.

70
CHAPTER 7

CONCLUSION

71
 CONCLUSION

7.1 CONCLUSION

The introduction of new technology has been changing the attire of banking. The brick
and mortar banking is slowly giving place to click of the mouse banking. Technology is
aiding globalization and integration of financial markets across the globe. Customer’s
expectations for new products and alternatives delivery channels have been rising. Banks
are under pressure to offer today, what customers would be expecting tomorrow. Thanks
to innovations and spread of new technology, banks today offer the customer a choice to
conduct his business across the counter, over phone or via a computer. The Rangarajan
Committee (1988) report is the first step for the introduction of computers. The Saraf
Committee (1994) on Technology issues relating to payments, cheques clearing and
securities settlements made several recommendations to improve the quality of service.
The introduction of new instruments such as ATM, retail Electronic Funds Transfer (EFT)
and Electronic Clearing Services (ECS) have all helped in developing an effective,
efficient and speedy payment and settlement systems.

In literature, the major emphasis have laid on significant innovation and investment is
under way that could lead to very rapid expansion in fully electronic business to business
and consumer to consumer payments in near time. While the pace of change in these
market makes it difficult to determine, eventually these innovations will generate
substantial effeciencies in retail payment system. Bank regulators are paying significant
attention to appropriate risk management of new technology. Evidence reveals a sense of
urgency about the adoption of new technology and reflects substantial competitive
pressure to act quickly.

The objective of the study was to study was to comprehend the Net Banking service
provided by HDFC Bank. The research was descriptive in nature. The universe of the
study was the customers of the HDFC Bank. The survey was carried out on 100
respondents. In this research for data analysis tools used were tables and graphs. Majority

72
of the respondents were aware of the Net Banking service provided by the bank and
availed the various services offered through net banking. Majority of the respondents felt
that net banking facility have enabled the customers to perform various banking
transactions online. It is hoped that the survey findings will have some useful
applications.

7.2 RECOMMENDATIONS

Following are the recommendations of the study:

1. The bank should make some efforts to familiarize the customers to various
services through demonstrations.
2. The bank should adopt more upgraded techniques to make their customer feel
more secure while accessing their accounts.
3. Effective awareness campaigns should be undertaken by the banks to make their
customers more aware of net banking service.
4. The bank should make a effort to provide a platform from where the customers
can access different accounts at single time without extra charge.
5. The bank should take steps to create a trust in mind of customers towards security
of their accounts.
6. The HDFC bank should introduce more services which can be accessed through
Net Banking like advice on investment, TDS, etc.

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