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Banking Theory and Practice

Notes

Case Study The Indian Internet Banking Journey

“We want to use the Internet to become a universal banking major.”
In 2001, a Reserve Bank of India survey revealed that of 46 major banks operating in India,
around 50% were either offering Internet banking services at various levels or planned to
in the near future. According to a research report, while in 2001, India’s Internet user base
was an estimated 9 lakh; it was expected to reach 90 lakh by 2003.
Also, while only 1% of these Internet users utilized the Internet banking services in 1998,
the Internet banking user base increased to 16.7% by mid- 2000. Many of the major banks
like ICICI, HDFC, IndusInd, IDBI, Citibank, Global Trust Bank (GTB), Bank of Punjab and
UTI were offering Internet banking services.

Based on the above statistics and the analysts’ comments that India had a high growth
potential for Internet banking, the players focused on increasing and improving their
Internet banking services. As a part of this, the banks began to collaborate with various
utility companies to enable the customers to perform various functions online. ICICI’s
‘Infinity,’ which was already a leader in the Indian Internet banking arena, began to allow
its customers to pay their online real time shopping bills. HDFC, through its ‘payment
gateway’ feature, allowed its Internet banking customers to make online and real time
payments for their purchases. HDFC also entered into tie-ups with various portals to
provide these business-to-customer (B2C) e-commerce transactions.
As more banks entered Internet banking arena, the competition between the banks also
increased. This compelled the banks to focus on capturing new markets and customers and
adopting advanced technology on the Internet.
In the light of these developments, industry watchers remarked that Internet banking had
arrived in a big way. Though it had a long way to go compared to the global standards, it
was beginning to be seen as a replacement for the traditional banking set up in the future."

About Internet Banking
Globally, the banking business has always been in the forefront of harnessing technology
to improve its services and efficiency. Banks have been quick to adopt rapidly evolving
electronic and telecommunication technologies to deliver an extensive line of value added
products and services to their customers. By the early 1990s, direct dial-up connections,
personal computers, tele-banking and automated teller machines (ATMs) became common
in most developed nations.

Internet banking evolved in the mid-1990s when Internet and the World Wide Web began
to catch on. Soon, many major banks in the US and Europe began to use the Internet to
provide banking services. Internet banking is a web-based service that enables the bank's
authorized customers to access their account information. It allows the customers to log
on to the bank's website with the help of a bank-issued identification and a personal
identification number (PIN).
ICICI - Internet Banking Initiatives

ICICI bank was incorporated as a commercial banking company, by the Industrial Credit
and Investment Corporation of India (ICICI), in May 1994. The first ICICI branch was
started in June 1994 at Chennai. The bank provides an array of domestic and international

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