A study On

IMPACT OF IMPLEMENTATION OF ELECTRONIC FUND TRANSFER (EFT) ON BANKS AND ITS USERS
Submitted in Partial Fulfillment of the Requirements of Bangalore University for the Award of the Degree of

MASTER OF BUSINESS ADMINISTRATION

By

Under the Guidance of

EMPOWERING MINDS

ACHARYA INSTITUTE OF MANAGEMENT & SCIENCES 1st Cross, 1st Stage, Peenya Industrial Area Bangalore 560 058 2008 2010

DECLARATION

I, , hereby declare that this dissertation titled, The Role of, is based on the original project study conducted by me under the guidance of Prof. KIRAN K S.

This has not been submitted earlier for the award of any other degree / diploma by Bangalore University or any other University.

Date: Place: ()

Acharya Institute of Management and Sciences

1st Cross, I stage Peenya Industrial Area Bangalore - 560058

CERTIFICATE

Certified that this dissertation titled Impact of Implementation of Electronic Fund

Transfer (EFT) on Banks and Its Users is based on the study conducted by of IV
Semester MBA under the guidance of Prof KIRAN K S.

This dissertation is based on the original project study undergone and has not formed the basis for the award of any other degree/diploma by Bangalore University or any other University.

Prof Kiran K S Department of Management Studies Date: Place:

Dr. Kerron G Reddy CEO and Principal, AIMS Date: Place:

CERTIFICATE FROM THE GUIDE

Certified that this dissertation titled Impact of Implementation of Electronic Fund

Transfer (EFT) on Banks and Its Users is based on an original project study conducted
by Mr. of IV Semester MBA under my guidance. This dissertation has not formed the basis for the award of any other degree / diploma by Bangalore University or any other University.

Date: Place: (Prof. KIRAN K S)

ACKNOWLEDGEMENT

I would like to convey my deep gratitude to Prof. KIRAN K S for his valuable guidance imparted, which has enabled me to complete this dissertation in accordance with Bangalore University norms.

I am thankful to Dr. KERRON G REDDY, Principal and CEO of AIMS, who had provided all the required facilities to carry out the report work and nurturing my skills to execute the requirement.

Last but not least, my gratitude goes to my family members and peers, who showered upon me with their best of good wishes and help, towards the successful completion of my dissertation.

()

CONTENTS

Chapter No. 1

Name of the Chapter Introduction 1.1 Indian Bank Profile 1.2 National Electronic Fund Transfer (NEFT) 1.3 Real Time Gross Settlement (RTGS) 1.4 Electronic Clearing Service (ECS) Research Methodology 2.1 Introduction 2.2 Statement of the Problem 2.3 Review of Literature 2.4 Objectives of the Study 2.5 Scope of the Study 2.6 Research Design 2.7 Sampling Method 2.8 Sample Size 2.9 Sources of Data 2.10 Limitations 2.11 Tool of Analysis Industry Profile 3.1 History of Banking in India 3.2 Nationalization of Banks in India 3.3 Scheduled Commercial Banks in India 3.4 Banking Structure in India 3.5 Major Reforms and Initiatives Analysis and Interpretation of Data Findings, Suggestions and Conclusion 5.1 Findings from the Secondary Data 5.2 Findings from the Questionnaire 5.3 Suggestions Conclusion

Page No. 1-17

18-22

23-30

4 5

31-53 54-61

62

LIST OF FIGURES

Serial No. 1 2 3 4 5 6 7 8 9 10 11 12 13

Name of the Figure 3.1 Banking Structure in India 4.1 Transferred Funds without EFT 4.2 Means of Non-EFT Transfer 4.3 Reason for using Non-EFT 4.4 Awareness of EFT 4.5 Source of Information 4.6 Use EFT 4.7 EFT Means of Fund Transfer 4.8 Why Prefer EFT 4.9 Technical Know How 4.10 Preference for EFT/Non-EFT 4.11 Change in Frequency of Transfer of Funds 4.12 EFT Convenient than Non-EFT

Page No. 30 31 33 34 36 37 39 40 42 43 45 46 48

LIST OF TABLES

Serial No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Name of the Table 4.1 Transferred Funds without EFT 4.2 Means of Non-EFT Transfer 4.3 Reason for using Non-EFT 4.4 Awareness of EFT 4.5 Source of Information 4.6 Use EFT 4.7 EFT Means of Fund Transfer 4.8 Why Prefer EFT 4.9 Technical Know How 4.10 Preference for EFT/Non-EFT 4.11 Change in Frequency of Transfer of Funds 4.12 EFT Convenient than Non-EFT 4.13 Income(INR)*Use EFT Crosstabulation 4.14 Chi-Square Test 4.15 Income (INR)*Change in Frequency of Transfer of Funds Crosstabulation 4.16 Chi- Square Test 4.17 Age (Years)*Use EFT Crosstabulation 4.18 Chi-Square Test 4.19 Gender*Use EFT 4.20 Chi-Square Test 5.1 Indian Bank (Non-EFT Charges) 5.2 ING Vysya Bank (Non-EFT Charges) 5.3 Indian Bank (Cheque Collection Charges) 5.4 NEFT Charges 5.5 RTGS Charges

Page No. 31 32 34 35 37 38 40 41 43 44 46 47 49 49 50 50 51 51 52 52 55 55 56 57 57

EXECUTIVE SUMMARY

The purpose of this dissertation was to study the impact of implementation of Electronic Fund Transfer (EFT) on the banks and their customers. As we all know that how in 21 st century, we all have become so addicted to technology and machines that without them we become helpless. This is the impact of Science and Technology. So when each and every nation, organization and even individual is using the benefits of technology to their fullest how can banks stay behind? Banks too have implemented various technologies to help themselves serve their customers better and ultimately make profits. That is reason for selecting this particular topic. During the course of this project I got an opportunity to learn a lot of new things. The secondary data required for the project is collected to know the changes in the funds transfer system from the banks staff and various books, magazines and internet of course. The primary data is collected to understand the customers perception regarding this facility from the customers of various banks through a well designed questionnaire. The research design for study is descriptive research. The sampling technique used is convenience sampling. The result of the questionnaire is analysed by using statistical tools such as percentage and cross tabulation. SPSS is used for analyses of corected data. The suggestions revolve around the findings collected through both the secondary data and the primary data. The banks can maintain a striking balance between the number of EFT transactions and the Non-EFT transactions. Banks can take an initiative to educate people about the EFT, because many are aware of this system but many do not use this system fearing it is not secured enough.

INTRODUCTION

In this modern era due to the various inventions and technological advancements, our life has become very smooth and easy. Today we all can do most of our day to day work at the click of a button. Thanks to technology. Many organizations too have applied latest technology to operate efficiently. The advanced technologies have not only helped the organizations to operate efficiently, but also to benefit the society. The new advanced technology is not only limited to any one particular industry or sector, but to all the industries and sectors. Then in such a scenario how can banks stay away? These days even the banks have adopted latest technologies to operate better and serve its clients in a better way. One of such technologies is Electronic Fund Transfer (EFT). In India EFT can be classified into: NEFT RTGS ECS In the further chapters lets discuss about the above mentioned technologies in detail so that we can get to know more about the above mentioned systems and a brief overview about the Indian bank.

1.1 Indian Bank Profile 1.1.1 A premier bank owned by the Government of India
Indian bank was established on 15 th August 1907 as part of the Swadeshi movement. Since then it is now serving the nation with a team of over 22, 000 dedicated staff. It is a premier bank owned by the Government of India. Indian bank head office is situated in Chennai. Its total business as on 31.03.2009 crossed Rs. 1, 24, 413 Crores. Banks Operating Profit increased to Rs. 2, 228.83 Crores as on 31.03.2009. The Net Profit increased to Rs. 1, 245.32 Crores as on 31.03.2009. The Indian Bank has successfully implemented Core Banking Solution (CBS) in all 1750 branches.

International Presence

Indian bank has branches not only in India, but also outside India. Its overseas branches are in Singapore and Colombo including a Foreign Currency Banking Unit which is situated in Colombo. In addition to that Indian bank has 240 Overseas Correspondent banks in 70 countries.

1.1.2 Diversified banking activities- 3 Subsidiary companies

Along with the normal banking functions Indian bank has also diversified in various banking activities. It has incorporated 3 subsidiary companies namely: Indbank Merchant Banking Services Ltd. Indbank Housing Ltd. Indfund Management Ltd.

1.1.3 Indbank Merchant Banking Services Ltd: Indbank Merchant Banking Services
Limited (Indbank) was incorporated in the year 1989 as a subsidiary of Indian Bank. Indbank is engaged in Merchant Banking: Indbank is a Category 1 Merchant Banker registered with Securities Exchange Board of India (SEBI) undertaking assignments under various capacities like Lead Manager, Co-Manager, Advisor, Arranger etc. for public issues and private placement. It also takes assignments for acquisition of shares & takeovers under SEBI (Substantial Acquisition of shares and Takeovers) Regulations, 1997, SEBI (Buyback of Securities) Regulations, 1998 and SEBI (De-listing of Securities) Guidelines, 2003. Also takes assignments for Employee Stock Option Scheme/Stock Purchase Scheme by Corporate under the SEBI (Employee Stock Option Scheme and Employee Stock Purchase Scheme), Guidelines, 1999. Advisory Services: Advisory services include valuation of shares & other financial instruments, syndication of loans, acquisitions, mergers & amalgamations and project counseling, appraisal & feasibility studies.

 Stock Broking: Indbank is a SEBI registered member of National Stock Exchange of India (NSE), Bombay Stock Exchange (BSE), Madras Stock Exchange (MSE) and Over The Counter Exchange of India (OTCEI). Indbank currently operates in the Cash, Derivatives & Wholesale Debt Market Segments of NSE for both retail and institutional investors and in cash segment of BSE. Depository Participant Activities: Indbank is a SEBI registered Depository Participant with National Securities & Depository Limited (NSDL) and is governed by the Depositories Act 1996, SEBI (Depositories & Participants) Regulations, 1996 and circulars issued by SEBI and NSDL from time to time. Distribution of Mutual Fund and other Investment products: As a part of broking, Indbank distributes Mutual Fund and investment products and is registered with the Association of Mutual Funds of India (AMFI) for distribution of Mutual Fund products. Online Trading: To enable the customer to trade from anywhere under Internet based trading system, Indbank has launched a powerful and user friendly online trading facility which is completely safe and secure. The facility is designed to provide you an expedient and paperless trading experience.

1.1.4 IndFund Management Ltd: Indian Bank Mutual Fund (IBMF) was formed as a
trust during 1990 sponsored by Indian Bank with a corpus of Rs. 25 lakhs. The schemes of IBMF were managed by trust during the years 1990-1994. To comply with the SEBI (MF) Regulations, 1993, Indfund Management Ltd. (IFML), the Asset Management Company was formed during January 1994 as a wholly owned subsidiary of Indian Bank with a paid up capital of Rs.5 crores. Since January 1994, the schemes of IBMF are being managed by IFML. IBMF launched 12 close-ended schemes and raised Rs.627.10 crore. Out of the 12 schemes 9 schemes were redeemed on maturity dates. Three schemes, i.e., Ind Navratna, Ind Shelter and Ind Tax Shield schemes were transferred to Tata Mutual Fund during November 2001.

1.1.5 A front runner in specialised banking

Indian is a front runner in specialised banking. It has 90 Forex Authorised branches inclusive of 1 Specialised Overseas Branch at Chennai exclusively for handling forex transactions arising out of Export, Import, Remittances and Non Resident Indian business. Apart from that Indian bank has 1 Small Scale Industries Branch, extending finance exclusively to SSI units.

1.1.6 Leadership in Rural Development

Indian bank being a responsible bank is not only focusing on the urban parts of the country but also extending an immense support to the rural parts of the country to help them develop. Indian bank is pioneer in introducing Self Help Groups and Financial Inclusion Project in the country. It is Award winner for Excellence in Agricultural Lending from Honorable Union Minister of Finance. Indian bank has also bagged the Best Performer Award for Micro-Finance activities in Tamil Nadu and Union Territory of Puducherry from NABARD. Apart from these it has established 7 specialized exclusive Microfinance branches called Microsate across the country to cater the needs of the urban poor through SHG (Self Help Group)/JLG (Joint Liability Group) concepts. It has a special window for Micro finance viz., Micro Credit Kendras are functioning in 44 Rural/Semi Urban branches. Indian bank is harnessing ICT (Information and Communication Technology) for Rural Development and Inclusive Banking. Indian bank has a provision of technical assistance and project reports in Agriculture to entrepreneurs through Agricultural Consultancy and Technical Services (ACTS). 1.1.7 A pioneer in introducing the latest technology in Banking Indian bank has been a pioneer in introducing the latest technology. Indian bank has 100% Core Banking Solution (CBS) Branches. Its business is 100% Business Computerized. That is the reason it works operates efficiently. Indian bank has 168 Centers throughout the country covered under Anywhere Banking. It has 966 connected Automated Teller Machines (ATM) in 260 cities/towns. Indian bank provides a 24*7 service through 40000 ATMs under shared network. It is leader in Internet and

Tele Banking Services to all Core Banking customers. It provides E-payment facility for corporate customers. The other services provided by Indian Bank are Cash Management Services, Depository Services, Reuter Screen, Telerate, Reuter Monitors, Dealing System provided at Overseas Branch, Chennai. Indian bank has launched IB Credit Card.

1.1.8 Vision: To take banking technology to the common man 1.1.9 Mission: To be a common mans bank to provide all financial services
under one roof at an affordable cost in a fair and transparent manner to all our customers

1.1.10 Logo:

1.2 National Electronic Fund Transfer (NEFT) 1.2.1 Introduction:

National Electronic Fund Transfer (NEFT) is an online system for transferring funds of Indian financial institutions (especially banks). This facility is used mainly to transfer funds below Rs. 1, 00, 000. The Reserve Bank of India has instructed banks that they should not use Real Time Gross Settlement (RTGS) for amounts below Rs. 1 lakh (100 thousand). The new rule came into effect on 1 January 2007. For small transactions, RBI has asked banks to offer National Electronic Fund Transfer (NEFT) which provided T+0 and T+1 settlement

system (depending on the time a customer gives instruction to the bank for transferring the fund). Individuals, firms or Corporates maintaining accounts with a bank branch can transfer funds using NEFT. Even such individuals, firms or Corporates who do not have a bank account (walk in customers) can also deposit cash at the branch with instructions to transfer funds using NEFT. A separate Transaction Code (No. 50) has been allotted in the NEFT system to facilitate walk-in customers to deposit cash and transfer funds to a beneficiary. Such customers have to furnish full details including complete address, telephone number etc. NEFT, thus, facilitates originators or remitters to initiate funds transfer transactions even without the need for having a bank account. NEFT is a creditpush system i.e. transactions can be originated only to transfer funds to the beneficiary. So a transaction cannot be originated to receive funds from another account. NEFT can also be used to transfer funds from or to a Non-Resident Indian (NRI) or Non-Resident External (NRE) accounts in the country. This, however, is subject to applicability of provisions of the Foreign Exchange Management Act, 2000 (FEMA). NEFT system can be used only for remitting Indian Rupees between the participating bank branches in the country. NEFT is on net settlement basis. It involves 6 settlement cycles a day 9:00 am, 11:00 am, 12 noon, 1:00 pm, 3.00 pm and 5:00 pm. Thus if a customer has given instruction to its bank to transfer money through NEFT to another bank in the morning hours, money would be transferred the same day, but if the instruction is given later during the day, money would be transferred next day. NEFT is available in 62, 000 branches of 94 banks in India (out of 75, 000 bank branches). NEFT is available only in 15 locations where RBI has its clearing house. There is no minimum value for NEFT.

1.2.2 Working of NEFT system:

Step1: An individual/firm/corporate intending to originate or transfer funds through NEFT has to fill an application form giving details of the beneficiary (like, name of the beneficiary, name of the bank branch where the beneficiary has an account, IFSC of the beneficiary bank branch, account type and account

number). The application form will be available at the originating bank branch. The originator authorizes the branch to debit hi/her account and remit specified amount to the beneficiary. Customers enjoying net banking facility offered by their bankers can initiate the funds transfer request online. Some banks offer the NEFT facility even through the ATMs. Walk-in customers will, however, have to give their contact details (complete address and telephone no. etc.,) to the branch. This will help the branch to refund the money to the customer in case credit could not be afforded to the beneficiarys bank account or the transaction is rejected or returned for any reason. Step 2: The originating bank branch prepares a message and sends the message to its pooling center (also called the NEFT Service Center). Step 3: The pooling centre forwards the message to the NEFT Clearing Centre (operated by National Clearing Cell, Reserve Bank of India, Mumbai) to be included for the next available batch. Step 4: The Clearing Centre sorts the funds transfer transactions destination bank-wise and prepares accounting entries to receive funds from (debit) the originating banks and give the funds to (credit) the destination banks. Thereafter, bank-wise remittance messages are forwarded to the destination banks through their pooling centre (NEFT Service Center). Step 5: The destination banks receive the remittance messages received from the Clearing Centre and pass on the credit to the beneficiary accounts. The beneficiary can expect to get credit for the first four batches on week days (i.e., transactions from 9 am to 1 pm from Monday to Friday) and the first two batches on Saturdays (i.e., transactions from 9 to 11 am) on the same day. For transactions settled in the last two batches on week days (i.e., transactions settled in the 3 and 5 pm batches) and the last batch on Saturdays (i.e., transactions handled in the 12 noon batch) beneficiaries can expect to get credit either on the same day or on the next working day morning (depending on the type of facility enjoyed by the beneficiary with his/her bank).

In case of non-credit or delay in credit to the beneficiary account, the NEFT Customer Facilitation Centre (CFC) of the respective bank can be contacted (the originator can contact his banks CFC; the beneficiary may contact the CFC of his bank). Details of NEFT Customer Facilitation Centers of banks are available on the websites of the respective banks. The details are also available on the website of Reserve Bank of India at http://www.rbi.org.in/scripts/neft.aspx. If the issue is not resolved satisfactorily, the NEFT Help Desk (or Customer Facilitation Centre of Reserve Bank of India) at National Clearing Cell, Reserve Bank of India, Mumbai may be contacted through e-mail or by addressing correspondence to the General Manager, Reserve Bank of India, National Clearing Centre, First Floor, Free Press House, Nariman Point, Mumbai-400021.

1.2.3 Processing or Services charges for NEFT transactions:

Reserve Bank of India had waived the processing or service charges for member banks till March 31, 2010. Accordingly, member banks participating in NEFT need not pay any processing or service charges to Reserve Bank of India. Further, processing or service charges to be levied by the member banks from their customers have also been rationalized by Reserve Bank of India as under: a) Inward transactions at destination bank branches (for credit to beneficiary accounts) Free, no charges to be levied from beneficiaries.

b) Outward transactions at originating bank branches (charges for the remitter) For transactions up to Rs. 1 lakh charges not exceeding Rs. 5. For transactions of Rs. 1 lakh and above charges not exceeding Rs. 25.

There is no value limit for individual transactions. The receiving branch acknowledges every transaction it receives after crediting the beneficiarys account. The acknowledgement particulars reach the remitting branch as an inward message on Day

3 of the EFT processing cycle. The remitting branch will, therefore, have precise information as to when the beneficiarys account was credit. It is not necessary for all branches to have computer systems. Branches can send the remittance details to their service branch in paper format (the copies of the EFT Application Forms submitted by the remitting customers accompanied by a Remittance Scroll). The service branch will make data entry and transmit the funds transfer information electronically to local NCC. But, if a branch has computer facility, it can transmit funds transfer information electronically to its service branch either on a floppy or through a network. This would minimize the data entry work at service branch. Each participating bank has to identify a branch at the respective center to act as the link point for transmitting all outward messages and receiving all inward messages. The Service Branch/Main Branches of banks who have been coordinating the chequeclearing are in the best position to discharge this role. So no additional organizational infrastructure is required to be created.

1.3 Real Time Gross Settlement (RTGS)

The acronym RTGS stands for Real Time Gross Settlement. RTGS system is a funds transfer mechanism where transfer of money takes place from one bank to another on a 'real time' and on 'gross' basis. It came into effect from March 2004. This is the fastest possible money transfer system through the banking channel. Settlement in 'real time' means payment transaction is not subjected to any waiting period. The transactions are settled as soon as they are processed. 'Gross settlement' means the transaction is settled on one to one basis without bunching with any other transaction. Considering that money transfer takes place in the books of the Reserve Bank of India, the payment is taken as final and irrevocable. The RTGS system is primarily for large value transactions. The minimum amount to be remitted through RTGS is Rs.1 lakh. There is no upper ceiling for RTGS transactions. No minimum or maximum stipulation has been fixed for NEFT transactions. In RTGS system, under normal circumstances the beneficiary branches are expected to receive the funds in real time as soon as funds are transferred by the remitting bank. The beneficiary bank has to credit the beneficiary's account within two hours of

receiving the funds transfer message. The remitting bank receives a message from the Reserve Bank that money has been credited to the receiving bank. Based on this the remitting bank can advise the remitting customer that money has been delivered to the receiving bank. If the money is not credited to the beneficiarys account then it is expected that the receiving bank will credit the account of the beneficiary instantly. If the money cannot be credited for any reason, the receiving bank would have to return the money to the remitting bank within 2 hours. Once the money is received back by the remitting bank, the original debit entry in the customer's account is reversed. The RTGS service window for customer's transactions is available from 09:00 hours to 18:00 hours on week days and from 09:00 hours to 14:30 hours on Saturdays for settlement at the RBI end. However, the timings that the banks follow may vary depending on the customer timings of the bank branches. The Processing Charges/Service Charges for RTGS transactions are as follows: a. Inward transactions: Free, no charge is levied. b. Outward Transactions: Rs. 1lakh to Rs. 5lakh: Rs. 25/- per transaction Rs. 5lakh and above: Rs. 50/- per transaction. The remitting customer has to furnish the following information to a bank for affecting a RTGS remittance: 1. Amount to be remitted. 2. His/her account number which is to be debited. 3. Name of the beneficiary account. 4. Name of the beneficiary customer. 5. Account number of the beneficiary customer. 6. Sender to receiver information, if any.

7. The IFSC number of the receiving branch. Since India is such a huge country and the banks in India have such a wide network, so all the bank branches in India are not RTGS enabled. As on December 31, 2008, more than 52, 000 bank branches are RTGS enabled. The list of such branches is available on RBI website www.rbi.org.in/Scripts/Bs_viewRTGS.aspx Some banks with internet banking facility provide remittance transaction tracking service. Once the funds are credited to the account of the beneficiary bank, the remitting customer gets a confirmation from his bank either by an e-mail or by a short message on the mobile. In case of non-credit or delay in credit to the beneficiary account, the remitter can contact his/her bank/branch. If the issue is not resolved satisfactorily, the Customer Service Department of RBI may be contacted at The Chief General Manager, Reserve Bank of India, Customer Service Department, 1st Floor, Amar Building, Fort, Mumbai- 400 001. On a typical day, RTGS handles about 60, 000 transactions a day for an approximate value of Rs. 2, 700 billion.

1.4 Electronic Clearing Service (ECS) 1.4.1 Introduction:

Electronic Clearing Service (ECS) is a mode of electronic funds transfer from one bank account to another bank account using the services of a Clearing House. This is normally for bulk transfers from one account to many accounts or vice-versa. This can be used both for making payments like distribution of dividend, interest, salary, pension, etc. by institutions or for collection of amounts for purposes such as payments to utility companies like telephone, electricity, or charges such as house tax, water tax, etc or for loan installments of financial institutions/banks or regular investments of persons.

1.4.2 Types of ECS:

There are two types of ECS called ECS (Credit) and ECS (Debit). ECS (Credit) is used for affording credit to a large number of beneficiaries by raising a single debit to an account, such as dividend, interest or salary payment. ECS (Debit) is used for raising debits to a number of accounts of customers/account holders for crediting a particular institution.

1.4.3 Working of ECS Credit System:

ECS payments can be initiated by any institution (called ECS user) that have to make bulk or repetitive payments to a number of beneficiaries. They can initiate the transactions after registering themselves with an approved clearing house. ECS users also have to obtain the consent as also the account particulars of the beneficiary for participating in the ECS clearings. The ECS user's bank is called as the sponsor bank under the scheme and the ECS beneficiary account holder is called the destination account holder. The destination account holder's bank or the beneficiary's bank is called the destination bank. The beneficiaries of the regular or repetitive payments can also request the paying institution to make use of the ECS (Credit) mechanism for effecting payment. The ECS users intending to effect payments have to submit the data in a specified format to one of the approved clearing houses. The list of the approved clearing houses or the list of centers where the ECS facility has been provided is available at www.rbi.org.in. The clearing house would debit the account of the ECS user through the account of the sponsor bank on the appointed day and credit the accounts of the recipient banks, for affording onward credit to the accounts of the ultimate beneficiaries. At present ECS facility is available at more than 60 centers and the full list is available at the web-site of RBI. The beneficiaries need to maintain an account with one of the banks at these centers in order to avail of the benefit of ECS. The beneficiary has to furnish a mandate giving his consent to avail of the ECS facility. He should also communicate to the ECS user the details of his bank branch and account particulars. Such authorization form is called a mandate. In case the information/account particulars undergo change, then the beneficiary has to notify the

ECS user to carryout changes in order to ensure continued benefits from the ECS user. In case the account particulars at the destination branch do not match, the destination branches would return the credit through their service branch to the clearing house. It is the responsibility of the ECS user to communicate to the beneficiary the details of credit that is being afforded to his account, indicating the proposed date of credit, amount and the relative particulars of the payment, so that the beneficiary can match the same with the details furnished by the bank in the account statement/passbook. No value limit on the amount of individual transactions has been prescribed under the scheme. RBI has deregulated Service Charges to be levied by sponsor banks.

1.4.4 Advantages of ECS Credit System:

1) Advantages to the ultimate beneficiary: a) The end beneficiary need not make frequent visits to his bank for depositing the physical paper instruments. b) He need not apprehend loss of instrument and fraudulent encashment. c) The delay in realization of proceeds after receipt of paper instrument. 2) Advantages to the corporate bodies/institutions: a) The ECS user saves on administrative machinery for printing, dispatch and reconciliation. b) Avoids chances of loss of instruments in postal transit. c) Avoids chances of frauds due to fraudulent access to the paper instruments and encashment. d) Ability to make payment and ensure that the beneficiaries' account gets credited on a designated date. 3) Advantages to Banks: a) Banks handling ECS get freed of paper handling. b) Paper handling also creates lot of pressure on banks as they have to encode the instruments, present them in clearing, monitor their return and follow up with the concerned bank and customers.

c) In ECS banks simply get the payment particulars relating to their customers. All they need to do is to match the account particulars like name, a/c number and credit the proceeds. d) Wherever the details do not match, they have to return it back, as per the procedure.

1.4.5 Working of ECS Debit System:

It is a scheme under which an account holder with a bank can authorize an ECS user to recover an amount at a prescribed frequency by raising a debit in his account. The ECS user has to collect an authorization which is called ECS mandate for raising such debits. These mandates have to be endorsed by the bank branch maintaining the account. Any ECS user desirous of participating in the scheme has to register with an approved clearing house. The list of approved clearing houses is available at RBI web-site www.rbi.org.in. He should also collect the mandate forms from the participating destination account holders, with bank's acknowledgement. A copy of the mandate should be available with the drawee bank. The ECS user has to submit the data in specified form through the sponsor bank to the clearing house. The clearing house would pass on the debit to the destination account holder through the clearing system and credit the sponsor bank's account for onward crediting the ECS user. All the unprocessed debits have to be returned to the sponsor bank within the time frame specified. Banks will treat the electronic instructions received through the clearing system on par with the physical cheques. RBI has deregulated Service Charges to be levied by sponsor banks.

1.4.6 Advantages of ECS Debit System:

1) Advantage to the ultimate beneficiary: a) Trouble free- Eliminates the need to go to the collection centers/banks by the customers and no need to stand in long Qs for payment. b) Peace of mind- Customers also need not track down payments by last dates.

c) The debits would be monitored by the ECS users.

2) Advantages to the corporate bodies/institutions: a) The ECS user saves on administrative machinery for collecting the cheques, monitoring their realization and reconciliation. b) Better cash management. c) Avoids chances of frauds due to fraudulent access to the paper instruments and encashment. d) Realize the payments on a single date instead of fractured receipt of payments.

3) Advantages to Banks: a) Banks handling ECS get freed of paper handling. b) Paper handling also creates lot of pressure on banks as they have to encode the instruments, present them in clearing, monitor their return and follow up with the concerned bank and customers. c) In ECS banks simply get the mandate particulars relating to their customers. All they need to do is to match the account particulars like name, a/c number and debit the accounts. d) Wherever the details do not match, they have to return it back, as per the procedure.

RESEARCH METHODOLOGY
2.1 Introduction
A research design is a logical and systematic plan prepared for directing a research study. It specifies the objectives of the study, the methodology and techniques to be adopted for achieving the objectives. It constitutes the blueprint for the collection, measurement and analysis of data. It is the plan, structure and strategy of investigation conceived so as to obtain answers to research questions. The plan is the overall scheme or program of research. A research design is the program that guides the investigator in the process of collecting, analyzing and interpreting observations. The preparation of a research plan for a study aids in establishing direction to the study and in knowing exactly what has to be done and how and when it has to be done at every stage. Without a research plan or research design, research work becomes unfocussed and aimless empirical wandering. The use of research design prevents such a blind search and indiscriminate gathering of data and guides him to proceed in the right direction. The design also enables the researcher to anticipate potential problems of data gathering, operations of concepts, measurement, etc.

2.2 Statement of the Problem

Prior to implementation of EFT system people used to transfer money from one bank account to another bank account through the means of Demand Draft (DD), Mail Transfer (MT), Telegraphic Transfer (TT), Pay Order (PO) and checks etc. For each such transaction, the bank used to charge some commission. It was a means of revenue generation to bank. After EFT systems implementation the commission charges for the transactions were reduced. Along with this a customers view is also taken regarding their behavior towards implementation of EFT through a questionnaire. Thus, this project will help us in knowing the changes in commission for the transfer of money and revenue generated through money transfer post implementation of EFT system and the behavior of customers towards EFT.

2.3 Review of Literature

In this modern era due to the various inventions and technological advancements, our life has become very smooth and easy. Today we all can do most of our day to day work at the click of a button. Thanks to technology. Many organizations too have applied latest technology to operate efficiently. The advanced technologies have not only helped the organizations to operate efficiently, but also to benefit the society. The new advanced technology is not only limited to any one particular industry or sector, but to all the industries and sectors. Then in such a scenario how can banks stay away? These days even the banks have adopted latest technologies to operate better and serve its clients in a better way. One of such technologies is Electronic Fund Transfer (EFT). My degree being BCA encouraged me to take up implementation of EFT as the dissertation topic. The article The Liability of Banks in electronic fund transfer transaction authored by Algudah and Fayyad inspired me to select this topic for my dissertation. Their thesis discusses the liability of banks in electronic fund transfer (EFT) transactions under the British and the United States law. It covers banks liability in Electronic Fund Transfer at the Point Of Sale (EFTPOS), Automatic Teller Machines (ATM) and home and office banking. In the absence of British legislation in this area, an analogy is made with the traditional methods of payment. An attempt is also made to extract the applicable rules from the general principles of law and the banking practice. The discussion, under the United States law, relies on analyzing the Electronic Fund Transfer Act of 1978 and Article 4A of the Uniform Commercial Code, which concern banks liability in consumer and commercially based EFT transactions. Analyzing consumer preference is perceived as cornerstone of a successful marketing strategy. Consumer preference is the mental and emotional processes and the observable behaviour of consumers during searching purchasing and post consumption of a product and service (Batra & Kazmi, 2004). Similarly Engel (et al, 1990) refers

consumer behaviour as the action and decision process of people who purchase goods and services for personal consumption. Now this suggested me to also include the customers perception towards this system of funds transfer implemented by banks, so that it will help the funds transfer quicker and also it will lessen the burden of charges which the customers had to pay. The other important reason is in todays competitive world, for any organization making profits is not really easy. They have think twice before taking any action and any action taken should satisfy the customers. Else all that is done is a waste. So I thought of making a questionnaire and taking customers views.

2.4 Objectives of the Study

This research is based on the comparative study of revenue generation of banks through funds transfer before and after implementation of EFT and to study the behavior of customers towards EFT. The objectives of the study are: To know the working of the EFT system. To calculate the revenue generated under this system. To compare the revenues generated prior to implementation of EFT and post implementation of EFT. To study the behavior of customers towards EFT.

2.5 Scope of the Study

The scope of this study is very huge. Keeping in mind this aspect total care is taken that no point is missed. The main objective of this research is to compare the revenue generation of banks prior to and after implementation of EFT. Along with this keeping customers behavior in mind, a questionnaire was designed to know what the customers have to say about the change and how this change has impacted them.

2.6 Research Design

The research design followed in the present research is descriptive in nature.

2.7 Sampling Method

The present research has used convenient sampling method to collect data through a pre-tested questionnaire.

2.8 Sample Size

A sample of 50 respondents representing different age, gender, income group and family size was taken for the present research. Also a few banks were visited.

2.9 Sources of Data

The data to be collected for the purpose of study is divided into two bases: Primary Source: The data has been collected directly from respondent with the help of structured questionnaires. Secondary Source: The secondary data has been collected from books, journals, government publications, a few banks and other information sources.

2.10 Limitations
The research may suffer through the following problems The research is purely done for academic purpose and covers only the city of Bangalore. The research has constraint of funds as the research is not funded by any organizations and solely depends on the researchers funds. The sample size of 50 is taken due to the constraint of duration of time and to meet the research deadline. Since it is a finance project and

2.11 Tool of Analysis

Standard techniques like graph, chi-square test, simple percentage method are used using SPSS software to analyze and interpret the raw data. The analyzed and interpreted data are presented in the form of tables, charts and graphs.

INDUSTRY PROFILE
3.1 History of Banking in India
Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors. For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of Indias growth process. The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India. Not long ago, an account holder had to wait for hours at the bank counters for getting a draft or for withdrawing his own money. Today, he has a choice. Gone are days when the most efficient bank transferred money from one branch to other in two days. Now it is simple as instant messaging or dialing a pizza. Money has become the order of the day. The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: Early phase from 1786 to 1969 of Indian Banks Nationalization of Indian Banks and up to 1991 prior to Indian banking sector Reforms. New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.

To make this write-up more explanatory, I prefix the scenario as Phase I, Phase II and Phase III.

3.1.1 Phase I
The General Bank of India was set up in the year 1786. Next came Bank of Hindustan and Bengal Bank. The East India Company established Bank of Bengal (1809), Bank of Bombay (1840) and Bank of Madras (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and Imperial Bank of India was established which started as private shareholders banks, mostly Europeans shareholders. In 1865 Allahabad Bank was established and first time exclusively by Indians, Punjab National Bank Ltd. was set up in 1894 with headquarters at Lahore. Between 1906 and 1913, Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank, and Bank of Mysore were set up. Reserve Bank of India came in 1935. During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). Reserve Bank of India was vested with extensive powers for the supervision of banking in India as the Central Banking Authority. During those days, public had lesser confidence in the banks. As an aftermath deposit mobilization was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders.

3.1.2 Phase II
Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalized Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas. It formed State Bank of India to act as

the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. Seven banks forming subsidiary of State Bank of India was nationalized in 1960 on 19th July, 1969, major process of nationalization was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country were nationalized. Second phase of nationalization Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. The following are the steps taken by the Government of India to Regulate Banking Institutions in the Country: 1949: Enactment of Banking Regulation Act. 1955: Nationalization of State Bank of India. 1959: Nationalization of SBI subsidiaries. 1961: Insurance cover extended to deposits. 1969: Nationalization of 14 major banks. 1971: Creation of credit guarantee corporation. 1975: Creation of regional rural banks. 1980: Nationalization of seven banks with deposits over 200 crore. After the nationalization of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%. Banking in the sunshine of Government ownership gave the public implicit faith and immense confidence about the sustainability of these institutions.

3.1.3 Phase III

This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalization of banking practices. The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is

introduced. The entire system became more convenient and swift. Time is given more importance than money. The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.

3.2 Nationalization of Banks in India

The nationalization of banks in India took place in 1969 by Mrs. Indira Gandhi, the then prime minister. She nationalized 14 banks then. These banks were mostly owned by businessmen and even managed by them. The banks that were nationalized then were: Central Bank of India Bank of Maharashtra Dena Bank Punjab National Bank Syndicate Bank Canara Bank Indian Bank Indian Overseas Bank Bank of Baroda Union Bank Allahabad Bank United Bank of India UCO Bank Bank of India Before the steps of nationalization of Indian Banks, only State Bank of India (SBI) was nationalized. It took place in July 1955 under the SBI Act of 1955. Nationalization of Seven State Banks of India (formed subsidiary) took place on 19 th July, 1960.

The State Bank of India is India's largest commercial bank and is ranked one of the top five banks worldwide. It serves 90 million customers through a network of 9,000 branches and it offers -- either directly or through subsidiaries -- a wide range of banking services. The second phase of nationalization of Indian banks took place in the year 1980. Seven more banks were nationalized with deposits over 200 crores. Till this year, approximately 80% of the banking segments in India were under Government ownership.

3.3 Scheduled Commercial Banks in India

The commercial banking structure in India consists of:

Scheduled Commercial Banks in India Unscheduled Banks in India

Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the Act. The scheduled commercial banks in India comprise of State bank of India and its associates (8), nationalized banks (19), foreign banks (45), private sector banks (32), co-operative banks and regional rural banks. "Scheduled banks in India" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934), but does not include a co-operative bank".

3.4 Banking Structure in India

The banking institutions in India can be broadly categorized into two types i.e. scheduled banks, non scheduled banks and specialized institutions. Scheduled banks are again categorized as public sector banks and private sector banks. Foreign banks are part of private sector banks. The major differentiating parameter that distinguishes banks from each other banks in the Indian banking is the level of service that is offered to the customer. Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.

3.5 Major Reforms and Initiatives

Some of the major reform initiatives in the last decade that have changed the face of the Indian banking are: Interest Rate Deregulation-Interest rates on deposits and lending have been deregulated with banks enjoying greater freedom to determine their rates. Government equity in banks has been reduced and strong banks have been allowed to access the capital market for raising additional capital. New private sector banks have been set up and foreign banks permitted to expand their operations in India including through subsidiaries. New areas have been opened up for bank financing like- insurance, credit cards, infrastructure financing, leasing, gold banking, besides of course investment banking, asset management, factoring, etc. Banks have specialized committees to measure and monitor various risks and have been upgrading their risk management skills and systems. Adoption of prudential norms in terms of capital adequacy, asset classification, income recognition, provisioning, exposure limits, investment fluctuation reserve, etc.

Reserve bank of India

Scheduled banks

Commercial banks

Co-operative banks

Forei gn bank s

RRB

Urban CB

Rural CB

Public sector banks

Private sector banks

Figure 3.1 Banking structure in India

ANALYSIS AND INTERPRETATION OF DATA

Analysis:
1. Number of respondents who have transferred funds to other accounts prior to implementation of EFT system or without using EFT system.

Table 4.1 Transferred funds without using EFT Cumulative Frequency Valid yes no Total 34 16 50 Percent 68.0 32.0 100.0 Valid Percent 68.0 32.0 100.0 Percent 68.0 100.0

Figure 4.1

Analysis: The above table 4.1 and figure 4.1 clearly shows:

 68% of the respondents have transferred funds prior to EFT system or without using EFT system. 32% of the respondents have not transferred funds using Non-EFT method. Interpretation: From the table 4.1 and figure 4.1 it is evident that 68% people have transferred funds prior to implementation of EFT method or use Non-EFT method of funds transfer. 2. Most preferred means of transfer of funds by Non-EFT method.

Table 4.2 Means of Non-EFT Transfer Cumulative Frequency Valid Demand Draft Mail Transfer Telegraphic Transfer Cheque NA Total 25 3 3 18 1 50 Percent 50.0 6.0 6.0 36.0 2.0 100.0 Valid Percent 50.0 6.0 6.0 36.0 2.0 100.0 Percent 50.0 56.0 62.0 98.0 100.0

Figure 4.2

Analysis: From the table 4.2 and figure 4.2, we can say: 50% of the respondents prefer Demand Draft (DD) mode of funds transfer whilw using Non-EFT method. Next most preffered method is Cheque, which is used by 38% respondents. Hardly anybody uses the other 2 modes of funds transfers (TT & MT).

Interpretation: From the table 4.2 and figure 4.2 we can interpret that the most preferred means of Non-EFT method of funds transfer is Transfer or Mail Transfer or who dont transfer at all. Demand Draft (50%) followed by Cheque (36%). There are hardly any bank account holders who use Telegraphic

3. Reason for using Non-EFT

Table 4.3 Reason for using Non-EFT Cumulative Frequency Valid User Friendly Easily Accessible Charges Others NA Total 17 24 1 7 1 50 Percent 34.0 48.0 2.0 14.0 2.0 100.0 Valid Percent 34.0 48.0 2.0 14.0 2.0 100.0 Percent 34.0 82.0 84.0 98.0 100.0

Figure 4.3

Aalysis: From the table 4.3 and figure 4.3, we can say: 48% respondents said Non-EFT is easily available or accessible. 34% feel it is user friendly.

Interpretation: From the table 4.3 and figure 4.3 it is clearly evident that 48% of the respondents use Non-EFT means for funds transfer because it is accessible them. Then 34% said it is user friendly. Only 2% said they used Non-EFT means for its charges. 4. Awareness of EFT

Table 4.4 Awareness of EFT Cumulative Frequency Valid yes no Total 48 2 50 Percent 96.0 4.0 100.0 Valid Percent 96.0 4.0 100.0 Percent 96.0 100.0

Figure 4.4

Analysis: Table 4.4 and figure 4.4 shows the awareness level of EFT among the respondents: The study shows that a whooping 96% of the respondents are aware about the EFT. Only 4% of the respondents are not aware about it. Interpretation: One good news for the technology inventors is that a whooping 96% respondents responded positively when they were asked, whether they were of this technology. Only 2 respondents said that they are not aware of this system. 5. Information about EFT

Table 4.5 Source of Information Cumulative Frequency Valid Newspapers & Magazines Internet Your bank staff Others NA Total 8 20 13 8 1 50 Percent 16.0 40.0 26.0 16.0 2.0 100.0 Valid Percent 16.0 40.0 26.0 16.0 2.0 100.0 Percent 16.0 56.0 82.0 98.0 100.0

Figure 4.5

Analysis: Table 4.5 and figure 4.5 shows how the respondents got to know about the EFT: 40% of the respondents say they got to know about the EFT through internet. 26% of the respondents were assissted by their respective bank staff.

Interpretation: From the table 4.5 and figure 4.5 we can easily interpret that most of the respondents (40%) got to know about the EFT from the internet followed by their respective bank staff (26%). Internet is obvious as technology rules in this 21 st century.

6. Use of EFT

Table 4.6 Use EFT Cumulative Frequency Valid yes no Total 29 21 50 Percent 58.0 42.0 100.0 Valid Percent 58.0 42.0 100.0 Percent 58.0 100.0

Figure 4.6

Analysis: Table 4.6 and figure 4.6 shows how many people use EFT: 58% of the respondents still dont use EFT or are not willing to use EFT. This means 42% people still use the conventional method of funds transfering.

Interpretation: though there was a tremendous response when it came to awareness level of EFT among the respondents, but when it comes to usage of this facility, the number is very low. Only 58% of the respondents use this facility.

7. EFT means of Fund Transfer

Table 4.7 EFT Means of Fund Transfer Cumulative Frequency Valid NEFT RTGS NA Total 23 6 21 50 Percent 46.0 12.0 42.0 100.0 Valid Percent 46.0 12.0 42.0 100.0 Percent 46.0 58.0 100.0

Figure 4.7

Analysis: Table 4.7 and figure 4.7 shows the most preferred EFT means of funds transfer: 46% of the respondents use NEFT for EFT funds transfer. RTGS users are still less.

Interpretation: Now the table 4.7 and the figure 4.7 shows that among the 58% EFT users, 46% respondents use the NEFT facility and only 12% respondents use the RTGS facility.

8. Reason for using EFT system for funds transfer

Table 4.8 Why prefer EFT Cumulative Frequency Valid Time Saving Advanced Technology User Friendly NA Total 22 6 2 20 50 Percent 44.0 12.0 4.0 40.0 100.0 Valid Percent 44.0 12.0 4.0 40.0 100.0 Percent 44.0 56.0 60.0 100.0

Figure 4.8

Analysis: Table 4.8 and figure 4.8 shows that:

 44% of the respondents use EFT because it saves time. 12% use it becausr of advanced technology. Only 4% feel its user friendly Interpretation: From the table 4.8 and figure 4.8 it is evident that 44% of the respondents, who value time, use EFT facility because it saves their time. The 12% respondents, who are tech savvy, use this facility simply because of its advanced technology. Hardly anybody said they said use it for its charges, though it being lower than the Non-EFT means 9. Technical Knowledge of EFT

Table 4.9 Technical know how Cumulative Frequency Valid yes no Total 34 16 50 Percent 68.0 32.0 100.0 Valid Percent 68.0 32.0 100.0 Percent 68.0 100.0

Figure 4.9

Analysis: Table 4.9 and figure 4.9 shows the technical knowledge or awareness about the EFT 68% know how the EFT system works technically. 32% dont know how thw EFT system works technically.

Interpretation: From the table 4.9 and figure 4.9 it can be interpreted that 68% of the respondents know how the EFT system works technically. Though 96% respondents had said that they are aware about the EFT system earlier

10. Preference for EFT or Non-EFT

Table 4.10 Preference for EFT/Non-EFT Cumulative Frequency Valid EFT Non-EFT Total 42 8 50 Percent 84.0 16.0 100.0 Valid Percent 84.0 16.0 100.0 Percent 84.0 100.0

Figure 4.10

Analysis: The table 4.10 and figure 4.10 shows: 84% of the respondents prefer to use EFT for funds transfer. 16% of them prefer Non-EFT fund transfer.

Interpretation: From the table 4.10 and figure 4.10 we can say that majority of the people (84% respondents) are willing to use EFT system of funds transfer in future. Though many still dont know about it, but they all are willing to learn and use this technology.

11. Frequency of transfer of funds after implementation of EFT

Table 4.11 Frequency of Transfer of Funds after Implementation of EFT Cumulative Frequency Valid Strongly Agree Agree Can't Say Disagree Strongly Disagree Total 3 18 14 12 3 50 Percent 6.0 36.0 28.0 24.0 6.0 100.0 Valid Percent 6.0 36.0 28.0 24.0 6.0 100.0 Percent 6.0 42.0 70.0 94.0 100.0

Figure 4.11

Analysis: Table 4.11 and 4.11 shows: 36% of the respondents agreed that their frequency of transferring funds to other accounts has increased. 26% respondents said cant say. 24% disagreed.

Interpretation: From the table 4.11 and figure 4.11 we can interpret that 36% of the respondents said that ever since they started using EFT, their frequency of transferring funds has increased. Whereas 24% said cant say or its at same level. There were also 24% respondents who denied to the statement.

12. Convenience

Table 4.12 EFT convenient than Non-EFT Cumulative Frequency Valid Strongly Agree Agree Can't Say Disagree Total 11 22 15 2 50 Percent 22.0 44.0 30.0 4.0 100.0 Valid Percent 22.0 44.0 30.0 4.0 100.0 Percent 22.0 66.0 96.0 100.0

Figure 4.12

Analysis:Table 4.12 shows the convenience of respondents with EFT and Non-EFT 22% Strongly Agree to the statement that EFT is convenient than Non-EFT.

 44% agreed to this ststement. 30% said cant say or its same. Nobdy Strongly Disagreed with this statement.

Interpretation: the table 4.12 and the figure 4.12 shows that 44% of the respondents feel that the EFT system of funds transfer is more convenient than the Non-EFT system. 22% of the respondents strongly agreed to this statement. Not a single respondent strongly disagreed to this though 4% of the respondents disagreed. 13. Annual Income and use of EFT

Table 4.13 Income (INR) * Use EFT Crosstabulation Count Use EFT Yes Income (INR) below 1 lakh 1 lakh-2 lakh 2 lakh-4 lakh more than 4 lakh Total 8 4 9 8 29 no 14 4 3 0 21 Total 22 8 12 8 50

Table 4.14 Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio N of Valid Cases 11.655 14.602 50
a

df 3 3

sided) .009 .002

a. 4 cells (50.0%) have expected count less than 5. The minimum expected count is 3.36.

Analysis: From the table 4.13 we can say that Very few people use EFT whose income is less than Rs. 1lakh per annum. People with higher income use EFT more often. Interpretation: From the table 4.13 and the Chi-Square Test above, it is evident that as of now usage of EFT depends on the income the respondents. The respondents whose income is more than Rs. 2lakh use EFT more often for transfer of funds. 14. Income and frequency of fund transfer after implementation of EFT

Table 4.15 Income (INR) * Change in Frequency of Transfer of Funds Crosstabulation Count Change in Frequency of Transfer of Funds Strongly Strongly Agree Income (INR) below 1 lakh 1 lakh-2 lakh 2 lakh-4 lakh more than 4 lakh Total 2 0 1 0 3 Agree 5 5 4 4 18 Can't Say 4 1 5 4 14 Disagree 9 1 2 0 12 Disagree 2 1 0 0 3 Total 22 8 12 8 50

Table 4.16 Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio N of Valid Cases 15.507 18.761 50
a

df 12 12

sided) .215 .094

a. 17 cells (85.0%) have expected count less than 5. The minimum expected count is .48.

Analysis: From the table 4.15 and the Chi-Square table we can say that: Majority of the respondents (41%) in the income group of below 1lakh have not increased their EFT transactions. Majority of the respondents (50%) in the income group of above 4lakh said that their transactions have increased after the implementation of EFT.

Interpretation: From the table 4.15 and Chi-Sqaure Tests table 4.16 it can be interpreted that the respondents who have higher income prefer to EFT transfer of funds and their transfer of funds have increased after implementation of EFT. 15. Age and Usage of EFT

Table 4.17 Age (Yrs) * Use EFT Crosstabulation Count Use EFT yes Age (Yrs) less than 20 21-40 41-60 more than 60 Total 0 17 9 3 29 no 7 10 2 2 21 Total 7 27 11 5 50

Table 4.18 Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Likelihood Ratio N of Valid Cases 12.510 15.274 50
a

df 3 3

sided) .006 .002

a. 5 cells (62.5%) have expected count less than 5. The minimum expected count is 2.10.

Analysis: Table 4.17 shows that 63% of the respondents in the age group of 21-40 years use EFT and in the age group of 41-60 years, 82% of the respondents use EFT. Whereas in less than 20 years age group nobody uses EFT. Interpretation: From the table 4.17 and the table 4.18 we can say that the majority of the EFT users are in the age group of 21-60 years. As of now most of the people in the age group of less than 20 years and above 60 years are not using EFT. Therefore usage of EFT is dependent on age. 16. Gender and Usage of EFT
Table 4.19 Gender * Use EFT Crosstabulation Count Use EFT yes Gender Total Male female 17 12 29 no 12 9 21 Total 29 21 50

Table 4.20 Chi-Square Tests Asymp. Sig. (2Value Pearson Chi-Square Continuity Correction Likelihood Ratio Fisher's Exact Test N of Valid Cases 50
b

Exact Sig. (2sided)

Exact Sig. (1sided)

Df
a

sided) 1 1 1 .917 1.000 .917

.011

.000 .011

1.000

.573

a. 0 cells (.0%) have expected count less than 5. The minimum expected count is 8.82. b. Computed only for a 2x2 table

Analysis: Table 4.19 shows that: 59% of the male respondents use EFT and 57% of the female respondents use EFT

Interpretation: From the table 4.19 and 4.20 we can say that the usage of EFT is not dependent on gender of the respondents. Both male and female use it equally.

FINDINGS AND SUGGESTIONS

5.1 Findings from the Secondary Data:

Doing something new which we have not done earlier, like taking up a new project, reading a new book or experimenting something new gives us a lot to learn. We get to know many new things which we did not know earlier. Thus this time I too got to learn many things during my project. My findings are as given below. Charges for the funds transfer prior to implementation of EFT system or when the funds are transferred without using EFT: Non-EFT means of transfer are as follows: Demand Transfer (DD). Mail Transfer (Mail Transfer). Telegraphic Transfer (TT). Cheque. Now let us look at the charges for using these means to transfer funds. Since India has 27 public sector banks and 30 private sector banks, the charges for the non electronic means of funds transfer is almost same in all the public sector banks. The charges in private sector banks differ from those of nationalized banks. The following two tables, table 5.1 and table 5.2 gives us the breakup of charges of two banks. One is Indian Bank (nationalized bank) and the other is ING Vysya Bank (private bank).

Table 5.1 (Indian Bank)

Amount (INR) Up to 500/30/-

Outstation DD/MT/TT (INR) 30/-

BPO (Pay Order) (INR)

501 1, 000 1, 001 5, 000 5, 001 10, 000 10, 001 1, 00, 000 Above Rs. 1,00 ,000

30/30/30/Rs. 3 per thousand with a

30/30/30/Rs. 3 per thousand with a

minimum of Rs. 30/minimum of Rs. 30/Rs. 2.60/- per thousand Rs. 1.50/- per thousand with a minimum of Rs. 300/- with a minimum of Rs. 300/-

Table 5.2 (ING Vysya Bank)

Amount (INR)

Outstation DD/PO/TT (INR)

Up to 10, 000/10,001 50, 000/50, 001 2,00,000/Above Rs. 2,00,000

50/Rs. 2.50/- per Rs. 1,000/- or part thereof subject to a minimum of Rs. 50/-. Rs. 2/- per Rs. 1,000/- or part thereof subject to the minimum of Rs.125/Re 1/- per Rs. 1,000/- or part thereof subject to the minimum of Rs. 400/- & max Rs. 600/-

The above charges in the table is applicable only to the account holders of those banks. Those who do not have account in those banks, are charged 1.5 times of the charges mentioned above in the public sector banks and private banks it varies from bank to bank. Another method of funds transferring is through cheques. Here the person who is issuing cheque is not charged, but the person who is collecting is charged if the collector is having bank account in another bank or the cheque issued to him is of another bank. This charge is known as collection charge. The following charges are charge by the Indian Bank:
Table 5.3 (Indian Bank)

Amount (INR)

Charges (INR)

Up to 10, 000/10,000 1,00,000/Above 1,00,000/-

50/- per cheque 100/- per cheque 150/- per cheque

In private sector banks, the charges differ from bank to bank. The charges are higher in the private sector banks when compared to the nationalized banks. Now let us look at the charges aplplicable when the EFT mode of funds transfer is used to transfer funds. The EFT funds transfer is classifed into NEFT and RTGS.

Table 5.4 (NEFT Charges)

Amount (INR) Up to 1,00,000/Above 1,00,000/Table 5.5 (RTGS Charges)

Charges (INR) 5/- per transaction 25/- per transaction

Amount (INR) 1,00,001 5,00,00 Above 5,00,000/-

Charges (INR) 25/- per transaction 50/- per transaction

According to RBI guidelines, an electronic funds transfer up to Rs. 1,00,000 is considered as NEFT. Any amount above Rs. 1,00,000 is considered as RTGS. Now from the above information it clearly noticable that charges collected through EFT is very much less when compared to Non-EFT mode of transfer. So EFT has been a boon to the customers when it comes to the charges of the funds transfer. Now this leaves a question, whether banks have lost their revenue by implementing EFT? Answer is no, because this EFT facility has increased the volume of transaction. Even from the analysis of the questionnaire it is visible that people have increased their volume of transactions after the implementation of EFT. Since the data required was very much confidential so we could not get the exact figures. But from the bank staff we got the information that compared to earlier transactions the volume of transactions has increased.

5.2 Findings from the questionnaire:

There are as many as 32% people who have not transferred funds prior to implementation of EFT or have still not used EFT. 50% of the respondents use Demand Draft to transfer funds while using NonEFT method. Followed by Cheque, which is used by 36%. Rarely anybody uses the other 2 means like Mail Transfer and Telegraphic Transfer to transfer funds. The reason why people use Non-EFT method of transfer is that it is easily accessible. It can be done through any branch. Whereas NEFT and RTGS is available in limited number of branches. When it came to awareness level of EFT, whopping 96% respondents said that they are aware of EFT. And majority of them (40%) said that they got to know about EFT through internet followed 26% respondents who said they got to know about it from their bank staff. When it comes to usage of EFT, 58% said that they are using EFT and the most preferred means of EFT is NEFT. 44% respondents feel that using EFT saves their time, and that is reason why they use it. While 12% said that they use it for its advanced technology. 68% of the respondents said that they know how the EFT system works technically. When it came to preference of EFT and Non-EFT, 84% respondents said that they prefer EFT. 42% of the respondents agreed and strongly agreed to the statement that they have increased their transfer of funds post implementation of EFT. 24% of the respondents disagreed to this statement.

 22% of the respondents strongly agreed and 44% agreed to the statement EFT is more convenient than the Non-EFT means of transfer. When cross tabulation was done for income group and use of EFT, it showed that EFT usage is dependent on the income group of the respondents. More respondents whose income is above Rs. 2lakh per annum use EFT than those whose is below Rs. 2lakh. 50% of the respondents in the income group of above Rs. 4lakh agreed to that their frequency of transfer of funds has increased after implementation of EFT. While 41% in the income group of less than Rs. 1 lakh did not agree to this statement. More respondents in the age group of 21-60 years use EFT than in the age group of less than 20 years and more than 60 years. Therefore EFT usage is dependent on the age group. EFT usage is not dependent on the gender of the respondents. Both male and female use it equally.

5.3 Suggestions
After looking at the various aspects earlier in this research, the following are the suggestions:

 Maintain a striking balance between the volumes of transfer of funds through Non-EFT and EFT methods. The reason is, as we have seen the difference between the commission charges charged by the banks for the funds transfer by both the methods is huge. The commission charged for Non-EFT method is almost 6 times than that of EFT. Banks can take an initiatve to educate people about the EFT systyem, because from the questionnaire we could see that 96% respondents were aware of EFT system but among those 96% only 58% use EFT. And also very few know how the system works technically. So this may be the reason that people hesitate yo use it. When more people start using EFT then it will the volume of transactions and thus help the bank to generate revenue. Banks can make sure that all their branches are 100% computerised and this facility is available in all the branches. From the questionnaire we can make out that people use Non-EFT methods because it is easily accessible and user friendly. We have seen that people in the low income group prefer not to visit bank for payments such as telephone bills, electric bill etc due high charges charged by banks. If banks can convert this group to EFT customers then it will be profitable to both bank and the customers. A notable point was that only 42% of the respondents said that their fund transfer transactions have increased after the implementation. In a country of 1.1 billion population, this number is quite small. So if the banks can think of some schemes wherein the the customers who are depositing funds to other accounts by directly visiting to that particlucar bank branch, which is free of cost, can be encouraged to use EFT. As the charges of EFT is very low the customers would not mind if the process is made simpler. The banks can thionk of doing the same thing using SMS service. As mobile phonis are very popular.

CONCLUSION

Any project is incomplete without a successful and meaningful conclusion. An ideal conclusion should be brief yet informative. The research conducted by me has the following conclusion: The implementation of EFT system has been a boon to the customers and bankers. For customers, it has saved their valuable time and also the charges which they had to pay to transfer their own money. When the amount was high the charges were also very high. Thus the implementation of EFT has brought a great relief to the customers. For bankers it has reduced their manual work and also has helped them to work quickly and efficiently without much error. Since it uses the computer system, the error rate has dropped significantly. From the analysis of the questionnaire it is quite evident that 96% of the respondents were aware of EFT system but only 58% use this system and 68% known how the system works technically. Also people in the age group of 21-40 years are more prone to use this system. This is a good sign as in the coming years the younger generation, who, now are below 20 years will follow their elders footsteps and use this EFT system to a great extent. Thus, once again technology is proving to be an integral part of 21 st century.

Bibliography

Books Referred:
Mohammed Arif Pasha: Financial Markets and Intermediaries, First Edition, Published by Kalyani Publications, 2008 Cooper Donald R: Schindler Pamela S. (2004). Business Research Methods, 4th Edition,Tata McGraw-Hill Publication Company Limited, New Delhi. Barney Warf: E-Business Development and Management in the Global

Economy 2009 edition.

Sites Referred:
www.indianbank.org www.rbi.org http://www.nlm.nih.gov/services/doc_efts.html http://www.ofm.wa.gov/policy/glossary.asp

ANNEXURE 1 Questionnaire
I am Nikhil Barge, a final year MBA student of Acharya Institute of Management and Sciences, conducting a study on Impact of EFT (Electronic Fund Transfer) on banks and its users, for the partial fulfillment of my course. Please help me by filling in the questionnaire completely. The information you provide is purely for academic purpose and hence will be kept confidential. 1. Name: 2. Age (yrs): Less than 20 3. Gender: Male 4. Qualification: Illiterate Post Graduate 5. Occupation: Student Self Employed 6. Income per annum (INR): Below 1 lakh 2 lakh-4 lakh Yes Daily Once in a month Yes 1 lakh-2 lakh Above 4 lakh No Once in a week Once in a year No Once in a fortnight rarely Private Employee Govt. Employee
(Please Specify)

20-40 female SSLC PUC

41-60

more than 60

Graduate

Others __________________________ ( Please Specify)

Others ___________________________

7. Do you have a bank account? 8. If yes, how frequently you visit your bank?

9. Do you transfer funds to other accounts?

10. Have you transferred funds to other accounts prior to implementation of EFT system? Yes No

11. Which means of transfer of funds you prefer most to use for transferring funds without EFT? Demand Draft Telegraphic Transfer User friendly Charges Yes Mail Transfer Cheque easily accessible Others ________________________ ( Please Specify) No Internet Others _________________ ( Please Specify) No RTGS Advanced technology Charges No

12. What is the reason for using the preferred means marked above?

13. Are you aware of the EFT system? (If no skip the next question) 14. How did you get to about EFT? Newspapers & Magazines Your bank staff Yes NEFT Time saving User friendly Yes one will you prefer? EFT Strongly Agree Disagree Non-EFT Agree Cant Say 20. Implementation of EFT has made me transfer funds more often than earlier. Strongly Disagree

15. Do you use EFT system for transferring funds? (If no, skip the next 2 questions) 16. If yes, which means of EFT funds transfer you use? 17. Why do you prefer to use EFT system?

18. Do you know how the EFT system works technically? 19. If both EFT system and non-EFT system is available for transfer of funds, which

21. I find EFT more convenient than Non-EFT system of fund transfer Strongly Agree Disagree Agree Cant Say Strongly Disagree