Chapter 1

1.1 Introduction:
WiththeestablishmentofNepalBankLtd.in1937,thefirstbanktostartbankinginNepal,ittooknearly53
yearsfortheintroductionofcreditcardsbytheNabilBankLtd.inearly1990s.AsforthedevelopmentofebankinginNepal,HimalayanBankLtd.standinafrontrowwiththeintroductionofAutomatedTellerMa
chine(1995)andTelebanking.Aftertheestablishmentoffirstbank,Bankingsectoraswellasbankcustomershavetowaitnearl
yabout65yearsforinternetbanking,andtheKumariBankLtd.wasthefirsttostarttheinternetbankingin
Nepalin2002(Mishra,2008).Aftertenyearsofintroductionofinternetbanking,itisstillnotpopularinN
epal;peoplestillrelyontraditionalwaysofbanking.AlthoughthemajorcitieslikeKathmandu,Pokhara,
Biratnagarhavegoodinternetfacilities.

E-banking, popularly known as the short form of Electronic banking is an umbrella term for the
process by which a customer may perform banking transactions electronically without visiting
the physical premises of the financial institution,if we exclude the ATM hub established in the
roadside from the definition of physical premises .If we see the definition of electronic devices it
is known as the "using valves, transistors, or silicon chips: relating to devices, systems, or
circuits that employ components such as vacuum tubes, integrated circuits, or transistors in their
design ".(source: Microsoft Encarta Reference Library 2004. ) The following terms all refer
to one form or another of electronic banking: personal computer (PC) banking, Internet banking,
virtual banking, online banking, home banking, remote electronic banking, and phone-banking.
PC banking and Internet or online banking are the most frequently used designations .But for the
Nepalese financial market the institutions isnt considered as involved in the E-BANKING
unless until it has ATM machines as well as the availability of the services for the customers to
query there deposit account statement through the use of cellular mobile phones.

1.2E-banking in context of Nepal:

Establishment of first Joint Venture Bank, Nepal Arab Bank Limited (now NABIL Bank), in
1984 was the first step towards e-banking in Nepal it introduced Credit Cards in Nepal in early
1990. Automated Teller Machine (ATM) was first introduced by another JV Bank, Himalayan
Bank Ltd. in 1995. Himalayan Bank Limited was also the first bank to introduce Tele-Banking
(Telephone Banking) in Nepal. Internet-Banking was first introduced by Kumari Bank Limited
in 2002. Laxmi Bank Limited was the first bank to introduce SMS-Banking (or Mobile Banking)
in Nepal in the year 2004. The channels in e-Banking available in Nepal are Automated Teller
Machines (ATM), Point of Sales (PoS), Telephone Banking (Tele Banking), Internet Banking,
Mobile Banking (SMS Banking). Currently Nepalese customer are enabled Cash Withdrawal,
Balance Inquiry from in PoS Terminals customer can do financial transactions via Cards, Cash is
debited from the clients account(s), from Tele- banking customer can do the Account Status
check, Balance Inquiry, similar to Tele-Banking SMS banking facilities is there, from InternetBanking customer are having fund Transfer within accounts (within the bank),Get balance
statement online and Pay bills online. All these type of facilities are available in cities but not in
remote places. But unless and until Nepal's two giant banks which are under restructuring
process, NBL and RBB, wont go for E banking large portion of banking customer will be out of
the use of EBANKING facilities.

1.3 Nabil Bank Ltd:

Nabil Bank Limited is the nations first private sector bank, commencing its business since July
1984. Nabil was incorporated with the objective of extending international standard modern
banking services to various sectors of the society. Pursuing its objective, Nabil provides a full
range of commercial banking services through its 48 points of representation. In addition to this,
Nabil has presence through over 1300 Nabil Remit agents throughout the nation.

Nabil, as a pioneer in introducing many innovative products and marketing concepts in the
domestic banking sector, represents a milestone in the banking history of Nepal as it started an
era of modern banking with customer satisfaction measured as a focal objective while doing
business. Operations of the bank including day-to-day operations and risk management are
managed by highly qualified and experienced management team. Bank is fully equipped with
modern technology which includes international standard banking software that supports the Echannels and E-transactions.
Nabil is moving forward with a Mission to be 1st Choice Provider of Complete Financial
Solutions for all its stakeholders; Customers, Shareholders, Regulators, Communities and Staff.
Nabil is determined in delivering excellence to its stakeholders in an array of avenues, not just
one parameter like profitability or market share. It is reflected in its Brand Promise Your Bank
at your service. The entire Nabil Team embraces a set of Values C.R.I.S.P, representing the
fact that Nabil consistently strives to be Customer Focused, Result Oriented, Innovative,
Synergistic and Professional.

1.4 Everest Bank LTD:

Catering to more than 6 lacs customers, Everest Bank Limited (EBL) is a name you can depend
on for professionalized & efficient banking services. Founded in 1994, the Bank has been one of
the leading banks of the country and has been catering its services to various segments of the
society. With clients from all walks of life, the Bank has helped develop the nation corporately,
agriculturally & industrially.

Joint Venture Partner:

Punjab National Bank (PNB), our joint venture partner (holding 20% equity) is the largest
nationalized bank in India having presence virtually in all important centers. Owing to its
performance during the year 2012-13, the Bank earned many laurels & accolades in recognition
to its service & overall performance. Recently, PNB was awarded with "IDRBT Banking
3

Technology Excellence Award" under Customer Management & Intelligence Initiatives. The
Bank also bagged "Golden Peacock Business Excellence Award 2013" by Institute of Directors.
Similarly, the Bank was recognized as 'Best Public Sector Bank' by CNBC TV 18. The bank has
now more than 6,000 branches and 7000 ATMs spread all across the India. As a joint-venture
partner, PNB has been providing top management support to EBL under Technical Service
Agreement. They are very pleased to have been given the chance to be of service and would like
to offer a wide range of services in the form of E-Banking. We hope that you will find the
experience enjoyable and useful. Currently following services are available through their internet
banking:
Account summary/ Statements
Balance Inquiry
Fund Transfers
Utility Bill Payment

1.5 Limitations of the Study

This report had been prepared under various limitations. So, while analyzing the data as well as
concluding the report, many constraints are seen. The limitations observed were:

The sample drawn for this research is representative of the population i.e. Only 50

respondents were considered.

The information provided by the respondents may not be correct since most of them were

in a hurry and had lack of information.

The sample might not include representative in equal number from different gender,
education background and occupation.

1.6 Objective of the study:

(1)
(2)
(3)

To know about the current status and trends of use of internet banking services.
To analyze the facilities provided by bank under internet banking services.
To identify the challenges faced by banks concerning development of internet

(4)

banking services.
To find out the level of awareness about the internet banking among the banking
customers.

1.7 Research Methodology:

This study is descriptive type and data collection was done in two phase. Two sets of different
questionnaire were developed for each phase i.e. Annex I and Annex II. During the first phase,
information about the internet banking, facilities and services under internet banking, problem in
providing such facilities etc. For this two banks were selected and information was collected
through the self-designed questionnaire distributed to the bankers.
In second phase, data collected from the customer through self-designed questionnaires. The
questionnaire was distributed to twenty customers of each bank. For the cases, convenience and
non-probability sampling was used due to limitation of time and resources, also in Nepalese
context, it is difficult find respondent because of disinterest and not willing to share genuine
information.

Chapter 2
2.1 Presentation of data:
2.2 Respondents internet banking using behavior (characteristic of the respondents)
The characteristic of the respondents are presented in the table (1). Out of the 40 respondents
data collected, 16 were female and 24 were male. Out of 16 female 7 respondents were for Nabil
bank and 9 were for Everest bank ltd and out of 24 male 11 male respondents for Nabil and 13
for Everest bank ltd. Besides, out of 20 respondents of Nabil bank, 9 were completed master
degree and 9 bachelors. Similarly, out of 20 respondents for Everest bank 12 was completed
bachelors degree and 8 were completed master degree. In terms of occupation, 2 were students,
4 were businessman, 2 were engaged in government services, and 5 respondents engaged
banking sector and 7 were in private sector. In the similar way, out of 20 respondent 5 was
student, 6 were businessman, 1 from government services, 3 were from banking sector and 5
from private sector in Everest bank ltd.
Table 2.1: Characteristic and Number of the Respondents

Sex

Female

Nabil Bank
9

Education

Male
+2

11
2

13
0

Bachelor

12

Master

private Student

Businessman

Government service

Bank

Private sector

Occupation

Everest Bank
7

Here, figure 2.1, reveals the frequency of the respondents knowing about the internet banking or
who have at least heard about the internet banking services provided by the bank.Around 63
percent of the respondents in our sample have heard and used internet banking services. Out of
which, 75 were male and 50 percent were female from both banks respondents. And remaining
other 37 percent have heard about the internet banking but not used ever.

Nabil bank ltd, in % Everest bank ltd , in %

heard and
used

heard and
used

25

heard but not

used

50

50

heard but
not used

75

Figure 2.1: knowledge about the internet banking services to the customer or respondent

The respondents behavior of using the internet banking services was also explored in the table 2.
Most importantly this stud finds out that using the internet for banking purposes or utilizing the
internetbanking facilities is not well developed among the customers. In our study, only 63
percent respondent has said that they have heard and used the internet for the banking purpose.
Nearly about 37 percent respondents in our study have not heard or heard but not used once
internet banking services. Those who have used internet banking services mostly said that they
have used for personal purpose (i.e. 12 out of 15) and few of them have said that they used
internet banking services for the official use (i.e. only 3 out of 15) while we study in Nabil bank
and in case of Everest bank 8 respondent said that they use internet banking services for personal
use and 2 only reply us they use internet banking services for the official use.

Table 2.2: Respondents behavior of using the internet banking services

Categories
Respondents using IBS
Regularity of using the IBS:

Nabil bank ltd

15

Everest bank ltd

10

Daily

Weekly

monthly

Personal

12

Office

Purpose of using the IBS;

Above table 2.2 showed that out of 15 respondents who have heard and used the internet bankng
services 2 respondent use IBS in daily basis for any one purpose, similarly 5 respondent use IBS
for weekly and 8 respondent respond that they use IBS for monthly while we study about he
Nabil bank ltd. Similarly talking about the scenario about the Everest bank ltd no one use IBS for
daily, 3 used for weekly and 7 respond that they use for monthly.
Table2.3: Activities performed by the internet banking services.
Activities
Account information
Request for statement viewed
Bills payment
Balance transfer
Purchase of recharge

Nabil bank ltd

7
2
2
3
1

Everest bank ltd

4
2
3
1
0

Table 2.3: showed that different kinds of activities performed by respondents under the internet
banking services or facilities provided by the bank. The table shows that majority of internet
adaptor have utilized the internet banking services for the account information about 8
respondent out of 20 respondent respond, 2 respondent respond that they use the internet banking
services for the request for the statement of bank, 2 respondent respond that they use for the bills
payment and 1 respondent use for purchase for the recharge in the study of the Nabil bank.
Likely, while we study among 10mrespondenet of the Everest bank we found that 4 use IBS for
the account information, 2 use internet banking services for the request for the bank statement 3
9

respondent use internet banking services for the bills payment, 1 use for the balance transfer and
no one use internet banking services for the purchase of the recharge card. The information about
the different activities performed by the respondent by using the internet banking services in
Nabil bank and Everest bank ltd is shown in the following graph:

7
6
5
4
3
Nabil bank ltd

Everest bank ltd

1
0

Figure 2.2: activities performed by the respondent from the internet banking services

Table2.4: Requirement for using internet banking services

Requirements
Types of customer

Nabil bank ltd

All
10

Everest bank ltd

All

Types of account
Internet banking service(IBS) time
Access to IBS on opening account
Registration need by customer
Registration for using IBS
Charges for using IBS
Method and time period of payment

All
24 hours
No
Yes
Yes
Rs.200
Yearly

All
24 hours
No
Yes
Yes
Rs.250
Yearly

In the table 2.3, we can see that respondents use internet banking services in both banks the
facilities provide to performed the activities like of account information, request for statement,
bills payment and balance transfer but no one use internet banking services to perform the
activities for the purchase of the recharge card in Everest bank ltd, in our study.
With the help of information collected from respondent of the both banks we can say that
national customer and international customer can use the internet banking services and bank has
been also provided the online banking services for the all types of account either account type is
saving account, fixed deposit account or current account used by the customer. Respondent
respond to us that they can use internet banking services 24 hours a day or at any time they can
use the internet banking services provided by the banks. There is no provision for the access to
internet banking services while they opened the account. They should pay money for accessing
the internet banking internet services to perform the different types of the online activities.
Through this study we also get information from the respondents that they should pay fee for the
internet banking services yearly or annually.
While we study the internet banking practices in Everest and Nabil banks ltd, we found that out
of 40 customer or respondent 15 were unknown about the internet banking services provide d by
the their bank. In this study, nearly 38 percent respondents were found not using the internet
baking services or internet banking facilities provided by their banks. They are asked the reason
for not using the internet banking services. Lack of information about the internet banking
services were identified the major reason behind not using the facility. Similarly, unfamiliarity
with online banking technology, electricity problem, irregular banking transaction, less
utilization of internet banking were other major reason behind for not using the internet banking
facility. Respondents were also concerned about the security, speed and reliability of the
technology, and the banking website related with the online banking.
11

No. of respondent
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

No. of respondent

Figure2.3: Factors for not utilizing the internet banking services

Nepal is a developing country so internet banking practices is going on day by day. Nepalese
commercial banks are facing different problem, challenging factors that have identified for the
addition and development if internet banking services. Education and security were highlighted
as the major challenging factors. Customers education level, their knowledge about the
computer and internet were also the prime challenges faced by the banks for adaption of internet
banking facility for both banks. Similarly, internet security, customer concerned about their
private information, theft or loss of password, and internet infrastructure in the country were
other major obstacles faced by the banks regarding the development of their online facilities.
Trust on internet banking, electricity problem, and training about the internet banking system to
customer were also other concerns for the adaption and development of internet banking in the
country.
12

2.3 Frauds in Internet-Banking

Most popular frauds in e-Banking (worldwide) are

Card duplication
In this, the information in the cards is copied to another card.
Although, the duplicated card may have other information, but the financial

transactions are done from the original account.

Key Loggers
These are the programs which stores the characters as typed in the keyboard.
The account no./passwords entered can be tracked via key loggers
2.4 Frauds in Internet-Banking
Phishing e-mails

E-mails pretending to be from the bank asking to input the username and password to

update the information.

After submitting the information, the information passes to the false site where the

information is captured.
Lack of understanding of internet technology may be the reason.
E-banking is at its infancy right now; it means the system is not perfectly secure.
Precaution must be taken.

2.5 Precaution and Protection

Use of device that creates ID for one session only

Login to that device using account id and passwordIt creates a temporary ID to login to

the banks server

User should login from that newly generated IDSome of the duties that the banks must do

to prevent e-banking frauds:

Information Security Controls
Up-to-date knowledge of ongoing attack sources, scenarios, andtechniques
Up-to-date equipments and network maps
Ability to show rapid response to react to newly discoveredvulnerabilities

2.6 Precaution and Protection

E-Banking users must consider these things while transacting electronically

13

Never give your cards, account no. to anybody

Update your antivirus program regularly
Dont use public computer for e-transactions
Dont give your information in the websites which you dont know
Before visiting any sites, check the certificate; and dont continue unless you feel it is

from trusted site

Use passwords which are difficult to guess
Regularly check your account status; if you feel something is wrong, then let this known
to your bank.

14

Chapter 3
3.1 Summary:
It has been found that internet banking services in Nepal is still in its primary stage. Although the
sample size chosen for the study is small but still, this study helps to know about the stage of the
internet banking and its usage levels and behavior about the customer and banks itself.
From the study, it could be said that the many of the account holders are using the internet, have
some knowledge about the internet banking provide by their bank, behind it: first concern about
the security and second the awareness about this facility and its benefits. Again, the facilities or
the services that bank provide through internet banking services are limited and unattractive even
to the customers using it. The low percentage of respondent using the internet banking services
shows that respondent lack of information about the online banking and they are unfamiliar with
the new and advance technology. Lack of awareness about the online banking services and its
benefits are found to be primary reasons for the customers reluctance to use these services.
On the other hand, banks are not informing as well as not motivating their customer for using the
internet banking facilities. Bank should not only just provide the general information about their
online facilities but also explain and educate their customers about the security problem, the
quality and reliability of the internet, trust and reliability on banks websites and theft and loss of
password.
In this study, it has been observed that consumer perception of online services and factors
affecting the adoption of these services have been linked to the information and type of service
provided by the bank. So, it could be inferred that the guidance and persuasion by bankers does
not promote the use of such services amongst the customer. The findings of this research
however cannot solely portray the overall population as a small size of samples and specific
sector was chosen for the research. Again,, only few banks were selected and detailed scenario
could not be presented.

15

3.2 Conclusion:
This study reveals that limited services are provided by the banks for internet banking facility
such as account information, balance inquiry, balance transfer, bills payments are main
component that included in their online banking services. Besides, this study also highlighted the
challenges facing by the Nepalese banks for the development of internet banking technology.
Mostly consumers are facing the problem like lack of security, electricity problem, loss of
password, unfriendly technological environment, lack of proper information etc. Even though the
customer enjoying the internet banking facilities are satisfied from the services and have positive
attitude towards it, but still a major chunk of population are out of its coverage. Hence, banks
should educate and encourage their customers for using the internet banking facility provide by
their banks.
Finally, the study suggest that improvements are certainly needed in the internet banking
application and environments of use, banks should not merely focus on the adaption of the new
technology but should also on encouraging the internet banking.

REFERENCES:
1. Econoarticlesmictimes.indiatimes.com/keyword/online-banking
2. http://www.info.com/article%20online%20banking?cb=20&cmp=3332
3. http://www.reportbuyer.com/banking_finance/online_banking/internet_banki
ng.html
4. http://search.blekko.com/blk.gp.27/search/web?
fcoid=417&fcop=topnav&fpid=2&cid=187653197&ad.segment=blk.gp.03
16

&ad.device=c&aid=c0e75410-3e20-4f75-b976d8276c2ba957&ridx=1&q=article+based+on+internet+bankingb+services&
ql=&ss=t
5. www.google.com

Annex I
Research questionnaire for internet banking to be filled by representatives of
bank
1. Date
2014/./..
2. Name of the bank
3. Address of the institution

.
4. Type of bank
a. Commercial

b. Development

c. Others.

5. Name of the respondent

.
6. Position .
7. Education completed
Intermediate.
Bachelors .
Masters .
GENERAL QUESTIONS
1. Does bank provide any internet banking services
Yes
No .
Cant say ..
Dont know.
2. Bankwhat kind of internet banking services are being provided by
you?
Account services
17

Account information..
Request for statement..
Cheque book request

Fund transfer
Within same bank

To other bank account in Nepal .

Credit card management

Credit card transaction review ..
Credit card payment... ..
Credit card limit increase request. ..
Personnel updates
Change contact details
Change address information
Utility purpose
Paying utility bills
Investment purpose
Others specify

18

3. For what kind of customer bank provides internet bank services

All customers .
Foreigners customers ..
Corporate customers ..
Dont know
Others specify
4. When was the first internet banking services operated by the bank

5. Is there any specific time allocated for internet bank services

Yes (..)
No ().
Dont know ( .. )
Cannot say ()
6. If yes when?
Morning (..)
Evening (..)
24 hrs . (.. ..)
Afternoon ()
Night ()
7. Do customers get access to internet banking service as soon as they
open account in the bank?
Yes ()
No (.)
Dont know (..)
Cant say ()
8. Does customer need to register for the internet banking service?
Yes ()
No ()
9. any fees for utilizing internet banking service? Is there
Yes ()
No ()
Dont know ()
19

Cant say ()
10.How much they have to pay for registration?
Less than 500 ().
Rs. 500 to 1000 ()
More than 1000 ()
11.On what basis customer have to pay for using internet banking
service?
Daily ()
Weekly ()
Monthly()
Yearly ()
Depend on transaction ()
12. How much they have to pay?
Less than 500 ()
Rs 500 to 1000 ()
More than 1000 ()
13.According to the bankers perspective which of the following are the
challenges for adaption and the development of the internet banking
services?
Lack of customers education ( )
Lack of customers computer education () .
Lack of customers internet education ( ..)
Customers concern about their private information ()
Users policy not clearly mentioned on the websites ()
Customers trust ion internet banking ( )
Websites language ()
Problem encounter in internet while using internet banking services
()
Concern about the theft of their password ()
Pricing of the internet ()
Cost of maintaining website of internet banking ()..
Difficulty of maintaining the website of internet banking ()
NRB regulation and policy ().
Charges regarding the uses of internet banking services by bank ()
20

Bank not providing enough information to customers ()

Lack of training to customers ()
Others (specify) ()
Annex II
Research questionnaire for internet banking in Nepal to be answered
by the individual customer respondent,
1. Date

2014/..

2. Name

..
3. Address ..
4. Education completed
Primary (..)
Secondary (..)
Higher secondary ()
Intermediate ()
Bachelors ()
Masters (.)
5. Occupation
Businessman (..)
Government service ()
Private sector (.)
Student (..)
Housewife (.)
Others ()
6. Do you have bank account?
Yes (..)
No ()
7. Name of the bank that you hold account
21

8. Have you heard about the internet banking?

Yes ()
No ()
9. If yes where you have heard from?
Bank itself (.)
Media (..)
Internet bank service users ()
Others (specify)
10.Does your bank provide internet bank service?
Yes (..)
No ()
Dont know (..)
11.Have you ever used internet bank service?
Yes (.)
No ()
Dont know (..)

12.How often you use internet bank service?

Daily ()
Weekly (..)
Monthly (..)
Others (specify)..
13.For what purpose you use internet baking service?
Personal ()
Business (.)
22

Official ()
Others (specify)
14.Where have you used internet banking service?
Within Nepal (..)
Outside Nepal ()
15.Which of the below given activity you do from internet banking?
Account services
Account information (..)
Request for statement (..)
Cheque book request ()
Fund transfer
Within same bank

( )

To other bank account in Nepal ()

Credit card management

Credit card transaction review ()
Credit card payment (..)
Credit card limit increase request.( ..)
Personnel updates
Change contact details ()
Change addresses information (.)

23

Utility purpose
Paying utility bills (..)
Investment purpose ()
Others specify

16.What are the factors for not using internet banking service?
Lack of information about internet banking service (.)
Concern about the security problem of internet banking (.)
Internet banking site is not trust worthy (.)
Internet banking is not trust worthy (.)
No access to internet and computers (.)
Lack of familiarity with online banking technology ()
Difficulty in understanding and using internet banking service (..)
Unfriendly website design ()
Lack of regular banking activity ()
If others (specify)

17.How aware are you about the internet banking services and its benefit
Agree
disagree
I receive enough informationaboutinternets banking service
24

I receive enough information about benefit of IBS

I receive enough information about how to use IBS
I receive information about IBS from bank
I prefer traditional method of banking than IBS
I prefer to use IBS when enough information and training is provided

25