CHAPTER-II

REVIEW OF LITERATURE
1. Dannenberg and Kellner (1998), in their study, overviewed the opportunities for
effective utilization of the Internet with regard to the banking industry. The authors
evaluated that appropriate application of today’s cutting edge technology could ensure
the success of banks in the competitive market. They evaluated the services of banks
via internet as websites provide sophisticated line of products and services at low price.
The authors analyzed that transactions via internet reduce the risk of data loss to
customers, chance to cut down expenses, higher flexibility for bank employees, re-
shaping the banks’ image into an innovative and technologically leading institutes, etc.
The researchers found that banks could move one step further by entering into a
strategic alliance with internet service provider. So, the bank of tomorrow stands to be
feasible with today’s technology.
2. Daniel (1999), in his research paper, described e-banking as the newest delivery
channel offered by the retail banks in many developing countries. The objective of the
study was to analyze the current provision of electronic services of major retail banking
organizations in the UK. The researcher through a questionnaire found that 25% banks
in the UK were those already providing e-banking services, 50% banks were testing or
developing such services while 25% were not providing any e-banking services.
3. Electronic channels, PC, digital TV and all these provide greater accessibility and
services at lower price. To make services more adaptable, customers should be
provided maximum choice and convenience. Restriction and limitation within
organization to operate the services and its market share or strength were viewed as
important to decide and operate the e-banking services.
4. Wenninger (2000) evaluated the emerging role of electronic commerce in banks’-
commerce had created new form of competition and compelled banks to make choices
about the services they offer, the size of their branch network and extent of their
support to inter- bank payments network. The main objective of the study was to
understand the changes that had taken place with the introduction of electronic
commerce. Development of e-banking products such as electronic billing, establishing
internet portals, electronic checks, ATM, etc. had provided additional services to
 customers’. The author also emphasized upon the strategic and operational risks which
arise in banking sector. These could be minimized with a cost efficient electronic
process.
5. Kamesam (2001) studied the changes that took place in the Indian banking industry
which emphasized on technological advancements and profitability in banks.
Technology has helped in centralized data storage with decentralized processing which
has helped in reduction of costs and NPAs. Further, emergence of services such as
electronic data interchange (EDI), usage of smart cards, RTGS, e-commerce; all
resulted in increasing the level of profitability and productivity of banks. The author
concluded that in order to reduce crimes, security audit should be done which will be
helpful in improving customer service, increase systematic efficiency and thus
increased productivity and profitability.
6. Unninthan (2001) described the impact of e-banking adaptation on Australian and
Indian banking sectors with the help of qualitative and quantitative analysis. The
researcher found that Australia had a strong platform for e-banking growth with 37.7
percent of population willing to engage in e-banking mostly in urban areas due to
literate young working population with discretionary income. However, India by
comparison was played by weak infrastructure, low PC penetration and consumer
reluctance in rural sector. But the professionals are compelling the government and
bureaucracy in the country to support and develop new initiatives at a faster speed of
internet banking. However, in both the countries, e-banking was a successful strategic
weapon for banks tore main profitable in a volatile and competitive market place
7. Yakhlef (2001) evaluated the services provided through internet and website. The
researcher explored the major services of Swedish banks provided via internet. The
objective of the study was to see whether internet banking services were compliment or
competitive to brick and mortar bank branches. The results of the study indicated that
although internet banking provided more safe, convenient and efficient services to the
customers, yet as far as personal contact and direct information was concerned, brick
and mortar was more preferable than internet. Internet has reduced number of branches
of banks, added value to the customers, attracted new customers and developed more
customized services but at the same time it also requires huge investment, infrastructure
 and trained employees of bank. So, internet was not a substitute rather compliment of
brick and mortar concept.
8. Aki (2002) highlighted the impact of technology in banking sector. New technologies
cannot replace the branch network but these can support old methods of delivering the
services. The author evaluated the structural change in Finnish banking sector from the
period 1993 to 2002 which showed that 42 per cent of households have internet
connection with banks and 90 per cent have mobile banking services. ICT hashed both
inter-spectral and intra-sectoral impact. The author concluded that main goals of
management of technology were to improve customer satisfaction, reduce cost and
develop new methods to collect and analyze the customer information.
9. Alu et al. (2002) reviewed that information technology was rapidly changing the
banking industry. The study evaluated the impact of IT on the banking industry in
Nigeria. The analysis was done through a structured questionnaire and out of
260respondents, 86 per cent agreed that IT was really helping the banks, 83.1 per cent
agreed that IT had a great positive impact on services rendered by the banks and 66.5
per cent disagreed that IT had an effect on services rendered by the banks. The study
revealed that IT had appreciable effect on banks’ productivity, cashier’s work, banking
transactions, bank patronage, bank service delivery and customers’ services. This
affects the growth of banking industry because now customers can withdraw money
from any branch of their bank. The study also revealed that telephones, computer
systems, LANs were available and being used by all the banks, while WANs, EFT and
wireless phones were available in some of the banks. To make an effective use of e-
banking, there should be adequate supply of power and that’s the major deterrent of e-
banking technique used in Nigeria.
10. Gurau (2002) analyzed the situation of online banking in USA and Europe. The author
described that there were more than 1500 websites of banks all over the world. Most of
banks in USA had internet presence, while in Europe, most of banking websites were
from UK, Germany, Spain, Italy and France. The author also found that in
2005,distribution channels used by banks included 10 per cent internet banking, 65 per
centmulti-channel,10 per cent telephone banking and 15 per cent through bank
branches, whereas in 1998, it was only 15 per cent direct banking and 85 per cent in
 branch banking. The author concluded that successful introduction of e-banking
services proved to be a complex operation which requires the harmonization of all
interacting elements of economic and financial system.
11. Durkin and Howcroft (2003) evaluated that the banker-customer relationship was
improved through mobile, phone and internet banking. The authors found that new
technology has made the banks very competitive and profitable and internet has played
a key role in it. Perception of bankers and customers regarding the use of internet was
examined. They pointed out that as consumer usage of remote bank delivery channels
increases, relationship management will become more important. Further, the
combination of traditional and new delivery channels, if followed, can help to improve
their productivity and profitability.
12. Joseph and Stone (2003), in their paper, explored that customer friendly technology
such as ATM, internet banking and telephone banking has been used by the banks to
reduce the cost of providing services, and to increase the customer loyalty and market
share. Technology plays a vital role in delivery of banking service. The study
highlighted that access, location, security and ease of use of ATM machines appears to
be the most important component for banking customers for the adoption of e-banking.
13. However, banks should emphasize more on providing speedy and efficient service to
the customers. Further, bank managers should conduct periodic marketing studies to
understand the level of technological services by the customers so that adequate service
could be delivered at the right time.
14. Lustik (2003) analyzed the main criteria for successful inter-bank strategy and brought
out benefits of e-banking from the viewpoint of banks, their clients and the economy in
general. The author explained that banks in Estonia had achieved significant success in
the implementation of electronic banking. The findings of the paper were helpful to
understand the main reasons and factors responsible for the rapid growth of electronic
banking. The author further revealed that making payment via e-banking creates overall
economy savings to the amount of 0.93 per cent of GDP. Electronic banking was not a
small application to computer fans and innovative adopters, and a profound research
was needed to map its customer base for the enhancement of value creation process.
15. Mattila et al. (2003) evaluated the electronic banking adoption in Finland. The study
showed that the proportion of people in Finland, who have adopted online banking, was
higher than anywhere else in the world. All the Finnish banks offered a full range of
internet banking services. The researchers also found that different people have
different attitude towards new technology. Some were innovators, who were interested
in new technology and positive towards it. Some were early adopters and some were
late adopters who have negative attitude towards it. Laggards had extremely negative
attitude towards it. The study also found that matured customers were late adopters of
internet banking. However, expensive start up, security and lack of personal service
were main hindrances in the use of electronic banking. The study brought out that most
customers
16. Sureshchander and Rajendran (2003), in their paper, focused on investigating the
important factors of customers’ perceived quality in banks of developing economy like
India. The authors had taken 15 public sector banks, 14 private banks and 14 foreign
banks for the period under study. The researchers found that there seems to be a great
variation in respect of services offered by three groups of banks. They used core
services such as human element, systemization of services, tangibility of services and
social responsibility as critical factors. They analyzed that three groups of banks in
India seem to vary significantly in terms of service quality factors but from the
customer perception of service quality, it could be acceptable only if customers’ need
could be satisfied at the right time in a right manner.
17. Yu and Boon (2003), in their study, examined the implications of technological
advances in the banking sector in Malaysia. An empirical study was made through
structured questionnaire. The results highlighted that electronic channels provide
alternatives for faster delivery of banking services to the customers. They described that
prior to adoption of electronic channels like ATMs, kiosks, internet banking;
investment costs must be identified to ensure a more cost-effective and efficient
execution of echannelservices. The authors analyzed the commercial banks in Malaysia
via frequency analysis and factor analysis. The results of the study indicated that banks’
operation management was the main factor affecting the success of ATMs, PC and
branch banking, while product innovation and knowledge development factors were
 found to have most significant effect on the success of banking kiosks and phone
banking respectively.
18. Lustik (2004), in his study, tried to assess the profitability of electronic banking
services for the banks. In order to analyze the cost structure for traditional and
electronic channel transactions, the author explored the implementation techniques of
activity based costing (ABC). The results of the study indicated that electronic channels
provide cost saving for banks and their clients. The study revealed that with help of
ABC technique, banks can reduce and regulate some costs. It was also found that the
decrease in transaction costs after introduction of electronic channels was slower than
expected as existing traditional channels could not be closed at the same speed as the
new electronic channels were introduced.
19. Lympero and Chaniotakir (2004) evaluated the implication of e-banking adoption
through a survey of the branch employees’ perception. The researchers framed
questionnaire of 527 branch employees and analyzed the existence of four distinct
factors which were hard advantages, soft advantages, market effects and risks. The
authors selected 17 commercial banks for the study. They highlighted the advantages
which influence the employees feel easy to adopt e-banking, i.e., cost alienation,
customers service and foreign competition. They focused that branch employees
‘perception toward e- banking depends upon their position in branch hierarchy,
qualification, employers’ size and type of ownership. So, in order to facilitate the
promotion of e-banking services, bank managers should make systematic efforts in
exploiting internet marketing processes such as continuous education, flawless
information and an attempt to minimize negative perception.
20. Suleiman et al. (2005) studied the impact of E-banking on Malaysian banking sector.
The study aimed at providing an overview of E-banking adoption in [Link] of 53.9
per cent, who used e-banking, 85 per cent used it for savings bank facility,55.8 per cent
for current account facility, 37 per cent for bill payment, 35.3 per cent for visa /master
card and 30.8 per cent used for third party transfer. The researchers analyzed websites
of the banks in order to know the impact of e-banking. Evaluation of websites
contained 32 elements, and a survey was conducted to obtained customers’ perspective
of e-banking. The researchers overviewed that results of the study cannot be
 generalized to the general population. Nevertheless, the results provide a fair indication
of what services e-banking users find useful and which group of customers were likely
to use the services more.
21. Heng Michael et al. (2006) analyzed the impact of e-banking on brick and mortar
banks through innovation model. The researchers’ analyzed 8 core capabilities to assist
the banks migrated to e-banking environment. Their capabilities fall into two groups
relating to configuration of existing business model. They suggested that banks need to
develop uniquely innovative services and products on the one hand and innovative
business model that changes the way banks operate on the other. They concluded that
eight core capabilities (technical dynamic capabilities and business dynamic
capabilities)provided a blue print for sustaining a bank’s ability to exploit e-banking.
22. Siam (2006) evaluated the effects of electronic banking on the profitability of
Jordanian banks. The study investigated the reasons behind providing electronic
banking services through internet, their impact on banking services in general, and
banks profitability in particular. The results of the study revealed that electronic
banking services had a negative impact on the profitability of banks in the short run
because of increased capital costs involved in technical and electronic infrastructure,
cost of training to employees and also the cost involved in creation of environment
where the banks can operate smoothly. However, these services had a positive impact
in the long run on the profitability of banks. The researcher recommended that banks
need to carryout awareness and promotion campaigns to educate clients and aware
them of feasibility through reduced time, cost, effort and also to hold training courses
for employees to understand the e-banking business strategies.
23. Manoharan (2007) highlighted the e-payment system in India and its performance
impact on Indian banking sector. The author described that competition in banking
industry had forced the banks to rethink the way they operate their business. E-banking
has made it possible to find alternate banking practices. In the paper, the author divided
the payment system in India into three parts, i.e., large value payment system, retail
payment system, and retail electronic system. Each one includes different categories of
e-payment. The author studied the performance of various Indian payment stems in the
last three years in which RTGS emerged as the principal payment system In India for
 wholesale payment. The study focused that having a huge opportunity of
epaymentsystem in India still 90 per cent of transactions were cash based. So, an effort
should be made to increase the use of e-payment, and RBI should make efforts to
strengthen the legal framework of electronic banking system
24. .Ramani (2007) studied the impact of e-payment system on Indian banking sector. E-
payment was required for handling large volume of business payment and remittances
for hassle free, quicker and faster payment remittances at low cost, and paperless
transactions. The researcher highlighted various steps taken by RBI for the [Link]
includes RTGS, deferred net settlement system such as electronic clearing services
debit and credit, electronic fund transfer and NEFT. The researcher studied that these
methods had increased the use of core banking solutions, data warehousing and data
mining. E-payment had reduced the chances of fraud, improved customer service
by cutting the delay in payment obligation.
25. Singh and Malhotra (2007) made an attempt to discover factors affecting a bank’s
decision to adopt internet banking in India. The study was based on 88 banks
comprising of public, private and foreign banks covering financial years from 1997
to2005. The results of the study showed that large banks having high fixed expenses,
high income and expenditure tend to use more technology. Banks had used internet
banking as complementary channel to existing branch network. However, the private
and foreign banks were quick adopter to internet banking than public sector banks. The
adoption of this innovation by other banks increases the probability that a decision to
adapt will remade as it has increased the profitability and productivity of banks.
26. Kautish (2008) described the paradigm shift of banking sector from traditional banking
to online banking. The objective of the paper was to discuss the derivation of value
added tool of online banking system which was used to attract new customers and
retain the existing ones. It helped the banks to acquire more business from existing
customers. People preferred to use online banking because of its availability, better
performance, ubiquity, speed and its effectiveness. Further, the author discussed two
bank models integrated banking model where the banks provide internet banking
services as an extension to their basic services like ATM and phone banking. So, it is a
kind of hybrid approach and the other was stand alone internet banking model, wher
27. Suresh (2008) highlighted that recently developed e-banking technology had created
unpredicted opportunities for the banks to organize their financial products, profits,
service delivery and marketing. The objectives of the study were to evaluate the
difference between traditional and e-banking, and to identify the core capabilities for
Thebes’s use of e-banking. The author analyzed that e-banking will be an innovation if
it preserved both business model and technology knowledge, and disruptive if it
destroys both the model and knowledge. He also differentiated e-banking from
traditional banking in five ways, namely, value proportion, market scope, cost structure,
profit potential and value network. However, in order to exploit technical and business
capabilities of ebanking, banks should generate more customers inside and outside
India so that more revenues could be generated that lead to better future of Indian
economy.
28. Al-Eisa and Alhemoud (2009) studied the most important attributes that influence
customer satisfaction with retail banks in Kuwait. They also measured the level of
overall satisfaction of the customers of the sample banks. The multipleattribute
approach was applied in the analysis of data. A convenient sample was selected from
customers of retail banks in Kuwait. They observe that the most important factors for
predicting customer satisfaction with retail banks in Kuwait are fast service, availability
of self-banking services and courtesy and helpfulness of employees
29. Herington and Weaven (2009) analysed the factors affecting customer satisfaction for
e-retail banking in Australia. A survey was conducted among the regular users of online
banking by selecting a convenience sample. The factors for customer satisfaction were
ascertained by factor analysis and regression analysis. He identifies that personal need
of the customer, website organization, user-friendliness of the websites and efficiency
as important factors contributing to the satisfaction of customers.
30. Kanning and Bergmann (2009) studied the “Factors affecting customer satisfaction
in the German retail banking sector”. By applying the field study method they
identified the factors affecting customer satisfaction. They identify Performance of
banks and fulfilment of customer expectations as the major factors which affect
customer satisfaction.
31. Mohammed Hossain and Shirley Leo (2009) in their study find that the perception of
customers changes in accordance with the nature of service. They view that in this
competitive environment, all banks are offering the same or similar products and the
only factor to differentiate them is the service quality. Thus retail banks must ensure
better service to their customers to become successful Pankaj Kumar (2009) in his
article “Customer relationship management in retail banking” highlights that Customer
relationship management is especially useful for large banks like SBI which are spread
across different locations. For CRM to be truly effective, it requires a well thought out
initiative involving strategy, people, technology and process.
32. Bhaskaran (2010) in the article “Impact of financial crisis on banks in India” views
that the impact of financial crisis is more on private sector banks. Nonperforming assets
have increased in all banking sectors. The increase in NPA preceded the financial crisis
and coincided with the retail boom.
33. Aparna Mishra and Kamini Tandon (2011)who studied “Customer centric
approach towards retail banking services” find that the important factor affecting
customer satisfaction in retail banking is service quality. The customer retention can be
ensured only through the quality of service provided by the banks.
34. Dhara Kothari (2011) views that retail banking offers vast opportunities for growth
and at the same time has challenges which are discouraging. The success of retail
banking depends on the ability of banks to make use of these challenges and
opportunities profitably. The efficiency of operations and use of technology would
provide the competitive strength for success in retail banking.
35. Dilip Kumar and Durga Sankar (2011) compare the performances of new generation
banks in India. During the periods of slow- down in the growth of credit, the private
sector banks have been able to perform better on account of the retail lending. The
competition in the field is very high and the customers are benefitted Review of
Literature 33 by it in the form of better service quality, product innovations and better
bargains. The retail segment has tremendous growth.
36. Ganguli and Roy (2011) also studied the “Factors affecting customer satisfaction in
the Indian retail banking sector”. The factors affecting customer satisfaction were
identified through factor analysis. Their study also shows that the important factors
 affecting customer satisfaction are customer service and technology usage, easiness and
reliability.
37. Gupta and Meera (2011) in their study on “Indian banks and Basel II norms” find that
the capital adequacy and risk structure of the banks have improved as a result of Basel
II regulations. The NPA of all banks have declined. The capital adequacy ratio of banks
has increased as a result of capital regulations which in turn lead to decrease in NPA.
38. Kajal Chaudhary and Monika Sharma (2011) in their article “Performance of Indian
public sector banks and private sector banks: a comparative study” suggests that banks
should take adequate measures to escape from NPA problem. Proper training should be
given in documentation and creation of charge of securities to the staff involved in loan
sanctioning. Care should be exercised in the selection of borrowers and projects
39. Kalpesh (2011) in his comparative study of financial performance of Indian banks
points out that efficiency and stability of the banking system in India is impacted by the
reform measures. The profitability and liquidity of both public and private sector banks
have also improved a lot.
40. Siddeshwar and Pradeep (2011) make an interesting observation regarding home
loans. They point out that home loans are beneficial to the banks due to various reasons.
Banks earn huge amount of interest income through home loans. House loans are
sanctioned against most secured asset compared to most other loans. Since the dream
home of the individual is mortgaged for the home loan, the borrower pays the
installments timely, and hence there is little or no chance of such a loan becoming bad
and non-performing asset for the bank.
41. Syed Ibrahim (2011) in his study states that Indian scheduled commercial banks have
improved their operational performance since 2000. There is constant increase in
aggregate deposits. The C-D ratio also shows an increasing trend. The investment
deposit ratio and priority sector advances have also gone up.
42. Uppal (2011) in his study states that as e-channels provide time and cost utility,
customers prefer them. His stance is that public sector banks have least growth in terms
of number of customers. The financial productivity index has decreased in new private
sector banks. The productivity index of employees, branch and bank is increased in all
bank groups.
43. Aashish Shashikant Jani (2012) in his comparative study on the use of technology in
retail banking among public and private sector banks argues that echannels are
preferred by customers because of cost and time utility. Her suggestion is that in this
era of information technology, the public sector banks have to introduce more
technology based products and services to compete with other bank groups especially
new generation banks.
44. Nishit (2012) in her comparative study on private sector banks in India analysed the
performance of six major private sector banks during the period 2008- 09 to 2009-10.
She found that profit maximisation and wealth maximisation are the main concern for
banks. The private sector banks play an important role in the economic development of
the country. The study also contains the profitability Review of Literature 36 analysis
of the sample banks which can be used as a basis for investment decision by the
investors. Examining the macro trends of retail credit in India,
45. Dinabandhu Bag (2012) observes that the personal credit has increased many times in
India since 1996. But this increase is not significant when compared to the increase in
per capita income and per household income in India. The demand for retail credit has
increased as a result of the increased employment generation in the organised sector.
He further views that a large portion of households remain unserved with retail credit
and that the gap between retail credit and income is increasing. Through better credit
management tools the banks can improve the credit eligibility and build a culture of
credit.
46. Paritosh and Kavita (2012) in their research paper on “The impact of customer
satisfaction on retail banking” conclude that the ATM, internet and branch office are
the popular channels used by retail banking customers. The financial crisis has not
affected the trust and relationship of customers with their retail banks
47. Raghuwanshi (2012) in his article states that the Indian retail banking has wide
opportunities and challenges. The retail portfolio of banks is subject to frequent change.
Banks should constantly innovate in retail banking through product diversification,
technology up-gradation, cross selling etc.
48. Ashok Kumar (2013) in his study “Opportunities and challenges in the Indian retail
banking industry” concludes that for the development of retail banking in India, a
 paradigm shift is required in bank financing through innovative products and
mechanisms involving constant up-gradation of the banks internal systems and
processes. Banks require product development and differentiation, innovation and
business process reengineering, micro-planning, marketing, prudent pricing,
customisation, technology up-gradation, electronic or mobile banking, cost reduction
and cross-selling for their development through retail lending. He says that retail
banking has more scope for generating profit than any other traditional methods.
49. Phanindra and Parashuramulu (2013) in their article view that the Indian banks have
wide scope for operations but the important obstacle before them is the hard regulations
made by the apex body. The LPG measures have affected the banking sector. Thus the
participants in retail banking in India have to adopt a different approach in designing
products and services in order to retain the market share.
50. Sujatha S. And Arumugam N. (2013) in their study “Customer satisfaction in Indian
banking sector” view that before introducing various services to customers, banks
should take care of their needs. To serve customers with different occupations and
educational backgrounds banks should adopt strategies. There is a correlation between
the satisfaction of the customer and the performance of the banks. So it is important for
banks to consider satisfaction of the customer as a relationshipmarketing strategy.
51. Gokilamani, and Natarajan (2014) in their study opine that customers of Indian
commercial banks are positively responding to retail banking. It is important for banks
to focus on service quality for strengthening their competitive edge and to allocate the
limited resources to serve the personal banking division. They further views that the
success of a retail bank will depend on product innovation, technological developments
and strategies to retain the retail customers.