A Study On Internet Banking In Nepal

This research is the effort for study and analyzing the Internet Banking in Nepal Bank Limited. Internet Banking can be defined as the use of technology to communicate instructions to and receive information from a financial institution where an account is held. Internet Banking includes the systems that enable financial institution customers, individuals or businesses, to access accounts, transact business or obtain information on financial products and services through a public or private network, including the Internet.

Since the launch of Internet the large planet has become a smaller one. It has rendered enormous impacts on business sectors. Remarkable development in Information and Communication Technology (ICT) has introduced a global revolution in banking industry. The global trend in business arena set some challenge that cannot be fulfilled with the help of the traditional banking system.

The survey of current banking system in Nepal reveals the fact that it requires rapid modification and adaptation to keep harmony with the world economy business. It becomes more obvious by observing the increased number of customers in some modern bank while others are losing them.

The existing banking system in our country is slow and error-prone. In one hand, fails to meet the customers’ demand and it causes some significant losses both for the banking authority and traders. E-Banking, on the other hand solves the above problems. Furthermore, it opens up some other salient aspects such as increased foreign trade and foreign investment.

Most plan allow customers to perform all routine transactions, such as account transfers, balance inquires, bill payments and stop payment requests everything but it’s very easy to set up an account. We can access our account information anytime day or night and we can do it from anywhere. A few online banks update information in real time, while others do it daily.

1.2 Introduction of Origin and Growth of Bank in Nepal

The growth of banking in Nepal is not so long. In comparison with other developing or developed country, the institutional development in banking system of Nepal is far behind. Nepal had to wait for a long time to come to this present banking position. The origin of bank in Nepal and its beginning of growth is controversial.

Even though the specific date of the beginning of money and banking deal in Nepal is not obvious, it is speculated that during the reign of the King Manadev, the coin “Manank” and “Gunank” during the reign of the King Gunakamadev were in use.

After the establishment of Nepal Bank Limited on 30th Karkik, 1994 (1938), modern banking system started in Nepal.

Under the Nepal Rastra Bank Act 2012 (1956), Nepal Rastra Bank was established in 2013(1957) Baisakh 14th in Nepal. But this act has been repealed and the Nepal Rastra Bank Act 2058(2002) has been enacted by the parliament. After its establishment, it issued the Nepali notes on 7th Falgon 2016 for the first time.

Gradually, bank develop their services in Nepal according to requirement of customers and to compete market so today we can transact via non cash elements : like Internet Banking, Credit Card, ATM Card and SMS banking etc.

1.3 Nepal’s ICT Background

Nations worldwide have recognized development opportunities and challenges of the emerging information age characterized by Information and Communication Technologies (ICT). These technologies are driving national development efforts worldwide and a number of countries in both developing and the developed world are exploring ways of facilitating their development process through development, deployment and the exploitation of ICT within their economies and societies.

Nepal’s journey into the world of information technology began some three decades back with the use of IBM 1401 for the population census, 1971. Royal Nepal Academy for Science and Technology (RONAST), for the first time, used the internet. Mercantile Private Limited started email services for commercial purpose in June 1994. In 1995 government purchased the machine for further data processing in the Bureau of Statistics and established a separate organization called Electronic Data Processing Center (EDPC) and after 6 years it converted to National Computer Center (NCC).

Government has formed High Level Commission for Information Technology (HLCIT), which is playing the role of facilitator between private and public sector in the development of ICT in Nepal.

1.4 Introduction of Internet Banking

“Internet banking” refers to systems that enable bank customers to access accounts and general information on bank products and services through a personal computer (PC) or other intelligent device.

Internet banking products and services can include wholesale products for corporate customers as well as retail and fiduciary products for consumers. Ultimately, the products and services obtained through Internet banking may mirror products and services offered through other bank delivery channels. Some examples of wholesale products and services include:

Cash management.

Wire transfer.

Automated clearinghouse (ACH) transactions.

Bill presentment and payment.

Examples of retail and fiduciary products and services include:

Balance inquiry.

Funds transfer.

Downloading transaction information.

Bill presentment and payment.

Loan applications.

Investment activity.

Other value-added services.

Other Internet banking services may include providing Internet access as an Internet Service Provider (ISP). The OCC has determined that a national bank subsidiary may provide home banking services through an Internet connection to the bank’s home banking system and, incidental to that service, may also provide Internet access to bank customers using that service. Historically, banks have used information systems technology to process checks (item processing), drive ATM machines (transaction processing), and produce reports (management information systems). In the past, the computer systems that made the information systems operate were rarely noticed by customers. Today, Web sites, electronic mail, and electronic bill presentment and payment systems are an important way for banks to reach their customers.

1.5 Statement of the Problem

Establishing Internet Banking infrastructure has been a challenging task for the developing countries like Nepal. In the context of Nepal there are ample of problems in Internet Banking some of them are given below :

Computer and Banking Literacy : In aggregate here is low level of IT literacy. Very few people are computer literate in Nepal and very few people understand banking system or banking process even educated people also there.

Infrastructure Development : Though banks reach with their services in rural area ISP or NTC services is not available there for internet services and vice versa.

Risk Management : In Nepal, Internet Banking is at its infancy right now. However, no Internet Banking frauds have been found yet. Lack of understanding of internet technology may be the reason. But precaution must be taken.

In order to mitigate the risks associated with all e-banking businesses, banks should have in place a comprehensive risk management process that assesses risks, control risk exposure and monitors risks.

Security : Security of a transaction, authenticity of a deal, identification of a customer etc are important technological and systems issues, which are major sources of concern to e-banking. Customers are afraid from online attack. Various online attacks are also available.

1.6 Objectives of the Study

The main objectives of proposed research are to study, analyze and understand the Internet Banking of Nepal Bank Limited. Some of the other objectives are as follows :

To identify the problems in existing Internet Banking services of Nepal

Are public satisfy or not from Internet banking Services ? If not what will be the effective service delivery mechanism.

To identify the prerequisites to get the Internet Banking services

The research tell prerequisites to get Internet Banking services (for e.g. Computers, telephones, internet, customer should be account holder of bank)

To examine the service delivery of different banks of Nepal

The research includes various types of Internet Banking services provided by different banks’ to general public.

1.7 Scope of the Study

The study will be mainly focused on three components of the study area :

Social aspects : In social aspect the studied is focus on public participation according to their satisfaction, knowledge, beliefs, values etc.

Technical aspects : This aspects is concerned with the technically how to develop system and technology used on projects.

Economic aspects : In the economic analysis part, the study will focus on the possible areas of economic development by using this Internet Banking.

1.8 Limitation of the Study

This research is the small effort for study and analyzing the Internet Banking services of Nepal which has limited time so it cannot focus on all areas and may not be able to explore many fields. This research work is done within limited time frame during the MBS dissertation. There are so many constraints while doing the work such as inadequate time, load shedding, and resources etc. To understand methodology of Internet Banking service is very difficult because banks only provide surface level of information because of their security concern.

In spite of great effort, there are many limitations of this research work. The major limitations are as follows :

In the field of E-banking, there are so many arenas like ATM, Tele Banking, Mobile Banking etc. but this research does not focus on all the e-banking services. Research works mainly focus on Internet Banking.

Fund transfer is possible within the branch of bank. It means once cannot transfer amount from one bank to another bank.

Banks have their own policy but there is no any standard policy for Internet Banking in Nepal.

In the field of Internet Banking security is must but this research doe not cover all the aspects of security.

General customers and corporate customers of Internet Banking system have same kinds of facilities.

1.9 Organization of the Study

This study is organized and decorated in seven chapters. Each chapter and unit will be on a prescribed format of thesis writing to the partial fulfillment of MBS program. Each unit gives the clear picture or roadmap of the study.

Chapter One

This chapter deals with “Introduction of The Study”. In this chapter, separated unit for background, significances objective and limitation of the study has mentioned.

Chapter Two

This chapter focused “Review of Literature”. In this chapter, various relevant such as different books, journals, article and previous thesis mention has mentioned.

Chapter Three

Third chapter presented “Research Methodology”. In this chapter, research design, sources of the data, method of data collection and analysis has mentioned.

Chapter Four

This chapter deals with “Analysis of Internet Banking”. This chapter provides the different analysis like strength, weakness, opportunity, threat (SWOT) analysis and feasibility analysis of Internet banking.

Chapter Five

Fifth chapter deals with “Internet Banking Security”. Security in Internet Banking comprises both the computer and communication security. Therefore this chapter consist different security principles, cryptographic key management, RAID etc.

Chapter Six

This chapter focused on “System Analysis and design” to present the current Internet Banking system. This chapter provides requirement analysis, process modeling, data dictionary, hardware and software requirement to execute program.

Chapter Seven

Seventh chapter presented with “Summary, Conclusions and Recommendation” of the Study.

1.10 Research Design

There are two types of research approaches qualitative and quantitative. In the quantitative approach results are based on numbers and statistics that are presented in figures, whereas in the qualitative approach where focus lies on describing an event with the use of words.

This study is the result of qualitative research using comparative and analytical methods. The comparative research was conducted in two ways : Firstly, the comparison is carried out by investigating the availability of basic services of Internet Banking in different banks of Nepal. Secondly, the comparison is also carried out by investigating the different features offered by banking institutions in Nepal. For that purpose, reviews of website from banks are conducted.

Thus to gain practical knowledge of Internet Banking in the Nepali context, this research is conducted as a qualitative study to explore the perception of Internet Banking among Nepali Banks. Hence, the aim is not to make any simplification but instead establish a closer contact with the objectives of prior research which intend to provide us a deeper understanding of the participants attitudes and perceptions. Finally my intention with this research is to understand Internet Banking first describe and explore, find and analysis detailed information about Internet banking services provided by different banks of Nepal so qualitative approach is the most suitable method for my research.

1.11 Source of Data

Both primary as well as secondary data have been collected in order to achieve the real and factual result out of this research. All possible and useful data available have been collected. The major sources of data are as follows :

a. Primary Source

The primary data are collected from primary sources. The primary sources of data are the opinion survey through questionnaire, field visit and information received from the respondents. Some of the information was also collected from interview with the respondents.

b. Secondary Data

The secondary data are collected from secondary sources. The secondary sources of data are the information received from books, journals and article concerned with the study for example website of the Nepal Bank Limited, thesis and dissertation submitted at Shanker Dev Campus, Central Library T.U.