GROWING RELATIONSHIP

BETWEEN DEMONETISATION
AND INTERNET BANKING.

SUBMITTED TO: SUBMITTED BY:

ERITRIYA ROY MUSKAN KHATRI
ASSISTANT PROFESSOR ROLL NO. 87
OF ECONOMICS SECTION B
B.A. L.L.B.(HONS.)

HIDYATULLAH NATIONAL LAW UNIVERSITY

UPARWARA POST, NEAR ABHANPUR, NAYA RAIPUR
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DECLARATION
I hereby declare that this project work entitled “growing relationship between
demonetisation and internet banking” is my own work and represents my own ideas, and
where others’ ideas or words have been included, I have adequately cited and referenced the
original sources. I also declare that I have adhered to all the principles of academic honesty
and integrity and have not misrepresented or fabricated or falsified any data/idea/fact/source
in my submission.

Muskan Khatri

Roll no. 87
Section B
Semester 1
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ACKNOWLEDGMENT

The practical realization of this project has obligated the assistance of many persons. I
express my deepest regard and gratitude for Eritriya Roy Ma’am. Her consistent supervision,
constant inspiration and invaluable guidance have been of immense help in understanding
and carrying out the nuances of the project report.

I would like to thank my friends and family without whose support and encouragement, this
project would not have been a reality.

Muskan khatri
Semester 1
Section B
Roll no. 87
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CONTENTS

Introduction……………………………………………….01
Objectives…………………………………………............03
Research Methodology…………………………………….03
Demonetisation…………………………………………….04
Internet banking……………………………………………06
Status of internet banking: pre-demonetisation…………….08
Post demonetisation……………………….………………..10
Conclusion……………………………………………….…14
References…………………………………….…………….15
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INTRODUCTION
India is no new to demonetization because it has implemented first currency ban in 1946 and

second time currency ban in 1978 and now we are talking about third time currency

demonetized in 2016 by prime minister of India – Mr. Narendra Modi has addressed on

November 8 the government’s decision to demonetise 500 rupees and 1000 currency notes,

which made up for 86 % of currency in circulation. Although initially Modi and his

government sold this to move as surgical Strike on black money or untaxed wealth the

narrative has since shifted to transforming India into a cashless economy. Last

demonetization which was implemented in 1978 held where the bank was only way to make

all kind transaction but now we are well adapted with technology to support the cash and

cashless transaction Government encouraging online banking online shopping is E-wallet,

mobile banking, credit and debit cards. The intention behind demonetization was to control

the black money under to increase E-transaction in the country.

Before demonetization 70% people were not having bank accounts but thereafter mostly

everyone had bank accounts and this will leads to digital payment system and transactions

with credit and debit cards used. With the recent implementation of demonetisation, a bold

step, by government of India it is a clear message to that entire government sector inclining

towards development of Nation for that government is taking constant effort to make India a

better place to invest and better place to do business.

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In a sense, it was a new beginning for bankers and customers in India to make use of

currency for transaction purposes. The move is presumed as a restricting of Indian economy,

has necessitated the usage of electronic media for making transaction with the help of net

banking, debit or credit card for making and receiving payments. Simultaneously, with the

advancement of technology and mobile phones more and more customers are using internet

to buy and compare products online. Consequently, more and more entrepreneurs have

encouraged the usage of internet to sell their product online. Resulting in widespread usage of

finance services, associated with internet.

Internet banking has enabled users to execute bank related transactions like making and

receiving payments, balance enquiry, fund transfers, term deposits, purchasing goods, tax

payments and grievance redressal etc. The usage of internet banking has increased with the

implementation of several security features like: browser login page encryption, two stage

authentication process, one-time password etc. Internet banking offer several advantages over

traditional banking. It allows to conduct various transactions using bank's website. Some of

the advantages are like: 24X 7 hours’ availability of banking facilities.

in user friendly interface, fast and efficient banking services and availability of loan facilities

at the fingertip. The launch of scheme like Jan Dhan Yojana has necessitated the usage of

banking services for each and every one in India and has provided a great platform for private

and public sector banks to serve each and every individual in this nation. Furthermore,

geographical diversity and remote terrines of country make it difficult for most of the banks

to provide their services to the residents residing there. In the meantime, the programs like

digital literacy and skill India can prove as great complement for banks to provide banking

services through internet banking. Hence internet banking can be seen as a great equipment

and necessity in the upcoming time with financial, economic and technological restructuring.
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OBJECTIVES

1. To study role of demonetization.

2. To understand the system of internet banking.
3. To have a Comparative analysis of pre-demonetization and post demonetization.

RESEARCH METHODOLOGY

The study focuses on use of internet banking in the Indian economy especially attracting its
concentration during demonetisation period. Factors affecting the economy and sectors, pre-
demonetisation period and post-demonetisation period.

The study is based on secondary sources of data information collected from Different books,
Journals, Newspapers and relevant websites in-order-to make the study more effective. Data
is analysed and put into the points that to clearly know the facts in the means of list. The
study attempts to know the increase or decrease in online work and transactions, going
through your own bank accounts, offers, deposit and withdrawal from your own accounts,
payments and credits in life of a common man.
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Demonetization
Demonetization refers to an economic policy where a certain currency unit ceases to be

recognized or used as a form of legal tender. In other words, a currency unit still loses its

legal tender status as a new one comes into circulation.1

The government can take such decisions to stop the circulation of a denomination of notes or

coins in the economy. The government from time to time formulates fiscal policies that are

meant to spur economic growth. A lot of black money circulates in the economy, and most of

it is unaccounted for because the sources of income are not known to the government. It can

be money generated through illegal trade or unauthorized funding. To mop up this money out

of circulation, the government can demonetize so that the money holders are forced to deposit

the cash with the banks or lose their wealth. It is a strategy that has worked quite well for

some countries.

This is necessary whenever there is a change of national currency. The old unit of currency is

retired and replaced with a new currency unit. Legal tender is a medium of payment

recognized by a legal system to be valid for meeting a financial obligation. It can be anything

which when offered in payment extinguishes the debt. Coins and banknotes are usually

defined as legal tender whereas personal cheques, credit cards, and similar non-cash methods

of payment are not considered legal tender as debt obligations is not relieved until the

payment is tendered. The higher denomination banknotes in Rs 1,000, Rs 5,000 and Rs

10,000 were reintroduced in the year 1954 and these banknotes were again demonetized in

January 1978. Now again, on 8 November 2016, Rs 1000 notes were retired, Rs 500 notes

1
https://www.importantindia.com/25613/what-is-the-meaning-of-demonetisation.
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and Rs 50 were taken back and introduced in new design, paper and colour and accordingly,

notes of Rs 2000 and Rs 200 were introduced after the lapse of some time.

Internet banking
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Internet plays vital role between banks and customers to receive and deliver information, this

form of banking is described as Internet banking (Reserve Bank of India, 2001). The process

in which internet and computer device are used as a medium to facilitate banking services is

termed as 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 device2. It permits the customers to log on to the banks website with the help of

banks issued identification and personal identification number (PIN). The banking system

verifies the user and provides access to the requested services, the range of products and

service offered by each bank on the internet differs widely in their content.

Banks have traditionally been in the forefront of harnessing technology to improve their

products, services and efficiency. Banks are using electronic and telecommunication

networks for delivering a wide range of value added products and services. The delivery

channels include direct dial – up connections, private networks, public networks etc and the

devices include Personal Computers. With the popularity of PCs, easy access to Internet and

World Wide Web (WWW), Internet is increasingly used by banks as a channel for receiving

instructions and delivering their products and services to their customers. Most of the banks

offer internet banking as a value-added service.

Internet banking benefits

2
http://www.cpuh.in/academics/pdf/LekhRaj-2_1.pdf.
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Internet banking3 provides numbers of benefits to its customers, some of the benefits are: It
removes the traditional geographical barriers for customers. The customer can access their
account anytime and from any part of the world, Due to new innovative and convenient
facility it attracts new customers who are using traditional banking system so far, It facilitate
the offering of more services because this is internet based services which is time saving and
customer can access and regulate his/her account himself/herself, This facility have zero fee,
so no monthly payments are required to forfeit for availing this service, Free of charge bill
reimbursement and refunds on ATM surcharges, Simple online submissions for personal
accounts, loans and credits, Due to self-access system it reduce customer attrition and
Increase customer loyalty, High-tech technical advancements in the form of intrusion
detection systems (IDS) to virus control equipments have made Online Banking system
hazard free. However, regardless of the fact it is vital on the part of every customer to
undertake few precautionary measures while transacting online.

Status of Internet Banking in

India: Pre-Demonetisation.

3
https://www.ermt.net/docs/papers/Volume_5/5_May2016/V5N5-138.pdf
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Indian banks have a wonderful history.4 Banks were started during British mandate; they
formed many large and small private banks. After independence, Indian government revealed
interest towards banks which results the nationalization of banks, leading to the emergence of
the public- sector banks. Later on in 90‟s the banking industry embracing technology in a
massive way, led in particular by the new private banks and MNC banks. The Indian banking
industry has undergone unprecedented rivalry among unconventional banking organizations.
The introduction of latest technologies along with the deregulation of the banking sector has
attracted new players to make a foray into the industry rapidly and competently. On online
banking has made things much easier and has saved lot of time of bank employees as well as
general-public. The traditional way of waiting in a queue and filling up all the forms
manually, is no hassle now for transacting with any bank. Banks in India are offering wide
range of their services and their products through internet banking. Some of the major
services and products in India are: Statements: Provide account statement (account info),
Balance enquiry, balance statement and transaction reports used. Customers can even
download and print the statement of accounts. Online Fund Transfer: Transfer funds between
accounts, even if they are in different branches or cities. Customer can also transfer funds to
any person having an account with the same bank anytime, anywhere, using third party funds
transfer option. Bill Payment Service: Banks Bill Payment is the easiest way to manage bills.
Account holder can pay their regular monthly bills i.e. telephone, electricity, mobile phone,
insurance etc. at anytime, anywhere for free. Saves time and effort. Make bill payments at
customer’s convenience form their home or office. Let’s account holders check their bill
amount before it is debited form their account. Requests and Intimations: Can electronically
submit a request for Cheque-book, Stop payment instructions, Opening a fixed deposit,
Opening a recurring deposit, Intimate for the loss of ATM card, Register online for phone
and mobile banking, Cheque status, Online application for debit card, Issue a DD or Banker’s
a cheque form account at special rates. Demat Account and Share Trading Demat Account:
Demat is commonly used abbreviation of Dematerialisation, which is a process whereby
securities like share, debentures are converted from the „material (paper documents) into
electronic data and stored in the computer of an electronic Depository. A depository is a
security „ banks, ‟ where dematerialized physical securities are held in custody, and form
where they can be traded. This facilitates faster, risk-free and low cost settlement. According
to a report by Boston Consulting Group (BCG), In India, out of 1.2 billion s, only 200 million
people having bank accounts, which is only 17 % of Indian and according to McKinsey
4
https://www.ermt.net/docs/papers/Volume_5/5_May2016/V5N5-138.pdf
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report (2011) , with 120 million internet , India has third largest internet in the world after
China and the US and India targeted for 330--370 million internet users in 2015 which will
make it second largest internet . In same report, it is mention that in made positive
improvement in e-commerce. Further it is reported that 7% of account holders in the country
are using the Internet for banking transactions, while branch banking has fallen by a full 15
percentage points.5

Post demonetisation.
After demonetisation6 the E-banking a major role E-banking become a essential component
to “improve economic growth” now Bank of India recently implemented cashless withdrawal
service. This concept helps to customer to send money through ATM. The government
implemented 24*7 service basis in India and provide integrated delivery channels like
5
https://www.ermt.net/docs/papers/Volume_5/5_May2016/V5N5-138.pdf.
6
https://www.ijser.org/researchpaper/Impact-Of-Demonetization-In-E-Banking.pdf.
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Internet. Due to demonetization this will replace the traditional clearing system. There are
three different types of wallet available in current scenario to make payment

a) Generic online

b) E wallet oxygen

c) Paytm.7

According to current scenario the government is planning to bring out its own E-wallet like
Paytm to move towards cashless transactions. Special in villages the government planning to
give subsidy on smartphone in able to use cashless transaction. Even Airtel implemented new
rule it’s any customer opening a savings account Airtel payment bank for cashless
transaction. And then the main things e commerce majorly Snapdeal announced the launch of
at home. After demonetization there is a change in purchasing Trends of goods and services
in market customers more over go through credit and debit card as well as through banking
especially youngsters are going through cashless payment. 8 Even the ICICI Bank introduced
debit and EMI option for mobile to make purchase transaction.

How demonetization effect on electronic payment:

The Indian government wants to go cashless transaction. Due to that online transaction
where done through use of debit and credit cards. They are many options to cashless
transaction available in India they are:

1. Plastic money

2. Aadhaar card

3. E-wallet

7
http://www.digitalvidya.com/blog/demonetization-effects-on-ecommerce-online-payments/.
8
data.conferenceworld.in/SGTB/P680-685.pdf.
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4. UPI

1. Plastic money: It includes debit and credit cards that are used at ATM for cash
withdrawal and POS machines are used at the time of shopping.

2. Aadhaar card: It leads to make payment through use aadhar number. It allows a person to
pay using his account if it is linked with his bank account when you have an account in bank
you can make payment through use of your fingerprints.

3.E-Wallet: E wallet paying major role and become a popular nowadays after demonetization
E-Wallet has been used large scale. E-Wallet allows users to make payment through use of
mobile number (or) QR code.

4. UPI (unified payment interface): UPI enables all bank accounts holders to send and
receive money from their smartphones with the need to enter bank account information. 9

Benefits of using e banking:

The operating cost per unit services is lower function to the bank.

 It offers convenience to as they are not required to go the banks premises.

 Lower handling cost.

Benefits to customer:

 E banking helps as a less waiting time.

 It easy and convenient to use.

 It provides 24×7 service.

 E-Banking saves time

.  It unable to help make transaction at any time of the day and as many times as you want.
9
https://www.ijser.org/researchpaper/Impact-Of-Demonetization-In-E-Banking.pdf.
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Benefits to banks:

 It improves customer relation with banks.

 It helps to cost effective to increase profitability.

 E-Banking helps as a reductionof burden to branch banking.

Features of e banking:

 Easy electronic fund transfer facility.

 E-Banking brings door step service.

 It can be to view balance of account and statements.

 It’s a better efficiency in CRM.

Challenges:

1. Security and privacy risk - A large number of users refuse to adopt e banking facility due
to securities privacy risk.

2. Consumer awareness- In India the use does not have one banking in India still lower
awareness.

3. Less Internet connections- Available in Indian context.

4. E banking the main challenge in infrastructure risk.

5. Challenge to E-Banking through social and cultural barriers.10

10
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CONCLUSION

The demonetization undertaken by the Indian government in a large concern. Due to that the
public turns to cashless transaction that is Internet banking. It reaches High success rates
through co-ordination. It’s like two faces of coin become of one side it will be benefit to
Nation and other side its going towards digital economy may bring the transparency in the
system. Internet banking brings easy and convenient service people develop the ability to use
Ebanking but the same time at the earlier time the people affected in this changes people are
facing problems because the limit of withdrawal has not been kept at the high level it difficult
to adapt illiterate people but even all these difficulties overcome and make the banking
transactions effectively due to this implementation increase Internet users and also initiative
taken by government Agencies to make the India developed in future.
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REFERENCES

1. International Journal of Scientific & Engineering Research, Volume 8. (30.09.17)

2. B.M. Salini, Demonetization – Metamorphosis for cashless transaction India IJSR Index
copenicusvalie (2015). (30.09.17)
3. DEMONETIZATION: IMPACT ON CASHLESS PAYEMNT SYSTEM Manpreet Kaur. (01.10.17)
4. International Journal of Emerging Research in Management &Technology ISSN: 2278-
9359 (Volume-5, Issue-5) Study of Internet Banking Scenario in India Dr. Geeta Sharma.
(02.10.17)
5.
6. https://www.importantindia.com/25613/what-is-the-meaning-of-demonetization/
(30.09.17)
7. http://www.cpuh.in/academics/pdf/LekhRaj-2_1.pdf An Exploratory Study of
Internet Banking Customer Behaviour. (02.10.17)
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