Steps to do are as follows:

First I shutdown the database:

SQLPLUS>shutdown immediate

Then I start the database in restrict mode:

SQLPLUS>startup restrict

Then I change the database character set as follows:
SQLPLUS>ALTER DATABASE CHARACTER SET INTERNAL_USE UTF8;

Then I shutdown the database:
SQLPLUS>shutdown immediate

Then I start the database in normal mode:
SQLPLUS>startup

Entry in tnsnames.ora of orant directory.