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CHAPTER – I
ROLE OF TECHNOLOGY IN BANKING SECTOR
1.1 Introduction & Meaning
The origin of banking, in the modern era, is traced in Italy The word
bank also seems to have originated from Italy The word bank is
supposed to have been derived from the German language
‘banck’, meaning a mound or heap from which Italians adopted ‘banco’
which means a bench at which the money changers used to change one
kind of money into another and transact their banking business The bank
of Venice, founded in 1157, was the first public banking institution The
bank of Barcelona and the bank of genoa were established in1401 and
1407 respectively Banking is a business like any other business An
indication of the financial position of a business concern may
be obtained by examing its statement of liabilities and assets, called the
‘balance sheet’Technology has brought a complete paradigm shift in the
functioning of banks and delivery of banking services
Gone are the days when every banking transaction required a visit to
the bank branch Today, most of the transactions can be done from the
home and customers need not visit the bank branch for anything
Technology is no longer an enabler, but a business driver The growth
of the internet, mobiles and communication technology has added a
different dimension to banking The information technology (IT) available
today is being leveraged in customer acquisitions, driving automation and
process efficiency, delivering ease and efficiency to customers The increased
penetration and impact on the scale of business can be judged from
metrics such as deposit and credit per account which according to the
RBI data was INR 6,412 and INR 20, 757 in 1992 and INR19, 898
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and INR84, 618 in 2000 — these metrics increased to INR59, 217 and
INR258, 751 in 2009, respectively,approximately thrice the levels in 2000
and 10 times the levels in 1992Many of the IT initiatives of banks
started in the late 1990s or early 2000 with an emphasis on the
adoption of core banking solutions (CBS), automation of branches and
centralization of operations in the CBS Over the last decade, most of
the bank completed the transformation to technology-driven organizations
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Moving from a manual, scale-constrained environment to a global presence
with automated systems and processes, it is difficult to envisage the
adverse scenario, the sector was in the era before the reforms, when a
simple deposit or withdrawal of cash would require a day ATMs, mobile
banking and online bill payments facilities to vendors and utility service
providers have almost obviated the need for customers to visit a branch
Branches are also transforming from operating as transaction processing
points into relationship management hubs
The change has been very productive for banks bringing in an increase
in productivity and operational efficiency to be more competitive Better
risk management due to centralization of information and real time
availability of critical data for decision making With most of the banks
being technology-enabled, the focus is shifting to computerizing regional
rural banks (RRBs) In addition,banks are moving toward decision making
and business intelligence software and trying to optimize the IT
infrastructure createdWith the globalization trends world over it is difficult
for any nation big or small, developed or developing, to remain isolated
from what is happening around For a country like India, which is one
of the most promising emerging markets, such isolation is nearly
impossible More particularly in the area of Information technology, where
India has definitely an edge over its competitors, remaining away or
uniformity of the world trends is untenable Financial sector in general
and banking industry in particular is the largest spender and beneficiary
from information technology This endeavours to relate the international
trends in it with the Indian banking industry The last lot includes
possibly all foreign banks and newly established Private sector banks,
which have fully computerized all the operations With these variations in
the level of information technology in Indian banks, it is useful to take
account of the trends in Information technology internationally as also to
see the comparative position with Indian banks The present article starts
with the banks perception when they get into IT up gradation All the
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trends in IT sector are then discussed to see their relevance to the
status of Indian banks
1.2.A Evolution Of Banking Technology In India
The usage of information technology (IT), broadly referring to computers
and peripheral equipment, has seen tremendous growth in service industries
in the recent past The most obvious example is perhaps the banking
industry, where through the introduction of IT related products in internet
banking, electronic payments, security investments, information exchanges
(Berger, 2003), banks now can provide more diverse services to customers
with less manpower
1.2.B Phases of Banking Technology in India
Technological innovation in general and information technology (IT)
applications in particular, have had a major effect in banking and finance
Outstanding IT-based innovations are considered and grouped into four
distinct periods: early adoption, specific application, emergence and diffusion
and their periods based on Indian scenarios are
• Early adoption (1960-1980),
• Specific application (1980-1990),
• Emergence (1990-2000) and
• Diffusion (2000-till date)
12.C Technology Based Banking Services and their
characteristics in India
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1. 3 Literature Review
The following studies on technology in banking sector, related directly or
indirectly have been reviewed in this chapter Dr Satish Tanaji Bhosale,
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Dr BS Sawant, “Technological Developments in Indian Banking Sector”
: This paper talks about the role of banking sector in the development
of Indian Economy So banks need to optionally leverage technology to
increase penetration, improve their productivity and efficiency, deliver cost-
effective products and services, provide faster Efficient and convenient
customer service and thereby, contribute to overall growth and development
of the country It highlights that 62 technology allows transactions to take
place faster and offer unparallel convenience through various delivery
channels This paper also talks about various technologies like MICR,
Cheque transaction system, RTGS, NEFT etc Dr VS Mangnale, Ms JV
Chavan, Mr AD Randive, “ E-CRM in Indian Banking Sector, Golden
Research Thoughts : This paper highlights that technology, people and
customer are the three elements on which hinges the success of banking
in the fast changing economic environment
The ultimate performance of a bank depends upon the satisfaction of its
customers In the emerging competitive and technological driven era, banks
have to strive hard for retaining and enlarging their customer base E-
CRM is the latest buzzword in the corporate sector and is perceived as
one of the effective tool in this direction by banks This paper analyzes
the concept of e-CRM in Indian banks from its various dimensions
covering specifically its need, process, present status and future prospects
KPMG,
“Technology enabled transformation in Banking”, The Economic Times
Banking Technology , Conclave 2011: The article has concluded the in
banking is fast evolving From enabling banking services to driving
transformation in the industry, Information technology holds a promise to
change the face of banking in the next few years New entrants are
looking to leverage their existing strengths in the Indian banking arena
The opportunity available to these entrants through leveraging their
understanding of technologies and markets they operate in, promises
innovative business models with a with a focus on delivering customer
value The pace of change aided by regulatory directions, will push banks
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to direct their strategies to a customer centric focus over the next four
years
1.4.A SIGNIFICANCE OF THE STUDY
The use of Technology in all spheres of financial and banking sectors is
a deep reality The sector has enabled the banking sector to go beyond
its traditional role and is now playing an increasingly important role in
its key areas of operation as securitization, risks preference and liquidity
among others to which IT helps in a big way It has assumed such
high levels that it is no longer possible for banks to manage their IT
implementations on a standalone basis
With technology revolution, banks are increasingly interconnecting their
computer systems not only across branches in a city but also to other
geographic locations which high-speed network infrastructure and setting up
local areas and networks are now exposed to a growing number The
customers have high expectations and have become more demanding now
as they are also more techno-savvy as compared to their counterparts of
the yesteryears They demand instant, anything and anywhere banking
facilities Though Reserve Bank of India has formulated many policies on
adoption of IT in the overall working of the commercial banks in India,
yet there is an urgent need to address the issues involved in this
respect to compete with the banks at international level As such there is
a great need to focus more on this aspect The present study helps a
lot in this regard
1.4.B Objectives Of The Study
The study has following objectives:
● To find out the progress of computerization in all the public sector
banks of India
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● To analyse the banking innovations after computerization of public
sector banks of India
● To analyse the ATM progress in the public sector banks of India
● To identify challenges in the implementation of IT solutions in the
public sector banks of India
1.5 Awards
The process for the Ninth Edition of IDRBT Awards for Excellence in
Banking Technology was initiated in March 2013 with a jury meeting to
discuss and finalize the award categories The jury for this year was
chaired by Mr KV Kamath, Chairman, ICICI Bank and comprised the
following:
Dr R B Barman, Former Executive Director, RBI (Jury Member)
Dr K Ramakrishnan, CEO, IBA (Jury Member)
Prof G Sivakumar, IIT Mumbai (Jury Member
Dr Santanu Paul, CEO, Talent Sprint and Distinguished Fellow,
IDRBT
The awards categories for the previous year were as follows:
1. Use of Technology for Financial Inclusion
2. Use of Technology in Mobile Banking
3. Electronic Payment Systems
4. Customer Management & Business Intelligence Initiatives
5. Use of IT for Business Optimization
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6. Managing IT Risk
7. IT Innovation
8. Best IT Team
9. Best IT enabled Cooperative Bank (one award)
Three new categories were introduced this year – Use of IT for
Business Optimization, IT Innovation and Best IT Team Additionally to
encourage the cooperative banks one award for Best IT enabled cooperative
bank was also introduced During evaluations the jury felt that banks had
not provided substantial nominations for Use of IT for Business
Optimization category and hence decided to drop the category for this year
CHAPTER – II
NEED & IMPORTANCES OF TECHNOLOGY IN
BANKING SECTOR
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2.1 Introduction
Technology has been a boon to many industries and especially to the
banking industry With the help of technology banks are able to reach
out to more customers and provide better services to them Also, it
helps them function in an organized and secure way As for us (the
customers) we have ATMs, Cash deposit machines, online banking, phone
banking etc which are all fruits of technological advances which have
made our banking experience much easier Imagine having to run to the
bank everytime you wanted to check your balance or make a deposit or
withdrawal
The following points prove the importance of technology in banking
industry:
The Banking sector in India has experienced a rapid transformation Due
to the advent of technology and automation there is a new trend in the
banking system The advancement in technology and introduction of
information technology played a significant role in improving the services
in the industry.
2.2 Computerisation in banking
The process of computerisation marked the beginning of all technological
initiatives in the banking industry Computerisation of bank branches had
started with installation of simple computers to automate the functioning of
branches, especially at high traffic branches Thereafter, Total Branch
Automation was in use, which did not involve bank level branch
networking, and did not mean much to the customer. Networking of
branches are now undertaken to ensure better customer service Core
Banking Solutions (CBS) is the networking of the branches of a bank,
so as to enable the customers to operate their accounts from any bank
branch, regardless of which branch he opened the account with The
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networking of branches under CBS enables centralized data management and
aids in the implementation of internet and mobile banking Besides, CBS
helps in bringing the complete operations of banks under a single
technological platform CBS implementation in the Indian banking industry is
still underway.
The vast geographical spread of the branches in the country is the
primary reason for the inability of banks to attain complete CBS
implementation Technology has charged the face of the Indian banking
sector through computation, while new private sector banks and foreign
banks have an edge in this regard Among the total number of public
sector bank branches, 978 percent are fully computerized at end – March
2012.
2. 3 Satellite Banking
Satellite banking is also an upcoming technological innovation in the
Indian banking industry, which is expected to help in solving the
problem of weak terrestrial communication links in many parts of the
country The use of satellites for establishing connectivity between branches
will help banks to reach rural and hilly areas in a better way, and
offer better facilities, particularly in relation to electronic funds transfers
However, this involves very high costs to the banks Hence, under the
proposal made by RBI, it would be bearing a part of the leased
rentals for satellite connectivity, if the banks use it for connecting the
north eastern states and the under banked districts
2.4 Automatic Teller Machines
ATMs were introduced to the Indian banking industry in the early 1990s
initiated by foreign banks Most foreign banks and some private sector
players suffered from a serious handicap at that time- lack of a strong
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branch network ATM technology was used as a means to partially
overcome this handicap by reaching out to the customers at a lower
initial and transaction costs and offering hassle free services Since then,
innovations in ATM technology have come a long way and customer
receptiveness has also increased manifold Public sector banks have also
now entered the race for expansion of ATM networks Development of
ATM networks is not only leveraged for lowering the transaction costs,
but also as an effective marketing channel resource ATM is an electronic
machine, which is operated by the customer himself to make deposits,
withdrawals and other financial transactions ATM is a step in improvement
in customer service ATM facility is available to the customer 24 hours
a day The customer is issued an ATM card
This is a plastic card, which bears the customer’s name This card is
magnetically coded and can be read by this machine Each cardholder is
provided with a secret personal identification number (PIN) When the
customer wants to use the card, he has to insert his plastic card in
the slot of the machine After the card is a recognized by the machine,
the customer enters his personal identification number After establishing the
authentication of the customers, the ATM follows the customer to enter
the amount to be withdrawn by him After processing that transaction and
finding sufficient balances in his account, the output slot of ATM give
the required cash to him When the transaction is completed, the ATM
ejects the customer’s card An automated teller machine is a computerized
device that provides access for financial transaction in a public place The
customer can have access to his bank account to make cash withdrawals
and check balances Apart from these functions ATM facilitates to transfer
money from one account to another and can request for a cheque book
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2.4.A Introduction of Biometrics
Banks across the country have started the process of setting up ATMs
enabled with biometric technology to tap the potential of rural markets A
large proportion of the population in such centers does not adopt
technology as fast as the urban centers due to the large scale illiteracy
Development of biometric technology has made the use of self service
channels like ATMs viable with respect to the illiterate population Though
expensive to install, the scope of biometrics is expanding rapidly It
provides for better security system, by linking credentials verification to
recognition of the face, fingerprints, eyes or voice Some large banks of
the country have taken their first steps towards large scale introduction of
biometric ATMs, especially for rural banking At the industry level,
however, this technology is yet to be adopted; the high costs involved
largely accounting for the delay in adoption
2.4.B Multilingual ATMs
Installation of multilingual ATMs has also entered pilot implementation
stage for many large banks in the country This technological innovation
is also aimed at the rural banking business believed to have large
untapped potential The language diversity of India has proved to be a
major impediment to the active adoption of new technology, restrained by
the lack of knowledge of English
2.4.C Multifunctional ATMs
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Multifunctional ATMs are yet to be introduced by most banks in India,
but have already been recognized as a very effective means to access
other banking services Multifunctional ATMs are equipped to perform other
functions, besides dispensing cash and providing account information Mobile
recharges, ticketing, bill payment, and advertising are relatively new areas
that are being explored via multifunctional ATMs, which have the
potential to become revenue generators for the banks by effecting sales,
besides acting as delivery channels Most of the service additions to the
ATM route require specific approval from the regulator
2.4.D ATM Network Switches
ATM switches are used to connect the ATMs to the accounting platforms
of the respective banks In order to connect the ATM networks of
different banks, apex level switches are required that connect the various
switches of individual banks Through this technology, ATM cards of one
bank can be used at the ATMs of other banks, facilitating better
customer convenience Under the current mechanism, banks owning the
ATM charge a fee for allowing the customers of some other bank to
access its ATMAmong the various ATM network switches are CashTree,
BANCS, Cashnet Mitr and National Financial Switch Most ATM switches
are also linked to Visa or MasterCard gateways In order to reduce the
cost of operation for banks, IDRBT, which administers the National
Financial Switch, has waived the switching fee with effect from December
3, 2007
2.5 Internet Banking
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Internet banking in India began taking roots only from the early 2000s
Internet banking services are offered in three levels The first level is of
a bank’s informational website, wherein only queries are handled; the
second level includes Simple Transactional Websites, which enables
customers to give instructions, online applications and balance enquiries
Under Simple Transactional Websites, no fund based transactions are
allowed to be conducted Internet banking in India has reached level
three, offering Fully Transactional Websites, which allow for fund transfers
and various value added services Internet banking poses high operational,
security and legal risks This has restrained the development of internet
banking in India The guidelines governing internet banking operations in
India covers a number of technological, security related and legal issues
to be addressed in relation to internet banking
According to the earlier guidelines, all internet banking services had to
be denominated in local currency, but now, even foreign exchange
services, for the permitted underlying transactions, can be offered through
internet bankingInternet banking can be offered only by banks licensed and
supervised in India, having a physical presence in India Overseas branches
of Indian banks are allowed to undertake internet banking only after
satisfying the host supervisor in addition to the home supervisor Internet
banking means conducting financial transaction through a website
Internet banking is also known as online banking
In Internet banking consumers have an access to their account through a
serverInternet banking is also known as virtual, cyber, net, interactive, or
web banking It provides various services like online trading, online bill
payment, shop online etc Rapid growth in the number of Internet
connection and user has opened up a large market for internet banking
Consumer can operate their bank account from anywhere in the world
from any personal computer at any time with an internet connection
Internet banking enables a customer to do banking transactions through the
bank’s website on the Internet It is a system of accessing accounts and
general information on bank products and services through a computer while
sitting in its office or home This is also called virtual banking It is more
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or less bringing the bank to your computer In traditional banking one has
to approach the branch in person, to withdraw cash or deposit a cheque or
request a statement of accounts etc but internet banking has changed the
way of banking Now one can operate all these type of transactions on his
computer through website of bank All such transactions are encrypted; using
sophisticated multi-layered security architecture, including firewalls and filters
One can be rest assured that one’s transactions are secure and confidential
2.6 Phone Banking
Customers can now dial up the bank’s designed telephone number and he
by dialling his ID number will be able to get connectivity to bank’s
designated computer The software provided in the machine interactive with
the computer asking him to dial the code number of service required by
him and suitably answers him By using Automatic voice recorder (AVR)
for simple queries and transactions and manned phone terminals for
complicated queries and transactions, the customer can actually do entire
non-cash relating banking on telephone: Anywhere, Anytime Phone banking
are a fairly recent phenomenon for the Indian banking industry There
exist operative guidelines and restrictions on the type and quantum of
transactions that can be undertaken via this route Phone banking channels
function through an Interactive Voice Response System (IVRS) or
telebanking executives of the banks.
The transactions are limited to balance enquiries, transaction enquiries, stop
payment instructions on cheques and funds transfers of small amounts (per
transaction limit of Rs 2500, overall cap of Rs 5000 per day per
customer) According to the draft guidelines on mobile banking, only banks
which are licensed and supervised in India and have a physical presence
in India re allowed to offer mobile banking services Besides, only rupee
based services can be offered Telephone banking is a service provided by
a financial institution which allows its customers to perform transactions
over the telephoneMost telephone banking use an automated phone
answering system withphone keypad response or voice recognition capability
To guarantee security, the customer must first authenticate through a
numeric or verbal password or through security questions asked by a live
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representative With the obvious exception of cash withdrawals and deposits,
it offers virtually all the features of an automated 75 teller machine:
account balance information and list of latest transactions,electronic bill
payments, funds transfers between a customer's accounts, etc
Usually, customers can also speak to a live representative located in a
call centre or a branch, although this feature is not guaranteed to be
offered 24/7 In addition to the self-service transactions listed earlier,
telephone banking representatives are usually trained to do what was
traditionally available only at the branch: loan applications, investment
purchases and redemptions, chequebook orders, debit card replacements,
change of address, etc Banks which operate mostly or exclusively by
telephone are known as phone banks.
2.7 MOBILE BANKING
Mobile banking services are to be restricted to bank account and credit
card account holders which are KYC and AMC compliantWith the rapidly
growing mobile penetration in the country, mobile banking has the
potential to become a mass banking channel, with very minimum
investment required by the banks However, more security issues need to
be addressed before banking can be conducted more freely via this
channel Mobile banking (also known as M-Banking, mbanking,SMS Banking
etc) is a term used for performing balance checks, account transactions,
payments, credit applicationsetc via a mobile device such as a or
Personal Digital Assistant (PDA) Mobile banking facility is an extension
of internet banking
The bank is in association with the cellular service providers offers this
service For this service, mobile phone should either be SMS or WAP
enabled These facilities are available even to those customers with only
credit card accounts with the bank Mobile banking (also known as M-
Banking, mbanking, SMS Banking etc) is a term used for performing
balance checks, account transactions, payments etcvia a mobile device such
as a mobile phone Mobile banking today (2007) is most often performed
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via SMS or the Mobile Internet but can also use special programs
called clients downloaded to the mobile devices Below Fig explains the
architecture of mobile banking
Mobile banking can offer services such as the following:
Account Information
Mini-statements and checking of account history
Alerts on account activity or passing of set thresholds
Monitoring of term deposits
Access to loan statements
Access to card statements
Mutual funds / equity statements
Insurance policy management
Pension plan management
Status on cheque, stop payment on cheque 73
Ordering check books
Balance checking in the account
Recent transactions
Due date of payment (functionality for stop, change and deleting of
payments)
PIN provision, Change of PIN and reminder over the Internet
Blocking of (lost, stolen) cards
Payments, Deposits, Withdrawals, and Transfers
Domestic and international fund transfers
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Micro-payment handling
Mobile recharging
Commercial payment processing
Bill payment processing
Peer to Peer payments
Withdrawal at banking agent
Deposit at banking agent
Investments
Portfolio management services
Real-time stock quotes
Personalized alerts and notifications on security prices
Support
Status of requests for credit, including mortgage approval, and
insurance coverage
Check (cheque) book and card requests
Exchange of data messages and email, including complaint submission
and tracking
ATM Location
Content Services
General information such as weather updates, news
Loyalty-related offers
Location-based services 74
Based on a survey conducted by Forrester, mobile banking will be
attractive mainly to the younger, more "tech-savvy" customer segment A
third of mobile phone users say that they may consider performing some
kind of financial transaction through their mobile phone But most of the
users are interested in performing basic transactions such as querying for
account balance and making bill payment
Mobile banking Architecture
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Despite this rise in m-banking transactions in India, banks are yet to
fully exploit this technologyeven for their existing customers. The current
penetration is low compared to the number of bank accounts and the
vast mobile subscriber base of more than 900 million. Some of the
reasons for which consumers are not adopting mobile banking include the
lack of adoption of mobile as a channel for banking, limitations of
services on mobile banking, non-replication of mobile banking services in
varied languages in India etc.
Most mobile banking applications are designed for smart phones, which
also limits the customer base, but with the introduction of USSD-based
applications,this may change in coming years. Most mobile banking
applications are designed for smart phones, which also limits the customer
base, but with the introduction of USSD-based applications,this may change
in coming years.
Mobile banking can be classified as follows:
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In an environment which has a paucity of advanced technology and
mobile handset capabilities a one-size-fits-all solution does not work.
Therefore, there is a need for banks to make investments on mobile
banking applications like custom applications, mobile browser, etc to offer
mobile banking services to cater to various mobile / tablet platforms like
iOS, Android etc which are available on high-end phones / tablet
platforms with good processing capabilities while at the same time offer
services like USSD to the low-end segment having java based phones
with limited data processing capabilities
There have been various developments over the past year in the mobile
banking space including new strategic partnership models (like banks and
telcos) and products / services (Inter Bank Mobile Payment System
(IMPS), National Unified USSD Platform (NUUP), etc) emerging in the
Indian markets. M - Banking has lowered some of the key barriers to
financial inclusion in India by reducing start-up costs and service prices.
Eko India Financial Services, as business correspondent provides bank
accounts, deposit, withdrawal and remittance services, micro-insurance, and
micro-finance facilities to its customers (nearly 80% of whom are migrants
unbanked section of the population )through mobile banking.
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2.8 SMs BANKING
Short Message Service (SMS) is a communication service standardized in
the GSM mobile communication system, using standardized communications
protocols allowing the interchange of short text messages between mobile
telephone devices. SMS text messaging is the most widely used data
application on the planet, with 2.4 billion active users, or 74% of all
mobile phone subscribers sending and receiving text messages on their
phones.
SMS banking is a technology enabled service offering from banks to its
customers, permitting them to operate selected banking services over their
mobile phones using SMS messaging. SMS banking services are operated
using both push and pull messages.The architecture of SMS Banking.
Depending on the selected extent of SMS banking transactions offered by
the bank, a customer can be authorized to carry out either non-financial
transactions, or both and financial and non-financial transactions. SMS
banking solutions offer customers a range of functionality, classified by
push and pull services as outlined below.71
Typical push services would include:
Periodic account balance reporting (say at the end of month);
Reporting of salary and other credits to the bank account;
Successful or un-successful execution of a standing order;
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Successful payment of a cheque issued on the account;
Insufficient funds;
Large value withdrawals on an account;
Large value withdrawals on the ATM or EFTPOS on a debit card;
Large value payment on a credit card or out of country activity
on a credit card.
One-time password and authentication
Account balance enquiry;
Mini statement request;
Electronic bill payment;
Transfers between customer's own accounts, like moving money from
a savings account to a current account to fund a cheque;
Stop payment instruction on a cheque;
Requesting for an ATM card or credit card to be suspended;
De-activating a credit or debit card when it is lost or the PIN
is known to be compromised;
Foreign currency exchange rates enquiry;
Fixed deposit interest rates enquiry.
SMS banking is a technology-enabled service offered by banks to its
customers. They permit the customers to operate banking services over
mobile phones using SMS messages. SMS banking is more advantageous
than Internet banking because people carry mobile phones everywhere. SMS
banking reduces the distances between banks and the customers.
2.9 Card Based Delivery Systems
Among the card based delivery mechanisms for various banking services,
are credit cards, debit cards, smart cards etc. These have been immensely
successful in India since their launch. Penetration of these card based
systems have increased manifold over the past decade. Aided by expanding
ATM networks and Point of Sale (POS) terminals, banks have been able
to increase the transition of customers towards these channels, thereby
reducing their costs too.
2.10 Paper Based Clearing Systems
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Among the most important improvement in paper based clearing systems
was the introduction of MICR technology in the mid 1980s. Though
improvements continued to be made in MICR enabled instruments, the
major transition is expected now, with the implementation of the Cheque
Truncation System for the processing of cheques.
2.11 Payment and Settlement Systems
The innovations in technology and communication infrastructure in recent
years have impacted banks in a large way through the development of
payment and settlement systems, which are central to the major portion
of the businesses of banks.In order to strengthen the institutional
framework for the payment and settlement systems in the country, the
RBI constituted, in 2005, a Board for Regulation and Supervision of
Payment and Settlement Systems (BPSS) as a Committee of its Central
Board. The BPSS now lays down policies relating to the regulation and
supervision of all types of payment and settlement systems, sets standards
for existing and future systems, approves criteria for authorisation of
payment and settlement systems, and determines criteria for membership to
these systems, including continuation, termination and rejection of
membership
Thereafter, the government and the RBI felt the need for a legal
framework dedicated to the efficient functioning of the payment and
settlement systems. The Payment and Settlement Systems Act was passed
in December 2007, which empowered the RBI to regulate and supervise
the payment and settlement systems and provided a legal basis for
multilateral netting and settlement.Important technological innovations in
payment and settlement systems introduced by the RBI in recent years
are discussed here. The Indian payment system, which is primarily cash
dominant, is now at a faster pace transforming from paper to electronic.
The share of electronic payments in non-cash payments has shown an
upward trend. The electronic payment system primarily comprises Real
Time Gross Settlement (RTGS), Electronic clearing services (ECS), credit
and debit payments and electronic fund transfers (EFTs) / National
Electronic Funds Transfer (NEFT). India is currently the 13th largest non-
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cash payments market in the world, but has the potential to grow
significantly.
2.12 Cheque Transaction System (CTS)
Truncation is the process of stopping the movement of the physical
cheque which is to be truncated at some point en-route to the drawee
branch and an electronic image of the cheque would be sent to the
drawee branch along with the relevant information like the MICR fields,
date of presentation, presenting banks etc. Thus, the CTS reduces the
probability of frauds, reconciliation problems, logistics problems and the
cost of collection.
The cheque truncation system was launched on a pilot basis in the
National Capital Region of New Delhi on February 1, 2008, with the
participation of 10 banks. The main advantage of the cheque truncation
system is that it obviates the physical presentation of the cheque to the
clearing house. Instead, the electronic image of the cheque would be
required to be sent to the clearing house. This would provide a more
cost-effective mode of settlement than manual and MICR clearing, enabling
realization of cheques on the same day. Amendments have already been
made in the NI Act to give legal recognition to the electronic image
of the truncated cheque, providing for a sound legal framework for the
introduction of CTS.Currently the effort is on increasing the processing
efficiency with respect to paper based transactions, and as far as possible,
to reduce the burden on paper based clearing. Through the introduction
of advanced electronic funds transfer mechanisms, the RBI has been
successful in diverting a large portion of paper based transactions to the
electronic route.
CHAPTER – III
2
RECENT TRENDS IN TECHNOLOGY IN BANKING
SECTOR
3.1 Introduction
Banking technology as a confluence of several disparate
disciplines such as finance (including risk management),
information technology, computer science, communication
technology, and marketing science. The tremendous influence
of information and communication technologies on banking
and its products, the quintessential role played by
computer science helped in fulfilling banks marketing objective
of servicing customers better at less cost and thereby
reaping more profits. Advanced statistics and computer
science are used to measure, mitigate, and manage
various risks associated with banks’ business with its
customers and other banks. The growing influence of
customer relationship management and data mining in tackling
various marketing-related problems and fraud detection
problems in the banking industry is well documented.
COMPONENTS OF BANKING TECHNOLOGY
BANKING TECHNOLOGY
FINANCE & RISK
MANAGEMENT
MARKETING SCIENCE
COMMUNICATI-ONS
TECHNOLOGYCOMPUTER
SCIENCEINFORMATION TECHNOLOGY
2
Technology is no longer being used simply as a means
for automating processes. Instead it is being used as a
revolutionary means of delivering services to customers. The
adoption of technology has led to the following benefits:
greater productivity, profitability, and efficiency; faster service
and customer satisfaction; convenience and flexibility; 24x7
operations; and space and cost savings (Sivakumaran, 2005)
3.2.A Technology Application in Banks
Indian banking industry adopted various technology applications in
banking. They are classified in to:
1) Data Warehousing
2) Data Mining
3) Electronic Data Interchange
4) Corporate Web Sites
5) Management Information System
6) RTGS
3.2.A.1 Data warehouse
Data warehouse is a repository of an organization's electronically stored
data. Data warehouses are designed to facilitate reporting and analysis.A
data warehouse houses a standardized, consistent, clean and integrated form
of data sourced from various operational systems in use in the
organization, structured in an way to specifically address the reporting and
analytic requirements. This definition of the data warehouse focuses on
data storage.
However, the means to retrieve and analyze data, to extract, transform
and load data, and to manage the data dictionary are also considered
essential components of a data warehousing system. Many references to
data warehousing use this broader context. Thus, an expanded definition
for data warehousing includes business intelligence tools, tools to extract,
transform, and load data into the repository, and tools to manage and
retrieve metadata. Architecture, in the context of an organization's data
2
warehousing efforts, is a conceptualization of how the data warehouse is
built. There is no right or wrong architecture, rather multiple architectures
exist to support various environments and situations. The worthiness of the
architecture can be judged in how the conceptualization aids in the
building, maintenance, and usage of the data warehouse. Fig 3.2.A.1and
Fig 3.2.A.1.ii explains data warehouse architecture and its process
respectively. One possible simple conceptualization of data warehouse
architecture consists of the following interconnected layers:
Operational database layer
The source data for the data warehouse - An organization's Enterprise
Resource Planning systems fall into this layer.
Data access layer
The interface between the operational and informational access layer -
Tools to extract, transform, load data into the warehouse fall into this
layer.
Metadata layer
The data directory - This is usually more detailed than an operational
system data directory. There are dictionaries for the entire warehouse and
sometimes dictionaries for the data that can be accessed by a particular
reporting and analysis tool.
Informational access layer
The data accessed for reporting and analyzing and the tools for reporting
and analyzing data - Business intelligence tools fall into this layer. And
the Inmon- Kimball differences about design methodology, discussed later in
this article, have to do with this layer.
2
FIG.3.2.A.1.i Data warehouse architecture
FIG.3.2.A.1.ii Process of Data warehouse architecture
2
3.2.A.2 Data mining
Data mining is the process of extracting patterns from data. As more
data are gathered, with the amount of data doubling every three years.
data mining is becoming an increasingly important tool to transform these
data into information. It is commonly used in a wide range of profiling
practices, such as marketing, surveillance, fraud detection and scientific
discovery. While data mining can be used to uncover patterns in data
samples, it is important to be aware that the use of non-representative
samples of data may produce results that are not indicative of the
domain. Similarly, data mining will not find patterns that may be present
in the domain, if those patterns are not present in the sample being
"mined".
There is a tendency for insufficiently knowledgeable"consumers" of the
results to attribute "magical abilities" to data mining, treating the technique
as a sort of all-seeing crystal ball. Like any other tool, it only
functions in conjunction with the appropriate raw material: in this case,
indicative and representative data that the user must first collect. Further,
the discovery of a particular pattern in a particular set of data does
not necessarily mean that pattern is representative of the whole population
from which that data was drawn.
An Architecture for Data Mining
To best apply these advanced techniques, they must be fully
integrated with a data warehouse as well as flexible interactive
business analysis tools. Many data mining tools currently operate
outside of the warehouse, requiring extra steps for extracting,
importing, and analyzing the data. Furthermore, when new insights
require operational implementation, integration with the warehouse
simplifies the application of results from data mining. The resulting
analytic data warehouse can be applied to improve business processes
throughout the organization, in areas such as promotional campaign
3
management, fraud detection, new product rollout, and soon.
Fig.3.2.A.2.illustrates an architecture for integrated data mining.
FIG.3.2.A.2 Integrated Data Mining Architecture
The ideal starting point is a data warehouse containing a combination of
internal data tracking all customer contact coupled with external market
data about competitor activity. Background information on potential customers
also provides an excellent basis for prospecting. This warehouse can be
implemented in a variety of relational database systems: Sybase, Oracle,
Redbrick, and so on, and should be optimized for flexible and fast data
access.An OLAP (On-Line Analytical Processing) server enables a more
sophisticated end-user business model to be applied when navigating the
data warehouse.
The multidimensional structures allow the user to analyze the data as
they want to view their business – summarizing by product line, region,
and other key perspectives of their business. The Data Mining Server
must be integrated with the data warehouse and the OLAP server to
embed ROI-focused business analysis directly into this infrastructure. An
advanced, process-centric metadata template defines the data mining
objectives for specific business issues like campaign 61management,
prospecting, and promotion optimization. Integration with the data warehouse
enables operational decisions to be directly implemented and tracked.
3
Fig.3.2.A.2 Steps in Data Mining Architecture
As the warehouse grows with new decisions and results, the organization
can continually mine the best practices and apply them to future
decisions. This design represents a fundamental shift from conventional
decision support systems. Rather than simply delivering data to the end
user through query and reporting software, the Advanced Analysis Server
applies users’ business models directly to the warehouse and returns a
proactive analysis of the most relevant information. These results enhance
the metadata in the OLAP Server by providing a dynamic metadata layer
that represents a distilled view of the data. Reporting, visualization, and
other analysis tools can then be applied to plan future actions and
confirm the impact of those plans. Fig.3.2.A.2.ii explains the steps in data
mining architecture
3.2.A.3 Electronic Data Interchange (EDI)
Electronic Data Interchange (EDI) refers to the structured transmission of
data between organizations by electronic means. It is used to transfer
electronic documents from one computer system to another, i.e. from one
trading partner to another trading partner. It is more than mere E-mail;
for instance, organizations might replace bills of lading and even Cheque
with appropriate EDI message It also refers specifically to a family of
standards, including the X12 series. However,EDI also exhibits its pre-
Internet roots, and the standards tend to focus on ASCII(American
Standard Code for Information Interchange)-formatted single messages rather
than the whole sequence of conditions and exchanges that make up an
3
interorganization business process. Fig 4 and 5 explains the EDI
architecture Electronic Data Interchange is the electronic exchange of
business documents like purchase order, invoices, shipping notices, receiving
advices etc. in a standard, computer processed, universally accepted format
between trading partners. Electronic Data Interchange (EDI) can also be
used to transmit financial information and payments in electronic form.
Fig.3.2.A.3 EDI Architecture
3
3.2.A.4 Corporate Website
A corporate website or corporate site is an informational website operated
by a business or other private enterprise such as a charity or non-profit
foundation. Corporate sites differ from electronic commerce, portal, or sites
in that they provide information to the public about the company rather
than transacting business or providing other services. The phrase is a
term of art referring to the purpose of the site rather than its design
or specific features, or the nature, market sector, or business structure of
the site operator. Nearly every company that interacts with the public has
a corporate site or else integrates the same features into its other
websites. Large companies typically maintain a single umbrella corporate
site for all of their various brands and subsidiaries.
Corporate Website Common Features
Corporate websites usually include the following:
A homepage
A navigation bar or other means for accessing various site sections
A unified look and feel incorporating the company logos, style
sheets, and graphic images.
A summary of company operations, history, and mission statement
3
A list of the company's products and services
A "people" section with biographical information on founders, board
members, and/or key executives. Sometimes provides an overview of
the company's overall workforce.
A "news" section containing press releases, press kits, and/or links
to news articles about the company
An "investor" section describing key owners / investors of the
company
A list of key clients, suppliers, achievements, projects, partners, or
others
Pages of special interest to specific groups. These may include:
An employment section where the company lists open positions
and/or tells job seekers how to apply
Investor pages with the annual report, business plan, current stock
price, financial statements, overview of the company structure, SEC
filing or other regulatory filings
Pages for employees, suppliers, customers, strategic partners, affiliates,
etc.
Contact information. Sometimes includes a feedback form by which
visitors may submit messages
A terms of use document and statement of intellectual property
ownership and policies as they apply to site content
A privacy policy
A splash page as an entry point that directs users to the site's
home page
Embedded search engines allowing users to search pages from within
the website, or external searches of the Web
A site map
A blog with news and commentary about the company, its products
and services
"Community" pages describing the company's environmental /
sustainability, charity, corporate citizenship, and other policies as they
affect the public
3
A "store locator" or similar feature used to find nearby retail
locations of the company or where the company's products or
services can be found
A "downloads" or "media" section for users to obtain web tools,
free or trial software, software patches, company demos, promotional
material, and the like
A calendar or events section
A "links" page with hyperlinks to consumer-oriented or other
websites, or information about specific brands or subsidiaries of the
company
3.2.A.5 Management Information System (MIS)
A management information system (MIS) is a subset of the overall
internal controls of a business covering the application of people,
documents, technologies, and procedures by management accountants to solve
business problems such as costing a product, service or a business-wide
strategy. Management information
systems are distinct from regular information systems in that they are
used to analyze other information systems applied in operational activities
in the organization.Academically, the term is commonly used to refer to
the group of information management methods tied to the automation or
support of human decision making, e.g. Decision Support Systems, Expert
systems, and Executive information systems. It has been described as,
"MIS 'lives' in the space that intersects technology and business. MIS
combines tech with business to get people the information they need to
do their jobs better/faster/smarter. Information is the lifeblood of all
organizations - now more than ever. MIS professionals work as systems
analysts, project managers, systems administrators, etc., communicating directly
with staff and management across the organization.Fig.3.2.A.5 explain the
architecture of MIS and modules of MIS respectively.
3
FIG.3.2.A.5 Architecture of Management Information System (MIS)
Fig.3.2.A.5 ii Modules of MIS
3
3.2.A.6 Real Time Gross Settlement (RTGS)
Real Time Gross Settlement system, introduced in India since March 2004,
is a Interlink Research Analysis system through which electronics
instructions can be given by banks to transfer funds from their account
to the account of another bank. The (RTGS) Real Time Gross Settlement
system is maintained and operated by the RBI and provides a means of
efficient and faster funds transfer among banks facilitating their financial
operations. As the name suggests, funds transfer between banks takes place
on a ‘Real Time’ basis. Therefore, money can reach the beneficiary
instantaneously and the beneficiary’s bank has the responsibility to credit
the beneficiary’s account within two hours.
Real time means payment transaction is not subjected to any waiting
period. In RTGS the transaction are settled as they are processed. Gross
settlement means the transaction is settled on one to one basis without
bunching or netting with any other transaction.“RTGS is funds transfer
system where transfer of money or securities takes place from one bank
to another on a “real time” and on “gross basis”. Once processed,
payment are final and irrevocable. The other payment and settlement
systems deployed were mostly aimed at small value repetitive transactions,
largely for the retail transactions. The introduction of RTGS in 2004 was
instrumental in the development of infrastructure for Systemically Important
Payment Systems (SIPS).
The payment system in India largely followed a deferred net settlement
regime, which meant that the net amount was settled between banks on
a deferred basis. This posed significant settlement risks.RTGS was launched
by RBI, which enabled a real time settlement on a gross basis. To
High systemic risks are posed by high value interbank transfers, so, it is
considered desirable that all major interbank transfers among commercial
3
banks having accounts with RBI be routed only through the RTGS
system. The RTGS system had a membership of 107 participants (96
banks, 8 primary dealers, the Reserve Bank and the Deposit Insurance,
Credit Guarantee Corporation and Clearing Corporation of India Ltd.) as at
end-August 2009. The reach and utilisation of the RTGS has witnessed a
sustained increase since its introduction in 2004. The bank/branch network
coverage of the RTGS system increased to 58,720 branches at more than
10,000 centres facilitating the increased usage of this mode of funds
transfer.
3.2.B.Current Information Technology Tools
Apart from already mentioned technology, banks adopting various
Information Technology Tools. They are:
1) Electronic Clearing And Settlement System
2) Plastic Money
3) Electronic Banking
3.2.B.1.Electronic Clearing And Settlement System
Some of the electronic electronic and settlement system are OCR clearing,
MICR clearing, Debit Clearing,SFMS, and SWIFT.
Optical Character Recognition (OCR)
Optical Character Recognition is the machine recognition of printed
characters. OCR systems can recognize many different OCR fonts, as well
as typewriter and computer-printed characters. Advanced OCR systems can
recognize hand printing. When a text document is scanned into the
computer, it is turned into a bitmap, which is a picture of the text.
OCR software analyzes the light and dark areas of the bitmap in order
to identify each alphabetic letter and numeric digit. When it recognizes a
character, it converts it into ASCII text (see ASCII file). Hand printing
is much more difficult to analyze than machine-printed characters. Old,
worn and smudged documents are also difficult. Scanning documents and
processing them with OCR is sometimes as much an art as it is a
science.
3
Magnetic Ink Character Recognition
Magnetic Ink Character Recognition is the machine recognition of numeric
data printed with magnetically charged ink. It is used on bank checks
and deposit slips. MICR readers detect the characters and convert them
into digital data. Although optical methods (OCR) became as sophisticated
as the early MICR technology, magnetic ink is still used. It serves as
a deterrent to fraud, because aphotocopied check will not be printed with
magnetic ink.
MICR Technology
MICR characters are printed using an ink laden with iron oxide particles.
Iron oxide has magnetic properties and can retain magnetic fields when it
is applied on it. The working of a MICR reader is essentially based
on the concept of moving characters printed with this magnetic ink over
two magnetic heads, one that charge the characters and the second one
that immediately follows the first and reads the magnetic charge. The
pattern of the electrical field is what determines the character being read.
The characteristic shape of the MICR font is designed to give a unique
electrical signature pattern to each character which can be easily
recognized by the machine with minimum ambiguity and maximum
tolerance.
3.2.B.2 Plastic Money
a. Debit Card
b. Credit Card
c. Smart Card
Debit card
A debit card (also known as a bank card or check card) is a plastic
card that provides an alternative payment method to cash when making
purchases. Functionally, it can be called an electronic check, as the funds
are withdrawn directly from either the bank account, or from the
remaining balance on the card. In some cases, the cards are designed
exclusively for use on the Internet, and so there is no physical card.The
4
use of debit cards has become widespread in many countries and has
overtaken the check, and in some instances cash transactions by volume.
Credit card:
Credit card is a plastic card with a magnetic strip authorised to
purchase upto a predetermined amount i.e. a credit limit. Banks issue it
to their customers to enable them to purchase on credit. These cards
store the information relating to customers account.
3.2.C. Electronic Banking
3.2.C.1.Electronic funds transfer (EFT)
Electronic funds transfer or EFT refers to the computer-based systems used
to perform financial transactions electronically. The term is used for a
number of different concepts:
• Cardholder-initiated transactions, where a cardholder makes use of a
payment card
• Direct deposit payroll payments for a business to its employees,
possibly via a payroll services company
• Direct debit payments from customer to business, where the transaction
is initiated by the business with customer permission
• Electronic bill payment in online banking, which may be delivered by
EFT or paper check
• Transactions involving stored value of electronic money, possibly in a
private currency
• Wire transfer via an international banking network (generally carries a
higher fee)
• Electronic Benefit Transfer
Electronic Funds Transfer (EFT) is a system whereby anyone
who wants to make payment to another person/company etc. can approach
his bank and make cash payment or give instructions/ authorization to
transfer funds directly from his own account to the bank account of the
receiver/beneficiary. Complete details such as the receiver’s name, bank
account number, account type (savings or current account), bank name,
city, branch name etc. should be furnished to the bank at the time of
4
requesting for such transfers so that the amount reaches the beneficiaries’
account correctly and faster. RBI (Reserve Bank of India) is the service
provider of Electronic Funds Transfer (EFT)
The launch of the electronic funds transfer mechanisms began with the
Electronic Funds Transfer (EFT) System. The EFT System was
operationalised in 1995 covering 15 centres where the Reserve Bank
managed the clearing houses.Special EFT (SEFT) scheme, a variant of the
EFT system, was introduced with effect from April 1, 2003, in order to
increase the coverage of the scheme and to provide for quicker funds
transfers. SEFT was made available across branches of banks that were
computerised and connected via a network enabling transfer of electronic
messages to the receiving branch in a straight through manner (STP
processing). In the case of EFT, all branches of banks in the 15
locations were part of the scheme, whether they are networked or not.A
new variant of the EFT called the National EFT (NEFT) was decided to
implemented (November 2005) so as to broad base the facilities of EFT.
This was a nation wide retail electronic funds transfer mechanism between
the networked branches of banks. NEFT provided for integration with the
Structured Financial Messaging Solution (SFMS) of the Indian Financial
Network (INFINET). The NEFT uses SFMS for EFT message creation and
transmission from the branch to the bank’s gateway and to the NEFT
Centre, thereby considerably enhancing the security in the transfer of
funds. While RTGS is a real time gross settlement funds transfer product,
NEFT is a deferred net settlement funds transfer product. As the NEFT
system stabilized over time, the number of settlements in NEFT was
increased from the initial two to six. NEFT now provides six settlement
cycles a day and enables funds transfer to the beneficiaries account on
T+0 basis, bringing it closer to real time settlement.
3.2.C.2 Electronic Funds Transfer at Point of Sale (EFTPOS)
EFTPOS (short for Electronic Funds Transfer at Point of Sale) is an
Australian and New Zealand electronic processing system for credit cards,
debit cards and charge cards. European banks and card companies also
4
sometimes reference "EFTPOS" as the system used for processing card
transactions through terminals on points of sale, though the system is not
the trademarked Australian/New Zealand variant.76
Credit cards EFT may be initiated by a cardholder when a payment
cardsuch as a credit card or debit card is used. This may take place
at an automated teller machine (ATM) or point of sale (POS), or when
the card is not present, which covers cards used for mail order,
telephone order and internet purchases.
A number of transaction types may be performed, including the following:
• Sale: where the cardholder pays for goods or service
• Refund: where a merchant refunds an earlier payment made by a
cardholder
• Withdrawal: the cardholder withdraws funds from their account, e.g.
from an ATM. The term Cash Advance may also be used, typically
when the funds are advanced by a merchant rather than at an ATM
• Deposit: where a cardholder deposits funds to their own account
(typically at an ATM)
• Cashback: where a cardholder withdraws funds from their own account
at the same time as making a purchase
• Inter-account transfer: transferring funds between linked accounts belonging
to the same cardholder
• Payment: transferring funds to a third party account
• Enquiry: a transaction without financial impact, for instance balance
enquiry, available funds enquiry, linked accounts enquiry, or request for a
statement of recent transactions on the account
• E top-up: where a cardholder can use a device (typically POS or
ATM) to add funds (top-up) their pre-pay mobile phone
• Mini-statement: where a cardholder uses a device (typically an ATM)
to obtain details of recent transactions on their account
• Administrative: this covers a variety of non-financial transactions including
PIN change
• The transaction types offered depend on the terminal. An ATM
would offer different transactions from a POS terminal, for instance.
.
4
3.2.C.3 Electronic Clearing Service
The Electronic Clearing Service (ECS) introduced by the RBI in 1995, is
akin to the Automated Clearing House system that is operational in
certain other countries like the US. ECS has two variants- ECS debit
clearing and ECS credit clearing service. ECS credit clearing operates on
the principle of ‘single debit multiple credits’ and is used for transactions
like payment of salary, dividend, pension, interest etc. ECS debit clearing
service operates on the principle of ‘single credit multiple debits’ and is
used by utility service providers for collection of electricity bills, telephone
bills and other charges and also by banks for collections of principal
and interest repayments. Settlement under ECS is undertaken on T+1 basis.
Any ECS user can undertake the transactions by registering themselves
with an approved clearing house.
Operating from 74 different locations, ECS handles an average of 20
million transactions per month. It enables easy payments and collections
for repetitive and bulk transactions. ECS takes off a lot of burden of
paper work from the banks, enabling smooth flow of transactions. The
volume of electronic transactions has increased at an annual average
growth rate of 32.1% during FY05-FY09. The use of ECS (credit) and
ECS (debit), in particular, has witnessed substantial growth in the last
few years.
The RBI has recently launched the National Electronic Clearing Service
(NECS), in September 2008, which is an improvement over the ECS
currently operational. Under NECS, all transactions shall be processed at a
centralized location called the National Clearing Cell, located in Mumbai,
as against the ECS, where processing is currently done at 74 different
locations. ECS system has a decentralised functioning, and requires users
to prepare separate set of ECS data centre-wise. Users are required to
tie-up with local sponsor banks for presenting ECS file to each ECS
Centre. As on September 2008, 25000 branches of 50 banks participate
in the NECS. Leveraging on the core banking system, NECS is expected
to bring more efficiency into the system.
4
CHAPTER – IV
RECENT DEVELOPMENTS IN BANKING SECTOR
(2014)
4.1.Introduction
Developments in the field of technology strongly supports the growth
and inclusiveness of the banking sector by facilitating inclusive economic
growth of technology improves the front end operations with back end
and helps in bringing down the transaction costs for the customers.
4.2. Society for Worldwide Inter-bank Financial
Telecommunications (SWIFT)
SWIFT, as a co-operative society was formed in May 1973 with 239
participating banks from 15 countries with its headquarters at Brussels. It
started functioning in May 1977. RBI and 27 other public sector banks
as well as 8 foreign banks in India have obtained the membership of
the SWIFT. SWIFT provides have rapid, secure, reliable and cost effective
mode of transmitting the financial messages worldwide. At present more
than 3000 banks are the members of the network.This network also
facilitates the transfer of messages relating to fixed deposit, interest
payment, debit-credit statements, foreign exchange
Institute for Development and Research in Banking Technology (IDRBT):
The main purpose of IDRBT is to adopt research and development as
well as consultancy in the application of technology to the banking and
financial sector in the country. Reserve Bank of India (RBI) established
IDRBT in 1996. Structured Financial Messaging Solution (SFMS):Structured
Financial Messaging Solution (SFMS) is helpful for inter-bank and intra-
bank messaging. This messaging is useful for applications like Electronic
Funds Transfer (EFT), Real Time Gross Settlement (RTGS), Delivery verses
4
Payment (DVP), Centralised Funds Management System (CFMS). The SFMS
was launched in India on December 14,2001 by RBI.
4.3 Cash Dispensers
Cash withdrawal is the basic service rendered by the bank branches.
The cash payment is made by the cashier or teller of the cash
dispenses is an alternate to time saving. The operations by this machine
are cheaper than manual operations and this machine is cheaper and fast
than that of ATM. The customer is provided with a plastic card, which
is magnetically coated. After completing the formalities, the machine allows
the machine the transactions for required amount.
4.4 Chip Card
The customer of the bank is provided with a special type of credit
card which bears customer’s name, code etc. The credit amount of the
customer account is written on the card with magnetic methods. The
computer can read these magnetic spots. When the customer uses this
card, the credit amount written on the card starts decreasing. After use
of number of times, at one stage, the balance becomes nil on the card.
At that juncture, the card is of no use. The customer has to deposit
cash in his account for re-use of the card. Again the credit amount is
written on the card by magnetic means.
4.5 Tele-banking
Tele banking is another innovation, which provided the facility of 24
hour banking to the customer. Tele-banking is based on the voice
processing facility available on bank computers. The caller usually a
customer calls the bank anytime and can enquire balance in his account
or other transaction history. In this system, the computers at bank are
connected to a telephone link with the help of a modem. Voice
processing facility provided in the software. This software identifies the
voice of caller and provides him suitable reply. Some banks also use
telephonic answering machine but this is limited to some brief functions.
4
This is only telephone answering system and now Tele-banking. Tele
banking is becoming popular since queries at ATM’s are now becoming
too long. Telephone banking is a service provided by a banks and
financial institution where customer performs their transaction, over the
telephone. Banking carried out over computer network is called telephone
banking.It represents conducting financial transactions using computer and a
telephone. Banking carried out over computer network is called as Tele
banking.
4.6 Bank net
Bank net is a first national level network in India, which was
commissioned in February 1991. It is communication network established by
RBI on the basis of recommendation of the committee appointed by it
under the chairmanship of the executive director T.N.A. Lyre. Bank net
has two phases: Bank net-I and Bank net- II. BANKNET is a internet
based communication network. It provides speed of financial transaction.
BANKNET is set up in 1991 by the RBI, this backbone is meant to
facilitate transfer of inter-bank (and inter-branch) messages within India by
Public Sector banks who are members of this network. Service Centers
- At present, service centers are viz. Mumbai, Delhi, Calcutta, Madras,
Nagpur, Bangalore , Pune, Ahmedabad, Kanpur, Lucknow, Chandigarh,
Kochi, Jaipur, Bhopal, Patna, Bhubaneshwar, Thiruvananthapuram, Guwahati,
Panaji Jammu.
4.7 Any where Banking
With expansion of technology, it is now possible to obtain financial
details from the bank from remote locations. Basic transaction can be
effected from faraway places. Automated Teller Machines are playing an
important role in providing remote services to the customers. Withdrawals
from other stations have been possible due to inter-station connectivity of
ATM’s. The Rangarajan committee had also suggested the installation of
ATM at non-branch locations, airports, hotels, Railway stations, Office
4
Computers, Remote Banking is being further extended to the customer’s
office and home.
4.8 Voice Mail
Talking of answering systems, there are several banks mainly foreign
banks now offering very advanced touch tone telephone answering service
which route the customer call directly to the department concerned and
allow the customer to leave a message for the concerned desk or
department, if the person is not available.
4.9 Internet Banking
Over the last few years, banks in India have come a long way in
using the internet as a channel to market, sell and serve their customers.
From just provisioning static marketing information, banks have moved to
more robust engagement and transaction models for their customers and in
the process have improved the customer experience while lowering cost to
serve.Internet banking today is the biggest focus area in the “Digital
Transformation” agenda of banks.
While mobile and social channels programs are still in their nascent
stages, most banks have prioritized internet banking as a top item on
their business and technology strategy agendas. The shift towards internet
banking is fuelled by the changing dynamics in India. By 2020 the
average age of India will be 29 years and this young consumer base is
internet savvy and wants realtime online information. Customers are looking
for convenience, simplification of process and ease of engagement. Peer
discussion and information gathering has led to increase in awareness
among customers. The rise of the middle class has also increased the
number of households with internet connectivity. The affordability and
penetration of the internet is increasing exponentially across customer
segments in rural and urban areas.
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4.9.i.Driving channel adoption
Based on the results of our survey, we see several clear evidence of
increasing usage of the internet banking channel across all segments of the
Indian banking space. Below are some statistics based on responses
received from participating banks. Internet banking continues to grow in
terms of number of registered users as well as in the number and
value of daily transactions executed as illustrated in Fig it has explain
4.9.B. Leverage enterprise data for marketing campaigns to
drive adoption:
Banks are sitting on a large customer base across retail, SME and
corporate segments of customers who have either not enrolled or do not
have an active internet banking account. This is a treasure trove of
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information and with intelligent analytics and campaign management, banks
can increase adoption significantly across their existing customers.
4.9.C Increase business involvement in internet banking
governance:
In many banks the internet banking channel is run out of the IT
department with the view that it is a technology capability. Banks have
to understand the power of internet technology to fundamentally change
the banking business model in terms of customer segments, revenue impact
and cost to serve. Business should increase its involvement with the
governance of this channel and must integrate this channel with its other
enterprise processes.
4.9.D.Educate customer facing staff
Many banks do not have trained personnel who understand the power
and benefits of the internet channel. Efforts to both educate, and optimize
front office, customer-facing staff is key to be able to drive adoption at
grass root level.
5.Risk Management & Information Security
Over the last few years, after the financial crisis, there has been an
increased thrust on risk management from the Reserve Bank of India
(RBI). A series of guidelines have been issued by the RBI with a
view to improve risk management practices at banks, of which guidelines
to migrate to advanced approaches of Basel II is one of the foremost.
Banks have responded by improving risk management processes and
upgrading their systems and infrastructure; however, a lot still remains to
be done. The maturity of risk systems and infrastructure is still at
nascent stages across the Indian banking landscape. The IBA survey and
EY analysis reveals that Core Banking System (CBS) is widely used
across the banks for transaction management. However, its integration with
risk management and other enterprise level applications is still at
preliminary stages. While banks have embarked on the journey of Basel II
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implementation, covering only credit risk, operational risk and market risk
capital computation engines, most of them are still at an implementation
stage due to ‘various challenges such as data availability and quality, as
well as lack of skilled resources for advanced risk modelling.
6. Financial Inclusion
7. Mobile Banking
The past 10 years have been the mobile decade. Advances in mobile
technology have revolutionized almost every facet of society, from
information to education, granting enhanced access to an ever-growing
number of people in the country. Penetration of mobile phones is one
of the highest across the world in India, and almost 83% of its
population is expected to use mobile phones by 2014. This is projected
to have a dramatic impact on the country’s social evolution. Mobile
banking continues to be a focus area for all banks in India. Our
survey indicates that they are not only looking at this channel as a
way to increase their customer engagement in urban areas, but also to
reach out to new ones in rural regions, and thereby significantly further
their financial inclusion agenda.
They have delivered the following:
a) Multi-platform solutions (iOS, Android, BB, Symbian and Java)
b) Customized online sites for usage on the internet on mobiles
c) The ability to open FD/RD and apply for other product types
d) An exhaustive list of service requests and addition of payees
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e) Views on integrated relationships and transactional capabilities relating to
credit cards, Demat accounts, insurance and mutual funds
Several steps, which need to be undertaken to accomplish this are as
follows:
a) Identify high potential customer segments: Apart from analyzing target
segments in their customer base, banks must also treat their employees as
a service segment. A close look at each of these segments would reveal
multiple sub-segments and their relevant journeys.
b) Understand their needs from the channel: The features that rural
retail customers would leverage (for example remittance) are very different
from those required by urban retail customers (payments, financial tools
and offers) and corporate ones (cash positions, market trackers and
overview of company’s
financial health).
c) Provide differentiated offerings: Banks need to understand the
difference in usage and features, and deliver capability that supports the
financial inclusion needs of the rural segment, provide a seamless shopping
experience to urban customers on the move, approve payments for
corporate customers and provide in-depth information on new products to
their employees.
8.Payments
The payments industry has witnessed significant changes over last few
years due to business requirements and technology innovations. In the last
decade, India has seen a shift from traditional payment methods, i.e.,
cash/paperbased payments to modern electronic payment systems. However,
97% of payment transactions for public sector banks are paper based as
compared to 60% for private sector banks. In the recent past, the RBI
has taken multiple steps to promote electronification of payment instruments
such as framing the Payment & Settlements Systems Act to provide for
the regulation and supervision of payment systems in India, providing robust
RTGS/NEFT platform, establishing National Payments Corporation of India
(NPCI) to act as an umbrella institution for all the retail payment
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systems, regulation and promotion of acceptance channels including ATMs,
POS and payment gateway policy guidelines for issuance and operation of
pre-paid payment instruments etc., issuance guidelines and security measures
for all card transactions.
A snapshot of various payments instruments in India is given here:
There are approximately 374 million debit cards in India as of
October 2013. With more than 49 milliondebit cards issued in
2012–13 and a larger number expected to be issued in 2013–14,
this rapid pace of growth is set to continue.
Credit card spends are back on the upswing after a period of
consolidation. More than 18 million cards are in circulation.
However, banks have adopted a cautious approach to acquire new
customers compared to the ad hoc approach adopted for fast growth
during 2008–09. Credit card usage stands at 0.3% of total electronic
transactions for public sector banks.
Pre-paid cards have grown by almost 50% from FY10to FY13. The
pre-paid card market grew from INR200 billion to INR700 billion
during this period.
Debit cards (43%), credit cards (28%), internet banking (29%) all
comprise a substantial percentage of the overall number of electronic
transactions for private sector banks.
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Acceptance infrastructure such as ATMs grew at a CAGR of 24%
during the period 2011–13 with133,000 ATMs deployed currently. The
presence of POS has also grown at a CAGR of 27% during
FY13, with the deployment of 9.63 lakhs POS.
Below is a snapshot of information on payments transactions from
the industry and various
participating banks.
9. Customer Management
1. Age of the customer
Broadly, the customer ecosystem can be divided into three main eras
or ecosystems in India.
Product-focused ecosystem:
This system was in place from the time of independence till the
so called “license raj” and coincided with the first private banking
licenses in the early nineties.
This was a period when power resided with banks. With little
or no product/services differentiation, customers more often than not
decided on their preferred banks, frequently on the basis of
locational convenience.
Customer expectations were low, and therefore, most of them were
willing to put up with long lines, rude staff and poor service
levels at branches.
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Banking channels were mainly restricted to branches, and in most
cases, it was a purchase economy with no concept of relationship
managers or sales teams.
Information flow was one way from the bank to the customer.
CRM was driven at the individual level rather than as a strategy,
and therefore, customer processes and systems were mainly non-
existent.
Customer-focused ecosystem:
The launch of the initial 10 private banks in 1993–94 ushered in
an era of consumer banking,when product and service differentiation
was thought to be an important element in winning of the market
place.
Customers had begun seeing trends in other industries and expected
the same from their banks.
Private banks changed the rules of the game by trying to
become more customer-centric, but rules were still set by banks.
This increased customers’ awareness that products needed to be
different and not all customers are equal, which led to initial
technology-related investments in CRM.
The internet as a channel began to make its presence felt in the
early part of the century
Considering the quantum of investments needed in setting up new
branches and their own growthrelated aspirations, most private sector
banks put in place “sales organizations” (both in-house and
outsourced) and also began riding on the telecom revolution by
providing toll free contact center numbers to their customers.
The customer ecosystem:
And now we come to the era of the digital customer.
Communication is no longer a one-way street from the bank to
the customer. The customer is now driving the agenda and
discussion.
Key technologies, including the web, mobile, social and cloud, have
ensured that customers are now taking decisions outside “official
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channels” and only approaching the bank once their decisions have
been made. Furthermore, mobility ensures that information is now on
tap and that customerscan compare services, prices, etc., on the
move.
CHAPTER – V
FUTURE TRENDS
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6.1 Beyond Core Banking
Increased adoption of e-payments and mobile banking areclearly the
emerging areas which are bound to strengthen in the near future. In
addition, the focus is shifting towards systems and processes needed in
the maturity phase of the Technology needs curve. Banks will need to
increasingly focus on cost and profitability management, business intelligence,
dashboards/ executive information reports, data warehousing and
analytics.Improving internal effectiveness and efficiency with integrated data
warehouse and real-time access to all customer information will help the
banks’ decision making and ability to deliver appropriate products and
services to the customers. Banks must see beyond applications that provide
solutions to today’s problems. They need to develop a vision of a
comprehensive infrastructure— comprising internal and external networks
instantaneously moving information from data stores to users and back
again.
The importance of the IT-business unit partnership cannot be
overemphasized. The people and processes are just ascritical to success as
hardware and software. Undoubtedly, banks have made great technological
advances in storing information. However, the full power to use that
information to be more productive and make better decisions still goes
unrealized. By continuing to emphasize only technology and the peripheral
business processes it affects, banks have seriously neglected their personal
and enterprise-wide intelligence. The effectiveness of the infrastructure is
measured in the value it brings to the customer. That value is
diminished by business units and individuals that are not networked.
Therefore, banks must provide access and training, to each member of
the bank who directly or indirectly serves customers. To make this
possible,clear standards and expectations must be published, so the
information technology organization can bring individuals online in a
consistent manner.
6.2 Increasing Interconnectivity and Ease of Payments through
Different Form Factors
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The economic role of payment systems is connected intimately to the
economic role of money. Money is a unit of account, a store of value,
and a medium of exchange. Cash, checks, electronic transfers, debit, credit
and charge cards, as well as payment methods relying on mobile phones
and on the internet are based on different systems for exchanging value
between economic entities and on different form factors for engaging in
this exchange.
Anywhere anytime banking is becoming the norm due to the
implementation of core banking solution (CBS), additionally increased efforts
by the regulator in setting up Electronic Clearing Service (ECS), Real
Time Gross Settlement (RTGS) and NEFT systems is leading to
interconnectivity and ease of inter and intra-bank funds transfer.
The increasing usage of credit/debit cards and mobile banking is
facilitating the ease of payments through different factors linked to vendors
and service providers. The trend is likely to strengthen with an increasing
number of transactions moving online.Presently, a technological development
is closely related to computerization in banks branches for adoption of
the core banking solution (CBS). An important development in the
percentage of branches of public sector banks implementing core banking
solution (CBS). The percentages of such branches increased by 79.4 % at
end March 2009 to 90% at the end of March-2010.
Table for Branches under Core Banking (in %)
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CHAPTER – VI
ROLE OF CRM TECHNIQUES
7.1 ROLE OF CRM TECHNIQUES
Customers have grown to expect comprehensive financial services from a
single point of contact. They are attracted by many new products and
services that non-banking institutions have been offering. The challenge for
banks is to package these products and services and deliver them through
convenient, user-friendly channels. Only by integrating people, processes, and
technology across business lines will banks be able to forge a portfolio
of virtual banking services based on the proclivities of specific customer
market segments.Consumer behavior is an important factor that will change
the functioning and business plans of banks in the next decade. The
banking sector will increasingly move towards a CRM banking model
where the banks will have to develop and service products suited/
required at different phases of a consumers life. Banks have already
started moving towards catching the customers young by providing school
and college going students with bank accounts. As the youngster grows
banks will have to track and predict the financial needs using sophisticated
analytical models and deliver focused products and services.
It has always been difficult for large institutions to compile information
on a single customer from multiple points of contact. Customers who
choose services and products from multiple business areas typically are
treated as separate relationships within each area. Because a customer-
centric infrastructure does not exist at most banks, customer service
representatives do not have the infrastructure support or the incentive to
pull the information together. Without clearly understanding the strategic
advantages of using a customer data warehouse, bank customer service
representatives will not change their behavior, and any competitive
advantage will be short-lived. The bank will gain minimal value from the
significant investment required to develop the requisite technologies.
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Knowledge Management treats the behavior of people as an equal and
essential component of effective information-sharing.Knowledge management
also enables knowledge from similar previous situations to inform current
decisions. Both managers and service teams must play a role in building
a knowledge culture.Managers must codify relevant experiences, packaging
them to maximize their relevance and reusing them in new situations that
create value. Once the knowledge has been codified, it needs to be
shared with appropriate individuals.
An integrated approach to knowledge management enables the bank to
group its products to serve specific market segments, such as lawyers,
young professionals, retirees. The product groupings would be based on
customer feedback as to which products are in demand and on the
bank’s assessment of each product’s profitability. Once the bank identifies
the product groupings, it can provide high-quality service, with high-quality
support from front and back offices, cross-functional data bases, and
customer service personnel. For banks, information technology plays an
important role in informed decision-making by creating a means to collect
and codify experiences and solutions from similar decisions in suchareas as
financial management, customer service, or relationship development. The
enabling technologies include client/server technology, distributed computing,
networking, and data warehousing.
Knowledge of what customers need most and are willing to pay a
premium to get, should be frequently updated and shared across the bank.
Technology allows the bank to accomplish this enormously complex task.
Knowledge means more than just having information; it happens when
information is put in proper context and shared. For customers, valuable
knowledge might be reflected in the performance of their financial
portfolio or in the ease and success of making transactions.
CHAPTER – VII
6
CHALLENGES FACED BY THE BANKING
INDUSTRY IN TERMS OF TECHNOLOGY
8.1 Introduction
The Indian banking sector has emerged as one of the
strongest drivers of India’s economic growth. It has a
large geographic and functional coverage. The sector has
undergone significant developments and investments in the
recent past. Here commercial banks cater to short and
medium term financing requirements, while national level
and state level financial institutions meet longer-term
requirements. Banking industry in India has also achieved a
new height with the changing times. Most of banks
provide various services such as Mobile banking, SMS &
Net banking and ATMs to their customers for their
convenience. The use of technology has brought a
revolution in the working style of the banks. Banking
today has transformed into a technology intensive and
customer friendly model with a focus on convenience.
However, changing dynamics of banking business also brings
new kind of risk exposure. In this article an attempt has
been made to identify the major challenges and
opportunities for the Indian Banking Sector. This article is
divided in two major parts. First half includes the
introduction and general scenario of Indian banking sector.
The second half discusses various challenges and
opportunities faced by Indian banking sector.
Some of the challenges that the banks are facing today are:
Changing needs of customers.
Coping with regulatory reforms.
Restructuring and reorganizing banks' setup towards thinner and leaner
administrative offices; Closing down and/or merging of unviable
branches particularly in urban and metropolitan branches;
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Thinning spread.
Maintaining high quality assets.
Management of impaired assets.
Keeping pace with technology up-gradations.
Sustaining healthy bottom lines and increasing shareholder value
8.2 Challenges Ahead
8.2.A Important Business Challenges:
Meet customer expectations on service and facility offered by the
bank.
Customer retention.
Managing the spread and sustain the operating profit.
Retaining the current market share in the industry and the
improving the same.
Completion from other players in the banking industry.
8.2.B.Other Important Operational Challenges
Frequent challenges in technologies used focusing up grades in
hardware and software, attending to that implementation issues and
timely roll out.
Managing technology, security and business risks.
System re-engineering to enable. Defined and implemented efficient
processes to be able to reap benefits off technology to its fullest
potential.
Upgrading the skill of work force spread across the country.
With the opening of economy, deregulation, mergers and acquisition of
banks, implementation of BASLE II norms, disinvestment of government
6
holding in banks, the competition is going to be increased from new
banks and merged entities. This will also open up new opportunities for
introduction of a new products and services. A definite trend is emerging
as to consolidation of the banking system, sharing of ATM networks and
services, tie ups with insurance companies, other billing organizations like
mobile operators, electricity and telephone bills and bank for cross selling
of various products and services.
8.2.C Immediate Focus
To facilitate successful implementation of the above initiative, intensive
efforts are to be undertaken by all of us on following issues:
Completion of correct MIS details in all accounts and SRM’s.
Customer/ Account data completion/correction.
Customer-ID crystallization.
Aggressive marketing of Internet Banking & Debit Card products to
increase share of delivery channels transaction.
Skill up gradation & increase in awareness of all staff member.
Strict compliance of Circular & Guidance available online
(CBSINFO)/ Messages issued through scrolling ticker on login page.
Present slowdown in rollover must be put to full use to have concrete
action on these fronts.
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CHAPTER – VIII
CASE STUDIES
State Bank of India, World's Largest Centralized Core
Processing Implementation
The State Bank of India (SBI), the largest and oldest bank in India,
had computerized its branches in the 1990s, but it was losing market
share to private-sector banks that had implemented more modern centralized
core processing systems.To remain competitive with its private-sector
counterparts, in 2002, SBI began the largest implementation of a
centralized core system ever undertaken in the banking industry.The State
Bank of India selected Tata Consultancy Services to customize the
software, implement the new core system, and provide ongoing operational
support for its centralized information technology.Although SBI initially
planned to convert only 3,300 of its branches, it was so successful that
it expanded the project to include all of the more than 14,600 SBI and
affiliate bank branches. The State Bank of India has achieved its goal of
offering its full range of products and services to all its branches and
customers, spreading economic growth to rural areas and providing financial
inclusion for all of India's citizens.
Report Coverage
The implementation of the Tata Consultancy Services (TCS) BaNCS Core
Banking at the State Bank of India (SBI) and its affiliate banks represents
the largest centralized core system implementaion ever undertaken. The
overall effort included the conversion of approximately 140 million accounts
held at 14,600 domestic branches of SBI and its affiliate banks. This
TowerGroup Research Note is a case study that overviews the history of
the State Bank of India and details the effort to modernize the bank's
core processing systems. It also identifies the drivers to modernization, the
critical success factors, and the conversion methodology.
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Unlike private-sector banks, SBI has a dual role of earning a profit and
expanding banking services to the population throughout India. Therefore, the
bank built an extensive branch network in India that included many
branches in low-income rural areas that were unprofitable to the bank.
Nonetheless, the branches in these rural areas bought banking services to
tens of millions of Indians who otherwise would have lacked access to
financial services. This tradition of "banking inclusion" recently led India's
Finance Minister P. Chidambaram to comment, "The State Bank of
India is owned by the people of India." A lack of reliable
communications and power (particularly in rural areas) hindered the
implementation of computerization at Indian banks throughout the 1970s and
1980s. During this period, account information was typically maintained at
the local branches with either semiautomated or manual ledger card
processing. During the 1990s, the Indian economy began a
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period of rapid growth as the country's low labor costs, intellectual
capital, and improving telecommunications technology allowed India to offer
its commercial services on a global basisThis growth was also aided by
the government's decision to allow the creation of private-sector banks
(they had been nationalized in the 1960s). The private-sector banks, such
as ICICI Bank andHDFC Bank, altered the banking landscape in India.
They implemented modern centralized core banking systems and electronic
delivery channels that allowed them to introduce new products andprovide
greater convenience to customers. As a result, the private-sector banks
attracted middle and upper-class customers at the expense of the public-
sector banks. Additionally, foreign banks such as Standard Chartered Bank
and Citigroup used their advanced automation capabilities to gain market
share in the corporate and high-net-worth markets
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CHAPTER – IX
SUMMARY, FINDINGS & CONCLUSIONS
9.1 Conclusions
From enabling banking services to driving transformation in the Industry.
Information Technology course do promise to change the pace of banking
to the next few years. Mobile bank and internet banking are going to
make indoor in the banking sector in the near future. Even though IT
systems are complex and sophisticated but they are “energy guzzlers”.
Hence, the future for banking sector is going to make rapid straights in
near future. Indian public sector banks that hold around 75 % of market
share do have taken initiative in the field of IT. They are moving towards
the centralized database and decentralize decisions making process. They posses
enviable quality manpower. Awareness and appreciation of Technology are very
much there. What is needed is a ‘big push’ the way it was given in the
post nationalization period for expansionary activities. Technology(I.T) and
India have become synonymous. Whether India becomes a destination for
outsourcing or it becomes a development centre is matter of debate. As far
as banking industry in India is concerned it can be said that although the
Indian banks may not be as technologically advanced as their counterparts in
the developed world, they are following the majority of international trends
on the IT front. The strength of Indian banking lie in withering storms
and rising up to the expectations from all the quarters catching up with all
the global trends is a matter of time
Use of technology in expanding banking is one of the key focus
areas of banks. The banks in India are using Technology not only to
improve their own internal processes but also to increase facilities and
services to their customers. Efficient use of technology has facilitated
accurate and timely management of the increased transaction volume of
banks of that comes with larger customer base. By designing and
offering simple, safe and secure technology, banks reach at doorstep of
customer with delight customer satisfaction.
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CHAPTER – X
INTERVEIW ANALYSIS
For better understanding of this project I have visited BANK OF
BARODA were I met P.K Bora(Manager) I asked in certain set of
question to know his views & thoughts on this segments here.I have to
share with you all his experience that he share with The question was
by me and reply were given by the manager P.K Bora are as follows
1) The Reserve Bank of India(RBI) in March 2012 hiked bank rate for
Primary cooperative banks to
1) 10.5 percent
2) 9.5 percent
3) 5.5 percent
4) 8 percent
5) 7 percent
Ans 9.5 percent
2) Which Indian City in March 2012 became the first one to provide
guaranteed land titles by distributing property cards?
1) Hyderabad
2) Mysore
3) Mangalore
4) Ahmedabad
5) Chandigarh
Ans Mysore
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3) IT Company HCL technologies Ltd. in March 2012 signed a five
year information technology outsourcing deal worth ------- with finnish
recyclable product maker UPM.
1) $ 50 million
2) $ 100 million
3) $ 150 million
4) $ 250 million
5) $ 300 million
Ans $ 300 million
4) The department of information technology in March 2012 has been
renamed as ----
1) Department of electronics
2) Department of IT
3) Department of Electronics and IT.
4) All of the above
5) None of these
Ans Department of Electronics and IT
5) PIN’ in Smart Card is called ---
A) Permanent Index Number
B) Personal Identification Number
C) Personal Index Number
D) Permanent Identification Number
Ans Personal Identification Number
6) MICR’ technology used for clearance of cheques by banks refers to --
A) Magnetic Ink Character Recognition
B) Magnetic Intelligence Character Recognition
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C) Magnetic Information Cable Recognition
D) Magnetic Insurance Cases Recognition
Ans Magnetic Ink Character Recognition
7)“Buy Now – Pay Now” is commonly used for ---
A) Debit Cards
B) Vault Cards
C) Credit Cards
D) E-purse
Ans Debit Cards
8) The technique is used to produce a “fingerprint” of a message as a
part of digital signing –
A) Scrambling
B) Extracting
C) Hashing
D) Condensing
Ans Condensing
9) Smart Card is –
A) Special purpose Cards
B) Microprocessor Cards
C) Processing unit contains memory for storing data
D) Processing unit for software handling
Ans Microprocessor Cards
10) Payroll System is essentially –
A) Online
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B) Batch Processing
C) Real Time
D) Transaction processing
Ans Online
CHAPTER – XI
BIBLIOGRAPHY
Mittal R.K, Dhingra Sanjay,"Technology in Banking Sector: Issues and Challenges",
Vinimaya, Vol. XXVII, No. 4, Jan- March, 2007, pp 14-22, 2007.
Narayan Tarun,"Banking on Technology, Indian Management Vol. 43, Issue 8,
August, 2004, pp.18-28, 2004.
Sathish.D, Bala Bharathi. Y,"Indian Banking Industry: Challenging Times Ahead,
Chartered Financial Analyst, February 2007, pp. 68-70.
Pathrose P P (2001), ―Hi Tech. Banking Prospects and Problem‖, IBA Bulletin, Vol.
13, No.7.
“Computerization in Development Financial Institutions (DFIs) IDBI Experience”,
Journal of Development Finance,June 1995, pp. 26.
WEBSITES
www.rbi.org
www.investopedia.com
www.scrib.com
www.theeconomics.com
www.commerce.nic.in
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