Banking On IT

by Sohini Bagchi    Jul 20, 2006

Over the years the banking scenario in India has evolved. The sector has matured rapidly to adopt new technology and is currently undergoing an IT revolution. At a recent symposium, ‘Banking Conclave 2006′, CIOs, IT heads and senior managers of leading banks shared their views on the existing and emerging trends of IT in banking and the road ahead for Indian banking.

B. Sambarmurthy, Chairman & MD, Corporation Bank commented, “The last two decades have witnessed a sea change in the nature of services offered by banks. The combination of regulatory and competitive reasons such as internet banking, mobile banking, ATMs and core banking systems for increased connectivity and channel integration - have led to total banking automation in the sector.”

He outlining the trends of IT in Indian banking, “With communication and connectivity already in place, today’s banks are compelled to think beyond these parameters. They are looking at areas such as business process reengineering for rigorous product development, better market infrastructure, and implementation of reliable techniques for control of risks. These have helped the financial intermediaries to reach
geographically distant and diversified markets.”

One major concern in the banking sector is the business continuity paradigm in the face of a disaster, said Kuldip Singh Bajwa, CIO, Punjab National Bank. He said that it is imperative for all banks to have their business continuity plan (BCP) in place to tackle serious business disruptions.

According to him, “A BCP should not only contain elements such as enterprise backup, recovery and restoration, but also encompass every aspect of company operations that could have an impact. It not only includes servers, storage, network equipment and connectivity links, but also other infrastructure like air-conditioning and power supplies. The plan should cover all risks that could possibly affect business.”

Citing example of PNB’s latest initiative of alternative data back-up centers, Bajwa said that timely action also saved the banks in protecting the data by transferring it to alternate centers in the country.

However, one has to keep in mind that BCP should provide an enterprise-wide risk-based approach, covering people, process, technology and extended enterprise to ensure continuing availability of business support systems and minimize disruption risks.

About cooperative banks’ adoption of IT, Ravi Manikkar, Head - IT, Shamrao Vithal Co-op Bank said, “Most of the co-operative banks are still in the branch automation phase, some trying to upgrade their legacy system while others are simultaneously implementing core banking applications.”

But the scenario has changed in the last few years as an increasing number of such banks are investing in IT to improve efficiency, cut cost, expand the range of services offered and provide better customer service.

Shamrao Vithal Co-op Bank is one of the early adopters of CBS among other co-op banks in the country, deploying the technology in 2002. The bank has recently deployed IP-Telephony and has a lot of technological plans in the pipeline and has received the award of the Best use of IT in retail banking last year by Indian Banks Association.

With rural banking becoming the new mantra, banks are constantly reinventing schemes to improve rural penetration. Rural credit cards and ATMs, a franchisee network, supply chain financing for agriculture; investments in rural infrastructure and cross selling of products are some of the schemes directed at the village folk. The need of the hour is to build a specialized cadre for rural banking and make these schemes effective, he pitched in.

Commenting on the future of banks in India and the use of IT, Ratnakar Deole, Chief General Manager, RBI said, “Internet, ATM, phone and mobile banking have already become an essential part of the banking experience. This calls for channel aggregation, which would be possible only through complete automation-which is not far away. Banks will further harness Internet-enabled technologies to improve customer offerings and service. By 2010, we are sure to witness what is called paperless banking.”

He further observed that wireless technology is also catching up in the banking sector. Apart from this, BASEL II credit norms, new payment standards, etc, would continue to dominate.

After heavy spending on IT, he feels that banks in India still have a long way to go. With automation taking place at the branch level, the front-end has been looked into with computerization at the back-end.
Interoperability was also in question for which banking from any branch in any part of the country becomes difficult. Further, in view of RBI’s initiative for implementing various payment and settlement systems such as- NDS-PDO, CFMS, SMFS and RTGS, connectivity intrabank as well as interbank is also something banks should essentially look into.

In the light of all these developments, Deole feels that banks should not only consider IT as a business enabler and a vital part of their business strategy but also keep updating their technology architecture frequently.