NEW DELHI: "E-banking leads to greater competition among banks, both domestic and foreign, as well as competition from the non-banking segment," the central bank said in its annual report, Trend and Progress of Banking in India 2001-02. "In India, e-banking, however, has not been able to make significant inroads as an independent mode of banking due to psychological, technological and socio-economic factors. "There are the additional hurdles relating to infrastructure and legal constraints," the report said. The report gives a detailed account of the performance of commercial banks, cooperative banks, financial institutions and non-banking financial companies in the fiscal year ended March 31, 2002. E-banking refers to the use of electronic delivery channels for banking products and services through automated teller machines (ATM), Internet banking and tele-banking. "This channel of distribution, though promising, is unlikely to threaten traditional distribution channels in the immediate future," the central bank observed in its report. Competition results in lowering of transaction costs and enables penetration into new markets, said the Reserve Bank. It noted that competition also compels banks to offer a broad range of products through diverse distribution channels. The RBI report further said major legal reforms had been initiated in the banking sector pertaining to security laws, frauds and regulatory framework.
Source: IANS