Why the Indian banking sector is undergoing a Change?
Date: Wednesday , August 28, 2013
Headquartered in Manipal, Karnataka; Syndicate Bank (NSE: SYNDIBANK) is one of the oldest and major commercial banks of India .The bank was nationalized on 19 July 1969, by the Government of India and has a current market capitalization is Rs.4,036.07 crores.
The Banking sector is undergoing a phase of metamorphosis with technology being its major catalyst. The need for technology and technology-based services has raised the demand of banks to move towards universal banking. Faster and more convenient channels like smart cards, ATMs, usage of the internet, mobile and social banking are inclusive. Overhauls like core banking, human resource management (HRM) and enterprise risk (ERP) management and process re-engineering to name a few, have been incorporated to improve on performance and productivity.
With the rise in the number of banks, there was a need to integrate a network and that is where technology pitched in. Core banking system has revolutionized connectivity from bank to bank, making banking more adapted to changing technological trends. With the convergence of the internet with mobiles, both are being used in replacement to the time consuming traditional methods of banking transactions with the only difference between the two would be added advantage of saving your transaction in a file in the case of internet banking and later for confirmation of your transaction.
With nearly 900 million mobile handsets in the country, there is potential in promoting the need to move towards a cashless and paperless banking methodology. Cards available at a minimal cost as low as ten rupees is a milestone moving towards this reality. Catalyzing this would be the decreasing cost of internet service from ISPs making it a greater reality for more accessibility to the general public.
These digital services have averted complications involved in traditional bank transactions; saving time, environment and money like the issuance and approval of bank drafts and cheques.
Foreign Vs. Indian Banks
There is greater security and stability in India, particularly Public Sector Banks, as they are more concentrated in retail marketing which has a greater reach to over millions of people. On the flipside, foreign banks focus more on investment banking like sales, debentures, letter of credit and others. The reach of corporate banking is limited to only a handful of people who are rich. From a risk perspective, if a handful of their clients go bankrupt, those banks will incur major losses. In the U.S., there are more than 6,000 banks with frequent incidences of closure as well as occurrences of fraud.
The major difference would be on the fact that Indian banking system is more tuned for middle and lower class of people who are more in number resulting in an extra stability in the Indian banking system.
Cumbrances of the Revolution
Hindrances to the banking industry would be lot of cash transactions still occurring which deal with huge amounts, resulting in a lot of black money floating untraced. Further, public sector banks remain challenged to educate the customers both in the rural and urban areas. In response there is a dispatch of a business correspondent from the Bank to the rural villages. Equipped with a hand held device they can give out cash to customers in remote areas with immediate mode of update of the transaction in the central database.
The Reserve Bank of India has issued nationwide electronic payment systems like the Real Time Gross Settlement (RTGS) and National Electronic Fund Transfer (NEFT) to encourage the general public to engage in electronic transactions. There will be more traction for this new technology in banks as the finance minister has instructed all public sector banks to have a minimum of one ATM per branch.
IT related challenges would be awareness as there is no specific training system for customers as it would be too complex owing to the huge population. The only avenue would be advertising which has heavily invested in time, effort and money. Ignorance would include instances where customers would be apprehensive of the security of the online services available. Ensuring them the integrity of the system inspite of conveying the application of encryption codes continues to be a challenge. Further instances would include customers revealing their bank credentials which should remain undisclosed to fraud opportunists who dupe them in innumerable ways.
Inspite of these challenges, Indian banks like Syndicate Bank aggress in training our personnel in diverse fields like technological securities, application security, database securities, database management. This helps them be at par with global standards but provided that they do not quit their jobs and join a multinational private bank.
IDRBT is an institute for development and research in banking technology continues to conjure protocols like data warehousing which does a segmentation of customers, data loss management systems which monitors fiscal access control and logical access control to ensure that nobody can download any data.
These protocols have made strides in curbing cyber crime in the recent years. A KPMG study revealed that in the Financial Year of 2012, 91 percent in value is done through non-cash payments in comparison to 88 percent in Financial Year 2010 and 48 percent in terms of value from 35 percent in Financial Year 2010. Further there was a decrease from 83 percent to 52 percent in payment made through cheques in non-cash transaction as also a decrease from 85 percent to nine percent in value terms between the Financial Year 2006 and 2012. (As told to Mewanshwa Kharshiing)