Technology in Retail Banking

Banking Management Batch 2011-13, SBM, NMIMS

By:
A006: Tushar Ambwani A008: Swetha Avula A028: Deepak Kadam A035: Shweta Mehani A038: Neha Mittal A043: Rishit Parikh A046: Aniket Rane A053: Niral Shah

Background
The basic function of a banking system is to help in allocation and deployment of resources, across space and time, in an uncertain ecosystem (Merton, 1992). Technology has revolutionized banking sector to (more than an) inch closer to this primary goal. So much so, the RBI has pushed mechanization of banks. Technology has not only enhanced efficiency of consumer banking but has also increased the capacity of financial services and has lead to inclusive growth. Technology has impacted the banking process: it has become a strategic tool for maintaining and enhancing customer relationship. It has reduced transaction costs and increased competitiveness and efficiency of banks. Financial resources can now be allocated more effectively. Technology has broken the time and space constrains of banking for the customer. While, core banking facilitates anywhere banking, ATM, Mobile and Net banking facilitates anytime banking. In fact; safe, quick and efficient transaction of money is practically guaranteed to anyplace anytime within the country. Benefits of technology can be materialized and milked only if the infrastructure is aligned with the business, organizational structure and HR policies of the bank. Penetration of technology has not been as smooth in public sector banks as in private sector banks. The biggest issue the banks faced was of making their employees accept the technological change and help them understand how the change was good for them. Changing contours of customer demands and expectations had pushed banks to reinvent and realign their business model and integrate technology into it. With increasing competition in the market, technology is no more a seen as a competitive edge but seen as a necessary hygiene. Still not all banks have been as successful in implementing the technology. A bank must understand the needs of its customers before developing services focused on their needs.

Objectives
To understand the causes and development stages of technology in Indian banking sector. To study changes in the industry due to new operational processes and customer services and products derived from the technology development. To study the impact of the technology development on the banking sector and on the society To measure the effectiveness of technologic development for major players in the sector. To summarize through examples various aspects of technology development.

Coverage
(The references will act as source of initial research). The report will 1. Comment on current status of technology in Indian Banking Sector [1]. 2. Summarize the possible methods of leveraging technology for bank products and services and recommended measures to enhance consumer protection published by RBI [2]. 3. Detail various events and factors that led to technology revolution in Indian banking sector
[3], [4], [5]

. It will include impact of Reserve bank of India and liberalization on

banking technology and technological developments in cooperative banks. It will focus on four waves in banking technology: a. b. c. d. the first wave: Advanced Ledger Posting Machines in 1980s the second wave: Total Branch Automation (TBA) in late 1980s the third wave: entrance of the new private sector banks into the field the fourth wave: evolution of the ATM delivery channel

4. Understanding changes brought by Electronic Services in the Banking Industry [6], [7]: a. b. c. d. e. f. g. h. i. Core Banking, Electronic Clearance System (Cheque truncation system), Electronic Funds Transfer, Online Banking or Internet Banking, Automated Teller Machine, Mobile Banking, Telephone Banking, Credit Cards/Debit Cards/Smart Cards PC Banking Productivity and profitability (DEA model)[8], [9] Efficiency (TFP Model) [10] Competition and Risk and fraud [11] IT governance [12] Financial Inclusion [12]

5. Discuss the impact of technology on Indian banking system [5] : a. b. c. d. e.

6. Cover some successful technological changes (Case Studies): a. b. c. d. e. f. Punjab National Bank Dramatically Improves Rural Banking in India [13] Investment In Technology Yielding Rich Dividends Today: ICICI [14] SBI, World's Largest Centralized Core Processing Implementation [15] SBI manages nation's largest ATM network with BASE24 [16] HDFC Bank: Multichannel Integration [17] Yes Bank open source CRM [18]

Methodology
Primary sources: Experts of speech of Dr. D. Subbarao, Governor, Reserve Bank of India would help shed

light on current status of technology in Indian Banking Sector. Testimonies, speeches opinions, interviews of respected members of industry would underline the changes brought by Electronic Services.

Secondary Sources:

Literature review would be done to understand the phases of technology development in Indian banking sector. Financial statements of banks will be used to calculate DEA index and TFP. Case Studies will be included from different published sources.

Meeting Dates:
Kindly allow us to postpone scheduling the meeting dates till after we receive a feedback from you on our chosen scope.

References:
1. Dr. D. Subbarao, Governor, Reserve Bank of India, Information Technology and Banking A Continuing Agenda, Institute for Development & Research in Banking Technology, Hyderabad, May 18, 2009 2. Committee on Customer Service in Banks, Report Of The Committee On Customer Service In Banks, Custom service department, Reserve bank of India, Mumbai, 2011. 3. Jadhav, Rajani Anil, Chapter 3 - Literature Review, Problems and prospects of bank computerisation: a study of selected cooperative banks in Pune, Sinhgad Institute Of Management, 2-May-2011 4. R. K. Uppal, Director, UGC Financed Major Research Project, E-Age TechnologyNew Face of Indian Banking Industry: Emerging Challenges and New Potentials, Journal of Social and Development Sciences, D.A.V. College, Malout, Punjab, Vol. 1, No. 3, pp. 115-129, Apr 2011

5. Namita Rajput, Monika Gupta, Impact Of IT On Indian Commercial Banking Industry: DEA Analysis, Global Journal of Enterprise Information System, Vol-3 Issue-I, Jan 2011- Mar 2011 6. Jadhav, Rajani Anil, Chapter 4 - Bank Computerisation, Problems and prospects of bank computerisation: a study of selected cooperative banks in Pune, Sinhgad Institute Of Management, 2-May-2011 7. Technology enabled transformation in Banking, The Economic Times, Banking Technology, Conclave 2011 8. Verma, Amitabh, The impact of technology on productivity and profitability of Indian banks in post liberalization period, Abhigyan, Jul 1, 2009 9. R.K. Mittal, Sanjay Dhingra, Assessing The Impact Of Computerization On Productivity And Profitability Of Indian Banks, Delhi Business Review, Vol. 8, No. 1 (January - June 2007) 10. Lakshmi Kumar, D. Malathy, L.S. Ganesh, Productivity growth and efficiency change in Indian banking: Technology effect vs catch-up effect, Journal of Advances in Management Research Volume 7, Issue 2, (2010) 11. Bindiya Tater, Manish Tanwar, Navaratan Bothra, Impact Of Information Technology On Banking Industry, IJBEMR, Volume 2, Issue 1, January 2011 12. Anand Sinha, Anand Sinha: Banking on technology, Institute for Development and Research in Banking Technology (IDRBT), 13 May 2011 13. Punjab National Bank Dramatically Improves Rural Banking in India, Microsoft Windows Server System Customer Solution Case Study 14. Investment In Technology Yielding Rich Dividends Today, retrieved from http://www.infosys.com/finacle/customers/case-studies/Pages/investment-intechnology.aspx, retrieved on 10 Feb 2012 15. Robert Hunt, Case Study: State Bank of India, World's Largest Centralized Core Processing Implementation, retrieved from http://www.tcs.com/sitecollectiondocuments/case%20studies/bancs_case_sbi.pdf, retrieved on 10 Feb 2012 16. State Bank of India manages nation's largest ATM network with BASE24, retrieved from http://www.aciworldwide.com/en/What-we-know/Case-studies/The-State-Bank-ofIndia-Managing-The-Nations-Largest-ATM-Network-With-BASE24-From-ACI.aspx, retrieved on 10 Feb 2012 17. Prathima Rajan, HDFC Bank: Multichannel Integration: A Case Study, Celent, Oliver Wyman, Inc, October 2010 18. Yes Bank open source CRM, InfoAxon Technologies, retrieved from http://www.infoaxon.com/documents/InfoAxon_Case_Study_YesBank_Issue.pdf, retrieved on 10 Feb 2012