Banking revolution

Private and public sector banks are going all out to make banking an easy and pleasurable experience.

THE Reserve Bank of India (RBI) has actively promoted the use of technology in the banking sector to achieve its goal of financial inclusion and bringing down transaction costs. This has resulted in increased spending by banks to upgrade information technology infrastructure.

The three major technology changes so far have been core banking solutions (CBS), automated teller machines (ATM) and electronic payment systems such as real-time gross settlement (RTGS) and national electronic funds transfer (NEFT).

While new private sector banks and foreign banks have the edge when it comes to computerisation, public sector banks have not lagged behind in making investments to computerise their operations. As of end-March 2010, 97.8 per cent of all the public sector bank branches have been fully computerised. Of them, 90 per cent provide CBS. This figure was 79.4 per cent at the end of the previous fiscal.

In the past 10 years, public sector banks have spent close to Rs.22,000 crore on computerisation and IT upgrades. For the final half of the 2010 fiscal alone, spending on this account stood at Rs.1,370 crore.

Thanks to CBS technology, State Bank of India's capability to handle transactions went up more than three times. As of April 2010, SBI could handle 35 million transactions a day as against 10 million earlier.

The bank started the move towards CBS in early 2000, and the implementation was complete by 2008. The entire project was handled by Tata Consultancy Services (TCS), which was the systems integrator, while the other major technology partners in the project were Hewlett-Packard (HP), Datacraft, Cisco and Microsoft.

Since 2003, SBI has witnessed a 60 per cent increase in customer account. Bank officials say this is primarily on account of quicker transactions.

All SBI branches are interconnected from a centralised IT department located at Belapur, Navi Mumbai. The bank has spent more than Rs.5,000 crore since September 1999 for the implementation of CBS and computerisation of its various branches. In the last half of the 2010 fiscal, it spent Rs.429 crore.

The advantages of the system are easier rectification of errors, minimisation of fraud and the elimination of human error. Bank of India has spent close to Rs.1,500 crore on technological upgradation and computerisation of its branches since September 1999.

P.A. Kalyan Sundar, General Manager - IT, Bank of India, said, Bank of India is now 100 per cent on CBS. This helps in quicker transactions in almost real time. Errors are minimised, and, overall, it is better for both the customer and the bank.

Automated Teller Machines

The growth of ATMs in the country has revolutionised cash advances made by banks. Off-site ATMs, in particular, have aided in the RBI's goal of financial inclusion.

ATMs have been a big success. They have helped in banking services reaching different parts of the country, said Kalyan Sundar. Almost 75 per cent of Bank of India's cash advances are made through ATMs now.

Off-site ATMs of public sector banks witnessed a 70 per cent increase in the 2010 fiscal from the previous fiscal. The number grew from 9,898 in end-March 2009 to 16,883 by end-March 2010.

For private sector banks, the growth in the number of off-site ATMs in the 2010 fiscal has been around 19 per cent. The number stood at 9,844 in end-March 2010 as against 8,324 in the previous year.

The number of on-site ATMs for public sector banks showed a growth of 36 per cent. The number grew to 23,797 as of end-March 2010 from 17,379 in the previous fiscal.

Electronic Transactions

A better and safer environment for electronic transactions has resulted in a sharp increase in the number of online transactions. The number of RTGS transactions in public sector banks more than doubled from 6.8 million in the previous year to 16.4 million in 2009-10.

Almost 10 per cent of our total transactions take place via the electronic mode, said Kalyan Sundar.

SBI officials too quoted a similar figure. I think as people get more confident of using electronic modes of payment, the volume of transaction will keep increasing, said an official.

The number of RTGS transactions in the private sector grew to 11.3 million in the 2010 fiscal from 4.2 million in the previous year.

The RBI has promoted NEFT for the common consumer. The sound net-banking infrastructure is visible in the increasing number of NEFT transfers as well.

The number of NEFT transactions for public sector banks grew almost three times to 14.4 million in the 2010 fiscal as against 4.9 million in the previous fiscal.

In the private sector too, NEFT transaction volumes jumped from 14.4 million in 2008-09 to 29.3 million in 2009-10.

Electronic transactions do reduce some burden on our bank branches. But we will continue to increase the number of branches because people still like to walk into a bank to open accounts and avail of our various products. Also, a lot of people are more comfortable with physical transactions, said Kalyan Sundar.

Mobile Banking

Following the success in net banking, banks are now looking at next-generation and mobile banking.

Axis Bank recently introduced the Instant Money Transfer (IMT) system. It is a remittance facility that allows a withdrawer to get money from an ATM even if the person does not have a bank account.

Ravi Rajagopalan, Managing Director and Chief Executive Officer, Empays Payment Systems, said: The sender would need to have an account with Axis Bank or one of the banks associated with IMT. The sender can then send a four-digit pin to the withdrawer's registered mobile number allowing him to withdraw money from an ATM.

Rajagopalan added that Empays is currently in talks with several public sector banks, and the reach of IMT would significantly increase by June 2011. Public and private sector banks have also started mobile banking applications; however transactions are yet to gather momentum.

The expectation is that once interbank transactions take off on mobile banking, one will see a lot more transactions. In the next few years, with 3G coming in, mobile banking will take off, said Kalyan Sundar.

Bank of Maharashtra is already gearing up for the 3G revolution. The bank plans to set up three 3G techno-savvy specialised branches in Mumbai, Delhi and Pune to cater to the younger generation.

The bank plans to roll out its financial services such as management of personal finances, transactions and payments to consumers over their mobile phones and personal digital assistants [PDA] through these 3G branches. This is the natural next step to continue the development of mobile banking services in line with customer demand for flexibility and simplicity, said A.S. Bhattacharya, Chairman and Managing Director, Bank of Maharashtra.