FINAL PROJECT REPORT

"Technology in Banking Sector"

THE PROJECT SUBMITTED TO THE UNIVERSITY OF

MUMBAI

IN PARTL\L FULFILLMENT OF THE REQUIREMENTFOR

THE AWARD OF DEGREE OF
MASTER OF MANAGEMENT STUDIES �1S)

BY

PARLE TILAK VIDYALAYA ASSOCIATION'S INSTITUTE OF

MANAGEMENT
VILE PARLE (E), MUMBAI - 400 057.
2013-2014

1
 CERTIFICATE

I Or. Rupa.m Tiwari hereby certify that Mr Arjwt Govande, MMS Student of Parle
Tilak Vidyalaya Associanon's Institute of Management, has completed a project
titled 'Technology in Banking Sector' in the academic year 2014. The work of
the student is original and the information included in the project is true to the best
of my knowledge.

Signature of Guide with Date Signature of the Member

Guide: Dr. Rupam Tiwari Board PTVA

2
DECLARATION:

I, Arjun Jaywn1 Gcvande • or Parle Tuak Vidyalaya Association 's Institute ofMana8Cfficnt.,
pw:suing MMS (Sem JV) hereby declare that I have completed a projce1 on Technology in
Banking Sector for the academic year 2013-14.

Tbe report wort: is origio:d and the iofonnationldata included in chc rcpon is true to the best of
my knowledge. Due Crcdi1 is extended on the wort of litcnuure/secondary survey by endorsing
it in the Bibliography es per prtseribcd fonruu

Signature of Student

3
 ACKNOWLEDGEMENT

Acknowledging 1hc wide panorama of pcopk who helped and motivated me to comptcte
this projtcl. I am grateful in presenting to you the rare sb3dcs of mark.ding and 1cdtoology by
documenting lhe project 'TECHNOU)(;\' IN BA.1�Kl:-i'G SE(IOR'

I nm cxln'mely thankful to my college guide. Dr.Rupam Thrari. Sfflior Core F3C:Uh:y.

(P'rVA ·s lnsntutc of Management, Vik Parle). wbose acnve co-opcmtion & guidance during the
course of completion of prejcct work helped me formulate. redefine aod implcmcru a practical
approach and finish the project successfully.

Lastly, C kd obligOO to express my grateful thanks to my colleagues.. profcsson Md

family. who rendered me all the possible help in the completion of this projCCL

4
 TABLE OF CONTENTS

PAGE
SR.NO TOPIC
NUMBER

I INTRODUCTION

2 EXECUTIVE SUMMARY

5 LITERATURE REVIEW

6 OBJECTIVES & NEED FOR THE STUDY

7 RESEARCH METHODOLOGY

ANALYSIS OF DATA, f1NDINGS AND

8
INTERPRETATJONS

9 RECOMMENDATIONS & SUGGESTIONS

JO LIMITATIONS OF THE PROJF.CrS

II CONCLUSION

12 BIBLIOGRAPHY, REFERENCES & WEBSITES

s
 INTRODUCTION

Advem or infomuuion 1ccboology Md cybcr devices heralded a new world and bough!
tremendous change io all sectors of the economy. Banking sector always stand at the forefront of
the economy and innovation has p:tt:unount concern 10 the application of the modem technical
devices. Electtomc denvery channels,. ATM·s, variety of cards, w�b besed banbng and mobtk
b3oking :ue few of 1hc outcomes of tbt process of au1onu1ion nod computerization in banking
sector. Technical mnovations, automnoon and JP based network have amplified oonk's
productivity and erftcicm msnifo1d. This bas funbcr led to lhc move from brick banking 10

concept of "dick banku,g:. The prcsc:nt paper attempts to analyse the applications of IT in
Banking Sector. The paper describes the c, olution of IT in bttnki.ng sector. The paper also
1

attempts to analyse the obstacles ::ind risks exposed due to the application of this technialJ boon
to the sector.

Information technology is one of the most imponant fnc:ilitatas for lhc cransfomuuion of the
Indian b3oking iodustry in terms of ns cran.s.iictions proce..,;sing as well as for \'n.riou.,; other
internal systems aod processes, Tbe various technological pJatronns used by banks for the
cooduct of their dny to day operations. tbtit maoner of reporting and the way in which intetbaok.
transactioos aod clearing is affected has evolved substantially over tbt years.

The techno1ogica1 evolutioo of the Codi.an banking iodustry has bce-n largely directed by the
variocs committC'c.'S Sc.'1 up by the RBI and the government of India 10 review 1he implemcotation
of technological change. No major breakthmug.h in tcchoology implementation was achieved by
the iodustry tiU the carty 80s. though some wott:ing groups and comminecs made suay
references IO the need for mechanization of some bankiog processes. This was la.rgely due 10 lhc
stiff resistance by the very strong bank emptoyccs unions. The early 1980s were: instnuncntaJ in
the introduction of mcchsnisstion and compurerisru:ion in lodi.an ban.ks. This was the period
w'ben bM.k.,; as well as the RBI wcnr ,·cry slow on mechaoisation. carefully avoiding the use of
"computers· to avoid resistance from employtt umons. However, this was the cnucal pcnod
oc1ing as lhe icebrcal.:er. which led to tbt slow aod steady move to·wards large scale technology
adoptioo.

6
 EXECUTIVE SUMMARY

Indian banking sector opened its door for computerised applications nnd dc,•clopmenl of
communication oet..-,.."'Orl;. basically due to the sheer compubion and necessity 10 cope up demand
from its customers from different ccenrrics. increasing number or bank brunches. growing
volume of btlnking; operations. problems inhcrcot in manual system and incrcac;ing incidence of
frauds made it imperative for banks 10 liignalilit' favourable response for lhc nttd of hour. Otuing
the first phase of introduction of computer applkru.ions in banking. a.round 4n6 Ad, :iottd Level
1

Posiing Madlincs (ALPMs) and 233 minicomputer.. have been in.-.talkd. In 1993. cmplO)'ttS of
banks signed agrccmtnt with managemcn1 regarding compcrensanon of banking indusuy in
India. Committees headed by C. Raognrajnn heve given fandm:uk reports strongly
recommending 1hc IT :ipplications in banking business. In 1994 Reserve Bank of lndia (RB()
constituted a committee fot technica! up grncbtion of the ba.nkli. TilC commiUtt worked with the
rcprcsentation of diffcttnl mcmbcn from banks. technical institutlOfl.S aod gcwcmmcnt. Based on
the recommcndm:ions of the comm.iuee the Institute for Developmeot and Resemch io Banking
Tedloology (JORDT) was established in 1996. The cac rcse:uch areas or the institute include
finnncial network. application architecrure. web based technology, payment sysem, multimedia.
data mining. dal!I warehousing aod risk management. In 1999 thc collaborative efforts or IDRBT
and RBI developed a satellite based wide area ne1work known ac; Indian Fi.oanci.n) Network
((NANET). The network is restrictive to be used by the bank.c; and financial institutioos only.
Presenuy, the oetwort. consists of over 950 Very Snwll Apcnurc Terminal (VSATs) lcceted in
127 cities or the cowury and wiliscs one full tmnsponder on (NSAT 38. Realising lhe
imponaoce or payment system RBI constituted an operational group aod payment system
ad\•isory commiutt in 2000. The prime task assigned to the committtt was to develop nn
cfficieot :ind wcU-intc-gnued system which could serve rbe purpose of Re:11 Time Gross
SettJemcot.

7
 LITERATURE REVIEW

TIK' followiog studies on lnformatioo tcchoology in banking sector. related directly or iodirecdy
have been reviewed in this chapter. Dr. Sati:sh Tanaji Bbosal� Dr. B.S Sawant,
..Tuboologkal Ot-n.lopments in h1diao Bankiog $«:tor'" : This paper talks about the role of
banking sector in 1hc oevelopmcm of lndi.nn Economy. So baob nCOO to optionally leverage
technology to increase pcnttrntioo. improve their prowctivity and efficiency. deliver cost·
effective product."> and services, provide fester. Efficient and ccnvcnicm customer service and
thereby. contribute to overall grov. tb and development of the country. lt highlights th:u
1

technolog:y allows transacuces co take place faster and offer unpa.rallcl convenience through
various dtli,.'t'ry channels. This pnpcr atso ta.lb about vences technologies like MICR. Cheque
tran..action system. RTGS. NEFr etc. Dr. \'.S M�nale, Ms. J.V Chavan, Mr. A.D Randive,
.. E.-CRM in Indian Banki� Stttor, Colden Researcll Thoui:.hts : This paper higblig.lus that
technology. poopJc aod customer are the three clements on which biogcs the success or bankiog
in the fruu changing economic l'Jl\'iroomcru. The ultimate petfonnancc or a b:tok. depends upon
the wisfoc1ion or its customers. ln the cmcrgiog competitive and techno1ogical driven era. baob
have to strive hard for rc1aioing aod enlarging their customer oo.sc. E·CRM is the lat� buu.word
io the corporate sector and is perceived as one of the effective tool in 1his direction by baob.
This paper anal)'tts the conccpc of c--CRM in Indian banks from its various dimcosions covering
specifically i1s need. process, present status aod future prospects. KPMC',, ..TtC'hnofogy uabltd
tn11nsformation in Haok:ing", Tht Etonomic Timts Duking TtthnolOJtY, Conclave 2011:
Tik' anicle has coodudcd dw Jnformatioo technology in banking is fas1 evolving, From coabling
baoking services to dri\'ing traosfornwion in the indusuy. lnfonruuioo technology bolds a
promise to cbaogc the fnce o( b:inkiog in the oext (cw )'CMS. New entrants are looking: to
teveragc their existiog strengths in lhc lndiao banking arena. 11,e opportuoi1y available co these
cmranrs lhrough lcvcragiog their undctstaoding o( k'Chnologies aod markets they operate in.
promises ineovarivc busiocss models with a focus on delivering customer value. The pace of
change aided by regulatory dirtttions will push b3ob to direct their strategics to a customer
centric focus over the next four years.

Computerisatioo

TIK' P'()CC.'-S of computerisation marked the bcginoing: of all technological initiatives in the
baoking indumy. Computeri.,.atioo o( bank btaocbcs bad started with installatioo of simple
computers to automate the funccioning of branches. cspccfally al high traffic btaocbcs.
Tik'reaftcr. Total Branch Automation was io use. which did ROI involve bank level branch
octwort:ing. and did noc mean much co 1he customer.

8
Networking or branches arc. now undertaken to en.c;un- bean cus1omcr service.• Core Banking
Solutions (CBS) is 1hc net\\out:ing or 1hc branches of a bank. so as to enable 1hc customers to
opcnue 1hcir accounts from any bank branch. regardless of which branch he opened the account
wilh. The networl.:ing of branches under CBS enables Cc.'ntralizcd data management and aids in
the implementation of intcreer and mobile banking. Besides. CBS helps in bringing 1hc complete
operations or bGnb under a single 1echnological planorm.
CBS implemcnuition in lhe lndi.an b3nking industry is still underway, The vns, g_cogmpbical
sprCtld of the branches in the country is lhe primary reason for the inability of banks &o attain
complcae CBS implementation.

9
 OBJECTIVE AND NEED FOR THE STUDY

Tilc. study has followiog objectives:

• To fiod out 1hc progress or oomputcrizru:ion in all the public sector banks or India

• To tuWyze 1hc banking innovations after computcriuirion of public sector ba.n!.:s of Cndia.

• To nrullyze the ATM progress in the public sector banks or India.

• To identify challenges in the: unplementation of LT. soluuons m the pubhc sector bunks of
India.

10
 RESEARCH METHODOLOGY

Tik' present nudy is ba<;Cd on the secondary dma colJcctcd from differeot jeumals. magazines.
sites and published dma rmm \•arious issues of RBI and different Public sector banks. Various
studies oo 1his subject hevc atso been referred io lhis s«udy. The heads and ocher functionaries
have also been oootactcd personally to collect the required data for this srndy.

Customtn have grown to expect comprehensive finaocinJ services from a sing.Jc point of comecc
Tilc:y arc aurnctcd by many new products and services 1tud non-banking institutions have been
Offering. The challenge for oonks is to peckege these products nnd services and deliver tbtm
through ccnvenssn. ust"T-fricndly channels. Only by integrating people. processes, nnd
technology acros.c; buliincss lines will oonks be abk to forge a ponfolio of virtual banking
services based on the prodi\ i!ics or specific customer mark£'1 segments.
1

Consumer behavior is an imponnnt factor thal will change the func1ioning and business plu.ns of
banks in the next decade. The blnkiog sector will increasiogly mcwe towards CRM ban.kiog
Model where the b3ob will have to de\•elop aod service products suited/ requited al differem
phases of a consumer's life. Banks have already started mo\'ing towards auchiog the cuscomers:
youog by providing school aod college going students with banlc accounts. As the yooog.stcr
grows b:tnk.,; will have to trnck. aod predict the financial needs using sophisticmcd analytical
models and deliver focused products and SCl"\'lCCs. 11 has always been difficuh for large
iostitutions to compile informatioo on a single customer from multiple points of conreca.

Cusiomers who choose services and products from multiple business areas lypically Me treated
as separate rdation.s.hips within each area Because a customer· centric iofra,;tructure docs not
exist m most bnn.ks. customer service reprcscmanves do oot have cbe infrastructure support or the
incentive to pull the informatioo together. Without clearly uodcrstanding the strategic ad\'aotagcs
of using a customer data warehottsc. baok. customer service represcmenvcs will 001 change their
bcha\'ior. nnd any competitive ad\'aotage will be short·lh·OO. The bank will gain minimal vnJuc
from the sigoificanl iovcstmcnl required to dc\•elop 1he requisite technologies.

Knowtcdgc Managc-ment treats 1hc bcha\•iot of people as ao equal and essential com.poneot of
effective iofonnation-sharing. Koowlcdgc m.atUlgCmcnt also enables knowledge from similar
previous situntions to inform current decisions. Both managers and service teams must play 3
role in building .t1 koowlcdgc culture. Managn:s must codify relevant experiences. p.iclcaging
them co maximize 1hcir retcvaecc aod reusing them in new situations thal create value. Once the
knowledge has been codified. it occds 10 be shared with :ippropri.nte individuals. An integrated
approach to koowlcdgc managcmcnl enables 1he banlc to group its products to serve specific
mart.cc segments. such as lawyers. young profcssiooal,;. renrecs. The prodUCI grouping,,; would
be based oo customer fccdb.nd: as 10 which produces arc m demand and on the bank·s assessment
of each product's profitabili1y. Once the baok. identifies 1hc prod.UC1 groupings. ii can provide

11
high-quality service. with high-quality suppon from front and b3Clt: offices. cross-func1ionaJ data
bases. aod customer service pcrsooncl.

For banlcs. ioformation tccboology play,; an importanl role in ioformcd dccisioo-makiog by

creating a means to collect aod codify experiences n.nd solutions from similar dccisioos in such
areas a'> financi.aJ management. cusiomer service. or reJatiooship dc\ elopmcn1. TilC etwbling
1

technolog.ies include chcnvscrver tccboology. distributed computing. oetwort:ing. and Wlla

warehousing. Knowledge of what cesscmcrs need most and are willing IO pay a premiwn to gc,.
should be frequently updated aod stwcd 3CroS.S the bank. Tedmology allows the bnnk 10
accomplish this enormously compJex task. Koowlcdgc means more man just haviog ioformatioo:
it happens wheo information is pul in proper COlllCXt and shared. For cesscmcrs. \ aluablc 1

knowledge mig.bl be. reflected in the performance of their fioaocial portfolio or in lhe ease and
success of making tran.snctions. lbe data warehouses and graphical interfaces thm suppon the
customer's portfolio provide real-cimc access to all customer aocounts and present them in an
iotegnucd. seamless interface. For 1hc bank, technology creates a tool for gathering tnowkdg_c
about customers· fin..mc1al behaviors, purcbasiog pmclivi1ies. portfolio performance. and marlcet
n.nd compceuvc altenwives. Profitability analysis rs crucial to the bank's customer rc:lauonsh1ps.
n.nd it helps identify alternatives for delivering value to customers,

u
 ANALYSIS OF DATA, FINDINGS AND INTERPRETATIONS

Indian bankiog industry. today is in the mids! of ao rr revolution. A combination of rcgulntory

and competitive reasons has Jed to increasing importance of total banking automation in the
Indian Banking loditstry. TilC bank which used 1hc right technology to supply timely iofonnation
wiJI sec produccivi1y increase and thereby gain a competitive edge:. To compete in an «onomy
which ii. opening up. it is imperative for the Codi.an Banks co observe 1hc latcsi technology and
modify it to sui1 1hcir cnvironmeol. lofonnatioo technoJogy offers a chance for banks to build
new systems th:u address a wide range of customer necd-. including m.nny that may not be
imagioabk today.

The Change Brought about by Tttbnologv in Indian Banking Sector

Banks have ctumgOO in 1hcir opcrntio1u and moved towards universal banking along with lhe
increased usage of technology and technology-based services offering alternate channels such as
smart cards, ATMs. usage of the internet, mobile nnd socinJ banking. Banks bave started
deploying core banking. human rcsouttt management (HRM) :wt enterprise risk (ERP)
manag_emcnt n.nd process re-engineering ccc to improve on their perfonnance nod producti\'ity.
Majori1y of banks arc insisting on cashless and paperless payment modes.

According 10 a KPMG smdy. a resea.reh analyst seys. as of FY2012. non<Zh payments

constituted 91 per cent in vatee tcnns es c:omp:ittd to 88 per cem in FY in 2010 and 48 per cent
in terms of value rmm 35 per cent in FY 2010. A bank anaJys1 says 1hc payments made through
c:hcquc.,; in total non-cash 1ransoction too bas come down to 52 per cent from 83 per cent in
volume tcnns. nnd to nine per cent from 85 per cent in value terms during between FY 2006 and
FY2012.

Indian banks ge1 top billing globally:-Thi,; has resulted in putting 20 Indian banks in 1hcir
standing glob.1Uy. ln 2010. 1hc UK-ba,;cd Braod Finance's annual ranking put these banks in the
top 500 banks by their brand value. In 2007. only six Indian banks had the top standing globally.

To sec funhcr gro..-vth in the banking sector regulators and policy m:ik.ers have been emphasising
on firumc:i.al inclusion to cover au sections of the sccjety. Half or India's population docs no1
b3nk.. The regulators and policy makers have started taking a serious view of this. As a result. the

top regulator the Reserve Bank of India (RBI) is now encouraging various entities including non•
b3nking finance c:omp:trues (NBFCs). co-operative banks. regional rural banks (RRBs). and self-

ll
help entities. bestncss ccrrcspondcms in rural areas and micmfinancc compamcs which bave
oow given exposure to oon-bankcd ruml areas. This sho\Jllt dw at some point of time banking
services would reach ruraJ areas as much as 1hc.y do in urban aod semi-urban areas.

°Ok', govcmmeot nod the regulator have Ulken several measures ioduding mandmory opeoiog of
a1 lca.,;1 25 per cem or new bMl:: branches in unbankcd rural areas, giving impetus to opeoing of
new bmncbts in 1itt III-VJ cities. The m:indatory and simplified Know Your Customer (KYC)
detailing for opeoiog smnJI accounts have made things easier for banks to extend their reach.

Banks have n!so become finance providers for community services <kwelopmcol. Posa•
libcralisatioo India bns also been attracting baob from various foreign Jaods. These now number
40 - from 28 in FY in 2008 and have a 7 per ecru share or the 10(.8) assets management. Over 20
Indian banks have now opcoed over 240 offices overseas.

Future outlook-The banking system hns to implemeot Basel m guidelines as per lhe directive of
the RBI to make it a stronger sector. Some of the key measures of this include creating finn
measures 10 make it foolproof of systemic risks. stringeni timelines. ongoing impt0\'cmen1 of
quality and quantity of capital liquidi1y risk management, value-based practices. solid
mechanism. disclosures for total transparency and rcduc1ioo of systemic risk io derivative and
other mooey-rdated markets..

11K' RBI bas stipulated a time frame of five years co implemcm Basel Ill nonns.. Bui thtrc are
economy related hurdles as 1hc g_ovcromcru v.'hich ho1ds majority stake in ,he public sector banks
(PSBs) copes with the high fiscal dcficjL Once 1hc govcmmem decides to dilute us shares in lhe
PSBs and brinp ii down 10 aroood 51 per cent, the Indian banking sector would Set' a sea
change. Also. a large nwnbtr of foreign p1a)'Cr.. and big Indian corporate are awai1iog
government ctearaeccs for setting up new geocrru:ion b:lnk.,;. Once there is d11.ri1y on this issue
things wou.ld dwnge drastically.

Adoption of Banking Ttthnology

Tik' IT rcvolutioo bas had a greru: iml)3CI on the Indian banking system. n.c use of compwcrs
has led to the iotroduc1ion or online bM.kiog in India. The use of computers io the bankiog sector
in India ha,; iocreascd many folds after the ccooomic liberalisation of 1991 as lbe count:rys
banking sector has been exposed to 1hc world's market. (ndian banks were finding it difficull to
compete with the interoatiGnm banks in tenns of customer service. without the use of
ioformation technology.

Tik' RBI set up a number or conuniuccs 10 define and co-onlin:uc baoking technology. These
have included:

In 1984 was formed 1hc Committee on Mccbanisatioo io the Banking Industry (1984)( I I I whose
chairman was Dr. C Rnngarajnn. Deputy Governor. Reserve Bank of India. TilC major

14
rccommcndation.c; of th.is committee were iotroduciog MtCR technology in all the banks io the
metropolises in lod:ia This provided for the use of staodardittd cheque fonns aod cocodcrs.

In 1988. the RBI set up the Committee oo Computerisation in Banks (1988)( 13) headed by Dr. C
Rangarajan. It cmphac;ized that settlement operation must be computerized in lhc clearing houses
of RBI io Bhubaoc.c;war. Guwahmi. Jaipur. Patn:i and Thiruvanamhapuram. 11 funher stated Iha!
there should be. Natiooal Cbring of inter-city cheques at Kotkata. Mumbai. Odhi. Chcnnai :ind
MICR shouJd be made. opcrru:ionaL h also focused on computerisation of br..mchC's aod
iocrcasing conncc1ivi1y amoog bmnchcs through computers. It also suggested modalities for
implcmcoting on-tine banking. lbe committee submined its reports io 1989 aod computerisruion
began from 1993 with 1hc sculcmcnt bctwcco IBA and bank employees' associations.

In 1994. the Committee oo Tcchoology Jss.ucs relating to Payment systems. Cheque Clearing aod
Securities Seulcmcn1 in the Baoking Industry (1994) was sci up under O.airmao W S Saraf. 11
emphac;ized Elcctrooic Funds Transfer (EfT) system. with the BANKNET communiauions
oetwort as us carrier. h also said 1hat MICR clearing should be set up in all brn.nchcs of all those
baok.s with more lhao 100 brooches.

In 1995. 1hc Committee for proposing Legislatioo oo Electronic Fuods Transfer aod olher
Electronic Paymcms (1995) again emphasized EFr system.

TotnJ numbers of ATMs instnlkd in India by vntiO\Lc; banks ac; oo end June 2012 is 99.218. The
New Private Sector Banks in lodio are having the largest oumbcrs of ATMs. which is followOO
by off-site ATMs belonging 10 SBJ aod its subsid:i.nrics aod then by Nntionaliscd baok.s aod
foreign OOnk.s. While oo site is highest for lhe Natiorui!iscd banks of India.

15
B'rnnchcs and AThis of Scheduled Commercial Banks es on end Mnrcb 2005

Bank l)'()C Number of On-site ATM.,; Off-site AThis Total ATMs

branches
Nationalised 33.627 3.205 1.567 4.772
baoks
State Bank of 13.661 1.548 3.672 5,220
India
01d private 4.51 I 800 441 1.241
sectorbaob
Ncw peivatc 1.685 1.883 3.729 5.612
sectorbaob
Forci bn.ok.<t 242 218 582 800
TOTAL 53,726 7.654 9.409 17.645

16
 Information technology in the banking sector: - opportunities,
threats and strategies

The New Em

n... 21st century will briog about an all-embracing convergence or computing. communications.
information nnd knowledge. This will radically change the way we Jive. work. nnd think. The
growth of high speed network.<;. coupled with the falling cost of computing power. is making
possible applications undrc:untd or in the past. Voice. data. images. and video may now be
transferred around the world in micro-seconds. This explosion of technology is changing the
b3oking indus1ry from paper and branch banks 10' digitized nnd ncrworl.cd banking services. lt
hes a!rc3dy changed the iotcnUl! accouruing and maoagcmtot systems of banks. 11 is oow
fundamentally changing the delivery systems bGoks use to interact with their customers. All over
the world. banks arc still struggling 10 find a technological solution to meet the challenges of a
rapidly-changing environment h is ctear that this new technology is changing the banking
industry forever. Banks wilh 1hc ability 10 invest aod integrate information 1cchnology will
become dominate in the highly competitive global marktt.. Bankcr.s are convinced thal investing
in IT is critical.. Its po(entiaJ and consequences on the b.mking industry future is enormous..

Tuhooloov ;md Q;mks TraosCormatioo

Computers are geuing more sophisticated. They have given banks a po<entinJ they couJd only
dream about and have given bank customers high expectations. TilC changes that new
tcch.ootog;ies haee brought to bankillg arc enormous in thtit impoc1 on officas. employees. and
customers of banks, Advances in 1cdlnology are allowing ror delivery of banking producrs nod
services more conveniently nnd effecth't'ly 1tuin ever before • thus creating new bases of
competition. Rapid access 10 critical infonnmion and the ability to ac1 quicldy and effccti\'cly
will distinguish the successful banlcs of the future.. TilC bani.: gains a vital competitive advantage
by havillg a direa marlcctillg and accountable customer service environment and new.
sucamlincd business processes.

17
Maigr appli�tions: The 3d\•aotag_es occruiog from computerintion ere thrce-ditcetiooal • to
the customer. to the baok. aod to the employee.

f9c lhe Customer: Banks are aware or customer's oecd for new services aod plao to make them
available. IT bas increased the level of oompcrition and forced them to integrate the new
technologies in order 10 satisfy their customers. They have altc.'3dy dc.wt:lopcd and impJcmeotcd a
certain number of solutions amoog them:

Self-inguirv facilitv: Focility for logging ioto specified selt-inquiry 1ennioals t11 1he branch to
inquire and view fhc1ransoc1ions in the account.

Remote hanking: Remote terminals at 1he customer site ccnrececd to the respective branch
through a modem. cn:ibling the customer to make inquiries reprdillg his nccounts.. on-line.
wit.how ha\•ing 10 move from his office..

Am1ime banking: Anywhere hM.king: Installation of ATM.,; which offer noo-stop cash
witbdmwaL rcminaeces and ioquiry facilities. Networt:ing of computerized bm.nchcs inter-ciry
and imra-ciry will pcnnit customers of these branches. when intcrroonectcd. 10 1ransoc1 from aoy
of these branches.

Tdehaokinr: A 24-hour service through which inquiries rcgnnliog balances aod traosac:tioos in
the nccouru can be m3de over lhe phone.

Eles:tmoir Baokinr: This eoablcs the OOok. 10 provide corporate or high value customers with
Graphical Ui;cr Coterface (GUI) software on a PC. co inquire about their financial trans.actions
and accounts. cash 1mnsfcrs. cheque book issue and inquiry oo rares wilhout \'isitiog the bank.
Moreover. LC rcxr nnd details on bills can be sen! by the customer. and the hnnk. can downlood
the same.• The technology used to provide this service is called ekc1ronic data interchange (EDI).
b is used to transmit bcstncss rransacnces in computer-readable f«m between organintions and
individuals in a standard format as information is centralized and updates arc avnifab1e
simultaneously at all pteccs. single-wiodow J;Cl"\'K"C becomes pos.,;iblc. t�ding to effective
reduction in waiting time.

18
For t.ht> Bank: During the ln.c;t decade. b:tnks applied IT to a wide range of bock. and from office
task.c; in addition to a greer number of new products. The major nd\•aotagcs for the oonk to
implement IT are:

• Availability of a wide range of inquiry facilities. nssistiog the bank in business

dc.welopmeru and follow-up.
• Immediate replies to customer queries without reference to ledger-keeper es terminals arc
provided to Managers aod Chief Managers.
• Automatic aod prom.pt carrying out of standing instructions on due date and genctat:ioo of
reports.
• Generation or various M JS reports aod periodical returns on due dates.
Fast and up-tCKlate information lt:losfcr enabling speedier decisions. by in1c-rc:onncc1ing
computerized branches and controlling offices.
For ,he employees IT has increased their prodacnvay lhrough the followings:

• Accurate computing of cu.mbttsome aod umc-consumtng jobs such as bal.anciog and

interest cakulmions oo due dates.
• Automatic priming or covering scbcdues. deposit receipts. pa..s boot I pass sheet. fTI.'('ing
the staff from performing these time-consuming jobs. aod eo:ibling lhcm to give more
aueotion to 1hc needs of the customer.
• Signature rctrieval facility. a.c;sisting in verification of nnnsoc1ions. sitting at their own
terminal.
• Avoidance of duplication of entries due to existence of single-point data entry.

19
A search or the b:tnkiog literruurc reveals that banks are moving rapid.Jy to take 00\•aotage or
rcccnl and new customer service nnd cost rcduc1ion oppon.uoities that new technologies offer. A
sampling is in the table below:

Ttthno1....-.., Current Use Use in Nexl 3 Yea.rs

PC Ne,work.,; Tellers
Sales Tracking ....
48%
..,,.
80%

Software
Relational Dal.ti Base 36" ,...
-
Automate Credit s.. 489'
Scorine

f.quipmeot 33,. ,,,.

E-mail 9S9'

M.ruuigement
Software
(magiog Checks I ,2.. 7:?'!li
Suuemems
,,.
Emaging Documents
"'"
Internet Bnnkiog 3.. :,s,.
Home Pnge
lmcrner Electronic IS'Jii
Off>«
TclebankiM
,.'".. ,,,,.
ss..
Sm.nn Cards Debit 3S"
Cards

Electronic Rankin" 12"- 769'

lnlernet: The lnrcrnet is rapidly becoming the iofonnation supethighway of a global electronic
marte1place. The risiog commercial interests in the Internee arc especially cvidem in "fr<mttnd�
applications such as electronic cat:a!ogs. yellow pages. storcfmots. malls. and customer support
centres. All these applicmions are based oo the World Wide Web (WWW) - the fa,; tes1 growing
segment of the Internet. Although "bacl:.'°nd" applications such as electronic data interchangc•
(EDr) are equally impon.ant. their adoption has noc been as rapid. One major concern is security:
the Internet is geoernlly perceived as not secure enough for transmitting seestuve data such as
paymeers, Upoo a closer look. bcwcvcr. this view is noc wnrramcd. smcc tcchnologic.,; such as
public key encryption aod firewalls addrcs.s esscntinJ security concerns. Moreover. such
tcchnoJog;ies a.re already available. The ooly rcmaioing barrier is the facl:. of real world users of
those technologies.

20
The pilot projeel between Bank of America (BofA) and one of us large
caporate customers
tnvotves transpon:ing financfal EDI transactions over 1he tmemce. Ir successful, BofA experts
lhal this new EDI option will lead 10 a reduc1ion in ectecommunicances costs. an improwd
position with respect IO its value-added network (VAN). and valuable leaming experience with
the lntemct eevtroomcm, which is btcoming increasingly important 10 the bank. The project is
also significant beyond BofA: because it is one of the tint large-scale. reaJ-wortd trials. its
outcome will help dispel many uncenai01ies surrounding Internet-based EDL and encourage
more companies IO move in 1his direcncn.

Jpyg5tjpg iP tes:hoolm:l'i According to a sun:ey conducted by the American Bankers

As.sociation. US banks expenditure on infornwion 1ecbnology grew rrom $16.3 billion in 1994
to $18.7 billion in 1995-nn increase of 14.7%. and SI billion more than the same bankers
rorccased they would spend in last year's sarvcy. By 1998. the bank..; expect 10 spend $21.2
billioo (an increase of7. I").

How to sun•h•e: The key 10 survival is customer service. Customer loyalty will be detennincd
by convenient and innovative dclivi.'l'Y of products and personalized services. ln the 70's and
'SO's. banks were marketing 10 a gi.'.ncmtion raised on old style banking: pcrson:iJ interaction m a
b3oking office. Ttl3I generation was disdainful or "impersonal" service and afraid of computers.
Convenience was having a "brooch" in ooo's ncighboutbood. TO®y. personal service and
convenience are still the critical factors in the banking relntionship. but they arc defined
differendy. Consumers still wan! to bank with a financial institution they "know." and one who
"knows" them. bu! they do not necessarily wanr 10 go to the b3nk.. "Oley att not afraid of
computers nnd technology: 1hey embrace rbem. Convenience is doing their b3nking when 1hey
wtml and where 1hcy wam. Tilcy arc now comfortab1c with personal computers and odlcr

Electronic devices. They expect fasL cfficienL and accurate service And the only way 10 cost
«.'ffccti\'ely provide the tnseem, quality service thal customers demand. and that the compctirioo
prevides, is lhmug.h intensive use of the mosa advanced information techoclogies and through
good people trained in the use or these technologies. For all lhcse reasons. the banks delivery
systems arc completely changing.

The New Delinrv S,·stem...;: TilC increasing cost or building brick:-and-monar branches,
decreasing cost of computers. high delivery costs and slow revenue growth force a rcklok at the
conventional delivery systems. Moreover. growing comfort of technology u.�gi.' by the customer
is rapidJy fostering us.age or non-brnncb dumncls for routine nansacuoes.

21
The new i.tmtegy chaoges the focus of the branch from being a high CO!,t uaosactioo centre 10 a
provider of a v.ide raoge or services like tdebank:ing. customer service kiosb. ATMs, nod
rc�e electronic bankiog..

New Madielior Oppprftmitin; As the new technology is so expensive baob need to use the
new systems 10 do more lhao deliver ioformation and basic services. Banks need the ability 10
also sell insurance aod investment peoducrs to ge1 a better return oo thi.c; investment. Tdepbonc
baoking can briog fmaooi.nJ services to lhc home or office. especially if they ate affordable
screen phones. By ooticing how nuch interest the cuscomc-r expresses. the bank cao markC1 stock.
quotes aod insurance quotes. Interactive videos are new technology that banks can make
available to lhe customer to m3intain personal cootac:t while still lowering the expense of
delivery service. With an interactive video an expcn employee is not occdcd io each branch.
Complex life insurance product..;. open brokerage eccoums. customized prodoo illusuatioos cao
be widely available where needed. The interactive videos will be cost effective expertise. n.....
iotemec is a mc-dium to allow baob to offc.":f products to customers outside 1he normal customer
base of a branch. Banks are aware of the customer's oeed for rbcsc services and plan to make
them avnilabJc btfore other sources do.

Current Trends; Anolher concept. virtual bankiog or direct traosact:ioos and data. banks can
improve is gainiog grouod This model produc1ivi1y. optimize costs. provide quiclcer aod offer
products, services and better quality customer service. These 1ransoc1ions only 1hrough electronic
help with 1bc cnvircemental angle delivery channels. generally without any physical branch. bas
alreudy been 1estcd out lo edvanced ccenrrics such a...; the United States aod Europe. Owing to
lower branch maintenance and manpower eesu. such banks arc abJc to offer competitive pricing
for their produc1s and services vis-s-vis traditional banks. More and more customers nre already
moviog to non-branch banking. and the direct oon.king trend will surely catch up in India as
lcchnolog:)'·snvvy OOob :idopc 1his model Thoogh it may appcnr to save the bank a lol of
ovcrbctlds. io reality. the customer never needing to visit a oonk. braoch. either for completing the
account opening process or the subsequent fioanci.al 3Clivitics actually throws up new challenges.
11k' power of technology makes it happco scamJcssly and virtually, bu! customer satisfactioo is
something which calls for human IOUCb. For all 1heir technological sophi.c;tication. virtual
banking shouJd be ha..;...Je free and n pleasurable experience for the user. The virtual banks need
to be aware of ibis foci io letter and spirit and always ensure duu the quality of user experience is
parmnouot and lcvcragiog lcchnology is only an aid to eoriching user experience.

As Bank.c; adopl more tccboology. 1..-,..-0 thiow- stand ow - using less p:ipcr and doing nansocrions
wirelessly. Co lhe last few years. many baob in India have implemented comem management
solutioos aod soccccdcd in cooduc:ting paperless cransoc1ions using the imaging aod workflow

22
c:apabili1ics of such sonware. Also. automated hMdling of service requests with proper
docwncrution and micting facilities hes significantly reduced turnaround time.

Processing: on.line applicacions for account opening and other services. transfer of fundc; withOOI
cheques. onlinc account statements are all becoming p:trt of the regular banking process. With
digitization of au customer tronsnctions and data. bank.c; can improve better quality customer
service producnvhy. optimize eese. and provide quicker and better quality service.

With customers demanding: an)'lime and anywhcn- access to tbtir money and financial
information. banks have no option but to impkmc-nt wireless solutions in de,•ic::e independent and
nerworx-agnosnc ways. On the user side. rapid progression of mobile tcchnologi-cs as evidenced
by the well known LTE (Long Term Evolution) means banks must increasingly :mpt their own
infrastrectnrc to the chem side needs.

On the flip side. unlike PCs. mobile phoocs arc small and arc easily Jost or stolen. making them
more \'Ulncrable to fraudulent trallStlClions. This calls for greater security measures combined
with powerful regulation. 11ltte arc also some privacy issues related to wireless banking that
need to be resolved OvcrnJL there is no denying th:lt lherc is both challenge and oppon.uni1y for
banks in enriching customer experience a.rising from die numtrOttS use cese scenarios of
powerful sman phones operating wirckssly. By ensuring the cese, comfon.. safety. and
seamlessness of such operations. banks can assuredly remain in business.

Product inno,•ation and technologv

Tbe banking industty is going through a period of rapid change to mttt competition. challenges
of technology. and the dcmnnds of the end users. Clearly technology is a key differentiation the
performance of banks. Studies reveal that approximately 20% or noo-intcn"St expenditure of
large b:tnks in 1hc United States is oo inf0ffll3tion technology. The needs of the rural market arc
quite different and bank.c; have to innovate accordingly. Also. along with new product offerings.
they need to wort. towards ex.isring product opcimization. With low cool technology the cnablctS.
supponcd by inoov-aai,'C products tailored ror 1hc ruraJ populace. bank.c; can offer secure
investments with good returns and in addition.. act es catalysts to alter rural mvesmem pm!Cm.S
along more proebcth-e lines. lodinn brulb nttd to focus on swifl nnd continued infusion of
technology while ensuring its oppropri.nteness and utility for both the rural and urban nwte1.

The Lebanei.e Case

During the l.as.t civil war (1975-1990). eigtuy percent of the Lebaeesc infra.c;aructurc was
dcslro)'Cd. The remaining tweruy percent are now outdmcd. The Lebanese banking sector was
heavily affected by the war. They lacked the infomwion technology revolution in the banking

2l
sector. h becomes a smnegic necessity for 1he Lebanese banks 10 impkmcnl 1he new
techooJog;ies mall Jt.\'els. transactional level. managerial level and cxcccuve tevet. En 1he 1990's
they started implementing rr capabilities co change the wort organization. raise the productivity.
au costs and deliver the bcsc services to tbcit customers and increase thtit profits in che same
time. Most of the Lebanese bankers believe that IT will eruible tbtm to face the foreign
compc1ition and the pos.,;iblc consequences of the coming pcecc.

Technology Adoption the ves nu.jority of ,he Lebanese banks have set very high standmds of
excellence for themselves in tcnn.s of ccchnology. statc.�f-1hc.-Mf facilities. customer service and
customer orientation with all f3C<'1s of operations tretlly computerized The bank.,; abo make
extensive use of communication technology 10 provide. off-site banking f:,ciJities including
ATh1s.

Tilcir ambition is to position rbcmsctves as cccbnology'1riven banks offering superior services to

both their clientele classes • lhc corporate customer and tbt retail customer. TilC corporate
customer typically requires quick. disposal of loan applications and maximum rearms from the
ca..tl balance. The needs of the corporate customer are func1ions of the speed of rcspoose.
Technologically 1he answer to 1his is a reliable netwott connecting branches tbaa run on-line.

TilC first steps. Al the early stage. Lcl>ancsc banks stancd co build tbtit datnba,;es and automate
their wort procedures. Most banks haw edcprcd re:idymadc packages for 1hcir internal
operations. Cwrcndy, these banks arc replacing. their old infonnauon systems. 1be bank's
branches arc planning to provide state-of-the-art services to their customers enabling a rapid
gro\Jlth of the bank's pcrformaocc in a very compcunve m.arkctpluce.

Different approocbcs are foUowcd in the Lcl>ancse banks co acquire and implement the new
techoolog:ies. Banque du Liban ET dourre-mer (BL0�1). for example. ha,; developed its own
complcse banking infornUltion system. While Ban I. Audi follCWi·ed nnotbct strategy nnd
purchased on on-line infomwtion system providing a real lime on line branch netwut with an
up-t<Hiate blinking and customer infomwion IO senior management. middJe managers. end users
and busieess analysts. Both infomwion systems. in BLOM in Bank Audi are scheduled to nm
during this year. The major reasons be-hind adopting or de\•eloping new information systems are:

Rapid geographical expansion hes forced banks to replace their off-line systems by an on-line
system linking the bmnchcs to che bead office lhrough the telecommunications nctwort..

Restructuring bank's precesses in order to reduce st.atT expenses which constitute a I.urge pan of
the operating costs and a bcavy burden on i1s operating profi1abili1y.

Incompatibility of the old systems with the strategic necessity of integrating new technologies
like AT�b. telebanking. etc. in ordcr ro provide the high quality services 10 the customers end
compcling on an equal foot with the foreign banks.

24
The ('Qmpetilion

The Lebanese banlcs ate aJso plaming to offer the entire range of service. like tcJcb3oking.
AThis. etc. They also respond \'Cry occivcly in the marketplace in imroducing new producu; aod
services. Arab Bank was the pioneer in iotroduciog AThis in Lebanon. Arab bank started to
install ATM machines in 1993. Other banlcs followed. by cstabli.c;hing in 1994 a nc,work called
Link N'ctworlc. using Liok cards. Aboul 25 banlcs have joined this nc,work aod are .sharing now
u ·s almost 60 machines located in the: major cities of Lebanon. The ccouaJ baok is expecting that
about 700 A™ machines will be in.stalJed in Lebanon by che ycnr 2CXXl.

Lebanese baob are also introducing remote ban.king services. Arab bank was also the first baok
in Lebanon to offer this service. Early in 1994. Arab b:tok installed an interactive voice response
system. called Phooc Banlcing. Ac the same time. it introduced the computer based remote
banking service which is called corporate banking. Four other banks. Allied Business Bank.
BLOM. Universal Bank. aod the British Bank of the Middk East foUowOO aod introduced 1heir
telephone based remote banking, However these services arc pro\1iding only inquiry facilities
bccau.sc they ate off-line systems.

Teclmologv A�,;essnw>nt

TilC diffusioo and successful implcmcotatioo of IT in Lebanese banlcs is noc an ea.c;y process.
Lebanese bank.c; arc facing coonnous chrulcogcs in mas.iering 1he new tools pro\'idcd by IT. An
importam coos.mint IO 1he diffusion and success of IT implcmeotatioo is the tclccommunicntions
iofta.c;truccurc. another obstade is m.tuU1gcrinJ practices and organi:udioruiJ weaknesses. lo the
following section. I will analyse: and discuss thc:sc obstacles.. In evatuanng banks "use of
technolog:y. we loolc m both the technology in place to serve tOMy's customer and the plans for
serving tomorrow's. The first objedivc is to examine the bank's deployment of technology

relative co what is available. tested. aod proven to enhance bank pcrfonnance. The second is to
examine 1hc banlc's preparation for 1he future. We want 10 answer the following questions: �
mOSI imponan1 Issues to be analysed are:

I) To wbnt degree is the bank using ptO\'CO technologies to enhance pcrformMCc?

2) Are thtrc aoy technologies 004 dcplo)'Cd thm would bavc a significant. positive effect on
pcrFonnancc?

3) What level of spcctnlizcd iraioing ha'> been received by the officers aod employees ac;signcd to
selecting, deploying. and managing technology?

25
4) Wh111 le..-el of systems traioing bes bceo provided to other officers nod employtts?

5) How effccnve arc the systems that arc being used?

6) ls Maongcment monitoriog 1he e..-0Ju1ion of baoking technologies and plaon.ing for the future?

Teltt0mmunkation Infrastructure

TIK' greatest obstacle to real time electronic banking in Lcbaoon is the- telecommunications
iofra,;1ruc.1urc. Te1ccommuoications in the bankiog see1or L,; a major feceor to the success or
failure or any apphcacion or service. The Lebanese 1ekcommunica1ions infrastructure was
devastated by the civil war. The process or rehabilitation aod modcmizatioo of this infrastmctnrc
started in 1993.According co the recovery pl.an dc.w('lopcd by CDR 1he rctecommcnicmces
rehabilitatioo plan will be completed by 1hc year 1998. This means that banks will noc be able to
rely on the public network uotil 1998. The rcsuh of such si1wuion is a delay in impJcmeotiog
new services and produces like remote banking. eteeeeete fuods transfer. real lime bank
ioformation systems, This hes also an effcc1 on the rcliebiliry of the services alfflldy
implemcotcd like ATMs. In order to fece this challcoge. baob begao studying the feasibility of
iostalliog a private 1clccommunicatioos nc1wotk. Foor banks. Baok Audi. Arab Baok... Byblos
Bank. and BL0�1. started in 1he early 1996 coosidcriog the installation of a private nccwork to
connect their braoches aod thus conduct real time baoking operenons, This network will also be
used to coenecr the ATMs machioes which will thus func:tioo co-tine. However three problems
arc delaying the implemenwioo of such oet\J/Ori;::

I) Obtaioing a license from the Mioimy of Posa and tclccomm.J.oicatioos.

2) The high cost of the equipment O the lock. of coordination between the members of the
Lebanese Banks As.'W>Ciation.

26
Human Re!iourtt,i Problem..,.

Banking induslry is bt:lvily depending upon information ,ccbnology dwt: needs professionals for
dc\•elopment. implemenwrion and suppon.. Despite ,he programs perrormed by m:iny baob lO
dc\•clop ,heir locnJ cxpcruse in IT. rbere is still a real .shortage or qualified personnel. According
to a recent survey ( T. Abdul Reem :ind M. Dayya. Banking IT: a look a1 Lebanon AUB. 1996)
the Following problems were identified:

AJmost hair of the Lebanese banks do n04 have one engineer nmoog their staff.

Lack or prorc."$.Sional training programs> Financial institutions in Lebanon offer a wide range of
training programs to 1heir employees. However. with respect 10 their tcchmeal IT staff the
percmtagc of training programs is much less. because IT staff arc considered co be U'aincd.
high.I)' qualifi-00 and hence do n04 need extended training sessions. The consequence of such
policy is a reduction or the capabilicy of rr staff to be up lO date in the most recent tld\•anc«."S.

High Turnover Rak' of Technical Su1tr: • TilC turnover rate of the ,cchnical staff in some 40%
percent the Lebanese baob is around 20%. lbe low salaries aod better opponunitics in other
industries a.re ,he main reasons for this high rate..

Resistantt to Change

Resistance to change and the absorption capacity is often neglected once the automation system
is adopted. However. this human factor is a critical factor in the success or any banking
application of informmion technology. The only way 10 solve 1his problem is to design adequate
training programs and increase the awareness of the cmploy«s. Most Lcl>ancse banks have
realized this fact and some or them have csmblishcd a mlining centre.

These arc the major obsreclcs for implementing IT in Lebanese banks. An04bcr point tha1 should
be mentioned is the necessity of planning very carefully the development or any new application.
A computerization ptan is the basis for implementing successful inrormation technology
solutions. To be rcjcvam, rbese pl.ans bave to be linked closely to organi:l.ationaJ strategics.
objectives, priorities and processes.

Strategv for the future

Banks foce a serious challenge. The basic suucturc or rhc bank is incmi.-.ingly in conflict with
the changing product. dcli..-ny. and service needs or the customers the ruturc bclon8,\ to financial
service providers OOl lr.lditional banks. n.e \'3St majority or l.argc oonks will create value
nClworb. Doing so presents ttemcndous chancngcs, Banks will have to first develop a
comprebenstvc distribution system that will erwblc customers to KIUCh them al multiple points.
27
Banks must also create ptnonnance measurement systems co as.sure fhc mix produces and
services they offer are bcocficial to both the customer and tbe b3nk. lllCy must determine
\.1/hetbcr to deploy ocw technologies du:�m.,;cJvcs or with ocher service providers. Ncvcnbctcss.
technology alone will not sotoe issues or create advantages. This cccboology needs to be
iotcgnued in an organization. with the change management issues linked to people resisting new
concepts and idta,;.. h also nttds to support a clearly dcfiocd and well commuoic:ued business
strategy.

Satellite Banking

Satellite bankiog is also an upcoming technological inoovation in rbe lnd:ian ban.king iodustry.
which is expected to help io solving 1he problem or weak ccrrestrial com.municatioo links io
maoy pans of the cowttry. The use of satellites for cstablisbiog connccnvay between branches
will help baob IO rc3Ch rural and billy areas in a bcucr way. and offer better focili1ics.
panicularly in relation to dccuonic funds transfers. However. 1his involves very high costs to the
banks, Hcooo. uodcr the propo!tal nude by RBl. it would be bearing a part of the kascd rentals
for satellite connectivity. if the ban!.:s use it for cooncctu:lg the nonh eastern states aod tht- uodcr
baok.ed districts..

Development of Di,;tribution Channels

Thc major and upcoming ch:lnncls of distributioo in the b30king industry. besides brnnchcs are
ATMs. iotcmc1 banking. mobile and cctepbonc bank.ing nnd card based delivery sysems.

Automatic Teller l\ta('hinH

ATh1s were introduced to lhc lodian banking iodustry in 1he early 1990s initiated by foreign
baob. Most foreign bnnk.,; and some private sector players suffered fmm t1 serious h:andictlp at
that time- lock. or a suong branch oct\J/Ort.. ATM technology was used as a means to partially
overcome this handicap by reaching 001 IO the customers at a lown- initinJ aod transaction costs
and offcriog hassle free services. Since then. innovntions in ATM 1cdloology ha\'t' come a long
WDY and customer rccepnveoess has also increa.,;ed nunifold. Public sector banks ba\'t' also now

28
cntem:I rbc race. for expansion of ATM networks. Development of ATM ncrworss is noc only
leveraged for lowering the unnsaction costs. but also as an effcc1h•e m:utc,ing channel resource.

lnlrodudion of Biometrit'.!.

Banks across the cowllry have staned the process of setting up ATMs m:iblcd with biometric
technology to tap 1hc. potential of rural markers. A large proportion of the population in such
ccnues docs nOI adop1 technology es Iast as the urban centres due to the ln.rge scaJt illiteracy.
OcvcJopmcnt of biometric 1ccbnology hes made 1hc use of self service chnnncls like AThis
viabJc with respect to the illiterate population. Though expensive to install. 1hc scope of
biometrics is expanding rapidly. It provides for better security sysem, by linking credentials
\•crification to recognition of the. face. fingerprinL'>. eyes or voice. Some large benks of the
country have taken their Iirst steps towards large scaJc truroducnon of biometric ATM.,;.
especially for rural banking. Al the industry tevet, however. this 1ccbnology is ye, 10 be adopted:
the high OOSL'> involved largi.'ly accounting for the delay in adopcion.

Multilingual ATl'\b

Jnstn!Jation of multilingual AThis bas also entered pil04 impJcmcntation st.age for many large
banks in the country. This technological inno\•ation is also aimed at the tutal brulking busieess
believed to have large uni.tipped potential. The language di\·ffSity of India bas proved to be a
major impediment to the acuve t1dopcion of new technology. rtstmincd by the 13ck of k.nowlo:lge
of English.

MultiOmrtigoal AIMS
MultiJunc1ional ATMs nrc ycl to be introduced by mosa b!ltlb in India, but have already bttn
recognized as a very effective means to access other banking services. Multifunctional ATM.,; are
equipped to perform other functions. besides dispensing ca'>h and providing 3C'COunt information.
Mobile recharges. tick.cling. bill payment. tllld ad\•cnising arc rdat:i..-cJy new areas 1tw are being
exp1ored via mullifunctional ATMs. which have the poccnaial co become revenue gcncrmors for
the banks by effecting safes. besides acting as dtli..-ery channels.. Most of the service additions to
the ATh1 route require specific approVtlJ from 1hc rcg_ulmot.
TM Network Switche§

AThi switches are used 10 connttl lhe ATMs to lhe nccounting plntfonns of 1hc rcspccuve
banks.. In otdcr 10 conntel the A™ ne1wort.s or difFetcot banks.. apex level switches arc required
that connect the various switches of indi\1idWl1 banks. Throogh 1his 1cchnology. ATh1 cani.,; of
one bank can be used at 1he ATMs of 01hcr OOJ\k.,;. facilitnting beucr customer convenience.
Under the cU1TCn1 mechanism.. banks owning 1he ATM charge a rec for allowing the customers of
some 01hcr bank to access it,; ATM.

Among the various ATM nt1wotk switches arc Cash Tree.• BANCS. Ca,;h net MITRE and
Nationn.1 Financial Switch. Most ATM switches are also linked to Visa or Ma,;te.Card gateways.

In order to reduce the cost of operation for banks, IDRBT. which administers the N:atimal
Financi.nJ Switch. has waived the switching fee with effcc1 from December 3. 2007.

Internet Banking

Internet banking in India began taking roots only rmcu the early 2CXXls. lntcrect banking services
111e off«ro m three levels. 1bc first kvd is of a bank's in(ormational website, wherein only
queries are bandied: the second level includes Simple Transactional Websites. which enables
customers to give tnserecuons, onlinc applications 3nd balance enquiries. Under Simp1e
Transactional Websites. no fund based transactions arc allowed to be conducted. Internet
banking in lndia bas micbcd level three. offering Fully Transnctioruil Websites. which .nJlow for
fund transfers and various value added services,

Internet banking poses high operational. scceriry and kgal risks. This has restrained the
de\•clopmcn1 of intcmc1 banking in India.. The guidelines governing internet btmking operations
in India CO\'etS a numbu of technological. security related and legal issues to be tlddrcsscd in
relation IO inteme1 banking. According to the earlier guidelines. all intemt1 banking services bad
to be denocuinmed in locaJ currency. bu1 now. even foreign exchange services. for the penniucd
underlying eansecnons. can be offered 1htoogb intemc, banking.

Internet ban.king can be offered only by btlnk.s licensed and supervised in India.. ba\'ing a physical
presence in India. Oversees branches of Indian banks arc aUowOO 10 undertake intcmCt banking
only after srui,;fying 1hc host supervisor in addition 10 the home supervisor.

Pho.ne Banking and Mo.bile Banking

Phone and mobile ban.king arc :i fairly recent phenomenon ror the Endian bunking industry. Tilcro
exist opcrosive guidelines and restrictions on the l)J>C and quantum or tronsnctions duu can be
undertaken \•ia this route.. Phone ban.king ctwnnels runaion through an lntcrnctive Voice

30
Response System (JVRS) or lelebrulking executives of the baob. The uansacuons are limited to
balanec enquiries. trnnsaction enquiries. srop payment insuuctions oo cheques and fuods
transfers of small amourus (per ttaosactioo limit of Rs 2500. ovcrnJI cap of Rs SCXXl per day per
customer). According to lhe draft guidelines on mobile banking. only banks which are licensed
and supervised in India and have a physical presence io lndia arc allowed co offer mobile
baoking services. Besides... ooJy rupee based services can be offered. Mobile baoking services are
to be restricted to bank eccoem and credit card account hokkts which are KYC and AMC
corupliara.

wuh 1hc rapidly growing mobile pencuatioo in the coo.nary. mobile banking bas the pcxenti.aJ 10
become a mass banking cbanoel. with ,·cry minimum iovcsuneat required by 1hc btlnk.c;.
However. more security issues need to be 3ddresscd before oonking CM be ccoducecd more
freely via this channel

C"ard Bazd Ptlinn Sntrms

Among the card based delivery mechanisms for \'arious banking services, arc credit cards. debil
cards... snuitt cards etc. l1ltSC have bcco imnlC'nscly successful in India sioce their Launch.
Pmcuatioo of these card based systems have increased manifold over the past decade. Aided by
expanding ATM nc1works and Point of Sale (POS) tcnnin:ils. banks have been able ro tncreese
the transition of customers towards these chnnncls. dicreby reduciog lhcir eese too.

PB,·me:ot and Seulernenl S\'Stem.'i

Tik' ionovatioos in technology and communication iofrac;trueturc in recent )'CW bave impnctcd
baob in a large way through the development of pnyment and settlement systems. which arc
central 10 1hc major portion of lhc businesses of banks.

In order 10 streogtbcn the iostitutiooal frnmcwotk for lhe payment and settkmcnt systems in the
country. 1hc RBI con.Wtuted. io 2005. a Board for Regulation and Supcrvisioo of Pa}mc-nl aod
Scttlcmcot Systems (SPSS) as a Comm.iucc of its Central Bootd. TI.e BPSS oow lays down
polkits relating lO 1hc regul.aaion and supervision of all types of paymc-nl and sculemem systems.
sets standards for exLc;tiog aod future systems. approves criteria for authorisation of paymcm and
settlement systems. and dcermines criteria for membership 10 these systems. induding
oootinuntion. tcnniruu:ion and rejection of membership. lbcrcafre.r. 1hc government aod the RBI
fdt die need for a leg.a) framework dedicated to the efficient funcrioniog of the paymeot and
sculcmcm systems. The Paymeot and Seulemcnt Systems Ac1 was passed io December 2007.
\Jlhidl empowered ,he RBI to regulate aod supervise the payment and scntemem systems aod
pr0\1idcd a legal basis for multilateral oeuiog and settlement.

31
PDper Ba_,;ed Clearing Svstems

Among the most important improvement in paper based clearing systems was the introduction of
MJCR technology in 1hc mid 1980s. Tilougb improvements continued 10 be m3dc in MJCR
enabled instruments.. the major transition is expected now. with 1hc impkmcotatioo of the
Cheque Truncation System for the processing of chtquts.

Cheque Trun�tion Svstem (CT'S)

Truncation is 1hc process of stopping the mcvcmem of the physical cheque which is IO be
trunct1tcd at some point co-route to the drawee branch and an electronic image of the cheque
would be scot to the drawro brnncb aJong with the refovnnt information like the MJCR fields.
date of presenranon. presenting banks etc. Thus. I.he CTS reduce the probability of frauds.
reconciliation problems. logistics p-obLcms and 1hc cost of collection.

Tik' cheque tntncntioo system was lmtnehcd on a pilot bests in the National Capital Region of
New Delhi on February I. 2008. with the participation of 10 baob. The main 3dv-antage of the
cheque uuocatioo system is lrull it obvitucs the physical presentation of lbe cheque IO tbc•
clearing house. los�c3d. the electronic inuge of 1hc cheque v.•o,dd be required to be scnr to the
clearing house. This would provide a more cosr-cffccnve mode of sculcmcnt than manual and
MICR denting. elUlbling rcalh:atioo of cheques on the same day. Amendment,; have nJre3dy
been made in the N'.I Ae1 to give legal recognition to the electronic im.nge of the «uncncd
cheque. providing for a sound legal framework for the iotroduc1ion of CTS.

Cumody the effort is on increasing I.he processing efficiency with respect IO paper based
trans.nctioos. and as fat as possible. to reduce the burden oo paper based dc.nring. Through the
inrroducnon of advanced ctectromc funds uaoi;fer mcch.nnisms. the. RBI has been successful in
diverting a l:wge ponion of paper based transnccions to the electronic route.

Eles:srorur Oeadur Secxis:e

Tik' Elcc1rooic Clearing Service (ECS) introduced by the RBI in 1995. is akin 10 lhc Automated
Cleating House system 1h.nt is operational in certain 01hcr countries like the US. ECS has two

32
variants- ECS debit clearing Md ECS credit clearing service. ECS credit ckaring operates on the
prmcrpte of "smgle debit muluple credus' and is used f« transactHHlS hke payment of salary.
dividend, J)CtlSK>fl. interest etc. ECS debit clearing servsce operates on the pnnc1ple of 'single
credit mul11ple debrts" and rs used by utilny SC1V1ce prov1den for cottecnon of elecmcuy bills.
telephone bills and orber duuges and also by baob for colfoctions of principal nnd interest
repayments, Settlement under ECS is undertaken on T+I basis. Any ECS user can undcnake rbe
rransaceons by registering d1tm.c;eh•es with an approved clearing house.

Opcrating from 74 different locations.. ECS bandJes ao average or 20 million 1rans3C'lions per
month. 11 enables easy payments and collections for repcnnve Md bulk transactions. ECS 1akcs
off a Joe of burden of paper work from the baob. erulbljng smoolh flow of transactions. Tbc
volume or electronic 1rnnsoc1ions bas increased at ao annual average grov.·th rrue of 32. I� during
FYOS-FY09. The use of ECS (credit) and ECS (debit). in pan:icuJar. hes witncs.std subs1antial
growth in the last few )'C:U:S.

TilC RBI h:,s rcccmly launched 1he Nntional Electronic Clearing Service (NECS). in September
2008. which is an impro..-emcnl over the ECS cutTent..ly operational. Under NECS. all
rransaceons shall be processed at a centralized location called the National Cl�ing Cell located
in Mumbai. as against 1he ECS. when- processing is currently done al 74 different locations. ECS
system has a decentralised functioning. and requites users 10 prepare separate sci of ECS data
centre-wise. Users arc required to tie-up with k>cal sponsor baob for presenting ECS file 10 eocb
ECS Centre. As on September 2008. 2SOOO branches of SO banks participate io 1he NECS.
Leveraging on 1bc core banking system. NECS is expected to bring more effrciency into the
system.

Eltttronic Fund!!' Tran_c;rer Svste:rns

Tilc. launch of the dcctrooic funds transfer mechanisms began with the Bec1ronic Funds
Transfer (EFr) System, The EFf System was opcnu:ionalizcd in 1995 covering 15 centres wbttc
the Reserve Bank maneged lhe clearing houses.

Special EFT (SEFT) scheme. a vartam of the EFT system. was introduced with effccl from ApriJ
I. 2003. in order IO mcrcasc the coverage of the scheme and to pro\•idc for quicker funds
transfers. SEFT was made available 3CtOSS branches or banb that were computerised aod
connected via a ne1work enabling tmnsfer of cJecuonic mcss:iges 10 the receiving branch in a
strnigtu through manner (STI' processing). In the case of EFf. all branches of banks in the 15
tocuions were pan of the scheme. v.bdbcr lhey nre nc1worktd or not..

A new vnrin.nt or the EFf called the National EfT (NEFf) was decided to implcmcn1cd
(November 2005) so a,; to broad base chc fncitities of EfT. This was a nationwide rnail
electronic funds tr:msftt mechanism between 1he oe1worl.:cd branches or banks. NEFT PfO\'idcd

33
for integration with the Structured Financial Mes...aging Solution (SFMS) of the Indian Financial
Network ((NFCNET). The NEF'T uses SFMS for EFT message creaaion and transmission from
the branch to the bank's gareway and to the NHT Centre, thereby considerably cnhanc-mg the
security in the uansfer of funds. While RTGS is a real time gross sculcmem funds 1ransfer
produc1. NEFT is a deferred net settlement funds uan.,;fer product As ,he NEFT system
stabilized over time. the number of scmemcras in NEFr was mcreescd from lhc initial two to
six. NEFT now provides six settlement cycles a day and enables funds mmsfcr to the
beneficiaries account on T+O basis. bringing ii closer to real time settlement

TilC commencement of NEFT led to discontinuation of SEfT. and EFf is now available only for
govcmmcm payments.. With lhc SFMS focility. brancbcs can participate in both the RTGS and
the NEFT System. 11 is cn\•i.,;ioncd th:u all the RTGSenabkd baok. branches would be NEFT•
cnabled too. so thal the customer wou.Jd have t1 chotet' between RTGS or NEFT. based on time
urgency. value of the uaosaction aod different chargt":s npplicable on the two systems. Using the
NEPT infrastructure.• a one-way remittance facility from Cndia to Nepal bas also bttn
implemented by the RBI since 15th May 2008.

In otdcr to tncrcese the coverage of NEFT to a wider scc1ion of bank customers in semi-urban
and rural areas. tin enbancemem of the NEFT called the NEFf-X (National EFf (Extended)) ts
also proposed for phase wise implementation. Thi.,; would facililalt- noo-nctwotked branches of
baob to traosfc."t funds electronically by accessing NEFf-c:nablcd brnndk'S for transfc."t of funds.
NEFT (Extended) would work oo t1 T+ I basts and would ensure wide rum) coverage of the
electronic funds u:ansfer system.

Tbc other paymcn1 aod scttJemem systems deployed were mostly aimed at small value repetitive
rransacuons. largely fot the retail traosnctioos. The introduction of RTGS in 2004 was
iostrumcotal in the dcvdopmcnt of iofr:mruccure for Systemically important Payment Systems
(SIPS).

Country Year S)'Stem Network Shape of

Operator Messa� Dow
Structure

34
 Belgium 1996 ELLI PS SWlFT y
Franc< 1997 TBF SW(FT y
Gtnnanv 1988 EIL-ZV CB y
Italy 1997 Bl-REL SIA v
fanon 1988 BOJ-NET CB v
Ncthm.ands 1997 TOP CB/ACH v
Sweden 1986 RIX CB v
Switzerland 1987 SIC Tclekurs AG v
UK 1984 CHAPS CHAPS L
USA 1918 Fed wire CB v

n.c. payment system in lndia l.ntS;tlY foucwcd a dcfcncd nc1 scttJemcnt regime. which meant that
the net amount was scttJed between banks on a deferred ba.<iis. This posed significant scttJemcnt
risk.s. RTGS was launched by RBt. which cnabJed a real time scntemem on a gross ba.'tis. To
ensure that RTGS system is used onJy for l.:usc value uansecnons aod retail tmllsoclions take an
alternate channel of c!ccuonic fuods transfer. a minimum threshold of one lakb rupees was
prc,;cribtd for customer trtltWlctions under RTGS on Jaowuy I. 2007.

RTGS minimizes systemic risks roo. in addition to settlement nsks, a" paper based funds
scttJement through the lntcmank clearing are replaced by the elecrrcnic. credit transfer based
RTGS system. High systemic risks arc posed by high value imerbanlc transfers. so. it is
considered dtsitab1c that all major interbank.1rnnsfers among commercial banks having accounts
with RBI be routed only through the RTGS system. The RTGS system had a membership of 107
participants (96 banks. 8 primary dtaJers. the Reserve Bnnlc and the Deposit Insurance. Credit
Guamnttt Corporation and Clearing Corporation of lndia L&d.) as at cnd August 2009. The reach
4

and utilisation of the RTGS has witnessed a sustained increase since us introduction in 2004. TilC
bank/branch network coverage of the RTGS system increased 10 58. 720 branches at more than
10.000 centres facilitating the increased usage of this mode of funds transfer.

Its:boolm Yendocs
Many Indian banks hmldkd 1cdlnological issues in house till the late 1990s. Thereafter. the
complications of the business necessitated the engagement of specialized veooors 10 handle
complex issues. Due to 1hc complexities involved, mosi bank." now prefer 10 engage IT vendors
to mtroduce spec,ahzcd software 's to help in their risk. management systems. retail and corporate
banking. card management systems. complete back office suppor1 including daia management
sysrcms,

35
Obstacle!> :and Rkk MSOciated with IT applications

TilC usage of IT in banking sector bas bought ample number of benefits 10 bnnks a,; well as its
customers. But m the flip side of changing financial landscape from brick to clicl: banking. the
application or IT in banking. exacerbates miditional banking risks nnd raised numy threats to
banking authorities. These amplified risks persist even if the system uses dosed nc1works instead
of open nClworb (as in case of closed nc1work programs atso. the pa.sibilil)' of insecure
telephone connections. pa,;sword \ iolations. and system mucb exist). Lock.cu Md Littler (1997)
1

also identified risk es a very crucial aspect or electronic banking, The risk involved in using IT in
banking operations include security risk. kgal rtsks, strategic risk. money laundering risk.
rcputntion risk etc. Some other obstacles essoctatcd with IT applications includes requirement of
heavy investment in hardware and sonwerc wuh comparative long gcsta1ion period. b may lend
to problem.,; conceming cosr control. integration of traditiotull system to new system Md chances
of excess capacity. Funhcr due to the exponential gmw1h in 1hc number of technical inventions.
there is always :i fear of gcuing 1hc implemented technique outdmed shortly.
 RECOMMENDATIONS AND SUGGESTIONS

(a) Policy Actions 1he Banking Sector shoo.Id:

(i) Estabfo;h programmes and policies 10 ensure th:u their human resources needs wiJJ be mer.
Tilcsc should make provision for tbt recruitment or skills which arc ancillary to their core
dii;ciplincs. a'> well as continuous training, both tn-hoese and through partnering 12

(ij) Be pro-acnve with respect 10 dcvctoproems in sector. 1llC b:tnks do ooc always haee 10
1he
wnit on governments to set the agenda or make suggestions for the iodusuy. One example in this
regard is the idt:I for a CAR1C0�1 numcroire currency which was first JUOOlcd by a bankers·
as.soc:iation. Another Issue which woo.Id btntfit from a jump-start by the banks is the old
CUITMC)' COll\'CrtibiJily initiative

(iii) Take steps to improve. its public im.ngc.. This CM be achic\ cd through public cducru:ion
1

which explains what banking is aboul and ns benefits to the society

n.c. Govcmmems should:

(i) Sign the CARIC0�1 Financial Services Agreement es soon a,; possible. This should qu.id:.en
the pace of financial integmtion and the establishment or the regi<,rul) cnpit.aJ m:uh1

(ii) Undertake some technical work on a regional basis 10 bcuer understand the relationship
between \ arious levels of taxation and the profitability of du:: banks, This would htlp 10
1

determine wbctber tax policies arc injurious 10 the grow1h or the banking sector and if any
tncenuves ate warranted. It would be useful for this wort to be undertaken es pm, of the
movement towards the harmonisation or fiscal policy

(iii) Establish watchdog agencies duu would be charged with protecling the interests of
consumers. Examples of 1hesc arc anti-tntsl bodies and deposit insurance corporations

(iv) EstabJi.,;h a supra·n:itional body 10 fnciliuue the effotts of banks to t.nte :id.vantage of
opponunilics provided in lt3dc agreements I 3

TIK' Central Banks should:

(i) Continue to use moral suasion 10 get the banks 10 al�te a higher proportion or their credit to
the forcign<xctumgc earning secsors. Hov.'Cwr. Ibey should examine the lea.,;.ibility of re•
introducing credit ceilings on lending for p:trticul!lt activities

(ii) Create posilions of btlnking ombudsman to look after complaints about bank fees and charges

37
(iii) Use public education 10 make consumer.. more aware of regulatory practices as well as
changc..c; in monetary policy and io the fioaocial environment

(b) Data Gaps the Bank.<t should: (i) endeavour 10 produce and publish a wider range of fin:incial
information and aru:iJysilt

(ii) Seek ro become familiar with all policies. programmc..c; and agreements which may iml)3C1
their current and future operations

(c) Legislative Changes The Oovemmems should: (i) make wbncver amendments are necessary
to ensure thal there are oo inconsistencies between the pieces of legislation under which the
banking scc1or is rc-gulatcd

(ii) wberever poi.sible h:lrmon.ise the lcg.islntion 14

(iii) Regulate the ban.king sector as a distincr group

(iv) Saengtbcn 1hc legal provisions relating to governance requirements

38
 LIMITATIONS OF THE PROJECT

Early experiences with cJectrooic commerce in the banking industry. which bas bttn a pioneer in
the use or electronic systems. can be used to lcam of some potential dangers aod issues to be
taken into account. The use of Automated Tell« Machioe..c, and dccuon.ic home banking systems
bas increasingly allowed customers to bank outside of trnditionaJ bank facilities, for mes of their
usual tronsnctioos. Th.is was consistent with the cost-savings strategy of most banks, which
discovered duu electronic uansoc1ions were about seven times less oostly compared IO the
maowiJ handling of rbcse uansoc1ions by a bank teller. NcvenhcJcss.1hc fact that customers' only
coruece with tbeit banks was through (rruhcr unsophisticated) dccuonic interfaces. aod the major
difficulties in intcg.mting the legacy systems of a typical bank. prevented banks in many cases
from selling additiorulJ produc1s to cesscmcrs (aos.s-sclliog). Co some Europtan markeu.. the
Insurance companies took opportunity of that co grab busincs.s from banks. selling savings
produces to customers through their extensive distribution network. Similarly. the decrease in
bwnan interac,ion with customers could also lead to a less sophisticated understanding of cheir
needs. as they're ooc always able co express comments. criticisms or requests for new products
wbif.e irueracting with machines. Th.is should tead co a design of electronic commerce systems
which incorporate capabilities for customer understanding aod for proactive selling of new
produces. Electronic business eransac1ions cao only be successful if financial c.xcbang_es between
buy�rs and scUers can occur in a simple. universally ecccped, safe aod cheap way. Various
systems have been proposed. some of them based oo uaditionaJ mechanisms (e.g. ercdi1 cards
eccoums) white others rely on new designs. such as electronic money. The key here will be to
find n few widely accepted mccMO.isms. which can be used by most actors.. The recem
agreement between MasterCard aod Vt:Sa on one security standan:I for credit card transactions
over chc Internet aod its booking by most m11jot software wndors is one step in chc right
direction. This doesn't diminish chc need for more specialized systems. for instonce to allow
micro uansocrions. the exchange of ,-ery small amounts of money (a few cents) in exchange for
information or services. These new payment mcctuinisms will in tum enable new business
models such es pay-pcr--aniclc newspapers.

39
 CONCLUSION

lnfomutioo. 1ecJJOOlogy offets enotmOU$ pochui:d and euundpa1ed. v:ttiou." OppotLW'lilies to the bl.ilki:ng
secscr, It p!'O\ides eosr-effecuve. 1'3pid and sysiem:uic prO\•ision of services to 1he cu.,10111letS.
Appl.ic.ion.s. of rr in b3:nk." etlables saphi.sdc:ued product de\-elopmenL ,eJi:lble 1tthniques fot risk
m:tn3�me... btit1gi tr:uispattDC)' to the S)'S«'tn aed belpi banking sector reach geograpbkaJly diM:uu and
divmlfied tnartets. rT �Del ronlmut1kaiion necwOtting S)'Sttlll have crud.31 itnp$Ct oo nlMey. capbal :ltld
foreign e,cdl:inge nwtet. However; extensive :idopcion of lT 1echnlqu� may excavate the «.tvendoml
batiking tisb. Large .sieale «.ll1)uterill!t.ioa nuy aJso «quire huge it1\"eSUl)l.'fil in hardware aad soltw:ue
:.nd sub�quent nuinit:nsnee. 1be fear of being outd:lted � to the r.i,pid 1eehn.icsl inDIW:k1iOM funher
leads 10 some obsrnde in adapt.sbiliiy. 8::W:s should educate lts cu.,1oi1lffl ttprding ptte:l\lt�
1netiutes aDd {l':\me suitable guidelines for safety neascres, B:ulla sbou.ld have a dear sm.e,gy dl'l\'en
frtwn the 1op and .s.hould eesure proper m:1:11agemen1 of risk$ i.nvah'ed in int.tmet battl:ing Lhrough :Mlc>p1l.ng
effecdve polidei. procedures.. and coaLroUing neascres. Policy 1ual:m and .rupe:rvisars tnust
continuously assess Lbe exiM:.ing (r':\me·wod:: 21M1 shoold introduce required modif.c:u.otl i1'I ii. 1t1 ordtr to
uJA� bes.:t �sihle use of preV3le.. «-duliques donlestic requirtrnents sre also .suhjiea to be :1nalysed by
the ttgul:uots.. To avoid 1he ptob:lbili1y of failure regul:ltly rnon.itoring or il<i ftulC'Ciolli r�ul:lr seeurity
1tbls ee :.I.so reqelred. 83tlb mug ensure proper b::idt·up and recovery pbM so :ti to e..wtt full faiLb in
1«hnology

40
 BIBILIOGRAPHY

• Eklksh1. s.. ·Corporate Governance in Transiormattan Tunes.. IBA Bliletm, 2003

• Bimd Jalan, ..Strcngthc:nmg Indian Banking and Finance-Progress and Prospect.,;··. The
Bank Economi.,;t Coofc.':ffilC..'C.• lndia. 2002

• A Bnnk ror 1he Buck

• www.rbi.org.in

• wwwbankrenodte.ccm

41