Banking in India From Wikipedia, the free encyclopedia

Structure of the organised banking sector in India. Number of banks are in brackets. Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786, and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, which originated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidency banks, the other two being the Bank of Bombay and the Bank of Madras, all three of which were established under charters from the British East India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks merged in 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India. Contents

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1 History 2 PostIndependence 3 Nationalisation 4 Liberalisation 5 Further reading 6 References 7 External links

[edit]History Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49. TheAllahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honor belongs to the Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being transferred to the Alliance Bank of Simla. When the American Civil War stopped the supply of cotton to Lancashire from the Confederate States, promoters opened banks to finance trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of Europeans for next several decades until the beginning of the 20th century. Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. The Comptoire d'Escompte de Paris opened a branch in Calcutta in 1860, and another in Bombay in 1862; branches in Madrasand Puducherry, then a French colony, followed. HSBC established itself in Bengal in 1869. Calcutta was the most active

trading port in India, mainly due to the trade of the British Empire, and so became a banking center. The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 in Faizabad. It failed in 1958. The next was the Punjab National Bank, established in Lahore in 1895, which has survived to the present and is now one of the largest banks in India. Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed since the Indian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which served particular ethnic and religious communities. The presidency banks dominated banking in India but there were also some exchange banks and a number of Indian joint stock banks. All these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times. We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments." The period between 1906 and 1911, saw the establishment of banks inspired by the Swadeshi movement. The Swadeshi movement inspired local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to the present such as Bank of India, Corporation Bank, Indian Bank, Bank of Baroda, Canara Bank and Central Bank of India. The fervour of Swadeshi movement lead to establishing of many private banks in Dakshina Kannada and Udupi district which were unified earlier and known by the name South Canara ( South Kanara ) district. Four nationalised banks started in this district and also a leading private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking".

During the First World War (1914-1918) through the end of the Second World War (1939-1945), and two years thereafter until the independence of India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with banks simply collapsing despite the Indian economy gaining indirect boost due to war-related economic activities. At least 94 banks in India failed between 1913 and 1918 as indicated in the following table: Number of banks Authorised capital Paid-up Capital that failed 274 710 56 231 76 209 (Rs. Lakhs) 35 109 5 4 25 1 (Rs. Lakhs)

Years

1913 12 1914 42 1915 11 1916 13 1917 9 1918 7 [edit]Post-Independence

The partition of India in 1947 adversely impacted the economies of Punjab and West Bengal, paralyzing banking activities for months. India's independence marked the end of a regime of the Laissez-faire for the Indian banking. The Government of India initiated measures to play an active role in the economic life of the nation, and the Industrial Policy Resolution adopted by the government in 1948 envisaged a mixed economy. This resulted into greater involvement of the state in different segments of the economy including banking and finance. The major steps to regulate banking included:

The Reserve Bank of India, India's central banking authority, was nationalized on

January 1, 1949 under the terms of the Reserve Bank of India (Transfer to Public Ownership) Act, 1948 (RBI, 2005b).[Reference www.rbi.org.in]

In 1949, the Banking Regulation Act was enacted which empowered the Reserve The Banking Regulation Act also provided that no new bank or branch of an

Bank of India (RBI) "to regulate, control, and inspect the banks in India."

existing bank could be opened without a license from the RBI, and no two banks could have common directors. [edit]Nationalisation

Banks Nationalisation in India: Newspaper Clipping, Times of India, July, 20, 1969 Despite the provisions, control and regulations of Reserve Bank of India, banks in India except the State Bank of India or SBI, continued to be owned and operated by private persons. By the 1960s, the Indian banking industry had become an important tool to facilitate the development of the Indian economy. At the same time, it had emerged as a large employer, and a debate had ensued about the nationalization of the banking industry. Indira Gandhi, then Prime Minister of India, expressed the intention of the Government of India in the annual conference of the All India Congress Meeting in a paper entitled "Stray thoughts on Bank Nationalisation." The meeting received the paper with enthusiasm. Thereafter, her move was swift and sudden. The Government of India issued an ordinance and nationalised the 14 largest commercial banks with effect from the midnight of July 19, 1969. Jayaprakash Narayan, a national leader of India, described the step as a "masterstroke of political sagacity." Within two weeks of the issue of the

ordinance, the Parliament passed the Banking Companies (Acquisition and Transfer of Undertaking) Bill, and it received the presidential approval on 9 August 1969. A second dose of nationalization of 6 more commercial banks followed in 1980. The stated reason for the nationalization was to give the government more control of credit delivery. With the second dose of nationalization, the Government of India controlled around 91% of the banking business of India. Later on, in the year 1993, the government merged New Bank of India with Punjab National Bank. It was the only merger between nationalized banks and resulted in the reduction of the number of nationalised banks from 20 to 19. After this, until the 1990s, the nationalised banks grew at a pace of around 4%, closer to the average growth rate of the Indian economy. [edit]Liberalisation In the early 1990s, the then Narasimha Rao government embarked on a policy of liberalization, licensing a small number of private banks. These came to be known as New Generation tech-savvy banks, and included Global Trust Bank (the first of such new generation banks to be set up), which later amalgamated with Oriental Bank of Commerce, Axis Bank(earlier as UTI Bank), ICICI Bankand HDFC Bank. This move, along with the rapid growth in the economy of India, revitalized the banking sector in India, which has seen rapid growth with strong contribution from all the three sectors of banks, namely, government banks, private banks and foreign banks. The next stage for the Indian banking has been set up with the proposed relaxation in the norms for Foreign Direct Investment, where all Foreign Investors in banks may be given voting rights which could exceed the present cap of 10%,at present it has gone up to 74% with some restrictions. The new policy shook the Banking sector in India completely. Bankers, till this time, were used to the 4-6-4 method (Borrow at 4%;Lend at 6%;Go home at 4) of functioning. The new wave ushered in a modern outlook and tech-savvy methods of working for traditional banks.All this led to the retail boom in India. People not just demanded more from their banks but also received more.

Currently (2007), banking in India is generally fairly mature in terms of supply, product range and reach-even though reach in rural India still remains a challenge for the private sector and foreign banks. In terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets relative to other banks in comparable economies in its region. The Reserve Bank of India is an autonomous body, with minimal pressure from the government. The stated policy of the Bank on the Indian Rupee is to manage volatility but without any fixed exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some timeespecially in its services sector-the demand for banking services, especially retail banking, mortgages and investment services are expected to be strong. One may also expect M&As, takeovers, and asset sales. In March 2006, the Reserve Bank of India allowed Warburg Pincus to increase its stake in Kotak Mahindra Bank (a private sector bank) to 10%. This is the first time an investor has been allowed to hold more than 5% in a private sector bank since the RBI announced norms in 2005 that any stake exceeding 5% in the private sector banks would need to be vetted by them. In recent years critics have charged that the non-government owned banks are too aggressive in their loan recovery efforts in connection with housing, vehicle and personal loans. There are press reports that the banks' loan recovery efforts have driven defaulting borrowers to suicide.[1][2][3] [edit]Further reading

The Evolution of the State Bank of India (The Era of the Imperial Bank of India, Banking Frontiers - a monthly magazine, published by Mumbai based Glocal

1921-1955) (Volume III)

Infomart. Editor [edit]References

1.

^ "ICICI personal loan customer commits suicide after alleged harassment ^ "Karnataka / Mysore News : ICICI Bank returns tractor to farmers ^ "ICICIs third eye : Its Indiatime". Indiatime.com. Retrieved 2010-07-28.

by recovery agents". Parinda.com. Retrieved 2010-07-28.

2.

mother". Chennai, India: The Hindu. 2008-06-30. Retrieved 2010-07-28.

3.
[dead link]

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IT in Banking 2003 (Special) An Overview of: IT in Banking

In the five decades since independence, banking in India has evolved through four distinct phases. During Fourth phase, also called as Reform Phase, Recommendations of the Narasimham Committee (1991) paved the way for the reform phase in the banking. Important initiatives with regard to the reform of the banking system were taken in this phase. Important among these have been introduction of new accounting and prudential norms relating to income recognition, provisioning and capital adequacy, deregulation of interest rates & easing of norms for entry in the field of banking. Entry of new banks resulted in a paradigm shift in the ways of banking in India. The growing competition, growing expectations led to increased awareness amongst banks on the role and

importance of technology in banking. The arrival of foreign and private banks with their superior state-of-the-art technology-based services pushed Indian Banks also to follow suit by going in for the latest technologies so as to meet the threat of competition and retain their customer base. Indian banking industry, today is in the midst of an IT revolution. A combination of regulatory and competitive reasons have led to increasing importance of total banking automation in the Indian Banking Industry. Information Technology has basically been used under two different avenues in Banking. One is Communication and Connectivity and other is Business Process Reengineering. Information technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets. In view of this, technology has changed the contours of three major functions performed by banks, i.e., access to liquidity, transformation of assets and monitoring of risks. Further, Information technology and the communication networking systems have a crucial bearing on the efficiency of money, capital and foreign exchange markets. The Software Packages for Banking Applications in India had their beginnings in the middle of 80s, when the Banks started computerising the branches in a limited manner. The early 90s saw the plummeting hardware prices and advent of cheap and inexpensive but high-powered PCs and servers and banks went in for what was called Total Branch Automation (TBA) Packages. The middle and late 90s witnessed the tornado of financial reforms, deregulation, globalisation etc coupled with rapid revolution in communication technologies and evolution of novel concept of 'convergence' of computer and communication technologies, like Internet, mobile / cell phones etc.

MILESTONES

In India, banks as well as other financial entities entered the world of information technology and with Indian Financial Net (INFINET). INFINET, a wide area satellite based network (WAN) using VSAT (Very Small Aperture Terminals) technology, was jointly set up by the Reserve Bank and Institute for Development and Research in Banking Technology (IDRBT) in June 1999. The Indian Financial Network (INFINET) which initially comprised only the public sector banks was opened up for participation by other categories of members. The first set of applications that could benefit greatly from the use of technological advances in the computer and communications area relate to the Payment systems which form the lifeline of any banking activity. The process of reforms in payment and settlement systems has gained momentum with the implementation of projects such as NDS ((Negotiated Dealing System), CFMS (Centralised Funds Management System) for better funds management by banks and SFMS (Structured Financial Messaging Solution) for secure message transfer. This would result in funds transfers and funds-related message transfer to be routed electronically across banks using the medium of the INFINET. Negotiated dealing system (NDS), which has become operational since February 2002 and RTGS (Real Time Gross Settlement system) scheduled towards the end of 2003 are other major developments in the area. Internet has significantly influenced delivery channels of the banks. Internet has emerged as an important medium for delivery of banking products & services. Detailed guidelines of RBI for Internet Banking has prepared the necessary ground for growth of Internet Banking in India. The Information Technology Act, 2000 has given legal recognition to creation, trans-mission and retention of an electronic (or magnetic) data to be treated as valid proof in a court of law, except in those areas, which continue to be governed by the provisions of the Negotiable Instruments Act, 1881. As stated in RBI's Annual Monetary and Credit Policy 2002-2003: "To reap the full benefits of such electronic message transfers, it is necessary that banks bestow sufficient attention on the

computerisation and networking of the branches situated at commercially important centres on a time-bound basis. Intra-city and intra-bank networking would facilitate in addressing the "last mile" problem which would in turn result in quick and efficient funds transfers across the country".

IT in Banking 2003 (Special) Initiatives of: Reserve Bank of India

Implementation of Centralised Funds Management System The centralised funds management system (CFMS) provides for a centralised viewing of balance positions of the account holders across different accounts maintained at various locations of RBI. While the first phase of the system covering the centralised funds enquiry system (CFES) has been made available to the users, the second phase comprising the centralised funds transfer system (CFTS) would be made available by the middle of 2003. So far, 54 banks have implemented the system at their treasuries/funds management branches. Certification and Digital Signatures The mid-term Review of October 2002 indicated the need for information security on the network and the use of public key infrastructure (PKI) by banks. The Controller of Certifying Authorities, Government of India, have approved the Institute for Development and Research in Banking Technology (IDRBT) as a Certification Authority (CA) for digital signatures. Consequently, the process of setting up of registration authorities (RA) under the CA has commenced at various banks. In addition to the negotiated dealing system (NDS), the electronic clearing service (ECS) and electronic funds transfer (EFT) are also being enhanced in terms of security by means of implementation of PKI and digital signatures using the facilities offered by the CA. Committee on Payment Systems In order to examine the entire gamut of the process of reforms in payment and settlement systems which would be culminating with the real time gross settlement (RTGS) system, a Committee on Payment Systems (Chairman: Dr. R.H. Patil) was set up in 2002. The Committee, after examining the various aspects relating to payment and settlement systems, submitted its report in September 2002 along with a draft Payment Systems Bill. The draft Bill provides, inter alia, a legal basis for netting, apart from empowering RBI to have regulatory and oversight

powers over payment and settlement systems of the country. The report of the Committee was put on the RBI website for wider dissemination. The draft Bill has been forwarded to the Government. Multi-application Smart Cards Recognising the need for technology based payment products and the growing importance of smart card based payment flows, a pilot project for multi-application smart cards in conjunction with a few banks and vendors, under the aegis of the Ministry of Communications and Information Technology, Government of India, has been initiated. The project is aimed at the formulation of standards for multi-application smart cards on the basis of inter-operable systems and technological components of the entire system.

Special Electronic Funds Transfer As indicated in the mid-term Review of October 2002, national EFT (NEFT) is being introduced using the backbone of the structured financial messaging system (SFMS) of the IDRBT. NEFT would provide for movement of electronic transfer of funds in a safe, secure and quick manner across branches of any bank to any other bank through a central gateway of each bank, with the inter-bank settlement being effected in the books of account of banks maintained at RBI. Since this scheme requires connectivity across a large number of branches at many cities, a special EFT (SEFT) was introduced in April 2003 covering about 3000 branches in 500 cities. This has facilitated same day transfer of funds across accounts of constituents at all these branches. National Settlement System (NSS) The clearing and settlement activities are dispersed through 1,047 clearing houses managed by RBI, the State Bank of India and its associates, public sector banks and other institutions. In order to facilitate banks to have better control over their funds, it is proposed to introduce national

settlement system (NSS) in a phased manner. Real Time Gross Settlement System (RTGS) As indicated in the mid-term Review of October 2002, development of the various software modules for the RTGS system is in progress. The initial set of modules is expected to be delivered by June 2003 for members to conduct tests and familiarisation exercises. The live run of RTGS is scheduled towards the end of 2003. Reporting of Call/Notice Money Market Transactions on NDS Platform Negotiated dealing system (NDS), which has become operational since February 2002, enables on-line dealing and dissemination of trade information relating to instruments in money, government securities and foreign exchange markets. Membership in NDS is open to all institutions which are members of INFINET and are maintaining subsidiary general ledger (SGL) Account with RBI. These include banks, financial institutions (FIs), primary dealers (PDs), insurance companies, mutual funds and any other institution as admitted by RBI. At present, all deals in government securities, call/notice/term money, CDs and CP executed among NDS members have to be reported automatically through NDS, if the deal is done on NDS and within 15 minutes of concluding the deal, if done outside NDS. However, it has been observed that a very sizeable proportion of daily call/notice money market deals is not reported by members on NDS as stipulated. With a view to improving transparency and strengthening efficiency in the market, it is proposed that: 1. From the fortnight beginning May 3, 2003, it would be mandatory for all NDS members to report all their call/notice money market deals on NDS. Deals done outside NDS should be reported within 15 minutes on NDS, irrespective of the size of the deal or whether the counterparty is a member of the NDS or not. 2. Full compliance with the reporting requirement to NDS will be reviewed in September 2003. In case there is repeated non-reporting of deals by an NDS member, it will be considered whether

non-reported deals by that member should be treated as invalid with effect from a future date

Perspectives of: CTOs of Banks in India

Banknet India invited CTO's (Chief Technology Officers) of various Major Indian Banks to share their perceptions on IT in Banking, with special reference to the Reserve Bank of Indias intitiatives in promoting computerisation in the Financial Sector. The participants include: V Chandrasekhar, General Manager & Chief Technology Officer,
Bank of Baroda; Mrs S A Panse, Deputy General Manager (Information Technology), Bank of Maharastra; C.N. Ram, Chief Technology Officer, HDFC Bank; Pravir Vohra, Chief Technology Officer, ICICI Bank; Neeraj B Bhai, Chief Technology Officer, IDBI Bank; Ravikiran Mankikar, Chief of Information Technology, Shamrao Vithal Co-Operative Bank; V.K. Ramani, President (Information Technology), UTI Bank. Also Prof. S. Sanyal, Tata Institute of Fundamental Research was invited to provide with the 'Other Perspective'.

IT in Banking 2003 (Special) Perspectives of: CTOs of Banks in India

Areas, which will get the emphasis in IT plans/Strategy of banks...

Mrs S A Panse, Deputy General Manager (Information Technology), Bank of Maharastra is of

view that as Asset-Liability management and Risk management have gained importance after liberalization and globalization, getting the data updated on real time basis for the organization is of prime importance. Establishing a WAN for connecting all the branches and moving towards Core Banking Solution is the prime business need. Further, in view of RBI's initiative for implementing various payment and settlement systems such as- NDS-PDO, CFMS, SMFS and RTGS, connectivity intrabank as well as interbank is also the basic necessity for every bank. With RTGS being implemented by Jan.2004, every bank would have to not only computerize the entire functioning of the Treasury department but also would have to consolidate the treasury function and move towards integrated treasury for better funds management. In order to achieve this, IT would be playing a major role. This has gained more importance after the establishment of the CCIL. Mr C.N. Ram, Chief Technology Officer, HDFC Bank feels that Connectivity of banks, Risk Management, Asset Liability Management systems and core banking will rank high in plans of Banks.According to Mr Pravir Vohra, Chief Technology Officer, ICICI Bank, Networking of branches, ALM & Risk management are going to be areas of top priority in IT plans/Strategy of banks. According to Mr Neeraj B Bhai, Chief Technology Officer, IDBI Bank, in view of RBI's policy this year, Inter-bank payment systems are poised to move to a much higher degree of advancement during the year. WIth impending arrival of RTGS, all banks will have to gear up for it. While Multi-application smart card pilot has been indicated in the policy, its active usage is still quite some time away. The earlier Smart Card project of RBI had met with a limited success. National Settlement System will enhance the efficiency of funds management, which can now be centralised in a much better way. Mr V.K. Ramani, President (Information Technology), UTI Bank is confident that the Policy announcements on the payment systems will pave the way for the establishment of the legal framework, for electronic settlements. The technology initiative taken by the RBI for setting up RTGS will have far reaching impact As follow up to the electronic clearing ECS, the move for an RTGS is logical extension.

According to Mr Ramani, the standards for inter operability of smart cards will enable multiple applications on a single chip. Currently smart cards are used for select applications. The technology for integrated applications is available but unless the volume of transactions is large, it is not an attractive proposition. Mr Ravikiran Mankikar, Chief of Information Technology, Shamrao Vithal Co-Operative Bank feels that RBI's initiatives and encouragement to the Banks to implement payment and settlement systems in a secured environment is surely the first logical steps towards the introduction of the electronic funds transfer mechanism in a big way. Banks that are not geared up for the networking should fear to be left behind. Implementation of the Core Banking solutions are to be planned by Banks as part of their strategy to align with the RBI initiative. Mr V Chandrasekhar, General Manager & Chief Technology Officer, Bank of Baroda summarises the key areas, which will get the emphasis in IT plans/Strategy of banksa. Networking of branches b. Secure Messaging for launching funds transfer products c. Integrated Treasury Management System d. Focus on technology based initiatives for Intra-day liquidity Management e. Core Banking Solution implementation

IT in Banking 2003 (Special) Perspectives of: CTOs of Banks in India

Approach of RBI towards IT in Banking...

Mr Neeraj B Bhai, Chief Technology Officer, IDBI Bank feels that as such there is no major shift on IT front in this year's RBI policy. What we see today is the culmination of the initiatives that were started a few years back. These were in the areas of moving towards

automating interbank payment and settlement systems. Mr C.N. Ram, Chief Technology Officer, HDFC Bank, agrees that RBI is continuing with the policy initiatives in a systematic manner. Mr Pravir Vohra, Chief Technology Officer, ICICI Bank is also of view that RBI has continued it's efforts for developing a modern and efficient, integrated payment and settlement system for the banking sector. Initiative taken by the RBI for setting up RTGS will have far reaching impact. According to Mr V Chandrasekhar, General Manager & Chief Technology Officer, Bank of Baroda, Technology initiatives started of with introduction of PDO-NDS during early 2002. This was followed by introduction of CFMS Phase I. Roll out of RTGS is expected before the year-end. The chain of incidents indicates that the technology focus of RBI is to bring in technology to minimize systemic risk. He points out that Bank of Baroda was the first bank to put in place a world class an Integrated State of the Art Treasury System covering front, middle and back office environment.

IT in Banking 2003 (Special) Perspectives of: CTOs of Banks in India How RBI's initiatives for Payment and Settlement system will impact customer service & efficiency of Banks? According to Mr V Chandrasekhar, General Manager & Chief Technology Officer, Bank of Baroda, RTGS / SEFT will addresses the requirement of the customers for moving funds across bank branches at almost the same cost they pay for the normal remittance facility. The Real Time Gross Settlement (RTGS) project would create a major upheaval in the banking sector. The real time payment across Banks & regions would revolutionise the payment mechanism in India, according to Mr Ravikiran Mankikar, Chief of Information Technology, Shamrao Vithal Co-Operative Bank.

Mr C.N. Ram, Chief Technology Officer, HDFC Bank, is of view that Reserve Bank of India initiatives on RTGS, which have been introduced in a systematic manner, will lead to technological upgradation in banks. Now banks will have to put proper Information Technology systems in place to participate in RTGS and provide the benefits of improved payment systems to their customers. If they lag in this area they will loose their customer to other banks. Mr Pravir Vohra, Chief Technology Officer, ICICI Bank feels that though in future the customers will have faster and cheaper instruments of movement of funds across the country as well as quicker realisation of cheques, but banks will be left with lower levels of float funds. Mr Neeraj B Bhai, Chief Technology Officer, IDBI Bank, is also of view that for customers it will mean availability of faster and cheaper instruments of movement of funds across the country as well as quicker realisation of cheques (once truncation comes in - but that is some time away). For the Banks the increased efficiency of funds movement and settlement will mean shrinking of available floats and partial/ significant cannibalization of some of the existing products (e.g. Cash Management Services). Mr Neeraj Bhai, however feels Banks will be able to ride the available infrastructure to introduce their own funds transfer products. They will have to price these products appropriately. In due course one will see this pricing also getting subjected to competitive pressures. Mrs S A Panse, Deputy General Manager (Information Technology), Bank of Maharastra also feels that NSS, coupled with connecting the service branches of the banks and Treasury with RTGS for settlement of all the transactions on real time basis, would have an impact on the FLOAT funds. With connectivity established across the banking industry, there would not be much availability of floats and this would have a major impact on the costing of various services being offered by the banks. Thus it would be imperative on each bank's part to establish a fullfledged Costing department (If not done already), and rework the service charges structure. Mr V.K. Ramani, President (Information Technology), UTI Bank. is of view that the Special electronic funds transfer (SEFT) opens up a significant business opportunity Large trading and

distribution firms can effectively implement e- procurement systems with settlement of transactions across the banking system taking place under the SEFT. Large public sector Banks and the new generation private sector banks who have made substantial investments in the IT infrastructure have an opportunity to offer a wider range of services through multichannel delivery systems backed by the RTGS and SEFT for funds settlement.

Roadmap of banks to strengthen the existing financial infrastructure... Roadmap of banks according to Mr V Chandrasekhar, General Manager & Chief Technology Officer, Bank of Baroda should comprise ofa. Introduction of Core Banking system within the next 12 to 24 months. b. As an interim solution, networking of branches in the identified commercially important centres immediately and start funds transfer products. c. Immediate Establishment of RA office for issue of Digital certificates for use in these funds transfer products. d. Establishment of an Integrated Treasury branch or in the interim proper reporting arrangements from major centres for effective management and maintenance of intra-day liquidity. e. Development of an interface with the RBI applications and the Core banking systems to enable STP. According to Mrs S A Panse, Deputy General Manager (Information Technology), Bank of Maharastra, it is necessary that each public sector bank take following stepsEstablish a WAN connecting all the major branches. Introduce all the delivery channels in addition to the branch network.

Move towards Core Banking Solution. Introduce data warehousing and data mining. Introduce Customer relationship Management. Move towards Integrated treasury management. Go in for Business Process Re-engineering. Have an aggressive HRD policy for retraining in IT skills. Take up restructuring/ reorganization for the entire bank. Mr Ravikiran Mankikar, Chief of Information Technology, Shamrao Vithal CoOperative Bank feels that the Banks are today aware for the need to be part of a networked system. The emerging role of technological employment by the Private Sector Banks and the leading Public Sector Banks is also motivating the Banks in the Co-Operative Sector to put their act together. The implementation of ATMs on a massive scale by some of the Banks is also spurring the other Banks to have an ATM installed base of their own. According to Mr Neeraj B Bhai, Chief Technology Officer, IDBI Bank, Roadmap has already been defined by RBI in great detail. What is needed is its efficient execution. To be able to launch one's own products, the Banks will have to enhance this roadmap to include integration with their existing applications so that end-to-end straight-through-processing becomes possible. Here the fully computerised banks will have the edge. There is no reason why such products can not be made available on self-service channels like Internet, mobiles and ATMs.

Prof. S. Sanyal, School of Technology & Computer Science, TIFR

The credit policy, recently announced by RBI will have severe implications in the world of technology a nothing could be better. Instant clearing of checks, electronic funds transfer, digital certificates ... what could the consumer ask for? But looking at it from the banker's point of view, it might mean burning midnight oil and implementation

way banks look at it. From the consumer's perspective, one feels that if everything works out as planne

of art encryption techniques. The network has to be extremely secure to be able to handle what the RB

proposes in its credit policy. Banks might need to invest additional amounts in employing ethical hacke cover large areas so as to reach all corners of India.

find loopholes in the network and correct them. More importantly, any solution provided should be scala

In the new policy, the RBI has also proposed implementation of negotiated dealing system (NDS), elec

clearing service (ECS) and electronic funds transfer (EFT). This would mean enhancing banking netwo

terms of security by means of use of Public Key Infrastructure (PKI) and Digital Signatures. Though the taking a concrete shape finally. The identification of certifying authorities, formation of a separate IT mi all are forward moving steps in this regard. The banks should gear up in the manner they did before the Y2K crisis. Everyone in the Government, including top officials were after various financial institutions in the country to make their systems Y2K

Government had been promoting the usage of technology in our day-to-day lives for a long time, things

compliant. Regular statistics were being published in the media. And, it worked. We could move over to approach needs to be adopted. Then only we can succeed in implementing the latest policy.

new century without any major problem. With the new paradigm shift towards electronic age banking, a

Another important but less thought-of area is that of upgrading the knowledge level of the Senior and M level staff of various banks. Young bankers will learn, as they are growing with the changes, not so for pragmatic manner. And one more point, which is emerging, is Electronics and Computerised staff is to

older lot. So, banks will have to make special provision for educating their staff and also to be progress

human beings (Bankers and Bank Users both). Sometimes, in the haste of total computerisation, one lo

the focus that Banks should have possibly more human interaction than earlier. People simply cannot k

talking to machines or keep punching numbers to get a solution, where they could have achieved the s

a shorter time with human help. I applaud the right directional movement by RBI but would like to stres other field.

human element should not be abolished. Then only we will achieve a total solution, be it in Banking, or