Technology and banking are inseparable now in India. The transformation from brick and mortar banking to technology driven banks has been been fairly rapid during the last two decades. Economic liberalization and the integration with international best practices in banking and finance gave the much needed push to a largely stagnating computerization programme. It was also understood that if banking was to become efficient and penetrative the aid of technology was crucial. Challenges of diverse nature were faced to achieve the current status though it can safely be said that much is still to be done. Banking in India had fairly laid back approach prior to the emergence of the reform period during the mid 1990s.
The nationalized banks and a handful of old private sector banks were managing the banking sector in their own inimitable way. The direction was given by the government by their periodic policy statements which were an extension of the social control initiated by banks’ nationalization in 1969. The major thrust was on penetrating the rural sector by opening of bank branches in this region and starting of rural development programmes with bank support. There was undoubtedly much activity in rural and semi urban regions with focus on directed funding of priority sectors.
However, during the late 1980s computerization was introduced in India and the banking sector was also identified as a thrust area. The cautious beginning was made with introduction of ALPMs or automatic ledger posting machines. The start met with very limited success as employees’ union across the banking sector strongly opposed computerization. They felt threatened that the workforce would be directly affected as a result of the machines. This stand off enabled only gradual penetration with only a handful of staff deployed to give shape to government’s initiative and directives. Some back room activities were attempted to be done during this period on an experimental and parallel basis.
In between ATMs or Automated Teller Machines were introduced by foreign banks and a couple of Indian banks. The cash dispensation services and the benefits of credit cards were a novel experience to some customers who were willing to accept new practices in banking. The business generated through credit cards by the first movers encouraged other banks to accept this technology but only in a measured manner. Credit cards evolution was cautious and calibrated with more and more banks offering this facility in a phased manner. During this time the liberalization and globalization of the world economy had started.
India too understood the necessity of initiating the reforms process and also align the financial sector with international standards for participating in trade and commerce. The nineties saw a major shift in the thought process of managing international trade and to have complimentary financial and banking standards. Prudential and regulatory norms were accepted for the banking sector in accordance with international practices. The single biggest contributor in making technology carry forward the banking services is the core banking solutions or CBS.
CBS refers to software application for recording transactions, storing customer information, calculating interest and completing the process of passing entries in a single data base. It enables accessing of complete customer account details centrally. In this way it makes it possible for the customer to reach the bank through which ever channel it prefer be it internet, mobile banking, phone banking,ATM,etc.This technology solution is the basis of spreading anytime, anywhere banking through adopting any module of banking. Banking has therefore become 24*7 from any place of choice of the customer. This paradigm shift in banking has revolutionized the speed, efficiency and reach of the delivery systems.
Accounting, processing and management information systems which were trouble spots earlier have witnessed dramatic improvements enabling banks to calculate interest on daily basis in savings accounts, sanction retail loans quickly and most of all finalize annual accounts in the shortest possible time. The payments and settlement systems are being continuously upgraded with faster mechanisms. The clearing house operations have got further boost with cheques to be sent instead of the physical cheque. This facility which has been successfully implemented in Delhi is to be extended to other centres in phases to reduce heavy work load and chances of fraud.
The intention is to have paperless banking in due course. Security safeguards are an important aspect in electronic banking and require close scrutiny. Technology has however brought in sophisticated means of committing frauds through internet hacking, identity theft, phishing, skimming of cards for making making duplicate cards and many other modes. This has meant that security and risk perception be adequately addressed if the technology push is to be accepted by many more customers.
The scope of frauds is being minimized through use of passwords, personal identification numbers, double authentication steps in internet banking, sms alerts etc.Use of technology also necessitates greater awareness on the part of bank staff and customers to fully understand the risks involved in using electronic means. Financial literacy is therefore essential to gain from the newer and faster modes of banking.
The role of technology in banking services is bound to strengthen in due course as demands increase to making banking services cheaper and accessible for the maximum number of people.
Rajani Das, Assistant Professor
St. Joseph’s College Jakhama
