In India the banks are being segregated in different groups. Each group has their own benefits and limitations in operating in India. Each has their own dedicated target market. Few of them only work in rural sector while others in both rural as well as urban. Many even are only catering in cities. Some are of Indian origin and some are foreign players.
Banks are the most significant players in the Indian financial market. They are the biggest purveyors of credit, and they also attract most of the savings from the population. Dominated by public sector, the banking industry has so far acted as an efficient partner in the growth and the development of the country. Driven by the socialist ideologies and the welfare state concept, public sector banks have long been the supporters of agriculture and other priority sectors. 'They act as crucial channels of the government in its efforts to ensure equitable economic development.
The banking sector in India has undergone remarkable changes since the economic reforms were initiated in 1991-92. The period has been marketed by a slew of reforms in the sector, which provided the much needed impetus for the growth of the sector as a whole.
One more section has been taken note of is the upcoming foreign banks in India. The RBI has shown certain interest to involve more of foreign banks than the existing one recently. This step has paved a way for few more foreign banks to start business in India.
INTRODUCTION
Innovations by organizations keep them competitive in today's world. The impact of innovations on balance sheets of the organizations can be seen through its influence on the Net Interest Income or otherwise the profitability of the organization. Many organizations come out with new and innovative products for customers as new products are developed to attract and retain them. Banking is one of the sectors which have not kept away from innovations. This is evident from the strategies adopted by different banks to retain their customers in their own unique and innovative methods The product innovation strategies will ultimately decide the difference between winner and loser.
This term paper will navigate through all the aspects of the Banking System in India. It will discuss upon the matters with the birth of the banking concept in the country to new players adding their names in the industry in coming few years.
The banker of all banks, Reserve Bank of India (RBI), the Indian Banks Association (IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO, etc. has been well defined under three separate heads with one page dedicated to each bank.
However, in the introduction part of the entire banking cosmos, the past has been well explained under three different heads namely:
History of Banking in India
Nationalisation of Banks in India
Scheduled Commercial Banks in India
The first deals with the history part since the dawn of banking system in India. Government took major step in the 1969 to put the banking sector into systems and it nationalised 14 private banks in the mentioned year. This has been elaborated in Nationalisationof Banks in India. The last but not the least explains about the scheduled and unscheduled banks in India. Section 42 (6) (a) of RBI Act 1934 lays down the condition of scheduled commercial banks. The description along with a list of scheduled commercial banks are given.
HISTORY OF BANKING IN INDIA
For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reason of India's growth process.
The government's regular policy for Indian bank since 1969 has paid rich dividends with the nationalization of 14 major private banks of India.
The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below:
1) Pre-Nationalization Era.
2) Nationalization Stage.
3) Post Liberalization Era.
1) Pre-Nationalization Era:
In India the business of banking and credit was practices even in very early times. The remittance of money through Hundies, an indigenous credit instrument, was very popular. The hundies were issued by bankers known as Shroffs, Sahukars, Shahus or Mahajans in different parts of the country.The modern types of banking, however, was developed by the Agency Houses of Calcutta and Bombay after the establishment of Rule by the East India Company in 18th and 19th centuries.
During the early part of the 19th Century, ht volume of foreign trade was relatively small. Later on as the trade expanded, the need for banks of the European type was felt and the government of the East India Company took interest in having its own bank. The government of Bengal took the initiative and the first presidency bank, the Bank of Calcutta (Bank of Bengal) was established in 180. In 1840, the Bank of Bombay and IN 1843, the Bank of Madras was also set up.
The RBI (Reserve Bank of India) was established in 1935 as the Central Bank of the Country. In 1949, the Banking Regulation act was passed and the RBI was nationalized and acquired extensive regulatory powers over the commercial banks.
In 1950, the Indian Banking system comprised of the RBI, the Imperial Bank of India, Cooperative banks, Exchange banks and Indian Joint Stock banks.
2) Nationalization Stages:
After Independence, in 1951, the All India Rural Credit survey, committee of Direction with Shri. A. D. Gorwala as Chairman recommended amalgamation of the Imperial Bank of India and ten others banks into a newly established bank called the State Bank of India (SBI). The Government of India accepted the recommendations of the committee and introduced the State Bank of India bill in the Lok Sabha on 16th April 1955 and it was passed by Parliament and got the president's assent on 8th May 1955. The Act came into force on 1st July 1955, and the Imperial Bank of India was nationalized in 1955 as the State Bank of India.
The main objective of establishing SBI by nationalizing the Imperial Bank of India was "to extend banking facilities on a large scale more particularly in the rural and semi-urban areas and to diverse other public purposes."In 1959, the SBI (Subsidiary Bank) act was proposed and eight state-associated banks were taken over by the SBI as its subsidiaries.On 19th July 1969, then the Prime Minister, Mrs. Indira Gandhi announced the nationalization of 14 major scheduled Commercial Banks each having deposits worth Rs. 50 crore and above. This was a turning point in the history of commercial banking in India.
Later the Government Nationalized six more commercial private sector banks with deposit liability of not less than Rs. 200 crores on 15th April 1980.
Consequences of Nationalization:
The quality of credit assets fell because of liberal credit extension policy.
Political interference has been as additional malady.
Poor appraisal involved during the loan meals conducted for credit disbursals.
The credit facilities extended to the priority sector at concessional rates.
The high level of low yielding SLR investments adversely affected the profitability of the banks.
The rapid branch expansion has been the squeeze on profitability of banks emanating primarily due to the increase in the fixed costs.
There was downward trend in the quality of services and efficiency of the banks.
3) Post-Liberalization Era---Thrust on Quality and Profitability:
The need for restructuring the banking industry was felt greater with the initiation of the real sector reform process in 1992. the reforms have enhanced the opportunities and challenges for the real sector making them operate in a borderless global market place. However, to harness the benefits of globalization, there should be an efficient financial sector to support the structural reforms taking place in the real economy. Hence, along with the reforms of the real sector, the banking sector reformation was also addressed.
The route causes for the lackluster performance of banks, formed the elements of the banking sector reforms. Some of the factors that led to the dismal performance of banks were.
Regulated interest rate structure.
Lack of focus on profitability.
Lack of transparency in the bank's balance sheet.
Lack of competition.
Excessive regulation on organization structure and managerial resource.
Excessive support from government.
Against this background, the financial sector reforms were initiated to bring about a paradigm shift in the banking industry, by addressing the factors for its dismal performance.
In this context, the recommendations made by a high level committee on financial sector, chaired by M. Narasimham, laid the foundation for the banking sector reforms. These reforms tried to enhance the viability and efficiency of the banking sector. The Narasimham Committee suggested that there should be functional autonomy, flexibility in operations, dilution of banking strangulations, reduction in reserve requirements and adequate financial infrastructure in terms of supervision, audit and technology. The committee further advocated introduction of prudential forms, transparency in operations and improvement in productivity, only aimed at liberalizing the regulatory framework, but also to keep them in time with international standards. The emphasis shifted to efficient and prudential banking linked to better customer care and customer services.
BANKING IN INDIA
Overview of Banking:
Banking Regulation Act of India, 1949 defines Banking as "accepting, for the purpose of lending or of investment of deposits of money from the public, repayable on demand or otherwise or withdrawable by cheque, draft order or otherwise." The Reserve Bank of India Act, 1934 and the Banking Regulation Act, 1949, govern the banking operations in India.
Organizational Structure of Banks in India:
In India banks are classified in various categories according to differ rent criteria. The following charts indicate the banking structure:
Reserve Bank of India
Commercial Banks
Co-operative Banks
Development Banks
Nationalized
Private
Short-term credit
Long-term credit
Agricultural Credit
Urban Credit
EXIM
Industrial
Agricultural
Reserve Bank of India (RBI) - Banker's Bank:
The Reserve Bank of India (RBI) is the central bank of India, and was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. Since its inception, it has been headquartered in Mumbai. Though originally privately owned, RBI has been fully owned by the Government of India since nationalization in 1949.
RBI is governed by a central board (headed by a Governor) appointed by the Central Government. The current governor of RBI is D.SUBBARAO. RBI has 22 regional offices across India.The Reserve Bank of India was set up on the recommendations of the Hilton Young Commission. The commission submitted its report in the year 1926, though the bank was not set up for nine years.
Scheduled Commercial Banks In India
The commercial banking structure in India consists of:
Scheduled Commercial Banks in India
Unscheduled Banks in India
Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of India (RBI) Act, 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the Act.
"Scheduled banks in India" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act,1934 (2 of 1934),but does not include a co-operative bank".
"Non-scheduled bank in India" means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank". Banquc Nationale de Paris
Public Sector Banks In India
Among the Public Sector Banks in India, United Bank of India is one of the 14 major banks which were nationalised on July 19, 1969. Its predecessor, in the Public Sector Banks, the United Bank of India Ltd., was formed in 1950 with the amalgamation of four banks viz. Comilla Banking Corporation Ltd. (1914), Bengal Central Bank Ltd. (1918), Comilla Union Bank Ltd. (1922) and Hooghly Bank Ltd. (1932).
Oriental Bank of Commerce (OBC), a Governmet of India Undertaking offers Domestic, NRI and Commercial banking services. OBC is implementing a GRAMEEN PROJECT in Dehradun District (UP) and Hanumangarh District (Raiasthan) disbursing small loans. This Public Secotor Bank India has implemented 14 point action plan for strengthening of credit delivery to women and has designated 5 branches as specialized branches for women entrepreneurs.
Private Sector Banks
Private banking in India was practiced since the begining of banking system in India. The first private bank in India to be set up in Private Sector Banks in India was IndusInd Bank. It is one of the fastest growing Bank Private Sector Banks in India. IDBI ranks the tength largest development bank in the world as Private Banks in India and has promoted a world class institutions in India.
The first Private Bank in India to receive an in principle approval from the Reserve Bank of India was Housing Development Finance Corporation Limited, to set up a bank in the private sector banks in India as part of the RBI's liberalisation of the Indian Banking Industry. It was incorporated in August 1994 as HDFC Bank Limited with registered office in Mumbai and commenced operations as Scheduled Commercial Bank in January 1995.
Cooperative Banks in India
The Co operative banks in India started functioning almost 100 years ago. The Cooperative bank is an important constituent of the Indian Financial System, judging by the role assigned to co operative, the expectations the co operative is supposed to fulfil, their number, and the number of offices the cooperative bank operate. Though the co operative movement originated in the West, but the importance of such banks have assumed in India is rarely paralleled anywhere else in the world. The cooperative banks in India plays an important role even today in rural financing. The businessess of cooperative bank in the urban areas also has increased phenomenally in recent years due to the sharp increase in the number of primary co-operative banks.
Co operative Banks in India are registered under the Co-operative Societies Act. The cooperative bank is also regulated by the RBI. They are governed by the Banking Regulations Act 1949 and Banking Laws (Co-operative Societies) Act, 1965.
CURRENT SCENARIO
Before the start of the 1991 reforms, there was little effective competition in the Indian banking system for at least two reasons. First, the detailed prescriptions of the RBI concerning for example the setting of interest rates left the banks with limited degrees of freedom to differentiate themselves in the marketplace. Second, India had strict entry restrictions for new banks, which effectively shielded the incumbents from competition Through the lowering of entry barriers, competition has significantly increased since the beginning of the 1990s. Seven new private banks entered the market between 1994 and 2000. In addition, over 20 foreign banks started operations in India since 1994. By March 2004, the new private sector banks and the foreign banks had a combined share of almost 20% of total assets
Currently (2009), overall, banking in India is considered as 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. Even in terms of quality of assets and capital adequacy, Indian banks are considered to have clean, strong and transparent balance sheets-as compared 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-without any stated exchange rate-and this has mostly been true. With the growth in the Indian economy expected to be strong for quite some time-especially in its services sector, the demand for banking services-especially retail banking, mortgages and investment services are expected to be strong. M&As, takeovers, asset sales and much more action (as it is unraveling in China) will happen on this front in India.
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. Currently, India has 88 scheduled commercial banks (SCBs) - 28 public sector banks (that is with the Government of India holding a stake), 29 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 31 foreign banks.
They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.
INNOVATIONS IN BANKING SECTOR AFTER LIBERLISATION
INNOVATIVE PRODUCTS AND SERVICES OFFERED BY BANKS
"Product Innovations in Banks: Reaching Customers"
This throws light on the different delivery channels of banking services, and discusses the advantages and disadvantages of innovations in delivery channels like Mobile banking, Tele-Banking, Branch Banking, e-banking, ATMs, and Credit Cards. It also briefly discusses the pros and cons of product innovations and recent guidelines by the RBI on ATMs and credit card payments.
Broad Classification of Products in a bank:
The different products in a bank can be broadly classified into:
Retail Banking.
Trade Finance.
Treasury Operations.
Retail Banking and Trade finance operations are conducted at the branch level while the wholesale banking operations, which cover treasury operations, are at the hand office or a designated branch.
Retail Banking:
Deposits
Loans, Cash Credit and Overdraft
Negotiating for Loans and advances
Remittances
Book-Keeping (maintaining all accounting records)
Receiving all kinds of bonds valuable for safe keeping
Trade Finance:
Issuing and confirming of letter of credit.
Drawing, accepting, discounting, buying, selling, collecting of bills of exchange, promissory notes, drafts, bill of lading and other securities.
Treasury Operations:
Buying and selling of bullion. Foreign exchange
Acquiring, holding, underwriting and dealing in shares, debentures, etc.
Purchasing and selling of bonds and securities on behalf of constituents.
.
There are other various types of banking services like:
Advances - Overdraft, Cash Credit, etc.
Deposits - Saving Account, Current Account, etc.
Financial Services - Bill discounting etc.
Foreign Services - Providing foreign currency, travelers cheques, etc.
Money Transmission - Funds transfer etc.
Savings - Fixed deposits, etc.
Services of place or time - ATM Services.
Status - Debit Cards, Credit Cards, etc.
"Innovations in Rural Finance:
The most significant innovation Self-Help Groups (SHGs). SHG movement in India, which is uniquely Indian, went much beyond bishis and can truly be called the innovation that emerged from the grassroots and later replicated elsewhere. Recognition of group collateral as a valid security and recognizing the loans to MFIs for lending to the poor clients as part of achievement of priority sector lending targets are the two important policy innovations that helped the banks derive some comfort in dealing not only with SHGs but also with MFIs.
The savings potential of the ruralities does not appear to have been efficiently channeled into the banking sector. Major issue of concern is the lackluster performance of commercial banks and cooperative societies in the rural sector. Rural India remains still underserved with regard to banking services, both on the deposit and credit sides.
"Innovative Internet Banking "
It speaks about the Internet banking services' features, adoption of Internet naming in India and drawbacks of Internet banking. Internet banking services have revolutionized the functioning of the entire banking sector. Most of the bank's businesses are carried out with the help of electronic gadgets including computers. Internet banking enables a customer to perform banking transactions through the bank's website. This is also called virtual banking, net banking or anywhere banking. Online banking usually offers features like electronic bill payment. Internet banking is increasingly becoming a 'need to have' rather than a 'nice to have' service, it is changing the banking industry and is having a major effect on banking relationships. The author concludes that the Indian banking industry, which had initiated the introduction of modern technology in the early 1980s, is yet to go a long way for introducing Internet banking at the grassroots level.
The Changing Face of Banking Many analysts predict still more revolutionary changes in the banking sector in India. The chief of these are likely to be the concept of Universal Banks and the introduction of Smart Card technology.
The Other Side Although the Indian banking sector has made rapid progress particularly in the number of innovations introduced, some analysts are skeptical about the efficacy and practical use of many of these services.
INNOVATIONS FOR EASY BANKING
A decade before, it was tough to belief that banking secctor will be at a finger tip. Now its possible. A mobile hand set with a connection is the only instrument needed to make a gateway to your banking transaction, the latest innovation of technology.
Apart from the Mobile Banking, including of SMS Banking, Net Banking and ATMs are the major steps taken by the banks in India towards modernisation. With all these devises and systems, there is a complete freedom to experience.
Check your account, transfer your fund, make payments and what more, do anything of everything what has been followed in physical banking since ages. But this time no standing for hours in front of cash counter and no time boundation in withdrawing your own money.
1) Automatic Teller Machine: The introduction of ATM's has given the customers the facility of round the clock banking. The ATM's are used by banks for making the customers dealing easier. ATM card is a device that allows customer who has an ATM card to perform routine banking transaction at any time without interacting with human teller. It provides exchange services. This service helps the customer to withdraw money even when the banks ate closed. This can be done by inserting the card in the ATM and entering the Personal Identification Number and secret Password.
ATM's are currently becoming popular in India that enables the customer to withdraw their money 24 hours a day and 365 days. It provides the customers with the ability to withdraw or deposit funds, check account balances, transfer funds and check statement information. The advantages of ATM's are many. It increases existing business and generates new business. It allows the customers.
To transfer money to and from accounts.
To view account information.
To order cash.
To receive cash.
E-Cheaques: The e-cheaques consists five primary facts. They are the consumers, the merchant, consumer's bank the merchant's bank and the e-mint and the clearing process. This cheaquring system uses the network services to issue and process payment that emulates real world chaquing. The payer issue a digital cheaques to the payee ant the entire transactions are done through internet. Electronic version of cheaques are issued, received and processed. A typical electronic cheque transaction takes place in the following manner:
The customer accesses the merchant server and the merchant server presents its goods to the customer.
The consumer selects the goods and purchases them by sending an e-cheque to the merchant.
The merchant validates the e-cheque with its bank for payment authorisation.
The merchant electronically forwards the e-cheque to its bank.
The merchant's bank forwards the e-cheque to the clearing house for cashing.
The clearing house jointly works with the consumer's bank clears the cheque and transfers the money to the merchant's banks.
The merchant's bank updates the merchant's account.
The consumer's bank updates the consumer's account with the withdrawal information.
Electronic Funds Transfer (EFT): Many modern banks have computerised their cheque handling process with computer networks and other electronic equipments. These banks are dispensing with the use of paper cheques. The system called electronic fund transfer (EFT) automtically transfers money from one account to another. This system facilitates speedier transfer of funds electronically from any branch to any other branch. In this system the sender and the receiver of funds may be located in different cities and may even bank with different banks. Funds transfer within the same city is also permitted. The scheme has been in operation since February 7, 1996, in India.
The other important type of facility in the EFT system is automated clearing houses. These are the computer centers that handle the bills meant for deposits and the bills meant for payment. In big companies pay is not disbursed by issued cheques or issuing cash. The payment office directs the computer to credit an employee's account with the person's pay.
Telebanking: Telebanking refers to banking on phone services.. a customer can access information about his/her account through a telephone call and by giving the coded Personal Identification Number (PIN) to the bank. Telebanking is extensively user friendly and effective in nature.
To get a particular work done through the bank, the users may leave his instructions in the form of message with bank.
Facility to stop payment on request. One can easily know about the cheque status.
Information on the current interest rates.
Information with regard to foreign exchange rates.
Request for a DD or pay order.
D-Mat Account related services.
And other similar services.
Mobile Banking: A new revolution in the realm of e-banking is the emergence of mobile banking. On-line banking is now moving to the mobile world, giving everybody with a mobile phone access to real-time banking services, regardless of their location. But there is much more to mobile banking from just on-lie banking. It provides a new way to pick up information and interact with the banks to carry out the relevant banking business. The potential of mobile banking is limitless and is expected to be a big success. Booking and paying for travel and even tickets is also expected to be a growth area.
According to this system, customer can access account details on mobile using the Short Messaging System (SMS) technology6 where select data is pushed to the mobile device. The wireless application protocol (WAP) technology, which will allow user to surf the net on their mobiles to access anything and everything. This is a very flexible way of transacting banking business.
Already ICICI and HDFC banks have tied up cellular service provides such as Airtel, Orange, Sky Cell, etc. in Delhi and Mumbai to offer these mobile banking services to their customers.
Internet Banking: Internet banking involves use of internet for delivery of banking products and services. With internet banking is now no longer confirmed to the branches where one has to approach the branch in person, to withdraw cash or deposits a cheque or request a statement of accounts. In internet banking, any inquiry or transaction is processed online without any reference to the branch (anywhere banking) at any time.
The Internet Banking now is more of a normal rather than an exception due to the fact that it is the cheapest way of providing banking services. As indicated by McKinsey Quarterly research, presently traditional banking costs the banks, more than a dollar per person, ATM banking costs 27 cents and internet banking costs below 4 cents approximately. ICICI bank was the first one to offer Internet Banking in India.
Benefits of Internet Banking:
Reduce the transaction costs of offering several banking services and diminishes the need for longer numbers of expensive brick and mortar branches and staff.
Increase convenience for customers, since they can conduct many banking transaction 24 hours a day.
Increase customer loyalty.
Improve customer access.
Attract new customers.
Easy online application for all accounts, including personal loans and mortgages
Demat: Demat is short for de-materialisation of shares. In short, Demat is a process where at the customer's request the physical stock is converted into electronic entries in the depository system.
In January 1998 SEBI (Securities and Exchange Board of India) initiated demat accountancy System to regulate and to improve stock investing. As on date, to trade on shares it has become compulsory to have a share demat account and all trades take place through demat.
STRAINS AND CHALLENGES AFTER LIBERLISATION
Liberalisation process has increasingly exposed Indian Industry to international competition and banking being a service industry is also not an exception. Banking Sector in India too faces same strains and challenges at local, national and international level.
Indian Banks, functionally diverse and geographically widespread, have played a crucial role in the socio-economic progress of the country after independence. However, the growth led to strains in the operational efficiency of banks and the accumulation of non-performing assets (NPA's) in their loan portfolios.
Banks face increasing pressure to stand out from the crowd. On the Internet, this means offering your target customers an increasingly broader range of services than your competitors and that too in unique way.
All this has resulted in a challenge to managers of banks to develop the right mix of acquired and internally grown IT applications which suits customer's expectations.
Banking sector reforms and liberalisation process raised many challenges before Indian Banks and for sustainable development it has become necessary to face these challenges effectively:
Intense Competition: The RBI and Government of India kept banking industry open for the participants of private sector banks and foreign banks. The foreign banks were also permitted to set up shop on India either as branches or as subsidiaries. Due to this lowered entry barriers many new players have entered the market such as private banks, foreign banks, non-banking finance companies, etc. The foreign banks and new private sector banks have spearheaded the hi-tech revolution. Heavy weight foreign banks with huge base, latest technology innovative and globally tested products are spreading their wings and wooing away customers form other banks. For survival and growth in highly competitive environment banks have to follow the new "Guru Mantra" of prompt and efficient customer service, which calls for appropriate customer centric policies and customer friendly procedures.
Technological Up gradation: Already electronic transfers, clearings, settlements have reduced translation times. To face competition it is necessary for banks to absorb the technology and upgrade their services.
However use of High-Tech sophisticated technology leaves the predominantly rural, poor and even illiterate mans in the lurch to which the level of automation and efficiency of services are immaterial.
Privacy and Safety: Among the most important aspects, of savings, i.e., safety liquidity and profitability, safety has to be accorded top most priority. The safety aspect assumes more significance in the emerging scenario as the economic loss caused internationally by these types of crimes might risk area and any lacunae is safety would result in erosion of confidence and the same might possibly paralyse the entire network. The areas among other things, which might endanger security in e-banking can be:
Changes in input data such as changing the amount in ledges, increasing the limits in accounts or face value of cheaques. Though these trends could be detected consequently, prevention is a major problem with these types of crimes.
Use of stolen or falsified cards in ATM machines.
Computer forgery could be committed by way of gaining access to other account, deliberate damage through viruses on data stored in computers. In this case, same criminals might gain entry into the computers and cause damage to the system. This apart, another through which security and privacy are maintained. If a hacker has found out the password, he can cause havoc to the entire network. Also, if the password is stolen money could be transferred from one account to another.
Software privacy is another area of potential danger faced by the banking industry. In this the entire software could be stolen. If this is done, the hackers could operate a parallel network.
Human Resources Management: In the recent past the human resource Policies in banks were mainly guided by the comcept of permanent employment and its necessary concomitants of creating career paths, terminal benfits, etc. for the employees. In today's fast-changing world of employee mobility both horizontally and vertically and value systems, the public sector banks need to hire the right talent at market related compensation and to shed surplus manpower/staff. Thus many banks are going for URS schemes to reduce the burden of excessive staff. Schemes like VRS are going to change the nature of workforce with many senior and experienced persons opting for it.
The key elements that shall provide a competitive edge to banking sector will not be physical assets but knowledge assets and information. Therefore, banks must understand how to retain knowledge based employees and prevent them to migrating to some other organisation. Banks must believe in people, customer orientation, and continuous improvement of excellence. Therefore it becomes necessary for banks to encourage all employees to take risks and work towards continuous improvements and breakthroughs.
Successful banks overcoming the challenges will be those that harness technology in a customer friendly yet cost effective way. This requires enormous internal and external management and the crux of the solution lies in blending human resources with information technology.
CONCLUSION
The banking scenario has changed drastically. The changes which have taken place in the last ten years are more than the changes took place in last fifty years because of the institutionalization, liberalization, globalization and automation in the banking industry.
Indian banking system has several outstanding achievements to its credit, the most striking of which is its reach. Indian banks are now spread out into the remote corners of our country. In terms of the number of branches, India's banking system is one of the largest in the world. According to the Banker 2004, India has 20 banks within the world's top 1000 out of which only 6 are within the top 500 banks.
Today banking sector is marked by high customer expectations and technological innovations. Technology is playing a crucial role in the day to day functioning of the banks. These banks that have harnessed and leveraged technology best have a strategic advantage. To face competition it is necessary for banks to absorb the technology and upgrade their services.
In today's context banks are following the strategy of "relationship banking" than "mass banking" which is need of the hour. The customer services are playing a very significant role in banking business. In India major events leading to deregulation, liberalisation and privatisation have unleashed forces of competition, making the banks run for their business, not only to create the customer, but more difficult to run for their business, not only to create the customer, but more difficult to retain the customer. Prompt and efficient customer service, thus, has become very significant. Relationship banking is the new paradigm for survival and success, embracing a 'share of customer' approach to growth by identifying, protecting and expanding customer relationship.
