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Role of Information Technology

Role of Information Technology

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Role of Information Technology in Indian Banking Industry

  Submitted By A.SUJATHA FLORENCE Versatile Business School

Sl. No Topics 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. Definition and meaning of Bank Types, Roles and Functions of Banks What is Information Technology? Why Technology in Banks? How Information Technology Helps In Banking Sector? Benefits, Advantages and Role of IT Information Technology in Banking Technology Products Scope and Objectives of the study Hypothesis Employees perception The future technology scenario Training needs in Indian Banks Conclusion

Technology and Banking
The Quintessence Nature of Banking harmonizes closely with Technology –
Tasks Common to Both Information Storage Processing Transmission Technolog y

Banking

What is BANK? A bank is a financial institution where an individual can deposit money. There are also other types of financial institutions that operate just like banks. repayable on demand or otherwise and withdraw able by cheques. Using banks and the many services they offer saves an incredible amount of time. order or otherwise". 1949 defines Banking as "accepting. and ensures that the funds of micro as well as macroeconomic agents "pass hands" in a legal and structured manner.  Definition of BANKING Banking Regulation Act of India. Banks provide a system for easily transferring money from one person or business to another. for the purpose of lending or investment of deposits of money from the public. . draft.

TYPES OF BANKS v Central Bank v Commercial Banks v Industrial Banks v Agricultural Banks v Foreign Exchange Banks v Indigenous Banks  .

ROLE OF BANKS v Capital Formation v Monetization v Innovations v Finance for Priority v Provision for Medium and Long term Finance v Cheap Money Policy v Need for a Sound Banking System  .

FUNCTIONS OF BANKS v Accepting Deposits from public/others (Deposits) v Lending money to public(Loans) v Transferring money from one place to another (Remittances) v Credit Creation v Acting as trustees v Keeping valuables in safe custody v Investment Decisions and analysis v Government business v Other types of lending and transactions  .

transmit. store. as defined by the Information Technology Association as "the study. W h y Te ch nolog y in Ba nk s? To transform Financial Services Industry in the Net-Worked world banks to be customer centric provide services/products across a range of channels to be futuristic and have “TIME” value in all its dealings with customers. protects.  What is Information Technology ? Information technology (IT). implementation. and securely retrieve information. support or management of computer-based information systems. development. particularly software applications and computer hardware." IT deals with the use of electronic computers and computer software to convert. . design. process.

or cable etc . As well. bank transfers and so on. such as automatic payments to insurance.How Information Technology Helps in Banking Sector? The net has helped in being able to transfer information immediately. It is also easier to find amount in account as well as what has been paid for. Also the sharing of information from branch to branch is not instant. has assisted many who are unable to get out in order to pay bills.

real-time transaction processing v Better cross-selling ability v Improved management and accountability v Efficient NPA and risk management v Minimal transaction costs v Improved financial analyses capabilities  .MANY BENEFITS OF TECHNOLOGY v Increased operational efficiency. profitability & productivity v Superior customer service v Multi-channel.

information. v Accessibility to data. internal efficiency v Collaborative tools to help create. cultivate. and disseminate knowledge. and knowledge.ADVANTAGE OF IT An effective IT Solution provide: v Operational effectiveness. v The ability to easily search across and retrieve relevant information v A project management system based on complete project lifecycle v A resource management system which improve linkages v .

m a n a g e m e n t . v IT f a cilit a t e t r a ck in g of a ct iv it ie s and in v e st m e n t s un d e r d e ve lop m e n t Init ia t ive s.IDENTIFY THE IT ROLE v IT e n h a n ce s t h e ca p a cit y t o r e vie w p r oje ct p r oce ssing a n d p or t f olio p e r for m a n ce . v IT syst e m s p r ovid e t h e t ools t o r e p or t on p r oje ct p e r for m a n ce a t e a ch st a g e v IT su p p or t s im p r ove d p la n n in g . a n d r e p or t in g on r e sou r ce m a n a g e m e n t . v IT su p p or t s d ocu m e n t a t ion on st u d y r e p or t s f or e v a lu a t ion a n d r e cor d le sson s le a r n e d . v IT m on it or s p e r f or m a n ce a g a in st M ille n n iu m D e v e lop m e n t Goa ls.  .

Loan Tracking System. Loan Database Loan Administration System [LAS] Other Systems Financial Database Controller’s Data Warehouse Loan Kiosk LAS WEB. Loan Database Loan System .e-Loan System e-Disbursements e-Documents 13 e-Billing e-Payments Integrated Loan Administration Platform Loan Administration Database Client Connection Loan Data Warehouse Loan WEB. LTS.

INFORMATION TECHNOLOGY IN BANKING Information Technology has basically been used under two different avenues in Banking. Online electronics banking. One is Communication and Connectivity and other is Business Process Reengineering. new services and efficient delivery channels for the banking industry. new products. implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets:   v Technology has opened up new markets. mobile banking and internet banking are just a few examples. Information technology has been the cornerstone of recent financial sector reforms aimed at increasing the speed and reliability of financial operations and of initiatives to strengthen the banking sector .  v Information Technology has also provided banking industry with the wherewithal to deal with the challenges the new economy poses. Information technology enables sophisticated product development. better market infrastructure.

. As a result. The progress of technology and the development of world wide networks have significantly reduced the cost of global funds transfer. They demand instant. and setting up local area and wide area networks and connecting them to the Internet. information systems and networks are now exposed to a growing number.  v It is information technology which enables banks in meeting such high expectations of the customers who are more demanding and are also more techno-savvy compared to their counterparts of the yester years. banks are increasingly interconnecting their computer systems not only across branches in a city but also to other geographic locations with high-speed network infrastructure. IT deployment has assumed such high levels that it is no longer possible for banks to manage their IT implementations on a stand alone basis with IT revolution. anytime and anywhere banking facilities.  v Further.CONTINU… v The IT revolution has set the stage for unprecedented increase in financial activity across the globe.

 .  v The new focus will be on :  a) Understanding thoroughly the business of banking in the new millennium. This has. Net Banking. technology change management. IT also facilitates the introduction of new delivery channels--in the form of Automated Teller Machines.  e) Evaluating the efficacy of various technical solutions provided by the IT industry to meet these system requirements..  c) Formulating the parameters of performance and operations in light of the overall institutional business objectives and strategic goals.  b) Create new and relevant paradigms for risk analysis and management. cost and performance evaluations of security and audit models etc. installation and maintenance or networking and communication administration etc. needed to fulfill the overall institutional business objectives and strategic goals. Mobile Banking and the like.CONTINU… v IT has been providing solutions to banks to take care of their accounting and back office requirements.  v It also follows that the primary focus of in-house IT establishment of banks should change from in-house application development. now given way to large scale usage in services aimed at the customer of the banks.  d) Translating these parameters into well defined system requirements. however.

TECHNOLOGY PRODUCTS: 1) Net Banking 2) Credit Card Online 3) One View 4) Insta Alerts 5) Mobile Banking 6) NetSafe 7) e-Monies Electronic Fund Transfer 8) Online Payment of Excise & Service Tax 9) Phone Banking 10) Bill Payment 11) Shopping 12) Ticket Booking 13) Railway Ticket Booking through SMS 14) Prepaid Mobile Recharge 15) Smart Money Order 16) Card to Card Funds Transfer 17) Funds Transfer (eCheques) 18) Anywhere Banking 19) Internet Banking 20) Mobile Banking 21) Bank@Home (i) Express Delivery 22) Cash on Tap: (ii) Normal Delivery   .

ATM Electron ic Banking Branch Bankin g Branch Head Office Branch 2 3 Branch 1 Branch 4 Branch n Branch 6 Branch 5 .

SCOPE OF THE STUDY The st udy confines t o t he exam ining t he Role of IT in t he St udy Banks. part icularly:   v The Perception of Employees towards the Implementation of Information Technology in the Banks.  v To assess the Customers' Satisfaction Level towards the Use of Information Technology related Services in the Banks.  .

Private Sector Banks and Foreign Banks.  .  v To Assess the Perception and Satisfaction of the Customers with the banks.  v To Assess the Perception of the Bank Employees towards the Implementation of Information Technology in the Banks.OBJECTIVES OF THE STUDY   The object ives of t he St udy are as follow s: v To assess the Role of Information Technology in the Public Sector Banks.

HYPOTHESIS v Inform at ion Technology facilit at e wide and speedy services t o banking sect ors. v v Reliable infra-structure of technology is the major constraint in implementing Information Technology in banks. v v There is a strong association between more IT related services and customer preferring a bank. v v Security concerns are the basic hindrance in using Technology related to banking services . v v Impact of technology on efficient low cost data communications is same across all banks. v v There is a strong association between competition pressure and implementation of IT in banking sector. v v Private and Foreign banks use more Information Technology related banking services then public sector banks.

v v On criteria "Impact of Technology is Reducing Physical Infrastructure Cost of Bank"--The Impact of Technology on Reduced Physical Infrastructure Cost of Bank is same across all the Banks  EMPLOYEES PERCEPTION   . 20% Private Banks and 9% Public Sector Banks are all through with the implementation of IT enable services in their banks. im prove com pet it ive posit ion and also geographical reach.v The st udy proved t hat t here is a posit ive relat ion bet ween im plem ent at ion of IT and delivery of service. In ot her words. Banks are m oving t ow ards im plem ent ing IT enabled services t o deliver bet t er service. v v Over 65% of the foreign banks.T. v v Almost 57% of the Respondents Strongly Agree that Competitive Pressure is one of the Lead Factor Driving towards the implementation of Technology. 45% of the Private Banks and 36% of the Public Sector Banks are in the implementation stage of I. 45% of the Bank Respondents Strongly Agree that Operational Efficiency and Business Process Reengineering are the Factors that drives the Implementation of Technology in the Banks. However. 37% of the Respondents remain neutral when asked if the drive towards Implementation of Technology is due to Organizational Restructuring.

SERVICES STISOPED GNISIAR Core Banking ( CBS ) Electronic Banking ATMs POS Terminals and Cash dispenser Corporat e Network Any Branch Banking CRM Risk Management Card Management Document Management Resource Management BANK ’ S BUSINESS .Focus aspects of Commercial Banking now are: BANK ’ S BUSINESS MIS & Intranet LOANS & MISC .

v It is one thing to engineer and implement a technique for making payments electronically. These t hree processes are in m ot ion and will be well on t he way t o com plet ion wit hin t he next t hree years. nor do they do anything to further the transaction once payments information has been .g. c) Universal Financial Inclusion. b) Quant ificat ion and m anagem ent of risk sensit ivit y driven by Basel II norm s.The Future Technology Scenario v All m ajor developm ent s in t he banking and financial sect or in India in t he next five years will revolve around t hree m ain processes. network technologies only make it possible to transmit information securely. v v Implicit in these processes is the need to cover a wide geographical area and the need to speed-up the process of end to end transaction processing. and another to make it usable and accessible (e.they do not address transmission of payments. They are: a) Consolidat ion of exist ing nat ional clearing & set t lem ent m echanism s along w it h t he universalisat ion of elect ronic paym ent s syst em s.

t he IT environm ent should also and will be as flexible as possible.Continu… v As an ent ire solut ion. accept ing different paym ent m et hods consist ent w it h t he m arket and business. generating actions to be taken as a result of any of the following transactions: (a) Product delivery instructions (b) Transaction settlement (c) Account activity reports (d) Confirmations (e) Transaction status reports (f) Information gathering . Next . IT solut ions will help t he bank collect inform at ion about t he cust om er. v They should be integrated into the general business environment.

Innovative Risk Management Complex Credit Calculations Global Operations Pervasive Branch Network kin an B g nd a no ch Te gy lo Mass Transaction & Items Processing .

Any t echnology solut ion. at present. . in t he ult im at e analysis. adm inist er and cont rol a count ry-wide IT enabled banking and financial environm ent cannot be overem phasised.Training needs in Indian Banks v The need for a com prehensively t rained m anpower base t o m anage. a major gap in the banking industry between the technology skill-set required to administer banking operations of the next millennium and the managerial demands of this new environment and the skilled manpower available. there is also the need to ensure a sort of continuity by setting-up a dedicated IT cadre or group in all institutions. v There is. Not only is there an urgent need to train a very large number of people across several levels and several institutions. is only as good or as bad as t he people who use t he solut ion.

Continu… v The educat ion and t raining needs can be addressed at t he following levels: LEVEL TARGET SOURCE (1) General aw areness Cust om ers/Client base TV/print m edia cam paign. . (2) Funct ional aw areness All bank/inst it ut ion em ployees Int ernal A/V t raining capsules. (4) Inst allat ion/im plem ent at ion Core im plem ent at ion personnel Out -sourced t raining. continuous process and incorporate provisions for periodic updates and reviews. v Management Module. There is also need to realize that training is not a fireand-forget mechanism which ensures availability of skilled manpower at all times. (3) Operat ional Module Operat ional personnel Int ernal hands-on t raining & CBTs. Training must be a rigorously scheduled.

it w ould be :   v Creating vision statements for banking of the future. opportunities and threats in banking of the future. services. Benchmarking and quality control of IT solutions. v v Analyzing and solving the implementation issues involved in translating the industry’s long term goals and evolutionary objectives into feasible organizational and managerial processes. IT Security and audit policies and parameters. Modeling of risk paradigms.CONCLUSION So what would a bank’ s in-house IT est ablishm ent be doing in t he next decade or so? Prim arily. v v Impact analysis of IT deployment vis-à-vis operational and managerial processes and business products. Creating the definitions of deliverable products and services flowing from the business needs of future banking. v v Identifying products. Establishing the boundaries of the business of banking in the medium to long term. .

Continu… v Disast er m anagem ent and cont ingency planning design and im plem ent at ion t o ensure business cont inuit y. . v Helping IT industry to understand banking industry’s business requirements. Be a certification authority for enabling a secure and accepted. Evaluate techniques for assessment of life-cycles of applications and build cost of ownership models. v System requirement studies of operational areas and specific business problems where IT deployment is considered. Modeling of t echnology change m anagem ent paradigm s. standards-based messaging solution for the Indian banking and financial sector.

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