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International Journal of Trend in Scientific Research and Development (IJTSRD)

International Open Access Journal |

ISSN No: 2456 - 6470 | Conference Issue – ICDEBI-2018

Organised By: V. P. Institute of Management Studies & Research, Sangli

The Impact of Digitalisation on Indian Banking Sector

Dr. Mrs. Manisha Vikas Jagtap
Assistant Professor
Department off Management Studies, KES’s Rajar
ambapu Institute of Technology,
Affiliated too Shivaji University, Kolhapur
Kolhapur, Maharashtra, India

“Digital” is the new buzz word in all sector. With banking. Strong initiatives have been taken by the t
other sector, banking is also all around the globe Reserve Bank of India in strengthening the Payment
shifting towards digitalization. Banks of all sizes and and Settlement systems in banks. Indian government,
across all regions are making huge investments in banks, fintech companies have been innovating and
digital initiatives in order to maintain a compe
competitive changing the way India spends its money. At the same
edge and deliver the maximum to its customers. time digital revolution also raises new challenges
challen to
Adoption of digitalization is very important for the the stability and the integrity of the financial system
banking sector. By embracing digitalization, banks and the protection of consumers.
can provide enhanced customer services. This
provides convenience to customers and helps in INTRODUCTION
saving time. Digitalization has transformed manual Digitization is the conversion of data into a digital
processes, transactions and activities into digital form with the adoption of technology. Digitization
services. Across all verticals, consumer needs have reduces human errors and, therefore, encourages
been met in entirely innovative ways, disrupting customer loyalty. Banks of all sizes and in all regions
existing enterprise value chains. Digitalization are making large investments in digital initiatives in
reduces human
uman error and thus builds customer loyalty. order to maintain a competitive advantage and offer
Today, people have round-the-clock
clock access to banks the maximum to their customers. In addition,
due to online banking. Managing large amounts of digitization leads to intelligence and
an intelligence of
cash has also become easier. Digitalization has also solid data, which helps banks to approach customers
benefitted customers by facilitating cashless and get closer to the competition. By adopting
transactions.. Customers need not store cash anymore digitization, banks are now providing better customer
and can make transactions at any place and time. services. This provides convenience to customers
custom and
Several commercial banks started moving towards helps save time.
digital customer services to remain competitive and
relevant in the race. Banks have benefitted in several Today, people have access to banks 24 hours due to
ways by adoptingting newer technologies. E
E-banking has online banking. Managing large amounts of cash has
resulted in reducing costs drastically and has helped also become easier. Digitization has also benefited
generate revenue through various channels. customers by facilitating transactions without cash.
Commercial Banks in India have moved towards Customers no longer need to store cash and can make
technology by way of Bank Mechanization and transactions
sactions anywhere, anytime. It is a powerful,
Automation with the introductionn to MICR based modular and open digital participation platform that
cheque processing, Electronic Funds transfer, Inter
Inter- allows people to boost agility and speed. The main
connectivity among bank Branches and steps of the digital banking process have focused
implementation of ATM (Automated Teller Machine) mainly on adding to the existing offer the use of new
Channel have resulted in the convenience of Anytime services
rvices enabled with technology to increase

@ IJTSRD | Available Online @ | Conference Issue: ICDEBI-2018 | Oct 2018 Page: 118
International Journal of Trend in Scientific Research and Development (IJTSRD) ISSN: 2456-6470
2456 | IF: 4.101
accessibility and value for customers. In this paper, 2. Telebanking: -
the study focuses on the impact of digitalization on Telebanking facilitates the customer to carry out
banking, which is a major concern with the payment banking transactions not related to cash phone.
services provided by the bank to its customers. According to this design, thee automatic voice recorder
is used for simpler transactions and queries. For
Need andnd Progress of digitalisation in banking complicated inquiries and transactions, manned
sector: telephone terminals are used.
In the late 1980s, to improve customer service,
accounting and record keeping the need for 3. Electronic Compensation Service (ECS): -
computerization was felt in the Indian banking sector. The Electronic Compensation Service is a retail
Then in 1988, the Reserve Bank of India established a payment system
tem that can be used to make bulk
committeeee to study Computerization in bank headed payments / receipts of a similar nature, especially
by Dr. C. Rangarajan. The process of computerization when each individual payment is of a competitive
gained pace with the reform in the Indian economy in nature and of an amount relatively minor. This service
92. One of the main drivers of this change was is useful for organisations and government
driven by the growing entries of private and foreign administrative divisionss to make / receive large
nks in the Banking industry. Several commercial volumes of payments instead of making transfers of
banks began to move towards digital customer service funds by individuals.
to remain competitive and relevant in the race.
4. Electronic Funds Transfer (EFT): -
The Commercial Banks in India have moved towards Electronic Funds Transfer (EFT) is a system where
technology through the Mechanization and anyone who wants to make payments to another
Automation of thee Bank with the introduction to person / company, etc. one can approach bank and
cheaque processing based on MICR, the electronic make cash payments or give instructions to transfer
transfer of funds, the interconnection between bank funds directly from his/her account to the recipient /
branches and the implementation of ATMs (ATM) beneficiary's bank account. Full details such as the
have resulted in the convenience of at any banking recipient's name, bank account number, type of
time. The Reserve Bank of India has taken strong account (savings or current
rent account), bank name, city,
initiatives to strengthen payment and settlement branch name, etc. they must be provided to the bank
systems in banks. Now the Indian government is at the moment of requesting such transfers so that the
aggressively promoting digital transactions. The amount of the beneficiaries' account is correct and
launch of United Payments Interface (UPI) and Bharat faster. RBI is the EFT service provider.
Interface for Money (BHIM) by Natio National Payments
Corporation of India (NPCI) are important steps for 5. Real-time gross settlement
ent (RTGS): -
innovation in the payment systems domain. UPI is a The real-time
time settlement system, through which banks
mobile interface where people can make instant give electronic instructions to transfer funds from
transfers of funds between accounts in different banks their account to the another bank account. The RBI
on the basis of a virtual address withoutout mentioning maintains and operates the RTGS system and
the bank account. Indian banks are now working hard provides an efficient and faster means of transferring
for providing following facilities to their customer for funds between banks that facilitates its financial
increasing their banking business, for attracting more operations. As the name suggests, the transfer of
customers etc. funds between banks is done in real time.
1. Automatic Teller Machine (ATM): -
The ATM is the most popular device in India, which 6. Point of sale terminal: -
allows customers to withdraw their money 24 hours a Point of sale terminal is a computer terminal that is
day, 7 days a week. With the use of ATM card connected in line to the computerized files of
customer can perform routine banking transactions customer information in a bank and magnetically
without interacting with a human cashier. encoded plastic transaction card that identifies the
Apart from cash withdrawals, ATMs can be uused for customer with the computer. During a transaction, the
paying utility bills, transfer funds between accounts, customer's account is debited and the computer credits
deposit cheques and cash, balance inquiries, etc. the retailer's account
count for the amount of the purchase.

@ IJTSRD | Available Online @ | Conference Issue: ICDEBI-2018 | Oct 2018 Page: 119
International Journal of Trend in Scientific Research and Development (IJTSRD) ISSN: 2456-6470
2456 | IF: 4.101
Growh of Indian banking sector: choice and savings. The following table indicate the
Technological advancements in the digital payment percentage change in digital payment in year 2016
ecosystem are changing lives significantly and when compared with 2015 and 2017 when compared
providing end consumers with speed, convenience, with 2016.1

Thus from the above table it can be seen that all the the total volume in 2013-14,
14, steadily declined to 7.4
payment systems used in India shows positive percent in 2017-18.
18. There is a corresponding increase
percentage growth when compared with the year in electronic
nic compensation actions and cards. Within
2016 in the year 2017 except in the CCIL volume in the category of electronic clearing cards and cards, the
million. But when we observe the CCIL operated PPI followed by the debit card and, to some extent,
systems in value the it shows increase in percentage IMPS have shown impressive increases in their shares
compared with 2016 in the year 2017. in total volume in recent years. The total payment of
the card, in fact, accounted for the largest part (almost
The Report submitted by Niti Aayog on Digital 50 percent) of the total volume in 2017-18.
2017 The
Payments in July 2018 depict the important participation of NEFT has generally increased over
information related to overall payment growth and the the years, except for some fall in 2017-18.
instrument wise payment growth trends in India.
UPI has shown an exponential growth compared to
They are as given below any other payment product and
Instrument Wise Growth Trends – Volume: services. The total volume of the UPI transaction has
The retail payment segment
egment accounted for as much as increased by 5024.5 percent in 2017-
99 percent of total volumes in 2017-18.
18. From this, the 18. The total value of the UPI transaction has
paper compensation ratio that formed 34 percent of increased by 1481 percent in 2017-18.

@ IJTSRD | Available Online @ | Conference Issue: ICDEBI-2018 | Oct 2018 Page: 120
International Journal of Trend in Scientific Research and Development (IJTSRD) ISSN: 2456-6470
2456 | IF: 4.101
Volume – Overall Growth Performance (MeitY Data):

The volume of global payments increased steadily important agenda for all banks in India is
during the period 2011-12 to 2015-16,16, registering an digitalization. The RBI data shows that the value of
average annual growth rate (CAGR) composed of transactions through checks as a proportion of the
more than 58.9 percent. The growth rate in the total number of transactions was reduced to 3%.
volume of global payments accelerated further to The average number of monthly transactions through
104.4% in 2017-18. 18. Figure 1 indicates trends in checks in 2012 was 16.53 million and, as of June
digital payments during the period from 20112011-12 to 2018, the number of check-based
check transactions
2017-18. The growth in 2017-18 18 is spectacular and increased to 94.7 million per month on average.
could be attributed to the development of an
tive digital payment platform such as BHIMBHIM- India’s digital payment industry, which is currently
UPI, BHIM Aadhaar and Bharat QR Code. It is worth around USD 200 Billion, is expected to grow
noteworthy that the growth in 2017-1818 is much higher five-fold
fold to reach USD 1 Trillion by 2023, as per a
than the growth rate of the trend in the last five years report by Swiss financial services holding company,
(2011-2016).3 Credit Suisse. Digital payments present a huge
portunity for various digitization initiatives in the
Today banks aim to provide a fast, accurate and country. 4
quality banking experience to their clients. The most

@ IJTSRD | Available Online @ | Conference Issue: ICDEBI-2018 | Oct 2018 Page: 121
International Journal of Trend in Scientific Research and Development (IJTSRD) ISSN: 2456-6470
2456 | IF: 4.101
Conclusion: industry, since this will reduce labor and automate the
The banking landscape is changing. A new wave of system.
technology is revolutionizing the way customers
interact with their
heir finances. From social to mobile Reference:
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@ IJTSRD | Available Online @ | Conference Issue: ICDEBI-2018 | Oct 2018 Page: 122