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A Comparative Study of Computerisation in Public and Private Sector Banks

* Sourabh Sharma ** K.S. Thakur

ABSTRACT

This paper is a survey of public and private bank employee’s responses toward computerisation of
banking services. The objective of this analysis is to measure the employees' awareness, perception, and
the level of satisfaction with regard to IT Services offered by the Indian public and private sector banks
in the Jaipur city. The study has divided into four major segments i.e.

1. Information Technologies Strategic advantages


2. Technological know-how and organizational capacity
3. Decision making process
4. Motivations toward Information Technology.
Although this survey declares that in comparison, private banks are well ahead in above said segments
but now because of the increasing competition and awareness, the public banks are also trying hard to
satisfy their customers and employees by providing virtual banking services through better IT
infrastructure.

INTRODUCTION

India has a well-developed banking system. Indian entrepreneurs and visionaries founded most of the
banks in India in the pre-independence era to provide financial assistance to traders, agriculturists and
budding Indian industrialists. Indian banks have played a significant role in the development of Indian
economy by inculcating the habit of saving in Indians and by lending finance to Indian industry. Indian
banks can be broadly classified into nationalised banks/public sector banks and private banks

* Sr. Lecturer,Faculty of Management Studies,Mody Institute of Technology & science (A Deemed


University),Lakshmangarh, Sikar, (Rajasthan).

** Sr. Reader & Former Head,Institute of Commerce and anagement,JiwajiUniversity, Gwalior (Madhya
Pradesh).

PUBLIC SECTOR BANKS

Nationalised banks or public banks dominate banking System in India. The nationalisation of banks in
India took place in 1969 by Mrs. Indira Gandhi the then prime minister. The major objective behind
nationalisation was to spread banking infrastructure in rural areas and make available cheap finance to
Indian farmers. Before 1969, State Bank of India (SBI) was the only public sector bank in India. Despite
the entry of many new domestic and foreign private banks since liberalization, public sector banks
continue to dominate the commercial banking industry.

PRIVATE SECTOR BANKS

All the banks in India were earlier private banks. They were founded in the pre-independence era to
cater to the banking needs of the people. But after nationalisation of banks in 1969 public sector banks
came to occupy dominant role in the banking structure. Private sector banking in India received a flip in
1994 when Reserve Bank of India encouraged setting up of private banks as part of its policy of
liberalisation of the Indian Banking Industry. Housing Development Finance Corporation Limited
(HDFC) was amongst the first to receive an 'in principle' approval from the Reserve Bank of India (RBI)
to set up a bank in the private sector.

Private Banks have played a major role in the development of Indian banking industry. They have made
banking more efficient and customer friendly. In the process they have jolted public sector banks out of
complacency and forced them to become more competitive.

It is by now well recognised that India is one of the fastest growing economies in the world. Evidence
from across the world suggests that a sound and evolved banking system is required for sustained
economic development. India has a better banking system in place of other developing countries.

COMPUTERISATION IN PUBLIC AND PRIVATE SECTOR BANKS

The Financial Reforms that were initiated in the early 90s and the globalisation and liberalisation
measures brought in a completely new operating environment to the Banks those were till then
operating in a highly protected milieu. The arrival of foreign Banks and Financial Institutions, the
setting up of a number of private banks and the measures of de-regulation that encouraged competition
has led to a situation where the survival of those who do not join the race will become difficult. Unless
the state-of- the-art IT was introduced as early as possible, winning new business and even holding on to
the old one will become increasingly difficult. Services and products like "Anywhere Banking", "Tele-
Banking", "Internet banking", "Web Banking", e-banking, e-commerce, e-business etc. have become the
buzzwords of the day and the Banks are trying to cope with the competition by offering innovative and
attractively packaged technology-based services to their customers.

Simultaneously, the importance of effective MIS for control of operations and of maintaining customer
and business/industry data bases for strategic planning has also surfaced; while Banks are looking at
Data warehousing, Data mining, Business Restructuring etc. as most essential things to have as early as
possible, they are taking urgent steps to computerise the operations in their administrative and
controlling offices (viz. head /zonal/regional offices) as well as the data collection machinery, so as to
evolve an effective MIS. In this phase, the new communication revolution sweeping the nation and the
world has come in extremely handy, as the communication infrastructure has improved significantly and
the Internet technologies are available to network branches at a relatively low and affordable cost with a
high degree of reliability.

The present level of MIS covers, basically, information needed for control, performance monitoring,
decision making etc. and encompasses most activities in administrative offices like processing of
statutory returns under Reserve Bank of India Act, monthly/quarterly performance reports from
branches, credit information/BSR, inter-branch transactions, personnel inventory, provident fund
accounting, profit and loss accounts, cash and investment management, stationery stock accounting, and
branch house keeping etc.

OBJECTIVE OF THE STUDY

The objective of present study is to know the IT advantages for the four major IT uses in banking
operation i.e. Information Technologies Strategic advantages, Technological know-how and
organizational capacity, Decision making process and, Motivations toward Information Technology.

COLLECTION OF DATA

Both Primary and secondary sources have been used for the purpose of data collection. For secondary
data books, research papers, journals, magazines and internet were referred. Primary data has been
collected with the help of a structured Questionnaire. The questionnaire was developed as per the
following mechanism:

Questionnaire Development

For the purpose of this analysis, a structured questionnaire was developed. in two stages. In the first
stage, an exploratory study was carried out using personal and focus group interviews. This was done to
understand the factors influencing employees’ preferences toward IT uses in banking operations. In the
second stage, based on findings of the exploratory study, a 5-point Likert scale was developed. Items in
the questionnaire covers four important factors of IT uses i.e. Information Technologies Strategic
advantages, Technological know-how and organizational capacity, Decision making process and,
Motivations toward Information Technology.

SCOPE OF STUDY

Six banks have been considered for comparing the computerisation effects in public and private sector
banks. State Bank of India (SBI), Punjab National Bank (PNB) and State Bank of Bikaner & Jaipur
(SBBJ) have been used from public sector whereas ICICI, HDFC and UTI (Now known as AXIS) banks
have been used from private sector banks for this study.
COMPARATIVE STUDY OF SELECTED PUBLIC AND PRIVATE SECTOR BANKS

A Questionnaire (enclosed in appendix 1 &2) having 22 questions covering four major IT uses i.e.
Information Technologies Strategic advantages, Technological know-how and organizational capacity,
Decision making process, Motivations toward Information Technology was circulated among the bank
employees for primary data collection. 125 copies of questionnaire were distributed in different branches
of each bank out of which the followings number of questionnaire returned back with full information:

SBI: 88

PNB: 85

SBBJ: 107

ICICI: 74

HDFC: 98
UTI: 105

DATA ANALYSIS

Likert Scale has been used to analyse the data, collected from questionnaire. A Likert scale is a
psychometric scale commonly used in questionnaires, and is the most widely used scale in survey
research. When responding to a Likert questionnaire item, respondents specify their level of agreement
to a statement.

An important distinction must be made between a Likert Scale and a Likert item. The Likert Scale is the
sum of responses on several Likert items. A Likert item is simply a statement which the respondent is
asked to evaluate according to any kind of subjective or objective criteria; generally the level of
agreement or disagreement is measured. Likert scaling is a bipolar scaling method, measuring either
positive or negative response to a statement.

Scoring and analysis

After the questionnaire is completed, each item may be analyzed separately or in some cases item
responses may be summed to create a score for a group of items. Hence, Likert scales are often called
summative scales.

Whether individual Likert items can be considered as interval-level data, or whether they should be
considered merely ordered-categorical data is the subject of disagreement. Many regard such items only
as ordinal data, because, especially when using only five levels, one cannot assume that respondents
perceive all pairs of adjacent levels as equidistant. On the other hand, often (as in the example above)
the wording of response levels clearly implies a symmetry of response levels about a middle category; at
the very least, such an item would fall between ordinal- and interval-level measurement; to treat it as
merely ordinal would lose information. Further, if the item is accompanied by a visual analog scale,
where equal spacing of response levels is clearly indicated, the argument for treating it as interval-level
data is even stronger.

The five point Likert scale has been used in the current study the calculations are as below:

Cumulative Likert Score

Information Technologies Strategic Advantages


Factors SBI PNB SBBJ HDFC ICICI UTI
F1 69.545 66.588 66.729 65.918 67.297 70.667
F2 75.227 65.882 69.907 71.020 74.865 70.857
F3 71.591 65.412 66.729 67.347 69.730 69.905
Technological Know-How & Organizational Capacity
Factors SBI PNB SBBJ HDFC ICICI UTI
F1 49.318 54.118 49.159 65.510 67.027 68.952
F2 60.909 59.765 61.682 65.510 70.270 68.571
F3 67.727 64.000 63.738 69.796 75.135 70.667
F4 77.727 75.059 74.019 71.020 73.514 72.190
F5 76.818 69.176 70.654 65.306 68.649 68.190
F6 53.864 56.706 57.570 66.735 71.622 69.714
F7 59.318 55.294 62.430 68.776 74.324 71.238
F8 55.227 54.353 58.131 61.633 61.892 62.095

Decision Making Process


Factors SBI PNB SBBJ HDFC ICICI UTI
F1 52.045 51.294 53.084 67.959 70.541 69.333
F2 57.727 60.000 61.308 67.755 67.568 69.143
F3 62.955 60.235 67.664 72.041 72.432 71.238
F4 55.227 54.353 55.140 64.490 65.676 64.952
F5 54.545 55.294 56.075 74.082 76.216 74.095
F6 52.500 57.647 54.019 69.184 73.243 70.476

Motivations Toward Information Technology


Factors SBI PNB SBBJ HDFC ICICI UTI
F1 54.545 56.000 57.196 69.184 71.622 69.905
F2 66.364 62.588 64.673 77.551 79.189 75.810
F3 65.909 68.235 66.729 74.694 76.757 73.333
F4 65.682 68.000 64.112 70.612 71.351 72.571
F5 71.818 68.941 71.028 77.347 80.270 75.619
Findings from Likert Scores
The questionnaire has divided into four major segments. Each segment has some
related questions or factors. Followings are the findings of Likert Scale:

I Information Technologies Strategic advantages

F1 Knowing the Information Technology used by your competition

Factors SBI PNB SBBJ HDFC ICICI UTI

F1 69.545 66.588 66.729 65.918 67.297 70.667

Conclusion: This factor is more or less common for all the banks. In UTI bank
around 71 percent employees are aware of IT used by the competitors whereas in SBI
bank around 70 employees are aware about the IT used by the competitor.

F2 Instituting a technology watch in order to change rapidly your Information


Technology when necessary

Factors SBI PNB SBBJ HDFC ICICI UTI

F2 75.227 65.882 69.907 71.020 74.865 70.857

Conclusion: Here we can see some difference between the data of private and public
sector banks. We can easily say that SBI bank is ahead in order to change their
technology whenever it needed. All private banks are also very conscious about this
change in technology.

F3 Ensuring that your choice of Information Technology follows the evolution of


your environment

Factors SBI PNB SBBJ HDFC ICICI UTI

F3 71.591 65.412 66.729 67.347 69.730 69.905

Conclusion: This factor is also more or less common for all the banks. Here the
maximum employees of SBI bank think that the choice of IT follows the evolution of
their work environment.
II Technological know-how and organizational capacity

F1 Mastering current Information Technology products

Factors SBI PNB SBBJ HDFC ICICI UTI

F1 49.318 54.118 49.159 65.510 67.027 68.952

Conclusion: This factor shows that private bank employees are far ahead to operate
current IT products. Around 69% of UTI employees and 67% of ICICI employees
have mastering in current information technology product whereas SBI & SBBJ
employees are less efficient to operate current technology products with 49 %.

F2 Being considered as a leader in Information Technology usage

Factors SBI PNB SBBJ HDFC ICICI UTI

F2 60.909 59.765 61.682 65.510 70.270 68.571

Conclusion: Here again the private banks are ahead than public sector banks. As we
can see that around 70% ICICI bank employees consider themselves as a leader in IT
usage whereas PNB has the least figure with around 60% for the same.

F3 Development of a technological culture in your firm

Factors SBI PNB SBBJ HDFC ICICI UTI

F3 67.727 64.000 63.738 69.796 75.135 70.667

Conclusion: This data also indicate about the awareness of private banks in
development of a technological culture. Around 75% of ICICI bank employees are in
favour of development of technological culture in bank whereas only 64% employees
of SBBJ bank are in favour of the same.

F4 Having, within the organization, the required human and organizational


resources to manage the information systems

Factors SBI PNB SBBJ HDFC ICICI UTI

F4 77.727 75.059 74.019 71.020 73.514 72.190


Conclusion: This factor shows the positive response coming from public sector banks.
Around 78% employees of SBI bank believe on required human and organizational
resources to manage the information systems within the organisation whereas in
private sector bank HDFC it is around 71%.

F5 Having the ability to effectively identify and fill your needs in Information
Technology

Factors SBI PNB SBBJ HDFC ICICI UTI

F5 76.818 69.176 70.654 65.306 68.649 68.190

Conclusion: Again public sector banks are ahead on the ability to effectively identify
and fill your needs in Information Technology. SBI bank has the highest percentage
with around 77 whereas HDFC has the lowest score with 65 percent.

F6 Strategic planning of information systems in relation to the organization's


business objectives

Factors SBI PNB SBBJ HDFC ICICI UTI

F6 53.864 56.706 57.570 66.735 71.622 69.714

Conclusion: Private banks give more concentration on organization’s business


objectives while planning the information system. Around 71% of ICICI bank
employees are agree with it where as for SBI it is only 54%.

F7 Mastering the technology presently in use in your organization

Factors SBI PNB SBBJ HDFC ICICI UTI

F7 59.318 55.294 62.430 68.776 74.324 71.238

Conclusion: Above figure says that private bank employees are using present
technology in a very efficient manner. Around 74% of ICICI employees are having
mastering on the technology presently in use whereas only 55% of PNB employees
are agreeing for the same.
F8 Using a distributed system to share information within the firm

Factors SBI PNB SBBJ HDFC ICICI UTI

F8 55.227 54.353 58.131 61.633 61.892 62.095

Conclusion: Figures for this factor are not very different for both public and private
sector banks. Around 62% of ICICI and UTI employees are using a distributed system
to share information whereas for SBBJ it is around 58%.

III Decision Making Process


F1 Use of specific selection criteria for the acquisition of new information
systems

Factors SBI PNB SBBJ HDFC ICICI UTI

F1 52.045 51.294 53.084 67.959 70.541 69.333

Conclusion: Here private sector bank employees are more concern about the use of
specific selection criteria for the acquisition of new information systems. Around 71%
employees of ICICI are agreeing with it whereas only 51% employees of PNB are in
favour.

F2 Choosing Information Technology related to the strategic orientation of your


firm

Factors SBI PNB SBBJ HDFC ICICI UTI

F2 57.727 60.000 61.308 67.755 67.568 69.143

Conclusion: Both public and private sector banks are choosing Information
Technology related to the strategic orientation of their firm. But again the private
banks are bit ahead. Around 68% employees of ICICI bank are agreeing whereas 61%
of SBBJ are in favour.

F3 Knowing the impact that IT will have on the different functions of your bank

Factors SBI PNB SBBJ HDFC ICICI UTI

F3 62.955 60.235 67.664 72.041 72.432 71.238


Conclusion: this factor is also more or less common in public and private sector
banks. Around 72% employees of ICICI know the impact that IT will have on the
different functions of their bank whereas for SBBJ it is around 68%.

F4 Evaluating potential problems related with the implementation of a new


system

Factors SBI PNB SBBJ HDFC ICICI UTI

F4 55.227 54.353 55.140 64.490 65.676 64.952

Conclusion: Private sector banks are ahead in evaluating potential problems related
with the implementation of a new system.

F5 Knowing the results of a financial feasibility study before the acquisition of IT

Factors SBI PNB SBBJ HDFC ICICI UTI

F5 54.545 55.294 56.075 74.082 76.216 74.095

Conclusion: Here also the private bank employees are far ahead. Around 76%
employees of ICICI bank know the results of a financial feasibility study before the
acquisition of IT whereas for PNB it’s around 55%.

F6 Identification of possible sources of resistance to change before


implementation

Factors SBI PNB SBBJ HDFC ICICI UTI

F6 52.500 57.647 54.019 69.184 73.243 70.476

Conclusion: As per the above data the private sector banks are ahead in identifying
the possible source of resistance to change before implementation.

IV Motivations toward Information Technology

F1 Use of IT to reduce your production costs

Factors SBI PNB SBBJ HDFC ICICI UTI

F1 54.545 56.000 57.196 69.184 71.622 69.905


Conclusion: Around 72% employees of ICICI are in favour whereas only 55%
employees of SBI are in support of use of IT to reduce your production costs.

F2 Use of IT to make substantial savings

Factors SBI PNB SBBJ HDFC ICICI UTI

F2 66.364 62.588 64.673 77.551 79.189 75.810

Conclusion: Here the private sector banks are far ahead in believe of use of IT to
make substantial savings.

F3 Use of IT to improve your firm's productivity

Factors SBI PNB SBBJ HDFC ICICI UTI

F3 65.909 68.235 66.729 74.694 76.757 73.333

Conclusion: Here also the private banks are some ahead. Around 77% employees of
ICICI think that IT is useful to improve productivity whereas 66% employees of SBI
and SBBJ are in support.

F4 Use of IT to increase your firm's profitability

Factors SBI PNB SBBJ HDFC ICICI UTI

F4 65.682 68.000 64.112 70.612 71.351 72.571

Conclusion: Here there is not much difference between both public and private sector
banks. They all feel that IT increases the profitability.

F5 Use of IT to improve the quality of products or services

Factors SBI PNB SBBJ HDFC ICICI UTI

F5 71.818 68.941 71.028 77.347 80.270 75.619

Conclusion: Here there is a good difference between both the banks. Around 80%
employees of ICICI think that IT is useful to improve the quality of product or
services whereas PNB shows 69%.
CONCLUSION

Information technology has played a vital role in the advancement of banking system.
The reach of Indian banking to every individual is possible because of the
computerisation process adopted by banking sector. Information technology has not
only simplified the operation but it has also given a great comfort to an individual
who does not have a good knowledge of IT but need to access banking in an optimum
manner.

The computerisation in banks has increased to their productivity and profitability.


Results show that ICICI Bank is found to be efficient in all indicators. ICICI Bank has
been the leader in IT introduction and adoption. ICICI Bank initiated internet banking
services in the year 1997.This was followed by HDFC Bank, Indusind Bank, Federal
Bank, Citibank and ABN AMRO. Nearly 70% of ICICI Bank transactions take place
electronically, resulting in lower cost of transactions, high productivity and better
profitability. Private Banks are the early adopter of technology and took more IT
initiative than public sector banks.

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Appendix 1

Questionnaire

Employee Name:_________________________

Bank Name & Branch:____________________________________________

In comparing your organization with the competition, indicate whether these aspects of your
information systems constitute a strong or weak point of your organization. Refer to this scale to answer:
Very Moderately Neither strong Moderately Very
Weak weak Nor weak strong strong
1 2 3 4 5

Information Technologies
Strategic advantages.

1. Knowing the Information Technology used by your competition. 1 2 3 4 5

2. Instituting a technology watch in order to change rapidly your Information 1 2 3 4 5


Technology when necessary.

3. Ensuring that your choice of Information Technology follows the evolution 1 2 3 4 5


of your environment.
Appendix 2

In comparing your organization with the competition, indicate whether these aspects of your
information systems constitute a strong or weak point of your organization. Refer to this scale to answer:
very moderately Neither strong moderately very
weak weak nor weak strong strong
1 2 3 4 5

Technological know-how and organizational capacity.

1. Mastering current Information Technology products. 1 2 3 4 5

2. Being considered as a leader in Information Technology usage. 1 2 3 4 5

3. Development of a technological culture in your firm. 1 2 3 4 5

4. Having, within the organization, the required human and 1 2 3 4 5


organizational resources to manage the information systems.

5. Having the ability to effectively identify and fill your needs in 1 2 3 4 5


Information Technology.

6. Strategic planning of information systems in relation to the 1 2 3 4 5


organization's business objectives.

7. Mastering the technology presently in use in your organization. 1 2 3 4 5

8. Using a distributed system to share information within the firm. 1 2 3 4 5

Decision making process.

1. Use of specific selection criteria for the acquisition of new information 1 2 3 4 5


systems.

2. Choosing Information Technology related to the strategic orientation of your 1 2 3 4 5


firm.

3. Knowing the impact that IT will have on the different functions of your bank. 1 2 3 4 5

4. Evaluating potential problems related with the implementation of a new 1 2 3 4 5