ICT DIFFUSION IN INDIAN BANKING: A STUDY

The banking system plays a significant role in the determination of money supply
in a country. The origin of Indian banking can be found in as early as the Vedic period.
In ancient India, mainly indigenous bankers and agency houses carried on banking
business. Commercial banking in India had traditionally developed along lines or pattern
of commercial banking in England. This pattern changed after the nationalization of
commercial banking in July 1969. After the Nationalization of commercial banks, they
have become a powerful instrument of development.

Another turning point in the transformation of banking system in India was the
Financial Sector Reforms initiated in 1991. A substantial part of the agenda for reforms
of the Indian financial sector since 1991 has related to the problems facing the public
sector banks, which have dominated commercial banking in India for many years.
Although progress has been made due to these measures, this is not the time
complacency; much more needs to be done to ensure that the banking system performs its
role to its fullest potential. As India embarks on the next phase of its development with
its accent on market signals and therefore on allocative efficiency, it is important that the
banking system evolves in a healthy manner and that the sustainability of the institution
of banks is ensured. It is in this context of global competition, ICT came to the forefront
of challenges faced by the banking system.

The changing face of contemporary world can be explained in terms of ICT. It

not only connects the world at one single platform but also helps in bringing traditional
and modern societies together. The ICT strategy of a nation is very curcial to put it on a
global map. ICT has been recognized as an infrastructure which helps to arrest urban-
rural divide and imbalance in socio-economic development, especially in developing
countries. Some important devices constantly made use of, especially in the banking
sector, can be listed as follows:
1. Automated Teller Machines (ATMs)
2. Personal Digital Assistants (PDAs)

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 3. Internet Voice Response(IVR) Technology
4. Smart Cards
5. Biometrics
6. Credit Scoring

The first target for these applications, along with internet banking and mobile banking
was to attract more people to banks by offering convenient and user friendly methods of
banking. In addition, it makes possible broader options of choice for them, additing to
the attractiveness of banking.

The entire approach towards technology-based banking has shown significant

improvements sin e the initiation of reforms in the `1990s. The foundation for large scale
induction of lIT in the banking sector was provided by the recommemndation of the
Committees headed by Dr. C. Rangarajan in 1984 and 1989. Subsequently, in 1994, the
RBI constituted a committee on ‘Technological Upgradation in the Banking Sector’. The
Committee made a number of recommendations covering payment systems including
setting up of an autonomous centre for development and research in banking technology.
The Institutute for Development and Research in Banking Technology(IDRBT) was
created as a sequel. The Institute operates the Indian Financial NETwork(INFINET),
performs research in banking technology and provides consultancy services apart from
providing educational and training facilities for the banking sector.

Objectives of the study

1. To examine the extent of technological adoption by the commercial banks.
2. To analyse the awareness and satisfaction level of the customers with the use of
computerized services, and
3. to understand the inclusability of technological change among the customers.
Methodology of the study
The study relies both on primary and secondary data. To understand the
technological spread in the commercial banking , a scheduled commercial bank, viz.,
Federal Bank has been selected purposively. The selected bank has a tradition in

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harnessing technology in providing banking services. An urban branch of the Federal
Bank from Calicut City of Kozhikode district has been identified and from this branch a
sample of 100 customers were selected at random to study the stated objectives.
Secondary data pertaining to the use of IT in the day to day functioning of the
bank and various facilities offered through the ICT has been collected from the records of
the Bank. We have also relied on the Economics journals, Publications of the RBI and
Annual reports of the Bank.

Profile of the Sample Bank

Federal Bank is one of the leading private sector banks in India with a history of
around 80 years. The bank has a very wide network as on March 2008 with 606
branches with 544 ATMs. The bank has switched over toits core banking platform at a
record pace and all its branches are now operating under computerized ban king services.

Table 1: Customers having ATM Card

No. of Customers ATM Card Holders Non-card holders
80 78(97%) 2(3%)

Table 2: Number of Customers using ATM Card

Category Number Daily Weekly Monthly Never
Holders of ATM Card 78 7 27 13 31
Non holders 2 - - - 2
Total 80 7 27 13 33

Table 3: Frequency of using ATM (Occupation Wise)

Occupation No. Daily Weekly Monthly Never
Professional 15 2 6 2
Business 28 3 14 7
Student 5 0 0 1
Salaried 25 2 7 2
Others 5 0 0 1
Total 78 7 27 13

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Table 4: Classification of ATM Card users on the basis of residential status
Area No. of Samples Daily Weekly Monthly Never
Urban 40 6 13 7 14
Semi-urban 12 1 2 1 8
Rural 26 0 12 5 9
Total 78 7 27 13 31

Table 5: ATM Card Users on the basis of annual income

Annual No. of Daily Weekly Monthly Never
income(Rs) Samples
100000 13 2 - 1 10
100000- 45 5 10 10 20
200000
200000 20 - 17 2 1
78 7 27 13 31

Table 6: Customers using other IT based services

Sl.No IT based Services No. of Customers % of customers

.
1 Internet banking 25 31.00
2 Tele-banking 21 26.00
3 Easy pay facility 25 31.00
4 Railway Reservation 3 04.00
5 Fed Alert Facility 33 41.00
6 Anywhere banking facility 27 34.00
7 Bill payment facility 32 40.00
8 Fed+Amrita 0 00.00
9 RTGS 0 00.00

Table 7: Frequency of using IT based services

Sl.No Services Number Daily Weekly Monthly
.
1 ATM 47 7 27 13
2 Internet banking 25 1 10 14
3 Tele banking 21 2 10 9
4 Easy pay facility 25 4 11 10
5 Fed Alert facility 33 5 15 13
6 Anywhere banking 27 5 13 9
7 Bill payment facility 32 - - 32

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Table 8: Usage of IT based services on the basis of residential status
Sl.No Services Rural Semi-urban Urban Total
.
1 ATM 4 17 26 47
2 Internet banking 2 15 8 25
3 Tele banking 0 8 13 21
4 Easy pay facility 0 12 13 25
5 Fed Alert facility 3 12 18 33
6 Anywhere banking 0 7 20 27
7 Bill payment facility 4 13 15 32

Table 9: Occupation-wise classification of IT based banking services

Services Professional Businessmen Students salaried Others Total
ATM 10 22 3 10 2 47
Internet banking 5 12 0 7 1 25
Tele banking 8 11 0 2 0 21
Easy pay facility 7 7 0 8 3 25
Fed Alert facility 12 11 2 8 0 33
Anywhere banking 12 10 0 4 1 27

Table 10: Problems encountered in using the services

Any Problems? Yes No
ATM 10.00 90.00
Internet banking 22.00 78.00
Fed Alert facility 10.00 90.00

Table 11: Main Problems

Sl.No. Main problems Rank
1 Technical Problems I
2 Accessibility II
3 Waiting at ATM counters III

Table 12: Attitude of the users towards IT based services

Sl.No. Attitude No. %
1 Highly satisfactory 38
2 Satisfactory 28
3 No opinion 09
4 unsatisfactory 03
5 Highly unsatisfactory 02