INDIAN BANKING - THE CHANGING LANDSCAPE

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INDIAN BANKING - THE CHANGING LANDSCAPE

BANKING TODAY- REDEFINED
AND RE-ENGINEERED
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AGENDA FOR THE SESSION

• To Sensitize the Participants to the Latest
  Changes in Banking Industry
• What is the Response to the Current Trends from
  Bankers and Customers?

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INDUSTRY PROFILE

• Public Sector banks
• Private Indian Banks New Generation Banks
• Private Foreign Banks
• Cooperative Banks
• Non Banking Financial Institutions

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Banking Sector Reforms Post-Liberalization

• 1st Narasimham Committee Report on Financial
  Sector Reform 1991
• Introduction of Capital Adequacy Norms and
  Prudential Norms - 1992
• Deregulation of Interest Rates, Prudential Norms
  for Maximum NPA 1993
• Introduction of Banking Ombudsman Scheme 1994

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Banking Sector Reforms Post-Liberalization

• Concept of Local Area Banks Introduced 1995
• 1st Shared Payment Network System conditional
  autonomy to PSUs 1996
• 2nd Narasimham Committee Report of Banking Sector
  Reforms 1997
• Guidelines on Risk Management 1998

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RECENT TRENDS IN BANKS

• Entry of New Generation Banks
• Change in the Process, Methods Techniques
• New Products and Services
• Collaboration between Banking Insurance
  Companies.
• Improvement in Service Quality
• Increasing focus on Retail Banking
• Shift Towards Branchless Banking

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RECENT TRENDS IN BANKS

• Change in Customer Expectations
• Outsourcing of Resources HumanNon-human
• Steady Reduction in Interest Rates
• Increasing Non- Interest and Fee Based Income
• Corporate governance and Business Transformation
• Mergers, Acquisitions and Consolidations

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CHANGING PERCEPTION OF CUSTOMER

• Servicing the Customer 1950s to 1960s
• Satisfying the Customer - 1960s to 1980s
• Pleasing the Customer - 1980s to 1990s
• Delighting the Customer -1990-2000
• Retaining the Customer 2000 and beyond

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WHAT CHANGES ?

• Electronic Fund Transfer (EFT)
• Electronic Clearing System (ECS)
• Automated Teller Machines (ATM)
• Shared Payment Network System (SPNS)
• Credit Cards/ Debit Cards
• Point of Sale Terminal
• Tele-banking
• Mobile Banking
• Net Banking
• Electronic Data Interchange
• Corporate Banking Terminals

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WHERE ARE WE GOING?

• Anywhere Anytime Anyplace Banking
• Timeless and Placeless Banking
• Banking at Convenience
• Good by to Traditional Instruments (Cheques DD)
  Invitation to new Instruments
• Disappearance of Conventional Risk and Arrival of
  New Risks
• Leading to currency-less monetary system
• Dismantling of Physical Structure

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WHAT IS THE TRIGGER?

• Hyper Competition
• Shrinking Margins
• Need to Reduce Cost
• Take Advantage of Technology
• Changing Customer Expectations
• Simplify the Procedure and Process
• Reduce Traditional Risk
• Offer Better / Improved Service
• Some Constraints Policy/Resources/Physical/Struct
  ure

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Author for Change Players in the Banking
Business Eco-System

• Shareholders
• Management
• Depositors
• Borrowers
• Employees
• Government
• Regulatory Authorities RBI
• Competitors

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PHASE OF TECH BANKING
INDUSTRY

• PSB
• PIB
• PFB
• CB
• NBFI

SBI, SBT ETC.
ICICI,IDBI,HDFC,UTI BANK ETC..
CITI BANK,SC BANK, ETC..
SCB,UCB,DCBs/SCBs
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SOME EARLY ADOPTERS
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STRATEGIES OF BANKS

• Citibank Parallel Banking
• HSBC Leveraging branches to grow C
• ICICI B Reducing importance of branch
• HDFC B Conservative migration
• UTI B ATMs as a force multiplier

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Issues and Challenges

• What will happen to the traditional rural credit
  institutions like, Cooperative Banks, RRBs and
  Low performing Public Sector Banks?
• What are all the options for the Public Sector
  Banks?

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Issues and Challenges

• Can the machines establish a strong connecting
  link with customers?
• Is the Convenience Banking good for all segment
  and all seasons?
• Is it not challenges the conventional wisdoms
  (keeping close contact with the customers)?

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Issues and Challenges

• Does IT confer Competitive advantage or is it
  just the cost of staying in business?
• How do we dispose the existing human resource?
• What are the new security issues?
• Is this changes a customer demanded/bank wanted?
  Are the customers happy and comfortable with the
  shift?

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THANK YOU
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Electronic Fund Transfer

• Transfer of funds between banks located in
  different cities in place of DD/MT/Telegraphic
  transfer.

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Electronic Clearing System

• Facilitates inter-bank settlements - both Debit
  Credit clearances through INFINET.
• CC Companies who have to make bulk payments to a
  large number of beneficiaries prepare the credit
  instructions on the magnetic media and submit the
  same to RBI for payment.
• DC Payment to utility companies by banks on
  behalf of the customers.

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Tele-banking

• Using automatic voice recorder it facilitates
  both cash non-cash transactions for the bank
  and customers.

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Automated Teller Machines

• Device used for withdrawal of money, depositing
  of money and balance enquiry and verification for
  24 hours of a day.

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Shared Payment Network System

• Facilitates Use of ATM cards across participating
  banks at ATM centers using Master/Visa Cards. In
  case of using other banks ATM one may have to
  pay service charges.

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Credit Cards/ Debit Cards

• CREDIT CARD It is a card that empowers the
  Customer to spend up to the fixed value of money
  limit fixed - A prepaid card.
• DEBIT CARD It is a post paid card and money is
  transferred after the spending.

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Corporate Banking Terminals

• Facilitates the Corporate customers to log on
  into the banks data base and have access to their
  account for balance verification etc. with
  defined powers.

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Point of Sale Terminal

• Computer terminal that is linked online to
  computerised customer information files that
  facilitates purchase from retail shops as it
  credits the retailer account online.

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Electronic Data Interchange

• Transmit financial information and payments in
  electronic form.- reduces transmitting cost and
  risk.

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ECS - How it works
Corporate Institution
Corporate Institutions Bank
Clearing House
Destination Bank
Destination Bank
Destination Bank
Branches of destination banks
Investors
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How ECS Works - Process flow
Data on Day-1
Reports on Day-2
Clearing House
Sponsor Bank
Destination banks service branches
Encrypted Data on Day-1
Reports on Day-3
Destination branches
User Institution
Credit on Day-4
Beneficiaries A/Cs
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ECS - Processing of Uncredited Payment
Instructions contd...
Encrypted Output Data on Post Settlement Day-2
Return Data submitted on Post Settlement Day-1
Clearing House
Sponsor Bank
Destination banks service branches
Encrypted Output Data on Post Settlement Day-2

Return Advice on Post Settlement Day-1
Destination branches
User Institution
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How to Participate in ECS - Registration
Procedure
Sponsor Bank

• Collect a copy of the ECS brochure and ECS
  Procedural Guidelines
• Identify your Sponsor Bank ( a member of the
  Clearing House)
• Submit an Application -Form annexed to the ECS
  brochure/Guidelines
• Obtain the Unique User Registration number from
  Sponsor Bank

Clearing House
Agreement
Corporate Institution
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Good Bye Paper Warrants
and...
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Switch over to ECS - The best way to Pay
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