A study on financial_services

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IT in Banking

Recommendations of the Narasimham Committee (1991) paved the way for the reform phase in the banking.

Important among the reforms have been introduction of new accounting and prudential norms relating to income recognition,

provisioning and capital adequacy, deregulation of interest rates & easing of norms for entry in the field of banking.

Information Technology has basically been used under two different avenues in Banking. One is Communication

and Connectivity and other is Business Process Reengineering. Information technology enables sophisticated

product development, better market infrastructure, implementation of reliable techniques for control of risks and

helps the financial intermediaries to reach geographically distant and diversified markets.

In view of this, technology has changed the contours of three major functions performed by banks, i.e., access to

liquidity, transformation of assets and monitoring of risks. Further, Information technology and the

communication networking systems have a crucial bearing on the efficiency of money, capital and foreign

exchange markets.

The Software Packages for Banking Applications in India had their beginnings in the middle of 80s, when the

Banks started computerising the branches in a limited manner. The early 90s saw the plummeting hardware

prices and advent of cheap and inexpensive but high-powered PCs and servers and banks went in for what was

called Total Branch Automation (TBA) Packages. The middle and late 90s witnessed the tornado of financial

reforms, deregulation, globalisation etc coupled with rapid revolution in communication technologies and

evolution of novel concept of 'convergence' of computer and communication technologies, like Internet, mobile /

cell phones etc.

In India, banks as well as other financial entities entered the world of information technology and with Indian

Financial Net (INFINET). INFINET, a wide area satellite based network (WAN) using VSAT (Very Small Aperture

Terminals) technology, was jointly set up by the Reserve Bank and Institute for Development and Research in

Banking Technology (IDRBT) in June 1999.

The Indian Financial Network (INFINET) which initially comprised only the public sector banks was opened up

for participation by other categories of members.

The first set of applications that could benefit greatly from the use of technological advances in the computer

and communications area relate to the Payment systems which form the lifeline of any banking activity. The

process of reforms in payment and settlement systems has gained momentum with the implementation of

projects such as NDS ((Negotiated Dealing System), CFMS (Centralised Funds Management System) for better

funds management by banks and SFMS (Structured Financial Messaging Solution) for secure message transfer.

This would result in funds transfers and funds-related message transfer to be routed electronically across banks

using the medium of the INFINET. Negotiated dealing system (NDS), which has become operational since

February 2002 and RTGS (Real Time Gross Settlement system) scheduled towards the end of 2003 are other

major developments in the area.

Internet has significantly influenced delivery channels of the banks. Internet has emerged as an important

medium for delivery of banking products & services. Detailed guidelines of RBI for Internet Banking has

prepared the necessary ground for growth of Internet Banking in India.

The Information Technology Act, 2000 has given legal recognition to creation, trans-mission and retention of an

electronic (or magnetic) data to be treated as valid proof in a court of law, except in those areas, which continue

to be governed by the provisions of the Negotiable Instruments Act, 1881.

As stated in RBI's Annual Monetary and Credit Policy 2002-2003: "To reap the full benefits of such electronic

message transfers, it is necessary that banks bestow sufficient attention on the computerisation and networking

of the branches situated at commercially important centres on a time-bound basis. Intra-city and intra-bank

networking would facilitate in addressing the "last mile" problem which would in turn result in quick and efficient

funds transfers across the country".

Banking Technology

The section provides at one place all information related to Technology in the

Banking, Finance & Insurance (BFSI) Industry.

The Software Packages for Banking Applications in India had their beginnings in the middle of 80s, when the

Banks. spurred on by RBI and the Rangarajan Committee Report, started computerising the branches in a limited

manner.

The early 90s saw the plummeting hardware prices and advent of cheap and inexpensive but high-powered PCs

and servers and Banks went in for what was called Total Branch Automation (TBA) Packages.

The middle and late 90s witnessed the tornado of financial reforms, deregulation, globalisation etc coupled with

rapid revolution in communication technologies and evolution of novel concept of 'convergence' of computer and

communication technologies, like Internet, mobile / cell phones etc.

The evolution of IT services outsourcing in the Indian banks has presently moved on to the level of Facilities

Management (FM). Banks now looking at business process management (BPM) to increase returns on

investment, improve customer relationship management (CRM) and employee productivity.

E-banking

With cybercafes and kiosks springing up in different cities access to the Net is going to be easy.

Internet banking (also referred as e banking) is the latest in this series of technological wonders in the

recent past involving use of Internet for delivery of banking products & services. Even the Morgan

Stanley Dean Witter Internet research emphasised that Web is more important for retail financial

services than for many other industries.

Internet banking is changing the banking industry and is having the major effects on banking

relationships. Banking is now no longer confined to the branches were one has to approach the

branch in person, to withdraw cash or deposit a cheque or request a statement of accounts. In true

Internet banking, any inquiry or transaction is processed online without any reference to the branch

(anywhere banking) at any time. Providing Internet banking is increasingly becoming a "need to have"

than a "nice to have" service. The net banking, thus, now is more of a norm rather than an exception

in many developed countries due to the fact that it is the cheapest way of providing banking services.

Computerisation in Public Sector Banks (As on March 31, 2006)

i) Branches already Fully Computerised # 48.5%

ii) Branches Under Core Banking Solutions 28.9%

iii) Fully Computerised Branches (i+ii) 77.5%

iv) Partially Computerised Branches 18.2%

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IT in Banking Recommendations of the Narasimham Committee (1991) paved the way for the reform phase in the banking. Important among the reforms have been introduction of new accounting and prudential norms relating to income recognition, provisioning and capital adequacy, deregulation of interest rates & easing of norms for entry in the field of banking. Information Technology has basically been used under two different avenues in Banking. One is Communication and Connectivity and other is Business Process Reengineering. Information technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets. In view of this, technology has changed the contours of three major functions performed by banks, i.e., access to liquidity, transformation of assets and monitoring of risks. Further, Information technology and the communication networking systems have a crucial bearing on the efficiency of money, capital and foreign exchange markets. The Software Packages for Banking Applications in India had ...
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