NEW TENCHNOLOGY IN BANKING IN INDIA 1. 2. 3. 4. 5.

INTRODUCTION REVIEW OF LITERATURE MAIN CONTENT RECOMMENDATION AND CONCLUSION BILIOGRAPHY

Introduction Banking sector plays a significant role in development of Indian economy. So banks need to optionally leverage technology to increase penetration, improve their productivity and efficiency, deliver cost-effective products and services, provide faster, efficient and convenient customer service and thereby, contribute to the overall growth and development of the country. Technology enables increased penetration of the banking system, increases cost effectiveness and makes small value transactions viable. Besides making banking products and services affordable and accessible, its simultaneously ensures viability and profitability of providers. Technology allows transactions to take place faster and offers unparallel convenience through various delivery channels. Technology enhances choices, creates new markets, and improves productivity and efficiency. Effective use of technology has a multiplier effect on growth and development. In the five decades since independence, banking in India has evolved through four distinct phases. During Fourth phase, also called as Reform Phase, Recommendations of the Narasimham Committee (1991) paved the way for the reform phase in the banking. Important initiatives with regard to the reform of the banking system were taken in this phase. Important among these 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. Entry of new banks resulted in a paradigm shift in the ways of banking in India. The growing competition, growing expectations led to increased awareness amongst banks on the role and importance of technology in banking. The arrival of foreign and private banks with their superior state-of-the-art technology-based services pushed Indian Banks also to follow suit by going in for the latest technologies so as to meet the threat of competition and retain their customer base. Indian banking industry, today is in the midst of an IT revolution. A combination of regulatory and competitive reasons has led to increasing importance of total banking automation in the Indian Banking Industry. 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 computerizing 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, globalization 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.

Review Of Literature
It is the study of various literatures on the level of information technology, and customer satisfaction in the banking sector. It has also emphasis the way in which a customer has access to a banks services and products, mainly through the use of automated processes such as computerized banking (cash and James T, 1994). Due to increase in technology usage the banking sectors performance increases day by day. Online banking is becoming the indispensable part of modern day banking services. It is expected that 60 % of retail banking dealings will be online in ten years' time, put forth by Barwise, P. (1997). The study reveals that most of the Indian banking customers are likely to prefer the online banking activity but with ensured security. A big concern about information technology on service delivery channels is security. According to Buchanan and Gilles (1990), security is the condition of being protected against danger, loss, and criminals. In the general sense, security is a concept similar to safety. The ultimate satisfaction of any the value added banking facility offered to the customer is arrived only with the security level attached with that facility in India. According to John Wiley (1997), Internet banking is the newest delivery channel to be offered by retail banks in many developed countries. It allows customers to conduct financial transactions on a secure website operated by their retail or virtual bank. In this case, the internet is used as a message carrier where the customer uses a PC and a modem or local area network to connect to the bank using its online website or software provided by the bank (Porter, 2001). In India, Internet banking is offered to customers on the basis of their requirements. E-channels refer to the methods of delivering service products using electronic media such as the telephone, internet and automated teller machines (ATMs) as noted by, Boon and Yu (2000). These delivery methods have become an increasingly important technique to retain customers in todays dynamic banking environment since customers can make withdrawals, deposits and

access balances at their own convenience, according to Tanzi (1997). E-Channels are preferred by the Indian customers nevertheless of their socio economic back ground. Mario Castelino (2006) suggests that Indian banking industry has provided the leading edge to what is happening to the Indian economy. Banks have equipped themselves with the latest of technology like core Banking. Business Process Reengineering has been introduced to enhance spleen and efficiency of delivery. Technological innovation and exposure creates a smooth competitiveness among the nationalized and private sector and foreign sector banks.

Contribution of ITeS in Indian Banking Sector

Banking is an Industry that provides vital service and support to the economic and financial sectors. It is information technology which enables banks in meeting such high expectations of the customers who are more demanding and are also more techno-savvy compared to their counterparts of the yester years. They demand instant, anytime and anywhere banking facilities. ITeS has been providing solutions to banks to take care of their accounting and back office requirements. This has, however, now given way to large scale usage in services aimed at the customer of the banks. ITeS also facilitates the introduction of new delivery channels - in the form of Automated Teller Machines, Net Banking, Mobile Banking, card mechanisms and the like. Although ITeS enhances the banks in achieving higher customer satisfaction by extending value added services. Computerization in Banks: Technology has charged the face of the Indian banking sector through computation while new private sector banks and foreign banks have an edge in this regard. Among the total number of public sector bank branches, 97.8 percent are fully computerized at end March 2010 where as all branches of SBI are fully computerized.

Automated clearing House (ACH): In clearing house, computers are employed to handle cheques. The nature of work involved in clearing operations in voluminous, repetitive, routine in nature. It is complex to clear, exchange and settles the transactions among several banks. Computers are deployed in clearing house to speed up the process and clearing the operations quickly and efficiently which is voluminous work. Automated clearing house (ACH) is an electronic network for financial transaction. ACH processes large number of debit and credit transaction in batches. National Automated clearing house Association (NACHA): It helps to debit transfers for point-of-purchase (POP) check conversion. Both government and the commercial sectors use ACH payment. Business are also increasing using ACH to collect payment online from customers, rather than accepting credit or debit cards. Rules and regulations governing the ACH network are established by NACHA and Federal Reserve. The Federal

Reserve banks are collectively the nation's largest automated clearing house operator. FEDACH is the Federal Reserve's centralized application software used to process ACH transactions. Electronic Clearing Services (ECS): ECS is a mode of electronic funds transfer from one bank account to another bank account using the services of a clearing house. This is used for bulk transfers from one account to many accounts or vice-versa. Types of ECS:There are two types of ECS called ECS (credit) and ECS (debit). 1. ECS (credit)- is used for affording credit to a large number of beneficiaries by raising a single debit to an account, such as dividend, interest, salary payment pension etc. 2. ECS (Debit)- is used for raising debits to a number of account of consumers/account holders for crediting a particular institution e.g. payment to utility companies like telephone, electricity or charges such as house tax, water tax etc.

Core Banking Solutions (CBS) Unlike their western counterparts, Indian banks had the opportunity to leapfrog through technological innovations as they started off with a comparatively clean slate. CBS enables banks to consolidate their technology platforms across functions and geographies leveraging cost and at the same time acquiring flexibility and scalability to adapt to a fast changing and competitive environment. In core banking, Banks are getting their data aggregation layers in place to facilitate projection of data in the form of static and dynamic reporting capability. This would be a logical extension of operational data aggregation using core banking systems. Systems such as core banking and business intelligence, if used synchronously, will add phenomenal enterprise value to business. In addition focus on integrated payment channels that provide real/ near-real time services by way of straight through processing (STP) and 24 x 7 operations will be key differentiators in banking technology going forward.

Automated Teller Machine (ATM) The traditional branch model of bank is now replaced with an alternative delivery channels like ATM network by using the plastic card with its special features. It is otherwise being called as debit cards. The plastic ATM card is replacing all paper based verification including cheque, and

it avoids the personal attendance of the customer during the restriction of banking hours. ATMs used as facilitator for Electronic Fund Transfer. ATM itself can provide information about accounts of customers and also receive informations and instructions from customers like stop instruction, auto pay, cheque drop, etc., An ATM is an Electronic Fund Transfer terminal facilitating cash deposits, inter and intra transfer between accounts, balance enquiries along with mini statement of accounts, cash withdrawals and pay bills.

Internet Banking ( i Banking / e-Banking) Internet banking (or E-banking) means any user with a personal computer and a browser can get connected to his banks website to perform any of the virtual banking functions. In internet banking system every bank has a centralized database that is connected with other banking system through web-based environment. All the services that the bank has permitted on the internet are displayed in menu. Through that any service can be selected by the customer and further the demo or working manual is provided by the nature of service. It would be a borderless entity permitting anytime, anywhere and anyhow banking. The network which connects the various locations and gives connectivity to the central office within the organization is called intranet. These networks are limited to organizations for which they are set up. SWIFT is a live example of intranet application.

Mobile Banking / Phone Banking In October, 2008, the first measure to regulate mobile banking in India was start up. Since then, it is progressively liberalized the manner and extent to which banks can conduct mobile banking, alive to the needs of the market, in particular, the un-banked population and the migrant labour force within the country. Today, mobile phone enhancing the banks in India to facilitate intra and inter bank funds transfer between bank accounts. India is enjoying an explosion in the development and usage of mobile communication technology. With this development the financial sector can exploit. Mobile phone users belong to all strata of society, spread across metropolitan centre, towns and villages. In telephone banking, the telephone is used as a message carrier to enable person to person or voice activated automated communication between the bank and the customer (Jun and Cai, 2001). Banks which operate mostly or exclusively by telephone are known as phone banks. (Jane Blake, 2000). Mostly telephone banking uses an automated phone answering system with phone keypad response or voice recognition capability in India.

Card Mechanism o Credit Cards/Debit Cards The Credit Card holder is empowered to spend wherever and whenever he wants with his Credit Card within the limits fixed by his bank. Credit Card is a post paid card. Debit Card, on the other hand, is a prepaid card with some stored value. Every time a person uses this card, the Internet Banking house gets money transferred to its account from the bank of the buyer. The bank never faces a default because the amount spent is debited immediately from the customers account. o Smart Card Banks are adding chips to their current magnetic stripe cards to enhance security and offer new service, called Smart Cards. Smart Cards allow thousands of times of information storable on magnetic stripe cards. In addition, these cards are highly secure, more reliable and perform multiple functions. They hold a large amount of personal information, from medical and health history to personal banking and personal preferences. Smart card technology is now familiarized in India. Dmat Card: The demat account has to be treated virtually like a account with the difference being that instead of actual cash there are shares in the account. A beneficiary account is an account opened by the investors or broker with a Depository Participants (DP) of his choice, to hold shares in dematerialized (demat) form and undertake scrip less trading. The investors must open a demat account with a DP. Opening a demat account

Fund Transfer Techniques It is necessary to highlight here the extent of customer migration to electronic payments in India. From less than half a percent of transactions in the electronic mode in 2001, today the process close to about 30 crores transactions per year in the electronic mode. The same holds true for RBIs recent initiative away from High Value Clearing to electronic modes, a move aimed at creating a safer, secure and credit-push based funds transfer route that has gained considerable transaction. o RTGS The past few years marking some major milestones in the Indian payment and settlement systems with the introduction of the Real Time Gross Settlement (RTGS) System has resulted in compliance with the Basle Core Principles for Systemically Important Payment Systems of the Bank for International Settlements. It also has providing the means for risk-free and credit pushbased fund transfers settled on a real-time basis with the central bank money. The facility for inter-bank funds settlement through RTGS is today available across more than 55,000 bank branches, in more than 2500 regional centers across the country, a coverage span perhaps not seen anywhere else in the world.

o NEFT The rapid acceptance of RTGS by users can be measured by the daily transaction volume, today the settlement close to 1,00,000 transactions a day in the RTGS mode, up from just about 6000 transactions a day in 2004-05. In fact, quick, safe and efficient electronic movement of funds from virtually any part of the country to any other location is now almost guaranteed. This is enabled by the coordination with the National Electronic Funds transfer (NEFT) System and the National Electronic Clearing Service (NECS). In 2005, RBI was clearing about 2.70 lakh NEFT transactions a month. This number has jumped exponentially to nearly 40 lakh a month. (10 lakhs = 1 Million) o INFINET Institute for Development and Research in Banking Technology (IDRBT) implemented the Indian Financial Network, the INFINET a one-of-a-kind initiative for the banking sector aimed at sharing expensive IT resources so as to achieve economies of scale. One of the notable achievements of IDRBTs has been the implementation of Public Key Infrastructure (PKI) based electronic data transfer with very high security levels. The Institute has also developed a messaging standard known as Structured Financial Messaging System (SFMS) with security features superior even to SWIFT. Electronic Funds Transfer (EFT): Electronic Funds Transfer (EFT) is the electronic exchange or transfer of money from one account to another. The exchange takes place between a single financial or across multiple institutions, through computer based systems. RBI introduced EFT to help banks offering their customers money transfer service from account to account of any bank branch to any other bank branch. The EFT system presently covers all the branches of the 27 public sector banks and 55 scheduled commercial banks at the 15 centers.

National Payment Corporation of India (NPCI) : NPCI consolidate and integrate the multiple systems with varying service levels to nation-wide uniform and standard business process for all retail payment systems. Also it helps to facilitate

an affordable payment mechanism to benefit the common man across the country and help financial inclusion. BANKNET: BANKNET is a internet based communication network. It provides speed of financial transaction. BANKNET is set up in 1991 by the RBI, this backbone is meant to facilitate transfer of inter-bank (and inter-branch) messages within India by Public Sector banks who are members of this network. Society for Worldwide Inter-bank Financial Telecommunication (S.W.I.F.T): The S.W.I.F.T provides reliable and expeditious telecommunication facilities for exchange of financial message all over the world. The gateway is in Mumbai and efforts are on to other cities through leased lines/public data network. The majority of international interbank messages use the SWIFT network. As of September Institute for Development and Research in Banking Technology (IDRBT): The main purpose of IDRBT is to adopt research and development as well as consultancy in the application of technology to the banking and financial sector in the country. Reserve Bank of India (RBI) established IDRBT in 1996. Structured Financial Messaging Solution (SFMS): Structured Financial Messaging Solution (SFMS) is helpful for inter-bank and intra-bank messaging. This messaging is useful for applications like Electronic Funds Transfer (EFT), Real Time Gross Settlement (RTGS), Delivery verses Payment (DVP), Centralised Funds Management System (CFMS). The SFMS was launched in India on December 14, 2001 by RBI. Benefits of Technology Competition Studies show that competitive pressure is the chief driving force behind increasing use of Internet banking technology, ranking ahead of cost reduction and revenue enhancement, in second and third place respectively. Banks see Internet banking as a way to keep existing customers and attract new ones to the bank. Cost Efficiencies National banks can deliver banking services on the Internet at transaction costs far lower than traditional brick-and-mortar branches. The actual costs to execute a transaction will vary depending on the delivery channel used. National banks have significant reasons to develop the technologies that will help them deliver banking products and services by the most cost-effective channels. However, national banks should use care in making product decisions. Management should include in their decision making the development and ongoing costs associated with a new product or service, including the technology, marketing, maintenance, and customer support functions. This will help management exercise due diligence, make more informed decisions, and measure the success of their business venture. Geographical Reach Internet banking allows expanded customer contact through increased geographical reach and lower cost delivery channels. In fact some banks are doing business exclusively via the Internet they do not have traditional banking offices and only reach their

customers online. Other financial institutions are using the Internet as an alternative delivery channel to reach existing customers and attract new customers. Branding Relationship building is a strategic priority for many national banks. Internet banking technology and products can provide a means for national banks to develop and maintain an ongoing relationship with their customers by offering easy access to a broad array of products and services. Internet Banking 4 Comptrollers Handbook By capitalizing on brand identification and by providing a broad array of financial services, banks hope to build customer loyalty, cross-sell, and enhance repeat business. Customer Demographics Internet banking allows national banks to offer a wide array of options to their banking customers. Some customers will rely on traditional branches to conduct their banking business. For many, this is the most comfortable way for them to transact their banking business. Those customers place a premium on person-to-person contact. Other customers are early adopters of new technologies that arrive in the marketplace. These customers were the first to obtain PCs and the first to employ them in conducting their banking business. The demographics of banking customers will continue to change. The challenge to national banks is to understand their customer base and find the right mix of delivery channels to deliver products and services profitably to their various market segments.

Recommendations
Demographic factors are the most significant as well as the independent factors of the respondents in determining the utility of IT enabled services offered by banks. So it is necessary for every bank to pay much attention on these factors. In this study reveals and provides much more opportunity to banks to extend the facilities to various segments of people. The bank can make strategy to cover the uncovered areas, the strategy may be varies from group to group. Already some of the Indian banks are adopted and offered some of the strategy oriented facilities to cover a particular segment. It can be further improved like designing discriminated services like specialized Personal banking services to old age people, local and remote language in ATM and other day to day transactions with banks to encourage illiterate, plan some new type of accounts and deposits for women empowerment and development like Shakthi Account, easy and quick fund transfer and fast track cash delivery option, to save time and effort of the employee segment the bank can have a tie up to arrange the payment services like telephone bill, electricity bill, insurance bill, etax filing, etc., it is very much essential for all the banks to establish very tighten security for all range of banking transactions. Nevertheless of the category, all the peoples are expecting the security aspects, since hot currency is involved in all the transactions. The information about various IT enabled services offered by banks is gathered by the respondents mostly from the bank employees and the campaign conducted by the banks. Hence it is further recommended to banks to have such kind of Education Camp or Awareness Program whenever a new range of facilities offered to people. Then only the optimum utility of the services can be ensured.

The banks can enter understanding or agreement with other network and telecommunication services, and they can even simplify the banking transactions online like fund transfer through mobile phone. To develop the core banking system and establishing the network connectivity among the branches of any banks, it is better to go for Unique banking Solutions. Through that, the connectivity among the bank branches is ensured and it further enhances the convenient and easy access of banking services to customers. Moreover it facilitates the customers to make faster transfer of money and payment services at any the bank branches. Besides the traditional banking services, the banks can plan for offering new range of financial products by establishing tie-up with some merchandise and they can offer some outsourcing service and joint venturing with other financial services company like offering insurance products through banks, i.e., Banc assurance. The banks can arrange the outsourcing company to offer services which are bulk in number and need some assistance to complete, like issue of credit card and bill collection, etc., so that the burdensome work is shared by the outsourcing company, and the banks can freely think about its customer relationship management. Foreign banks are offering financial services in a global way, because it operates at various parts of the world. To compete with the foreign banks, private banks also started to incorporate the technological advancement in their business. In the hectic competition, public sector banks also need to satisfy the customer requirements by modifying the business operation in a technological way to meet the globalization.

Conclusion
In general, todays people live in an IT era. So the technological advancement and interaction in financial service industry is completely inevitable and most invited. The technological development will enhance all segment people to update their business and individual operations in a simplified and most convenient manner. It makes a certain change in the standard of living of the people, and it is used as tool in abolishing the economic imbalance. It will support the sustainable as well as the balanced economic growth. The technological advancement and intervention in the banking sector not only facilitates the banks to offer value added financial services to its customers, but also helps to maintain the bulk volume of daily financial transactions and constructing a wide range of data warehousing. So that the bank can construct, develop and maintain a complete data base of the customer, it will be used to build up strong customer relationship management. BIBLIOGRAPHY
www.rbi.org.in www.wikipedia.org

www.nseindia.com