Chapter -2

INDIAN BANKING SYSTEM:

TREND AND PROGRESS IN
INDIA
 Chapter-2

INDIAN BANKING SYSTEM: TREND AND

PROGRESS

2.1 Banking System in India: An Overview

Indian culture is low risk taking culture, so banks are very important financial
institution which protects the cash related risk of the general public Globalization,
competitive pressure, and technology advancement change the whole process of banking
industry. Brick and mortal system are now replaced by click and portal system. All banking
services such as opening an account, transaction processing, record maintenance, queue
management and information providing have been changed by using information
technology. Technology enhancement changes batch processing system of the bank into the
real-time processing system. ATM, Internet banking, mobile banking, and plastic money
are some new emerging concept which changes mass services into customized services..
Banks are now adopting mobile based channels to cater the need of every individual in
order to reach maximum people and to go for low cost service delivery platform. Market of
mobile phone is growing at a rate of 20% and mobile connectivity present almost every
corner of India. Mobile banking is the next revolution in the telecom and banking sectors
.Major telecoms are entering into the deals with banks and banks are providing a range of
financial products and services offered by the bank through the mobile operator outlets. For
mobile banking transactions every customer has to open mobile accounts

The Indian banking system consists of

 Public Sector Banks -26

 Private Sector banks-20

 Foreign banks-43

 Regional Rural banks-56

 Urban Cooperative banks-1589

 Rural Cooperative Banks -93550

15
 As per RBI, majority of the banks already meet capital requirements of Basel III .
Indian banking system is sufficiently capitalized and well regulated. Indian banking system
had rolled out with new innovative banking model like payment and small finance banks.
The transformation of banking industry is widely influenced by the adoption of technology.
Liberalization of economic and the adoption of best practices in banking had increased the
efficiency of banks with the aid of technology.

Advantages:

1. Banking service can be provided to unbanked areas and to customers who have not
got the banking service.

2. Those staying away from their homes and finding difficulty in remitting their
money to their families can send their money through mobile banking.

3. Non cash banking transactions can be carried out by using mobile phones.

In India public sector bank assets stand at USD1.4 trillion and the total Indian banking
system assets is around USD1.96 trillion Currently 56 RBs (Regional rural banks) are
functioning in India as on March-2016 with net worth of USD 15.28 million. Airtel
payment bank has around 60% coverage in the rural areas; Mobile banking, ATM and
Instate banking are being used for increasing their operational efficiency. Unbanked
population highlights the cope for innovation delivery.

2.1.1 Evolution of Indian Banking sector

 1921- Sate owned Imperial bank of India was established.

 1935- RBI was established as the central bank of India. Role of imperial bank
came to an end.

 1936-195- Imperial bank expanded its network to 480 branches. In order to

enter to rural area Imperial bank was converted to State Bank of India.

 1956-2000 – Entry of Private layers such as ICICI started the competition

among the banks. Technology up gradation was done in the public sector banks.

 2000- Onwards- As per RBI report India recorded highest foreign exchange
reserves around USD 363.14 billion .RBI had allowed foreign banks to invest in
local private lenders and institution like LIC upto a limit of 0percent.

16
 STRUCTURE OF INDIAN BANKING SECTOR

Fig-2.1.1 Structure of Indian banking sector

2.1.2 Growth of Indian banking system

There is an increase of demand for both corporate and retail loans in particularly the
services, real estate, consumer durables and agriculture allied sectors have led the growth in
credit.

2.1.3. Constraints in adoption of mobile banking

Security concerns are the main aspect of mobile banking adoption which needs to
be addressed. A bank has to launch mobile apps and diversity of operating system and
devices present, Customers are reluctant to learn new technology and lack of incentives to
for adoption of new channel. Lack of reliable initiatives from banks to move customers to

17
mobile banking channel. The growth of every economy depends on various sectors like
agriculture, manufacturing, education, Finance, etc. In India, after implementation of new
economic policy in 1991, financial sector observed as a key element for the growth of the
economy. The government has also taken various steps towards this like financial
inclusion, rural banking, etc. According to Indian brand equity foundation, the financial
sector in India is primarily a banking sector with commercial banks covering more than 60
percent of the total financial assets held by the financial system. The resultant of above fast
pace financial sector growth, Indian banking sector has observed significant reforms in
recent times, like Automated Teller Machine (ATM), Green channels, Internet baking,
mobile banking, etc. focused toward maximum profit, minimum cost and above all
maximum satisfaction of the customer. In spite of these facilities, one critical problem was
left behind i.e. Queue Yes, a daily long waiting line of the customer to be served is a
common custom to see in banks. But long waiting line in banks is most annoying thing
being the public’s most important units. So m-banking is a new innovative step taken by
banks to resolve this issue. Cost-benefit analysis and usefulness are the key factors which
affect adaptation of information technology by users. Hadidi argued that information
technology based applications are fundamental requirements for all banks and there is a
positive correlation between use of information technology and performance of banks.
Hence, technology plays very important role in banking services, but in India people have
still faith in personal contact with a service provider which is missing in self-services
technology. Factors which affect adaptation of electronic and m-banking in Indian context
and impact of it on consumer behavior are desirable to examine. The emergence of mobile
commerce which is consist of mobile payment, mobile marketing and m-banking. The
customer can enjoy many benefits by using m-banking such as mini statement, new account
opening, insurance term payment, balance inquiry, banking transaction alert, cheque related
functions, fund transfer, PIN management, bill payments, mobile recharge, commercial
shopping, third party transfer and many more.

Over the past few years, India has emerged as one of the largest economies in the
world; and it is set to emerge ahead of China, as per the recent report by the World Bank.
The improvement in India’s economic fundamentals has accelerated in the year 2015 with
the combined impact of strong government reforms, RBI’s inflation focus supported by
benign global commodity prices. The size of the Indian economy was estimated at US$

18
2.07 Trillion (INR 132.7 Trillion) for the year 2015, compared to US$ 2.04 Trillion (INR
124.5 Trillion) in 2014. Number of Commercial Banks rises to 152 in the year 2015, as
against 151 in 2014, registering an increase after 2 years. As regards to broadband
subscribers, the Central Government had revised the definition of 1 Indian Economic
Overview Broadband in July 2013. According to revised definition of broadband, the
numbers of broadband subscribers have increased to 99.2 Million in 2015 as compared to
15 Million subscribers in the year 2013 (as per pre revised definition).

Fig 2.1.2 Economic Overview 2009-2015

Mobile Banking is a game changer for the Indian Banking Sector and more
particularly in the context of Financial Inclusion. Providing banking services by ensuring
safety, security, reliability and interoperability, on both low-end and high-end mobile
phones, through various mobile communication channels is a challenge as well as an
opportunity for Banks. Developing customized Mobile Banking Applications and testing
them is another big challenge since mobile phones have varying degrees of embedded
features, different operating systems, non-uniform computing resources.

2.1.4 Technology Adoption in Indian banks

Adoptions of technology by the banks have a positive impact on payment systems

in India. Technology plays a vital role in the bank strategy through which banks are
migrating from paper based transactions to paper less transactions. Technological

19
innovation has a positive impact on increasing the operational efficiency as well as
productivity of the banks. A paradigm shift has been done in the banking sector due to the
adoption of technology, branchless banking are being carried now a days. Most of the
transaction customers do at their home or work place at their convenience and they do not
feel to go to branch for their banking. Technology acts as catalyst and business driver for
the banks. The growth of the telecommunication technology has added a dimension to the
banking and is being leveraged in acquiring customers, enabling automation and increasing
the process efficiency. Over the last decade almost all the banks have emphasized on core
banking solutions and had completed the transformation to technology driven banks. Banks
branches are transforming from operating as transaction processing points into relationship
management hubs. Adoption in banking increases the productivity and efficiency by
enabling the banks to be more competitive. Real time data availability leads to the better
decision making. Efficient regulatory and competitive atmosphere has led to increasing
importance of total banking automation in the Indian banking industry. By supplying the
right information and adopting right technology banks always want to remain competitive
and banks compete with each other in adoption g the technology for providing better
customers to their customers. Information Communication technology (ICT) offers the
banks to build a new competitive strategy weapon in order to combat the competitive
environment. Present techno savvy customer’s wants to use the latest technology adopted
by banks and In order to attract to those techno savvy customers banks are trying to adopt
technology in order to keep pace with customer changes. Adoption of newer technology by
banks and delivering their product and services through it becomes a challenge for the
banks. Technology Developments adapted by Indian Banking are as follows:

 Era of 1980’s: Mechanization of transactions and processes started in banking

sector in the 80’s .the introduction of encoders, mechanization of cheque processing
i.e. MICR. Manual processing of negotiable instruments were eliminated.
Particularly bank draft and cheques were processed during this period.

 Era of 1990’s: Effort towards computerization was done in Indian banking system.
All branches were computerized resulted in increasing productivity and expansion
of delivering their product and services were offered to customers. Connectiviy
among branches resulted into a new platform i.e. EFT (Electronic fund transfer) ,

20
 which facilitated funds transfer between customers. Core banking solutions (CBS)
was implemented which improved the efficiency of the banking operations and
sustainability of bank improved due to the increased productivity. Experience of
ATM was introduced in this period by which a customer’s experienced the branch
less banking.

 Era of Private Banks with Modern Technology: Due to the new economic
reforms that took place in 1991, private banks were established which introduced
the advanced technology and they brought the new technology and also attracted the
new customers and this forced the existing bank to adopt the new technology and to
retain their existing customers.

 Era of 2000: In the beginning of 2000, banking sector saw a new face and internet
was adopted by banks in delivering their banking services and thus giving new
experience to the customers to ban online. NEFT and RTGS facilitated quick fund
transfer and customers experienced the taste of branch less banking. Fund transfer
was carried out within few minutes which were supposed to take more than hour.
Now customers are experiencing banking with the touch of their finger in to smart
phones.

 Current Technology adopted By Banks: Technology has changed every facet of

banking transactions and banks are busy with the compliance with the regulatory
requirements Fusion of finance technology firms that develop new technology are
targeting future needs of financial business and services. Fintech are working on
different disruptive technology in fulfilling the changing needs of the customers.

 Bank and Finance Technology: Banks and the finance technology are working
together in eliminating the manual efforts and thus bringing a new dimension to
automation. Biometric, speech recognition, robotics etc are taking place in the
banking industry which is reshaping the banking future. Mobile banking apps are
interacting with software and also locating the ATMs, even bank transfer, balance
check can be performed with this new technology..

21
 Smart Watches: Smart watches are also used to carry out banking transactions and
interact with the bankers.

 Smart Banks: Smart bank branches are coming up with smart kiosks through
which customers can interact with their banking transactions. New tech savvy
customers will enjoy the smart banks.

 Robotics: Bank staff role will be replaced by the robotics. Customers can interact
with robots for their banking transactions by using speech recognition and facial
recognition

 Virtual reality or Video banking: Customers will be able virtually enter bank
through a virtual reality simulation headset and interact with banks representatives
and also perform these transactions.

 Data Analytics and AI: Data analytics and Artificial intelligence used by banks to
known the behavior patterns of customers and to understand their desire and needs
and by understanding theses they can design as per the suit of the customer needs.
Personalized and customized products and services can be offered to offered by the
use of this technology.

 Internet of Things (IoT): ‘IoT will enable different smart devices or technologies
to integrate and interact with each other enabling seamlessly banking. Big data will
facilitate data mining and analysis to arrive at customer needs’. Social media will be
used by banks in providing the data about customers which will be helpful for banks
to develop their personalized and customized wants of customers.

22
 Table 2.1: Technologies in India Banking System
Electronic Fund “EFT is considered as the process by which money is
Transfer(EFT) being transferred from one place to another electronically
on a real time basis. It is very convenient and it can be
carried out from any place and even 24x7 operations can
be done. Secure payments are being done due to the
adoption of advanced security system like encryption,
password verification etc.”
National Electronic Fund “Fund transferred from one bank to other through RBI
Transfer(NEFT) server and settlement occurs on net basis. Every day, RBI
system enables 3 sessions of electronic clearing and after
the completion of each session; the net amount will be
settled among banks through their current accounts
maintained with RBI.’ NEFT settlement happens within
24 hours and there is no limit for amount transacted. The
condition here is that, the two branches of bank must be
Core Banking Solution enabled.”
Real Time Gross “RTGS is payment mechanism for interbank payments.
Settlement(RTGS) One bank makes payment to another bank electronically
through RBI. Participating banks in RTGS maintain
current account with RBI and the transaction are settled
within 2 hours. It is done through interfacing Core
banking solution of 2 banks with server of RBI.”
Immediate Payment “Introduced in 2010 by National payments corporation of
Service(IMPS) India. IMPS are a real time interbank electronic fund
transfer system of India through mobile phone. Services is
available 24*7 basis.”
Unified Payment “UPI interconnects banks to help transfer funds. In this
Interface(UPI) mode, both money sender and receiver need a UPI
identity. Currently thirty banks in India offer this facility.”
Unstructured Supplementary “Developed by National payments Commission of India
Service data (USSD) ,helps customers to link their mobile number and bank
accounts and then to make payments , technology based
service for feature phones through which customers
needed to dial *99# and enter short messages for basic
banking activities such as balance enquiry and generating
mini statement”.
Mobile Banking “Mobile banking refers to banking operations on mobile.
The services under mobile banking involves, making
enquiry about bank balance and last few transactions,
viewing details of bank account, order demand draft and
so on.” It allows customers to conduct financial
transactions via mobile device .Mobile banking uses
software called an app for this purpose.” This facility is
available on a 24 hour basis and some banks impose
restrictions on which accounts can be accessed and limits
the amount of transaction.”

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 Radical changes is occurring in the banking system by which new banking product
and services are introduced to the market .Customers demands are changing and due to the
changing patterns need of customers banks are rapidly adopting theses new technology to
retain and attract new customers to remain competitive in the global banking scenario.
Banks have to adopt the new technology and also banks are having their own incubators in
developing new technology for the new next generation banking.

Table 2.1.2: Literature Review in Context of Adoption of Technology by Indian

Banks.

Sathye (2003) Privatization in Indian banks had improved their

competence and performance.

Weng et.al.(2006) Information technology development are forcing

organization to adopt and to remain competitive as well as
developing a mutual relationship.

Gupta et.al(2007) Early in 1990s Indian banking sector under the control of
government is being liberalized. Efficiency is the key to
growth and survival for the banks.

Safeena et al.(2010) Found PEOU ,risk plays a vital role in the adoption of
Internet banking in India.

Bamoriya(2012) Growth of mobile banking is felt in India but there a

number constraints and threats in the adoption.

Kumbhar has described the bi-directional correlation between the market condition
and banking industry growth. He has also discussed the metamorphic growth of banking
sector in the new millennium.

Mobile penetration in India

“”India is the second-largest mobile phone user just behind china and contributes
approx. 10% of total 900 million global users. 983.21 million People are using mobile
device in India, in which 567.29 (57.69%) million users belong to urban area and 415.92
(42.31%) million users belong to rural area.”

“A big chunk of these billion mobile subscribers will become smart phone users in
the next couple of years, that is the thrilling next wave,” “From here on, it will be about

24
exploding growth in data usage and internet access through the mobile, which will get
millions of Indians conducting business, getting social and participating in governance
through their phones, “In India, the user base has climbed rapidly only recently with the
advent of ultra-affordable devices and call tariffs that are the world’s cheapest. “The
ubiquitous reach of the mobile phones makes it the most relevant channel for last mile
outreach,” “The little device in Indians’ pocket or purse has become their window to a
world of information, education, livelihood, employment and even shopping and
commerce,” Indian telecoms will come under pressure to offer creative new pricing
packages for data users. “Everybody can afford a Smartphone and wants to get on the
internet,”

Growth in internet penetration will have several ramifications, including on internet

commerce, delivery of financial and healthcare services as well as e-Governance.
“Smartphone adoption in India is shooting high, thereby giving a fillip to the number of
mobile internet users in the country”. With the introduction of smart phones and tablets,
digital content has come to the fingertips of consumers. Given such easy accessibility
coupled with affordability, there has been a dramatic shift from laptop/desktop to mobile
devices. Another factor that is driving the use of mobile devices is their flexibility/mobility
i.e., users can obtain data on the go without having to be stationed at a fixed location.

The Urban and the Rural Divide

“It has been forecasted that 71% of the aforementioned 371 million mobile internet
users (262 million) in India will hail from urban areas while rural India is expected to have
109 million users. Nevertheless, one cannot ignore the pace at which rural areas are
catching up. In 2015, the number of mobile internet users from rural area doubled from
2014, and in 2016 the growth percentage is estimated to surpass all the previous figures.
Consumers in smaller cities and towns are rapidly embracing smart phones and mobile
internet to bridge the digital gap. For most of the rural and semi-urban populace, mobile
technology represents an easy to carry and economical alternative to other personal
technology-driven devices, primarily used for entertainment, followed by 39% for social
media and 37% for communication. Needless to say, mobile internet is gradually emerging
as an everyday essential for the Indian population. Adoption of mobile internet is growing

25
in tandem with the smart phone penetration in the country. However, there remain several
rural pockets which are yet to be brought under the umbrella of this technological
revolution. “

Mobile banking

Barnes et al. suggest that M-banking is the result of recent telecommunication

growth and innovation, which provide a new access point to the customer. M-banking is a
kind of m-commerce in which bank customer interact with bank through mobile and
enjoying all facilities and services provided by banks via mobile applications. M-banking
services are being offered through many channels such as Short Messaging Services
(SMS), Interactive Voice Response (IVR), Mobile Application, and Wireless Application
Protocol (WAP), etc. Banks are taking advantages of mobile innovation to provide its
services to customers economically and profitably. The introduction of m-banking helps
banks to perform its activity efficiently which leads to consumer satisfaction and loyalty.

Cheong et al. identified mobile provide customers many low cost and secure self-
service channels for banking activity. Bank should expand their services to m-banking as
next step of e-banking as it provides immediate and more controlled financial services to
bank consumer. Now-a-days m-banking is replacing electronic banking as many customers
are omitted e-banking after using m-banking. But there are so many issues also faces by m-
banking users revenue sharing agreements is one of the major issue. Large types of mobile
phones and different operating systems are also a big challenge for banks, as it is very
difficult for them to provide standardized applications. Convenience and security are two
main factors which can motivate other non-user to use technology based banking services.

Mobile banking in India

ICICI bank is first private and union bank is first public sector bank which provides
m-banking services to customers. Indian banks are now targeting non-online user who is
not having access to desktop but having mobile phone. So m-banking may future great
potential in Indian banking system. Security and privacy issue is the main hurdle in the path
of m-banking in India as Indian are less risk taker. Unnithan suggested that there is strong
potential market for electronic banking in India, especially for m-banking. Increasing

26
number of mobile users is good indication for development of m-banking in India. Lack of
knowledge and awareness is major problem in adaptation of m-banking in India as major
rural population is unaware about new technology. Introduction of ‘Digital India’,
technological innovation and increasing number of mobile user is now changing the story
and preparing ground for m-banking potential in India.

Table2.1.3: National Electronic Fund Transfer (NEFT) Feb-2017

NATIONAL ELECTRONIC FUND TRANSFER (NEFT) - FEB 2017

RECEIVED INWARD
TOTAL OUTWARD DEBITS
CREDITS
Sr.
BANK AMOUNT
No. NO. OF AMOUNT NO. OF
(Rs.
TRANSACTIONS (Rs. Million) TRANSACTIONS
Million)
ABHYUDAYA CO-
1 65689 2846.49 148400 4331.52
OP BANK LTD
ABU DHABI
2 COMMERCIAL 2114 1156.65 627 213.9
BANK
AHMEDABAD
3 MERCANTILE 8276 544.84 20969 1189.85
COOP BANK
AIRTEL
4 PAYMENTS BANK 21447 623.61 7367 11.9
LIMITED
AKOLA DISTRICT
5 CENTRAL CO-OP 14875 667.51 18025 601.56
BANK
ALLAHABAD
6 1178383 78334.01 2808349 107666.16
BANK
ALMORA URBAN
7 CO-OPERATIVE 9293 474.43 15275 615.08
BANK LTD
8 ANDHRA BANK 1007080 102738.75 3046112 134087.46
ANDHRA
9 PRAGATHI 68903 3455.89 142909 3897.29
GRAMEENA BANK
ANZ Banking Group
10 23906 9262.4 3201 8020.15
Limited
APNA SAHAKARI
11 10448 669.42 30004 1098.78
BANKLTD
12 AXIS BANK 12188636 701100.38 6536245 669674.52
Akola Janata
13 Commercial Co-Op 13407 1195.55 8300 896.13
Bank
14 B N PARIBAS 344819 98092.74 114442 131218.03
15 BANDHAN BANK 139155 10621.33 131360 7469.39

27
 Ltd.
BANK
16 INTERNASIONAL 1443 216.02 30 18.31
INDONESIA
BANK OF
17 744290 85150.78 84230 45179.6
AMERICA
BANK OF
18 BAHARIEN AND 23697 2309.64 1727 1097.49
KUWAIT
19 BANK OF BARODA 2572193 196207.57 7008570 276625.43
20 BANK OF CEYLON 1306 62.13 451 204.52
21 BANK OF INDIA 1900371 110374.91 6298050 258037.06
BANK OF
22 934995 52792.12 1930457 83688.14
MAHARASHTRA
BANK OF NOVA
23 795 1181.63 1096 4152.43
SCOTIA
BANK OF TOKYO
24 41757 10060.35 6110 12351.39
AND MITSUBISHI
25 BARCLAYS BANK 27843 9819.18 2095 19552.58
BASSEIN
26 CATHOLIC CO-OP 15458 1140.88 37626 1428.77
BANK LTD
BHARAT CO-OP
27 53938 4388.78 104441 5174.14
BANK LTD
BHARATIYA
28 8492 256.02 20335 297.26
MAHILA BANK LTD
29 CANARA BANK 2444015 195792.45 4624200 240939.92
CAPITAL LOCAL
30 15805 915.04 24101 1766.24
AREA BANK LTD
CATHOLIC SYRIAN
31 101634 6720.65 131466 7430.05
BANK LTD.
CENTRAL BANK
32 1700889 126809.63 4697367 186802.77
OF INDIA
33 CITI BANK 4530973 755729.6 1790938 468186.72
CITIZEN CREDIT
34 COOPERATIVE 7952 495.95 20078 808.71
BANK LTD
CITY UNION BANK
35 783351 32452.1 508762 28924.81
LTD
COMMONWEALTH
36 BANK OF 18 0.65 15 0.47
AUSTRALIA
CORPORATION
37 2680773 105885.76 2428769 134721.45
BANK
COSMOS
38 COOPERATIVE 83239 8498.99 156699 9322.62
BANK
CREDIT AGRICOLE
39 1273 601.19 1408 4217.77
CORP N INVSMNT

28
 BANK
40 CREDIT SUISSE AG 75 200.19 27 36.47
CTBC BANK CO
41 538 928.71 243 518.03
LTD
DCB BANK
42 201372 11046.29 138554 13547.58
LIMITED
DELHI STATE CO
43 2170 816.97 4739 204.1
OP BANK LTD
44 DENA BANK 416484 41164.98 1086498 48758.11
DEOGIRI NAGARI
45 SAHAKARI BANK 4348 521.04 6209 365.25
LTD
46 DEUSTCHE BANK 2509742 239786.69 505998 190837.26
DEVELOPMENT
47 BANK OF 334008 69454.2 46993 29261.68
SINGAPORE
DHANLAXMI
48 167835 6693.4 146947 7526.21
BANK LTD
49 DICGC 97 6.41 138 1.88
50 DOHA BANK QSC 17186 1712.92 572 156.15
DOMBIVLI
51 NAGRIK 11972 1319.3 36281 1514.18
SAHAKARI BANK
EQUITAS SMALL
52 FINANCE BANK 2259 174.45 2270 309.37
LIMITED
EXPORT IMPORT
53 0 0 230 890.43
BANK OF INDIA
54 FEDERAL BANK 1648778 90394.8 1068342 66242.2
55 FIRSTRAND BANK 1878 258.21 257 104.62
GOPINATH PATIL
56 PARSIK JAN SAHA 16606 1577.83 47394 1713.68
BANK
GREATER
57 BOMBAY CO-OP 8128 582.65 31247 847.44
BANK
58 HDFC BANK 20359271 1495164.87 11360784 1578597.61
HIMACHAL
59 PRADESH STATE 47872 1171.26 27928 1087.38
COOPERATIVE
60 HSBC BANK 1574986 255625.48 443547 186097.78
61 ICICI BANK LTD 12415143 658805.85 9205324 796589.03
62 IDBI BANK 4286230 255821.89 2911058 309160.43
IDFC BANK
63 78272 36140.36 51002 13314.15
LIMITED
IDUKKI DISTRICT
64 COOPERATIVE 5674 474.4 1888 305.12
BANK LT
65 INDIAN BANK 1329238 80787.66 3259421 109079.67

29
 INDIAN OVERSEAS
66 1548177 98883.11 2812826 118104.2
BANK
67 INDUSIND BANK 2008497 166685.23 822171 124331.57
INDUSTRIAL AND
68 COM BANK OF 200 136.42 67 222.7
CHINA LT
INDUSTRIAL BANK
69 469 95.99 100 328.33
OF KOREA
JALGAON JANATA
70 SAHKARI BANK 8136 416.91 12295 811.6
LTD
JALGAON PEOPLES
71 6453 765.18 11956 480.46
COOP BANK LTD
JAMMU AND
72 KASHMIR BANK 206222 17849.18 252657 22478.24
LTD
JANAKALYAN
73 SAHAKARI BANK 8630 761.76 27641 1265.33
LTD
JANATA
74 SAHAKARI BANK 38689 2782.26 58392 3340.41
LTD
JANSEVA
75 SAHAKARI BANK 2777 143.52 6113 225.52
BORIVILI LTD
JANSEVA
76 SAHAKARI BANK 7334 332.64 21865 715.37
PUNE
77 JP MORGAN BANK 329442 29984.99 6930 25662.81
KALLAPPANNA
78 9719 536.88 12512 823.83
AWADE IJSB LTD
KALUPUR COMM
79 COOPERATIVE 15976 1794.17 47245 3159.14
BANK
KALYAN JANATA
80 9217 757.84 28060 1000.32
SAHAKARI BANK
81 KAPOLE BANK 1283 75.51 6665 305.57
KARAD URBAN
82 13227 883.84 24578 1539.79
CO-OP BANK LTD
KARNATAKA
83 377723 22094.15 855818 38938.01
BANK LTD
KARNATAKA
84 STATE COOP APEX 64499 2392.92 114274 7823.57
BANK
KARNATAKA
85 VIKAS GRAMEEN 97374 7646.19 165678 6394.98
BANK
KARUR VYSYA
86 842048 52669.58 1063772 61763.63
BANK

30
 KOREA
87 135 203.68 357 540.14
EXCHANGE BANK
KOTAK
88 MAHINDRA BANK 4486914 326188.91 2365902 319319.08
LTD
KURMANCHAL
89 NAGAR SAHAKARI 8451 666.93 7976 672.54
BANK
90 Kerala Gramin Bank 79125 6675.34 186272 7395.26
LAKSHMI VILAS
91 293975 15608.47 283236 20576.25
BANK LTD
MAHANAGAR
92 11781 973.93 29810 1450.73
COOP BANK LTD
MAHARASHTRA
93 73585 3655.62 56922 3020.5
GRAMIN BANK
MAHARASHTRA
94 STATE CO-OP 3729 338.01 8017 5462.56
BANK LTD
95 MASHREQ BANK 313 116.58 30 101.98
MEHSANA URBAN
96 COOPERATIVE 19228 1632 24288 2571.32
BANK LTD
MIZUHO
97 CORPORATE BANK 12587 10127.19 3087 10095.27
LTD
MUMBAI DISTRICT
98 CENTRAL CO-OP. 10445 329.59 15554 1192.26
BANK
MUNICIPAL COOP
99 3101 177.62 4306 683.53
BANK LTD
NAGAR URBAN
100 10468 859.86 9741 856.63
COOP BANK LTD
NAGPUR NAGRIK
101 SAHAKARI BANK 8118 578.42 10697 739.67
LTD
NAINITAL BANK
102 25355 2040.39 42002 3280.27
LTD
NATIONAL
103 1 0 6 0.77
AUSTRALIA BANK
NATIONAL BANK
104 OF ABU DHABI 49 15.12 2 0
PJSC
NEW INDIA CO-OP
105 10645 656.93 26309 1525.63
BANK
106 NKGSB BANK 23839 2323.9 56492 2841.76
NUTAN NAGARIK
107 SAHAKARI BANK 8292 579.26 20505 1255.33
LTD
108 ORIENTAL BANK 1031172 128437.04 1879389 112738.78

31
 OF COMMERCE
109 PRATHAMA BANK 80179 4795.76 115760 4310.91
PRIME CO-OP
110 7382 545.37 9702 453.56
BANK LTD. SURAT
PUNJAB AND
111 MAHARASHTRA 42072 2132.39 137633 3812.67
CO BANK
PUNJAB AND SIND
112 212133 15867.45 465099 25756.7
BANK
PUNJAB
113 3517345 268722.26 7861460 395669.43
NATIONAL BANK
Pragathi Krishna
114 89352 10331.44 181172 8219.05
Gramin Bank
RABOBANK
115 1293 1952.39 446 2277.5
INTERNATIONAL
RAJGURUNAGAR
116 SAHAKARI BANK 6912 377.26 10099 506.93
LTD
RAJKOT NAGARIK
117 SAHAKARI BANK 7794 531.79 16012 667.14
LTD
118 RBI,PAD 6746576 688371.95 71259 39307.3
119 RBL BANK LTD 455125 27714.08 206818 41262.69
SAMARTH
120 SAHAKARI BANK 2576 131.13 1553 98.94
LTD SOLAPUR
SARASWAT CO-OP
121 188120 13619.81 365667 24385.47
BANK LTD.
122 SBER BANK 105 90.14 35 61.72
SEVA VIKAS
123 COOPERATIVE 5468 267.25 17882 594.77
BANK LTD
SHAMRAO VITHAL
124 135624 8716.87 210960 12483.87
CO-OP BANK LTD
SHIKSHAK
125 SAHAKARI BANK 3575 513.98 4596 243.83
LTD
126 SHINHAN BANK 13743 4955.9 6967 6659.93
SHIVALIK
127 MERCANTILE CO- 5355 354.2 3599 163.35
OP BANK
SHRI
CHHATRAPATI
128 9965 534.81 6456 488.36
SHAHU URBAN
COOP B
SOCIETE
129 5838 1896.66 393 2473.51
GENERALE
SOLAPUR JANATA
130 8133 803.45 13602 656.06
SAHAKARI BANK

32
 LTD
SOUTH INDIAN
131 506630 33295.49 688237 35783.93
BANK
STANDARD
132 2993273 338451.89 974362 287705.13
CHARTERED BANK
STATE BANK OF
133 BIKANER AND 4778590 56041.85 1870110 51447.14
JAIPUR
STATE BANK OF
134 2936697 124113.4 2307688 128979.85
HYDERABAD
STATE BANK OF
135 19699895 1489488.14 28577414 1554717.22
INDIA
STATE BANK OF
136 786 1627.32 566 229.67
MAURITIUS
STATE BANK OF
137 636891 45744.69 1123883 56337.85
MYSORE
STATE BANK OF
138 874480 55185.54 815570 77320.41
PATIALA
STATE BANK OF
139 946588 44674.13 2180681 77089.8
TRAVANCORE
SUMITOMO
140 MITSUI BANKING 4601 1529.9 542 10200.36
CORPORATION
SURAT DISTRICT
141 COOPERATIVE 5780 478.88 13700 909.95
BANK Ltd
SURAT NATIONAL
142 2563 206.44 4543 203.78
CO-OP BANK LTD
SURAT PEOPLES
143 COOPERATIVE 12575 1039.53 25891 1348.1
BANK
SUTEX COOP
144 7186 425.71 10493 594.47
BANK
145 SYNDICATE BANK 1224996 130681.45 2607232 129941.31
TAMIL NADU
146 STATE APEX COOP 153279 5239.41 57401 3137.3
BANK
TAMILNADU
147 MERCANTILE 399170 28304.94 499871 28504.51
BANK
TELANGANA
148 STATE COOP APEX 4329 213.93 2924 357.68
BANK LTD
THANE BHARAT
149 SAHAKARI BANK 5060 1173.71 14762 756.94
LTD
THANE DISTRICT
150 CENTRAL COOP 15447 1563.1 34215 726.29
BANK LT

33
 THANE JANATA
151 SAHAKARI BANK 59336 4025.65 118234 6157.22
LTD
THE A. P. MAHESH
152 URBAN CO-OP 15158 2318.94 23087 1309.84
BANK L
THE AP STATE
153 74904 3986.09 76545 4499.22
COOP BANK LTD
THE BARAMATI
154 SAHAKARI BANK 4 0.3 0 0
LTD
THE GUJARAT
155 STATE CO-OP 62199 4151.59 84723 6066.27
BANK LTD
THE HASTI CO-OP.
156 4082 256.06 3022 280.79
BANK LTD.
THE KANGRA
157 CENTRAL COOP 30530 1103.25 38332 1568.39
BANK LTD
THE KANGRA CO
158 OPERATIVE BANK 3425 1463.19 8711 219.78
LTD
THE NASIK
159 MERCHANTS CO- 12600 728.69 14646 935.97
OP BANK LTD.
THE NAVNIRMAN
160 COOPERATIVE 1166 83.75 357 32.24
BANK LTD
THE PANDHARPUR
161 URBAN CO-OP 3589 266.87 1534 177.3
BANK
THE RAJASTHAN
162 ST. COOP. BANK 33534 1669.77 198720 2345.48
LTD
THE ROYAL BANK
163 2736 334.95 2414 200.4
OF SCOTLAND PLC
THE SAHEBRAO
164 DESHMUKH COOP 3596 221.79 7645 317.36
BANK LTD
THE VARACHHA
165 13255 796.88 28864 817.8
CO-OP. BANK LTD
THE ISHWESHWAR
166 SAHAKARI BANK 9885 620.42 15281 737.85
LTD
THE OROASTRIAN
167 2927 157.31 3762 374.47
CO-OP BANK LTD
TUMKUR GRAIN
168 MERCHANTS COOP 5489 321.91 3988 353.87
BANK

34
 The Gadchiroli Dist
169 9028 295.05 18586 421.91
Co-Op Bank
170 UCO BANK 627075 48073.5 2163746 72142.26
UJJIVAN SMALL
171 FINANCE BANK 33 0.39 58 1020.15
LTD.
UNION BANK OF
172 2097824 162491.45 4295605 258401.06
INDIA
UNITED BANK OF
173 943172 42095.58 2208492 58054.69
INDIA
UNITED OVERSEAS
174 91 15.95 85 98.53
BANK LTD
VASAI VIKAS
175 SAHAKARI BANK 3441 233.18 9816 386.56
LTD
176 VIJAYA BANK 536041 43874.75 1288511 70744.92
WEST BENGAL
STATE
177 34931 1270.58 123396 3235.2
COOPERATIVE
BANK
WESTPAC
178 BANKING 261 224.52 32 1150.17
CORPORATION
179 WOORI BANK 1293 558.42 360 442.15
180 YES BANK 5926261 263199.54 1267895 233396.07
ZILA SAHKARI
181 BANK LTD 3616 213.13 4742 154.08
GHAZIABAD
TOTAL 148205456 10877909.23 148205456 10877909.2
Total (No. of
transactions in mn and 148.21 10877.91 148.21 10877.91
Amount in bn)
Source: https://rbi.org.in

35
 Table 2.1.4: Bank wise Mobile banking Transactions for the month of July-2017
Bank-wise Mobile Banking Transactions for the month of July 2017
Sr. Bank Name Volume Value (In
No. (Actual) Rs'000)
1 A P MAHESH CO-OP URBAN BANK LTD 472213 1195710
2 Allahabad Bank 528053 3755698
3 Andhra Bank 912025 7131163
4 AXIS BANK LTD 10963537 132345114
5 BANASKANTHA DISTRICT CO-OP. BANK LTD. 562 13821
6 Bandhan Bank 41035 780475
7 BANK OF BARODA 2585514 12260788
8 Bank of India 15818 104531
9 Bank of Maharashtra 527579 2963045
10 BASSEIN CATHOLIC CO-OP. BANK LTD 4553 144222
11 BHAGINI NIVEDITA SAHAKARI BANK LTD.,
730 8334
PUNE
12 BHARAT CO-OPERATIVE BANK LTD. 121934 499677
13 Canara Bank 1342941 7241152
14 CATHOLIC SYRIAN BANK LIMITED 15695 127973
15 Central Bank of India 696626 2856155
16 CITI BANK 1176056 19018261
17 CitizenCredit Co-op. Bank Ltd. 1608 12618
18 CITY UNION BANK 418343 2974293
19 Corporation Bank 211560 2403645
20 DBS BANK LIMITED 406767 2611573
21 DCB Bank Ltd. 32380 372944
22 Dena Bank 119379 579429
23 DHANLAXMI BANK LIMITED 15303 103024
24 DOMBIVALI NAGRIK SAHAKARI LTD 62635 8287615
25 EQUITAS SMALL FINANCE BANK LIMITED 25627 307726
26 ESAF SMALL FINANCE BANK 541 3048
27 FEDERAL BANK LTD. 1303711 11081387
28 G.P. PARSIK JANATA SAHAKARI BANK LTD. 8337 115546
29 GREATER BOMBAY CO.OP BANK LIMITED 33553 236077
30 HDFC BANK LTD. 33441284 187632831
31 HSBC 20218 643472
32 HUTATMA SAHKARI BANK LTD., WALWA 792 8782
33 ICICI BANK LTD 13456776 128293390
34 IDBI LTD. 365378 1287810
35 Indian Bank 1251597 7732432
36 INDIAN OVERSEAS BANK 196145 1552864
37 INDUSIND BANK LTD 1747163 22337904
38 JAMMU AND KASHMIR BANK 224465 1533612
39 JANTA SAHAKARI BANK PUNE 4296 23738
40 Karnataka Bank Ltd 710527 6230195
41 KARUR VYSYA BANK LTD 581896 6975258

36
42 KERALA GRAMIN BANK 80436 678186
43 KOTAK MAHINDRA BANK LTD 4921203 66339945
44 LAXMI VILAS BANK LTD 177045 2253483
45 Maharahtra Gramin Bank 11726 81585
46 MALAD Sahakari Bank Ltd. 356 3559
47 MEHSANA URBAN CO-OP. BANK LIMITED 3986 35
48 NAINITAL BANK LIMITED 185 509
49 NKGSB CO-OPERATIVE BANK LIMITED 12680 92769
50 Oriental Bank of Commerce 131640 1224332
51 Pallavan Grama Bank 887 145
52 PAVANA SAHAKARI BANK LTD. 1041 11529
53 Paytm Payments Bank Limited 188 494
54 PRAGATHI KRISHNA GRAMIN BANK 35139 281424
55 PRIYADARSHANI NAGARI SAHAKARI BANK
787 19
LTD., JALNA
56 Punjab & Sind Bank 33075 189972.0116
57 PUNJAB AND MAHARASHTRA CO-OP BANK 171094 839116
58 Punjab National Bank 490024 3982442
59 RAJARAMBAPU SAHAKARI BANK LTD; PETH 1562 20784
60 Rajkot Nagarik Sahakari Bank Ltd. 3294 32541
61 RBL BANK LIMITED 3149475 15177484
62 Sadhana Sahakari Bank Ltd. 4 0
63 Saraswat Co-op. Bank Ltd 338217 2068464
64 SARDAR BHILADWALA PARDI PEOPLES CO-
950 29268
OPERATIVE BANK LTD.
65 Sarva Haryana Gramin Bank 260 1260
66 Saurashtra Gramin Bank 1470 3703
67 Sindhudurg District Central Co. Operative Bank Ltd.
745 5461
Sindhudurg
68 SOUTH INDIAN BANK 471491 3820909
69 STATE BANK OF INDIA 11979284 81622447
70 SUCO SOUHARDA SAHAKARI BANK LTD. 1189 65300
71 SYNDICATE BANK 853167 4552043
72 Tamilnad Mercantile Bank Ltd 175410 1159470
73 THANE JANTA SAHAKARI BANK LTD 70936 653533
74 THE AHMEDABAD DISTRICT CO-OPERATIVE
2779 40588
BANK LTD
75 The Ajara Urban Co-op. Bank Ltd., Ajara 7 1
76 THE AKOLA JANATA COMMERCIAL CO-OP.
1585 21449
BANK LTD., AKOLA
77 THE COSMOS CO-OP BANK LIMITED 25567 219064
78 The Gujarat State Co-operative Bank Ltd. 2113 30171
79 The Shirpur Peoples Co-op Bank Ltd. 2250 22031
80 The Surat People's Co-op. Bank Ltd. 5568 204449
81 THE THRISSUR DISTRICT CO-OP. BANK LTD. 2962 22905
82 THE VARACHHA CO-OP. BANK LTD., SURAT 11300 434115
83 The Vishweshwar Sahakari Bank Ltd., Pune 3321 23265
37
 84 TUMKUR GRAIN MERCHANTS CO-OP. BANK
1207 36838
LTD.
85 UCO BANK 784512 5377456
86 Ujjivan Small Finance Bank Limited 5843 45783
87 Union Bank of India 1079942 9169196
88 United Bank of India 1799787 1506014
89 Utkarsh Small Finance Bank 265 5091
90 UTTARAKHAND GRAMIN BANK 2198 13578
91 VIJAYA BANK 1028488 4739835
92 YES BANK LIMITED 479467 10473560
TOTAL 10240325
801364936
9
Total (Volume in million, Value in ` billion) 102.40 801.36
NOTE: The data from July 2017 includes only individual payments and excludes corporate
payments as was being included earlier;
The data is provisional. The data is being cross checked with the banks which have shown
high variation month-on-month basis.

2.2 Technology in Banking

Adoption of technology improves the productivity in banks. Thus technology is

acting as driving force for long term economic growth as well as enhancing the
productivity. Economy growth results both from both slow and steady technology
improvement.

Beginning of banking Industry

In the mid 1980’s the process of computerization started and which had a difficult
beginning initially it was opposed by trade unions. First it started computerization of few
departments where principal branches started work earlier acknowledged as ledger posting
machines. The system implemented during that time was taking care of functions related to
accounts of banks which was the core of the banking transaction. It has a great significance
for control and accuracy.

Branch Automation

Introduction of Single Window service facilities was introduced and priority was
focused on customers. Emergence of networked based operations came to existence thus

38
providing a interbank connectivity. In the next stage , the ATM was introduced providing
an evolution of user friendly technology and the core banking solutions was introduced
which radically transformed the way the banking transactions are being carried out.
Bankers and customers have a radical transformation in delivering as well as
servicing.IDRBT was set up and 3 important technology infrastructure were created and
these was INFINIT, PKI, SFMS which facilitated a secure payment system in India.
Innovation in new delivery channel i.e. Mobile banking, internet banking and other
distribution channel came into existence. Technology products were introduced which
benefited both banks and customers and India also became a member of Basle committee
or payment settlement systems. The most important benefits customers got from ATM ,
Internet banking and mobile Banking and secured credit and debit cards .banks befitted by
having centralized information , transaction processing and real-time information and MIS
reporting availability. Among all the technology ranked the high which contributed a lot to
the changes in the Indian banking system. Electronic based system was superior to the
paper based transaction system.

Mobile banking users are becoming more comfortable doing banking transaction
with their smart phones. With the increase of trend in m-banking new users shows more
confident in banking on mobile devices. India has the youngest population of mobile
banking users across the globe at a median age of 30, as opposed to 32 in the US and 39 in
Europe, According to the research by KPMG and UBS. Further, it also showed that the
Mobile Banking users in India account for over 50% of its population today. Many banks
have came up with their banking apps which help people to make online transactions, pay
bills, recharge mobile phones, etc.. The top five mobile banking apps are State Bank
Freedom, HDFC Bank mobile application, iMobile from ICICI Bank, Baroda M-connect
and New Axis Mobile in India. Almost all banks have been building mobile banking apps
for their customers, and upgrading them too. The Reserve Bank of India (RBI) has given
approval to 80 banks to start mobile banking services, which includes apps and 64 banks
have commenced operations.

39
 Table 2.2.1: Trends in Mobile banking

Fig-2.2.1: Mobile Banking Share By Types of Banks in %

Fig 2.2.2: Tops 5 Banks in Mobile Banking Transactions (in Crore)

40
 The above graph revealed that ICICI Bank, India’s largest private sector lender, has
outpaced its peers to record the highest number of mobile banking transactions from last
two years.

The number of mobile Internet users in India is projected to double and cross the
300 million mark by 2017 from 159 million users at present, a new report by Internet and
Mobile Association of India (IAMAI) and consultancy firm KPMG said on Monday.
Though India has low Internet penetration at 19% compared with other developed and
developing economies that have up to 90% penetration, the country has the third-largest
Internet user base in the world, with more than 300 million users, of which more than 50%
are mobile-only Internet users. “The number of mobile Internet users in India is expected to
grow to 314 million by the end of 2017 with a CAGR (compounded annual growth rate) of
around 28% for the period 2013- 2017

The number of mobile internet users in India is estimated to reach around 420
million by June 2017 with the rural India growing at a much higher rate than urban India
says a published by Internet and Mobile Association of India (IAMAI) & market research
firm IMRB. According to a report titled Mobile Internet in India 2016, there were 389
million mobile internet users in India as on December 2016.
Urban India, with 51% penetration is fast reaching saturation point while rural India with
16% is the future market of growth," said the report. It added that number of Internet users
has registered a jump of 15% year on year between October 2015 to October 2016. While
Urban India grew at 9%, growth in rural India was almost three times at 26%.

41
 (Source: Monthly Bulletins for 2016, Reserve Bank of India.)
Fig-2.2.3: Mobile banking fastest Growing Digital platform (2016)
Digital Transactions Faster Than Growth in Consumption

Consumption of goods and services by people and the government in the second

quarter of the financial year 2016-17 – 1 July to 30 September – grew 2.8 percent over the

previous quarter (April to June), according to data from the central statistics office.

(Source: Central Statistics Office; Reserve Bank of India)

Fig-2.2.4: Payments on Digital Platform

42
 Consumers used the Unified Payments Interface, or UPI, the mobile payments
platform, released in August 2016, for 3,00,000 transactions amounting to Rs 90 crore in
November 2016. The number grew to 1.4 million transactions, worth Rs 480 crore, till 25
December 2016.

There were 7,000 transactions, amounting to Rs 73 lakh, in November 2016 through

the Unstructured Supplementary Service Data (USSD), which uses mobile networks, and
not the Internet, making it the least used digital payment platform by number and value of
transactions.

USSD transactions rose to 60,000 in December 2016, amounting to Rs 6.6 crore

until 25 December 2016.

Fig 2.2.5: Statistics of Mobile Phone users/ Internet Users/ Smart phone Users

43
 Fig-2.2.6 Massive Growth in Digital Transactions

Fig-2.2.7: Significant Payment Activities since 5 Years

44
Source RBI Payments Systems

Fig 2.2.8: Prepaid Instruments Transactions Mobile banking Transactions

Fig 2.2.9: Maturity of Banking and Payment Channels

45
Fig 2.2.10: Evolution of Mobile banking In India

46