An Introduction and

Scope of Information
Technology in Banking
 • What is Information Technology?

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 Information Technology in
Banking
• During Fourth phase, also called as Reform Phase, Recommendations of the
Narasimham Committee (1991) paved the way for the reform phase in the Banking

• IT has basically been used under two different avenues in Banking. One is
Communication and Connectivity and other is Business Process Reengineering.

• Technology has changed the contours of three major functions performed by banks,
i.e.,
1. Access to Liquidity,
2. Transformation of Assets and
3. Monitoring of Risks.
Further, IT 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 mid of 80s, when the Banks spurred on by RBI and the Rangarajan Committee
Report, 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)

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 The scope of IT usage in
Banking Operations
• 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 process of reforms in Payment and Settlement systems

has gained momentum with the implementation of projects
such as NDS (Negotiated Dealing System)

• CFMS (Centralized Funds Management System) for better

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

• RTGS (Real Time Gross Settlement system) scheduled towards

the end of 2003

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 Categories of Packages and
their scope:
• Stand-alone branch-level Packages

• Multi-branch Solutions

• Foreign Packages

• Packages for specialized niche areas

• Service Branch / high-volume Transaction

Processing Packages

• IT Services
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 THE FUTURE OF RETAIL
BANKING SOLUTION

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 Retail Banking Growth
Growth
• Retail banking alone is expected to add approximately
$180 billion in
new revenues in Asia over the rest of this decade**
• India's retail-banking market is expanding rapidly, with
total annual
revenues expected to more than double, to $16.5 billion,
by 2010, from about $6.4 billion today *
The no of accounts and customers is growing at a very rapid
pace
• ATM usage in India rose six fold from 1999 to 2004, and
now 39 percent of bank customers use teller machines.
Customers in their 20s were almost twice as likely as those
in other age groups to use ATMs, whose availability has
grown dramatically during the same period. State Bank of
India, for example, increased its network to more than
3,400 machines, from some 200.

*Source: TowerGroup
**Source: McKinsey
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 Causes for this Growth
• Technology - itself had enabled to multiply
the number of transactions by each
customer e.g.: ATM withdrawals
• Economic growth – more disposable income
leading to increase in spend transactions
• All these factors have tremendous impact
on the profitability of the bank - Pressure
on Costs and Profitability.

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 External & Internal
Challenges

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 Drivers Threatening the
Growth of Retail Banking

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 Key Challenges & Trends
Going Forward
Trends
• Five major trends that will drive much of the
growth in Asia's banking markets are:
– The rise of the modern consumer.
– A growing concentration of wealth.
– A likely doubling of the bankable population.
– The emergence of powerful small and
medium sized
enterprises.
– Asia's fascination with new technologies.
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 Technology Challenges &
Trends
– Significant momentum towards open
systems
– Consolidation from application silos to
Universal Banking Solutions
– Focus on Horizontal & vertical scalability of
applications, Database and hardware
– Focus on lower CPT (cost per transaction)
–Operational challenges of managing the
large production Databases
( Number of Production Database > 1Tb
going to double in
next 18 m)
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 YOUR QUERIES ?

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