Transcript INDIAN BANKING - THE CHANGING LANDSCAPE BANKING TODAY- REDEFINED AND

INDIAN BANKING THE CHANGING LANDSCAPE
BANKING TODAYREDEFINED AND
RE-ENGINEERED
AGENDA FOR THE SESSION
o
To Sensitize the Participants to the Latest Changes
in Banking Industry
o
What is the Response to the Current Trends from
Bankers and Customers?
INDUSTRY PROFILE

Public Sector banks

Private Indian Banks New Generation Banks

Private Foreign Banks –

Cooperative Banks

Non Banking Financial Institutions
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

Banking Sector Reforms –
Post-Liberalization
 Concept
of Local Area Banks
Introduced – 1995
 1st Shared Payment Network System &
conditional autonomy to PSU’s – 1996
 2nd Narasimham Committee Report of
Banking Sector Reforms – 1997
 Guidelines on Risk Management – 1998
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

RECENT TRENDS IN BANKS
Change in Customer Expectations
 Outsourcing of Resources [Human&Nonhuman]
 Steady Reduction in Interest Rates
 Increasing Non- Interest and Fee Based
Income
 Corporate governance and Business
Transformation
 Mergers, Acquisitions and Consolidations

CHANGING PERCEPTION OF
CUSTOMER
Servicing the Customer – 1950’s to 1960’s
 Satisfying the Customer - 1960’s to 1980’s
 Pleasing the Customer - 1980’s to 1990’s
 Delighting the Customer -1990’-2000
 Retaining the Customer – 2000 and beyond

WHAT CHANGES ?
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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
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

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/Structure]

Author for Change –
Players in the Banking Business
Eco-System

Shareholders
 Management
 Depositors
 Borrowers
 Employees
 Government
 Regulatory Authorities – RBI
 Competitors
PHASE OF TECH BANKING
INDUSTRY

PSB
SBI, SBT ETC.

PIB
ICICI,IDBI,HDFC,UTI BANK ETC..

PFB
CITI BANK,SC BANK, ETC..

CB
NBFI
SCB,UCB,DCBs/SCBs
SOME EARLY ADOPTERS
BANK
____________
CHANNEL
HSBC
Bank
HDFC
Bank
UTI
Bank
CITI
BANK
ICICI
Bank
ATM (No.)
250
500
550
174
1000
ATM
Share(%)
40
50
NA
80
45
Other
Channel[%]
(mobile,
35
15
NA
15
15
25
35
NA
5
40
phone, net)
Branch
Banking[%]
STRATEGIES OF BANKS
 Citibank:
 HSBC
 ICICI
: Leveraging branches to grow C’
B : Reducing importance of branch
 HDFC
 UTI
B
Parallel Banking
B: Conservative migration
: ATM’s as a force multiplier
Issues and Challenges
 What
will happen to the traditional rural
credit institutions like, Cooperative
Banks, RRB’s and Low performing
Public Sector Banks?
 What
are all the options for the Public
Sector Banks?
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)?
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?
THANK YOU
Electronic Fund Transfer
 Transfer
of funds between banks
located in different cities in place of
DD/MT/Telegraphic transfer.
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.
Tele-banking
 Using automatic voice recorder it
facilitates both cash & non-cash
transactions for the bank and
customers.
Automated Teller Machines
Device
used for withdrawal
of money, depositing of
money and balance enquiry
and verification for 24
hours of a day.
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.
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.
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.
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.
Electronic Data Interchange
Transmit
financial
information and payments in
electronic
form.reduces
transmitting cost and risk.
INTRA BANK COMMUNCATION THROUGH
THE INFINET
HUB
BANK’S GATE
WAY
BR 1
BR 2
BR3
BR4
BR5
INTER BANK COMMUNCATION THROUGH
THE INFINET
HUB
BANK 1
GATE
WAY
BR 1
BR 2
BR 3
BANK 2
GATE
WAY
BR 1
BR 2
BR 3
ECS - How it works
Corporate Institution
Corporate Institution’s Bank
Clearing House
Destination Bank
Destination Bank
Branches of
destination
Investors
Destination Bank
banks
How ECS Works - Process flow
Reports on Day-2
Data on Day-1
Encrypted
Data on Day-1
Sponsor Bank
User Institution
Clearing
House
Destination banks’
service branches
Reports on Day-3
Destination
branches
Credit on Day-4
Beneficiaries’
A/Cs 11
ECS - Processing of Uncredited
Payment Instructions contd...
Return Data submitted on
Post Settlement
Day-1
Encrypted Output Data on
Post Settlement
Day-2
Sponsor Bank
Clearing
House
Destination banks’
service branches
Return Advice on Post Settlement Day-1
Destination
branches
User Institution
How to Participate in ECS Registration Procedure

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
Sponsor Bank
Clearing
House
Agreement
Corporate
Institution
and...
Switch over to
ECS
- The best way to Pay
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