technology management in banks-a paradigm shift

7/29/2019 Technology Management in Banks-A Paradigm Shift

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Indian Business Scenario - Opportunities and Challenges

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Archers & Elevators Publishing House www.aeph.in

Technology Management in Banks-A paradigm shift

*Dr.V. venkateshwara Rao

*Professor & HOD, Pace Institute of technology & Sciences, Ongole 523272

Introduction

The Indian Banking sector has emerged quite creditably in the last 20years eversince the reforms were ushered in the financial sector. The reforms havedramatically changed the Banking scenario in the country and it is now in theprocess of transformation and consolidation. The reforms have ultimately resultedto a heightened competition, increased autonomy and technological up gradation.Of late, technological applications have had a major effect in the operations ofbanks. The arrival of foreign and private banks have resulted severe competition inthe industry. The banking industry is at cross roads with applications of technologywhich is leading towards globalization and integration of world financial markets.

Against this backdrop, a modest attempt is made in this paper to examine thestatus of information technology in the Indian commercial banks and study thechallenges they would face the present day competitive environment.

Advent of I.T in banking sector:

Information technology (I.T) today permeates almost every sphere of humanendeavour with the advent of financial reforms in 1991 aiming to globalize andliberal Indian economy, new challenges were thrown unprecedented change infinancial environment of banks. Further, there have been quantum jumps in theexpectations and demands of the customers for new products and services. Banksare under pressure to offer today what customers would expecting tomorrow.

Technology has emerged has a catalyst and driving force in enhancing the qualityof service and improving business performance of a bank. The foreign banks andnewly setup private banks are exploiting the full potential of IT are placed in amuch better position to offer facilities like ATM network, anywhere/any timebanking, tele-banking, Home Banking, Internet banking, virtual Banking- bankingand universal banking etc.

There has been fierce competition and new generation banks like ICICI bank, AXISbank, HDFC bank and UTI bank are so aggressively delivering the goods in a mostefficient manner thereby prompted the old generation banks go for higher levels oftechnology. Information is life blood of banks sparring over all the main areas ofoperations. Strides in technology at a greater pace was accomplished after 1993when Dr.Rangarajan committee gave a broad frame work of computerization ofbanks

Initiatives in the adoption of technology:

The technology adoption of a Indian banks was a process which streamed out of arecommendation of various committees formed by the RBI. Besides, the issue oftechnology adoption of banks was also examined in detail by the financial reformscommittee set up in 1991 and 1998 headed by Sri M.Narasimham. Almost manyrecommendations of the above committees have been accepted by the RBI and arebeing implemented now in banking industry. By leveraging technology, banks haveimproved their consumer services and enhanced the standards of their housekeeping. The Process of Technology absorption by Indian banks has been

increasing in recent years and the positive feature has been the attitudinal changeamong the bank staff, management, and public from reluctance to use computers.


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The RBI took a decisive lead in the computerization of banks. Many bankingsoftware packages for important operations have been developed and they are beingwidely used in the industry. The main focus of IT would BE on improving customerservices, quick decision making, accuracy in dealings and increased productivity.

The fast developments in the field of IT helped banks to promote connectivity

among the branches and offering several on line service to their clienteleApplications of IT services offered:

At present most of the banking business transactions are carried with theapplication of information technology. Banking services are made easily andquickly accessible to customers anywhere in the world. Following are the some ofthe innovative services provided by banks based on technology

-Automated teller machines (ATM)

-Internet banking (IB)

-Electronic fund transfer (EFT)

-E. banking

-credit cards, debit cards, smart cards

- Home banking (HB)

- Tele banking/mobile banking

-Inter branch reconciliation (IBR)

-Electronic clearing service (ECS)

-Total branch computerization (TBC)

-Any time Banking (ATB)

-Fully electronic transactional System (FETS)

-Any wheel Banking (AWB)

Implementation of IT has helped banks to build up a comprehensivecustomers data base and research to aid strategic policy making mechanism. Ithas been realised that IT in banking industry is vital for sharp progress in financialintermediation and efficient delivery system

Challenges before the industry:

The two major challenges the present day banker is forced to face or fast changingcustomer expectations on one hand, and diversification of banking business in to

new areas to optimize and resources and to deliver value based products toconsumer on the other. The heavy initial cost involved in adoption of IT would beanother constraint for some works. The application of IT is not uniform amongdifferent banks or branches of a bank. This restricts the service benefits to bankand customers alike. Another major hurdle for wide spread use of IT in the entirebanking industry is the poor communication infrastructure in various parts ofrural India. The big challenge is to ensure that the benefits of technology percolateto every type of banks and to all sections to consumers especially those living inrural areas.

One has to note that more introduction of IT alone will not be sufficient to bring innecessary performance improvement and to get competitive edge. It is the peoplewho have to play the crucial role in turning the technology to help the banks inpromoting their performance It Requires intelligent and skilled personnel to use


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such technological tools. The work culture needs to be directed as per changingscenario of technology driven banking.

Strategies for Effective IT management In Banks:

Technology has revolutionized the way Indian banking is looked at the way it is

being functioned. It has opened new avenues for the industry in terms of businessopportunities and challenges. In fact, the bank competition and customerexpectations have forced to evolve strategies for better management of technology.for effective technology management there should be a paradigm shift in themindset of bankers. There is an imperative need for dissemination of knowledgerelating to the latest developments in the hardware and software system. Successof technology largely depends on the quality of software management. A strategylong term plan has to prepare by every bank with corporate vision to ensure thesuccessful role of IT. The functions and operation of bank should be redefined andnecessary structural changes should be made. Sometimes banks may becomevictims of virus attack, frauds, hacking, internal threats and natural disorders etc;

The banks should implement latest technology to avoid any untoward incidents in

their branch network.

The banks are not able to attract best talent in IT From reputed IT institutes in thecountry. The Reason is the banks cannot offer the salary and position on par withsoftware companies. Hence, banks have to formulate a separate salary structure forIT people. It is heartening to note that many public sector banks have beeninvesting considerable money in IT to meet future requirements of the industry. Oflate, banks are diversifying in to financial services and insurance business. Themushrooming of multifunctional activities is being operated by modern technologytools. There is a vast improvement in the quality of service, productivity,profitability, transparency and increased corporate image after the adoption oftechnology in banks. Therefore, it is most imperative to effectively manage IT in

public sector banks to face the challenges of globalised financial environment andfor gaining competitive edge. Using latest and update technology that is existingglobally should become the direction for Indian banks in future. Those who areproactive in future in the application of IT will survive and others will be leftbehind.

Conclusion:

This paper describes in a nutshell the evolution of banking and defines bankingtechnology as a Consortium of several disciplines, namely finance subsuming riskmanagement, information and communication technology, computer science, andmarketing science.

In summary, it is quite clear that banking technology has emerged as a separatediscipline in its own right. As regards future directions, the proliferating research inall fields of Technology and computer science can make steady inroads intobanking technology because any new research idea in these disciplines canpotentially have a great impact on banking technology.

References

Cruz, M.G. (2002). Modeling, measuring and hedging operational risk. Chichester:John Wiley & Sons.Engler, H., & Essinger, J. (2000).The future of banking.UK: Reuters, PearsonEducation.

Graham, B. (2003).The evolution of electronic payments.BE Thesis, Division ofElectrical and Electronics Engineering, School of Information Technology and


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Electrical Engineering, University of Queensland, Australia. Retrieved fromhttp://innovexpo.itee.uq.edu.au/2003/exhibits/s334853/thesis.pdf

Hofmann, F., Baesens, B., Martens, J., Put, F.,& Vanthienen, J. (2002).Comparinga genetic fuzzy and neurofuzzy classifier for credit scoring. International Journal ofIntelligent Systems, 17(11), 1067-1083

technology management in banks-a paradigm shift

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