100 Mrks Project

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Ten great innovation initiatives frombanks around the worldAs part of our efforts in keeping an eye on the future of banking, weve come across some great sites from banks trying to push back the boundaries ofproduct innovation and collaborative working with their customers.

Heres a list of ten of them. Not all of them are in English: if youre not multilingual, try typing the site URL into theGoogle Translate toolwhich willprovide you with a translation of each page on-the-fly.

1. American Express Labs (USA)

This site enables American Express cardmembers to sign up to pilot programmes which give them access to emerging technologies and innovativeapplications before they are made available to the public. The site also provides a forum for customers to share their feedback and comments on thebeta services with others.

2. Bankinter Labs (Spain)

Bankinter aims to be a market leader in Web 2.0 service innovation, and itsLabs siteis where it shares its latest projects with its customers andenables them to participate in them.

3. Bank of America Center for Future Banking (USA)

A collaboration between Bank of America and MIT,the Center for Future Bankinghas been set up to explore how emerging technologies and insightsinto human behavior can transform customers' experiences and elevate the role of the bank in their financial lives. Take a look at their recent researchon Proverbial Wallets.

4. BBVA Plant 29 (Spain)

BBVAs Plant 29project comprises a number of components designed to nurture innovation within the bank, including Blogsfera BBVA: a collectiveblogging environment involving all employees of the bank (more than 110,000 employees in 35 countries) and designed to encourage proactivity,knowledge sharing and idea generation.

5. Le Lab Cofidis (France)

Like American Express, French consumer credit provider, Cofidis, has created anonline Lab where customers can sign up to services and conceptsbefore they are launched. Participants are invited to test, comment and vote on beta services in order to influence final product development.

6. The Umpqua Bank Innovation Lab (USA)

Its been around for a couple of years now, but Umpqua banksInnovation Lab website and showcase physical branch are still pretty innovative. Thesite enables customers to book a visit to the branch which includes a 25-foot interactive touch screen, merchandise on display for purchase,customised computer stations, a collaborative workspace and free cappuccinos!

7. Wells Fargo Labs (USA)

This site enables Wells Fargos customers to be one of the first to test its latest ideas and technologies from still-in-development beta offerings tonewly launched products. These include a customised credit card design studio, an iPhone app, vSafe accounts, and Rapid Alert text messaging.

8, 9 and 10

These last three sites arent collaborative labs, but they are excellent examples of banks pushing back the traditional boundaries around how theyconnect with their customers.

Innovation in Banking - what's going to change in the next 5years

Innovation in Banking is going to be the key in FY 2010-2011 and beyond!

Innovation has always been an important area of focus for all industries, not just for Banks. However, in view of the economic slowdown, it is

common knowledge that banks have been taking a very conservative approach over the last two years as many have been consolidating their

portfolio and innovating products had lost its importance and has taken a back seat. We have not seen many innovative products designed for

customers during the consolidation phase, and rightly so, as the primary focus of Banks has been in cleansing their portfolio and tightening

credit extension apart from being extremely guarded in getting only credit worthy customers in their books.

The scene in the Indian Banking industry is changing; the various global economies have started showing signs of revival leaving

behind them the worst recessionary phase and moving towards growth. The Prime Minister of India, during the recent platinum jubilee

celebrations of Reserve Bank of India, has encouraged Banks to be more innovative. Please recall the budgetary announcement by theFinance Minister on opening up the Banking space by offering additional banking licenses to private players and NBFC's. It is expectedthat at least 5 more International Banking giants will set up operations in India in the next 1-2 years, bringing with them superior technology.

These are exciting times for customers in India and challenging times for existing Banks, more so for the Public Sector Banks.

The choice before the customer today is far wider both in the selection of banks as well asproducts than ever before. The future growth is

largely in retail banking. Innovating products backed by superior service are vital to provide the cutting edge.

Here's a quick look at some factors which may probably be the key drivers for Innovation in Banking, keeping in mind customer expectations

and behavior changes:

1. With intense competition between banks which is going to be more severe in the coming years and with more private players waiting to

step in, adopting new technology has assumed added importance, especially for public sector banks. The key to success is adopting state-of-

the-art technology and continuously accelerating business processes.
http://translate.google.com/http://translate.google.com/http://translate.google.com/https://www213.americanexpress.com/PowerLabsWeb/un/landingpage.htmhttps://labs.bankinter.com/about/default.aspxhttps://labs.bankinter.com/about/default.aspxhttps://labs.bankinter.com/about/default.aspxhttp://cfb.media.mit.edu/http://cfb.media.mit.edu/http://cfb.media.mit.edu/http://planta29.com/http://planta29.com/http://lelabcofidis.fr/http://www.umpqualab.com/http://www.umpqualab.com/https://labs.wellsfargo.com/https://www213.americanexpress.com/PowerLabsWeb/un/landingpage.htmhttps://labs.bankinter.com/about/default.aspxhttp://cfb.media.mit.edu/http://planta29.com/http://lelabcofidis.fr/http://www.umpqualab.com/https://labs.wellsfargo.com/http://translate.google.com/


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2. Investment and innovation in technology will result in further advancement in credit analytics systems that will help them assess

customer behavior and enhance portfolio profitability. Experience in matured markets has proven the value of credit bureaus in the

development of consumer credit. With the possibility of more credit bureau's competing with CIBIL looming large, further advancement

and innovation to quickly assess customer credit history will be a critical factor to provide convenience banking to customers. The day is not

far away where you call up your Bank for a loan, provide your UID/PAN Number, your credit score verified, eligibility calculated and the

processing is completed almost instantaneously and the loan amount gets credited to your account within 24 hours.

3. The 3G spectrum auction expected in mid 2010 across various circles to private telecom providers in India will further open up immense

migration possibilities to more convenient channels. It may not be too long where the customer would access his bank account using

a secured application through his mobile phone. Needless to say, a secured and fast internet banking platform will become a basic

necessity.

4. RBI's recent directive on payment of interest on daily balance maintained in the savings account effective 1st April 2010 will result

in higher outflow to Banks. This will also result in the interest rates for short term deposits (7 - 90 days) undergoing an upward revision as

against the 2.5% - 3.5% being paid currently by banks on these deposits. While most Banks seem to have enhanced their technology to

comply with this interest calculation methodology, this change however would result in an increased outflow of around 20% in interest

credits. Banks will find ways to innovate and encourage customers to use their debit cards for purchases, bring the average daily balance

down and gain the differential between interchange spend and interest payouts. These strategies of promoting debit card usage will also

keeps the banking system going, interchange revenues flowing in and ensuring that credit exposure by way of credit cards is

minimized.

5. Continuous innovation on the product offerings by Banks is paramount to ensure that their products stand out from the crowd. A lot of

effort and innovation from Banks is required to make their product the preferred choice of the customer. This needs to be backed by a

powerful and customized loyalty program for customers to be continuously encouraged to keep using their card. Service is an extremely

vital cog in the wheel and the Banks which make the investment to have superior service levels as their USP will have a clear advantage.

Investment in providing a chat interface as a service channel for routine enquiries would be in line with times to come.


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6. Ten years ago, a customer would have been happy to bank with those who provided just a fixed deposit or a recurring deposit in addition

to his savings account and a credit card. Today, there is a need to spread the wealth around, diversify the savings into shares, fixeddeposits, mutual funds, pension products and insurance. Banks have a choice offer all these as part of their Convenience Banking to

customers or lose him. This desire and the compulsion to be the one-stop shop for the entire customer's investment and borrowing needs will

ensure a lot of banks adopt this model increasingly.

7. Smart Cards embedded with microprocessors or memory chips will become tamper proof and replace the existing plastic cards,

offering customers a secure digital identity. This will also provide convenience to customers; provide access to bank's website and individual

accounts, accurate tracking of usage, spend analysis and manage long term customer relationships through efficient, timely and valuable

services to them.

8. Biometric ATM's will replace the conventional ATM's across the country, apart from all banks investing in additional ATM's. Banks can

authenticate the identity of the customer in three ways; most common being something the user knows (passwords or personal identification

numbers), something the user has (a security token etc) or something the user is (a physical characteristic like fingerprint, palm geometry

etc., called as biometric). With increasing threats on compromise of passwords and account take over's and misuse of cards, biometric form

of authentication (which have withstood the test of scrutiny coming out as the most secure form) for ATM and POS transactions would be the

way ahead. Statistics show that India's ATM density is around 35 ATM's per mill ion people which is abysmally low compared to the US's ATMdensity of 1300. This is an area of focus for many banks clearly, offering a branding and marketing proposition for their investments apartfrom interchange revenues on usage.

9. Cheques will gradually be phased out and replaced by RTGS and NEFT and other electronic forms of money transfers and

payment mechanisms offering superior turnaround times. Operational efficiency in processing electronic payment mechanisms will undergo aradical change, with the beneficiary receiving the credit real time online.

10. The 2010 Census process which has begun is going to throw up interesting focus areas for Banks. The demographics of our country,

with 54% of the Indian population being under 25 years of age and 60% within 40 years of age, will be a key driver to create a

large retail customer base. With increasing income levels and an annual GDP growth of 8.5-9% predicted for the next 2-3 years, this segment

is a good target market to sell insurance, mutual funds, credit cards etc.

With so much of talk about inclusive growth and focus on rural development, there is a considerable gap between demand and supply

for all financial services, especially in rural segments. Almost 70% of the rural population does not have a bank account, 85% do not

have access to credit and less than 10% have any kind of insurance (life, health, crop insurance etc). More importantly, still 60%

of the rural poor borrow from moneylenders, friends and other sources.

While banks have largely stayed away from lending to this segment leaving it to the microfinance companies and institutions, the statistics

suggest that non-performing loans in the rural sector are similar to urban averaging between 1-2%. It would make enormous business sense


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for banks and over the next few years, we would be seeing many banks enter into micro finance which will, hopefully narrow the gap between

banking services provided in urban and rural India.Here's a look at some statistics on how the various segments within the Banking industry today are placed in terms of financial strength to

take on these challenges:

SBI & Associates have been aggressive in their ability to attract capital, deposits and investments and have been in the forefront in

advances, followed by nationalized banks and other scheduled banks. This also shows in their increase in income from interest and other

incomes. Foreign banks have been very cautious in their advances.

Foreign Banks have a distinct advantage - their Business per employee is almost 100% better than most banks in India and their

profit per employee is 400% higher. Their cost of funds (CoF) is also significantly lower by almost 25% compared to all banks and

they have performed well to get superior returns on assets. A superior CRAR, higher than the overall industry average gives a lot of comfort

but a significantly higher net NPA ratio at 1.80 is still a cause of concern.

Banking in India

Banking in India originated in the last decades of the 18th century. The first banks were The General Bank of India, which started in 1786,and Bank of Hindustan, which started in 1790; both are now defunct. The oldest bank in existence in India is the State Bank of India, whichoriginated in the Bank of Calcutta in June 1806, which almost immediately became the Bank of Bengal. This was one of the three presidencybanks, the other two being the Bank of Bombayand theBank of Madras, all three of which were established under charters from the BritishEast India Company. For many years the Presidency banks acted as quasi-central banks, as did their successors. The three banks mergedin 1921 to form the Imperial Bank of India, which, upon India's independence, became the State Bank of India.

History

Indian merchants in Calcutta established the Union Bank in 1839, but it failed in 1848 as a consequence of the economic crisis of 1848-49.

TheAllahabad Bank, established in 1865 and still functioning today, is the oldest Joint Stock bank in India.(Joint Stock Bank: A company

that issues stock and requires shareholders to be held liable for the company's debt) It was not the first though. That honor belongs to the

Bank of Upper India, which was established in 1863, and which survived until 1913, when it failed, with some of its assets and liabilities being

transferred to theAlliance Bank of Simla.

When theAmerican Civil Warstopped the supply of cotton toLancashire from the Confederate States, promoters opened banks to finance

trading in Indian cotton. With large exposure to speculative ventures, most of the banks opened in India during that period failed. The
http://en.wikipedia.org/wiki/Bank_of_Bengalhttp://en.wikipedia.org/wiki/Bank_of_Bengalhttp://en.wikipedia.org/wiki/Bank_of_Bombayhttp://en.wikipedia.org/wiki/Bank_of_Bombayhttp://en.wikipedia.org/wiki/Bank_of_Madrashttp://en.wikipedia.org/wiki/Bank_of_Madrashttp://en.wikipedia.org/wiki/Bank_of_Madrashttp://en.wikipedia.org/wiki/Imperial_Bank_of_Indiahttp://en.wikipedia.org/wiki/Imperial_Bank_of_Indiahttp://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/wiki/Allahabad_Bankhttp://en.wikipedia.org/wiki/Allahabad_Bankhttp://en.wikipedia.org/wiki/Allahabad_Bankhttp://en.wikipedia.org/wiki/Alliance_Bank_of_Simlahttp://en.wikipedia.org/wiki/Alliance_Bank_of_Simlahttp://en.wikipedia.org/wiki/American_Civil_Warhttp://en.wikipedia.org/wiki/American_Civil_Warhttp://en.wikipedia.org/wiki/Lancashirehttp://en.wikipedia.org/wiki/Lancashirehttp://en.wikipedia.org/wiki/Confederate_Stateshttp://en.wikipedia.org/wiki/Confederate_Stateshttp://en.wikipedia.org/wiki/Bank_of_Bengalhttp://en.wikipedia.org/wiki/Bank_of_Bombayhttp://en.wikipedia.org/wiki/Bank_of_Madrashttp://en.wikipedia.org/wiki/Imperial_Bank_of_Indiahttp://en.wikipedia.org/wiki/State_Bank_of_Indiahttp://en.wikipedia.org/wiki/Allahabad_Bankhttp://en.wikipedia.org/wiki/Alliance_Bank_of_Simlahttp://en.wikipedia.org/wiki/American_Civil_Warhttp://en.wikipedia.org/wiki/Lancashirehttp://en.wikipedia.org/wiki/Confederate_States


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depositors lost money and lost interest in keeping deposits with banks. Subsequently, banking in India remained the exclusive domain of

Europeans for next several decades until the beginning of the 20th century.

Foreign banks too started to arrive, particularly in Calcutta, in the 1860s. TheComptoire d'Escompte de Paris opened a branch in Calcutta in

1860, and another inBombayin 1862; branches inMadrasandPuducherry, then a French colony, followed.HSBCestablished itself

inBengalin 1869. Calcutta was the most active trading port in India, mainly due to the trade of theBritish Empire, and so became a banking

center.

The first entirely Indian joint stock bank was the Oudh Commercial Bank, established in 1881 inFaizabad. It failed in 1958. The next was

thePunjab National Bank, established in Lahorein 1895, which has survived to the present and is now one of the largest banks in India.

Around the turn of the 20th Century, the Indian economy was passing through a relative period of stability. Around five decades had elapsed

since theIndian Mutiny, and the social, industrial and other infrastructure had improved. Indians had established small banks, most of which

served particular ethnic and religious communities.

The presidency banks dominated banking in India but there were also some exchange banks and a number of Indianjoint stock banks. All

these banks operated in different segments of the economy. The exchange banks, mostly owned by Europeans, concentrated on financing

foreign trade. Indian joint stock banks were generally under capitalized and lacked the experience and maturity to compete with the

presidency and exchange banks. This segmentation let Lord Curzon to observe, "In respect of banking it seems we are behind the times.

We are like some old fashioned sailing ship, divided by solid wooden bulkheads into separate and cumbersome compartments."

The period between 1906 and 1911, saw the establishment of banks inspired by theSwadeshi movement. The Swadeshi movement inspired

local businessmen and political figures to found banks of and for the Indian community. A number of banks established then have survived to

the present such asBank of India,Corporation Bank,Indian Bank,Bank of Baroda,Canara BankandCentral Bank of India.

The fervour of Swadeshi movement lead to establishing of many private banks inDakshina KannadaandUdupi districtwhich were unified

earlier and known by the name South Canara ( South Kanara ) district. Four nationalised banks started in this district and also a leading

private sector bank. Hence undivided Dakshina Kannada district is known as "Cradle of Indian Banking".

During the First World War(1914-1918) through the end of theSecond World War(1939-1945), and two years thereafter until

theindependenceof India were challenging for Indian banking. The years of the First World War were turbulent, and it took its toll with banks

simply collapsing despite theIndian economygaining indirect boost due to war-related economic activities. At least 94 banks in India failed

between 1913 and 1918 as indicated in the following table:

Years

Number ofbanks

that failed

Authorisedcapital

(Rs. Lakhs)

Paid-upCapital

(Rs. Lakhs)

191

312 274 35
http://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/w/index.php?title=Comptoire_d%27Escompte_de_Paris&action=edit&redlink=1http://en.wikipedia.org/w/index.php?title=Comptoire_d%27Escompte_de_Paris&action=edit&redlink=1http://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Pondicherryhttp://en.wikipedia.org/wiki/Pondicherryhttp://en.wikipedia.org/wiki/HSBChttp://en.wikipedia.org/wiki/HSBChttp://en.wikipedia.org/wiki/HSBChttp://en.wikipedia.org/wiki/Bengalhttp://en.wikipedia.org/wiki/Bengalhttp://en.wikipedia.org/wiki/Bengalhttp://en.wikipedia.org/wiki/British_Rajhttp://en.wikipedia.org/wiki/British_Rajhttp://en.wikipedia.org/wiki/British_Rajhttp://en.wikipedia.org/wiki/Faizabadhttp://en.wikipedia.org/wiki/Faizabadhttp://en.wikipedia.org/wiki/Faizabadhttp://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/wiki/Lahorehttp://en.wikipedia.org/wiki/Lahorehttp://en.wikipedia.org/wiki/Indian_rebellion_of_1857http://en.wikipedia.org/wiki/Indian_rebellion_of_1857http://en.wikipedia.org/wiki/Indian_rebellion_of_1857http://en.wikipedia.org/wiki/Joint_stock_companyhttp://en.wikipedia.org/wiki/Swadeshihttp://en.wikipedia.org/wiki/Swadeshihttp://en.wikipedia.org/wiki/Bank_of_Indiahttp://en.wikipedia.org/wiki/Bank_of_Indiahttp://en.wikipedia.org/wiki/Bank_of_Indiahttp://en.wikipedia.org/wiki/Corporation_Bankhttp://en.wikipedia.org/wiki/Corporation_Bankhttp://en.wikipedia.org/wiki/Indian_Bankhttp://en.wikipedia.org/wiki/Indian_Bankhttp://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Canara_Bankhttp://en.wikipedia.org/wiki/Canara_Bankhttp://en.wikipedia.org/wiki/Canara_Bankhttp://en.wikipedia.org/wiki/Central_Bank_of_Indiahttp://en.wikipedia.org/wiki/Central_Bank_of_Indiahttp://en.wikipedia.org/wiki/Central_Bank_of_Indiahttp://en.wikipedia.org/wiki/Dakshina_Kannadahttp://en.wikipedia.org/wiki/Dakshina_Kannadahttp://en.wikipedia.org/wiki/Dakshina_Kannadahttp://en.wikipedia.org/wiki/Udupi_districthttp://en.wikipedia.org/wiki/Udupi_districthttp://en.wikipedia.org/wiki/Udupi_districthttp://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/Second_World_Warhttp://en.wikipedia.org/wiki/Second_World_Warhttp://en.wikipedia.org/wiki/Second_World_Warhttp://en.wikipedia.org/wiki/Indian_independence_movementhttp://en.wikipedia.org/wiki/Indian_independence_movementhttp://en.wikipedia.org/wiki/Indian_independence_movementhttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Economy_of_Indiahttp://en.wikipedia.org/wiki/Kolkatahttp://en.wikipedia.org/w/index.php?title=Comptoire_d%27Escompte_de_Paris&action=edit&redlink=1http://en.wikipedia.org/wiki/Mumbaihttp://en.wikipedia.org/wiki/Chennaihttp://en.wikipedia.org/wiki/Pondicherryhttp://en.wikipedia.org/wiki/HSBChttp://en.wikipedia.org/wiki/Bengalhttp://en.wikipedia.org/wiki/British_Rajhttp://en.wikipedia.org/wiki/Faizabadhttp://en.wikipedia.org/wiki/Punjab_National_Bankhttp://en.wikipedia.org/wiki/Lahorehttp://en.wikipedia.org/wiki/Indian_rebellion_of_1857http://en.wikipedia.org/wiki/Joint_stock_companyhttp://en.wikipedia.org/wiki/Swadeshihttp://en.wikipedia.org/wiki/Bank_of_Indiahttp://en.wikipedia.org/wiki/Corporation_Bankhttp://en.wikipedia.org/wiki/Indian_Bankhttp://en.wikipedia.org/wiki/Bank_of_Barodahttp://en.wikipedia.org/wiki/Canara_Bankhttp://en.wikipedia.org/wiki/Central_Bank_of_Indiahttp://en.wikipedia.org/wiki/Dakshina_Kannadahttp://en.wikipedia.org/wiki/Udupi_districthttp://en.wikipedia.org/wiki/First_World_Warhttp://en.wikipedia.org/wiki/Second_World_Warhttp://en.wikipedia.org/wiki/Indian_independence_movementhttp://en.wikipedia.org/wiki/Economy_of_India


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191

442 710 109

191

5

11 56 5

191

613 231 4

191

79 76 25

191

87 209 1

PROCESS INNOVATION IN THE INDIAN BANKING INDUSTRY

Wednesday, 07 January 2009

The crisis in the international financial markets had been simmering for quite some time. However, its effects are now evident with the collapse ofsome of the leading financial institutions.

While India has not been as seriously impacted by the global financial turmoil, the current credit crunch has affected all sectors of the Indian

economy. On the one hand, the Indian banking industry is witnessing rapid change given the evolving regulatory environment, rapid technologicaladvancements, heightened competition and consolidation. On the other hand, with the global recession looming, the industry is now exploringprocess innovation and is more aggressively adopting technology.

ValueNotes along with the Indian Banks' Association (IBA) conducted a conference on "Process Outsourcing in the Indian Banking Industry" onJanuary 6th to address the immediate issues concerning the banking industry. There were several speakers from the banking industry includingHDFC Bank, Punjab National Bank, Bank of India, IDBI, who spoke on the issues and concerns of the banks. There were also some serviceproviders such as Intelenet, MphasiS BPO, HTMT Global and Shell Transource who were present at the conference. These service providers talkedabout their experience with the international banks and spoke about issues related to vendor selection and process transition.

Inaugurating the conference, Dr. K Ramakrishnan, Chief Executive, IBA talked about the economy and the banking sector in his opening remarks. Hesaid "The country will see difficult times for at least another one year and in these trying times the question that most banks are asking themselves is- How do I still lend and keep the portfolio intact?" He emphasized that this is a time to look internally and examine and set processes in place.

Outsourcing in the Indian Banking Industry

Globally, the banking and financial services sector has been at the forefront of the outsourcing movement. Third party service providers have alsobuilt greater processing and analytical capabilities and are able to handle more complex functions like financial modeling and equity research. Incontrast with global evolution of outsourcing, the Indian banking industry has been slower to outsource.

The Indian banking Industry is highly fragmented. There are banks ranging from small co-operative banks (presence limited to a few branches in a

city) to large nationalized commercial banks like SBI with over 10,000 branches (one of the largest banking network in the world). The Indian bankingIndustry is dominated by PSBs with 70% market share. Further, there are different issues that concern the Indian banks when outsourcing.

Harsha Pai, General Manager, Sparsh BPO (part of Intelenet) touched upon the issue of vendor selection and the necessary parameters whileselecting a suitable vendor. Several attendees said that Indian banks were wary of outsourcing especially given the client confidentiality issues andthe associated risks. According to Pai, "Initially, international banks had also certain concerns about outsourcing, however, now a majority of thebanks outsource a wide range of services to third-party service providers. Indian banks need to clearly understand and convey to the serviceproviders what is truly confidential".

While there were some apprehensions about outsourcing, there were also banks such as HDFC Bank, Bank of India and Punjab National Bank whoshared their experiences about outsourcing and its rewards. BinduMadhav Tikekar, Senior Vice President & Regional Head - Wholesale bankingOperations, HDFC Bank talked about the rewards in the form of cost effectiveness, reduction in technical staff and low implementation andoperational costs. However, he also cautioned the banks about the risks associated with outsourcing.

Gaurav Bhatia, Vice President) BFS Solutioning Head - BPO, spoke about process transition - possibility and plausibility. With the help of several


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case studies he drove home the point that processes are crucial for outsourcing. Banks need to standardize and document every process before theycan initiate outsourcing.

Process Innovation and Technology

In India, outsourcing of processes is largely constrained by the RBI regulations and resistance from trade unions. According to Arun Jethmalani,CEO, ValueNotes, "Aggressive adoption of IT and centralization of operations have served as a key enabler to outsourcing of business processes inthe banking industry." Other factors such as growth in the banking industry, deregulation, increasing competition, consolidation and improvingbenchmarks in the industry are driving the outsourcing of business processes.

PSBs have been sluggish in adopting new technology as compared to global banks. Post liberalization, with RBI tightening its regulations, PSBshave undertaken massive computerization to achieve 'Total Branch Automation'. With privatization and increasing competition, all the large banks arenow aggressively implementing 'Core Banking Solutions'.

There is increasing focus on technology as evidenced by more and more PSU banks going for aggressive computerization and transferring theirprocesses into some technology platform or other. While a few large PSBs have been quick to respond to competitive pressures by introducing newservices, investing in technology and acquiring capabilities like marketing and sales, others lag behind.

Sanjay Sharma, MD & CEO, IDBI Intech Ltd spoke about leveraging technology for process innovation. He argued that "Banks still need to reach thelevel where processes are streamlined in a manner so that there is consistent customer service in every branch on any bank."

P A Kalyanasundar, General Manager, Bank of India said that "Unlike the new generation private and foreign banks, PSBs come with a legacy. Thebiggest challenge that PSBs are faced with is completeness of data. This poses a hurdle when a bank decides to outsource." On similar lines, R I SSidhu, Chief General Manager (IT), Punjab National Bank said that "While banks need to invest in technology, it is a challenge for them to implementtechnology and train their staff. Explaining the marked difference when talking about technology in a PSB, he said that until recently there was verylittle 'technology' for the banker and processes were largely manual procedures, however today technology implies enterprise wide datawarehousing."

Most banks have partially outsourced their IT related requirements and matured in terms of their understanding of risks and advantages inoutsourcing. We believe that with greater success in IT outsourcing, banks will be more inclined to outsource their business processes and thusleverage on the benefits and economies gained through investments in IT.

INNOVATIONS IN INDIAN BANKING SECTOR:

Category I: Types Of Innovative Banking

Category II: Types Of Product & Services

Category III: Electronic System

TYPES OF INNOVATINE BANKING:

1:E BANKING=Internet banking (or E-banking) means any user with a personal computerand a browser can get connected to his bank -s website to perform any of the virtual bankingfunctions. In internet banking system the bank has a centralized database that is web-enabled.All the services that the bank has permitted on the internet are displayed in menu. Any servicecan be selected and further interaction is dictated by the nature of service. The traditionalbranch model of bank is now giving place to an alternative delivery channels with ATMnetwork. Once the branch offices of bank are interconnected through terrestrial or satellitelinks, there would be no physical identity for any branch. It would a borderless entitypermitting anytime, anywhere and anyhow banking.

Internet banking in india

The Reserve Bank of India constituted a working group on Internet Banking. The group divided theinternet banking products in India into 3 types based on the levels of access granted. They are:

i) Information Only System: General purpose information like interest rates, branch location,bank products and their features, loan and deposit calculations are provided in the banks website. Thereexist facilities for downloading various types of application forms. The communication is normally donethrough e-mail. There is no interaction between the customer and bank's application system. Noidentification of the customer is done. In this system, there is no possibility of any unauthorized persongetting into production systems of the bank through internet.

ii) Electronic Information Transfer System: The system provides customer- specific


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information in the form of account balances, transaction details, and statement of accounts. Theinformation is still largely of the 'read only' format. Identification and authentication of the customer isthrough password. The information is fetched from the bank's application system either in batch mode oroff-line. The application systems cannot directly access through the internet.

iii) Fully Electronic Transactional System: This system allows bi-directionalcapabilities. Transactions can be submitted by the customer for online update. This system requires high

degree of security and control. In this environment, web server and application systems are linked oversecure infrastructure. It comprises technology covering computerization, networking and security, inter-bank payment gateway and legal infrastructure.

Automated Teller Machine (ATM):ATM is designed to perform the most important function of bank. It is operated by plastic card with itsspecial features. The plastic card is replacing cheque, personal attendance of the customer, bankinghours restrictions and paper based verification. There are debit cards. ATMs used as spring board forElectronic Fund Transfer. ATM itself can provide information about customers account and also receiveinstructions from customers - ATM cardholders. An ATM is an Electronic Fund Transfer terminal capableof handling cash deposits, transfer between accounts, balance enquiries, cash withdrawals and paybills. It may be on-line or 0ff-line. The on-line ATN enables the customer to avail banking facilities fromanywhere. In off-line the facilities are confined to that particular ATM assigned. Any customerpossessing ATM card issued by the Shared Payment Network System can go to any ATM linked toShared Payment Networks and perform his transactions.

Credit Cards/Debit Cards:The Credit Card holder is empowered to spend wherever and whenever he wants with his Credit Cardwithin the limits fixed by his bank. Credit Card is a post paid card. Debit Card, on the other hand, is aprepaid card with some stored value. Every time a person uses this card, the Internet Banking housegets money transferred to its account from the bank of the buyer. The buyers account is debited with theexact amount of purchases. An individual has to open an account with the issuing bank which givesdebit card with a Personal Identification Number (PIN). When he makes a purchase, he enters his PINon shops PIN pad. When the card is slurped through the electronic terminal, it dials the acquiring banksystem - either Master Card or VISA that validates the PIN and finds out from the issuing bank whetherto accept or decline the transactions. The customer can never overspend because the system rejectsany transaction which exceeds the balance in his account. The bank never faces a default because the

amount spent is debited immediately from the customers account.

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 stripecards. In addition, these cards are highly secure, more reliable and perform multiple functions. They holda large amount of personal information, from medical and health history to personal banking andpersonal preferences.

Core banking

Core Banking is normally defined as the business conducted by a banking institution with its

retail and small business customers. Many banks treat the retail customers as their core

banking customers, and have a separate line of business to manage small businesses. Larger

businesses are managed via the corporate banking division of the institution. Core banking

basically is depositing and lending of money.

Nowadays, most banks use core banking applications to support their operations where CORE


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stands for "centralized online real-time exchange". This basically means that all the bank's

branches access applications from centralized datacenters. This means that the deposits

made are reflected immediately on the bank's servers and the customer can withdraw the

deposited money from any of the bank's branches throughout the world. These applications

now also have the capability to address the needs of corporate customers, providing a

comprehensive banking solution.

A few decades ago it used to take at least a day for a transaction to reflect in the account

because each branch had their local servers, and the data from the server in each branch was

sent in a batch to the servers in the datacenter only at the end of the day (EoD).

Normal core banking functions will include deposit accounts, loans, mortgages and payments.

Banks make these services available across multiple channels likeATMs,Internet banking,

and branches.

What is corporate banking?

Corporate banking is a generic term given to different banking

services that large companies, governments, or other big institutions need inorder to carry out daily functions.

Corporate banking consists of simple business of issuing loans to more

complex matters, such as helping minimize taxes paid by overseas

subsidiaries, managing changes in foreign exchange rates, or working out thedetails of financing packages necessary for the construction of a new office,plant or other facility.

In many cases, there is an overlap between corporate banking and capital

markets. Bankers associated with capital markets help companies raisemoney by issuing equities or debt whereas corporate banking has the bankers

who typically help clients raise money through loans. Whennecessary, corporate bankers will bring in the expertise of their capitalmarkets colleagues.

Corporate banking also needs an understanding of complex financing methodslike securitization, where a company sells bonds based on the money it will

earn in the future from assets such as rented shop space or a back catalogueof products.

During the last five years, in an atmosphere of fierce competition, the

corporate banking has changed considerably as there has been an enormousconsolidation taking place. One of the most important among such
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consolidations is UK based Royal Bank of Scotland integrating the operationsof Dutch asset manager ABN Amro.

Investment banking:

An investment bank is a financial institution that assists individuals, corporations and

governments in raising capital by underwriting and/or acting as the client's agent in the

issuance ofsecurities. An investment bank may also assist companies involved

in mergers and acquisitions, and provide ancillary services such as market making,

trading ofderivatives, fixed income instruments, foreign exchange, commodities,

and equity securities.

Unlike commercial banks and retail banks, investment banks do not take deposits.

From 1933 (GlassSteagall Act) until 1999 (GrammLeachBliley Act), theUnited

States maintained a separation between investment banking andcommercial banks.

Other industrialized countries, including G8 countries, have historically not maintained

such a separation.

There are two main lines of business in investment banking. Trading securities for

cash or for other securities (i.e., facilitating transactions, market-making), or the

promotion of securities (i.e., underwriting, research, etc.) is the "sell side", while

dealing with pension funds, mutual funds,hedge funds, and the investing public (whoconsume the products and services of the sell-side in order to maximize their return on

investment) constitutes the "buy side". Many firms have buy and sell side components.

An investment bank can also be split into private and public functions with a Chinese

wall which separates the two to prevent information from crossing. The private areas of

the bank deal with private insider information that may not be publicly disclosed, while

the public areas such as stock analysis deal with public information.

An advisor who provides investment banking services in the United States must be a

licensed broker-dealerand subject to Securities & Exchange Commission (SEC)

and Financial Industry Regulatory Authority (FINRA) regulation.

Rural Banking:Rural banking in India started since the establishment of banking sector in India. Rural Banks in thosedays mainly focussed upon the agro sector. Regional rural banks in India penetrated every corner of thecountry and extended a helping hand in the growth process of the country.

SBI has 30 Regional Rural Banks in India known as RRBs. The rural banks of SBI is spread in 13 states
http://www.rbs.co.uk/http://wiki.ask.com/Securities?qsrc=3044http://wiki.ask.com/Mergers_and_acquisitions?qsrc=3044http://wiki.ask.com/Market_making?qsrc=3044http://wiki.ask.com/Derivative_(finance)?qsrc=3044http://wiki.ask.com/Fixed_income?qsrc=3044http://wiki.ask.com/Foreign_exchange_market?qsrc=3044http://wiki.ask.com/Commodities?qsrc=3044http://wiki.ask.com/Equity_securities?qsrc=3044http://wiki.ask.com/Commercial_bank?qsrc=3044http://wiki.ask.com/Retail_bank?qsrc=3044http://wiki.ask.com/Glass%E2%80%93Steagall_Act?qsrc=3044http://wiki.ask.com/Gramm%E2%80%93Leach%E2%80%93Bliley_Act?qsrc=3044http://wiki.ask.com/United_States?qsrc=3044http://wiki.ask.com/United_States?qsrc=3044http://wiki.ask.com/United_States?qsrc=3044http://wiki.ask.com/Commercial_bank?qsrc=3044http://wiki.ask.com/Commercial_bank?qsrc=3044http://wiki.ask.com/G8?qsrc=3044http://wiki.ask.com/Underwriting?qsrc=3044http://wiki.ask.com/Underwriting?qsrc=3044http://wiki.ask.com/Sell_side?qsrc=3044http://wiki.ask.com/Pension_fund?qsrc=3044http://wiki.ask.com/Mutual_fund?qsrc=3044http://wiki.ask.com/Hedge_fund?qsrc=3044http://wiki.ask.com/Hedge_fund?qsrc=3044http://wiki.ask.com/Buy_side?qsrc=3044http://wiki.ask.com/Chinese_wall?qsrc=3044http://wiki.ask.com/Chinese_wall?qsrc=3044http://wiki.ask.com/Insider_information?qsrc=3044http://wiki.ask.com/Broker-dealer?qsrc=3044http://wiki.ask.com/U.S._Securities_and_Exchange_Commission?qsrc=3044http://wiki.ask.com/Financial_Industry_Regulatory_Authority?qsrc=3044http://www.rbs.co.uk/http://wiki.ask.com/Securities?qsrc=3044http://wiki.ask.com/Mergers_and_acquisitions?qsrc=3044http://wiki.ask.com/Market_making?qsrc=3044http://wiki.ask.com/Derivative_(finance)?qsrc=3044http://wiki.ask.com/Fixed_income?qsrc=3044http://wiki.ask.com/Foreign_exchange_market?qsrc=3044http://wiki.ask.com/Commodities?qsrc=3044http://wiki.ask.com/Equity_securities?qsrc=3044http://wiki.ask.com/Commercial_bank?qsrc=3044http://wiki.ask.com/Retail_bank?qsrc=3044http://wiki.ask.com/Glass%E2%80%93Steagall_Act?qsrc=3044http://wiki.ask.com/Gramm%E2%80%93Leach%E2%80%93Bliley_Act?qsrc=3044http://wiki.ask.com/United_States?qsrc=3044http://wiki.ask.com/United_States?qsrc=3044http://wiki.ask.com/Commercial_bank?qsrc=3044http://wiki.ask.com/G8?qsrc=3044http://wiki.ask.com/Underwriting?qsrc=3044http://wiki.ask.com/Sell_side?qsrc=3044http://wiki.ask.com/Pension_fund?qsrc=3044http://wiki.ask.com/Mutual_fund?qsrc=3044http://wiki.ask.com/Hedge_fund?qsrc=3044http://wiki.ask.com/Buy_side?qsrc=3044http://wiki.ask.com/Chinese_wall?qsrc=3044http://wiki.ask.com/Chinese_wall?qsrc=3044http://wiki.ask.com/Insider_information?qsrc=3044http://wiki.ask.com/Broker-dealer?qsrc=3044http://wiki.ask.com/U.S._Securities_and_Exchange_Commission?qsrc=3044http://wiki.ask.com/Financial_Industry_Regulatory_Authority?qsrc=3044


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extending from Kashmir to Karnataka and Himachal Pradesh to North East. The total number of SBIsRegional Rural Banks in India branches is 2349 (16%). Till date in rural banking in India, there are14,475 rural banks in the country of which 2126 (91%) are located in remote rural areas.

Apart from SBI, there are many other banks which function for the development of the rural areas inIndia. These banks are listed below:

Andhra Pradesh Bihar

Andhra Pradesh Grameena VikasBank

Andhra Pragathi Grameena Bank

Deccan Grameena Bank

Chaitanya Godavari Grameena Bank

Saptagiri Grameena Bank

Chhattisgarh

Chhattisgarh Gramin Bank

Surguja Kshetriya Gramin Bank

Durg-Rajnandgaon Gramin Bank

Haryana

Harayana Gramin Bank

Gurgaon Gramin Bank

Jammu & Kashmir

Jammu Rural Bank

Ellaquai Dehati Bank

Kamraz Rural Bank

Assam

Assam Gramin Vikash Bank

Langpi Dehangi Rural Bank

Jharkhand

Jharkhand Gramin Bank

Vananchal Gramin Bank

Madhya Pradesh

Narmada Malwa Gramin Bank

Satpura Kshetriya Gramin Bank

Madhya Bharath Gramin Bank

Chambal-Gwalior Kshetriya GraminBank

Madhya Bihar Gramin Bank

Bihar Kshetriya Gramin Bank

Uttar Bihar Kshetriya Gramin Bank

Kosi Kshetriya Gramin Bank

Samastipur Kshetriya Gramin Bank

Gujarat

Dena Gujarat Gramin Bank

Baroda Gujarat Gramin Bank

Saurashtra Gramin Bank

Himachal Pradesh

Himachal Gramin Bank

Parvatiya Gramin Bank

Punjab

Punjab Gramin Bank

Faridkot-Bhatinda Kshetriya Gramin

Bank

Malwa Gramin Bank

Kerala

Narmada Malwa Gramin Bank

North Malabar Gramin Bank

Tamil Nadu

Pandyan Grama Bank

Pallavan Grama Bank

Maharashtra

Marathwada Gramin Bank

Aurangabad -Jalna Gramin Bank

Wainganga Kshetriya Gramin Bank

Vidharbha Kshetriya Gramin Bank

Solapur Gramin Bank


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Rewa-Sidhi Gramin Bank

Sharda Gramin Bank

Ratlam- Mandsaur Kshetriya GraminBank

Vidisha Bhopal Kshetriya Gramin

Bank

Mahakaushal Kshetriya GraminBank

Jhabua Dhar Kshetriya Gramin Bank

Thane Gramin Bank

Ratnagiri-Sindhudurg Gramin Bank

Karnataka

Karnataka Vikas Grameena Bank

Pragathi Gramin Bank

Cauvery Kalpatharu Grameena Bank

Krishna Grameena Bank

Chikmagalur-Kodagu GrameenaBank

Visveshvaraya Gramin Bank

Rajasthan

Baroda Rajasthan Gramin Bank

Marwar Ganganagar Bikaner GraminBank

Rajasthan Gramin Bank

Jaipur Thar Gramin Bank Hodoti Kshetriya Gramin Bank

Mewar Anchalik Gramin Bank

Orissa

Kalinga Gramya Bank

Utkal Gramya Bank

Baitarani Gramya Bank

Neelachal Gramya Bank

Rushikulya Gramya Bank

West Bengal

Bangiya Gramin Vikash Bank

Paschim Banga Gramin Bank

Uttar Banga Kshetriya Gramin Bank

Meghalaya

Ka Bank Nogkyndong Ri Khasi- Jaintia

Arunachal Pradesh

Arunachal Pradesh Rural Bank

Manipur

Manipur Rural Bank

Mizoram

Mizoram Rural Bank

Nagaland

Nagaland Rural Bank

Tripura

Tripura Gramin Bank

Uttar Pradesh

Purvanchal Gramin Bank

Kashi Gomti Samyut Gramin Bank

Uttar Pradesh Gramin Bank

Shreyas Gramin Bank

Lucknow Kshetriya Gramin Bank

Ballia Kshetriya Gramin Bank

Triveni Kshetriya Gramin Bank

Uttaranchal

Uttaranchal Gramin Bank

Nainital Almora Kshetriya Gramin Bank


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Aryavart Gramin Bank

Kisan Gramin Bank

Kshetriya Kisan Gramin Bank

Etawah Kshetriya Gramin Bank

Rani Laxmi Bai Kshetriya Gramin Bank

Baroda Western Uttar Pradesh Gramin Bank

Devipatan Kshetriya Gramin Bank

Prathama Bank

Baroda Eastern Uttar Pradesh Gramin Bank

TYPES OF PRODUCTS AND SERVICES:

Banks in India have traditionally offered mass banking products. Most common deposit

products being Savings Bank, Current Account, Term deposit Account and lending

products being Cash Credit and Term Loans. Due to Reserve Bank of India guidelines,

Banks have had little to do besides accepting deposits at rates fixed by Reserve Bank

of India and lend amount arrived by the formula stipulated by Reserve Bank of India at

rates prescribed by the latter. PLR (Prime lending rate) was the benchmark for interest

on the lending products. But PLR itself was, more often than not, dictated by RBI.

Further, remittance products were limited to issuance of Drafts, Telegraphic Transfers,

Bankers Cheque and Internal Transfer of funds.

In view of several developments in the 1990s, the entire banking products structure

has undergone a major change. As part of the economic reforms, banking industry has

been deregulated and made competitive. New players have added to the competition.IT revolution has made it possible to provide ease and flexibility in operations to

customers. Rapid strides in information technology have, in fact, redefined the role and

structure of banking in India. Further, due to exposure to global trends after Information

explosion led by Internet, customers - both Individuals and Corporates - are now

demanding better services with more products from their banks. Financial market has

turned into a buyer's market. Banks are also changing with time and are trying to

become one-stop financial supermarkets. Market focus is shifting from mass banking

products to class banking with introduction of value added and customised products.

A few foreign & private sector banks have already introduced customised banking

products like Investment Advisory Services, SGL II accounts, Photo-credit cards, Cash

Management services, Investment products and Tax Advisory services. A few banks

have gone in to market mutual fund schemes. Eventually, the Banks plan to market

bonds and debentures, when allowed. Insurance peddling by Banks will be a reality


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soon. The recent Credit Policy of RBI announced on 27.4.2000 has further facilitated

the entry of banks in this sector. Banks also offer advisory services termed as 'private

banking' - to "high relationship - value" clients.

The bank of the future has to be essentially a marketing organisation that also sells

banking products. New distribution channels are being used; more & more banks are

outsourcing services like disbursement and servicing of consumer loans, Credit card

business. Direct Selling Agents (DSAs) of various Banks go out and sell their products.

They make house calls to get the application form filled in properly and also take your

passport-sized photo. Home banking has already become common, where you can

order a draft or cash over phone/internet and have it delivered home. ICICI bank wasthe first among the new private banks to launch its net banking service, called Infinity.

It allows the user to access account information over a secure line, request cheque

books and stop payment, and even transfer funds between ICICI Bank accounts.

Citibank has been offering net banking to its Suvidha program to customers.

Products like debit cards, flexi deposits, ATM cards, personal loans including

consumer loans, housing loans and vehicle loans have been introduced by a number

of banks.

Corporates are also deriving benefit from the increased variety of products and

competition among the banks. Certificates of deposit, Commercial papers, Non-

convertible Debentures (NCDs) that can be traded in the secondary market are gaining

popularity. Recently, market has also seen major developments in treasury advisory

services. With the introduction of Rupee floating rates for deposits as well as

advances, products like interest rate swaps and forward rate agreements for foreign

exchange, risk management products like forward contract, option contract, currency

swap are offered by almost every authorised dealer bank in the market. The list isgrowing.

Public Sector Banks like SBI have also started focusing on this area. SBI plans to open

100 new branches called Personal Banking Branches (PBB) this year. The PBBs will

also market SBI's entire spectrum of loan products: housing loans, car loans, personal


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loans, consumer durable loans, education loans, loans against share, financing against

gold.

ELECTRONIC BANKING (E-BANKING):

It is an powerful tenure for a routine by that a patron might

perform promissory note exchange electronically but upon vacation a brick-and-mortar institution. The following conditions all impute to a single form

or an a single some-more of electronic banking: personal mechanism (PC)banking, Internet banking, practical banking, online banking, home

banking, remote electronic banking, as well as phone banking. Personal

Computer promissory note as well as Internet or online promissory notehave been a many mostly used designations. It should be noted, however,

that a conditions used to report a assorted sorts of electronic promissorynote have been mostly used interchangeably.

E-banking have been a buzzwords in a tellurian blurb activitiescurrently E-banking or electronic promissory note refers to conducting

promissory note activities with a assistance of report record as well as

computers.

E-banking is a brew of services that embody Internet banking, Mobile

banking, ATM kiosks, Fund Transfer System, Real Time Gross Settlement(payment & allotment system), Credit/Debit/Smart/Kisan Cards, Cash

government services, as well as Data warehousing, Operationalinterpretation for MIS as well as Customer Relationship Management.

Latest innovations in record similar to broadband transmission, internet

entrance around mobiles (GSM) as well as WebTV will suggest yieldprocedure to digital revolution.

Further, banks have been seeking brazen to indicate a picture of a coupon

that can be zapped to an a single some-more bank, in to a repository aswell as behind to customers bank.(BSO,2006) Banking exchange can be

carried out twenty-four hours a day regulating these methods. In actuality

judgment of Anytime, Anywhere promissory note is creation it easy forcommercial operation to entrance their income some-more conveniently. It

has been determined that augmenting a purpose of record in a operateclassification can suggest to revoke costs as well as mostly urge operate

trustworthiness (Lee, 2002).

Case study:

Case Details: Price:


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Case Code : BREP005 For delivery in electronic format: Rs. 500;

For delivery through courier (within

India): Rs. 500 + Rs. 25 for Shipping &

Handling Charges

Themes

-

Case Length : 14 Pages

Period : 1991 - 2004

Pub Date : 2004Teaching

Note

: Not Available

Organization : -

Industry : Banking

Countries : India

Abstract:

In the 1990s, the banking sector in India sawgreater emphasis being placed on technology andinnovation. Banks began to use technology toprovide better quality of services at greater speed.

Internet banking and mobile banking made itconvenient for customers to do their bankingfrom geographically diverse places. Banks alsosharpened their focus on rural markets andintroduced a variety of services geared to thespecial needs of their rural customers.

Banking activities also transcended theirtraditional scope and new concepts like personalbanking, retailing and banc assurance wereintroduced.

The sector was also moving rapidly towards universal banking and electronic transactions, which were expected to change the

way banking would be perceived in the future.

Issues::

Examine the development of the banking system in India and understand the changes occurring in it.

Understand the need for innovations in banking to create greater value for customers and enhanced efficiency for the banks.

Appreciate the role of technology in increasing the convenience of customers and improving banking operations.

Study the banking needs of rural India and the initiatives taken up by banks to cater to these needs.

Analyze the changes occurring in the Indian banking sector and how these changes are likely to influence the way banking will

be done in the future


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Innovations in Banking in India

Over the years, the banking sector in India has seen a number of changes. Most of the banks have begun to take an innovative

approach towards banking with the objective of creating more value for customers, and consequently, the banks. Some of the

significant changes in the Indian banking sector are discussed below:

Technology for Value Creation

The use of information technology in the Indian banking sector was a corollary of theliberalization process initiated in the country in the early 1990s...

Rural India Catching Up

With a majority of the Indian population living inrural areas, rural banking forms a vitalcomponent of the Indian banking system.Besides, rural banking operations in India arerather different from urban operations, due to thestrong disparity that exists between urban and

rural life, and the needs of these two sections ofpeople...

Banking Beyond Banking

While traditionally, banking meant 'borrowing and lending', in the latter part of the 20th century, the word took on a different

meaning altogether. Banks no longer restricted themselves to traditional banking activities, but explored newer avenues to

increase business and capture new markets...

The Changing Face of Banking

Many analysts predict still more revolutionary changes in the banking sector in India. The chiefof these are likely to be the concept of Universal Banks and the introduction of Smart Cardtechnology...

The Other Side

Although the Indian banking sector has made rapid progress particularly in the number ofinnovations introduced, some analysts are skeptical about the efficacy and practical use of manyof these services...

Where is Indian banking heading?

Banking in India has already undergone a huge transformation in the years since Independence. The rate of transformation was

particularly high in the 1990s and 2000s, when a number of innovations changed the way banking was perceived...

Some of the systems implemented earlier included the electronic clearing service (1995), electronic funds transfer (EFT) facility

(1997) and special electronic funds transfer system (2003). Changes in the Indian banking sector in the late 1990s and early

2000s, are expected to create high value for customers as well as the banks involved.

Background Note

While the history of banking in India can betraced back several centuries, banking in themodern sense of the word actually began towardsthe end of the 1700s.

The Bank of Hindustan, set up in 1770, by theBritish rulers5 in India was the earliest bank in
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the country. Over the years, the British set upseveral other banks, notable among which werethe three Presidency Banks in the Presidencies ofBengal (in 1809), Bombay (in 1840) and Madras(in 1843).

These three banks were very powerful in theirrespective Presidencies and functioned as quasi-central banks, having even the power to issuecurrency notes.

Joint stock banking companies with limited liability began to make their appearance in the early-1860s.Allahabad Bank Ltd. was

the first joint stock bank established in India. The Swadeshi Movement6in the early-1900s provided an impetus to the setting up

of banks owned by Indians. In 1920, the British government in India passed the Imperial Bank of India Act and

After India became independent from British rule in 1947, the newly formed government of thecountry passed the Banking Regulations Act, 1949, laying down the guidelines for the

operation of commercial banks in the country.

This regulation brought RBI under government control (under the RBI Act, 1934, the RBI didnot have any government ownership).

The RBI was also made the supervisory and regulatory authority of the banking sector.

In 1955, the Imperial Bank was converted into the State Bank of India (SBI), through thepassing of the State Bank of India Act, 1955.

In 1959, SBI took over control of eight private banks floated in the erstwhile princely states, making them 100% subsidiaries. In

1969, the government of India (GoI) undertook a bank nationalization program with the objective of streamlining the banking

operations in the country and strengthening the sector through government support...

Excerpts>>

Top of Form

amalgamated the three Presidency banks.

Innovations In Banking Sector

INNOVATIONS IN BANKING SECTOR

INTRODUCTION

The term innovation meansto make something new. Banks no longer restricted themselves to traditional banking activities but explored newer

avenues to increase business and capture new market.

INDIAN BANKING SECTOR

From 1806 qualitative & quantitative changes have been taken place. With 1935 regulation RBI was proclaimed as central bank of India. In 1990s

greater emphasis was placed on technology & innovation. New concepts like personal banking, retail banking, total branch automation etc were
http://www.icmrindia.org/casestudies/catalogue/Innovation/Banking%20Industry%20-%20Business%20Report.htmhttp://www.icmrindia.org/casestudies/catalogue/Innovation/Banking%20Industry%20-%20Business%20Report.htmhttp://www.icmrindia.org/casestudies/catalogue/Innovation/Banking%20Industry%20-%20Business%20Report%20-%20Excerpts.htmhttp://www.icmrindia.org/casestudies/catalogue/Innovation/Banking%20Industry%20-%20Business%20Report.htmhttp://www.icmrindia.org/casestudies/catalogue/Innovation/Banking%20Industry%20-%20Business%20Report%20-%20Excerpts.htm


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introduced.

INNOVATIONS IN INDIAN BANKING SECTOR

TYPES OF INNOVATIVE BANKING

1. E-BANKING

Enables people to carry out most of their banking transactions using a safe website which is operated by the respected bank

Advantage

Faster & more convenient transaction

No longer required waiting in long queuesOpening of account simple & easy

Apply for bank loan

Cost effective for banker side

Fund transfer become faster & convenient

Stock trading, exchanging bonds& other investment

2. CORE BANKING

Depositing and lending of money

Core banking solution

Knowing customers needs

2. CORPORATE BANKING

Financial services to large corporate & MNCs

Services:

Overdraft facility

Domestic and international payments

Funding

Channel financing

Letters of guarantee

Working capital facility for domestic & international trade

4. INVESTMENT BANKING

Creating funds and wealth of clients

Fund creating in two ways:

Corporate Financ e

M & A s

Professional sales person providing advice on stock trading

5. RURAL BANKING

It provides & regulates credit services for the promotion & development of rural sector mainly agriculture, SSI, cottage and village

industries, handicrafts and many more.

Examples Of Regional Rural Banks are NABARD, HARYANA STATE COPERATIVEAPEX BANK LIMITED, SYNDICATE BANK, UNITED BANK

OF INDIA

KIOSK BANKING

6. NRI BANKING...

READ FULL ESSAY

Banking In India

India Banking 2010

The last decade has seen many positive developments in the Indian banking sector. The policy makers, which comprise the Reserve Bank of India(RBI), Ministry of Finance and related government and financial sector regulatory entities, have made several notable efforts to improve regulation in

the sector. The sector now compares favorably with banking sectors in the region on metrics like growth, profitability and non-performing assets

(NPAs). A few banks have established an outstanding track record of innovation, growth and value creation. This is reflected in their market

valuation. However, improved regulations, innovation, growth and value creation in the sector remain limited to a small part of it. The cost of

banking intermediation in India is higher and bank penetration is far

Lower than in other markets. Indias banking industry must strengthen itself significantly if it has to support the modern and vibrant economy

which India aspires to be.While the onus for this change lies mainly with bank managements, an also be critical to their success. The failure torespond to changing market realities has stunted the development of the financial sector in many developing countries. A weak banking structure has

been unable to fuel continued growth, which has harmed the long-term health of their economies. In this white paper, we emphasize the need to act
http://www.oppapers.com/join.phphttp://www.oppapers.com/join.php


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both decisively and quickly to build an enabling, rather than a limiting, banking sector in India.

GOOD PERFORMANCE, QUESTIONABLE HEALTH

Indian banks have compared favorably on growth, asset quality and profitability with other regional banks over the last few years. The banking

index has grown at a compounded annual rate of over 51 per cent since April 2001 as compared to a 27 per cent growth in the market index for the

same period. Policy makers have made some notable changes in policy and regulation to help strengthen the sector. These changes include

strengthening...

History Of Banking In India

HISTORY OF BANKING IN INDIA

Banking is an old as civilization. The practice of money lending, the predecessor of banking has been practiced in india from time immemorial.

During the mughal period, the indigenous bankers were faintly prominent in financing the trade and use of instrument for trade. The first bank in

india, through conservative was established in1786. From 1786 until today the journey of Indian banking system can be segregated into 3 distinct

phase. They are mentioned below,

Early phase from 1786 to1969 of Indian banks

Nationalization of Indian banking sector reforms

New phase of Indian banking system with the advent of Indian financial and banking sector reforms.

To make this more explanatory, the scenario can be pre fixed as phase 1, phase 2, phase 3.

Phase 1 (1789-1969)

The general bank of India was set up in the year 1786. Next come the Bank of Hindustan and Bank of Bengal. The East India company established

Bank of Bengal(1809) Bank of Bombay(1840)and Bank of Madras(1843) as independent units and called it presidency Banks. These threeamalgamated in 1920 and Imperial Bank of India was established.

In 1865, Allahabad Bank was established and first time exclusively by Indian, Punjab National Bank Ltd. Was set up in 1894 with headquarters at

Lahore. Between 1906 and 1913 Bank of India, Central Bank of India, Bank of Baroda, Canara Bank, Indian Bank and Bank of Mysore were set up.

Reserve Bank Of India come up in 1935.

During the first phases the growth was very show and bank experienced periodic failure between 1913 and 1948. The govt. of India came up with

Banking companies Act, 1949 as per amending Act 1965. Reserve Bank of India was vested with extensive over the supervision of banking in India as

central banking activity.

SECOND PHASE

Government took major step in this Indian, banking sector reforms after independence in 1955, it nationalized imperial bank of India with extensivebanking facilities on a large scale...

Banking In India

Banking System & all about Banks,insurance,mutual funds ..

2011

APURVA DUTTA

3/9/2011

Introduction:-

The banking section will navigate through all the aspects of the Banking System in India. It will discuss upon the matters with the birth of the banking

concept in the country to new players adding their names in the industry in coming few years.

The banker of all banks, Reserve Bank of India (RBI), the Indian Banks Association (IBA) and top 20 banks like IDBI, HSBC, ICICI, ABN AMRO, etc.

has been well defined under three separate heads with one page dedicated to each bank.

However, in the introduction part of the entire banking cosmos, the past has been well explained under three different heads namely:

* History of Banking in India


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* Nationalisation of Banks in India

* Scheduled Commercial Banks in India

The first deals with the history part since the dawn of banking system in India. Government took major step in the 1969 to put the banking sector into

systems and it nationalised 14 privatebanks in the mentioned year. This has been elaborated in Nationalisationof Banks in India. The last but not the

least explains about the scheduled and unscheduled banks in India. Section 42 (6) (a) of RBI Act 1934 lays down the condition of scheduled

commercial banks. The description along with a list of scheduled commercial banks are given on this page.


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SECTO


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