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Journal of Management and Science, Special Issue 4, Feb-2018
ISSN 2250-1819 / e-ISSN 2249-1260
JOURNAL OF MANAGEMENT AND SCIENCE
A International Level Quarterly Journal on Journal of Management and Science
Published by Non Olympic Times
Journal of Management and Science, Special Issue 4, Feb-2018
ISSN 2250-1819 / e-ISSN 2249-1260
Special Issue 4 (Feb-2018)
JOURNAL OF MANAGEMENT AND SCIENCE
Sl.No. Contents Page No.
01 Artificial Intelligence in Banking Dr.K.Umadevi, Dr.M.Prakash 001-002
02 Artificial Intelligence Could be the Future of Banking Dr. P.Shanthini 003-005
03 Banking on the Cloud J.Vinodhini ,Mrs.Kalaimani, Sruthi Gopalakrishnan . 006-008
04 Banking on the Cloud M.Manidayanand . 009-015
05 IS Cloud Banking IS Banking in Clouds Dr. P. Suganya, Mr. I. Abishake . 016-018
06 A Study on Corporate Governance Practices in Commercial Banks Dr. Mutharasi. M, 019-027
07 Digital Banking in India: Challenges and Opportunities Dr.P.B.Banudevi , P.Dhanya . 028-031
08 Digital Payments in India – A Disruption Dr.R.Rupa, 032-035
09 Disruption of Banking Sector S.Dhivya 036-038
10 Emerging Digital Transformation and Artificial Intelligence in Banking
Sector - Current Scenario Ms.P.Janani 039-041
11 Expanded ATM Capabilities G.Baby Cellin, S.Divya Bharathi, 042-045
12 Grievance Redressal Mechanism-Opinion Study Dr.S.Valli Devasena, 046-050
13 A Study of Customer Satisfaction towards Housing Loans in Select Private
Sector Banks in Coimbatore District Dr. B.Sivakumar, N.S.Lissy, 051-053
14 Impression if Information Technology in Banking Sector V.Priyanka 054-058
Readers may send popular articles of topical interest in English to the editor email address ([email protected])
Journal of Management and Science, Special Issue 4, Feb-2018
ISSN 2250-1819 / e-ISSN 2249-1260
Sl.No. Contents Page No.
15 A Study on Customers Awareness and Stratification towards Internet Banking
in Semi – Urban Areas of Coimbatore City. Mrs.R.Sudha, Mrs. X.Catherine Arputha Divya, Mrs.M.Kovarthini 059-064
16 Mobile Bank in the Transformation in Banking System Mrs.R.Saranya., V.S.Prabhu., 065-070
17 New Digital Gateways for Payments Dr.V.Abirami, Yashoda R Ganesh 071-075
18 A Study on Non-Performing Assets of Banking Sectors in India Dr.D.Vijayalakshmi , Srihari Ramesh, Shenbagadevi.G 076-080
19 Payments Innovations Prof. A.V. Ravi 081-084
20 Empowerment of Women Employees in Nationalized Bank in Chennai M.Vishvabharathi. 085-087
Readers may send popular articles of topical interest in English to the editor email address ([email protected])
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 1
Artificial Intelligence in Banking
Dr.K.Umadevi
Associate Professor & Course Coordinator–PG,
School of Commerce, CMS College of Science and
Commerce,
Coimbatore.
Dr.M.Prakash Associate Professor,
School of Commerce, CMS College of Science and
Commerce
Coimbatore.
INTRODUCTION
Traditional banking has three distinct components
namely. Capital, Deposits and Loans. The pillars of
traditional banking (Deposits and Loans) rest upon the
foundation of capital. All banks must have access to
capital, which is leveraged with deposits and then
prudently converted in to loans that generate jobs and
economic growth. Now, Banking is a rapidly changing
industry and the biggest paradigm shift that has occurred
is the move to digital only banks.
STATEMENT OF THE PROBLEM
The banks need to analyse services and
answer the following questions. Do they really “Know “ their customers
Is the “Product Channel” fit for their customers?
Are they providing multi-channel experience?
Are they making a genuine effort for „Relationship
Building‟?
Do their customers have enough „Confidence‟ and
„Trust‟ in them?
OBJECTIVES OF THE STUDY
1. To understand the need for Artificial Intelligence in
Banking
2. To identify the Artificial Intelligence applications in
Banking.
METHODOLOGY
This study is descriptive in nature and secondary data has
been collected from published sources and internet.
Limitation of the study
Any limitation pertaining to the descriptive study is bound
to be applicable to this study as well.
Meaning of Artificial Intelligence [AI]
The theory and development of computer systems able to
perform tasks normally requiring human intelligence such
as visual perception, speech recognition, Decision Making
and Translation between languages.
AI is the branch of Computer Science concerned with
making computers behave like humans. The term was
coined in 1956 by John Mc Carthy at the Massachusetts
Institute of Technology.
Need for AI in Banking
Reduce costs
Increase workforce productivity
Increase efficiency
Wealth management for the masses
Customer support / help desk – An end to the waiting
in line.
Identify opportunities in data that would be otherwise
missed
Personalized communication at scale.
Improve the ability to compete with perks.
Increasing standing as an innovative company
In recent years, if AI has impacted one industry more than
any other, it is the Banking industry.
Characteristics of AI
Reasoning : The ability to solve problems through
logical deduction.
Knowledge : The ability to represent knowledge about
the world.
Planning : The ability to set and achieve goals.
Communication : The ability to understand written and
spoken language.
Perception : The ability to deduct things about the world
from visual images, sounds and other sensory inputs.
AI Specification
Game playing – Programming computers to play games
against human opponents.
Expert System – Programming computers to make
decision in real life situations e.g. help doctors diagnose
diseases based on symptoms.
Natural language –Programming computers to
understand natural human languages.
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
2 Special Issue on Disruptions in Banking Sector in the Current Scenario
Natural Networking- System that simulate intelligence
by attempting to reproduce the types of physical
connections that occur in animal brains.
Robotics – Programming computers to see and hear and
reach to other sensory stimuli.
AI applications in Banking
AI is the blend of three advanced technologies- machine
learning, natural language processing and cognitive
computing. The concept of AI is to simulate the
intelligence of humans into artificial machines with the
help of sophisticated machine learning and natural
language processing algorithms.
AML Pattern Detection
Anti-money laundering refers to a set of procedures, laws
or regulations designed to stop the practice of generating
income through illegal actions.
Chat bots.
AI based automated chat systems simulate human chats
without any human interventions. Chat bolts are
extensively used in the banking industry to revolutionize
the customer relationship management(CRM) at personal
level.
Algorithmic trading
Plenty of hedge funds across the globe are using high end
system to deploy AI model which learn by taking input
from several sources of variation in financial markets and
sentiments about the entity to make investment decisions
on the fly.
Fraud detection
It is the one of the key areas in banking sector where AI
systems have excelled the most.
Customer recommendations
It is based on using the data from the past about users and
/ or various offerings from a bank like credit card plans,
investment strategies, fund etc., to make the most
appropriate recommendation to the user based on their
performance and the user‟s history.
CONCLUSION
One of the key values of the banking industry has been its
“Customer Focused” mindset, but in the new era, the
trend is moving to being “Customer Centric”. This is
because advances on technology & communication,
combined with an explosive growth in data &
information, have given rise to an even more empowered
& aware global customer. With this change in customer
dynamics the banking industry has an opportunity to
develop an improved customer engagement strategy.
Union budget 2018 brought fourth many announcements.
But an unexpected, albeit a significant one, was regarding
the establishment of a national programme to direct
efforts in the area of AI. Now, this is a Welcome initiative
REFERENCES [1]. Management Information System-Aman Jindal
[2]. www.hhrjournal.org/
[3]. https://gomedici.com/the-role-of-ai-technologies-in-
humanizing-digital-banking/
[4]. Finanicalbrand.com
[5]. businesstoday.in
[6]. economictimes.indiatimes.com
[7]. https://thefinancialbrand.com/69154/ai-banking-financial-
artificial-intelligence-trends-uses/banking-to-look-out-for-
in-next-
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 3
Artificial Intelligence Could be the
Future of Banking
Dr. P.Shanthini,
Assistant Professor,
Department of B.Com Banking and Insurance
Dr. N. G. P. Arts and Science College (Autonomous)
Abstract : Artificial Intelligence (AI), the ability of a
digital computer or computer-controlled robot to perform
tasks commonly associated with intelligent beings. AI is
frequently applied to the project of developing systems
endowed with the intellectual processes characteristic of
humans, such as the ability to reason, discover meaning,
generalize, or learn from past experience.
Artificial Intelligence (AI) is being used across the
financial services industry, and is becoming more popular
in customer - facing digital channels. AI involves ‗the
ability of machines to emulate human thinking, reasoning
and decision - making. As well as being driven by
consumer demand and a need to cut costs, AI is emerging
in financial services as banks enjoy better access to
improved technology and lower costs for processing tools
and data storage than ever before.
Artificial intelligence is the blend of three advanced
technologies – machine learning, natural language
processing and cognitive computing. The concept of
Artificial Intelligence is to simulate the intelligence of
humans into artificial machines with the help of
sophisticated machine learning and natural language
processing algorithms. The prime motive for the idea of
transferring the intelligence from humans to machines is
to overcome the very barrier of human intelligence:
scalability. There‘s always a limit to the speed with which
humans can perform the given tasks. Artificial
intelligence looks to overcome this very challenge with
human intelligence by transferring the human intelligence
to cognitive machines with supreme computational
capabilities.
Artificial Intelligence and its relevance to Banking
In recent years, if Artificial Intelligence has impacted one
industry more than any other, it‘s the Banking industry.
For organizations working in the banking industry, it has
become increasingly crucial to keep up with competition,
and increase their standing as an innovative company.
Most of the major banks across the globe are shifting
from rule based software systems to artificial intelligence
based systems which are more robust and intelligent to the
anti-money laundering patterns. Over the coming years,
these systems are only set to become more and more
accurate and fast with the continuous innovations and
improvements in the field of artificial intelligence.
Artificial Intelligence has several applications in the
Banking Industry:
The five key applications of artificial intelligence in the
Banking industry that will revolutionize the industry in
the next 5 years.
AML Pattern Detection Anti-money laundering (AML) refers to a set of
procedures, laws or regulations designed to stop the
practice of generating income through illegal actions. In
most cases, money launderers hide their actions through a
series of steps that make it look like money that came
from illegal or unethical sources are earned legitimately.
Chat bots Chat bots are artificial intelligence based automated chat
systems which simulate human chats without any human
interventions. They work by identifying the context and
emotions in the text chat by the human end user and
respond to them with the most appropriate reply. With
time, these chat bots collect massive amount of data for
the behaviour and habits of the user and learns the
behaviour of user which helps to adapts to the needs and
moods of the end user.Chat bots are already being
extensively used in the banking industry to revolutionize
the customer relationship management at personal level.
Algorithmic trading Plenty of Hedge funds across the globe are using high end
systems to deploy artificial intelligence models which
learn by taking input from several sources of variation in
financial markets and sentiments about the entity to make
investment decisions on the fly. Reports claim that more
than 70% of the trading today is actually carried out by
automated artificial intelligence systems. Most of these
hedge funds follow different strategies for making high
frequency trades (HFTs) as soon as they identify a trading
opportunity based on the inputs.
Fraud detection Fraud detection is one of the fields which has received
massive boost in providing accurate and superior results
with the intervention of artificial intelligence. It‘s one of
the key areas in banking sector where artificial
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
4 Special Issue on Disruptions in Banking Sector in the Current Scenario
intelligence systems have excelled the most. Starting from
the early example of successful implementation of data
analysis techniques in the banking industry is the FICO
Falcon fraud assessment system, which is based on a
neural network shell to deployment of sophisticated deep
learning based artificial intelligence systems today, fraud
detection has come a long way and is expected to further
grow in coming years.
Customer recommendations Recommendation engines are a key contribution of
artificial intelligence in banking sector. It is based on
using the data from the past about users and/ or various
offerings from a bank like credit card plans, investment
strategies, funds, etc. to make the most appropriate
recommendation to the user based on their preferences
and the users‘ history. Recommendation engines have
been very successful and a key component in revenue
growth accomplished by major banks in recent times.
Since the development of the digital computer in the
1940s, it has been demonstrated that computers can be
programmed to carry out very complex tasks—as, for
example, discovering proofs for mathematical theorems or
playing chess—with great proficiency. Still, despite
continuing advances in computer processing speed and
memory capacity, there are as yet no programs that can
match human flexibility over wider domains or in tasks
requiring much everyday knowledge. On the other hand,
some programs have attained the performance levels of
human experts and professionals in performing certain
specific tasks, so that artificial intelligence in this limited
sense is found in applications as diverse as medical
diagnosis, computer search engines, and voice or
handwriting recognition.
Advantages of Artificial Intelligence 1. AI would have a low error rate compared to
humans, if coded properly. They would have
incredible precision, accuracy, and speed.
2. They won't be affected by hostile environments,
thus able to complete dangerous tasks, explore in
space, and endure problems that would injure or
kill us.
3. This can even mean mining and digging fuels that
would otherwise be hostile for humans.
4. Replace humans in repetitive, tedious tasks and in
many laborious places of work.
5. Predict what a user will type, ask, search, and do.
They can easily act as assistants and can
recommend or direct various actions.
6. An example of this can be found in the smart
phone.
7. Can detect fraud in card-based systems, and
possibly other systems in the future.
8. Organized and manages records.
9. Interact with humans for entertainment or a task as
avatars or robots.
10. An example of this is AI for playing many
videogames.
Disadvantages of Artificial Intelligence 1. Can cost a lot of money and time to build, rebuild,
and repair. Robotic repair can occur to reduce time
and humans needing to fix it, but that'll cost more
money and resources.
2. It's questionable: is it ethically and morally correct
to have androids, human-like robots, or recreate
intelligence, a gift of nature that shouldn't be
recreated? This is a discussion about AI that's
popular in the days.
3. Storage is expansive, but access and retrieval may
not lead to connections in memory as well as
humans could.
4. They can learn and get better with tasks if coded to,
but it's questionable as to if this can ever become as
good as humans can do such.
5. They cannot work outside of what they were
programmed for.
6. They could never, or, at least, seemingly never
with our technological perceptions, receive
creativity that humans have.
7. This can prevent sympathizing with emotions for
human contact, such as in being nurses.
8. This can also reduce wisdom can understanding.
9. This can prevent common sense occurring. Even if
coded with common sense and to learn, it seems
hard for them to get as much common sense that
humans could.
10. Robots, with them replacing jobs, can lead to
severe unemployment, unless if humans can fix the
unemployment with jobs AI can't do or severely
change the government to communism.
CONCLUSION:
In the modern era of the digital economy, technological
advancements are no longer a luxury for the
organizations, but a necessity to outsmart their
competitors and business growth. With the technological
advancements in the recent times, the impact of Machine
Learning (ML) and Artificial Intelligence (AI) are very
critical than ever before. In order to be successful and
making an impact, the banks and financial institutions
need to make machine learning and artificial intelligence
an expansion of their big data and data analytics
approach. The machine learning technology is used in
most banking and finance industry because the proper
implication of technology can give the outstanding result
and significant improvement can be seen in terms of
replacing legacy system and developed enterprise. The
machine learning technology helped the banking and
Finance sector in taking company‘s decision making,
improving customer experience, increasing the backend
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 5
and frontend staff efficiency. Machine learning
applications have the ability to understand the need of
each individual customer by analyzing the previous
account activity and help the customer to make better
product selection offered by banking & financial service
companies.
REFERENCES: [1]. N Ramesh, C Kambhampati, JRT Monson, PJ Drew,
―Artificial intelligence in medicine‖, 2004.
[2]. Charles Weddle, Graduate Student, Florida State
University ―Artificial Intelligence and Computer
Games‖, unpublished.
[3]. C. Sampada,, et al, "Adaptive Neuro-Fuzzy Intrusion
Detection Systems", Proceedings: International
Conference on Information Technology: Coding and
Computing (ITCC‟04),2004.
[4]. Daniel E.O.‟Leary Artificial Intelligence and Expert
System in Accounting Databases: Survey and
Extensions‖, Expert Systems with Applications, vol-3,
1991.
[5]. Fatai Adesina Anifowose, Safiriyu Ibiyemi Eludiora,
―Application of Artificial Intelligence in Network
Intrusion Detection‖, World Applied Programming, Vol
(2), No (3), March 2012.
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
6 Special Issue on Disruptions in Banking Sector in the Current Scenario
Banking on the Cloud
J.Vinodhini
Assistant Professor
CSI Bishop Appasamy College of Arts and Science
Mrs.Kalaimani
Assistant Professor
CSI Bishop Appasamy College of Arts and Science
Sruthi Gopalakrishnan
Student – III B.Com (CA)
CSI Bishop Appasamy College of Arts and Science
Abstract Banks are seeking to transform their products
offerings, channels and consumer service to reflect the
demands of the changing consumer-connected, impatient,
empowered and demanding services that meet their
individuals and social needs. For this, banks need to
integrate business processes with advanced analytical
capabilities driving continuous refinements to processes,
service and product in real-time. Cloud banking generates
carbon credits. Cloud computing is used by most of the
banks, but not commonly for core services, mainly due to
risk concerns. An attempt is made to study the benefits of
cloud based banking infrastructure, hurdles to banking on
cloud adoption, waves of cloud adoption by banks, cloud
security in banking, and the current problems of banking
on cloud.
INTRODUCTION
The „digital ecosystem‟ surrounding a bank today is
exploding at a pace never seen before. The reason for this
is two-fold. First, consumers are leading the way, forcing
banks to offer what they want. Secondly, with consumers
embracing a mobile lifestyle and socializing on digital
platforms, they expect banks to connect with them on the
same platforms. Banks are seeking to transform their
products offerings, channels and consumer service to
reflect the demands of the changing consumer-connected,
impatient, empowered and demanding services that meet
their individuals and social needs. For this, banks need to
integrate business processes with advanced analytical
capabilities driving continuous refinements to processes,
service and product in real-time. These tectonic shifts,
which include facets such as mobile banking through
near-field communication (NFC) or mobile wallets and
geo-localization, will define the banking experience over
the next 5 to 10 years. Banks are increasingly relying the
power of the cloud to achieve their objectives and manage
current market challenges. These shifts are occurring in
phase, sometimes in parallel, through distinct adoption
curves in process and complexity.
CLOUD BANKING:-
In cloud banking the entire banking process could be done
through the cloud, especially if both buyer and seller are
banking with the same bank .cloud banking enables the
consumer and bank to move on to paperless transactions
with a host of benefits such as any times and saves time,
Anywhere, instant cash, error free documentation,
empowering of consumers, transfer of money in moments.
Cloud banking generates carbon credits. Cloud computing
is used by most of the banks, but not commonly for core
services, mainly due to risk concerns. Moving core
services to the cloud could help banks focus on their
primary mission and save money, but it comes with
significant challenges. Smaller banks will lead the
transition of core services to the cloud as they are
positioned to make the largest relative gains.
BENEFITS OF CLOUD BASED BANKING
INFRASTRUCTURE:-
Cloud based services have been driving efficiency and
cost reduction across industries for quite some time now.
In banking, however, the transaction towards cloud
storage and access has not been met with the same
enthusiasm due to various reasons- risk management
being one of the primary explanations. Some of the
important points under the cloud based banking
infrastructure are as follows:-
Cloud-based banking infrastructure provides efficiency
into decision-making and policy implementation:-
With remote access to the information regarding new
implementations and internal changes, the cloud brings
efficiency in providing access to all involved parties in a
single format and place to securely and effectively
evaluate the matter.
Allow banks to choose where they want to run systems:-
Cloud technology enables banks to quickly scale
processing capacity up or down in order to react to
changes in customer demand, as BI along with cloud‟s
flexibility advantage that allows banks to choose where
they want to run systems.
Cloud embraces the team based collaborative culture of
modern organizations:-
In addition, the cloud embraces the team-based
collaborative culture of modern organisations, where the
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 7
value of team-work has been given a high esteem. With
regard to the transformation of the way people work
nowadays from standard workplace –bassed-9-to-5 jobs to
remote and personalized schedules, cloud in the banking
industry can make changes to the traditional state of the
workforce, management in a sphere untouched by modern
employment trends
Over the coming years, an increasing number of financial
institutions will certainly be turning towards the cloud in
the realization of broader opportunities it brings in
comparison to owning data centres.
SEVEN HURDLES TO BANKING ON
CLOUD ADOPTION:-
The seven hurdles to cloud adoption are as follows:-
Difficulties in understanding whether the use of a
specific public cloud technology enables a
“criteria” or “important” operational function of a
bank.
Uncertainty as to what amounts to effective
supervision and oversight of a public cloud service
provider, and its supply chain.
Practical constraints in enabling regulators to have
effective oversight of regulated activities depend
on the public cloud technology.
Adapting internal risk frameworks to a new
technology environment that accounts for
additional risk that may arise in a public cloud
context.
Issues concerning the location of data including
transferring the data outside the European
economic area. And access to data by law
enforcement authorities.
Issues concerning the management of data
including security, data breach reporting and
ensuring that new obligations soon to come into
effect such as privacy by design and default can be
effectively met in a public cloud environment and
Difficulties in establishing a complaint termination
and exit regime in a public context.
THREE WAVES OF CLOUD ADOPTION
BY BANKS:-
Banks are increasingly relying on the power of the cloud
to achieve their objectives and manage current market
challenges. The shifts are occurring in phase, sometimes
in parallel, through distinct adoption curves in process and
complexity. The three waves of cloud adoption are as
follows:-
TAKING NON -CORE OPERATION TO THE
CLOUD:-
Adoption of cloud models generally has the greatest
impact in the parts of the value chain where there is
minimal differentiation. Cloud computing can provide
banks with new-lower costs operating models thanks to
greater automation, virtualization and massive scale-out
option with the ability to outsource a number of non-core
activities. These cloud services can be also be extended to
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
8 Special Issue on Disruptions in Banking Sector in the Current Scenario
activities such as check clearing, credit card processing,
procurement and HR processes.
SINGLE –TENANT PRIVATE CLOUDS ENSURE
SECURITY:-
Today, banks are still reluctant to entrust sensitive
customer and financial data to third- party public cloud
services providers. Data privacy and regulations also
prohibit storage and processing of customer data outside
national borders. Banks are also wary of the potential
threats such as breach of privacy due to brief outages in
ATM operation, fraud monitoring or credit card
processing. However present days banks have proved to
be more willing to incorporate single tenant cloud
solutions into their core banking activities. Cloud models
that are being executed at different levels of the
technology stack range from Infrastructure as service, via
software as a service, and platform as a service.
SOCIAL MEDIA TO TRANSFORM CONSUMER
BANKING:-
Core banking products such as checking accounts are
increasingly undifferentiated. The real differentiation lies
in the pricing and bundling for consumers. Some banks
might locate their product engines in a cloud, while
retaining a unique and sophisticated bundling capability
that pulls together and combines cloud-based components
in responsive, collaborative and dynamic bundles relevant
to specific consumers. Cloud – enabled digital wallets
carrying a range of different services on smartphones is
another high-potential area, although this will require
agreements with various Telco‟s over customer
ownership.
CLOUD SECURITY IN BANKING:-
Cloud security is the protection of data stored online from
theft, leakage and deletion. Methods of providing cloud
security include firewalls, penetration testing,
obfuscation, tokenization, virtual private networks (VPN)
and avoiding public internet connections. Major threats to
cloud security include data breaches, data loss, account
hijacking, service traffic hijacking, insecure application
program interfaces, and poor choice of cloud storage
providers and shared technology that can compromise
cloud security.
CURRENT PROBLEMS OF BANKING ON
CLOUD:-
Disparate systems need integration.
Need to upgrade software periodically
Need to be BASEL II and IFRS complaint.
Need to adopt to regulatory requirements.
Scalability issue
Risk a major issue.
Software costs and implementation costs going up
and so are support costs.
Banks also have costs in IT staff and maintaining
hardware, software and network.
CONCLUSION:-
In this paper it is concluded that, Banks around the world
are flocking to digital tools and new technologies both to
meet higher customer expectations and to respond more
quickly to their changing environments. One of the most
beneficial technology adoptions has been the move to
cloud based technology platforms and financial
applications.
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Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 9
Banking on the Cloud
M.Manidayanand, M.Com, M.Phil, M.B.A,(PhD),
Assistant Professor,
School of Commerce and International Business,
Dr.G.R.Damodaran College of Science, Civil Aerodrome Post,
Coimbatore-641 014.
Abstract A number of banks are now adopting cloud
technologies to fulfill their varied purposes. Virtually
every business sector today is betting big on cloud
computing More so, given the benefits it promises and the
way it changes how technology is delivered and
consumed by the end user in an enterprise. Cloud
computing helps banks to transform their business
processes and enhance their ability to grow in new sectors
or regions without the time and cost burdens involved
with establishing a physical presence. Like most other
sectors, banks and financial services companies too can
benefit from the fact that cloud computing helps to create
a more flexible, agile business model to meet the growing
business needs in a dynamic and competitive landscape.
Cloud computing helps banks to transform their business
processes and enhance their ability to grow in new sectors
or regions without the time and cost burdens involved
with establishing a physical presence. It helps to create
new markets and services to differentiate from
competition and improve the ways customers' access and
use the bank's products and services. Banks will have a
much better ability to provide consistent service to
customers across branches, geographies and also integrate
a plethora of disjoint customer information and analytics.
Cloud technology offers business models for delivering
innovative client experiences, effective collaboration,
upgraded speed to market and enhanced IT efficiency. It
is an evolutionary result of the improvements in digital
networks and computing speed over the last decades.
Banks are already widely using cloud computing for non-
core and non-critical uses, such as human resources, e-
mail, customer analytics, customer relationship
management, and development and testing (88% of
surveyed EU-based financial institutions were already
using cloud based services by June 2015),2 while a few
smaller banks either have transferred or are in the process
of transferring entire core services (treasury, payments,
retail banking, enterprise data etc.) to the cloud
(U.S.based Independence Bancshares, Tunisia-based
Zitouna Bank, U.K.-based My Community Bank, and
Australia‟s ME Bank, for example). This brief looks into
the relationship between banks and technology; presents
an overview of the cloud model; outlines the model‟s
benefits, costs and risks; discusses risk management
strategies; and predicts what the near future holds for
cloud computing in banking. Banks are an important
segment of business area that cloud computing is
targeting in the next few years. Due to this type of
business needs, cloud services must be similar with a
“silver bullet”. There are many advantages that cloud
provides for banks as customers. First of all, cost savings,
using cloud-servers instead of personal servers, will save
a lot of money. Moreover, cloud provides: usage-based
billing, business continuity, business agility, green IT.
This document provides a beneficial insight into how
cloud computing can be used in the banking industry,
various business models associated with it and the
problems faced by the banking industry in adopting this
technology.
Keywords: Cloud computing, Banking, Business model,
Hybrid cloud
INTRODUCTION
Cloud computing today encompasses every vertical in the
market across sectors. Organizations are adopting
innovative cloud apps to support their everyday business
operations. To drive growth and innovation in banking, it
is increasingly necessary to dramatically leapfrog the
competition using IT and business model transformation.
The dramatic changes taking place in banking require new
ways to maximize profitability and returns. Cloud
technology offers secure deployment options that can help
banks develop new customer experiences, enable effective
collaboration and improve speed to market all while
increasing IT efficiency. Banks that take advantage of
cloud computing are better positioned to respond to
economic uncertainties, interconnected global financial
systems and demanding customers. They can use
information to enhance customer segmentation techniques
and to develop more focused services that are aligned
with customer needs. Banks also can optimize their
channel investments and differentiate themselves through
customer service excellence. Perceived cost savings, ease
of scaling-in and scaling-out, faster time to-market for
deploying systems, virtualization of enterprise-wide data
as a service, enterprise technology standardization, and
the ability to access data and applications on the move are
all critical consideration factors that can drive financial
services firms to adopt cloud computing. There are
countless opportunities for financial services firms to
leverage the benefits of cloud computing by migrating a
variety of applications to the cloud. Non-core applications
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10 Special Issue on Disruptions in Banking Sector in the Current Scenario
and such business processes as recruiting, billing and
organization wide travel management can and should
easily move to the cloud. A number of infrastructure
operations, such as data center management, data storage
and disaster recovery, should also move to a cloud after a
thorough evaluation of different vendors offerings and
based on the flexibility of cloud vendors in documenting
contract. Because of its expanded computing power and
capacity, a cloud can store information about user
preferences, which can enable product or service
customization. The context driven Variability provided
using cloud computing makes it possible for banks to
personalize customer interactions and adapt to subtle
changes, which leads to a more user-centric experience.
OVERVIEW
Banks may have various reasons for migrating to the
cloud, but the main reason applications. A pivotal
stumbling block for huge investments in new technologies
has always been the capital expenditure needed for
advance infrastructure. With cloud computing, various
financial institutions only have to budget for functional
expenses and wage for the services they use. This makes
it effortless and more cost effective to test new
applications on the cloud versus prevailing conventional
infrastructures. No cloud computing services model is
customary to meet all the technology requirements for
every financial organization. Banks should develop and
preserve an application portfolio consisting of both cloud
and on- ground applications. While endorsements in
legacy systems are supposed to continue, cloud based
services are ideal for recent business fields. Cloud-based
services are expected to provide the edge of both
minimum investments in enforcing business strategies and
faster turnaround time for product and service
contribution.
Banks are racing to take advantage of the opportunities
and manage the risks that the digital economy creates. To
do so, they will need computing platforms that provide
greater agility at lower cost. As global head of Goldman
Sachs‟s technology division, Don Duet has led the
development and execution of the firm‟s private-cloud
strategy, as well as its thinking about opportunities in the
public cloud. “None of this marks a sudden or abrupt shift
in strategy for the firm. It‟s always been about making
continual progress,” he says. In this edited interview
conducted by McKinsey‟s James Kaplan at Goldman
Sachs‟s headquarters in New York, Duet discusses the
firm‟s use of a private-cloud infrastructure the challenges
and risks it faced in conceiving of and launching the
platform almost a decade ago and the benefits the firm is
realizing through this technology.When von Friedberg
made her case for the cloud at World Bank, one of her
points was how much they could reduce their cost
footprint. In fact, by migrating from Lotus Notes to
Microsoft 365 for email, they experienced a cost
reduction of $7 to 8 million, as well as a reduction in the
amount of IT staff time needed to manage it. Capital one
is also benefitting from cost reductions enabled by the
cloud. The company went from managing and paying for
eight data centers to 2014 to a planned three by 2018.
Cost savings, coupled with the rapid improvements the
cloud can bring to an organization, means IT
organizations within banks are quickly shifting from
being seen as a cost center to an innovation center. And
because cloud applications are accessible from any
location, organizations like World Bank find that their
employees are now more productive. A connected
workforce means employers get more for their investment
in each employee.
The fact is, the cloud is no less secure than on-premise
infrastructure. It‟s simply a matter of leveraging the right
tools those built for the cloud. But what companies have
tried to do instead is apply their on-premise security tools
the ones they‟ve heavily invested in and become
comfortable with to their new cloud environments. Since
these tools aren‟t built for the data security in cloud
computing, they simply can‟t catch everything. Unlike in
an on-premise world where there is a defined perimeter to
protect, in the cloud, there is no perimeter. That means the
threat landscape becomes unbounded, so the best way to
add security is by leveraging continuous security
monitoring. With continuous monitoring, no anomalous
behavior goes unnoticed, giving banks the same level of
visibility and protection (if not more) as they had on
premise.
The private cloud is the first step towards cloud
computing, and it is here that the most critical
applications of the enterprise will be hosted for quite
some time. The private cloud emerges stronger than the
public cloud because it grants banks control over their IT
while providing reduced complexity, increased flexibility,
and all other benefits associated with cloud computing.
Private clouds have emerged as the hot favorite of the
banking industry also because in a financial environment
where applications are critical and governed by stringent
user industry compliance, they can provide high security.
They ensure that no data is lost or misplaced and also
provide the flexibility of control in order to modify
resource configuration according to demand. Since private
clouds are deployed within an organization's firewall, the
threat of security breaches is obviated. The company's IT
infrastructure can be moved onto a single private network
using a virtual private network (VPN) with ease and faster
access.
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Special Issue on Disruptions in Banking Sector in the Current Scenario 11
SECURITY STRENGTHS IN CLOUD
COMPUTING
Security is one of the biggest arguments used against the
actual cloud computing system. However, cloud
computing systems are often safer than mainframe
systems managed at the local level, at least for small and
medium companies (banks). This may list the strengths of
cloud computing systems: private cloud, data
centralization, multi-factor authentication, sharing
security, economy of scale and others. Private cloud is
probably the most important argument in favor of using
cloud computing systems by organizations (banks). An
interesting comparison is between the current situation of
internet banking and cloud computing. Security issues
were also an inhibitor to adoption of internet banking [1]
(about mid 90's), which can be considered a precursor of
cloud computing. Similarly, as cloud computing providers
who continue to address market concerns relating to
safety, economy and convenience of cloud computing will
become a commonplace like online banking and other
online financial transactions today.
Although cloud computing is not a new concept for
banks, this sector has been slow in adopting the
technology. The key concerns are that such deployment
models could lead to an environment sprawl and a lack of
control in terms of change management. This can further
lead to security risks, reliability issues and a lack of
effective business continuity planning. A lack of core
application solutions has delayed the process further.
From the public cloud standpoint, the issues are around
regulation, location, liability and recoverability in the
cloud. These are some of the reasons that have slowed
down the adoption and deployment of cloud computing
and rather led most banks to start building mini 'private'
infrastructure clouds. To reduce this risk, the management
of the infrastructure that underpins these computing
environments needs to move away from complex IT
provisioning requests to the presentation of a series of
standardized services. Through the use of standardized
processes and workflows, implementation risk is
minimized, while established change management
practices are supported. Reaching this state is the
beginning of the journey to the cloud.
CLOUD SECURITY
MODELS
Cloud service models offer financial organization the
option to move from a capital-intensive way to a more
malleable business model that minimize operational wage.
The key to achievement lies in choosing the right cloud
services model to meet business needs. In this section we
review various models for cloud computing services,
functions and deployment.
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12 Special Issue on Disruptions in Banking Sector in the Current Scenario
Cloud Service Models: Business Process-as-a-Service
(BPaaS) the cloud is used for standard business processes
such as billing, payroll, or human resources. BPaaS
combines all the other service models with process
expertise.
Software-as-a-Service (SaaS) A cloud service provider
manage the business software and related data and users
access the services and data via their web browser.
Number of software that can be delivered this way include
accounting ,CRM ,ERP, invoicing, human resource
management, content management, and service desk
management.
Platform-as-a-Service (PaaS) A cloud service provider
offers a complete platform for application, interface, and
database development, storage, and testing. This allows
businesses to streamline the development, maintenance
and support of custom applications, lowering IT costs and
minimizing the need for hardware, software, and hosting
environments.
Infrastructure-as-a-Service (IaaS) This cloud model
allows businesses to buy those resources as a fully
outsourced service rather than purchasing servers,
software, data center space or network equipment. Cloud
Deployment Models
There are three ways service providers most commonly
deploy clouds:
Private clouds. The cloud infrastructure is operated
uniquely for a specific organization. It may be governed
by the company or a third party and may prevail inside or
outside the premises. This is the most impregnable of all
cloud choice.
Public clouds. The cloud infrastructure is made attainable
to the common public or a large industry group and is
governed by an organization that trades cloud services.
Hybrid clouds. The cloud infrastructure is consist of two
or more clouds (private or public) that remain sole entities
but are associated in order to administer services.
CLOUD OPERATING MODELS
Choosing the right cloud services delivery model is
determining the appropriate operating model for the
required mix of resources and assets. We have identified
three operating models for cloud services:
Staff augmentation: Financial firms can gain cloud
expertise by hiring people with the right skill sets from
service vendors. The additional staff can be housed in the
firm„s existing offshore captive center. This operating
model allows for flexibility and lets firms choose the best
resource for each specific requirement.
Virtual captives: Virtual captives have a dedicated pool
of resources or centers to help with cloud operations and
meet demand. This operating model is a good alternative
to a complete outsourcing approach.
Outsourcing vendors: This approach uses offshore
centers, facilities, and people from a third party vendor to
handle cloud operations. The model combines resources
and investments to cater to cloud services for multiple
banks.
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Special Issue on Disruptions in Banking Sector in the Current Scenario 13
ADVANTAGES
Cost Savings: Business sharpness is determined by the
cost an organization incurs. There are a few self-service-
based, and perceptually cost effective public cloud
computing solutions. Low-cost price plans advertised by
public cloud vendors have inspired IT departments to gain
an insight into costs, resource allocation models and the
variety of cloud models, including public, private and
hybrid. Billing is a non-core process for banks, and
outsourcing it to a less expensive mediator allows them to
route their capital into core technology-based functions.
Scalability: If well designed, cloud solutions empower
banks to meet customer demands and scale quickly,
dynamic provisioning of computing resources, will save
business users and IT experts from engineering the
systems for peak loads. Banks can tackle the challenges of
security and data privacy by devising a hybrid cloud
where precise data can reside on a private cloud and
computing power can be available on a public cloud.
These private and public clouds can be integrated in a
virtual private network to forge a single scalable hybrid
cloud.
Time to market: With cloud computing, time to market
can be curtailed from months to weeks or days, depending
on the size of a bank. A self-service based, on-demand
and real-time monitored cloud helps by: • Phasing out
procurement delays for computing hardware and software
Accelerating computing power for when current
applications need to deal with peak loads •Eradicating the
capital and time investment for procuring hardware for
proof of concept work .
Data Virtualization: Data virtualization is the assimilation
of data from multiple and diverse sources across the
enterprise or external sources for the on-demand
consumption by a wide range of applications in a
virtualized manner. Many mandates in context with the
regulations and performance of banks require a data
virtualization strategy. This strategy can be used to
provide a single source of reference data, such as security
master data. Also, risk and analytics calculations rely on
many different types and sources of data, including
relational and semi-structured XML. Combining such
discordant data from public and private domains is a test.
Accordingly, accessing that data from a single virtual
source would drive scores of data consolidation within
banks.
Mobility: Many of today„s corporate world techno savvy
workers want to access risk and analytics reports while
they are on the move. They see the benefits of accessing
the internet on their smart phones and I pad‟s, instantly
even in remote locations. Likewise, they want similar
interfaces for banking services-specific applications. And
since a cloud facilitates users to access systems and
infrastructure using a web browser or customized clients
regardless of location and time, advancement of such
interfaces has started taking shape.
CHALLENGES
The Cloud computing technologies adoption continues to
gain momentum across a wide range of banking services.
Aside from all the positive spin around cloud computing
technologies, a reliable, trusted, standard model of cloud
computing that will enable faster rates and higher levels
of adoption is still a long way off, with relatively limited
progress being made in that regard in the past year. When
a bank moves into cloud computing, there are two prime
challenges that must be addressed:
Security-The confidentiality and security of commercial
and personal data and mission-critical applications is
preeminent. Banks cannot allow the danger of a security
breach. Despite economic strain for business to cut down
charges and fervent assurances from cloud computing
technology providers, security remains a top barrier to
cloud technology acceptance. Ultimately, for cloud
computing to gain full acceptance within the banking
services sector, cloud services must be harmlessly
integrated into existing security platforms and processes.
Regulatory and compliance-Customers are basically
responsible for the security and integrity of their own
data, even when it is govern by a service provider.
Conventional service providers are subjected to external
audits and security certifications. A cloud computing
provider who ignores to undergo this evaluation are
signaling that customers can only use them for the most
superficial activities .Many banking mangers require that
financial data for banking consumers stay in their native
country. Certain compliance arrangements require that
data not to be mixed with other data such as on shared
servers or databases. As a result banks must have a fair
understanding of where their data is stored in the cloud.
Security issues which cloud clients should advert are.
Privileged user access: There dwell sensitive data that is
processed outside the organization inherent risk of
security of data because outsourced services bypass the
physical and logical IT controls.
Regulatory compliance: Customers are responsible for the
security of their data. Traditional service providers are
subjected to external audits and security certifications.
Data location: When users use the cloud, they have no
knowledge about the hosted data. Distributed data storage
is a main reason of cloud providers that can cause lack of
control and that is risky for customers.
Data segregation: As cloud is typically in a shared
environment in that data can be shared. So there is the
danger for data loss. Is encryption available at all phases,
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14 Special Issue on Disruptions in Banking Sector in the Current Scenario
and were these encryption patterns designed and tested by
experienced professionals.
Recovery: It is very essential to recover the data when
some problem occurs and creates failure. So the main
question arises here is that can cloud provider restore data
completely or not, this issue can cause a stalemate in
security. Investigative support: Cloud technology
services are difficult to investigate, because logging and
data for multiple customers may be co-located and may
also be spread across an ever-changing set of hosts and
data centers.
Long-term viability: Ideally, cloud computing provider
will never go broke or get acquired by a larger company
with maybe new policies. But clients must be sure their
data will remain available even after such an event. In the
early phases of cloud computing adoption, it is expected
that banks will own and operate the cloud themselves with
service providers playing more vital role in increasing
ownership and control of the cloud infrastructure as cloud
computing matures and more rigorous controls become
available.
FUTURE ADVANCEMENT
In the coming times, Financial Services firms will
typically leverage Hybrid Cloud architecture to realize
benefits (cost, speed, and efficiency) while balancing
requirements (security, compliance, quality of service)
across various business functions. A hybrid cloud model
enables banks to garner the benefits of cloud computing
while also maintaining the security and confidentiality of
their data. Banks need to adopt practical approach to
security and data privacy in the cloud. Most banks
segment data with different levels of sensitivity, from low
level (published widely with no restrictions) to ultra
secure (only accessible by top decision makers). In the
same way, banks will need to implement their cloud to
have similar and appropriate security. Banking services
organizations are starting to adopt cloud computing
technologies in a number of fields, in particular for
mobile applications, innovation testing and micro-
banking.
Mobile banking: Banks are now offering mobile
applications to online banking customers and partners for
checking balance, order new cheque books or stop
payment orders. New service R&D: Banking services
Organizations are also increasingly advancing the
computing power that cloud services offer for research
and development and testing of new services prior to any
attempt at going into production. Micro banking: Another
trend emerging in developing countries of cloud services
whereby micro banks are running their entire business on
cloud computing.
CONCLUSION
Continued advancement of cloud computing within the
banking sector will require vendors and banks to
overcome its challenges together. When planning cloud
computing initiatives in the near future, banks should
choose service and delivery models that best match
requirements for operational flexibility, cost efficiency,
and pay-as-you-use models. Banks should adopt a
progressing evolutionary approach towards cloud
computing services, examining each project based on the
type of applications and nature of the data. Lower risk
projects may include customer relationship management
and enterprise content management. Higher risk projects
will involve core business functional systems such as
wealth management or core banking. In the long term
banks will have an application portfolio mix of on-
premise and cloud-based services delivered across a
combination of private, hybrid, and public cloud- based
deployment models with the share of cloud services
gradually increasing in the service mix. Private clouds are
expected to increasingly become the deployment model
for cloud services among banks, giving financial
institutions full control through ownership and operations
of their cloud systems.
REFERENCES
[1]. GartnerIncorporation,http://www.gartner.com/.
[2]. www.sapient.com/content/dam/sapient/.../GM_Cloud_C
omputing.pdf
[3]. Adelman, Rachel. ―‗Such Stuff as Dreams Are Made
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On„: God„s Footstool in the Aramaic Targumim and
Midrashic Tradition. Paper presented at the annual
meeting for the Society of Biblical Literature, New
Orleans, Louisiana, November 21–24, 2009.
[4]. Choi, Mihwa. ―Contesting Imaginaires in Death Rituals
during the Northern Song Dynasty. PhD diss., University
of Chicago, 2008.
[5]. Cicero, Quintus Tullius. ―Handbook on Canvassing for
the Consulship. In Rome: Late Republic and Principate,
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of University of Chicago Readings in Western
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33–46. Chicago: University of Chicago Press, 1986.
[6]. Originally published in Evelyn S. Shuckburgh, trans.,
The Letters of Cicero, vol. 1 (London: George Bell &
Sons, 1908).
[7]. García Márquez, Gabriel. Love in the Time of Cholera.
Translated by Edith Grossman. London: Cape, 1988.
[8]. Kelly, John D. ―Seeing Red: Mao Fetishism, Pax
Americana, and the Moral Economy of War. In
Anthropology and Global Counterinsurgency, edited by
John D. Kelly, Beatrice Jauregui, Sean T. Mitchell, and
Jeremy Walton, 67–83. Chicago: University of Chicago
Press, 2010.
[9]. Kossinets, Gueorgi, and Duncan J. Watts. ―Origins of
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February 28, 2010. Doi: 10.1086/599247.
[10]. Kurland, Philip B., and Ralph Lerner, Eds. The
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Chicago: University of Chicago Press, 1951.
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
16 Special Issue on Disruptions in Banking Sector in the Current Scenario
IS Cloud Banking IS Banking in Clouds
Dr. P. Suganya
Assistant Professor,
Department of Commerce –PG,
CMS College of Science and Commerce,
Coimbatore
Mr. I. Abishake
CMS College of Science and Commerce,
Coimbatore
Abstract: The banking industry is facing unprecedented
changes, especially cloud storage and data centre have
facilitated in understanding the technology shifts in many
sectors especially in the banking industry.Now a days,
Control is in customer’s hands, rather than the bank.
Customers aredriving force for the new emerging business
models. Their use of technologywith the changes in social
and dynamic household leads to huge business
transformation. Banks are in position to react to this new
customer-driven environment with innovation in business
models, operations and IT. Cloud computing is used to
store data on an external server, accessed via the Internet.
It is defined as convenient, ubiquitous, on-demand
network access to a shared pool of configurable
computing resources e.g., networks, servers, storage,
applications, and services that is an evolutionary result in
digital networks and computing speed over the last
decades.
The paper aims to provide a means of understanding
about cloud banking, exploring the available models,
associated risks, regulations and also challenges while
moving to cloud technology.
INTRODUCTION:
In early and mid-20th
century, Banking activities are
manual, Then they rely upon on in-house mainframes and
server farms for data processing gradually in 90’s PC’s
interact with the mainframes, replacing the older terminal
technology and accessed external networks through
Internet, e-mail, online banking brings flexibility and
speedy transactions to customers at low cost. The greater
transparency in online banking and the digital economy
lead to greater competition between banks.
What does the future of cloud computing holds?
It is a strategic decision whether or not to move services
to the cloud, like other outsourcing decision involves
about comparing control with transaction costs, detailing
and risks. Usually banks know what the costs and risks
are in traditional environment and do not know with
certainty what the transaction costs for using cloud
computing in core services would be. But the changes in
technology have made cloud computing cheaper and
readily available and still the terms of the transactions in
the long run will be heavily influenced by cloud
computing providers. As the number of cloud computing
providers is smaller than the banks, absence of efficient
regulation and competitions, banks could end up in a
situation where the providers dominate, and thus increase
prices or renegotiate contracts to the banks. Cloud
services take a standardized form of raw computing
power, so if the transition is planned and managed well,
the low asset specificity can keep switching costs low,
thus improving banks’ bargaining power.
BASIS OF CLOUD COMPUTING:
SERVICE AND DEPLOYMENT MODELS
Banking companies however do not hold any computer
scientists and programmers which influence the
corporates to develop cloud computing service and
deployment models.
Cloud Service Models SaaS (Software as a Service) –This model provides
service through Internet and there is no need of any prior
Installations, but the users have to pay a minimum amount
for this services across from any part of the world.
PaaS (Platform as a Service)–This model runs on its
Database software, physical servers and web servers that
are basically known as platforms which allows to deploy
onto the cloud on their own or acquired applications
without having to build it from scratch.
LaaS(Infrastructure as a Service)–It includes
infrastructure such as disk drives, servers, networks,
Domain servers, email servers etc., on LaaS on demand
allows consumers to use operating system and associated
software without paying any hefty fees for license.
Cloud Deployment Models On the other hand, when moving to core services to the
cloud, banks have four deployment models such as:
Private cloud-A private сlоudinfrаѕtruсturе is
рrоviѕiоnеdforеxсluѕivеuѕе by a singleоrgаnizаtiоn
whichсоmрriѕes of multiple buѕinеѕѕ units. It is adopted
for its reliability, реrfоrmаnсе,inсrеаѕеd security and
ѕеrviсе. One Example for this is deployment model
implemented in Federal government by Los Alamos
National Laboratory, which allows researchers, to access
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Special Issue on Disruptions in Banking Sector in the Current Scenario 17
and utilizeѕеrvеrѕon demand.
Community cloud- This is a type of deployment model in
which the cloud is рrоviѕiоnеdforеxсluѕivеuѕеby a
community of users with similar needs and concerns E.g.,
Banks, Trading firms etc.
Public cloud - The public cloud implies use by multiple
unrelated users. It shall be owned, ореrаtеd and mаnаgеd,
by a business, асаdеmiс, or government оrgаnizаtiоn, or
some combination ofthem. It еxiѕtѕ on the рrеmiѕеѕ ofthe
cloud рrоvidеr itself.
Known еxаmрlе of this is the Trеаѕurу Department,
which hаѕmoved itswеbѕitеTrеаѕurу.gоv to a public
сlоud. The site also inсludеѕ social media аttributеѕ like
Face book, YouTubeandTwitterwhich аllоwѕ for rарid
and еffесtivе communication with соnѕtituеntѕ.
Hybrid cloud- This is a deployment model which contains
the composition of two or more of the above models that
is unique but are bound together by technology.
BENEFITS OF CLOUD COMPUTING IN
BANKS
With the advent of this technology, cost of computation,
scalable infrastructure, content of storage and delivery is
reduced significantly. But the two key advantages are:
Cost reduction: There are number of attribute which
lower its costs.
Billing model is pay as per usage
infrastructure is not purchased thus lowering
maintenance
Compared to traditional computing Initial expense
and recurring expenses are much low.
Large the storage capacity: Storage and maintenance of
large volumes of data becomes real due to massive
infrastructure offered by cloud providers. Unexpected
spikes of workload can also be managed efficiently and
effectively, since there is dynamic scalability in the cloud.
Flexibility: One of the important features in cloud
computing is it stresses on getting
applicationsappropriate building blocks necessaryto
changing business conditions.
CHALLENGES OF CLOUD COMPUTING
IN BANKS:
There are still remain some concerns in cloud computing
despite of its growing influence. The common opinion is
benefits overweigh the drawbacks and model is worth
exploring. Some challenges are:
Data security:
Data protection is a crucial element that warrants scrutiny.
Banks are reluctant to buy assurance from vendors with
the fear of losing data confidentiality of customers. In the
existing model firewalls owned by banks protects the
sensitive information. In cloud model, Service providers
are responsible for securing data and banks are in position
to rely on them for data security.
Data availability and recovery:
For business applications, there are stringently followed
agreements by operational teams. They support in
Data Replication
System monitoring
Appropriate clustering and Fail over
Maintenance
Capacity and performance management
Disaster recovery
The damage and impact could be severe, if any of the
above services is under- served by a cloud provider.
Capabilities of banks:
The platform and infrastructure of banks are still in its
infancy, despite of multiple cloud providers.With cloud
computing to interface between suppliers and multiple
groups of service customers, it demand expertise in
procurement, risk assessment and service negotiation
areas- that many banks are only modestly equipped to
handle
Regulation and Compliance restrictions:
There are government regulations that do not allow
customer’s personal information and other sensitive
information to be physically located outside the country.
In this situation, cloud providers need to setup a storage
site exclusively within the country to comply with
regulations. Having such an infrastructure may not always
be feasible and is a big challenge for cloud providers.
Success factors for implementing cloud:
When considering to adopt cloud solutions for services,
banks should partner to gain expertise. Therefore, cloud
service providers should have
1. A clear defined cloud strategy
2. Banks should be cautious about making significant
investments in cloud computing until tangible
benefits are available. As a first step, cloud
providers should explain the costs and implications
of migrating existing banking applications and
infrastructure to the cloud.
3. For cloud initiatives, banks need service level
agreements (SLAs) that link billing to consistent
system performance
4. Banks may need to keep sensitive data within
firewalls to fulfil local regulations and client
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
18 Special Issue on Disruptions in Banking Sector in the Current Scenario
confidentiality requirements
5. Demonstrable return on investment.
CONCLUSION:
Though cloud requires technology it is difficult to predict
when and how banks will move core services to cloud.
Large banks are in transition onto cloud step by step,
diving deeper into its application areas such as Customer
analytical, Customer relationship management,
somepayments, all the while cautiously and continuously
assessing trade- offs. Ultimately, we need not wait longer
to watch the banks tripping to clouds.
REFERENCES: [1]. Kotabe, M. Mol, M. (2009). Outsourcing and financial
performance: A negative curvilinear effect. Journal of
Purchasing and Supply Chain Management.
http://goo.gl/zKKbS1
[2]. National Institute of Standards and Technology
(2011).
http://nvlpubs.nist.gov/nistpubs/Legacy/SP/nistspecialpu
blication800-145.pdf
[3]. National Institute of Standards and Technology.
(2011). http://dx.doi.org/10.6028/NIST.SP.800-145
[4]. Darrow, B. (2016).Pst, Amazon Cloud Is Not Really
New to Banks. Fortune Magazine http://goo.gl/UEVi8l
[5]. ENISA. (2016). Secure Use of Cloud Computing in the
Finance Sector Good practices and recommendations.
https://goo.gl/txcRKd
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Special Issue on Disruptions in Banking Sector in the Current Scenario 19
A Study on Corporate Governance Practices in
Commercial Banks
Dr. Mutharasi. M,
Assistant Professor at Jain University,
Bangalore.
Abstract: If we will look at the society we live in, we
would see that if there would be no rules regulating the
behavior of the people, providing the rights and
restrictions then society may break down and it could lead
to chaos and anarchy. As there would be no rules, there
would be no violations and penalty too. Due to these
reasons, there is a need for governance in society at large
which is done mostly by government and due to such
reasons; there are watchdogs which regulate the
governance of companies and financial institutions too.
The term “governance” means control and corporate
governance is governing or controlling the corporate
bodies i.e. ethics, values, principles, morals. Governance,
in general terms means “the process of decision-making
and the process by which decisions are implemented (or
not implemented), involving multiple actors. Good
governance is one which is accountable, transparent,
responsive, equitable and inclusive, effective and
efficient, participatory and which is consensus oriented
and which follows the rule of law. “Corporate governance
is concerned with set of principles, ethics, values, morals,
rules regulations, & procedures etc. Corporate governance
establishes a system whereby directors are entrusted with
duties and responsibilities in relation to the direction of
the company‟s affairs. For effective corporate governance,
its policies need to be such that the directors of the
company should not abuse their power and instead should
understand their duties and responsibilities towards the
company and should act in the best interests of the
company in the broadest sense.
Bank and Financial Institutions are the backbone of the
economic sector of any country. The healthy economic
condition of a nation is depicted through the sound
functioning of its banks. Banks form a crucial link of a
country‟s economic sector hence they are universally
regulated industry and their well-being is imperative for
the economy. Working of banks is different from other
corporate in many important respects, and that makes
corporate governance of bank not only different but also
critical. Hence corporate governance is conceptually
different for banks. If a corporate fails, the fall outs can be
restricted to the stakeholders, but if a bank fails, the
impact can spread rapidly through other banks with
potentially serious consequences for the entire financial
system and the macro economy. Regulations, guidelines
and corporate governance are complementary to each
other in banking industry.
In the context of India, presently the magnitude of
Corporate Governance is quite enormous. Good Corporate
Governance is a source of competitive advantage and
critical and social progress. The Corporate Governance in
banking sector is particularly important in less developed
countries like India because economic development and
growth is dependent to a large extent on well-functioning,
stable and sound managed banking system. The concept
of „corporate governance‟ is not an end; it‟s just a
beginning towards growth of company, banks and
financial institutions for long term prosperity.
Keywords: corporate governance, regulations, banking
sector, transparency, composition of board
INTRODUCTION
Corporate governance is an age old concept which
provides for a set of transparent relationships between an
institutions management, its board, shareholders and other
stakeholders. Corporate governance is gaining center
stage in the recent times due to failure of corporate and
wide dissatisfaction among the people with the way
corporate works and hence became a widely discussed
topic worldwide. Corporate Governance is now
recognized as a paradigm for improving competitiveness
and enhancing efficiency and thus improving investors‟
confidence and accessing capital. Now corporate
governance has become a more dynamic concept and a
not a mere static one Corporate Governance was brought
in limelight through series of corporate failures such as
Enron and World Corn. These companies collapsed
because of the corporate mis-governance and unethical
practices they indulged in. Satyam scandal in India is also
the case of corporate mis-governance. Satyam case
exposed the complete lack of accountability in the
company and raised questions on corporate governance
practices of the country.
In a service industry like banking, corporate governance
relates to the manner in which the business and affairs of
individual banks are directed and managed by their board
of directors and senior management. It also provides
through which the objectives of the institutions are set, the
strategy for attaining them is determined and the
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20 Special Issue on Disruptions in Banking Sector in the Current Scenario
performance of the institution is monitored. Every major
industrialized country as well as the Organization for
Economic Co-Operation and Development and the World
Bank has made efforts in recent years to refine their views
on how large industrial corporations should be organized
and governed. Academics in both law and economics
have also been intensely focused on corporate
governance. Oddly enough, in spite the general focus on
this topic, very little attention has been given to the
corporate governance of bank.
Definitions of corporate governance
Cadbury Committee (U.K.), 1992 has defined
corporate governance as:
“Corporate governance is the system by which
companies are directed and controlled. It
encompasses the entire mechanics of the
functioning of a company and attempts to put in
place a system of checks and balances between
the shareholders, directors, employees, auditor and
the management.”
The Institute of Company Secretaries of India has
defined corporate governance as:
“Corporate Governance is the application of best
Management practices, Compliance of law in true
letter and spirit and adherence to ethical standards
for Effective Management and distribution of
wealth and discharge of social Responsibility for
sustainable development of all stakeholders”.
History &need of corporate governance
Corporate governance concept emerged in India after the
second half of 1996 due to economic liberalization and
deregulation of industry and business. With the changing
times, there was also need for greater accountability of
companies to their shareholders and customers. The report
of Cadbury Committee on the financial aspects of
corporate Governance in the U.K. has given rise to the
debate of Corporate Governance in India. The “corporate
governance concept” dwells in India from the Arthshastra
time instead of CEO at that time there were kings and
subjects. Today, corporate and shareholders replace them
but the principles still remain same, unchanged i.e. good
governance.20th century witnessed the glossy of Indian
Economy due to liberalization, globalization, and
privatization. Indian economy for the 1st time here was
together with world economy for product, capital and lab
our market and which resulted into world of
capitalization, corporate culture, business ethics which
was found important for the existence of corporation in
the world market place.
Need for corporate governance arises due to separation of
management from the ownership. For a firm success, it
needs to concentrate on both economic and social aspect.
It needs to be fair with producers, shareholders, customers
etc. It has various responsibilities towards employees,
customers, communities and at last towards governance
and it needs to serve its responsibilities at the best at all
aspects.
Need for corporate governance in banking system:
Banks are important catalysts for economic reforms,
including corporate governance practices. Because of the
systemic function of banks, the incorporation of corporate
governance practices in the assessment of credit risks
pertaining to lending process will encourage the corporate
sector in turn to improve their internal corporate
governance practices, importance of implementing
modern corporate governance standards is conditioned by
the global tendency to consolidation in the banking sector
and a need in further capitalization. It is of crucial
importance therefore that have strong corporate
governance practices. Banks just like any other
organization are incorporated entities. As a result of
which, the primary requirements of corporate governance
apply to them as any other incorporated entity. Added to
this certain features that are very specific to banks, adds
on to the importance of Corporate Governance issues in
banks.
Among other features, the most important one is the fact
that banks form an integral part of the economy of the
country, and any failure in a bank might have a direct
bearing on the financial health of the country. Banks, help
in channelizing the people‟s saving. The capital structure
of bank is unique in two ways. First, banks tend to have
very little equity relative to other firms. Second, banks‟
liabilities are largely in the form of deposits, which are
available to creditors/depositors on demand, while their
assets often take the form of loans that have longer
maturities. The second important driver of a good
corporate governance stems from their funding patterns.
Banks, by their basic definition are highly leveraged
financial institutions, with the equity capital of the
shareholders being reduced to a miniscule proportion of
loan capital in the form of borrowing and deposits of
deposits from customers of the bank. As a result of this,
the stakeholders in banks, (mainly the depositors and
lenders) have a rightful claim of accountability from the
banks and their boards.The third important element in the
Corporate Governance structure relates to the control
function. It is imperative to discuss the same in brief.
Control functions in banks deal with internal frauds as
well as external frauds. The former relates to situations
where the banks own personnel indulge in corrupt and
unethical practices. Finally, failing to comply with
stipulated norms can be one of the challenging issues of
Corporate Governance framework. With Banks being
under intense watch of the central bank as well as other
regulatory bodies, it is a common observation, that most
failures (crashes) in banks have occurred due to
compliance failure situations. With a lot of reports and
norms, being introduced (The Basel II norms being the
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Special Issue on Disruptions in Banking Sector in the Current Scenario 21
latest of them), failure to adhere to the regulatory norms
have never reduced.
BASEL II Recommendation: The Basel Committee on
Banking Supervision is a committee, of banking
supervisory authorities, established by the Central Bank
Governors of the G10 developed countries in 1975. The
Committee in 1988 introduced the Concept of Capital
Adequacy framework, known as Basel Capital Accord,
with a minimum capital adequacy of 8 %. It also issued a
consultative document titled “The New Basel Capital
Accord” in April 2003, to replace the 1988 Accord, which
re-enforces the need for capital adequacy requirements
under the current conventions. This accord is commonly
known as Basel II and is currently under finalization.
Basel II is based on three pillars:
Pillar 1 – Minimum Capital Requirements
Pillar 2 – Supervisory Review Process
Pillar 3 – Market Discipline
Enhancing Corporate Governance in Banks
The Basel committee had issued, in August 1999, a
guidance paper entitled “Enhancing Corporate
Governance for Banking Organizations” to supervisory
authorities worldwide to assist them in promoting the
adoption of sound corporate governance practices by
banks in their countries.
LITERATURE REVIEW
Levine(2004), discusses two special attributes of banks
that make them special in practice: greater opaqueness
than other industries and greater government regulation.
These attributes weaken many traditional governance
mechanisms. Next, the study reviews emerging evidence
on which government policies enhance the governance of
banks and draws tentative policy lessons. In sum, he
concludes that the existing work suggests that it is
important to strengthen the ability and incentives of
private investors to exert governance over banks rather
than relying excessively on government regulators.
Arun and Turner (2004) discuss the corporate
governance of banking institutions in developing
economies. Based on a theoretical discussion of the
corporate governance of banks, authors suggest that
banking reforms can only be fully implemented once a
prudential regulatory system is in place. An integral part
of banking reforms in developing economies is the
privatization of banks; so the corporate governance
reforms may be a prerequisite for the successful
divestiture of government ownership. Furthermore,
authors opine that the increased competition resulting
from the entrance of foreign banks may improve the
corporate governance of developing-economy banks.
Asian roundtable on corporate governance (2006) identifies corporate governance that affects Asian banks
and finds that banking sector in many Asian jurisdictions
do not have, in place, sufficient institutional infrastructure
necessary for effective enforcement of the corporate
governance of the corporate policy framework. The
members of the Task Force believe that Asian banks play
a dominant role in regional finance due to the immature
capital markets, and Asian policy makers should be aware
that sound corporate governance of banks cannot be
developed effectively without tackling institutional
constraints and weaknesses. The Task Force recommends
that Asian banking supervisors should take the lead to
improve corporate governance of banks in Asia.
Pati (2006) explains that policy framework for corporate
governance has been developed lately in India and for
banking it is still evolving. For Indian banking the RBI
has taken the sole responsibility of framing policy in this
regard. The Standing Committee on International
Financial Standards and Codes which was set up in 1999
to bring common financial standards in line with
international practices constituted an advisory committee
on corporate governance under the chairmanship of R.H.
Patil.The sub-committee submitted its report in 2001; and
in this report it has been observed that since most of the
Indian companies belong to the “insider” model of East
Asia i.e. dominance of family/promoter ownership and
control, it is essential to bring quick reforms in
corporates/banks/financial institutions/public sector
enterprises to make them more autonomous and
professional. Furthermore, as a part of strengthening the
functioning of their boards, banks should appoint a risk
management committee of the board in addition to the
three other board committees viz., audit, remuneration
and appointment committees.
According to Cocris&Ungureanu (2007) banks are
special and their corporate governance systems are of
major importance because banks have a critical position
in the development of economies due to their major role
in running the financial system. The authors report that
sound corporate governance system of banks increases the
efficiency of firms and also enhances the credibility of the
banking industry, which has positive economic effects
and countries that adopt regulation on forcing the
disclosure of accurate, comparable information about
banks tend to have better developed banks. These policies
enhance the operations and governance of banks. The
authors opine that banks, nowadays, respond to tight
regulation through mechanisms such as financial
innovation, securitization, globalization and new
technologies, if these responses are managed adequately,
they may have stimulating effects on the governance of
banks.
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22 Special Issue on Disruptions in Banking Sector in the Current Scenario
Chahine and Safieddine (2009) provide new insights
into the effect of corporate governance in emerging
markets by examining the banking system in Lebanon.
This research shows that board characteristics influence
bank conduct and performance. Using a sample of 749
firm years of unbalanced panel data on the banking
industry in Lebanon from 1992 to 2006, this paper shows
that bank performance, as measured by Return on Assets
and the Return on Equity, have a positive association with
board size. It also identifies a quadratic relationship
between bank performance and board independence as
both Return-on-Assets and Return-on-Equity first
decrease and then increase in direct proportion to the
increased percentage of outside directors on the board.
This study sheds some light on the differential impact of
corporate governance on firm performance across
industries and countries. It concentrates on banks in
developing countries that are generally known to suffer
from high asymmetric information and where concerns
about safety and soundness remain. Hence, it contributes
to the existing debate on appropriate regulations for an
effective and stable financial system in the Arab World
After reviewing the available literature and understanding
the complexity of corporate Governance in banks, it has
been observed that no detailed study has been done to
analyze the Corporate Governance Policies in the banking
sector in India in the light of various committees‟
recommendations which were appointed in India in the
recent decade. Thus, there arises a need to make an in-
depth analysis of Corporate Governance practices of the
commercial banks operating in India.
STATEMENT OF THE PROBLEM
The special nature of banking institutions necessitates a
broad view of corporate governance where regulation of
banking activities is required to protect depositors. In
developed economies, protection of depositors in a
deregulated environment is typically provided by a system
of prudential regulation, but in developing economies
such protection is undermined by the lack of well-trained
supervisors, inadequate disclosure requirements, the cost
of raising bank capital and the presence of distributional
cartels. Due to special nature of the activities carried on
by the banks, they face a lot of problems as far as the area
of corporate governance is concerned. Also, in the Indian
scenario, due to the peculiar nature of bank holdings there
are a lot of embedded conflicts. There exists a doubt as to
what standard should be applied while enforcing
corporate governance in banks. Central banks play an
important role in this regard. As far as best corporate
governance practices for banks are concerned, they may
realize that the times are changing, establishing an
effective, capable and reliable board of directors,
establishing a corporate code of ethics by the banks for
themselves, considering establishing an office of the
chairman of the board, having an effective and operating
audit committee, compensation committee and
nominating corporate governance committee in place,
disclosing the information and recognizing their duty to
establish corporate governance procedures that will serve
to enhance shareholder value.
OBJECTIVES OF THE STUDY
1. To study the reasons for the written code of
Corporate Governance in the Indian commercial
banks
2. To assess the availability of corporate Governance
policies in commercial banks of India
3. To study the various issues taken into account in
the code of conduct for the corporate Governance
of Indian commercial banks
4. To understand the code of conduct for independent
directors
5. To offer suggestions for the improvement of
Corporate Governance policies in the Indian
commercial banks.
SCOPE OF THE STUDY
Topical Scope: The topical scope of the present study is
confined to the“A study on corporate governance
practices in commercial banks”
Analytical Scope: The analytical scope of the present
study is confined to the scope, objectives, issues,
importance and practices of corporate governance in
banks
Geographical Scope: The present study is confined to the
corporate practices of Banks in India.
METHODOLOGY
The data used for the study is secondary data comprising
of official websites, journals, magazines and articles.
Since the data is secondary, it is more dependable and
reliable. The primary data is supplementary.
RESEARCH DESIGN
Important issues in corporate governance
There are several important issues in corporate
governance and they play a great role, all the issues are
inter related, interdependent to deal with each other. The
issues are as follows:
1. Value based corporate culture: For any
organization to run in effective way, it needs to
have certain ethics, values. Long run business
needs to have based corporate culture. Value based
corporate culture is good practice for corporate
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Special Issue on Disruptions in Banking Sector in the Current Scenario 23
governance. It is a set of beliefs, ethics, principles
which are inviolable.
2. Holistic view: This holistic view is more or less
godly, religious attitude which helps in running
organization. It is not easier to adopt it, it needs
special efforts and once adopted it leads to
developing qualities of nobility, tolerance and
empathy.
3. Compliance with laws: Those companies which
really need progress, have high ethical values and
need to run long run business they abide and
comply with laws of Securities Exchange Board of
India (SEBI), Foreign Exchange Regulation Act,
Competition Act 2002, Cyber Laws, and Banking
Laws etc.
4. Disclosure, transparency, and accountability:
Disclosure, transparency and accountability are
important aspect for good governance. Timely and
accurate information should be disclosed on the
matters like the financial position, performance etc.
5. Corporate Governance and Human Resource
Management: Each individual staff and employee
in an organization should be given best
opportunities to prove their worth and these can be
done by Human Resource Department. Thus in
Corporate Governance, Human Resource has a
great role.
6. Innovation: Every Corporate body needs to take
risk of innovation i.e. innovation in products, in
services and it plays a pivotal role in corporate
governance.
7. Necessity of Judicial Reform: There is necessity of
judicial reform for a good economy and also in
today‟s changing time of globalization and
liberalization. Withthe changing scenario and fast
growing competition, the judiciary needs to bring
reforms accordingly. It needs to speedily resolve
disputes in cost effective manner.
8. Globalization helping Indian Companies to become
global giants based on good governance: In today‟s
age of competition and due to globalization our
several Indian Corporate bodies are becoming
global giants which are possible only due to good
corporate governance.
9. Lessons from Corporate Failure: Failure can be
both internal as well as external whatever it may
be, in good governance, corporate bodies need to
learn from their failures and need to move to the
path of success.
CORPORATE GOVERNANCE IN BANKS
IN INDIA
Broad Canvass of Corporate Governance guidelines
for Banks:
Effective corporate governance practices are essential to
achieving and maintaining public trust and confidence in
the banking system, which are critical to the proper
functioning of the banking sector and economy as a
whole. The OECD (The Organization of Economic
Cooperation) principles define corporate governance as
involving “a set of relationships between a company‟s
management, its board, its shareholders, and other
stakeholders. Corporate governance also provides the
structure through which the objectives of the company are
set, and the means of attaining those objectives and
monitoring performance are determined. Good corporate
governance should provide proper incentives for the board
and management to pursue objectives that are in the
interests of the company and its shareholders and should
facilitate effective monitoring.
From a banking industry perspective, corporate
governance involves the manner in which the business
and affairs of banks are governed by their boards of
directors and senior management, which affects how they
function .The functions involve:
Set corporate objectives;
Operate the bank‟s business on a day-to-day basis;
Meet the obligation of accountability to their
shareholders and take into account the interests of
other recognized stakeholders;
Align corporate activities and behavior with the
expectation that banks will operate in a safe and
sound manner, and in compliance with applicable
laws and regulations; and
Protect the interests of depositors.
Importance of Corporate Governance for Banks
Corporate governance is a key element in improving the
economic efficiency of a bank. Good corporate
governance also helps ensure that corporations take into
account the interests of a wide range of constituencies, as
well as of the communities within which they operate.
Further, it ensures that their Boards are accountable to the
shareholders. Sound corporate governance also
contributes to the protection of depositors of the bank and
permits the supervisor to place more reliance on the
bank‟s internal processes. In this regard, supervisory
experience underscores the importance of having the
appropriate levels of accountability and checks and
balances within each bank. Moreover, sound corporate
governance practices are especially important in situations
where a bank is experiencing problems, or where
significant corrective action is necessary, as the
supervisor may require the board of directors‟ substantial
involvement in seeking solutions and overseeing the
implementation of corrective actions.
Role of RBI in Promoting Corporate Governance:
The growing competitiveness and interdependence
between banks and financial institutions in local and
foreign markets have increased the importance of
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24 Special Issue on Disruptions in Banking Sector in the Current Scenario
corporate governance and its application in the banking
sector. Corporate governance in banks can be achieved
through a set legal, accounting, financial and economic
rules and regulations. To make sure that the competence
and integrity in banking sector is maintained, the need for
uniform standards of the concept of governance in private
and public sector is emphasized. The regulatory
framework implemented by the central bank can affect the
overall wellbeing of banking sector.
Debut of Corporate Governance in Indian banks:
Keeping in viewall the recommendations and the cross-
country experience, the Reserve Bank initiated several
measures to strengthen the corporate governance in the
Indian banking sector. Indian banking system consists of
Public/Private sector banks having a basic difference
between them as far as the Reserve Bank‟s role in
governance matters relevant to banking is concerned. The
current regulatory framework ensures, by and large,
uniform treatment of private and public sector banks. In
regard to governance aspects of banking, the Reserve
Bank prescribed its policy framework for the private
sector banks. It also suggested to the Government the
same framework for adoption, as appropriate, consistent
with the legal and policy imperatives in PSBs as well.
Hence the endeavor is to maintain uniformity in policy
prescriptions to the best possible extent for all types of
banks.
Since role of Independent Directors form the basis for
effective implementation of corporate governance in
banks, it is necessary to reproduce the code of conduct
prescribed under SCHEDULE IV [section 149(7)] as
prescribed in Companies Bill 2012 for the guidance to the
companies. These are reproduced from the Companies‟
bill 2012.
Code for independent directors
The Code is a guide to professional conduct for
independent directors. Adherence to These standards by
independent directors and fulfillment of their
responsibilities in a Professional and faithful manner will
promote confidence of the investment community,
particularly minority shareholders, regulators and
companies in the institution of independent directors.
I. Guidelines of professional conduct:
An independent director shall:
Uphold ethical standards of integrity and probity
act objectively and constructively while exercising
his duties
exercise his responsibilities in a bona fide manner in
the interest of the company
Not abuse his position to the detriment of the
company or its shareholders
Assist the company in implementing the best
corporate governance practices.
II. Role and functions:
The independent directors shall:
Help in bringing an independent judgment to bear on
the Board‟s deliberations
bring an objective view in the evaluation of the
performance of board and managementscrutinize the
performance of management in meeting agreed goals
and objectives and monitor the reporting of
performance
safeguard the interests of all stakeholders, particularly
the minority shareholders
Balance the conflicting interest of the stakeholders
III. Duties:
The independent directors shall:
Undertake appropriate induction and regularly update
and refresh their skills
Strive to attend all meetings of the Board of Directors
and of the Board committees of which he is a
member
keep them well informed about the company and the
external environment in which it operates
Report concerns about unethical behavior, actual or
suspected fraud or violation of the company‟s code of
conduct or ethics policy
Not disclose confidential information, including
commercial secrets, technologies, advertising and
sales promotion plans, unpublished price sensitive
information, unless such disclosure is expressly
approved by the Board or required by law.
IV. Manner of appointment:
The appointment of independent director(s) of the
company shall be approved at the meeting of the
shareholders.
The appointment of independent directors shall be
formalized through a letter of appointment, which
shall set out:
The terms and conditions of appointment of
independent directors shall be open for inspection at
the registered office of the company by any member
during normal business hours.
The terms and conditions of appointment of
independent directors shall also be posted on the
company‟s website.
V. Re-appointment:
The re-appointment of independent director shall be on
the basis of report of performance evaluation.
VI. Resignation or removal:
The resignation or removal of an independent director
shall be in the same manner as is provided in sections
168 and 169 of the Act.
An independent director who resigns or is removed
from the Board of the company shall be replaced by a
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Special Issue on Disruptions in Banking Sector in the Current Scenario 25
new independent director within a period of not more
than one hundred and eighty days from the date of
such resignation or removal, as the case may be.
Where the company fulfils the requirement of
independent directors in its Board even without
filling the vacancy created by such resignation or
removal, as the case may be, the requirement of
replacement by a new independent director shall not
apply.
VII. Separate meetings:
The independent directors of the company shall hold
at least one meeting in a year, without the attendance
of non-independent directors and members of
management;
All the independent directors of the company shall
strive to be present at such meeting;
The meeting shall:
Review the performance of non-independent directors
and the Board as a whole;
Review the performance of the Chairperson of the
company, taking into account the views of executive
directors and non-executive directors;
Assess the quality, quantity and timeliness of flow of
information between the company management and
the Board that is necessary for the Board to
effectively and reasonably perform their duties.
VIII. Evaluation mechanism:
The performance evaluation of independent directors
shall be done by the entire Board of Directors,
excluding the director being evaluated.
On the basis of the report of performance evaluation,
it shall be determined whether to extend or continue
the term of appointment of the independent director.
Setting „Fit and proper‟ criteria for Directors of
banks:
It may be useful to distinguish the issue of the
composition of the Board from the „fit and proper‟ status
of individual non-executive directors and chief
executives. The Directors should be from professional
areas such as accountancy, banking, economics, finance,
agriculture, etc. But it does not specify the extent or
degree of professionalism or expertise required in regard
to that area. Hence, it is left to the good faith of the
shareholders to elect directors from the various specified
areas with qualifications and experience that is
appropriate to the bank. In regard to PSBs, such good
faith is expected when directors are nominated by the
Government. In the case of non-executive directors not
satisfying the „fit and proper‟ criteria, there is a prescribed
due process to be followed by the RBI to disqualify such
directors, which includes opportunities to be heard.
Continuing surveillance of “Fit and Proper” criteria is
maintained on continuous basis. Under these provisions,
nationalized banks are required to form a committee
consisting of minimum three directors (all independent
and non-executive directors) from amongst the Board of
Directors to examine and certify that none of these
directors disqualify for being “Fit and proper”. Moreover,
in some banks directors are also exposed to high level of
training to fine tune their expert domains to enable them
to more effectively contribute to the governance of banks.
The Corporate Governance systems have evolved over a
period of time to cover all types of banks to develop a
sound and strong financial system. After the Corporate
Governance System is established in banks, there could be
conspicuous change in the quality of governance.
SEBI Guidelines on corporate Governance in Banks:
The Securities and Exchange Board of India (SEBI) had
constituted a Committee on Corporate Governance and
circulated the recommendations to all stock exchanges for
implementation by listed entities as part of the listing
agreement vide SEBI‟s circular SMDRP/Policy/CIR-
10/2000 dated February 21, 2000. However it had at that
time exempted body corporates such as public and private
sector banks, financial institutions, insurance companies
and those incorporated under separate statute. SEBI has
now suggested to RBI to consider issuing appropriate
guidelines to banks and financial institutions so as to
ensure that all listed companies would have uniform
standards of corporate governance. As requested by SEBI,
it has now been proposed that the SEBI Committee‟s
guidelines may be taken up for adoption by those
commercial banks listed in stock exchanges so that they
can harmonize their existing corporate governance
requirements with the requirements of SEBI, wherever
considered appropriate. On a review by RBI of the
existing corporate governance requirements in banks, it is
observed that many of the recommendations in regard to
the following stand implemented in banks and may not
require further action towards implementation in respect
of these guidelines for the present:
Optimum combination of executive and non-
executive directors in the Board
Pecuniary relationship or transactions of the non-
executive directors vis-à-vis the bank
Independent Audit Committees, their constitution,
chairmanship, power, roles, responsibilities, conduct
of business, etc.
Remuneration of Directors (in case of private sector
banks)
Periodicity /number of board meetings
Disclosure by management to the board about the
conflict of interest
Information to shareholders regarding
appointment/re-appointment of directors,
Maintenance of office by non-executive Chairman.
Reviewing with the management by the Audit
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26 Special Issue on Disruptions in Banking Sector in the Current Scenario
Committee of the board.
Financial statements before submission to the Board,
focusing primarily on:
o Any changes in accounting policies and
practices,
o Major accounting entries based on exercise of
judgment by management,
o Qualifications in draft audit report
o Significant adjustments arising out of audit,
compliance with accounting standards,
o Compliance with stock exchange and legal
requirements concerning financial statements,
and the going concern assumption.
Best Practices of Banking System in Corporate
Governance:
Good governance can be built based on the business
practices adopted by the board of directors and
management. Many bank failures in the past have been
attributed to inadequate and insufficient management
which enabled the banks to accept low quality assets and
assume additional risks that extend beyond the level
appropriate for the banks‟ capacity. Important
commandments for ensuring corporate governance in
banks are:
Banks shall realize that the times are changing
Banks shall establish an Effective, Capable and
Reliable Board of Directors
Banks shall establish a Corporate Code of Ethics for
themselves
Banks shall consider establishing an office of the
Chairman of the Board
Banks shall have an effective and Operating Audit
Committee, Compensation Committee and
Nominating/ Corporate Governance Committee
Banks shall consider Effective Board Compensation
Banks shall disclose the information
Banks shall recognize that duty is to establish
Corporate Governance Procedures that will serve to
enhance shareholder value
Recent steps taken by Banks in India for Corporate
Governance are:
Introduction of non-executive members on the Board
Constitution of various Committees like Management
Committee, Audit Committee, Investor‟s Grievances
Committee, ALM Committee etc.
Gradual implementation of prudential norms as
prescribed by RBI
Introduction of Citizens Charter in Banks
Implementation of “Know Your customer” (KYC)
concept.
SUGGESSIONS
With a view to further improving the Corporate
Governance standards in banks, the following measures
are now recommended for implementation.
In the interest of the shareholders, the private sector
banks and public sector banks which have issued
shares to the public may form committees on the
same lines as listed companies under the
Chairmanship of a non-executive director to look into
redressal of shareholders' complaints.
All listed banks may provide un-audited financial
results on half yearly basis to their shareholders with
summary of significant developments.
It is also suggested that, the corporate governance
practices in the banking and financial sector in India
should improve for best investment policies, appropriate
internal control systems, better credit risk management,
better customer service and adequate automation in order
to achieve excellence, transparency and maximization of
stakeholder‟ value and wealth.
CONCLUSION
Banks and financial sector being a highly service oriented
sector, making corporate governance effective is a great
challenge. Due to the special nature of the activities
carried on by the banks, they face a lot of problems as far
as the area of corporate governance is concerned. In the
Indian scenario, due to the peculiar nature of bank
holdings there are a lot of embedded conflicts. The trend
in the world of targeting governance practices in the
banking sector to be at the cutting edge of prevailing
practices worldwide is a significant step in the right
direction and should continue to be so in the future as well
India has one of the best Corporate Governance legal
regimes but poor implementation.Corporate Governance
is a mission intended to create strong fundamentals for the
banks. With changing dimensions of corporate
governance practices banks need to transform into much
more dynamic and forceful entities setting a broad vision
for the future. Many investment banks, commercial banks
and financial institutions across the globe had to file
bankruptcy petitions and vanished from the market. The
reasons are definitely a focus on achieving short term
business goals often ignoring the long term goals of the
organization. The philosophy of Corporate Governance
spells out the long term sustainability with strong
fundamentals.
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Special Issue on Disruptions in Banking Sector in the Current Scenario 27
REFERENCES [1]. Romero, Alberto, G. (2003), The need for Corporate
Governance in Averting banking Crises -Lessons from
the Banco Latino Crisis, speech, KPMG Banking
Seminar in the Dominican Republic, (2003).
[2]. http://ssrn.com/abstract=1090291, accessed on 7 Nov.
2013.
[3]. T.G. Arun, and J.D. Turner, Corporate Governance of
Banks in Developing Economies: Concepts and Issues,
Corporate Governance: An International Review, 12 (3),
371-377, 2004, Available at SSRN:
http://ssrn.com/abstract = 557319, surfed on 7thNov.
2013.
[4]. Asian Roundtable on Corporate Governance (2006),
Policy Brief on Corporate Governance of Banks in Asia,
www.oecd.org, accessed on 10 November, 2013.
[5]. A.P. Pati, Does Corporate Governance Matter in Indian
Banking? Policy Implication on the Performance, (Indian
Institute of Capital Markets) 9th Capital Markets
Conference Paper, 2006. Available at SSRN:
http://ssrn.com/abstract = 877810, accessed on7
November 2013
[6]. http://www.oecd.org/corporate/ca/corporategovernancepr
inciples/31557724.pdf
[7]. http://www.nfcgindia.org/ipe-report.html
[8]. Basel Committee on Banking Supervision (BCBS)
Enhancing Corporate Governance for Banking
Organisations. Switzerland: Bank for International
Settlements
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
28 Special Issue on Disruptions in Banking Sector in the Current Scenario
Digital Banking in India: Challenges and
Opportunities
Dr.P.B.Banudevi
Head of the Department
Department of Commerce Finance
Dr.N.G.P.Arts and Science College (Autonomous)
Coimbatore-48
P.Dhanya
Assistant Professor
Department of Commerce with Professional Accounting
Dr.N.G.P.Arts and Science College (Autonomous)
Coimbatore-48
Abstract Financial sector plays a vital role in the
economic development of a country. Banking is the
helping hand of an economy. A strong and healthy
banking system is vital requirement for economic
prospects and growth. Indian banking industry, today is
observing an IT revolution. The execution of internet in
banking organizations has modernized the banks.
Implementing the digital banking approach has benefited
both the consumers as well as banks. Considering the
benefits, the banks all over the world have implemented
the digital banking and banking organizations in India are
no exception. The competition among the banks has led to
the rising total banking computerization in the Indian
banking industry. Digital Banking is a generic term
encompassing internet banking, telephone banking,
mobile banking etc. Through digital banking the bank
wants to introduce the core concept of IT based Enabled
Services (ITES). The digital banking services are carried
out only upon the customer, and these digital banking
services would fully incorporate with the core banking
solution that is already in usage. The objective of the
present paper is to examine and analyze the progress
made by digital banking in India.
Keywords: Digital Banking, Information Technology,
Mobile Banking, IT based Enabled Services.
INTRODUCTION
Information Technology has become a necessary tool in
today’s organizations. Banks today works in a highly
liberalized, privatized, globalized and a competitive
environment. IT has introduced new business model. It is
increasingly playing an important role in civilizing the
services in the banking industry. Indian banking industry
has witnessed a tremendous developments due to
sweeping changes that are taking place in the information
technology. Digital Banking refers to a system allowing
individual customers to perform banking activities at off-
bank sites such as home, office and other locations via
internet based secured networks. Internet or online
banking through traditional banks enable customers to
perform all routine transactions, such as account transfers,
balance inquiries, bill payments and stop-payment
requests, and some even offer online loan and credit card
applications. Digital Banking is a web-based service that
facilitates the banks authorized customers to access their
account information. It permits the customers to log on to
the banks website with the help of bank’s issued
identification and personal identification number (PIN).
The banking system verifies the user and provides access
to the requested services, the range of products and
service offered by each bank on the internet differs widely
in their content. Tremendous progress took place in the
field of technology which has reduced the world to a
global village and it has brought remarkable changes in
the banking industry.
REVIEW OF LITERATURE
A.J.Joshua, Moli P (2014), in this study majority of the
respondents has computer and internet access and they are
also mostly proficient in using them. The users of internet
banking, tele banking and mobile banking are in general
found to be spending more hours using computers and
internet than non-users of these services. The hours of
computer usage, the frequency of internet usage and hours
of internet browsing were found to be significantly higher
among users as compared to non-users of technology
enabled banking self-service. It concludes that banks can
target those customers whose usage of computers, internet
and other technology products are relatively on the higher
side.
Trivedi & Patel (2015) analysed the problems faced by
customers while using digital banking facilities in India. It
observed that most of the customers know about the
digital banking services offered by their bank. The study
found that there is a notable difference between different
problems identified while using digital banking services.
It also found that some problems affect more and some
problems affect less in use of banking services. It
finalized that all the reasons are not equally accountable
for not using digital banking services.
Haq & Khan (2016) analysed the challenges and
opportunities in the Indian Banking sector. The study
showed that only 28 per cent banking clients were using
digital banking after evaluating the population
characteristics. It found that there was no significant
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Special Issue on Disruptions in Banking Sector in the Current Scenario 29
relationship in between age and use of cyber banking. It
also depicted that there is no relation in between gender
and the adoption of internet banking. It experimented that
qualification in terms of education and income of the
respondents were playing significant role in the
acceptance of online banking. The study suggested that it
is the need of time that financial literacy of the users
should be increased through various programs which
should be run by banks to increase the awareness of
internet banking.
Vijay and Rajkumar (2017), has specify that users were
inclined by factors such as quick direct access, ease of
use, anytime anywhere banking, status symbol, safety and
security. The influence of the factors varied from the type
of users. Consumers have different levels of competency
in digital banking usage. More the consumers felt about
their competency in handling internet banking, more was
their frequency in usage of internet banking. Moderate
and novice of digital banking users had relatively lesser
levels of usage satisfaction.
OBJECTIVES OF THE STUDY
1. To study the current status of financial innovations in
Indian banking sector.
2. To identify various digital banking services/products
adopted by India.
3. To study the challenges faced in digital banking.
4. To study the opportunities available in digital
banking.
DIGITAL BANKING
Digital Banking is the term that signifies and
encompasses the entire sphere of technology initiatives
that have taken place in the banking industry. Digital
Banking is a general term refers to making use of
electronic channels through telephone, mobile phones,
internet etc. for delivery of banking services and products.
The concept and scope of digital banking is still in the
transitional stage. Digital Banking has broken the barriers
of branch banking.
CURRENT STATUS OF DIGITAL
BANKING IN INDIA
Digital Banking has become an integral part of banking
system in India. The concept of digital banking is of
fairly recent origin in India. Till the early 90‟s traditional
model of banking i.e. branch based banking was
prevalent, but after that non-branch banking services were
started. The credit of launching digital banking in India
goes to ICICI Bank. Citibank and HDFC Bank followed
with digital banking services in 1999. The Government of
India enacted the IT Act, 2000 which provided legal
recognition to electronic transactions and other means of
electronic commerce. The Reserve Bank is monitoring
and reviewing the legal and other requirements of digital
banking on a continuous basis to ensure that it would
develop on sound lines and its related challenges would
not pose a threat to financial stability. According to report
of RBI in Jan 2017, there are 196079 ATM and 1337310
point of sale devices in India.
To cope with the pressure of growing competition, Indian
commercial banks have adopted several initiatives and
digital banking is one of them. The competition has been
especially tough for the public sector banks, as the newly
established private sector and foreign banks are leaders in
the adoption of digital banking. Indian banks offer to their
customers following digital banking products and
services:
Automated Teller Machines
Internet Banking
Mobile Banking
Phone Banking
Tele banking
Electronic Clearing Services
Electronic Clearing Cards
Smart Cards
Door Step Banking
Electronic Fund Transfer
CHALLENGES IN DIGITAL BANKING
Security Risk: The problem related to the security has
become one of the major concerns for banks. A large
group of customers refuses to opt for digital banking
facilities due to uncertainty and security concerns.
According to the IAMAI Report, 47% of internet users
are not using digital banking in India because of security
concerns. So it’s a big challenge for marketers and makes
consumers satisfied regarding their security concerns,
which may further increase the online banking use.
The Trust Factor: Trust is the biggest hurdle to online
banking for most of the customers. Conventional banking
is preferred by the customers because of lack of trust on
the online security. They have a perception that online
transaction is risky due to which frauds can take place.
While using digital banking facilities lot of questions
arises in the mind of customers such as: Did transaction
go through? Did I push the transfer button once or twice?
Trust is among the significant factors which influence the
customers’ willingness to engage in a transaction with
web merchants.
Customer Awareness: Awareness among consumers
about the digital banking facilities and procedures is still
at lower side in Indian scenario. Banks are not able to
disseminate proper information about the use, benefits
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30 Special Issue on Disruptions in Banking Sector in the Current Scenario
and facility of internet banking. Less awareness of new
technologies and their benefits is among one of the most
ranked barrier in the development of digital banking.
Privacy risk: The risk of disclosing private information
& fear of identity theft is one of the major factors that
inhibit the consumers while opting for digital banking
services. Most of the consumers believe that using online
banking services make them vulnerable to identity theft.
According to the study consumers’ worry about their
privacy and feel that bank may invade their privacy by
utilizing their information for marketing and other
secondary purposes without consent of consumers.
Strengthening the public support: In developing
countries, e-finance initiatives have been the result of
joint efforts between the private and public sectors. If the
public sector does not have the necessary resources to
implement the projects it is vital that joint efforts between
public and private sectors along with the multilateral
agencies like the World Bank, be developed to enable
public support for e-finance related initiatives.
Availability of Personnel services: In present times,
banks are to provide several services like social banking
with financial possibilities, selective up gradation,
computerization and innovative mechanization, better
customer services, effective managerial culture, internal
supervision and control, adequate profitability, strong
organization culture etc.
Implementation of global technology: There is a need to
have an adequate level of infrastructure and human
capacity building before the developing countries can
adopt global technology for their local requirements. In
developing countries, many consumers either do not trust
or do not access to the necessary infrastructure to be able
to process e-payments.
Non- Performing Assets (NPA): Nonperforming assets
are another challenge to the banking sector. Vehicle loans
and unsecured loans increases N.P.A. which terms 50% of
banks retail portfolio was also hit due to upward
movement in interest rates, restrictions on collection
practices and soaring real estate prices.
Competition: The nationalized banks and commercial
banks have the competition from foreign and new private
sector banks. Competition in banking sector brings
various challenges before the banks such as product
positioning, innovative ideas and channels, new market
trends, cross selling ad at managerial and organizational
part this system needs to be manage, assets and contain
risk.
Handling Technology: Developing or acquiring the right
technology, deploying it optimally and then leveraging it
to the maximum extent is essential to achieve and
maintain high service and efficiency standards while
remaining cost effective and delivering sustainable return
to shareholders.
OPPORTUNITIES IN DIGITAL BANKING
Untapped Rural Markets: Contributing to 70% of the
total population in India is a largely untapped market for
banking sector. In all urban areas banking services entered
but only few big villages have the banks entered. So that
the banks must reach in remaining all villages because
majority of Indian still living in rural areas.
Multiple Channels: Banks can offer so many channels to
access their banking and other services such as ATM,
Local branches, Telephone/mobile banking, video
banking etc. to increase the banking business.
Competitive Advantage: The benefit of adopting digital
banking provides a competitive advantage to the banks
over other players. The implementation of digital banking
is beneficial for bank in many ways as it reduces cost to
banks, improves customer relation, increases the
geographical reach of the bank etc.
Increasing Internet Users & Computer Literacy: To
use digital banking it is very vital or initial requirement
that people should have knowledge about internet
technology so that they can easily adopt the digital
banking services. The fast increasing internet users in
India can be a very big opportunity and banking industry
should enact this opportunity to attract more internet users
to adopt digital banking services. Table shows evidence of
increasing number of internet users in India.
Worthy Customer Service: Worthy customer services
are the best brand ambassador for any bank for growing
its business. Every engagement with customer is an
opportunity to develop a customer faith in the bank.
While increasing competition customer services has
become the backbone for judging the performance of
banks.
Internet Banking: It is clear that online finance will
pickup and there will be increasing convergence in terms
of product offerings banking services, share trading,
insurance, loans, based on the data warehousing and data
mining technologies. Anytime anywhere banking will
become common and will have to upscale, such up
scaling could include banks launching separate digital
banking services apart from traditional banking services.
CONCLUSION
With the time, the concept of digital banking has got
attention in the Indian context. Most of the banks have
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Special Issue on Disruptions in Banking Sector in the Current Scenario 31
already implemented the digital banking facilities, as
these facilities are beneficial to both i.e. banks as well as
consumers. The banks are facing many challenges and
many opportunities are available with the banks. Many
financial innovations like ATMs, credit cards, RTGS,
debit cards, mobile banking etc. have completely changed
the face of Indian banking. Thus, there is a paradigm shift
from the seller's market to buyer's market in the industry
and finally it affected at the bankers level to change their
approach from “conventional banking to convenience
banking” and “mass banking to class banking”. The shift
has also increased the degree of accessibility of a common
man to bank for his variety of needs and requirements. In
years to come, digital banking will not only be acceptable
mode of banking but will be preferred mode of banking.
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Accessed January 20, 2015,
http://www.iba.org.in/oltas.asp
[2]. ICICI Bank Website, “ICICI bank launches Pocket by
ICICI bank”, Accessed January 25,
2015,http://www.icicibank.com/aboutus/article/icicibank
-launches-pockets-by-icicibank.html
[3]. Business Today, “Now, Access Your SBI Account via
Twitter”, Accessed January 12, 2016,
http://businesstoday.intoday.in/story/now-access-your-
sbi-account-via-twitter/1/204918.html
[4]. Prema C, “A framework for understanding consumer
perceived characteristics of Digital Banking as predictors
of its adoption”, Indian Journal of Marketing, Vol. 41,
No. 2, (2016): pp. 46-53.
[5]. Kuisma T, Laukkanen T and Hiltunen M, “Mapping the
reasons for resistance to internet banking: A means-end
approach”, International Journal of Information
Management, Vol. 27 No. 2, (2015): pp. 75–85.
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32 Special Issue on Disruptions in Banking Sector in the Current Scenario
Digital Payments in India – A Disruption
Dr.R.Rupa, M.Com., M.Phil., MBA., PGDCA., Ph.D
Associate Professor
SCMS School of Technology and Management
SCMS Campus, Prathap nagar
Muttom, Aluva, Cochin – 683 106
Email: [email protected]
DIGITAL PAYMENTS IN INDIA – A DISRUPTION
The Digital India programme is a flagship programme of
the Government of India with a vision to transform India
into a digitally empowered society and knowledge
economy. “Faceless, Paperless, Cashless” is one of
professed role of Digital India. Digital payment is a way
of payment which is made through digital modes. In
digital payments, payer and payee both use digital modes
to send and receive money. It is also called electronic
payment. No hard cash is involved in the digital
payments. All the transactions in digital payments are
completed online. It is an instant and convenient way to
make payments. As part of promoting cashless
transactions and converting India into less-cash society,
various modes of digital payments are available.
Major new digital payment modes in India
UPI apps
UPI or unified payment interface is a payment mode
which is used to make fund transfers through the mobile
app. Customer can transfer funds between two accounts
using UPI apps. The customer will have to register for
mobile banking to use UPI apps. Currently, this service is
only available for android phone users. UPI app had to be
downloaded and create a VPA or UPI ID. It is not
mandatory to use the UPI app from our bank to enjoy UPI
service. UPI apps are a faster solution to send money
using VPA or even IFSC and account number. But they
have some limitations also. The United Payments
Interface (UPI) envisages being a system that powers
multiple bank accounts onto a single mobile application
platform (of any participating bank).
AEPS
AEPS is an Aadhaar based digital payment mode. The
term AEPS stands for Aadhaar Enabled Payment Service.
Customer needs only his or her Aadhaar number to pay to
any merchant. AEPS allows bank to bank transactions. It
means the money you pay will be deducted from our
account and credited to the payee’s account directly.
Aadhaar number has to be linked to the bank account to
use AEPS. Unlike Debit cards and USSD, AEPS does not
have any charges on transactions. The good thing about
AEPS is that it doesn’t need our signature, bank account
details or any password. It uses the fingerprint as a
password. No one can forge the fingerprints, thus it is the
most secure digital payment mode. It uses the 12-digit
unique Aadhaar identification number to allow bank-to-
bank transactions at PoS. AEPS services include balance
enquiry, cash withdrawal, cash deposit, and Aadhaar to
Aadhaar fund transfers.
USSD
USSD banking or *99# Banking is a mobile banking
based digital payment mode. USSD Stands for
Unstructured Supplementary Service Data based mobile
banking. Linked to merchant’s bank account and used via
mobile phone on GSM network for payments up to Rs
5,000 per day per customer. USSD banking is as easy as
checking our mobile balance. This service can be used for
many financial and non-financial operations such as
checking balance, sending money, changing MPIN and
getting MMID. The *99# code works as a bridge between
our telecom operator’s server and our bank’s server. It
uses our registered mobile number to connect with our
bank account. Hence, dial *99# with our registered
number only. RBI has also set a maximum charge of Rs.
2.5 per operation.
Cards
Cards are provided by banks to their account holders.
These have been the most used digital payment modes till
now. Many of us use cards for transferring funds and
making digital payments. Credit cards, debit cards and
prepaid cards are the main types of cards.
Credit cards are issued by banks and some other
entities authorized by RBI. These cards give you the
ability to withdraw or use extra money. Credit cards
are used for domestic as well as international
payments.
Debit cards are issued by the bank where you have
our account. You can use these cards for the money
in our account. The payments you make with these
cards debit from our account and credit immediately
to the payee’s account. You can use these cards to
make payments to one bank account to another.
These are linked to an individual’s bank account.
This can be used at shops, ATMs, online wallets,
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Special Issue on Disruptions in Banking Sector in the Current Scenario 33
micro-ATMs, and for e-commerce purchases. Debit
cards have overtaken credit cards in India. In
December 2015, there were more than 630 million
debit cards as compared to 22.75 million credit cards.
Prepaid cards are another type of cards which you
use to pay digitally. It is similar to a gift card;
customers can make purchases using funds available
on the card – and not on borrowed credit from the
bank. It can be recharged like a mobile phone
recharge, up to a prescribed limit.
E-Wallets
E-wallet or mobile wallet is the digital version of our
physical wallet with more functionality. Online wallets
are used via the internet and through smartphone
applications. Money can be stored on the app via recharge
by debit or credit cards or netbanking. Consumer wallet
limit is Rs 20,000 per month or Rs 100,000 per month
after KYC. The merchant wallet limit is Rs 50,000 per
month after self-declaration, and Rs 100,000 after KYC
verification. These E-Wallets also give additional
cashback offers. Some of the most used E-wallets are
State bank buddy, ICICI Pockets, Freecharge, Paytm etc.
Advantages of Digital Payments
1. Digital payments are easy and convenient. All we
need is our mobile phone or Aadhaar number or a
card to pay. UPI apps and E-Wallets made digital
payments easier.
2. With digital payment modes, we can pay from
anywhere anytime.
3. Government has announced many discounts to
encourage digital payment like 0.75% discounts on
fuels and 10% discount on insurance premiums of
government insurers.
4. With digital payments our spending are
automatically recorded in our passbook or inside
our E-Wallet app. This helps to maintain our
record, track our spendings and budget planning.
5. Digital payments have less risk because without
MPIN, PIN or our fingerprint no transaction can be
done. But it is advised that to block the card or call
the helpline of E-wallet to suspend the wallet
account to prevent anyone from using digital
payment apps.
Drawbacks of Digital Payments:
Every coin has two sides so as the digital payments.
Despite many advantages, digital payments have a few
drawbacks also.
1. As most of the digital payment modes are based on
mobile phone, the internet and cards. These modes
are somewhat difficult for non-technical persons such
as farmers, workers etc.
2. There is a big risk of data theft associated with the
digital payment. Hackers can hack the servers of the
bank or the E-Wallet and easily get our personal
information. They can use this information to steal
money from our account.
3. Using the digital payment modes, we have all our
money with us always which can result in
overspending.
Factors affecting the future of digital payments:
1. Digital revolution: It has provided an easy way to go
for digital payments. India has more than 100 crore
active mobile connections and more than 22 crore
smartphone users as of March 2016. The reach of
mobile network, Internet and electricity is also
expanding digital payments to remote areas. This will
surely increase the number of digital payments.
2. Government’s support: The government is supporting
digital payments a lot. It has reduced some taxes and
announced incentives for digital payments. It has
launched Lucky Grahak Yojna for customers
and Digi Dhan Vyapar Yojna for shopkeepers. Due to
the announcement of incentives and waivers, more
people are showing interest in digital payments.
3. Three years ago, India began transferring government
benefits directly into recipients’ bank accounts in 43
of its 686 districts. The program, known as the Direct
Benefit Transfer (DBT), was envisioned as a digital
revolution for government transfers.
4. Designed to replace traditional schemes with cash
transfer-based ones, DBT is built on a technological
platform linking bank accounts, unique identification
numbers and mobile phone numbers. It was seen as a
means to further the government’s anti-poverty
agenda in an efficient manner – by plugging leakages
and fixing errors of exclusion in the short run, and by
bringing all such transactions into one common
account in the long run.
Future of Digital Payments:
The future of digital payments is very bright. India is
experiencing a remarkable growth in digital payments. In
2015-16, a total of Rs. 4018 billion transacted through
mobile banking as compared to Rs. 60 billion in 2012-13.
The percentage of the digital payments through other
modes is also increasing in a significant speed.
The digital payments have aimed to ease the transfer of
funds across India, especially in rural communities, and
more importantly, seek to facilitate a behavioral change
towards the greater adoption of cashless services. As
such, the digital payments industry is fast becoming a
highly attractive destination for foreign investors keen to
establish a foothold in India.
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
34 Special Issue on Disruptions in Banking Sector in the Current Scenario
Multiple factors and parallel institutional and behavioral
trends seem to be powering India’s transition towards a
less-cash economy. The rapid penetration of smartphones
and spread of internet connectivity on mobiles, digital
payment services provided by non-banking institutions
and the rise of the fintech sector, consumer expectations
of one-touch payments, and progress in regulatory
governance and tax breaks, have altogether shaped India’s
payments landscape in favor of digital solutions.
Within months of its launch Google Tez is already
processing the same number of digital transactions as the
country's fourth largest lender, Axis Bank, and has
resulted in unified payment interface (UPI) transactions
increasing about eight times. So with WhatsApp, India's
most popular application, now integrating a payments
button, digital payments is sure to further explode.
The new WhatsApp Payments feature, which allows users
to send and receive money, has started rolling out widely
to Android users. And India is among the first markets to
get the new service. The payment feature has been built
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 35
using India's Unified Payment Interface (UPI), currently
offered by 71 banks and hence encompassing almost
every person with a bank account in India. Although
WhatsApp Payments started with ICICI Bank, several
banks like Axis Bank, HDFC Bank, ICICI Bank, State
Bank of India and Yes Bank have since been included,
and more may get included future.
WhatsApp being the most popular messaging platform
today enjoys over 250 million monthly active users.
According to sources cited by The Economic Times, the
National Payments Corp of India (NPCI), which manages
the UPI protocol, did not allowed a full-scale launch of
WhatsApp Payments because of its large user base. It
instead preferred a phased rollout to allow time for both
the app and bank platforms to adjust to a sudden spike in
volumes.
Moreover, with pretty much everyone with a smartphone
in India already on WhatsApp, convenience becomes
another major advantage for its payments feature.
Transferring money to contacts becomes terrifically
simple and quick as you can perform the action from
within the messaging service-just ensure that you are
using the latest version (2.18.46) of WhatsApp-without
the need to download another app or even open multiple
windows on our phone. All we have to do is tap on the
attachment button in any open chat and then hit on the
payment button.
For users who rely more on digital transactions for
various purposes, WhatsApp Payments in its current form
will not be enough. Then there is the big question of
fraudulent transactions on WhatsApp. The messaging
service has been a haven for spam letters and the
payments feature could now enable fraudulent
transactions by duping uninformed users. If WhatsApp
can address these issues, it might end up disrupting the
market a second time round.
CONCLUSION
Digital payments in India, already witnessing
unprecedented activity since the government's surprise
demonetisation announcement in 2016, is likely to take a
great leap forward with the entry of WhatsApp Payments.
"Digital payments in India currently aggregate less than
$200 billion, of which mobile is still at just $10 billion in
financial year 2018 (estimated)," investment banking firm
Credit Suisse said in a recent report, adding, "Payment
integration into popular apps in India will drive the digital
payment market in India to $1 trillion over the next five
years. Digital payments in India are soaring on the back of
the entry of global tech giants that are acting as
aggregators for retail transactions."
REFERENCES: [1]. //economictimes.indiatimes.com/articleshow/52899821.c
ms?utm_source=contentofinterest&utm_medium=text&u
tm_campaign=cppst
[2]. //economictimes.indiatimes.com/articleshow/62937881.c
ms?utm_source=contentofinterest&utm_medium=text&u
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[3]. //economictimes.indiatimes.com/articleshow/62989133.c
ms?utm_source=contentofinterest&utm_medium=text&u
tm_campaign=cppst
[4]. Global Payments 2015: A Healthy Industry Confronts
Disruption
[5]. http://www.cgap.org/blog/digital-social-payments-india-
can-challenges-be-overcome
[6]. https://economictimes.indiatimes.com/industry/banking/f
inance/banking/why-whatsapps-entry-into-banking-
arena-could-change-indian-banking-
forever/articleshow/62937881.cms
[7]. https://upipayments.co.in/digital-payment/
[8]. https://www.businesstoday.in/current/economy-
politics/whatsapp-payments-digital-payments-
market/story/270780.html
[9]. https://www.india-briefing.com/news/growth-of-digital-
payments-systems-in-india-14797.html/
[10]. https://www.thehindubusinessline.com/opinion/columns/
c-p-chandrasekhar/what-they-dont-tell-you-about-digital-
payments/article9455432.ece
[11]. Report “India’s Digital Payments Future” that was
published in February 2017.
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
36 Special Issue on Disruptions in Banking Sector in the Current Scenario
Disruption of Banking Sector
S.DHIVYA
Research Scholar - Commerce
Dr. N.G.P. Arts and Science College
Coimbatore.
Abstract The banking industry in India has a huge
canvas of history, which covers the traditional banking
practices from the time of Britishers to the reforms
period. Therefore, banking in India has been through a
long journey. Today banking is known as innovative
banking. The use of technology has brought a revolution
in the working style of the banks. Information
Technology has had a positive impact on substitutes for
traditional funds movement services. With networking
and interconnection new challenges are arising related to
security privacy and confidentiality to transactions. In this
paper, an attempt is made to explain the changing
banking scenario. The study also identifies the challenges
and opportunities for the Indian banking sector in
changing banking scenario.
Keywords: Networking, IT, Internet Security, Global
Banking, NPA
INTRODUCTION:
The traditional functions of banking are limited to accept
deposit and to give loans and advances. Today banking is
known as innovative banking. Current banking sector has
come up with a lot of initiatives that oriented to provide a
better customer services with the help of new
technologies. Indian banking sector today has the same
sense of excitement and opportunity that is evidence in
the Indian economy. In the competitive banking world
improvement day by day in customer services is the most
useful tool for their better growth. Bank offers so many
changes to access their banking and other services. Banks
play an important role in the economic development of
developing countries. Economic development involves
investment in various sectors of the economy. In normal
banking, the banks perform agency services for their
customers and helps economic development of the
country. Bank arranges foreign exchange for the business
transactions with other countries. Banking sectors are not
simply collecting funds but also serve as a guide to the
customer about the investment of their money.
OBJECTIVES OF THE STUDY
To explain the changing banking scenario
To identify the challenges for the banking sector
To study the opportunities for the banking sector
METHODOLOGY USED
The study is based on secondary data. The sources of
secondary data include banking books, annual reports of
RBI, Internet (websites) and research papers etc.
STRUCTURE OF INDIAN BANKING
SECTOR
Today, role of banking industry is very important as one
of the leading and mostly essential service sector.
Banking Industry in India functions under the sunshade of
Reserve Bank of India - the regulatory central bank.
Banking industry mainly consists of
Commercial banks
Co-operative banks
The commercial banking structure in India consists of
Scheduled commercial banks
Unscheduled bank
Scheduled commercial banks constitute those banks
which have been included in the second schedule of
Reserve Bank of India (RBI) Act, 1934. For the purpose
of assessment of performance of banks, the RBI
categories them as public sector banks, old private sector
banks, new private sector banks and foreign banks.
THE COMMERCIAL BANKING
STRUCTURE IN INDIA
CHALLENGES FACED BY BANKING SECTOR
NOT MAKING ENOUGH MONEY Despite all of the headlines about banking profitability,
banks and financial institutions still are not making
enough return on investment, or the return on equity, that
shareholders require.
CONSUMER EXPECTATIONS These days it‟s all about the customer experience, and
many banks are feeling pressure because they are not
delivering the level of service that consumers are
demanding, especially in regards to technology.
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 37
INCREASING COMPETITION FROM FINANCIAL
TECHNOLOGY COMPANIES Financial technology (FinTech) companies are usually
start-up companies based on using software to provide
financial services. The increasing popularity of FinTech
companies is disrupting the way traditional banking has
been done. This creates a big challenge for traditional
banks because they are not able to adjust quickly to the
changes – not just in technology, but also in operations,
culture, and other facets of the industry.
REGULATORY PRESSURE Regulatory requirements continue to increase, and banks
need to spend a large part of their discretionary budget on
being compliant, and on building systems and processes
to keep up with the escalating requirements.
DISRUPTION IN BANKING SECTOR
Today, in banking sector customers are more value
oriented in their services because they have alternative
choices in it. So that each and every bank have to take
care about fulfilling customers satisfaction.
TO PROVIDE SEVERAL PERSONNEL SERVICES
Today, it is demanded that banks are to provide several
services for which they have to expand their service,
social banking with financial possibilities,
computerisation and innovative mechanization, better
customer services, internal supervision and control,
adequate profitability, strong organisation culture etc.
Therefore banks must be able to provide complete
personal service to the customers who comes with
expectations.
COMPETITION
The nationalized banks and commercial banks have the
competition from foreign and new private sector banks.
Competition in banking sector brings various challenges
before the banks such as product positioning, innovative
ideas and channels and new market trends. Banks are
restricting their administrative folio by converting
manpower into machine power.ie, banks are decreasing
manual powers and getting maximum work done through
machine power. Skilled and specialised manpower is to be
utilised and result oriented targeted staff will be
appointed.
GLOBAL BANKING
It is practically and fundamentally impossible for any
nation to exclude itself from world economy. Therefore,
for sustainable development, one has to adopt integration
process in the form of liberalization and globalization as
India spread the red carpet for foreign firms in 1991. The
impact of globalization becomes challenges for the
domestic enterprises as they are bound to compete with
global players. The foreign banks operating in India,
becomes a major challenge for nationalised and private
sector banks. These banks are large in size, technically
advanced and having presence in global market, which
gives more and better options and services to Indian
traders.
MANAGING TECHNOLOGY
Developing or acquiring the right technology, deploying it
optimally and then leveraging it to the maximum extent is
essential to achieve and maintain high service and
efficiency standards while remaining cost effective and
delivering sustainable return to shareholders. Early
adopters of technology acquire significant competitive
advantages. Managing technology is therefore, a key
challenge for the Indian Banking Sector.
OTHER CHALLENGES
Development of skill of bank personnel
Customer awareness and satisfaction
Changing needs of customers
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
38 Special Issue on Disruptions in Banking Sector in the Current Scenario
Lack of common technology standards for
mobile banking
Manpower planning etc.
OPPORTUNITY
RURAL AREA CUSTOMERS
Contributing to 70% of the total population in India is a
largely untapped market for banking sector. In all urban
areas, banking services entered but only few big villages
have the banks entered. So that the banks must reach in
remaining all villages because majority of Indian still
living in rural areas.
GOOD CUSTOMER SERVICES
Good customer services are the best brand ambassador for
any bank for growing its business. Every engagement
with customer is an opportunity to develop a customer
faith in the bank. While increasing competition, customer
services has become the backbone for judging the
performance of banks.
INTERNET BANKING
It is clear that online finance will pick up and there will be
increasing convergence in terms of product offerings,
banking services, share trading, insurance, loans based on
the data warehousing and data mining technologies.
Anytime anywhere banking will become common and
will have to upscale. Such upscaleing could include banks
launching separate internet banking services apart from
traditional banking services.
OFFERING VARIOUS CHANNELS
Banks can offer so many channels to access their banking
and other services such as ATM, Local branches,
Telephone/Mobile banking, Video banking etc. to
increase the banking business.
PRODUCT DIFFERENTIATION
Apart from traditional banking services, Indian Banks
must adopt some product innovation so that they can
compete in gamut of competition
EXPANSION
Expansion of branch size in order to increase market share
is another opportunity to combat competitors. Therefore
Indian nationalised and commercial banks must spread
their wings towards global markets as some of them have
already done it.
CONCLUSION
Indian banks are trust worthy brands in Indian market,
therefore these banks must utilise their brand equity as it
is a valuable asset for them. The paper discusses the
various challenges and opportunities like transparency,
growth in banking sector, global banking, managing
technology etc. Banks are striving to combat the
competition. The competition from global banks and
technological innovation has compelled the banks to
rethink their policies and strategies. Finally the banking
sector will need to master a new business model by
building management and customer services. Banks
should contribute intensive efforts to render better
services to their customer. Nationalized and commercial
banks should overcome the challenges and to get
advantage of opportunities in changing banking scenario.
REFERENCES [1]. Levesque, T. and Mcdougall, 1996. “Determinants of
customer satisfaction in retail banking” International
journal of Bank Marketing pp 12-20.
[2]. Uppal, R.K. 2007. „Banking services and IT‟ New
century publications, New Delhi.
[3]. Niti Bhasin, 2007, “Banking development in India 1947
to2007”, Century publication, Delhi 110005.
[4]. Zhao, T, Casu, B. and Ferrari, A. 2008. “Deregulation
and Productivity Growth: A study of the Indian
commercial banking industry”, International journal of
Business Performance Management pp318-343.
[5]. Goyal, K.A. and Joshi, V. 2011. “Mergers in banking
industry of India: some emerging issues”, Asian journal
of Business and Management Sciences. pp157-165
[6]. Fernando, A.C 2011. “Business Environment” Noida:
Dorling Kindersley(India) Pvt. Ltd pp549-553
[7]. WWW.indiatoday.com
[8]. WWW.wikiepedia.com
[9]. WWW.moneyindia.com
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 39
Emerging Digital Transformation and Artificial
Intelligence in Banking Sector - Current Scenario
Ms.P.Janani
Assistant Professor
Department of Commerce Banking and Insurance
Dr. N. G. P Arts and Science College
Mail.ID- [email protected]
Abstract The year of disruptions on a global scale and the
events of last year – most notably India’s demonetization
drive makes the banking and financial sectors to witness
the most changes in banking sector of Indian economy.
Looking at the scenario in India, on one hand are
traditional banks that are still encumbered by legacy
systems and processes. On the other, a global, digital
India has entered an age of innovation with the adoption
of updated technology. Nevertheless, despite their legacy
systems, our Indian banks are leading the digital
transformation by constantly reinventing their business to
stay ahead in this age of digital hyper-connectivity. The
world of Banking and Finance is changing more than
ever, with Artificial Intelligence (AI) being the front-
runner in bringing a change in the banking industry.
Keywords: Artificial Intelligence, Transformation,
Technology, Robot, Banking.
INTRODUCTION
Artificial intelligence (AI) has the potential to transform
both front office and back office operations with its self-
improving programs. The brilliance of AI has already
been evident in the enhanced customer experiences and
seamless, differentiated services on digital channels. It has
also helped in creating advanced security measures by
integrating with banking infrastructure. The use of
intelligent digital assistants is now common in some of
the more developed banking markets like US, Japan and
Hong Kong. In India also these facilities are transformed
in many banks. The self-learning capabilities of these
programs help them get better with every subsequent
interaction.
OBJECTIVE
1. The main objective of the study is the find the
digital transformation in banking sector.
2. To find the technologies used in banking sector.
AI in Financial Services Artificial intelligence is the blend of three advanced
technologies – machine learning, natural language
processing and cognitive computing. The concept of
Artificial Intelligence is to simulate the intelligence of
humans into artificial machines with the help of
sophisticated machine learning and natural language
processing algorithms. The prime motive for the idea of
transferring the intelligence from humans to machines is
to overcome the very barrier of human intelligence:
scalability. There’s always a limit to the speed with which
humans can perform the given tasks. Artificial
intelligence looks to overcome this very challenge with
human intelligence by transferring the human intelligence
to cognitive machines with supreme computational
capabilities.
Let’s take two examples to better understand the concept
of artificial intelligence:
Consider a scenario where the task is to map inputs to
outputs following a well-defined logical path. Let’s
take an example of producing the product of two
given numbers. Today, any computer can beat any
human in this task in terms of speed and accuracy.
This is the class of problems for which the software
revolution took place in the late 19th
century and is an
integral part of everyone’s life.
Now let’s take another scenario in which the mapping
of inputs to outputs is not very well defined. Consider
an example where the task is to identify whether an
image has a dog or a cat in it. It’s safe to say that
most of the humans will easily outperform computers
in this task.
These are scenarios where artificial intelligence is
focusing on, to simulate the mapping of inputs to outputs
as it happens in a human brain which makes very difficult
tasks for computers like image recognition, sarcasm
detection, voice recognition, etc. seamlessly easy for even
an 8-year old kid. Currently, the application of AI in the
financial service sector is at a still to witness a number of
changes in the way communications, customer service,
recruitment and wealth management takes place across
the industry. For example, today stock trading and
investing happens mainly on personal skills and divine
luck. But in future we will be able to manage wealth with
the help of sentiment analysis, crowd sourced research
and algorithms. Various AI solutions have already been
implemented in banking across various areas like core
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40 Special Issue on Disruptions in Banking Sector in the Current Scenario
banking, operations efficiency, customer facing services
and analytics. With the onset of AI, banking will no
longer be just apps, websites or physical branches but a
whole new experience.
Emerging Technologies and Artificial Intelligence To stay ahead of the technology curve in the
industry, Bank has made sure to leverage emerging
technologies across its range of services. We are all
pervasive even when it comes to the range of data
connectivity. Solutions like our Mobile Banking App, AI
based On Chat has been developed for customers who
enjoy good connectivity. Customers who struggle with
limited connectivity issues have LITE App and m – site to
avail banking services, whereas customers with no
connectivity or feature phones have missed call
commerce, SMS/ Toll Free Banking at their service.
Advantages And Disadvantages Of Information
Technology In Banking
Advantages
Online Banking/ Convenient Payments Many banks have integrated advanced information
technology systems to improve their customer service.
Today, it is effortless to withdraw money or make a
purchase using a Credit card or smartphone with a simple
tap; this saves customers from wasting time lining up in
banks or from carrying a lot of cash.
Fast Credit The technology used in banks helps in the gathering of
financial details and credit scores about each customer,
the information gathered can be used when a customer
applies for credit in that bank.
Disadvantages
Money Laundering Cases of online money laundering are on the rise, and this
has exposed many online users to the predators.
Security Banking security has improved significantly, however, so
has hacking expertise. If your information is connected to
the internet, there is always the possibility it may get
hacked.
Adoption Today, the applications of AI are ubiquitous ranging from
data analytics to a number of tools like software testing,
face detection, optical character recognition. AI is already
being implemented across a number of service sectors
including advertising and targeting, banking, finance,
media, navigation, aerospace, agriculture and genetics. In
1990, big techs concentrated on research in the AI
industry enhancing its scope to natural language
processing, image recognition, deep learning, speech
recognition and emotions. This was later picked up a
number of start-ups with a view to create business value.
New category leaders will appear by 2020, which will be
marked as the inflection point for Artificial Intelligence.
This will be followed by rise in new leaders and the
consolidation of laggards.
Our Indian banks, currently using an AI-based solution
developed by Chapdex, the winning team from its first
hackathon. “The solution essentially scans cameras
installed in the branch and captures the facial expressions
of the customers and immediately reports whether the
customer is happy or sad … this is real-time or near real-
time feedback.”The bank will now build a dashboard that
will gauge the effectiveness of representatives or tellers
based on customer feedback added. From a customer
chatbot perspective, Bank has launched an AI-powered
chat assistant that addresses customer enquiries instantly
and helps them with everyday banking tasks just like a
bank representatives. The bank’s customers can get
information on its products and services instantaneously.
It removes the need to search, browse or call and becomes
smarter as it learns through its customer interactions.
Robotic Software A kind of software generally focused on automating
office work and bank deploy this technology, which
emulates human actions to automate and perform
repetitive, high-volume and time-consuming business
tasks. Software robots have reduced the response time to
customers by up to 60 percent and increased accuracy to
100 percent thereby sharply improving the bank’s
productivity and efficiency. It has also enabled the bank’s
employees to focus more on value-added and customer-
related functions. Software robots now perform more than
1 million banking transactions per working day. software
robots at Bank are configured to capture and interpret
information from systems, recognize patterns and run
business processes across multiple applications to execute
activities, including data entry and validation, automated
formatting, multi-format message creation, text mining,
workflow acceleration, reconciliations and currency
exchange rate processing among others. The bank has
created the software robotics platform mostly in-house,
leveraging AI features such as facial and voice
recognition, natural language processing, machine
learning and bots among others. That implementation of
software robotics will herald a transformational change in
the Indian banking industry. It should be noted that
robotic software is by no means new, and is a staple in
large white collar work environments – including
many US banks. That being applications one way or
another from the outside.
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Special Issue on Disruptions in Banking Sector in the Current Scenario 41
Mobile App technology
Mobile app technology involves three broad categories for
customers they are as follows:
Category 1: It involves FAQs, which are simple
questions that you may want to ask your bank executive
for which there are simple, structured answers. You ask
the queries and the chatbot will give you the correct
response, and it learns along the way.
Category 2: It involves financial transactions, wherein
you can make fund transfers from person-to-person, pay
your bills or recharge your mobile phone bills using
queries.
Category 3: It involves helping people discover new
features. These are simple how-to tasks such as how to
reset your ATM pin, which is a bit more evolved and is
like interacting with your bank executive.
“The intent is to provide 24×7 assistance, instant
gratification and convenience to our customers in an
intuitive and native way.”
Chatbots at Indian Banks
Commercial banks in India, in collaboration with fintech
startups, are using AI to improve the customer experience,
reduce costs and improve efficiency. Chatbots seems to be
the primary AI use-case at Indian banks today, with all
four banks investing in conversational apps – mostly
focused on customer service. In some cases, like in Bank,
we have also seen the use of AI-powered smart cameras
that captures facial expressions of customers to offer real-
time feedback on their experiences.
CONCLUSION
The banks seem to be competing with each other to
launch their AI solutions and stay ahead in the technology
adoption curve. While none of the banks quantified an
investment figure, it’s evident that a large percentage of
the digital transformation budget is being geared toward
AI and related technologies and they spend is only going
to increase in the future.
REFERENCES: [1]. AI application in the top 4 Indian Banks
www.techemergence.com/ai-applications-in-the-top-4-
indian-banks/
[2]. AI applications in Banking to look out for in next 5 years
https://www.analyticsvidhya.com/blog/2017/04/5
[3]. Wikipedia and Bank Management- S. Arunajatesan and
S. Radhakrishnan
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
42 Special Issue on Disruptions in Banking Sector in the Current Scenario
Expanded ATM Capabilities
G.Baby Cellin,
Assistant professor,
Department of Commerce,
Bishop Appasamy College of Arts and Science,
Coimbatore - 18.
S.Divya Bharathi,
III B.COM (C.A),
Bishop Appasamy College of Arts and Science,
Coimbatore - 18.
ABSTRACT ATMs exist in a world like this. After more
than thirty years, they have become an endemic part of
our banking culture. For many people, the only contact
they now have with their bank is through an ATM. For
bankers, ATMs, along with all of the other customer
service channels, may seem to be merely a necessary cost
of serving their customers. We’re all familiar with the
traditional ATM functions: cash withdrawal, transfers,
deposits, statements and the like. These ATM functions
automate branch teller activities from which they were
derived and have a value in speed and convenience for
customers. But to truly unlock the value of an ATM, we
must look closer at the user experience and the type of
services that could be delivered. Some of the strategies
that we should consider include: improving customer
interaction; integrating ATMs with the bank's other
customer channels; expanding the ATM transaction set;
and taking advantage of location based services. We have
the technology and the experience to transform the ATM
into a customer-focused channel for value added services,
greater customer retention and improved bank profits.
INTRODUCTION TO ATM
Automated teller machine (ATM) is a computerized
telecommunications device that provides the customers of
a financial institution or bank with access to financial
transactions in a public space without the need for a
human clerk or bank teller 24 hours a day. ATMs play a
vital role in facilitating the banking services to banks as
well as customers. ATM is the back bone of retail banking
sector. The word “machine” in the term “ATM machine”
is certainly redundant, but widely used. The ATM is an
automatic banking machine (ABM) which allows
customer to complete basic transactions without any help
of bank representatives. There are two types of automatic
teller machines (ATMs). The basic one allows the
customer to only draw cash and receive a report of the
account balance. Another one is a more complex machine
which accepts the deposit, provides credit card payment
facilities and reports account information.
HISTORY OF AUTOMATED TELLER
MACHINE (ATM):
ATM was invented by john-shepherd-barron.the world’s
first ATM was installed in a branch of Barclays in the
northern London borough of Enfield, in 1967. a
mechanical cash dispenser was developed and built by
Luther George simian and installed in 1939 in newyork by
the city bank of newyork. The first person to use the
machine was regvarney of “on the buses” frame, a British
television program me from the 1960’s the idea of a PIN
stored on the card was developed by the British engineer
john rose in 1965. The modern, networked ATM was
invented in Dallas, Texas, by downwetzel in 1968.notable
historical models of ATMs include the IBM 3624 and
473x series, and NCR5XXX series.
BLOCK DIAGRAM OF AUTOMATED TELLER MACHINE (ATM)
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 43
The Automatic telling machine consists of mainly two
input devices and four output devices that are;
Input Devices:
Card reader
Keypad
Output Devices:
Speaker
Display Screen
Receipt Printer
Cash Depositor
INPUT DEVICES:
Card Reader: The card reader is an input device that reads data from a
card .The card reader is part of the identification of your
particular account number and the magnetic strip on the
back side of the ATM card is used for connection with the
card reader. The card is swiped or pressed on the card
reader which captures your account information i.e. the
data from the card is passed on the host processor
(server). The host processor thus uses this data to get the
information from the card holders.
Automatic Teller Machine Card Reader
Keypad: The card is recognized after the machine asks further
details like your personal identification number,
withdrawal and your balance enquiry Each card has a
unique PIN number so that there is little chance for some
else to withdraw money from your account. There are
separate laws to protect the PIN code while sending it to
host processor. The PIN number is mostly sent in
encrypted from. The key board contains 48 keys and is
interfaced to the processor.
Automatic Teller Machine keypad
OUTPUT DEVICES:
Speaker:
The speaker provides the audio feedback when the
particular key is pressed.
Display Screen: The display screen displays the transaction information.
Each steps of withdrawal is shown by the display screen.
A CRT screen or LCD screen is used by most of ATMs.
Automatic Teller Machine LCD Display
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
44 Special Issue on Disruptions in Banking Sector in the Current Scenario
Receipt Printer: The receipt printer print all the details recording your
withdrawal, date and time and the amount of withdrawn
and also shows balance of your account in the receipt.
Cash Dispenser:
Automatic Teller Machine Cash Dispenser
Cash dispenser is a heart of the ATM. This is a central
system of the ATM machine from where the required
money is obtained. From this portion the user can collect
the money. The duty of the cash dispenser is to count each
bill and give the required amount.
If in some cases the money is folded, it will be moved
another section and becomes the reject bit. All these
actions are carried out by high precision sensors. A
complete record of each transaction is kept by the ATM
machine with help of an RTC device.
ATM NETWORKING:
The internet service provider (ISP) also plays an
important role in the ATMs. This provides
communication between ATM and host processors. When
the transaction is made, the details are input by the card
holder. This information is passed on to the host processor
by the ATM Machine. The host processor checks these
details with authorized bank. If the details are matched,
the host processor sends the approval code to the ATM
machine so that the cash can be transferred.
Automatic Teller Machine Networking
EXPANDED AUTOMATED TELLER MACHINE
(ATM):
ATM is a revolutionary concept to execute a single
software application in the entire ATM network. The
ATM technology has developed to such an extent that
some ATMs can memorize consumer preferences as per
their past transactions, behavior, and tailor services
accordingly. In many cases, ATMs have internet scope
which facilitates two way communications with live
agents, provide biometric options, and have the ability to
demonstrate personalized advertisements. Maintenance of
web enabled ATMs are easy. These ATMs can be quickly
connected to central monitoring system of vendors.
Within two decades, ATM technology development is
happening at an alarming rate. Gone are the days when
customers were limited to only withdrawing cash from
ATM’s.
GROWTH OF THE INDUSTRY:
As per the Global ATM Market and Forecasts to 2016, the
maximum growth of ATMs is happening in Asia pacific
region. India and Indonesia are having one fourth of the
number of ATMs, and china is accounted for half of the
New ATMs. Worldwide growth of ATMs is steadily
increasing. The growth of ATMs in Western countries and
other advanced countries has reached at a mature stage.
However; there is a lot of scope of growth of ATM
industry in developing countries like India. In India, ATM
industry is growing at an exponential rate. So to say,
ATM has brought a self service revolution. ATMs were
introduced to the Indian banking industry during 1987 by
HSBC Bank in Mumbai.
Since many banks still operate proprietary networks, the
increasing number of banking customers is likely to spur
ATM growth.”ATM technology was used to reach the
customers at a lower initial and transaction cost with
hassle free services. As per an interaction with senior
general managers (South Asia channel partners and
strategic alliance), ATM segment witnessed a growth rate
of 30% since last 5 years in India. ATM terminals in India
will be expected to grow at a compounded average growth
rate of 25% between 2011 and 2015. There is now service
providers take the responsibility of identification of ATM
installation site, connectivity and power arrangement,
negotiation with landlords, and finishing the interiors of
ATM site. Now there is a trend in India, to outsource
ATM functions and activities like; ATM selection and
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 45
Installations, site up keeping, card issuance and
management, transaction processing, field services, and
provide technology solutions to connect ATMs by service
providers.
NATIONAL FINANCIAL SWITCH (NFS):
The first ATM in India was set up in 1987 by HSBC in
Mumbai.[2]
In the following twelve years, about 1500
ATMs were set up in India. In 1997, the Indian Banks'
Association (IBA) set up Swadhan, the first network of
shared ATMs in India. It was managed by India Switch
Company (ISC) for five years, and allowed cardholders to
withdraw cash from any ATM in the network, for a fee if
they did not have an account with the bank that owned the
ATM. In 2002, the network connected over 1000 ATMs
of the 53 member banks of the association. The network
was capable of handling 250,000 transactions per day, but
only 5000 transactions, worth about 100,000, took place
each day.
After the contract with ISC expired, IBA failed to find a
bidder to manage the operationally uneconomical
network, and shut it down on 31 December 2003.After the
collapse of Swadhan, Bank of India, and Union Bank of
India, Indian Bank, United Bank of India and Syndicate
Bank formed an ATM-sharing network called Cash
Tree. And Canara Bank also created such networks. In
August 2003, the IDRBT announced that it would be
creating the National Financial Switch (NFS) to link
together the country's ATMs in a single network.
Citibank, the Industrial Development Bank of
India, Standard Chartered Bank and Axis Bank formed a
similar network called Cash net. Punjab National Bank.
OBJECTIVES OF NFS:
It aims to interconnect all the ATM’s in the country
and facilitate easy banking to the users.NFS connects
the ATM of member banks under a single network.
The user or the customer need not avail the use of his
core/ home bank for transactions. Since all the ATM
of the member banks are connected, the customer can
use any ATM other than that of his specified bank.
The banks without ATM network but which can
provide core banking facilities with 24x7 services can
join the NFS through a sponsor bank. The objective
behind such a move is to enable the non-scheduled
cooperative banks and other regional rural banks
(RRB) to access the wide network of ATMs in the
country, enabling the customers of such bank to
access banking services through any ATM of a
connected bank.
ADVANTAGES OF ATM
Quick Cash Withdrawal
Anyone Can Have Bank Card
Account balance inquiry
Details of recent transactions
Deposit cash / cheque
Request for new cheque book
Transfer funds between accounts within the same
Bank
Pay your Utility bills
Make other payments too
CONCLUSION
Based studies on the ATM we hereby conclude that ATM
is the easiest way of depositing and withdrawing money.
Transactions are possible any time, that’s why in India
some people call ATM as “all time money”. If ATM
machines are connected to internet then it is possible to do
transactions from anywhere. 24 hours days and 365 days a
year. With security ATM improving it has now become a
safe mode of transaction. Hence it can be concluded that
ATM is safe, fast, realizable, convenient, excisable and
any time money machine.
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Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
46 Special Issue on Disruptions in Banking Sector in the Current Scenario
Grievance Redressal Mechanism-Opinion Study
Dr.S.Valli Devasena,
Assistant Professor,
Department of Commerce,
Mother Teresa Women’s University,
Research & Extension Centre, Madurai-19
Abstract Customers not only look for a high-quality
product and access to great services, they want to be
treated well. No matter what industry they are in,
customers expect great service, but in the banking
industry, it is especially important. This is because
customers want to feel supported and as if their
transactions facility is really there to help them reach their
goals. Hence, banks should make sure that their business
is using technology in a way that helps, not hinders, the
customer experience.
INTRODUCTION
The Banking sector in India has experienced a rapid
transformation. With the entry of private players into
retail banking and with multi-nationals focusing on the
individual consumer in a big way, the banking system
underwent a phenomenal change. Technology played a
key role in providing this multi-service platform. The
entry of private players combined with new RBI
guidelines forced nationalized banks to redefine their core
banking strategy. And technology was central tothis
change. Today banks have to look much beyond just
providing a multi-channel service platform for its
customers. There are other pressing issues that banks need
to address in order to chalk-out a roadmap for the future.
IMPORTANCE OF THE STUDY
Banking is essentially a service oriented industry and no
service is deemed complete unless it is accompanied by
satisfaction of the people who avail the service. Customer
satisfaction and customer protection are the hallmarks of
banking service. Regulators and supervisors across the
financial world have built policy edifices on strong
foundations of consumer protection and customer service.
In this context, it is indeed a commendable initiative on
the part of the bank to train the employee to focus on
customer service and reward exemplary service rendered
by employees. The bank will reach even greater heights in
customer service while simultaneously enhancing the
skills of personnel in this area. Attributes of customer
service have changed over the years. Customers are more
aware, there is a predominance of masses seeking tangible
action to ensure that their rights as customers are upheld.
More importantly, customers are becoming increasingly
aware of Banking Ombudsman schemes, legal channels of
redressal, consumer courts etc. The same has also been
made possible on account of leaps that information
technology has taken over the last one decade with
information on the above channels being available widely.
Banking penetration through use of technology and the
increase in number of non face –to –face transactions adds
a different dimension to the customer care paradigm.
REVIEW OF LITERATURE
John Brooks,45
former President and Chairman of the
council of the chartered institute of bankers, London
states : “Customer care is emerging as a critical factor in
the banking industry and banks are fully conscious of the
need for attaining international standards of service.”
P.V. Anantha Bhaskar56
opined that receiving customer
complaints listening to the grievances patiently and
solving problems are important areas of customer service.
V.K. Gupta57
stated that as a part of managing customer
relationship, banks have to provide greater value to the
customer through enhanced customisation in products,
services and establishing an internal mechanism in the
bank to recognise customer’s right to get speedy, timely
and satisfactory redress of grievances.
K. Santi Swarup58
stated that for delivering quality
service, it is imperative to have customer orientation as a
culture in the bank. Customer orientation builds long
term relationship resulting in customer satisfaction and
cash flows to the banks.
K.V. Bhaskara Rao64
has suggested initiatives to reorient
banks outlook towards customer service. They are:
1. Pursuit of total quality management at operational
units.
2. Multiple platforms for redressal of grievances.
3. Continued training for the staff focusing on customer
service.
STATEMENT OF THE PROBLEM
Customer retention is one of the main priorities for banks
today. With the entry of new players and multiple
channels, customers have become more discerning and
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Special Issue on Disruptions in Banking Sector in the Current Scenario 47
less 'loyal' to banks. Given the various options, it is now
possible to open a new account within minutes. Or for that
matter shift accounts within a couple of hours. This makes
it imperative that banks provide best levels of service to
ensure customer satisfaction. The customer is interested
in how he/she can benefit from the bank and its products.
That's why it becomes necessary for a bank to
differentiate its products from the others. Some of the
ways in which differentiation can be introduced are
through specialization, new products, and increasing
theadded value. While banks have to ensure product
superiority and operational excellence, the biggest
challenge today is to establish customer intimacy without
which the other two are meaningless.
Banking is essentially a service oriented industry and no
service is deemed complete unless it is accompanied by
satisfaction of the people who avail the service. Customer
satisfaction and customer protection are the hallmarks of
banking service. Regulators and supervisors across the
financial world have built policy edifices on strong
foundations of consumer protection and customer service.
In this context, it is indeed a commendable initiative on
the part of the bank to train the employee to focus on
customer service and reward exemplary service rendered
by employees.
OBJECTIVES OF THE STUDY
To know whether the bank customer aware of
Ombudsman Scheme and its purpose and to analyses
whether complaints are lodged and redressed
effectively or not
To offer suggestions and conclusions
SCOPE OF THE STUDY
This study covers the customer services rendered by State
Bank of India in Madurai city. As the study is an
empirical study to identify the attitude of the customers
towards the services rendered by the banker, the study has
been focused towards customers who are the recipient of
services and bank employees who are the agencies of
delivery of services. As such, it has been projected from
the point of view of bank employees and from the point of
view of bank customers. It is analysed with reference to
customers and employees attitude. The State Bank of
India in Madurai city consists of 13 branches. The study
was undertaken on the customers and Bank employees of
13 branches only.
METHODOLOGY
The present study is an empirical one based on survey
method. Data were collected from both primary and
secondary sources. The primary data were collected from
banks’ customers and bank employees by means of
interview schedule and questionnaire.
Sampling Design
The study aims at analysing the attitude of customers of
State Bank of India in Madurai city branches with regard
its services.
The customers of State Bank of India in Madurai city
branches are large in number and hence a comprehensive
list of customers could not be prepared. Moreover, the list
of customers of each branch could be obtained only from
the bank managers. They should not reveal the names of
customers due to their obligations to maintain the
confidentiality of customers’ accounts as per sec.13 of
Banking Company (Acquisition and Transfer of
undertakings) Act, 1970. Therefore, a sample of 50
customers from each branch was selected by applying a
non-probability random sampling method. Equal
importance is given to all branches irrespective of size,
volume of business and so on. In total 650 customers
consist of sample customers.
Geographical Area of the Study
The study covers the whole area of Madurai city only
where the branches of the State Bank of India are situated.
They are Amman Sannadhi Branch, Arasaradi Branch,
Commercial Tax Complex, Madurai Agricultural
Development Bank Branch, Madurai city Branch,
Pasumalai Branch, Personal Banking Branch, Tallakulam
Branch, Vinayaganagar Branch, West Tower Branch,
Railway Station Branch and Madurai Main Branch.
Analysis of the Study
Opinion on the successfulness of Ombudsman Scheme
Ombudsman Scheme is a complaint redressal mechanism
available for customers when they are not satisfied with
the remedial measures of the Branch Manager on the
complaint received. Table 1 shows the opinion of bank
employees on the success or failure of the Ombudsman
scheme.
TABLE 1 Opinion on the Success of Ombudsman
Scheme
Opinion No. of
Employees Percentage
Strongly agree 100 42
Agree 100 42
No opinion 24 10
Disagree 4 1
Strongly disagree 12 5
Total 240 100
Source: Primary Data.
Table 1 reveals that majority of the bank employees, that
is 42 per cent, strongly agreed that Ombudsman scheme
was successful.
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48 Special Issue on Disruptions in Banking Sector in the Current Scenario
CUSTOMER COMPLAINTS
Most business institutions are more concerned with
keeping old customers happy rather than getting new
customers. In order to retain customers, the bank
employee must work harder on managing individual
customer relationship. Hence the customers should be
given a chance to express their views either orally or in
written form. If the complaints are written, they must be
handed over to the bank. Table 2 shows the opinion of
bank employees regarding whether they have meetings for
receiving customer’s complaints.
TABLE 2 Opinion of Bank Employees about Holding of
Meetings
Opinion No.of Employees Percentage
Yes 208 87
No 32 13
Total 240 100
Source: Primary Data.
Table 2 reveals that 87 per cent bank employees opined
that the bank holds meetings to discuss the customers’
grievances and 13 per cent bank employees differed on
that point.
Opinion about Display of Higher Officials Address for
Grievances
Building enduring relationship requires a bank
commitment to provide high-quality service, which is
reliable, empathic, and responsive. One of such things is
displaying higher officials’ addresses to customers for
redressal when they are not satisfied with the actions of
the branch manager. Hence, the researcher attempted to
know whether bank displays the addresses of higher
officials for redressal of complaints, other than branch
manager. Table 3 shows the opinion of the bank employee
in this regard.
TABLE 3 Opinion about the Display of High Officials
Addresses for Redressal of Complaints
Opinion No.of Employees Percentage
Yes 212 88
No 28 12
Total 240 100
Source: Primary Data.
It is inferred from Table 3 that 88 per cent bank
employees opined that the bank displays the addresses of
higher officials for redressal of complaints and 12 per cent
bank employees opined that the bank does not display the
addresses of higher officials for redressal of complaints.
Opinion on the Availability of Suggestion
Box/Complaint Box It is not possible for all the customers to wait for a day to
give a written complaint. Suggestion box/complaint box
is a gift to the customer to solve this problem. He can just
drop a written complaint in the box whenever he feels he
is not satisfied with the service provided. Table 4 shows
the opinion of bank employees on the availability of the
suggestions/complaint boxes.
TABLE 4 Opinion on the Availability of
Complaint/Suggestion Box
Opinion No.of Employees Percentage
Yes 232 97
No 8 3
Total 240 100
Source: Primary Data.
It is evident from Table 4 that 97 per cent of the bank
employees agreed on the existence of complaint
box/suggestion box in their branch premises.
Opinion on Existence of Customer Service Committee Today, businesses are following customer driven business
strategy to optimise profitability, revenue and customer
satisfaction. To achieve effectiveness, there must be a
customer service committee to recognize the customers’
perspective, do offer excellent service, rectify mistakes,
and develop teams spirit, bring about a harmonious
relationship with the customers.
Table 5 shows whether customer service committee exists
or not.
TABLE 5 Opinion on the Existence of Customers Service
Committee
Opinion No.of Employees Percentage
Yes 200 83
No 40 17
Total 240 100
Source: Primary Data.
Table 5 reveals that 83 per cent bank employees agree that
the bank has constituted customer service committee at
their branch levels while 17 per cent bank employees
disagree.
Opinion on Complaints Received
Complaints are the written expression of the customers’
dissatisfaction with the services provided by the bank
employees.
The bank employees’ opinion on whether they have
received any complaint or not is given in Table 6
TABLE 6 Opinion on whether Complaints are taken up
Opinion No. of Employees Percentage
Yes 156 65
No 84 35
Total 240 100
Source: Primary Data.
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Special Issue on Disruptions in Banking Sector in the Current Scenario 49
Table 6 shows that 65 per cent of the bank employees
received complaints/suggestions from their customers.
And 35 per cent bank employees did not receive any
complaint from customers.
Opinion on the Occasions on which Complaints
Received
How frequent the complaints are received is an important
factor that determines the quality of the service of the
service provider. Hence an attempt is made by the
researcher to know the occasions on which complaints are
received. Table 7 shows the fact in this regard.
TABLE 7 Occasions on which Complaints Received
Occasions No.of Employees Percentage
Many 20 13
Few 56 36
Rarely 80 51
Total 156 100
Source: Primary Data.
Table 7shows that 13 per cent of the bank employees
view that they have received complaints on many
occasions. 36 per cent of them received complaints on a
few occasions and 51 per cent received complaints very
rarely from customers.
Major Issues of Complaints Lodged The present day customer is becoming more and
demanding. He wants all the services under one roof and
expects to save time while doing business. He wants the
transaction to be as simplified as possible and demand
gentle behaviour of staff and so on. So when he has not
received due attention on these areas, he expresses his
views in the form of complaints.
Table 8 shows the issues/areas relating to which bank
employees receive complaints.
TABLE 8 Major Issues of Complaints Lodged
Issues No. of
Employees
Percentage
Staff behaviour 7 5
Operational 72 46
Physical faculties 27 17
Procedural rigidities 50 32
Total 156 100
Source: Primary Data.
Table 8 reveals that 5 per cent of the bank employees
opined that the complaint is due to staff behaviour, 46 per
cent bank employees opined that it is due to operational
area, 17 per cent opined that it is due to physical faculties
of the bank, and 32 per cent opined that it is due to
procedural rigidities.
Opinion on whether Complaints are Redressed
Customers expect that complaints they have lodged must
be redressed as early as possible and satisfactorily. Table
9 shows the opinion of bank employees regarding whether
complaints are redressed promptly or not.
TABLE 9 Opinion on whether Complaints are Redressed
Opinion No. of Employees Percentage
Yes 151 97
No 5 3
Total 156 100
Source: Primary Data.
Table 9 reveals that 97 per cent bank employees opined
that complaints are redressed and 3 per cent bank
employees deny that.
SUGGESTIONS
Recognition of service quality as a competitive weapon is
relatively a recent phenomenon in the Indian Banking
sector. Prior to the liberalisation era the banking sector in
India was operating in a protected environment and was
dominated by nationalised Banks. Banks at that time did
not feel the need to pay attention to service quality issues
and they assigned very low priority to identification and
satisfaction of customer needs.
CONCLUSION
Customers vary in their expectations and attitudes and
belong to wide socio-economic and cultural backgrounds.
The gap between the expectations of customers and their
fulfillment is the root cause of grievances which affects
the image of the bank. To overcome this situation, there
should be an effective monitoring mechanism and
constant vigil over the services provided to customers.
Since they have a wide choice of services and multiplicity
of products they are more conscious of convenience and
cost, safety and speed, respect and quality, courtesy and
elegance. State Bank of India has to be very careful in
responding to the needs of their customers in an intensely
competitive and rapidly changing environment.
REFERENCES [1]. H.G. Rindani and L.G. Ramesh, “Business
Communications and Customer Relationship”, The
Indian Institute of Bankers, Mumbai, 2000.
[2]. P.V. Anantha Bhaskar, “Customer Service in Banks”,
IBA Bulletin, August 2004, p.9.
[3]. V.K. Gupta, “Legal Rights of Customers to Get Prompt
and Satisfactory Redressal of Grievances”, IBA Bulletin,
August 2004, p.14.
[4]. K. Santi Swarup, “Customer Service in Banks”, IBA
Bulletin, August 2004, p.17.
[5]. K.V. Bhaskara Rao, “Customer Service in Banks”,
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
50 Special Issue on Disruptions in Banking Sector in the Current Scenario
Banking Finance, January 2006, Vol.XIX, No.1, p.8.
[6]. R. Neelamegam, “Institutional Financing to Small Scale
Industries”, Ph.D., Thesis Submitted to Madurai Kamaraj
University, Madurai, 1983
[7]. M.P.Ranade, “Marketing of Deposit and Allied Service to
Non-Resident”, BMP, Ph.D., Thesis Submitted to NIBM,
Pune, 1985.
[8]. Eugene W. Anderson, Daes, Furness and Donald R.
Lehmann, “Customer Satisfaction, Market Share and
Profitability: Findings from Sweden”, Journal of
Marketing, Vol.58, July 1994, pp.53-66.
[9]. R.M. Chidambaram, “Promotional Mix for Bank
Marketing”, IBA Bulletin, Vol.16, No.3, March 1991,
pp.24-26.
[10]. Biswa N. Bhattacharyya, “Marketing Management and
Innovators in the Light of Liberalisation”, Prajnan,
Vol.20, No.5, 1991, p.419-425.
[11]. Valariee A. Zeithaml and Mary Jo Bitner, Building
Customer Relationship through Segmentation and
Retention Strategies, Service Marketing, McGraw
Hill, 1996, pp.169-199.
[12]. A.M. Sadare, “Competency Building for Improving
Customer Service in Banks”, Banking and Finance,
Vol.17, No.8, August 2004, pp.19-21
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 51
A Study of Customer Satisfaction towards
Housing Loans in Select Private Sector Banks in
Coimbatore District
Dr. B.Sivakumar, M.Com., M.Phil., PGDCA.,
MBA.,MBA., Ph.D.,
HOD, Assistant Professor,
Department of Commerce CA
VLB Janakiammal College of Arts and Science,
Coimbatore.
Email id: [email protected]
N.S.Lissy, M.Com., M.Phil., MBA.,
Assistant Professor,
Department of Commerce CA
VLB Janakiammal College of Arts and Science,
Coimbatore.
Email id: [email protected]
ABSTRACT: House is the most important of life.
Everybody wants to own a home. Person gets shelter in
the home to take rest and feel comfortable. Many private
banks and financial institutions give loan for home to the
people who want to own a home. To attract customers,
banks provide housing loans at cheaper rate. Currently
banks offer cheapest loan for homes, as a gesture of
customer friendly attitude. The present study was
undertaken with the intent to investigate after examining
the literature reviewed and noticed that their exit gap in
terms of customer perception towards the housing loan
disturbed by banks. Accordingly, the problem of the study
focuses on customer views towards the housing loan
schemes of the bank. An attempt has also been made for
the study of banks delivery and disturbancement of loan
lending to customer satisfaction. This section explains the
research methods procedures and analytical frame work of
the present study.The research methods have been
designed to fit main objectives of the study. Since not
much research work has been done in the area of housing
loans provided by various private sector banks from
customer satisfaction and point of view, it was decided to
undertake one such study is Coimbatore District. It was
decided to 5 Private Sector banks are namely. AXIS,
HDFC, ICICI, KVB, LVB. So that the customer
satisfaction towards Housing loans can be under taken.
Keywords: Customer Satisfaction, Housing Loan, Private
Sector Banks.
INTRODUCTION
House, is centre and domestic device for mankind’s moral
and substance development ever since the dawn of
civilazation. Housing is one of the most important that we
human beings need. Adequate housing is essential for
human survival with dignity. There are many things that
we would find difficult, if not impossible to do without
good-quality housing. Housing shortage is a universal
phenomenon. It is more acute in developing countries.
The housing scenario has become more critical in India in
recent years. India has initiated so many housing reform
that has taken many forms and manifestations
characterized by the reduction in social allocation,
cutbacks in public funding and promotion of a real estate
culture in close partnership between the state and private
sectors. Mortgage financing markets can play an
important role in stimulating affordable housing markets
and improving housing quality in many countries.
Unfortunately, these are still in infancy in India.
FACTORS CONSIDERED WHILE
TAKING A HOUSING LOAN
Customers have become aware about the various
options/plans of housing loans offered by the banks,
thanks to their media campaigns. Although some factors
are more important than others, there are certain factors
which should be considered before financing the housing
loan. These are
1. Rate of Interest
2. Types of interest rate: fixed or floating
3. Tenure/repayment period
4. Down payment/ percentage of amount given as
loan
5. Calculation of interest: Daily/Monthly/Yearly
6. Processing fee/administration fee
7. Time taken to process the loan
8. Prepayment penalty
9. Foreclosure penalty
10. Requirement of a guarantor
11. Freebies offered
12. Other considerations
REVIEW OF LITERATURE
John (2007) in his study on “A Research study of
customer preferences in the Housing loan market”. The
Mortagage Experience of Greek Bank Customers
proposed to study the customers attitude towards the
possibility of obtaining housing loans, the customers use
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52 Special Issue on Disruptions in Banking Sector in the Current Scenario
of information sources, the choice criteria used by
customers in choosing a financial institution and a
housing loan.
NEED FOR THE STUDY
The research methods procedures and analytical frame
work of the present study. The research methods have
been designed to fit main objectives of the study. Since
not much research work has been done in the area of
housing loans provided by various private sector banks
from customer satisfaction and point of view, it was
decided to undertake one such study is Coimbatore
District. It was decided to 5 Private sector banks are
namely. AXIS, HDFC, ICICI, KVB, LVB. So that the
customer satisfaction towards housing loans can be under
taken.
OBJECTIVES OF THE STUDY
To study the customer satisfaction towards Housing
loans.
To study the various factors affecting the customers
satisfaction towards Housing loans private sector
banks.
To assess the satisfaction of housing loans in
Coimbatore District.
RESEARCH METHODOLOGY
Period of the study:
The period of study for the study was a course of 4
months.
Study Area
The study is undertaken in Coimbatore District. It is
popularly known as Manchester of south India, situated in
the western part of Tamil Nadu which is well known for
educational institutions, textile industry, upcoming IT
Sectors. Thus Coimbatore District is chosen for the study.
Data source
Primary data have been collected by the interview
schedule. Secondary data were collected from books,
journals and websites.
Sample Frame
It was observed that using 50 respondents are considered
from housing loan customers in various places of
Coimbatore District.
Tools Applied
Frequency percentage was applied for the purpose of the
study.
LIMITATIONS OF THE STUDY
The main limitations are:-
This study is limited only to Coimbatore District
Getting the information from the investors are not an
easy job as they find no time to spare with and also
they felt reluctant
ANALYSIS AND INTERPRETATION
This chapter has been analysed by taking in to primary
data which have been collected from their respondents in
selected from the respondents in selected areas of
Coimbatore District.
FREQUENCY TABLE
1.Personal Details:
No.of
Respondents Percentage
Gender Male 26 52
Female 24 48
Age
Below 30
Years 04 08
30 to 40
Years 14 28
41 to 50
Years 26 52
Above 50
Years 06 12
Education
Upto HSC 13 26
UG 12 24
PG 09 18
Professional 05 10
Others 11 22
Occupation
Private
Employee 28 56
Govt.
Employee 08 16
Agriculture 03 06
House Wife 04 14
Others 07 14
Martial
Status
Married 44 88
Unmarried 06 12
Total 50 100 Source: Primary Data
The table it reveals that, 88% of the respondents were
Married and 12% of the respondents were Un married.
2.Customer Housing Loan Profile:
Private Sector
Banks No. of Respondents Percentage
HDFC 10 20
KVB 25 50
AXIS 04 08
ICICI 10 20
LVB 01 02
Total 50 100
Source: Primary Data
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Special Issue on Disruptions in Banking Sector in the Current Scenario 53
From the table, it reveals that, 50% of the respondents
were housing loan from KVB, 20% of the respondents
were housing loan from ICICI Bank and other 20
respondents were housing loan from HDFC. (Majority of
the respondents 50% of respondents were housing loan
from LVB).
3.Period of Loan:
Period of
Housing Loan
No. of
Respondents
Percentage
Below 5 years 07 14
10 years 17 34
15 years 15 30
20 years 07 14
Above 20 years 04 08
Total 50 100
Source: Primary Data
4.Repayment of loan:
Repayment of housing
loan
No. of
Respondents Percentage
Repayment
of loan
Cash 19 38
Cheque 16 16
Online
Banking 10 20
ECS 04 08
Other form 09 18
Range of
EMI
Upto
Rs.2,000 14 28
Rs.2,001 to
Rs.5,000 07 14
Rs.5,001 to
Rs.8,000 15 30
Above
Rs.8,000 14 28
Overall
satisfaction
Satisfied 14 28
Highly
Satisfied 10 20
Moderate 07 14
Dissatisfied 06 12
Highly
Dissatisfied 13 26
Total 50 100
Source: Primary Data
FREQUENCY TABLE:
1. 52% of the respondents were Male.
2. Majority of the respondents 52% were under the age
group of 41 to 50 years
3. Majority of the respondents were Professional.
4. 56% of the respondents were occupation from Private
Employees
5. Majority of the respondents 88% of the respondents
were Married.
6. Majority of the respondents 50% of the respondents
were housing loan from KVB.
7. 34% of the respondents were period of housing loan
from 10 years.
8. 34% of the respondents were repayment of housing
loan from cash.
9. 30% of the respondents were range of EMI amount
from Rs.5,001 to Rs.8,000
10. 28% of the respondents were satisfied.
SUGGESTIONS: They are the following customer satisfaction towards
housing loan suggestions are as follows:
Housing schemes and process of passing loan
should be easy to make the people understand
Rate of interest should be competitive with other
financial institutions.
Proper credit appraisal of the customer should be
done.
Pen more number of branches in different cities
and tap the rural area.
Counter facility should be provided in all banks to
help the customers.
To attract more customers banks should make
process of loan repayment easy.
Loan passing should be quicker by like private
sector banks.
File processing charges should be eliminated in the
banks.
CONCLUSION Now a day customers’ expectations are the major
challenges faced by the employees of banking services in
India. The improvement of quality of service delivery is a
vital concern for banking services. Quality of service
delivery is increasingly being seen as a key strategic
differentiator within the financial services sector. The
interest rate is lower in private banks but services are not
up to the mark. The appearance of banks also becomes
very important for the present generation and private
banks put their complete efforts on this, which is lacking
in private sector banks.
REFERENCES [1]. Innovative Journal of Business and Mangement : Journal
homepage: http//:www.innovative
journal.in/index.php/ijbm sep.2013
[2]. Journal of Housing Economics 10, 176-209 (2001) at
http://www.idealibrary.com
[3]. Intrnational Journal of current research academic review
ISSN: 2347-3215 Volume2 November 1 (January, 2014)
pp.30-40 www.ijcrar.com
[4]. Global Journal of Research in social sciences Vol.1,
No.1, June 06, 2015 www.gpcpublishing.com ISSN:
2455-751X
[5]. Midas Touch International Journal of Commerce,
Management and Technology, Volume 3, No.1 &2
January & February 2015, ISSN: 2320-7787
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54 Special Issue on Disruptions in Banking Sector in the Current Scenario
Impression if Information Technology in
Banking Sector
V. Priyanka
Assistant Professor
Department of Banking and Insurance
Dr.N.G.P.Arts and Science College,
Coimbatore
Abstract : Information technology has been of great
essence in banking system. It refers to the acquisition,
processing, storage and dissemination of all types of
information using computer technology and
telecommunication systems. Information technology
architecture is an integrated framework for acquiring and
evolving IT to achieve strategic goals. These technologies
are used for the input, storage, processing and
communication of information. Information technology
includes additional equipment, software, firmware and
similar procedures, services etc. Recent developments of
banking sector in India are done through Internet,
(SWIFT), (ATM), Cash dispensers, Electronic clearing
service, Bank Net, Chip card, Phone banking, Tele-
banking, Internet banking, Mobile banking, Anywhere
banking, Voice mail, E-banking Etc., The basic need of
Information Technology in Banking Sector isto Meet the
Internal Requirements, Effective Data Handling,
Prolongingthe services to Customer, Creative Support for
New Product Development, End-user Development of the
Non-technical Staff thatenhances the banking industry.
Emerging trends of information technology in banking
sector are Outsourcing, Integration, Distinctive Edge, IT
as Profit Centre, Prospering in Down Market. Challenges
are faced by Indian banking sector which is to meet
customer expectations on service and facilities offered by
the bank, Customer retention etc. The study examines
various relevant issues related to the impact created by IT
in banking sector andrecommends the safeguarding
measures to have a privacy and confidentiality of data‟s,
and implementation of other Cyber lawsproperly. This
will ensure the developmental of IT in the banking
industry.
Key Words: Information Technology, Internet Banking,
Mobile Banking.
INTRODUCTION
A system of trading money which: provides a safe place
to save excess cash, known as deposits. Supplies liquidity
to the economy by loaning this money out to help
businesses grow and to allow consumers to purchase
consumer products, homes, cars etc. Section 5 (b) of the
Banking Regulation Act 1949 defines “Banking” as
“Accepting for the purpose of lending and investment,
deposits of money from the public repayable on demand
or otherwise and withdraw able by cheque, draft, order or
otherwise”. Institutions which deals in money and
credit.An intermediary, which handles other people‟s
money both for their advantage and to its own profits.A
financial institution that links the flow of funds from
savers to the users.Plays an important role in the economy
of any country as they hold the saving of the public.
OBJECTIVES OF BANKING
To make an account of evolution of present day
banking in India
To evaluate the interventions of state in banking
sector over years
To appraise the entry of foreign banks
Banking environment has become highly competitive
today. To be able to survive and grow in the changing
market environment banks are going for the latest
technologies, which is being perceived as an „enabling
resource‟ that can help in developing learner and more
flexible structure that can respond quickly to the
dynamics of a fast changing market scenario. It is also
viewed as an instrument of cost reduction and effective
communication with people and institutions associated
with the banking business. Information Technology
enables sophisticated product development, better market
infrastructure, implementation of reliable techniques for
control of risks and helps the financial intermediaries to
reach geographically distant and diversified markets.
Information technology refers to the acquisition,
processing, storage and dissemination of all types of
information using computer technology and
telecommunication systems. Information technology
architecture is an integrated framework for acquiring and
evolvingIT to achieve strategic goals. These technologies
are used for the input, storage, processing and
communication of information. Information technology
includes ancillary equipment, software, firmware and
similar procedures, services etc. Modern high throughput
technologies are providing vast amounts of the sequences,
expression and functional data for genes and protein. One
of the most difficult challenges is turning this enormous
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Special Issue on Disruptions in Banking Sector in the Current Scenario 55
pool of information into useful scientific insight and novel
therapeutic products. This auspicious technology
influences the banking industry, mainly in the following
three aspects:
Technology is influencing competition and the degree
of contestability in banking: Due to the development of
technology, bank‟s superiority in information is
deteriorated. Entry barrier have been declining, new
competitor have emerged. Some financial products and
services have become more transparent and commodities,
customer show willing to unbundled the demand for
financial products and services, all these lead to a more
competitive market environment. Due to lowered entry
and exist and deconstruction, for some sub-financial
markets, contestability in banking is also raised.
Technology influence Economy of scale: Competitive
pressure force banks to lower their cost. Bank seeks to get
economy of scale in bank procession instead of being a
big bank. Bank seeks to secure the optimal business
structure, and secure the competitive imperative of
economy of scale. There are other options to get economy
of scale, including joint venture and confederation of
financial firms. Small firms also can get economy of scale
by outsourcing, i.e. buy in economy of scale.
Technology influence the economics of delivery: Technology has a major impact on the way banking and
financial services are delivered. A wide range of
alternative delivery mechanism becomes available,
Internet, ATM these Reduces the dependence on the
branch network as a core delivery mechanism. With the
development of technology, the financial systems are
substantially over-supplied with delivery system through
a duplication of network, bank has to change their
delivery strategy, rationalize their branch network
strategy, and widen the range of delivery option. Banking
industry has been taking advantage of the following 22
Technology Products: (1). Net Banking; (2). Credit Card
Online; (3). One View; (4). InstaAlerts; (5). Mobile
Banking; (6). Net Safe; (7). e-Monies Electronic Fund
Transfer; (8). Online Payment of Excise & Service Tax;
(9). Phone Banking; (10). Bill Payment (11). Shopping
(12). Ticket Booking; (13). Railway Ticket Booking
through SMS; (14). Prepaid Mobile Recharge; (15). Smart
Money Order; (16). Card to Card Funds Transfer; (17).
Funds Transfer (eCheques); (18). Anywhere Banking;
(19). Internet Banking; (20). Mobile Banking; (21).
Bank@Home (i) Express Delivery; (22). Cash on Tap: (ii)
Normal Delivery.
OBJECTIVES OF THE STUDY:
To analyse how IT creates a major impact on banking
industry.
To study the requirements and recent developments
created by IT for banking sector.
To provide Guidelines that is Followed & Focused
for Effective Implementation of IT in Banking
Sector.
RECENT DEVELOPMENTS OF BANKING
SECTOR IN INDIA
INTERNET
Internet is a networking of computers. In this marketing
message can be transferred and received worldwide. The
data can be sent and received in any part of the world. In
no time, internet facility can do many a job for us. It
includes the following:
This net can work as electronic mailing system.
It can have access to the distant database, which
may be a newspaper of foreign country.
We can exchange our ideas through Internet. We
can make contact with anyone who is a linked with
internet.
On internet, we can exchange letters, figures/ diagrams
and music recording. Internet is a fast developing net and
is of utmost important for public sector undertaking,
Education Institution, Research Organization etc.
SOCIETY FOR WORLDWIDE INTER-
BANKFINANCIAL TELECOMMUNICATIONS
(SWIFT)
SWIFT, as a co-operative society was formed in May
1973 with 239 participating banks from 15 countries with
its headquarters at Brussels. It started functioning in May
1977. RBI and 27other public sector banks as well as 8
foreign banks in India have obtained the membership of
the SWIFT. SWIFT provides have rapid, secure, reliable
and cost effective mode of transmitting the financial
messages worldwide. At present more than 3000 banks
are the members of the network. To cater to the growth in
messages, SWIFT was upgrade in the 80s and this version
is called SWIFT-II. Banks in India are hooked to SWIFT-
II system. SWIFT is a method of the sophisticated
message transmission of international repute. This is
highly cost effective, reliable and safe means of fund
transfer.
This network also facilitates the transfer of message
relating to fixed deposit, interest payment, debitcredit
statements, foreign exchange etc.
This service is available throughout the year, 24
hours a day
This system ensure against any loss of mutilation
against transmission.
It serves almost all financial institution and
selected range of other users.
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56 Special Issue on Disruptions in Banking Sector in the Current Scenario
AUTOMATED TELLER MACHINE (ATM) ATM is an electronic machine, which is operated by the
customer himself to make deposits, withdrawals and other
financial transactions. ATM is a step in improvement in
customer service. ATM facility is available to the
customer 24hours a day. The customer is issued an ATM
card. This is a plastic card, which bears the customer‟s
name. This card is magnetically coded and can be read by
this machine. Each cardholder is provided with a secret
personal identification number (PIN). When the customer
wants to use the card, he has to insert his plastic card in
the slot of the machine. After the card is a recognized by
the machine, the customer enters his personal
identification number. After establishing the
authentication of the customers, the ATM follows the
customer to enter the amount to be withdrawn by him.
After processing that transaction and finding sufficient
balances in his account, the output slot of ATM give the
required cash to him. When the transaction is completed,
the ATM ejects the customer‟s card.
CASH DISPENSERS
Cash withdrawal is the basic service rendered by the bank
branches. The cash payment is made by the cashier or
teller of the cash dispenses is an alternate to time saving.
The operations by this machine are cheaper than manual
operations and this machine is cheaper and fast than that
of ATM. The customer is provided with a plastic card,
which is magnetically coated. After completing the
formalities, the machine allows the machine the
transactions for required amount.
ELECTRONIC CLEARING SERVICE
In 1994, RBI appointed a committee to review the
mechanization in the banks and also to review the
electronic clearing service. The committee recommended
in its report that electronic clearing service-credit clearing
facility should be made available to all corporate bodies /
Government institutions for making repetitive low value
payment like dividend, interest, refund, salary, pension or
commission, it was also recommended by the committee
Electronic Clearing Service-Debit clearing may be
introduced for pre-authorized debits for payments of
utility bills, insurance premium and instalments to leasing
and financing companies. RBI has been necessary step to
introduce these schemes, initially in Chennai, Mumbai,
Calcutta and New Delhi.
BANK NET
Bank net is a first national level network in India, which
was commissioner in February 1991. It is communication
network established by RBI on the basis of
recommendation of the committee appointed by it under
the chairmanship of the executive director T.N.A. Lyre.
Bank net has two phases: Bank net-I and Bank net-II. The
Applications of Bank Net are the message of banking
transaction can be transferred in the form of codes from
the city to the other, Quick settlement of transactions and
advices, Improvement in customer service withdrawal of
funds is possible from any member branch, Easy transfer
of data and other statements t RBI, Useful in foreign
exchange dealings, Access to SWIFT through Bank net is
easily possible.
CHIP CARD
The customer of the bank is provided with a special type
of credit card which bears customer‟s name, code etc. The
credit amount of the customer account is written on the
card with magnetic methods. The computer can read these
magnetic spots. When the customer uses this card, the
credit amount written on the card starts decreasing. The
customer has to deposit cash in his account for re-use of
the card. Again the credit amount is written on the card by
magnetic means.
PHONE BANKING
Customers can now dial up the bank‟s designed telephone
number and he by dialling his ID number will be able to
get connectivity to bank‟s designated computer. The
software provided in the machine interactive with the
computer asking him to dial the code number of service
required by him and suitably answers him. By using
Automatic voice recorder (AVR) for simple queries and
transactions and manned phone terminals for complicated
queries and transactions, the customer can actually do
entire non-cash relating banking on telephone: Anywhere,
Anytime.
TELE-BANKING
Tele banking is another innovation, which provided the
facility of 24 hour banking to the customer. Tele-banking
is based on the voice processing facility available on bank
computers. The caller usually a customer calls the bank
anytime and can enquire balance in his account or other
transaction history. In this system, the computers at bank
are connected to a telephone link with the help of a
modem. Voice processing facility provided in the
software. This software identifies the voice of caller and
provides him suitable reply. Some banks also use
telephonic answering machine but this is limited to some
brief functions. This is only telephone answering system
and not Tele-banking. Tele banking is becoming popular
since queries at ATM‟s are now becoming too long.
INTERNET BANKING
Internet banking enables a customer to do banking
transactions through the bank‟s website on the Internet. It
is a system of accessing accounts and general information
on bank products and services through a computer while
sitting in its office or home. This is also called virtual
banking. It is more or less bringing the bank to your
computer. In traditional banking one has to approach the
branch in person, to withdraw cash or deposit a cheque or
request a statement of accounts etc. but internet banking
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Special Issue on Disruptions in Banking Sector in the Current Scenario 57
has changed the way of banking. Now one can operate all
these type of transactions on his computer through
website of bank. All such transactions are encrypted;
using sophisticated multi-layered security architecture,
including firewalls and filters. One can be rest assured
that one‟s transactions are secure and confidential.
MOBILE BANKING
Mobile banking facility is an extension of internet
banking. The bank is in association with the cellular
service providers offers this service. For this service,
mobile phone should either be SMS or WAP enabled.
These facilities are available even to those customers with
only credit card accounts with the bank.
NEED OF INFORMATION TECHNOLOGY (IT) IN
BANKING SECTOR
Since the early nineties, each Indian bank has done some
IT improvement effort. The first and foremost compulsion
is the fierce competition. While deciding on the required
architecture for the IT consideration is given to following
realities.
Meeting Internal Requirements
The requirements of the banks are different individually
depending upon their nature and volume of business;
focus on a particular segment, spread of branches and a
like. Many a time‟s banks to have the required
information but it isscattered. The operating units seldom
know the purpose of gathering the information by their
higher authorities.
Effective in Data Handling
As stated earlier the banks have most of the needed data
but are distributed. Further the cost of collection of data
and putting the same to use is prohibitively high. The
accuracy and timeliness of data generation becomes the
causalities in the process. Best of the intentions on
computerization are wished away because there is non-
visible reduction in cost/ efforts/ time required for the
required data gathering.
Extending Customer Services
Addressing to rising customer‟s expectations is significant
particularly in the background of increased competition.
In case bank A is unable to provide the required service at
a competitive price and in an accurate manner with speed.
There is always a bank IT at its next-door waiting to hire
the customer. Awareness of customers about the
availability of services and their pricing as also available
options have brought into sharp focus the issue of
customer satisfaction.
Creative Support for New Product Development
It has become necessary for the banks to vitalize the
process of product development. Marketing functionaries
needs a lot of information not only from the outside
sources but also from within the banks. Banks are looking
to retail segment as the future market places for sales
efforts. Having full-fledged information of existing
customer is the key for this purpose. The emergences of
data requirement and an appropriate architecture to
support the same are significant issues to be handled in
this regard.
GUIDELINES TO BE FOLLOWED&
FOCUSED FOR EFFECTING
IMPLEMENTATION OF IT IN BANKING
SECTOR
At corporate level to meet the challenges, various initiated
have been taken and implementation is process beside up
gradation of data centre facilities:
Centralization of functions
Inward clearing data uploading and processing Check
book issues MIS-On-Line Monitoring/ Generation of
statement by controlling offices Audit from the remote
location Sending mails and statement of accounts to
customers & completion of non-mandatory field in newly
opened accounts.
Single Window System
Revised Account opening from for capturing
complete customer/ Account data as per CBS
requirement.
Call centre for customers.
Customer Relationship Management (CRM)
Application.
Data Warehousing.
To facilitate successful implementation of the
above initiative, intensive efforts are to be
undertaken by all of us on following issues:
Completion of correct MIS details in all accounts
and SRM‟s
Customer / Account data completion / correction.
Customer-ID crystallization.
Aggressive marketing of Internet Banking & Debit
Card products to increase share of delivery
channels transaction.
Skill up gradation & increase in awareness of all
staff member.
Strict compliance of Circular & Guidance available
online (CBSINFO) / Messages issued through
scrolling ticker on login page. Present slowdown in
rollover must be put to full use to have concrete
action on these fronts.
CONCLUSION
Information Technology enables sophisticated product
development, better market infrastructure, implementation
of reliable techniques for control of risks and helps the
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58 Special Issue on Disruptions in Banking Sector in the Current Scenario
financial intermediaries to reach geographically distant
and diversified markets. Internet has significantly
influenced delivery channels of the banks. Internet has
emerged as an important medium for delivery of banking
products and services. Information, communication and
networking, achieving inter branch connectivity, moving
towards Real Time gross settlement (RTGS) environment
the forecasting of liquidity by building real time
databases, The shift from traditional banking to e-banking
is changing customer‟s expectations. With the
globalization trends world over it is difficult for any
nation big or small, developed or developing, to remain
isolated from what is happening around. For a country
like India, which is one of the most promising emerging
markets in India.
REFERANCES
[1]. Bimil Jalan, “Strengthening Indian Banking and Finance
– Progress and Prospects”, the Bank Economist
Conference, India, 2002.
[2]. Reddy, Y.V. (1998) “Financial Sector Reforms: Review
and Prospects”. RBI Bulletin, December.
[3]. Reddy, Y.V.(2000), Monetary and Financial Sector
Reforms in India, A Central Banker‟s Perspective, UBS
Publishers, New Delhi.
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 59
A Study on Customers Awareness and
Stratification towards Internet Banking in Semi –
Urban Areas of Coimbatore City.
Mrs.R. Sudha,
Assistant Professor,
Department of Commerce BPS &CM
Sri Krishna Arts and Science College,
Coimbatore.
[email protected], [email protected]
Mrs. X.Catherine Arputha Divya
Assistant Professor,
Department of Commerce BPS &CM
Sri Krishna Arts and Science College,
Coimbatore.
Mrs.M.Kovarthini
Assistant Professor,
Department of Commerce BPS &CM
Sri Krishna Arts and Science College,
Coimbatore.
ABSTRACT: The research is focused on examining the
customer satisfaction towards internet banking in semi
urban areas of Coimbatore district. The present study is
mainly based on primary data which has been collected
through issue of questionnaire to 16`0 respondents
residing in semi urban areas of Coimbatore district by
adopting convenient sampling method. The statistical
tools like simple percentage analysis; chi-square &
average score analysis applied to the analysis and
interpreted the collected data. From the analysis, it is
ascertaining that customer‟s usage of internet banking can
be knows through friends, relatives or through bank
employees. The finding helps us to know about the
internet banking and the uses as it minimize the work of
customer in doing person to person banking without any
waste of time and energy from the place where you are.
Also able to know the use of internet banking in different
sector of our country likewise in industries, institute etc.
Keywords: Internet banking - Customer - Satisfaction.
INTRODUCTION
Bank are said to be the heart of the financial structure in
the world. It plays vital role in economic development of
nation. It is a system of trading money which provides a
safe place to excess cash as deposits and supplies liquidity
to the economy by loaning this money out to the needed
business men for the growth of business and customer. It
is one of the oldest services in India. Internet banking
provides a speedier, faster and reliable service to the
customer for which they are relatively happy. Cost of
internet banking form a fraction of costs through
conventional methods.
In recent years, the banking industry around the world has
been undergoing a rapid transformation. Today customers
expect highest quality services from banks which, is
fulfilled, could result in significantly improved customer
satisfaction level. Internet technology holds the potential
to fundamentally change banks and the banking industry.
An extreme view speculates that the internet will destroy
old models of how bank services are developed and
delivered. The widespread availability of internet banking
is expected to affect the mixtures of financial services
produced by banks, the manner in which bank produces
these services and the resulting the customer service of
the bank. Banking through internet has emerged as a
strategic resource for achieving higher efficiency, control
of operations and finding may change as the use of
internet become more widespread. Customer satisfaction
is defined as “The number of customer, or percentage of
total customers, whose reported experience with a firm,
its product, or its services exceed specified satisfaction
goals”
Internet Banking means a kind of self-help financial
services provided by the bank for its clients by the
medium of internet, including account information
inquiry, account transfers and online payments etc. Online
Banking is the practice of making bank transactions or
paying bills via the internet. Thanks to the technology and
internet in particular that no one has to leave the house at
all. One can shop online, communicate online and now
one can even do banking online. Online banking allows
account information, transaction information, instant fund
transfer, cheques collection across cities and pay bills
with the click of a mouse.
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60 Special Issue on Disruptions in Banking Sector in the Current Scenario
Some of the distinctive features of Internet Banking
are:
1. It removes the traditional geographical barriers as it
can reach out to customers of different countries /
legal jurisdiction. This has raised the question of
jurisdiction of law / supervisory system to which such
transactions should be subjected.
2. It has added a new dimension to different kinds of
risks traditionally associated with banking,
heightening some of them and throwing new risk
control challenges.
3. It is simple to open and easy to operate.
4. It poses a strategic risk of loss of business to those
banks who do not respond in time to this new
technology, being the efficient and cost effective
delivery mechanism of banking services.
5. A new form of competition has emerged both from
the existing players and new players of the market
who are not strictly banks.
STATEMENT OF THE PROBLEM
The use of technology forms the backbone for better
result in banking industry. Today‟s banking situation
demands continuous innovation in order to meet the
earning and aspirations of the ever demanding customers.
Hence banks need to roll out new products and services
quickly and effectively using the latest technological
equipment. The development of technology and the
adoption of internet by all industries remove a time,
distance and communication constraint that brings the
world under a single roof. Banking industry, no doubt,
with the use of latest technology and adoption of internet
banking, they are rendering quick services to their
customers. One of the main benefits that bank derives
from electronic banking products and service is the
delivery with improved efficiency and effectiveness of
their operations, so that more transaction can be processed
faster and more conveniently. The customer on the other
hand enjoy the benefit of quick service delivery, reduced
frequency of going to banks physically and reduced cash
handling, which will give rise to higher volume of
turnover. Though, customers are enjoying the benefits of
internet banking in one aspect, they are also facing some
problems during their interaction with the machines.
The expectation and idea of people differ from one
another. After the demonetization the usage of internet
banking is increased rapidly all over the period of time.
Here the main problem of this survey is to know the
various factors which are essential and important to know
the need of internet banking which will make banking
process easier. Hence this study titled as “A study on
awareness and satisfaction internet banking among the
customers in semi urban areas of Coimbatore city”.
The study was done with the idea of analyzing people‟s
knowledge about internet banking facility, provided by
almost every bank in Coimbatore. It was done mainly to
know what people think about internet banking and its
growth in the country. As India is all set to move towards
cashless economy internet banking will play a major role
in the move. Customer satisfaction towards banking
facilities keeps changing and internet banking can be the
future of India‟s banking service.
It removes the traditional geographical barriers for
customer.
The customer can access their account anytime and
from any part of the world, due to new innovative and
convenient facility it attracts new customer who are
using traditional banking so far.
It facilitates the offering of more services because
this is internet based services which is time saving
and customer can access and regulate their account.
This facility have zero fee, so no monthly payment
are required to forfeit for availing this service, free of
charge bill reimbursement and refund on ATM
surcharge.
Simple online submissions facilities for personal
account, loans and credit.
Due to self-access system it reduce customer attrition and
increase customer loyalty, high-tech technical
advancement in the form of intrusion detection system to
virus control equipment‟s have made internet banking
system.
OBJECTIVES OF THE STUDY
To find out the answer for questions raised above, the
following objectives were framed for the study,
To study the socio-economic profile of the
customer using the internet banking services.
To find out the source of awareness on internet
banking services.
To know the customer satisfaction and to analyze
the variables influencing customer satisfaction on
internet banking services.
RESEARCH METHODOLOGY
Area of the study:
Area studies are interdisciplinary fields of research and
scholarship pertaining to particular geographical,
national/federal, or cultural regions. The study was
conducted semi urban areas within the limits of
Coimbatore city.
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Special Issue on Disruptions in Banking Sector in the Current Scenario 61
Sample design:
In this research simple random sampling method is used
to collect information form the respondents. Customers of
both public and private sector banks are selected
randomly.
Method of data collection:
Both primary and secondary data‟s are used for the study.
Primary data was directly collected from the internet
banking users with the help of questionnaires &
secondary data were collected from the various
newspapers and magazines.
Sapling:
This is done through preparing questionnaires which is
collected from the customer directly by the researcher to
find the percentage of satisfaction by customers in
internet banking. Questionnaire contains question relating
to customer awareness on internet banking service, factor
influencing to adopt the internet banking service,
satisfaction on online services and problem faced. This
framed questionnaire has been issued to customers of both
public & private sector banks that are located in
Coimbatore district by issuing and collecting directly
from the respondents the filled questionnaire.
Sample size:
From the total population who make use of internet
banking, due to time constraints only 160 respondents
have been selected on convenient random sampling
method to evaluate the customer satisfaction in internet
banking.
Tools used for the study:
Simple percentage analysis
Chi – square analysis
Average score analysis
LIMITATION OF THE STUDY
The analysis was made within Coimbatore city
only.
The time period for the project was limited to just
three months.
REVIEW OF LITERATURE
Divya Singhal and V. Padhmanabhan, (Dec 2008) “A
study on customer perception towards internet banking:
Identifying major contributing factor”, Internet banking is
becoming is increasingly becoming popular because of
convenience and flexibility. The present paper explores
the major factors responsible for internet banking based
on respondents‟ perception on various internet
applications. The study employs primary data as well as
secondary data. Secondary data was collected from
different published source. Primary data was collected by
structured survey. Thus, providing internet banking is
increasingly becoming a “need to have” than a “nice to
have” service.
Rajpreet, KaurJassalet. (2013) This paper aims to
explains about the reason behind the security breaches
and the participation of both customers and the banks to
enable the hackers or crackers to access others network.
The present study aims to find various types of flaws in
the security of online banking those results in loss of
money of account holders and financial institutions.
Security breaches are not only because of banks faults and
banks inadequate police but customers are equally
responsible for it, because customer‟s awareness
regarding security is equally important.
ANALYSIS AND INTERPERTATION
The study was confined to internet banking users in semi
urban areas of Coimbatore city. The target population for
the study was to be 160. This constituted various people
from different walks of life. A detailed analysis is
represented through the following tools,
Percentage analysis
Chi - square analysis
Average score analysis
Table showing the data‟s of percentage analysis
PROFILE OF
CUSTOMERS
Demographic
variables Number (N) Percentage %
Age 32 (Mean) 100
Male 122 76
Female 38 24
No schooling /
Sign only 20 12
Up to Middle
school 86 54
High school 32 20
Under
Graduation and
above
31 19
Small business
owner 31 19
Employee 26 16
Housewives 19 12
Daily wage /
casual labour 17 11
Domestic worker 13 8
Part time
employed 13 9
Professional
workers 11 7
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62 Special Issue on Disruptions in Banking Sector in the Current Scenario
CHI –SQUARE ANALYSIS
Hypothesis
H0: There is no significant relationship between
personal variable and study variable of internet
banking
H1: There is a significant relationship between
personal variable and study variable of internet
banking
S.no Variables Degree of
freedom P value X
2 value
Accepted/
Rejected
1 Gender and awareness of internet baking 4 9.488 10.24 Rejected
2 Age and awareness of internet banking 12 21.026 1.56 Accepted
3 Educational qualification and factors influence
on usage of internet banking 15 24.996 46.23 Rejected
4 Occupation and factors influence on usage of
internet banking 9 16.919 9.465 Accepted
5 Monthly income and average cost perceived in
internet banking 15 24.996 75.69 Rejected
6 Type of account holder and purpose of using
internet banking 5 11.071 11.3 Rejected
7 Annual saving of a customer of a bank and
customer satisfaction 12 21.026 49.50 Rejected
Level of significance: 5%
Interpretation:
From the above table it can inferred that,
In serial number 1: The chi square value is more than
the table value. Hence the null hypothesis is rejected.
There is a significant relationship between gender and
awareness level of respondents.
In serial number 2: The chi square value is less than
the table value. Hence the null hypothesis is accepted.
There is no significant relationship between age and
awareness level of respondents.
In serial number 3: The chi square value is more than
the table value. Hence the null hypothesis is rejected.
There is a significant relationship between
Educational qualification and factors influence on
usage of internet banking.
In serial number 4: The chi square value is less than
the table value. Hence the null hypothesis is accepted.
There is no significant relationship between
Occupation and factors influence on usage of internet
banking
In serial number 5: The chi square value is more than
the table value. Hence the null hypothesis is rejected.
There is a significant relationship between Monthly
income and average cost perceived in internet
banking.
In serial number 6: The chi square value is more than
the table value. Hence the null hypothesis is rejected.
There is a significant relationship between Type of
account holder and purpose of using internet banking.
In serial number 7: The chi square value is more than
the table value. Hence the null hypothesis is rejected.
There is a significant relationship between annual
saving of a customer of a bank and customer
satisfaction.
AVERAGE SCORE ANALYSIS
Factors High
ly
Satis
fy
Satis
fy
Neutr
al
Dissati
sfy
Highly
Dissati
sfy
Tot
al
Sco
re
Convenie
nt
120 116 51 40 10 2.2
Perceive
d cost
130 100 36 42 16 2.1
Transacti
on speed
155 104 48 28 13 3.3
Risk free 140 120 39 42 8 2.3
Security 90 96 96 40 6 2.2
Promotio
nal
115 112 42 38 16 2.1
Services 100 116 63 28 16 3.0
Availabil
ity
140 144 42 30 7 2.4
INTERPRETATION
It is clear from the above table out of total respondents
taken for the study, majority of the respondents „Highly
Satisfied‟ with transaction speed and services offered by
internet banking, majority of the respondents „Satisfied‟
with various services offered by the internet banking,
majority of the respondents „Neutral‟ with availability of
internet banking anywhere, majority of the respondents
are „Dissatisfied‟ with convenience, secured and risk free
services, majority of the respondents „Highly Dissatisfied‟
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Special Issue on Disruptions in Banking Sector in the Current Scenario 63
with cost perceived and promotional activities of internet
banking.
The result inferred that majority of the respondents stated
„Highly Satisfy‟ with transaction speed and various
services offered in internet banking.
FINDING, SUGGESTIONS AND
CONCLUSIONS
FINDINGS OF PERCENTAGE ANALYSIS:
Most of the customers were male
Majority of the customers belongs to the age Group
of 25 – 35 years.
Most of the customers were under graduates.
Most of the customers were employee.
Majority of the customer hold savings account in a
bank
Most of the customers have an annual savings below
Rs.1,00,000/-
Most of the customers came to know about online
banking through advertisement.
Most of respondents have recommended about use of
online banking to friends, relatives and their
association.
Most of the respondents having internet banking
facility in their private sector banks.
Majority of the respondents used their internet
banking facility weekly.
Most of the respondents are used internet banking for
the purpose of online bill payment and fund transfers.
FINDINGS OF CHI-SQUARE ANALYSIS:
Majority of the personal factors like gender, age,
educational qualification and occupational status of
the respondents have directly influence on the study
factors like awareness level, factors influenced and
purpose of using internet banking facility.
FINDINGS OF AVERAGE SCORE ANALYSIS:
Majority of the respondents stated „Highly Satisfy‟
with transaction speed and various services offered in
internet banking.
SUGGESTIONS
The bank must provide more advertisement in rural
areas so that the common people also can of online
banking.
The bank employees should maintain good and
cordial relationship with their customers.
The banks must provide frequent updates of their
online banking services to customers.
The procedure for usage of online banking must be in
a simple mode so that a common man can make easy
use of it.
The processing speed should be increased for fast use
of all service.
CONCLUSION
Now a day, Due to increase in competition, customer
satisfaction is considered to be the most important think in
banking industry. So the bankers are in the position to apt
to the information technology to change the way of
service to attract customers and increase their satisfaction
level. This study gives information about internet banking
and their services methodology, design and validation of
questionnaire and factor analysis were used to enhance
the reliability of findings.
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[7]. Cooper R G (1997), “Examining Some Myths About
New Product Winners”, in R Katz(Ed.), The Human Side
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[8]. Daniel E (1999), “Provision of Electronic Banking in the
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Bank Marketing, Vol. 17, No. 2, pp. 72-82.
[9]. Durkin, M., Jennings, D., Mulholland G. and
Worthington, S. (2008), Key influencers and inhibitors
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Retailing and Consumer Services, Vol.15, pp. 348-357.
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R. (2007), “Application of the latent class regression
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Research, Vol.60, pp. 137-145.
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Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 65
Mobile Bank in the Transformation
in Banking System
Mrs.R.Saranya.,MBA.,M.Phil.
Asst. Professor,
Dept of Management Studies,
NIFT-TEA college of Knitwear Fashion,
Mudalipalayam, Tirupur-641606.
V.S.Prabhu., MBA.,M.Phil.,
Asst.Professor,
Dept of Management Studies,
NIFT-TEA college of Knitwear Fashion,
Mudalipalayam, Tirupur-641606.
Abstract: Retail Marketing has undergone a high-tech
makeover over the past few years. Typically slow to react
to technological change, retail banks are finally
recognizing the benefits it provides to consumers as well
as the cost savings it gives the firm. One of banking‟s
initial forays into technology was the introduction of the
now ubiquitous automatic, or ATM, as an alternative to
human bank tellers. Today, ATMs can handle all sorts of
common banking transactions in addition to cash
withdrawals, such as accepting deposits, transferring
balances or paying bills. With the advent of mobile
devices and the popularity of the app economy, these
financial institutions are now transitioning to mobile
banking. The increased prevalence of mobile phones
provides exciting opportunities for the growth of mobile
banking (m-banking). This paper reviews the emerging
research literature on banking. It presents a classification
framework for m-banking research based on 65 m-
banking papers published between 2000 and mid-2010 in
Information Systems (IS), technology innovation,
management, and marketing journals, and major IS
conferences. These papers are classified into five main
categories: m-banking overview and conceptual issues,
Features & Benefits of Mobile Banking, Current
operating practices of commercial banks, Mobile
banking/payment practices in Indian Commercial Banks
and Challenges in India strategic, legal and ethical issues.
It is expected that the comprehensive list of references
and assessments presented in this paper will provide a
useful anatomy of young m-banking literature to anyone
who is interested in m-banking and help stimulate further
interest.
INTRODUCTION:
Three billion people are expected to own mobile phones
in the globe by 2012.More than 500 million people are
expected to have mobile phones in India. Mobile
commerce is a natural successor to electronic commerce.
The capability to pay electronically coupled with a web
site is the engine behind electronic commerce. Electronic
commerce has been facilitated by Automatic Teller
Machines (ATMs) and shared banking networks, debit
and credit card systems, electronic money and stored
value applications and electronic bill presentment and
payment systems. Mobile payments a reanatural evolution
e-payment scheme s that will facilitate mobile commerce.
A mobile payment or m-payment may be defined, for our
purposes, as any payment.Where a mobile device is used
to initiate, authorize and confirm an exchange of financial
value in return for goods and services. Mobile devices
may include mobile phones, PDAs, wireless tablets and
any other device that connect to mobile
telecommunication network and make it possible for
payments to be made. The realization of mobile payments
will make possible new and unforeseen ways of
convenience and commerce. Unsuspected technological
innovations are possible. Music, video on demand,
location based services identifiable through mobile
handheld devices – procurement of travel, hospitality,
entertainment and other uses are possible when mobile
payments become feasible and ubiquitous. Mobile
payments can become a complement to cash, cheques,
credit cards and debit cards. It can also be used for
payment of bills (especially utilities and insurance
premiums) with access to account-based payment
instruments such as electronic funds transfer, Internet
banking payments, direct debit and electronic bill
presentment. Several mobile payment companies and
initiatives in EU have failed and many have been
discontinued. In Europe and North America with few
exceptions such as Austria, Spain and Scandinavian
countries the development of mobile payments has not
been successful. However, mobile payment services in
Asia have been fairly successful especially in South
Korea, Japan and other Asian countries (e.g., Mobile
Suica, Edy, Moneta, Octopus, and GCash). NTT
DoCoMo has 20 million subscribers and 1.5 million of
them have activated credit card functionality in Japan.
There are 100,000 readers installed in Japan. The main
difference between successful implementations of mobile
payment services in the Asia Pacific region and failure in
Europe and North America is primarily attributed to the
„payment culture‟ of the consumers that are country-
specific.
In this paper we present an overview of the mobile
technology landscape and address the concomitant issues
that arise with the introduction of mobile payment
services.
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66 Special Issue on Disruptions in Banking Sector in the Current Scenario
Mobile Banking Nature and Importance:
A mobile payment service in order to become acceptable
in the market as a mode of payment the following
conditions have to be met:
Simplicity and Usability: The m-payment application
must be user friendly with little or no learning curve to the
customer. The customer must also be able to personalize
the application to suit his or her convenience.
Universality: M-payments service must provide for
transactions between one customer to another customer
(C2C), or from a business to a customer (B2C) or between
businesses (B2B). The coverage should include domestic,
regional and global environments. Payments must be
possible in terms of both low value micro-payments and
high value macro payments.
Interoperability: Development should be based on
standards and open technologies that allow one
implemented system to interact with other systems.
Security, Privacy and Trust: A customer must be able to
trust a mobile payment application provider that his or her
credit or debit card information may not be misused.
Secondly, when these transactions become recorded
customer privacy should not be lost in the sense that the
credit histories and spending patterns of the customer
should not be openly available for public scrutiny. Mobile
payments have to be as anonymous as cash transactions.
Third, the system should be foolproof, resistant to attacks
from hackers and terrorists. This may be provided using
public key infrastructure security, biometrics and
passwords integrated into the mobile payment solution
architectures.
Cost: The m-payments should not be costlier than existing
payment mechanisms to the extent possible. A m-payment
solution should compete with other modes of payment in
terms of cost and convenience.
Speed: The speed at which m-payments are executed
must be acceptable to customers and merchants.
Cross border payments: To become widely accepted the
m-payment application must be available globally, word-
wide.
Advantages of Mobile Banking:
A very effective way of improving customer service could
be to inform customers better. Credit card fraud is one
such area. A bank could, through the use of mobile
technology, inform owners each time purchases above a
certain value have been made on their card. This way the
owner is always informed when their card is used, and
how much money was taken for each transaction.
Similarly, the bank could remind customers of
outstanding loan repayment dates, dates for the payment
of monthly installments or simply tell them that a bill has
been presented and is up for payment.
The customers can then check their balance on the phone
and authorize the required amounts for payment. The
customers can also request for additional information.
They can automatically view deposits and withdrawals as
they occur and also pre- schedule payments to be made or
cheques to be issued. Similarly, one could also request for
services like stop cheque or issue of a cheque book over
one‟s mobile phone. There are number of reasons that
should persuade banks in favor of mobile phones. They
are set to become a crucial part of the total banking
services experience for the customers. Also, they have the
potential to bring down costs for the bank itself.
Through mobile messaging and other such interfaces,
banks provide value added services to the customer at
marginal costs. Such messages also bear the virtue of
being targeted and personal making the services offered
more effective. They will also carry better results on
account of better customer profiling. Yet another benefit
is the anywhere/anytime characteristics of mobile
services. A mobile is almost always with the customer. As
such it can be used over a vast geographical area. The
customer does not have to visit the bank ATM or a branch
to avail of the bank‟s services. Research indicates that the
number of footfalls at a bank‟s branch has fallen down
drastically after the installation of ATMs. As such with
mobile services, a bank will need to hire even less
employees as people will no longer need to visit bank
branches apart from certain occasions. With Indian
telecom operators working on offering services like
money transaction over a mobile, it may soon be possible
for a bank to offer phone based credit systems. This will
make credit cards redundant and also aid in checking
credit card fraud apart from offering enhanced customer
convenience. The use of mobile technologies is thus a
win-win proposition for both the banks and the bank‟s
customers. The banks add to this personalized
communication through the process of automation. For
instance, if the customer asks for his account or card
balance after conducting a transaction, the installed
software can send him an automated reply informing of
the same. These automated replies thus save the bank the
need to hire additional employees for servicing customer
needs.
COMMERCIAL BANKS PRACTICES IN INDIA AN
OVERVIEW
Activities and Primary Functions of Commercial
Banks Deposit Acceptance: Being a short term credit
dealer, the commercial banks accept the savings of
public in the form of following deposits: Fixed term
deposits, Current A/c deposits, Recurring deposits,
Saving A/c deposits, Tax saving deposits, Deposits
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Special Issue on Disruptions in Banking Sector in the Current Scenario 67
for NRIs, Lending Money. A second major function
is to give loans and advances and thereby earn
interest on it. This function is the main source of
income for the bank. Overdraft facility: Permission to
a current A/c holder of withdrawal more than to what
he has deposited. Loans & advances: A kind of
secured and unsecured loans against some kind of
security. Discounting of bill of exchange: in case a
person wants money immediately, he/she can present
the B/E to the respective commercial bank and can
get it discounted. Cash credit: Facility to withdraw a
certain amount of money on a given security.
Secondary Functions of Commercial Banks Agency
functions: Bank pays on behalf of its customers as an
agent and gets paid fee for agency functions such as:
Payment of taxes, bills Collection of funds through
bills, cheques etc. Transfer of funds, Sale-purchase of
shares and debentures, Collection/Payment of
dividend or interest, Acts as trustee & executor of
properties Forex Transactions, General Utility
Services: locker facility, Credit Creation: It is one of
the most outstanding functions of commercial banks.
A bank creates credit on the basis of its primary
deposits. It further lends the money which people has
deposited with the bank also charge interest on this
money, which is much higher than what it actually
pays to depositor. Thus bank generates money for
itself. List of Abbreviations AML Anti Money
Laundering CDMA Code Division Multiple Access
GPRS General Packet Radio Service GSM Global
System for Mobile IDS Intruder Detection System
IRDA Infrared Data Association ISO International
Standards Organization ( Sometimes also written as
International Organization for Standardization) IVR
Integrated Voice Response KYC Know Your
Customer MNO Mobile Network Operator mPIN
Mobile Personal Identification Number MPFI Mobile
Payment Forum of India NFC near Field
communication. OTP One Time Password PCI-DSS
Payment Card Industry Data Security Standard PIN
Personal Identification Number RFID Radio
Frequency Identification SIM Subscriber Identity
Module SMS Short Messaging Service USSD
Unstructured Supplementary Service Data WAP
Wireless Application Protocol
CHALLENGES WITH ADOPTION OF MOBILE
BANKING
Economic Challenges: The rural population in India is
spread across 600,000 villages, each with a low
transaction value. Profitability can only be achieved by
large volumes, requiring significant initiative from
financial institutions. Unlike the very successful M-PESA
of South Africa, whose model has been very successful
due to the lack of alternative payments in South Africa,
India does possess some infrastructure in the forms of
postal payments, reasonable transport and local
governments. Therefore, any mobile banking must be
inexpensive enough to be attractive for the end-customer
over existing methods.
Regulatory Challenges: Although the RBI is supportive
of mobile banking in India, there are many regulations
that are being put into place:
i) Restricted to Financial Institutions: The guidelines
state that only existing financial institutions and
banks are allowed to offer mobile banking. Although
the guidelines cover Microfinance Institutions
(MFIs), significant economies of scale cannot be
achieved by these due to existing large fixed costs.
For a very inexpensive solution, it would have been
more effective to allow non-profit organizations or
evangelical organizations to build their own MFI
without being encumbered by large existing
infrastructure.
ii) Rupee Transactions: All transactions must be done
only in India‟s national currency, the rupee. While
this may not be a threat in the beginning, this may
pose a constraint for interoperability between Indian
mobile payments and the world. Also, it excludes
providers from the lucrative remittance market in
India and limits areas from which mobile operators
can be profitable.
iii) Existing Account Holders: The guidelines also state
that only those having a valid bank account would be
allowed mobile banking. This limits the full potential
of mobile banking to extend micro-credit and bring
banking to the large number of unbanked customers
in India. Demographic Challenges: India has 18
official languages which are spoken across the
country. The state governments also are dictated to
correspond in their regional language for official
purposes. Additionally, two-thirds of the population
in India is illiterate, creating difficulties in
deployment of mobile banking solutions. For a pan-
Indian mobile banking solution, this will be
cumbersome to overcome.
Transaction Services Model For Mobile Banking
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68 Special Issue on Disruptions in Banking Sector in the Current Scenario
Security issues in mobile banking Mobile banking have
two zones, one is the handset held by the user and the
other is the bank zone. Literature shows that possibility of
security threat exists for transaction of payment using
mobile device.
A mobile banking and Security issue with WAP (Wireless
Application Protocol) WAP is used for communication
between devices like digital mobile phones, internet, PDA
etc. Through WAP customer can realize more
functionality of internet banking. Encryption process is
currently used for secure data transmission between bank
and users but the problem is that this encryption process is
not good enough for the protection of sensitive data
between bank and customer. The reason is that security
methods require more powerful computing and high
storage capacity. If we take internet banking it is realized
that there are powerful computer systems and well
defined complex encryption process to ensure the
security. Mobile device have low computational capacity
and hence we are unable to apply complex cryptographic
system .Due to advancement in technology, it is now
necessary to provide end-to-end security. It means that if
user uses his/her mobile device for mobile banking then
the data transacted are secure at the bank end and not at
the user end, thus leaving the data vulnerable to attacks. It
was noted that it is difficult to provide end to end security
through WAP. The reason is that the data is not encrypted
at gateway during the switching of protocol process,
which leads to security concern for mobile banking in
WAP.
ISSUES AND RISK
Authentication Risks and Issues:
One of the authentication method used in mobile banking
is the login method. However PINS authentication
method is an old method and many security issues such as
password and id theft were discovered in this method. In
such cases, the secret may be revealed and this results in
customer‟s distrust on the security service company. Bank
follows some security mechanisms in mobile banking.
While the customers and the banks are bound to each
other. This security mechanism is done by identifying the
customer‟s phone number, SIM card number, pin number
etc. Customer likes to use the mobile banking technology
because of its mobility as they can access the bank
anywhere and in any situation. They can transfer their
money from one account to another account faster in a
user-friendly environment. And also they can check the
current status of their account. But all customers of the
bank are not ready to use this service because of some
security issues. They are not ready to adopt the mobile
banking systems as it brings inconvenience to the users
assuming that it cannot prevent direct or indirect attacks
.The security mechanism adopted by the banks face many
security issues like being attacked by unauthorized users
which is of highest priority in terms of security. If the
device gets stolen then the hackers or unauthorized
persons may find the password from the log files or saved
draft files. Many customers save their password in their
mobile or they may keep the password under auto fill
settings of the form, this loophole can be easily used by
the unauthorized person. Uneducated people are less
aware of these issues and thus leading to loss of trust by
customers.
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 69
Authentication Model: There are two types of services
provided to the customer which are as follows:
i) The bank provides the service directly to the
customer
ii) Banks share their facility to 3rd
party service provider
Bank provides the service directly to the customer
Architecture
If a mobile bank customer wishes to process the
transaction, for example, transaction of money from one
account to another account he/she must first authenticate
themselves to the bank server through firewall. And the
security application at the server has to verify the user
through password or pin number and the server allows the
customer to do transactions .In this method, there are
some security issues such as server failure, system crash,
and malevolent intrusion. These are serious problems and
will not make the server come back in normal form. So
many banks do not prefer this method.
This is a setup which shows the Internet web server,
database, application server and firewall at the bank‟s
side. The above architecture is an example of mobile
banking service handled directly by the bank. In this
application, server plays an important role to provide
services to the customer. The database will be accessed by
transactions both from the bank and from mobile device.
Banks share their facility to 3rd
party service provider
Familiar banks outsource their facility to 3rd
party
architecture i.e. handling mobile banking customer
service to 3rd
party service provider. This service provider
may lie close to the bank geographically or it may be in
other country. They handle the customer through mobile
or internet. They are responsible for secure transaction
and management of the customer data. This method also
has authentication issues as they follow the same
authentication method like verifying the pin or password
with the database and it also involves 3rd
party server.
There is no trust in securing the data of customers such as
bank account details and customer addresses as they are
managed by 3rd
party service provider. So customer feels
no security to share their password and details to the
unknown 3rd
party. And also customers need to pay extra
charge for their service.
This is a list of issues that need to improve by the 3rd
party
service.
Network Security& Control
Parental Controls
Customer Privacy & Informed permission
Liability
Fraud Prevention (or)Authentication
Interoperability (or) Standardization
Data Access & Use
Financial Risks (or) Reward
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70 Special Issue on Disruptions in Banking Sector in the Current Scenario
SMS based Mobile banking SMS based mobile banking is
a convenient and easy way for accessing bank but there
are end-to-end security problems. These problems exist in
SMS, GPRS protocols and security issues for transaction
of money. Today, most of the banks in the world offer
SMS based mobile banking. If we take any mobile
banking system we can realize that customers also interact
with databases, files and important records through
mobile phone. In developing countries like Bangladesh
SMS banking is gaining popularity because of low cost
and low bandwidth requirement. The main advantages of
SMS are the simplicity and easiness to use. Due to plain
text property, SMS is not suitable for authentication. So
lacking of privacy, integrity and security are the main
issues involve in SMS banking. SMS banking is useful for
small consumer and for small merchant. SMS banking is
also useful for travelers because customer can buy ticket
for buses and trains easily and in urgent situations without
going to the respective stations.
SMS encryption: As default data format for SMS is
plaintext. Currently end to end encryption is not available.
The only encryption involved at base transceiver station
and SMS bank server during transmission. The encryption
algorithm used is A5 which is proven to be defenseless.
SMS Spoofing Attack: The most dangerous attack in SMS
banking is spoofing attack where attacker can send
messages on network by manipulating sender‟s number.
Due to spoofing attack, most of the organizations are not
adopting mobile banking through SMS.
Virus Attacks in mobile banking: There are more than
fifty thousand different types of computer viruses, internet
malicious program and Trojans. Software like Trojan
horses can easily take up password on the web browser or
any cached information on operating system. Malicious
codes are written for remote communication. Zeus Trojan
targeted mobile bank users. Zitmo has been used by
attackers to defect SMS banking. Zeus is commonly used
to steal mobile transaction authentication number or
password.
Risk with Digital Signature: To reduce hardware cost,
designer may prefer digital signature. Digital signature is
efficient that‟s why most companies are interested in
digital signature for authentication. It is founded that
digital signature is computational intensive. With
unsigned values for example date, amount, they differed
from transaction to transaction. So a signed template can
be used with several unsigned values like date, amount
etc.
CONCLUSION:
Study shows mobile handset operability is an important
issue in mobile banking, due to availability of various
handset models i.e supporting different type of technology
in the market. To resolve it service providers i.e. banks
must coordinate with mobile handset manufacturers so
that all handsets irrespective of manufacturer and
technology (GSM or CDMA) become compatible with
single mobile banking technology. Majority customers
perceived „privacy and security‟ a critical issue. Here
banks are advised to educate customers on this issue to
raise their awareness. Especially for the customers‟
worries like losing money if once mobile handset is lost
(substantial number of respondents worried about it).
Secondly banks and telecom operators are suggested to
draft comprehensive joint policy regarding security &
privacy so that customers can be assured at both banks
and telecom operator‟s levels while doing mobile
banking. „Standardization‟ is another major issue as lack
of standardization of mobile banking services in the
country resulted in increased complexity while using
mobile banking services (especially when using mobile
banking services of multiple banks).
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Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
Special Issue on Disruptions in Banking Sector in the Current Scenario 71
New Digital Gateways for Payments
Dr.V.Abirami
Professor in Management
Dr. N.G.P. Arts and Science College
Coimbatore
Yashoda R Ganesh
Ph.D Research Scholar -Management
Dr. N.G.P. Arts and Science College
Coimbatore
Abstract Payments are at the centre of everyday banking.
However, the payments industry is in the midst of
dynamic change. The existing system is being outdated
and the ecosystem is evolving rapidly. New, innovative
and non-rational competitors will be increasing their
market share to up to 10 per centof overall revenue by
2020. These trends have given rise to the importance of
providing aseamless, customer centric payment
experience – to assist in remaining front of mind for
consumers.
In the last few years we have witnessed the growth of the
‘financial wellness’ movement championed by various
startups in the banking sector. Innovative payment
platforms offer customer centric solutions which offer a
user-friendly purchasing process, with seamless checkout
solutions with not multiple steps in checkout and fields to
fill out. Merchants look for solutions with fast on
boarding, with dead-simple integration process,
innovative technology and responsive customer support
by which the startups are increasingly offering better,
faster and more securely than with traditional banks.
A generation ago, a consumer would visit Main Street to
fulfill all of one’s shopping needs and undoubtedly pay in
cash. A lot has changed since then. The arrival of personal
computers in homes and the launch of companies, such as
Amazon, Flipkart, Snapdeal, Alibaba Group and eBay, in
the 2010s acquainted consumers to the new concept of
shopping online. The popularization of smart phones
within the last decade then introduced consumers to
anytime, anywhere commerce.
Improved security measures and convenience are likely to
be the key drivers of growth of digital payments in mature
and emerging markets. Technology has reinvented
commerce. It changed what consumers expect to
experience in physical retail and foodservice outlets. It
opened the door to new ways of engaging with brands
across the path to purchase. It altered the role the
payments industry plays in the transaction. Stemming
from this week’s Money20/20 event, the below takes a
deep dive into three of the most impactful technology-
driven trends reshaping payments.
The online payment industry is witnessing fast
improvements in technology that are making it simple to
transfer funds and accept payments. In 2017, these
developments have become more efficient and common.
This article summarizes the key online payment trends in
2017 that are redefining the industry and making things
more comfortable for consumers.
INTRODUCTION:
The adoption of new mode of payment mode are on the
rise with instruments such as wallets, card and mobile
becoming the mainstream. A disruptive mix of consumer
– behavioral changes and emerging technologies create
huge opportunities in the payment industry. Since the
birth of ecommerce, global card payments have been the
technological backbone of a rapidly expanding market.
Such unprecedented technological innovation and rapidly
changing business needs has resulted in an increasingly
demanding regulatory landscape. Increasing numbers of
payment vehicles and Internet-enabled devices are coming
to market, requiring businesses to process on multiple
channels. This is omnichannel retail.
REDEFINING THE INDUSTRY:
The online payment industry is witnessing fast
improvements in technology that are making it simple to
transfer funds and accept payments. In 2017, these
developments have become more efficient and common.
This article summarizes the key online payment trends in
2017 that are redefining the industry and making things
more comfortable for consumers.
Cash is Passe
The world over cash payments, ATM and cheque usage is
declining as digital payments are becoming more popular.
This is because online payments offer more value,
control, and convenience in this digitalized world
compared to cash. Consumers can store their account
information and preferences securely so that they can
personalize and automate payments anytime, anywhere
when they wish to buy anything.
Other advantages are you can manage your budgets and
finances more efficiently and control your expenses.
Vendors are boosting this trend by offering extended
services and offers that are customized for customers’
needs and location.
Mobile Payments are in
Mobile payments are not yet completely dominant but
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72 Special Issue on Disruptions in Banking Sector in the Current Scenario
they are making fast inroads thanks to the availability of
Near Field Communication (NFC) smartphones. Apps are
offering friendlier interfaces and shops are using MCX
readers or NFC-powered POS terminals to encourage
consumers to use their mobile phones to make convenient
payments.
A recent survey reveals that a good percentage of
shoppers used their mobile phones for holiday shopping
and have downloaded their favorite retailers’ apps on their
devices. Brands like Facebook, Google, Samsung, and
Apple are capitalizing on this trend by making use of
payment services that enable their customers to use their
smartphones to make payments.
Smartwatch Payments are the Next Big Thing
If you thought mobile payments are revolutionary,
technology has already gone one up with smartwatch
payments. You can now simply tap or wave your NFC-
powered smartwatch over a POS machine at the shop to
make the payment. So the smartwatch is not just
fashionable and trendy, it has become payable too.
Besides smartwatches, other wearables such as the Lyle &
Scott bPay jacket, bPay Band, and the Jawbone UP4 can
store your debit or credit card data.
Mobile Apps Dominate
Mobile apps are changing the manner in which consumers
buy and pay for services and products. Domino’s Pizza
reports that 35% of its global sales are through mobile
apps, Groupon says 50% of its transactions are on mobile,
and Taco Bell informs that two million users downloaded
its mobile application. The advantages of mobile apps are
more payment options, tracking, coupons, accuracy,
personalization, and speed.
Contextual Commerce is the Trend
The integration of mobile devices, apps, and social media
is revolutionizing the manner in which consumers pay for
services and products. Sellers are boosting their
conversion rates by making the purchase process simpler,
engaged, and more relevant for consumers. The customer
is already present on their app or website and is ready to
buy, so why drive them away to another seller? This is the
reason Pinterest, Twitter, and Facebook are making good
use of the impulse buy button to tempt customers and
ensure merchants get faster payments. Smart sellers are
focusing on commerce, context and convenience to boost
their sales.
Integration of Mobile Payments with Loyalty
Merchants and payment companies are integrating
payment services with loyalty features to differentiate
their offerings. Starbucks has hitched its loyalty scheme
with its payment app. Consumers get loyalty points when
they use their mobile device to pay for their coffee and
they can track their points easily. A good percentage of
smartphone users opine they would like to have loyalty
schemes on their devices and merchants see the benefit of
offering them the same.
Another benefit is sellers get insightful data on customer
behavior as well as effective ways to convey their
messages to their patrons. It is a win-win for all as
customers reap the benefits of being loyal to their
preferred brand and payment companies can offer faster
and more secure payment methods that do not violate data
ownership or consumer privacy.
Advanced Payment Features
Payment providers look to serve consumers in multiple
commerce channels by expanding their capabilities to
make use of reliability testing, quicker product
development, application program interfaces (APIs), and
cloud-based data warehousing. These technologies help
payment companies to compare consumer spends and
minimize risk and fraud.
Strategic Alliances
Merchants need to fully support their customers through
their decision cycle which consists of searching,
evaluating, buying, paying, and brand loyalty. They also
need to track buyers across various shopping channels
like mobile and online. To help merchants’ needs,
payment providers are looking to expand their products
by forming alliances with cloud-based applicators, data
analytics specialists, app developers, and digital
innovators to offer integrated payment solutions. Thus, it
has become important to form technological and strategic
partnerships to stay relevant and competitive.
Blockchain Technology is Gaining Ground
Blockchain is the key technology behind Bitcoin and
many established financial institutions like Capital One,
Citi Ventures, and Visa are investing in Chain, a
blockchain services provider. This technology is
becoming important and can impact the entire financial
industry because it has the capability to offer convenient
and secure online payments to users. Among its many
benefits is the capability to analyze and process a huge
amount of digital data. The technology can significantly
improve cash management in banks and make the process
more transparent. It can reduce the time needed for the
settlement window to just a few hours from days and also
eliminate risk.
Subscription Services are Becoming Popular
The e-commerce arena is witnessing the growing
popularity of subscription services such as the Dollar
Shave Club. Therefore, it is not surprising that
enterprising companies like Adobe and Microsoft have
successfully adopted the subscription model. The reason
for this trend is Millennials prefer the various pricing
models offered by subscription and they can also stay
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Special Issue on Disruptions in Banking Sector in the Current Scenario 73
connected across the multiple devices they use in their
daily life.
EMV Usage
EMV stands for ‘Europay, MasterCard, and Visa’ and
these companies are issuing new credit cards
with embedded microprocessor chips. These secure cards
have become mandatory in the US and consumers can
make safer payments as this technology makes it more
difficult to steal data. However, it will take time for the
credit card companies to ensure all their cards have the
secure embedded microprocessor chip.
Big Data Benefits
Big data crunching is throwing up predictive analytics
that is enabling companies to offer more relevant
discounts, promotions, coupons, and deals to their loyal
customers by reviewing their purchase history and
shopping habits. Consumers are indicating that they prefer
to be offered loyalty program rewards inside a mobile
wallet. This trend has been successfully exploited by
enterprising brands like Starbucks and Kohl’s and more
companies are expected to follow them.
Beacons and Sensors
This technology is having a big impact on the payment
industry. This is because companies are using it to attract
customers with quick sales offers when they visit their
area. Another benefit is consumers can make purchases
and pay more quickly without even stepping inside a
store. They can also make advance payments, for
example, they can order and pay for a pizza on their way
home. The impact of beacons and sensors is expected to
grow with more widespread adoption of the Internet of
Things.
Few important adoptions of next gen payments:
Mobile is the new standard for consumers to make
purchases. Numerous threats that have affected traditional
payment systems, coupled with new technology, have led
to the development of different payment processing
technologies that are more convenient and secure. It’s
crucial your business is prepared to enter the next
generation of payments as the strength of cash vanishes in
this digital world.
Due to its ease of use, mobile payments are preferred
by consumers. It’s predicted that within the next year,
half of today’s smartphone users will use mobile
payments as their preferred method for transactions.
About 10% of Americans don’t carry any cash at all
and of Americans that do carry cash, the average
amount is less than $20. It’s predicted that by 2019,
fewer than 25% of all in-store purchases will be cash-
based transactions.
The market for mobile payments is growing quickly.
By 2019, it is expected to be worth $720 billion in
transactions compared to just $235 billion in 2014.
The launch of new debit and credit cards that utilize
cryptography, like EuroPay, MasterCard and Visa,
has resulted in decreased fraudulent activity. These
cards detect modified transactions and require a pin
for added protection. For merchants that accept chip
cards, counterfeit fraud fell 26% in January compared
to last year.
Mobile wallet brands such as Paytm, Google wallet,
PhonePe, Amazon payment and FreeCharge, offer
services including online payment, online ticket
booking, online gifts, cashback offers, various
coupons and loyalty cards. The market is predicted to
reach $142 billion by 2020.
Bitcoin’s digital currency is growing at incredible
rates, with more than $1.46 trillion in circulation as of
June 1, 2016. Blockchain, a permission-less,
distributed database technology for managing and
recording transactions, could help banks reduce the
confusion and cost of numerous complex processes.
The Top 20 Digital Wallets in India:
1) Airtel Money:
With the Airtel Money app, users can easily recharge
prepaid accounts or pay postpaid bills. You can also shop
online if your digital wallet has cash loaded in it. It’s also
extremely safe as every transaction or payment you make
requires a secret 4-digit mPin.
2) Citi MasterPass: Citi MasterPass, a free digital wallet, helps make
checking out while online shopping a speedier process.
Once you’ve stored all your payment and shipping details
in your Citi Wallet, simply click on the MasterPass button
and it will take care of the rest.
3) Citrus Pay: Citrus Pay, one of the top e-wallets in India, it offers a
Citrus wallet for customers as well as payment solutions
to businesses. With a strong base of 800 million
customers, it has definitely earned its spot as one of the
best mobile wallets in India.
4) Ezetap: Ezetap, a Bangalore based digital payment solution
founded in 2011, offers business owners solutions to
accept card payments via electronic devices. It also send
customers e-receipts through an SMS or email.
5) Freecharge: Freecharge, one of the most famous names right now
when it comes to digital payment in India, has been
known to target the youth in all their promotions. With
equivalent amount of coupons given for every recharge
you make, it’s a great option to save while paying your
bills online.
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74 Special Issue on Disruptions in Banking Sector in the Current Scenario
6) HDFC PayZapp: HDFC PayZapp, making digital payment in India
simplified with one click payments, is one of the top
online wallets in India. Users can easily compare flight
and hotel tickets and even buy music or pay bills with the
app. Simple connect your debit/credit card once
and forget to worry about making payments.
7) ICICI Pockets: While you might find a Pocket card redundant,
considering you’re opting for an e-wallet app to avoid
using a card, they do have a pretty neat wallet app. It’s
VISA powered and can be used on any Indian website, or
to transfer money to email ids, WhatsApp contacts, and
also just tap and pay your friends easily.
8) JioMoney: JioMoney, launched recently in 2016 by Jio, is a digital
payment app. With JioMoney, one can receive great
discounts and offers. Users can also bookmark their
frequently visited retailers so shopping can be made
quicker than usual.
9)Juspay: JusPay Safe is a payment browser with over 650+
transactions in a day. They offer a browser with which
users can make payments quickly via cards with 2 clicks.
10) LIME: LIME, launched by AXIS in 2015, was the first mobile
app in India to integrate wallets, shopping, payments, and
banking. Apart from the usual features like making
payments, they also let you analyze what you spend. With
a cool feature that rounds up all your change and invest in
a deposit and a shared wallet tool, they’ve definitely
earned their spot in the top list of mobile wallets in India.
11) Mobikwik: Mobikwik is a Gurgaon based e-wallet payment system in
India that helps its users store their money. Founded in
2009 by Bipin Singh and UpasanaTaku, this digital wallet
enables users to recharge, pay bills, and make third-party
purchases with one tap.
12) MomoeXpress: MomoeXpress, a Bangalore based digital wallet in India,
claims to have the fastest checkout system. Though
they’re only available in Bangalore, they have a wide
range of solutions they offer to residents on the city. From
paying for your rickshaw ride to salons & spas, there are
over 3000 outlets available at your disposal.
13) MoneyonMobile: MoneyOnMobile, authorized by the Reserve Bank of
India, enables users to buy goods, products, and services
from registered merchants. It’s a multilingual app that
reaches remote areas of the country to millions of users
making online payments available to a wide population.
14) Mswipe: Mswipe, the first mobile point-of-sales solution in India
was founded in 2012. They don’t exactly offer an app, but
they do provide a machine that can be attached to your
mobile device to accept card payments. This may not be a
digital wallet app but it does support going cashless.
15) Ola Money: Ola Money, launched in 2015, is a digital wallet in India
offered by Ola. While it’s majorly being used to make
payments for Ola cab rides, making cashless traveling a
dream come true, it can also be used to buy groceries or
flight tickets and much more.
16) Oxigen: Oxigen, a FinTech company founded in July 2004, is one
of the major providers of digital payment in India. Along
with making online purchases and paying bills, you can
also send gift cards to your dear ones.
17) PayMate: PayMate, founded in 2006 by Ajay Adiseshann, launched
PayPOS in 2012, an app for small businessowners to
receive payments conveniently via debit cards and credit
cards and also process electronic transactions.
18) Paytm: Paytm, launched in 2010, is currently the largest mobile
wallet app in India. With payments via Paytm being
accepted almost everywhere, it’s hard not to simply
switch to it completely. From paying mobile bills to
buying movie tickets, there’s almost nothing you can’t do
with Paytm.
19) PayUmoney: PayUmoney, a part of PayU India, is a free payment
gateway solution for merchants to collect payments from
customers via debit/credit cards or net banking, and more.
They also offer SMS and email invoicing for merchants
that do not have a website.
20) State Bank Buddy: State Bank Buddy, a product of State Bank of India, is an
online wallet in India that’s available in 13 languages.
Users (non SBI account holders too) can send money via
Facebook, or to other bank accounts, book hotels or
movie tickets and much more!
ULTIMATE PAYMENT TRENDS:
Trend 1: Cross-channel payments
The boundaries between the online world and the offline
world are blurring; cross-channel payments are a clear
trend in 2017 and this is backed up by the evolution of
mPOS terminals into SmartPOS terminals. At the same
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Special Issue on Disruptions in Banking Sector in the Current Scenario 75
time, mobile payments are also becoming ever more
popular. Merchants such as Starbucks, Walmart and Kohl
in the USA or suppliers including Payback and Orange
Cash have already realized that mobile payments are of
strategic importance in bridging the gap between the real
world and the digital world.
Trend 2: Seamless checkout
Payment evolution is still going strong in the online area
too. Payment processes must become quicker or fade into
the background completely – and they must be done with
the user’s mobile device. Card-on-file solutions like
Amazon and Uber or Masterpass solutions are being used
more and more by end customers, enabling them to
complete the payment process with very few clicks, or
even none at all. The focus is on a smooth shopping
experience with an uncomplicated and seamlessly
integrated payment process.
Trend 3: Internationalization
The trend towards internationalization in online retail will
continue unabated. While digital goods suppliers have
been focusing on internationalization for a long time
already, the trend has only just begun to be felt strongly in
physical goods retail. However, for both areas it is
important not just to offer international payment processes
such as credit cards or PayPal, but to also take into
account local features; payment processes which have
been established within a certain region and are popular
there should be supported. Risk management and fraud
detection must also be adapted according to regional
circumstances. Technical approaches such as voice and
fingerprint recognition will set new security standards
Trend 4: Security
The guidelines on this published by the EBA (Electronic
Banking Authority) by order of the EU call for strong
two-factor authentication for all payment transactions.
Only a few exceptions are allowed. If this framework is
adhered to, it will have a huge impact on internet
payments and will require every transaction to be
authorized by the customer in two ways. Payment security
is always a factor. Regardless of regulatory standards,
what is needed most is for everyone involved to work on
improving security, while also keeping in mind user
friendliness. It is fundamentally to be expected that
new technical approaches such as voice, fingerprint or
facial recognition, which combine security with user
friendliness, will be increasingly introduced.
CONCLUSION:
Improved security measures and convenience are likely to
be the key drivers of growth of digital payments in mature
and emerging markets. Technology has reinvented
commerce. It changed what consumers expect to
experience in physical retail and foodservice outlets. It
opened the door to new ways of engaging with brands
across the path to purchase. It altered the role the
payments industry plays in the transaction. Stemming
from this week’s Money20/20 event, the above takes a
deep dive into three of the most impactful technology-
driven trends reshaping payments.
These strategic trends will interact to cause some pretty
interesting changes in our markets across the coming
years, driven above all by the absolute necessity to restore
sanity to the cost-benefit calculations around compliance.
It will be regulatory pressures, not technology drivers,
that shape most decisions in the next few months but we
understand how to make effective use of new technology
in responding to those pressures so that’s all good. Here’s
to another great year in the world of secure electronic
transactions!
REFERENCES:
[1]. https://www.totalprocessing.com/blog/13-trends-in-the-
2017-online-payment-market/
[2]. https://blog.wirecard.com/5-ultimate-payment-trends-
will-play-huge-role-2017/
[3]. https://www.sumhr.com/digital-wallets-india-list-online-
payment-gateway/
Journal of Management and Science | ISSN: 2249-1260 | e-ISSN: 2250-1819 | Special Issue No.4 | Feb’2018
76 Special Issue on Disruptions in Banking Sector in the Current Scenario
A Study on Non-Performing Assets of
Banking Sectors in India
Dr.D.Vijayalakshmi
Prof., MBA, Anna University - Coimbatore.
Srihari Ramesh
Student, MBA, Anna University - Coimbatore.
Shenbagadevi.G
Student, MBA, Anna University - Coimbatore.
Rathnavel Subramaniam Institute of Management Studies
Abstract : Every 4 hours, 1 bank staffer held for fraud.
On an average, at least one banker is caught and punished
for involvement in fraud every four hours, an analysis of
data compiled by the Reserve Bank of India has
revealed. For a developing country like India, a strong
banking sector is necessary. Due to the rise in NPAs (Non
- performing -Assets), the Indian banking sector is facing
a serious issue. There seems to be no unanimity in the
proper policies to be followed in resolving this problem.
NPAs reflect the performance of banks. A high level of
NPAs suggests high probability of a large number of
credit defaults that affect the profitability and Net-worth
of banks and also erodes the value of the asset. NPAs
affect the liquidity and profitability, in addition to posing
threat on quality of asset and survival of banks. The
problem of NPAs is not only affecting the banks but also
the whole economy. In fact high level of NPAs in Indian
banks is nothing but a reflection of the state of health of
the industry and trade. It is necessary to trim down NPAs
to improve the financial health in the banking system. An
attempt is made in this paper to understand NPA, the
status and trend of NPAs in Indian Scheduled commercial
banks, the factors contributing to NPAs, reasons for high
impact of NPAs on Scheduled commercial banks in India
and recovery of NPAS through various channels.
INTRODUCTION
Before the period of economic liberalization in 1991,
quality of asset was not a prime concern in Indian banking
sector. Instead of this, it focused on achieving goals such
as development of rural areas, opening wide networks,
priority sector lending, higher employment generation,
etc. Although the primitive function of banks are to lend
funds as loans to various sectors such as agriculture,
industry, personal loans, housing loans etc., Accepting
deposit involves no risk, since it is the banker who are
indebted to repay the deposit, whenever it is demanded.
On the other hand lending always involves much risk
because there is no certainty of repayment. But in recent
times the banks have become very cautious in extending
loans. The reason being mounting non-performing assets
(NPAs) and nowadays these are one of the major concerns
for banks in India. Withal the complete elimination of
such losses is not possible, but banks can always aim to
keep the losses at an inferior level.
According to RBI, term loans on which interest or
installment of principal remains overdue for a period of
more than 90 days from the end of a particular quarter is
called a Non-performing Asset. Non-performing Asset
(NPA) has come forth since over a decade as an alarming
threat to the banking industry in our country sending
distressing signals on the sustainability and durability of
the affected banks. The positive results of the chain of
measures affected under banking reforms by the
Government of India and RBI in terms of the two
Narasimhan Committee Reports in this contemporary
period have been neutralized by the ill effects of this
surging threat. Despite various correctional steps
administered to solve and end this problem, concrete
results are included. It is a sweeping and all pervasive
virus confronted universally on banking and financial
institutions too. The severity of the problem is however
actually suffered by Nationalized Banks, followed by the
SBI group, and all the Indian Financial Institutions.
OBJECTIVES OF THE STUDY
To study the status of Non-performing Assets of
Indian Banks.
To examine the causes for NPAs in banking sectors.
To study the impact of NPAs on Banks.
To make appropriate suggestions to avoid future
NPAs.
METHODOLOGY
For our study, we have considered Non-performing
Assets in scheduled commercial bank which includes
public sector banks, private sector banks and foreign
banks which are listed in the Second Schedule of the
Reserve Bank of India Act, 1934. The study is based on
secondary data. The paper discusses the conceptual
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Special Issue on Disruptions in Banking Sector in the Current Scenario 77
framework of NPA and it also highlights the current
status and impact of NPA on these banks during the
period of 5 years i.e. from 2013 to 2018. Several reputed
research journal including research paper and articles has
been used by the researchers. Moreover, RBI Report on
Trend and Progress of Banking in India for various years,
websites and a book on banking has been referred during
the study.
LIMITATION OF THE STUDY
The study of non-performing assets of is limited to the
Indian Banks and till the end of the year 2017-2018.
Reasons for NPAs and Management of NPAs are
changing with the time.
The study is done in the present environment
without foreseeing future developments.
MAGNITUDE OF NPAS (Table – 1)
Indian banks' gross non-performing assets (NPAs) or bad
loans stood at Rs 8.40 lakh crore as on 30 September
2017. On quarter, the pile has grown only marginally - by
1.31 percent from Rs 8.29 lakh crore as on 30 June 2017.
A report in Reuters 3 months had put the figure at Rs 9.5
lakh crore, including restructured loans, quoting RBI data
obtained through an RTI query. Taking note of the
alarming bad loan situation, the government had before 2
months announced a Rs 2.11 lakh crore bank
recapitalization plan to help state-run banks to come out
of the mess. As much as 90 percent of these sticky assets
are on the books of government-owned banks. A break-up
of the NPAs shows that 21 PSBs, or public sector banks,
saw their bad loans remaining flat at Rs 7.33 lakh crore
compared with June 2017 figures while that of 17 private
banks surged by 10.5 percent to Rs 1.06 lakh crore in
September from Rs 96,201 crore. Industry leader, State
Bank of India which tops the NPA chart, has managed to
restrict the rise in bad loans in the September quarter as it
marginally declined from Rs 1.88 lakh crore in June
quarter to Rs 1.86 lakh crore in the September quarter.
Like SBI, most of the other PSBs' also managed to arrest
the rise in bad loans during the quarter. The trend may be
an indication that the bad loans at these banks may be
peaking. However, it has to be seen whether the trend will
sustain over the next few quarters. However, gross NPAs
of some private banks have risen significantly. Yes Bank's
bad loans doubled from Rs 1,364 crore in June quarter to
Rs 2,720 crore and Axis Bank's widened by 24 percent to
Rs 27,402 crore from Rs 22,031 crore during the same
period. In five years, by March 2017, gross NPAs of all
state-owned banks, barring five, have been in double
digits. These five banks are Vijaya Bank (6.6%), State
Bank of India (6.9%), Indian Bank (7.5%), Syndicate
Bank (8.5%) and Canara Bank (9.6%). Two banks now
have more than 20% gross NPAs—Indian Overseas Bank
(22.5%) and IDBI Bank Ltd (21.3%) and five, more than
15%. They are Central Bank of India (17.9%), Uco Bank
(17.1%), Bank of Maharashtra (16.9%), Dena Bank
(16.3%) and United Bank of India (15.5%).
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78 Special Issue on Disruptions in Banking Sector in the Current Scenario
(Table – 2)
The above figure portrays the trend of Gross NPA of
PSB( Public Sector Banks ) in rupee crore for the period
of 5 years i.e. from 2013-14 to 2017-18. The x-axis
represents the years whereas y-axis represents the rupee
crore of NPA. We can observe here that the Gross of NPA
has been showing upward trend beginning from 2013-14
to 2017-18.In India, the NPAs that are considered to be at
higher levels than those in other countries has of late,
attracted the attention of the public. The Indian banking
system had acquired a large quantum of NPAs, which can
be termed as legacy NPAs. NPAs seem to be growing in
public sector banks over the years. For public sector
banks, the gross bad loan ratio could be as much as
14.2% by March 2018, from 11.4%.
(Table – 3)
The above figure portrays the trend of Gross NPA Private
Sector Banks in rupee crore for the period of 5 years i.e.
from 2013-14 to 2017-18. The x-axis represents the years
whereas y-axis represents the rupee crore of NPA. We can
observe here that the Gross of NPA has been showing
upward trend beginning from 2013-14 to 2017-18. Last
five years’ net NPA graph of private banks is a mirror
image of their gross NPAs. For Axis Bank, it rose from
0.3% in 2012 to 0.7% in 2016 and zoomed to 2.3% in
2017. The trajectory for ICICI Bank is 0.7% in 2012, 1%
in 2014, 3% in 2016 and 5.5% in 2017. For Dhanlaxmi
Bank, after peaking in 2014 (3.8%) it has been
progressively coming down (2.6% in 2017). Similarly,
DCB Bank’s net NPAs peaked at 1% of its loan book in
2015 and it has managed to contain it at 0.8% in the past
two years. For J&K Bank, it has been a progressive
deterioration—from 1.6% in 2015 to 3% in 2016 and,
finally, 5.5% in 2017.
Causes of NPA’s
Diversification of funds to unrelated
business/fraud.
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Special Issue on Disruptions in Banking Sector in the Current Scenario 79
Lapses due to diligence.
Business losses due to changes in
business/regulatory environment.
Lack of morale, particularly after government
schemes which had written off loans.
Global, regional or national financial crisis which
results in erosion of margins and profits of
companies, therefore, stressing their balance sheet
which finally results into non-servicing of interest
and loan payments. (For example, the 2008 global
financial crisis).
The general slowdown of entire economy for
example after 2011 there was a slowdown in
the Indian economy which resulted in the faster
growth of NPAs.
The slowdown in a specific industrial segment,
therefore, companies in that area bear the heat and
some may become NPAs.
Unplanned expansion of corporate houses during
boom period and loan taken at low rates later being
serviced at high rates, therefore, resulting into
NPAs.
Due to mal-administration by the corporate, for
example, willful defaulters.
Due to miss-governance and policy paralysis
which hampers the timeline and speed of projects,
therefore, loans become NPAs. For example
Infrastructure Sector.
Severe competition in any particular market
segment. For example Telecom sector in India.
Delay in land acquisition due to social, political,
cultural and environmental reasons.
A bad lending practice which is a non-transparent
way of giving loans.
Due to natural reasons such as floods, droughts,
disease outbreak, earthquakes, tsunami etc.
Cheap import due to dumping leads to business
loss of domestic companies. For example steel
sector in India.
Impacts of NPAs
The problem of NPAs in the Indian banking system is one
of the foremost and the most formidable problems that
had impacted the entire banking system. Higher NPA
ratio trembles the confidence of investors, depositors,
lenders etc. It also causes poor recycling of funds, which
in turn will have a deleterious effect on the deployment of
credit. The non-recovery of loans affects not only the
further availability of credit but also financial soundness
of the banks.
Lenders suffer lowering of profit margins.
Stress in banking sector causes less money
available to fund other projects, therefore, negative
impact on the larger national economy.
Higher interest rates by the banks to maintain the
profit margin.
Redirecting funds from the good projects to the bad
ones.
As investments got stuck, it may result in it may
result in unemployment.
In the case of public sector banks, the bad health of
banks means a bad return for a shareholder which
means that government of India gets less money as
a dividend. Therefore it may impact easy
deployment of money for social and infrastructure
development and results in social and political
cost.
Investors do not get rightful returns.
Balance sheet syndrome of Indian characteristics
that is both the banks and the corporate sector has
stressed balance sheet and causes halting of the
investment-led development process.
NPAs related cases add more pressure to already
pending cases with the judiciary.
Steps taken by government to eradicate NPAs
In the year 1991, Narsimham committee recommended
many reforms to tackle NPAs. Some of them were
implemented.
The Debt Recovery Tribunals (DRTs) – 1993
Credit Information Bureau – 2000
Lok Adalats – 2001
Compromise Settlement – 2001
SARFAESI Act – 2002
ARC (Asset Reconstruction Companies)
Corporate Debt Restructuring – 2005
5:25 rule – 2014
Joint Lenders Forum – 2014
Strategic debt restructuring (SDR) – 2015
Asset Quality Review – 2015
Sustainable structuring of stressed assets (S4A) –
2016
Insolvency and Bankruptcy code Act-2016
Pubic ARC vs. Private ARC – 2017
Bad Banks – 2017
Solutions Apart from the government precautions, the
following are some strategies by which banks can curtail
non-performing assets to a great extent:
Recovery camps: Bank personnel can jointly approach
the defaulting borrowers for repayment at a place and
time convenient to both the parties. These are more suited
to small loans. Normally the borrowers who had availed
small loans will be more in number in rural and semi
urban areas rather than urban and metro centers. As such,
the banks instead search areas rather than urban and metro
centers. As such, the banks instead of conducting the
recovery camps at their branches, they usually conduct
such recovery camps in centers like panchayat board
offices, court buildings, government department buildings
etc such recovery camps so that the borrowers find it
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80 Special Issue on Disruptions in Banking Sector in the Current Scenario
convenient to attend the recovery camps.
Preference of claims: Banks should expeditiously and
properly claim indemnity from organizations like Deposit
Insurance and Credit Guarantee Corporation called
DICGC, Export Credit Guarantee Corporation called
ECGC, Credit Guarantee Fund Trust for small scale
industries, Insurance Companies etc and invoke
Government/other personal guarantees to recover loan
dues and reduce non-performing assets.
Technical write off: Normally banks decide writing off
small loans which have become bad and the recovery is
not at all possible in those accounts under any
circumstances on account of the facts that the borrower
might have been expired; he has no means to repay the
loan at any cost and there may be huge losses in respect of
the properties etc. This is for the sole purpose of servicing
such non-performing accounts.
One time settlement scheme: To reduce the absolute
amount of non-performing assets, Government of India
along with Reserve Bank of India announced onetime
settlement schemes periodically for the past few years.
When the borrowers are alive and when the borrowers are
farmers, small entrepreneurs etc and they find it very
difficult to pay their dues for various reasons like bad
health and fall in their business ventures, however, they
have the inclination to repay their debts to the banks, this
type of practice is very much helpful to the borrowers and
the lending institutions.
Suit filing: Filing of a suit is taken up as a last resort
when all other remedies to recover non-performing assets
fail. Banks can initiate recovery proceedings with or
without intervention of the courts of law. To Expedite the
process; banks should be alert and proactive in all stages
of the proceedings. i.e. preparation of plaint, service of
summons, written statements, trial of the suit, obtaining
decree copy, praying for interim relief, execution of
decrees, attachment of the property, arrest of the
defendants, if needed etc.
Debt recovery tribunals: The debt recovery tribunal act
was passed by Indian Parliament in 1993 with the
objective of facilitating the banks and financial
institutions for speedy recovery of dues in cases where the
loan amount is Rs. 10 lakhs and above. The time limit
envisaged under the act is not being adhered to in
disposing off the suits because of inadequate
infrastructure and a shortage of recovery personnel with
the DRTs.
CONCLUSION:
Growing NPAs is one of the biggest problems that the
Indian banks are facing today. NPAs reflect the overall
performance of the banks. The money locked up in NPAs
has a direct impact on the profitability of the bank as
Indian banks are highly dependent on income from
interest on funds lent. A high level of NPAs suggests high
probability of a large number of credit defaults that affect
the profitability and liquidity of banks. If the concept of
NPAs is taken very lightly it would be dangerous for the
banking sector. Due diligence and utmost care must be
taken by the branch managers before sanctioning the
loans to the clients. The government should also make
more provisions for the faster settlement of pending cases
and also it should reduce the mandatory lending to
priority sector as this is the major problem creating an
area. So the problem of NPA needs lots of serious efforts
otherwise NPAs will keep killing the profitability of
banks which is not good for the growing Indian economy
at all.
REFERENCES [1]. https://indianmoney.com/articles/what-is-the-main-
cause-for-an-increase-in-non-performing-assets-of-banks
[2]. https://www.clearias.com/non-performing-assets-npa/
[3]. http://www.firstpost.com/business/bank-npa-trend-in-7-
charts-bad-loans-at-state-run-banks-may-be-peaking-
select-private-peers-see-rise-4218813.html
[4]. http://www.livemint.com/Opinion/TmNoZgpiuiYV2QS
mxQOy8N/Its-official-Indian-banks-health-will-
worsen.html
[5]. http://www.thehansindia.com/posts/index/Civil-
Services/2017-10-11/Understanding-the-NPAs-and-
their-impact/332611.
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Special Issue on Disruptions in Banking Sector in the Current Scenario 81
Payments Innovations
Prof. A.V. Ravi
HOD – Dept. of Commerce
Bishop Appasamy College of Arts & Science
Coimbatore-18.
ABSTRACT: A payment is the trade of value from one
party to another for goods, or services, or to fulfill a legal
obligation. The payments system provides financial
institutions and their customers a variety of ways to
transfer funds, but the goal is essentially the same in all
cases to move money from one individual or business to
another in a reliable, secure, low cost, and convenient
manner.A popular payment method in countries with low
credit card and banking penetration, mobile payments
offer a quick solution for customers to purchase on
ecommerce websites. This paper is an attempt to find out
the various mode of payments and the new innovation in
payments.
INTRODUCTION:
A payment is the trade of value from one party (such as a
person or company) to another for goods, or services, or
to fulfill a legal obligation.
Payment can take a variety of forms. Barter, the exchange
of one good or service for another, is a form of payment.
The most common means of payment involve use
of money, cheque, or debit, credit or bank transfers.
Payments may also take complicated forms, such
as stock issues or the transfer of anything of value or
benefit to the parties. In US law, the payer is the party
making a payment while the payee is the party receiving
the payment. In trade, payments are frequently preceded
by an invoice or bill
Public Policy Objectives for the PaymentSystem:
We trust financialinternediariesto hold and transfer funds
in a safe and secure manner to meet the needs of
commerce. The payments system provides financial
institutions and their customers a variety of ways to
transfer funds, but the goal is essentially the same in all
cases: to move money from one individual or business to
another in a reliable, secure,lowcost, and convenient
manner.
TYPES OF PAYMENT:
credit cards
Mobile payments
Bank transfer
E-wallets
Prepaid Cards
Direct Deposit
Cash
online payments (eg Paypal)
Credit Cards:
As a global payment solution, credit cards are the most
common way for customers to pay online. Merchants can
reach out to an international market with credit cards, by
integrating a payment gateway into their business. Credit
card users are mostly from the North America and
Europe, with Asia Pacific following suit.
Mobile Payments
A popular payment method in countries with low credit
card and banking penetration, mobile payments offer a
quick solution for customers to purchase on ecommerce
websites. Mobile payments are also commonly used on
donation portals, browser games, and social media
networks such as dating sites, where customer can pay
with SMS. Majority of mobile payments are done in the
Asia Pacific, with 64 million users expected by the year
2016.
Bank Transfers
Customers enrolled in an internet banking facility can do
a bank transfer to pay for online purchases. A bank
transfer assures customers that their funds are safely used,
since each transaction needs to be authenticated and
approved first by the customer’s internet banking
credentials before a purchase happens.
E-wallets
Ane-wallet stores a customer’s personal data and funds,
which are then used to purchase from online stores.
Signing up for ane-wallet is fast and easy, with customers
required just to submit their information once for
purchases. Additionally, e-wallets can also function in
combination with mobile wallets through the use of smart
technology such as NFC (near field communication)
devices. By tapping on an NFC terminal, mobile phones
can instantly transfer funds stored in the phone.
Prepaid Cards
An alternative payment method, commonly used by
minors or customers with no bank accounts. Prepaid cards
come in different stored values for customers to choose
from. Online gaming companies usually make use of
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82 Special Issue on Disruptions in Banking Sector in the Current Scenario
prepaid cards as their prefered payment method, with
virtual currency stored in prepaid cards for a player to use
for in-game transactions. Some examples of prepaid cards
are Mint, Ticket surf, Paysafecard, and Telco Card. It
appears that age rather than income is the trait that affects
the adoption of prepaid cards, according to Troy Land’s
research.
Direct Deposit
Direct deposits are when customers instruct their banks to
pull funds out of their accounts to complete online
payments. Customers usually inform their banks on when
funds should be pulled out of their accounts, by setting a
schedule through them. A direct deposit is a common
payment method for subscription-type services such as
online classes or purchases made with high prices.
Cash
Fiat, or physical cash, is a payment method often used for
physical goods and cash-on-delivery transactions. Paying
with cash does come with several risks, such as no
guarantee of an actual sale during a delivery, and theft.
There are different types of payment methods to choose
from. But by understanding how each one functions, and
knowing who your target audiences are (particularly,
where they are located), can help you decide which
payment methods to integrate. If you need help on setting
your business up with appropriate types of payment
methods.
Online payment:
Online payment refers to money that is exchanged
electronically. Typically, this involves use of computer
networks, the internet and digital stored value systems.
When you collect a payment over the internet, you are
accepting an online payment. Online payment usually is
the transaction that results in transfer of monetary funds
from the customer bank or credit card account to your
bank account.
THE THINGS NEED TO CONSIDER
WHEN CHOOSING A PAYMENT
METHOD FOR BUSINESS INCLUDE:
Customer preference
Choosing a payment method your customers prefer will
make them more likely to pay you on time. The most
common payment method is through electronic credit and
debit cards. For example, there has been a 42% growth in
Paywave and other tap-and-go accounts and 74% of all
MasterCard in-store transactions are now contactless.
Risk :
For example, cash has a higher risk of theft since it
doesn’t go directly into your bank account. There's also
more risk of mistakes.
Privacy :
Different payment methods are more private. For
example, credit cards automatically record transactions.
Some customers might prefer to pay cash for certain
goods and services, such as medication, for privacy
reasons.
Service fees :
For example, EFTPOS and credit card providers often
charge service fees.
Transaction costs :
e.g. the bank may charges a cost for each transaction.
Reliance on electrical and telecommunications
infrastructure :
For example, EFTPOS uses electricity and needs access to
a phone network. These payment methods can be
unavailable if these systems go down.
INNOVATION MADE IN PAYMENT:
1. PAYTM PayTM is one of the best digital wallets to make
payments. It allows you to add your Credit/Debit cards
and link your bank account to it. Make use of QR code to
send and receive payments easily. PayTM mobile wallet
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Special Issue on Disruptions in Banking Sector in the Current Scenario 83
allows you to buy movie tickets, online mobile recharge,
pay electricity bills and more from your mobile. It is
available for Android, iOS, and Windows Mobile Phone.
2. Mobikwik Mobikwik is another versatile & secure app that allows
you to pay or transfer money using the mobile number. It
allows you to make mobile recharge and pay bills in
seconds. Use Mobikwik mobile wallet and buy anything
online with good discounts. Making bill payments, mobile
recharge, shopping and more has become easy with
Mobikwik mobile wallet. It is available
for Android, iOS and Windows Phone.
3. FreeCharge FreeCharge e-Wallet allows you to add credit and debit
cards which make it easy to make payments. It is the
fastest growing digital payment platform allowing you to
pay electricity bills, mobile and DTH recharge and more.
Use FreeCharge mobile wallet and avoid long queues. It
makes us easy to make online and digital payments
securely using mobile. FreeCharge is available
for Android, iOS and Windows Phone.
4. State Bank Buddy State Bank Buddy by State Bank of India is the first
Indian mobile wallet available in 13 Indian languages.
Using this sending money, asking reminders to clear dues,
instant bill payments and more from your mobile.Sate
Bank Buddy mobile wallet helps you to do so by linking
your credit or debit cards to it. It allows you to load
amount into your wallet and make payments to your
contacts on phone book. It is available
for Android and iOS
5. HDFC PayZapp PayZapp from HDFC Nabk is available to customers of
all banks and allows you to make payments with just a
single click. Make payments easily by adding credit or
debit card details. Your card details are safe with the bank
and no need to worry about that. PayZapp mobile wallet
does three security checks for every transaction. It is
available for Android and iOS.
Top Payment Gateways in India – 2017 List
A payment gateway is an online service provided by
software companies in collaboration with financial service
providers like Visa and Master Card that enables a
website to accept electronic payments. In India payment
gateways are offered by private banks like ICICI Bank,
HDFC Bank and Yes Bank, along with international
players like Paypal. A payment gateway comprises of a
secured encrypted connection created between your web
portal and the commercial bank. It enables a business to
get money into it’s chosen bank account through different
channels like credit card, debit card, internet banking,
prepaid cards and mobile wallets
TRENDS WHICH ARE CHANGING
PAYMENT INNOVATION:
The payment industry in itself keeps on evolving with the
ever changing consumer sentiments and the needs of the
businesses. Innovations in this space is thus a continuous
process, while the adoption of each of new development
takes its own pace to penetrate, here are 5 such trends
which are changing the way India pays
Shift to Mobile In February 2016, a report by Counterpoint Research
stated that India has become the second largest
smartphone market in the world with 220 million
smartphone users. Thus, it does make economic sense for
businesses to have a mobile first/mobile ready platform.
Payment system providers are now offering ready-to-
integrate development kits for mobile app companies to
deliver a native payment experience.
Wallets & Banking Apps Savvy consumers are now even ditching their credit/debit
cards when it comes to making a purchase online, all
thanks to wallet and banking apps which allow swift
checkout experience. In fact at EBS we have already
integrated a number of mobile wallets & banking apps to
allow companies to provide this experience.
Wallet &PoS Integration Another notable development that is happening with the
onset of the wallet adoption is the usage of these
instruments beyond the digital space. Restaurants, brick
and mortar stores which depend upon PoS systems for
payment collection can also give wallet users an option to
use the same instead of swiping their bank cards.
Government Support Also, to keep up with the pace of the global economy, the
Government too is pushing out policies to encourage a
movement towards a cashless society. This is happening
through various initiatives: Payment banks, Bharat Bill
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84 Special Issue on Disruptions in Banking Sector in the Current Scenario
Payment Services, proposal to do away with surcharge /
convenience fees, etc.
Contactless Payments Payments via NFC is a development that has already
come into practice. However now contactless payment is
the next step, where in a tangible scenario customers can
make payments by flashing their card at the terminal.
CONCLUSION:
Merchants can reach out to an international market with
credit cards, by integrating a payment gateway into their
business. Credit card users are mostly from the North
America and Europe, with Asia Pacific following suit.
Mobile payments are also commonly used on donation
portals, browser games, and social media networks such
as dating sites, where customer can pay with SMS. Online
payment usually is the transaction that results in transfer
of monetary funds from the customer bank or credit card
account to your bank account. from the above paper we
got an idea of payments mode and its innovation in recent
trend.
REFERNCES:
[1]. Agarwal, Sumit, Sujit Chakravorti, and Anna Lunn
(2010), “Why Do Banks Reward Their Customers to
Use Their Credit Cards,” Federal Reserve Bank of
Chicago Working Paper, WP-2010-19.
[2]. Chakravorti, Sujit and Victor Lubasi (2006), “Payment
Instrument Choice: The Case of PrepaidCards,” Federal
Reserve Bank of Chicago Economic Perspectives
[3]. Dhingra Sanjay, (2011), Measuring IT Effectiveness in
Banks of India for Sustainable Development,
BVICAM’s, International Journal of Information
Technology,
[4]. Jain M. &.Popli G.S., Role of Information Technology
in the development of Banking Sector in India, RBI
Annual Report.
[5]. Sharma M.C.,Role of Information Technology in Indian
Banking Sector, International Journal
inMultidisciplinary and Academic Research
[6]. Sreelatha T and Chandra Sekhar, (2012), Role of
Technology in Indian Banking Sector, IJMBS, 2(4).
[7]. Connolly, Sean and Joanna Stavins (2015), “Payment
Instrument Adoption and Use in the United States,
2009–2013,” Federal Reserve Bank of Boston Research
Data Reports, 15-6.
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Special Issue on Disruptions in Banking Sector in the Current Scenario 85
Empowerment of Women Employees in
Nationalized Bank in Chennai
M.Vishvabharathi.
Research Scholar
Mother Teresa Women’s University,
Research and Extension Center,
Madurai.
INTRODUCTION
Bank job is a very attractive one for women since it is one
of the high paying jobs and carries some status. There has
been a marked increase in women‟s employment in the
financial sector since the 1950s, in both public sector
companies and private foreign-controlled banks. Despite
this increase, women are still concentrated at the clerical
level, and the general picture is changing only very
slowly. Women officers in banks are a recent
phenomenon, which has become a little more significant.
The highest percentage of women is in the clerical cadre
in all the rural, semi-urban, urban and all India level
followed by sub-ordinate category. At urban metropolitan
level it is 8.78% and helped to raise the all India average
to 6.48%.
REVIEW OF LITERATURE
Khalequke & Chowdhury (1999) viewed about the Job
satisfaction is the single most sought after attribute of the
employment relationship. The most important element of
job satisfaction is job security.
Kamala Srinivasan (1999) states 50% of women
complained that extra work is always shunted to women.
They also complained about sexual harassment from
colleagues, managers, or customers. Women also felt
dissatisfied that they were not sent out for training. Some
obstacles arise from women‟s specific difficulties in
demanding promotion - because promotions are linked
with transfers; or they have difficulties in working late; or
because women shy away from responsibility having a
low opinion of their own abilities and a negative attitude
to accepting recognition.
Anitha Sharma’s (1999) revealed that women constitute
a big segment of India‟s total population. However their
share India‟s total employment has not been in proportion
to their total employment has not been in proportion to
their total population. This has been due to the lack of
modernization and due status in the society. But it is
hoped that the decade of the 90‟s will have for reaching
effects on the level of modernization and the existing
status of women.
Mankidy, (2000) point out some women employees feel
that these constraints are intensified by being forced to
adopt the behaviour of the successful manager or officer
which has been established by men. They argue that
women could find their own strategies which would
achieve the result. One way of improving prospects for
women could be to restructure the work, for example with
flexible working hours, part-time job assignments, split
location positions performed partly at home, and job
sharing.
McChanic (2000) analyses the employed married women
and men, and housewives found few differences in
satisfaction between marital, parental and employment
roles. Although, theoretical work has suggested that a
variety of job characteristics impact family life, Hughes
and his co-workers observed that the direct relationship
between job characteristics and marital tensions and
companionship was weak.
Meera Desai (2006) says that the working group of
employment of woman has emphasized that a policy of
promotion of woman‟s employment has to go hand in
hand with the broader social policy of strengthening
women‟s participatory roles and empowerment in
increasing their dignity.
STATEMENT OF THE PROBLEM
The progress and prosperity of an organization depends
upon the effective utilization of human resources which in
turn improves the level of output, productivity and
building healthy, organizational relations. Job satisfaction
of Workers is an important aspect which helps or leads to
achieve the above targets. In order to make a Worker to
satisfy with his job, the management must provide the
primary and secondary needs to a Worker.
The main importance of this study is to study and to
evaluate is to the various factors which lead to
empowerment of Women employees of Nationalized
Banks, Madras. The endeavour in it is concerned on
drawing of job satisfaction Working condition, how
Women among bank employees and thus achieving the
goal of better utilization of the work force this study aims
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86 Special Issue on Disruptions in Banking Sector in the Current Scenario
to prove the above analysis fact.
OBJECTIVES OF THE STUDY
To analyse the extent of Economic Independence
variation from growth opportunity of the respondents and
to offer suggestions and conclusions.
METHODOLOGY
The study primarily depends on primary data and data
were collected based on survey method. The survey is
conducted among the sample respondents. To elicit the
opinion of the respondents‟ interview schedule was used.
Sampling Design
The study was conducted in Chennai which includes
Kodambakkam, Saidapet, and T.Nagar. There 16
Nationalized Banks in these areas and have 56
branches in total. Among these branches 120 women
employees are selected based on proportionate random
sampling method. Sample respondents are selected
from all nationalized banks and more weightage is
given to Bank which has more number of branches in
the selection of samples.
Analysis of the study
Economic empowerment is the capacity of women and
men to participate in, contribute to and benefit from
growth processes in ways which recognise the value of
their contributions, respect their dignity and make it
possible to negotiate a fairer distribution of the benefits of
growth. Economic empowerment increases women‟s
access to economic resources and opportunities including
jobs, financial services, property and other productive
assets, skills development and market information.
The economic empowerment depends on economic
independence depends which leads to growth opportunity.
In this paper the researcher aimed to analyse whether the
economic independence of women bank employees lead
them into opportunity growth and development.
In this paper the profile of the respondents are-
educational qualification wise and income wise
classification are given and ‘t’ Test is applied to assess
for significance difference between economic independent
and Growth Opportunity and development.
1.Educational Qualification of the Respondents
Table 1shows the educational qualification of women
respondents.
Table 1 Educational Qualification of the women
respondents
Sl.No. Qualification No. of
Respondents Percentage
1 Up to H.S.C 20 15
2 U.G 81 68
3 P.G 19 17
TOTAL 120 100
Sources: - Primary Data Compiled
Table 1 clearly shows that the educational qualification
of women employees in banking sector. 68 percent of
women employees completed Under Graduates level, 17
percent of women employees completed Post Graduates
and 15 percent of women employees‟ educational
qualification is up to Higher Secondary level.
2. Income Distribution of the Respondents
Table 2 Income Distribution of the Respondents
SI. No. Income No. of
Respondents
Percentage
1 Below 30,000 68 57
2 Above 30,000 52 43
TOTAL 120 100
Sources: - Primary Data Compiled
Table 2 depicts the income of the respondents. Around 57
percent of the respondents earned below 30,000 and the
remaining 43 percent of the respondents earned above
30,000.
t test
Null Hypothesis: There is no significant different
between economic independent of family with respect to
the opportunity for growth and development.
Table 3 ‘t’ Test for Significance Difference between
Economic Independent and Grow Opportunity.
Economic
Independent
No. of
Respondent Mean S.D „t‟ Value
Table
Value
Yes 102 2.1176 .649 .62 1.96
No 18 2.222 .73 2
Since the calculated value t‟ is less than table value t‟, it is
so accepted the Null hypothesis at 5% level of
significance. Hence there is no significance difference
between economic independent in family worker related
towards the growth of opportunity. So Hypothesis is
accepted.
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Special Issue on Disruptions in Banking Sector in the Current Scenario 87
SUGGESTIONS AND CONCLUSION
Women‟s economic empowerment is a prerequisite for
sustainable development and pro-poor growth. Achieving
women‟s economic empowerment requires sound public
policies, a holistic approach and long-term commitment
and gender-specific perspectives must be integrated at the
design stage of policy and programming. Women must
have more equitable access to assets and services;
infrastructure programmes should be designed to benefit
both men and women
REFERENCES [1]. Heges J.N. and J.K. Barbett (1972), “Working Women
and the Decision of Household tools,” Monthly
Working Review .
[2]. Gulati L. (1975), “Ocupational Distribution of Working
Women - Weekly.
[3]. Maeeche Sherwari (1984), “Creating more Jo for
Female Workers”, Kurukshedra - A Journal On Rural
Development.
[4]. Shree Manju K. and Munirathna Naidu (1993),
“Employment of Women in India” in Indian Journal of
Socialism
[5]. Mahandra Devi S. and Vijay Mahajan (2003),
“Employment and Unemployment,” Eonomic and
Political Weekly.
[6]. Uma Rani (2003), “Women‟s Employment in the
Japaneses Economy”, Economic and Political Weekly.
