“A CASE STUDY ON INNOVATIONS IN THE INDIAN BANKING SECTOR”
Abstract: In the 1990s, the banking sector in India saw greater emphasis being placed on technology and innovation. Banks began to use technology to provide better uality o! services at greater speed.
Internet banking and mobile banking made it convenient !or customers to do their banking !rom geographically diverse places. Banks also sharpened their !ocus on rural markets and introduced a variety o! services geared to the special needs o! their rural customers.
Banking activities also transcended their traditional scope and new concepts like personal banking, retailing and banc assurance were introduced.
"he sector was also moving rapidly towards universal banking and electronic transactions, which were e#pected to change the way banking would be perceived in the !uture.
Breakthrough in !und trans!er: In $ay %00&, the curtain was !inally li!ted on the much discussed 'eal "ime (ross )ettlement *'"()+ system, which many analysts considered, would revolutionie !unds trans!er in the Indian banking sector.
'"() is an electronic !unds trans!er system designed to allow the real time settlement o! inter bank payments in a !ully secure environment.
It enables companies to trans!er outstanding !unds between banks in real time, thus allowing them to settle payments instantaneously and manage their working capital better. It is also e#pected to save signi!icant amounts o! money in interest payments on !loating !unds lying in banks. "he !irst '"() transaction took place when )tandard -hartered Bank *)-B+ e#ecuted a deal !or industan /ever /td *//+ with )tate Bank o! India *)BI+ being the receiving bank. "he amount trans!erred to )BI was 's 100 million. )everal commercial banks in India had been involved in the phased implementation o! '"() !or several preceding months. )ome o! the early adopters o! '"() were )-B, )BI, ousing evelopment 2inance -orporation *2-+ and )araswat Bank. IndusInd Bank was also close to implementing the system.
-ommenting on the implementation o! '"(), a senior o!!icial at the 'eserve Bank o! India *'BI+ said, 34e have achieved a very signi!icant landmark in migrating high value !unds trans!er !rom paper5based system to electronic based payment system3.
'"() was the latest in the line o! payment delivery systems that have been implemented in the Indian banking sector since the 1990s.
)ome o! the systems implemented earlier included the electronic clearing service *1996+, electronic !unds trans!er *72"+ !acility *1998+ and special electronic !unds trans!er system *%00+. -hanges in the Indian banking sector in the late 1990s and early %000s, are e#pected to create high value !or customers as well as the banks involved.
Innovations in banking in india: ver the years, the banking sector in India has seen a number o! changes. $ost o! the banks have begun to take an innovative approach towards banking with the obective o! creating more value !or customers, and conseuently, the banks. )ome o! the signi!icant changes in the Indian banking sector are discussed below: "echnology !or value creation: "he use o! in!ormation technology in the Indian banking sector was a corollary o! the liberaliation process initiated in the country in the early 1990s. 'ural India catching up: 4ith a maority o! the Indian population living in rural areas, rural banking !orms a vital component o! the Indian banking system. Besides, rural banking operations in India are rather di!!erent !rom urban operations, due to the strong disparity that e#ists between urban and rural li!e, and the needs o! these two sections o! people. Banking beyond banking: 4hile traditionally, banking meant ;borrowing and lending;, in the latter part o! the %0th century, the word took on a di!!erent meaning altogether. Banks no longer restricted themselves to traditional banking activities, but e#plored newer avenues to increase business and capture new markets.
"he changing !ace o! banking: $any analysts predict still more revolutionary changes in the banking sector in India. "he chie! o! these are likely to be the concept o!
Questions:
1. 7#amine the development o! the banking system in India and understand the
changes occurring in it. 2.
to cater to these needs. Analye the changes occurring in the Indian banking sector and how these changes are likely to in!luence the way banking will be done in the !uture.
