The Banking industry in India has experienced radical changes since independence. With the improvements in technology and automation, the banking sector has become highly competitive today.
To survive and grow in the changing market scenario, banks are opting for best in class and latest technologies. Information Technology (IT) has become the base of the recent financial sector reforms and has helped the banks in developing leaner and more flexible structure that can respond quickly to the dynamics of a fast changing market.
The use of IT in the banking sector has increased beyond one’s imagination with features like online loan application, online uploads of documents, net banking, online bill payments, etc. Before a couple of decades, who would have thought these things could have been possible.
Major Trends that bring out importance of information technology in banking sector:
E-cheques (Electronic Cheques) are a form of electronic tokens designed to make payments through the internet and performs the same functions as a conventional paper cheque.
As the cheque is in an electronic form, it can be processed in fewer steps and has more security checks than a standard paper cheque, like authentication, public key cryptography, digital signature, encryption, etc.
With the amendments in Negotiable Instruments Act, 1881, an e-cheque has become legalized since 2002. These cheques make the transfer process faster, due to the use of conventional encryption.
2) NEFT and RTGS
National Electronics Fund Transfer (NEFT), started in November 2005, is a nationwide fund transfer system that can move funds from an individual’s bank account to any other bank account within the country.
Real Time Gross Settlement (RTGS) that was introduced in 2004,transfers money from one bank to another on a “real time” and on “gross” basis.
Here, “real time” means the transaction is not subject to any waiting period and “gross” means thetransaction is settled on one to one basis without bunching or netting with any other transaction.
The difference between NEFT and RTGS is that the latter is only for an amount exceeding Rs. 2 lakhs and the former is for transactions of any amount.
3) Point of Sale (PoS) terminals
PoS terminals are electronic devices, which are used to process (Dr. and Cr.) card payments at retail locations. It can be considered as a computerized replacement for a cash register.
This system has the ability to track and record customer orders, process credit and debit cards, connect to other systems in a network, and manage inventory. These terminals make extensive use of the technology and enable banks to quickly process the payments.
4) Mobile Banking
The banking has now come in the hands of the customers, with the introduction of mobile banking in 2002 and continuous developments since then.
Today, a customer can perform, a number of functions like checking account balance, transferring money, making a fixed/recurring deposit, recharging a phone, paying different kinds of bills, etc. with the help of a smartphone and internet.
With the times to come, the use of technology in the banking sector will only increase and will bring about disruptive changes.
Also, banks are expected to play a very critical role in the economic development in future. Currently, the Indian public sector banks that hold around 75% of market share have taken initiative to make optimum use of technology to meet customer expectations and provide them quality service.
As far as the Indian banking industry is concerned, it can be said that although the banks in Indiaare not as technologicallyadvanced as their counterparts in the developed world, they are following the majority ofinternational trends in the IT domain.
To conclude, the banking industry in India is rapidly progressing with increased customer base and due to newly improved and innovative facilities offered by the technology.