National Conference on Emerging Business Strategies in Economic Development Special issue - December 2016

A Study on Recent Trends in Indian Banking

Facilities
B.Ananda Raj Mba, M.Com, M.Phil
Asst. Professor,
Department Of Business Administration,
Loyola College, Vettavalam, Thiruvannamalai (Dt) .Pin-606754

ABSTRACT: to meet the demands of the customers and are also

Indias banking sectors has made rapid strides in
reforming and make even itself to the new
competitive business environment. Indian Banking
Industry is in the midst of the Information
Technology Revolution and its changes has put forth
the competition among the Banks worldwide.
Indian economic environment is witnessing path
breaking reform measures. The financial sector, of
which the banking industry is the largest player, has
also been undergoing a metamorphic change.
Today, we are having a fairly well developed banking
system with different classes of banks public sector
banks, foreign banks, private sector banks both old
and new generation, regional rural banks and co-
operative banks with the Reserve Bank of India as the
fountain Head of the system.
During the last 41 years since 1969, tremendous
changes have taken place in the banking industry.
The banks have shed their traditional functions and
have been innovating, improving and coming out
with new types of the services to cater to the
emerging needs of their customers.
adding the economic development of the nation at
large.
Indias Banking sector has made rapid strides in
reforming and aligning itself to the new competitive
business environment.Technology has swiftly turned
as a boon to the customers. With Technology the
Bank branches becomes only one of the many
channels that are now accessible to customers for
performing routine banking transactions.
The Information Technology has transformed the
functioning of the businesses worldwide. It has
bridged the gaps in the terms of reach and the
coverage of system. It also enabled better decision
making based on the latest and the accurate
information. It has not only tried to reduce the cost
but also tried its level best to improve the efficiency
in the many new processes, products and services
offered by the Banks and the IT centers. Banks that
employ IT solutions are perceived to be innovative
and should be capable of satisfying the customers
with their services.
THE INDIAN BANKING SECTOR

Key words: Banking and Technology, E- Banking.
INTRODUCTION:
In 1969, a landmark was registered in the Indian
Financial Sector, when 14 Banks werenationalized by
the center. It is a matter of great pride to mention that
during the economic meltdown in 2008-09, our
Indian Bank stood firm and remained unaffected.
This shocked the whole world as few Banks of the
developed nations crumbled down but Indian Bank
stood strong and also witnessed many positive
developments in this industry.
To improve the regulation in this sector, several
notable efforts were made by the Policy Makers i.e.
The Reserve Bank of India, Ministry of Finance and
other Government and financial sector agencies. It
must be appreciated that the Banks are in a position
The history of Indian banking can be
divided into three main phases.
Phase I (1786- 1969) - Initial phase of banking in
India when many small banks were set up
Phase II (1969- 1991) - Nationalization,
regularization and growth
Phase III (1991 onwards) - Liberalization and its
aftermath
With the reforms in Phase III the Indian
banking sector, as it stands today, is mature in
supply, product range and reach, with banks having
clean, strong and transparent balance sheets. The
major growth drivers are increase in retail credit
demand, proliferation of ATMs and debit-cards,
decreasing NPAs due to Securitization, improved
macroeconomic conditions, diversification, interest

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 National Conference on Emerging Business Strategies in Economic Development Special issue - December 2016
rate spreads, and regulatory and policy changes (e.g.
amendments to the Banking Regulation Act).
Certain trends like growing competition,
product innovation and branding, focus on
strengthening risk management systems, emphasis on
technology have emerged in the recent past. In
addition, the impact of the Basel II norms is going to
be expensive for Indian banks, with the need for
additional capital requirement and costly database
creation and maintenance processes. Larger banks
would have a relative advantage with the
incorporation of the norms.
OBJECTIVES OF THE STUDY:
1. The main objective of the study is to understand
Banking Sector
2. To understand the emerging technological trends
in Banking Sector in India.
3. To trace the utility of technology in Banking with
special reference to India.
RESEARCH METHODOLOGY:
This research is based on the analysis of the
secondary data and the research proposes to
throwlight on the emerging technology trends in
banking sector.
PERSPECTIVES ON INDIAN BANKING
In 2009-10 there was a slowdown in the
balance sheet growth of scheduled commercial banks
(SCBs) with some slippages in their asset quality and
profitability. Bank credit posted a lower growth of
16.6 per cent in 2009-10 on a year-on-year basis but
showed signs of recovery from October 2009 with
the beginning of economic turnaround. Gross
nonperforming assets (NPAs) as a ratio to gross
advances for SCBs, as a whole, increased from 2.25
per cent in 2008 -2009 to 2.39 percent in 2009
10. Not with standing some knock-on effects
of the global financial crisis, Indian banks
withstood the shock and remained stable and sound
in the post-crisis period. Indian banks now compare
favorably with banks in the region on metrics such as
growth, profitability and loan delinquency ratios. In
general, banks have had a track record of innovation,
growth and value creation. However this process of
banking development needs to be taken forward to
serve the larger need of financial inclusion through
expansion of banking services, given their low
penetration as compared to other markets.
During 2010-11, banks were able to improve their
profitability and asset quality. Stress test showed that
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banking sector remained reasonably resilient to
liquidity and interest rate shocks. Yet, there were
emerging concerns about banking sector stability
related to disproportionate growth in credit to sectors
such as real estate, infrastructure, NBFCs and retail
segment, persistent asset-liability mismatches, higher
provisioning requirement and reliance on short-term
borrowings to fund asset growth.
GLOBAL BANKING DEVELOPMENTS
The year 2010-11 was a difficult period for
the global banking system, with challenges arising
from the global financial system as well as the
emerging fiscal and economic growth scenarios
across countries. Global banks exhibited some
improvements in capital adequacy but were
beleaguered by weak credit growth, high leverage
and poor asset quality. In contrast, in major emerging
economies, credit growth remained at relatively high
levels, which was regarded as a cause of concern
given the increasing inflationary pressures and capital
inflows in these economies. In the advanced
economies, credit availability remained particularly
constrained for small and medium enterprises and the
usage of banking services also stood at a low,
signaling financial exclusion of the population in the
post-crisis period. On the positive side, both
advanced and emerging economies, individually, and
multi-laterally, moved forward towards effective
systemic risk management involving initiatives for
improving the macro-prudential regulatory
framework and reforms related to systemically
important financial institutions.
POLICY ENVIRONMENT
Banking sector policy during 2010-11
remained consistent with the broader objectives of
macroeconomic policy of sustaining economic
growth and controlling inflation. The Reserve Bank
introduced important policy measures of deregulation
of savings bank deposit rate and introduction of
Credit Default Swap (CDS) for corporate bonds. It
initiated the policy discussions with regard to
providing new bank licenses, designing the road-
ahead for the presence of foreign banks and holding
company structure for banks. The process of
migration to the advanced approaches under the
Basel II regulatory framework continued during
2010-11, while also facilitating the movement
towards the Basel III framework Financial Inclusion
continued to occupy center stage in banking sector
policy with the rolling out of Board-Approved
Financial Inclusion Plans by banks during 2010-11
for a time horizon of next three years.
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 National Conference on Emerging Business Strategies in Economic Development Special issue - December 2016
RECENT TRENDS IN BANKING
The Indian banking industry is not lagging behind, it
has started providing services electronically over the
internet. These services rendered over electronic
media include:
Electronic Payment Services
E Cheques:
Real Time Gross Settlement (RTGS):
Electronic Funds Transfer (EFT)
Electronic Clearing Service (ECS)
Automatic Teller Machine (ATM)
Electronic Data Interchange (EDI)
Shared Payment Network System
SPNS
Tele Banking
Phone banking
Credit Cards
Point of Sale POS
D-Mat Accounts
1. Electronic Payment Services
E Cheques:
Now-a-days we are hearing about e-governance, e-
mail, e-commerce, e-tail etc. In the same manner, a
new technology is being developed in US for
introduction of e-cheque, which will eventually
replace the conventional paper cheque. India, as
harbinger to the introduction of e-cheque, the
Negotiable Instruments Act has already been
amended to include; Truncated cheque and E-
cheque instruments.
2. Real Time Gross Settlement (RTGS):
Real Time Gross Settlement system, introduced in
India since March 2004, is a system through which
electronics instructions can be given by banks to
transfer funds from their account to the account of
another bank. The RTGS system is maintained and
operated account within two hours.
3. Electronic Funds Transfer (EFT):
Electronic funds transfer is a system of processing
and communication of payment through electronic
methods. EFT assumes greater significance in the
banking system as the RBI also encourages the
commercial banks to adopt this technique. Inter and
intra bank transfers of funds are now made through
this EFT mechanism. Transactions of high value i.e.,
at least more than one lakh is now made through this
cost effective and quick system of settlement.
Normally, payments are made through cash, cheques,
drafts and credit cards. The latest in this process are
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the debit card system, charge, digital cash, and
electronic purse and so on.
4. Electronic Clearing Service (ECS):
Electronic Clearing Service is a retail payment
system that can be used to make bulk
payments/receipts of a similar nature especially
where each individual payment is of a repetitive
nature and of relatively smaller amount. This facility
is meant for companies and government departments
to make/receive large volumes of payments rather
than for funds transfers by individuals.
5. Automatic Teller Machine (ATM):
Automatic Teller Machine is the most popular devise
in India, which enables the customers to withdraw
their money 24 hours a day 7 days a week. It is
a devise that allows customer who has an ATM card
to perform routine banking transactions without
interacting with a human teller. In addition to cash
withdrawal, ATMs can be used for payment of utility
bills, funds transfer between accounts, deposit
of cheques and cash into accounts, balance enquiry
etc.
6. Electronic Data Interchange (EDI):
Electronic Data Interchange is the electronic
exchange of business documents like purchase order,
invoices, shipping notices, receiving advices etc. in a
standard, computer processed, universally accepted
format between trading partners. EDI can also be
used to transmit financial information and payments
in electronic form.
7. Shared Payment Network System
(SPNS):
SPNS installed by the IBA in the city of Mumbai,
enables electronic banking service like cash
transactions, extended hours of banking, utility
payments, cheques, point of sale facilities by the
SPNS can go to any ATM linked to S
8. Tele Banking:
Tele Banking facilitates the customer to do entire
non-cash related banking on telephone. Under this
devise Automatic Voice Recorder is used for simpler
queries and transactions. For complicated queries and
transactions, manned phone terminals are used.
9. Phone Banking:
Bank on phone, provides easy access for customers to
have large businesses through telephones. Data are
exchanged over the phone regarding any queries, to
issue instructions on balance transfer, statement of
account, cheque- book, stop payments, new schemes,
interest rates etc. at any convenient time and place.
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 National Conference on Emerging Business Strategies in Economic Development Special issue - December 2016

Tele banking has gone a long way in providing for this lies in the capabilities of the Reserve Bank of
maximum customer satisfaction within the limited India as an able central regulatory authority, whose
infrastructure policies have shielded Indian banks from excessive
leveraging and making high risk investments. By the
10. Credit Cards: government support and a careful re-evaluation of
These plastic cards enable customers to spend existing business strategies can set the stage for
whenever he/she wants within the prescribed limits Indian banks to become bigger and stronger, thereby
and pay later. Debit card is a prepaid card with stored setting the stage for expansions into a global
value, whereas credit card is postpaid with fixed consumer base. The long term success by any bank
limits. It is seen that spending is higher through debit cannot be achieved without the development of new
cards than with credit cards currently CITY Bank and business ideas,innovative products and services and
time bank have started with Debit cards and now intense focus on customer retention.
other banks are also following these to launch their
own cards.
References:
11. Point of sale [POS] terminal: 1. www.google.com
Payment card at a retail location for electronic 2. www.wikipedia.com
transfer of fund is called POS. The client enters his
3. www.ijsr.net
personal identification number [PIN] and confirms
4. www.abhinavjournal.com
the amount due. Customers account is automatically
5. www.moneycontrol.com
debited with the amount of purchases and it credits
6. http://www.mbaknol.com/business-
the retailers account POS installed at petrol stations
finance/recent-trends-in-indian-banking-sector/
and large retail houses are linked to banks network
7. http://www.articlesbase.com/information-
participant sometimes make illegal money at the cost
technology-articles/it-emergence-recent-trends-
of investors. SEBI should find ways to overcome this
in-banking-industry-of-india-1981838.html
to give a good scope for Demat in India
Journals:
12. D-Mat Accounts: 1. International journal of science and research
Transacting shares business through electronic media (ijsr)
is called D-Mat. Investor opens an account called 2. National monthly refereed journal of research in
Demat Accounts with DPS. They get shares in commerce & management
electronic form. Then they send the actual shares to 3. Communications of the IIMA 63 2005 Volume 5
the investor. Investor pays for the opening, Issue 4
maintenance and collection of shares. This has 4. Tactful Management Research Journal
reduced the paper work, bad deliveries; loss of shares
and less transaction cost. However delays in
demating, higher cost charged by the investors has
not given a good start for the growth and scope of
Demat in India. Depository.

Conclusion:
Indian banking system will further grow in
size and complexity while acting as an important
agent of economic growth and intermingling different
segments of the financial sector.As banking in India
will become more and more knowledge supported,
capital will emerge as the finest assets of the banking
system. Ultimately banking is people and not just
figures. To conclude it all, the banking sector in India
is progressing with the increased growth in customer
base, due to the newly improved and innovative
facilities offered by banks. The economic growth of
the country is an indicator for the growth of the
banking sector. The Indian economy is projected to
grow at a rate of 5-6 percent the countrys banking
industry is expected to reflect this growth. The onus

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