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“Innovations in Indian Banking Sector – A Study

Article · January 2019

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Vivek Nagarajan Samuel Anbu Selvan S.C.B

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JASC: Journal of Applied Science and Computations ISSN NO: 1076-5131

INNOVATIONS IN INDIAN BANKING SECTOR – A STUDY

1
Dr.S.C.B.SAMUEL ANBU SELVAN; 2N.VIVEK
1
Assistant Professor, Department of Commerce, the American College, Madurai
Email :anbuselvan73@gmail.com
2
Research Scholar, Department of Commerce, Madurai Kamaraj University, Madurai
Email : vivekautcbe@gmail.com
ABSTRACT
The term innovations refer to “performing an existence process / task / an activity in
a new way”. Banking industry is one of the fastest growing industries in India. Banks in India
have no longer restricted themselves to traditional banking activities but explored newer
avenues to increase business and capture new market. Banks once were of brick and mortar
model. Now, due to innovation initiatives they have turned out to be Click and Portal Model.
Indian Banks have also introduced practices such as e-banking, application oriented payment
services, e-pass books and the like. This article deals in detail about the various innovations
that have taken place in the Indian banking.
Keywords: E banking, Branch Automation, DEMAT Services, Plastic Money

INTRODUCTION
The trend has been the creation of service delivery channels through which consumers
can interact with the banks. Therefore modern banks provide their consumers with increased
channel choice, reach out consumers through many routes. As such, ATMs, telephone,
internet and wireless channels are now available to the consumers to perform their banking
transactions in addition to the traditional branch banking. Banks cannot go back in the future
by reducing the number of channels as consumers have become somewhat adapted to and
indeed are utilizing a broad range of options (Durkin, 2004)
Modern scenario projects that E-banking is shaping the financial services industry.
Henceforth, it is imperative to understand comprehensively the evolution of E-banking. A
brief history and trend analysis of the evolution of E-banking industry globally using
document analysis reveals the major barriers, impediments and boosters for the rapid
transition of the banking sector and uptake of E-banking. Document analysis is the systematic
analysis of a particular topic, using documents such as newspapers, annual reports,
employment records, published and unpublished articles, industry and consultancy reports,
ongoing academic working papers, government white paper reports and white papers
(Neuman, 1997). In a broader perspective, electronic banking is defined as the provision of
banking services via means other than traditional physical branches (Liao et al., 1999).
Electronic banking offers its financial services to its prospective customers through various
forms such as:

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JASC: Journal of Applied Science and Computations ISSN NO: 1076-5131

 Automated Teller Machines (ATM)

 Telephone Banking
 Home Banking
 Internet Banking
 Mobile Banking

OBJECTIVE OF THE STUDY

 To study about the various innovations that has taken place in the Indian banking
sector.

METHODOLOGY
 Research Type : Descriptive
 Data Collection : Secondary data collected through Books, Web Sites, Journals
and
the like
Discussions - Innovations in Indian Banking Sector

1. Internet banking

The shift towards internet banking is fuelled by the changing dynamics in

India. By 2020 the average age of India will be 29 years and this young consumer
base is internet savvy and wants real time online information. Indian banks
therefore need to aspire high and move toward implementing a world class
internet banking capability.

Urban areas had a total of 205 million internet users in October 2013 that
accounts for 40% of growth, while rural India have 68 million users and a growth
rate of 58%.

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2. Business intelligence

India‘s banking industry is on the cusp of a major transformation, with new

banking licenses expected to bring in more players in an already competitive
environment. In such an environment, banks across India are increasingly
adopting business intelligence (BI) and analytics to drive their overall
profitability.
RBI has also encouraged banks to adopt BI to increase transparency and
control over the banking business. The Automated Data Flow (ADF) initiative has
been a strategic step in this direction, seeking to ensure submission of correct and
consistent data from banks‘ systems to the RBI without any manual intervention.

3. Customer management

Banks need to clearly articulate and measure the expected benefits from the
winning strategies which would be dependent on the value various initiatives
provide customers. These include:

o Customer segmentation

o Co-creation

o CRM to customer experience

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o Use of alternative channels

o Effective cross and up sell

4. Risk management and information security

The Indian Bank‘s Association (IBA) survey and EY analysis reveals that
Core Banking System (CBS) is widely used across the banks for transaction
management. However, its integration with risk management and other enterprise
level applications is still at preliminary stages.

Some key risk management methods include:

o Credit systems

o Enterprise Risk Management Systems

o Liquidity risk systems

With the advent of mobile computing, social media, cloud computing and
increasing sophistication of hackers it is evident that the risk environment is
changing. With more and more cases being registered under the IT Act 2000,
banks can no longer ignore privacy of customers.

5. Technology in training and e-learning

The last decade, which marks the era of liberalization and reforms in the
country, has been an eventful one for the banking sector, changing the face of the
industry in a big way. The increase in investment on training and development by
banks in India is caused by a variety of motives, which include — new technology
adoption, productivity, responding to skills deficiencies, new hire inculcation, and
staff performance management.

6. Financial inclusion

The six cornerstones pillars of financial inclusion

The ability of Electronic Regulators Interoperability Keeping pace Government can

technology to payments are should consider can create value with technology incentivize service
bring services to accelerating this relaxing for customers to changes in the providers to introduce
people wherever drive, and new restrictions in attract large financial technologyenhanced
they are and developments, areas that volumes. inclusion space business models that
whenever they including Big disproportion will require improve last mile

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need them is the Data, ubiquitous ally affect significant delivery by deploying
biggest driver of internet access unbanked investments in their own resources, e.g.,
achieving and cloud customers, e.g., the regulatory DBT payments and
comprehensive computing, are through KYC, capacity and universal service funds.
financial inclusion. expected to have agent banking changes made
enormous impact. and mobile in regulatory
banking. processes.

7. Mobile banking

Mobile banking continues to be a focus area for all banks in India. Our survey
indicates that they are not only looking at this channel as a way to increase their
customer engagement in urban areas, but also to reach out to new ones in rural
regions, and thereby significantly further their financial inclusion agenda.

8. Payment systems

In the last decade, India has seen a shift from traditional payment methods,
i.e., cash/paper-based payments to modern electronic payment systems. However,
97% of payment transactions for public sector banks are paper based as compared
to 60% for private sector banks.

o Providing robust RTGS/NEFT platform, establishing National Payments

Corporation of India (NPCI) to act as an umbrella institution for all the
retail payment systems

o Regulation and promotion of acceptance channels including ATMs, POS

and payment gateway policy

o Issuance guidelines and security measures for all card transactions [2]

9. Credit Cards/Debit Cards

The Credit Card holder is empowered to spend wherever and whenever he
wants with his Credit Card within the limits fixed by his bank. Credit Card is a post
paid card. Debit Card, on the other hand, is a prepaid card with some stored value.
Every time a person uses this card, the Internet Banking house gets money transferred
to its account from the bank of the buyer. The buyers account is debited with the exact
amount of purchases.

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10.Smart Card
Banks are adding chips to their current magnetic stripe cards to enhance
security and offer new service, called Smart Cards. Smart Cards allow thousands of
times of information storable on magnetic stripe cards. [1]

CONCLUSION

The spread of digital connectivity and mobile phones have created attractive
opportunities in the Indian financial inclusion landscape. In particular, technology promises
to enable hundreds of millions of people to access financial services for the first time due to
its wide reach, convenience and low cost of delivery. India is experimenting with several new
ideas in financial inclusion in almost all areas requiring immediate focus — banking and
payment channels, technology platforms, regulatory. Significant progress is required in
financial inclusion, as indicated clearly by the World Bank Findex Survey 2012

REFERENCES
1. http://www.shanlaxjournals.in/pdf/MGT/V3N2/MGT_V3_N2_011.pdf
2. https://www.ey.com/in/en/industries/financial-services/banking---capital-markets/ey-
banking-on-technology-india-banking-industry

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