TECHNOLOGICAL ADVANCEMENT IN BANKING SECTOR IN INDIA: CHALLENGES AHEAD
ABSTRACT Over the last three decades the role of banking in the process of financial intermediation has been undergoing a profound transformation, owing to changes in the global financial system. India’s banking system has seen some major financial innovations in the past decade as well as steps to promote financial inclusion, schemes that aim to take banking services to yet-to-be-banked areas. The various innovations in banking and financial sector are ECS, RTGS, EFT, NEFT, ATM, Retail Banking, Debit & Credit Cards, free advisory services, implementation of standing instructions of customers, payments of utility bills, fund transfers, internet banking, telephone banking, mobile banking, selling insurance products, issue of free cheque books, traveller’s cheques and many more value added services. The major impetus for financial innovation has been globalization of financial systems, deregulation, and great advances in technologies. In increasingly integrated financial systems facing higher volatilities, more competition and wide varieties of risks, financial innovation has become an essence to provide new products and strategies to better suit different circumstances of time and market and to meet different requirements of participants in financial system. This paper studies about financial innovation in banking in India. It also highlights the benefits and challenges of innovative banking trends. Banks boost technology investment spending strongly to address revenue, cost and competitiveness concerns. The purpose of present study is to analyze such effects of innovation in banking on growth and development of India.
Keywords: Financial Inclusion, ATM, Retail Banking, Debit & Credit Cards INTRODUCTION Financial innovation in India is key to making growth inclusive by connecting hundreds of millions to the banking system, said panelists at the World Economic Forum’s India Economic Summit. The deregulation of financial service industry and increased competition with in investment banking undoubtedly led to increased emphasis on the ability to design VOLUME NO.2, ISSUE NO.1 89 ISSN 2277-1166 new products, develop better process, and implement more effective solution for increasingly complex financial problems. These financial innovations are a result of number of Government regulations, tax policies, globalization, liberalization, privatization, integration with the international financial market and increasing risk in the domestic financial market. Financial innovation is the process through which finance managers or intermediary institutions in financial markets add value to existing plain vanilla products that satisfy the user needs. According to John Finnerty, “Financial Innovation involves the design, the development, and the implementation of innovative financial instruments and processes, and the formulation of creative solutions to problems in finance”. The various innovations in banking and financial sector are ECS, RTGS, EFT, NEFT, ATM, Retail Banking, Debit & Credit cards, free advisory services, implementation of standing instructions of customers, payments of utility bills, fund transfers, internet banking, telephone banking, mobile banking, selling insurance products, issue of free cheque books, travel cheques and many more value added services. Intense competition among the banks has redefined the concept of the entire banking system. The banks are looking for new ways not only to attract but also to retain the customers and gain competitive advantage over their competitors. The banks like other business organizations are deploying innovative sales techniques and advanced marketing tools to gain supremacy. The main driver of this change is changing customer needs and expectations. Customers in urban India no longer want to wait in long queues and spend hours in banking transactions. This change in customer attitude has gone hand...
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