Technological Developments in Indian Banking Sector
N. Mohan Babu,
Vignan Degree and P.G. College,
Palakaluru Road, Guntur – 5.
The origin of Banking in the modern era is traced in Italy. Banking is a business like any other business, banking sector place a significant role in development of Indian Economy. So, Banks need to have technology to improve their productivity and efficiency, to provide faster and better services to the customers. Technology enables the banks to contribute more for overall growth and development of the country. After Industrial Revolution, Financial institutions including Banks have used Information Technology to achieve desired level of efficiency and to maximize the profitability. IT improves the front end operations with back end and helps in bringing down the transaction costs for the customers. Electronic Fund Transfer (EFT), Automatic Teller Machines (ATMs), Telephone Banking, Home Banking, Credit Card facility, Internet Banking etc. are most useful technological advances for banking sector to serve customers effectively now a days. So, the effective use of technology has multiplier effect on growth and development.
The bank of Venice, founded in 1157, was the first public banking Institution. The Bank of Barcelona and the Bank of Genoa wee established in 1401 and 1407 respectively. The Banking companies Act-1949 of India defines bank as – “A Bank is a financial Institution which accepts money from the public for the purpose of lending or Investment repayable on demand or otherwise withdrawal by cheques, drafts or order or otherwise.” Technological Development in Banks
After the industrial revolution, the information revolution has been hailed as the most significant development in this country. Financial Institutions including Banks have used Information Technology to handle large volumes of business with the desired level of efficiency and maximizing profitabilility of operations. IT improves the front end operations with back end and helps in bringing down the transaction costs for the customers. Some important events are
Arrival of card-based payments – Debit, Credit Card late 1980 and 1990s. Introduction of Electronic clearing Services (ECS) in late 1990s. Introduction of Electronic Fund Transfer (EFT) in early 2000s. Introduction of RTGS in March 2004.
Introduction of National Electronic Fund Transfer (NEFT) as a replacement to Electronic Fund Transfer/Special Electronic Fund Transfer in 2005/06. Computerization in Banks
Among the total number of Public Sector Bank branches, 98% are fully computerized at the end March 2011. Table 1: Computerization in Public Sector Banks
|Category |2007 |2008 |2009 |2010 |2011 | |Fully Computerized Branches (%) |85.6 |93.7 |95.0 |97.8 |98 |
Automated Clearing House (ACH)
The ACH system is the primary Electronic Funds Transfer (EFT) system used by agencies to make payments, and the Financial Management service anticipates the agencies increasingly will use the ACH system to collect funds. ACH processes large number of Debit and Credit transactions in batches. National Automated Clearing House Association (NACHA)
The National Automated Clearing House Association (NACHA) governs the Automated Clearing House (ACH) network, a system that allow Banks and Financial Institutions to process direct debits, electronic cheques and direct deposits. NACHA formulates business practices and operating rules to keep ACH and electronic banking secure, efficient and reliable. FEDACH is the Federal Reserve’s centralized application software used to process ACH transactions. Electronic Clearing Service (ECS)
ECS is an electronic mode of payment; it facilitates bulk transfer of money from one Bank account to many Bank...