Recent Trends in Indain Banking Sector Essay Example for Free

Recent Trends in Indain Banking Sector EssayThe economy can be divided in the entire spectrum of stinting activity into the accredited and monetary sectors. The real sector is where production takes place while the monetary sector supports this production and in a way is the mean to the end. We know and we accept the financial system is critical to the working of the rest of the economy. In fact, the Asian crisis of the nineties, or for that matter what happened in Latin America and Russia by and by and also Dubai Crisis have shown how a fragile financial sector can wreak havoc on the rest of the economy. Therefore the banking sector is crucial and we destiny to express our views to explore how this sector can work in harmony with the real sector to achieve the desired objectives.the b Banking sector has been immensely benefited from the instruction execution of superior technology during the recent past, almost in every nation in the world. Productivity enhancement, innov ative products, speedy transactions seamless transfer of finances, real time breeding system, and efficient risk management are some of the advantage derived through the technology. nurture technology has also improved the efficiency and lustiness of business processes across anking sector.Indias banking sector has made rapid strides in reforming and aligning itself to the impudent competitive business environment. Indian banking industry is the midst of an IT revolution. Technological root has become an indispensable part of the reforms process in the banking system, with the gradual development of sophisticated instruments and innovations in foodstuff practices.IT in BankingIndian banking industry, today is in the midst of an IT revolution. A combination of regulatory and competitive reasons has led to increasing richness of total banking automation in the Indian Banking Industry. Information engineering science has basically been employ under two different avenues in Ba nking. One is Communication and Connectivity and other is Business Process Reengineering. Information technology enables sophisticated product development, better market infrastructure, implementation of reliable techniques for control of risks and helps the financial intermediaries to reach geographically distant and diversified markets.The bank which utilise the right technology to supply timely information will see productivity increase and thereby gain a competitive edge. To compete in an economy which is opening up, it is imperative for the Indian Banks to incur the latest technology and modify it to suit their environment. Not only banks need greatly enhanced office of technology to the node friendly, efficient and competitive vivacious go and business, they also need technology for providing newer products and newer forms of services in an increasingly dynamic and globalize environment. Information technology offers a chance for banks to build new systems that address a wide range of customer needs including many that may not be imaginable today.Following are the innovative services offered by the industry in the recent pastElectronic Payment Services E ChequesNowadays 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.Real metre 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 reckon to the notice of another(prenominal) bank. The RTGS system is maintained and operated by the RBI and provides a means of efficient and faster funds transfer among banks facilitating their fin ancial operations. As the pretend suggests, funds transfer between banks takes place on a Real Time basis. Therefore, money can reach the beneficiary instantaneously and the beneficiarys bank has the office to credit the beneficiarys account within two hours.Electronic Funds Transfer (EFT)Electronic Funds Transfer (EFT) is a system whereby anyone who wants to discharge payment to another person/company etc. can approach his bank and make cash payment or give instructions/authorization to transfer funds directly from his own account to the bank account of the receiver/beneficiary. Complete details such as the receivers name, bank account number, account type (savings or current account), bank name, city, branch name etc. should be furnished to the bank at the time of requesting for such transfers so that the amount reaches the beneficiaries account aright and faster. RBI is the service provider of EFT.Electronic Clearing Service (ECS)Electronic Clearing Service is a retail paymen t 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 comparatively 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.Automatic Teller forge (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 program bills, funds transfer between accounts, deposit of cheques and cash into accounts, balance enquiry etc.Point of Sale TerminalPoint of Sale Terminal is a computer terminal that is linked online to the computerized customer information files in a bank and magnetically encod ed plastic transaction card that identifies the customer to the computer. During a transaction, the customers account is debited and the retailers account is credited by the computer for the amount of purchase.Tele BankingTele Banking facilitates the customer to do entire non-cash related banking on telephone. Under this devise Automatic Voice vertical flute is used for simpler queries and transactions. For complicated queries and transactions, manned phone terminals are used.Electronic Data Interchange (EDI)Electronic Data Interchange is the electronic exchange of business documents manage 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.ImplicationsThe banks were quickly responded to the changes in the industry especially the new generation banks. The continuance of the trend has re-defin ed and re-engineered the banking operations as whole with more customization through leveraging technology. As technology makes banking convenient, customers can access banking services and do banking transactions any time and from any ware. The importance of physical branches is going down.Challenges Faced by Banks, vis--vis, IT ImplementationIt is becoming increasingly imperative for banks to assess and ascertain the benefits of technology implementation. The fruits of technology will certainly experiment a lot sweeter when the returns can be measured in absolute terms but it needs precautions and the safety nets.It has not been a smooth pilotage for banks keen to jump onto the IT bandwagon. There have been impediments in the path like the obduracy once shown by trade unions who felt that IT could turn out to be a threat to secure employment. Further, the expansion of banks into remote nooks and corners of the country, where logistics continues to be a handicap, proved to be an other stumbling stock. Another challenge the banks have had to face concerns the inability of banks to retain the trained and talented personnel, especially those with a good knowledge of IT.The increasing use of technology in banks has also brought up security concerns. To debar any pitfalls or mishaps on this account, banks ought to have in place a well-documented security policy including network security and internal security. The passing of the Information Technology Act has come as a boon to the banking sector, and banks should now ensure to abide strictly by its covenants. An effort should also be made to peak e-business in the countrys consumer laws.Some are investing in it to drive the business growth, while others are having no option but to invest, to stay in business. The plectron of right channel, justification of IT investment on ROI, e-governance, customer relationship management, security concerns, technological obsolescence, mergers and acquisitions, penetration of IT in rural areas, and outsourcing of IT operations are the major challenges and issues in the use of IT in banking operations. The main challenge, however, remains to motivate the customers to increasingly make use of IT while transacting with banks. For small banks, heavy investment requirement is the compressing need in addition to their capital requirements. The coming years will see even more investment in banking technology, but reaping ROI will call for more strategic thinking.Future OutlookEveryone today is convinced that the technology is going to hold the key to future of banking. The achievements in the banking today would not have make possible without IT revolution. Therefore, the key point is while changing to the current environment the banks has to understand properly the trigger for change and accordingly find out the fit departure point for the change.Although, the adoption of technology in banks continues at a rapid pace, the concentration is perceptibly more in the metros and urban areas. The benefit of Information Technology is yet to percolate sufficiently to the common man living in his rural hamlet. More and more programs and software in regional languages could be introduced to attract more and more people from the rural segments also.Standards based messaging systems should be increasingly deployed in order to address cross platform transactions. The free manpower generated by the use of IT should be used for marketing new schemes and banks should form a brains trust comprising domain experts and technology specialists.ConclusionThe banking today is re-defined and re-engineered with the use of Information Technology and it is sure that the future of banking will offer more sophisticated services to the customers with the continuous product and process innovations. Thus, there is a ikon shift from the sellers market to buyers market in the industry and finally it affected at the bankers level to change their approach from conven tional banking to convenience banking and mass banking to single out banking. The shift has also increased the degree of accessibility of a common man to bank for his variety of needs and requirements.