In the development of Indian Banking, banking sector plays a very important and crucial role. The banking Industry has experienced a series of significant transformations in the last few decades. The use of modern technology by banks is one of the strategic responses that manage the business of banking in more transparent and profitable manner in the globalized and liberalized financial system. The banking today is redefined and re-engineered with the use of IT and it is sure that the future of banking will offer more sophisticated services to customers with the continuous product and process innovations. The article presents a study which aims to analyze the role of information technology (IT) in the Indian banking system. Indian banks are investing heavily in the technologies such as automated teller machine, net banking, mobile banking, credit cards, debit cards and data warehousing etc. These technologies driven delivery channels are being used to reach out to maximum number of customers at lower cost and in most efficient manner. It is essential to evaluate the impact of information technology on the performance of Indian banks as well as to assess the Status of E-Banking in Indian commercial banks.
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Keywords: Indian Banks, Information Technology, Customer satisfaction, E-Banking
Introduction: Business profile of banks in India has been undergoing a drastic change. Forces of globalization, liberalization of interest rate regime, autonomy to banks, have changed the traditional benchmarks of banking and now profitability and transparent banking are hallmarks of today's banking. Therefore, technology in banks has played an increasingly critical role to improve the performance in terms of productivity and customer satisfaction. The overall impact an Indian bank is being presented below:
Productivity: Use of technology by banks has increased the productivity very fast through automation of banking operations. The Electronic technology instruments adopted by Indian Banks are: Automated Teller Machine (ATM's), Telex, Fax, E-Banking, On-line banking etc. With the introduction, implementation and adoption of above techniques and instruments by the banks have totally revolutionized the functions, operations, administration, decision making and management information system. The benefits accruing to the banks are:
Speed and accuracy in transaction dealing
New look, new appeal, new appearance and new attraction
Better storage and economical preservation of records and easy retrieval.
Better communication, information and coordination.
Reduction in staff as a result of decrease in establishment cost.
Reduces customer visits to the branch and thereby human intervention.
Customer Satisfaction: Banks are now turning their focus from market orientation to customer orientation, because in banking business now there is perfect competition due to liberalization in economy and entry of new private banks. Technology is the key to move towards providing integrated banking services to customers. New technology has rapidly altered the traditional ways of doing banking business. Customer can view the accounts, get account statements, transfer funds, purchase drafts by just making a few key punches. The benefits accruing to the customer are:
Excellence in customer services, prompt attention to their needs and quick disposal of their grievances
Anywhere Banking no matter wherever the customer is in the world. Balance enquiry, request for services, issuing instructions etc., from anywhere in the world is possible.
Anytime Banking - Managing funds in real time and most importantly, 24 hours a day, 7days a week.
Brings down "Cost of Banking" to the customer over a period a period of time.
Cash withdrawal from any branch / ATM
On-line purchase of goods and services including online payment for the same.
The use of interactive electronic links via the Internet could go a long way in providing the customers with greater level of information about both their own financial situation and about the services offered by the bank.
Review of literature
AnanthaKrishnan G. (2005) describes customer's services in the banks. The discriminating customer's expectations have begun to change in terms of quality and service. With the advent of computers and ATMs, the gap between the customers and the banking personnel is widening. Unless a change of heart occurs, even the largest banks will find it hard to survive on their assumed false glory. Banks which take care to see the reality and react early will survive and prosper, while those who continue the traditional path will find their market share eaten away. Sobol and Cron (2006) conducted the study to find the relationship between computerization and several measures of overall firm performance. Three performance comparisons are presented: users versus non-users of computers, three levels of usage, and class of computer usage. Results indicate that computerization is related to overall performance. Non-users tend to be small firms with about average overall performance. Shetty (2006) concluded that globalization in banking is based on four important pillars viz. trade in goods and services; flow of capital and movement of human beings across boundaries; harmonization of regulatory framework in different countries; and developments in technology, particularly those in information technology. J.C Henderson (2011) highlights that even though (IT) has evolved from its traditional orientation of administrative support toward a more strategic role within an organization. It says that there is still a glaring lack of fundamental frameworks within which to understand the potential of IT for tomorrow's organization.
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The objectives of this paper are as follows
To assess the Status of E-Banking in Indian commercial banks.
To analysis the role of Information Technology and its relevancy in Indian banks in the recent era.
IT Percolation in Banks : India's banking operations are dominated by 20 nationalized banks, State Bank of India together with 5 of its associates called SBI group, 21 private sector banks out of which 7 are new & 14 are old private sector banks and 32 foreign banks operating in India. In tune with the global trends, these banks have been investing heavily in technology, infrastructure and solutions total expenditure incurred on computerization and development of communication networks by public sector banks alone between September 1999 and March 31st 2010 is Rs. 17897 crore.
Table-1 Group- wise Scenario of Percolation of IT in Indian Banks
(as at end March 2010)
State bank group
Old private sector banks
New private sector banks
Fully computerized branches (%)
IT Expenditure (in crore incurred between September 1999 & March 2010
Source: RBI's Report on Trend and Progress of Banking in India 2009-2010
It is clear from the data shown in table 1 that banks have invested heavily over the years in information technology systems.
E-Banking: Electronic banking is generally an extension of traditional banking, using the internet as an electric delivery channel for banking products and services. E-banking is a range of banking services that utilizes electronic equipment and includes Telephone banking, Net Banking, ATM, Debit/Credit Card. EFT, AFT etc. Many banks have modernized their services with the facilities of computer and electronic equipments. The electronics revolution has made it possible to provide ease and flexibility in banking operations to the benefit of the customer. The e-banking has made the customer say good-bye to huge account registers and large paper bank accounts.
Status of E-Banking in India
E-banking concept now largely implemented in various activities of banks. Following are some payment system indicators which show the progress of E-banking in India.
Table 2 Payment system indicators
Value (Rupees trillions)
1.High Value Clearing
3. MICR Clearing
5. ECS DR
6. ECS CR
9. Debit cards
Table 2 relates with Payment System Indicators shows that the use of debit cards for payment is most commonly used instrument in Indian banking sector. However RTGS and ECS CR system also showing progress also. The table also shows the progress of transactions under e-banking in 2011-12 as compared 2009-10.
Credit and 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 bank never faces a default because the amount spent is debited immediately from the customer's account.
Table: 3 Credit and Debit cards issued by Schedule Commercial Banks (As at end March2012) (In Millions)
Outstanding Number of Credit cards
Outstanding Number of debit cards
Public sector banks
Private sector banks
Old private sector banks
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New private sector banks
Source RBI Note: Components may not add up to total due to rounding off numbers to millions.
Table 3 shows that Issuance of credit cards declined, while debit cards showed a high growth trend. Foreign banks, however, showed a small decline in the issuance of debit cards. More than three-fourths of the total debits cards outstanding as at end of March 2012 were issued by public sector banks. In contrast, more than half of the outstanding credit cards as at the end of March 2012 were issued by new private sector banks.
Automated Teller Machine (ATM): The traditional branch model of bank is now replaced with an alternative delivery channels like ATM network by using the plastic card with its special features. It is otherwise being called as debit cards. The plastic ATM card is replacing all paper based verification including cheque, and it avoids the personal attendance of the customer during the restriction of banking hours. ATMs used as facilitator for Electronic Fund Transfer. ATM itself can provide information about accounts of customers and also receive information's and instructions from customers like stop instruction, auto pay, cheque drop, etc., An ATM is an Electronic Fund Transfer terminal facilitating cash deposits, inter and intra transfer between accounts, balance enquiries along with mini statement of accounts, cash withdrawals and pay bills.
Table 4 ATMs of Schedule Commercial Banks (As at end -March 2012)
On -Site ATMs
Total number of ATMs
1.Public sector banks
1.1 Nationalized Bank
2. Private sector banks
2.1Old private sector banks
2.2 New Private sector bank
Source RBI Note: Excluding IDBI Bank Ltd.
Table 4 shows that during the year 2011-12, an additional 21,000 ATMs were deployed by the banks. Public sector banks accounted for more than 60 percent of the total number of ATMs as at end March 2012, while close to one -third of the total ATMs were attributable to new private sector banks.
Future outlook in India
The Indian banks lag far behind the international banks in providing online banking. In fact, this is not possible without creating sufficient infrastructure or presence of sufficient number of users. Technology is going to hold the key to future of banking. Banking achievements is not possible without IT revolution. In the future, the internet is likely to become an important instrument for the banking industry, though security consideration will largely determine its usage. So, banks should try to find out the trigger of change. The approach of the IT concept to the rural area may also be adopted. More and more regional languages software's could be introduced to attract more and more people from rural area also.
The information Technology is becoming an important component of the banking sector. IT has no doubt changes the overall pattern of banking system. There is a paradigm shift from seller's market to buyer's market. Banks also change their approach from "Conventional Banking to Convenience Banking" and "Mass banking to Class Banking". So banks are now more concentrate on providing value added services to customers. In India it can be successful only if it is properly implemented in rural areas also. The technological advancement and intervention in the banking sector not only facilitates the banks to offer value added financial services to its customers, but also helps to maintain the bulk volume of daily financial transactions and constructing a wide range of data warehousing . So, that the bank can construct, develop and maintain a complete data base of the customer, it will be used to build up strong customer relationship management. In that scenario, the banks will contribute their best towards nation's growth.