1. Changing Dynamics in the
Banking Industry
Module-5
S-7 B-Tech IT (2014)

2. Module-5: Syllabus
 E-Banking : Changing Dynamics in the Banking
Industry
– Changing Consumer Needs, Cost Reduction, Demographic
Trends
 Regulatory Reform
 Technology Based Financial Services Products
– Home Banking using bank’s Proprietary Software
– Banking via the PC using Dial-up Software
– Banking via Online Services;
– Banking vis the Web
 Security First Network bank
 Management issues in online Banking
– Marketing, Pricing

3. Reference Books
 Ravi Kalakota, Andrew B Whinston, “Electronic
Commerce: A Manager’s Guide”, Pearson
Education, 2009
 Dr. Tushar Kanti, Manish Kumar, Shilpi Gupta,” E-Commerce”,
Savera Publishing House, New Delhi
 Indian Institute of banking & Finance, ”General
Bank Management”, Macmillan India Ltd, 2008
 Vikas Taneja, Sakshi Parashar,”E-Banking and E-Commerce
“ , alfa Publications, New Delhi, 2011

4. Changing Dynamics in the Banking
Industry
1. Changing Consumer Needs
– Globalisation ,Privatisation, Liberalisation
1. Cost Reduction
– Technological
1. Demographic Trends
2. Banking Regulation

5. CHANGING PERCEPTION ABOUT
CUSTOMER
 Servicing the Customer – 1950’s to 1960’s
 Satisfying the Customer - 1960’s to 1980’s
 Pleasing the Customer - 1980’s to 1990’s
 Delighting the Customer -1990’-2000
 Retaining the Customer – 2000 and beyond

6. Changing Consumer Needs
 The 7 Ps of Marketing
 Forces of LPG
 Competition

7. Changing Dynamics in the Banking Industry
Indian banks are facing substantial competitive pressures as banking
landscape gets redefined
BANKS
Deregulation
Increasing financial
disclosure
requirements and
credit rating
requirements for
banks
Privatisation /
corporatisation / IPO’s
Consolidation /
Increasing M & A
activity
Greater managerial
autonomy to banks
Basel-II
requirements,
income recognition
and provisioning
standards
Increasing availability
of risk management
products like
derivatives
Managing asset
quality, NPA
Improving
productivity
E-Business

8. WHAT IS THE TRIGGER?
 Hyper Competition
 Shrinking Margins
 Need to Reduce Cost
 Take Advantage of Technology
 Changing Customer Expectations
 Simplified the Procedure and Process
 Reduce Traditional Risk
 Offer Better / Improved Service
 Some Constraints [Policy/Resources/Physical/Structure]

9. How Banks get affected
 The size of profit pools are getting smaller.
 Sluggish employment growth and stringent credit
criteria weakens the demand and success ratios for
consumer and small business loans.
 Recent regulatory reforms have increased the cost
of compliance and operating costs for the entire
banking industry. Regulations such as Basel III that
require banks to hold more capital have added to the
burden and it has become a pressing concern for
many small and mid-tier banks, thrifts, and credit
unions.

10. Changing Dynamics in the Banking
Industry
Banking sector early adopters of technology
Improve
operational
efficiency
Minimise
costs
Enable
high-speed
processing
Allow data
capture and
data mining
Improve customer experience with enhanced internal
efficiency

11. Progress of computerization in
PSB

12. Accenture(June 2011)

13. Technology impact on banking post
2000
Infrastructure
 RTGS (2004)1
 NEFT (2005)2
 Interbank Mobile Payments System (2010)
 ATM installed base of over 100,000 (over 27%
compounded growth from 2006 to 2012)
 POS terminals over 700,000
1. Real time gross settlement system
2. National electronic funds transfer

14. Optimization of branch networks
using ATMs

15. Optimization of branch networks
using ATMs
 The relaxation of norms for using ‘other bank'
ATMs by the Reserve Bank of India in 2009
seems to have encouraged banks to set up
more ATMs across the country in order to
garner fee-based income, acquire new
customers as well as to service the existing
ones

16. Optimization of branch networks
using ATMs

17. Optimization of branch networks
using ATMs

18. The disruptive power of technology
ICICI Bank
Branches
ATMs
Internet
Share of
transactions in
2001
94%
3%
2%
POS 7%
Call centre
Share of
transactions in
2012
12%
41%
35%
2%
-
1%
-
Mobile 2%

19. Technology is in a continuing state of flux
From mainframe to
minicomputer to desktop PC
And now, mainframe in a
pocket
 Higher capacity and processing capability
 Software to run the devices
 Ability to connect through broadband and
wireless
 Mobility, new platforms and the ecosystems
in handheld devices
 New platforms such as for payments are now challenging the
traditional bank channels

20. Changing Consumer Needs
 Changing demographics;
 Changing work patterns;
 Increasing financial assets and liabilities of
households;
 Increasing awareness of value; and
 Willingness to adopt technology.

21. Changing Customer Needs
 Indian retail banking has been showing
phenomenal growth
 In 2004-05, 42% of credit growth came from
retail
 Over the last 5 years CAGR has been over 35%
 Retail credit level crossed Rs.189K Crore in
2004-05
 Market has transformed into a ‘buyer’s market’
from a ‘seller’s market’
 Comprises of multiple products, channels of
distribution and multiple customer groups

22. Customer Needs

23. Economy vs. Retail Banking
 Retail assets are just 22% of the total banking
assets of India
Contribution of retail loans to GDP:
India 6% China 15 %,
Thailand 24% Taiwan 52%
Indian population below 35 yrs of Age – 70 %
Reach of Formal Banking Channels – 20-25% of
Indian population
Source: Cygnus Industry Insight

24. Market Share: Retail Loan - 2005
Auto
28%
Other personal
Loans
16%
Home
49%
Consumer
Durables
7%

26. Change in Consumer Needs

27. Customer Preferences for Multiple
channels

28. Future OOff RReettaaiill BBaannkkiinngg
 The accelerated retail growth has been on a
historically low base
 Penetration continues to be significantly low
compared to global bench marks
 Share of retail credit expected to grow from 22% to
36%
 Retail credit grow to Rs.575,000 crs by 2010 at an
annual growth rate of 25%
Source: Cygnus industry insight

29. Future of Retail Banking Contd….
 Dramatic changes expected in the credit
portfolio of Banks in the next 5 years
 Housing will continue to be the biggest
growth segment, followed by Auto loans
 Banks need to expand and diversify by
focussing on non urban segment as well as
varied income and demographic groups
 Rural areas offer tremendous potential too
which needs to be exploited

30. Strategic prerequisites….
 Performance oriented leadership
 Sophisticated marketing and sales
 Efficient distribution channels
 Process efficiency and ease of scalability
 Superior credit policy, procedures and skills
Source: Mckinsey

31. Challenges
 Sustaining Customer loyalty
 NPA reduction & Fraud prevention
 Avoiding Debt Trap for customers
 Bringing Rural masses into mainstream banking

32. Strategies for Future…
 Reaching to masses : Need to customize
 Customer segmentation/differentiation
 Data mining/CRM based campaigns
 Products per customer/loyalty
 Promoting low risk retail lending products
 Offer an array of products and financial advisory.

33. Strategies for Future… Contd.
 Cost effective expansion
 Renewed emphasis on superior execution by
front-line employees
 Grow through Alliances:
Hospitality Education
Retailers Automobiles
Consumer Durables
Housing/Construction

34. Customer segmentation

35. Winning Strategy
The bank that best addresses and anticipates
customers needs, delivers consistently higher
quality service and connects to the customer
via their channel of choice wins
Y.Y.Chin, OCBC Bank

36. IT solutions for Banks
 Tata Consultancy Services (TCS) acquired Australian Financial
Network Services (FNS), a core banking solutions vendor, for
approximately $26m. TCS has bought the stakes owned by
Macquarie Bank and other promoters in an all-cash deal(2005)
 Finacle, the banking software solutions suite of Infosys
Technologies
 HCL’s partnership with leading Core Banking vendors like SAP,
Oracle and Misys is leveraged to provide intricate product
customization and multi-layered implementation initiatives
across the world for leading banks.

37. Cost Reduction
 Post-technology adoption, only 10% of the
banking staff is involved in "back office" jobs
and the remaining 90% of the banking staff
are freed for performing "front office" jobs of
customer acquisition, servicing and retention
by ensuring customer loyalty. “
– RBI Deputy Governor KC Chakrabarty
(07/09/2010)

40. As per Census 2011
 India's population stands at 1.21 billion,
slightly more than the forecast, although the
population growth rate has declined from
1.97% per annum between 1991 and 2001 to
1.64% between 2001 and 2011.
 India has a younger population in
comparison to many other countries.
 Labour force in India is expected to increase
by 32% over the next 20 years while it will
decline for developed nations and China

41. CHANGING CONSUMER DEMOGRAPHICS
 Growing disposable incomes
 Youngest population in the world
 Increasing literacy levels
 Higher adaptability to technology
 Growing consumerism
 Fiscal incentives for home loans
 Changing mindsets-willingness to borrow or
lend
 Desire to improve lifestyles
 Banks vying for higher market share

42. http://www.rbi.org.in/scripts/bs_viewcontent.aspx?Id=2598

43. The next wave: being connected
 2.25 bn (32%) of world population is online
today, and 1.10 bn users are on 3G
 Mobile internet is ramping up dramatically
– 57 mn 3G users in China, y-o-y growth of 115%
– 39 mn 3G users in India, y-o-y growth of 840%
 Mobile internet now makes up 50% of internet
traffic in India
Source: KPCB
 Out of 1.80 bn mobile users in China and India
 One billion will go online in two years

44. Connectivity in India ..
Third largest
internet user base
Third largest
internet user base
Second largest
mobile subscriber
Second largest
mobile subscriber
base
base
 100 mn internet users, 800 mn mobile
subscribers
 Broadband connectivity a catalyst
 Consumers are becoming part of the cloud
seamlessly without consciously realising it
 Device costs will continue to drop
 More and more capabilities would be
available at lower costs
.. would have a significant impact on banking

45. India’s current positioning
China
(USD)
2003 2005 2010 2012 (E)
GDP (bn) 1,641 2,257 5,930 7,992
Per capita GDP 1,270 1,726 3,738 5,899
Population (bn) 1.29 1.31 1.34 1.35
India
(USD)
2003 2005 2010 2012 (E)
GDP (bn) 590 808 1,598 1,779
Per capita GDP 549 729 1,342 1,455
Population (bn) 1.07 1.11 1.19 1.22
India in 2010 was at the juncture where India in 2010 was at the juncture where C Chhininaa w waass i nin 2 2000033
(E) - estimate
Note: GDP is on nominal basis
Source:IMF

46. Rapid urbanisation
India’s large metros in 2030: by GDP
35
45
44
68
64
117
115
157
146
174
171
249
GDP USD bn
Belgium
Mumbai
Denmark
Thailand
Delhi
Portugal
Kolkata
Czech
Bangalore
Ukraine
Chennai
Hyderabad
Source: Mckinsey
India’s metros in 2030 will
be as large as some
countries were in 2005
Assuming an annual GDP growth of 8.0% between
2009-2018 and 7.0% between 2018-2030

47. Resurgent rural India
 Over 700 mn people across 600,000 villages
 Rural growth supported by:
– Changing characteristic of rural economy with reduced
dependency on agriculture
– Rising wealth creation with estimate of 40 mn middle & high
income households by 2010
28.6 37.5 42.4
31.8
24.1
51.4 38.3
25.8
20.0
100
80
60
40
20
0
1999-00 2004-05 2008-09
Services
Industry
Agriculture
(%) S hare in rural NDP
Ag ricu lture In dustry S ervices

48. Looking ahead: impact of per
capita GDP growth
Per capita
GDP < US$ 500
Per capita
GDP at US$
500 -1,500
Per capita
GDP at US$
1,500 -2,500
Demand for
better living
environment
• Limited
aspirations
• Low affordability
• Increased
affordability
• Aspirations of a
better lifestyle
Per capita
GDP at US$
2,500-4,000
Accelerating
consumption
cycle
Early 2000
2002-2011
2012-2017
2018-2021

52. Technology for the masses
59% of India’s households avail of banking services
Only 10% have life insurance
< 1% have general insurance
Only 2% have a credit card
Only 13% have an ATM + Debit card
The challenge is in banking 700 million people in 600,000 villages in
close to 600 districts

53. Channel innovation
Driving scale and profitability
 Opening and operating savings accounts
Smart cards  Easy KYC
POS machines
Low cost branch
Low cost ATMs
Mobile phones
 Used by branchless banking channels
 Resource efficient branches
 To bridge distance and ease transactions
 For all banking operations
 Steadily gaining traction

54. 54
Smart cards have simplified data
capture
Biometric Transaction Card
 Biometric smart card for secure validation
 Overcome distance by setting up service
points close to customers
 Most effective for the poor and uneducated

55. Branch in a box
 POS based solution offering banking
transactions like balance enquiry,
cash withdrawal, deposit
 Cheque payment (with capability to
display signatures for verification)
 RTGS1/ NEFT2
 Can support transactions like pass
book printing, opening of fixed
deposits and bill payment
 Low bandwidth
 GPRS connectivity
1. Real time gross settlement system
2. National electronic funds transfer

56. ATM
 The oldest of the alternative banking channels
and enjoys the highest level of acceptance
among customers.
– The number of ATMs in India has doubled in the
past three years.
 More than 100,000 ATMs, around 70 per cent
of them in urban locations(2011-12).
 Global research firm Celent expects the
number of ATMs to double by 2016, with more
than 50 per cent being set up in small towns.

57. Month-wise total volume of NFS Transactions
From Jan 2013
Month/Y
ear
No. Of
participa
nts
No. Of
ATM
balance
enquiry
Cash
withdrawal
Pin
Change
Mini
Statemen
t
Total
Volume
Jan-13 129 1,09,664 3,96,61,110 14,75,62,566 2,21,014 44,37,657 19,18,82,347
Feb-13 143 1,11,493 3,72,57,214 13,82,20,349 2,16,506 42,50,210 17,99,44,279
Mar-13 150 1,16,025 4,12,20,908 15,82,38,934 2,85,276 52,31,088 20,49,76,206
Apr-13 150 1,18,660 4,16,80,350 15,67,16,840 3,07,855 64,44,567 20,51,49,612
May-13 176 1,20,828 4,04,94,563 16,25,14,775 3,07,934 65,57,104 20,98,74,376
Jun-13 185 1,24,078 3,88,97,846 15,69,23,710 3,23,634 63,72,028 20,25,17,218
Jul-13 196 1,26,612 4,25,18,702 16,37,08,983 3,49,932 69,73,798 21,35,51,415

58. NEFT and RTGS transactions
 The volume of online fund transfers through
NEFT (National Electronic Funds Transfer,
used for low value transactions) and RTGS
(Real Time Gross Settlement, used for high-value
transaction) grew by 71 per cent and
11.7 per cent, respectively
– RBI: 2011-12

59. Unique identity number
Preliminary KYC and wider acceptance
 Instant identity verification
 Basis for Know Your Customer
 Build credit history
 Improve service delivery to the poor
 Customer management to avoid issues of over-leveraging

60. Financial services for all
 Direct payment of benefits such as NREGA,
Social Subsidy transfer Security Pension schemes
Payment
ecosystem
Credit
 Cashless payments through mobile wallets
 Account history from electronic
transactions for data driven lending

61. Customer engagement
Customer acquisition and on-boarding
Branches
ATMs
Online
channels
 Products that address needs of diverse
customer segments
 Strong distribution backing products
 Development of new channels by leveraging
technology
 Consistency in experience across channels

62. Customer engagement
Servicing customers through the life cycle
Analytics
 Consistency of customer experience across
channels of distribution
 Analytics to understand and address
customer needs across diverse segments
 Development of banking history for
underbanked and unbanked customers for
cost effective credit

63. Cross-industry competition
caused by deregulation
 Developmental Financial Institutions
transforming to banks
 Banks like SBI venturing to Long Term
Project Financing
 Growth in capital market causes
disintermediation and companies raise funds
from both domestic & abroad

64. Re-alignment of Development
Finance Institutions
ICICI from DFI to Bank
IDBI to Bank retaining DFI status
Deregulation of interest rates
Increasing disintermediation
Mounting NPAs in DFIs due to unfavourable
Business Cycles, Politically motivated social
banking schemes, unscrupulous creditors
lagging/denying repayment of loans in the
absence of strong laws like SARFEASI Act 2000

65. DFIs in India
 1947 IFCI debated status from 2003 to 2006 and finally
continuing as DFI
 1956 ICICI become Bank in 2002
 1964 UTI become UTI MF 2003
 1964 IDBI become bank in 2004 with DFI status
 EXIM bank – March 1982
 IIFCL 2004
 Specialised Financial Institutions
– IFCI Venture Capital Funds Ltd; ICICI Venture Funds Ltd; Tourism
Finance Corporation of India Ltd
 Sectoral DFIs also proliferated
– RFC, PFC,

66. Globalisation
 Globalization (or globalisation) describes an
ongoing process by which regional
economies, societies and cultures have
become integrated through globe-spanning
networks of exchange.
 Economic globalization: the integration of
national economies into the international
economy through trade, foreign direct
investment, capital flows, migration, and the
spread of technology

67. Globalisation
Correspondent Banking
Entry of foreign Banks; SBI and others opening
foreign branches
Integration of services with Internet Banking
Growth in foreign trade, Migration of worker
class to Gulf, Europe and USA
Level playing field expected by 2009, not
materialised due to US Recession and bursting of several
leading banks and FIs there during 2006-2008

68. Privatisation
 Privatization is the incidence or process of
transferring ownership of a business,
enterprise, agency or public service from the
public sector (government) to the private
sector (business).

69. Privatisation
Listing of PSBs like SBI etc..
Single holding in banks not >10%

70. Govt ownership in Indian banks
reduces
 In 2005 the government owned 100% shares
only in four out of the 19 nationalised banks.
 At present in all the nationalised banks, and
IDBI Bank and State Bank of India i.e. PSBs,
the government has less than 100% holding;
in almost 14 of them the private shareholding
exceeds 30%.

71. Entry Norms
 Bank Nationalisation 1955(SBI), 1959(7
associates); 1969 (14 No.s);1980 (6 No.s)
 Foreign ownership cannot exceed 20%, By
law Govt holding not <51%
 Stake sales in PSU banks
 Entry of private banks
– Indus Ind Bank 1994
– HDFC Bank 1995
– UTI Bank(Axis Bank)
– Yes Bank

72. Privatisation
 In the first wave of privatisation of the banking
sector, 10 players were allowed in the mid-
1990s and these included ICICI Bank, HDFC
Bank and IDBI Bank, among others.
 The last time new banks were allowed was in
2002-03 when two licences were issued. 2010
guidelines finalised in 2012 with Rs 500 cr
capital
 Branch expansion restriction on Foreign banks
to be phased out; Subsidiary route

73. Entry Norms Feb 2013
 Capital 5 billion
 Foreign shareholding max 74%
 Promoters holding 40% capital to be
reduced to 15% in due course
 13% capital adequacy ratio

74. Liberalisation
 Liberalization (or liberalisation) refers to a
relaxation of previous government
restrictions, usually in areas of social or
economic policy.
 Started with interest rate deregulation in early
90s

75. Liberalisation
 Banks are given freedom to fix the price for
their products
 RBI fixes policy rates and Reserve
requirements only
 Banks can decide the limits for WC loan
 Norms for ATMs, Off-site ATMs, Branch
expansion
 Norms for NPAs recognition and
management

76. RRBBII
IINNIITTIIAATTIIVVEESS
IINN PPAAYYMMEENNTT
&&
RTGS
Clearing Corporation
of India
SSEETTTTLLEEMMEENNTT
SSYYSSTTEEMMSS Compliance with
BIS Core Principles
PKI based Security CFMS
SFMS
INFINET
IDRBT
PDO-NDS & SSS

77. Institute for development and Research in
Banking Technology (IDRBT), Hyderabad
 The set up in the mid nineties, as a research
and technology centre for the Banking
sector;
 Commencement of Certification Authority
(CA) functions of the IDRBT for ensuring that
electronic banking transactions get the
requisite legal protection under the
Information Technology Act, 2000

78. INFINET
 The commissioning in 1999, of the Indian
Financial Network as a Closed User Group
based network for the exclusive use of the
Banking sector with state-of-the-art safety
and security. The network supports
applications having features such as Public
Key Infrastructure (PKI) which international
networks such as S.W.I.F.T. are
implemented

79. SWIFT
 Society for Worldwide Inter-Bank Financial Telecommunication
(SWIFT), Brussels is a co-operative society for interbank
financial networking, is established in May 1973 with 239
participating banks from 15 countries
 More than 9,000 banking organisations, securities institutions
and corporate customers in 209 countries trust to exchange
millions of standardised financial messages.
– Messages relating to financial transaction, debit-credit exchange, and
foreign exchange.
– Make customers to automate and standardise financial transactions,
thereby lowering costs, reducing operational risk and eliminating
inefficiencies from their operations.
– Available 24 hours to participating member.

80. Other IT related initiatives
 Ensuring Information Systems Audit (IS Audit) in the banks for
which detailed guidelines relating to IS Audit were formulated
and circulated;
 Enabling IT based delivery channels which enhance customer
service at banks, in areas such as cash delivery through
shared Automated Teller Machines (ATMs), card based
transaction settlements etc.;
 Providing Guidelines for Internet Banking, which facilitated the
banks to ensure that common minimum requirements relating
to Internet Banking offerings were provided for;

81. Other IT related initiatives
 Providing detailed specifications to banks on the
configuration of systems relating to critical inter-bank
payment system applications such as Real Time
Gross Settlement (RTGS) System, Negotiated
Dealing System (NDS), Centralised Funds
Management System (CFMS) etc.;
 Implementation of the National Financial Switch
(NFS) to ensure interconnectivity of shared ATMs
and to provide for funds settlement across various
banks.

83. National payment corporation of
India: www.npci.org.in
 National financial switch – ATM switching
 Immediate payment system – mobile phone
 Automated clearing house - ECS
 Aadhar payment bridge system
 Interoperable financial inclusion system - BC
 Cheque truncation system
 Express cheque clearing system
 Aadhar enabled payment system
 RuPay

84. Indian Banks’ Technology Consortium
 RBI Working Group on Information
Security, Electronic Banking, Technology
Risk Management and Tackling Cyber
Fraud recommended formation of
Technology Consortium under the aegis
of IDRBT

85. Indian Banks’ Technology Consortium
 Established by IDRBT to work with
 Indian banks
 Academic institutions
 Industry bodies &
 Outstanding professionals

86. Indian Banks’ Technology Consortium
Objectives
 Impact Banking
Advancement
Development &
Practical application of technology
Develop and update standards in the use of
technology and information security in banks
Improve customer service and advocate
regulation / legislation.

87. Indian Banks’ Technology Consortium
Charter
 Pioneer New Technologies with PoC,
 Focus on Collaborative Research in Technology
Development &
 Resolution of Shared Problems & Challenges in
Banking Technology

88. Indian Banks’ Technology Consortium
Proposed Activities
 Discuss and research technology issues
 Work collaboratively
 Solve shared problems and challenges
 Pioneer new technologies that benefit banks
 Collaborative research projects
 Technology development pilots
 Proof-of-concept tests

89. Indian Banks’ Technology Consortium
Advantages to members
 Updating of current developments and trends
 Promoting standards
 Networking on shared technical challenges
 Discussing the legal and regulatory dimension of
complex technical issues facing the banking industry
 Conducting studies affecting the industry as a whole
 Address issues faced by banks collaboratively

90. Indian Banks’ Technology Consortium
Organizational Structure
Executive Board Members
 Director, IDRBT
 CEO / Chairman, IBA
 Chairman / Executive Directors / Managing Directors / Deputy
Managing Directors / Chief General Manager from Banks
 Government Representative
 Academician from top Technology / Management institutions
 NASSCOM representative
 Chief General Manager, DIT, RBI (Invitee)

91. Indian Banks’ Technology Consortium
Organizational Structure
Advisory Council Members
Chief Operating Officer, IDRBT
Chief General Manager / General Manager from the
Banks presently working in the IT domain
General Manager, DIT, RBI
Government Representative
Academicians from top Technology / Management
institutions

92. Indian Banks’ Technology Consortium
Organizational Structure
 Vendor Affiliates
 Representatives from the Industry / Vendor affiliates
will be nominated by the Executive Board for a project
on a case to case basis.

93. Indian Banks’ Technology Consortium
Organizational Structure
 Steering Committees Members
 Chief Operating Officer, IDRBT
 Senior Executives from the Banks presently working in the
IT domain
 General Manager / Deputy General Manager, DIT / Payment
Systems, RBI
 Academicians from IITs / Universities / Research Institutes
 Faculty, IDRBT

94. Technology
 Transaction based systems to Core Banking
Solutions and then to Integrated Systems
 Telephone & Fax to PC/Mobile with Internet
connectivity
 Clearing and settlement systems on INFINET
and linking to SWIFT making througput
processing
 Relationship banking, Universal banking, and
Unit banking gaining importance

95. Financial stability forum Report
2008
 Issues in fraud monitoring
 Supervisory process
 On-site inspection
 Revised strategies of on-site supervision
– Frequency
– Reporting and registration system for NBFCs
 Off-site monitoring and surveillance system(OSMOS)
 Supervisory rating
– CAMELS / CACS since 1998-99
 Preventive supervision-prompt corrective action
– Trigger points
 CRAR 9-6, 3-6 and below 3, net NPA 10-15% or above 15%, and ROA below 0.25%

96. Risk based supervision
 Monetary and Credit Policy statement , April
2000
– Formal risk assessment of a bank by producing a
detailed risk profile
– Designing a customised supervisory action plan
based on risk profile for each bank
– Delineating scope and extent of supervision to
target high risk areas and areas of supervisory
concern
– Issues related to HR and skill development

97. Bank’s Marketing Mix
 Product, Price, Place, Promotion
 Success of Delivery channels
– Strong bank branding.
– Unique value to customers.
– Customer centric -- reflecting the customer
relationship.
– Must be easy to use and intuitive to the customer.
– Finally, and most important, it must be secure!

98. Changes in Bank’s Marketing Mix
 Core Banking and ATMs altered the branch’s layout,
the way of servicing customers
 Freeing of Interest Rates widened product portfolio
 Code ensured display of rates and better level of
banking services
 Internet enabled Universal banking from any where
any device at any time
 New segments like Film Financing got established
 VRS gave way to young technically oriented staff

99. Role of Information Technology (IT) and
Customer Relationship Management (CRM)
in Banking
 The application of IT and e-banking is
becoming the order of the day with the
banking system heading towards virtual
banking

100. STRATEGIES OF BANKS
 Citibank : Parallel Banking
 HSBC Bank : Leveraging branches to grow C’
 ICICI Bank : Reducing importance of branch
 HDFC Bank : Conservative migration
 AXIS Bank : ATM’s as a force multiplier

101. RECENT TRENDS IN BANKING
 Entry of New Generation Banks
 New Products and Services
 Increasing Non- Interest and Fee Based Income
 Collaboration between Banking & Insurance
Companies.
 Improvement in Service Quality
 Increasing focus on Retail Banking
 Shift Towards Branchless Banking
 Focus shifting to inclusive banking

102. RECENT TRENDS IN BANKING
 Outsourcing of Resources [Human&Non-human]
 Steady Reduction in Interest Rates
 Corporate governance and Business
Transformation
 Regulatory reforms
 Mergers, Acquisitions and Consolidations

103. Industry’s response to the
change
 “Any where”, “Any time” Banking
 Improved processes/Bundled product offerings
 Faster service/Reduced TATs
 Customer specific products/offerings on a regular
basis
 ‘Bank’ customer has replaced ‘Branch’ customer
 Focus on understanding customer needs/
preferences
 Segmentation/Differentiation of customers
 Customer driven strategies
 Building relationships

104. IT Expenditure pattern