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Recommendations of the Narasimham Committee (1991) paved the way for the reform phase in the banking.







Important among the reforms have been introduction of new accounting and prudential norms relating to income recognition,
provisioning and capital adequacy, deregulation of interest rates & easing of norms for entry in the field of banking.


Information Technology has basically been used under two different avenues in Banking. 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.


In view of this, technology has changed the contours of three major functions performed by banks, i.e., access to
liquidity, transformation of assets and monitoring of risks. Further, Information technology and the
communication networking systems have a crucial bearing on the efficiency of money, capital and foreign
exchange markets.

The Software Packages for Banking Applications in India had their beginnings in the middle of 80s, when the
Banks started computerising the branches in a limited manner. The early 90s saw the plummeting hardware
prices and advent of cheap and inexpensive but high-powered PCs and servers and banks went in for what was
called Total Branch Automation (TBA) Packages. The middle and late 90s witnessed the tornado of financial
reforms, deregulation, globalisation etc coupled with rapid revolution in communication technologies and
evolution of novel concept of 'convergence' of computer and communication technologies, like Internet, mobile /
cell phones etc.


In India, banks as well as other financial entities entered the world of information technology and with Indian
Financial Net (INFINET). INFINET, a wide area satellite based network (WAN) using VSAT (Very Small Aperture
Terminals) technology, was jointly set up by the Reserve Bank and Institute for Development and Research in
Banking Technology (IDRBT) in June 1999.

The Indian Financial Network (INFINET) which initially comprised only the public sector banks was opened up
for participation by other categories of members.

The first set of applications that could benefit greatly from the use of technological advances in the computer
and communications area relate to the Payment systems which form the lifeline of any banking activity. The
process of reforms in payment and settlement systems has gained momentum with the implementation of
projects such as NDS ((Negotiated Dealing System), CFMS (Centralised Funds Management System) for better
funds management by banks and SFMS (Structured Financial Messaging Solution) for secure message transfer.
This would result in funds transfers and funds-related message transfer to be routed electronically across banks
using the medium of the INFINET. Negotiated dealing system (NDS), which has become operational since
February 2002 and RTGS (Real Time Gross Settlement system) scheduled towards the end of 2003 are other
major developments in the area.

Internet has significantly influenced delivery channels of the banks. Internet has emerged as an important
medium for delivery of banking products & services. Detailed guidelines of RBI for Internet Banking has
prepared the necessary ground for growth of Internet Banking in India.

The Information Technology Act, 2000 has given legal recognition to creation, trans-mission and retention of an
electronic (or magnetic) data to be treated as valid proof in a court of law, except in those areas, which continue
 to be governed by the provisions of the Negotiable Instruments Act, 1881.

As stated in RBI's Annual Monetary and Credit Policy 2002-2003: "To reap the full benefits of such electronic
message transfers, it is necessary that banks bestow sufficient attention on the computerisation and networking
of the branches situated at commercially important centres on a time-bound basis. Intra-city and intra-bank
networking would facilitate in addressing the "last mile" problem which would in turn result in quick and efficient
funds transfers across the country". 




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The Software Packages for Banking Applications in India had their beginnings in the middle of 80s, when the
Banks. spurred on by RBI and the Rangarajan Committee Report, started computerising the branches in a limited
manner.

The early 90s saw the plummeting hardware prices and advent of cheap and inexpensive but high-powered PCs
and servers and Banks went in for what was called Total Branch Automation (TBA) Packages.

The middle and late 90s witnessed the tornado of financial reforms, deregulation, globalisation etc coupled with
rapid revolution in communication technologies and evolution of novel concept of 'convergence' of computer and
communication technologies, like Internet, mobile / cell phones etc.

The evolution of IT services outsourcing in the Indian banks has presently moved on to the level of Facilities
Management (FM). Banks now looking at business process management (BPM) to increase returns on
investment, improve customer relationship management (CRM) and employee productivity.






With cybercafes and kiosks springing up in different cities access to the Net is going to be easy.
Internet banking (also referred as e banking) is the latest in this series of technological wonders in the
recent past involving use of Internet for delivery of banking products & services. Even the Morgan
Stanley Dean Witter Internet research emphasised that Web is more important for retail financial
services than for many other industries.

Internet banking is changing the banking industry and is having the major effects on banking
relationships. Banking is now no longer confined to the branches were one has to approach the
branch in person, to withdraw cash or deposit a cheque or request a statement of accounts. In true
Internet banking, any inquiry or transaction is processed online without any reference to the branch
(anywhere banking) at any time. Providing Internet banking is increasingly becoming a "need to have"
than a "nice to have" service. The net banking, thus, now is more of a norm rather than an exception
in many developed countries due to the fact that it is the cheapest way of providing banking services.

`
 

  

 

i) Branches already Fully Computerised # 48.5%

ii) Branches Under Core Banking So lutions 28.9%
iii) Fully Computerised Branches (i+ii) 77.5%
iv) Partially Computerised Branches 18.2%
v) Non Computerised Branches 4.3%
#: Other than branches under Core Banking Solutions.

(Source- Reserve Bank of India)

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the networking of the already -computerised branches also assumed urgency and
some of the Banks have started inter -connecting their computerised branches
using leased telephone lines or Very Small Aperture Terminals (VSATS). This is
meant to provide a more comprehensive service to customers and at the same
time give banks better centralised control over the branch operations. As of now,
New Private Sector and Foreign Banks have an edge over Public Sector Banks as
far as implementation of technological soluti ons is concerned. However, the
latter are in the process of making huge investments in technology.

Services and products like "Anywhere Banking" "Tele -Banking" "Internet

banking" "Web Banking" , e -banking, e-commerce, e-business etc. have become
the buzzwords of the day and the Banks are trying to cope with the competition
by offering innovative and attractively packaged technology -based services to
their customers.

Simultaneously, the importance of effective MIS for control of operations

and of maintaining customer and business/industry data bases for strategic
planning has also surfaced; while Banks are looking at Data warehousing,
Data mining, Business Restructuring etc. as most essential things to have
as early as possible, they are taking urgent steps to computerise the
operations in their administrative and controlling offices (viz. head
/zonal/regional offices) as well as the data collection machinery, so as to
evolve an effective MIS. In this phase, the new communication revolution
sweeping the nation and the world has come in extremely handy, as the
communication infrastructure has improved significantly and the Internet
technologies are available to network branches at a relatively low and
affordable cost with a high degree of reliability. 

The present level of MIS covers, basically, information needed for control,
performance monitoring, decision making etc. and encompasses most
activities in administrative offices like processing of statutory returns under
Reserve Bank of India Act, monthly/quarterly performance reports from
branches, credit information/BSR, inter -branch transactions, personnel
inventory, provident fund accounting, profit and loss accounts, cash and
investment management, stationery stock accounting, and branch house
keeping etc.

IT in Insurance
Two different types of technologies used in business ± proprietary and infrastructural. Any technology
that you can protect and keep private ± often through a patent or an exclusive license ± is proprietary.
Proprietary technologies can provide a strong source of competitive advantage, because they're hard
for competitors to copy. The defining characteristic of an infrastructural technology, on the other hand,
is that it provides its greatest value and its greatest productivity gains only when it's broadly shared by
many companies and industries.

What three things should insurance companies do to make IT more valuable to the business?

O
First, find ways to capitalize on the commoditization trend in order to drive down the cost of
computing while still getting all the capabilities and benefits you require. Second, be wary of trying to
be an IT pioneer. If you're out on the cutting edge, you're going to pay a lot more and you're going to
take on a lot more risk. Therefore, in most cases, it makes sense to be a fast follower: wait for
standards to emerge and costs to come down. Finally, if you are going to seek IT innovation, you
should look to see if there are ways to push down the costs of being an innovator on to suppliers or
other partners. And you should make sure your competitors will face barriers to replicating your
innovation. If there's no way to reduce the cost of being an early mover and there are only weak
barriers to competitors copying what you're doing, then being an IT pioneer probably is foolhardy.

What three things should insurance companies do to make IT more valuable to the business?

O
First, find ways to capitalize on the commoditization trend in order to drive down the cost of
computing while still getting all the capabilities and benefits you require. Second, be wary of trying to
be an IT pioneer. If you're out on the cutting edge, you're going to pay a lot more and you're going to
take on a lot more risk. Therefore, in most cases, it makes sense to be a fast follower: wait for
standards to emerge and costs to come down. Finally, if you are going to seek IT innovation, you
should look to see if there are ways to push down the costs of being an innovator on to suppliers or
other partners. And you should make sure your competitors will face barriers to replicating your
innovation. If there's no way to reduce the cost of being an early mover and there are only weak
barriers to competitors copying what you're doing, then being an IT pioneer probably is foolhardy.

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