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R. Savitha

Both public sector banks and private players are arming themselves with technology to stay ahead.

SERVICE with a smile and how best to offer customers value addition — this thought drives both private and public sector banks today as they jostle for survival space in a competitive market. And giving banks' offerings that edge is information technology.

Driving home the point is the National Association of Software and Services companies (Nasscom). According to Nasscom, in order for banks to introduce the benefits of IT and provide a centralised banking solution to customers, this sector will need to set apart sizeable resources in the medium term. For that matter, the level of IT implementation in public sector banks has been commendable over the past three years. The number of fully computerised branches has increased from 5,514 in September 2000 to 11,578 in March 2002 and the number of PCs/nodes has increased from 95,090 to 1,65,986. The rapid computerisation of public sector banks over the past three years was also, in part, prompted by the Central Vigilance Commission. The CVC had set a deadline of January 2001 for having at least 70 per cent of bank business to be computerised. This directive forced banks to focus on large branches that handle bulk business and get them computerised, rather than focus on wholesale computerisation. Today, all public sector banks have seen almost 90 per cent of their business computerised. Simultaneously, their coverage of branches has also been on the rise.

Private banks have also been aggressively pushing their new products and services, and this has seen them eating up large slices of the market share of their public sector counterparts. PSU banks, which control about 65 per cent of the banking industry today, aren't sitting back but fighting spiritedly for their share of the pie.

Ashok Saraf of Zenith Infotech says bank investments in IT is a fast growing market and the investment being made in it is growing at more than 50 per cent every year. The benefits to the bank are obvious — better customer service, faster MIS to the management to make effective decisions and eventually increase profitability. At the Government level, it improves the quality of regulation on banks by the RBI (Reserve Bank of India) due to better availability of data. The drawbacks of this approach are not to do with the concept as much as faulty implementation.

Many banks implement technology due to regulatory pressures and hence choose low-cost products purely from a formality perspective.

However, there are no drawbacks if an implementation is done correctly and with the active participation of the bank staff, he says.

And there's plenty of software on offer, including Banc724, Flexcube and Nucleus software. What has been the experience of PSUs in utilising software? Syndicate Bank has rolled out Flexcube in over 150 branches and plans to extend this to 250 this year. It has been a key part of its business transformation strategy, which was kicked off three years ago.

Bank of Baroda has deployed the software as part of automation of treasury operations and the system has been live for over a year.

Canara Bank is deploying Flexcube to automate its treasury operations. The domestic portion of the project is live and work is under way to make the international treasury operations live in the next few months.

Vishnu R. Dusad, Managing Director, Nucleus Software, says as most major banks went about getting their businesses computerised, their network inevitably became the backbone for all transactions.

A minuscule loss of information could now result in huge transaction losses that translated into money, besides costing brand image. Because of this, it also became easier for vendors to pitch solutions such as CRM, storage, security and banking tools at bank CIOs.

From the customer's point of view, the use of IT has resulted in improved efficiency and enhanced customer services. Mobile banking and ATM facilities give banks a competitive advantage.

That IT is being given due weightage by players in the banking, financial services and insurance sectors is underscored by their annual budget allocation — over 10 per cent of the total expenditure at banks and insurance companies is going into IT implementation, he says.

Overall, there has been a clear change in mindset of PSU banks as a result of a change in market conditions.

New private sector banks attacking the top end of the retail segment has made PSUs rethink, replan, and reposition their services delivery framework.

Whatever the trigger for development, the customer isn't complaining.

rsavitha@hotmail.com

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