`Our efforts are directed at making banking easier and at reaching the benefits to the end customer.' Working closely with AP on a rural micro-finance initiative
In less than a decade, banking has undergone major changes in the country. In the big cities, except to open an account, a customer, need not visit a bank. ATMs, online banking and many more features are making banking easier.
Silently, playing the catalyst role in ushering in this significant change in the banking sector is the Institute for Development and Research in Banking Technology (IDRBT), in Hyderabad.
The major changes in the banking sector have been facilitated through better means of communication - between branches of same banks to different banks.
The setting up of the Indian Financial Network (INFINET), by the Reserve Bank of India, as a V-Sat-based, cost-effective communication backbone has triggered the developments faster. Come July, 2006 and this institute established by the RBI will complete 10 years. The IDRBT is registered as a not-for-profit society and is perhaps among a handful of such institutes in the world.
"Our efforts are directed at making banking easier and at reaching the benefits to the end customer through various technological interventions," explained Mr Arvind Sharma, who took over as Director recently.
He said the Rangarajan Committee, which recommended the deployment of IT in Indian banking and the Saraf Committee (of which Mr Sharma was a member), which made major suggestions during 1994-95, were the starting points for the establishment of the IDRBT and also giving it a focussed mandate.
In the last decade, the institute has through a series of initiatives facilitated the absorption of technology in the banking sector. Some of the significant ones being the INFINET, issue of digital certificates, launch of the structured financial messaging system (SFMS) for free flow of financial messages and the implementation of the mail messaging system (MMS) for enabling secure and efficient communication within and among organisations.
The IDRBT has also set up the National Financial Switch (NFS) and Inter-Bank Payment Gateway. It is also involved in research projects to develop standards and systems of banking technology at the industry and national levels, Mr Sharma told
Business Linein an interview. In the area of electronic transfer of funds and transactions online, Internet banking, stock trading, the establishment of the Certifying Authority has been a major step. The institute is making various applications PKI-enabled, so that transaction of digital data has legal sanctity under the IT Act of 2000.
So far, the institute alone has okayed 30,000 digital signatures since 2002 of the total 37,000. TCS, MTNL, Verizon are others who have the Certifying Authority. With securities, insurance etc also expected to see a big jump, the use of digital signatures would grow. Since, banks are moving from fund-based income to fee-based income, the big challenges would be in efficiency and security of transactions, he said.
The SFMS is another important challenge ahead of the institute. At present, about 13,000 bank branches use it. In due course all the 65,000-odd bank branches need to use it as SFMS is expected to emerge as the backbone for most bank activities, Mr Sharma said.
On the other hand, the NFS, which facilitates credit card applications, is also tipped to grow exponentially. The RBI has provided the switching services and the settlements would be done in India. About 18 banks are members at present. About Rs 4.5 crore has been invested and around 20,000 transaction per day take place. It connects nearly 6,000 ATMs. The IDRBT is also involved in the SWIFT operations.
Rural sector needs
The increase in plastic cards/money and growth of banking activity in rural areas offer challenges to the IDRBT in the coming years. The institute is working closely with the Andhra Pradesh Government on a rural micro-finance initiative. The issue is how to deploy technology in rural micro-finance, usage of smart cards, low cost ATMs. Mr Sharma felt that it was time IT was deployed to help Indian customers. For decades Indian IT professionals and contributions The IDRBT research efforts have also resulted in innovative technologies and products. It has filed Indian patents in various security aspects. The e-Check, EnDesign, mobile payments, smart cards, embedded systems are some of the areas where it has contributed.
To mark the 10 years, the institute has planned three international seminars after July. The institute is ready to scale up operations as far as the RBI allows it.
"We are contemplating e-learning programmes to take banking technologies faster to the target groups. In 2006, there is a proposal to redo the INFINET. An Expert Committee is looking into it," Mr Sharma added.