Banking Heavily on IT

The BFSI sector has always been the leader in IT spending in the Indian

domestic scenario. According to Nasscom, while the sector spent around Rs 6,000

crore ($1.2 billion) in 2002-03, the figure would cross $2 billion in 2003-04.

The main demands for increasing IT usage came from growing CRM focus by banks

to deliver better customer satisfaction, use of knowledge management and

business intelligence to analyze customer profiles and behavior, besides the

expansion of ATM networks and Internet and mobile banking.

Even regulatory requirements were significantly responsible for creating the

need for more IT adoption.

RBI’s guidelines on the implementations of Real Time Gross Settlement (RTGS)

systems, SEBI’s introduction of Straight Through Processing (STP) for

financial messaging and legal recognition of electronic contract notes, Basel

Capital Accord or Basel II guidelines on risk management and the Money

Laundering Act, 2003 are some of the catalysts for growing IT usage.

A recent IMRB survey says 24% of BFSI firms in India list BI and KM as top

priority for the coming year. While RBI, ICICI Bank, HDFC Bank, IDBI Bank, LIC

and Standard Chartered Bank have already gone for BI implementation in 2003,

many more like Punjab National Bank and Bank of Baroda are slated to follow suit

this year.

In fact, Global Trust Bank is currently in the process of selecting and

implementing a Customer Contact Management (CCM) module to integrate its

delivery channels. This would enable it to provide a complete CRM platform–track

customer behavior, lead generations, call center management, focused response

according to customer profile.

Says V Chandrasekhar, chief technology officer, Bank of Baroda, "With

retail banking through multiple channels expected to become a norm for the

larger banks and insurance companies, BI would be absolutely crucial for them to

retain and acquire customers to survive."

The installed base of ATMs has also grown dramatically last year–from 7,500

to 11,000.

A number of other non-banking functionalities like utility payments and

routine transfers would be included under the purview of ATMs. Explains T K

Srivastava, assistant General Manager–Department of Information Technology,

Central Office, Union Bank of India, "The ATM machine would become a

self-service banking unit, replacing the teller in the bank."

RTGS, which is expected to bring India’s bond and money markets on par with

international practices, is to be operational by June 2004.

Once operational, RTGS would provide a new generation of high value payment

systems that would enable the core of the banking system across the country to

make secure payments across the country.

"This would enable around 205 Indian BFSI institutions to interface

directly," feels G M Shenoy, senior vice president–IT, National Stock

Exchange.

A host of banks like ABN Amro Bank, ING Vysya Bank, IndusInd Bank, State Bank

of India, ICICI Bank, HDFC Bank, Punjab National Bank, UTI Bank and Allahabad

Bank have already walked into the RTGS fold.

The Hyderabad-based Institute for Development and Research in Banking

Technology (IDRBT) is developing the structured financial messaging system (SFMS),

which is a web-enabled software for inter-bank messaging in RTGS.

The enterprise integration and straight through processing (EISTP) is an

emerging technology, an end-to-end automation of financial transaction

processing–from pre-trade through to post-settlement.

Explains T P Ganapathy, assistant Vice President–IT, Central Depository

Services (India), "The scope ranges from processing of the original

customer order through to post-settlement position management and

reconciliation."

Because of regulatory reasons, a few private banks and big PSUs like State

Bank of India would look at risk evaluation tools in 2004. Another heavy IT

usage area could be anti-money laundering systems, and with only 8 banks

currently having one in place, this could be the IT hotspot in 2004.

Finally, Business Process Management (BPM) which along with document

management are likely to be the technologies offering highest RoIs to banks in

2004-05.

However, CN Ram, the high-profile CIO of HDFC Bank voices a growing concern

in the BFSI sector. "Banks have been the first to automate their business,

but they have gone overboard in embracing technology. While we evangelized IT,

we have, along the way, also de-personalized customer services."

Notwithstanding Ram’s reservations, a reversal or withdrawal of technology

adoption is unlikely.