10:20 am - Wednesday June 28, 2017

Banks’ development and role of technology

Well. That was the topic of the IDRBT Foundation Day Lecture 2011 delivered by Dr C Rangarajan, former Governor of Reserve Bank of India and present Chairman, Advisory Council to the Prime Minister of India on 28th November 2011 at the sprawling campus of IDRBT – Institute for Development and Research in Banking Technology at Hyderabad, India. I was invited by Mr Sambamurthy, Director of the Institute to attend this Lecture.

IDRBT is a unique institution which has through its research and product development contributed immensely to the induction and propagation of technology in the banking industry. It was established by the Reserve Bank of India in 1996 as an Autonomous Centre for Development and Research in Banking Technology. This Institute has made three most important technology infrastructures – INFINET, the implementation of PKI based electronic data transfer and the Structured Financial Messaging System which facilitated the development of secured payment system practice in India. More details about this Institute can be found in its website www.idrbt.ac.in

In his lecture Dr Rangarajan observed that though Indian banks joined the technology bandwagon rather late in comparison with other major countries, they have been able to leap-frog to latest versions of technology. He was also appreciative of the fact that today one can look back with satisfaction at some of the innovative technology based products and services offered by the banks.

He has identified the following five major areas under the ‘way forward’ as far as the use of technology in banking in India is concerned

Financial Inclusion – Technology adoption has enabled the authorities to further the cause of financial inclusion. Technology provides the scope for affordable financial inclusion. Harnessing technology holds the key for faster reach even more than the brick and mortar model. In his view, this is going to give the proverbial last mile connectivity to the untouched segment. The continuous availability of banking services with reliable and secured banking transactions is at the heart of the problem and emphasis on technology alone can make significant impact.

Enhancing the secured net work – Security is the root of technology centric banking. The advent of low cost and all pervasive communication channels such as internet has made communication more efficient, but not necessarily safe and secure. It is important to address issues such as computer virus, hacking, etc.

Capability of handling large volumes – Financial transactions have increased phenomenally and there is a question on the ability of our present payment system to run millions of payments instructions daily. One may need to think in terms of next generation products which could handle any amount of volumes with due scalability facilities

Fraud monitoring and prevention – There is a felt need to assess the nature and scope of activities supported by technologies engaged by banks w.r.t information security, electronic banking, technology risk management and cyber frauds. In this electronic age speed in detecting frauds has become extremely important. The response has to be with the same blinding speed as the fraud committed. Or else, the fund could vanish in no time.

Business continuity plan – With the complexities of modern banking a robust and dynamic BCP is a must for every bank.

In addition he has also identified the following areas that will facilitate the adoption of technology in banking

  • Data quality and consistency
  • Data standards and protocols
  • Information – key operative and strategic asset
  • Information and IT governance
  • Application consolidation
  • IT-Business Alignment
  • Development of in-house IT skills
  • Broaden IT management
  • Leadership competencies

Well. Banks in India have a plateful of agenda to pursue with.

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