Digital Banking A New Frontier in Indian Business

Paper submitted to

IFIM Business School, Bangalore, India

for the
CONVERGENCE -10th International Conference on
Digital Business: New Frontiers in Management

Scheduled on
February 4-6, 2016

by

Prof. Chowdari Prasad

Dr. K. S. Srinivasa Rao

Dean (Planning and Development)

IFIM Business School, Bangalore

Dean (Academics)
IFIM Business School, Bangalore

[email protected], +91 9482549472 (M)

[email protected], +91 9620559612 (M)

Digital Banking A New Frontier in Indian Business

Banking has taken a paradigm shift in India now even though it has a historical legacy for
over two centuries. Definition of Banking has taken a different meaning with technology
becoming a cutting edge in business. A major revolution is taking place in Banking Sector
due to the Economic and Banking Sector Reforms going on since 1991. New private and
foreign banks gave a threat and challenge to Indian Pubic Sector Banks as an outcome of
Liberalization, Privatization and Globalization (LPG) measures by the Government of India.
Stand-alone branches have taken a new avatar due to Core Banking facilities. Banks are
differentiating from each other in rendering best customer service through digital banking to
handle large volumes of business and meeting the Financial Inclusion goals set by the
government. Computerisation and ATMs made the life of customers easy for processing of
their cash transactions and retail banking needs. Online Banking made the job further
simplified in all kinds of transactions. With the advent of mobile technology and smart
phones, M-Banking is now the order of the day making the traditional banks as virtual.
Interestingly, PSBs in India withstood the onslaught to give tough competition to their
counterparts using technology, after a time tuning of two decades. Technology in Banking
Sector made the banks to also think about Lean and Green Management. Digital Marketing
became a strategy to attract Gen-Y customers even in Banking Sector. The authors have
taken secondary data and analysed the Indian Banking System on how Technology supported
in the development of the Banking Business in recent years.
Key Words: Bank, Business, Digital Banking, Indian Banks, Technology, Utility Services

1. Introduction
1.1 History of Banking in India
Indian Banking System comprising of Commercial, Developmental and Central
Banking (RBI) witnessed several twists and turns for over two centuries. These
include Organisational changes, Operations and Geographical Spread, Legal and
Technological interventions and Offering of various types of products and services by
the Public, Private, Foreign and Cooperative Sector Banks. Broadly, the functioning
of banks can be divided into three phases viz., (i) prior to 1969 - first nationalisation,
(ii) between 1969 to 1990 - growth period and (iii) after 1991 - consolidation with the
introduction of Economic Reforms through Liberalisation, Privatisation and
Globalisation (LPG).
The IT revolution during mid-1980s had a great impact on the Indian Banking system.
Use of computers for back-office reconciliation extended to front-office operations in
due course leading to introduction of Online Banking. Several innovations and
computerisation increased their business many-fold as the country's banking sector
reached global standards. The domestic banks were finding it difficult to compete
with their international counterparts in terms of customer service without the use of
Information Technology. The new wave ushered in a modern outlook and tech-savvy
methods of working for traditional banks to offer top class customer service at all

levels. All this led to the Retail Banking boom in India by turn of the twenty-first
century.
1.2 Reforms in Banking Sector with focus on Technology
RBI formed several Working Groups and Expert Committees on Mechanisation /
Computerisation in the Banking Industry as given in Table-1.
Major
recommendations of these Groups / Committees were to introducing MICR
Technology, use of standardized cheque forms/encoders, settlement operations in the
Clearing Houses, computerisation of branches by increasing their connectivity, Issues
relating to Payments System, Cheque Clearing for Securities Settlement, Electronic
Funds Transfer (EFT) System, Electronic Banking, Doing Banking by Using
Technologies like - internet and networking, so as to increase efficiency, quick
service, productivity and transparency. These initiatives brought in remarkable
changes in the working of banking system eventually as is experienced today.
Table 1: Committees of RBI for Technology in Banks
S.
No.

Year

Name of the Committee

Chairperson

1982

1984

1987

1988

Working Group to consider feasibility of

introducing MICR / OCR Technology for
processing of Cheques
Committee on Mechanization in the Banking
Industry
Committee on Communication Network for Banks
and SWIFT implementation
Committee on Computerisation in Banks

1994

Dr Y B Damle, Advisor,
Management
Services
Dept., RBI
Dr. C. Rangarajan, Deputy
Governor, RBI
Sri. TNA Iyer, Executive
Director, RBI
Dr C. Rangarajan, Deputy
Governor, RBI
Sri. W S Saraf, Executive
Director, RBI

Committee on Technology Issues relating to

Payments Systems, Cheque Clearing and Securities
system in the Banking industry
6
1995 Committee on Proposing Electronic Funds
Transfer and Electronic Payments
7
1999 Committee on INFINET
8
2001 Committee on Legal Aspects of Bank Frauds
9
2002 Working Group on Electronic Money
10
2003 Working Group on Cheque Truncation and eCheques
11
2011 Working Group on Information Security,
Electronic Banking, Technology Risk Management
and Cyber Frauds
12
2013 Committee on Comprehensive Financial Services
for Small Businesses and Low Income Households
(formation of Payment Banks)
Source: Various Reports of RBI

Smt. K S Shere, Principal

Legal Adviser, RBI
Sri. Vasudevan RBI Expert
Dr. Mitra
Ms. Zarir Cama RBI
Dr. R B Barman, Executive
Director, Reserve Bank
Shri G Gopalakrishna, RBI

Dr. Nachiket Mor, RBI

Board Member

What began with usage of Advanced Ledger Posting Machines (ALPMs) for service
over the counter during seventies, reached todays most sophisticated levels of Mobile
and Network banking. In the process, several products and services like clearing of
cheques, reconciliation of accounts, offering of services like Credit / Debit / Smart
3

Cards, Kisan / SME Cards, Dematerialisation, Core Banking Solutions, Cross Selling,
faster remittance of funds through RTGS / ECS / EFT / SEFT / SWIFT, Cheque
Truncation, etc., are being offered by all banks. Usage of NICNET, I-NET, RABMN,
BANKNET, INFINET, RBINET, NDS, SFMS have become the order of the day.
Similarly, compliance to prudential norms like CAR, CRR, SLR, NPA, KYC, ALM
and Risk Management has become smooth. Benefits of Interest Rate Deregulation is
being extended to customers efficiently. Robust MIS mechanisms are withstanding the
onslaught and Management of Disasters, Cyber Crimes, Money Laundering, Phishing,
Pharming, Hacking, Vishing, Skimming, Smishing, Trojan, etc.
1.3 Digital Banking
Internet has brought in the biggest change in the way we have been banking for
centuries. Digital Banking is the present trend in banking. It is not only merely using
the internet and is much more, based on the SMAC (Social, Mobile, Analytics and
Cloud) model, which puts customer first and cuts costs associated with banking.
SMAC makes banking business more agile and customer centric which contributes to
the building of the Digital Banking. There are other elements such as Big Data and
user-experience that also contribute to the concept.
2. Review of Literature
2.1 Articles from Research Journals
K.S. Srinivasa Rao and U.Rama Rao (1998) discussed on the issues and challenges of
the utility services offered by Banks using technology proposed by WS Saraf as
PUSHPA System.
Chowdari Prasad and K.S. Srinivasa Rao (2004) analysed the Performance of Public
Sector Banks and compared them with their counterparts and indicated how
technology would be taking a cutting edge for the future banking business.
K.S. Srinivasa Rao and Chowdari Prasad (2006) studied on the sustainability of
Foreign Banks operating in India in-spite of their Technology advantage.
Ankit Gupta (2010) studied on the Mobile Banking adoption in rural India as case
study.
Varalakshmi A, Chowdari Prasad and K.S. Srinivasa Rao (2013) created awareness on
Lean and Green Banking and suggested how technology in Banking can reduce
wastage.
Anshu Tyagi and Smitha Chitranshi (2015) have studied the relationship between
Electronic Banking and Customer Satisfaction in a select Indian bank. Davinder
Kumar and Bhubaneswar Sharma (2015) have discussed about how virtual circuits
will become permanent in making M-Banking applications a success. They focussed
on the issues of cost effective planning of network and location management between
ATMs and WATMs (White Labelled ATMs).

Gomathy Thyagarajan (2015) has studied more on issues related to Mobile Banking in
India. Muhammed Juman BK and J. Christopher (2015) have indicated that eBanking in India is still in evolution stage eventhough Government of India and RBI
have taken several initiatives. Kamaleswar Boro (2015) has studied on the prospects
and challenges of technological innovations in Indian banks viz. ATMs, Credit Cards,
Debit Cards, Internet Banking, Mobile Banking, ECS, RTGS, and Mobile Wallet in
North Eastern India.
S Nagaraju and Latha Parthiban (2015) have discussed about the advantages of Cloud
Technologies and mentioned about issues like data security and privacy. They have
presented a multi-factor authentication scheme using biometric finger prints as a key
parameter for online banking systems. Thankom Arun and Rajalaxmi Kamath (2015)
have opined that Financial Inclusion is the key enabler for development. The macro
data analysed by them through round table discussions, gave different regional
perspectives on the policies and practices of financial inclusion in India, South Africa
and Australia.
V. Varalakshmi (2015) has described about the attacks on PIN entry and secure ATM
transaction methods used to reduce physical and electronic thefts in ATMs. Y V Rao
and Srinivasa Rao Budde (2015) have studied on the development in Information
Technology which enables banks in making value-added services to be more effective
in satisfying customer needs by adopting innovative solutions in banking services. R.
Srinivasan and M. Subramanian (2015) have demystified about Payment Banks and
how they are going to support in Digital Banking revolution.
Aboagye Michael Osei et al., (2016) have suggested through a survey findings on
how to redefine the SERV-QUIL dimensions and constructs while applying to
Electronic Banking.
2.2 Reports of Consulting Companies on Digital Banking
Infosys-2012: Branch Bank of the Future- Transforming to Stay Relevant
Infosys believes that technology, innovation and channel integration will play
a key role in re-engineering and re-energizing the bank branch as one of the
preferred mode of banking.
McKinsey & Company -2013: Retail Banking in Asia Actionable insights
for new opportunities
Retail Banking in Asia is on the cusp of a new eraan era of amazing growth
and opportunities but also an era that will see downward pressure on returns.
Asia will reach over USD 900 billion in retail banking revenue by 2020,
growing at about 14 percent per year from 2010. It is expected to be the
second largest wealth management region globally after the United States,
with more personal financial assets residing here in Asia than Europe by 2015.
This is also a market where they are seeing and will continue to see rapid
shifts in three consumer behavioursheightening demands on frontline
services, fast adoption of new mobile platforms, and increasing need for credit
5

and a larger variety of products alongside growth of the middle class and
urbanization, amongst others.

WIPRO and Efma-2013: The Global Retail Banking Digital Marketing

This study was based on global surveys of banks covering marketing and
digital channels, and is also based on interviews with banks from all regions of
the world. Digital Marketing Capability Index shows that only a few banks
can consider themselves to be world class when it comes to Digital Marketing.
The potential for improvement at most banks is huge. Social media also
introduces lots of new issues for banks in their Digital Marketing activities.
India Brand Equity Foundation (IBEF)-2013: The Indian Banking
Sector: Recent Developments, Growth and Prospects
Though the Government is working hard to control inflation rates, the industry
expects full implementation of Basel III (currently banks in India are
following Basel II) norms by March 2018. This will require a considerable
credit raise, especially for public sector banks; however, an assessment of the
assets of private sector banks such as ICICI and Kotak Mahindra reveals that
they already have sufficient capital, and will sail through this change.
Deloitte Consulting Pvt. Ltd- 2014: Digital Transaction Banking:
Opportunities & Challenges
In this study, Deloitte explores in-depth the digital phenomenon developing in
the transaction banking landscape by identifying key global technology trends
and changes to the end-clients ecosystem, as well as the different degrees of
trend prevalence and maturity across key industries. Deloitte then examined
the current state of the incumbents and alternative service providers in the
industry, and finally, takes a glimpse into the road ahead.
PWC Report 2014: Productivity in Indian Banking
The report deals with Digital Banking Opportunity for Extraordinary Gains
in Reach, Service, and Productivity in next 5 years as well as its Disruptive
Potential.
Happiest Minds Technologies Pvt. Ltd. 2014: Digital Transformation in
Banking The Future of Banking
Todays demand of banking is anytime anywhere banking. This requires
innovative, robust, secure, optimized and ready to meet the expectations of
empowered and tech-savvy customers. Digital Transformation is far beyond
just moving from traditional banking to a digital world. It is a vital change in
how banks and other financial institutions learn about, interact with and satisfy
customers. An efficacious Digital Transformation begins with an
understanding of digital customer behavior, preferences, choices, likes,
6

dislikes, stated as well as unstated needs, aspirations etc. And this

transformation leads to the major changes in the organizations, from productcentric to customer-centric view.

Cognizant (2014): Digital Banking: Enhancing Customer Experience;

Generating Long-Term Loyalty
To stay profitable and grow in the new digital economy, banks need to adopt a
customer-centric business model, diversify online delivery of products and
services channels, and begin making meaning from valuable trails of digital
information. Digital modernization gives traditional banks a second chance. A
smart, enterprise-wide approach positions them to deepen customer
satisfaction and loyalty, driving long-term relationships and profitability.

EY and IBA (2014): Banking on Technology Perspectives on the Indian

Banking Industry
Responding to Basel norms and a more aggressive supervisory regime, banks
have undertaken risk and compliance management system implementations.
Information Management and Analytics are in focus as banks have built out
large data warehouses in an attempt to leverage their data assets to better
understand, sell and serve their customers. All this points to a flourishing
industry, focused on technological innovation. However, while there has been
significant action, considerable amount remains to be done. The next few
years are critical as banks focus on sweating their technology investments to
increase their Return on Investment.
BCG and IAMAI Report 2015: India @Digital.Bharat creating a $200
billion Internet economy
The Boston Consulting Group and Internet and Mobile Association of India
envisage that Indian economy will create a $200 billion business for mobile
banking shortly.
McKinsey & Company -2015: Digital Banking in Asia: What do
consumers really want?
Asian consumers are moving quickly into Digital Banking, McKinseys latest
research shows. Incumbents and new entrants alike should plan for the
implications.
DBS Group Research Equity 2015: Regional Industry Focus- ASEAN
Banks
Banks have started to invest in digitization which includes key areas such as
back-office automation, digitization of document management and automation
of credit decisions. DBS stated in its 2013 Annual Report that it plans to invest
S$200m a year over three years in Digital Banking. As per the McKinsey Asia
Personal Financial Services Survey, 2015; extracted from Digital Banking in
7

Asia: What do consumers really want?, it was noticed that India has 18%
penetration out of other several Asian countries, in which South Korea and
Australia got highest penetration (96%) with a least penetration in Philippines
(13%).
PWC- ASSOCHAM India-2015: Logging into Digital Banking, Creating
access and transforming lives
ASSOCHAM and PwC present this knowledge paper with the objective of
contemplating the issues and challenges being faced by IT and telecom
companies in providing a platform for taking banking to the unbanked masses.
3. RBI Guidelines on Technology
3.1 Corporate Governance of Banks in India
IT Governance is an integral part of the Corporate Governance that constitutes
accountability framework of a bank. It involves leadership support, organizational
structure and processes to ensure that a banks IT sustains and extends business
strategies and objectives. Effective IT Governance is the responsibility of the Board of
Directors and Executive Management. Access to reliable information has become an
indispensable component of conducting business, indeed, in a growing number of
banks, information is business. Today, almost every commercial bank branch is at
some stage of technology adoption: Core Banking Solution (CBS), or alternate
delivery channels such as internet banking, mobile banking, phone banking and
ATMs.
3.2 Reserve Bank of India, Department of Payment & Settlement Systems, Payment
Settlements in India - Vision 2012-15
Vision Statement: To proactively encourage electronic payment systems for ushering
in a less-cash society in India and to ensure payment and settlement systems in the
country are safe, efficient, interoperable, authorised, accessible, inclusive and
compliant with international standards.
The Vision Document "Payment Systems in India - Vision 2009-12", sought to reflect
the changes in the entire gamut of the payment systems, post-legislation of the
Payment and Settlement Systems Act, 2007. The Mission Statement accordingly
reflected the public policy objectives of the Reserve Bank "to ensure that all the
payment and settlement systems operating in the country are safe, secure, sound,
efficient, accessible and authorised" and contained both short and medium term plans
along with a slightly longer term perspective to achieve those goals.
To accomplish the vision of a less-cash society, if not cashless society, the key
elements which would impact all our efforts towards creation of a modern and
widespread payment system are: Accessibility, Availability, Awareness, Acceptability,
Affordability, Assurance and Appropriateness (7 As). The Vision Statement 2012-15
sets out the roadmap to ensure benefits of a structured modern payment and
settlement systems, including innovative products, to reach out beyond the currently
served target groups thereby facilitating greater financial inclusion. This is to be
achieved by nurturing a payment system that adequately serves the national and
international transaction needs of the nation.
8

3.3 IDRBT, Hyderabad

Institute for Development and Research in Banking Technology was set up and
funded by RBI in Hyderabad to provide technological and operating support to banks
and financial institutions. It is an autonomous centre for development and research in
banking technology. It is a Think-Tank for promotion of technological research and
consultancy and provides V-Sat based financial network for banks. It also is engaged
in Data Warehousing and Data Mining and publishes a journal on IT in Banking.
IDRBT offers web-based training to all bank executives using Indian Financial
Network (INFINET).
IDRBT has outlined its plans to launch a Digital Banking Framework in 2016 aimed
at making Digital Banking versatile by incorporating new channels of payments. The
framework / platform being developed with inputs from banking sector players,
technology firms and IDRBT research teams, is aimed at also meeting the emerging
requirements in the e-Commerce sector.
Recent advances in Big Data and Analytics has thrown up immense possibilities in
identifying areas of business propositions for banks, while meeting choosy demands
of their customers. Big Data has become the mantra for understanding new leads for
banks, likes and dislikes of customers, their behavioural analysts and information
security threats, among other issues. IDRBT will introduce a Post Graduate Diploma
in Banking Technology (PGDBT) program beginning July 2016.
Table-2 gives a gist of Technological & Innovative Products and Services being
offered by some Indian Banks and other new wave technology platforms which
evidence on Digital Banking initiatives:
Table 2: Technological & Innovative Digital Banking Products and Services
offered by some Banks
S.
No.
1

Type of
Bank

Name of the Bank

Technological & Innovative

Digital Banking Products and Services

Public Sector

State Bank of India

(3.7 lakh touch points,
16,415 branches, 56,930
group ATMs including
Multi-Function and SelfService Kiosks and Cash
Deposit Machines, 2.4
Lakh POS Terminals
and 58,571 Customer
Service Points)

In-touch, InCube (Start-up Branch), ExclusiF

(Wealth Management), ATMs, Point of Sale
Terminals, Core Banking, Internet Banking, State
Bank Anywhere Smart Mobile Banking, Business
Correspondents, Customer Service Points, Buddy
(Anyone, Anytime, Anywhere), SBI Quick (Missed
Call Banking), Foreign Travel Card, SBI Online
Customer Acquisition Solution (OCAS) and SBI Self
Service Kiosks (Bank @ Your Service 24x7), eSmart SME (e-Commerce Loan), e-auctions and eCRM
Mobile ATMs, Green Channel Banking, SBBJ e-

Public Sector

SBBJ

Public Sector

Panjab National Bank

Public Sector

Bank of Baroda

Public Sector

UCO Bank

Public Sector

Andhra Bank

Public Sector

Union Bank of India

Old Private
Sector Bank

Karnataka Bank

Old Private
Sector Bank

Federal Bank

10
11
12
13
14

15

16

17

18

New Private
Sector Bank
New Private
Sector Bank
Foreign Bank
Foreign Bank
Regional
Rural Banks
(RRBs)
Cooperative
Bank
Wallet
Banking
(2004)
Wallet
Banking
(2009)
Wallet
Banking
(2015)

LOBBY, Internet and Mobile Banking, e-Trade, eTax Payment, e-Remittance, Quick Missed Call
Banking
NEFT, RTGS, Cash Deposit Kiosk, SMS Banking,
IMPS, e-Statement, ECS, Fee Portal, Mobile
Banking, Internet Banking, EMV Debit Cards,
Talking ATMs, Doorstep Banking, Credit Cards
Rapid Funds2India, Baroda Flash Remit (with UAE
Exchange), Speed Remittance (with UAE/Lulu/Al
Ansari Exchange), MTSS and Swift Remittance
UCO Tap & Pay (for College Students and
Corporate) and UCO m-Passbook
Digital Wallet, Speed Pay, etc
1. IMPS through branches for Retail and Corporate
customers
2. Mobile Passbook ( M Passbook)
3. Missed Call facility for Mobile Banking &
Account balance
4. SMS based value added services
Blocking Debit Card
Balance enquiry of various accounts
Aadhar ID seeding
Enable/Disable user id of internet banking
ATM and Branch Locator

ICICI Bank

Core Banking, Internet Banking, Money Plant

(ATMs), Quick Remit (for NRIs), Moneyclick, KBL
ApnaApp and KBL m-PassBook
FedBook (mobile app), Co-branded VISA Credit
Card (with SBI), Automated Chat Facility (Virtual
Relationship Officer), e-Passbook App
Rail Ticket Booking on Website (IRCTC), etc

HDFC Bank

Click2ProtectPlus and others

Citi Bank
Standard Chartered
Bank
66 Grameen Banks
sponsored by
Commercial Banks
Saraswat Cooperative
Bank Ltd.

e-Core Banking through ATMs

Standard Chartered Breeze-Mobile Banking

Oxigen

Online Transaction services from Regional Rural

Banks, Internet Banking (non-transactional services
view only) for weak Banks
ATMs, NFS Network, E-payments-VISA Bill
Payment, Go-Recharge, RTGS, NEFT, Missed Call
Service, GOMO-Mobile Banking, Online Trading
Instant Money Transfers anytime anywhere using
IMPS, recharge your Phone or book a Movie ticket

MobiKwik

Mobile Recharge, DTH Recharge, Utility Bills,

Online Shopping
Online Mobile Recharging, Online Bill Payments,
Online Bus Travel, Credit and Debit Card Payments,
Net Banking, BCCI Payments, Mobile Wallet, etc

Paytm

10

19

Deposits, Cash Management, Manpower and

Technology (partnering with ICICI Bank),
Recharges for Mobiles, Utility Bill Payments, Ticket
Booking, Insurance Distribution, and Assisted
Online Shopping
20
Payment
Tech Mahindra
A first of its kind Tap N Pay, Contactless Digital
Bank (2015)
Mobo Money
Payment Solution (Near Field Communication)
Source: Information taken from various websites, Newspaper Reports and Advertisements
Payment
Bank (2015)

FINO Pay Tech

4. Objectives of the Research Study:

By understanding the way Technology is entering into the banking system in India by
design through the regulatory body, the researchers have taken the following
objectives for the study:
1) To understand the importance of Digital Banking in Indian Banking System as
per the Vision document of RBI on Payment Systems
2) To analyse the Banking business using IBA data
3) To understand the advantages of Digital Banking for the Stakeholders
including intermediaries using Big Data of RBI on Payments
4) To understand the importance of SMAC as a competitive Strategy for Digital
Marketing
5) To create Awareness of Threats and Challenges of Digital Banking in terms of
Cyber Crimes
5. Research Methodology:
After doing the Literature survey, an interest was developed to work on the status of
Digital Banking with reference to Indian Banks. Type of Research is of Exploratory
mainly as the concept is still at the evolving stage in India. On several parameters of
Financial and Technological strengths of Banks, the research is of descriptive nature.
The work is more on Secondary Data which was collected from various sources of
Bank Websites, Newspaper Advertisements, and Information through Press Releases.
The objectives of the Research were verified through the information available but not
tested by any hypothesis.
6. Limitations of the Study
The concept of Digital Banking is at the primitive stage and government is also taking
lot of initiatives to promote assessing the situation time to time. This limited the
authors to confine to descriptive analysis rather predictive.
7. Analysis
A Bank interested to do a new initiate should make their financial strengths in order.
As Digital Banking is a new initiate, all banks are competing and trying to grab the
market. The Descriptive Analysis done based on the data taken from IBA website on
the core financial aspects like Deposits, Advances, Investments, Total Assets, Total
Income, Total Expenditure, Net Profit, and Net NPA for the periods of 2013-15 and
given in Table 3 (a) to 3 (d).
11

Table: 3 (a) Status of Aggregate Deposits and Advances of Banks in India

Deposits (Rs. Crores)
2013
2014
2015
5,745,697 6,589,02 7,195,480
(77.3)
0 (77.2)
(76.6)
1,395,836 1,591,69 1,787,761
(18.8)
4 (18.7)
(19.0)
288,144
352,459
414,441
Foreign Banks
(3.9)
(4.1)
(4.4)
7,429,677 8,533,17 9,397,682
Total
(100.0)
3 (100.0)
(100.0)
Note: Figures in Brackets indicate Percentage to Total
Types of Banks /
Year
Public Sector
Banks
Private Sector
Banks

Advances (Rs. Crores)

2013
2014
2015
4,472,84 5,101,142 5,476,250
5 (76.1)
(75.7)
(74.5)
1,143,24 1,342,935 1,543,917
9 (19.4)
(19.9)
(21.0)
263,680
291,142
327,615
(4.5)
(4.3)
(4.5)
5,879,77 6,735,219 7,347,781
3 (100.0)
(100.0)
(100.0)
Source: IBA website

All banks are in steadily moving in terms of Aggregate Deposits and Advances but for
Public Sector Banks, there is a slight downfall in terms of Advances over the period of
2013-15. Interestingly, even though the actual numbers are different across banks, in
terms of Percentage over Total Deposits and Advances, all banks are going on the
same pace by facing the competition.
Table: 3 (b) Status of Investments and Total Assets of Banks in India
Types of
Banks / Year
Public Sector
Banks

Investments (Rs. Crores)

2013
2014
2015
1,759,0 1,974,1 2,168,8
56
89
52
(77.3)
(77.2)
(76.6)

Private
Sector Banks
Foreign
Banks

625,931 648,698 727,998

(18.8)
(18.7)
(19.0)
228,063 260,456 254,020
(3.9)
(4.1)
(4.4)
2,613,0 2,883,3 3,150,8
51
44
71
Total
(100.0) (100.0) (100.0)
Note: Figures in Brackets indicate Percentage to Total

Total Assets (Rs. Crores)

2013
2014
2015
6,961,9
88
7,968,41 8,678,77
(76.1)
6 (75.7)
0 (74.5)
1,989,7
97
2,258,81 2,534,55
(19.4)
0 (19.9)
8 (21.0)
637,894 748,809
754,356
(4.5)
(4.3)
(4.5)
9,589,6 10,976,0 11,967,6
79
35
84
(100.0)
(100.0)
(100.0)
Source: IBA website

All banks are in steadily moving in terms of Investments and Total Assets but for
Public Sector Banks, there is a slight downfall both in terms of Investments and Total
Assets over the period of 2013-15. Interestingly, even though the actual numbers are
different across banks, in terms of Percentage over Investments and Total Assets, all
banks are going on the same pace by facing the competition.
Table: 3 (c) Status of Total Income and Total Expenditure of Banks in India
Types of Banks /
Year
Public Sector
Banks
Private Sector
Banks
Foreign Banks
Total

Total Income (Rs. Crores)

2013
2014
2015
611,65 685,35
6
8
751,782
(71.0)
(70.7)
(70.5)
196,27 224,61
9
0
249,226
(22.8)
(23.2)
(23.4)
53,460 59,258
65,332
(6.2)
(6.1)
(6.1)
861,39 969,22 1,066,34
5
6
1 (100.0)

12

Total Expenditure (Rs.

Crores)
2013
2014
2015
489,81 557,70 613,68
9
5
5
(73.1)
(73.4)
(73.5)
147,62 165,35 180,82
3
4
4
(22.0)
(21.8)
(21.7)
32,945 36,571 40,088
(4.9)
(4.8)
(4.8)
670,38 759,63 834,59
7
0
7

(100.0) (100.0)
(100.0)
Note: Figures in Brackets indicate Percentage to Total

(100.0) (100.0)
Source: IBA website

All banks are in steadily moving in terms of Total Income and Total Expenditure but
for Public Sector Banks and Foreign Banks, there is a slight downfall in terms of Total
Income over the period of 2013-15. In case of Foreign Banks, there is a slight
downfall even in terms of Total Expenditure over the period of 2013-15.
Interestingly, even though the actual numbers are different across banks, in terms of
Percentage over Total Income and Total Expenditure, all banks are going on the same
pace by facing the competition.

Table: 3 (d) Status of Net Profit and Net NPA of Banks in India
Net NPA (Rs. Crores)
2013
2014
2015
89,950 130,360 159,973
(91.2)
(91.6)
(91.2)
5,994
8,862
13,680
(6.1)
(6.2)
(7.8)
2,661
3,160
1,761
Foreign Banks
(2.7)
(2.2)
(1.0)
98,606
91,165 80,906 88,842 (100.0 142,381 175,414
Total
(100.0) (100.0) (100.0)
)
(100.0)
(100.0)
Note: Figures in Brackets indicate Percentage to Total
Source: IBA website
Types of Banks /
Year
Public Sector
Banks
Private Sector
Banks

Net Profit (Rs. Crores)

2013
2014
2015
50,583 37,019 37,820
(55.5)
(45.8)
(42.6)
28,995 33,755 38,219
(31.8)
(41.7)
(43.0)
11,586 10,132 12,802
(12.7)
(12.5)
(14.4)

All banks are in steadily moving in terms of Net Profit and Net NPA but for Public
Sector Banks and Foreign Banks, there is a slight downfall in terms of Net Profit over
the period of 2013-15. In case of Foreign Banks, there is a slight downfall even in
terms of Net NPA over the period of 2013-15. Interestingly, even though the actual
numbers are different across banks, in terms of Percentage over Total Income and
Total Expenditure, all banks are going on the same pace by facing the competition.
Annexure-I gives about Big Data on Digital Banking. RBI has taken data from
various aspects of Technologies like RTGS, CCILK, Electronic Clearing, Cards, PPIs,
Mobile Banking, and also Paper Clearing. This Big Data gives a clarity how in fact
the Digital Banking concept is working.
8. Digital Marketing
One should see the key issues in Digital Marketing for banks and other financial
services firms, taking a truly global perspective. Online and Mobile Banking are at or
near the top of the banks agendas. What services to introduce, how to engage
customers, and how to use customer information to personalise marketing are typical
questions. There is a high degree of uncertainty because banks are still learning and
the digital environment is constantly changing. It was not a surprise to find that banks
13

in countries as different as India. Singapore, United States and Sweden are all
thinking about the same issues when it comes to digital channels and Digital
Marketing. Perhaps more surprising is the time its taking for banks to develop really
world class Digital Marketing capabilities. Most banks have some form of presence
on Social media but how far should they develop transactional capability and how
deep should they make customer engagement will depend on how they brand
themselves.
9. Cyber Risks to Banks
Human risk is a big problem for Indian financial institutions and banks need to start
proactively educating their employees and customers to prevent cyber threats from
persisting. Banks should work on improving awareness of the different threats that
currently exist, including e-mail fraud, Phishing, Vishing, Smishing, Skimming,
Hacking, and Trojan. Banks need to work on how to have effective customer
awareness programs as far as cyber fraud and banking fraud are concerned.
10. Financial Inclusion
Financial inclusion or inclusive financing is the delivery of financial services at
affordable costs to sections of disadvantaged and low-income segments of society, in
contrast to financial exclusion where those services are not available or affordable. An
estimated 2 billion working-age adults globally have no access to the types of formal
financial services delivered by regulated financial institutions.
11. India @ Digital Banking through Financial Inclusion
New Avatar of ATMs
ATM (Automated Teller Machines) is also known as an Automated Banking
Machine (ABM),
cash
machine, cashpoint, cashline, minibank, bankomat or
colloquially hole in the wall in some countries.
It is an electronic
telecommunications device that enables the customers of a financial institution to
perform financial transactions, particularly cash withdrawal, without the need for a
human cashier, clerk or bank teller.
In India, ATM facility was first introduced in 1988 in Mumbai. Over a period, there
are a variety of ATMs being offered by all types of Banks, Non-Banking Financial
Companies, India Post Offices and others. These are On-site, Off-site, Solar-based,
Bio-metric, Floating, Mobile, Micro, While-labelled, Brown-labelled and even
Talking ATMs. GOI is envisaging to allow more free ATM transactions for certain
types of accounts as part of its drive to deepen financial inclusion through spread of
cash vending machines. Very soon, 1.55 lakh Post Offices across India will also have
ATMs, in combination with third parties in order to leverage electronic banking for
financial inclusion.
ATMs will soon become as good as bank branches. Customers will be able to apply
for credit cards and avail of loans using these self-servicing machines. There are over
1.90 lakh ATMs across India. In January 2016, RBI allowed banks to extend all their
banking products and services through their ATMs provided their technology allows
14

it. Till recently, banks could provide services on ATMs like deposits and withdrawals,
PIN change, cheque book requisition, statement of account, balance enquiry, funds
transfer, bill payments and purchase of railway tickets. Now, even Vehicle Insurance
facility can be availed through ATMs. Several studies in India and abroad have
indicated that the cost per transaction to the bank is economical through ATMs or
Online Banking vis--vis when a customer visits the branch.
In view of low penetration of ATMs in rural and semi-urban centres, a panel of RBI
has recommended that the Rs. 2,000 crore Financial Inclusion Fund (FIF) should be
utilised to encourage installation of ATMs in these centres. The RBI Committee on
Medium-term path on financial inclusion observed that as of 2014, there were only 18
ATMs per one lakh adult population in India against 65 in South Africa and over 180
in Russia. The objective of FIF which is managed by NABARD is to support
developmental and promotional activities including creating financial inclusion
infrastructure across the country, capacity building of stakeholders, creating
awareness to address demand-side issues. The Committee headed by Shri Deepak
Mohanty, ED of RBI, is of the view that installing of more ATMs in rural and semiurban centres will create more touch points for customers. Micro ATMs can be used
by the Banking Correspondents.
Governments Initiative: PMJDY
Pradhan Mantri Jan-Dhan Yojana (Prime Minister's People Money Scheme) is
National Mission for Financial Inclusion to ensure access to financial services,
namely Banking Savings & Deposit Accounts, Remittance, Credit, Insurance, and
Pension in an affordable manner. This financial inclusion campaign was launched by
the Prime Minister Shri. Narendra Modi on 28 August 2014 for which the
announcement was made on Independence Day speech on 15 August 2014. Run
by Department of Financial Services, Ministry of Finance, on the inauguration day,
1.5 Crore (15 million) bank accounts were opened under this scheme. It was
informed by Indian Finance Minister Shri. Arun Jaitley that increased banking
penetration and use of technology in payments will reduce the prevalence of
unaccounted money. PM' s Jan Dhan Yojana - a program to provide bank accounts to
all with a game plan to digitize most payments and through Digital Banking more
money in tax net.

Governments Initiative: e-NPS

e-NPS is a scheme of government through online portal (https://enps.nsdl.com) of
National Pension Scheme (NPS) Trust wherein a subscriber can register and
contribute under NPS online. Through e-NPS, a subscriber can register, generate a
Permanent Retirement Account Number (PRAN) and contribute his/her account
through use of Net Banking / Debit Card or Credit Card.
Regulatory Body Initiative: Rupay
15

RuPay is an Indian domestic card scheme conceived and launched by the National
Payments Corporation of India (NPCI). It was created to fulfill the Reserve Bank of
Indias desire to have a domestic, open loop, and multilateral system of payments
in India. RuPay facilitates electronic payment at all Indian banks and financial
institutions, and competes with MasterCard and Visa in India. NPCI maintains ties
with Discover Financial to enable the card scheme to gain international acceptance.
Regulatory Body Initiative: Payment Banks
The term Payment Banks is new and seems to have been invented in Indian
context. In September 2013, a Committee on Comprehensive Financial Services for
Small Businesses and Low Income Households, headed by Nachiket Mor, was
formed by the RBI. By January 2014, the Nachiket Mor committee submitted its
final report and one of its recommendations was the formation of a new category of
bank called payments banks. Out of 41 applicants in the race, on 19 August 2015,
RBI gave "in-principle" licences to following eleven entities to launch payments
banks:-

Aditya Birla Nuvo

Airtel M Commerce Services

Cholamandalam Distribution Services

Department of Posts

FINO PayTech

National Securities Depository

Reliance Industries

Dilip Shanghvi, (founder of Sun Pharmaceuticals)

Vijay Shekhar Sharma, (CEO of Paytm)

10

Tech Mahindra

11

Vodafone M-Pesa

Regulatory Body Initiative: Wallet Banks

As the technology advents from Technology Banking in terms of Usage of ATMs,
Online Banking using Internet to Mobile Banking, Payment Banks became the order
of the day. The usage of M-Banking in India is increasing day by day as India as a
Country having largest younger Generation. The Volume and Value of the Mobile
Banking Business (year 2011-2013) is given in the following diagram:

16

Wallet Banks are special type of Mobile Banking systems where money can be
transferred from Mobile to Mobile and can be used for the several Utility services
including Banking. The following information gives more details of Wallet Banks:
(a) MobiKwik was founded by Bipin Preet Singh and Upasana Taku in 2009. Over
the years, MobiKwik extended their service on mobile apps. They tied up with
various online merchants such as eBay India, BookMyShow, Dominos
India, ShopClues and Snapdeal to provide accessibility of their wallet as a
payment option on e-commerce sites. Moreover Mobikwik also introduced the
feature of sending and receiving money via MobiKwik mobile app. Mobikwik
raised under $5 million in its Series A funding from an unnamed US-based VC
firm in 2013 and is expected to get another $30 million in the coming year.
(b) Oxigen Services India Pvt. Ltd was founded in July 2004, out of a vision of an
Indian professional entrepreneur - Mr. Pramod Saxena in partnership with the
Blue Label Telecom, a South African company with an objective to reach services
to the masses of India, through a virtual network for Payments and Services. In a
short span of 10 years, Oxigen has become a leading payment solutions provider
with a retail footprint of 1, 30,000 + outlets pan India and more than 35 million
transactions on a monthly basis. Oxigen is the first virtual wallet in India, to be
integrated with NPCI (National Payments Corporation of India) that allows for
Instant Money Transfers anytime, anywhere using IMPS. Oxigen Wallet is secure.
This mobile wallet technology is built using multiple layers of security and is
designed with anti-hacking codes. The website is secured using 128 bit SSL
encryption. It uses authentication tools to protect your account from any
unauthorized access. Thereby you limit chances of any fraud.
12. Conclusion
The prognosis for Indian banks is positive with the domestic credit as a percentage of
the GDP having grown substantially over the last decade. This was primarily because
17

the conventional policies of the RBI have worked well to limit Indias exposure to the
sub-prime crisis of 2008, which stemmed when regulators eased their grip on
financial corporations, thereby leading to the high risk leveraging of assets.
Over the last decade, technology has transformed the landscape of Indian banking.
Implementation of core banking platform has automated basic processes, enabled the
movement to a single customer view and allowed for optimization of work across
branch and hub network. Core banking platform have also given banks a strong
launch pad to offer digital channel capabilities almost all banks today are
feverishly building out their online and mobile channel offerings. ATM deployments
and technology-enabled business correspondent (BC) network have allowed banks to
service large parts of the Indian hinterland.
The strategic use of technology to implement a differentiated business model, a
transformed customer experience and an optimized cost structure will separate the
leaders from the laggards in the industry. According to McKinseys analysis (2015),
depending on the starting point, banks that adopt and implement Digital Banking
systems could see a 30-50% impact on net profits. About two-thirds of the gains are
expected to come from cost savings and the rest from new products and market share
gains. On the other hand, inaction could possibly result in banks losing between 2936% of bottom line. They are not able to quantify this at this juncture.
Information Technology (IT) today has become an important tool for an efficient
banking system, and Indian Banks have put in place a fairly strong infrastructure to
leverage its benefits. It has made a visible difference in the functioning of banks and
conduct of banking operations. IT is one of the most important facilitators for the
transformation of the Indian Banking industry in terms of its transactions processing
as well as for various other internal systems and processes.
With the advent of mobile technology and smart phones, M-Banking is now the order
of the day making the traditional banks as virtual. Interestingly, PSBs in India
withstood the onslaught to give tough competition to their counterparts using
technology, after a time tuning of two decades. Technology in Banking Sector made
the banks to also think about Lean and Green Management. Digital Marketing became
a strategy to attract Gen-Y customers even in Banking Sector.
13. Scope for further Research
As the Banks are able to generate both volume and value in business, there is a score
of working on time-series fluctuations for the data related to new initiatives like MBanking, W-Banking etc. One can work on the data using Multivariate Analysis once
a good amount of data is captured over a period of time. Also, the customer
perception towards Digital Banking can be studies by collecting primary data across
verticals and across different types of banks.
14. Bibliography
1) Aboagye Michael Osei et. al. (2016), Redefining Service Quality Dimensions
In Electronic Banking from Extant Theories, British Journal of Economics, Management &
Trade, Vol. 11 (3), pp.1-22

18

2) Ankit Gupta (2010), Mobile Banking Adoption in Rural India, PGDM e-Business, Welingkar
Institute of Management Development & Research
3) Anshu Tyagi and Smitha Chitranshi (2015), Customer Satisfaction Measurement of Internet
Banking, International Journal of Education and Science Research Review, Vol. 2 (3), pp.1013
4) Chowdari Prasad and Srinivasa Rao KS (2004), Can Public Sector Banks compete with
Foreign / Private Banks? A Statistical Analysis, The ICFAI Journal of Bank Management, Vol
III, Number 1
5) Davinder Kumar and Bhubaneswar Sharma (2015), Virtual Circuit that may be permanent
to make M-Banking applications as a success bandwidth management is an important issue for
analysing variable sized packets and frames, International Journal of Advances in Scientific
Research, Vol.1(10), pp.376-377
6) Gomathy Thyagarajan (2015), Mobile Banking A Review, International Journal of
Management and Social Science Research Review, Vol.1 (14), pp.174-181
7) Kamaleswar Boro (2015), Prospects and Challenges of Technological Innovation in Banking
Industry of North East India, Journal if Internet Banking and Commerce, Vol. 20 (3), pp. 1-6
8) K.S. Srinivasa Rao and Chowdari Prasad, Sustainability of Foreign Banks Working in India
A Statistical Analysis, Advances in Research in Business and Finance, 2005, Vol.III, Banking
and Insurance, the ICFAI University Press, Hyderabad, 2006, pp. 84-131
9) K.S. Srinivasa Rao and U.Rama Rao, A Note on PUSHPA System, SANKALPA, The
Journal for Management Development & Application, Department of Business
Administration, Utkal University, Bhubaneswar, Orissa, Vol.VI, No.1, Jan-June, 1998,
pp.115-119
10) Muhammed Juman BK and J. Christopher (2015), The Evaluation of E-Banking: Challenges
and Opportunities in India, International Journal of Research Science & Management, Vol. 2
(12), pp.11-22
11) R. Srinivasan and M. Subramanian (2015), Payment Banks in India Demystified, SSRG
International Journal of Economics and Management Studies, Vol. 2 (6), Nov-Dec, ISSN:
2393-9125, pp.1-4
12) Sabout Nagaraju and Latha Parthiban (2015), A Secure Authentication and Authorization
Scheme for Online Banking Systems in Cloud, International Journal of Applied Engineering
Research, Vol. 10 (76), pp.484-490
13) Thankom Arun and Rajalaxmi Kamath (2015), Financial Inclusions: Policies and Practices,
IIM Management Review, Vol. 27, pp.267-287
14) V.Varalakshmi (2015), A Survey on PIN Authentication for ATM Transactions, International
Journal of Advanced Research in Science, Engineering and Technology, Vol. 2 (10), pp.951954, ISSN: 2350-0328
15) Varalakshmi, A., Chowdari Prasad and K.S. Srinivasa Rao, Banking Innovation for an Eco
Friendly Environment: A new Trend of Lean and Green Management, Journal of
International Academic Research for Multidisciplinary (JIARM), Vol.1 (6), July, 2013,
pp.400-421, ISSN: 2320-5083 http://www.jiarm.com/Jul/paper4422.pdf
16) Y V Rao and Srinivasa Rao Budde (2015), Banking Technology Innovations in India:
Enhancing Customer Value and Satisfaction, Indian Journal of Science and Technology,
Vol.8 (33), pp.1-10
Industry Reports:
17) Reserve Bank of India, Department of Payment & Settlement Systems, Payment Settlements
in India : Vision 2012-15
18) Infosys, Branch Bank of the Future- Transforming to Stay Relevant, 2012
19) McKinsey & Company, Retail Banking in Asia Actionable Insights for New Opportunities,
2013
20) WIPRO and Efma, The Global Retail Banking Digital Marketing, 2013
21) Industry Report of India Brand Equity Foundation (IBEF), The Indian Banking Sector:
Recent Developments, Growth and Prospects, 2013
22) Deloitte Consulting Pvt. Ltd, Digital Transaction Banking: Opportunities & Challenges, 2014
23) PWC , Productivity in Indian Banking, 2014
24) Happiest Minds Technologies Pvt. Ltd., Digital Transformation in Banking The Future of
Banking, 2014

19

25) Cognizant, Digital Banking: Enhancing Customer Experience; Generating Long-Term

Loyalty, 2014
26) EY and IBA, Banking on Technology Perspectives on the Indian Banking Industry, 2014
27) BCG and IAMAI Report, India @Digital.Bharat, 2015
28) DBS Group Research, Regional Industry Focus- ASEAN Banks, 2015
29) McKinsey & Company, Digital Banking in Asia: What do Consumers Really Want?, 2015
30) PWC- ASSOCHAM India, Logging into Digital Banking Creating Access, Transforming
Lives, 2015

ANNEXURE I: Big Data on Digital Banking

Finan
cial
Year

201516 (*)
201415
201314
201213
201112
201011
200910
200809
200708
2006-

1 RTGS

2 CCIL
Operated
Systems

3 Paper
Clearing

4 Retail
Electronic
Clearing

5 Cards

11

17

22

Volu
me
(Mil
lion)

64
93
81
69
55
49
33
13
6
4

Val
ue
(Ru
pees
Billi
on)
640
199
929
333
904
968
102
635
0
107
979
1
941
039
101
169
9
611
399
482
946
246

Val
ue
(Ru
pee
s
Billi
on)
530
017
752
000
621
570

501
598

131
3

100
168

406
071
383
901

134
2
139

990
12
101
3

387
396
320
168
264
403
163

138
0
139
7
146
1
136

104
099
124
691
133
961
120

Volu
me
(Mil
lion)

2
3

2
2
1
1
1
1

1197
125
7

Val
ue
(Ru
pee
s
Billi
on)
544
45
854
34
933
16

Volu
me
(Mil
lion)

729

33

1108
694

318
81

617
4

186
71

205
76
119
45

573
2
502

155
11
114
2

404

882

387

839

384
352

821
709

0
0

0
0

0
0

0
0

192
5
168
7

512
406
314
281
304
325

596
6
416
4
149
34
861

20

648
0
842
4
721
9

7 Mobile
Banking

Val
ue
(Ru
pee
s
Billi
on)
554
98
653
66
478
56

Volu
me
(Mil
lion)

Val
ue
(Ru
pee
s
Billi
on)
191
87
254
15
221
60

6 Prepaid
Payment
Instrument
s (PPIs)
29
Val
ue
Volu
(Ru
me
pee
(Mil
s
lion)
Billi
on)

Volu
me
(Mil
lion)

11 Grand
Total
(1.1+1.2+2+
3+4+5+6)
39

477

287

213

314

213

172

Val
ue
(Ru
pee
s
Billi
on)
197
3
103
5

134

81

95

224

967
7
1171
8
980
2

67

79

53

60

832
0

1329
239

31

62

26

18

767
3
108
2

1080
539
7925
35

213
3
208
0
215
5
204

8928
78
7726
61
6873
01
4778

Volu
me
(Mil
lion)

Volu
me
(Mil
lion)

Val
ue
(Ru
pees
Billi
on)
1178
183
1682
461
1519
235

07
200506
200405

2
0

192
115
408
406
62

1
1

334
107
521
771
13

7
128
7

424
113
291

83

7
106
6

202

398

9
157
3

58

777

171

310

230

Source: RBI website

21

96
2222
76
7820
1