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AGENDA FOR THE SESSION
o To Sensitize the Participants to the
Latest Changes in Banking Industry
o What is the Response to the Current
Trends from Bankers and Customers?
INDUSTRY PROFILE
Public Sector banks
Private Indian Banks New Generation
Banks
Private Foreign Banks –
Cooperative Banks
Non Banking Financial Institutions
Banking Sector Reforms – Post-Liberalization … 1st Narasimham Committee Report on
Financial Sector Reform – 1991 Introduction of Capital Adequacy Norms and
Prudential Norms - 1992 Deregulation of Interest Rates, Prudential
Norms for Maximum NPA – 1993 Introduction of Banking Ombudsman Scheme
– 1994
Banking Sector Reforms – Post-LiberalizationConcept of Local Area Banks
Introduced – 19951st Shared Payment Network System &
conditional autonomy to PSU’s – 19962nd Narasimham Committee Report of
Banking Sector Reforms – 1997Guidelines on Risk Management – 1998
RECENT TRENDS IN BANKS Entry of New Generation Banks Change in the Process, Methods &
Techniques New Products and Services Collaboration between Banking &
Insurance Companies. Improvement in Service Quality Increasing focus on Retail Banking Shift Towards Branchless Banking
RECENT TRENDS IN BANKS Change in Customer Expectations Outsourcing of Resources [Human&Non-
human] Steady Reduction in Interest Rates Increasing Non- Interest and Fee Based
Income Corporate governance and Business
Transformation Mergers, Acquisitions and Consolidations
CHANGING PERCEPTION OF CUSTOMER
Servicing the Customer – 1950’s to 1960’s Satisfying the Customer - 1960’s to 1980’s Pleasing the Customer - 1980’s to 1990’s Delighting the Customer -1990’-2000 Retaining the Customer – 2000 and beyond
WHAT CHANGES ? Electronic Fund Transfer (EFT) Electronic Clearing System (ECS) Automated Teller Machines (ATM) Shared Payment Network System (SPNS) Credit Cards/ Debit Cards Point of Sale Terminal Tele-banking Mobile Banking Net Banking Electronic Data Interchange Corporate Banking Terminals
WHERE ARE WE GOING? Anywhere Anytime Anyplace Banking Timeless and Placeless Banking Banking at Convenience Good by to Traditional Instruments
(Cheques &DD) & Invitation to new Instruments
Disappearance of Conventional Risk and Arrival of New Risks
Leading to currency-less monetary system Dismantling of Physical Structure
WHAT IS THE TRIGGER? Hyper Competition Shrinking Margins Need to Reduce Cost Take Advantage of Technology Changing Customer Expectations Simplify the Procedure and Process Reduce Traditional Risk Offer Better / Improved Service Some Constraints
[Policy/Resources/Physical/Structure]
Author for Change – Players in the Banking Business Eco-System
Shareholders Management Depositors Borrowers Employees Government Regulatory Authorities – RBI Competitors
PHASE OF TECH BANKING
PSB
PIB
PFB
CB
NBFI
SBI, SBT ETC.
ICICI,IDBI,HDFC,UTI BANK ETC..
CITI BANK,SC BANK, ETC..
SCB,UCB,DCBs/SCBs
INDUSTRY
SOME EARLY ADOPTERS
BANK____________CHANNEL
HSBC
BankHDFCBank
UTI Ban
k
CITI BANK ICICI Bank
ATM (No.) 250 500 550 174 1000
ATM Share(%)
40 50 NA 80 45
Other Channel[%] (mobile, phone, net)
35 15 NA 15 15
Branch Banking[%]
25 35 NA 5 40
STRATEGIES OF BANKS
Citibank: Parallel Banking
HSBC : Leveraging branches to grow C’
ICICI B : Reducing importance of branch
HDFC B: Conservative migration
UTI B : ATM’s as a force multiplier
Issues and Challenges
What will happen to the traditional rural credit institutions like, Cooperative Banks, RRB’s and Low performing Public Sector Banks?
What are all the options for the Public Sector Banks?
Issues and Challenges
Can the machines establish a strong connecting link with customers?
Is the Convenience Banking good for all segment and all seasons?
Is it not challenges the conventional wisdoms (keeping close contact with the customers)?
Issues and Challenges
Does IT confer Competitive advantage or is it just the cost of staying in business?
How do we dispose the existing human resource?
What are the new security issues? Is this changes a customer demanded/bank
wanted? Are the customers happy and comfortable with the shift?
Electronic Fund TransferTransfer of funds between
banks located in different cities in place of DD/MT/Telegraphic transfer.
Electronic Clearing System
Facilitates inter-bank settlements - both Debit & Credit clearances through INFINET.
CC: Companies who have to make bulk payments to a large number of beneficiaries prepare the credit instructions on the magnetic media and submit the same to RBI for payment.
DC: Payment to utility companies by banks on behalf of the customers.
Tele-bankingUsing automatic voice recorder
it facilitates both cash & non-cash transactions for the bank and customers.
Automated Teller Machines
Device used for withdrawal of money, depositing of money and balance enquiry and verification for 24 hours of a day.
Shared Payment Network System
Facilitates Use of ATM cards across participating banks at ATM centers using Master/Visa Cards. In case of using other banks ATM – one may have to pay service charges.
Credit Cards/ Debit CardsCREDIT CARD: It is a card that
empowers the Customer to spend up to the fixed value of money limit fixed - A prepaid card.
DEBIT CARD: It is a post paid card and money is transferred after the spending.
Corporate Banking TerminalsFacilitates the Corporate
customers to log on into the banks data base and have access to their account for balance verification etc. with defined powers.
Point of Sale TerminalComputer terminal that is
linked online to computerised customer information files that facilitates purchase from retail shops as it credits the retailer account online.
Electronic Data Interchange
Transmit financial information and payments in electronic form.- reduces transmitting cost and risk.
JAMMU
CHANDIGARH
DELHI
JAIPUR
AHMEDABAD
MUMBAI
PUNE
BANGALORE
THIRUVANANTHAPURAM
CHENNAI
HYDERABAD
BHUBANESHWAR
CALCUTTA
PATNAKANPUR
GUWAHATI
BHOPAL
Back up NMS at Mumbai
NMS at Hyderabad
Integration of VSAT network with Terrestrial network
DESIGN OF TERRESTRIAL NETWORK AND INTEGRATION WITH VSAT NETWORK
2 mbps leased line
64/128 kbps leased line
VSAT Network
NAGPUR
KOCHI
GOA
LUCKNOW
INFINET - INDIAN FINANCIAL NETWORK (LEASED LINE CONNECTIVITY AND INTEGRATION WITH IDRBT VSAT
NETWORK)
INTRA BANK COMMUNCATION THROUGH THE INFINET
INTRA BANK COMMUNCATION THROUGH THE INFINET
BR 1 BR 2 BR3 BR4 BR5
BANK’S GATE WAY
HUB
BR 1 BR 2 BR 3
HUB
INTER BANK COMMUNCATION THROUGH THE INFINET
BR 1 BR 2 BR 3
BANK 1 GATE WAY
BANK 2 GATE WAY
ArchitectureArchitecture
INFINET IP Network (IIPN)
Gateway 1
Bank SiteBank Site Bank Site
Gateway 2
Bank SiteBank Site Bank Site
Gateway N
Bank SiteBank Site Bank Site
….
Central HUB•Safe storage
•Direct Routing to intra-bank sites•Routing to ‘others’ Bank sites via Central HUB
•Safe storage of inter-bank messages•Direct Routing to destination Bank Gateway•Access Validation
•Common IIPN access point•Safe storage
Corporate Institution
Corporate Institution’s Bank
Clearing House
Destination Bank
ECS - How it works
Destination Bank Destination Bank
Branches of destination banks
Investors
11
How ECS Works - Process flow
User InstitutionBeneficiaries’
A/Cs
Destination banks’service branches
Destination branches
Clearing House
Sponsor Bank
Data on Day-1 Reports on Day-2
Reports on Day-3
Credit on Day-4
Enc
rypt
ed
Dat
a on
Day
-1
ECS - Processing of Uncredited Payment Instructions contd...
User Institution
Destination banks’service branches
Destination branches
Clearing HouseSponsor Bank
Encrypted Output Data on Post Settlement
Day-2
Return Data submitted on Post Settlement
Day-1
Return Advice on Post Settlement Day-1
Enc
rypt
ed O
utpu
t D
ata
on
Pos
t Set
tlem
ent
Day
-2
How to Participate in ECS - Registration Procedure
Corporate Institution
Sponsor Bank
Clearing House
Agreement
Collect a copy of the ECS brochure and ECS
Procedural Guidelines
Identify your Sponsor Bank ( a member of the Clearing House)
Submit an Application -Form annexed to the ECS brochure/Guidelines
Obtain the Unique User Registration number from Sponsor Bank