IT for Business Excellence
Address by Shri V Leeladhar, Deputy Governor, Reserve Bank of India at the Banknet India's Bank Tech Summit, Mumbai, on September 21, 2006
Another important challenge facing all of us is the need for standardisation. While standardisation does not mean that the same uniform systems are used across all banks, the bare minimum requirements to ensure inter-operability has to be provided for. With margins across different partners in business thinning, it is essential that banks take up Straight Through processing and Inter-operability as key issues to be addressed in all their technological implementations. The usage of the SFMS of the IDRBT, it is hoped, will address this concern to a large extent. This is also a challenge which I am sure that the IDRBT will also take up in right earnest for the benefit of the financial sector as a whole.
The growth in mobile communications and the exponential usage of mobile telephony by India’s masses is an aspect which in my view, banks have to look upon as an opportunity to harness to their benefit. The power of the chip in the mobile phone is enormous and its usage for secure banking transactions needs to be examined and provided for.
I would also like to touch on another challenge which banks are slowly overcoming. The need for regular, sustained IS audit is being highlighted by the Reserve Bank for some time now. While some initiatives have been taken by banks towards achieving this, much more needs to be done. The speed with which IT implementation and upgradation is being done may outpace the frequency of IS Audit and it is in the best interests of banks that this vital activity is given due importance.
IT also facilitates a host of other functions which banks have been hitherto performing through manual operations. Let me take up the case of verification of the genuineness of the customer - the Know Your Customer or KYC factor. Technology facilitates easier access to verification of information on a real time basis. Since IT tools provide a scientific and almost real time monitoring and analysis of funds movement, this would help a great deal in ensuring compliance to Anti-Money laundering requirements. Many IT based banking solutions have incorporated sophisticated algorithms and comprehensive permutations and combinations to provide alerts on a real time basis. Such a facilitation may well be impossible using manual means.
Another vital aspect that has to be taken cognisance of is that technological deployment must always be consistent with the levels of expertise in each bank as well as the nature and sophistication of its customers. Alternatively it is important to train all the stake holders to ensure a smooth technological transformation. Many of you must have had occasion to read the book ‘Freakonomics’ by Steven Levitt and Stephen Dubner. The narrative there on the lifetime episode of Paul Feldman on the sale of the American bread - bagels is an eye opener. He commenced sale of the bagels in an unsupervised manner which led to a situation where the buyers did not always pay for their offtakes. Nevertheless the recovery rate was rather encouraging. He further studied the behaviour-versus-payment patterns and came out with correlations - such as the increased payments during Christmas or even during pleasant weather situations while catastrophies (such as the 9/11 event) or bad weather resulted in lesser payment realisations. Based on this he replanned his strategies. Banks could do well to keep this story in their minds while planning so that their products and services meet employee and customer requirements - all of which provide improved results for banks in the long run.
Let me now conclude on a positive note. Indian banks have proved that IT based upgradation of banking services can be achieved within short time spans and at remarkably accurate levels. We have some of the largest core banking implementations in the world, we have a unique network for the exclusive use of banks in the form of the INFINET; banks have their own corporate intra-nets which are functioning effectively; we have the enabling legal infrastructure for large scale IT deployment and able all, we have a large customer population which has adapted well to the changes using Technology. These do give us comfort, but let these not lead us to complacency. As India has made a place in the IT arena, it may not be long before we make our presence felt in an IT enabled banking world as well. Indian Banks have always risen up to challenges and have successfully overcome them. Today’s success mantra for achieving excellence lies in the optimal use of technology in a manner where the process of change is managed well enough to blend with customer expectations of excellent customer service. This in turn would result in better house keeping and improved bottom lines for the banks and above all in overall systemic efficiency.
My best wishes to all of you and may your efforts lead to creation of IT based bank models of the morrow.
I wish you all fruitful deliberations during the day.
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