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Indian banking industry , today is in the midst of an IT revolution. A combination of regulatory and competitive reasons have led to incresing importance of total banking automation in the Indian Banking Industry. As on 31st March 2002, out of the over 50,000 branches of Public Sector Banks, only 11,578 branches have been fully computerised. Lack of computerisation among over 50,000 branches of Public Sector Banks provides a huge market for players in IT Industry.

The Indian Banking system has been operating successfully over the last two centuries. It was in 50s that the Government of India evolved the policy of using the Banking system as an instrument of economic development and social change and, as a first step, nationalised the then Imperial Bank of India and re-christened it as State Bank of India.(SBI). The SBI was given the mandate of a massive branch expansion programme and was asked to open branches in far flung unbanked areas and assist in their development. This resulted an explosion of sorts in volumes of transactions and posed a severe strain on all resources. More particularly, the inter-branch reconciliation became one area that defied manual handling. It was in this background that the first steps towards mechanisation were taken by installing what was known as ICL 40-column punched card equipment in late 50s/early sixties in the Calcutta office of the SBI for the reconciliation of inter-branch transactions.

The pace of branch expansion was so fast that by early sixties this equipment was also considered inadequate and the Bank went in for the first computer - an IBM 1401 supported by a battery of about one hundred 80-column punched card machines for data input. The whole system of reporting and reconciliation of transactions was revamped and modernised. Other larger nationalised Banks also followed suit.

Interestingly, at that time, no immediate need was felt for automation of Branch and customer related activities or for that matter head office/corporate office operations. The banking system went in for massive employment drives. Most of the banking being of mandated kind, quality inputs in the form of analysed data were neither envisaged nor considered necessary. MIS was still in its infancy. RBI & SBI made some efforts to develop MIS in the area of Deposits and Advances through use of Uniform Balance Books etc. which finally matured in the form of Basic Statistical Returns (BSRs). By 70s though Committee reports like Tandon committee had started talking in terms of industrial databases.

Another significant development that had a bearing on the bank computerisation was the advent of Personal Computers (PCs) in the 80s and their easy availability.

As time passed, volumes increased further and manual handling of these volumes led to dwindling customer service and increasing complaints. With increased trade unionism and rather restrained handling of available human resources, a realisation grew that unless computerisation of customer accounts and other banking services like remittances etc. at branch level was resorted to, things will go out of hand. However, mechanisation of any kind was opposed by the Unions and resulted in slowing down of computerisation drive in Indian Banks.

Like most of other activities in banking RBI got into the act for IT also and set up two committees in quick succession to hasten the pace of mechanisation of operations in the banking sector. In the early 80s, a high level committee was formed under the chairmanship of Dr. C Rangarajan, then Governor of the Reserve Bank of India, to draw up a phased plan for computerisation and mechanisation in the Banking Industry over a five year time frame of 1985-89. The focus by this time (justifiably) was on customer service and two models of branch automation were developed and implemented. Having gained experience in the earlier mode of computerisation, the second Rangarajan Committee constituted in 1988 drew up a detailed perspective plan for computerisation of in Banks and for extension of automation to other areas like funds transfer, electronic mail, BANKNET, SWIFT, ATMs etc.

The present level of computerisation in Public Sector Banks is a result of these initiatives. RBI has also went ahead in creating of nation wide and localised networks for integration of the entire financial system

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