Recent Trends in Banking-2020
Lakshmiranganatha R
Assistant Professor of Commerce
Government First Grade College, Hosadurga - 577527
E-mail: lrngfgc2003@gmail.com, Mob No: 9480468935
ABSTRACT
The banking sector plays a significant role in the development of the country’s Economy. Due to changing scenario, banks are paying more attention to expanding their activities from just lending and borrowing to other ends like electronic banking, mobile banking, leasing, insurance merchants, and bill payer etc. Today the banking industry is stronger and capable of withstanding the pressures of competition. The growth of banking sector depends upon the services provided by them to the customers in various aspects. Recent years banking system provides E-banking System of all the customers. During the transactions, banks have seen tough competition, risk and revolutionary changes forcing them to take immediate steps to retain market share redress the grievances as fast as possible by maintaining good environment. It also reflects the various reforms were caused to improve their services to satisfy the customers. The different technologies which are used by banks for conducting day-to-day operations interbank transaction have been changer over the year.
Keywords: Recent Trends in Banking, country’s Economy, E-banking, interbank
INTRODUCTION
The Banking industry is vital sectors of any economy. Development of the economy can impact the growth of the country in an incredible way. In the era of “Digital India”, the banking services in India have undergone a massive evolution and the phenomenon continues. The change can be attributed to various components like new regulatory policies and customer expectations. However, the one element that has affected banking services the most is technological advancement.
The emergence of innovative financial technology has revolutionized financial services in India as well as the banking sector. It has resulted in the introduction and advancement of several technology trends that have contributed to the radical transformation, growth, and advancement of these industries. The alliance between the innovative technologies of the banking services has changed the conventional systems of handling money, and this collaboration is expected to create a massive shift with emerging trends in financial services.
There has been considerable innovation and diversification in the business of major commercial banks. Some of them have engaged in the areas of consumer credit, credit cards, merchant banking, leasing, mutual funds etc. A few banks have already set up subsidiaries for merchant banking, leasing and mutual funds and many more are in the process of doing so. Some banks have commenced factoring business.
The most important goal of RBI’s is to maintain monitoring stability in India. The RBI uses monitory policy to maintain price stability and adequate flow of credit. The rates used by RBI to archive this bank rate, Repo rate, Reserve Repo Rate and Cash Reserve Ratio inflation has been one of the important goal of RBI.
REVIEW OF LITERATURE
A review of existing literature reveals the impact, challenges, trends and development made by Indian banking sector.
Rakesh H M & Ramya T J (2014)
In their research paper titled “A Study on Factors Influencing Consumer Adoption of Internet Banking in India” tried to examine the factors that influence internet banking adoption. Using PLS, a model is successfully proved and it is found that internet banking is influenced by its perceived reliability, perceived ease of use and perceived usefulness. In the marketing process of internet banking services marketing expert should emphasize these benefits its adoption provides and awareness can also be improved to attract consumers’ attention to internet banking services
Raghavan (2006)
I his article “perception of Indian banks in 2020”, that at present over 85% of these payment transactions are electronic and the tradition way of doing banking at the branch level has relatively little importance as compare to electronic banking users. Mostly all the banks including PSU banks would have online ATMs, Phone banking, Virtual banking, E-banking, Internet banking etc. by 2020
OBJECTIVE OF THE STUDY
1. To study the challenges faced by the banking industry.
2. To present the technological developments in Indian banking sector.
RESEARCH METHODOLOGY
This paper is based on descriptive analysis and various secondary information sources from various research papers, journals and magazines. The journal of internet Banking and Commerce, e-service journal, various issues of RBI and also includes websites of banks.
THE INDIAN BANKING SECTOR
The history of Indian banking can be divided into three main phases.
Phase I (1786- 1969)
- Initial phase of banking in India when many small banks were set up
Phase II (1969- 1991)
- Nationalization, regularization and growth
Phase III (1991 onwards)
- Liberalization and its aftermath
With the reforms in Phase III the Indian banking sector, as it stands today, is mature in supply, product range and reach, with banks having clean, strong and transparent balance sheets. The major growth drivers are increase in retail credit demand, proliferation of ATMs and debit- cards, decreasing NPAs due to Securitization, improved macroeconomic conditions, diversification, interest rate spreads, and regulatory and policy changes (e.g. amendments to the Banking Regulation Act).
Certain trends like growing competition, product innovation and branding, focus on strengthening risk management systems, emphasis on technology have emerged in the recent past. In addition, the impact of the Basel II norms is going to be expensive for Indian banks, with the need for additional capital requirement and costly database creation and maintenance processes. Larger banks would have a relative advantage with the incorporation of the norms.
RECENT TRENDS IN BANKING
Today we are having a fairly well developed banking system with different classes of banks – public sector banks foreign banks, regional rural banks and co-operative banks. The Reserve Bank of India is at the paramount of the banks. The recent trends are,
With the rapid growth of digital technology, it became imperative for banking services in India to keep up with the changes and innovate digital solutions for the tech-savvy customers. Besides the financial institutions, insurance, healthcare, retail, trade, and commerce are some of the major industries that are experiencing the enormous digital shift. To stay competitive, it is necessary for the banking and financial industry to take the leap on the digital bandwagon
Real Time Gross Settlement system, introduced in India since March 2004, is a system through which electronics instructions can be given by banks to transfer funds from their account to the account of another bank. The RTGS system is maintained and operated by the RBI and provides a means of efficient and faster funds transfer among banks facilitating their financial operations. As the name suggests, funds transfer between banks takes place on a ‘Real Time' basis. Therefore, money can reach the beneficiary instantaneously and the beneficiary's bank has the responsibility to credit the beneficiary's account within two hours.
Electronic Funds Transfer (EFT) is a system whereby anyone who wants to make payment to another person/company etc. can approach his bank and make cash payment or give instructions/authorization to transfer funds directly from his own account to the bank account of the receiver/beneficiary. Complete details such as the receiver's name, bank account number, account type (savings or current account), bank name, city, branch name etc. should be furnished to the bank at the time of requesting for such transfers so that the amount reaches the beneficiaries' account correctly and faster. RBI is the service provider of EFT.
Block chain is the new kid on the block and the latest buzzword. The technology that works on the principles of computer science, data structures and cryptography and is the core component of crypto currency is said to be the future of banking services globally. Block chain uses technology to create blocks to process, verify and record transactions, without the ability to modify it.
Electronic Clearing Service is a retail payment system that can be used to make bulk payments/receipts of a similar nature especially where each individual payment is of a repetitive nature and of relatively smaller amount. This facility is meant for companies and government departments to make/receive large volumes of payments rather than for funds transfers by individuals.
Automatic Teller Machine is the most popular devise in India, which enables the customers to withdraw their money 24 hours a day 7 days a week. It is a devise that allows customer who has an ATM card to perform routine banking transactions without interacting with a human teller. In addition to cash withdrawal, ATMs can be used for payment of utility bills, funds transfer between accounts, deposit of cheques and cash into accounts, balance enquiry etc.
Point of Sale Terminal is a computer terminal that is linked online to the computerized customer information files in a bank and magnetically encoded plastic transaction card that identifies the customer to the computer. During a transaction, the customer's account is debited and the retailer's account is credited by the computer for the amount of purchase.
Tele Banking facilitates the customer to do entire non-cash related banking on telephone. Under this devise Automatic Voice Recorder is used for simpler queries and transactions. For complicated queries and transactions, manned phone terminals are used.
Electronic Data Interchange is the electronic exchange of business documents like purchase order, invoices, shipping notices, receiving advices etc. in a standard, computer processed, universally accepted format between trading partners. EDI can also be used to transmit financial information and payments in electronic form.
UPI or Unified Payments Interface has changed the way payments are made. It is a real- time payment system that enables instant inter-bank transactions with the use of a mobile platform. In India, this payment system is considered the future of retail banking. It is one of the fastest and most secure payment gateways that is developed by National Payments Corporation of India and regulated by the Reserve Bank of India. The year 2016 saw the launch of this revolutionary transactions system. This system makes funds transfer available 24 hours, 365 days unlike other internet banking systems. There are approximately 39 apps and more than 50 banks supporting the transaction system. In the post-demonetization India, this system played a significant role. In the future, with the help of UPI, banking is expected to become more “open.”
Several private and nationalized banks in India have started to adopt chatbots or Artificial intelligence robots for assistance in customer support services. For now, the use of this technology is at a nascent stage and evolution of these chatbots is not too far away. Usage of chatbots is among the many emerging trends in the Indian banking sector that is expected to grow.
It is a recent trend in the Indian financial system and cannot be ignored. With the entire banking services industry jumping to digital channels, digital-only banks have emerged to create paperless and branchless banking systems. This is a new breed of banking institutions that are overtaking the traditional models rapidly. These banks provide banking facilities only through various IT platforms that can be accessed on mobile, computers, and tablets. It provides most of the basic services in the most simplified manner and gives access to real-time data. The growing popularity of these banks is said to be a real threat to traditional banks.
Cloud technology has taken the world by storm. It seems the technology will soon find its way in the banking services sector in India. Cloud computing will improve and organize banking and financial activities. Use of cloud-based technology means improved flexibility and scalability, increased efficiency, easier integration of newer technologies and applications, faster services and solutions, and improved data security. In addition, the banks will not have to invest in expensive hardware and software as updating the information is easier on cloud-based models.
Essentially for security reasons, a Biometric Authentication system is changing the national identity policies and the impact is expected to be widespread. Banking services are just one of the many other industries that will be experiencing the impact. With a combination of encryption technology and OTPs, biometric authentication is forecasted to create a highly- secure database protecting it from leaks and hackers attempts. Financial services in India are exploring the potential of this powerful technology to ensure sophisticated security to customers’ account and capital.
CHALLENGES FACED BY BANKS
FUTURE OUTLOOK
Everyone today is convinced that the technology is going to hold the key to future of banking. The achievements in the banking today would not have make possible without IT revolution. Therefore, the key point is while changing to the current environment the banks has to understand properly the trigger for change and accordingly find out the suitable departure point for the change.
Although, the adoption of technology in banks continues at a rapid pace, the concentration is perceptibly more in the metros and urban areas. The benefit of Information Technology is yet to percolate sufficiently to the common man living in his rural hamlet. More and more programs and software in regional languages could be introduced to attract more and more people from the rural segments also.
Standards based messaging systems should be increasingly deployed in order to address cross platform transactions. The surplus manpower generated by the use of IT should be used for marketing new schemes and banks should form a ‘brains trust' comprising domain experts and technology specialists.
CONCLUSION
Indian banking system will further grow in size and complexity while acting as an important agent of economic growth and intermingling different segments of the financial sector.
It automatically follows that the future of Indian banking depends not only in internal dynamics unleashed by ongoing returns but also on global trends in the financial sectors. Indian Banking Industry has shown considerable resilience during the return period. In future the bank will offer more sophisticated service to the customer with continuous product and process innovation. In year to come, e-banking will not only be acceptable mode of banking but will be preferred mode of banking because of the computerization process adopted by banking sector with a vision to reach Indian banking to every citizen. The shift has also increased the degree of accessibility of a common man to bank for his variety of needs and requirements. Adoption of stringent prudential norms and higher capital standards, better risk management systems, adoption of internationally accepted accounting practices and increased disclosures and transparency will ensure the Indian Banking industry keeps pace with other developed banking systems.
RFERENCES