Digital Banking in India 05022016

“Digital Banking – A New Frontier in Indian Business”
Presented at
CONVERGENCE -10th International Conference on
‘Digital Business: New Frontiers in Management’
Prof Chowdari Prasad
And
Dr KS Srinivasa Rao
05th February 2016

Flow of Presentation
• Introduction to Banking, Information Technology, Reforms
• Committees of RBI for Technology in Banks & Various Developments
• Digital Banking - Meaning
• Review of Literature, 16 Articles in Research Journals & 13 Reports
• Objectives of the Study & Research Methodology
• RBI Guidelines, Payment Settlements : Vision 2015 and IDRBT
• Digital Banking Products & Services offered by various outfits
• Status of aggregate business of banks in India for 3 years 2012-2015
• Cyber Risks, Financial Inclusion, PMJDY, Rupay, Payment Banks, m-Banking
• ATMs, Big Data on Digital Banking from RBI website, Conclusion
5/2/2016 Digital Banking in India 2

Introduction to Banking, Information Technology,
Reforms
• Indian Banking System - Commercial, Developmental, etc
• Organisational changes, Operations and Geographical Spread, Legal and
Technological interventions and Offering of various types of products
• 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)
• Use of computers for back-office reconciliation extended to front-office
operations in due course leading to introduction of Online Banking

1. Retail
Banking
2. Wealth
Management /
Growth trend
3.Demand for Low
Cost Banking
Solutions
4.Branches
vs. ATMs to
increase5. Mobile
Banking and
Internet
penetration
6. CRM and
Data
warehousing
7.Generate
more fee-
based income
8. Importance
of SME
segment
9. Investment
Banking and
10. Infrastruc-
ture Financing
Indian
Banking :
Opportunities
& Challenges
2/8/2016 4

2/8/2016 Digital Banking 5
Focus aspects of Commercial Banking
Core
Banking (CBS)
ATMs
Card
Management
Any Branch
Banking
Document
Management
Risk
Management
Resource
Management
MIS &
Intranet
CRM
Corporate
Network
Electronic
Banking
POS Terminals
and Cash
dispenser
BANK’S BUSINESS
BANK’S BUSINESS
RAISINGDEPOSITS
LOANS&MISC.SERVICES

Committees of RBI for Technology in Banks &
Various Developments
• RBI formed 12 Working Groups and Expert Committees on Mechanisation /
Computerisation in the Banking Industry (1982-2013) as given in Table-1.
• Major recommendations of these were on 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, Cheque Truncation, etc.,
to increase efficiency, quick service, productivity and transparency.

RBI Working Groups / Committees on IT
S. No. Year Name of the Committee Chairperson
1 1982 Working Group to consider feasibility of introducing
MICR / OCR Technology for processing of Cheques
Dr Y B Damle, Advisor,
Management Services Dept.,
RBI
2 1984 Committee on Mechanization in the Banking
Industry
Dr. C. Rangarajan, Deputy
Governor, RBI
3 1987 Committee on Communication Network for Banks
and SWIFT implementation
Sri. TNA Iyer, Executive
Director, RBI
4 1988 Committee on Computerisation in Banks Dr C. Rangarajan, Deputy
Governor, RBI
5 1994 Committee on Technology Issues relating to
Payments Systems, Cheque Clearing and Securities
system in the Banking industry
Sri. W S Saraf, Executive
Director, RBI
6 1995 Committee on Proposing Electronic Funds Transfer
and Electronic Payments
Smt. K S Shere, Principal
Legal Adviser, RBI

7 1999 Committee on INFINET Sri. Vasudevan RBI Expert
8 2001 Committee on Legal Aspects of Bank Frauds Dr.Mitra
9 2002 Working Group on Electronic Money Ms. ZarirCama RBI
10 2003 Working Group on Cheque Truncation and e-Cheques Dr.R B Barman, Executive
Director, Reserve Bank
11 2011 Working Group on Information Security, Electronic
Banking, Technology Risk Management and Cyber Frauds
Shri G Gopalakrishna, RBI
12 2013 Committee on Comprehensive Financial Services for
Small Businesses and Low Income Households
(formation of Payment Banks)
Dr.NachiketMor, RBI Board
Member

2/8/2016 Digital Banking 9
DEVELOPMENTS IN BANKING & IT
• ALPMs
• CLEARING HOUSE
• CAR,CRR,SLR,PS,NPAs
• CREDIT/DEBIT CARDS
• NICNET,I-NET, RABMN
• INFINET, RBINET
• BANKNET, NDS, SFMS
• MICR, ATMs, SWIFT
• DEMAT, IT ACT-2000
• INTERNET BANKING
• ECS, EFT, SEFT, RTGS
• CROSS SELLING
• ALM & RM, MIS
• CRM, KYC, AML
• Core Banking Solutions
• KISAN /SME CARD
• CREDIT INFO BUREAU
• DISASTER MANAGEMENT
• Cheque Truncation
• CYBER CRIMES – HACKING,
PHISHING, PHARMING, TROJAN,
SKIMMING, ETC
• SMART CARDS
• DIGITAL BANKING

Digital Banking - Meaning
• Internet has brought in the biggest change in the way we have been
banking for centuries.
• Digital banking is the present trend in banking using the internet and much
more, based on SMAC model, which puts customer first and cuts costs
• SMAC stands for Social, Mobile, Analytics and Cloud.
• SMAC makes banking business more agile and customer centric which
contributes to the building of the Digital Banking.
• Other elements are ‘Data’ and “User-experience” that contribute to the
concept.

Review of Literature, 16 Articles in Research
Journals & 13 Reports
• 16 Articles between 1998 and 2016 on IT, Networking, ATMs, Credit
Cards, Debit Cards, Internet Banking, Mobile Banking, ECS, RTGS,
Mobile Wallet, Payment Banks, Cloud Technology, SERV-QUIL, etc
• 13 Reports on Digital Banking between 2012 and 2015 by Consulting /
IT Companies like Infosys (2012), WIPRO, Efma (2013), McKinsey &
Company (2013), India Brand Equity Foundation (2013), Deloitte
Consulting (2014), PWC (2014), Happiest Minds Technologies (2014),
Cognizant (2014), E&Y and IBA (2014), BCG and IAMAI (2015), DBS
Group Research Equity (2015), McKinsey & Company (2015), and
PWC- ASSOCHAM India-2015

Objectives of the Study & Research Methodology
Objectives of the Study:
1. To understand the importance of Digital Banking in Indian Banking System
2. To analyse the advantages in business through Digital Banking for the
Stakeholders including intermediaries (IBA, Payment banks)
3. To understand the importance of SMAC as a competitive Strategy for Banks
(Wallet)
4. To create Awareness of Threats and Challenges of Digital Banking (Crimes)
Research Methodology:
Exploratory mainly as the concept is still at the evolving stage in India. Secondary
Data was collected from various sources of Bank Websites, Newspaper
Advertisements and Information through Press Releases. Objectives of Research
were verified through the information available but not tested by any hypothesis.

RBI Guidelines, Payment Settlements : Vision 2015
and IDRBT
• Corporate Governance of Banks in India
• IT Governance is an integral part of the Corporate Governance
• IT sustains and extends business strategies and objectives
• Responsibility of the Board of Directors and Executive Management.
• Every commercial bank branch is at some stage of technology adoption like Core Banking Solution (CBS), or
alternate delivery channels such as internet banking, mobile banking, phone banking and ATMs.
• 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.
• IDRBT, Hyderabad
• It is a ‘Think-Tank’ for promotion of technological research and consultancy. 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.

Digital Banking Products & Services offered by
various outfits
S.
No.
Type of Bank Name of the Bank Technological &Innovative
Digital Banking Products and Services
1 Public Sector State Bank of India
(3.7 lakh touch points,
16,415 branches, 56,930
group ATMs including
Multi-Function and Self-
Service 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), e-Smart SME (e-Commerce Loan), e-
auctions and e-CRM

2 Public
Sector
SBBJ
Mobile ATMs, Green Channel Banking,
SBBJ e-LOBBY, Internet and Mobile
Banking, e-Trade, e-Tax Payment, e-
Remittance, Quick Missed Call Banking
3 Public
Sector
Panjab National
Bank
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
4 Public
Sector
Bank of Baroda
Rapid Funds2India, Baroda Flash Remit
(with UAE Exchange), Speed Remittance
(with UAE/Lulu/Al Ansari Exchange), MTSS
and Swift Remittance
5 Public
Sector
UCO Bank UCO Tap & Pay (for College Students and
Corporate) and UCO m-Passbook

6 Public Sector Andhra Bank Digital Wallet, Speed Pay, etc
7 Public Sector Union Bank of India
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
8 Old Private
Sector Bank Karnataka Bank
Core Banking, Internet Banking, Money Plant (ATMs),
Quick Remit (for NRIs), Moneyclick, KBL ApnaApp and KBL
m-PassBook
9 Old Private
Sector Bank Federal Bank
FedBook (mobile app), Co-branded VISA Credit Card (with
SBI), Automated Chat Facility (Virtual Relationship Officer),
e-Passbook App

10 New Private
Sector Bank
ICICI Bank Rail Ticket Booking on Website (IRCTC), etc
11 New Private
Sector Bank
HDFC Bank Click2ProtectPlus and others
12 Foreign Bank Citi Bank e-Core Banking through ATMs
13 Foreign Bank Standard Chartered
Bank
Standard Chartered Breeze-Mobile Banking
14 Regional Rural
Banks (RRBs)
66 Grameen Banks
sponsored by
Commercial Banks
Online Transaction services from Regional Rural
Banks, Internet Banking (non-transactional services
view only) for weak Banks
15 Cooperative
Bank
Saraswat Cooperative
Bank Ltd.
ATMs, NFS Network, E-payments-VISA Bill Payment,
Go-Recharge, RTGS, NEFT, Missed Call Service,
GOMO-Mobile Banking, Online Trading

16 Wallet
Banking
(2004)
Oxigen
Instant Money Transfers anytime anywhere using
IMPS, recharge your Phone or book a Movie ticket
17
Wallet
Banking
(2009)
MobiKwik
Mobile Recharge, DTH Recharge, Utility Bills, Online
Shopping
18 Wallet
Banking
(2015)
Paytm
Online Mobile Recharging, Online Bill Payments,
Online Bus Travel, Credit and Debit Card Payments,
Net Banking, BCCI Payments, Mobile Wallet, etc
19
Payment Bank
(2015)
FINO Pay Tech
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 Bank
(2015)
Tech Mahindra –
Mobo Money
A first of its kind “Tap N Pay”, Contactless Digital
Payment Solution (Near Field Communication)

Status of ASCBs in Deposits for 2012-2015
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
2013 2014 2015
Deposits (Rs. Crores)
Public Sector Banks
Private Sector Banks
Foreign Banks
Total

Status of ASCBs in Advances for 2012-2015
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
2013 2014 2015
Advances (Rs. Crores)
Public Sector Banks
Foreign Banks
Total

Status of ASCBs in Investments for 2012-2015
0
500,000
1,000,000
1,500,000
2,000,000
2,500,000
3,000,000
3,500,000
2013 2014 2015
Investments (Rs. Crores)
Public Sector Banks
Foreign Banks
Total

Status of ASCBs in Total Assets for 2012-2015
0
2,000,000
4,000,000
6,000,000
8,000,000
10,000,000
12,000,000
2013 2014 2015
Total Assets (Rs. Crores)
Public Sector Banks
Foreign Banks
Total

Status of ASCBs in Net NPAs for 2012-2015
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
160,000
180,000
2013 2014 2015
Net NPA (Rs. Crores)
Public Sector Banks
Foreign Banks
Total

Status of ASCBs in Net Profit for 2012-2015
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
80,000
90,000
100,000
2013 2014 2015
Net Profit (Rs. Crores)
Public Sector Banks
Foreign Banks
Total

Status of ASCBs in Total Income for 2012-2015
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
2013 2014 2015
Total Income (Rs. Crores)
Public Sector Banks
Foreign Banks
Total

Status of ASCBs in Total Expenditure for 2012-2015
0
100,000
200,000
300,000
400,000
500,000
600,000
700,000
800,000
900,000
2013 2014 2015
Total Expenditure (Rs. Crores)
Public Sector Banks
Foreign Banks
Total

Cyber Risks, Financial Inclusion, PMJDY
Human risk is a big problem for Indian financial institutions. Banks need to start
proactively educating their employees and customers to prevent cyber threats.
Improving awareness of the different threats that currently exist, including e-mail
fraud, Phishing, Vishing, Smishing, Skimming, Hacking, and Trojan.
Financial inclusion or inclusive financing is the delivery of financial services at
affordable costs to sections of disadvantaged and low-income segments of society
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

Rupay, Payment Banks and m-Banking
• RuPay is an Indian domestic card scheme conceived and launched by NPCI.
• It was created to fulfil the RBI’s 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.
• The term “Payment Banks” is new in Indian context. In Sep 2013, a
“Committee on Comprehensive Financial Services for Small Businesses and
Low Income Households”, headed by Nachiket Mor, was formed by 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 banks
called payments banks.Out of 41 applicants in the race, on 19 August 2015,
RBI gave "in-principle" licences to eleven entities to launch payments banks

11 Payment Banks licensed by RBI in 2015
1 Aditya Birla Nuvo
2 Airtel M Commerce Services
3 Cholamandalam Distribution Services
4 Department of Posts
5 FINO PayTech
6 National Securities Depository
7 Reliance Industries
8 DilipShanghvi, (founder of Sun Pharmaceuticals)
9 Vijay Shekhar Sharma, (CEO of Paytm)
10 Tech Mahindra
11 Vodafone M-Pesa

Big Data on Digital Banking from RBI website,
Conclusion
• RBI Website has Payment Settlements data (Volume in Mns and Value in Bns)
for 12 years between 2004-2005 and 2015-2016* (*Partial) on parameters
like:
• RTGS, CCIL Operated Systems,
• Paper Clearing, Retail Electronic Clearing, Cards,
• Prepaid Payment Instruments (PPI) and Mobile Banking (from 2011)
• Grand Total of these seven have recorded a steep growth

10 Varieties of ATMs in India
1. On-site ATMs
2. Off-site ATMs
3. Solar based ATMs
4. Bio-metric ATMs (for
illiterate customers)
5. Floating ATMs (SBI)
6. Mobile ATMs (Van)
7. Micro ATMs
8. White-labelled ATMs
9. Brown-labelled ATMs
10. And now…..Talking
ATMs (for blind in
Canada : Oct 22,1997) -
from UBI in Ahmedabad
in Sept 2012;
11. 1.50 lac ATMs@POs
12. Use of Analytics!
IBS Challenges etc 322/8/2016

Conclusions
• Prognosis for Indian banks is positive with Domestic Credit as a
percentage of GDP having grown substantially over the last decade.
• Technology has transformed the landscape of Indian banking
• Implementation of core banking has automated basic processes
• Core banking platform have also given banks a strong launch pad to
offer digital channel capabilities building out their online and mobile
channel offerings
• ATM deployments and technology-enabled Business Correspondent
(BC) network allowed banks to service large parts of Indian hinterland.
• Transformed customer experience and an optimized cost structure will
separate the leaders from the laggards in the industry
• M-Banking is now order of the day making the traditional banks as
‘virtual’

Digital Banking in India 05022016

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