Management of payment & settlements in india [www.writekraft.com]

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(All Rights Reserved)
Management of
Payment and
Settlement Systems in
India: Critical Review
and Challenges
(Regd. No. AAI-1261)
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TABLE OF CONTENT
Sr.No Contents Page
Number
I Certificate i.
II Declaration ii.
III Table Of Content iii.
IV List of Tables iv.
V List of Graphs v.
VI List of Figures vi.
VII List of Maps vii.
IX Acknowledgement viii.
X Abbreviations ix.
1 Chapter One
Introduction & Research Methodology 1-36
1.1 Preamble
1.2 Power of Knowledge
1.3 The Learning Curve and Hierarchy OF Knowledge
1.4 Modes of Growing Knowledge
1.5 The Knowledge Management and KM Cycle
1.6 Knowledge Management History and Evolution
1.7 Evolving To Enterprise Knowledge Management (EKM)
1.8 Enterprise Knowledge Management , IT Industry and HRD
1.8.1 Indian IT Sector linkage
1.8.2 The Multinational linkage
1.8.3 The HRD linkage
1.9 Research Problem Description
1.10 Scope Of The Research
1.11 Objectives Of The Research Study
1.12 Hypotheses
1.13 Research Design
1.13.1 Data Collection Method
1.13.2 Pilot Study
1.13.3 Sources Of Data
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1.13.4 Data Sampling
1.13.5 Schedule and Period Of Study
1.13.6 Chapter Scheme
1.14 Utility Of The study
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2 Chapter Two 37 – 73
Review Of Literature
2.1 Introduction
2.2 Introduction To Knowledge Management And Enterprise Knowledge
Management
2.3 HRM And KM : Practices And Challenges
2.4 Impact Of EKM On Key Business Processes
2.5 Application Of EKM And Role Of EKM In HRD And
Role/Contribution Of HR Personnel
2.6 Apparent Benefits From EKM And Technological Aspects
2.7 Significance Of The Review Of Literature
2.8 Concluding Remarks
3 Chapter Three 74-97
Overview Of Enterprise Knowledge Management
3.1 Introduction
3.1.1 Knowledge : Some Fundamentals
3.1.2 Understanding Organization Memory , Organization
Learning and Learning Organization
3.2 Outlook on Enterprise Knowledge Management and Enterprise
Knowledge Management
3.2.1 KM Dimensions
3.2.2 Components of Knowledge Management
3.2.3 Enterprise Knowledge Management and Ontologies
3.3 Enterprise Knowledge Management as a Methodology
3.4 Enterprise Knowledge Management Practices
3.5 Enterprise Knowledge Management Framework
3.6 Enterprise Knowledge Management Tools
4 Chapter Four 98-121
Mechanism And Challenges of Application Of EKM In IT Business
Context
4.1 Introduction
4.2 Key Business Process and Enterprise Knowledge Management
4.3 Application Of Enterprise Knowledge Management: Strategy and
Practicing recommendations
4.4 Factors affecting application of Enterprise Knowledge Management
4.5 Challenges Associated with application Enterprise Knowledge
Management
4.6 Use of IT and Quality Perspectives of Enterprise Knowledge
Management
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5 Chapter5 122-152
Impact Of application of EKM in HRD
5.1 Introduction
5.2 Stakeholders forKnowledge ManagementSystems
5.3 Human Resource Management –Human Resource Development
Perspective
5.3.1 The Role of HRD in Creating and Supporting KM Practice
5.3.2 Role of HR professionals
5.3.3 Competencies of HRD professionals
5.4 Challenges Faced by Human Resource Department
5.5 Impact Of Technological Advancements In HRM & worthiness Of
EKM Implementation
5.6 Apparent benefits of application of EKM
6 Chapter6 153 -320
Comparative Analysis Of Application Of EKM
6.1 Introduction
6.2 Profile of IT companies
6.2.1 Distributions Of Organizations Based On Type And Domain Of
IT
Company
6.2.1 Distributions Of Organizations Based On Type and Annual
Turnover Of IT Company
6.3 Application of EKM in IT companies
6.3.1 Understanding the Key Business Processes as observed in the
IT companies and their correlation with application of EKM
6.3.2 Understanding the Magnitude of Challenges faced by HR
personnel in IT Companies
6.3.3 Understanding the HR Measures opted to overcome the HR
challenges and their relevance with EKM
6.3.4 Best way to understand and get vital updates of certain
organizational information: like Vision and mission, and
changes in organization
6.3.5 Forms in Which organization keep Information in general
6.3.6 Workplace Mechanisms existing in the sample organization
(Association with KM)
6.3.7 Understanding the Feedback system undertaken for employees
and its relevance with application of EKM
6.3.8 Understanding the KM initiatives existing in IT companies
6.3.9 Need to Launch KM initiative (s)
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6.3.10 Understanding existence of any Official system where the KM
awareness is made known to all the employees
6.3.11 Understanding the Existence of knowledge sharing agreement
of IT organizations with any external organizations like
Microsoft, Oracle, SAP etc.
6.4 Study of influencing aspects of mechanism for application of EKM
6.4.1 Preferences given to obtain vital updates of certain
organizational information: like Vision and mission, as well
as changes in organization structure.
6.4.2 Knowledge Sharing in IT Sector
6.4.3 KM initiative rooted in the IT organization
6.4.4 HR personnel’s Contribution towards formulation of KM
Initiative
6.4.5 Examining the experience wise distribution of respondents
facing challenges while implementation of EKM in
organization
6.4.6 Execution of KM application across the organization
observed
6.4.7 Stakeholder in formulating and executing EKM initatives
6.4.8 Identifying factors influencing the EKM Implementation
6.5Diagnosis of the Impact of application of EKM in IT companies
6.5.1 Understanding of Magnitude of Challenges faced by
HR personnel in IT Companies
6.5.2 HR Measures to overcome the HR challenges
6.5.3 Knowledge sharing in IT Sector
6.5.4 Examining the experience wise distribution of respondents
facing challenges while implementation of EKM in organization.
6.5.5 Identifying the factor(s) influencing the EKM implementation
6.5.6 Understanding the Feedback system undertaken for employees
and association with application of EKM
6.5.7 Identifying Major hurdles in achieving the KM initiative
related objectives
6.5.8 Impact of EKM implementation in achieving Objectives
6.5.9 Company perspective towards employees to attend/organize
events
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6.5.10 Effectiveness rating of organized training
6.5.11 Perspective of Effectiveness of employee engagements to the
company
6.6 Comparative study of application of EKM in HRD in IT companies.
6.7Impact of technological advancements in HRD and the worthiness of
EKM in that direction
6.7.1 Increase in scope and responsibilities HR function (in the last
three years)
6.7.2 Magnitude of Challenges faced by HRD
6.7.3 Action steps / HR Measures required in order to overcome the HR
challenges
6.7.4 Company encouragement received by employees to
attend/organize events
6.7.5 Effectiveness rating of organized Training
6.7.6 Utility of employee engagements (events and training) to the
company
6.7.7 Maturity Of KM initiative in IT organization
6.7.8 Knowledge sharing agreement of company; with any external
organizations (like Microsoft, Oracle, SAP, etc.)
6.7.9 Major advantages perceived through EKM Implementation
6.7.10 HRD as an imperative entity; has a significant contribution
towards EKM implementation; with the changing environment
in business and technology
6.8 Understanding the attitude and role of HR towards application of
EKM in IT companies.
6.8.1 Increase in scope and responsibilities of HR function (period:
2009-2010-2011)
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6.8.2 Prime role of HR Department
6.8.3 Mechanisms existing in the sample organization (Association with
KM)
6.8.4 Knowledge sharing in IT Sector (within employees, with
customers and partners)
6.8.5 Best way to understand and get vital updates of certain
organizational information like Vision and mission as well as
changes in organization structure
6.8.6 HR personnel’s Contribution towards formulation of KM Initiative
6.8.7 Opinion about fellow colleagues’ contribution, in the department;
with respect to implementation of EKM.
6.8.8 Stakeholder in formulating and executing EKM initatives
6.8.9 Significant contribution of HRD towards EKM implementation
6.9 Testing Of Hypotheses
7 Chapter7 321-339
Conclusions and Suggestions
7.1 Introduction
7.2 Conclusions
7.4 Suggestions
7.3.1 Suggestive EKM Implementation Model
7.3.2 Proposed component Layered Framework of
application of EKM
7.3.3 Suggestive EKM Life Cycle Model
7.4Scope for Future Research
A] Future Research Scope with respect to Enterprise Knowledge
Management with a new Information Integrity Approach
B] Other areas of future scope of research study
340-356
8 Selected Bibliography
Appendices: 357
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Onwards
Annexure 1: Preliminary Interview Questionnaire
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Management of Payment and Settlement Systems in India:
Critical Review and Challenges
ABSTRACT
Introduction
Payment system is considered as one of the major components of the infrastructure of any
modern country. As economy develops and moves to a sharper growth path, economic
transactions among individuals and institutions tend to increase rapidly. In order to facilitate
these transactions smoothly and effectively, there is a need to develop an efficient payment and
settlement system. Modernization of the payment system of any country is a necessity to ensure
efficiency of the economy in general and the financial system in particular.
The instruments for payment in India have evolved over time from precious metals to
currency to cheques and finally to e-payments. Correspondingly, the payment systems in the
country also evolved over time, but the changes were more rapid during the last decade,
especially from the year 2004 onwards. These changes were necessary to facilitate the ever-
increasing volume of transactions taking place as a result of faster economic development in
India during the decade. Rapid advances in information technology, changes in regulatory
framework, setting up of new institutions like CCIL, NPCI, etc., have initiated the emergence
of new payment processes, products and delivery channels for small as well as large value and
‘time critical’ payments.
The payment system of any country, though advanced and sophisticated, does face
various risks, viz. bank failures, frauds, counter-party failures, etc. Such eventualities may
trigger a chain-reaction, which might ultimately result in disruption of the payment system of
the entire country. Such systemic failure of the payment system can hamper effectiveness of
monetary policy and adversely affect the real sector. Minimization of systemic risk is, therefore,
a critical challenge facing the regulator. The Central bank in any country is, therefore, keenly
involved in promoting a sound and efficient payment system and in initiating appropriate
measures to reduce potential systemic risks.
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In the year 1999, the Committee on Payment and Settlement Systems of the BIS
developed certain core principles for important payment systems. These principles
provide guidelines to improve the efficiency of payment systems to handle the increasing
volumes, and, the value of payment flows both within the country as well as in
international transactions. Each country, however, has to evolve its own approach and
strategies in the design of its own fabric of the payment system to suit its unique
requirements. The present study aims to analyze the issues involved in ensuring efficiency
in the functioning of the payment systems in India in the light of the progress made during
the last two decades, more especially during the recent period.
Hypotheses of the Study
The study sets out the following hypotheses:
1. The efficiency of the payment systems in the country depends on the role played
by the regulator to ensure safety of the payment systems, and, prevention of any
occurrence of systemic risk.
2. The systemic risk shall be observed as the size of payment systems grows in size
and becomes varied in nature.
3. Improved efficiency in payment and settlement systems would result in improved
operational efficiency of banks.
4. Strong and efficient payment systems in the country would lead to enhanced
banking business and its profit.
Objectives of the Study
The study examines the evolution and performance of the Payment and Settlement
Systems of India and benchmarks the same with advanced economies like the European
Union, the USA, the UK and the Asian economies like Japan and China. This is done with
a view to suggest certain measures to make the Indian payment system more efficient, less
vulnerable to various risks and make it more cost-effective. In particular, the objectives of
the study are:
1. To examine the evolution of the payment system in India, especially during the
period 2005-10, when the country witnessed a rapid growth in economic
activities.
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2. To assess the importance of the efficient and effective payment and settlement
systems in improving the financial performance of the economy.
3. To understand the real impact of information technology on payment and
settlement systems.
4. To examine the various issues relating to the efficient functioning of the payment
and settlement systems like security, risk management, cost, etc.
5. To suggest measures to aggressively promote e-payment systems by banks.
Methodology
Initially, an extensive literature survey was carried out in order to gain insights into the
various areas of concern and the issues involved in the design, structure and efficiency in
the functioning of the payment systems in various countries including India. Secondary
data was then collected mainly from the RBI Annual Reports, Report on Payment
Systems in India (RBI, 1998) and Payment System Development Reports of selected
countries. As the specific focus of the study was the period covering 2005-06 to 2009-10,
which has recorded a massive rise in the volume and value of transactions handled by the
Payment and Settlement system in our country, relevant data was captured from the RBI
Annual Reports. Similar data was also collected from the RBI website for individual
banks.
For the purpose of this study, the purposive stratified random sampling method
was adopted for the selection of 20 banks. As nearly 80 per cent of the total banking
business in the year 2005-06 was handled by public sector banks and the rest by the
private sector banks and foreign banks (IBA, 2005-06), 18 public sector banks out of 27
and 2 out of 25 private sector banks were selected for this study.
Public sector banks were further grouped into three categories in descending order
of their size of total business. The first category (termed as Large Banks) included five
banks: namely, State Bank of India, Punjab National Bank , Canara Bank , Bank of India
and Bank of Baroda . The next category of seven banks (termed as Mid-Size Banks)
included the Union Bank of India, Central Bank of India, UCO Bank, Syndicate Bank,
Indian Overseas Bank , Oriental Bank of Commerce, and Allahabad Bank. The third
category (termed as Small Banks) included Indian Bank, Corporation Bank, Andhra
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Bank, Vijaya Bank, Bank of Maharashtra and Dena Bank. From the private sector banks’
category, one new generation private sector bank and one old generation private sector
bank were picked randomly; thus the two private sector banks selected for the study were
: the Axis Bank , and the Lakshmi Vilas Bank Ltd respectively. The relationships of
technology vis-à-vis net profit were analyzed for all the 20 banks.
The annual reports of the selected 20 banks were studied in order to assess the
initiatives of these individual banks in introducing new products and services using the
payment system as the backbone to garner new business. In order to get an in depth and
holistic picture of the state of art in payment products and services in Indian banks,
primary data were collected from two of the 20 selected banks that were willing to share
such information through structured questionnaire and personal interviews.
Payment Systems : Global Scenario
In the European Union (EU), technological developments, financial innovations and
globalization have all contributed to reshape the infrastructure that affects payments. In
the USA, the increase in the volume of electronic payments and the corresponding decline
in the usage of cheque is the outcome of the technological and financial innovations,
which have also influenced the payment instrument choices of consumers and businesses.
According to Bank of England, the UK Payment Systems have been able to meet the
challenges posed by the recent market turbulence. The value and number of transactions
processed by the major Payment and Settlement Systems in Japan had broadly remained
constant since the latter half of 2007, but decreased substantially following the bankruptcy
of Lehman Brothers – Japan in September 2008. State-owned commercial banks in China
hold the dominant position in payment business, handling about 53.4 per cent and 42.2
per cent of the total HVPS transactions and values respectively.
Evolution of Payment Systems in India
In India, as the volume of paper-based instruments and the time taken for clearing these
instruments increased, MICR clearing was introduced in 1986 with a view to improve
system efficiency and customer service. It is found that the RBI took the lead role in
driving the initiation and modernization of payment systems in India. In the early and
mid-90s, ACH services such as ECS and EFT were introduced by the RBI. Almost
simultaneously, card-based payments like debit card, credit card, etc., were introduced in
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India by the global players. The RBI initiated the efforts and set up the telecommunication
network – INFINET – in the year 1999 to serve the needs of the industry. The
implementation of the RTGS by the RBI in March 2004 revolutionized the large value
payment system in the country by facilitating faster movement of funds across the
country. The RBI inaugurated the NEFT system in November 2005 to cater to the retail
payment requirements. In order to enhance the efficiency of the paper-based clearing
system, the RBI introduced the CTS in February 2008 in the NCR.
Consequent to the above developments, and, in order to facilitate e-commerce and
m-commerce, banks introduced the internet e-commerce payment gateways and mobile
payment schemes during 2005-06. Currently, banks are leveraging modern technologies,
such as mobile telephony, smart cards and biometric authentication to provide banking
and financial services to the rural populace. With a view to bring about reforms in tax
administration and payment mechanism, the Government of India has introduced an e-
payment system known as the OLTAS. The BPSS was constituted by the RBI in March
2005, and, subsequently, the PSS Act, 2007, was introduced to provide the legal basis for
the payment systems introduced in the country.
Indicators of Growth of the Indian Payment Systems
The total volume of transactions through the payment and settlement systems grew by 36
per cent, from 157.42 crore in 2005-06 to 213.34 crore in 2009-10. There was a three-fold
increase in the value of the total transactions during the said period: the total value of
transactions under the payment and settlement system steadily climbed from Rs. 308.15
lakh crore in 2005-06 to Rs. 892.85 lakh crore in 2009-10. In terms of its ratio to GDP at
current market prices, the value of total transaction was 8.6 per cent of GDP in 2005-06
and went up to 14.3 per cent in the year 2009-10. It may also be noted that the Indian
payment and settlement systems remained unaffected during the global financial crisis.
Study of Payment Systems of Select Indian Banks
Banks are today increasingly using the payment-system structure, created by the RBI, to
facilitate customers’ transactions. In addition, Indian banks are also using information
technology to offer innovative and tailor-made products and services with the ultimate
objective of enhancing the value of the services offered to their customers. Banks are
today offering a wide array of payment solutions by way of RTGS, NEFT, ECS, debit
v

cards, credit cards, pre-paid cards, cards acceptance service and the Internet Payment
gateway. In order to relieve branches of the cumbersome back-office operations, most
Indian banks have set up centralized back offices to handle the entire clearing and
collection functions.
Specific findings of the study and related suggestions are as follows
Findings
™ Cheque clearing and ECS payment systems are being run on a decentralized basis
across several clearinghouses spread throughout India. The cost of processing
payment instructions, as a result, is very high.
™ In India, NEFT is a centralized retail electronic payment system which processes
one-to-one payments; whereas, ECS is an electronic payment system which
processes bulk and repetitive types of payments. The users of these systems at times
get confused due to these multiple payment systems delivering the same jobs like in
the case of ECS Credit and NEFT.
™ At present, the NEFT payment system cannot be used for processing payments that
are of urgent/critical nature on a 24 x 7 real time basis.
™ Retail payment systems do not have any foolproof risk-mitigation mechanism
except resorting to ‘unwinding’ in case of failure of any bank in fulfilling its
obligation.
™ The RTGS system in India adopts a pure gross settlement mechanism for funds
settlement. In this mechanism, as banks are unaware of the incoming credits, it
creates strain to manage liquidity requirements to meet the debit obligations on real
time basis, resulting in high liquidity costs for the banks. This might result into
settlement risk, in case a bank fails to meet its obligation.
™ The Reserve Bank of India owns and operates the major interbank funds transfer
systems, like RTGS, NEFT and NECS, in the country. The said approach termed as
‘Public Service Approach to Payment Systems Development’ is not considered very
efficient since a large share of fixed costs is absorbed by the Central Bank and the
cost recovery is based on subsidization.
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™ In the absence of a domestic price setter, today Indian banks incur significant costs
for affiliation to international card associations like VISA/MASTERCARD.
Moreover, in the process, domestic card transactions, which account for more than
90 per cent of the total, are routed to switches located outside the country. This,
apart from posing security concerns regarding customer privacy, also results in the
migration of valuable foreign exchange.
™ As of now, there are no standards in place for various ‘financial inclusion’
operations and components. As a result, in spite of the banks agreeing to share their
networks, their customers cannot use their smart cards at other banks’ terminals.
™ The analysis of relevant data for the period 1990-91 to 2009-10 for the selected
banks indicated that, irrespective of their size, there existed a strong relationship
between profitability and technology investment. One bank however stood out of the
rest. This bank has been able to exploit the power of technology much faster than
the others. Technology adoption has also led to increased efficiency of its Payment
Systems which is quite evident from the increasing number of RTGS and NEFT
transactions emanating from its branches and alternate delivery channels.
™ Taking into consideration the progress of the selected banks in the year 2009-10
over the base year 2005-06, it was observed that all the sample banks were
successful in more than doubling their total business. However, two banks expanded
their business by 3.5 times and 4 times respectively. As these two banks had taken
steps to provide the maximum banking services using information technology
extensively, they reflected the highest progress among all the sample banks Both
these banks have also recorded significant progress in its payment and settlement
systems.
™ By considering the month-wise volumes and values of RTGS, for the period June
2008 to April 2011 for the selected banks, it is observed that the majority of banks
covered by the study have created enabling features to significantly increase the
volume and value of their transactions.
™ In terms of the month-wise progress of NEFT from June 2008 to April 2011, it is
seen that all the 20 sample banks indicated lower rates of growth in their NEFT
volumes and values up to June 2009; but they attained higher rates of growth during
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the following period. This trend is due to the stabilization of their NEFT systems by
mid-2009, and, these banks were making sincere efforts to migrate low value
payments to NEFT.
™ While analyzing the payment products of selected banks, it was observed that banks,
which were early implementers of technology (CBS), have also been pioneers in
introducing the maximum number of products and services. These banks also had a
clear strategy to innovate and market their products.
™ Three of the banks in the sample have created a new business vertical, namely
‘Transaction Banking’, to give a thrust to products that involve payment and
collection transactions. This vertical also states the percentage of the total
transactions that have migrated to electronic mode, and, also sets targets for the next
year in its annual report.
™ Currently, there are manifold choices and multi-channels for customers to make
payments. This has led to tremendous complexity of relationships between payment
channels (ATM, mobile phone, etc.), payment instruments (credit cards, RTGS, etc.)
and customers. Banks are maintaining and servicing these relationships as separate
payment silos with separate processing entities for each payment method leading to
infrastructure duplication.
Suggestions
™ Steps should be initiated towards consolidation of the payment processing centers to
ensure reduction in cost and eventually achieving economies of scale. NEFT and
ECS should be merged into one and India should eventually move over to an
Automated Clearing House (ACH) as is prevalent in the USA (ACH), China (BEPS)
and Japan (ZENGIN). This system should have the capability of doing one-to-one
payments (credit transfers), one-to-many payments (bulk credit transfers), many-to-
one payment (bulk debit transfers) and also one-to-one payment (debit transfers).
™ In order to make NEFT operate on a 24 x 7 basis, the following model can be
adopted : A pre-funded account can be established which will settle the members’
obligations arising out of the interbank settlement in NEFT. An interbank settlement
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at predefined intervals can be carried out on a 24 x 7 basis. If net debit caps are
reached, settlement of some payments can be deferred till the next cycle.
Leads may also be taken from the operations of ‘Faster Payment Service’ in the
UK which is a 24 x 7 running payment system.
™ To mitigate the settlement risk in retail payment systems, appropriate steps, similar
to the BACS payment system in the UK, need to be taken. In fact, mechanisms, like
the soft net debit caps and the new referral type regression in appropriate
circumstances, and, the introduction of the Liquidity Funding and Collateralization
Agreement have been implemented in the BACS.
™ To mitigate the settlement risk in RTGS, it may be migrated to a Hybrid System, i.e.
either to a Continuous Net Settlement system (like the new CHIPS Payment System
in the USA) or to a Queue-Augmented RTGS System (like the RTGS plus system in
Germany). The RBI has also initiated steps to revamp the current RTGS system by
proposing to introduce technological and liquidity saving features.
™ Like in the USA, India should gradually migrate to ‘The Competitive Approach to
Payment Systems Development’ whereby both the public and private sectors own
and operate interbank payment systems so that cost recovery is fully taken care of.
™ A national payment Point of Sale (POS) switch using the IDRBT’s INFINET
network should be established to take care of domestic transactions by creating an
INDIACARD, with the rest being handled by VISA/MASTERCARD. This will
reduce costs and also minimize the value of interbank liabilities (interchange fees)
arising out of the card transactions.
™ Standards need to be prescribed by an apex level agency for various ‘financial
inclusion’ operations and components, as is currently being done for credit and debit
cards by VISA and MASTERCARD. This will address the non- interoperability
issue.
™ Indian banks should exploit the power of technology smartly/vigorously to increase
efficiency of their payment systems. They should also constantly focus on
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augmenting non-interest income through diversification of income streams by using
the payment backbone and introducing new e-payment products and services.
™ Indian banks, in order to give more thrust to products that involve payment and
collection transactions, should create ‘Transaction Banking’ as a separate business
vertical. This would further hasten the transition to electronic mode of payments.
™ Banks should create a streamlined IT architecture like a “Payment Hub”, which will
eliminate point-to-point interfaces for various payment products. This would allow
consolidation of multiple payment systems into one centrally managed mid-office
payment system, which brings in better efficiency, reduces cost, enables more
transparency in processing and improves customer service, thereby improving
profitability in the long run.
Scope for Further Research
In India, the share of paper-based transactions is still very high: in terms of volume, it still
continues to be 65 per cent. In the CBS mode, today it is possible for banks to identify
customers who make paper payments and the purpose thereof. Banks should therefore be
able to analyze and understand the customer payment requirements and habits and
workout appropriate strategies to facilitate their migration to electronic payment modes.
Further, banks should analyze the feedback of their customers on various payment
products and services launched by them in the recent past and also their expectations from
the banks in the future. The analysis of such data would not only provide a deeper insight
into the expectations of their customers but also enable banks to design and deliver tailor-
made products – payment solutions – to meet the requirements of their customers.
Similarly, the dominant (almost monopolistic) position of Indian commercial banks over
retail payment systems and services is being increasingly challenged by a variety of non-
bank payment service providers and products. Indian Banks’ Association may like to
initiate appropriate study to find out the areas where the new service providers are trying
to enter and suggest ways and means so that banks maintain their lead by continuously
innovating new payment methods, products and services. In the same way, a successful
payment model also requires the building up of good bilateral and multilateral partnership
arrangements, which can leverage on the respective strengths of the stakeholders. Such a
study can also suggest collaborative initiatives, so that both banks and non-banking
x

financial institutions can benefit in the long run. A clear demarcation of the role of each
service provider can also be worked out so that each one has a level playing arena.
Chapter Design
Chapter 1 : Introduction
Chapter 2 : Methodology
Chapter 3 : Payment Systems: Global Scenario
Chapter 4 : Evolution of Payment Systems in India
Chapter 5 : Indian Payment Systems : Growth Indicators
Chapter 6 : Risk Management in Payment Systems and the Regulatory Framework
Chapter 7 : Analysis of Payment Business in Select Banks and Findings
Chapter 8 : Summary and Recommendations
Appendices
Bibliography
Mr Deepankar Roy
(Research Student)
1. Dr Asish Saha
(Director, NIBM, Guide)

Chapter 1
INTRODUCTION
1.1 Introduction
Efficiency in the functioning of any economy depends upon the efficiency of its infrastructure.
Payment system is considered as one of the key components of the infrastructure of any modern
economy. As an economy develops and moves to a higher plane of growth, economic
transactions among the individuals and institutions tend to grow exponentially. In order to
facilitate these transactions smoothly and effectively, there is a need to develop an efficient
payment and settlement system. Modernization of the payment system of any country is a sine
qua non to ensure the efficiency of the economy in general and the financial system in
particular. Humphrey and Setsuya (1995) argued that there is a need to modernize the payment
system and move away from paper-based to electronic mode of payment system to improve
efficiency and save cost. According to the authors “the resource cost of a nation’s payment
system can account for 3 per cent of its Gross Domestic Product (GDP)”.
In India the instruments of payment evolved over time from precious metals to currency
to cheques and currently migrated to e-payments. Correspondingly, the payment systems in the
country also evolved over time; but rapid changes have been witnessed during the last decade,
especially from 2004-05 onwards. These changes were necessary to facilitate the ever-
increasing volume of transactions taking place as a result of faster economic development in
India during the first decade of this century. Rapid advances in information technology,
changes in regulatory framework, setting up of new institutions like the Clearing Corporation of
India Ltd (CCIL), the National Payments Corporation of India (NPCI), etc., have encouraged
the emergence of new payment processes, products and delivery channels for small as well as
large value, and ‘time critical’ payments. As e-commerce becomes more common in the
economic activities in the country, several major changes in the payment system would take
place at a faster pace.
The payment system of any country, though advanced and sophisticated, does face
various risks, viz. bank failures, frauds, counter-party failures, etc. Such aberrations could
trigger a chain-reaction that might ultimately result in disruption and distrust of the

payment system. For example, the failure to settle one large payment transaction tends to
affect other transactions, and, correspondingly, the institutions involved in the payment
mechanism, which may disrupt the entire payment system in the country. Such systemic
and cascading failure of the payment system can hamper effectiveness of monetary policy
and adversely affect the real sector. Minimization of systemic risk is therefore a critical
challenge facing the regulators. The central bank in any country is deeply engaged in
promoting a sound and efficient payment system and also takes appropriate measures to
reduce systemic risks.
In the year 1999, the Committee on Payment and Settlement Systems (CPSS) of
the Bank for International Settlements (BIS) developed certain core principles for
important payment systems (See Annexure 1). These principles provide guidelines to
improve the efficiency of payment systems in handling the ever-increasing volume and
value of payment flows both within the country as well as across international borders.
These guidelines also help the developing economies to modernize their payment systems
in the light of increasing financial market integration throughout the world.
1.2 Payment and Settlement Systems
Payment and Settlement Systems constitute a major aspect of a country’s financial and
economic structure. “A well planned and executed system contributes towards promoting
economic activities and improving macro-economic management, including release of
funds from the clearing and settlement functions for more productive use, the reduction of
float levels, the lowering of transaction costs and the control of monetary aggregates”
(Khiaonarong, 2001). “The payment system provides the arteries or highways for
conducting trade, commerce and other forms of economic activities in any country. An
efficient payment system functions as a lubricant speeding up the liquidity flow in the
economy and creating a momentum for economic growth. The payment process is a vital
aspect of financial intermediation; it enables the creation and transfer of liquidity among
different economic agents. A smooth, well functioning payments system not only ensures
efficient utilization of scarce resources but also eliminates systemic risks” (GOI, 2007).
According to the Payment Settlement Act, 2007, “A payment system means a
system that enables payment to be effected between a payer and a beneficiary and
includes clearing, settlement or payment service” (RBI, 2004).
2

“A payment system encompasses a set of instruments and means generally
acceptable in making payments, the institutional and organizational framework governing
such payments (including prudential regulation); and the operating procedures and
communications network used to initiate and transmit payment information from payer to
payee and to settle payments” (Lamberte, 2005).
1.3 Settlement System
Settlement is the actual transfer of funds between payer’s bank and the payee’s bank. It
discharges the obligation of the payer bank to the payee bank in respect of transfer of
funds. Settlement, which is irrevocable and unconditional, is described as final settlement.
Generally, the settlement of interbank funds transfer can be based on the transfer of
balances in the books of the central bank; it can also be settled between the banks in the
books of the settlement bank, which is itself a commercial bank that has assumed the role
of a settlement bank. In practice, the settlement in majority of large value funds transfer
system takes place in terms of central bank funds.
Systems of settlement may be classified as Net Settlement Systems and Gross
Settlement Systems. In the case of Net Settlement System, the settlement of funds transfer
occurs on a net basis according to the rules and procedures of the system. The net position
of a participating bank is calculated on the basis of bilateral or multilateral basis, as the
sum of the value of all the transfers it has received up to a particular point of time minus
the sum of the value of all the transfers it has remitted. The net position, which can be a
net credit or debit position at the settlement time, is called net settlement position. In the
case of multilateral net settlement system, each settling participant settles its multilateral
net settlement position.
In the Gross Settlement System, the settlement of funds occurs on a transaction-
by-transaction basis without netting debits against credits.
1.4 Need for Sound and Efficient Payment Systems
An efficient and sound payment system is necessary for an economy because it not only
helps in promoting commercial and economic activities, but also helps in implementing
monetary policies. Payment systems are not only useful in meeting specific needs of the
public authorities as well as defining the key role of the central bank but also reduces the
3

settlement risks and helps in improving the credit standing of the countries. Sound and
efficient payment systems also help in the efficient management of liquidity and provide
various alternatives for customers to make payments. It contributes significantly towards
fostering customer relationship and enables the bank in the process of strengthening and
widening the customer base. Efficient payment systems are also needed for generating
fresh revenues and to reduce the existing costs.
1.5 Risks Associated with Payment Systems
However, payment systems are subject to several risks, which may briefly be stated as
follows.
5. Credit risks – These are financial obligations that a participant in the system will
not be able to meet fully, within the system currently or at any time in future.
6. Liquidity risks – A player within the system may have insufficient funds for
meeting financial obligations as and when expected, although it may be able to
meet them at some time in the future.
7. Operational risks – These arise on account of operational factors such as technical
malfunctions or operational mistakes, leading to credit or liquidity risks.
8. Systemic risk – It is the inability of one of the participants to meet his/her
obligations, or a disruption in the system itself that may result in the inability of
the other participants or financial institutions in other parts of the financial system
to meet their obligations, as they become due. This type of failure may give rise to
wide-spread credit or liquidity problems and may threaten the stability of the
system as well as the financial markets.
The effective management of financial risks is at the heart of designing safe and
appropriate payment systems. The appropriate tools and incentives depend on the type of
system design and techniques used. The tools for managing credit risks in payment
systems include: (i) Using system designs whereby credit risk between participants does
not arise; (ii) Specifying access criteria: (iii) Introducing credit limits; and (iv) Assigning
loss-sharing arrangements. Tools for managing liquidity risks include : (a) management
of payment queues, (b) provision of intra-day credit, and (c) specifying throughput
guidelines and position (receiver or sender) limits. The general tools are : (x) information
systems that support the tools for managing credit and liquidity risks, (y) providing
4

financial information to participants, and (z) timely monitoring by the system operator
(BIS, 2000).
1.6 Importance of Payment and Settlement Systems
Efficient and effective payment systems are vital for the economic prosperity of
developing countries, to promote commerce, trade, etc., and to achieve optimum
utilization of available resources required for the transfer of payments and to control the
risk involved in the process of moving large funds. Thus, sound and efficient payment
systems contribute significantly towards promoting economic and commercial activities
and can meet the specific needs of public authorities. These systems define the role of
central banks and help in macro management. They help in implementing monetary
policies effectively and reduce the settlement risks. They are useful for improving credit
standing of the companies. They provide various options for customers to make
payments. They reduce transaction costs, speed up liquidity flow and improve
transparency. They help in integrating domestic economy into a global economy (Bhasin,
2007).
Each country however has to evolve its own approach and strategies in the
designing of its own fabric of the payment system to suit its unique requirements. The
present study aims to analyze the issues involved in ensuring efficiency in the functioning
of the payment systems in India in the light of the progress she has achieved during the
last two decades, particularly during the last decade.
1.7 Scope of the Payment System
2. A well-designed payment system should facilitate the exchange of goods and
services between economic agents using the accepted medium of exchange.
3. The system should include instruments through which payments can be made, and,
provide rules, regulations and procedures that guide these payments, the institutions
facilitating the payment mechanism and the legal system that supports the
established systems to facilitate the transfer of funds between the participants.
6. Payment systems encompass a
acceptable in making payments;
governing such payments; and
set of instruments and the means generally the
institutional and organizational framework the
operating procedures and communications’
5

network used to initiate and transmit payment information from payer to payee and
to settle payments.
: Payment systems are to be used by individuals, business organizations, banks, and
government departments in order to make payments to and receive payments from
each other.
: A modern payment system consists of specialized sub-systems developed to serve
particular sets of customers; some of these settle small payments, some large
payments, while some cover both large and small settlements.
1.8 Hypotheses of the Study
The study sets out the following hypotheses:
™ The efficiency of the payment systems in the country depends on the role played by
the regulator to ensure safety of the payment systems and prevention of any
occurrence of systemic risk.
™ The systemic risk shall be observed as the size of payment systems grows in size
and becomes varied in nature.
™ Improved efficiency in payment and settlement systems would result in improved
operational efficiency of banks.
™ Strong and efficient payment systems in the country would lead to enhanced
banking business and its profit.
1.9 Objectives of the Study
The study examines the evolution and performance of the Payment and Settlement
Systems of India and benchmarks the same with advanced economies like the European
Union, the USA, the UK and the Asian economies like Japan and China. This is done with
a view to suggest certain measures to make the Indian payment system more efficient, less
vulnerable to various risks and make it more cost effective. In particular the objectives of
the study are:
™ To examine the evolution of the payment system in India, especially from 2005 to
2010, when the country witnessed a rapid growth in economic activities in spite of
global economic upheavals.
6

™ To assess the importance of efficient and effective payment and settlement systems
in improving the financial performance of the economy.
™ To understand the impact of information technology on payment and settlement
systems.
™ To analyze the various issues relating to the efficient functioning of the payment
and settlement systems like security, risk management, cost, etc.
™ To suggest further measures to promote e-payment systems by banks.
1.10 Scheme of the Present Study
Chapter 1 : Introduction
Chapter 2 : Methodology
Chapter 3 : Payment Systems: Global Scenario
Chapter 4 : Evolution of Payment Systems in India
Chapter 5 : Indian Payment Systems : Growth Indicators
Chapter 6 : Risk Management in Payment Systems and the Regulatory Framework
Chapter 7 : Analysis of Payment Business in Select Banks and Findings
Chapter 8 : Summary and Recommendations
Appendices
Bibliography
Before examining the payment and settlement systems in India, it is necessary to
study the global developments with reference to various studies conducted on the subject.
Towards this end, chapters 2 and 3 attempt to review the literature.
7

ANNEXURE 1
Core Principles for
Systemically Important Payment Systems
™ The system should have a well-founded legal basis under all relevant jurisdictions.
™ The system’s rules and procedures should enable participants to have a clear
understanding of the system’s impact on each of the financial risks they incur through
participation on it.
™ The system should have clearly defined procedures for the management of credit
risks and liquidity risks, which specify the respective responsibilities of the system
operator and the participants and which provide appropriate incentives to manage and
contain those risks.
™ The system should provide prompt and final settlement on the day of value,
preferably during the day and at a minimum at the end of the day.
™ A system, in which multilateral netting takes place should, at the minimum, be
capable of ensuring the timely completion of daily settlements in the event of an
inability to settle by the participant with the largest single settlement exposure.
™ Assets used for settlement should preferably be a claim on the central bank, where
other assets are used; they should carry little or no credit risk.
™ The system should ensure a high degree of security and operational reliability and
should have contingency arrangements for timely completion of daily processing.
™ The system should provide a means of making payments, which is practical for its
users and efficient for the economy.
™ The system should have objectives and publicly disclosed criteria for participation,
which permit fair and open access.
™ The system’s governance arrangements should be effective, accountable and
transparent.
Reference : Reserve Bank of India, Annual Report 2001-02

8
Conclusion:
It is imperative to mention that the study undertaken has provided
focused insight into the topic of actual contribution of HRD in KM
implementation in considered type of IT companies. It as well threw light on the
significance of EKM that is to be carried out in a systematized manner that not
only addresses the growth of the individual but the organization too. A
comparative analysis between the two types of IT companies: IndianandIndian
MNCs and Foreign MNCs, projected mostly the similarity about the application
of EKM with few distinctions. Yet the study had many limitations which sowed
the seeds for the future scope for the research with a wider and in-depth focus.
It would be interesting to investigate the proposed model of EKM that facilitates
the individual and the organization along-with the help of the technological
advancements to be considered. Moreover, Knowledge workers base is‟
significantly expanding in every organization hence it would be again worthy to
study the varied strata of respondent to have a holistic outlook on the study
aspect. Checking other perspectives of the study like elaborating the types of
company as all Indian and foreign companies in India would give a different
outlook on this area of study.
In the research study undertaken herewith; main focus was on the HRD
initiatives and contribution in a systematized effort of KM implementation that
is observed predominantly in every successful organization in the IT sector.
Knowledge management is basically; one of those managerial philosophy, that is
recognized in several practices executed in the organizations. Although,
Knowledge Management is definitely not an ultimate tool; that resolves each
and every information cycle problem, in the dynamic business scenario, but
knowledge management does give an edge over the other enterprise where
such innovative drives are yet to be carried-out or are in their infancy or the
mechanism of EKM Implementation is not appropriate or systematic. In order to
efficiently apply EKM, proper organized efforts are very essential wherein the
learning curve of data is eventually managed through various KM practices-at
individual and organization level.
Thus Enterprise Knowledge Management (EKM); should be considered as
an organizational process and one of the vital business methodology. This
methodology is used to achieve better performances and productivity which is
the effect of resourceful knowledge elicitation and organizational learning,
recognizing and developing competencies, and gaining from individuals, utilized

to reinforce constructive and up-to-date growth of the enterprise.
However, it should also be noted that EKM is an individual organizational
issue and the introduction of a technical solution for KM will now, more than
ever, need to be accompanied by an appropriate set of organizational measures
and recommendations to ensure its acceptance and success.
EKM as a Methodology actually identifies preserves and manages, critical
and voluminous company data making it strategically very useful in every way.
The rationale behind the research study undertaken is to gain better
understanding of Enterprise Knowledge Management; as a strategic tool in
support of enterprise transformation for a new economy; especially by HRD of
an IT company. The IT industry is resource –oriented and intellectual-assets
being the Human resource signify the mission of HRD; in context to the high
turnover .Thus there evolves a challenge of sustaining the level of competence
needed to manage this living – dynamic-data-repositories; which is the HR, to
fulfill organization undertakings. This helps us infer that there are challenges
even in EKM implementations wherein HRD can contribute effectively to
improve the EKM application in the companies in the IT sector.
Furthermore in order to manage employees for competitive edge in the
postglobalization era, human resource personnel must possess competencies
relevant for effective implementation of such innovative strategic HRM policies
and training. Specifically, HRM must respond to the crucial challenges presented
by the knowledge economy; wherein knowledge-based capabilities are the key
to competitive advantage. Better skill-equipped smart HR personnel would do
wonders for the knowledge-based systems in today s enterprises. It would‟
reflect certain HRM priorities such as becoming not technological expert but
technological savvy, not traditional ordinary HR personnel but HR professional
who has an eye to recognize strategic knowledge capabilities; who has the
aptitude for developing and managing knowledge workers by leveraging the
knowing-learning-doing bond. Such HR-professional would then constructively
contribute towards building knowledge value as an organizational as well as an
individual asset; and curtailing enterprise knowledge risk factors that may
evolve in future.
In this context; from the research study undertaken, it is recognized that
o EKM as a Methodology actually identifies preserves and manages
critical and voluminous company data, making it strategically useful
in every way, across the organization qualitatively.
o There is significant awareness among the employees of IT
companies in both the type of companies: IndianAndIndianMNCs as
well as Foreign MNCs. And there are good number of enterprises
where the knowledge –based products are utilized to defend the

dynamics of business.
o It is imperative to mention that the study undertaken has provided,
focused insight into the topic of actual contribution of HRD in KM
implementation in IT companies.
o For successful KM execution methodical efforts are essential
followed by identification of the priority areas, immaterial of the
size of the organization.
o It has been substantiated that application (implementation) of EKM
needs to be carried out in a step-by-step approach; as such
mechanism not only addresses the growth of the individual but of
the organization too.
o It can be ascertained that along-with the traditional method of
„access to documents’ as best way to understand and get vital
details of organizational information such as vision and mission and
changes in the organization structure ; even HR from IT companies
are open to interact with the immediate managers and fellow
colleagues. Although revitalization of these KM Practices for more
better reach in order to make effective is essential.
o There exist KM systems in the organization actively working, and
they have influenced the business processes specifically HRM,
quality control and IT Services very significantly in both
Indian&IndianMNCs and Foreign MNCs, in all the given aspects of
the achievements.
o The major thrust to start the EKM Initiatives in IT companies have
been understood as an aid to bring transparency in process and
enhance efficiency of work in an innovative and qualitative way.
These were the IT organization where EKM initiative is in its young
age which as well concentrates on these drives for enabling
uniformity in understanding and orientation of the complete
business cycle. Whereas the organization where EKM initiative was
in a more mature phase reflected the need for such drives to
facilitate creating technological diversified team with competency
building and sharing, providing more clientcentric solutions in more
cost effective way, foreseeing prospects to become pioneer in the
specific domain, better reach-out within employees, with the
partners and with the customers too, and keeping up with the pace

in the competitive business market.
o Involvement of both Indian&IndianMNCs and Foreign MNCs
showed poor score in the initial stage as compared to the later
stage; due to initial inhibitions and predispositions in the mind of
the knowledge workers. Also it is the senior members which faced
hurdles especially in the earlier phase while application of EKM in
the organization. This indicates the need of more attention to the
orientation to be given to the immature employee as well as
mentoring during the initiation of any new KM drive in the
organization that would certainly increase the success rate and
impact of KM implementation.
o Newer methodologies can strengthen the task of educating and
enlightening the employees; and in the process, achieve proper
knowledge management across the enterprise.
o Appropriate set of organizational measures and recommendations
to ensure its acceptance and success is as well needed as it has come
out to be a vital business need and not just a trend.
o There are numerous HRD challenges that the HR faces while
handling day-today business functions such as Talent Management
and Development was an important reflection noted at some
organization which further remarked on knowledge transfer at
exponential level and motivating individuals for Innovation &
creative contributions. Leadership development and Change
management were the next significant challenges faced which can
be well-supported by the EKM practices. This is indeed a positive
gesture which would support the progression in the productivity by
improving the skill-set, proficiency and efficiency of the Human
resources in all verticals.
o To overcome these HR challenges the support of measures
reflecting EKM has been predominantly useful and popular such as
HR Benchmarking and use of Technological Support and tools. Also
a positive impact is perceived in achieving the aims and objectives
of the individual as well as the organization as an end result in both
the types of IT Companies.
o Knowledge sharing level within the employees and with the
partners is higher than that with the customer. Hence role of HR is

mostly and closely associated with the employees and partners;
which demand proper knowledge creation and management
through various KM Drives. It as well indicates the positive impact
of application of EKM in HRD in IT companies with respect to
understanding the tendency of the human resource of an IT
company with the entities in its environment. It revealed a positive
picture about the attitude of the employees exists in these IT
organizations. It certainly shows a positive culture, as people being
open for knowledge transfer.
o Organisation are becoming more people centric hence better
mentorship with better clarity of business requirement leads to
enrichment of knowledge.
o Performance appraisal is one of those workplace mechanisms in
HRD which has been revealed as the most vital HR function having
close association with application of EKM in the IT firms. It is one of
the interesting recognition about the way the performance
evaluation is looked and handled in the organization where EKM is
applied as additional measures. In addition to the traditional
system, the KM based approaches as well were followed which have
strengthen the system.
o It is an important observation that combination of 360 degree as
well as selfappraisals is executed in most of the IT companies. But
wherever only single method is applied; an additional supportive
methodology based on KM based systems are utilized while
evaluating the resources on a continuous basis throughout the year.
KMS whether informally and formally associated with the feedback
systems add value to the critical business challenges.
o It is worth noting that the effectiveness percentage of training being
organized in order to increase the creativity and innovation in both
Indian&IndianMNCs and Foreign MNCs is very significant reflecting
positive aspect for EKM Implementation. At the same time it is
worth noticing that effectiveness of events/training with respect to
market reputation and branding is just little better in both
Indian&IndianMNCs and Foreign MNCs , indicating as well that its
relevance with KM needs more attention so as to raise its value. It is
evident that EKM fosters the process of achieving the defined goals
qualitatively and with appropriate pace if managed with
systematized efforts.

o There is considerable existence of non-routine involvement from
the employees in various events that is supported by the IT
companies. Such involvement creates a platform for the employees
to explore more knowledge, be creative and explicitly project the
piece of work either individually or in a Team. This exercise
contributes constructive efforts into the process of knowledge
generation thereby promoting EKM Implementation in the
company. It would be interesting in finding ways to further improve
this percentage of participation in context of the comparative study
of company encouragement that exists verses employee
participation that actually takes place. Here when the employees are
said to have been actively participating in the attending or
organizing events it is apparent that it is not possible until they take
help of the technological support for such undertakings.
o HR function has increased lot of responsibilities and scope during
the last 3 years year 2008-2009-2010 in both the categories ( Indian
and MNCs), which are very much in favour of the rise in HR
functions . And in the this study it is shown that major task or role
played by HR is Recruitment with highest significance points,
followed by Resource development and management through
training in both the type of organization-Indian companies /MNCs
as well as Foreign MNCs.
o EKM initiatives across the IT organizations are right now the
happening events, wherein, existence of various drives have been
observed. The strategic force of the Organization should note that
these EKM initiatives are indeed not a trend but a very effective
methodology in the long run. These drives enrich and strongly
support business which are heavily dependent on information and
allied services in the knowledge intensive economy.
o One of the vital inferences derived from the study is with respect to
the type of the organizations as IndianAndIndianMNCs versus
Foreign MNCs, there is not much difference in its application
strategy. Although differences were observed in the actual
execution and acceptance.
o The current recognitions systems fall short of impressing the
employees and at some time it is rather taken too lightly. Also using
incentives always does not guarantee a successful KMS. And this has

been a critical observation in the qualitative study of this current
research study, hence innovative ways of recognitions of the
employee is very much essential. This was another important
another dimension that came forward through this study.
o The comparative study indicated that there is a need for especially
in the IndianandIndianMNCs to gear with Training as an effective
tool of knowledge gain and enriching the resources regularly and
not underestimate it.
o As far the Quality perspective is concerned there is significant
awareness among the resources in both type of companies but no
concrete inputs were received in context to the understanding to
the co-relation of EKM and the CMM level obtained by the company
in the IT sector.
o Considering the dynamic nature of Information, its requirement and
usage; a versatile and speedy paradigm is expected to be used.
Under such circumstances of dynamic business requirement that
too in the field of IT sector, a suggestive Model adapted from the
AGILE Model of system development can be applied. Enterprise
Knowledge Management is getting acceptance although slowly; and
it is observed that it has shown the capability to become an integral
part of a business function rather than just a methodology.
 It would not be exaggeration to state that; to achieve success in global
marketplace and to tackle the challenges of businesses; immaterial of
their sizes, it is essential to understand the global corporate cultural
differences and invest in human resources innovatively.
 As a part of this study the researcher concludes that Enterprise
Knowledge Management (EKM) should be considered as an organizational
process and one of the vital business methodologies.

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