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1. Introduction

Banking has been service industry, since inception and will always be. But, the change has been

witnessed in the way the service being delivered. So, when in 1991 the economy opened up we

saw private banks coming into the picture. It has been the story of India that when private

players got chance they brought efficiency and also the PSUs type entity need to adopt the

changes, similar in this case as well. Whenever an industry grows IT helps to manage the

operations and its stature. Information technology has revolutionized the way banking was

done firstly by shifting the paradigm to online. With the advent of ATMs, debit/credit cards,

internet-banking, NEFT/RTGS etc. the banking has been transformed, and replacing traditional

way or method of service delivery and even the products to achieve the new scales in an

industry where scope of differentiation or compete on the price was minimal previously and

fiercely competitive, so quite tough to build the brand who owns the great share mind and heart

and eventually of the market.

It all started with ICICI Bank under the visionary leader K. V. Kamath who brought and

promoted the NON-HUMAN SERVICE INTERFACE IN BANKING. Multinational (mainly foreign)

and private banks adopted the technological innovations more quickly as compare to public

sector and hence, started reaping the fruits early from the investments made on technology in

terms of HIGHER C-SAT (customer satisfaction) and improved efficiency; which became the

major differentiator for all of them from public sector banks. Again, now is the phase where

banking is changing in terms technology as always but also in terms of users. So, our study has

two phases one is the effect of e-banking on various parameters various banks performance and

second is the present scenario and what are the changes it’s going to account or seems to take

place in that are going shape industry’s future.

A number of studies are available on productivity evaluation and a few of scholarly research on

analysis of technology’s impact on banks’ in terms of productivity on various factors is available;

but very-very few in case of India; that too scattered in different papers and reports.

2. Literature Review

Indian banking industry has been one of the largest spenders and beneficiaries of of information

technology. Global trends in the banking industry show the move amply clear from services to

products, it naturally becomes obvious for an emerging country like us India to take lead in

delivering such instruments. Over the past few years, the industry has continuously leveraged

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IT in expansion of banking operations, for improving internal processes and for improving

facilities & services to customers likewise. In recent times, banks in India had introduced

various instruments such as E-Cheques, RTGS, EFT, ECS, ATMs, Tele banking, EDI. From

enabling banking services to driving transformation in the Industry, Information Technology

course do promise to change the pace of banking to the next few years (Mohan & Madhu, 2014).

Over a duration of time, the managing an account division had seen certain patterns everywhere

throughout the world. With the improvement of IT, two things are occurring all the while. The

work power as a rate of aggregate staff is going down and spending on IT as rate of aggregate

spending is going up. The IT activity is making the association incline and level. IT is currently

seen as an asset for get-together and scattering of official data framework (EIS). IT is seen as an

empowering influence that as well when very much upheld by BRP (Business Process Re-

designing), HR activities, physical base and responsive association. IT set up to produce salary

for the association is the fresh start. Landing positions from outside the bank for handling

information and so forth are the present patterns. One of the IT pattern is moving from chain of

importance to group approach. Rather than vertically partitioned pyramid sort hierarchical set-

ups, banks are presently being to have separate gathering like money, worldwide shopper

managing an account, modern/business credit and so on. Outsourcing is a standout amongst the

most discussed as likewise a disputable issue. The drivers for inspiring into outsourcing are

numerous to incorporate crevices in IT desires and the truth, demystification of

computerization all in all and IT in particulars, pattern towards concentrating on center

capabilities, expanded authenticity of outsourcing and expectation of escaping from stresses

and kind of up degree of equipment and programming variants.

Robotized information stream – Under mechanized information stream (ADF), banks were

encouraged to submit computerized comes back to guarantee stream of information from their

CBS or other IT frameworks to the Reserve Bank in a straight-through way with no manual

mediation. To guarantee coherence and sustenance of ADF execution, banks have been

encouraged to set up inside returns administration gatherings to continually screen progres

Cutting edge constant gross settlement framework (NG-RTGS) – The new RTGS framework was

propelled on October 19, 2013. The framework settled a record number of 0.48 million

exchanges on March 28, 2014. All around, it is interestingly that the ISO 20022 message

arrangements are being utilized for transmitting RTGS messages. The RTGS framework 2 Rating

Level 1: Draft execution measures not distributed; Rating Level 2: Draft usage measures

distributed; Rating Level 3: Final execution measures distributed; Rating Level 4: Final usage Do Not

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measures completely in power; and Rating Level NA: No execution measures required (that is,

not relevant

SETTLEMENT SYSTEMS AND INFORMATION TECHNOLOGY is exceptionally versatile with new

functionalities viz. advance liquidity components including a gridlock determination system and

cross breed settlement office, office to acknowledge future worth dated exchanges and

alternatives to transform multi-cash exchanges. The new RTGS framework gives 3 entrance

alternatives to members: thick-customer, web API (through INFINET or some other sanction

system) and the installment originator module. Members have the decision to choose the

method of support in the framework in view of the volume of exchanges and the expense of

setting up the base. With usage of the new RTGS framework, the old RTGS framework stops to

exist and the RTGS System Regulations 2013 have supplanted the RTGS (Membership) Business

Operating Guidelines, 2004 and RTGS (Membership) Regulations, 2004. Report on 'Empowering

Public Key Infrastructure (PKI) in Payment System Applications' IX.29 The Reserve Bank

constituted a gathering in September 2013 to set up a methodology paper for empowering PKI

for instalment framework applications in India. The gathering contained delegates from banks,

the IDRBT-Certifying Authority, the Controller of Certifying Authority and branches of the

Reserve Bank. The gathering additionally communicated with Indian Banking Association (IBA).

The last report of the specialized board was discharged in April 2014. IX.30 The report

suggested the requirement for all banks' web keeping money applications to make a

confirmation domain for a secret key based 2-stage validation and additionally a PKI-based

framework for validation and exchange check for internet saving money exchanges and its

usage in stages. It additionally recommended that banks give the choice to their clients for

empowering PKI for their internet managing an account exchanges.(RBI Annual Report’13-14)

3. Research Methodology

I. LIBRARY RESEARCH: Secondary research through media and internet to formulate the

Literature review. Later a good analysis of papers by going thoroughly in and out along with

articles from internet and news.

II. Gathering data from various websites regarding banks performances from various point

of views like financial performance, IT index, no. of customers, share prices, etc.

III. ANALYSING: Compiling the entire data and analysing it to develop the further insights

by means of ratios, matrices, like ROTI i.e. Return on Technical Investment, graphs, etc.

IV. Compiling all the insights and finding conclusion and preparing the final document and

presentation and presenting it.

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4. Data & Analysis

I. What IT is enabling the Banks (Impact on delivery):

Firstly Technology has impacted in a way that it has unfolded the box of financial services

and created new opportunities by enabling the change in manner the services and products

were delivered. The following figure shows what technology in enabling the present market

served by industry at lower cost of delivery.

II. Investment on Information Technology & Returns (ROTI)

Banks invest more on IT when compared with other financial services firms. In deed the

entire financial market spends more on IT as compare to any other industries; which banks

are topmost investors in the IT segment. Banks’ spend almost 7.3% of their revenues, Do

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which is quite higher as compare to others found out in a large survey covering firms in the

Asia, Europe and North & South America by Forrester Research Inc. Whereas, on an

average, across various sectors polled in the same survey, the cost of IT is equivalent to

3.7% of their revenues.

It is obvious any sector invests only and only when it can generate returns. IT is rather than

a cost is an investment especially for Banks since its result come after the implementation

that comes as long as the system is serving. So, a costly system can also get implemented

more with ease as compare other industries since the results are good and exponentially

increasing in terms of profit. Lets’ see how the banks got profited with e-banking on the

basis of following analysis:

i. Employee Productivity

This is the measure of productivity on an average by each employee by the evaluation done

on the various factors like Business per employee, Setting up/Establishment cost of

technology per employee (for equipment, etc.), Expense on per employee in terms of

training, etc. , with respect to Total earnings/business per employee and increase in it with

the advent of e-banking. The period considered is 1996-97 to 2006-07. After 2007 mobile

telephony started spreading its wing so considering after that point is not going to give

accurate measures. The mentioned data is obtained from:

1. Report on Trends and Progress of Banking in India

2. Performance Highlights of IBA (1996-97 to 2006-07)

Table 1: Business per employee

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Firstly, How much business is captured by an employee that’s taken out from records

[Obviously total business divided by no. of employees is done for calculations] and after

that Establishment Expense & Spread per employee is taken care which results in Total

earning per employee and hence on the basis of these, we calculated the Employee

productivity.

Table 2: Establishment Expenditure per employee

Table 3: Spread per employee

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Table 4: Total Earnings per employee

On the basis all the above parameter the productivity per employee has been calculated.

Table 5: Employee Productivity Index

Let’s put these data on line graph and we observer it almost twice from pre-e-banking to

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ii. Branch Productivity

Branches were the only touch points earlier for banks. So, a bank was highly dependent on

the no. of branches and also their productivity. To overall productivity of bank is what

branch level productivity is summed up; which is calculated by means of proportionate

production of the banks per branch in terms of business, deposits, credits, establishment

expenditure, total expenditure and total income. The idea to look for per branch concept

was that since every year the no. of branch operated were different so to get a common

ground to calculate can be done by looking for per branch; also since each bank has

different no. of branches depending upon their feasibility so it provides better ground for

comparison. Lets’ look at all tables and productivity of branch.

Table 6: Business per Branch

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Table 7: Deposits per Branch

Table 8: Credits per Branch

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Table 9: Establishment Expenditure per Branch

Table 10: Total Expenditure per Branch

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Table 11: Total Earnings per Branch

Table 12: Branch Productivity Index

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iii. Recent Years Overall Banks Performance

So, let us analyse the performance of banks in the recent years; after implementing

the system i.e. 2011-15 and see whether they are gaining sustainable profit or not.

So, by looking the trends one can clearly say that IT is rather than an expense is an

investment which is delivering its fruit again and again like a tree after initial take

care of it and becomes the part of organization.

(Amount in Rs. crore)

2011 2012 2013 2014 2015

ICICI 5,151.38 6,465.26 8,325.47 9,810.48 11,175.35

HDFC 3,926.40 5,167.09 6,726.28 8,478.38 10,215.92

KOTAK 818.18 1,085.05 1,360.72 1,502.52 1,865.98

SBI 7,370.35 11,707.29 14,104.98 10,891.17 13,101.57

Table 13: Overall Profit(Loss) in respective FY

Figure : Overall Profit(Loss) in respective FY

So, it has clearly shown impact at smallest possible level i.e. per employee productivity to

each level further. And that’s the reason why banks heavily invest on IT since it has almost

doubled the key productivity and delivered a sustainable growth over a period of more

than 15 years and enabling to fulfil the un-served demand existing at present. This is the

banks have invested in the innovations like ATMs, Credit/Debit Cards, Electronic Fund

Transfers (RTGS/NEFT), etc. continuously and backed them.

0.00

2,000.00

4,000.00

6,000.00

8,000.00

10,000.00

12,000.00

14,000.00

16,000.00

2011 2012 2013 2014 2015

ICICI

HDFC

KOTAK

SBI

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III. Nature of IT Investment of Banking & its Impact

Banks are still investing in newer

technologies that too almost 30%

to improve further experience of

their customers that’s the reason

we are watching such a quick

transformation from e-banking to

m-banking. Now, also the

payments banks are coming into

picture; so let’s see what’s the potential lying in it to know why banks are investing

in this pattern.

Scope of growth in internet and enabled banking

Lets’ see what’s the scope of growth available in the market in terms of internet and

hence internet enabled banking i.e. e-banking and m-banking.

Fig: Growth in internet usage and potential as compare to other countries

Since internet enabled banking i.e. e-banking and m-banking is all about the

convenience of customers is all going to increase just the comfort ability with

technology needs to increase in consumers and banks are loving it as it increases

their bottom line as well so we are surely going to watch rise in it as its reinforcing

loop unless some external factor disturbs this cycle. The transition from e-banking

m-banking has taken less than the halftime to the transition for traditional to e-

banking. And let us have look where the future IT investments are taking place: Do

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So, banks are investing in Mobile

App for the engagement with

current and new customers and

also investing in Data Mining and

Analysis to know more about the

customers and their preferences

and deliver the experience. Since

customers are quite worried

about the security banks are

investing heavily on cyber

security after that on social

media and cloud computing to

enable business processes and

smoothen the execution.

Fig.: Future investment as per CEOs

Fig.: Digital technologies feature in the

top 5 strategic consideration for various

industries

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Fig.: Bank’s overall approach to digital channel strategy around mobile banking & social media

IV. Impact on Consumers & Consumers Back Impact on Banking

The banking’s digital offered consumer the convenience they were wishing and

hence, people started adopting the practice of internet enabled or digital banking.

Also, the ones who adopted or converted their banking from traditional to digital

called “digital converts” became majority in 2013. But, in 2020, those who started

their banking in digital era will form the form the majority. Those who have “digital

native”- thinks that the e-banking and m-banking are basic facility so they are

having more expectations and these expectations are shaping the future of banking

which is so far married happily with technology.

Fig.: The consumer base and trends as per number

(So

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e: P

wC

’s S

urv

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ggin

g in

to d

igit

al b

ank

ing

)

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V. Macro Environmental Impact

Macroeconomic factors are also serving in favour of marriage of the banking with

technology. As banking system is the backbone of financial activities of the nation;

central govt. is using banks to reach up to last mile. The schemes developed under

these programs are also incentivising the banks towards the advancement of

technology use to deliver the customers a better experience of banking.

5. Conclusion

So, after all analysis we can say it with the ease that IT has impacted hugely the banks in

terms of their operations and changed the way the customers experienced banking. Its impact

is not only qualitative but also quantitative. The result of IT is not one shot but it’s actually

an investment whose result starts after the implementation begins i.e. after establishing

means incurring the cost. And, the result is far more efficient processes which are resulting

higher profits at each level from individual to not only organization but at industry level. Due

to complexity involved in implementing and accessing impact of technology on the

organizations which depends on various variable the Return on technology investment i.e.

ROTI is tough task to calculate. Also, organizations are having a look at ROTI with a lot of

qualitative aspects to take better improved quality of decisions. Since, the technology is Do Not

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delivering consumers convenience & comfort whereas profit and better management control

in terms processes to banks; so it’s a WIN-WIN game for all the parties involved.

References:

Technological development in Indian banking sector by N. Suresh Babu & G.V. Chalam,

INTERNATIONAL JOURNAL OF RESEARCH IN COMMERCE, IT & MANAGEMENT, Volume No. 3

(2013), Issue No. 12 (DECEMBER) ISSN 2231-5756

Information technology and its role in Indian banking sector by P. Mohan & K. Madhu,

International Journal of Business and Administration Research Review, Vol.2, Issue.7, Oct - Dec,

2014

Role of Information Technology in Indian Banking Sector by Prof. M. C. Sharma & Abhinav

Sharma, International Journal in Multidisciplinary and Academic Research (SSIJMAR), Vol. 2, No.

1, January-February (ISSN 2278 – 5973)

Sing, S., Chhatwal, S.S., Yahyabhoy, T.N., and Yeo, C.H., (2002) Dynamics of innovation in E-

banking, in 10th European Conference on Information Systems, Gdansk, Poland, university of

Gdansk

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