[sbinews] Technology: Key Differentiator of Future Success -Speech by Sri. VepaKamesan -Dy. Governor, RBI

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  • Date: Sat, 22 Nov 2003 06:21:38 +0500

November Reserve Bank of India Bulletin 2003
Technology: Key Differentiator of Future Success
(Remarks by Shri Vepa Kamesam, Deputy Governor, Reserve Bank of India on 
September 26, 2003 in the session on Technology : Key Differentiator of Future 
Success at the Conference on Indian Banking : Global Benchmarks ‘03  organised 
by Federation of Indian Chambers of Commerce and Industry (FICCI) at Mumbai 
(September 25-27, 2003).
Technology is the key word to success in the business world of today. The 
Banking sector, which is one of the largest users of Information Technology 
(IT) has reaped immense benefits out of the developments in technology not only 
the world over but also in India in particular; IT is now an integral part of 
the corporate plans of banks of the country. The role played by IT impacts the 
way of banking within the country; the greatest effect would, however, be in 
the area of emulating and surpassing global trends.

Traditionally, IT has been providing solutions to banks to take care of their 
accounting and back office requirements; this has now given way to large scale 
usage implementation in services aimed at the customer of the banks and as a 
delivery channel - in the form of Automated Teller Machines, Net Banking, 
Centralised data base solutions etc. Further, IT deployment has assumed such 
large levels that it is no longer possible for banks to manage their IT 
implementations - and more so in the context of the rapid rate of change in the 
IT industry. Yet another sector of banking which has significant linkages with 
IT relates to developments in payment and settlement systems of the country. I 
am happy to state here that the ambitious plans of the Reserve Bank of India 
which are aimed at reforms in the payment and settlement systems - are all 
centred around large scale IT usage, and with the objective of risk reduction. 
Positive signs in this regard are already visible - in the form
 of increased volumes of electronic based funds transfers - which have been 
showing growth rates of more than 100 per cent per annum of late, the complete 
end-to-end network based processing of transactions in the Government 
securities segment, cheque truncation and the impending introduction of the 
Real Time Gross Settlement System. The Reserve Bank is also addressing the need 
for attendant legal requirements in all these areas of activity.

Many challenges are being faced by bankers in the IT plans, some of which 
relate to the following areas: Deciding the IT plan for the bank as whole; 
Working out the strategy for implementation of the plans; Standardisation of 
the various components of IT - including hardware, software, operating systems 
and application software platforms; Interfacing across banks - especially in 
the context of disparate systems across different banks; Security of the 
environment at banks and security during networked based transmission of 
messages; Training requirements for IT implementation; Data Warehousing, data 
mining and other related areas; Sourcing of the IT requirements; and 
Outsourcing of the various components of IT including maintenance

All the aspects listed by me would show that the future lies in organisation 
embracing better methods for improved performance. This could be achieved only 
if change is accepted as the key word to a successful future. The changes 
staring at the face of bankers all relate to the fundamental way of banking - 
which is undergoing a rapid transformation in the world of today. Prime factors 
necessitating these changes relate to the forces of competition, productivity 
and efficiency of operations, reduced operating margins, better asset / 
liability management, anytime and anywhere banking.

One of the major challenges faced by banks is the impact of competition and the 
falling margins in the transactions undertaken by them. With hair thin profit 
margins being the order of the day, the solution to this would perhaps lie in 
increasing volumes so as to result in better operating results for banks. This 
is best achieved by exploiting the benefits of technology which facilitates 
handling increased volumes at higher levels of efficiency. It is in this 
context that there is an imperative need for not mere technology upgradation 
but also integration of technology with the general way of functioning of 
banks. The competitive advantage in current day banking is technology and its 
effective usage by banks. A holistic approach towards computerisation would 
give banks an edge in respect of service provided to their constituents, better 
housekeeping, optimising the use of funds - and building up of MIS for 
empirical decision making which has a relationship with the critical 
aspect of Asset-Liability management which in turn has a direct impact on the 
balance sheet of banks as a whole. Solutions to all the above are available in 
the form of technology based implementations. Technology is, however, not a 
great leveler. It brings about in its wake, many key variations which offer 
themselves as differentiators, all of which are the keys to organisational 
effectiveness in the days to come. Banks and other financial institutions of 
the country have now to provide focussed attention in all these key aspects.

It is indeed a privilege to chair the Technology session which boasts of the 
best fields in their own fields of expertise. We have with us lead players from 
banks and a major software technology solution provider to provide inputs to us.

I have great pleasure in being present for this session and would look forward 
to highly informative deliberations between the speakers and the delegates, so 
that at the end of the session we could work out our strategies to use IT 
solutions as cutting edge tools for business excellence.

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