TECH-TONIC shift need of the hour

The Economic Times

The central government, which always tread gingerly towards labour-saving technology, has finally acknowledged the game-changing role of computerisation in the case of state-owned banks. The Economic Survey shows the decision by PSU lenders to put in place a core banking solution has led to an improved outlook for the banking industry.

According to the survey, the new technology has helped public sector banks change their image and also the outlook of the entire banking sector significantly through an improvement in processes and procedures, rapid product development by alternate delivery channels and a reduction in the transaction costs. The report adds that technology is also helping in making banking more inclusive, particularly to rural areas.

The core banking solution refers to the software package under which all information of the account holder is maintained in a central database. Further, all branches and ATMs are networked to the central database. Implementation of a core banking solution transforms a branch customer into a bank customer. It also allows the customer to access his account anytime through any channel—branch, ATM or internet thereby facilitating anytime, anywhere banking.

The fact that there has been a re-rating of public sector banks in the past decade becomes obvious while looking at the share price of PSU banks. Over the past decade, State Bank of India has returned its shareholders 724 percent, excluding payouts. Similarly, the appreciation in the Punjab National Bank scrip since listing in 2002 has been 1,336 percent while Bank of India has returned 1,602 percent over the past 10 years.

The rise in share prices of state-owned banks is extraordinary considering that Indian banking is a mature industry—most banks celebrated their 100th anniversary recently. Moreover, the growth in the share prices of government banks has been higher than that of some new generation businesses such as IT and telecom.

The number of branches providing core-banking solutions (CBS) rose rapidly to 67 percent as of end-March 2008 from 44.4 percent at end-March 2007. The number of automated teller machines (ATMs) at end-March 2008 was 34,789 compared with 27,088 at end-March 2007. “Core banking has helped banks improve their resources position. Banks are better placed to deploy their surplus cash and manpower,” said Canara Bank CMD A C Mahajan.