Page 33 - Banking Finance December 2024

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card and use of various UPI payment apps -PhonePe, BHIM, later migrated to Local Area Network (LAN)
Amazon Pay, Paytm, Google Pay, Cred, BharatPe and the connectivity. Computerisation of banks gained pace with
like. Further, banks have their own digital banking apps. the liberalisation of economy in 1991, which led to the
rising competition from private and foreign banks. For
The Need of the Hour remain competitive in the market, several commercial
The following paras make clear the need for digital banking: banks initiated the steps towards providing customer
1. Moving from Books to Computers: Olden-days banks services digitally through core banking.
were used books to enter transactions. These books 3. Core Banking: Traditional core banking system faced
provide inputs to management to understand and several issues. The major issues are: processing
analyse business details like deposits, loans, assets, transactions in real time, leveraging partnerships with
liabilities, income, expenditure, balance-sheet items. fintech companies, poor digital customer experience
Maintenance of records is very much necessary for without flexibility, complexities during platform
meeting the requirements of different account holders. integration after M&As, scaling infrastructure needs as
For example, payment of interest on different types of required, launching new features frequently, risk and
deposits needs to be done on time as and when the compliance management, high maintenance cost, and
maturity or period arises. There were various other high reliance on vendor. To address these issues, a core
needs as per regulations for maintaining records. banking introduced in 1980 with error free banking
The primary aim of records to enter details on day-to- business with cloud-ready and open-banking compliant
day basis as and when accountholders transacts with and have very advanced architectures made frequent
bank, store and retrieve when required. Banks deals feature releases smooth.
day-in and day-out, high risky documents need to be With the adoption of core banking platform, branch
preserved carefully for future reference. Therefore, banking changed to bank banking. Core Banking Solution
proper handling and retention of records assumes great (CBS) helped various core banking platforms, among
significance. This was easy when the numbers of them the popular platforms are: Finacle (by Infosys),
accountholders are less and transaction frequency is BaNCS (by TCS), and FLEXCUBE (by i-flex) gained
less. But, it was difficult to maintain books and deliver popularity. These platforms are the reason for offering
services on time. So, computerisation of banking was greater customer experience at reasonable price. No
necessary then. more consumers accept generalised services, and they
2. Computerisation: The necessity of computerisation of are demanding for customised efficient services. So,
banks was sensed in late 1980s. As per the report banks need focus on meeting the customer demands
released in 1985 by Reserve Bank of India (RBI) banks and live upto their expectations. Government of India
were facing different types of difficulties like increasing was focussed on inclusive growth, especially financial
delays in the posting and balancing of various ledgers inclusion.
leading to give a way for fraud; statement of accounts 4. Financial Inclusion: Financial inclusion is increasingly
are not properly and legibly compiled; out of date gained significance in promoting equity and economic
passbooks; unnoticed standing instructions; enormous growth across the globe. The same was included
delays in clearing of cheques; huge delays in the prominently in Indian public policy agenda for a quite
payment of cash cheques at banks where teller system long-time. Financial inclusion was very much required
in not in place; revenue leakage through short-collection for inclusive growth and development. In India was very
of interest, and so on. less number of adults possessed account in bank by 2011
Further, banks were not able to fine-tune policy which was well below the average of other emerging
measures due to difficulty in processing of large volumes market economies (Kunt et.al., 2018). 12 per cent adults
of out dated data, unprocessed data, and lack of vital saved money, eight per cent adults borrowed from
current data. All these led to streamline bank operations financial institution. People were using cash widely with
to avoid deep troubles. So, computerisation was needed the currency in circulation was about 12 per cent of
in late 10980s. gross domestic product (GDP).

Banks introduced standalone Personal Computers and There were 21 ATMs per 100,000 adults, IMF Financial

30 | 2024 | DECEMBER | BANKING FINANCE