CHAPTER V TECHNOLOGICAL ADVANCEMENT OF INDIAN COMMERCIAL …shodhganga.inflibnet.ac.in/bitstream/10603/73238/12/12_chapter5.pdf · TECHNOLOGICAL ADVANCEMENT OF INDIAN COMMERCIAL BANKS

167

CHAPTER V

TECHNOLOGICAL ADVANCEMENT OF INDIAN COMMERCIAL BANKS

5.1 Introduction

5.2 Banking Transformation through Technology

5.3 Channels of Banking Technology

5.3.1 Types of Online Banking

5.4 Technological Advancement of Indian Banking Sector

5.4.1 Automated Teller Machines

5.4.2 Innovative Payment and Settlement Systems of Banking Sector

5.4.3 Types of Innovative Payment Systems

5.4.4 Evolution of Credit Cards/Debit Cards

5.4.5 Mobile Payments

5.4.6 Aadhaar Enabled Payment System and IMPS

5.5 Electronic Clearing Service (ECS)/ NationalElectronic Clearing Service (NECS)

5.5.1 National Electronic Fund Transfer (NEFT) system

5.5.2 Credit/Debit Cards and ATMs

5.6 Conclusion

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CHAPTER V

TECHNOLOGICAL ADVANCEMENT OF INDIAN COMMERCIAL BANKS

5.1 Introduction

The origin of banking can be traced to ancient times, starting with rudimentary

money lending and bartering practices for agricultural and other commodities. But it

gained great momentum only after the industrial revolution which commenced in

Europe in the 17th

Century, when Europeans started establishing colonies around the

world and the need for credit for trade was felt like never before. Ever since banks

started operating, their essential mode of operation remained much the same until late

into the 20th

Century. But the arrival of the Internet in the 1990s changed all that. A

plethora of possibilities emerged for worldwide commerce, which naturally impacted

the functioning of banks as well. Even now, technological evaluation shapes the

nature and extent of global economic activity and continues to fundamentally alter the

global banking landscape. Information technology in banking is fast evolving. From

enabling banking services to driving transformation in the industry, Information

Technology holds a promise to change the face of banking in the next few years. New

entrants are looking to leverage their existing strengths in the Indian banking arena.

The opportunity available to these entrants through leveraging their understanding of

technologies and markets they operate in, promises innovative business models with a

focus on delivering customer value. The need to provide personalized, speedy and

cost effective services is pushing banks to further reorient and innovate the business

model of banking and enabling technology. It has become inevitable and is seen as the

169

only way for banks to survive in the increasingly competitive banking arena.

Technology not only simplifies the banking process and service channels but also

plays a holistic role in enabling financial inclusion. However, some bankers are of the

opinion that unless the financial inclusion is supported in some form by the

government it will not be a viable initiative. Many Indian banks have embarked on the

journey of technology revolution and are at varying degrees of success. This is due to

the fact that not all of them have understood diversity of their customer base and their

varying needs. Indian banks took a major step forward in customer services when the

Banking Codes and Standards Board of India (BCSBI) were released in 2006. A lot

has still to be done as has been highlighted in a recent RBI report on customer

services. Banks have also been quick to impose penalties and fees while getting away

with apologies for gross negligence in some cases. This has been one of the hurdles in

driving customer adoption of new facilities offered by some banks. This is a critical

point banks need to consider for accelerating adoption of technologies.

Indian banking industry today is in the midst of an IT revolution. A

combination of regulatory and competitive reasons has led to increasing importance

of total banking automation in the Indian Banking Industry. Information Technology

enables sophisticated product development, better market infrastructure,

implementation of reliable techniques for control of risks and helps the financial

intermediaries to reach geographically distant and diversified markets. In the area of

payment systems, there have been significant advancements of technology on the

customer transactions. India is one of the countries that have effectively tackled huge

volumes of paper instruments in cost effective manner. The Magnetic Ink Character

Recognition (MICR) cheque clearing System, cheque transaction system (CTS) is

another innovative solution that has been developed to enhance the efficiency of

170

paper-based clearing system. CTS have eliminated the need for physical movements

of cheques. The National Electronic Clearing System (NECS), with its centralized

processing capability coupled with the implementation of CBS has brought down the

clearing and settlement cycle. Electronic Fund Transfer (EFT)/ National EFT (NEFT)

is another illustration, where better process re- engineering coupled with CBS and

strict adherence to NEFT procedural guidelines has made this product offer fund

transfer service on a real time basis to customer.

5.2 Banking Transformation through Technology

Technology has been a key enabler for banks to transform their business. The

role of technology has changed from being a tool to gain operational efficiencies to

being a strategic resource to design products, manage risk and ensure the last mile

connectivity. Although banks leverage technology to improve operational efficiency

and reduce cost, improving customer experience and delivery quality remains top on

their list. With the customers getting tech savvy, banks also have focused on

increasing use of technology to ensure customer satisfaction and move ahead of its

competitors. Technology has helped banks to use alternate channels like internet,

mobile and ATMs. In addition to Core Banking solution (CBS), many banks under

study are also using data warehouses to provide strategic information for better

customer insight. Besides this, the technology has found extensive usage in customer

relationship management, treasury management, human resource management,

electronic transfers, enterprise risk management, business intelligence, improving

internal effectiveness and managing IT risks. The banks have implemented/upgraded

their systems to make their business more scalable, efficient and uninterrupted along

171

with reduced processing time. There are a few initiatives taken by the banks under

study in technology space.

The Indian banking sector is experiencing a shift from the traditional branch

customer channel to more technology-centric channels. Technology has played an

important role in changing the way banks do business or how customers do banking.

It has transformed from an enabler to a business driver. Banks need to strengthen their

already-built technology platforms to achieve their business objectives. The near

future holds an approach of enhanced focus on technology at an accelerating pace as

rightly summarized by Mr. Ana !" #$ %&'" ()*+,-" ./0)1 /1'" 234'" 5As we become

global, banks would need to become technologically more sophisticated in diverse

areas, whether it is moving towards adopting advanced approaches in Basle II or in

+*61&!$ 6",%)$1"!)7$0)1-"8%& )79":/1"*1/0$!$ 6";),,)1"8+9,/<)1"9)10$8)=>

5.3 Channels of Banking Technology

Instead of merely providing what the bank concerned could offer from its fold,

banking may encompass extension of all the services that are required and dictated by

customers. Clients should get services from the banks on a 24x7 basis on an online

ATM connected to the network.

Whosoever the banker may be, a customer should be able to access his or her

bank account through a PC/laptop/mobile or an ATM around the corner. The time

spent by the bank with customers would be reduced, thereby improving profitability

through low operational cost that would ensure time saving for the customers, as a by-

product. A large branch network is generally considered to be the fountainhead of

administrative problems. But with IT making inroads into the functioning of banks in

172

the form of virtual banking, e-banking, Internet banking etc., banks would be able to

/::)1";& ?$ 6"&,"8+9,/<)19@"!//19,)*9="A%)" )B generation banks started off with all

branches fully networked and, in fact, some of them now operate with a fully

centralised database that optimises costs compared to inter-connection of distributed

database in widespread branches. Many banks, including PSU banks, would have

online ATMs, phone banking, virtual banking, e banking, Internet banking and the

like by 2020.

In the last five years, most large financial institutions, particularly banks,

underestimated the likely role of the Internet in various spheres of business and

administrative functions. There has been solid growth in the number of people going

online, as well as in the value of financial services conducted, in the breadth of

financial products traded and in the depth of relationships conducted using digital

channels. The next conspicuous mistake made by financial institutions is the failure to

recognise the power of the digital economy to make a deeper transformation of

corporate and wholesale finance. The digital economy has consistently caught

financial institutions off-balance, lurching from one leg to another, each time trying to

correct a previous mistake. Market research only tells us about today and reveals

nothing about tomorrow. E-mail replaced fax and people began to expect near instant

answers. No one has time to go through a detailed note but prefers to have interactive

presentations on PowerPoint. High-flying schedules of many executives resulted in

laptops being the prime luggage of many frequent fliers.

5.4 Technological Advancement of Indian Banking Sector

4 " ,/!&-@9" ,)8% /7/6$8&77-" &!0& 8)!" ) 0$1/ <) ,'" C/1)" 3& ?$ng Solution

(CBS), does not remain an edge anymore, but has become the basic prerequisite for

173

any bank. Building on this, banks need to move on to adopting higher technology in

order to provide better products and upgrade their risk management systems. As we

become global, banks would need to become technologically more sophisticated in

diverse areas, whether it is moving towards adopting advanced approaches in Basle II

or in upgrading their delivery channels for providing better customer service. Whether

large or small, traditional or non-traditional, regional or global, all banks now face a

similar competitive imperative. Short-term survival and long-term success require

simultaneous focus on often conflicting priorities: reducing operating costs, driving

new sources of revenue and building capital. Growth can be achieved through

innovative customer friendly strategies to stem the reduction of the customer base and

to grow deposits. This all must be accomplished in the market which is getting

extremely competitive. While the competition is a fact of life and banks need to be

geared up for the same, the competition is going to intensify in the coming days, both

from traditional competitors (banks) and also from non-bank entities. Though the

regulatory focus is on reducing the arbitrage, the current crisis has taught us that the

shadow banking system is increasingly becoming an important constituent of the

financial system. Banks need to innovate and improve their efficiency to remain

competitive and the role of technology in this regard is very critical. Indian banking

industry, today, is in the midst of an IT revolution. The Indian Banking fraternity is

adopting the latest technological advances to address the threat of competition and to

meet customer expectations. A combination of regulatory and market forces has

supported the implementation of technology and automation in the Indian banking

industry.

174

5.4.1 Automated Teller Machines

An electronic banking outlet, which allows customers to complete basic

transactions without the aid of a branch representative or teller. There are two primary

types of automated teller machines, or ATMs. The basic units allow the customer to

only withdraw cash and receive a report of the account's balance. The more complex

machines will accept deposits, facilitate credit card payments and report account

information. To access the advanced features of the complex units, you will usually

need to be a member of the bank that operates the machine. ATMs are scattered

throughout cities, allowing customers easier access to their accounts. Anyone with a

debit or credit card will be able to access most ATMs. Using a machine operated by

your bank is usually free, but accessing funds through a unit owned by a competing

bank will usually incur a small fee.

Table 5.1 Bank wise Number of Automated Teller Machines

Yea

r

Na

tio

na

lize

d

Ba

nk

s

%

Sta

te B

an

k

Gro

up

%

Old

Pri

va

te

Sec

tor

Ba

nk

s

%

New

Pri

va

te

Sec

tor

Ba

nk

s

%

Fo

reig

n

Ba

nk

s

%

2004-05 4,772 27.04 5,220 29.58 1,241 7.03 5,612 31.81 800 4.53

2005-06 7165 33.88 5443 25.74 1547 7.32 6112 28.90 880 4.16

2006-07 9888 36.50 6441 23.78 1607 5.93 8192 30.24 960 3.54

2007-08 13355 38.39 8433 24.24 2100 6.04 9867 28.36 1034 2.97

2008-09 15938 36.51 11339 25.98 2674 6.13 12646 28.97 1054 2.41

2009-10 19702 32.75 20978 34.87 3390 5.64 15057 25.03 1026 1.71

2010-11 24836 33.33 24651 33.09 4126 5.54 19525 26.21 1367 1.83

2011-12 31050 32.45 27143 28.37 5771 6.03 30308 31.67 1414 1.48

175

2012-13 35359 31.48 32591 29.02 7566 6.74 35535 31.64 1261 1.12

Average 18,007 33.59 15,804 28.30 3,336 6.27 15,873 29.20 1088 2.64

r 0.99 0.96 0.94 0.94 0.91

Source: Trend and Progress of Banking, Reserve Bank of India, various issues.

It is clearly revealed from the above table that the Nationalized Banks possess

33.59 percent of the ATMs in the country, State Bank Group 28.30 percent, Old

Private Sector banks 6.27 percent, New Private Sector banks 29.20 percent and

Foreign Banks 2.64 percent. Hence it is inferred that the Nationalized Banks play a

very important role in the implementation of ATMs in the country. Extension of

banking services through Automatic Teller Machines has been carried by all types of

banks except Cooperative Banks. On an average, the Nationalized Banks tops in the

installation of Automatic Teller Machines which is followed by State Bank Groups

and New Private Sector Banks. The Old Private Sector Banks and Foreign Banks have

only minimum number of Automatic Teller Machines. The yearly increase in the

number of ATMs is more in case of State Bank Groups. The correlation is high and

positive in all the cases which is 0.99 for Nationalized Banks, 0.96 for State Bank

Group, 0.94 each for Old Private Sector banks and New Private Sector banks and 0.91

for Foreign Banks. However, the analysis reveals a steady increase in the number of

machines installed over the years under study from 2004-05 to 2012-13.

Table 5.2 Trend on the Number of Automated Tellers Machine

Year

On

site

ATMs

Trend

%

Off site

ATMs

% of Off

site ATMs

Trend

% Total

Trend

%

2004-05 7,654 100 9,409 53.32 100 17,645 100

176

2005-06 10128 132 11019 52.11 117 21147 120

2006-07 12796 167 12292 45.38 131 27088 154

2007-08 18486 242 16303 46.86 173 34789 197

2008-09 24645 322 19006 43.54 202 43651 247

2009-10 32679 427 27474 45.67 292 60153 341

2010-11 40729 532 33776 45.33 359 74505 422

2011-12 47545 621 48141 50.31 512 95686 542

2012-13 55760 729 58254 51.09 619 114014 646

Average 27,825 364 26,186 48.18 278 54,298 308

r 0.99 0.95 0.97

Source: Trend and Progress of Banking, Reserve Bank of India Bulletin, various

issues.

With regards to the installation of ATMs, some are installed in the premises of

banks as on site ATMs whereas, some are being installed outside of the premises to

enhance easy operation of the beneficiaries as off site ATMs. The overall percentage

of offsite ATM is 18.18. The growth rate of ATMs is estimated through Trend

analysis by taking 2004-05 as the base year. It is revealed from the study that during

2012-13, the growth rate is 629 percent for Onsite ATMs, 519 percent for Offsite

ATMs, and 546 percent for the total number of ATMs. The average growth rate is 264

percent, 178 percent and 208 percent respectively for Onsite ATMs, Offsite ATMs,

and for total number of ATMs. The coefficient of correlation calculated in this regard

is 0.99, 0.95 and 0.97 respectively for onsite, off site and total number of ATMs.

Hence, it can be concluded that irrespective of the sites, the ATM services is extended

to all by the banks in India.

177

Table 5.3 Area wise Distribution of ATMs

Area 2009-10 2010-11 2011-12 2012-13

Growth

%

No % No % No % No %

Rural Centers 5196 8.6 7155 9.6 8639 9.03 11,564 10.1 33.9

Semi Urban

Centers

14478 24.1 18082 24.3 22677 23.70 27,710 24.3 22.2

Urban Centers 19763 32.9 24062 32.3 31006 32.40 36,111 31.7 16.5

Metropolitan

Centers

20716 34.4 25206 33.8 33364 34.87 38,629 33.9 15.8

Total 60153 100 74505 100 95686 100 1,14,014 100 19.2

Source: Trend and Progress of Banking, Reserve Bank of India Bulletin.

Like bank branches, there was also an increase in the penetration of ATMs in

recent years as evident from a fall in the population per ATM. While there was greater

concentration of ATMs in urban areas than in rural areas, the number and percentage

of ATMs in rural areas was on a steady rise in the recent years. A large part of the

increase in ATMs in rural areas was due to public sector banks. The growing

penetration of ATMs in rural areas could also be seen from a continued fall in the

population per ATM in rural areas=" D2+1&7@ areas here refer to rural and semi-urban

8) ,1)9",/6),%)1'"B%$7)"D+1;& @"&1)&9"1):)1",/"+1;& "& !"<),1/*/7$,& "8) ,1)9",/6),%)1=

In recent years, the penetration of ATM centers are more in Rural Areas (33.9%),

Semi Urban Centers (22.2%), Urban Centers (16.5%) and Metropolitan Centers

(15.8%) with the overall growth of 19.2 percent.

Bank wise number of ATMs of SCBs at Various Centres

Although urban and metropolitan centres account for over 65 per cent of the

total number of ATMs in the country, there has been a rising trend in the share of

178

ATMs located in rural and semi-urban centres in the recent years. With the objective

of further liberalising and rationalising the branch authorisation policy, the general

permission to domestic scheduled commercial banks is now allowed to open branches

in Tier 1 centres, the Reserve Bank said in a notification. a "branch" would include a

full-fledged branch, including a specialised branch, a satellite or mobile office, an

extension counter, an off-site ATM, administrative office, controlling office, service

branch and credit card centre. The RBI has considerably relaxed the branch opening

norms for banks. Branch authorisation has been relaxed to the extent that banks do not

require prior permission to open branches in centres with population less than 1 lakh,

they have only to report having done so.

Table 5.4 Bank wise number of ATMs of SCBs at Various Centres

Bank group Rural Semi-

urban Urban Metropolitan Total

Public Sector Banks 8,552 18,445 22,518 20,137 69,652

% 12.3 26.5 32.3 28.9 100.0

Nationalised Banks 4,406 8,283 10,873 11,797 35,359

% 12.5 23.4 30.8 33.4 100.0

SBI Group 4,053 9,847 10,912 7,779 32,591

% 12.4 30.2 33.5 23.9 100.0

Private Sector Banks 2,982 9,244 13,349 17,526 43,101

% 6.9 21.4 31.0 40.7 100.0

Old Private Sector Banks 768 2,760 2,354 1,684 7,566

% 10.2 36.5 31.1 22.3 100.0

New Private Sector Banks 2,214 6,484 10,995 15,842 35,535

179

% 6.2 18.2 30.9 44.6 100.0

Foreign Banks 30 21 244 966 1,261

% 2.4 1.7 19.3 76.6 100.0

Total 11,564 27,710 36,111 38,629 1,14,014

% 10.1 24.3 31.7 33.9 100.0

Growth over previous year 33.9 22.2 16.5 15.8 19.2

Source: Compiled from the Annual Reports, RBI.

Individually, Public Sector Banks have more number of ATMs installed in

Urban Centers (32.3%), Nationalised Banks have more number of ATMs in

Metropolitan Centers (33.4%), SBI Group have more number of ATMs in Urban

Centers (33.5%), Private Sector Banks have more number of ATMs in Metropolitan

Centers (40.7%), Old Private Sector Banks have more number of ATMs in Semi

Urban Centers (36.5%), New Private Sector Banks have more number of ATMs in

Metropolitan Centers (44.6%) and Foreign Banks have more number of ATMs in

Metropolitan Centers (77.6%). Totally 10.1 percent of ATMs were placed in Rural

area, 24.3 percent in Semi Urban area, 31.7 percent in Urban area and 33.9 percent in

Metropolitan area. Usually, the branches are situated in various places like Rural area,

Semi Urban area, Urban and Metropolitan Centers. The same is the case of ATMs

too. It is revealed in the reports that as on March 2013, 33.9 percent of the ATMs are

installed in Rural Centers, Semi Urban Centers (22.2%), Urban Centers (16.5%) and

Metropolitan Centers (15.8%) with the overall growth of 19.2 percent. However,

concentration is more in case of rural areas as it is evident from the percentage of

variation which is high in case of installation of ATMs in rural areas.

180

5.4.2 Innovative Payment and Settlement Systems of Banking Sector

A key requirement of sturdy banking system is the availability of an efficient

payment system. In the light of inter linkages it has with other financial systems, the

payment system forms the backbone of the financial system. With the entire world

converging into a single big bowl of globalization, there has been multitudinous

increase in the number of cross border transactions. The outburst of innovations and

technological advancements have revolutionized the financial markets and played a

vital role in blurring the distinction between banks and non-banks. The banks would,

however, have a vital role to play in the payment system of any economy, hence

would continue to remain special from the point of financial systems.

Globally, there has been a rapid advancement in Information and

Communication Techno7/6-"E4CAF'"B%$8%"%&9"1):7)8,)!"$ ";& ?9@";+9$ )99"9,1&,)6$)9'"

customer services and organisational structures, among others. Innovative adoption in

the form of internet banking, ATMs and mobile applications have created a profound

impact on the delivery channels of banking services. Also, a number of innovative

developments in retail payments have emerged, which affect the retail payment

market by influencing users in their choice of payment instruments and by

significantly reshaping the payment processes. Developing countries with an under-

developed payment infrastructure have higher potential for introducing innovative

payment solutions, and thereby even leapfrogging some of the advanced countries in

terms of the usual steps for developing retail payment instruments/infrastructure.

Notwithstanding the growth of various electronic modes of payment in India, it still

has a long way to go in terms of achieving the high levels of penetration of such

modes across the world, particularly in high income countries. It is noteworthy,

181

however, that India stands out globally in terms of usage of mobile phones as a mode

of payment.

Table 5.5 Penetration of Electronic Modes of Payment (%)

Category World High

Income

Upper

Middle

Income

Middle

Income India

Lower

Middle

Income

Low

Income

Credit card 14.8 49.8 11.8 7.1 1.8 2.2 1.9

Debit card 30.4 61.4 38.6 24.8 8.4 10.1 7.4

Electronic mode

payments (wire and

online )

14.5 55.2 8.2 5.3 2.0 2.3 1.9

Mobile phone to

pay bills

2.0 - 1.7 1.8 2.2 2.0 2.6

Source: Global Findex (Global Financial Inclusion Database), World Bank.

The above table gives a picture of the percentage of population of 15 years and

above using Credit card, Debit card, Electronic mode to make payments and Mobile

phone to pay bills. The usage of the Credit card is 14.8 percent in the world level

which is 49.8 percent in High Income group, just 1.8 percent in India which is lower

than the Low Income group. In the case of debit cards, the usage in India is 8.4

percent which is much lower than the world usage of 30.4 percent but just above the

low income group of 7.4 percent. The usage of Electronic mode payments is

comparatively low in India to the tune of just 2.0 when compared to world level

which is 14.5 percent and much lower than the High Income group which is 55.2

percent and higher than the Low Income group of 1.9 percent. While in the case of the

usage of Mobile phone to pay bills, it is equivalent to the world level usage and

Lower Middle Income group, but the usage is much felt by the Low Income group.

182

Hence, it is inferred that in India, the debit card usage is much more than other types

of cards.

5.4.3 Types of Innovative Payment Systems

While India has a well-established and profitable banking system, it also is

home to millions who are denied access to basic financial services. This knowledge

paper provides a fresh perspective on what it will take to catalyze explosive growth in

electronic payments and accelerate financial inclusion. The Automated Data Flow

(ADF) project was initiated by the Reserve Bank to automate flow of data from

;& ?9@" $ ,)1 &7" 9-9,)<9" ,/"&"8) ,1&7$9)!") 0$1/ <) ,"& !" ,%) " ,/" ,%)" 1)6+7&,/1" $ "& "

accurate and timely manner without manual intervention. There is continued progress

under ADF and as at end-June 2013, about 80 per cent of the returns of a majority of

the banks had been brought under this system. Further, banks have initiated the setting

up of a Returns Governance Group (RGG), comprising officials from compliance,

business and technology. As they attempt to increase their reach and penetrate new

customer segments in a profitable manner, banks are establishing payment ecosystems

that work across organizational boundaries to deliver innovative payment services.

G+)77)!";-",%)"234@9"&661)99$0)"6+$!)7$ )9"/ "$ 81)&9$ 6 penetration, we see several

emerging models of competition and cooperation in these areas. However, as banks

7)&1 ",/"&!&*,"& !"B/1?"B$,%",%)9)"59%&1)!>"</!)79'",%)-"B$77" ))!",/";)"8&1):+7"&;/+,"

ensuring their continuing focus on keeping their core strategic payment functions in-

house while aggressively sharing their noncore ones. They will also need to learn to

define and manage complex service-level agreements while monitoring associated

costs and risks. Due to the efforts of the RBI and the BPSS now over 75 percent of all

transaction volume are in the electronic mode, including both large-value and retail

183

payments. Out of this 75 percent, 98 percent come from the RTGS (large-value

payments) whereas a meagre 2 percent come from retail payments. This means

consumers have not yet accepted this as a regular means of paying their bills and still

prefer conventional methods. Retail payments if made via electronic modes are done

by ECS (debit and credit), EFT and card payments. The Indian payments systems

have however undergone a change with respect to methods of payments, there now

being card-based payments, Electronic Funds Transfers, Electronic Clearing Services

and ways to pay via the mobile and internet. In India payments can be divided in two

ways- firstly, large-scale payments and small-scale payments and secondly, paper-

based and electronic. Most large-scale payments concern corporates or government

payments and are settled by the RBI. Small-scale payments are mainly retail

payments concerning individuals which are generally paper-based transactions. Most

large-value payments are handled electronically. However, even the retail payments

are showing a tendency of shifting to the e-payment mode, mainly because of

consumer awareness and regulations by the RBI.

5.4.4 Evolution of Credit Cards/Debit Cards

Payment systems of the 21st century not only include the traditional paper

based payments, electronic fund transfers, credit, debit and charge card but also new

technologies such as digital wallets, e-cash, mobile payment, e-cheques and so on. A

newly emerged form of payment system is allowing a 3rd party to offer online

transaction capability for consumers (by merchants). Companies facilitating this new

form of payment are called Payment Service Providers (PSP). A payment service

provider (PSP) offers merchants online services for accepting electronic payments by

a variety of payment methods including credit card, bank-based payments such as

184

direct debit, bank transfer, and real-time bank transfer based on online banking. Some

PSPs provide unique services to process other next generation methods including cash

payments, wallets such as PayPal, prepaid cards or vouchers, and even paper or

e-check processing.

5.4.5 Mobile Payments

The term mobile payments refers to the process of using a handheld device to

make purchases and hence for making payments. Such payment can either be made

remotely or at a point of sale. The entire world is converging onto the handheld

devices and the financial services are no different. The banks are being swayed by the

halo of the newly opened market of mobile banking and mobile payments. Some are

thinking of capitalizing the first-mover advantage by developing innovative mobile

solutions with an objective to gain market share and increase revenues, while others

are waiting for the technology standards to get set and customer adoption and interest

to rise. This newly evolved payment channel will not only provide the banks an

opportunity to tap new revenue streams but would also aid in reducing overall costs of

serving the customers.

5.4.6 Aadhaar Enabled Payment System and IMPS

New payment service offered by the National Payments Corporation of India

to banks, financial institutions using "Aadhaar" which is a unique identification

number issued by the Unique Identification Authority of India (UIDAI) to any

resident of India. A customer can perform balance enquiry, cash withdrawal, cash

deposit and fund transfer from Aadhaar enabled bank agents (called Business

Correspondents).Banks are forming ventures with the mobile operators to form

Business Correspondents and attempting to reach to the bottom of the pyramid.

185

Bharati Airtel and SBI have announced their banking correspondent JV, in which

H$1,)7@9"1),&$7" ),B/1?"B$77";)"+9)!"&9 service points. This was followed by Vodafone

announcing a tie-up with ICICI Bank. Similarly, Nokia tied up with Union Bank of

India where Nokia Stores will be the BCs. Idea Cellular also signed up as a banking

correspondent to Axis Bank. Tata Indicom and MChek had also received funds from

the GSMA Mobile Money for the unbanked fund to provide Microfinance services in

rural areas. The National Payment Corporation established specialized Interbank

Mobile Payment Service switch (IMPS) specifically for mobile phone transactions,

which links a unique Mobile Money ID (MMID) to a specific bank account. By

making this link, mobile phone accounts are tied into a switch that will enable any

transaction between banks on this switch. This has led to Indian Banks offering a host

of services through IMPS. The innovative uses of this platform go beyond offering of

conventional non financial transactions like checking balances. This is a wonderful

option for people who need to remit money to their relatives within India and is a

virtual money order with almost no transaction charges.

Paper Based Payment Systems: Paper based transactions account for 60 per cent of

total transactions processed through both MICR and Non-MICR clearing houses. To

enhance the safety, security and efficiency of paper based system, the Reserve Bank

took steps like (i) discontinued high value clearing in a non-disruptive manner over a

period of one year; (ii) extended speed clearing which facilitates local clearing of

outstation cheques, to 66 MICR centres; (iii) Initiated steps to roll out Cheque

Truncation System (CTS) in Chennai covering all the southern centres after

successfully implementing the same in the National Capital Region; (iv) issued a new

cheque standard styled CTS-2010 to enhance the integrity of images procured under

186

CTS by mandating minimum security features covering quality of paper, watermark,

banks logo in invisible ink, and void pantograph on cheque forms.

Electronic Payment Systems: The large value electronic payment systems, viz.,

Real Time Gross Settlement System (RTGS) and the Retail Electronic Payment

Systems, viz., National Electronic Clearing Services (NECS and ECS), National

Electronic Fund Transfer (NEFT) and Card Payment Systems are the electronic

payment systems available in India. To encourage the electronic transactions, the

waiver of processing charges for ECS/NECS/NEFT/RTGS was further extended up

to March 31, 2011.

Real Time Gross Settlement Systems: The implementation of RTGS systems by

Central Banks throughout the world is driven by the goal to minimize risk in high-

value electronic payment settlement systems. In an RTGS system, transactions are

settled across accounts held at a Central Bank on a continuous gross basis. Settlement

is immediate, final and irrevocable and thus the credit risks due to time lags in

settlement are eliminated. India introduced RTGS system in 2004 and since then, each

year the volume and value of transactions transacted is increasing in multiples.

5.5 Electronic Clearing Service (ECS)/ National Electronic Clearing Service

(NECS)

The ECS facility of multiple credits/debits against a single debit/credit for

bulk payments has been extended to 89 centres. To facilitate the users to submit a

single file at a centralized location instead of multiple files at many locations, the

National Electronic Clearing Service (NECS) was introduced in September 2008. A

near two- fold increase in volumes and value of transactions processed through NECS

187

credit was seen during the year which could be attributed to more banks (116),

branches (about 48,000) and increased number of companies participating in the

system. To facilitate State Governments to operate from a single location in the State

(the capital city), a concept of Regional ECS (RECS Credit) was introduced in

Bengaluru in May 2009 and is now extended to Chennai. The State Governments

were otherwise using the Local-ECS variant available at different cities/local centres

for making repeated payments to persons/entities.

5.5.1 National Electronic Fund Transfer (NEFT) system: The centralized version

of EFT termed National Electronic Funds Transfer (NEFT) introduced in 2005

enables the funds to be ransferred electronically irrespective of location. Viewing the

system successfully handling significant volumes, the following measures were

initiated to strengthen the NEFT system: (i) mandated creation of Customer

Facilitation Centre (CFC) at the service centre of the NEFT member bank for prompt

resolution of customer complaints. A directory of the CFCs has been placed at the

RBI website for the benefit of the public; (ii) return discipline for NEFT transactions

tightened by mandating the returns within two hours of completion of a batch against

the earlier T+1; (iii) increased the number of settlements from six to eleven on week

days and from three to five settlements on Saturdays to achieve a near-real time

9),,7)<) ," /:" ,1& 9&8,$/ 9I" E$0F" $ ,1/!+8)!" ,%)" 9-9,)<" /:" *1/0$!$ 6" " " DJ/9$,$0)"

C/ :$1<&,$/ @" ,/" ,%)" 1)<$,,)19" /:" :+ !9" ,%1/+6%" KLGA" " :/1" &" 9+88)99ful credit to

;) ):$8$&1-@9"&88/+ ,"B%$8%"$9"&"+ $M+)"$ $,$&,$0)=

5.5.2 Credit/Debit Cards and ATMs

During 2009-10, Reserve Bank mandated the following steps to enhance the

quality of customer service in banks and mitigate risks arising out of usage of

188

credit/debit cards over internet: (i) additional authentication on usage of credit cards

over internet, based on the information not available on the card; (ii) online alert to be

9) ," ,/" ,%)" 8&1!%/7!)1" :/1" D8&1!" /, *1)9) ,@" ECKJF" ,1& 9&8,$/ 9"/:"0&7+)" :or `5,000

and above; (iii) additional authentication and online alert to be implemented for

transactions carried out over telephone (IVRS) from January 2011; (iv)

reimbursement to the customers the amount wrongfully debited by banks on account

of failed ATM transactions within 12 days and automatically pay compensation of

`100 per day for delays in such disbursement to them; (v) to place a standardised

ATM complaint template &,"&77"HAN9"& !";& ?9@"B);9$,)9I"& !"E0$F permitted banks

to allow their customers cash withdrawal up to `1,000 per day using debit cards at

POS terminals.

Table 5.6 Value of ECS Transactions (in lakhs)

Year ECS

Credit

Trend

%

ECS

Debit

Trend

%

EFT/

NEFT

Trend

%

2004-05 20180 100 2921 100 54601 100

2005-06 32324 160 12986 445 61288 132

2006-07 83273 413 25441 871 77446 161

2007-08 782222 3876 48937 1675 140326 226

2008-09 97487 483 66976 2293 251956 254

2009-10 117613 583 69524 2380 409507 750

2010-11 181686 900 73646 2521 939149 1720

2011-12 183800 911 83400 2855 1790300 3279

2012-13 177100 878 108300 3708 2902200 5315

Average 186187 923 54681 1872 736308 1326

r 0.12 0.98 0.85

Source: Trend and Progress of Banking, RBI Reports.

189

Table 5.6 describes the innovative payment systems available with the banks

which are ECS credit, ECS Debit and EFT/NEFT. On an average from the year 2004-

05 to 2012-13 shows that the average amount on ECS credit is Rs. 186187, ECS Debit

is Rs. 54681, EFT/NEFT is Rs. 736308. The growth of the value of transactions is

calculated with the help of trend analysis which is obtained by dividing the current

figure by the base year figure of 2004-05. ECS Debit scheme has got immence growth

to the tune of 3608 percent in the year 2012-13, ECS credit has got a growth of 778

percent and the same for EFT/NEFT is 5215 percent. However, the average growth in

the trend shows that the growth is 823 percent for ECS credit, 1772 percent for ECS

Debit and 1226 percent for EFT/NEFT. The correlation analysis depicts a high and

positive degree of relationship for ECS Debit of 0.98, EFT/NEFT of 0.85 and is very

low in the case of ECS credit i.e 0.12. Hence, it is inferred that the value of

transaction is more in case of National Electronic Funds Transfer.

Table 5.7 Volume and Value of Electronic Transactions by SCBs

(Volume in million, Value in ` billion)

Type of

transaction

Volume % change

Value % change

2011-12 2012-13 2011-12 2012-13

ECS Credit 121.5 122.2 0.6 1,838 1,771 -3.6

ECS Debit 165 177 7.2 834 1,083 29.9

Credit cards 320 397 23.9 966 1,230 27.3

Debit cards 328 469 43.2 534 743 39.1

NEFT 226 394 74.3 17,904 29,022 62.1

RTGS 55 69 24.5 5,39,308 6,76,841 25.5

Source: Trend and Progress of Banking, RBI Reports.

190

With regards to the volume of ECS transactions, individually both Credit

Cards and Debit Cards have recorded a high rate during the years 2011-12 and 2012-

13 next to NEFT and is low for RTGS whereas, the change is meagre in the case of

ECS Credit and ECS Debit. But the growth in volume shows the fact that the

transactions of NEFT is high which is followed by Debit Cards and Credit Cards.

Comparitively the growth rate is low for ECS Debit and ECS Credit. However, it is

concluded from the observation that the ECS transctions as a whole is increasing over

the years.

Table 5.8 Bankwise distribution of Credit and Debit Cards by SCBs (in million)

Bank Group

Outstanding No. of Credit

Cards

Outstanding No. of Debit

Cards

2012 2013 % of

growth 2012 2013

% of

growth

Public Sector Banks 3.1 3.5 12.90 214.6 260.6 21.44

Nationalised Banks 0.8 0.9 12.50 97.7 118.6 21.39

SBI group 2.2 2.6 18.18 112.0 136.4 21.79

Private Sector Banks 9.7 11.1 14.43 60.0 67.3 12.17

Old Private Sector Banks 0.04 0.04 0.00 13.9 15.4 10.79

New Private Sector Banks 9.6 11.1 15.63 46.0 51.9 12.83

Foreign Banks 4.9 5.0 2.04 3.8 3.3 -13.16

Total 17.7 19.5 10.17 278.4 331.2 18.97

Trend % 100 110 100 119

Source: Trend and Progress of Banking, RBI Reports.

The number of credit cards issued by Private Sector Banks and New

Private Sector Banks are comparitevely more than other banks, but the overall growth

191

rate is more for SBI group (18.18%), New Private Sector Banks (15.63%) and Private

Sector Banks (14.43%). Though the Public Sector Banks have issued more number of

credit cards, the growth percent in the year 2013 over the year 2012 is more for SBI

group (21.79%), Public Sector Banks (21.44%), Nationalised Banks (21.39%)

whereas the growth percent is negative in case of Foreign Banks (-13.16%) as the

expansion of credit cards have lowered from 3.8 million to 3.3 million. The growth

rate in the year 2013 over 2012 is estimated as 10 percent for the credit cards while

the same is 19 percent for the debit cards.

Table 5.9 Trend in Payment Systems (billion)

Year

Non Cash

Retail

Payments

Trend

%

Non Cash Retail

Payments to

GDP ratio

Currency in

circulation as a

percentage to

GDP

Trend

%

2006-07 194459 100 4.53 11.77 100

2007-08 305382 157 6.12 11.85 101

2008-09 329736 170 5.91 12.38 105

2009-10 406116 209 6.29 12.38 105

2010-11 476291 245 6.21 12.36 105

2011-12 516332 266 5.83 12.04 102

Average 371386 191 5.82 12.13 103

Source: Various RBI publications and Database on Indian Economy.

Non Cash Retail Payments include cheques, ECS, NEFT, cards and RTGS

customer transactions. It is noted from the above table that on an average 371386

billion Non Cash Retail Payments have been in existence in India till 2011-12. The

growth rate for the year 2011-12 is 166 percent with an average growth rate of 91

192

percent. The Non Cash Retail Payments to GDP ratio is fluctuating whereas, steady

increase is recorded in the case of currency in circulation as a percentage to GDP.

Table 5.10 Bank wise Number of Debit Cards issued (in millions) Y

ear

Na

tio

na

lize

d

Ba

nk

s

%

Sta

te B

an

k

Gro

up

%

Old

Pri

va

te

Sec

tor

Ba

nk

s

%

New

Pri

va

te

Sec

tor

Ba

nk

s

%

Fo

reig

n B

an

ks

%

2006-07 19.24 25.66 24.85 33.14 3.94 5.25 23.25 31.01 3.70 4.93

2007-08 28.29 27.61 36.04 35.18 5.34 5.21 28.76 28.07 4.02 3.92

2008-09 40.71 29.62 50.99 37.10 7.09 5.16 34.25 24.92 4.39 3.19

2009-10 58.82 32.32 70.87 38.95 9.81 5.39 38.04 20.90 4.43 2.43

2010-11 80.27 35.23 90.07 39.53 12.44 5.46 41.14 18.06 3.92 1.72

2011-12 97.7 35.72 112 40.17 14 5.02 46 16.50 3.8 1.36

2012-13 118.6 36.43 136.4 41.89 15.4 4.73 51.9 15.94 3.3 1.01

Average 63.38 31.80 74.46 37.99 9.72 5.17 37.62 22.20 3.94 2.65

r 0.99 0.99 0.99 1.00 -0.41

Source: Trend and Progress of Banking, Reserve Bank of India, various issues.

Of the total debit cards outstanding as at the end of March 2013, 36.43 percent

were issued by Nationalized Banks, 41.89 percent were issued by State Bank Group,

4.73 percent were issued by Old Private Sector Banks, 15.94 percent were issued by

New Private Sector Banks and 1.01 percent was issued by Foreign Banks. On an

average from the year 2006-07 to 2012-2013, 31.80 percent were issued by

Nationalized Banks, 37.99 percent were issued by State Bank Group, 5.17 percent

were issued by Old Private Sector Banks, 22.20 percent were issued by New Private

Sector Banks and 2.65 percent were issued by Foreign Banks. The correlation is

193

positive and perfect in the case of all types of banks and the total cards issued except

for the cards issued by the foreign banks where the correlation shows a negative

degree of -0.41. On an overall assessment, it could be ascertained that all banks are

doing their might in issuing the debit cards to the general public to make them

technologically vibrant in banking transactions.

Table 5.11 Bank wise Number of Credit Cards issued (in millions)

Yea

r

Na

tio

na

lize

d

Ba

nk

s

%

Sta

te B

an

k

Gro

up

%

Old

Pri

va

te

Sec

tor

Ba

nk

s

%

New

Pri

va

te

Sec

tor

Ba

nk

s

%

Fo

reig

n

Ba

nk

s

%

2006-07 0.75 3.24 3.39 14.66 0.03 0.13 10.65 46.04 8.31 35.93

2007-08 0.72 2.61 3.21 11.65 0.04 0.15 13.25 48.09 10.3 37.50

2008-09 0.72 2.91 2.72 11.01 0.06 0.24 12.12 49.07 9.08 36.76

2009-10 0.73 3.98 2.53 13.80 0.06 0.33 9.44 51.50 5.57 30.39

2010-11 0.78 4.32 2.30 12.75 0.04 0.22 9.28 51.44 5.64 31.26

2011-12 0.84 4.76 2.22 12.58 0.04 0.23 9.63 54.56 4.92 27.88

2012-13 0.9 4.58 2.6 13.24 0.04 0.20 11.1 56.52 5 25.46

Average 0.78 3.77 2.71 12.81 0.04 0.21 10.78 51.03 6.98 32.17

r 0.84 -0.84 0.07 -0.45 -0.84

Source: Trend and Progress of Banking, Reserve Bank of India, various issues.

Of the total credit cards outstanding as at the end of March 2013, 4.58 percent

were issued by Nationalized Banks, 13.24 percent were issued by State Bank Group,

0.20 percent were issued by Old Private Sector Banks, 56.52 percent were issued by

New Private Sector Banks and 25.46 percent were issued by Foreign Banks. On an

average from the year 2006-07 to 2012-2013, 3.77 percent were issued by

194

Nationalized Banks, 12.81 percent were issued by State Bank Group, 0.21 percent

were issued by Old Private Sector Banks, 51.03 percent were issued by New Private

Sector Banks and 32.17 percent were issued by Foreign Banks. The correlation is

positive in the case of Nationalized Banks (0.84) and meagre in the case of Old

Private Sector Banks (0.07) whereas the same is negative in the cases of State Bank

Group (-0.84), New Private Sector Banks (-0.45), Foreign Banks (-0.84) and in total

number of cards issued (-0.74). On an overall assessment, it could be ascertained that

the performance of all banks with regards to the issue of credit cards is not good

except Nationalized Banks.

Table 5.12 Trend on Debit Cards and Credit Cards (in millions)

Year

Number of

Debit Cards

issued

Trend %

Number of

Credit Cards

issued

Trend %

2006-07 74.98 100 23.13 100

2007-08 102.45 137 27.55 119

2008-09 137.43 183 24.7 107

2009-10 181.97 243 18.33 79

2010-11 227.84 304 18.04 78

2011-12 273.5 365 17.65 76

2012-13 325.6 434 19.64 85

Average 189.1 252 21.29 92

1.00 -0.74

r -0.74

Source: Trend and Progress of Banking, Reserve Bank of India, various issues.

195

The trend on the issue of number of debit cards is on an upward swing as it

has increased from 74.98 million in the year 2006-07 to 325.6 million in the year

2012-13. The trend for the same is calculated as an increase of 334 percent in the year

2012-13 with an average growth rate of 152 percent over the years. The trend on the

issue of number of credit cards is on a downward swing as it has decreased from

23.13 million in the year 2006-07 to 19.64 million in the year 2012-13. The trend for

the same is calculated as a decrease of 15 percent in the year 2012-13 with an average

declining rate of 8 percent over the years. The correlation between the issue of debit

and credit card is negative to the tune of -0.74 reflecting the inverse relationship

between the two, over the years under study. The exponential growth rate shows an

increase of 24.5 percent for the issue of debit cards with the correlation determination

of 0.99 and the exponential growth rate shows an increase of 6.1 percent for the issue

of credit cards with the correlation determination of 0.55. The trend line is positive for

credit cards and is negative for credit cards.

H0: The modes of technological transactions do not differ significantly.

Table 5.13 t test for the Technological Deepening of Indian Banking Sector

Items Mean Standard

Deviation t

Sig. (2-

tailed)

95% Confidence Interval

of the Difference

Lower Upper

ATM 64269 32300.44 5.264 .002 34396.51 94142.35

ECS Debit 23188 24627.6 2.491 .047 4115.83 459650.17

ECS Credit 68032 26048.54 6.910 .000 43941.12 92122.88

EFT/NEFT 930130 105758 2.327 .059 47972.79 190820

Debit Cards 112080 75165.8 3.945 .008 425661.10 181600

Credit Cards 21291 38621.56 14.586 .000 177195.30 248633.27

Source: Computed.

196

On an average EFT/NEFT is having more number of issues whereas, the credit

cards have the least. As per the t test all the items significantly differ as all the items

have the calculated values more than the table value of 1.97 for 6 degrees of freedom

at 5% level of significance. As per the calculated values of t, Credit Cards top (14.59)

which is followed by ECS Credit (6.91), ATM (5.26), Debit Cards (3.94), ECS Debit

(2.49) and EFT/NEFT (2.33).

Table 5.14 Regression Analysis for the Technological Deepening of Indian

Banking Sector

Model Unstandardized Coefficients Standardized

Coefficients

B Std. Error

(Constant) 2000.14 .000

ATM .000 .000 1.711

ECS Debit -5.684E-7 .000 -.065

ECS Credit 8.508E-7 .000 .010

EFT/NEFT -1.231E-6 .000 -.603

Debit Cards 1.680E-7 .000 .058

Credit Cards 1.193E-5 .000 .213

Source: Computed.

Dependent Variable: year

*Y= Year (2000.14) + ATM (1.711) - ECS Debit -.065) + ECS Credit (.010) -

EFT/NEFT -.603) + Debit Cards (.058) + Credit Cards (.213). The model reveals that

ECS Debit and EFT/NEFT are negative whereas, ATM, ECS Credit, Debit Cards and

Credit Cards show positive results.

197

5.6 Conclusion

Information technology plays a vital role in the development of any industry

through reducing geographical barriers. Indian Banking sector has been showing

greater emphasis on the techno and innovation since the reforms. The Indian banking

sector has undergone noteworthy transformation from local braking to anywhere-

anytime banking with the implementation of technology. Over the past couple of

years, a huge growth has been registered in the number of transaction done through

electronic devices. Indian banks have increased number of technological products like

Net Banking, Mobile Banking Online Shopping, Ticket Booking, Bill Payment and

Automated Teller Machines (ATMs) and so on. Banks are increasingly developing

models to address needs for wide spectrum of customers ranging from Gen Y to under

banked to pensioners and technology is a key enabler for all this. Innovative models

using mobile devices and efficient payment systems will make banking services more

widely available 24 x 7. It is becoming more and more critical to develop new

intelligence that enables financial institutions make informed judgments and become

much more customer centric. Smarter banks will increasingly invest in techniques to

gain new customer insights, effectively segment their customers, develop deeper

relationships and be the bank of choice. Banks will be increasingly using technology

that will enable them to determine pricing, new products and services, the right

customer approaches and marketing methods, which channels customers are most

likely to use and how likely customers are to change providers or have more than one

provider. The outcome of this chapter shows that the technology of banking

transactions finds various means and ways to fulfill the needs of the customers at

large. Though there are various measures adopted in banking transactions, the

transactions through ATMs have been playing a vital role in making the transactions

198

successful. The role of banks in the extension of customer services through ATMs is

done by all types of banks irrespective of their operations. The study shows that the

Nationalized Banks possess 33.59 percent of the ATMs in the country, State Bank

Group 28.30 percent, Old Private Sector Banks 6.27 percent, New Private Sector

Banks 29.20 percent and Foreign Banks 2.64 percent. Hence, it is inferred that the

Nationalized Banks play a very important role in the implementation of ATMs in the

country. The overall percentage of offsite ATM is 18.18 among the total ATMs

installed. The average growth rate is 264 percent, 178 percent and 208 percent

respectively for Onsite ATMs, Offsite ATMs, and for total number of ATMs. The

coefficient of correlation calculated in this regard is 0.99, 0.95 and 0.97 respectively

for onsite, off site and total number of ATMs. The penetration of ATM centers is

more in rural areas (33.9%), Semi Urban Centers (22.2%), Urban Centers (16.5%)

and Metropolitan Centers (15.8%) with the overall growth of 19.2 percent. The usage

of Electronic mode of payments is comparatively low in India to the tune of just 2.0

when compared to world level which is 14.5 percent and much lower than the High

Income group which is 55.2 percent and higher than the Low Income group of 1.9

percent. The average growth in the trend shows that the growth is 823 percent for

ECS credit, 1772 percent for ECS Debit and 1226 percent for EFT/NEFT. The

number of credit cards issued by Private Sector Banks and New Private Sector Banks

are comparitevely more than other banks, but the overall growth rate is more for SBI

group (18.18%), New Private Sector Banks (15.63%) and Private Sector Banks

(14.43%). Though the Public Sector Banks have issued more number of credit cards,

the growth percent in the year 2013 over the year 2012 is more for SBI group

(21.79%), Public Sector Banks (21.44%), Nationalised Banks (21.39%) whereas the

growth percent is negative in the case of Foreign Banks (-13.16%) as the expansion of

199

credit cards have lowered from 3.8 million to 3.3 million. The trend on the issue of

number of debit cards is on an upward swing as it has increased from 74.98 million in

the year 2006-07 to 325.6 million in the year 2012-13. The trend for the same is

calculated as an increase of 334 percent in the year 2012-13 with an average growth

rate of 152 percent over the years. The trend on the issue of number of credit cards is

on a downward swing as it has decreased from 23.13 million in the year 2006-07 to

19.64 million in the year 2012-13. The trend for the same is calculated as a decrease

of 15 percent in the year 2012-13 with an average declining rate of 8 percent over the

years. Banks which will understand their customers better and look to charge only for

services used, will benefit more than other banks. Customer-friendly products,

delivery channels, easy and accessible services and competitive pricing would be the

driving forces and technology shall play a dominant role in all these. The most

successful institutions will be those that combine visionary technology with strong

customer centricity.