Reduced margins, intense competition, sweeping reforms, rapid technology changes. That is the Indian banking sector for you. While the techno-savvy, private domestic banks hog the limelight, the basic tenet of survival for our ailing PSU banks is this: A robust communications infrastructure.

The Oxford English dictionary defines the bank as an entity which uses money deposited by customers for investment, pays it out when required, makes loans at interest, exchanges currency, etc. But what would you call an entity, which apart from basic financial services, offers you mobility, financial advice, pays your utility bills and lets you go on a shopping spree without walking into a mall. Probably this is what makes it increasingly difficult to define what a bank is these days.

Welcome to the brave new world of banking and financial services. Probably, no other industry is going through such a turbulent albeit interesting phase of re-invention – riding piggyback on technology. Banking today is not about where the branch is but being where the customer is. Perhaps, to use the cliché, this is the most discernible paradigm shift taking place in the Indian banking sector. And there are many terms to describe this radical change: universal banking, next generation banking, etc. But whatever name you choose to call it, this all means only one thing: deliver cost effective and better services to the customer in the way he wants, where he wants it and how he wants it. Banks in the country, especially in the public sector, have just woken up from a deep slumber and are getting their act together to meet increased customer expectations and fine-tuning their communication infrastructure.

For the traditional financial service providers, who are reeling under technology shifts and a balance of power from intermediaries to consumers, the message is loud and clear: connectivity is the name of the game.

Can of Worms

Our banking system is faced with several difficult challenges—the high cost of doing business, level of non-performing assets and a poor level of customer satisfaction, to name a few. On the other hand, there has been a phenomenal growth in the volume of capital flow across the nation and integration of financial markets across the globe as a fall out. Indian banks are no longer insulated from international development and international capital movements. The same holds true in the case of technology.

What came as a rude awakening to the Indian banks was the introduction of electronic technology for transactions, settlement of accounts, bookkeeping and all other related functions. This was where many behemoths in the public sector were caught napping and whether they like it or not, all banking transactions are on the way to being electronic. Those who can’t catch up with the times are bound to be the losers.

In a way, the RBI set the ball rolling by spearheading technological change as part of its reform process in the early 90s. The banking industry responded to the clarion call by accelerating the pace of computerization among branches, controlling offices and head offices. The thrust was on commercially important centers, which account for sixty five percent of banking business in terms of value. Probably that explains why a staggering eighty percent of PSU bank branches in the country are still non-connected and non-networked.