Technological Innovation in Indian Banking Sector – Use of It Products

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Now coming down to specifics, why do we say that the Indian Banking Industry is probably in one of those interesting times that probably it has never or will never see again? We say so because competition inadvertently brings out the best in all possible aspects and circumstances. And the competition that is being unleashed today has never been seen in the past, at least in the Indian Banking Industry. Now that the Indian Public Sector Banks don’t feel the need to hold on to government’s crutches, the sector is slowly but steadily attracting competition. As if the entry of new and energetic private sector banks was not enough, even the multinational banks are leaving no stone unturned to ride the Indian growth bandwagon.

With the advent of liberalization policy and RBI’s easy norms several private and foreign banks have entered in Indian

Private banking industry has changed in a very basic way, driven by many key factors such as: free competition systems, modern developments in information technology (in particular, developments of the internet), and changing demographics. Private banks now operate in an environment shaped by increasing and shifting regulations, and in markets influenced by the uncontrolled situations of the world economy and geopolitical issues.

India’s banking industry is largely fragmented with more than half of the commercial banks being state-run entities. It has seen one of the biggest mergers of all time in the recent past with Kotak Mahindra taking over ING Vysya. While the Indian banking sector is still facing tough times, Kotak Mahindra’s merger with ING Vysya will help the former to expand their presence across India.

The Banking sector in India has always been one of the most preferred avenues of employment. In the current decade, this has emerged as a resurgent sector in the Indian economy. As per the McKinsey report ‘India Banking 2010’, the banking sector index has grown at a compounded annual rate of over 51 per cent since the year 2001, as compared to a 27 per cent growth in the market index during the same period. It is

The Banking Industry plays an important role in the economic development of the country and is the most dominant segment of the financial sector. Banks encourage economic growth by allocating savings to investments that have potential to yield higher returns. They perform their basic role of accepting deposits and lending funds from these deposits. Banks securely save the money of depositors, provide interest to them, and lend the funds raised from depositors to consumers. They are in a wide range of sizes, from large Global Banks to Regional and Community Banks. We can study the structure of an organized banking industry by taking an example of Indian banking industry:

The industry that I have chosen to analyze for this paper in the banking industry. The companies which I have selected to analyze are Bank of America & Southeastern Bank. Bank of America will represent as the example for the company who has acquired and merged with other banks, and Fresno Southeastern Bank will act as the example for the bank who has never merged with a larger bank in any form or has been acquired. Both these banks offer similar products to their customers, for checking and savings accounts to home and car loans. They both offer investment products as well. Bank of America has a lot more products on a larger scale due to the size of their company, and the mergers they have made over their history. They operate worldwide

Banks are the most significant players in the Indian financial market. They are the biggest purveyors of credit, and they also attract most of the savings from the population. Dominated by public sector, the banking industry has so far acted as an efficient partner in the growth and the development of the country. Driven by the socialist ideologies and the welfare state concept, public sector banks have long been the supporters of agriculture and other priority sectors. They act as crucial channels of the government in its efforts to ensure equitable economic development.

By international standards, however, there is still much scope for retail banking in India. After all, retail loans constitute less than seven per cent of GDP in India vis-à-vis about 35 per cent for other Asian economies — South Korea (55 per cent), Taiwan (52 per cent), Malaysia (33 per cent) and Thailand (18 per cent). As retail banking in India is still growing from modest base, there is a likelihood that the growth numbers seem to get somewhat exaggerated. One, thus, has to exercise caution is interpreting the growth of retail banking in India.

The study was carried out only as per the requirements for the award of Masters of Business Administration, Bangalore university

PGDM POST GRADUATE DIPLOMA IN MANAGEMENT (2009-2011) Submitted To: Mrs. Mukta Keskar Submitted By: Jyoti Mishra

Revised and Updated by Sushama Khanna, Dean and Director (Outreach), UPHR-LABS, EMPI Business School, New Delhi.

In the partial fulfillment of the requirement of Master of Business Administration (M.B.A.) Program (2002-2004) Hemchandracharya North Gujarat University, Patan.

This case was written by P. Indu, under the direction of Vivek Gupta, IBS Center for Management Research. It was compiled