Chairman of Prime Minister’s Economic Advisory Council C Rangarajan on Monday said the country's banking sector had a long way to go in achieving standards and efficiencies through effective use of technology platforms in addition to financial inclusion.
Delivering the foundation day lecture of the Institute for Development and Research in Banking Technology (IDRBT) on the role of technology in development of banking here on Monday, Rangarajan said financial inclusion still remained one of the biggest challenges though technology provided the scope for affordable financial inclusion in the country.
“The best way offered for inclusive banking would be through twin-routes - mobile banking through bank-led model and banking correspondent (BC) model. However, I admit at this point that the progress of the BC model is yet to take off,” he said. He cited lower remuneration as one of the reasons for low penetration of this model.
He also asked the banks to piggyback on the mobile telephony platform for achieving financial inclusion.
Commenting on the safety and security aspects of banking transactions in the light of cyber crimes, he said there was a need for a secured network for transmission of information for the banking system as the government was planning to implement an e-payment gateway for a single point distribution of all the payments.
Indicating some of the areas of improvement for further adoption of technology in banking, Rangarajan said it was time banks and financial institutions started looking at common data standards and protocols so as to make the information system truly interoperable and to facilitate easy data flow.
Asking the banks to consolidate the accumulated IT infrastructure to help improve efficiency while minimising the costs, he also said banks should develop in-house IT skills.
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“Banks have become increasingly dependent on third party IT service providers for all technology needs, to the extent that in many cases service providers are in control of the banks technology agenda. This is an undesirable development and it is critical that banks develop strong in-house competency on how to frame the technology agenda and then hold IT vendors accountable to deliver to that agenda,” he said.
With the use of information technology, the cost of intermediation of the scheduled commercial banks has come down significantly from 2.59 per cent in 1991-92 to 1.71 per cent in 2010-11. Similarly cost-income ratio has declined from 55.3 per cent to 45.21 per cent during the same period, according to Rangarajan.