Banking Industry in India

As per the Reserve Bank of India (RBI), India’s banking sector is sufficiently capitalized and well-
regulated. The financial and economic conditions in the country are far superior to any other country
in the world. Credit, market and liquidity risk studies suggest that Indian banks are generally
resilient and have withstood the global downturn well. Indian banking industry has recently
witnessed the roll out of innovative banking models like payments and small finance banks. RBI’s
new measures may go a long way in helping the restructuring of the domestic banking industry. The
digital payments system in India has evolved the most among 25 countries with India’s Immediate
Payment Service (IMPS) being the only system at level 5 in the Faster Payments Innovation Index
(FPII).

The Indian banking system consists of 27 public sector banks, 21 private sector banks, 49 foreign
banks, 56 regional rural banks, 1,562 urban cooperative banks and 94,384 rural cooperative banks,
in addition to cooperative credit institutions. In FY07-18, total lending increased at a CAGR of
10.94 per cent and total deposits increased at a CAGR of 11.66 per cent. India’s retail credit market
is the fourth largest in the emerging countries. It increased to US$ 281 billion on December 2017
from US$ 181 billion on December 2014.
 INNOVATIONS BY DIFFERENT BANKS

Some of the innovative products and services introduced by different banks are:

1. ICICI Securities’ “Track & Act” Robo Advisory:

ICICI Securities Ltd has launched its robo advisory platform called Track and Act (T&A). A robo
adviser suggests a financial plan based on an algorithm or programme. The T&A platform will make
a financial plan for you, and then help you track it throughout the year using its smart robotic
tools.Once you decide to enrol for the financial planning services on www.icicidirect.com, one of
the advisers of the firm will get in touch with you offline. She will collect your details, do the
paperwork, help you get onboard with your existing investments, and then suggest a financial plan,
taking into account your goals, income, expenses and so on. After that, the robo adviser takes over,
and you can then control your investments and financial plan online

2. HSBC Bank Introduces SIP MODEL:

HSBC bank had came up with an easy way of banking for the customer known as SIP model. SIPs
are small and disciplined investments in mutual funds that can be executed through HSBC on a
monthly basis. The following are the benefits for SIP model provided by the bank-
 Power of compounding
 Repeated regular investments compound the benefits
 Disciplined approach
 Investments can be made at regular intervals (monthly or quarterly)
 Sentiment-driven purchases are avoided
 Convenience
  Small amounts can be invested (monthly or quarterly)
 Facility of directly debiting your HSBC Bank Account

3. CITY UNION BANK (CUB) WALLET:

CUB Wallet can be used to send money to other CUB Wallet accounts or other CUB accounts and
also to other bank accounts. Most important features of CUB wallet are:
 Wallet can be used by both CUB customers and Non-CUB Customers.
 KYC customers are those opened wallet account using CUB account number and NON-
KYC customers are those opened using Aadhar number
 Load money can be done through CUB Net / CUB Mobile or through net banking or Debit
Card of any other bank.
 The Sum of credits of a particular month in the wallet account or the balance in the account
at any point should not exceed Rs. 1.00 Lakh for KYC Customers and Rs. 10,000/- for Non-
KYC Customers
 Wallet can be used to Pay all utility bills, broadband / Telephone Bills, Mobile Post-Paid
Bills, Mobile recharge, DTH recharge, Insurance premium, Credit card bills, Charity
 donations, Gas bills and Electricity bills
 Create favorites for one touch transactions
 Wallet works with any Android Phone and can also view your wallet statements

4. Partnering With E-wallets:

Riding on the back of cashless economy initiatives, most of the top banks in the country have
partnered with or acquired start-ups, to adapt their e- wallets and make them accessible to
customers. While HDFC has partnered with the likes of PayZapp, a complete payment solutions app
and Chillr, a multi-bank mobile payments app, others banks like Yes Bank have partnered with
FreeCharge and PhonePe. The alliance gives the banks easy access to technology while also
providing start-ups an access to the banks’ database.

5. Humanoid Robot IRA (Intelligent Robotic Assistant):

HDFC Bank has recently launched the first "Humanoid" in the domestic banking space. The human-
sized robot IRA, will be deployed at a city branch very soon. The robot will act as an assistant to
augment existing services that are being offered in the branches.
 6. Chatbot:

Chatbot seems to be the primary AI use-case at Indian banks today. ICICI Bank launched its AI-
based Chatbot, named iPal, it involves FAQs, financial transactions, wherein you can make fund transfers
from person-to-person, pay your bills or recharge your mobile phone bills using queries. HDFC Bank
has developed an AI-based chatbot, “Eva” “With the launch of Eva, the bank’s customers can get
information on its products and services instantaneously. It removes the need to search, browse or
call. Going forward, Eva would be able to handle real banking transactions as well.

7. Smarter Services For Faster Growth:

YES Bank has rolled out an initiative like SIMse Pay, a service that allows a consumer to transfer
money, pay bills and use other bank services, without access to the internet. Similarly, ICICI Bank’s
Pocket app eliminates the need to visit a bank and targets the mobile-first generation. With over 5
million downloads on Google play store, the app creates instant accounts for consumers. SBI’s
multi-option payment device: SBI has about 700,000 PoS machines deployed in the country, and
MOPAD would be rolled out across every terminal in a phased manner. New PoS machines will
come with MOPAD embedded in them, the bank said MOPAD is an extension of SBI’s ‘Cash Ki
Aadat Badlo’ initiative that is in line with the Modi government’s digital payments push since
demonetisation in 2016. It works “towards a less-cash economy” SBI said in a statement. Customers
get a charge-slip as proof of payment on MOPAD.
 8. Electronic Funds Transfer:

Electronic banking and Internet banking, also known as electronic fund transfer (EFT), uses
computer and electronic technology as a substitute for cheques and other paper instruments. They
refer to any transfer of funds that is initiated by electronic such as an electronic terminal, computer,
telephone, ATM magnetic tape, etc. EFTs are initiated through devices like cards or codes that allow
account holders to authorize payments and access their account.
RBI EFT is a Scheme introduced by Reserve Bank of India (RBI) to help banks those who are
offering their customers money transfer service from account to account of any bank branch to any
other bank branch in places where EFT services are offered. Funds transfer is possible from any
branch of these banks at the EFT centres to other branch of any bank at the EFT centres both inter-
city and intra-city.
The significance of EFT can be understood from the below points: -
  It is easy and convenient.
  It is fast and secure.
  Reduced administrative costs.
  Increased efficiency.
  It is efficient and less expensive than paper cheque payments and collections.

9. Electronic Data Interchange (EDI):

Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents in

a standard electronic format between business partners. EDI (Electronic Data Interchange) processes
ensure secure communication with central banks when transmitting accounting data and statistical
reports.
By moving from a paper-based exchange of business document to one that is electronic, businesses
enjoy major benefits such as reduced cost, increased processing speed, reduced errors and improved
relationships with business partners.

The significance of EDI can be understood from the below points

  Automation of multiple payments (e.g. payroll)
  Efficient cash management via frequent account reconciliation
  Electronic Bill Presentment (EBPP) in online banking systems
  Exchange of financial information between banks
  Minimizes error risk
  Highly secure processes
  Minimizes the need for manual intervention
10. Payment banks:

Payments banks is an new model of banks conceptualized by the Reserve Bank of India (RBI).
These banks can accept a restricted deposit, which is currently limited to ₹100,000 per customer and
may be increased further. These banks cannot issue loans and credit cards. Both current account and
savings accounts can be operated by such banks. Payments banks can issue ATM cards or debit
cards and provide online or mobile banking.
The significance of Payments Bank can be understood from the below points:-
  Zero Balance Account
  Higher Interest Rate
  Convenience
  Safe and Secure
  Cashback and Discount Offers
 11. UPI

Unified Payments Interface (UPI) is a system that powers multiple bank accounts into a single
mobile application (of any participating bank), merging several banking features, seamless fund
routing & merchant payments into one hood. It also caters to the “Peer to Peer” collect request
which can be scheduled and paid as per requirement and convenience. Unified Payments Interface
(UPI) is an instant real-time payment system developed by National Payments Corporation of India
facilitating inter-bank transactions. The interface is regulated by the Reserve Bank of India and
works by instantly transferring funds between two bank accounts on a mobile platform.

The significance of UPI can be understood from the below points: -

  It is a fast, hassle-free and the cheapest way of money transfer, which you can do from anywhere
and at any time.
  It requires just a single click authentication that involves only two factors.
  It requires only the UPI ID for carrying out a transaction.
  One does not need to share, store, or remember any sensitive information related to the
account.
  You can easily link all your accounts to this one ID on the UPI app.
  One can also get payments from clients through this app’s collect payment option.
  It allows funds settlement in real-time.
  Any complaints that you have can be raised directly from the UPI app.
 12. Mobile wallet
Mobile Wallet is a type of payment service through which individuals can receive and send money
by mobile devices. It is a form of an e-commerce model designed for the mobile devices for the
convenience and ease of access. Mobile Wallet is also known as Mobile Money or Mobile Money
Transfer.
It is the digital version of the wallet that you can carry in your pocket. It stores payment details like
credit or debit card and cash balances which can be used to make payments.
The significance of mobile wallets can be understood from the below points: -
  They may help to reduce fraud.
  They can save you time
  You can trim your wallet contents.
  You can shop online on the go.
  You still receive rewards.

13. E- KYC :
The Reserve Bank of India, the apex bank of the nation has made KYC compulsory for all banks
and financial institutions in 2004. KYC is of primary importance as not only an identity proof but
also a safeguard against money launderers or other criminal activities.
Aadhaar based e-KYC (electronic-Know Your Customer) offered by the Unique Identification
Authority of India can be used voluntarily by Aadhaar card holders as a means to authenticate and
establish their identity, if they so desire/consent. The Electronic Know your customer or e KYC is
the way of resident authentication which allows the residents to submit it as an address proof
electronically to banking companies. Aadhaar based e-KYC provides this information electronically,
negating the need for physical document submission.
Under the existing system, the UIDAI has made provision for both Aadhaar Authentication and
offline verification/ paperless-offline e-KYC.
The significance of E-KYC can be understood from the below points:-
  Safe and secure method to share confidential information with relevant KUA’s.
  Online e-KYC is an instant authenticated verification, thereby speeding up the KYC
process.
  Being online, there is a reduction in costs associated with paper-based verification.
  Since the information is shared through the UIDAI’s internal encrypted software, privacy
and security of the data is assured.

14. CDM :

The Cash Deposit Machine, better known as CDM is an ATM like machine that allows you to
deposit cash directly into your account using the ATM cum debit card. You can use this machine to
instantly credit your account without visiting the branch. The transaction receipt also gives you your
updated account balance.
The significance of CDM can be understood from the below points:-
  Instant credit of cash deposit into your own account
  Quick and convenient way to deposit cash
  Paperless transaction
  The per transaction limit is Rs.49,900/- for Cardless deposit and through Debit Cards Rs.
2.00 lacs (subject to account has PAN number).
  You can also deposit cash in your PPF, RD and Loan accounts
 15. Point of Sale Terminal

A point-of-sale (POS) terminal is a hardware system for processing card payments at retail
locations. Software to read magnetic strips of credit and debit cards is embedded in the hardware.
Portable devices (i.e., not terminals anchored to a counter), either proprietary or third-party, as well
as contactless capabilities for emerging forms of mobile payments, represent the next generation of
POS systems.
The significance of Point of Sale (POS) Systems can be understood from the below points -
  Increased Efficiency
  Ease of Use
  Expanded Payment Capabilities
  Greater Accuracy
  Detailed Receipts
  Faster Service
 Conclusion

To be able to compete and grow where margins are thin, competition is fierce, regulations are
changing and technology has an increasing impact, financial institutions must place innovation as a
top priority. Organizational cultures must be shifted to support innovations that will impact
increasingly outdated business models. Banks and credit unions must also anticipate consumer
needs and innovate in ways that will prioritize the most effective mix of capabilities, processes and
people. Thus, innovation is required in every sector to grow and sustain in this competitive world.

Banking is becoming more convenient thanks to the Internet, and the future of the banking sector is
growing increasingly digital. India has leapfrogged into the era of innovation in banking by adopting
the latest in technology. Today’s digital age and hyper-connected environment requires banks to re-
imagine their business continuously, and Indian banks are making great strides when it comes to
true digital transformation. Data is the new science and driving force for every industry’s growth,
financial institutions being one of it. Banking industry has incorporated the traits that were once
limited just to Fintech segment like data and analytics. Over the last couple of years, the spurt of big
data has opened up enormous opportunities for the banking sector to grow. Data is seen as the most
valuable asset to successfully stabilize the overall evolving banking environment.

Overall, the banking sector has long been at the forefront of innovation. From making payments an
easier task to walking towards a cashless economy — thanks to demonetization — banks have been
opening the doors to innovation. Partnering and acquiring start-ups have become a popular method
of creating an alliance with the sector. Corporates are also setting up tech labs to foster innovation
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bank- launches-robo-advisory-app-for-mutual-fund-investment/story/298007.html
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