Indian Banking Sector is fast making a transition into Next Gen Banking Technology. Banks are devising products to take care of the customers’ life cycle keeping in view of the requirements of a person in every stage of his life from birth to death. An alternate delivery tool—the new TV banking to access banking products from home is also a coming thing. The Next Gen Banking technology aims to cut banks' administrative expenses, make banks credit generate surplus, improve surveillance on NPA and deepens financial inclusion. Next Gen aims to develop business intelligence, improve human resources management and quicken delivery of any banking products at the click of the mouse. The question is how far the banking sector is going to serve its main purposes: to pay its present and future depositors in full when their claims accrue and serve the public good. As per Banking Regulation Act the one of the main objective of Banks is to serve public good.
The question before the Next Gen. Banking is whether the customers are familiar with the present information technology. Are they aware of the various risks involved in the new banking environment? As on March 31, 2013, there are 1,14,019 Automatic Teller Machines (ATMs) across the country out of which 11,564 are in rural areas 27,710 in semi urban area, 36,116 in urban areas and 79,327 are in metropolitan cities. The number of POS terminals has been doubled to 8,45,653 between 2008 and 2013. In June 2013, CRISIL prepared a financial inclusion index which identified three areas: branch penetration, deposit penetration and credit penetration. The World Bank Financial Access Survey observed in terms of bank branch density, ATM density, bank credit to Gross Domestic Products (GDP) and bank deposit to GDP is quite low as compared to most developing countries in the world. Now RBI has given permission to two private banks to operate and the non banking finance companies will soon get bank status too. Many more private entities are in the queue to get permission. The question is whether people are ready for this new set-up? An all encompassing financial inclusion programme can yield result if the Indian mass is educated, computer literate and have awareness about online safety measures. Over and above the RBI should be in a position to supervise the banks and get a mirror image of banks’ day to day business performance.
Reports about ATM frauds are pouring in. Different electronic devices are fitted to ATM machines by the miscreants to steal ID and password without the knowledge of the customers. Hidden cameras spy on customers' pass word. Cloning machines are fitted to copy the ATM cards. ATM reconciliation becomes a big headache for banks. Crores of rupees are lying idle in ATM accounts due to non-reconciliation. Many people write pass word on the back of the ATM cards due to lack of awareness. Many are not in a position to key password into the system and fail to withdraw money from the machines. Outside agencies are engaged by banks for keeping cash in the machines which involves risk. Sometimes ATMs releases counterfeit notes. In case of robbery ATM does not give signal to nearby police station. Thieves attack old customers at ATM booth. Some ATM machines are so light that two persons can easily carry it. Many ATMs give signals that cash is not available and give false withdrawal message. Phishing mails are sent to lure customers. Hackers pretending as caring executives collect ID and password from gullible customers. Fraud committed through internet channels, ATMs and other alternate payment channels like credit, debit and other prepaid cards account for 65 per cent of the total fraud cases. The online money transaction has increased the number of online frauds. The amount of fraud in banking sector has reportedly grown four times from Rs 2,038 crore in 2009-10 to Rs 8,646 crore in 2012-13. Attempts are made every day from foreign destinations mainly from Nigeria and London to hack banks' main servers in India. The administrative cost of safeguarding Information Technology network has increased to above 5 per cent of the total administrative expenses. This may go up as the new information technologies from the developed nations will be available at a premium. Oracle charges 22 per cent of the cost of the software as annual maintenance charge. The Indian IT professionals are yet to develop software in India for the safeguard of banking industry. In fact, fraud risk is mounting in core banking environment as manual checking has become a passe. Rapid growth of technology, cross border financial transactions, hybrid products and real time fund movement have made banking sector prone to frauds. A state of the art Information System Audit can safeguard banks' e-bay transaction route. The problem is that there are not many Certified Information System Auditors(CISA) in the banking sector. When BASEL III norms compels Indian banking sector to integrate with the global financial sector with larger capital base, there is possibility of huge frauds along with big business opportunities which may require close monitoring and IS audit skill. Banks have to ensure that people posted at main data servers must go through rigorous integrity tests and the top management owns up the responsibility of security lapses and NPA growth. Banking sector in India is passing through tough time and it needs tough solution.
– Sudhansu R Das
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