Banks Asked to Adopt New Tech to Cut Transaction Costs
Mumbai, Sep 04, 2010 -- Penetration of technology in the country has to increase and the cost per transaction has to decrease, Reserve Bank of India deputy governor KC Chakrabarty has said.
"The intermediation costs of banks in India still tend to be higher than those in developed banking markets. There is enough empirical evidence to show that the cost of small transactions has not gone down. Unless low-value transactions are not cost-effective, it is not going to impact efficiency drastically," said Chakrabarty, while speaking at a banking technology Conclave 2010, in Mumbai on Friday.
The deputy governor urged banks to adopt a system of Business Process Re-engineering (BPR) to change their business processes, delivery models, as also information processing systems.
They will have to have a re-look at the entire process and have a unified and integrated approach to take full benefits of technology up-gradation in the banks. They will have to fully re-engineer their business processes as per the CBS software. Re-engineering would include developing new process manuals and training of personnel to effectively use the new systems, which would free staff for performing front-office functions, observed Chakrabarty.
Chakrabarty also noted that banks need to leverage on their IT so as to develop comprehensive customer relationship management (CRM) techniques to increase the volume, quality and profitability of business.
An associated area, which needs improvement is the integrity and reliability of the data; an effective MIS is the sine qua non of efficiency and informed decision making.
"A seamless data extraction process from the transaction server to the MIS server enabling generation of returns required internally within a bank and submission to external agency almost instantaneously is needed," he added.
The country had 6.42 branches per one lakh population in 2001, which has only gone up to 6.6 now. Similarly, the operational cost per Rs 100 of business has come down marginally from Rs 2 to Rs1.6.
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