RBI governor Raghuram Rajan said that the use of technology in the banking system has increased over the last few years; these changes are not finding consideration in the cost of services, which should have ideally come down. He also said that banks need to restructure and branches cannot be run as they were during the days of the ledger system.
According to Rajan, the present market structure including IT companies, who provide technology and, at times, run crucial IToperations for banks, has not been very helpful in bringing down costs of operations. Market structure is one of the main factors that may prevent from bringing down costs. It could be the structure of key players that are involved in technology and the structure of fees that have to pay is such that the cost reduction does not get converted into a bottom line reduction. He implied that banks need to be careful about aggressively forwarding home loans.
Huge amount of information about the customer is being made available through the system. But they figuring out how to serve customers better using this data. We had an issue in a number of large project loans. With bad loans mounting, banks should be more careful in lending and use technology to reduce risks. One way to do this is by creating a database of large loans, which the RBI has now done.
The use of smart-phones in rural areas is important but perhaps most interesting is that the share of time spent on mobile banking is relatively small, and that needs to increase substantially. Also, there is huge information available, ranging from social media habits to the kind of products customers use and so on, which can be used to not just better serve the customer but also for efficient banking.
On the RBIs proposed IT subsidiary, Raghuram Rajansaid that it will focus on cyber security and review IT-related functions in banks. Because of the importance of this area (IT) and the need to improve our supervision and regulation of IT-related factors as well as cyber security, RBI is in the process of setting up an information technologysubsidiary. They will actually enlist people directly from the sector, who have expertise and can build the expertise within the RBI.