RealTime IT News

Indian Public Banks Move Online Slowly

While many Indian private banks are moving into the Internet medium, large public sector banks have been slow to adopt online banking solutions.

In Indian banking circles, Net banking is the new buzzword. With the decision of two more major private sector banks, HDFC Bank and UTI Bank, to get into Net banking very soon, the number of online Indian banks has been increased to seven.

Already in the fray are ICICI Bank, Citibank, IndusInd Bank and Timesbank. At present online banking is the only true e-commerce service in India.

Citibank has recently rolled out a bundle of innovative services. A large number of banking exercises can be performed by account holders. The bank, last week, has decided to extend the facility of debit cards to account holders in Delhi and Mumbai. The facility is now available in Bangalore.

"Through internet banking, customers can not only get account balance and see statements of account online but they can also transfer funds across Citibank accounts, order demand drafts, pay utility bills, pay Citibank card bills, stop payment on checks and order check books and deposit slips." says a bank official.

In fact, it was ICICI Bank that initiated the electronic banking revolution in India when they introduced Internet banking as early as 1997. ICICI won the CSI National Award for the best IT usage in 1998. Their web site was adjudged as the highly commended business site of 1997 and 1998 by the Financial Times, UK. ICICI won the prestigious Cyber-Corporate of the year award at India Internet World 1998.

According to sources at HDFC Bank and UTI Bank, these banks are all set to enter Net banking soon. HDFC sources confirmed that the bank is launching its online banking in a couple of weeks' time. UTI bank may take some more weeks. However, as far as Indian banking industry is concerned, the private sector has a minuscule market share compared to large public sector banks.

The PSBs are still shying away from Internet. A number of PS banks have Web sites, State Bank of India, Union Bank Of India, Bank of Baroda , Denabank, but none of those sites offers e-commerce services. According to industry analysts, the reasons are a combination of government restrictions, lack of awareness and ambivalence.

The rate of Internet penetration is a factor. With the low number of Internet users in India compared to its size and population, banks aren't too sure whether the investments they put into Net banking will have any takers.

Moreover, the drafting and implementation of an e-commerce legal framework is slow in India. Many of the large banks don't want to burn their fingers by offering something which does not have legal sanction.

"In India there's no protection for a transaction done through a Personal Identification Number, unlike the signature on a check which is protected under the Negotiable Instruments Act," according to V. K. Ramani, UTI Bank's general manager of IT. Thus, the banks are waiting for the government to wave the green flag before they can offer full-feature Net banking.

Some observers believe that if and when the government ensures the passage of the cyber-laws legislation, Indian consumers should gain access to real Net banking. But this will only occur after the new government is formed in October.

Nevertheless, some of PSBs seem to be finally seeing the light. The first off the blocks is the Chennai-based Indian Bank which is expanding its ATM network across the country and is also connecting 100 branches to a TANDEM BASE24 switch over a VSAT and leased-line network.

According to sources in Indian Bank, its pioneering move will see a number of other nationalized banks following suit in setting up their own ATM and branch networks.