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.
