CHAPTER - V INFORMATION TECHNOLOGY IN BANKING: NATURE AND TRENDS

84 CHAPTER - V INFORMATION TECHNOLOGY IN BANKING: NATURE AND TRENDS In the recent years, the utilization of information technology has magnificently increased in service industry, particularly in the banking industry. Indian banking industry is witnessing drastic changes. Technology is playing a definite role in facilitating transactions in the banking sector and the impact of technology implementation has resulted in the introduction of new products and electronic information based services by various banks in India. The financial sector reforms of the nineties and opening up of the economy and its integration with global market has facilitated the speedier use of information technology in the banking industry in India. In this context, the chapter reviews the current status of Indian banking industry with respect to various parameters of customer-centric information technology initiatives. The extent of information technology utilization is measured by the volume of investment in equipments, software, internet etc. First part of the chapter analyses the trends in information technology for overall banking industry. In the second part, analysis is carried out by disaggregating the commercial banks into five groups. These are nationalized banks, State Bank of India and its associates, old private banks, new private banks and foreign banks. 5.1: Trends in information technology in Overall Banking Sector The progress of information technology uses in commercial banking industry from year 1998-99 to 2010-11 is summarized in table 5.1. Percentage of different delivery channels per branch is given in table 5.2. The focus of analysis is on main six delivery channels mainly ATMs, credit cards, telephone banking, internet banking, computerization and mobile banking. The available data about the investment plans in banks, in information technology, for the years 1998-99 to 2010-11 indicates that almost all the major banks have earmarked the hefty amounts for IT.

85 Table 5.1: Information Technology Parameters in Scheduled Commercial in India Year No. of ATMs No. of Credit Cards No. of Internet Banking Branches No. of Mobile Banking Branches No. of Telebanking Branches No. of Computerized Branches Total No. of Branches No. GR No. GR No. GR No. GR No. GR No. GR No. GR 1998-99 290-1766724 - 219-200 - 129-2561 - 28226-1999-00 401 38.28 2133551 20.76 371 69.41 321 60.50 171 32.56 3917 52.95 30000 6.28 2000-01 803 100.25 2840713 33.14 925 149.33 552 71.96 452 164.33 6264 59.92 30699 2.33 2001-02 1883 134.50 3674293 29.34 1570 69.73 955 73.01 979 116.59 10034 60.19 32713 6.56 2002-03 3190 69.41 4535532 23.44 2854 81.78 1705 78.53 1400 43.00 14121 40.73 33267 1.69 2003-04 5240 64.26 5510383 21.49 3853 35.00 2815 65.10 2039 45.64 18648 32.06 35044 5.34 2004-05 8392 60.15 6557154 19.00 5753 49.31 3892 38.26 2948 44.58 23474 25.88 37544 7.13 2005-06 13196 57.24 7605044 15.98 7494 30.26 6003 54.24 3727 26.42 30238 28.81 39141 4.25 2006-07 16348 23.89 9399227 23.59 9837 31.27 7608 26.74 5871 57.53 33228 9.89 39992 2.17 2007-08 20255 23.90 10110055 7.56 16606 68.81 10918 43.51 9037 53.93 38232 15.06 41630 4.10 2008-09 23670 16.86 11636045 15.09 19042 14.67 12991 18.99 11262 24.62 41564 8.72 43743 5.08 2009-10 39263 65.88 16362911 40.62 22335 17.29 20676 59.16 19330 71.64 47824 15.06 49066 12.17 2010-11 46879 19.40 25305740 54.65 34092 52.64 32157 55.53 28652 48.23 51025 6.69 52252 6.49 CAGR 53.75 22.28 49.42 51.00 54.40 27.52 4.94 Source: Report on Trend and Progress of Banking, RBI, various issues and Balance Sheets of respective banks.

86 Table 5.2: Number of IT Delivery Channels as Percentage of Total Number of Branches in India (Percent) Year No. of ATMs No. of Internet Banking Branches No. of Mobile Banking Branches 2010-11 89.72 65.25 61.54 54.83 97.65 Source: Calculated 5.1.1: Number of Automatic Teller Machines (ATMs) No. of Tele- Banking Branches No. of Computerized Branches 1998-99 1.03 0.78 0.71 0.46 9.07 1999-00 1.34 1.24 1.07 0.57 13.06 2000-01 2.62 3.01 1.80 1.47 20.40 2001-02 5.76 4.80 2.92 2.99 30.67 2002-03 9.59 8.58 5.13 4.21 42.45 2003-04 14.95 10.99 8.03 5.82 53.21 2004-05 22.35 15.32 10.37 7.85 62.52 2005-06 33.71 19.15 15.34 9.52 77.25 2006-07 40.88 24.60 19.02 14.68 83.09 2007-08 48.65 39.89 26.23 21.71 91.84 2008-09 54.11 43.53 29.70 25.75 95.02 2009-10 80.02 45.52 42.14 39.40 97.47 In banking industry, in last couple of years, ATMs have changed the face of banking services. In the year 1987, Hong Kong and Shanghai Banking Corporation (HSBC) installed the first ATM in India. In the subsequent years, Indian Bank and Citibank introduced ATMs at various locations. In India, during the 1990 s, the ATM usage in the banking industry witnessed a slow growth on account of high installation costs. Ten years ago, an ATM was a novelty in Indian banking industry but with the entry of private sector banks, ATMs mushroomed in the urban landscape. Till then, all the banks deployed ATMs aggressively and saw their customer-base expanding. After a relatively slow start in the late 1990 s, there was a spurt in ATMs installations across the country with doubling the ATMs in two years from 401 in the year 1999-00 to 803 in 2000-01. The trend continued in the subsequent two years and aggregate number of ATMs increased from 5240 in the year 2003-04 to 13196 in 2005-06. Since the year 2004-05, ATMs have seen an explosive growth as banks have committed to substantial capital outlays on ATMs deployment. In the year 2006-07, number of ATMs was 16348 and it rose to 39263 in 2009-10, registering a growth rate of 65 percent. During the year 2010-11, total

87 number of ATM increased by 46879. Since the year 2006-07, the growth in ATMs has been exponential in India. Growth rate of ATMs deployed in the banking industry has increased from 38 percent in year 1999-2000 to 60 percent in 2004-05 and further to 65.8 percent in 2009-10. In the year 2010-11, ATMs of scheduled commercial banks grew at a nominal rate of 19.40 percent. It is further observed from table 5.1 that these commercial banks have shown an impressive trend growth rate of 53.75 percent per annum in ATM installation. Notwithstanding such remarkable achievement, it is noted that India still lags far behind other countries. The reason behind the slow growth in ATMs expansion is high installation costs and dissent from the labour unions of the bank employees. It is evident from table 5.2 that number of ATMs per branch grew slowly from 5.76 percent in the year 2001-02 to 14.9 percent in 2003-04 but thereafter galloped to a level of 33.7 percent in 2005-06. The ratio increased by around eight percentage point to 48 percent in the year 2007-08 from 40.3 percent in 2005-06. In 2008-09, the ratio of ATMs to total bank branches registered the growth crossing the 50 percent mark. The ratio reached a new milestone which increased to 89.7 percent in the year 2010-11. 5.1.2: Number of Credit Cards The introduction of credits cards by banks began the era of plastic money. Credit card constitutes an important part of a payment system. The use of cards for making retail payments is one of the preferred modes in recent years. The acceptability and convenience of this mode of payment is reflected in the increased volume and value of transactions through credit cards. Credit cards have witnessed a gradual growth from about 21.33 lakhs in the year 1999-00 to 55.10 lakhs in 2003-04. The commercial banks issued a total of 101.10 lakhs cards in the year 2007-08. The credit card volumes grew substantially by 23.59 percent in the year 2006-07 as against 19 percent in 2004-05. Year, 2005-06 was a bountiful year for credit cards in India as these credit cards witnessed a robust growth. Specifically in the year 2009-10, the number of credit cards in circulation reached to 163.62 lakhs as against 116.36

88 lakhs in 2008-09, registering a growth rate of 40.62 percent per annum in 2009-10 as compared to 15.09 percent in the year 2008-09. In the year 2010-11, the number of credit cards issued by commercial banks increased to 253.05 lakhs, registering a prolific growth rate of 54.65 percent in the same year. It is further observed from trend based growth rate that credit cards have shown an impressive growth of 22.28 percent per annum over the years under study. The extremely expanding use of credit cards shows that consumers in India are more open to the possibility of owning a credit card. The fact that financial cards are still perceived as a status symbol in India also serve as a contributing factor to the healthy performance registered by the credit cards but the Indian credit cards industry is still in a relatively nascent stage when compared to developed economies. The extent of the use is remarkably low. According to a survey by Master Card International, only 14 percent of the Indian customers currently own a credit card. This is in sharp contrast to countries such as United Arab Emirates and America, where 65 percent and 85 percent people respectively own a credit card. This owes to a set of intriguing facts viz. (a) banks have not been sufficiently active in channel creation, and (b) customers are not utilizing even the installed capacities. 5.1.3: Number of Internet Banking Branches During the last few years, banks across India have invested heavily to build sophisticated internet banking capabilities. Internet has emerged as an important medium for delivery of banking products and services. Table 5.1 shows that the number of bank s branches offering internet banking facility has increased gradually. In year 1999-00, there were 219 bank branches giving internet banking facility and it has grown to 1570 in the year 2001-02 and further to 5753 in the year 2004-05. Last few years have seen internet banking branches growing exponentially. It is observed from the table that the total number of internet banking branches rose to 19042 in 2008-09 as against 7494 in the year 2005-06 and it further increased to 34092 in 2010-11. Clearly, this suggests a strong growth trend. Internet banking is slowly becoming popular

89 and this e-channel is more popular in urban and metropolitan cities of India. Table further exhibits the growth rate of internet banking branches of scheduled commercial banks in India. In year 1999-00 internet banking experienced a growth rate of 69.41 percent which increased to 81.78 percent in 2002-03 and then in 2005-06 it came down to 30.26 percent but after 2006-07, it again galloped at the level of 61.81 percent. In year 2010-11, internet banking has seen a growth rate of 52.64 percent and if we see the compound growth rate, it is observed from the table that it has been 49.42 percent per annum over the years. Table 5.2 shows the internet banking branches as percent of total branches. The table shows that the internet banking as percentage of total branches has increased sharply for whole of the banking industry. This ratio was 10.99 percent in year 2003-04 and it increased to 24.60 percent in 2006-07, 43.53 percent in 2008-09 and further to 65.25 percent the year 2010-11. This rising trend in internet banking is due to increasing availability of broadband connections, at falling tariff rates. Moreover advancement in technology used by banks especially in core banking system and the growth of internet usage is propelling the growth of internet banking. Further, there are special campaigns which gave a focused marketing thrust towards increasing customer base and usage of internet banking. 5.1.4: Number of Mobile Banking Branches It is evident from the growth trend of mobile banking that it has received wider acceptance all over India. Today it is offered by most of the Indian banks. Since the year 2004-05, the number of mobile banking branches has grown remarkably. Between years 2003-04 to 2010-11, 30,342 mobile banking branches have been added to the banking industry of India. Initially in the year 1999-00 mobile banking branches grew slowly from 321 to 955 in 2001-02 and further to 1705 in 2002-03. But thereafter, they galloped to a level of 12,669 in 2008-09 and further to 32,157 in the year 2010-11. It is further clear in the table that there has been explosive growth in mobile banking branches over the years. In the year 1999-2000, mobile banking

90 branches grew at the rate of 60.50 percent per annum which further increased to 73.01 percent in 2001-02 and 78.53 percent in 2002-03 but in year 2004-05 it dipped to 38.26 percent per annum. Then again in year 2007-08 growth rates registered some improvement by increasing to 43.51 percent. Since then, it continued to increase and reached at 55.53 percent in year 2010-11. Further the mobile banking branches have observed a trend growth rate of 51 percent per annum in the recent decade. It is because the mobile banking has drastically cut down the cost of providing service to the customers. For service providers mobile banking offers the next surest way to achieve growth, therefore mobile banking is more popular in all the commercial banks. It is further observed from table 5.2 that the share of mobile banking branches in the total branches increased to 19.02 percent in 2006-07 as compared to 10.37 percent in the year 2004-05. It gradually increased to 42.14 percent in 2009-10 and further to 61.54 percent in the year 2010-11. It shows that with rapid growth in the number of mobile banking branches, the banks are exploring the feasibility of using cell phones as an alternate channel of delivery of banking services. With the exponential growth of mobile connections in India, mobile banking applications can be used as an efficient channel to deliver the financial services to the remote parts of the country at low cost. 5.1.5: Number of Tele-banking Branches Tele-banking is also a popular e-channel among the bank customers. As per table 5.1, number of banking branches using telephone was 129 in the year 1998-99 which rose to 1,400 in 2002-03, 2,948 in the year 2004-05, 5,871 in 2006-07 and further to 19,330 in 2009-10. In the year 2010-11, it rose to 28,652. Year-wise data of tele-banking branches show a positive growth trend. It is further observed that the growth rate of tele-banking branches in commercial banks was 32.56 percent in the year 1999-00 which rose to 44.58 percent in 2004-05, 53.93 percent in 2007-08 and further to 71.64 percent in the year 2009-10. Overall compound annual growth rate comes to be 54.40 percent per annum. The percentage of tele-banking to total branches shows a

91 rising trend. This ratio was 1.47 percent in 2000-01 which increased sharply to 5.82 percent in 2003-04, 14.68 percent in 2006-07, and 39.40 percent in 2009-10 and further to 54.83 percent in the year 2010-11. 5.1.6: Number of Computerized Branches The most fundamental way in which technology has changed the phase of Indian banking sector has been through computerization. The entire approach towards technology based banking has shown significant improvement since the initiation of financial sector reforms in 1990 s which has facilitated speedier computerization in the banking sector in India. In early sixties, introduction of computers in India in financial sector began in a small way. Life Insurance Corporation was perhaps the first to introduce computerization in 1965 for insurance policies. Later on, Reserve Bank of India (RBI) and State Bank of India installed computer systems. Towards the end of 1970 s a number of banks initiated the process of computerization in some selected departments. A second revolution occurred in the 1990 s with the advent of electronic payment technology. During 1995-2000, almost all commercial banks have started integrating the on-line banking with the mainstream banking technology. A major development, during the years 2000-2011, has been a significant increase in coverage of the number of branches providing computer facility. As a result the number of computerized branches increased from 2,561 in the year 1998-99 to 18648 in 2003-04 as shown in table 5.1. Computerization of banking business received high importance in the year 2005-06, when banks invested heavily in technology and computerized branches increased to 33228 in 2006-07 and further to 51025 in the year 2010-11. Further the table shows the growth rate of computerized branches. It is observed that computerized branches registered a simple growth rate of 52.95 percent per annum in 1999-00 which increased to 59.92 percent in the year 2000-01 and further to 60 percent in 2001-02. Then it dipped to the level of 25.8 percent in 2004-05. Again in the year 2005-06, it made a prolific growth (28.81 percent). In the year 2008-09, computerized branches posted a growth rate of only 8.72 percent. This growth

92 rate which showed some deceleration in 2008-09 again accelerated to 15 percent in year 2009-10. It was because of decelerated growth rate in the amount spent on computerization in 2008-09 which again registered an increase in the year 2009-10. It is further observed from the table that the computerized branches observed a compound annual growth rate of 27.52 percent per annum over the period under study. Further table 5.2 shows number of computerized branches as a percentage of total branches. The percentage share of computerized branches to total branches increased from 20.40 percent in the year 2000-01 to 62.52 percent in 2004-05 and further to 95.02 percent in 2008-09. In 2010-11, the share of computerized branches in total branches was 97.65 percent as against 97.47 percent in the year 2009-10. Banking industry has witnessed a positive annual growth rate in computerized branch from 1997-98 to 2010-11. During the entire period, the growth rate is higher in the year 2001-02. The overall growth rate of computerized branches shows a positive trend for the whole period. This phenomenon hints on the increasing expenditure to provide adequate resources for computerization and development of communication network. Overall table 5.1 shows that over the years the highest trend growth rate per annum is observed in tele-banking branches (54.40 percent) followed by ATM s (53.75 percent), mobile banking branches (51.00 percent), internet banking branches (49.42 percent), computerized branches (27.52 percent) and credit cards (28.28 percent). In nutshell, current status of Indian banking industry on various parameters of information technology shows that Indian banking industry is at the threshold of a paradigm shift. Information technology innovations in the last few years have changed the landscape of banks in India. Anywhere banking, tele banking, mobile banking, net banking, ATM, credit cards and computerization have totally transformed the banking industry. Today almost all major banks in India are offering online services to their customers. ATMs have emerged as the most favored channel for offering banking services to the customers.

93 5.2: Comparative Trends in IT among Bank Groups Several bank groups have been positioning themselves as a one stop shop financial service provider with a fairly exhaustive range of products. In tune with global trends, these bank groups have been investing heavily in technology, infrastructure, solution and manpower. Both, in the spatial and temporal dimension all the banks have not been at par in the adoption of technology. Following analysis deals with the spatial and temporal variations in the adoption of technology in Indian banking. For spatial analysis, different banking groups on the basis of ownership have been taken. The banking groups are nationalized banks, State Bank of India and its associates, old private banks, new private banks and foreign banks Analysis is based on different parameters like: number of computerized branches, number of ATM s installed, number of credit cards, number of Internet banking branches, number of mobile banking branches and number of tele banking branches. 5.2.1: Number of Computerized Branches An analysis of investment to computerize bank branches is presented in table 5.3. Table shows that in the year 1998-99, computerized branches per bank of nationalized group were 186, which increased to 885 in 2002-03. The Central Vigilance Commission directives to achieve 100 percent computerization have resulted in renewed vigor in public sector banks. Number of computerized branches of nationalized banks grew by 29.20 percent in 2002-03 and then registered a decline in growth rate in the year 2009-10 (8.59 percent). All bank groups witnessed a positive annual growth rate in computerization of branches for the entire period under study. It is further observed from the table that highest trend growth rate per annum in computerized branches among bank groups is observed by old private banks (44.80 percent) followed by new private sector banks (37.18 percent) SBI and associates (37.08 percent) nationalized banks (23.28 percent) and foreign banks (14.10 percent). SBI and its associates have shown an excellent performance in computerizing their branches as in the year 2010-11,

94 all branches of SBI are fully computerized. The proportion of public sector bank branches which achieved full computerization has increased from 93.70 percent in year 2008-09 to 95 percent in 2009-10. On the whole, it is observed that private banks and foreign banks have an edge in computerization. These banks have chosen a different path to woo customers into their fold taking technological support. They are working in a computerized environment using the latest banking software but now public sector banks have been investing for upgrading their operations by way of computerization. Table 5.3: Banking Group-wise, Number and Growth Rate of Computerized Branches in India Nationalized SBI and its Associates Old Private New Private Foreign Year No. GR No. GR No. GR No. GR No. GR 1998-99 186-68 - 4-19 - 12-1999-00 266 43.01 149 119.12 7 75.00 29 52.63 13 8.33 2000-01 442 66.17 203 36.24 16 128.57 48 65.52 14 7.69 2001-02 685 54.98 282 38.92 79 393.75 124 158.33 16 14.29 2002-03 885 29.20 599 112.41 120 51.90 141 13.71 16 0.00 2003-04 1145 29.38 858 43.24 140 16.67 184 30.50 27 68.75 2004-05 1421 24.10 1139 32.75 160 14.29 239 29.89 31 14.81 2005-06 1738 22.31 1671 46.71 213 33.13 304 27.20 36 16.13 2006-07 1853 6.62 1932 15.62 260 22.07 337 10.86 40 11.11 2007-08 2027 9.39 2364 22.36 308 18.46 471 39.76 45 12.50 2008-09 2212 9.13 2419 2.33 367 19.16 614 30.36 46 2.22 2009-10 2402 8.59 2986 23.44 410 11.72 839 36.64 44-4.35 2010-11 2462 2.50 3201 7.20 458 11.71 1084 29.20 45 2.27 CAGR 23.28 37.08 44.80 37.18 14.10 Sources: Report on Trend and Progress of Banking, RBI, various issues and Balance Sheets of respective banks. 5.2.2: Number of ATMs installed Number of ATM s installed among different bank groups are given in table 5.4. It shows that maximum number of ATM s installed by different bank groups has been observed in SBI group (3,758) in the year 2010-11, followed by new private sector banks (2,934), nationalized banks (970) and old private sector banks (394). ATM s installed by foreign banks were more than three times of their branches. ATM to branch ratio was much lower for public sector banks in the year 2006-07, but then it steadily increased. Table

95 also shows trend growth rate of ATM installation. Nationalized banks show the highest trend growth rate per annum (65.32 percent) followed by SBI and associates (58.11 percent), new private sector banks (38.75 percent) foreign banks (27.25 percent). This table shows that the number of ATMs of SBI group and nationalized banks, registered a sharp growth over the years. Over all, it is observed that growth in ATMs among different bank groups has been generally on a steady rise in recent years. A large number of ATMs have already been installed by different bank groups throughout the country. The utility of ATM is gaining popularity day by day among customers of banks and benefit of such huge number of ATMs spread over the country is being utilized by the customers of banks. Many public sector banks have gone a big way in opening ATM s and private sector banks are going ahead with aggressive ATM plans for wider reach. Table 5.4: Banking Group-wise, Number and Growth Rate of ATM Installed in India Nationalized SBI and its Associates Old Private New Private Foreign Year No. GR No. GR No. GR No. GR No. GR 1998-99 3-13 - 8-23 - 7-1999-00 4 33.33 21 61.54 11 37.50 29 26.09 11 57.14 2000-01 12 200.00 59 180.95 19 72.73 41 41.38 14 27.27 2001-02 44 266.67 130 120.34 30 57.89 88 114.63 32 128.57 2002-03 67 52.27 278 113.85 62 106.67 114 29.55 37 15.63 2003-04 105 56.72 549 97.48 88 41.94 137 20.18 42 13.51 2004-05 255 142.86 744 35.52 118 34.09 209 52.55 45 7.14 2005-06 397 55.69 1121 50.67 138 16.95 437 109.09 70 55.56 2006-07 556 40.05 1251 11.60 182 31.88 540 23.57 74 5.71 2007-08 620 11.51 1518 21.34 220 20.88 859 59.07 90 21.62 2008-09 696 12.26 1752 15.42 247 12.27 1109 29.10 94 4.44 2009-10 901 29.45 2945 68.09 356 44.13 2434 119.48 136 44.68 2010-11 970 7.66 3758 27.61 394 10.67 2934 20.54 157 15.44 CAGR 65.32 58.11 38.75 51.44 27.25 Sources: Report on Trend and Progress of Banking, RBI, various issues and Balance Sheets of respective banks. 5.2.3: Number of Credit Cards and Credit cards form one of the most established segments of financial system in India. While usage of cards by customers of different bank groups in India has been in vogue since 1980 s, it is only since the mid 1990 s that the market had witnessed a quantum jump. Table 5.5 shows that actual usage of credit card has increased both in terms of volume and value. Today all

96 categories of banks issue credit cards. It is observed from table that foreign banks have emerged as market leader in card issuance (5.91 lakhs in the year 2005-06) by registering a growth rate of 13.40 percent, which increased to 9.50 lakhs in the year 2009-10 showing a growth rate of 23.84 percent. It is followed by new private sector banks (3.96 lakh in 2005-06) with a growth rate of 21.03 percent. Further, among public sector banks, SBI group and its associates are holding a major share in card issuance (4.25 lakhs in the year 2009-10). SBI is the largest player among public sector banks. New private sector banks and foreign banks with their state of the art technology and grandiose plans are taking the lead in credit cards. It is due to their aggressive marketing strategies as private sector banks are offering all credit cards for life and they are not charging, joining as well as annual charges for new credit card customers. It is observed from the table that public sector banks are also showing a marvelous and fabulous positive change in credit cards. In the year 2005-06, number of credit cards issued by nationalized public sector banks was 1.26 lakhs which registered a growth rate of 25.40 percent. It increased to 3.55 lakhs in the year 2010-11. In the year 2010-11, the highest number of credit cards was of new private banks (18.66 lakhs) followed by SBI and associates (13.19 lakhs) foreign banks (10.18 lakhs), nationalized banks (3.55 lakhs) and old private banks (0.78 lakhs). Table also shows the trend growth rate of credit cards in various bank groups. Again, highest trend growth rate per annum in credit cards is observed by new private sector banks (31.11 percent) followed by nationalized banks (27.45 percent) old private sector banks (27.17 percent), SBI and associates (24.40 percent) and foreign banks (13.77 percent). The trend growth rate shows that public sector banks are making progress and they are attempting to leverage technology by more spending. They are putting on new resources by investing in trained personnel for marketing of their credit cards.

97 Table 5.5: Banking group-wise, number and growth rate of credit cards in Year India Nationalized SBI and its Associates Old Private New Private Foreign No. GR No. GR No. GR No. GR No. GR 1998-99 19322-48306 - 2226-58671 - 201633-1999-00 22340 15.62 62222 28.81 2629 18.10 70672 20.45 242038 20.04 2000-01 30903 38.33 90998 46.25 4074 54.96 109545 55.00 295539 22.10 2001-02 51768 67.52 97530 7.18 8218 101.72 141526 29.19 373695 26.45 2002-03 63375 22.42 103874 6.50 9362 13.92 229409 62.10 425037 13.74 2003-04 75480 19.10 147079 41.59 10066 7.52 291788 27.19 487088 14.60 2004-05 100661 33.36 229755 56.21 11197 11.24 327321 12.18 521703 7.11 2005-06 126233 25.40 242859 5.70 12651 12.99 396169 21.03 591618 13.40 2006-07 166694 32.05 263079 8.33 15978 26.30 550484 38.95 683577 15.54 2007-08 182296 9.36 274963 4.52 17032 6.60 606843 10.24 722123 5.64 2008-09 205373 12.66 302950 10.18 18319 7.56 787271 29.73 766849 6.19 2009-10 293855 43.08 425119 40.33 34892 90.47 1216434 54.51 949657 23.84 2010-11 354460 20.62 1319399 210.36 77777 122.91 1866040 53.40 1018120 7.21 27.45 24.40 27.17 31.11 13.77 Sources: Report on Trend and Progress of Banking, RBI, various issues and Balance Sheets of respective banks. 5.2.4: Number of Internet Banking Branches As a business tool, internet banking is rapidly transforming the banking and financial world. Today banks are emerging as financial supermarkets by introduction of online banking. The new generation private banks kicked off online banking in 1996, followed by a host of other categories of banks but for internet as a whole, time period 1996 to 2000 marked the adoption phase while usage increased only after 2000. The number of banks offering internet banking in India is increasing steadily. Table 5.6 shows that the internet banking branches of nationalized banks were 14 in the year 1999-00 which rose to 284 in 2004-05 and further to 620 in the year 2007-08. The number of banks offering internet banking has increased exponentially during the last four years as it has increased to 1224 in 2010-11 for nationalized banks. The highest growth rate in internet banking branches in the year 2010-11 is observed by SBI and its associates (80.58 percent) followed by new private sector banks (60.36 percent) nationalized banks (48.45 percent), old private sector banks (43.37 percent) a nd foreign banks (3.70 percent). Table further shows the trend growth rate of internet banking branches. No doubt, all bank groups witnessed a positive trend growth rate of internet banking branches but the trend growth rate of SBI and associates and nationalized

98 banks (57.18 percent and 48.45 percent per annum respectively) are higher compared to old private sector banks (43.37), new private sector banks (43.09) and foreign banks (19.55). It implies that over the time, public sector nationalized banks and SBI and associates are taking the lead. They are aging into net-banking by offering great convenience to customers. No doubt, private banks and foreign banks are the early ones to bite the technology bullet in 1999-00 and internet banking has also increased their market share in earlier years and created a dent in the market share of public sector and old private banks. Therefore at that time public sector banks lagged in the race for adopting internet banking practices but now they are investing more and more to develop. Table 5.6: Banking Group-wise, Number and Growth Rate of Internet Banking Branches in India Nationalized SBI and its Old Private New Private Foreign Year Associates No. GR No. GR No. GR No. GR No. GR 1998-99 9-9 - 2-9 - 3-1999-00 14 55.56 24 166.67 2 0.00 13 44.44 5 66.67 2000-01 42 200.00 61 154.17 7 250.00 18 38.46 6 20.00 2001-02 62 47.62 92 50.82 36 414.29 41 127.78 8 33.33 2002-03 133 114.52 143 55.43 55 52.78 69 68.29 10 25.00 2003-04 204 53.38 161 12.59 68 23.64 80 15.94 12 20.00 2004-05 284 39.22 327 103.11 83 22.06 100 25.00 15 25.00 2005-06 364 28.17 441 34.86 97 16.87 142 42.00 18 20.00 2006-07 504 38.46 562 27.44 106 9.28 170 19.72 20 11.11 2007-08 620 23.02 1569 179.18 124 16.98 242 42.35 23 15.00 2008-09 704 13.55 1828 16.51 133 7.26 274 13.22 25 8.70 2009-10 933 32.53 1925 5.63 155 16.54 507 85.04 27 8.00 2010-11 1224 31.19 3115 80.58 170 9.68 813 60.36 28 3.70 CAGR 48.45 57.18 43.37 42.09 19.55 Sources: Report on Trend and Progress of Banking, RBI, various issues and Balance Sheets of respective banks. 5.2.5: Number of Mobile Banking Branches It is clear from table 5.7 that there has been tremendous growth of mobile banking branches for all the bank groups. In the year 2004-05, number of mobile banking branches of new private sector banks registered a highest growth rate (42.86 percent) followed by SBI and associates (40.64 percent), nationalized banks (39.37 percent), foreign banks (30.00 percent) and old private sector banks (23.26 percent) but in the year 2005-06 nationalized group surpassed the other bank group by improving its growth rate in mobile banking branches to 87.01 percent. Table further shows that new generation

99 private sector banks are pioneers in introducing mobile banking. However with the technological transformation of public sector banks, now they are very active on this front. In the year 2010-11, SBI and associates registered highest growth rate (79.06 percent) followed by new private sector banks (50.96 percent), nationalized banks (38.39 percent) and old private banks (11.72 percent). It is further observed from table that trend growth rate for mobile banking branches over the year has been highest for SBI and associates and nationalized banks (58.26 percent and 49.83 percent per annum respectively) followed by old private sector banks (47.67 percent per annum), new private sector banks (44.28 percent per annum) and foreign banks (21.02 percent). Overall, it is observed while new generation private sector banks and foreign banks have been able to create a niche in the mobile banking in the early stages of technology adoption, the public sector banks have not lagged behind. Leveraging their technology, public sector banks have aggressively forayed to garner a larger slice of this. Table 5.7: Banking Group-wise, Number and Growth Rate of Mobile Banking Branches in India Nationalized SBI and its New Private Foreign Year Old Private Associates No. GR No. GR No. GR No. GR No. GR 1998-99 10-7 - 2-7 - 3-1999-00 13 30.00 20 185.71 1-50.00 10 42.86 4 33.33 2000-01 26 100.00 32 60.00 6 500.00 11 10.00 5 25.00 2001-02 36 38.46 64 100.00 21 250.00 22 100.00 7 40.00 2002-03 68 88.89 121 89.06 29 38.10 32 45.45 8 14.29 2003-04 127 86.76 187 54.55 43 48.28 42 31.25 10 25.00 2004-05 177 39.37 263 40.64 53 23.26 60 42.86 13 30.00 2005-06 331 87.01 316 20.15 63 18.87 78 30.00 15 15.38 2006-07 387 16.92 436 37.97 89 41.27 128 64.10 18 20.00 2007-08 478 23.51 846 94.04 100 12.36 166 29.69 20 11.11 2008-09 564 17.99 996 17.73 133 33.00 202 21.69 26 30.00 2009-10 818 45.04 1748 75.50 145 9.02 416 105.94 27 3.85 2010-11 1132 38.39 3130 79.06 162 11.72 628 50.96 28 3.70 CAGR 49.83-58.26-47.67-44.28-21.02 - Sources: Report on Trend and Progress of Banking, RBI, various issues and Balance Sheets of respective banks. 5.2.6: Number of Tele-banking Branches Tele-banking is also becoming more popular in this world of technology among all the bank groups. Table 5.8 shows remarkable progress

100 of all bank groups. In the initial years, number of tele-banking branches of private sector banks is more but in the year 2004-05, nationalized banks registered highest growth in tele-banking branches (55.00 percent) followed by SBI and associates (45.16 percent), new private banks (35.48 percent) and old private banks (30.61 percent). In the year 2010-11, highest growth rate is observed by new private sector banks and SBI and associates (64.34 percent and 62.06 percent per annum respectively) followed by nationalized banks (35.83 percent). The lowest growth rate is for foreign banks (3.57 percent). It is further observed that trend growth rate per annum of tele banking branches has been the highest for SBI and associates (61.81 percent) followed by nationalized banks (56.67 percent) old private sector banks (48.00 percent) new private banks (43.27 percent) and foreign banks (23.91 percent). Overall it is observed from table that new generation banks, with well focused business vision, duly synergized with technology as an integral component, posted challenges to public sector banks in the early years of technology adoption but with the passage of time, public sector banks are taking the lead and the tremendous success of usage of technology has helped these public sector banks also to penetrate the market. Table 5.8: Banking Group-wise, Number and Growth Rate of Tele-banking Branches in India Year nationalized SBI and its old private sector new private foreign banks banks associates banks sector banks No. GR No. GR No. GR No. GR No. GR 1998-99 5-5 - 2-6 - 2-1999-00 6 20.00 8 60.00 2 0.00 8 33.33 3 50.00 2000-01 15 150.00 36 350.00 3 50.00 11 37.50 6 100.00 2001-02 25 66.67 83 130.56 20 566.67 30 172.73 8 33.33 2002-03 36 44.00 111 33.73 37 85.00 43 43.33 9 12.50 2003-04 60 66.67 155 39.64 49 32.43 62 44.19 11 22.22 2004-05 93 55.00 225 45.16 64 30.61 84 35.48 13 18.18 2005-06 126 35.48 276 22.67 77 20.31 100 19.05 16 23.08 2006-07 203 61.11 501 81.52 90 16.88 117 17.00 21 31.25 2007-08 310 52.71 848 69.26 104 15.56 150 28.21 24 14.29 2008-09 448 44.52 934 10.14 124 19.23 179 19.33 30 25.00 2009-10 773 72.54 1600 71.31 165 33.06 373 108.38 28-6.67 2010-11 1050 35.83 2593 62.06 187 13.33 613 64.34 29 3.57 CAGR 56.67-61.81-48.00 -- 43.27-23.91 - Sources: Report on Trend and Progress of Banking, RBI, various issues and Balance Sheets of respective banks.

101 5.3: Conclusion To conclude, the highest trend growth in computerized branches is observed in old private banks followed by SBI and its associates and nationalized banks but in ATMs, highest trend growth rate per annum is observed in nationalized banks and SBI and its associates followed by new private banks. In credit cards, private banks are leading but in internet banking mobile banking and tele-banking, trend growth rate per annum has been the highest for SBI and its associates and nationalized banks followed by private sector banks but it has been lowest for foreign banks. A look at the operation of various players in banking industry in India reveals a high degree of variations in technology adoption. New private sector banks and foreign banks adopted multiple delivery channels in mid 1990 s and with use of technology and full computerization of their branches they have become able to spur global competition. Now public sector banks, though they are late entrants, yet they are competing aggressively with new generation banks by providing state of art services to stop erosion of their client base to select high value customers by preventing them from moving to new generation banks.