The RBI chief Dr. Duvvuri Subbarao spoke on major operational and technical issues concerning Indian Banking System (IBS), on Monday in Hyderabad where he conferred the Banking Technology Excellence Awards 2009. The awards are instituted by Institute for Development and Research in Banking Technology (IDRBT), chaired Ms Shyamala Gopinath.

Addressing the participations on the occasion, Dr. Subbarao emphasized on lowering the Inter-Banking Fund Transfer (IBFT) charges, under Core Banking System/Solution (CBS). He said"I was surprised to note that transfer of funds from one branch of a bank to another which are both under core banking system entailed a service charge for the remitting customer,". RBI provides two types of inter-bank fund transfers under CBS- RTGS (Real Time Gross Settlement) and NEFT (National Electronic Funds Transfer). Presently the Inter-Banking Fund Transfer (IBFT) charges are more than inter-bank charges.

Dr. Subbarao also emphasized the customer-oriented service of industry saying "I was surprised to note that transfer of funds from one branch of a bank to another, both under the core banking system (CBS), entails a service charge for the remitting customer. The entire institution of banking is built on consumer trust. By imposing charges not commensurate with the cost of services provided, we risk losing this fundamental trust that underlies a banking relationship."

In another issue addressed by Dr. Subbarao, he suggested how use of IT can help in rendering operational/functional efficiency and better customer service. Highlighting the exponential growth in number of mobile users, Dr. Subbarao indicated the potential for mobile banking. Implicitly, this would also require banks to take additional security steps for ensuring secured transactions and customer privacy - "There is also a human element, as many studies show that a significant proportion of IT frauds are the work of insiders," he said. Technical innovation, besides helping in lowering cost, helps in sustained growth and customer satisfaction. Dr. Subbarao advised banks to pass on the low cost benefits to customers.

Dr. Duvvuri also suggested that use of IT can help banks in better management of asset liability ratio (A/L), which directly effects profitability. This would also means compliance with Basel II norms for capital adequacy, besides reducing Non-Performing Assets (NPA) and lowering the operational risk.

The major issues confronting banks include aligning overall organization structure, human and business resources with IT, which forms part of effective corporate governance practices. Such challenges include, but not limited to capacity building, talent acquisition and retention especially for Public Sector Banks (PSUs) as they face multiple business challenges from private players.

Dr. Duvvuri rightly embraced that, "The success of IT implementation is ultimately manifested at the counters of the bank ATM, and not the data centre. If the customer is turned back on the last day of tax payment or the cheque gets returned because the CBS cannot be accessed at a branch, the entire edifice of efficiency collapses in the eyes of the common man."