INTRODUCTION

• Financial System : significance & Definition—A

financial system is a set of institutions,
instruments and markets which foster savings
and channels them to their most efficient use,
Has individuals, intermediaries ,markets and
users of savings,
• Financial Markets –Transfer of funds from
surplus sectors (lenders) to the deficit sectors
(borrowers)
Types Of Markets

• Money Markets—credit market is centre

for dealings in monetary assets of short
term nature generally below one year .
Has organized and unorganized sector
• Organised –Commercial Banks ,RBI ,LIC
UTI,SEBI ,DFHI,NABARD
• Unorganised –Hundis,
Capital Markets

• Primary & secondary Markets

• Primary ==IPOs, new instruments issuance
• Players –Merchant bankers ,Mutual Funds
,Financial Institutions,FIIs ,Individual Investors
• Secondary -28 SE,NSE ,BSE,OTCEI ,ISEIL
• Players ==MutualFunds ,stock brokers,FI,FIIs
Individual investors
Foreign Exchange markets

• Linked to InterBank or Call Money

Markets (Commercial bank Dealings)
• Capital account Convertibility
• FEMA vs FERA
• LPG Concepts
FUTURE OF INDIAN BANKING AND
FINANCIAL SERVICES
 Challenges facing the Indian banking sector
Growth opportunities in regional and rural
India
Innovation in product design and delivery
Accessing capital
Trends in M & A and market consolidation
 RISK MANAGEMENT: TOWARDS BASEL
II

• Industry best practice

Development of risk management
strategies
– market risk – operational risk – credit
risk
ALM and treasury risk management
Capital allocation strategies
INNOVATION IN RETAIL BANKING

• Product innovation and development

– NRI – credit – wealth management
Product delivery and channel management
– ATM – web – mobile and telebanking – branch
Alliance and franchise arrangements
Customer retention initiatives & customer
relationship management
 SMALL SCALE INDUSTRY –
GROWTH OPPORTUNITIES IN SME
CORPORATE BANKING

• Techniques and strategies for servicing small

scale industry
Product design and delivery
Development of web based relationship
banking and e-banking channels
Impact of government legislation driving
growth in the SME market
RURAL BANKING

• Development of new credit products for

rural India
– weather insurance (rainfall, wind speed)
– life and non-life insurance
Alliance arrangements and franchises
Partnership models with MFIs
BANCASSURANCE

• Increasing returns on assets through the

delivery of bancassurance products
Leveraging existing infrastructure
Investment in information technology and
telecommunications infrastructure
Developing innovative products with in-
built flexibility
Lessons to be learned
CHALLENGES AND
OPPORTUNITIES

• Enterprise integration
RTGS and inter-bank payment systems
Branch network connectivity
ATM networks
Linux
Smart card technology
SELECTING AND IMPLEMENTING A
CORE BANKING SOLUTION

• Selection criteria
Vendor viability
Depth, functionality and scalability of
solution
Inter-operability and integration
Customisation
ACHIEVING ENTERPRISE
APPLICATION INTEGRATION

• Achieving real time access through a common hub

Ensuring consistent data delivery
Selecting a systems architecture model: Challenges and
benefits
– broker centric vs. multiple applications
– moving towards a service based architecture
– security
– aligning architecture with business strategy and units
MULTI-CHANNEL BANKING
PLATFORM

• Deploying technology to integrate banking

channels
Internet/ ATM network/ branch / mobile
Challenges of integration
Delivering uniform services across delivery
platforms
Realising the benefits of enterprise integration
– capitalising on cross sell/up sell opportunities
RISK MANAGEMENT SYSTEMS

• Implementing an integrated risk architecture

across front, middle and back office
Developing a comprehensive and dynamic
framework for measuring, monitoring and
managing risk
Systems requirements
Transfer-pricing mechanism and profitability
analysis
Reporting
SYSTEMS: TOWARDS RISK BASED
KYC

• Proactive vs. reactive response to ML risk

Risk based KYC
Trend and cluster analysis based on
customer behaviour
Traditional rules based analysis
Suspicious transactions and development
of new AML filters and rules
Noise or actionable risks?
SERVICES IN INDIA: ATM AND
BACK OFFICE UTILITIES

• When will banking utilities become a reality –

globally and in India
What is the key impact on stakeholders - banks,
clients, regulatory bodies
What lessons can be learned from shared ATM
networks
Future of shared services in
– payment and settlement – back office
processing
– data warehousing
COST EFFECTIVE, SECURE
PRODUCTS THROUGH THE
INTERNET CHANNEL
• Developing an effective internet strategy
– maintaining customer service and
satisfaction
– using internet services to market and
cross sell banking products
Integrating customer analytics and
relationship management strategies
Future of internet banking service
INTERNET BANKING
• successful Internet banking solution offers
• · Exceptional rates on Savings, CDs, and IRAs
· Checking with no monthly fee, free bill
payment and rebates on ATM surcharges
· Credit cards with low rates
· Easy online applications for all accounts,
including personal loans and mortgages
· 24 hour account access
· Quality customer service with personal
attention
TREASURY MANAGEMENT
SYSTEMS

• Benefits of a centralized treasury function

Factors to consider when developing a treasury
management system
– build vs. buy – vendor selection
– system integration and automation –
functionality
Cash management
Risk management and regulatory compliance

•
IT in Banking 2005

• New accounting and prudential norms

relating to income recognition,
provisioning and capital adequacy,
deregulation of interest rates & easing of
norms for entry in the field of banking
HAVE BEEN MAJOR CHANGES IN Banking.
• Indian banking industry, today is in the
midst of an IT revolution
• Technology has changed the contours of
three major functions performed by banks,
i.e., access to liquidity, transformation of
assets and monitoring of risks. Further,
Information technology and the
communication networking systems have a
crucial bearing on the efficiency of money,
capital and foreign exchange markets.
• In India, banks as well as other financial entities entered the world
of information technology and with Indian Financial Net (INFINET).
INFINET, a wide area satellite based network (WAN) using VSAT
(Very Small Aperture Terminals) technology, was jointly set up by
the Reserve Bank and Institute for Development and Research in
Banking Technology (IDRBT) in June 1999.

• Implementation of projects such as NDS ((Negotiated Dealing

System), CFMS (Centralised Funds Management System) for better
funds management by banks and SFMS (Structured Financial
Messaging Solution) for secure message transfer.
• Negotiated dealing system (NDS), which has become
operational since February 2002 and RTGS (Real Time
Gross Settlement system) scheduled towards the end of
2003 are other major developments in the area.

The Information Technology Act, 2000 has given legal

recognition to creation, trans-mission and retention of an
electronic (or magnetic) data to be treated as valid proof
in a court of law, except in those areas, which continue
to be governed by the provisions of the Negotiable
Instruments Act, 1881.
OTHERS
• SECURITISATION NEWS AND DEVELOPMENTS -
• Current Problems
• The current problems faced by the Banks in recovering their dues
after the Decree/Certificate is passed inter-alia include:
• a. Difficulty in taking possession of the properties of the defaulters;
b. The properties are in the possession of third parties, who are not
the defaulters;
c. Inability to fetch the market price as against the White declared
price in auction sale;
d. Failure to attract bidders at the auction sale;
e. Disposal of objections takes eternity; and
f. Recovery officers are not trained in law, hence unable to deal with
difficult questions of law