Page 1 of 9

European Journal of Business &

Social Sciences

Available at https://ejbss.org/

ISSN: 2235-767X

Volume 07 Issue 02

February 2019

Available online:https://ejbss.org/ P a g e | 703

Impact of computer based information system on credit management in

indian banking sector

Dr. Ramesh Rani(Assistant Professor)

Department of Commerce

NIILM University ,Kaithal

ABSTRACT

Banking industry is a backbone of Indian financial system and it is afflicted by many challenging forces.

One such force is revolution of information technology. In today’s era, technology support is very

important for the successful functioning of the banking sector. Without IT and communication we cannot

think about the success of banking industry, it has enlarged the role of banking sector in Indian economy.

For creating an efficient banking system, which can respond adequately to the needs of growing

economy, technology has a key role to play. In past 10 years, banks in India have invested heavily in the

technology such as Tele banking, mobile banking, net banking, ATMs, credit cards, debit cards, electronic

payment systems and data warehousing and data mining solutions, to bring improvements in quality of

customer services and the fast processing of banking operation. Heavy investments in IT have been made

by the banks in the expectation of improvement in their performance. But important in the performance

depends upon, differences in the deployment, use and effectiveness of IT.

Keywords: Afflicted, Tele Banking, IT

INTRODUCTION

Over the last decade, the Indian economy progressed rapidly and is now the third largest in the world.

However, the Indian economy has recently been facing a period of increased uncertainty owing to the

trinity of slowing GDP growth, rising inflation and a depreciating rupee. The banking sector in India, a

true barometer of the economy, is mirroring these economic challenges with slowing growth,

increased stress on assets and pressures on profitability and capital adequacy. The continued

Page 2 of 9

European Journal of Business &

Social Sciences

Available at https://ejbss.org/

ISSN: 2235-767X

Volume 07 Issue 02

February 2019

Available online:https://ejbss.org/ P a g e | 704

challenging environment and the key role of banking sector in the economy, reignites the debate on

what does it take to shape a more favourable banking scenario in India over the next 5 to 7 years.

As, Indian banking has undergone a total transformation over the last decade. Moving seamlessly from

a manual, scale-constrained environment to a technologically-leading position, it has been a miracle.

Nowhere in the world has such a transformation taken place in such a short span of time with such a

low cost. The process started in 1999-2000 when a couple of banks signed their first core banking

transformation deal with Infosys.

By the end of 2010, about 50 banks with around 55,000 branches had completed the journey, offering

their customers anywhere, anytime banking across various channels. The current computerisation of

regional rural banks is expected to add another 22,500 branches to this number by the year-end.

Today, a consumer can go to an ATM across 52,000 locations, operate the bank account through the

web, call a customer service centre for queries and never visit the branch for banking transactions.

For the banks too, the journey has been fruitful. They have scaled up, reduced the drudgery of work for

their staff, despite the golden handshake and voluntary retirement schemes, increased internal

efficiency and become more competitive. At the systemic level, risks have reduced since information is

real time and on line, reconciliation is instant, enterprise views are available and all information is

available on a single database for decision-makers. This journey has been completed at an incredibly

low cost. RBI, in a recent report, said that the total cost of computerisation has been around Rs

22,400 crore (for PSU banks), or less than $4.8 billion, an amount a global tier-I bank spends annually.

The accompanying graphic gives a snapshot of what has been achieved in the last decade and as well

as a projection for the next decade.

The banking industry has grown at a compounded annual growth rate (CAGR) of 24% over the last

decade. It has grown by a factor of five times. Total deposits have grown by 4.8 times, assets by 6.6

times, interest income by 9.5 times and net worth by 4.5 times. Employee strength has grown by only

5%. This is an incredible transformation of an industry with no parallel in the country.

During 2004-14, our gross domestic product (GDP) nearly trebled from Rs 21,50,000 crore to Rs

Page 3 of 9

European Journal of Business &

Social Sciences

Available at https://ejbss.org/

ISSN: 2235-767X

Volume 07 Issue 02

February 2019

Available online:https://ejbss.org/ P a g e | 705

59,95,000 crore, return on assets (RoA), which varies between 0.25% and 1.5% worldwide, has risen

from 0.99% in 2004 to 1.6% in 2014, in the country. At 2.3%, the net non- performing assets (NPA) ratio

is a far cry from the 6% level 10 years ago.

In contrast to most countries, in India, retail deposits form a sizeable chunk of gross domestic savings,

creating a large potential for investment. The ratio of total deposits to GDP, which stood at 51% in

2004, has now climbed to 82%. However, the credit to GDP ratio presents an opposite picture, and

India, lags many countries whose banks lend more than the size of their economies. We also have to

catch up with the world’s best-run banks in the area of cost management at anywhere between 37%

and 66%, our cost-income ratio is no match for international benchmarks of 30-35%

This transformation has been enabled by Indian technology, and domestic IT companies deserve all the

credit for creating a world-leading banking industry. Looking forward, the journey becomes even more

remarkable, possibly only because of the technology transformation that the banking sector has

undergone.

Technology transformation in Banking is getting into an entirely new wave of business focused

innovations. What started with basics like branch automation and evolved to focus on areas like

centralized core banking has now come a long way in the overall journey.

We see some interesting examples with Banks in India today. M-Pesa launched by ICICI Bank and

Vodafone as a unique service to transfer money and make payments; Movida from ICICI Bank for card

holders to pay bills, recharge air time and do a lot more using the mobile; Solar ATMs from Vortex

engineering enabling effective rural banking, and Knowledge Banking from YES Bank focused on SME

segment. Each one of these are examples of Smarter Technology Transformation in Banking which are

enabling banks to “innovate” and differentiate thereby leading to larger customer base and wallet

share.

IMPORTANCE OF PROPOSED RESEARCH WORK

The high incidence of sickness in business and the lengthy as well as complex procedure for obtaining

credit, have led to an increasing need to upgrade credit practices and asset quality. One of the top-