Computerisation of Banks India – Issues & Events

In the eighteenth and nineteenth centuries the industrial revolution brought profound changes in the life style of man. Many activities that were hitherto performed by man employing his hands and his finger skill came to be carried at great speed and efficiency by machines. Man continued to carry out only those functions that needed his thinking process to be involved.

The Industrial Revolution on account of mass production of goods and services brought large commercial and business organizations, transcending national boundaries that employed several thousands of persons for performing routine, repetitive clerical tasks, relating to record keeping, maintaining accounts, attending/answering correspondence, preparing vouchers, invoices, bills and multiple of such other functions. This created white-collar employment for educated persons by leaps and bounds.

Clerical task is defined as a routine and repetitive performance involving, adding, subtracting, multiplying, dividing numbers, and duplicating data/information from one source to another. The tools employed are “a pen, ink and paper”, the knowledge of arithmetic tables, the basic knowledge of a language and minimum acquaintance with rules & procedures of the organisation that are followed day in day out and relevant to the job of the particular employee. Two plus two is four. It is always four. Should we need an educated worker to compute this task again and again? A business needed human agents to attend to production, marketing, finance etc. depicting high-level tasks. But more and more people were employed for performing low-level tasks.

However, as time went on the internal chorus of record keeping multiplied geometrically as commerce and industry grew in size and volume. The civil services of the Government and service-based organizations came in the forefront to inherit this overload of white-collar employment. To quote a concrete example a major nationalised bank in India, which employed merely 3000 workers in the Fifties (around the time I entered its service in 1957), came to engage over 70,000 employees towards the end of the century.

The Government of India and the States including government owned bodies employed as many as 100 lakh junior employees at the clerical and subordinate level. Such employees by virtue of their strength of numbers organise themselves into powerful trade unions, and aggressively utilise the bargaining power without reference to the input benefit the organization is deriving from them and the productivity they are providing.

In this world of human beings necessity is the mother of inventions. After 15 years of educational studies, an individual should not be employed for routine repetitive tasks. This makes him dull and feels the work monotonous without job satisfaction. He turns back and diverts his loyalty to an informal group i.e. the trade union. He feels happy once in a month on payday, but on other days his work leaves him nothing to rejoice. There are neither opportunities nor challenges to bring in his innovative or creative genius. As years passes the clerical employment results in the individual losing efficiency and productivity to progressively depict a trend of progress in reverse.

The advent of mechanical calculating devices and later electronic computing in the West heralded a new age, that dispensed with this white collar and white-elephant employment progressively. This evolved in the west three decades before, but the advent of this evolution in India is only now taking place.

To quote again a concrete example- the statistics of two banking institutions in India, the largest and the next large in size can be fruitfully compared. These are the State Bank of India, that was until recently employing 2.3 Lakh workers, for a turn over of Rs.36,000 Crores (Deposit 25000 + Advances 11000 Crores).

ICICI bank has at present less than 1000 branches and around 10000 employees. It has a turnover of Rs.23000 Crores (Deposits 16 + Advances 7 thousand Crores). The bank started functioning from the year 1997 and has gained the No.2 position in status in India after SBI in volume of business turnover within 5 years of its operation. It will be interesting to know that CMD of ICICI Bank draws annual emoluments of Rs.150 Lakhs, while CMD of SBI around Rs.4 to 5 Lacs. ICICI is a new age high-tech and fully computerised bank, while SBI retained its manual operations in totality up to 1993 and maintained the work force of that time up to 2001, though it is partially computerised starting from the year 1993.

The per employee turnover for ICICI bank is Rs.2.3 Crores, that for SBI is Rs.1.56 Lakhs. The gap accounts for the difference between manual operations and high-tech banking.

If we project the future in respect of State owned banks, which employ presently nearly 10 Lakh employees, computerisation is destined to bring about rapid changes. By about the year 2010 the present turnover of commercial banks in India may double or even treble to around Rs.30 to 40 Lakh Crores, but these Banks will have no need of 75 percent (today 25 percent of the work force is subordinate staff, 50 percent is clerical staff and 25 percent is the officers) of the existing workforce by 2011. Only in very few hinterland rural pockets there may be a possibility of a need of the present structure of workforce. The objective of the recently administered VRS is to prepare for this reality of the first decade of the New Millennium, where banking will be more tech based and less people based.

Computerisation brings transparency, improves customer care and customer-service tremendously and reduces substantially scope for corruption or extending undue favour to particular constituents and uneven service to others.

Challenges Faced in Computerisation

Computerisation is expensive and needs huge investment in hardware and software and subsequent maintenance. The National Stock Exchange, India’s No.1 user in computerised service has spent Rs.180 Crores to enable investors and brokers across the country to trade securities online. The rate of obsolescence in respect of both hardware and software is considerable. New and better products are emerging in the market, whose use would enable a rival organization to throw a challenge.

Computer crimes are committed widely in the West. India is no less potentially exposed to this risk, when turnover under Internet banking increases. It is easier to enforce security of information and accountability of performers in a manual system. But it needs elaborate steps to incorporate these features in the electronic system.

The structure of legal system is so far based on manual record keeping. It has to provide for electronic data to be accepted legally as evidence and in contracts.

Indian banking has accepted computerisation since 1993, more out of sheer compulsion and necessity to cope up increasing overload and incompatibility of the manual system to sustain further growth. The following pages you are presented a series of articles discussing the various facets of this momentous event and its far-reaching effects anticipated to unfold in the coming decade.