Academic journal article Journal of Finance, Accounting and Management

Business Intelligence for Public Sector Banks in India: A Case Study-Design, Development and Deployment

Academic journal article Journal of Finance, Accounting and Management

Business Intelligence for Public Sector Banks in India: A Case Study-Design, Development and Deployment

Article excerpt

Brief History on Public Sector Banks in India

The Indian Banking industry mainly comprises of the Public sector banks (PSBs) (in which Government holds majority stake and developed even prior to its political independence in 1947), Private Banking Sector (PBS), Multinational Banks and cooperative banks. There was a significant presence of both foreign and domestic banks and well developed stock market. The system expanded rapidly after nationalization of major commercial banks in late 1969 and now ranks in the top quarter among developing countries [2]. Prior to this the Indian banking sector was not seriously drawn toward mechanization of operations, particularly with regard to customer related activities. Instead, the banks focused on employment generation and supported growth in transaction volume by adding more employees instead of technology.

The following steps are taken by the government of India to regulate banking institutions in the country.

1949 : Enactment of Banking Regulation Act.

1955 : Nationalisation of State Bank of India.

1959 : Nationalisation of SBI subsidiaries.

1961 : Insurance cover extended to deposits.

1969 : Nationalisation of 14 major banks.

1971 : Creation of credit guarantee corporation.

1975 : Creation of regional rural banks.

1980 : Nationalisation of seven banks with deposits over 200 crore.

After the nationalization of banks, the branches of the public sector bank India rose to approximately 800% in deposits and advances took a huge jump by 11,000%.

Public Sector Banks gain Market Share

T. T. Ram Mohan et al, were unable to uncover any significant differences in productivity growth and efficiency between the public and private sectors in the period (1999-2000) under study. One of the reason they have noted that there has been a change in orientation in PSBs from social objectives towards an accent on profitability, especially given that some of these have come to be listed on the exchanges and have private investors [4]. It is evident that PSBs have dominated the banking industry in India since Independence. Public sector banks (PSBs) inched closer to acquire 75 per cent market share, as they acquired depositors and borrowers at a faster pace than their rivals during the quarter-ended September 2009. According to the latest data released by the Reserve Bank of India (RBI), PSBs - comprising 19 nationalized banks, State Bank of India and its six associates - increased their share of deposits to 74.3 per cent, while they accounted for 74.2 per cent of the gross bank credit at the end of September 2009 [5].

At the top of the banking system is the Reserve Bank of India; it was established in 1935 in accordance with the Reserve Bank of India Act 1934. Its central office has been in Mumbai since 1937 [4].which is responsible for prudential supervision of banks, non-banks and for performing other central banking functions. There were two successive nationalizations of banks in India, one in 1969 and the other in 1980 and as a result public sector banks occupy a predominant role in Indian financial system. The last decade has seen many positive developments in the Indian banking sector (Exhibit 1 helps us to understand the expansion of banking sector in India in last 5 years).

Figure 1 depicts that the Public Sector Banks (PSBs) are dominant in the business profiles of Indian banks, controlling around 77.68% and 77% of the Total Deposits and Total Advances respectively. The Private Sector Banks (a dominant phenomenon post economic reforms) represent around 17% and 18% of the Total Deposits and Advances. On the other hand, Foreign Banks (so far restricted in terms of local aggression for the limited scope offered by law), have mere 5% and 4.6% share in the Total Deposits and Advances respectively.

Information Technology

The private and the multinational banks have started the banking practice with a sound technology base and the Public sector banks, which have a large number of branches, spread across the entire country have begun inducting technology at a rapid pace with large scale investments [3]. …

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