Alapati, Varalakshmi and Prasad, chowdari and Rao, Srinivasa K S (2013) BANKING INNOVATION FOR A ECO-FRIENDLY ENVIRONMENT: A NEW TREND OF LEAN AND GREEN MANAGEMENT. Journal of International Academic Research for Multidisciplinary, 1 (6). pp. 400-421. ISSN 2320 – 5083

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Banking System in India is over two hundred years old. During the British period, majorly there were three Presidency Banks but in 1921 Imperial Bank of India (IBI) was formed by merging the three Presidency banks. Only in 1934, Reserve Bank of India (RBI) was formed by taking over the functions of a Central Bank of the country from Imperial Bank of India. In 1955, IBI was transformed into State Bank of India (SBI) 1955. Within two years of formation of SBI, seven subsidiaries which were the treasuries of the Kings in different regions were made part of State Bank Group. The State Bank Group (SBG) was given the primary responsibility of opening more and more rural branches and lending to the rural sector including agriculture,small business, etc. Subsequently, with the two nationalizations in 1969 and 1980,twenty leading private banks were brought into the fold of Public Sector Banks (PSBs). The Indian Banking System also comprises the co-existence of Old and New Private Sector Banks, Foreign Banks, Cooperative Banks, Regional Rural Banks and Local Area Banks. The operations were mainly to attract deposits which were deployed in lending and investment in securities besides complying with RBI requirements. However, up to late 1980s, Indian Banking system was working on traditional lines. Apart from adopting archaic accounting principles, risk management techniques, etc., they were adhering to the administered interest rates of RBI and directed lending to identified sectors without concern for customer care, productivity and profitability parameters. The economic reforms in India started in early nineties, but after about two decades, their outcome is visible now. It was such a coincidence that while the Indian economy suffered with shortage of Foreign Exchange Reserves in 1989-90 due to political and economic ills in India, banking sector became the target or victim thus becoming a subject of reforms simultaneously. Major changes took place in the functioning of Banks in India only after beralization, Privatization and Globalization. Due to reforms in the 1990s, the depth and width of financial system in India has improved and two PSBs were merged making the number down to nineteen. Transparency of Balance Sheets of banks became the ‘buzz word’ and capital was to be infused in many banks conforming to the Basel standards. Though role of banks as financial intermediaries has reduced gradually, market share of banks continues to remain the largest in the financial market. Increased competition, new information technologies and thereby declining processing costs, the erosion of product and geographic boundaries, and less restrictive governmental regulations have all played a major role for Public Sector Banks in India to forcefully compete with Private and Foreign Banks. Healthy competition has set in among different banking players leading to efficient customer relations management. It is interesting that Foreign Banks were operating in India for over a century. Even though, RBI liberalizing the licensing policy and enabling more Foreign Banks and their branches to be established / opened in India since 2005, there seem to be no much change in their market share. These banks are expected to be having attractive financial products, offering competitive service, world class working environment with technologically equipped manpower and quick decision-making. However, domestic banks have also competing with technology, competitive products and services offered. Several agencies started comparing the working of Banks in India on their performance over the past, through surveys. Banks in India have become compliant to the mechanization followed by computerization and well net-worked. Technology was introduced in a progressive manner both at back-office and front office level in almost all the branches in rural, semi-urban, urban and metro centers. Gradually,ATMs, Internet Banking, Credit, Debit & Smart Cards and other facilities were made effective at all the bank branches. These changes and developments have benefitted to all the customers. Banks are investing / spending huge funds for technology as well as training its staff in order to meet the changed work environment and Core Banking became order of the day. Lean Management is a concept applicable generally to manufacturing units. However, the same is now made applicable to banking industry too, which is a service sector. Against several odds like opposition from Trade Unions, these banks – both in private and public sectors were brought under the system with the help of Technology. Another major breakthrough was offering facilities like ‘Golden Handshake’ or “Voluntary Retirement” to the staff who could not cope with the changing environment. Hence, the downsizing of staff and introduction of technology in the industry lead not only to efficient customer service, but also improved on productivity, profitability. Banks are adapting to Risk / Asset Liability Management aspects and also compliance to Basel norms by attaining global standards. Green banking can benefit the environment either by reducing the carbon footprint of consumers or banks. On-line banking is an example of an initiative of Green Banking. When a bank’s customers go on-line, the environmental benefits work both ways. All the above developments have definitely helped the transformation of banks in India during the last two decades. There has been a remarkable improvement in the working of banks in terms of cutting costs, increasing productivity, improving the profitability, controlling and management of the Non- Performing Assets (NPAs), face the risks, carry out the Asset Liability Management, manage the changes in interest rates, handle the foreign exchange rate fluctuations, comply with the regulator’s requirements and finally improve the customer service to their best satisfaction.

Item Type: Article
Uncontrolled Keywords: Lean Management, Computerization, Customer Service, Productivity, Green Banking.
Subjects: Departments at MU > Commerce
Depositing User: MIM User
Date Deposited: 07 Nov 2013 09:38
Last Modified: 26 Nov 2014 06:51

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