Role of Technology in Enhancing Quality of Customer Service in Banks

By M.D. Mallya

Summary

M. D. Mallya, then Chairman and Managing Director of Bank of Baroda, uses this Forum of Free Enterprise booklet — the text of his Chief Guest address at the Fifth M.R. Pai Memorial Award function in Mumbai on 30th June 2009 — to argue that information and communication technology has become the central enabler of quality customer service in Indian banking. He frames customer confidence as the foundation of any banking system and identifies three dimensions of service quality: accessibility (branch and virtual presence), a wide range of liability and asset products, and the human element of processing and delivery.

The address traces an arc from the pre-Independence private banking system through the 1935 founding of the Reserve Bank of India, the 1969 and 1980 waves of nationalisation, and the post-1991 Narasimham Committee reforms that opened the field to new-generation private and foreign banks. Mallya documents how competition pushed Public Sector Banks to lift their delivery models — citing CAGR figures for deposit growth, Deposit-to-GDP rising to 67.8% by FY08, the migration to Core Banking Solutions (67% of branches), the spread of around 35,000 off-site ATMs, the IDRBT-built INFINET, and newer rails such as RTGS, NEFT, ECS, NFS and Cheque Truncation. He explains how Core Banking turns the branch customer into a customer of the bank as a whole, and surveys benefits including anywhere/anytime banking, MIS-driven customisation, and remote back-office automation.

The second half of the booklet takes up unfinished business: financial inclusion in a country where most villagers still bank with indigenous moneylenders; the need for low-cost, multilingual, energy-light and biometric ATM solutions; the integration challenges of obsolescence, security, phishing, and the cost asymmetry between manual (Rs. 45–50) and electronic (Rs. 15 ATM, Rs. 4 e-banking) transactions; and the rising customer expectations created by globalisation. Mallya closes by inviting his audience to become partners in spreading e-banking literacy and by insisting that even as Customer Relationship Management, smart-card mobile wallets and call-centre video banking arrive, the value of personal relationship will continue to outweigh the computer — banks, he says, must deliver the right blend of both.

Key points

• Customer confidence is presented as the foundation of any banking system, with service quality decomposed into accessibility, product range, and the human element.

• Mallya narrates the evolution of Indian banking through the 1935 RBI Act, the 1969 and 1980 nationalisations, the 1991 Narasimham Committee reforms, and the entry of new-generation private and foreign banks.

• Quantitative evidence anchors the argument: PSBs hold 72.6% of SCB advances (March 2008), deposits grew at 19.6% CAGR FY03–FY08, and Deposit/GDP rose to 67.8% by FY08.

• Core Banking Solutions, present in 67% of branches with about 35,000 off-site ATMs, are framed as a centralisation that makes each account-holder a customer of the bank rather than of a single branch.

• Payment and settlement infrastructure — INFINET, RTGS, NEFT, ECS, NFS, Cheque Truncation, and CCIL platforms — is surveyed as the plumbing behind anywhere-anytime banking.

• Financial inclusion is identified as the unfinished agenda: indigenous moneylenders still dominate villages, and low-cost multilingual biometric ATMs, business correspondents and mobile banking are proposed remedies.

• Transaction-cost economics drives the case for migration: manual transactions cost Rs. 45–50 against Rs. 15 for ATM and Rs. 4 for e-banking, but only volume can amortise the technology investment.

• Mallya warns that integration risks — obsolescence, hacking, phishing, data integrity, vendor alignment — are operational hazards that must be addressed alongside customer education, and that personal relationship will remain more valuable than computer-driven service.

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