The union budget for 2019-20 among other things hasannounced proposals to bring certain changes in the ways banking operations areconducted. There are two major announcements made by the finance ministerNirmala Sitharaman in her budget speech, which may witness change in bankingpractices in near future.
To begin with, public sector banks will be leveragingtechnology "to further improve ease of living, offering online personal loansand doorstep banking, and enabling customers of one public sector bank toaccess services across all public sector banks." This means extendinginteroperability facility to the account holders. In other words, customer ofone public sector bank can walk into any of the public sector banks to operatehis/her account and avail any banking service.
Besides, the budget proposal envisages that the governmentwill initiate steps "to empower account holders to remedy the current situationin which they do not have control over deposit of cash by others in theiraccounts".
At present, the account holders have no control over whodeposits money in their accounts. Besides, they are not required toauthenticate transactions in which someone else is depositing money in theiraccounts. Now, by virtue of the FM's announcement, such a control in placewould possibly require account holders' authentication to allow money goinginto their account through such transactions.
Why account holders will be given such a control over themoney deposited by someone else in their accounts? Even as the government isnot clear in their statement on this proposal, there are different theories putforward by cross section of experts. Some call it a measure to arrest evasionof tax, while some argue it as a safety measure to depositors against money laundering.Notably, money laundering is a major issue in the country and bank accounts are seen as convenient means ofcarrying out this activity.
Meanwhile, it would be interesting to see how both the abovementioned proposals are being implemented on ground. Leveraging technology tomake these proposals operational in near future would be a somethinginteresting to watch. As far as Interoperability is concerned, all the publicsector banks would be required to share their data on a single platform. One ofmy acquaintances, an IT experts, says that an interface or APIs (applicationprogram interface) can also be built so that banks share information to makeinteroperability a success.
Are the present technology platforms in line with theproposed changes? This is a big question. Of course, there are already certainbanking services that are interoperable, like usage of ATMs. A card holder canuse his/her card at any ATM of any bank to conduct cash or other transactions.But the scale of proposed change is mega in nature and needs to be flawless.Otherwise, it would create unrest among the account holders as was caused bythe 2016-demonetization drive.
Since interoperability facility has emerged as a possiblemeans of change in the way of banking in future, I am reminded of bank accountnumber portability. Some years back, the Reserve Bank of India (RBI) hadproposed to facilitate account number portability just like mobile networkproviders. It had asked banks to accentuate the process as it would improve customerservice. The intent as spelt out by the RBI was to support the "prospect of anaggrieved customer silently moving his/her account to another bank."
Bank account number portability means a customer can moveaway from one bank to the other by just transferring his bank account numberand not having to open a new account altogether in another bank. It is similarto telecom sector where unhappy customers can change their service operatorwithout the need to change their mobile numbers.
Presently, every bank has its own specific method ofallocating account numbers. If a customer desires to have an account in someother bank, he/she has to open new account. Opening a new account meanscomplying to the know your customer (KYC) formalities entailing a fair amountof paperwork and a new bank account number. With account number portability,the bank account number will remain the same when the customer moves his/heraccount to a different branch of the same bank or an altogether different bank.
So far, the progress on account portability initiative is unheard.
However, the fact remains that banking is undergoing aradical change as far as its operations are concerned. Be it interoperabilityor account portability proposals, banks have to get ready for huge investmentin bringing these services to the doorsteps of their customers. They need to betechnologically more advanced to sustain because of growing competition withthe digital banks. Besides, they will have to focus more on services andcustomer satisfaction.
(The views are of the author and not that of the institutionhe works for)