Governance And Compliance Emerge As Central Issues For BFSI

The economic crisis has changed a lot of things; in BFSI, it has highlighted the importance of IT in tough times.

“The way to manage downturn and sustain growth in the banking and financial sector is to take advantage of the present crisis and move forward by making IT spending cost effective and revenue generating,” said Shyamala Gopinath, deputy governor – Reserve Bank of India. She was delivering her ‘Inaugural Address’ at the 4th CII BANKing TECH Summit 2009 organised by the Confederation of Indian Industry (CII) in Mumbai yesterday.

Gopinath observed that in the past considerable focus of IT spending was on customer services and products, which did not extend to internal audit, back office and internal operations of banks. There was also a marked reluctance to spend on these areas as they were not considered profit centres. She thus emphasised the need for greater IT spending by banks on internal governance and control.

More from Biztech

Future Group - Reliance Retail Deal approved by CCI RBI ban on cryptocurrencies takes effect; prohibition could force investors to tap the black market

She further elaborated on the various initiatives taken by the RBI in converting Indian banking from brick and mortar banking to virtual banking. “There is marked improvement in various processes like fund transfers and settlement including RTGS, NFS, ATMs and others. Paper transactions still continue to be in high numbers, which also carry a high risk. RBI is thus considering shifting of high-value clearing to electronic mode,” stated Gopinath.

She expressed concerns of fraud, software and hardware glitches and money laundering resulting into tremendous loss. Gopinath concluded by saying that response required from IT providers would be in terms of affordability, availability, reliability, adaptability, convenience and operational comfort.

G Gopalakrishna, executive director, Reserve Bank of India, emphasised the role of internal control in banks. He said that technology could play a key role by ensuring good governance and good management practices. “IT-related concerns include inadequate governance, inadequate alignment with business requirements, system failures, inadequate segregation of duties, unauthorised access, malicious activities like hacking, cost overruns and data integrity issues among others,” said Gopalakrishna.

Dr K C Chakrabarty, chairman and managing director, Punjab National Bank, in his address said that this was time for the Indian banking and financial services industry to turn crisis into an opportunity and emphasised on the need to focus on inclusive growth by generating domestic demand. “It is necessary to make banking and financial products and services accessible to billions of Indian people by improving penetration. Taking products and services to masses will provide the necessary stimulus to the industry,” said Dr Chakrabarty. Explaining the role of IT, he pointed that information technology and infrastructure technology are the two vital pillars which can be utilized to effectively increase access to the masses. “Though these are tough times, we must expand but cautiously. Two things to be avoided in managing downturn are complacency and inaction,” highlighted Dr Chakrabarty.

“Banks will have a new role to play and technology will have to be part of the solution,” said Dr Naushad Forbes, chairman – CII Western Region and Director, Forbes Marshall. Dr Forbes observed that in the past, economic situations had forced automation in banking and hoped that the current crisis would also lead to such innovation.