Promoting Digital Banking

• 28 Jul 2021

Why in News

Recently, the Union Minister of State for Finance has stated in the Rajya Sabha that the Government has taken a number of steps to facilitate digital banking, doorstep banking services and digital lending platforms.

Key Points

• Digital Banking:
  • It is the digitization (or moving online) of all the traditional banking activities and programs services that were historically only available to customers when physically inside of a bank branch.
  • This includes activities like Money Deposits, Withdrawals, and Transfers, Checking/Saving Account Management, Applying for Financial Products, Loan Management, Bill Pay, Account Services.
• Challenges:
  • Internet access is not the only barrier to adoption of digital payments.
  • Educating users as well as ensuring the security of their data is essential.
• Initiatives Highlighted:
  • EASE Reforms Agenda: It was launched in January 2018 jointly by the government and PSBs.
    • It was commissioned through Indian Banks’ Association and authored by Boston Consulting Group.
    • EASE Agenda is aimed at institutionalizing CLEAN and SMART banking.
    • EASE Reforms Index: The Index measures performance of each PSB on 120+ objective metrics. The goal is to continue driving change by encouraging healthy competition among PSBs.
    • EASE 1.0: The EASE 1.0 report showed significant improvement in PSB performance in resolution of Non Performing Assets (NPAs) transparently.
    • EASE 2.0: EASE 2.0 builds on the foundation of EASE 1.0 and introduced new reform Action Points across six themes to make reforms journey irreversible, strengthen processes and systems, and drive outcomes.
      • The six themes of EASE 2.0 are: Responsible Banking; Customer Responsiveness; Credit Off-take, PSBs as UdyamiMitra (SIDBI portal for credit management of MSMEs); Financial Inclusion & Digitalisation; and Governance and Human Resource (HR).
    • Ease 3.0: It seeks to enhance ease of banking in all customer experiences, using technology viz. Dial-a-loan, Partnerships with FinTechs and E-commerce companies, Credit@click, Tech-enabled agriculture lending, EASE Banking Outlets etc.
    • Ease 4.0: State-run banks will focus on co-lending with non-banking firms, digital agriculture financing, synergies and technological resilience for 24x7 banking as part of their reforms agenda for this fiscal, Ease 4.0.
  • PSBloansin59 minutes.com:
    • Initiation of digital lending has been made contactless through PSBloansin59 minutes.com, using triangulation of credit bureau, income-tax and goods and services tax (GST) data, to provide online in principle approval for Micro, Small and Medium Enterprises (MSME) loans.
  • Trade Receivables Discounting System (TReDS) Platform:
    • Online bill discounting for MSMEs has been enabled on a competitive basis through Public Sector Banks (PSBs) onboarding onto the TReDS platform and the proportion of online discounted bills has grown rapidly.
      • Bill Discounting is a trade-related activity in which a company's unpaid invoices which are due to be paid at a future date are sold to a financier (a bank or another financial institution).
  • Jeevan Pramaan' Initiative:
    • This initiative for pensioners has enabled senior citizen pensioners the facility to update their annual life certificate online.
  • Doorstep Banking Services:
    • PSB Alliance, an initiative of all PSBs and Indian Banks' Association, has launched doorstep banking services for all customers.
    • Through ‘Door Step Banking’, customers can avail major Banking transaction services at their Doorstep.
• Current Status:
  • Now, nearly 72% of financial transactions of PSBs are done through digital channels, with doubling of customers active on digital channels from 3.4 crore in FY 2019-20 to 7.6 crore in FY 2020-21.
  • The share of financial transactions undertaken through home and mobile channels has increased from 29% in FY 2018-19 to 76% in FY 2020-21.

Way Forward

• Digital is the only way forward. Banks will have to hitch to this bandwagon by adapting new age technologies like Blockchain, Artificial Intelligence, Machine Learning, and Internet of Things (IOT).
• Cross-selling through Intelligent Analytics driven on the strength of big data and curated product offerings for different customer segments is what will distinguish banking offerings.

Source: PIB