CHENNAI, Dec 23: The smaller, more flexible banks are taking advantage of the fact that customers of banks here, especially the public sector banks (PSBs), are still awaiting the realisation of the promises made concerning the benefits flowing from computerisation. HDFC Bank's Freedom Account, is a classic example, offering ATM facilities, among others, as part of an ordinary savings account.

Most PSBs, and the older private banks, have only burdened customers with higher minimum balances, pointing to computerisation as a main factor behind increased operating costs. But computerisation has been more often than not used for administrative purposes rather than improving customer efficiency.

Faced with choosing between paying a higher price for much better service on one hand and paying slightly less for age-old standards it is not difficult to guess the choice customers will make. Even the cost factor will soon disappear as the "techno-banks" appear to be working on removing this disadvantage.

In fact, said a senior Indian Bank executive, most banks have been looking at computerisation largely in treasury management because of large range of fund inflows now-a-days and also to cope with administrative demands.

Both major Tamil Nadu banks, Indian Bank and Indian Overseas Bank have made grand announcements about opening a website on the Internet, launching automatic teller machines (ATMs), promising interconnectivity among their large number of branches and of the imminent arrival of services like Tele-banking. But customers have seen precious little by way of "real time" benefits. And this, sad to say, does not end with the bigger banks. Even smaller banks and those in private sector are quite culpable of a similar lack.

Take the case of Union Bank of India. Despite computerisation of all its city branches the clearance of cheques still take two days.

It is in such areas that the new generation private sector and foreign banks find customers' favour. Banks like HDFC Bank and Times Bank offer customer almost instantaneous clearing in such cases.

Even smaller private banks like Bank of Madura, Lakshmi Vilas Bank and Federal Bank have been unable to match such services. Agreed the size and scale of computerisation is quite daunting.

In the case of Canara Bank, computerisation of over 200 branches would entail an investment of over Rs 125 crore.

Even after this less than 50 per cent would be totally computerised at 1000, a senior official in the bank said. IOB's automation project would still cover only a fraction of its huge network of 1400 branches as is the case with Indian Bank. But this argument does not hold good for banks with branch networks that measure around 300 or less in strength. BOM, LVB, KVB, Federal Bank, Catholic Syrian, South Indian, Dhanalakshmi, Dena, Bharat Overseas, the list is endless.

IOB in fact has just finished drawing up final plans for a large scale computerisation. Of its over 1360 branches, IOB has presently around 350 automated centres, with only 40 being completely computerised. Similarly Indian Bank too has dismal numbers. Of the 1486 branches only 100 are totally computerised and it offers ATM facilities at 18.

IOB also plans to have in place by March 1998, 30 centres VSAT linked, a Management Information System (MIS) and a database at headquarters. Until then it is handicapped as it is unable to offer products like Telebanking. Its entire networking project will be complete only as late as 2000.

PSBs, a senior banker argued, had to treat each branch as a cost centre, he argued. It was also not as easy as in their instances to become totally technology oriented as the large number of branches and accounts could create problems, basically with security considerations, if computerisation was rushed, he pointed out.

The large scale was also one of the reasons the bigger banks suffered in comparison. Unlike the new breed of banks, and the foreign banks, they had to work at computerising numerous branches. The strategy of selecting a few branches for automation has not paid the estimated dividends. Recent entrants started off with the best technology in place and were thus afford to win the pricing war.

PSBs have also had to overcome protests from the unions, especially the workmen associations. Even now, unions like the Bank Employees Federation of India (BEFI) are not fully convinced of "machines not taking over humans." PSBs have also spent a lot in training personnel and then watch them leave to foreign banks or other countries, the official said. "We are unable to match the salaries others offer," an IOB manager said.

It is because they have sensed these lacunae that the smaller outfits are rushing in. The recent promises made by India at the WTO convention would only "add to our headaches," felt a PSB official. HDFC Bank, for instance, is planning to double its branch network by March 1999. It is one of the very few to offer "anytime and anywhere" banking. The bank feels that there is a huge market of around 15 million spread over 15 cities. In fact it is one of two banks which allows on-line cash transfers. BOM is another to take advantage of autonmation though it is using it more for large scale funds transfer. But being a more flexible organisation it has been able to succeed. Federal Bank has tied up with ICICI in a "strategic alliance" to take advantage of the strengths of both entities. It has 386 branches, of which 34 are fully and 69 partially computerised branches. It plans to invest Rs 32 crore in information technology (IT) this year and by 2000 around 85 per cent of the bank's transactions would be carried out through computers, a bank official said.

With margins declining, banks like Corporation Bank, Karur Vysya Bank (KVB) and LVB have begun to race towards increased efficiency in operations and to fine tune their asset liability management. IDBI Bank is another outfit to study ways of how it can "exploit its technological edge" especially in servicing the retail segment, a bank source said. Handicapped by a small 16-branch network the bank is to offer the ability to customers to operate their account from any city, he said. Facilities, like Telebanking and Electronic Funds Transfer, were already in place for corporate clients, he said and added that these would soon be extended to serve individual clients also.

Banks may have realised that in the end the way to higher profits is through enhanced customer service. But unless they can make this a reality they will be forced to take a back seat and watch their advantages, like a large network, turn into millstones around their operational neck.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.