Computerisation became popular in the western countries right from the Sixties. Main Frames were extensively used both by the Public Institutions and Major Private Organizations. In the Seventies Mini Computer became popular and Personal Computers in early Eighties, followed by introduction of several software products in high level language and simultaneous advancement in networking technology. This enabled the use of personal computers extensively in offices & commercial organisations for processing different kinds of data.

However in India organised Trade Unions were against introduction of computers in Public Offices. Computerisation was restricted to major scientific research organizations and Technical Institutes and defence organizations. Indian Railways first accepted computerisation for operational efficiency.

The Electronics Corporation of India Ltd. was set up in 1967 with the objective of research & development in the fields of Electronic Communication, Control, instrumentation, automation and Information Technology. CMC Ltd (Computer Maintenance Corporation of India Ltd.) was established in 1976 to look after maintenance operations of Main Frame Computers installed in several organisations in India, to serve the gap, when IBM left India, due to the directive of the then Central Government.

In the Private Sector the first major venture was TCS (Tata Consultancy Services) which started functioning from 1968. In the year 1980 a few batch-mates of IIT Delhi pioneered the effort to start a major education centre in India to impart training in Information Technology and their efforts resulted in the setting up of NIIT in 1981. Aptech Computer Education was established in 1986 following the experiment of NIIT.

Before large scale computerisation, computer education became popular in India and coveted by bright students, when several Engineering Colleges and Technical Institutes introducing Post Graduate Degree courses in Computer Engineering. The booming hardware and software industry in the West attracted Indian students and many of them migrated for better opportunities to the U.S.A. and settled there. We have today the paradox of India being one of the major powers possessing diverse talents in fields of software development, but at the same time, we are still a decade back to the using computerised service extensively in the country and bringing the facility to the realms of the common man.

Rapid development of business and industry brought manual operations of data, a saturation point. This acted as a overload on the growing banking operations. Government owned banks in general found the "house-keeping" unmanageable. Several heads of accounts in particular inter-bank clearing and inter-branch reconciliation of accounts went totally out of control.

Low productivity pushed cost of wages high and employees realised that unless they agreed for computerisation further improvement in their wage structure was not possible.

In the year 1993, the Employees' Unions of Banks signed an agreement with Bank Managements under the auspices of Indian Banks' Association (IBA). This agreement was a major break through in the introduction of computerised applications and development of communication networks in Banks.

The first initiatives in the area of bank computerisation, however, stemmed out of the landmark report of the two committees headed by the former Governor of the Reserve Bank of India and currently Governor of Andhra Pradesh, His Excellency, Dr.C.Rangarajan. Both the reports had strongly recommended computerisation of banking operations at various levels and suggested appropriate architecture.

In the 'seventies, there was a four-fold increase in the number of branches, five-fold increase in advances and a six-fold increase in deposits'. Mechanisation was seen as the best solution to the "problems inherent in the manual system of operations, their adverse impact on customer services and the grave dangers to banks in the context of increasing incidence of frauds.

The first of these Committees, viz. the Committee on the Mechanization of the Banking Industry (1984) was set up for the first time to suggest a model for mechanisation of bank branches, regional / controlling offices and Head Office necessitated by the explosive growth in the geographical spread of banking following nationalization of banks in 1969.

In the first phase of computerisation spanning the five years ending 1989, banks in India had installed 4776 ALPMs at the branch level, 233 mini computers at the Regional/Controlling office levels and trained over 2000 programmers/systems personnel and over 12000 Data Entry Terminal Operators. The Reserve Bank too had embarked upon an ambitious program to bring about state-of-the-art technology in the clearing process and had introduced MICR clearing at 4 centres and computerized clearing settlement at 9 centres.

Against this backdrop, the Committee on Computerisation in Banks was set up once again under Dr.Rangarajan's Chairmanship to draw up a perspective plan for computerisation in banks. In its report submitted in 1989, the Committee acknowledged the gains of the initial efforts and sought to move away from the stand-alone dedicated systems to an on-line transaction processing environment in branch banking. It recommended that the thrust of bank computerisation for the following 5 years should be to fully computerise the operations at both the front and back offices of large branches then numbering around 2500.

Computerisation efforts among the Public Sector Banks (PSBs) in India, which account for over 80 per cent of the assets of the entire banking system, has been substantial. Of the 45,439 branches of the PSBs as on September 30, 1998, as many as 3,668 branches serving customers directly had been fully computerised with a complement of more than 65,000 computer nodes/PCs. A total of 6961 branches have been partially computerised - with Advanced Ledger Posting Machines, Electronic Accounting Machines and Personal Computers. Of the 336 service branches, 149 had been fully computerised and 166 had been partially computerised.

The PSBs had installed 194 Automated Teller machines (ATMs) all over the country; they had issued over 8.5 lakh credit cards and over 32,000 debit cards. The latest in this area of activity has been the issue of SMART cards.

For international interconnectivity of computers and for cross-border transactions, 568 branches have been connected to the Society for Worldwide Interbank Financial Telecommunication (popularly known as S.W.I.F.T). Local Area Network of branches has been established at 571 branch locations using internal captive networks while 148 branches are on the RBINET.

The Reserve Bank then identified the Payment Systems area as thrust region for computerisation in banks. The Bank has constituted a Payment Systems Advisory Committee and an operational group to make policy guidelines. The payment systems which constitute the arteries of any economy has been recognised as the focus area for this group. This group was asked to consolidate the existing payment systems, developing new, technologically advanced modes of payments and integration of different payment and settlement systems into an efficient, integrated system that will function as a real time gross settlement (RTGS) in an on-line environment.

To facilitate these objectives, a Computer based network has also been established. This Wide Area Satellite Based network, called the Indian Financial Network (INFINET) aims at connecting computers at branches of banks. 479 branches at commercially important cities are to be connected to the INFINET in the first phase while the next phase would witness the coverage being extended to about 5000 branches.

The INFINET is a robust and secure network which would be used for effecting financial funds movements and important information flow within the country. In view of the sensitive nature of the transactions to be routed through the network and to make it totally secure, the usage of the network would be restricted to a 'Closed User Group' consisting of member banks and financial institutions only. The INFINET User Group is engaged in various aspects pertaining to the Payment Systems in the country including the issues related to security over the network, encryption and decryption of messages during transmission, standardisation of message formats, exchange of encryption keys etc.

The Reserve Bank continued to be involved in shaping the technology vision of the banking system. Following the recommendations of the Committee on Financial Sector Reforms, (which is popularly known as the second Narasimham committee), a Committee on Technology Upgradation was set up by the RBI for the Banking Sector in 1994. This committee has representation from banks, Government, technical institutions and the RBI. Among other things, this committee looked into issues relating to

1. Encryption of Public Switching Telephone Network (PSTN) lines

2. Admission of electronic files as evidence

3. Record keeping

4. Modalities for a satellite based WAN for banks and financial institutions with the necessary security systems by banks and other financial institutions, to ultimately develop a sound and an efficient payments system

5. Methods by which technological upgradation in banks and financial institutions could be effected and in the context study the feasibility of establishment of standards, designing payments system backbone and standards relating to security levels, messages and smart cards.

The Committee realised the urgent need for training, research and development activities in the Banking Technology area. Banks and Financial Institutions started setting up Technology based training centres and colleges. However, a need was felt for an apex level Institute which could be a Think-tank and Brain Trust for Banking Technology

The committee recommended a variety of payment applications which can be implemented with appropriate technology upgradation and development of a reliable communication network. The committee also suggested setting up of an Information Technology Institute for the purpose of Research and Development as well as Consultancy in the application of technology to the Banking and Financial sector of the country. As recommended by the Committee, IDRBT was established by RBI in 1996 as an autonomous centre for Development and Research in Banking Technology at Hyderabad.

IDRBT is engaged in a number of Research Projects to improve Banking Technology in India. The Institute is concentrating on four major areas of Research as follows:

1. Financial Network and Application Architecture

2. Payments System and Security Technology

3. Multimedia, Internet Technologies and Web Based Learning

4. Data Mining, Data Warehousing and Risk Management

IDRBT is also collaborating with Academic Institutions and Research Organisations in India and abroad for the purpose of promoting higher education, research and development in Banking Technology in India. The Institute is actively involved in the development of various standards and systems for Banking Technology, in coordination with the Reserve Bank of India, Indian Banks' Association and the various high-level committees constituted at the industry and national levels.

Apart from investing most of its time and resources in Research and Development, the Institute also offers Consultancy in I.T. and related areas to Banks and other Financial Institutions. Certification Management for E-Commerce and Electronic Payment Systems, Real Time Gross Settlements, Data Warehousing and Data Mining for Banks, Intrusion Detection Systems, Computer Based Training and Web Based Learning are some of the primary projects on which IDRBT teams are now working and offer consultancy to Banks and Financial Institutions.

The Institute has already established leadership in VSAT Networks and Corporate Network Design.

The term "MICR"stands for Magnetic Ink Character Recognition, and is used to describe the line of numbers and special characters that appear at the bottom of every check. Since the 1940s, banks have speeded check processing with special devices that " read" the MICR encoding and translate the characters into the account number and other pertinent information.

The Magnetic Ink Character Recognition (MICR) technology based cheque processing was first introduced in Mumbai and Chennai in 1987 by the Reserve Bank of India and gradually extended to Delhi in 1988 followed by Kolkata in 1989.

The Ministry of Commerce, Government of India has identified 114 centers as major export / import intensive centers in the country. The Ministry desired that, at all these centers, the bank branches should be fully computerised, inter-connected and networked and there should be inter-bank connectivity so that on-line banking facility could be made available to the exporter-importer customers.

The Department of Commerce in the Ministry of Commerce & Industry, Government of India, New Delhi is the nodal agency for overseeing implementation of Electronic Commerce (EC)/ Electronic Data Interchange (EDI) in the various organisations in the country.

Banks are one of the agencies entrusted with the responsibility for implementing EC/EDI. The Indian Banks' Association is coordinating the implementation of the EC/EDI in the various banks as per the directives of the Ministry of Commerce & Industry. Currently, 11 Public Sector Banks at 28 locations in the various airports / seaports are implementing the Banks- Customs EDI Project.

As part of the initiatives aimed at quick movement of funds in a paperless mode, the Reserve Bank of India had introduced the Electronic Funds Transfer System (EFT) in the year 1996 for quick movement of funds between different banks for the bank customers. Currently , the scheme is available for transfer of funds across 8,500 branches of banks at 15 centres where Reserve Bank of India manages the Clearing House (Ahmedabad, Bangalore, Bhubaneshwar, Chandigarh, Chennai, Guwahati, Hyderabad, Jaipur, Kanpur, Kolkata, Mumbai, Nagpur, New Delhi, Patna and Thiruvananthapuram)..The facility is available for transfer of funds for individual transaction up to Rs.2 crore per transaction with effect from 1st October, 2001.

THE Reserve Bank of India is considering a proposal to utilise State Bank of India's clearing houses to increase the reach of electronic fund transfer (EFT) facility in the country.

EFT is the safest and fastest way to transfer money from your account to another individual in another city regardless of which bank she uses.

All the transferor needs is her account number. A maximum of Rs.0.1mn can be transferred for a flat fee of Rs.25. The bank has discretionary powers to raise the limit for select customers. Or a customer can break up the transactions in to multiples of upto Rs0.1mn. The money sent is credited overnight and can be withdrawn by the receiver the day after transfer.

Disclosing other advantages of the EFT, an official of the IBA's department of information technology, says, "The facility can be availed of even if the branch from where you are sending the amount is not fully computerized. The details of the transfer have to be sent to the RBI which in turn notifies the receiving bank to credit the individual with the mentioned amount."

Being the largest bank, SBI has the maximum number of clearing houses across the country. A tie-up with SBI's clearing houses will enable RBI to expand the electronic fund transfer facility, said sources. The RBI will provide the EFT software to SBI's clearing houses.

The tie-up with SBI will enable the central bank to provide electronic fund transfer facility to almost every district in the country, the source said.

The EFT package, a software package developed by RBI, can run on even a Windows platform. It was developed in 1996 and is becoming increasingly popular with over 50 banks having implemented it.

EFT enables fund transfer from any branch of any bank, which is a member of the EFT system to any branch of any bank within 24 hours. This includes both inter-city, intra-city and also inter-bank and intra-bank.

EFT was first tested between Chennai and Mumbai. The year 1997 saw the EFT facility expanded to all metros and in 2002 over to 15 centres in a phased manner.

EFT is primarily aimed at retail transactions with a maximum amount permitted at Rs 2 crore. The NCC collects a mere Rs.5 per transaction.

The RBI gives the software free of charge to banks for faster processing of transactions and minimising paper based processing.