Third Seminar for Directors of Banks on Beyond Core Banking

Independent Directors have an important role to play in evolving a good corporate governance structure. Good corporate governance framework is absolutely essential for any enterprise to meet new challenges, grasp new opportunities and also protect itself from risks by putting in place proper mechanism for risk monitoring.

On February 18-19 2013, IDRBT brought together Independent Directors of about 16 banks for the Third Seminar for Independent Directors of Banks to deliberate upon IT governance issues in banks. The Seminar was an ideal platform to put forth issues and concerns and expectations that are relevant to IT implementation initiatives in banks. Welcoming the gathering, Shri B. Sambamurthy, Director, IDRBT, spoke about the importance of Independent Directors in IT and Corporate Governance. He stated, "IT is no longer a technology function, IT has become a key business function." Therefore, the Board of Directors has the fundamental responsibility of sharing the business strategy.

The workshop emphasized on the crucial role played by Independent Directors and has lined up very relevant topics for discussion during the 2-day workshop. Shri. Anand Sinha, Deputy Governor, Reserve Bank of India and Chairman, IDRBT, inaugurated the Seminar. The highlights of his speech are as follows:

  • The global financial crisis underscored the lacunae in the governance framework of banks and has necessitated a re-look in the roles and responsibilities of the Board. Crisis has demonstrated that the institutions that had better governance systems could withstand the crisis better than the institutions that did not. Strong corporate governance helps to ensure ethical and vigilant activities of Directors and other professionals in the bank.
  • With the ever-increasing role of IT in automating banks' processes and MIS, the role of IT Governance as a part of corporate governance is also gaining importance. IT, with its immense potential in identifying, measuring and managing risks and also in providing robust MIS, can play a significant role in strengthening banks' governance systems.
  • While, as members of Board, their role is similar to any other Director, their independence is the crucial factor in ensuring effective governance. Independent Directors can provide inputs to all key decisions, such as strategies, performance evaluation and risk evaluation, etc., affecting the bank.
  • One of the major initiatives taken by the Reserve Bank in the direction of implementing good governance practices in RBI is the setting up of an IT Sub-Committee (ITSC) of the Central Board.
  • The mandate of the ITSC includes giving guidance to the Reserve Bank on overall IT strategy, infrastructure and applications, recommending measures for implementation of appropriate IT systems in the Reserve Bank, monitoring the progress of implementation of various IT initiatives undertaken, reviewing the security of IT systems, business continuity preparedness and suggesting necessary measures for improvement in these areas.
  • IT is being expected to play a leading role in delivering top line value and business transformation.
  • The IT capabilities of institutions drive their business strategy. The capabilities of emerging IT shape the strategic direction of a bank. It enables new competencies that make new business strategies possible.
  • The IT strategy should aim at actions that are necessary to build a responsive, efficient and delivery-focused institution.
  • The IT Vision Document 2011-17 sets priorities for commercial banks to move forward from their core banking solutions to enhanced use of IT in areas like MIS, Regulatory Reporting, overall Risk Management, Financial Inclusion and Customer Relationship Management.
  • The Vision document urges banks to work towards reaping benefits of technology in terms of cost reduction of small value transactions, improved customer services and effective flow of information within the banks and to the regulator.
  • Banks are now providing 24x7 banking services through their Core Banking Solutions. Banks have adopted CBS which are comprehensive and integrated and effectively address the strategic and day-to-day challenges faced by banks. However, competition among banks is now forcing them to look beyond CBS.
  • Banks can look at Beyond Core Banking technologies to automate, harness and analyze the data to utilise the same to enhance their productivity. There is an urgent need for the banks to build on the CBS capability in view of the financial system becoming more sophisticated and risk management becoming effective.Banks can look at Beyond Core Banking technologies to automate, harness and analyze the data to utilise the same to enhance their productivity. There is an urgent need for the banks to build on the CBS capability in view of the financial system becoming more sophisticated and risk management becoming effective.
  • With intensifying competition and an increasingly deregulated environment and, more importantly, with smarter and more demanding customers, banks will have to have a greater focus on CRM to remain competitive. The use of CRM in banking has gained importance with the aggressive strategies for customer acquisition and retention being employed by banks in today's competitive milieu.
  • At the top, the Board needs to be adequately aware of the IT resources and infrastructure available to meet required strategic business objectives and ensure that a process is in place to record the resources available/potentially available to the bank.

As part of the Seminar, a series of sessions were conducted on topics such as Corporate Governance and IT Governance: Role of the Board, Gopalakrishna Committee Recommendations, The Power of Analytics, Analytical CRM, IT Business Alignment, Regulatory Concerns on IT-related Issues, The Challenge: Technology Overview, Cloud Computing.

The Seminar also included a panel discussion on Information Security – Role of the Board – Information Security Strategy – Metrics to evaluate the challenges and concerns of various banks. A discussion was held to address the concerns in terms of Information Security in Banks, IT issues and challenges faced by banks, IT and Business Alignment, Cyber Frauds and IT Controls and Human Capital in IT: Current and Future Challenges, wherein the Directors provided useful insights and suggestions to resolve the same.