The Indian banking system has transformed from primitive `barter' system to online. As the economies developed, the barriers between countries got blurred, and this had a cascading impact on the system of trade and commerce. The necessity of international convergence had become an important factor in giant strides on the technology front, particularly Information Technology. The effect of technological sweep is fairly spread across the world and over different sectors. The technological developments enabled trade and commerce to flourish beyond the man-made boundaries. Corporate clients and businessmen started leveraging technology for their day-to-day operations. In the process, a need for reducing the time being consumed in the collection and payment system was felt.
Recycling of funds depends upon effective and efficient collection as well as payment system by business/commercial organizations. For the same, banks introduced a clearing and various other fund transfer systems.
Even though, the present system is time-tested, the advent of technology and spread of business and commercial activities forced banks to look for an efficient collection and payment system. If technology impelled banks to go for newer versions of collection and payment systems, necessity of fee-based income, with falling spreads compelled them to introduce a system that will increase non-interest income.
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