Bankers have responded to queries about their level of IT capabilities in light of the RBI action on Kotak Mahindra Bank freezing digital onboarding and issuing credit cards.They said that investments in IT capability are a continuous process and cannot be considered as done and dusted.
Previously, technology mainly replicated manual tasks. Now, investments cover various areas, such as handling billions of monthly transactions across channels, enabling integration with other businesses and services, leveraging analytics for targeted sales, and employing artificial intelligence for customer service without human involvement.
The scale-up in the use of technology is an area of concern for the Reserve Bank of India, which wants to ensure that banks have made the necessary investments in systems to handle the volume, protect against fraud, and have a backup.
“Our IT and cybersecurity spending as a percentage of overall spending between 2019 and the current fiscal year has moved up from 5.6% to about 9.4%,” said Sandeep Batra, Executive Director of ICICI Bank, in an earnings call after the bank’s results. The bank said that technology spending would continue to grow at a faster pace than overall expenses, but the rate of growth of tech expenses, given the large pace, would moderate.
Bankers said that the issues cited by RBI in the case of Kotak – managing IT equipment, updating software, controlling user access, vendor risk management, and data security strategy – are part of the RBI’s checklist in supervision. “These are issues that have to be constantly addressed. A bank cannot say that it has addressed the issues once and for all.”
According to Sumant Kathpalia, MD & CEO of IndusInd Bank, the bank spends 8-10% of its total expenditure on information technology. He added that the private lender has a board-level committee that is constantly evaluating its technology capabilities.
Yes Bank said that its IT expenditure has gone up 17% to Rs 1108 crore in FY24, which is almost 30% of what the bank spends on staff expenditure. The expenditure includes the opex spend as well as depreciation. “About 10% of our operating costs are coming from technology, and we are conscious of making sure that we keep investing in technology, information security, and infrastructure for our future scale,” a bank official said.
Subrat Mohanty, Executive Director in charge of banking operations at Axis Bank, said that the bank has made investments to handle the surge in digital transactions while ensuring system resilience and data security. “This is a constant kind of work that we have been at for the last three to four years. And fundamentally, this requires a very strong and new-gen technology architecture, which separates the core banking system from the middleware, and then middleware from the frontend systems where most of the transactions are happening, which we have done,” he said.