Jalan for new regulatory framework for fin sector

Speaking after inaugurating Bancit 2000, an annual banking technology event hosted by Infosys Technologies Limited, he said instability in financial sector could affect not only depositors but also everybody else 8212; as happened in East Asia.

In East Asia, he said, the crisis was not of the real economy and not that output had collapsed but the banking and financial system was not working. 8220;When transactions are not paper-based8230; and banks can transfer money through the electronic mechanism, the regulatory mechanism has to live up to that level,8221; he said.

He pointed out that internationally, a lot of consideration is given as to how to regulate E-banking, E-commerce and E-financial services to protect people8217;s interests.

Emphasising the need for all banks to come up to a certain standard of electronic transaction, Jalan said if the country wants to take maximum advantage of the IT revolution in financial services, it has to go across the board8217;.

8220;You cannot have three very good banks in terms of electronic transaction8230; three bad banks and three not very good banks,8221; he explained.

Asked if the RBI was ready to set a deadline for banks to convert their transactions into electronic, Jalan said: 8220;it is not possible to have a deadline. The change has to come from within the banks.8221;

He emphasised that along with electronic transactions, banks should also change their processes, noting that it takes several steps now to clear a cheque. 8220;I write on a piece of paper8230; somebody checks it, third person writes it on registers and fourth person8230; there are ten steps.8221;

8220;You cannot have electronic banking and all this if your processes do not change,8221; he observed. Stating that the benefits of IT should reach the masses, Jalan said it had thrown up a tremendous opportunity for India, especially in the financial and banking sector.

Giving an example, he said the country8217;s poverty alleviation programmes are connected with banking and financial services in some way or the other. 8220;If we can incorporate this revolution and change our banking and financial services, it would provide tremendous impetus not only for banking, but also for the economy as well,8221; he stressed.