MUMBAI, MARCH 8: A few far-sighted Indian banks, largely privately run, are using the Internet to deliver convenience banking and lower transaction costs while shareholders reap the benefits of better valuations. "The obvious benefits are lower service costs and the access it provides.one can reach the bank anytime from anyplace," said K M Thiagarajan, chairman of Bank of Madura. Share prices of these Net savvy banks have hit historical highs and their valuation multiples have risen far above the sectoral average, since their Net banking plans were announced. HDFC Bank shares have more than doubled since the start of December 1999 while ICICI Bank share prices rose by over six times in the same period. Their respective price earnings multiples, at around 50 and 40, are much higher than the sector average which is below 10. During the same period, shares of the country's largest bank State Bank of India have fallen by one per cent to Rs 203 while the bellwether 30-share Bombay Stock Exchange index rose by around 20 per cent. GETTING THE RIGHT MIX: But bankers know that while Internet may be the future,consumers still need time to catch up. Banks needed a multi-channel strategy as the right of choice of the delivery method would be with the customers, said Mohan N Shenoi, senior vice president at ICICI Bank. "The idea is to drive low margin (transactions) traffic to electronic delivery channels and provide the profitable products like advisory services with the expensive facilities," he said. The use of the Internet would also ensure banks did not lose customers who were on the move. "Surely in the next two to three years it will become an important delivery channel which banks will have to offer in order to retain the mobile customers." said Ramesh Gelli, chairman and managing director of Global Trust Bank. THE MATCH-UP WITH PORTALS: Banks would need to "portalise" to meet the competition head-on as customer relations could be taken away by B2C sites and banks could end up as the back office to the transaction, bankers said. "On a broader plane suddenly portals have become competitors to banks.so banks will be forced to enter some sort of a portal situation," said Shenoi. Others saw these portals in a more complementary role. "They (portals) create the market place and we enable the payment mechanism and gateway services," said H Srikrishnan, country head - operations at HDFC Bank. The increased delivery of products through this new channel would also lead to data mining possibilities in the future. Bankers said the vast amount of data collected through Internet banking will lead to newer products. "Mass customisation, which is to identify the customer and offer him a tailor made product, will be possible only if you have data mining abilities," said Neeraj Swaroop, head of marketing and retail assets at HDFC Bank. TAPPING THE EXPATS: State-run banks have an advantage in terms of physical reach, but private sector banks have the edge in the virtual domain. Analysts said the low level of automation in state-run banks contrasted with private banks' readiness to think along product lines and engage technology. The Net would also help private banks capture a growing share of the lucrative expatriate business. Private sector banks are targeting the non-resident Indian (NRI) community which according to some independent estimates was worth $100 billion. "Though the number of transactions in NRI accounts are few,these transactions are high-ticket items with high profit potential," said Shenoi.
