Banks are investing large sums – up to 10% of their operating expenses – to upgrade their IT systems and comply with regulatory norms even as they cope with the rising number of online transactions.
Sandeep Batra, executive director, ICICI Bank, said last week that IT resilience and customer security were of paramount interest to the bank. “This is not constrained by any budget. In fact, since 2019, our IT and cyber security spends as a share of overall spends have moved up from 5.6% to 9.4%,” Batra said.
HDFC Bank is also making substantial investment in technology, its MD & CEO Sashidhar Jagdishan said. “We will continue to invest in distribution, people and technology. In fact, our operating leverage will be harnessed over a period of time to use enhanced tech and digital infrastructure,” Jagdishan said.
Axis Bank’s technology and digital spends constituted 9.3% of its total operating expenses of Rs 9,319 crore during Q4. Its MD & CEO Amitabh Chaudhry said the strong position of the bank’s products was due to the continuous investment in people, process and technology in the past five years. “We have early leadership in micro services-based cloud adoption and it is the first Indian bank to be ISO certified for its AWS and Azure Cloud Security as part of its commitment to open API ecosystem,” he said, adding that the lender now offers a wide stack of 410-plus APIs on its developer portal.
Sumant Kathpalia, MD & CEO of IndusInd Bank, said the lender spends 8%-10% of its cost-to-income on digital and IT capabilities. “IT infrastructure can especially be dedicated towards developing better UI/UX design, fraud management, shoring up KYC and e-KYC capabilities on real-time and online basis,” he said.
CSB Bank MD & CEO Pralay Mondal told FE that it spent 7%-8% of its operating expenses on building IT services and the amount will increase in the next three-to-four years. “Our maximum investment is in technology. Most of the IT systems will be new-age and the best in class. We are building a new bank by rebooting technology completely,” he said.
Bank of Maharashtra MD & CEO Nidhu Saxena said the lender’s IT spending has increased over the years. It spent Rs 800 crore in 2023 for IT and digital services, Rs 900 crore in 2023 and is aiming to spend more than Rs 1,000 crore this year. “A proper mechanism will be put in place to check how many new accounts are being opened digitally, how many debit cards are being issued, and how many are actively doing mobile banking transactions,” Saxena said.
In the past several years, the regulator has pulled up some lenders for inadequate IT infrastructure and has barred them for activities such as on-boarding clients digitally or issuing credit cards. Last week, the Reserve Bank of India (RBI) asked Kotak Mahindra Bank to stop on-boarding new customers through its online and mobile banking channels and to stop issuing fresh credit cards