UTI Bank announces internet and retail plans - Views on News from Equitymaster

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UTI Bank announces internet and retail plans

Feb 25, 2000

UTI Bank has announced its plans to launch internet banking and increase its thrust into retail banking by March'2000. The bank would offer business to business (B2B) products such as cash management services to its corporate clients and also offer business to commerce (B2C) products to enable its clients to enter into transactions. As soon as the cyberspace laws are in place UTI Bank plans to tie-up with web portals to offer B2C products. On the information technology front with the aim of networking all its 45 branches UTI Bank has tied up with Infosys Technologies and Wipro. Wipro would lay the entire network for the bank and Infosys Technologies would provide the software support.

However UTI Bank has not specified the following: the amount that it would be spending towards this internet activity, how much returns would be generated from this for the bank. It has not announced a tie-up with any payment gateway as in the case of HDFC Bank and ICICI Ltd.

The other two banks to have launched internet banking are HDFC Bank and ICICI Bank. They have been very aggressive on this front with HDFC Bank announcing a tie for a payment gateway with Singapore Telecom for its e-commerce activities. HDFC Bank has also announced products like BillPay which provides its web customers to pay their phone bills from any place and at anytime. ICICI Bank has entered into a joint venture with Satyam Infoway for the online distribution of retail banking products on the internet.

Through the internet these banks would be able to provide everything from credit cards, housing loans, consumer loans to project finance on the internet. There are currently 2 m internet users in India and this is growing at a very fast pace of 25%-30% per annum. These internet related ventures can be seen as the key to future profitability in the banking sector as they can leverage on their strong and trusted brand names. As competition in the retail segment is on the rise those companies with the technology edge will be able to garner up more customers. They will be able to provide a more convenient and better range of products and services and this will eventually lead to banking from the convenience of your home. Other players in the banking sector too realise this need of higher technology and tie-ups of this nature in banking and finance sector are increasing.

Market View:
UTI Bank has not been viewed favourably by the market as it has been promoted by a public institution. However as has happened in the case of other private sector banks like ICICI Bank and HDFC Bank, UTI Bank is also likely to be re-rated by the market given its recent thrust to use technology.

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