much as banking and finance. it has become the most important factor for dealing with the intensifying competition and the rapid proliferation of financial innovations. it has enabled, in general, raising the efficiency of financial intermediation in the face of ever - rising volumes of transactions, falling margins and more empowered customer expectations. in particular, there are four or five key areas in which the financial system has experienced the benefits of the technology revolution : product development, market infrastructure, risk control and market reach. the interaction of technology with globalisation has contributed to the expansion of financial markets beyond national borders, heralding the end of geography. in the process, technology has changed the contours of three major functions of financial intermediaries : access to liquidity, transformation of assets and monitoring of risks. the indian financial system is quickly adapting itself to these developments and is acquiring a customer - centric focus. the proliferation of automated teller machines ( atms ), networking of these atms and shared payment network based atms is a feature that has been welcomed by the banking public. other innovations already within the domain of banks and financial systems in india include internet banking, electronic funds transfer and ‘ anywhere / anytime banking ’, all of which have a high level of technology embedded in the systems offering these services. many of the older banks are migrating towards the implementation of core banking or clustered solutions which would contribute significantly towards increasing customer satisfaction. in all this, business process re - engineering becomes an essential concomitant to ensure best results in technology upgradation. in recent years, the reserve bank has assigned priority to the upgradation of technological infrastructure in the indian financial system. efforts have been made to modernise clearing and payment through micr based cheque clearing, electronic clearing services and funds transfer ( ecs and eft ) and the centralised funds management system. for the traditional paper - based cheque systems, introduction of cheque truncation and imaging of cheques is envisaged to reduce the time lags in realisation of cheques. substantial efforts have gone into developing what has been described as the ‘ plumbing ’ in the financial architecture - a modern, efficient, integrated and secure payment and settlement system for the financial services industry in india. significant milestones in this path are the negotiated dealing system for transactions in government securities and the clearing corporation of india. in order to establish an efficient, cost - effective and dependable communication backbone, the infinet has been set up

conditions. under the present circumstances, improvement in the cost structure of the banks and work culture are important priorities. in order to enable the public sector banks to deal with the new capital requirements as per international guidelines, recapitalisation was initiated in 1993, aggregating rs. 20, 446 crore by the end of the 1990s. the verma committee ’ s recommendation that recapitalisation of ‘ weak ’ public sector banks be accompanied by conditionality relating to managerial and operational aspects of the banks ’ functioning was endorsed in the union budget, 2000 - 01. accordingly, in 2001 - 02, a sum of rs. 1, 300 crore was provided to one of the weak nationalised banks. two of the weak banks have already turned around and are reporting profits and a capital adequacy ratio of 9 per cent. the last one is also going through a turnaround. recapitalisation is associated with a monitorable reform programme and operational restructuring to ensure that flow problems in a bank ’ s performance are dealt with. mergers have reflected efforts to reap economies of scale and scope through joint production of financial services and one - stop delivery wherever synergies in service supply can be exploited to lower costs of production. in general, these mergers have come about as a result of government efforts to restructure inefficient national financial systems. market - driven consolidation is a relatively new phenomenon in these countries. a critical issue in almost all emerging economies is a reassessment of the ownership of the state in the financial system and a redefinition of the role of state - owned banks and financial institutions. the changing structure of the banking and financial systems in emerging economies has implications for systemic stability and the supervisory regime. a major structural change in our financial system is the infusion of competition. the enabling conditions for a more competitive environment initially took the form of shifts in the policy regime. statutory pre - emptions were progressively lowered, interest rates were deregulated and restrictions on entry and exit were eased. financial markets were developed to enable financial intermediaries to deal in assets and liabilities of varying maturities and risk profiles. activity restrictions were eased and banks can now undertake various types of activities reserved earlier for development financial institutions. likewise, the term - lending financial institutions have been allowed to undertake working capital financing. elements of this growing convergence have determined the pace and sequencing of the approach to universal banking in the recent years. within the banking system, there