The Reserve Bank of India [Get Quote] on Monday sought the banking sector to develop business intelligence to sustain high economic growth and balanced development of the country.

Speaking on ''Sustaining Growth and Managing Risk Through IT: Issues and Implications for the Indian Banking Industry'' at the inaugural session of the CII Banking Tech Summit in Mumbai, RBI Executive Director R B Barman said that though IT had enabled banks to build efficient and less risky payment and settlement system, much of the growth had been witnessed in the urban sector only.

''When it comes to rural development, our banking system has not succeeded in providing the much needed credit for absorbing capital and advanced plant breeding practices for raising productivity and thereby higher income for the rural masses,'' he said, adding that of the total credit from the banking system, rural credit accounted only for 10 per cent.

''Credit available from alternative sources is costly and its servicing takes away a sizable part of an individual's income. As a result of juxtaposition of many factors, rural income has been growing at a very slow pace'' Barman said.

Banks should design schemes for the delivery of efficient banking service, particularly credit delivery to raise rural income.

Information asymmetry between borrower and lender still persists.

Banks should invest in IT to build better information system to act upon incipient weakness well in time to avoid higher risks and possible non-performing assets. It could also attempt to find other avenues including securitisation to bundle out risks, he added.

IT helps in going beyond traditional banking to expand the scope of business, understand risk and return profile of each area of business and decide tactical and strategic stances to be pursued for higher efficiency and profitability.

Barman said that it had been a strategic instrument for high performance in the banking sector, which had been in the forefront of IT revolution. While bank deposits were largely liquid, bank assets compose of sizable illiquid loan portfolio. Even if a bank is privy to better information about the borrower than the market, information asymmetry between borrower and lender still persists.

He said as systemic risk involved in modern banking could destablise the entire economy, banking was subject to stringent prudential and supervisory regulations as a public policy. The administration of such regulatory policy and surveillance required comprehensive information.

Barman informed that the RBI has built a major Enterprise Wide Datawarehouse, which was still evolving to cater to the varied needs of users, both within and outside the Bank. Though various developed data models were available, banks need to keep in view the needs of inclusive growth and financial inclusion as part of the architecture for developing data warehouse and business intelligence relevant for their own purpose.