core banking report
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Project Report
On
Need & Effectiveness of Core Banking Solution
Submitted in the partial fulfillment of
Master of Business Administration
(2004-2006)
Submitted To: Submitted By
Project Guide Saurabh Bakliwal
Mr. Santosh Tagore MBA 2004-2006
Faculty, IMS IMS, DAVV Indore
Indore
Institute of Management Studies
Devi Ahilya Vishwa Vidyalaya, Indore
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CERTIFICATE
I certify that Mr. Saurabh Bakliwal, a student of MBA (2004-2006)FT of Institute of
Management Studies, DAVV Indore, has carried out a research project entitled Need &
Effectiveness of Core banking solution with special reference to State Bank of Indore, inpursuance to the requirement of the MBA (2nd Sem) curriculum.
I am satisfied with the work done by him. I wish him luck for all his future endeavors.
Project Guide:
Mr. Santosh Tagore
Faculty, IMS
DAVV, Indore
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DECLARATION
I have tried my level best in making this research project useful, pragmatic & successful. I
have tried to provide the accurate information to the best of my knowledge. The data collectedis primary, authentic & analyzed by me.
I have got the questionnaires filled by branch managers of different branches in Indore and
their respective employees & clients. All other information has also been gathered fromreliable sources.
I hereby declare that project entitled Need & Effectiveness of Core Banking solution isauthentic I have put in my efforts meticulously to make this project to come up to the
expectations and pragmatically viable.
(Saurabh Bakliwal)
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ACKNOWLEDGEMENT
This project is not one persons solitary effort. Its successful completion is the result of many
different people to whom I owe a debt beyond repayment. Unfortunately, I can not
acknowledge my indebtedness to all these people, so I must necessarily limit my thanks tothose who have helped me directly in making my project work an incredibly pleasant task and
giving to final shape.
It is my duty as well as privilege to express my deep sense of gratitude to all those who have
been associated with me in this research project.
First of all, I express my deep gratitude towards Mr. Santosh Tagore, my project guide whoinitiated this study and also helped me by giving his valuable comments at every stage of my
work.
I m also deeply indebted to Dr. (Mrs.) Sangeeta Jain, Coordinator MBA (Full Time) atIMS, Director Dr. Rajeev Gupta at IMS for the providing the required facilities for my
project.
I offer my sincere thanks to all the branch managers of various branches of State bank of
Indore situated in Indore & their respective employees & clients for their co-operation &
providing valuable information by filling questionnaires.
Last but not least, I m also thankful to my father Mr. Dilip Jain, my uncle Mr. Narendra Jain
and rest of the family for providing me crucial feedback that influenced the development ofthis project. I m also thankful to my friends and all my classmates for their constructive
criticism and constant encouragement and friendly co-operation.
(Saurabh Bakliwal)
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PREFACE
Banking scenario has changed rapidly since 1990s. The decade of 90s has witnessed a sea
change in the way banking is done in India. Technology has made tremendous impact inbanking. Anywhere banking and Anytime banking have become a reality. The financial
sector now operates in a more competitive environment than before and intermediates
relatively large volume of international financial flows. In the wake of greater financial
deregulation and global financial integration, the biggest challenge before the regulators is ofavoiding instability in the financial system.
Technology has thrown new challenges in the banking sector and new issues have started
cropping up which is going to pose certain problems in the near future. The new entrants in
the banking are with computer background. However, over a period of time they would
acquire banking experience. Whereas the middle and senior level people have rich bankingexperience but their computer literacy is at a low level. Therefore, they feel the handicap in
this regard since technology has become an indispensable tool in banking.
Foreign banks and the new private sector banks have embraced technology right from the
inception of their operations and therefore, they have adapted themselves to the changes in the
technology easily. Whereas the Public Sector Banks (PSBs) and the old private sector banks(barring a very few of them) have not been able to keep pace with these developments. In this
regard, one can cite historical, political and other factors like work culture and working
relations (which are mainly governed by bipartite settlements between the managements and
the staff members) as the main constraints. Added to these woes, the PSBs were also saddledwith some non-viable and loss making branches, thanks to the social banking concept thrust
upon them by the regulatory authorities in 1960s.But, now PSBs are also trying to compete
with private sector bank in terms of technology and Core banking solution is one of the
example of it.
My project is concerned with the motive of probing into the effectiveness level of corebanking solution with respect to its users i.e. branch managers/ systems managers, employees
& clients. This study is mainly concerned with measuring the need & effectiveness of Core
banking solution confined to State Bank of Indore, Indore division. In the proceedings, I hadformed an experience survey form that I got filled by various branch managers, employees &
clients of State Bank of Indore along with their personal interviews.
The research traces need & effectiveness of Core banking solution from the perspective ofbranch managers/ system managers, employees & clients. Along with these, I have thrown
light upon future aspect of banking scenario in India with respect to technology.
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CONTENTS
Chapter-1
1.1. Executive Summary
Chapter -2 Impact of technology on Banking-Literature review
2.1 The banking industry, history & technological changes2.2 Impact of IT Act 2000 on banking sector
Chapter-3 Core banking solution
3.1 Core banking solution
Chapter-4 Objective
4.1 Rationale of Study
4.2 Objective of Study4.3 Type of Research
Chapter-5 Project Methodology
5.1 Sample Design & Sample Size
5.2 Methods of Data collection5.3 Analysis
5.4 Findings
5.5 Managerial Implications & Recommendation5.6 Conclusion
Chapter-66.1 Bibliography
Chapter-7 Annexure
7.1 Questionnaires7.2 Raw score data sheet
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CHAPTER -1
7
1.1 Executive Summary
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EXECUTIVE SUMMARY
Banking was never been such a pleasure, but today information technology & its impact have
made banking a pleasure activity. In the present kaleidoscopic economic scenario l bankinghas seen sea change especially in Global as well as Indian context. It may be true that conceptof universal banking rushed through not because of inherent strength of the model but perhaps
may be of the sheer pressure of globalization & competition. But the fact remains is that
Indians are getting world-class services & products. Core banking solution is one of the
medium through which all these world-class facilities are being provided.
Its the core banking solution, which has made possible the concept of Anywhere banking
and Anytime banking with the help of ATMs, having centralized database. Now, acustomer is no more a customer of a particular branch, in fact he/she has become customer of
that banking organization and can do transaction from any branch of the bank all over the
India.
Core banking solution is the need of the hour. In this global village, where geographical
distances are ever shrinking with the advent of newer technologies and communication, Corebanking is essential. Core banking provides the ease of performing transactions, where we go.
In order to compete in this cutthroat competition, its essential for any banking organization to
integrate all its products and services and make a formidable combination for its customers.
Currently, most of the banking organizations are facing lot of problems in implementing Core
banking solution due to resistance to change, sophisticated technology etc. but they all are like
toothache problem and should be over in some time. Afterwards, we can expect a smoothjourney towards the new era of banking through Core banking solution.
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CHAPTER -2
Impact of Technology on Banking
9
2.1 Banking industry, history & technological changes
2.2 Impact of IT Act 2000 on Indian Banking
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IMPACT OF TECHNOLOGY ON BANKING
The banking industry, history and technological changes
Historical overview
Indian banking got its start in 1870, with the Bank of Hindustan. Modern banking began with
the establishment of three presidency banks under The Presidency Banks Act, 1876 - the Bank
of Calcutta, the Bank of Bombay and the Bank of Madras, which were subsequentlyamalgamated to form the Imperial Bank of India. Bank of Calcutta, the Bank of Bombay and
the Bank of Madras, which were subsequently amalgamated to form the Imperial Bank of
India.
The Imperial Bank carried out some of the functions of a central bank before the formationThe Reserve of the Reserve Bank of India under Bank of India (RBI) Act of 1934. The RBI
was constituted as India's apex bank without major government ownership. The BankingRelations Act of 1949 brought the RBI under government control, vesting it with wide-
ranging powers of supervision and control of Indian banks.
In 1955, the RBI acquired control of the Imperial Bank of India. It was renamed the State
Bank of India (SBI); The SBI then converted eight private banks floated in the erstwhile
princely states into 100% subsidiaries. Subsequently, the RBI forced weak banks to mergewith the strong ones reducing the numbers from 566 in 1951 to 85 in 1969; In 1980, the
government acquired six more banks with deposits of more than Rs. 2 billion. The avowed
purpose was to turn these banks into catalysts for economic growth. Rural markets forindustrial goods could not be developed so long as moneylenders, charging usurious rates ofinterest, were the main source of rural credit. Moreover, the 'green revolution' depended on
farmers finding substantial sources of credit to pay for fertilizers and hybrid seeds.
Since the mid-1970s, there has been a spectacular growth in the spatial distribution of bank
branches and in the size of their deposits and advances. According to experts in banking this
transformation has no parallel anywhere in the world (Anantharam Iyer, 1991). Afternationalization, there was also a change in recruitment policy. For the first time, the doors of
the banks were opened to everyone, irrespective of family status, caste, community, religion
or gender. Recruitment was placed on a more systematic basis, with merit assessed by aptitudetests conducted by an external agency in a relatively impartial manner (Deekshit, 1991).
As the size of the banking sector increased, the industry became difficult to manage.
Computer technology offered a possible solution. In India, a small number of industrialhouses and a few educational, research and development institutions started using computers
in the early 1960s. During the late 1960s and 1970s, service-oriented industries such as
airlines, railways and insurance companies introduced computers to 'improve theirfunctioning' and 'to provide better customer service' (Anantharam Iyer, 1991). Banks in India
did not, however, introduce computers on a large scale because of the fear that these would
result in retrenchment and unemployment (Goodman, 1991). For a long time Indian banks
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faced very little competition and operated in a protected economy. Thus no long-term policy
or perspective for the banking sector was formulated: it was simply treated as part of the
public sector. This is now changing. Well-computerized foreign banks are beginning tocompete seriously with the nationalized banks. They aim at a profitable and wealthy part of
the market and, in contrast to the nationalized banks, do not recognize any social
responsibilities to small account holders or to a rural and semi-urban clientele.
Technological changes, legislation and bargaining
In India, the main agents affecting the introduction of new technology have been the unions,
management and the workforce. The government has played a very indirect role in the
process. In the early days of the massive introduction of computer technology into industry
and services, union policies on new technology were basically defensive. They focused almostentirely on the immediate consequences of technological change on the workforce, especially
the aspect of possible job losses.
However, these attitudes and the strategies of unions vis--vis computerization have begun to
change, especially since the 1980s. Management in many places has been able to convinceworkers and unions that competition is becoming increasingly harsh, and computerization isnot only inevitable for the health and survival of the unit but also beneficial to employees,
because it may improve the competitiveness of the enterprise, enhance job security and
improve employment conditions. Many unions that have consistently opposed
computerization have had to face their members who are keen on technological changes. Asone EDP employee who is also a unionist put it, 'As a unionist I would oppose
computerization, as an employee I would welcome it. That is my dilemma.'
Consequently, unions today are increasingly seeking to influence the process of technological
changes so that new technology can be introduced in such a way as to benefit workers and
minimize its adverse consequences. The last decade has seen several 'technology agreements'or 'computerization agreements', along with routine collective bargaining agreements, which
contain clauses related to technology. Despite these agreements, most managers in India,
including those in the public sector, have consistently regarded all aspects of technologicalchanges as matters falling within the area of managerial prerogative. When consultation with
unions has occurred, these have been far from fair since unions have lacked the requisite
know-how and information.
The Reserve Bank of India (RBI) installed its first computer in 1968, and a larger one in 1979.
But the United Commercial (UCO) Bank, the Standard Chartered Bank, Lloyds' Bank, Grind
lays, and others had installed accounting and other machines before 1966. Operations such aspayrolls had been computerized fairly early on. Some head offices began to use computers by
the beginning of the 1980s. In September 1983. Two of the major banking unions - the AllIndia Bank Employees Association (AIBEA) and the National Confederation of BankingEmployees (NCBE) signed an agreement with the Indian Banks Association (IBA),
representing 58 bank managements. The unions wished to maintain surveillance of the process
and to protect job prospects in the banking sector, but the final settlement was self-
contradictory. On the one hand there were restrictions on computerization, with numericallimits on the numbers of mainframe computers, and even on the number of accounting
machines that might be used in rural branches, but there was also a loop-hole which allowed
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the banks to use 'such number of mini-computers as are warranted by their needs and
exigencies'.
The 1983 agreement provided an opening for individual banks to make their own
computerization agreements, and many foreign banks immediately took advantage of this
'openness' to negotiate agreements giving them a free hand to introduce new technology,despite the careful restrictive approach of the AIBEA and NCBE.
In March 1987 the AIBEA and NCBE signed a new settlement with the IBA. The settlementwas similar in its approach and concerns to the 1983 agreement. Although it allowed for an
extension of new technology in both the operations computerized and the equipment used, the
concern was largely still with ways of restricting and controlling the use of computers to
protect existing staff and preserve the prospects for future staff. The agreements also providedsome additional allowances and protection for pregnant women. Taking advantage of the
'openness' clause in the 1983 and 1987 agreements, some of the AIBEA's own affiliates
agreed to the installation of automatic teller machines and fax machines, which were beyondthe purview of the industry level accord.2 There are signs that the AIBEA has been forced to
reverse its earlier relatively liberal stance on computerization because of the campaignspearheaded in recent years by its arch rival, the Bank Employees' Federation of India (BEFI),which has been seeking recognition from the IBA.
However it would be misleading to look at the unions alone in explaining the slow rate of
technological innovation. A highly placed bank executive commented that the management ofthe banks lack perspective, because of the protection they had enjoyed, and were not really
serious about computerization (Goodman, 1991). There is also uncertainty among bank
managers about the implications of computerization in terms of the hierarchy and their ownpositions. Employees of many Indian banks, including the State Bank of India and Bank of
Baroda, said that management 'just dumped these machines here. They are hardly used, and
some don't work.' A comprehensive policy seems completely absent. In contrast, themultinational banks have computerized almost totally, with the unions unable to have any say.
Impact of computerization on the workforce
Some of the general issues that have concerned unions and employees, especially women, in
the wake of the introduction of new technology in the banking and finance sectors have been:
Prospects of job losses and declining employment levels.
Increase in workloads.
Pressure for flexibility.
Changes in job contents.
Increased insecurity in the workplace, and loss of union power.
Increase in the proportion of 'non-bargainable' staff (i.e. those without an
automatic right to unionize) as compared to the 'bargainable' staff.
Changes in grading and pay.
Changes in information and control.
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Changes in the autonomy of employees.
Job losses
There have not been visible losses of employment in either the banking or insurance
industries, due to the massive expansion and diversification in the two industries and to the
high proportion of nationalized enterprises, in which workers are generally protected againstjob losses. Some of the foreign banks have undergone massive expansion in terms of the
number of their branches and their areas of operation. In fact, in January 1992, 12 foreignbanks sought permission to open 44 more branches in various major cities of India (Economic
Times, 1992). There has however been a reduction in the rate of recruitment in the
nationalized banks. According to a recent study covering three banks and two insurance
companies, the growth of new jobs has dwindled. As the use of new technology expands,labour savings are likely to increase further in some operations (Chopra, 1991). The three
developments that are likely to displace workers, and women in particular are voice
recognition, optical character recognition and artificial intelligence (Rajan, 1990). Anemployee at the Hong Kong bank observed that the entire category of typists had already been
abolished.
It is possible to discern a tendency to reduce the proportion of 'bargainable' staff in both
nationalized and foreign banks. The Banque Nationale de Paris reduced its bargainable staff
from 200 employees in 1979 to just 135 in 1992, by not recruiting staff at the lowest levels
and by asking about 35 employees to accept the so-called Voluntary Retirement Scheme(VRS) because computerization was expected to reduce the need for their labour.
Increase in workloads
New technology could lessen the repetitive and heavy nature of certain operations. However,
most employees in the insurance and banking industry, especially in the foreign banks, have
experienced serious strain and heavy workloads. According to an employee working in thecash department of the Citibank,
Before computerization we used to do 30-40 cash entries per day; now we
have to do more than 100. There is a greater pressure of work more work andmore responsibility. The speed has increased enormously
According to experienced unionists in ANZ Grind lays Bank, computerization, coupled with
non-recruitment and non-replacement of retired staff, has led to a tremendous increase in
workloads, 'after 20 years of employment, people are bound to be completely fagged out.Then the management will term them "unsuitable", "old" or "unfit"'. The personnel officer of
Grind lays, who disagrees with the union on everything else, admitted, 'since the emphasis is
entirely on productivity and efficiency, there has been intensification of work. Employees'efficiency levels have gone up ten-fold'. Personnel officers at the Life Insurance Corporation
(LIC) confirmed this picture.
Pressure for flexibility
Over the last decade and a half, management has consistently sought to have flexible manning
levels. They have argued that they need operational flexibility in order to respond quickly tochanges in the market, to introduce technological innovations, and to deal with fluctuations in
the flow of work. This, they say, can be achieved by employing a core of secure, permanent,
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multiskilled, full-time employees and a 'periphery' of marginal, generally single-skilled
workers who may be employed part-time or temporarily, and directly or indirectly, in a
variety of 'new' ways (Huws et al., 1989)
Computer technology demands functionally flexible multi skilled workers rather than
specialists. The strategy of increasing flexibility in the employment system frequently targetswomen workers, who occupy the lower rungs of the job hierarchy. They are often forced to
change workstations or leave the firm. Professionals and specialists, a majority of whom are
men, benefit from the strategy.
Changes in job content
Changes in work methods caused by the introduction of computerization affect the content ofwork as well as the skills needed by employees. The direction of changes is, however, not
uniform. Two divergent tendencies can be observed. In routine transactions, certain skills of a
mechanical nature, which nevertheless require a measure of mental effort and concentration,are no longer required or are needed less. The skills replacing them are equally mechanical but
call for less mental effort. The level of skills required for the performance of routinetransactions therefore actually falls, although the degree of attention and concentrationrequired will be just as high or even higher. In contrast, in the area of customer services,
computerization offers potential for an increase in both the necessary range and level of skills,
for example, searching for, extracting and assimilating relevant information in response to a
request. The realization of the potential is, however, contingent on the relevant organizationaldecisions being taken by management (Ozaki et al., 1992)
The impact of new technology on work content and the skills required of workers alsodepends on how rigidly jobs are defined and demarcated and on the skill levels of the existing
workforce. Various studies seem to show that, in places where the tasks of workers have
already been defined broadly and flexibly, with much overlapping, the reorganization of workafter the introduction of new technology has been comparatively smooth and workers'
resistance relatively minor. In places where the skill level of workers is high, technological
change tends to strengthen the tendency towards the integration of planning and productiontasks. Where skill levels are low there seems to be a trend towards polarization of skills.
Computerization is also creating skills that are largely transferable from one enterprise to
another, such as the skills of computer programmers (Ozaki et al., 1992).
Product innovations have generally led to an increase in the importance of formal skills. The
informal skills, learned on the job, which characterized women's work, are not seen as
important. The professional and technical jobs increase in number and importance, and formaltheoretical knowledge is becoming more important for employees in the banking sector
(Tremblay, 1991). In India as elsewhere, categories such as junior clerks and tellers arebecoming less important in the overall workforce as Automated Teller Machines (ATMs)multiply (Rajan, 1990).
An employee working at the bill discounting department in Citibank, Bombay, says:
Earlier, when a bill was brought to us, we made manual entries. The customer
would present the bill. We had to scrutinize it, and then send it to the liability
department for their approval. In the liability department, each client had one
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big card that showed her status. After approval, it was sent back to us for
processing. That is:
Calculate the interest using a interest machine
Make debit/credit cards ticket.
Balance the amount
Finally, send the tickets to journal keeper, who would balance all the amounts
Each department had a journal keeper. Now, we still have to scrutinize a bill. Then we key it
into the programme - the bill programme. The computer shows the credit limit automatically.The ticket is then given to the officer, who takes it to the Credit Approval Committee.
According to the personnel manager of the LIC, work had not been enriched or tasks enlarged,
because jobs were set and functions well defined. 'Computerization has made the jobs easierrather than interesting.' The personnel officer at the ANZ Grind lays Bank, in contrast, was
adamant that employees' skills had increased ten-fold, but he was actually referring to theirproductivity or efficiency. He agreed however that many jobs have been 'realigned'. Forexample, in bill discounting, work that was previously done by a team is now done
individually by workers with their own machines. An employee at Grindlays comments,
'Earlier, there was greater interaction between employees. Teamwork was good work. Welearnt more about the work. Now there is no time to look around, help or seek help from
colleagues. You just sit there and bang at the keyboard'. The management of Grindlays argues
that employees used to spend most of their time with books (e.g. tabulations) and now spend
more time with customers. The unionists at Grindlays dismissed this claim, 'There have beenno changes. Work has become more monotonous. The brain is getting more dull.'
Many employees expressed mixed feelings about computerization. While it relieved somework pressures and strains of particular types, it has made work dull. It increased efficiency,
but decreased the feeling of teamwork and sharing. Work might be less arduous, but it also
becomes less varied. Computerization is supposed to increase customer interaction, but manyemployees experienced a reduction, and all complained of an increased work tempo.
Increased insecurity and loss of union power
Deskilling contributes to a feeling of powerlessness vis--vis the employer. This feeling was
expressed more definitely by employees working in foreign banks than by those employed
either in the nationalized banks or the nationalized LIC, Four women employees in theBanque Nationale de Paris said that the closure of some branches and their awareness that
they had not been given computer training at a time when nearly all the banking operationshad been computerized had made them 'very scared.' All four were later made redundant.
At ANZ Grindlays, insecurity was said to have increased, with early retirements and no
recruitment for the last four to five years, 'that itself creates insecurity. If there is a reduction,then it creates panic.'
Citibank employees reported feeling, on the one hand, that their workload was generally too
heavy, and, on the other hand, that any temporary reductions made them fear that work hadbeen contracted out. They said that contract workers had been employed for specific tasks,
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without informing the employees or the union. This has become possible because of
computerization.
The feeling of insecurity has also increased because unions have been considerably weakened.
The women who were forced to take the VRS (Voluntary Retirement Scheme) by the Banque
Nationale de Paris say:
Here is virtually no union in the BNP. The union officials were bendingbackwards to sell the VRS to us. We didn't want to resign. We wanted to fight it
out. But how can you do that without the firm backing of the union?
Even when a union is strong, women may not be protected against discrimination.
Increase in the proportion of 'non-bargainable' staff
Control over the workforce provides the basis for controlling production processes, outputlevels, and scheduling. Over the years, this control has been loosened as unions have come to
play a role in areas such as work intensity, output levels, health and safety, which were and
still are considered to be 'management prerogatives'. One of the strategies available to wrestcontrol back is to weaken unions, both numerically and in terms of the functions, which the
unionized workforce performs. This is one reason behind the dramatic and continuous
increase in the non-bargainable category of workers, as compared to unionized workers. This
actualization process has occurred in the banking and insurance industry as well as inmanufacturing.
The number of workers in the bargainable categories is being reduced, for instance by usingcontract couriers in place of employing messengers. In 1973, 18.7 per cent of all workers in
the banking industry were officers. By 1987 this had grown to 26.7 per cent. Over the same
period, the percentage of clerical workers fell slightly, from 55.9 per cent to 52.4 per cent, and
the percentage of workers in more subordinate positions fell quite significantly from 25.4 percent to 20.9 per cent (Borkar, 1991).
In almost every industry in India, computer programmers are in the non-bargainable category.
Computer programmers are usually in a position to anticipate changes and may use their
knowledge to keep other workers and unions informed. Most new recruitment is done in the
'officer' category, though often these new employees do the same work as the bargainableemployees. In industries where the union has refused to cooperate with computerization, the
management recruits 'officers' to do the work of data entry operators etc. The unionists are
increasingly feeling that they have to bargain with the management about the content of workin the bargainable and non-bargainable categories, and be vigilant about any infringement.
Changes in grading and pay
There seems to have been no attempt to redefine a new grade structure in the banking and
insurance industry after computerization was introduced. In the Banque Nationale de Paris a
'promotion agreement' was signed in 1987, under which all the clerical staff were promotedwithin three years to the status of Special Assistants, a supervisory category with an extra
wage allowance. Everybody, including the lower grade staff, received the allowance, and
there was a substantial increase in basic pay too. But there was no attempt at evolving a newgrade structure, nor any training to equip employees to deal with the new type of work. All
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employees, including the women, have gained financially but there has not been any change in
their job definition or real status.
All the banks have some allowance for EDP staff or computer operators. In the LIC the
allowance was Rs 100. In the Hong Kong Bank only the most senior employees in the
department got the allowance, although almost all the employees have to work on theterminals. The Union Bank of India employees who work on the computers get an allowance
of Rs 350 per month. The Hong Kong Bank employees get an allowance of Rs 400. In the
words of one computer operator in the Bank of Baroda, 'EDP staffs are definitely gradedhighly in the Bank'.
Changes in information and control
Traditional craft workers often knew far more about their jobs than managers or supervisors,
which gave them a lot of freedom as to how the work was done. But computers have
enormously increased management's ability to collect and analyze information - about productperformance, market trends, customers, sales, finance, and of course about employees. The
tendency has been for management to learn more about how work is done, and to specifymore tightly how jobs should be done - both in terms of method and speed.
Every minute of your time is being recorded. How many words did you key in?
How much time was required for posting debits and credits, for bill
discounting? However, we cannot access information that is not in ourjurisdiction. If one tries it, it is invalid; but the fact that you tried will be
recorded in the computer. If one looks at it dispassionately, one would have an
eerie feeling.
Employees felt that they were being watched and intimidated, increasing the sense of
insecurity. Unions have not claimed a right to have access to information relevant for
negotiating. Employees in ANZ Grindlays bank found such a demand difficult to evenimagine. 'Management has total control over all information. Profits, costs etc. are under
secret code. They have all the information about us though.'
Changes in health and safety conditions
The introduction of new technology has also created a range of new hazards for the workers.The development of new materials, processes and substances, without adequate information
being made available about their impact, may be creating problems, which will not be
perceived for many years. Increases in the scale and pace of production have contributedtowards stress, especially where there is also inadequate support or training or an unfair
distribution of workloads.
Some specific health and safety problems have been shown to arise from the introduction of
computer-based equipment. Visual Display Units (VDUs) have been known to cause a
number of health problems, especially if operated continuously for a long time. 'Video blues',
eye problems, musculoskeletal problems, painful conditions such as tenosynovitis, varicoseveins, ulcers, nausea, headaches, and skin diseases as well as reproductive problems such as
miscarriages, stillbirths, birth defects, infertility, menstrual problems and low sperm counts
have been very extensively documented (Labour Research Department, 1985). However, noneof the bank employees had been given any health training. Most employees complained of
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eyestrain, headaches, or a heavy feeling in the head, but they worked at the terminal from 9.30
a.m. to 4.30 p.m. with only breaks for lunch and tea i0n between. Three women in Citibank
had had miscarriages, though none of them had any personal or familial history ofmiscarriages. Of the forty women interviewed only one had heard that working on the
computers continuously could cause health problems. None of the training sessions had
mentioned this problem. Though information on the health and safety aspects of working withcomputers is widely available, employees were ignorant of health hazards. This indicates their
lack of access to information relevant to women, the unwillingness of management to share it,
and the indifference of the union to issues of health and safety. This is a serious issue,especially because the number of women working on computers is increasing rapidly.
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Impact of IT Act 2000 on Indian Banking
Indian Banking: Withstanding the Challenges
After a decade of reforms, the Indian banking sector is slowly getting stronger. Regulationsare forcing the banks to adopt better operational strategies and upgrade their skills. The
system has witness the integration of the financial markets. Externally, the happenings in the
international markets have their implications on the markets and the players. All these aremaking the operational environment more volatile and hence challenging for the Indian
banks. Thus the need of a strong IT acts for Indian banks was required, so that the new way of
banking can be safe, secure and adaptive. Indian banks have nevertheless, withstood all these
challenges and are becoming more adaptive to the changing environment with new bankingreforms like IT Act 2000, Bankers book evidence act and Reserve Bank of India Act etc.
With the onset of 2001, the Indian financial sector has entered its 10th year of reforms. During
this decade, the reforms have touched upon almost every segment of the financial sector.Nevertheless, it is the banking sector, which experienced major reforms. A retrospect of the
events clearly indicates that the Indian banking sector has come far away from the days of
nationalization. Increase in the number of banks due to the entry of new private and foreign
banks, increase in the transparency of the banks balance sheets through the introduction ofprudential norms and increase in the role of the market forces due to the deregulated interest
rates have all significantly affected the operational environment of the Indian banking sector.
Also with the introduction of electronic method of operations Indian banks got a new threat. It
was required to have a proper method of working with clear guidelines for it. IT Act 2000,Bankers book Act provided the necessary guidelines for such situation and is helping the
banking sector to grow stronger and stronger.
The Narasimham Committee had laid the foundation for the reformation of the Indian banking
sector. Constituted in 1991, the Committee submitted two reports, in 1992 and 1998, which
laid significant thrust on enhancing the efficiency and viability of the banking sector but itwas the IT Act of 2000 which boosted the concept of E-banking, E-commerce with the
support to the secure banking system thru electronic media.
As the international standards became prevalent, banks had to unlearn their traditional
operational methods and adopt new way of banking.
Different level of Computerization: Public and Private Banks
The Indian banking sector faces significant challenges. Public banks are struggling tocomputerize, while private banks are eager to adopt security mechanisms.
The private banks that have a clear-cut agenda in place to tackle the emerging challenges in
this sector drive the online banking business in India. Meanwhile, public sector banks viewthe basic computerization of operations as an daunting task. The security risk involved is
directly related to the size of the network.
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In India, the computerization of banking operations and the maintenance of manual methods
each has their pros and cons. While computerization can lead to efficiency through automated
transactions across branches, reduced cost of operations and workload management, it alsohas its pitfalls in the form of security risks, network downtime, scarcity of trained personnel,
expensive system upgrades and recurring costs.
The advantages to manual banking include no network security risks, the high availability of
personnel, and confirmed transactions through physical verification and re-confirmation. But
it also carries a legacy of drawbacks, including operating inefficiencies, a massive paper trailand the slow update of transactions.
In spite of their different positions on the computerization spectrum, both public and private
banks understand the concept of the Public Key Infrastructure. It is only the size of theinitiative in both these categories that will vary. While private banks look at security as a
value added, risk reduction utility for their online and real-time transactions; The public sector
banks look at computerization as their first agenda, a massive exercise in itself consideringtheir huge branch networks, and security as something that will happen as they get
computerized.
Automation in Banking sector
Public sector banks realize that computerized banking is the way to go and are moving
frantically pace in this direction, but it will take time. An interesting factor here is that 100banking centers in India, with high levels of Internet connectivity, control 70% of the assets
and liabilities of the entire financial system. This region thus becomes a priority zone for the
public banks to computerize as well as work security measures into their operations.
Private banks came into existence knowing that they would have to use technology, as a
cutting edge tool to deliver services in those areas that public sector banks couldn't. Such
areas include customer service and real-time banking and related products. Adding value tothe banking experience by using technology is a thing easier said than done. There are very
few online trading sites that are successful. There are only prototype payment gateways anddigital signatures don't exist in the banking system.
The inclination towards developing a state of the art network in the financial system in general
and the banking system in particular is evident in recent legislation.
The Information Technology Bill 2000 has been passed in parliament and has come into
effect. The Office of the Controller of Certifying Authorities (CCA) has been constituted andMr. K.N. Gupta has been appointed as the first Controller. The CCA will be issuing the
license needed to operate as a Certification Authority, and the first set of licenses will be
issued sometime in January after a stringent evaluation of the applicants' technical,infrastructural and financial strengths.
In spite of their different positions on the computerization spectrum, both public and private
banks understand the concept of the Public Key Infrastructure.
The IT Bill is aimed at bringing in structure, legal validity and authenticity for transacting
online". Its passage can be perceived as an indication of the government's inclination towardspromoting e-commerce and e-governance while ensuring accountability.
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Credit Information Bureau
Unlike other developed or developing countries, data on individuals or corporates is notavailable in the Indian market. With over a billion Indians, this data structuring exercise is
indeed a massive task. It is noteworthy that efforts are afoot in this area too. The CreditInformation Bureau (CIB) is being established under the mandate of the Reserve Bank of
India. The State Bank of India and HDFC BANK are supervising it with technical support
from Dun & Bradstreet India and TransUnion. While Dun & Bradstreet will provide
assistance for retail accounts, TransUnion will provide technical support for maintainingdatabases of corporate accounts. The bureau will have access to the largest database of
borrower accounts with the SBI group having close to 30% of the banking sector advances
and HDFC having the largest database of long term retail borrowers.
The CIB will collect commercial credit related data and create, package, market, sell and
distribute credit reports to banks, financial institutions and businesses, which agree tocontribute the relevant data on a regular and continuous basis.
Acceptance of emerging technologies in India like PKI is driven by two main factors, one
being the brand value of the solution provider. How strong is the reference value of thesolution and is it a globally accepted product? Second, is the pricing correct," he asks? "In this
case the cost of the solution will most probably have to be discounted by the service provider
who is keen on identifying his customer and building a relationship. As the usage increasesthe end user will realize the value of the product and be willing to pay a higher price for it".
The need for a globally accepted product places the Identrus framework in a prime position to
succeed in the Indian embryonic banking security market.
The Indian market place also has a unique vendor factor in play. The local partner of the
technology provider is a key factor in the decision making process of the buyer. Deliverycapabilities, corporate relationships, business networks and the option of getting a one-stop
shop for end-to-end solutions are also factors that influence the buying procedure.
As awareness grows and user comfort increases, it would not be surprising to find uptake ofPKI growing exponentially. India with its skilled computer professionals is perfectly
positioned to set the global benchmark in terms of innovation and product benchmarks in the
PKI world.
Pushing through reform
The Narasimhan Committee Report of 1992 initiated reforms for the banking sector to align
them with internationally accepted banking practices. The amendment of Banking Regulation
Act in 1993 saw the entry of new private sector banks through a licensing system. The state
funded financial development institution called the Industrial Credit and InvestmentCorporation of India (ICICI), the Housing Development Finance Corporation, the database of
long-term retail borrowers. Hinduja group and some prominent non-banking financial
institutions were among the successful licensees.
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These new private sector banks that entered the field in 1994 started with a clean balance
sheet. They used technology as the means of improving efficiency and reach. In the last few
years the private sector banks have come a long way though they have not achieved thepotential in terms of deposit growth. The top private sector banks (PSBs) -- ICICI Bank,
HDFC Bank, Global Trust Bank, UTI Bank, and Centurion Bank -- are present in almost
every major city and metro in the country.
IT and private sector banks
The private banks were in a position to leverage IT applications in their daily operations
adopting new technology for the delivery of various financial products. While HDFC is keen
on setting up its own virtual marketplace, ICICI is concentrating on venture capital
investments and keeping financial intermediation under its direct domain.
IT and public sector banks
The top management in state-owned banks has hit a wall in their own pursuit of the same
goals. The lack of trained manpower, hostile trade unions and the general enormity of the task
are all major obstacles. For example, in 1998 the State Bank of India with more than 5,000branches started work on a plan to build an IT network -- including the integration of an
electronic payment gateway managed by a private service provider -- connecting all its
branches. Unfortunately, progress has not been up to the expectation.
Net Banking
Net banking will make an impact in India even though the overall level of Internet access isvery low. The top 100 centers out of around 36000, which account for about 70% of assets
and 60% of liabilities, have high penetration levels. Recent research indicates that Internet
connections and users are growing exponentially with 11 million connections and around 23
million users by 2003. The market for PKI applications will hopefully experience a similargrowth curve. The need for a globally accepted product places Identrus' framework in a prime
position to succeed in the Indian embryonic banking security market.
IT Act Contributions: Banking sector E-commerce
The three best contributions of the IT Bill to the E-commerce movement in India are asfollows: -
1. The legal recognition of electronic records. The IT Bill has laid down for the first timein the legislative history of India that where any law provides that information or any
other matter shall be in writing or in the typewritten or printed form, then,
notwithstanding anything contained in such law, such requirement shall be deemed tohave been satisfied if such information or matter is - rendered or made available in an
electronic form; and accessible so as to be usable for a subsequent reference. This is
likely to give a huge boost to e-commerce in India because it solves the practical
problems, which were arising prior to the existence of the IT Bill on the law book.
2. The IT Bill further states that unless otherwise agreed, an acceptance of contract may
be expressed by electronic means of communication and the same shall have legalvalidity and enforceability. The said Bill purports to facilitate electronic intercourse in
trade and commerce, eliminate barriers and obstacles coming in the way of electronic
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commerce resulting from the uncertainties relating to writing and signature
requirements over the Internet. The Bill also aims to fulfill its objectives of promoting
the developing of the legal and business infrastructure necessary to implementelectronic commerce.
3. Thirdly, the said law grants legal recognition to digital signatures. This is further likelyto give an impetus to the rapid development of e-commerce.
Banking a part of Service Sector
Services the 'tertiary sector'of the economy covers a wide gamut of activities like trading,banking & finance, infotainment, real estate, transportation, security, management & technical
consultancy among several others. The contribution from services sector today stands over 40
per cent of the total GDP in India. The sector currently employs close to 20 million people inIndia. For all the aforesaid areas IT plays the prime role in information processing, storage &
access with a view to providing improved services to the consumers.
Financial Services
Financial services have been the major users of IT and communication technologies. IT
expenditure by US banks has recorded a compounded annual growth rate of 8.4 per cent. TheManagement Information System (MIS), distributed computing devices, open systems, high-
speed data networks (LAN, NIAN, WAN, ISDN etc.), RDBMS have been important
development milestones in IT with major impact on financial services.
Use of multimedia for storage of text, graphics, video, sound etc. has immensely benefited the
information storage system. All these technologies are used extensively by the banking and
financial services sector.
Automated Teller Machines (ATM)
ATMs though operational in the country for quite some time, are expected to make a big
headway in India. It has been estimated that there are around 400,000 ATMs worldwide. The
latest generation networked ATMs allow the user to perform upto 150 kinds of transactionsranging from simple cast withdrawals & deposits, to fund transfer to trading in stocks to
buying mutual funds to something mundane like payment of electricity bills, booking air-
tickets and making hotel reservations, although many of above services are not yet availablein India.
In 1999-2000 as many as 40 percent of ATM cardholders used it for cash withdrawal, while in2000-01 the figure rose to 80 percent, which shows the kind of confidence and awareness
increasing in India.
ATMs are synonymous with credit cards - 578 million credit cards issued worldwide andIndia is poised to become one of the world's largest credit card users by 2010.
'Virtual' Bank
Multimedia technology would be quite effective in bringing the banking services to the
doorstep of its customers. The Customer Activated Terminal (CAT) or Kiosk is an interactive
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multimedia display unit, housed in a small enclosure, typically consisting of a computer
workstation, monitor, videodisk player and a card reader. It allows the customers to browse
through information and use the available banking services at their own speed. Some banksare thinking of establishing 'virtual' branches where a customer can walk through the door,
explore services by touching parts of the screen and at any time call up a member of the bank
staff by video conferencing. While the banks do not need to invest heavily in real estate forsetting up such a branch, the customer gets the benefit of 'one-stop banking' at a convenient
location.
Phone banking
Many of Indian banks (ICICI etc) have started giving this facility of doing the banking from
any phone. Your transaction is safe and secure, as you need to tell a specified code that isknown only to the authentication server.
Home Banking
Apart from phone banking, Smart phones with screen built-in modems and programmable
microprocessors let the customer access a variety of financial services from home. Another isNet Banking in which Subscriber can access various financial /Banking services thru the
Internet.
Electronic Funds Transfer at Point of Sale (EFTPOS)
While travelers cheques meant 'pay-now-buy-laterand credit cards had 'buy-now-pay-later
advantages, EFTPOS or debit cards signify 'buy-now-pay-now' but without cash transaction.The user presents his ATM card when he buys goods and the EFTPOS system immediately
debits his bank account.
Smart Cards
The 'processor' type Smart Cards with in-built integrated circuits (ICs) or microchips offer awide range of transactional opportunities even from remote areas. The Smart Cards are
extensively being used for employee 'clocking in', withdrawing cash from ATM, using pay
phones, payment of various bills etc.
Electronic Data Interchange (EDI)
EDI typically denotes paperless financial transactions across the locations. EDI is fastbecoming the norm for inter-company transactions and also for procurement of bought-out
items from the suppliers. The companies can now operate their bank accounts through
corporate banking terminals in their own offices, which are linked to the bank computers.Companies can thus carry out transactions like transferring funds, managing its cash flow,
opening Letters of Credit etc. without any paper work.
India thru VSNL has already established Trade- Net (EDI) to facilitate electronic submissionof trade documents by traders to various Govt. agencies and the response of these agencies to
the sender. It has reduced document-processing time from one day to 15-30 minutes. BHEL is
using the same for getting orders, filling tenders etc thru this EDI facility.
Image Processing
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As financial services including capital markets and banking are highly document intensive,
image-processing technology can have a far-reaching impact for such applications for its 'less
paper'handling characteristics.
In banks, image technology could be used for automatic identification or character recognition
to read text and diagram wherein the cheques or documents can be scanned.
Expert Systems
The financial services sector is increasingly using decision support systems (DSS) or expert
systems for functions such as credit risk appraisal, forecasting loan delinquencies, investment
decisions etc. One of the most promising developments in this field is the use of 'neural
network' approach to build an expert system, which lets the software literally learn fromexample and experience. Several banks today are using neural network programs to detect
credit card fraud. Some leading international investment banks to track stock price patterns
and predict their movements are also using it. Although such credit rating are not verycommon in India but for individual customers sooner it will also come up.
Information Technology & Financial Services: Key Issues
While the technological possibilities of IT may be unlimited, their applications and adoption
in India need a conscious approach towards Business Process Reengineering of existing
practices and procedures to take the fullest advantage of IT. Continuous training & skill upgradation of human resources assume critical importance towards absorption of new
technologies.
The elimination of manual records, the introduction of electronic fund transfer, ATMs etc.
raise the important issue of security and integrity of data. This includes issues relating to
confidentiality of information, preventing data corruption and prevention of fraud.
Appropriate technologies for encryption of data for secured transaction, regular & multiplebackups, extensive use of passwords and other forms of authorization are been adopted. As in
case of EFT, a cheque is not required to be presented physically for making payment as perthe current practice. Also the legal liabilities of banks and customers in case of loss of ATM
cards, ATM frauds etc. are not quite understood in the present system. The adoption of new
technologies would warrant a thorough review of the system towards changed legal
stipulations.
For paperless and electronic financial transactions in India, a host of legal aspects need to be
looked into. These legal aspects are taken care in the new IT Act 2000.
The services sector covers a vast range of occupations involving comparatively little capital
investment leading to gainful employment and has a very good potential for export revenues.The sector calls for continued induction and infusion of knowledge-based technologies with
cutting edge applications of information technology. With the highly skilled manpower and
excellent entrepreneurship qualities, India can truly emerge as a 'global player' in the services
sector, once a proper frame work start working in fashioned way, and IT Act 2000 will showthe way for growth of all service sectors including the banking.
The table below provides a glimpse of the technologies of future related to banking sector andtheir likely time- frame of introduction in India.
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IT Applications in Financial/Banking Sector: FUTURE SCENARIO
SNo.
Future Services
Likely Time frame of
Introduction /
completion
in India (in Years)
1 Networked ATMs for banking & other transactions 0 to 5
2 Smart phones for home banking operations 2 to 10
Virtual branches of bank operating from Customer
Activated Terminal (CAT) or a Kiosk2 to 10
4 Debit Cards for EFTPOS 5 to 10
5Smart Cards with built-in microchips for paperless cash,
pay phones etc.0 to 5
6Electronic Data interchange (EDI) for paperless banking
transactions0 to 5
7Image processing technologies for optical scanning andstorage of digitized images/papers
0 to 10
8
Expert Systems and Neural Networks for credit risk
appraisal, monitoring/prediction of stock price
movement, detection of credit card fraud
5 to 10
9 Business Process Reengineering, training & skillsdevelopment for absorption of new technologies
5 to 15
10Information Security for confidentiality, prevention of
data corruption and fraudulent practices0 to 10
11Legal aspects for paperless & electronic financialtransactions
0 to 5
12
Bar coding to emerge as an important device for
payment processing, accounting & inventory
management
0 to 5
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Is IT Act sufficient for Growth of banking sector?
Everybody familiar with the cyber world talks about e-commerce and the recently enactedInformation and Technology (IT) Act recognized one of the revolutionary features of cyber
world - the digital signature.
Thinking IT Act, digital signatures etc as full proof and safe. Even some say it to be
instrumental in bringing major reforms in Banking sector like it has done for IT sector. But
most of the experts feels IT Act to be insufficient in many ways. Experts feel the act has nothave enough teeth to safeguard e banking from frauds and complexities. With most of the
sites been hacked and content changed, IT Act should have given more powers to deal with
complexities of virtual world.
Although IT Act was only needed to give legal validity to e-commerce and inclusion of every
sensitive aspect into the single framework would unnecessarily make the act complex, it hasexcluded negotiable instrument as defined under the Negotiable Instrument Act from the
applicability of the Act.
This is a classic example what changes banking sector is seeing and adapting. With still thescope of improvement in IT act this sector can grow even stronger.
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CHAPTER -3
Core banking Solution
28
3.1 Core banking solution
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CORE BANKING SOLUTION
What is Core Banking?
Core Banking is a generic term, which denotes inter-branch transaction capability through acentral database. Inter-branch transaction facility is available through out Internet Banking
Solution. With the introduction of Core Banking, the facility of inter-branch transactions will
cover a wide range of business (as decided by the Bank from time to time), through any of theCore Banking branches.
Need for introducing Core Banking
The new wave in retail banking is an enterprise-wide, customer-centric approach wherebranch banking; call centers and e banking converge to provide a "best of breed" approach tocustomers. The objective is to deliver banking services on demand across any channel without
impacting a customer's experience of the process. This new wave is attributable primarily to
advances in new technology such as J2EE and customer analytics.
As a bank, implementing a core banking solution is not just about replacing the old core
system with a new one, but also about affecting business transformation in building and
selling products and services that are customer-centric. Ultimately, the philosophy behind anytechnology initiative is to drive easier consumer access and greater convenience, while
enhancing customer service levels
Through the power of technology available through Core Banking, the new
generation banks and foreign banks are able to target niche markets and provide valueadded services with speed and efficiency. It has, therefore, become imperative that
Nationalized Bank also inducts this technology, to effectively leverage it for business
and maintain out supremacy in the market place.
The Business Process Re-engineering (BPR) initiatives of the Bank, which are being
implemented, need Core Banking as pre-requisite.
Customers of the Bank, who are currently associated with a particular Branch, willbecome customers of the entire Bank Group and derive benefits. Similarly, the
organization, powered by information available through the central database, will bepositioned to conduct its business in a far more efficient manner.
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Central aspects of the Core Banking Project?
All data would be at central host. Having a centralized database would be the biggest
advantage offered by Core Banking. There would be minimal data for front-end validations at Branch.
Data flow from/to the CDC would be through connecting model.
All system-related activities would be done at host level
EOD would be done at the Host place only.
It offers Offline functionalities too.
What does Core banking allows us to do?
Centralized Processing: State Bank group has computerized all the branches with
Bank Master under the Universal Computerization Project. However, this is branchlevel computerization. Core banking on the contrary, has a centralized database, and
all processing of transactions are carried out in this database, residing at the CentralData Center (CDC). Certain features (such as screens, signatures of customers,
transactions for the current day, end of day balances of previous day) are also made
available at the Branch, for smooth and speedy conduct of operations
24*7 Banking/Anywhere banking: Core banking will make available 24 *7 banking
and Anywhere banking to the customers, and all other channels like ATM, InternetBanking etc. will be fully integrated with branches
Integration with delivery channels ATMs, Internet, Mobile Banking.
Strengthening MIS/DSS/EIS: As all data will be in a centralized database and
branches as well as administrative offices can be connected through Core banking,better management Information System (MIS)/Decision Support System (DSS)/
Executive Information System (EIS) will be possible. This connectivity will also
facilitate timely and informed decision-making.
Many of the back office functions currently performed by branches can be
conveniently handled at a central location (or locations) after introduction of Core
banking, enabling branches to focus on efficient product delivery, marketing and
cross selling.
Integration with strategic areas like Trade Finance, Treasure, ALM, Corporate BalanceSheet.
Change in Business processes value addition to the organization and customers.
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What is the need for integration of various IT Products for a Bank?
To exploit the Group synergy
To meet the rising customer expectations
To overcome the pressure of competition
To meet the regulatory requirements which are growing stringent day by day
To improve efficiency in operations
To reduce transactions costs.
For efficient and timely settlement and management of funds
For providing timely and accurate MIS to Top management thereby facilitatingimproved decision making
Risk management
What are the process changes that would take place due to the implementation of Core
banking solution?
Core banking is not just Computerization; it aims at changing the way we do business.
There would be changes in workflow at branches.
Core banking frees branches from Back office work.
The entity of Branches would undergo a big change Branches would emerge as
delivery points- marketing outfits.
The implementation of Core banking enables BPR (Business Process Restructuring)initiatives of Bank.
Loans- Sanction, Tracking and Debt Collection would become more efficient.
NPA - online tracking, write-off, probability of default
Maintenance of many registers in system- nomination, stop payment/loan related.
Changes in reporting: Core banking would enable control related exception reporting,
unlike wholesale reporting as in vogue now.
Accounting/ reporting related changes SCs, Inward clearing, and FD.
There would be reduced Reconciliation overhead.
Rationalization of service charges.
Core banking aims at a paperless/register-less office
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Shared operations Center (SOC) are being proposed to take care of Back office
functions
Maker-Checker integrated with powers.
Branch Calendar
Fees & Charges
Reports Generation & Distribution Voucher verification Reports
Clearing Centralized Handling
Cash/Currency chest computerization
Computerized maintenance of Security Forms (VPIS Valuable Paper Inventory
System)
Self service facilities.
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CHAPTER -3
OBJECTIVE
33
3.1 Rationale of study
3.2 Objective of study
3.3 Type of Research
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OBJECTIVE
Rationale of the Study
To study the effectiveness of Core banking solution and its impact on its users i.e. branch
managers, system managers, employees and most important clients.
Research objectives
Primary objective
Effectiveness of Core banking solution
Impact of Core banking solution on its users
Secondary objectives
Impact of technology on Indian banking
To check the awareness level of Core banking solution among clients, employees
To study the effect of ever changing technology on humans.
Research Type
Exploratory research
It is also known as formulative research. The main purpose of such studies is that offormulating a problem for more precise investigation or of developing the working hypothesis
from an operational point of view. The major emphasis on such type of studies is on the
discovery of ideas and insight with the help of various methods viz, the survey of concerningliterature, experience survey, analysis of insight stimulating.
Limitation of the Project
Study to be conducted at branches situated in Indore district only.
Time duration of project is 2 months.
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CHAPTER -5
Research Methodology
35
5.1 Sample Design & Sample Size
5.2 Methods of data collection
5.3 Analysis
5.4 Findings5.5 Managerial Implications & Recommendations
5.6 Conclusion
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RESEARCH METHODOLOGY
Sample Design & Sample Size
The sample design being chosen for this project is Judgment Sampling. Judgment Sampling is
that sampling is that sampling in which elements from the population are purposively
selected. Thats why; Judgment sampling is also called Purposive Sampling
My project was focusing on the persons who are the users of Core banking solution.
Therefore, the sample designs I have chosen consist of Branch Managers, employees andclient of State Bank of Indore only.
The sample size of research project for various experiential survey forms are as follows:
Branch Managers: 20
Employees: 50
Clients: 50
Total: 120
Methods of Data Collection
All the data collected for my research project is Primary Data.
Primary data is collected by the way of getting questionnaires or survey forms filled &
through personal interviews from the selected sample size.
Analytical Techniques
Percentage Analysis
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DATA ANALYSIS
Core banking solution on Manager Friendliness parameter
Very unfriendly
10%
Not friendly
20%
Neutral
45%
Friendly
25%
Very friendly
0%
Very unfriendly
Not friendly
Neutral
Friendly
Very friendly
Results:
Every 2nd Manager finds Core banking solution similar to previous software on User
friendliness parameter. Every 4th Manager finds Core banking solution comparatively friendly
Every 5th Manager finds Core banking solution comparatively In-Friendly
Every 10th Manager finds Core banking solution comparatively Very In-Friendly
No Manager finds Core banking solution Very Friendly
Conclusion:
Most of the manager rated Core banking solution Neutral on User-Friendliness parameter.
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Core banking on User Friendliness parameter By Employees
Very unfriendly
9%
Not friendly
22%
Neutral
30%
Friendly
39%Very unfriendly
Not friendly
Neutral
Friendly
Results:
Every 2nd Employee finds Core banking solution User friendly.
Every 3rd Employee finds Core banking solution comparatively similar on User-Friendliness parameter.
Every 5th Employee finds Core banking solution comparatively In-Friendly
Every 10th
Manager finds Core banking solution comparatively Very Unfriendly
Conclusion:
Most of the employees rated Core banking solution Friendly on User-Friendliness
parameter.
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Core banking on Efficiency parameter By Managers
Very Less10%
Less
25%
Neutral
35%
Efficient
25%
Very efficient5%
Very Less
Less
Neutral
Efficient
Very efficient
Results:
Every 3rd manager finds Core banking solution similar to previous software on
efficiency parameter.
Every 4th manager finds Core banking solution comparatively efficient Every 4th manager finds Core banking solution comparatively In-efficient
Every 20th
manager finds Core banking solution comparatively Very efficient Every 10th manager finds Core banking solution comparatively Very In-efficient.
Conclusion:
Most of the manager rated Core banking solution Neutral on Efficiency parameter
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Core banking solution on Routine banking operations
Very In-efficient
5%
In-efficient
20%
Neutral
15%Efficient
45%
Very Efficient
15%
Very In-efficient
In-efficient
Neutral
Efficient
Very Efficient
Results:
Every 2nd manager finds Core banking solution efficient on routine banking operations
Every 5th manager finds Core banking solution comparatively in-efficient on routine
banking operations
Every 6th manager finds Core banking solution comparatively Very efficient on
routines banking operations.
Every 7th manager finds Core banking solution comparatively similar on routine
banking operations Every 20th manager finds Core banking solution comparatively Very In-efficient on
routine banking operations.
Conclusion:
Most of the manager rated Core banking solution Efficient on performing routine bankingoperations.
Core banking efficiency on reducing workload on branches
40
-
7/29/2019 Core Banking Report
41/62
Very In-efficient
5%
In-efficient
40%
Neutral
30%
Efficient
20%
Very Efficient
5%
Very In-efficient
In-efficient
Neutral
Efficient
Very Efficient
Results:
Every 2nd manager thinks that Core banking solution is In efficient in reducingworkload on branches.
Every 3rd manager thinks that Core banking solution is comparatively similar in terms
of reducing workload on branches.
Every 5th manager thinks that Core banking solution is efficient in reducing workload
on branches
Every 20th manager thinks that Core banking solution is very efficient in reducingworkload on branches
Every 20th manager finds Core banking solution is Very In-efficient in reducing
workload on branches
Conclusion:
Most of the manager rated Core banking solution In-efficient in terms of reducing
workload on branches.
Core banking solution on reducing workload parameter By employees
41
-
7/29/2019 Core Banking Report
42/62
Very Inefficient
20%
Inefficient
24%Neutral
36%
Efficient
18%
Very efficient
2%
Very Inefficient
Inefficient
Neutral
Efficient
Very efficient
Results:
Every 3rd employee thinks that Core banking solution is similar to previous system on
reducing workload.
Every 4th employee thinks that Core banking solution is Inefficient in reducing his or
her workload. Every 5th employee thinks that Core banking solution is Very Inefficient in reducing
his or her workload.
Every 6th employee thinks that Core banking solution is Efficient in reducing his or herworkload.
Every 50th employee thinks that Core banking solution is Very efficient in reducing his
or her workload.
Conclusion:
Most of the employee rates Core banking solution similar to previous system on comparing its
ability to reduce their workload
Core banking solution on Increased efficiency of Employee- By Managers
42
-
7/29/2019 Core Banking Report
43/62
Very In-efficient
15%
In-efficient
35%
Neutral
40%
Efficient
10%
Very Efficient
0%
Very In-efficient
In-efficient
Neutral
Efficient
Very Efficient
Results:
Every 2nd manager finds that Core banking solution is comparatively similar onemployee efficiency.
Every 3rd manager finds that Core banking solution is In efficient, when it comes to
increasing efficiency of employees.
Every 6th manager finds that Core banking solution is Very Inefficient, when it comesto increasing efficiency of employees.
Every 10th
manager finds that Core banking solution is Efficient, when it comes toincreasing efficiency of employees.
No manager finds Core banking solution Very efficient for increasing efficiency of
employees.
Conclusion:
Most of the manager rated Core banking solution similar to previous software, when it comesto increasing the efficiency of employees.
Core banking solutions ability in Increasing Employee work efficiency
43
-
7/29/2019 Core Banking Report
44/62
Not at all
8%
Not helpful
20%
Neutral
16%
Helpful
44%
Very Helpful
12%
Not at all
Not helpful
Neutral
Helpful
Very Helpful
Results:
Every 2nd employee finds Core banking solution helpful in increasing his or her work
efficiency.
Every 5th employee finds Core banking solution not helpful in increasing his or herwork efficiency.
Every 6th employee finds Core banking solution neutral in increasing his or her work
efficiency
Every 8th employee finds Core banking solution Very helpful in increasing his or her
work efficiency
Every 12th employee finds Core banking solution Very Unhelpful in increasing his or
her work efficiency
Conclusion:
Most of the employee finds Core banking solution Helpful in increasing their work
efficiency.
Core banking solution on Fraud Management parameter
44
-
7/29/2019 Core Banking Report
45/62
Very In-efficient
5%
In-efficient
10%
Neutral
25%
Efficient
45%
Very Efficient
15%
Very In-efficient
In-efficient
Neutral
Efficient
Very Efficient
Results:
Every 2nd manager rates Core banking solution Efficient in Fraud Management. Every 4th manager rates Core banking solution similar to previous system in Fraud
Management.
Every 6th manager rates Core banking solution Very Efficient in Fraud Management
Every 10th manager rates Core banking solution Inefficient in Fraud Management.
Every 20th manager rates Core banking solution Very Inefficient in Fraud Management
Conclusion:
Most of the managers rated Core banking solution Efficient in Fraud Management.
Core banking solution on Auditing procedure simplification
45
-
7/29/2019 Core Banking Report
46/62
Yes
65%
No35%
Yes
No
Results:
65% Managers thinks that Auditing of branches would be easier with Core banking solution,
where rest 35% managers thinks that there would be no changes in auditing procedure withcore banking solution.
Brand Image Enhancement due to Core banking solution
46
-
7/29/2019 Core Banking Report
47/62
Enhancement
70%
No
Enhancement30%
Enhancement
No Enhancement
Results:
70% Managers thinks that introduction of Core banking solution should results into
enhancement of brand image, which should eventually result into enticing customers. On theother side, 30% managers think that there would no enhancement in brand image of the
organization due to introduction of Core banking solution.
Core banking solution on Customer service
47
-
7/29/2019 Core Banking Report
48/62
Very
Inefficiently
22%
Inefficiently
28%
Neutral
42%
Efficiently
8%
Very Efficiently
0%
Very Inefficiently
Inefficiently
Neutral
Efficiently
Very Efficiently
Results:
42% employees find Core banking solution is comparatively similar to previoussystem in terms of customer service.
28% employees find Core banking solution comparatively Inefficient in Customer
service
22% employees find Core banking solution comparatively Very Inefficient in
Customer service.
8% employees find Core banking solution is Efficient in Customer service.
No employee finds Core banking solution Very efficient in Customer service.
Conclusion:
Most of the managers rated Core banking solution Efficient in Fraud Management.
Core banking requirement
48
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7/29/2019 Core Banking Report
49/62
Core banking requirement
No, it was'nt
required
52%
Yes, it was
essential
48%
Yes, it was necessary
No, it was'nt required
Most of the employees felt that Core banking solution was need of an hour.
49
-
7/29/2019 Core Banking Report
50/62
Core banking awarness - Customers
Yes
72%
No
28%
Yes
No
Most of the customers were aware of the Core Banking solution concept.
Customer enticement towards Core banking solution
Yes, it entices
82%
No enticement
18%
Yes, it entices
No enticement
Most of the customers were enticed/attracted towards Core Banking solution
Findings
50
-
7/29/2019 Core Banking Report
51/62
Benefits
The concept of Anywhere Banking has been appreciated by all categories of core
banking users viz branch managers, employees and clients.
Clients found the concept of Internet banking i.e. online balance checking, online
chequebook order system very enticing.
Client is no more a customer of particular branch and can do transaction more any
branch in India, which is very lucrative.
8 Hour banking
Quick service
Clearing system may totally be removed now
Centralized banking
ATM facility all over India
Auditing of branches would be comparatively easy.
Less burden on branches.
Enhancement brand image of the bank, which would eventually help the entire bank tokeep up with stiff competition from private sector banks
Problems
51
-
7/29/2019 Core Banking Report
52/62
Users of Core banking solution found it very slow in processing. According to them, ittakes comparatively lot of time in processing transaction as compare to previous
system
Transaction completion/ updating process is very lengthy, involves lots of steps tocomplete a transaction, which eventually makes time consuming.
Link fails very frequently and takes lot of time to re-connect. In the meantime, it haultsthe complete banking operations.
Single side entry is allowed in Core banking solution, which employees and branchmanagers thinks that it can be very dangerous for branches and prone to fraud.
Reduced customer satisfaction level
Transaction completion request is denied quite frequently without any reasonwhatsoever.
All the required reports are not available.
Rejection of transaction/entry can be done only by supervisory staff, which creates lotsof hassles and takes lot of time
It doesnt show account no with name of the party and its balance, which doesntbrings confidence to employees to perform transaction for them. So employees have
ensure every time before making transaction for that particular client/party.
Payment order/Demand draft making process is too lengthy and erroneous.
It doesnt suite psyche of Indians
Employees as well as Branch Managers/System Managers thinks that Core banking
has been enforced from Top Level Management but it wasnt the demand from the
client side.
Core banking solution has resulted in extra expenditure, as new charges has levied
now such as statement charges etc.
52
-
7/29/2019 Core Banking Report
53/62
Future impact of Core banking?
Changes in workflow
Vouchers in Branches would reduce.
There would be fewer reports to check
Daybooks would be generated Checker-wise- movement of vouchers in branchwould reduce.
There would be reduced dependency on branch for data
Controllers would have Online/Real-time information on branches.
Better Monitoring & Control control returns/ irregularity statements
ABC Analysis of customers segmentation possible.
MIS for branches generated at Host W