iv/4 oct'08- dec'08

punjab national bank institute of information technology

e-trackbusiness of future

vol. IV no.4 quarterly journal october-december-2008

Credit Cards Security Threats and Controls

e-track

Editor

Pratima Trivedi

Editorial Team

Pramod Dikshit

M K Bose

Swapnil Srivastava

Sanjay Srivastava

Printed by

Swastik Printing Press

27, Mai Gi Ki Bagiya,

Kapoorthala Crossing,

Mahanagar, Lucknow

Mobile : 9415419300

punjab national bank institute of

information technology

Vibhuti Khand, Gomti Nagar,

Lucknow--226 010 (U.P.)

T : +91 522 2721442, 2721174

F : +91 522 2721201, 2721441

E-mail : [email protected]

URL : www.pnbiit.com

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ContentsFrom Director's Desk Ajay Misra 3Credit Cards Security Threats and Controls Sanjay Srivastava 5Electronic Filing of Returns ...... Dr. S. Sudalaimuthu 9“IDRBT - Mail Messaging System (MMS) Concepts........... Dr. Firdos T. Shroff 19Global Meltdown and Micro Financing......... Dr S. N. Ghosal 21A Primer on Credit Scoring Ravi Kumar Jain 25FAQ's on Finacle Pratima Trivedi 32Financial and Technical News 34

Ability is what you are capable of doing. Motivation determines what you do. Attitude determines how well you do it."

Thought for the quarter

From the editor

Very Happy And Prosperous New Year ……

Dear Readers, Now-a-days trend of using Plastic money is increasing and it is convenient mode of payment. Security is the major concern in electronic transactions. To highlight various intricacies on this, article on “Credit Cards Security Threats and Controls” is incorporated in this issue.e-filing of Income tax returns has been made mandatory for corporate assesses from the accounting year 2006-07. For Companies and Firms requiring statutory audit u/s 44AB it has been made compulsory to submit the Income tax returns electronically from the accounting year 2007-08. To elaborate the process article on “Electronic Filing of Returns and e-Payment of Income Tax - Procedure and Present Scenario” has been included in this issue of e- track.Electronic Mails are transforming the way people communicate within and outside the organisation. IDRBT Mail Messaging System serves as the Mail Gateway for the Indian Banking System. To enlighten details on the issue, article on “IDRBT - Mail Messaging System (MMS) Concepts & Functioning of the MMS System” has been added in this issue.The global financial crisis, which had been simmering for over a year, came to a boil in September 2008 when major US and European financial institutions teetered on the brink of collapse and had to be bailed out by their respective governments and central banks. It has created chaos in financial markets all over the world. In such a situation, it would be necessary to adopt a strategy to restore confidence of common people and provide support to poor to enable them to take up economic activities and generate sustained income. Keeping this in view article on “Global meltdown and micro financing--- a strategy to restore confidence and vibrancy in the financial market” has been included in this issue of e-track.The Indian banking and financial services industry has witnessed massive growth and activity over the last decade. The entry of private and foreign banks has not only improved the quality of services, it has also made access to innovative products and services which were hitherto not available to the Indian customers. The rise in the usage of plastic money especially credit cards, introduction of innovative loan products such as personal loan on credit cards, together with the emergence of e-banking channels has transformed the credit environment. In such a scenario “Credit scoring” has emerged as an effective tool for assessing the creditworthiness of the customers. It is used to determine the probable risk involved in providing credit. The article “A primer on credit scoring” provides insight into the topic.As you turn the pages you'll discover that "e-track" has a new look. This redesign is in response to your comments and suggestions and our desire to make this magazine shine for you. Everyone at "e-track" has been engaged in the process-sharing ideas and opinions. We hope you enjoy the way "e-track." looks, as much as you enjoy the contents and I look forward to hearing from you.Happy Reading! And a

Pratima Trivedie-mail : [email protected]

October-December-2008 2

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The IT revolution is flattening and shrinking the world and intensifying competition

which poses a variety of challenges and opportunities.

As you are aware, India is playing a vital role in the digital global economy fuelled by IT.

Taking a strong note of this, Punjab National Bank Institute of Information Technology

(PNBIIT), first of its kind in India, combining both IT and Bank Management was established

by the Punjab National Bank as an apex autonomous institute to cater to the growing needs of

the Banking industry especially in IT. The institute aims to take up this challenge upfront by

grooming technology developers, technology managers and researchers through a carefully designed academic portfolio.

BFI sector has witnessed deregulation, liberalization and migration from legacy system to Core Banking. The

process is getting increasingly IT oriented, handling very large volume of sensitive financial transactions online and

managing critical financial data. Due to this, the demand of human resource with rich knowledge of IT and banking

has increased manifold. At present, there is a dearth of such professionals, as the students, who are coming out from the

formal education system who do not have adequate exposure in these areas. They are required to be trained and

groomed by the prospective employers in Banking and Software Industry, before they can be productively deployed.

This leads to investment in terms of both time and money before they become trained as per the requirement of the

Institute.

To meet this need, Advanced Diploma in Banking Technology (ADBT) has been devised by PNBIIT as a joint

initiative with Indian Institute of Banking & Finance (IIBF). The ADBT is aimed at creating a pool of responsible

techno-bankers for Banking & IT Sector. It is designed to impart in-depth knowledge and expertise to the students

through innovative learning, supported by relevant high-end technology. ADBT is aimed at creating professionals,

who should be employable from day one.

First batch of ADBT has successfully passed out and most of the students are suitably placed. Second batch of

ADBT is also launched. The advertisement was released in Times of India on 13.12.08 in the Delhi, Patna and

Lucknow editions. The course is likely to start in the first week of February 2009. The students will complete this

programme in August 2009 and will be available for recruitment.

We invite Public and Private Sector Banks, IT companies for campus recruitment at the Institute during the

currency or towards end of the course and take the benefit of employing trained techno-bankers resources. More number

of campus recruiters will encourage the Institute, students as well as the recruiter and largely, Industry as a whole.

The vision of the institute is to achieve global excellence in knowledge economy. This vision says little but

means much more to all of us (faculty, students, staff and all our stakeholders) at the institute: a vision we personally

believe with passion. The emerging knowledge economy requires special technical and managerial skills coupled with

appropriate training and wide exposure to the state-of-the-art practices. Through dedicated efforts of faculty and

students, the institute attempts to translate vision into action.

The institute has excellent physical and IT infrastructure. With wide green campus, the institute provides quality

ambience to nurture creative minds.

At PNBIIT, we are developing and training human resource to meet today's challenges and tomorrow's

opportunities.

Ajay Misra

Director-PNBIIT

E-mail: [email protected]

From Director's Desk

October-December-20083

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Appeal: As a part of our drive to make the contents of Journal more pertinent and germane to the readers we welcome articles on latest topics of Banking / Information Technology. Articles may be of about 1000 words. Published articles are suitably remunerated .

Reader's Comments

Having been a witness to the conceptualization and grounding of Punjab National Bank

Institute of Information Technology, it is quite convincing to find from the successive issues of 'e-track'

that this journal has, indeed, become a torch bearer of the Institute. It is pertinent to mention that apart from

the depth of the articles published in it, the editorial comments too are adding value to the journal.

I am sanguine PNBIIT will keep it up ! With best wishes, Dr. S. C. Anand

Assistant General ManagerPunjab National Bank, Circle Office, Kanpur

Kudos to Shri Ajay Misra, Director, PNB-IIT, a leader with an unmatched vision and dynamism and

efforts of their Editor, Ms. Pratima Trivedi and team for giving the global outlook to hitherto 'e-track'

quarterly journal of PNB-IIT, with the current issue July-September 2008 in hand. It carries rich

contributions, which has equipped not only banking & finance professionals but also researchers/students at

large, to get hold of invaluable facts, data and information on tap, to hone their skills further in the field of

Technology Management. We send our greetings to the well deserved admirable and laudable Journal for its

pinnacle of success in the years to come..

Dr. Firdos T. Shroff Jt. Director (Academics-IT) & Fellow Indian Institute of Banking & Finance

Cracked Pot An elderly Chinese woman had two large pots, each hung on the ends of a Pole Which she carried across her neck. One of the pots had a crack in it while the other pot was perfect and always delivered a full portion of water. At the end of the long walks from the stream to the house, the cracked pot arrived only half full. For a full two years this went on daily, with the woman bringing home only one and a half pots of water. Of course, the perfect pot was proud of its accomplishments. But the poor cracked pot was ashamed of its own imperfection, and miserable that it could only do half of what it had been made to do.After two years of what it perceived to be bitter failure, it spoke to the Woman one day by the stream."I am ashamed of myself, because this crack in my side causes water to leak out all the way back to your house." The old woman smiled, "Did you notice that there are flowers on your side, of the path, but not on the other pot's side?" "That's because I have always known about your flaw, so I planted flower Seeds on your side of the path, and every day while we walk back, you water them.""For two years I have been able to pick these beautiful flowers to decorate the table.Without you being just the way you are, there would not be this beauty to grace the house."

********* Each of us has our own unique flaw. But it's the cracks and flaws we each have that make our lives together so very interesting and rewarding.

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Credit Cards Security Threats and Controls

Very often we receive unsolicited occurring within families and groups of friends.

calls from credit card salesmen or Individuals are more likely to have their guard down

insurance agents from call centres on protection of credit and account data around

with all our personal data at their people they know. Often, such thieves are connected

fingertips? Hardly a day goes by to drugs or other illegal activities being done by their

without our hearing of someone peers. Some of the method used by the fraudsters are

becoming a victim of identity theft or learning about given below:-

another data breach. Recent findings in the US by the Identity thefts are of two types - Privacy Rights state that over 230 million records application fraud and account takeover.have been compromised due to security breaches Applicat ion f raud since January 2005. We have no such data for India refers to the fraud when the but the reported and unreported credit card frauds criminal steals our document and unsecured online transactions present a major to open an account in risk to consumers. someone else name. The

Criminals use a variety of methods to steal criminal may steal important PAN (permanent account number) details, driving documents like utility bills license, credit card numbers, ATM cards, telephone and bank statements in order to build up calling cards, and other pieces of individuals' useful personal information. Alternatively identities. They use this information to impersonate they may create fake documents. their victims, spending as much money as they can in In account takeover fraud: the criminal may as short a time as possible before moving on to gather the information of a person's bank account someone else's name and identifying information. then the criminal calls up the bank as a genuine

With the higher usage of credit cards comes an cardholder and ask the bank to send the mail to the increase in credit card fraud. The best way to avoid new address. The criminal would then report the loss fraud is to know how the fraud occurs. Credit fraud of card and then once the criminal receives the starts when the card is stolen or when the crucial replacement card, he/she can use it! Once information of the card is stolen. This includes name accomplished, the fraudster has established a of card holder, the account number, expiration date, window of opportunity in which transactions are and verification/CVV code. But stolen information conducted without the victim's knowledge.is difficult to trace and one can only know that the Victims are not likely to learn of application fraud has occurred when the bill statement is fraud for some time, because the monthly account received. Ergo, one should also check bill statement statements are mailed to an address used by the carefully when it comes in. Identity fraud is digging impostor. Victims learn of account takeover when deep into consumers' pockets -- more than $48 they receive their monthly account statement.billion was lost in the past year by financial Skimming is another type fraud done on credit institutions and businesses, and individuals lost an cards. It is typically done by the dishonest employee estimated $5 billion in US only. working with the merchant. In skimming the

criminal uses a small electronic device which is Identity thefts on card are increasing these known as skimmer to capture the magnetic strip data

days. Sadly, there are more reports of identity theft on the card. This is then transferred to another,

Threats

- Sanjay Srivastava


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duplicate, card. The duplicate card is then used for

fraud purposes. It is easy for the bank to detect this

type of fraud. The bank can collect a list of all the

card holders who have complained about fraudulent

transactions. Then, it uses data mining to discover

relationships among the card holders and the

merchants they use. For instance if a large no. of the

afore-mentioned credit card holders have used a

particular merchant, that merchant terminal or

(point-of-sale device) can be directly investigated.

Stealing wallets, mails, letter box skimming

used to be the best way identity thieves obtained

PAN number, driver's licenses, credit card numbers tactics to obtain our personal information and and other pieces of identification. Besides these, drain our finances: posing as a loan officer and they now use a variety of means: ordering our credit report (which lists lines of ·Dumpster diving or thrashing: Dumpster credit).

Divers are people who search for things that ·White collar crime: Obtaining names and PAN other people have thrown out that are still number, Bank Account number from useful, can be recycled, and have value. personnel or customer files in the workplace.Dumpster Divers will not only pick up ·Shoulder surfing at ATM machines and phone discarded items left at the curbside of people's booths in order to capture PIN numbers. Smart homes, but they will climb into dumpsters at thieves use cell-phones to video record while apartment buildings and behind shopping we are at the ATM inputting our data or by centers. They look in trash bins for un- watching that individual type his/her password shredded credit card and loan applications and on the keyboard.documents containing PAN number, canceled ·Social Networking Exposure: Finding cheques, bank records or any documents identifying information on Internet sources, containing personal information, Passport via public records sites and fee-based number, etc. information broker sites.

·Stealing mail from unlocked mailboxes to ·Phishing: Sending e-mail messages that look obtain newly issued credit cards, bank and like they are from our bank, asking you to visit credit card statements, pre-approved credit a Web site that looks like the bank's in order to offers, investment reports, insurance confirm account information. Sometime statements, or tax information. Unfortunately, fraudsters send fake e-mails promising a prize even locked mailboxes may not stop the most or gift in exchange for completing a survey or determined thief, especially in a large answering a few questions. In April 2005, a apartment complex. new “cousin” of phishing was defined called

·Impersonation: Accessing our personal “WiPhishing”. information fraudulently, for example, by ·WiPhishing is an act executed when an posing as an employer, loan officer, or individual covertly sets up a wireless-enabled landlord. The perpetrator may use a variety of laptop computer or access point to get other


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wireless – enabled laptop computers to and stores, pay close attention to how the associate with it before launching a crack magnetic stripe information is swiped by the attack. About 20% of wireless access points waiter or clerk.use default SSIDs. Because user failed to ·Void incorrect receipts. rename them, a cracker can quite easily guess ·Destroy carbons. the name of a network that target computers ·Save receipts to compare with billing are normally configured to, thereby gaining statements. access to the laptop computer and putting ·Open bills promptly and reconcile accounts malicious code into it. monthly.

·Hacking into unsecured and unencrypted data ·Report any questionable charges promptly and files of financial institutions, retailers, and in writing to the card issuer.credit card transaction processing companies.

·Always Delete Cookies·Accessing unsecured Web sites that contain

·Notify card companies in advance of a change sensitive personal information such as PAN

in address. numbers and financial account numbers.

·Do not use debit cards when shopping online. Use a credit card with lower credit limits

We cannot prevent identity theft. Criminals because we are better protected in case of can commit such theft relatively easily because of fraud.lax security practices and careless information-

·Always take credit card receipts. Never toss handling in the workplace. But we can reduce our

them in a public trash container. When risk of fraud by following a few counter measures.

shopping, open put receipts in the wallet rather Here are some vital do's and don'ts to help us protect

than in the shopping bag.credit card frauds.

·Order the credit card summary report at least once a year. If we are a victim of identity theft,

·Sign the cards as soon as they arrive. our credit report will contain the tell-tale signs ·Carry cards separately from the wallet, in a – inquiries that were not generated by us, as

zippered compartment, a business card well as accounts that we did not open.holder, or another small pouch. ·Reporting Losses and Fraud: Quickly report

·Keep a record of all account numbers, their the customer care department for stolen or lost expiration dates, and the phone number and cards. Many companies have toll-free address of each company in a secure place. numbers and 24-hour service to deal with such Keep a list or photocopy of all the credit cards, emergencies.debit cards, bank accounts, and investments — ·Reduce the number of credit and debit cards the account numbers, expiration dates and which we carry in our wallet. We should not telephone numbers of the customer service use debit cards because of the potential for and fraud departments — in a secure place (not losses to our savings account. Instead, carry in wallet or purse) so we can quickly contact one or two credit cards and ATM card in the these companies in case our credit cards have wallet.been stolen or accounts are being used

·Watch the mail when expecting a new or fraudulently.

reissued credit card to arrive. Contact the ·Keep an eye on the card during the transaction, issuer if the card does not arrive.

and get it back as quickly as possible. When Don't:

using the credit or debit cards at restaurants ·Lend the card(s) to anyone.

Controls

Do:


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·Leave cards or receipts lying around. privacy of our information as soon as when discovering that the personal information might be at ·Sign a blank receipt. When signing a receipt, risk. Even if when discovering later that our draw a line through any blank spaces above the information remained safe, the steps you take now total. can provide us with the skills we need to remain ·Write the account number on a postcard or the secure.outside of an envelope.

For Preventing Identity Theft: We can avoid ·Give out the account number over the phone some of the ways identity thieves access our unless when making the call to a company we information by getting a secure mailbox, shredding know is reputable. our documents, not giving out personal information ·Give out the PAN, credit or debit card number over the phone, and keeping the minimum amount of or other personal information over the phone, personal information possible in our wallet or purse. by mail, or on the Internet unless when having Of course we can't protect our self against some of a trusted business relationship with the sources such as white collar crime and online theft of company and when have initiated the call. our information from a third party. Although we can't Identity thieves have been known to call their prevent those from happening we can make it more victims with a fake story that goes something difficult to apply for credit with our social security like this. “Today is your lucky day! You have number by putting a fraud alert on our credit report. been chosen by the Lotto Lucky Prize to Monitoring the credit report is definitely a step we receive a free trip to the Singapore. All we need should take to protect ourselves from identity theft. is your PAN number, credit card number and Keeping an eye on all the lines of credit and accounts expiration date to verify you as the lucky in our name can help us from getting nasty surprise winner.months down the road. ·Ever permit the credit card number to be

Next time take a look at the form of identity written onto the cheques as it puts us at risk for theft where a person actually assumes the identity: fraud.name, driver's license, and all. Never forget that ·When online, don't click on virus-laden e-mail debit card fraud differs from a credit card fraud in the attachments (or any attachments for that fact that it's our money that is being swindled. It's up matter unless when verified their arrival with to all of us to take timely action to protect our bank the sending party), and be careful about balance.clicking on links contained within instant Ref: messages or even on trusted sites. Cyber cops, cyber criminals and internet by Deepti In some cases, we might not learn that our data Chopra & Keith Merrill.was stolen until the company or organization that Webster's new world hacker dictionary.was affected informs us about the breach. The Businessline, Sept 29. 2008.government should make it mandatory for banks,

enterprises, and firms that do business in India to Pictures courtesy www.identity-theft-faq.com and notify consumers when a data breach has occurred, www.expandmywealth.com.regardless how that information was or was not used. The Economic Times Nov 04.2008.Data at rest can be protected by hardware based and bankers'sonlive.comsoftware-based encryption and documents can be allthingsfrugal.com.protected by Digital Signatures for authentication. We must take immediately steps to secure the


Author is Librarian at PNBIIT, Lucknow

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Option 1: Use digital signature in e-Filing of Taxwhich case no paper return is required The process of electronically filing of to be submitted.Income tax returns through the internet is known as Option 2: File without digital e-Filing. e-filing of Income tax returns was signature in which case ITR-V form is introduced and became mandatory for corporate to filed with the department. This is a single page assesses from the A Y 2006-07 and it is mandatory receipt cum verification form.for Companies and Firms requiring statutory audit Option 3: File through an e-return intermediary who u/s 44AB to submit the Income tax returns would do e-Filing and also assist the Assessee file electronically for AY 2007-08. Any Company/Firm the ITR V Form.requiring statutory audit u/s 44AB return submitted Hardware (minimum) requirement for e-filing: without a e-Filing receipt will not be accepted. e-vPC with 128 MB RAM, PIII processor or filing is possible with or without digital signature.

rd equivalent with atleast 25 MB free disk space.Now it is the 3 year of e-filing of income tax vInternet connection (preferably broadband)returns. For the Assessment year 2007-08, 21.93 lacs Software requirement for e-filing:e-returns were filed (for Assessment year 2006-07 -

vWindows operating system (XP/2000 or 3.7 lacs e-returns were filed). Of these 14.47 lacs e-

higher version)returns are filed voluntarily.

vMicrosoft Office software

vAcrobat reader 8.1.0. – can be downloaded Types of e-Filing

through Income tax website.There are three ways to file returns electronically

vJRE (Java run time environment) version 1.6

(called JRE 6 (Beta) may be required.

v In addition to the above, downloads the utility

Software from the income tax department e-

filing website,

Utility Software

vThis is free utility software (In the Form MS

Excel Files) for taxpayers.

vThis software can be downloaded and

installed on your computer for repeated /

multiple use.

Once installed you may use this utility

www.incometaxindiaefiling.gov.in.

Electronic Filing of Returns and e-Payment of Income Tax - Procedure and Present Scenario

-Dr. S. Sudalaimuthu

Figure-1 - Types of e-filing


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software to print challans with PAN and other

details. The Barcode of PAN will be printed

automatically.

This site urges the user to check the

correctness of PAN by using the "know your PAN"

facility available on the site.

Steps for Installation of the Software

a. Download the Taxprochallan.zip file.

b. Extract the Taxprochallan.zip file into a

physical path.

c. Double click on the Taxprochallan.exe from

the extracted path.

Utility Software Downloading Procedure

Download the utility software by clicking the 1. ITR – 1 is used for submitting Income Tax

Return for Individuals having Income from

salary / Pension / Family Pension & Interest.

2. ITR – 2 is used for submitting Income Tax

Return for Individuals and HUFs not having

income from Business or Profession.

3. ITR–4 is used for submitting Income Tax

Return for Individuals and HUFs having

income from a proprietary Business or

Profession (Details regarding the other ITR

are given in the e-filing process step number 5)

Download Tab available in the above said web site

(As Shown below).

If you open the above said Excel files you are

able to open well designed macro based MS excel

based ITR 1, ITR 2 and ITR 3 forms. With help of

these forms the required tax details are entered in

the appropriate column and row and submit the file.

It will automatically upload our tax details in the xml

form to the income tax department.

Figure-3 – Downloading e-filing Utility Software

Click here

Figure-4 – Downloading e-filing Utility Software

Now we are able to download the following zip file

The above Zib file consist of the following excel file


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Register Online

Login

Down load Client Side Utility Instructions

Complete Form using Software provided

Yes

Do you Have user ID & Password

Review Instructions, FAQ’sAnd IT Call center

Was there any Error or Difficulty

Generate XML File

Click Submit Return Button

Attach and Upload XML File

Was Digital Certificate used

for e-filing?

Take Print out of Acknowledgement indicating Successful transmission

Take the printout of the ITR-V Form which is a provisional acknowledgment receipt & submit to the nearest income tax Department Office

e - FILING PROCESS

No

NO

Yes

NO


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e-FILING PROCESS

1. Log on to the website www.incometaxindia. gov.in, click on “e-filing of Income Tax Returns”.

Figure – 8 – e-filing of Income Tax Returns

2. Now you are in https://incometaxindiaefiling. gov.in/portal/index.jspHere, the new user – Click the Register optionExiting user - Click the Login option

3. CREATING USER ID AND PASSWORD:

(for filing of e return for the first time)

Before creating user id for any assessee, be

ready with the following:

vPhotostat copy of the PAN card.

Figure–9– e-filing Login & Registration

vA valid and regularly used Email id.

vPhone number of the assessee.

Go to register option and enter the exact details

available from the above.

Preferably enter alphanumeric passwords

like “abcd1234”

Fill up the details required in the Registration

form

Figure – 10 – e-filing Registration

4. The Existing user enter their user name and password in the following screen

Figure – 11 – e-filing Login


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5. Select appropriate type of Return Form Tax, Corporate tax, FBT, BCTT (TDS, Advance tax,

self assessment tax) to be paid online using net 1. For Individuals & HUF – Use ITR 1, ITR 2, banking facility. Taxpayer can make tax payment ITR 3, ITR 4 Forms to fill and submit the from any location without going to Bank branch. required data. Amount of tax debited from his bank account 2. For Firms / Association of Persons / Body of electronically and credited to GOI. Individual - use ITR 5

Log in to website of Income Tax Department: 3. For Companies - use ITR 6www.incometaxindia.gov.in Choose the button “pay 4. Trusts – use ITR 7 taxes online”5. Fringe Benefits Tax – FBT – Use ITR 8

e-Payment facilitates payment of direct taxes 6. Download Return Preparation Software online by taxpayers. To avail of this facility the (Excel Utility Version 1) for selected Return taxpayer is required to have a net-banking account Form. (Downloading procedures are shown with any of the banks listed below, which the only above) banks are offering this facility at present.

7. Fill your return offline and generate a XML 1. Axis Bank file. 2. State Bank of India 8. Login and click on relevant form on left panel 3. Punjab National Bank and select "Submit Return" 4. Indian Overseas Bank 9. Browse to select XML file and click on 5. Canara Bank "Upload" button 6. Indian Bank 10. On successful upload acknowledgement 7. Bank of India details would be displayed. Click on "Print" to

generate printout of acknowledgement/ITR-V 8. Corporation Bank

Form. 9. State Bank of Bikaner & Jaipur

Incase the return is digitally signed; on generation 10. State Bank of Travancore of "Acknowledgement" the Return Filing process 11. State Bank of Indore gets completed. You may take a printout of the 12. Vijaya Bank Acknowledgement for your record. 13. HDFC Bank Incase the return is not digitally signed, on 14. Oriental Bank of Commerce successful uploading of e-Return, the ITR-V Form

15. State Bank of Patiala would be generated which needs to be printed by the

16. Bank of Baroda tax payers. This is an acknowledgement cum

17. IDBI Bank verification form. The tax payer has to fill-up the 18. State Bank of Mysore verification part and verify the same. A duly verified 19. Bank of Maharashtra ITR-V form should be submitted with the local 20. State Bank of Hyderabad Income Tax Office within 15 days of filing 21. Union Bank of India electronically. This completes the Return filing

process for non-digitally signed Returns. 22. Allahabad Bank

E-PAYMENT OF TAX 23. Dena Bank

This is a facility provided to the taxpayers to 24. Syndicate Bank make income tax payments through internet, using 25. ICICI Bank net-banking facility. All Direct Taxes e.g. Income 26. United Bank of India


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27. UCO Bank PAN/TAN entered by you.

28. Central Bank of India Step 4

29. Andhra Bank You can now verify the details entered by you. In

STEPS TO BE FOLLOWED FOR THE E- case you have made a mistake in data entry, click on

PAYMENT OF TAX “EDIT” to correct the same. If all the detail and

Step 1 name as per ITD is correct, click on “SUBMIT”

a) Log on to NSDL-TIN website (www.tin- button. You will be directed to the net-banking site

nsdl.com). provided by your bank.

b) Click on the icon e-payment: pay taxes online. TIN system will direct you to net-banking

c) Click on 'Please Click Here'. facility of your bank. You will have to log on to the

d) Select the required challan. net banking site of your bank using your login ID

Step 2 and password/PIN provided by the bank. The

After selecting the required challan, you will be particulars entered by you at TIN website will be

directed to the screen for entering the following data: displayed again.

a) PAN for non-TDS payments and TAN for You will now be required to enter the amount

TDS payments * of tax you intend to pay and also select your bank

b) Name and address of the taxpayer account number from where you intend to pay the

c) Assessment Year tax. After verifying the correctness, you can proceed

d) Major Head Code with confirming the payment.

e) Minor Head Code Your bank will process the transaction online

f) Type of payment by debiting the bank account indicated by you and

g) Select the bank name from the drop down generate a printable acknowledgment indicating the

listprovided Challan Identification Number (CIN). You can

* In case of challan no. 280, 282 and 283 the verify the status of the challan in the “Challan Status

Permanent Account Number (PAN) needs to be Inquiry” at NSDL-TIN website using CIN after a

entered. In case of challan no. 281 Tax week, after making payment.

Deduction/Collection Account Number (TAN) Apart from CIN given to you, you can check

needs to be entered. Please ensure that you enter your online bank statement to verify the tax payment

PAN/TAN correctly, as this is extremely important If any problem encountered at the NSDL

for further processing. The system will check the website while entering non-financial data then

validity of PAN/TAN. In case PAN/TAN is not contact the TIN Call Center at 022-24994650 or

available in the database of the Income Tax write to [email protected]

Department then you cannot proceed with the If any problem encountered while entering the

payment of tax. financial details at the net-banking webpage of your

Step 3 bank, then you should contact your bank for

After entering all the above detail, click on assistance.

PROCEED button. TIN system will display the After making e-payment of direct tax if status

contents you have entered along with the “Name” of challan is not available under Challan Status

appearing in the ITD database with respect the Enquiry on NSDL site, You can verify the status of


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the challan in the “Challan Status Inquiry” at NSDL- TIN system

TIN website after 5 to 7 days of making e-payment.

In case of non availability of the challan contact the

concerned bank.

If after entering challan details in NSDL site if

Bank Name is not being displayed, the problem may

be encountered because of the following

Reason 1: If Assessee enters incorrect TAN / PAN in

challan data entry screen.

Reason 2: If Assessee using Internet Explorer

browser then temporary internet files should be

deleted by following

A. Open Internet Explorer window Impact of e-filing of Tax:

The e-filing project is a high impact, high B. Go to “Tools” Menuvisibility project of significant importance to the C. Select “Internet Options”Government and taxpayers wi th many D. Delete cookies and Delete temporary Internet achievements. The first cycle of e-filing of I-T files on your machinereturn by companies was completed in 2006-07

E. Close the current Internet Explorer windowswherein nearly 3.7 lakh returns were filed. However,

F. Again go to tin-nsdl site & make e-paymentonly about 1% of I-T returns were filed voluntarily.

If still above raised problem not resolved then It established a foundation for an alternative kindly contact the TIN Call Center at 022-24994650 channel for I-T return receipt.or write to us at [email protected] The implementation of strategic changes for Security related to the data submitted to the 2007-08 led to an increase in number of Income tax website for e- payment returns from 3.7 lakh in 2006-07 to over 21.93 lakh

in 2007-08 (till 31/03/2008).All transmission through NSDL-TIN website i) Of these returns, over 14.41 Lakh returns is encrypted and is with Secure Socket Layer (SSL)

(66%) have been filed voluntarily by authentication. With respect to the banks, it depends taxpayers indicating the broader acceptance of on the security measures provided by the bank for the convenience of e-filing.net-banking.

ii) Electronic return filing before or after regular TAX INFORMATION NETWORK (TIN)

office hours (9 a.m. to 6 p.m.) is another Tax Information Network (TIN), a repository

indicator of taxpayer convenience. Over 6 of nationwide Tax related information, has been lakh returns (27%) have been filed beyond established by National Securities Depository office hours.Limited (NSDL) on behalf of Income Tax iii) Though use of digital signature was optional, Department of India (ITD). TIN is an initiative by 166,624 corporate returns (42% of all

ITD for the modernisation of the current system for corporate returns) and overall 247, 272 returns

(11% of all returns) have been filed using collection, processing, monitoring and accounting digital signature, making the entire return of direct taxes using information technology. filing process - paperless in such cases.


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Table - 1

E-Filing Achievements

Milestones Achievements

E-returns upto 31/03/2008 21.93 Lakh (up by 504 % from 06-07)

Corporate E-returns 3.96 Lakh (up by 11 % from 06-07)

Voluntary E -returns 14.42 Lakh (66 % of total E-returns)

E-returns received on the due date* 1.62 Lakh (up by 238 % from 06-07)

E-returns received on the last 5 days before due date 1.62 Lakh (up by 238 % from 06-07)

Number of registered users 24.0 Lakh (up by 612 % from 06-07)

Number of Corporate returns filed using free Return Preparation Software available on website

1.66 Lakh (42 % of total Corporate E-returns filed)

Number of all returns filed using free Return Preparation Software available on website

7.4 Lakh (34 % of total E-returns filed)

Number of E -Returns filed before 9 am or after 6 pm (beyond office hours)

6.01 Lakh (27% of total E-returns)

Number of E-returns filed using digital signature

2.47 Lakh (11% of all returns and 42% of corporate returns)

No. of Tax Deducted at Source Records in e-Returns

1,51,04,288

No. of Tax Challan Records in e-Returns

26,70,775

Peak rate of return received/hour

21,729/hr (up by 279% from 06-07)

Peak bandwidth utilized

45 Mbps (up by 78% from 06-07)

Table - 2

Number of Returns filed for AY 2007-2008 (Form wise) From 01-APR-2007 To 31-MAR-2007

Form Type Total Returns Filed

ITR-1 (For Individuals with Salary or Interest Income only) 1,42,826

ITR-2 (For Individuals and HUF without Income from Business) 2,67,469

ITR-3 (For Individuals and HUF who are partners in any Partnership Firm but do not have any other Income from Business)

1,02,324

ITR-4 (For Individuals and HUF with Income from Business)

8,56,987

ITR-5 (For Partnership Firms, AOPs, Local Authority, BOI and for Profit Trusts)

4,03,218

ITR-6 (For Companies)

3,96,749

ITR-8 (For Fringe Benefit Tax)

850

TOTAL

21,70,423


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Table – 3 State wise e-filing of Returns

State E-Returns Filed Voluntarily Mandatory E-Returns Total

Maharashtra 246,132 148,362 394,494

Delhi

173,805

111,206

285,011

Gujarat

160,128

59,530

219,658

West Bengal

99,964

78,082

178,046

Punjab

137,209

26,239

163,448

Karnataka

119,582

41,128

160,710

Tamilnadu

95,557

60,273

155,830

Uttar Pradesh

101,621

38,239

139,860

Andhra Pradesh

47,723

45,230

92,953

Madhya Pradesh

63,434

14,563

77,997

Rajasthan

51,411

24,462

75,873

Haryana

32,481

12,686

45,167

Kerala

32,481

12,686

45,167

Chhatishgarh

24,920

18,356

43,276

Jharkhand

14,361

4,715

19,076

Assam

10,473

5,503

15,976

Orissa

7,285

7,759

15,044

Chandigarh

7,700

4,986

12,686

Bihar

6,661

5,534

12,195

Uttaranchal

4,839

3,471

8,310

Goa

3,626

3,773

7,399

Jammu & Kashmir

3,892

3,403

7,295

Himachal Pradesh

1,784

2,256

4,040

Address Outside India (Nris Etc)

1,891

1,126

3,017

Pondicherry

519

1,233

1,752

Goa

3,626

3,773

7,399

Andaman And Nicobar Islands

442

316

758

Meghalaya

394

321

715

Tripura

213

480

693

Daman & Diu

228

356

584

Dadra & Nagar Haveli

136

315

451

Arunachal Pradesh

169

78

451

Nagaland

58

110

168

Manipur

49

107

156

Sikkim

102

30

132

Mizoram

21

7

28

Lakhswadeep

19

3

22

Total

1,441,519

728,904

2,170,423


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Largest number of e-returns were filed from 3. What we write on the e-challan will be directly

Maharastra (278,112), followed by Delhi (153,992), sent to Income Tax Department. Banks will

Karnataka (144,287), Tamil Nadu ((118,354) and not do any data entry.

Gujarat (115,798). Last year (fiscal 2007-08), up to 4. We can save/print the challan copy and the

31st March 2008 about 21.93 Lakh e-returns were receipt copy.

filed from all over India, out of which over 14.6 Lakh 5. As soon as our Bank authorizes payment of the

e-returns were filed voluntarily. E-returns have been amount, We will receive a clear, legible

received from far-off regions across the country receipt/counterfoil from our Bank.

such as Jammu & Kashmir, Nagaland, Manipur, 6. Transaction id of the e-payment transaction

Andaman & Nicobar Islands, Lakshwadeep, etc., will be available to us in our bank statement.

indicating the broad and far reach of Internet and e- 7. We can check online if our money has actually

filing across the country. A number of e-returns have reached the I-T Department. For this we have

also been filed from outside India. to go to Tax Information Network Website:

Advantages of e-filing and paying taxes online https://tin.tin.nsdl.com/oltas/index.html and

1. Pay taxes from any location at any time click the box

through your net-banking account.

2. Instant transfer of funds from your account. Author is Faculty, Dept of Commerce, Bharathiar University, Coimbatore

The Obstacle in Our Path

In ancient times, a king had a boulder placed on a roadway. Then he hid himself and watched to see

if anyone would remove the huge rock. Some of the king's wealthiest merchants and courtiers came

by and simply walked around it. Many loudly blamed the king for not keeping the roads clear, but

none did anything about getting the big stone out of the way. Then a peasant came along carrying a

load of vegetables. On approaching the boulder, the peasant laid down his burden and tried to move

the stone to the side of the road. After much pushing and straining, he finally succeeded. As the

peasant picked up his load of vegetables, he noticed a purse lying in the road where the boulder had

been. The purse contained many gold coins and a note from the king indicating that the gold was for

the person who removed the boulder from the roadway. The peasant learned what many others

never understand.

“Every obstacle presents an opportunity to improve one's condition"


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The IDRBT MMS Gateway Introduction

receives mail from the Internet and Mail Messaging System:

delivers it to Mail Servers within the Electronic Mail is transforming the way people Closed User Group [CUG]. It also communicate within and outside the organisation. receives mails from the CUG and Messaging hasn't just become a lot quicker, but delivers them to Mail Servers within the CUG and as well messaging costs have dipped drastically. Mission critical as on to the Internet, depending on the recipient's address. information now passes in and out of the user's desktop at Firewalls between the INFINET and the Internet ensure a click. The Indian Banking and Financial Sector, waking that the system is secure from external threats. up to the wide range of possibilities and immense Implemented with a standard protocol, the SMTP, the benefits, was on the lookout for a reliable Corporate e-system is also integrated with ancillary services such as mail System. DNS Services, Domain Name Registration, and Web IDRBT is uniquely positioned to offer a robust Based Mail access from Internet. backbone for such a system since it owns and operates a

Now a typical Public Sector Bank, having closed user group wide-area network – INFINET, for all branches spread across the length and width of this vast banks and Financial Institutions, and IDRBT Mail country will find it difficult to manage with one or two Messaging System serves as the Mail Gateway for the mail servers. Hence most of the banks maintain their own Indian Banking System. With over 20 Public Sector multiple mail servers, which are connected to the IMMS Banks, including the Reserve Bank of India making use Gateway. Most of the Banks have a standard e-mail ID of this backbone, it's perhaps one of the largest format, like [email protected] Systems in the country.

So all e-mails for, say, the Bank of Maharashtra Since banks with a wide network of branches in will land at IDRBT gateway with an e-mail ID of the form every nook and cranny of the country are making use of [email protected]. The actual mail boxes of a bank this messaging platform, it becomes a mission critical are automatically classified based on the location, service and it is absolutely essential that there are no thereby directing all the mails headed to a particular hiccups. An obstruction of even an hour can cause serious location, into that mailbox, which is designated disruption to functioning of a critical section of a Bank. [email protected]. The mailbox ID is translated System Architecture :from the mail ID by an automated list lookup process, and

The IDRBT Mail Messaging System [IMMS] acts the mail is delivered to that specific Bank Server over SMTP

as a bridge between the INFINET and facilitates seamless session, making the process smooth, simple and reliable.

to and fro transmission of mails.Features :

Quite a few unique features are built into the

system to address the specific needs of the Banking

Sector. For instance, the routing entries have been made

available for addition /deletion from the remote sites with

web front ends, thereby helping the banks to make

changes in the location of a particular address as and

“IDRBT - Mail Messaging System (MMS) Concepts & Functioning of the MMS System”

-Dr. Firdos T. Shroff


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when the need arises. This feature comes in handy, 4.12. Since it provides seamless backend database

especially as transfers are a regular phenomenon in the support, Exim on Linux is a very efficient solution for a

sector. Mail Gateway System. The Exiscan anti-virus wrapper

patch with tight integration with MTA ensures efficient The Mail Transfer Agent [MTA] is closely

screening of Mail Content and dropping of malicious integrated with the Database System for fast lookup for

mail. The Anti-Virus Engine for the System is MCAffee Mail Routing. The system also brings along Good Mail

on Hub 1, 2, 7, 8 and Sophos on the other Hubs. So, all the Logging and Traffic Monitoring Features, thereby

mails are scanned by two-different anti-virus engines - considerably tapering off the problem areas. Further, the

MCAffee or Sophos, and all mails containing malicious easy troubleshooting and diagnostics facilities ensure

content is summarily dropped. that there are no glitches and the system functions

smoothly. A summary on the volume of the mail traffic,

delivery efficiency, and the errors encountered is

automatically generated by the system daily and

forwarded to the Mail Administrator. This is

accomplished using the 'eximstats' scripts from all the

servers and enables the administrator to have a snap-shot

view of previous days traffic and any errors that

happened.

MMS - Webmail :

IDRBT Webmail is a multi-lingual web-based e-

Mail facility implemented by IDRBT for Indian Banks.

In addition to all the standard features of web-based Mail The IMMS consists of eight mail servers with:

services (like Yahoo, Hotmail etc) this facility can also be ·two Mail Servers receiving mails from the Internet utilized to compose and receive Mails in 11 Indian Servers languages from the same interface.·two Mail Servers receiving mails from the Conclusion :INFINET Servers

MMS system developed by IDRBT will go a long ·two Mail Servers delivering mails to the Internet way in assisting banks in effective exchange of Servers communication as also usage of multi-lingual web-based ·two Mail Servers delivering Mails to the INFINET e-mail facility. This indeed will be very valuable tool for Servers the multi-lingual customers not only in India but across

Firewalls at both ends cut off all the 'affected mails' the globe.

from both the Internet and INFINET Servers, thus making sure that the system continues without a glitch. Reference:Moreover, double mail servers for each activity

www.idrbt.ac.inguarantees that the traffic continues uninterrupted even

when a server malfunctions.

The Servers use Red Hat Linux 7.2 Platform and

the Mail Transfer Agent is Exim 4.2 patched with Exiscan

Gateway MMS set-up :

The author is Fellow & Consultant (Academics-Faculty-IT),Indian Institute of Banking & Finance, Mumbai


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Abstract: It would be interesting to note as has

been recently brought out by Bank of Global meltdown has created chaos in England that global taxpayers have financial markets particularly in developed already paid around $ 8 trillion to countries. It is fast spreading all over the world. It bail out big global banks. But has mainly originated from the leverage but also due currently no such serious big scale to opacity of financial instruments floated in the efforts have been made even to bail out poor market due to overplay of technology and expertise borrowers for their dwelling house mortgage loans.recently brought in the markets. An attempt has been

made globally to bail out the affected financial

institutions through treasury support but this appears Adverse Impactto be inadequate as it would not help in restoring No one can deny that poor people even in rich confidence of investors and also of financial countries are burnt seriously in the present financial markets. It would be necessary to adopt a strategy to crisis. It should have also been realized that such restore confidence of common people and provide effects would turn them desperate to indulge in theft support to poor to enable them to take up economic and crimes for survival if immediate succor is not activities and generate sustained income. This provided to them.would be the only effective strategy to come out

It has to be appreciated that credit crunch unscathed from the present meltdown.

resulting from liquidity crunch – one of the key reason of the present financial crisis- affects poor Introduction more adversely as most of them are heavily

Global financial crisis has spared none – dependent on financial institutions. In fact it ripples

individuals or institutions- rich or poor- developed through the entire economy affecting each and

or developing countries- global or a country, everyone as it raises the cost of credit and makes it

institutions- financial or non financials. Each one scarcer each day and thus makes it difficult to

has been experiencing the heat of financial borrow from formal banking institutions and

meltdown in one form or the other. survive. It obviously ultimately leads to job cuts and

consequent unemployment.

Bail Out Strategy

Some Profound ObservationsIt is therefore surprising to observe that an all

out effort has been undertaken by most of the Joseph Stieglitz has rightly said that the

developed countries particularly to bailout their big present bail out plan of USA is 'like a patient

banks and insurance companies but regrettably there suffering growing massive blood transfusion while

is no visible effort could be seen to provide succor to there is internal bleeding, it does not do anything

small people and micro institutions both about the basic source of hemorrhaging'.

manufacturing and financial institutions catering to Similarly Paul Craig Roberts of Wall Street their poor people. Journal has observed that such bailout program

Global Meltdown and Micro Financing- A Strategy to Restore

Confidence and Vibrancy in the Financial Market

-Dr S. N. Ghosal


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should have been thought for helping people with worldwide. However it has not yet affected as

failing mortgages instead of bailing out banks. because these institutions have been able to maintain

their enviable repayment record and also to generate

entrepreneurs and sustainable business for poor and Insularity of Micro Financing Institutionneglected sector of the society. This indeed will help

It is true global financial crisis has not yet them to grow despite the dark cloud of bankruptcy of

directly affected micro financing institutions as has financial institutions hovering all around the globe.

been observed by Jacques Attalli the founder of It would therefore all the more necessary to

PlaNet Finance of France. However he also added strengthen these institutions further to save these

that the future is uncertain and therefore one does not from the onslaughts of present financial crisis.

know when and where it may happen.

However there should not be any doubt that Policy Measures to Insulate MFIglobal credit crunch would severely affect micro

It would therefore be necessary not only to financing institutions if immediately some positive come forward to save these institutions by providing policy measures are not initiated to insulate these funds and enabling them to help rural and urban poor institutions from the present crisis as these to pursue their economic activities and earn institutions heavily lean on endowments and bank livelihood with dignity and confidence. funds. It is obvious that under credit crunch and

resource evaporation due to meltdown would not In this regard recent Chinese efforts to

only make availability of funds difficult but also rejuvenate rural poor by introducing land reforms to

would make it costly. It would therefore become vest farmers the right to own land and empowering

imperative for states to fund these institutions not them to get adequate funds from banks should be

only to save the poor but also avoid rising despair commended.

and social tension that would generate heat and social turbulence all over. New Business Model for MFI in India

However an in depth study would reveal that As regards India Attali opined rightly that these institutions have over the years have earned the 'India is a very important country as far as micro reputation of maintaining a very enviable record of finance is concerned as financial inclusion in India is

threpayment of their debts—almost at 99% level—and lowest in the world as India has been ranked 50 also enabling poor people to earn their livelihood below countries like China, Kenya and Morocco. It through sustainable business or farming. In fact would be therefore all the more necessary for India these features have helped them to source fund from for not only to bail out banks by redeeming of farm outside equity and endowment funds even today. loans but also to make available enough liquidity to This is true that due to global meltdown such funds farmers and artisans at competitive rate of interest so are gradually drying up but despite this it is that they can pursue their economic activities interesting to observe the interest still evinced by profitably. In this regard micro financing institutions these funds in these institutions. It is therefore high if funded adequately and supported by competent time to make conscious efforts to insulate these management team along with risk sharing by institutions from the glowing fire of meltdown that commercial banks both public and private would has shaken the confidence of people on all highly definitely de-couple India from the present global developed and sophisticated financial institutions meltdown.


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The Present Strategy Need to Comprehend both obviously resulted in heavy losses to even best

Funding and Market Liquidity managed and well reputed banks of US, Europe and

U.K. In fact it has lead to systemic risk and caused The present strategy adopted in India to illiquidity spiral. It obviously leads to market counter the melt down effect on the economy is to illiquidity and consequent collapse and bankruptcy enhance credit availability in the market by initiating of financial institutions not only in one market or measures to improve the liquidity position of banks. even in one country but almost globally. This would It has been repeatedly emphasized by policy makers continue until a new equilibrium is created by policy to give more loans to business and corporate houses and strategy changes that are now keenly debated so that the present illiquidity in the financial market and periodically introduced by policy makers to test could be taken care of and emerging recession the efficacy and ultimate impact to reduce the thereof could be avoided.intensity of fire arising from this turbulence.However it has to be understood that there are

two types of liquidity: one is funding liquidity and

the other one is market liquidity. The funding Impact of Illiquidity

liquidity arises when a trader is unable to fund his The present liquidity constraint has affected deal and therefore is compelled to unwind the deal adversely the asset prices and created downward whereas the market liquidity refers to ease in trading liquidity spiral which has in turn has adversely and high resilience that is where trade has a low bid affected balance sheets of many banks. It has and low price impact. In simple language it indicates therefore become necessary for them to de-lever. that market function smoothly without any hassle These are no doubt imperative measures to bring under appropriate market liquidity. back banks to their normal operating condition but

It is unfortunate that both funding and market the present crisis has gone so deep that something

liquidity risks have arisen and hence dealers and more might be needed to bring back the confidence

manufacturers in the market are closing their shops of people, and market.

or cutting their production and supply in the market

due to market liquidity constrains and along with Chart Exhibiting Liquidity Spiralthat to add fire to the fuel banks are also

The chart exhibited below highlights in what experiencing illiquidity of extreme nature as they

way the circle of liquidity to illiquidity and vice-have to provide more finance to retrieve trade and

versa happens in the market.commerce from their present default and also to

meet the growing demands arising from innovative

instruments and hedge funds where it has become

difficult to honor each other bids on time.

Leveraged Deals Leading Financial Constraints

It is true the present crisis has arisen mainly

due to bursting of housing mortgage loans but this

has deteriorated further due to large exposure of

financial institutions in highly leveraged deals. It


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In fact if the problem would have been only funds are still funding these institutions in India. It is

illiquidity or liquidity spiral it would have been however necessary to augment their resources as

solved by the monetary and fiscal measures recently much as feasible as this is perhaps most effective

taken by the government and the monetary institution to bring back confidence of masses in the

authorities of India. May be some further measures financial markets of the country. Already some of

like enhancing capital base of banks and or our financial institutions and banks have started

enhancing deposit guarantees of all financial evincing interest in funding these institutions as

institutions would be required to halt any further could be seen from recent funding of SPANDAN by

deterioration of Indian economy and might bring SIDBI to the tune of Rs. 200 crores. This trend

back the rate of economic growth at some should continue as it would have a very healthy

respectable level. But this would not happen as the effect on the economy and insulate the country from

immediate need is to restore confidence of people on the impact of the present global meltdown.

financial institutions and instruments. This would be

possible only when much more transparent and Need is to Develop PPP Model for MFIsimple institutions having direct contact with It is imperative to change the present model masses are encouraged, supported and revived by MFIs as the existing model of these institutions policy measures and management and risk support. would not be able reach all farmers and artisans and For this obviously micro financing institutions stand urban and rural poor for two reasons-inadequacy of out as an ideal institution. funds and incapacity to bear and manage risks. It

would therefore become much more effective

Strategy to Restore Confidence: Conclusion. institution if these institutions are developed on

It is obvious therefore that the strategy should public private partnership model where funds and

be tackle the two fold problem simultaneously. In the management support is provided by the state, banks,

first phase there is need to restore the confidence of farmers and artisans. These institutions could

investors in the financial market and financial develop on cluster basis business activities for

institutions. And in the second place one has to artisans and on compact lands of ten to twenty acres

generate adequate employment opportunities to a well thought out farming projects for farmers

combat the aftermath of the meltdown- owning that plot.. These institutions may be

unemployment. In this regard it would be imperative organized block or anchal basis by lead banks along

for the government to create special funds to give with other operating banks both public and private.

boost to infrastructure development of the country Obviously it would outreach larger and needy

which is woefully poor and also to empower and section and therefore would be able to restore

regulate the micro financing institutions in the confidence and consequent activities of people not

country to fund the poor to develop appropriate and only on sustainable basis but also on much

economic activities for farmers and artisans. It is rewarding basis.

perhaps the only financial institution in the country

which is insulated from the present global meltdown

and hence even global equity funds and charity


Author is retired GM United Bank of India, Adjunct Faculty, ICFAI,Kolkatta.

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Abstract: creditworthiness of the customer. Credit

Scoring is one of the methods of credit Credit scoring has emerged as an effective tool for appraisal, which has gained prominence assessing the creditworthiness of the customers. It is used in the recent years. Credit Scoring is a to determine the probable risk involved in providing technique used by lenders in determining credit. It is increasingly gaining prominence in an era the future risk of sanctioning a loan to a where credit is no longer considered a stigma. The scope borrower on the basis of his past record. of credit scoring has widened with the advent of

innovative financial products like credit cards, increased Lenders face various types of risks like market risk,

usage of mobile phones and rise in insurance penetration. operating risk, exchange risk and credit risk, etc. Credit

Credit scoring is not only useful to the lenders but also Scoring is a tool used by the lenders to minimize the

facilitates decision-making of the customers. This paper credit risk, which may arise due to non-payment of dues

introduces the concept of credit scoring, explores the by the customer. Credit scoring helps in predicting the

various components of a credit and dwell on the chances of default by a customer on the bases of his/her

applications and benefits of credit scoring. It also previous record or credit history. It involves the use of

provides insights on the relevance of credit scoring in the statistical methods to determine the risk of default. The

Indian credit market and highlights on initiatives taken by credit scores are usually single 3-digit numbers arrived at

various agencies in India. It further explores the on the basis of a customer's credit report. Credit score

significance of credit scoring during the credit crisis. ranges from 300 to 750 that vary depending upon the

credit bureaus.1. Introduction

While credit scoring has been in use for more than Over the last few decades, several countries around half a century, it grew in significance over the last few the world have witnessed the initiation of economic decades. It has been primarily used in consumer and retail reforms. It resulted in deregulation, entry of private lending. Lenders have realized the significance of credit players, increased inflow of foreign direct investment in scoring and are now applying scoring techniques for key sectors, which include banking and finance, small business lending. Apart from banking and financial insurance and telecom among many others. The process institutions, insurance and telecom companies also of economic and financial reforms and initiatives taken utilize credit scoring.by the regulatory agencies led to the development of

financial markets and innovative financial products. The 2. Components of a Credit Score

entry of private sector and multi-national companies also In order to determine the probable risk of lending to led to expansion of trade and employment opportunities, a prospective customer, various factors and resulting in increased disposable incomes. Buoyant characteristics of customer payment behaviour have to be economic growth and rise in consumerism have taken into consideration. The FICO score, developed by contributed to increase in demand, which resulted in Fair Isaac Corporation, is extensively used by credit expansion of credit. scoring agencies. Credit scoring agencies consider

The banking sector has witnessed the increased various factors while arriving at a credit score like the

usage of credit cards and personal loans. At the same past payment history of the customer, the amount

time, expansion of credit has also resulted in rise in the outstanding against various credit accounts held by the

number of defaults and non-performing assets. In this customer, the length of the credit history, new credit and

context it is imperative for banks and financial types of credit in use. Exhibit-I shows the relative

institutions to formulate effective ways to assess the weightage assigned to these factors in arriving at credit

credit risk of the borrowers so as to protect their financial scores. According to Fair Isaac Corporation, the

position. They use various methods to assess the weightage may vary depending upon whether the

A Primer on Credit Scoring - Ravi Kumar Jain


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applicant is a new customer or an existing one.

i.) Past Payment History: It is the most important

criterion factored in credit scores. The past

payment history of the customer provides valuable

insights into the credit behavior of the customer

and his payment patterns. Timely payments,

number of defaults, late payments, lien on

accounts, frequency of delays affect the credit

scores.

ii.) Amount Outstanding: The amount outstanding,

against various credit accounts held by the

customer like credit cards and loans, is the next

major factor considered in credit scores. The

extent to which, the credit limit is utilized on credit

cards and the amount of outstanding balance

impacts the credit score.

iii.) Length of the Credit History: The length of the

credit history is another significant factor

considered in credit scores. A customer may have 3. Types of Credit Scoring Models

many credit accounts. The average age of the credit 3.1 Application Scoringfile is utilized in credit scores.

When a new customer applies for credit, credit iv.) New Credit: Applications for fresh credit or new scoring agencies and lenders have to rely on the details credit accounts may have adverse impact on the provided in the application. Application scoring uses the credit scores. The reason being new credit information provided by the prospective customer in the applications lead to increase in enquiries into the application for credit. Applications include information credit history of the customer by lenders. However related to customer's annual income, credit history, this factor is given less weightage in comparison to stability in business or job, and assets and liabilities, etc. the above three factors.The data so collected is used for determining the risk of

v.) Types of Credit: A customer may have various delinquency and default. The objective is to determine

types of credit accounts like credit card, auto loans, the probability of delinquency or default of the applicant

retail loans and mortgage loans. Again, the loan based upon the various relevant factors or characteristics

may be taken from a bank or a financing company. provided in the application. It is useful in determining the

This information is factored into credit scores. credit limit in case of credit cards and the amount of loan

The factors like the purpose of the loan, monthly to be approved in case of loans.

income, collateral security provided, residential and

employment status, period of stay at current address, and 3.2 Behavioral Scoringthe nature of employment are significant in calculation of

Behavioral scoring involves determining risk of a credit score. These characteristics are assigned scores or existing customers. The payment patterns of the existing weights and then added to arrive at a credit score for a customers are factored into the credit scores. Credit customer. Scores are assigned to characteristics based scores are regularly updated as per the performance of the

upon their relevance and probable impact on repayment customer. Various characteristics and customers'

of credit. For example, a person owning a residential payment patterns like late payments, defaults, the extent

property may score more points while a person with a to which credit limit is utilized, the number of credit

rented accommodation may be given negative points.accounts and outstanding balances on these accounts

Exhibit I: Factors Considered in a Credit Score

Source: www.consumerismcommentary.com(last accessed on 20/03/2008)


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have an impact on the credit scores. Behavioral scoring judgement based decisions as they have a high turn facilitates the lenders to devise strategies to recover dues around time (TAT). Credit scoring agencies provide from customers, limit the bad debts and examine the Banks with scoring models that help them in assessing quality of the existing assets. the future risk of the customer and devise effective

strategies to maximize returns while maintaining good 4. Application of Credit Scoringasset quality. Based upon the credit scores Banks can The credit scoring is now widely used across speed up the application process, set the credit limit, various services like banking, telecom and insurance as authorize or decline transactions and set the criteria for an effective credit assessment tool. increase in limit. Scores are dynamic in nature. Any new 4.1 Credit Scoring in Telecom: information relating to the credit history of the customer As is the case with any other business, telecom or payment pattern may either increase or decrease the companies face the risk of non-payment of dues by the score depending upon relative importance of such customer. The risk may arise from a post-paid customer information. who turns into a defaulter. Risk also arises from pre-paid

Depending upon the scores, the banker may customers who convert to post-paid and then turn as bad decline to offer a particular product or scheme to debts over a period of time. customers below a predetermined cut-off score or level. Credit Scoring agencies collect and maintain records of 4.3 Credit Scoring in Insurance:both new applicants as well as existing customers. These

Insurance companies are also utilizing credit records and databases are used to develop scorecards that scoring in the form of insurance scores to set the premium assist telecom companies in determining the future risk of rates for customers with varying degrees of risk. The pre-paid customers and current risk of post-paid and credit file of the prospect customer is used to determine existing customers. While application scoring is used to the insurance score of the customer. The higher the level assess the risk of default by new applicants, behavioral of risk, higher will be the premium. Insurance scoring scoring techniques are used for assessing the risk of facilitates better risk management and assessment of existing customers. Furthermore, telecom companies insurance risk. Insurance companies use scoring to make use of collection scoring in order to determine the determine the risk of a customer filing the claim, the level probability of recovery of dues from customers and of risk, and the expected claim amount. They use developing strategies for collection and setting time techniques like decision-tree, neural network model and frames for the same.rule-based modeling.4.2 Credit Scoring in Banking:4.4 Credit Scoring in MicrofinanceBanks and financial institutions are the major

Use of credit scores is making its way into providers of credit in the form of personal loans, credit microfinance as well. The clientele and the scope of cards, mortgage loans, etc. As such, they are always operations of the microfinance institutions are exposed to risk of defaults and delinquencies. This makes characterized as following it necessary to develop effective and accurate credit risk i.) These institutions usually, function in poor and assessment techniques. The lending process requires

developing countries. Credit bureaus in many bankers to take wide range of decisions. For example, in developing countries are in the initial stages of case of credit cards the decisions involved include:development. As such, information related to the i.) Approval / Rejection of Application.credit history of the prospective clients is readily ii.) Determining the credit limit.not available. iii.) Authorising transactions.

ii.) Microfinance institutions usually serve low-iv.) Processing requests for increase in credit limit.income groups or self-employed like vegetable v.) Issuing multiple cards and add-ons.vendors, farmers, auto-rickshaw and taxi drivers, vi.) Eligibility for offers and promos.etc. vii.) Offering new products like personal loans on credit

iii.) The opinion of the loan officer is crucial in cards and insurance.microfinance. The loan officer is in direct contact Banks are required to take the above-mentioned with the customer and makes an assessment of the decisions in a very short span of time. It is difficult to creditworthiness through his interactions with the sustain the competition, if they rely on the traditional


e-trackcustomers, their family members, neighbours and processing the applications. It helps in reducing the turn colleagues. around time for banks. Customers are also benefited as

they can get the status of their loan application in short iv.) The loan amount and the credit cycles are generally period and plan for their credit requirements accordingly.shorter in case of microfinance in comparison with

other forms of lending, ii.) Objective rather than Judgmental decisionsAs such, application of credit scoring in micro Credit scoring uses statistical tools and empirical

finance poses several challenges. The application of analysis to derive at the credit scores. The decisions are credit scoring may however, addresses the issue of based on similar kind of information related to all sustainability of microfinance institutions. Customizing customers. It brings lot of objectivity to the approval the credit scoring models in terms of the factors process, as decisions are not based on judgments or considered like occupational experience, past payment assumptions. It reduces the risk of bias for customers.history, capacity to repay, etc., and weights assigned to iii.) Reduction in defaultsthem on a case to case basis, would facilitate effective use Credit scoring helps banks, financial institutions, of credit scores in microfinance. insurance companies and telecom companies in reducing 4.5 Credit Scoring for “Unscoreables”: their exposure to risk. Apart from evaluating the credit

While the advancement of technology and advent risk from the existing customers, credit scores also aid in of innovative financial products has led to the expansion the screening of applications. It allows lenders to reduce of credit, considerable proportions of people are still their exposure to customers with high credit risk. It also outside the reach of credit. This segment consists of facilitates in devising adequate strategies for collecting people who: and recovering dues from customers. Customers get the - are vary of credit and prefer paying cash. opportunity to plan their credit requirements diligently.- have depended upon non-banking systems for iv.) Pricing Products

credit. Credit scoring facilitates pricing of various - are poor and have no access to credit. products and services. Insurance companies make use of - are young and belong to a minority group. credit scores to price their insurance policies. Banks use

Now, when the customers from the above segments credit scores to decide the rate of interest on loans and approach a banker for a home loan, the bankers are faced credit cards as well as the security to be provided in case with the problem of assessing the credit worthiness of of mortgage loans. Telecom companies use credit scores these customers, as they don't have any credit history. to decide post-paid rates and formulate promotional Hence, these segments of customers are either denied the policies. Exhibit II shows how interest rates vary for credit or are forced to pay high rates of interest. Over the different levels of credit scores.recent years, credit scoring agencies and lenders have Exhibit II: Varying Interest rates for varying credit realized the significance of the 'Unscoreables'and scorescustomers with thin credit history. They are now finding alternative ways to assess the creditworthiness of these customers. These include the use of alternative data such as utility bill payments (such as payment of water and electricity bills), phone bills, house rentals and insurance premium payments to assess the payment history of the customer. The information derived is integrated into the credit scoring models like the FICO Expansion score for better assessment of the creditworthiness of the customer.

5. Benefits of Credit Scoring

i.) Reduction in the Turn-around time (TAT) of credit approval process

Source: www.money.aol.com (last accessed on Increasing number of banking and financial

20/03/2008)institutions are deploying automated credit decision systems that make use of credit scoring models for


e-track6. Credit Scoring in India noticeable change in the mindset of the customers

wherein the focus has shifted from deciding whether to 6.1 Credit Scenarioborrow or not to planning their EMI's. However, the urge The Indian banking and financial services industry to spend more has resulted in the tendency to avail and has witnessed massive growth and activity over the last use multiple credit cards and EMI facilities. It has given decade. The entry of private and foreign banks has not rise to compulsive shopping leading to debt traps. Banks only improved the quality of services, it has made access have also experienced rise in defaults and non-payments. to innovative products and services which were hitherto Some of the primary reasons for the debt trap are:not available to the Indian customers. The rise in the i.) Lack of understanding of various charges and usage of plastic money especially credit cards,

penalties applicable on the loan products.introduction of innovative loan products such as personal

loan on credit cards, together with the emergence of e- ii.) Using credit cards for taking credit, rather than

banking channels has transformed the credit for convenience.

environment. The competitive banking environment iii.) Multiple loan accounts and credit card accounts.encouraged banks to promote their lending products iv.) Inadequate attention to details in loan and credit aggressively. Banks have entered into arrangements with card statementsairlines and retail outlets to promote their credit cards. v.) Use of credit cards for withdrawal of cash. The Increased competition has ensured easy availability vi.) Lack of proper debt management: Numerous of personal loans and other forms of credit. In addition to EMIs.credit cards, personal loans, and housing loans, other loan

The rise in number of delinquencies and instances products such as vehicle loans, educational loans,

of fudging have raised the concerns of banks. As such, overdraft facility, top-up loans and even travel loans are

information about the credit history and related gaining popularity. As such, the current decade has

information would improve the credit assessment and witnessed the transformation of the previously traditional

approval process. and credit-averse Indian consumer. Exhibit III depicts the

6.3 Credit Information Bureau (India) Limited rise in the credit to GDP ratio. The credit-GDP ratio has

(CIBIL)increased significantly during the current decade.

Credit information sharing is crucial for

facilitating banks in taking informed decisions while Exhibit III: Credit –GDP Ratio

approving credit to the customer. Credit information

sharing is crucial for judging the credit worthiness of the

prospective clients. However, till recently the credit

information sharing was constrained by the provisions of

various Banking Acts such as Section 4 of the State Bank

of India Act, 1955, Section 52 of the State Bank of India

(Subsidiary Banks) Act, 1959, and Section 13 of the

Banking Companies (Acquisition and Transfer of

Undertakings) Act, 1970/80. Under the above, banks

were prohibited to divulge any information related to the

clients, except in circumstances in which it is, accordance

with the law or practices and usages customary among Source: www.rbi.org.in, Chapter IV Credit Market, Report bankers, necessary or appropriate for the corresponding on Development of Financial Markets and Role of the bank to divulge such information. The focus of the Central Bank, Reserve Bank of India, 2005-2006.existing bureaus was on the collection of negative data

and banks were depended on the limited information 6.2 Debt trap: the other sideabout credit history of customers.

The rise in disposable incomes, easy availability of Credit Information Bureau (India) Limited credit and the retail boom of the recent years has

(CIBIL) was formed in 2000 to address the credit encouraged Indian consumer to spend more. There is a


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information needs of the banks and financial institutions. With the subprime meltdown, the credit boom has

CIBIL collects both positive and negative data and given way to liquidity crisis in the United States. Banks disseminates the Credit Information Report to its and financial institutions have tightened the credit norms. members. Accordingly, the Credit Information Lenders are now vary of providing credit to customers Companies (Regulation) Act, was enacted in 2004. with low credit history. Customers with low credit scores

Credit Information Reports would facilitate better are now charged higher interest rates and vice-versa. and quick appraisal of loan applications by banks in

Banks have been using risk-based pricing for consumer India. At the same time, it would also help customers in

lending and more recently for mortgage lending. The timely repayments and better lending rates from the

credit crisis and rising number of bad debts has resulted in lenders. Credit Scoring is relatively new in India. The

extensive use of risk-based pricing by Banks. Banks are collection and collation of both positive and negative data also pursuing the policy of Universal Default . One of the has only begun in the recent years. As such, use and consequences of the recent credit crisis has been the steep significance of credit scoring is poised to grow in India in rise in the number of foreclosures. Banks have witnessed the times to come.

the spill over of the mortgage crisis on other credit 7. Significance of Credit Scoring in Credit Crisis

accounts like credit cards and installment loans that have Various economies across the world experienced

credit expansion over the last few years. Apart from the also witnessed foreclosures. Banks now want to play safe United States, emerging economies like Brazil and India and are trying to steer clear of customers with low credit have also witnessed credit boom. The credit boom saw scores, delinquencies and high rate of defaults. Bank of the rise of the subprime market in the United States America, one of the leading banks in the United States wherein the credit was provided to individuals with poor hiked interest rates on credit cards of customers with low credit history at very low interest rates. As the property

credit scores in January 2008. The ICICI Bank, the prices were on the rise, customers managed to pay the

second largest Bank of India is moving out of the small-loan back by selling their property. The fall in the housing

ticket business loans as a result of raise in defaults. The prices in early 2007 led to increased foreclosures of loans importance of credit scoring has thus increased and rise in defaults. As a consequence, the US economy substantially in the current global economic scenario.witnessed the collapse of the subprime market and crash 8. Access to Credit Reports of the credit boom in August 2007. Exhibit IV shows that

foreclosures in the United States continue with an Over the years credit score has grown in

increase of 60% in February 2008 over the corresponding significance for customers. Customers have realized the figures of February 2007. A high cut-off score for impact of credit scores on their financing decisions. Fair customers with poor credit history could have reduced Isaac Corporation was among the first to develop a credit the exposure of banks to these segment of customers. scoring model called 'FICO' which is used by various

Exhibit IV: Foreclosures credit bureaus. Credit bureaus like Experian,

TransUnion, and Equifax are now developing their own

models like Experian, Empirica, and Beacon systems.

These agencies have also jointly developed

VantageScore model to bring consistency in Credit

reports across lenders and bureaus. At the same time,

many consumer organizations have raised concerns over

discrimination and unfair practices of traders on credit

scoring. Regulatory provisions with respect to credit

scores do not permit use of factors like race, ethnicity,

religion, marital status and nationality to be considered in

calculating credit scores. However, until recently, credit Source: http://www.chinapost.com.tw


e-trackscoring bureaus and lenders were not obliged under the customers about the utility of credit scores can help in

law to reveal credit scores to customers. The Fair and improving the credit environment.

Accurate Credit Transactions Act of 2003 or the FACT

Act of the United States makes customers eligible for a References:

free credit report once in a 12 month period. “Report to the Congress on Credit Scoring and its effects

Credit bureaus are now required to provide on the availability and affordability”, August 2007

customers with one credit report in the span of 12 months “Need Credit or Insurance? Your Credit Score Helps

upon request. Further more, credit bureaus also provide Determine What You'll Pay”, FTC Facts for Consumers,

credit reports at reduced rates in certain scenarios. For July 2007, www.ftc.gov/bcp/edu/pubs/consumer/credit

example, TransUnion provides credit report to customers /cre24.shtm (last accessed on 19/03/2008)

for free or at reduced rates if they receive adverse action “How To Read And Understand Your Credit Report”,

LaToya Irby, http://credit.about.com/od/creditreport notice like denial of credit, insurance, government scoring/ss/creditreports.htm (last accessed on license or utility service based on its credit report in last 19/03/2008)60 days. This facility is also available in case a customer “Rapid Credit Growth in Converging Economies – the believes that his credit report is inaccurate or has been Challenges Ahead” Closing remarks by Krzysztof denied employment in last 60 days or is planning to seek Rybiñski, Deputy Governor of the National Bank of

employment in next 60 days. Credit bureaus are also Poland, 22-23 November 2007, http://www.nbp.pl/

offering paid credit monitoring service. Equifax provides publikacje/wyklady/rybinskilic.pdf (last accessed on

Score Watch service, which alerts customers of changes 20/03/2008)in credit scores that may affect the interest rate levied by “Mortgage Crisis Spreads Past Subprime Loans” Vikas lenders like. Bajaj and Louise Story, February 12, 2008, Conclusion- Credit scoring has evolved over the years. http://www.nytimes.com/2008/02/12/business/12credit.Phenomenal growth of banking, insurance, html (last accessed on 19/03/2008)telecommunication and other sectors along with 'Credit Scoring: Added Boost of Productivity in Small increased demand for credit has resulted in increased Ticket Business', Jeff Weisman, Monitor leasing &

Financial Services, May 2003. significance of credit scoring. It helps lenders in judging

'What's the Point of Credit Scoring', Loretta J.Mester, the efficacy of the customer in management of his or her Business Review, September/October, 1997, Federal finances. Credit scores help in assessment of Reserve Bank of Philadelphia.creditworthiness of prospective and existing customers. Web references:While lenders can reduce their exposure to customers http://www.cibil.comwith high risk levels by evaluating their credit history, www.myfico.comcustomers have the opportunity for better credit www.businessweek.commanagement. The recent credit crisis has only increased www.economictimes.comthe significance of credit scoring. Credit scores are now www.transunion.comused for wide variety of purposes like consumer lending, www.g-stat.comtrade credit, microfinance and small-business lending. www.fractalanalytics.comThere are however concerns especially in case of www.money.aol.cominsurance lending wherein consumer groups have been http://www.chinapost.com.twalleging discrimination. Also, there is risk of lenders www.consumerismcommentary.comoverriding credit scores and making judgement based

decisions. Adequate regulatory provisions to safeguard

customers against discrimination and steps to educate


Author is Senior Faculty at ICFAI,Hyderbad

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Case 1. Details of FFDs like their number, Use menu option GSPI (general scheme parameter

amount, date of opening, date of closure etc are inquiry) .Give 'I' in function and write the scheme

required to be known. How to proceed? code for which enquiry is to be made. Its exceptions

along with codes will be displayed. Other details of Go to menu- ACCBAL. Write the related number of the scheme can also be viewed by giving other SF or CA a/c. Press accept. The balance in FFD is options ( various available options can be viewed by shown. Select the tab available in front of FFD pressing F2 in option button.)details. Press ctrl E (Explode). The details of all the

FFDS will be displayed. For further details of a FFD Case 5- I have put through a transaction some

press ctrl E (Explode ) for respective FFD. time back. Now I require modifying the

particulars of that transaction. Is it possible?Case 2- In DL against FDR (SPL), branches are

not able to enter a Demand Loan account number The user can change the remarks of any transaction,

in ACM - C details. The acceptable accounts here even back dated, if he wants to. The user will have to

are only SB, CA, CC and OD type only. invoke the menu TD and go for modification mode.

The user will be able to change the particulars, Give operative account number in the C details of the remarks, etc of the transaction.ACM menu option for the said Spl FDR and

thereafter create a SI in the operative account for Case 6 - An account gets transferred from

transfer of the interest to the DL account. inoperative to operative category, Do the

signature also gets transferred automatically.Case 3 - What is the difference between a back

dated and a value dated transaction? No - The user has to manually modify Image Access

Code to ''AL' from 'IN' in each of these accounts In a back dated transactions the GL gets updated using menu option IMGMNT. Thereafter from the back date given. verification of the record is also required.

In a value dated transactions the GL does not get Case 7- Report for knowing history of updated as on the value date but will have an effect modification in rate of int. in any account since only for the calculation of interest as of the value beginning.date, even if the interest is already calculated for the

account. Branches are allowed to do only value dated To know all the modifications in rate of interest in

transactions. any account, A report has been provided at PNBRPT

3/31A.Case 4 - How to view various exceptions that can

be displayed by the system for a particular

scheme code.

FAQs in CBS

Contributed by Pratima Trivedi , Senior Faculty at PNBIIT Lucknow

“Many of life's failures are people who had not realized how close they were to success when they gave up.”

- Thomas A Edison


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This book is written by Dr. Firdos T. Shroff,

who is presently working as Jt. Director

(Academics-Faculty-IT), Indian Institute of

Banking & Finance (IIBF). This book on Modern

B@nking Technology is a systematic and

comprehensive on Banking Technology. The book

covers the rich experience of the author in the field of

research, banking & finance. This book focuses on

critical financial concepts, skills, and technological stapplications required by every banking person in 21

century workplace. It is a lean textbook that provides

an in-depth treatment of all essential topics of

banking technology.

Modern banking technology offers the

advantages banks can reap with the usage of IT

applications in their banking affairs replacing

traditional ones. The book covers the growth of

computing and infrastructure technology in the

banks. The book focuses on the advantages of the ·e-learningnew technology that includes the reduction of cost s

and increase in performance. ·Banking – Based Information Technology

Services (BITeS) and Financial and Banking This book is organized in ten chapters and Sector Reforms.dwells in details on the following:

The author has also discussed in details the various ·Impact on and explosion of Banking issues involved in technology up gradation at bank Technology in new millennium; level, e-cheques- protocols and standards, RBI's ·Technology changes in the Indian Banking regulations and supervision regarding e-banking, Industry etc. Modern Banking Technology also has set of ·Payment & Settlement Systems (RTGS), and case studies, reports, relevant figures and statistics e chequesthat give practical insight into the key issues covered ·Role of IDRBT in development of Protocols in the book. This book is a rich source of information and Standards about evolution and innovations occurring in

·Role of IBA and its Report on Banking technology driven Indian Banking.

Industry VISION-2010,

·Transforming India Vision-2020 by Dr. A.P.J.

Abdul Kalam, Hon'ble President of India

·Introduction to Information

Book ReviewModern B@nking Technology

Author: Dr. Firdos T. Shroff, ISBN: 9788172112226, Publisher: Northern Book Centre Format: Hardcover, lvii+221p. Tables; Figures; Appendices; 26cm., Pub. Date: May 2007, 1st Ed.

Reviewed by Sanjay Srivastava Librarian, PNBIIT, Lucknow


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8 Indian supercomputers enter global top 500 list New software will track unauthorized presence at airportsWith India making a mark in

every sector of the technology field, the New software will soon help airport staff maintain country has shown its importance in the strict vigil and promptly track unauthorised persons and supercomputing race too. Eight of the objects. A new technology LocON, sponsored by the top 500 supercomputers are of India European Union and developed by Fraunhofer Institute with Tata Group's Eka, a Hewlett for Integrated Circuits (IIS), will greatly facilitate the Packard (HP) based system leading the

work of the security staff in future.race in the 13th rank.

LocON is a platform that enables automatic gate-Source :www. siliconindia.com

free access control, both for the people who work there and for vehicles and other objects. LocON permanently

Microfinance Institutions (MFIs) are now using locates all persons and objects by radio. Employees are mobile phone technologies to make it more convenient

required to wear an electronic badge that transmits a radio and secure for the users. This comes in as an effort to

signal and thus the person's location and identification to increase the reach of micro-financing into rural India.

the LocON platform. Vehicles, air freight containers and A recent example is Cashpor India, which has

other objects are also equipped with a tag that emits radio partnered with the Israel-based Classif Eye to adopt their

signals.software-based fingerprint authentication technology Source : www.siliconindia.comthat enables the MFI agents to carry out transactions

World largest ice embedded telescope coming up at competently. Antarctica. Source- Business Line

An international team is building the world's Sharp rise in phishing attacks on Indian banks largest neutrino telescope in the Antarctic, deep beneath Several Indian banks have the continent's snow-covered surface.come under more than 400 phishing

attacks during the past few months Dubbed "IceCube", the telescope will occupy a with the number rising sharply in cubic kilometre of Antarctica when it is completed in Sept-Oct, 2008, according to 2011, opening super-sensitive new eyes into the heavens. industry lobby National Association "IceCube will provide new information about of Software Companies (Nasscom).

some of the most violent and far-away astrophysical Phishing is the criminally fraudulent

events in the cosmos.process of masquerading as a Source : www.siliconindia.comtrustworthy entity in an electronic

Grasshopper like robot created for space explorationcommunication in a bid to acquire sensitive information such as The first robot that can jump like a grasshopper and usernames, passwords and credit card details. roll like a ball could play a key role in space exploration.

Source : www.siliconindia.com The 'Jollbot', created by Rhodri Armour, PhD student India's first 3G service launched in Delhi from University of Bath, can jump over obstacles and roll

over smoother terrain, could be used for space Ushering in a new era in the Indian telecom sector, Prime Minister exploration or land survey work. One of the major Manmohan Singh launched the state- challenges that face robots designed for space run Mahanagar Telephone Nigam's exploration is being able to move over rough terrain. (MTNL) third generation (3G) Robots with legs are generally very complex, expensive mobile service 'Jaadu'. to build and control, and encounter problems if they fall

There is mobile TV facility over. Wheels are a simpler solution to this, but are limited available with 3G services along with by the size of obstacles they can overcome.other features.

Source : www.siliconindia.comSource : www.siliconindia.com

Microfinance Institutions reach out to rural India

Financial / Technical News


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After successful recruitment of first batch of ADBT methods of financial analysis, corporate / business Credit and PNBIIT has launched second batch of ADBT which will also exposure to Forex and International Business etc.commence in early February 2009. The aim of ADBT is to Application Software in Banking Operations- The bridge the gap between knowledge provided by the Institutes concept, technology and entire working in Core Banking i.e. and requirements of BFI sector. Retail Module, Credit Module, Trade Finance and MIS

The course aims at training the students in such a way so alongwith intensive hands-on. that they are able to fulfill the requirements of the recruiter Apart from the banking and advanced IT, this course from the day one, without the need of further on the job training exposes the students in Business Communication and at the cost of the company. The Institute prepares students to Soft Skills.meet the ever-increasing technological and social challenges Curriculum of ITwith its tradition of self-discipline, hard work and all round Advanced Database Management System using Oracle 10g personality. Pedagogy :Theory and Hands on Sessions

It is aimed at creating a pool of IT professionals with ·Database Components & Architecture thorough knowledge of banking operations in a Core Banking ·Core Banking Application Software Architecture ConceptsEnvironment using Finacle, Advanced concepts of Operating ·Core Banking Application InstallationSystem using Linux, Data Based Management System using ·Online Services Architecture and Customization Oracle 10g and Networking Management. ·Core Banking Directory Structure

In the said course a student with MCA/BE/B.Tech. in ·SQL/PLSQLcomputer science, Electronics and communication or IT, ·Backup and RecoveryM.Sc.(IT)/BCA/B.Sc.(CS) with minimum 55% marks is eligible. · Oracle Forms 10g

The programme consists of classroom instructions, ·Oracle Reports 10ghands on exercises on computers, tutorial and assignments, ·Oracle Networking case studies, interaction with Industry experts and project Advanced Concept of Operating System Using work/internship. Linux/Unix Pedagogy :Theory and Hands on Sessions

The course curriculum of ADBT is as below: ·Basic Unix/Linux Commands Curriculum of banking: ·Advanced Unix/Linux Commands

Participants will learn through a comprehensive ·Linux / Unix File Systeminstructor led study system alongwith case-studies that will ·Client/Server/User Managementprovide with theoretical and practical knowledge that can be ·Shell Scriptingput to work immediately in the banking and financial services ·Workflow Scriptingindustry anywhere in the world. Students will gain a firm ·Groups and Permissionunderstanding of: ·Network ManagementBanking Overview- The concept of banking, functions and ·Advanced Topics in Users, Groups and Permissionscontrols of RBI, Monetary policy, banking competitive ·Essential System Administration Toolsenvironment, post nationalization liberalization and impact of ·Package Managementglobalization, role of technology in banking industry, legal ·Kernel Servicesaspects of banking among various other topics will be covered. ·System ServicesFinancial System- The contents will give the details of Indian ·Installation and TroubleshootingFinancial System and concept, Accounting principles, ·System Performance and Securityknowledge of Financial Mathematics, Financial Analysis and Web Concepts and Commercial Networking Pedagogy : Accounting. Theory and Hands on Sessions Web ConceptsRetail Banking- This part will give the details of different ·Web fundamentalscustomers and accounts of the bank, various modes of ·Web Interface to Core Banking Application Softwareremittances, collection and clearing services, special emphasis Commercial Networkingon connecting with the customer and service excellence, ·Network Configuration fundamental of financial markets and products, alternate ·Implementation & Troubleshooting delivery channels such as internet banking, debit/ credit cards, ·Wi-Fi Networks ATM management, Payment settlement systems such as; ·Introduction to Switches and Routers RTGS and NEFT etc. ·Introduction to TCP/IP Various Network Servers Corporate and International Operations- This section will Configurationsharpen the skill of assessment of working capital requirement,

Advanced Diploma in Banking Technology ( ADBT) – Batch II


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“Let us appreciate the efforts put in by PNB- and I have learnt preliminary procedures of Banking.

ADBT towards training these resources. We The fundamentals of integration of IT & banking

recruited 10 candidates from the first batch and we have been explained very well. Here I have had the

are happy with their performance. These opportunity of practically working on Linux as a

candidates are very good in communication, root user, which is never allowed anywhere in

confidence & technical skills.” colleges or any other institution. This hand on

practice has given me an absolutely new insight into …….Mayur Shukla, HP India

all the theory I had read as yet. I am glad that as far as “The knowledge which I got from you all not only in IT is concerned, both in oracle & UNIX the exposure banking but also in UNIX & Oracle is proving handy of practical work is immensely good.”for me. I have been selected as UNIX Admin L2 for

………….. Nidhi Goel, studentmultinational IT Company in Malaysia. Thanks for

nurturing me in banking and IT skills” The Course of ADBT is designed in a

professional yet exhaustive manner having the right ………. Rohan Mehrotra, student

combination of Banking and Technology as the (Placed in Alchemist /HP, Later joined name suggests. The course curriculum introduces us multinational company at Malaysia) to each and every sphere of banking in detail keeping “ADBT course forms a solid foundation related to in view that being IT students; we are totally novice banking and IT concepts, its architecture and to this field. The curriculum of Technology is also contents are excellent”designed as per the latest demand in the concerned …………. Pooja Pant, studentfield. And its my privilege that I am being taught

(Placed in Nurture software ltdmany things in technology from scratch and my

Working as Team leader for Finacle doubts are being cleared at each

implementation in many Banks in Nepal)……….. Jayshree Nimesh, student

“The course contents are very well designed (Placed in Nurture software ltd)

The BFI sector is one of the biggest users of IT services, and almost all big IT Companies both in

the hardware, software and support services domain cater to this sector.

We are happy to inform that first batch of ADBT has been successfully placed in premier IT companies

and Banks . The details are as below:

Status of past campus placement

Nurture Technology - 5

Dena Bank - 5

PNB - 3

HP/Alchemist - 15

One more step ahead One more step ahead Advanced Diploma in Banking Technology

This is what the IT Companies and students have to say about the programme

iv/4 oct'08- dec'08

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