Computerization in Banking

Group 5- Ajay Sharma Ashok Rana Prerana Negi

Amruta Patil Nimish Gangrade Shakun Tadu

Introduction
-Till the early 1990's, banking industry in India was a near monopoly of the government. -In January 1993 government of India issued guidelines for licensing of new banks in the private sector. -Since then the competition in banking has increased tremendously with the entry of private banks, permission to foreign banks to open new branches and relaxation of various restrictions on public sector banks. -Due to enhanced competition banking sector took strides towards computerization and automation of their operations

Computerization in Banking
 Computerization is a positive step to bank growth.  With the aid of computers, the bank work can be done faster.  Reserve bank of India and state bank of India installed computers for processing reconciliation of inter branch transactions , processing statistical data and for research purposes.

Content of transformation
PARAMETER structure FROM Monolithic Centralization of power Large space and staff TO Thin and lean due to IT induction Delegation , empowerment induced by MIS/DSS Limited space and staff req. due to computerization

Buisness

Focus on volume of assets

Market segmentation with different life style and relationship with CRM Enabling innovation and development of new products and services due to parameterized CBS

Selling existing products without marketing

People

Old skill set

Understanding of business and customer centric attitude Alertness as pro-action and round the clock banking behavior Efficient , in build audit trail and reduced cost Innovative and team spirit Customer centric CBS fully integrating all channels across national and international frontiers Internationally accepted and adopted standards

Alertness as reaction to minimize events like frauds

Systems

Security oriented and high cost per transaction Conservative and individualistic approach Procedure centric

culture

Information technology

Stand alone ALPMs PCs ATMs

Limited security

Types of Bank computerisation

Back Office Application Total Branch Automation Core Banking Solution

Back office Application

First steps of RBI towards bank computerization Uses computers for data entry operations and Few calculative operations Stores customer s data Use FoxPro to calculate interest and develop pay roll system to calculate employee salary Not beneficial to banks customers Working hours of bank employee were increased Daily / weekly / monthly back up was required

Total Branch Automation

In this the bank should have TBA s/w being used in branches that are covering 80% of the total business of a bank. These branches should have single customer ID concept Also provide ATM facility but the facility is restricted to that branch only which provide ATM centres Branch needs to keep the back up of their data and send the back up copy to the head office of the bank. Many Cooperative bank works on TBA system. Convenient as compare to back office application

Core banking Solution

Core banking means performing accounting transactions like depositing , withdrawals , availing loan, repayment of bills, statement of account etc. through the multiple delivery channels like ATMs, Internet banking, and new branches. Provide complete front-end and backend automation of banks. Anywhere, anytime 24 by 7 non stop services. Automation across multiple delivery channels. Provides a central operational database to bank s assets and liabilities,  a transaction processing engine and a system for the financial management of the bank

 Customer can operate their account from various locations. Allows inter connectivity of branches with the centralised data centre The major Banks in India are moving towards core banking solutions Providing right products at right time through the right channels 24 by 7.

Modules offered By CBS

Customer information files management: provides centralised access to all customerrelated information Deposit management:  offers automated, real-time posting and highly efficient deposit processing for all the balance-based liability products.  Also provides back up support for opening, settling, and closing card and check account contracts.

 Loan management:
Loan management is an automated process for many lending products like secured and unsecured loans. It helps the bank in creating a flexible/tailormade product portfolio and streamlining the processes according to the customer s need

Reserve for bad debts: Supports risk monitoring, provisioning, and realization of bad-debt charges.

Limit management: This module indicates the liability limits and actual liability levels of business units and partners. Limit management checks the transactions against liability limits assigned to the borrowers. Financial accounting: The Financial Accounting function supports the general ledger transactions and finance management transactions at all the organizational levels, thus improving the management control and reporting. Complementary third-party products : Help the bank managing the teller machines and payments. by

Advanced Electronic Services provided by the Banking Industry

Electronic Clearance System (ECS) ECS(credit):
   provides customers an option to collect their monthly/Quarterly /half yearly/yearly interest/dividend/ salary / pension directly through their bank accounts. The customer s bank account would be credited through the new payment mechanism on the due date Right to withdraw from this mode of payment by giving an advance notice of 6 weeks. This ECS allows customer to pay their monthly/quarterly/half yearly/yearly utility bills like telephone, electricity, loan instalments, insurance premium etc directly through their bank accounts. The Customer s bank account would be debited through the new payment mechanism right on the due date The Customer can have the right to withdraw from this mode of payment by giving an advance notice of 2 weeks.

ECS(debit):


 

Advantages of ECS
To consumer Payment on due date No more loss in transit Effortless receipt. No hassle of standing in a long queues for payments No fraudulent encashment Accounts statement/pass book will show the source of credit and debit. To corporates Eliminates postal loss and delays as well as paper work and lengthy procedures. Saves cost on stationary, printing and postage. No fraudulent encashment Immediate receipt and payment of due Automatic reconciliation

Electronic Funds Transfer (EFT)

 System of transferring money from one bank account directly to another

without any paper money changing hands

 used for both credit transfers and for debit transfers.  The Transactions are processed by the bank through the Automated Clearing House (ACH)  Benefits include:  Fast: funds are transferred within 24 hours  Safe: frauds in processing paper instrument is avoided  Secure: Computerization of control records and detailed procedural guidelines make the system absolutely secure  Hassle free: Beneficiary need not go to the bank

Online Banking or Internet Banking

 Customers can access to their bank through the Internet, to complete transactions such as viewing their accounts status, transferring money between accounts, viewing images of cancelled cheques, print copies of those cheques and paying bills online.  Customer have the facility of scheduling a recurring payment.  Internet banking mainly falls into three categories
 Basic information web sites: This only broadcast information on banking products and services offered to banks customers and general public.  Simple transactional web sites: which allow bank customers to submit application for different services, make enquiries on their account balances, but does not permit any account transfer.  Advanced transactional web sites: which allows bank customers to transfer funds to/from their accounts, pay utility bills and conducts banking transactions online

Key Internet banking services

Internet banking services are broadly classified into four types 1) Account Information Provides the summary of bank accounts Allows transaction tracking, which enables retrieval of information like Cheque number, transaction amount, date etc. Balance enquiry Account statement 2) Online Fund Transfer Provides the facility to transfer funds to/from their account 3) Utility Bill payment By using this facility. the customer can pay their telephone, Mobile, Electricity, Insurance premium, Credit card bills online 103

4) Request and Intimation By using this facility, the customer can electronically submit request for Cheque book Stop payment instruction Opening fixed/recurring deposit account Intimate the loss of ATM card Online registration of Telephone and Mobile banking Demand draft Cheque status Online application for Credit/Debit card, Home loans, Car Loans

Beware of .
Hacking Phishing Pharming Skimming

 Telephone Banking  Allow customers to perform their transactions over the telephone.  Enables the customers to:
 Check their account balance  Check the last few transactions( depending on the bank s policies)  Get mini statement  Request for cheque book, demand draft, stop cheque payment  Report loss of ATM/Debit card  Get product information  Pay utility bills  Transfer fund

 Offers all the facilities of ATM except cash withdrawals and deposits.  Benefits of Telephone Banking: Lowers the bank s total cost of customer care Supports the bank s marketing plans ,with Brandable messages that play while a customer is waiting/on hold Improves customer s and the bank s productivity by managing the flow of customer s information Strengthens strategic positioning by increasing the customer s loyalty by improving the customer service and achieving highercustomer satisfaction

Credit card/Debit card/Smart card

card empowers the holder to spend wherever, whenever and on whatever he wants, within the limits fixed by his bank. Post paid card It allows its holder to buy goods and services based on the holder's promise to pay for these goods and services. Return of payment with in a fixed term period and has a limit to credit. Interest free credit with in a limited day period. Plastic money, no need to carry cash. Ease of transaction. Helps in online transaction Increases purchasing power.
 Credit

An example of the front in a typical credit card: 1) Issuing bank logo 2) EMV chip on "smart cards" 3) Hologram 4) Credit card number 5) Card brand logo 6) Expiration Date 7)Card Holder Name 8)contactless chip An example of the reverse side of a typical credit card: 1) Magnetic Stripe 2) Signature Strip 3) Card Security Code

Debit card
Prepaid card with some stored value. Every time a person uses this card, the Internet Banking house gets money transferred to its account from the bank of the buyer. The buyers account is debited with the exact amount of purchases. Individual has to open an account with the issuing bank which gives him a debit card with a Personal Identification Number (PIN). The customer can never overspend, because the system rejects any transaction which exceeds the balance in his account. The bank never faces a default, because the amount spent is debited immediately from the customers account.

PC Banking
PC banking means Personal Computer based home banking services to other banks. Customer can contact their banks from their home by using their personal computer. Customer can also submit electronic loan applications through PC Banking. Services offeredTransfer funds Make loan payments Request withdrawal cheque View current balances

View account history View cleared cheques Add a product or service to your existing account Read alert messages on your account Update your password Apply for a loan Report a lost or stolen ATM, debit or credit card PC banking uses software like Quicken, Quick Books and Microsoft Money to get connected to the customer s bank. PC banking allows the customer / user to manage the entire transactions like handling saving account, loan account, investment transactions, paying bills etc. with the help of personal computer.

RBI s FINANCIAL SECTOR TECHNOLOGY VISION DOCUMENT

It focuses on four major areas
IT for regulation and supervision IT and Institute for Development and Research in Banking Technology (IDRBT) IT for Financial Sector IT for Government related functions

Feedback from bank managers on computerization in respective banks

Methodology Questionnaire and personal interviews

SBI

OBC

PARAMETERS SERVICE SPEED CUSTOMER REACTION DECREASE IN TIME SPENT IN QUES

SBI INEFFICIENT NEGATIVE NO EFFECT

OBC HIGHLY EFFICIENT POSITIVE YES HIGHLY IMPROVED

IMROVEMENT IN OPERATIONS NO IMPROVEMENT

TRAINING REQUIRED

STRONGLY AGRE

REQUIRED

Thank You