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Core Banking Solution

Core Banking Solution

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Published by ali3800

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Published by: ali3800 on Jun 21, 2009
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01/19/2011

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Electronic Banking and Payment System Reading Material 103
CORE BANKING SOLUTION
Levels of computerization vary significantly in the Indian Banking Industry. On theone hand centrally computerized and fully networked new private banks andforeign banks and on the other with little computerization in old private banks andPSBs are in two ends of the spectrum. This situation will very soon change andthe entire banking system in the country will be technology driven. This is evidentfrom the fact that almost all the banks have implemented / are implementing thecore banking solution and are also offering Internet banking services. With thepayment system in the country getting upgraded technologically, theintermediaries namely the Banking system will have to absorb technology in a bigway. Further, competition in the industry, cutting edge technology basedcustomer services and products, growing customer needs, RBI guidelines,guidelines issued by CVC and also the VRS offered by Banks are some of thefactors that are driving all the players to computerize the operations quickly andeffectively to reduce the transaction cost and maximize profits. Major effortstowards computerization in the banking industry started almost two decades ago.The stages of computerization in the banking industry may be classified asbelow:
ALPM branches
Partially computerized branches
Fully computerized branches
Centrally Computerized and Fully Networked Banks
 
o
Banks offering Internet Banking,
 
o
ATM banking
 
o
Off-shore data processing
 
Various Committees appointed by the Reserve Bank of India proactivelyencouraged introducing technology to enhance customer service in the bankingindustry. Simultaneously the Central Vigilance Commission also urged the banks
 
Electronic Banking and Payment System Reading Material 104
to improve transparency in their operations by computerizing all their operations /business. These driving forces coupled with the need to bring down transactioncosts and increase profitability forced banks to embrace technology in a big way.In the early 80s banks introduced Automated Ledger Posting Machines whichwas the genesis for introducing automation in banks. During the mid 1980s,banks computerized their operations on stand-alone computers for catering tothe needs of the customers and at the same time improve the efficiency in thefunctioning of the branch. Through introduction of such a system, banks couldrender a particular service only at specified counters in the branch. For example,transactions relating to savings bank account or term deposits can be putthrough only at specific computers. Even though this marked the beginning of automation, it did not meet the expectations of the demands of the customers.However the branch functioning improved noticeably and the employees wereexposed to the use of computers. In order to improve the customer servicefurther, banks adopted the concept of ‘single window’, which meant that thebranches move over to a ‘client-server’ environment. This led to networking within the branch and the branches were classified as ‘Totally Automated branch’(TBA) or ‘Partially Automated Branch’ depending upon the extent of computerization of the various business areas of a branch functioning. A major thrust to networked computing came about with the entry of new private sector banks in the later part of 1990s, which were mandated by the RBI to be totallycomputerized and networked banks right from day one of their existence. Thesebanks were able to offer anywhere / anytime banking and also offered multipledelivery channels in the form of ATM, Internet banking, Mobile banking etcthereby weaning away the clientele from the PSBs. Today, if banks want tosurvive in their business they need to cater to the demands of the customers whodictate to a great extent the service that banks are required to offer. CoreBanking offers an ideal platform to meet the challenges in the financial industry. Itis heartening to note that all banks, especially the PSBs, with their constraintsand compulsions have been able to adapt to core banking technology smoothly.
 
 
Electronic Banking and Payment System Reading Material 105
 Core banking solution refers to a common IT solution wherein a central shareddatabase support the entire banking application. Business processes in all thebranches of a bank update a common database in a central server located atData centre, which gives a consolidated view of the bank’s operations. Branchesfunction as delivery channels providing services to the customers of the bank.Core Banking Solution is an integrated application that supports real time, multi-banking and multi-channel strategies.
 
The single biggest achievement of implementing the Core Banking Solution is that each customer is truly thecustomer of the Bank and not just the customer of the Branch, where his/her account is maintained. He/she can go to a branch anywhere in the country andperform a transaction. This is possible as the entire Customer Database iscentrally located at the Central Data Centre (CDC) and can be accessedthroughout the network of branches
.Key Features of the System:24X7 Banking
As a result of implementing Core Banking, most of the facilities being offered bybanks, are available to Customers 24 hours a day, 7 days a week. Thetransactions are performed using multiple channels such as ATMs, InternetBanking, Phone Banking and Mobile Banking. Further, the transactions usingthese delivery channels are updated in the CDC in real time.
Anywhere Banking
Customers can avail of banking services across the branch and Channel networkirrespective of location where their account is maintained.
Integration with strategic sectors
Core Banking integrates all strategic sectors of Banking such as Trade Finance,Treasury, Asset-Liability Management and Corporate Balance Sheet. As a

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