CORE BANKING SYSTEM

Core Banking and Run the Bank are synonymous for most part. Core Banking is the meeting point of the largest banking services segment namely Retail and Commercial Banking, cutting edge Information Technology and the ever advancing Communication Technology. It is the heart of a modern financial service organization and is all about providing the banking customers with the right products at the right time through the right channels 24 hours a day, 7 days a week through a multi location, multi branch network. Elements of core banking include:

Making and servicing loans. Opening new accounts. Processing cash deposits and withdrawals. Processing payments and cheques. Calculating interest. Customer relationship management (CRM) activities. Managing customer accounts. Establishing criteria for minimum balances, interest rates, number of withdrawals allowed and so on.

Establishing interest rates. Maintaining records for all the banks transactions.

Core banking functions differ depending on the specific type of bank. Retail banking, for example, is geared towards individual customers; wholesale banking is business conducted between banks; and securities trading involves the buying and selling of stocks, shares and so on. Core banking systems are often specialized for a particular type of banking. Products that are designed to deal with multiple types of core banking functions are sometimes referred to as universal banking systems.

Core Banking system or CBS is one of the recent developments in the field of banking, and has proved to be very useful. It is a facility provided by banks in which a person, having an account in one branch, can operate his account, in another branch. This has become possible, because each account holder is given a specialised, computerised and unique account number. In simple terms, CBS is a type of banking, in which a person, who opens a bank account in a particular branch of a bank, will be a customer of the bank, rather than being a customer of a particular branch. Therefore, he can transact anywhere, at any time.

The prime features of the CBS are that it facilitates banking operations like ATM's, Electronic fund, Transfers, Telebanking, Internet banking etc. Moreover, introduction of new facilities and products wouldn't be a time-consuming process, and branch clearings would become instantaneous.

The CBS is presently hosted on two Sun fire V6900R servers, clustered in an active passive mode. Both the servers and the two storage boxes are connected to both the switches for redundancy. Power for these servers is received from two additional similar capacity UPS, installed as standby. The application software is developed in COBOL and the version being used is version 10.0. M/s. Lasersoft Infosystems Ltd., Chennai, has developed this software.

The banks have to implement a three tier architecture, for wide Area Network. The branches are connected to a Zonal centre, by 64KBPS, based line, from telephone corporations like BSNL. The district layers are in turn connected to the data centre, and disaster recovery centre, by 2 MBPS based lines.

CBS has facilitated better operational efficiency by ensuring improved house keeping and preventing seepage of income. Inter branch reconciliation has become faster and accurate. Users can log in only from their authorised branches and data access is restricted to their levels. For recovery of disaster, two servers, installed in the primary site ensure high availability and achieve fault tolerance through hardware redundancies and

protection against component failures.

Many banks have covered 100% of their business of the bank under CBS, and intend to bring all their branches under WAN connectivity. The centralized database has enabled introduction of new products and services apart from bringing about work simplification at branches.Therefore, CBS has been effective, in bringing about a radical change in the field of banking, and we can also expect further developments in this field, because of this system.

A packaged retail core banking system might include functions that are closely related to core banking activities. So a package may include such functions as:

Processing of applications for loans received from branches, etc. (called loan origination)

Branch management, often including facilities for maintaining teller cash drawers, etc.

Cheque book ordering Internet banking

Banks can have differences in the type of business that they conduct. They may for example be in retail banking (the type of banking that is seen in the high street), or be in wholesale banking (the bank-to-bank market often referred to as the inter-bank market) or securities trading (the buying and selling of stock, shares or government debt instruments). As a result their core businesses can be considerably different. Their core banking system will therefore reflect the type of business of the bank and be either:

Retail banking Commercial banking Wholesale banking Treasury banking Private banking

Different types of module in CBS:

Kernel Module keeps a record of each customers complete relationship with the bank. Knowledge Manager Module provides an enterprise OLAP data-warehousing framework designed to meet data analysis and knowledge management requirements. General Ledger Module maintains a multi-currency enterprise and client accounting system. Limits Control Module offers the capability to manage credit and currency exposure limits at multiple product and geographic levels. Deposits Module provides online transaction processing for a range of deposit accounts. Customer Lending Module - handles a wide variety of loan products from consumer loans to wholesale lending. Branch Teller Module enables high-speed teller operations with online and offline processing capabilities. Trade Finance Module automates the full lifecycle of trade finance operations. Funds Transfer supports incoming, outgoing and internal transfers. Domestic Payments delivers intraday and batch processing of transactions that initiate from deposit accounts or incoming clearing files. Treasury Modules support treasury operations including the processing of a comprehensive range of financial instruments in money markets, capital markets and the international foreign exchange. How shall CBS help Customers? All CBS branches are inter-connected with each other. Therefore, Customers of CBS branches can avail various banking facilities from any other CBS branch located any where in the world. These services are:

To make enquiries about the balance; debit or credit entries in the account. To obtain cash payment out of his account by tendering a cheque. To deposit a cheque for credit into his account. To deposit cash into the account.

To deposit cheques / cash into account of some other person who has account in a CBS branch. To get statement of account. To transfer funds from his account to some other account his own or of third party, provided both accounts are in CBS branches. To obtain Demand Drafts or Bankers Cheques from any branch on CBS amount shall be online debited to his account. Customers can continue to use ATMs and other Delivery Channels, which are also interfaced with CBS platform. Similarly, facilities like Bill Payment, I-Bob, M-bob etc. shall also continue to be available. Bank is in the process of launching Internet-banking facility shortly.

All these aim to provide convenient, efficient, and high quality banking experience to the customers, comparable to world class standards. What are other benefits to the Customers ? A CBS branch is like a Sales & Service Delivery Center. Back office processes/activities are handled through technology at some other site, called Data Center. Branch, therefore, has more time for serving customers. This improves the quality and efficiency of the services rendered and the customer is directly benefited by way of satisfying and happy banking experience. Since a CBS branch is essentially designed to focus on customer-interface and customer service, the special lay-out and ambience of the branch is made to provide a convenient and delightful banking experience. The Customer Service Representatives / Executives at the branch are specially trained to understand, facilitate and deliver banking services efficiently and effectively. Advantages: Customer:

Transaction of business from any branch, ATM that offers him anytime anywhere banking facility. Lower incidence of errors. Hence accuracy in transactions. Better funds management due to immediate availability of funds.

Banks: Standardisation of process within the bank. Better customer service leading to retention of customer and increased customer traffic. Availability of accurate data & Better use of available infrastructure Better MIS and reporting to external agencies such as Govt., RBI etc. Increased business volume with better asset liability management and risk management. Core banking solution architecture :

I Banking Application Architecture Platform

Underlying technical foundation for all systems and applications. Represents the basis for a service oriented architecture used across the integrated platform. Central system for business partner management serving multiple banking applications. Interface between users and backend systems. Presents data stored and calculated in the back-end in a well-arranged business supporting way. System to manage customer and sales prospect interactions from a sales

II Customer Data Management

III Frontend

IV Customer Relationship Management

or marketing perspective by providing technologies to automate and organize business processes. Bank controlling system containing technical solutions for analytical processes in fields like risk management, BASEL II, IFRS or profitability

V Analytical Banking

analysis. Transactional banking covers the processing of operational banking transactions managed by account managing systems. These are

VI Transactional Banking

responsible to support the complete lifecycle of accounts or contracts. Enterprise applications for all industries to support common business

VII Enterprise Banking

processes, such as quality management, human resources or financial accounting. A BI system supports business decision processes by providing client

VIII Business Intelligence

specific historical, current, or predictive views on business operations. A transaction broker connects the banking system to the outside world,

IX Transaction Broker

mainly focusing on payment transaction flows. Teller applications provide user interface solutions for tellers to support customer transactions like payment transfers, deposits and withdrawals,

X Teller Application XI Further Applications

foreign exchange cash transactions etc. Further bank applications outside the banking application platform