Group 5 Final Banking

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Computerization in Banking

Group 5- Ajay Sharma Amruta Patil

Ashok Rana Nimish Gangrade

Prerana Negi Shakun Tadu


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Introduction

-Till the early 1990's, banking industryin India was a near monopoly of the

government.

-In January 1993 government ofIndia

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 variousrestrictions on public sector banks.

-Due to enhanced competition banking sector took strides

towards computerization and automation of their operations


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Computerization in Banking

Computerization is a positive

step to bank growth.

With the aid of computers, thebank work can be done faster.

Reserve bank of India and state bank of India installed

computers for processing reconciliation of inter branchtransactions , processing statistical data and for research

purposes.


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Content of transformationPARAMETER FROM TO

structure Monolithic Thin and lean due to IT

induction

Centralization of power Delegation , empowerment

induced by MIS/DSS

Large space and staff Limited space and staff req.

due to computerization

Buisness Focus on volume of assets Market segmentation with

different life style and

relationship with CRM

Selling existing products

without marketing

Enabling innovation and

development of new

products and services due

to parameterized CBS


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People Old skill set Understanding of business

and customer centric

attitude

Alertness as reaction tominimize events like frauds Alertness as pro-action andround the clock banking

behavior

Systems Security oriented and high

cost per transaction

Efficient , in build audit trail

and reduced cost

culture Conservative and

individualistic approach

Innovative and team spirit

Procedure centric Customer centric

Information technology Stand alone ALPMs PCs

ATMs

CBS fully integrating all

channels across national

and international frontiers

Limited security Internationally accepted

and adopted standards


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Types of Bank computerisation

Back Office Application

Total Branch Automation

Core Banking Solution


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Back office Application

First steps of RBI towards bank computerization

Uses computers for data entry operations andFew calculative operations

Stores customers data

Use FoxPro to calculate interest and develop payroll system to calculate employee salary

Not beneficial to banks customers Working hours of bank employee were increased

Daily / weekly / monthly back up was required


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Total Branch Automation

In this the bank should have TBA s/w being used in branches that arecovering 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 onlywhich provide ATM centres

Branch needs to keep the back up of their data and send the back up copyto the head office of the bank.

Many Cooperative bank works on TBA system.

Convenient as compare to back office application


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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 channelslike 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 banks

assets and liabilities,

a transaction processing engine and

a system for the financial management of the bank


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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 bankingsolutions

Providing right products at right time through the right

channels 24 by 7.


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Modules offered By CBS

Customer information files management:provides centralised access to all customer-related information

Deposit management:

offers automated, real-time posting andhighly efficient deposit processing for all the

balance-based liability products.Also provides back up support for opening,settling, and closing card and check accountcontracts.


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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 processesaccording to the customers need

Reserve for bad debts: Supports risk monitoring,

provisioning, and realization of bad-debt charges.


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Limit management: This module indicates the liability limitsand actual liability levels of business units and partners. Limitmanagement checks the transactions against liability limitsassigned to the borrowers.

Financial accounting: The Financial Accounting functionsupports the general ledger transactions and financemanagement transactions at all the organizational levels, thusimproving the management control and reporting.

Complementary third-party products : Help the bank bymanaging the teller machines and payments.


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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 customers bank account would be credited through the new paymentmechanism on the due date

Right to withdraw from this mode of payment by giving an advance notice of 6

weeks.

ECS(debit):

This ECS allows customer to pay their monthly/quarterly/half yearly/yearly utility

bills like telephone, electricity, loan instalments, insurance premium etc directlythrough their bank accounts.

The Customers 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.


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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 andpayment of due

Automatic reconciliation


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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 ClearingHouse (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 proceduralguidelines

make the system absolutely secure

Hassle free: Beneficiary need not go to the bank


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Online Banking or Internet Banking

Customers can access to their bank through the Internet, to complete

transactions such as viewing their accounts status, transferring moneybetween accounts, viewing images of cancelled cheques, print copies ofthose 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 bankingproducts 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 notpermit any account transfer.

Advanced transactional web sites: which allows bank customers to transfer fundsto/from their accounts, pay utility bills and conducts banking transactions online


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Key Internet banking services

Internet banking services are broadlyclassified 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


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4) Request and Intimation

By using this facility, the customer can electronically submitrequest 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, CarLoans


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Beware of.

Hacking

Phishing

Pharming

Skimming


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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

banks 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


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Offers all the facilities of ATM except cash withdrawals and

deposits.

Benefits of Telephone Banking:

Lowers the banks total cost of customer care

Supports the banks marketing plans ,with

Brandable messages that play while acustomer is waiting/on hold

Improves customers and the banks productivityby managing the flow of customers information

Strengthens strategic positioning by increasing the

customers loyalty by improving the customerservice and achieving highercustomer satisfaction


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Credit card/Debit card/Smart card

Credit 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.


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An example of the reverse side of a typical

credit card:

1) Magnetic Stripe

2) Signature Strip3) Card Security Code

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


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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 PersonalIdentification Number (P

IN).

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.


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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 offered-Transfer funds

Make loan payments

Request withdrawal cheque

View current balances


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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 customers 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.


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RBIs FINANCIAL SECTOR TECHNOLOGY

VISION DOCUMENT

It focuses on four major areas

IT for regulation and supervision

IT and Institute for Development and Research inBanking Technology (IDRBT)

IT for Financial Sector

I

T for Government related functions


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Feedback from bank managers oncomputerization in respective banks

Methodology Questionnaire and personal

interviews


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SBI


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OBC


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PARAMETERS SBI OBC

SERVICE SPEED INEFFICIENT HIGHLY EFFICIENT

CUSTOMER REACTION NEGATIVE POSITIVE

DECREASE IN TIME SPENT IN

QUES

NO EFFECT YES

IMROVEMENT IN OPERATIONS NO IMPROVEMENT HIGHLY IMPROVED

TRAINING REQUIRED STRONGLY AGRE REQUIRED


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Thank You

Group 5 Final Banking

Documents

Transcript of Group 5 Final Banking