UNIVERSITY OF MUMBAI

A Project Report On

“CORE BANKING”

Submitted

By

Mr. ATUL.R.RAJAK

ROLL NO :40

T.Y.Bachelor of commerce

Accounting & Finance

Semester VI

AY: 2018-2019

In Partial Fulfilment of the requirement for the Award of Degree

of Bachelor of Commerce-Accounting & Finance

UNDER THE GUIDANCE OF

PROF:

Mrs. DIPALIMEHTA

BHAVANS HAZARIMAL SOMANI COLLEGE

Kulapati Munshi Marg, Mumbai-400007

 DECLARATION

I,ATUL.R.RAJAK, studentoftheBHAVANSHAZARIMAL SOMANI

COLLEGE Kulapati Munshi Marg, Mumbai-400007.hereby declare that I
have completed the project entitled“CORE BANKING’’
inpartialfulfilmentoftherequirementforthethirdyearofthe bachelor of
Com. Accounting and Finance (BAF) semester VI (2018-2019).

Ifurtherdeclarethatinformationsubmittedbymeistrueandoriginaltothe
best of myknowledge.

DATE:

PLACE:

SIGNATURE OFSTUDENT

(ATUL.R.RAJAK)
 CERTIFICATE

This to certify that Mr. ATUL.R.RAJAKof T.Y.B.A.F. (Semester VI),

has successfully carried out work on the topic of “CORE
BANKING”inpartialfulfilmentof Bachelor of Commerce Accounting and
Finance (BAF) semester VI (2018-2019).as perthecurriculum laid down by
the University of Mumbai for the Academic Year 2013-2014.

ThisisaBonafedeprojectworkandtothebestofmyknowledge,the
informationpresentedistrueoriginal.

InternalExaminer Co-coordinator

ExternalExaminer Principal

Date:

Place: CollegeSeal
 ACKNOWLEDGEMENT

Apart from the efforts of me, the success of my project depends largely
on the encouragement and guidelines of many others. I take this
opportunity to express my gratitude to the people who have been
instrumental in the successful completion of this project. I would like to
show my greatest
appreciationtoMrs.DIPALIMEHTAIcan’tsaythankyouenoughfor this
tremendous support and help. Without her encouragement and
guidancethisprojectwouldnothavematerialized.

I also wish to express my gratitudetocoordinator Mrs.

DIPALI.MEHTAfor providing me an opportunity to do my project work.
The specialthankstoalltheprofessorsof“BHAVANS HAZARIMAL
SOMANICOLLEGE,Kulapati Munshi MargMumbai-400007.” For their
kind co-operation to the completion of my projectwork.

The guidance and support received from all the professors of

Wilson’s who contributed towards this project is vital for the success
of the project. I am grateful for these constant support and help. Last
but not least Iwish
toavailmyselfofthistothankmyparentfortheirmanualsupport,strength
and helpfor everything.

(ATUL RAJAK)
 TABLE OF CONTENT

Chapter no. Topic Pg. No.

1 INTRODUCTION

2 REVIEW OF LITERATURE

CONCEPTUAL FRAMEWORK
3

RESEARCH METHODOLOGY
4

5 DATA INTERPRETATION
FINDINGS
6

CONCLUSION
7

BIBLIOGRAPHY
8

QUESTIONNAIRE
9

Investmentandfinancialplanningforretailinvestor Page5
 CHAPTER 1
1.1 INTRODUCTION TO STUDY

CORE BANKING:

Core banking is a general term used to describe the services provided by a group ofnetworked bank
branches. Bank customers may access their funds and other simpletransactions from any of the
member branch offices.

Core Banking is normally defined as the business conducted by a banking institution with itsretail
and small business customers. Many banks treat the retail customers as their corebanking customers,
and have a separate line of business to manage small businesses. Largerbusinesses are managed via
the corporate banking division of the institution. Core bankingbasically is depositing and lending of
money.

Nowadays, most banks use core banking applications to support their operations whereCORE stands
for "centralized online real-time exchange". This basically means that the entirebank's branches
access applications from centralized data centres. This means that the depositsmade are reflected
immediately on the bank's servers and the customer can withdraw thedeposited money from any of
the bank's branches throughout the world. These applicationsnow also have the capability to address
the needs of corporate customers, providing acomprehensive banking solution.

A few decades ago it used to take at least a day for a transaction to reflect in the accountbecause each
branch had their local servers.

Normal core banking functions will include deposit accounts, loans, mortgages andpayments. Banks
make these services available across multiple channels like ATMs, internetbanking, and branches.

WHAT TS A CORE-BANKING SYSTEM?

The Core Banking solution incorporates the entire spectrum of Banking operations on one single
platform, Front-to-Back, making it a complete Core Banking Management software package. The
solution ensures high levels of automation, risk-free deployment, and full STP workflow coverage,
ease of use, low-cost operation and full cross bank account management.
Core banking became possible with the advent of computer and telecommunication technology that
allowed information to be shared between bank branches quickly and efficiently.

Before the 1970s it used to take at least a day for a transaction to reflect in the account because each
branch had their local servers, and the data from the server in each branch was sent in a batch to the
servers in the data centre only at the end of the day (End).

Over the following 30 years most banks moved to core banking applications to support their
operations where CORE Banking may stand for "centralized online real-time exchange". This
basically meant that all the bank's branches could access applications from centralized data centres.
This meant that the deposits made were reflected immediately on the bank's servers and the customer
could withdraw the deposited money from any of the bank's branches.

Core banking solutions is jargon used in banking circles. The advancement in technology, especially
Internet and information technology has led to new ways of doing business in banking. These
technologies have reduced manual work in banks and increasing efficiency. The platform where
communication technology and information technology are merged to suit core needs of banking is
known as core banking solutions. Here, computer software is developed to perform core operations
of banking like recording of transactions, passbook maintenance, and interest calculations on loans
and deposits, customer records, balance of payments and withdrawal. This software is installed at
different branches of bank and then interconnected by means of computer networks based on
telephones, satellite and the internet. It allows the banks customers to operate accounts from any
branch if it has installed core banking solutions.

Gartner defines a core banking system as a back-end system that processes daily banking
transactions, and posts updates to accounts and other financial records. Core banking systems
typically include deposit, loan and credit-processing capabilities, with interfaces to general ledger
systems and reporting tools. Core banking applications are often one of the largest single expense for
banks and legacy software are a major issue in terms of allocating resources. Strategic spending on
these systems is based on a combination of service-oriented architecture and supporting technologies
that create extensible architectures.

Many banks implement custom applications for core banking. Others implement/customize
commercial ISV packages.
While many banks run core banking in-house, there are some which use outsourced service providers
as well. There are several Systems integrators like Cognizant, Edge Verve Systems Limited,
Capgemini, Accenture, IBM and TCS which implement these core banking packages at banks.

A core banking system is the software used to support a bank’s most common transactions.

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 bank’s 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.

Examples of core banking products include Infosys’ Finacle, Nucleus FinnOne and Oracle's

Flexcube application (from their acquisition of Indian IT vendor I-flex). With the expanding of
operations across geographies, most global banks face the need to upgrade their core banking
systems. Although an integrated core banking system has several benefits, there are many unique
deployment challenges that must be dealt with before such benefits can be realized. This paper
presents a generic road map for a multi-country implementation. First, it highlights the challenges
that a multi-country core banking implementation might have to face. Second, it outlines an approach
to mitigate most of these risks and challenges. Third, it delineates some techniques to make an
objective selection of the right vendor and systems integrator.

Are basically the heart of all systems running in a bank and it forms the Core of the bank's IT
platform. Amongst other functionalities, it provides the customer information management, financial
information system and the transaction-processing functions, which by far are the most fundamental
processes in a bank. With the advancement in technology and with passage of time, core systems
now-days tend to cover more and more functionality giving the bank a join solution for most of its
operations in different business lines.Alongside, it also provides a central operational database of
customer’s assets and liabilities giving facility to generate a 360 degree view of the customer’s
relationship with the bank. Core banking systems reside as the heart of the data-centre itself.

Core banking solution:

Core banking solutions are banking applications on a platform enabling a phased, strategic approach
that is intended to allow banks to improve operations, reduce costs, and be prepared for growth. An
overall Service-Oriented-Architecture (SOA) helps banks reduce the risk that can result from manual
data entry and out-of-date information, increases management information and review, and avoids
the potential disruption to business caused by replacing entire systems.

Core banking solutions is frequently used in banking circles. The advancement in technology,
especially Internet and information technology has led to new ways of doing business in banking.
These technologies have cut down time, working simultaneously on different issues and increasing
efficiency. The platform where communication technology and information

Technology are merged to suit core needs of banking is known as core banking solutions. Here,
computer software is developed to perform core operations of banking like recording of
transactions, passbook maintenance, and interest calculations on loans and deposits, customer
records, balance of payments and withdrawal. This software is installed at different branches of
bank and then interconnected by means of communication lines like telephones, satellite internet etc.
It allows the user (customers) to operate accounts from any branch if it has installed core banking
solutions. This new platform has changed the way banks are working.
Gartner defines a core banking system as a back-end system that processes daily banking
transactions, and posts updates to accounts and other financial records. Core banking
systemstypically include deposit, loan and credit-processing capabilities, with interfaces to general
ledger systems and reporting tools. Strategic spending on these systems is based on supporting
technologies that create extensible.

India post is losing its customers due to lack of modernization in its customer experience
andoperations.

At present, India post does not have the services of ATMs, Mobile banking and demitcertificates
facility.

Banks have traditionally been in the forefront of harnessing technology to improve theirproducts,
services and efficiency. They have, over a long time, been using electronic andtelecommunication
networks for delivering a wide range of value added products andservices. The delivery channels
include private networks; public networks etc. and thedevices include telephone, Personal Computers
including the Automated Teller Machines, etc. With the popularity of PCs, easy access to Internet
and World Wide Web (WWW),Internet is increasingly used by banks as a channel for receiving
instructions and deliveringtheir products and services to their customers. This form of banking is
generally referred to asInternet Banking, although the range of products and services offered by
different banks varywidely both in their content and sophistication.

The core banking system is the central processing unit of a bank. It is a customer accountingand
transaction processing engine for high-volume back-office transactions. The inflexibility of
traditional core banking systems is hobbling sustainable growth. Banks in most emerging markets, as
well as traditional markets, are finding core replacement inevitable. Among the main drivers for core
replacement, the most obvious is the need to provide a more cost-effective and efficient way to run
core processes. Global deployment of core banking systems offers significant benefits. Yet, less than
5% of the world’s banks deploy a multi-country application to service their global customers.

There are several reasons why a bank operating in multiple countries should choose a single core
banking platform, primary among which are cost savings, having a holistic and single view of the
customer, ease of management information, streamlined and efficient processes and faster product
development and deployment across multiple geographies. With multi-country deployment of core
bankingsolutions, banks will be able to leverage IT to the maximum and build competitive
advantage.
1.2 OBJECTIVES OF CORE BANKING SOLUTION

• To study the core banking services provided by nationalized bank

• To study the core banking services provided by co-operative bank

• To suggest the scope for improvement to co-operative bank if any

METHODOLOGY USED TO COLLECT DATA

Primary data:

I) Sample frame:

Questionnaire is prepared to get the information from the public relating to the subject manner of the
topic, minimum numbers of 15 people for the survey of the topic that is core banking solution.

2) Data collection & analysis:

Data is collected from 15 respondents and depending upon their response the tabulation & graphical
representation of responder is made available in research work.

Secondary data:

Information is related to the subject matter of the research work is collection from books, magazines
and newspaper and it is made available in the project work.

SCOPE OF THE STUDY

 To find most important reasons to open an Internet bank account.

 To know facilities is given more importance in bank.
 To find kinds of account customers prefer maintain in the bank

1.3 LIMITATION OF THE STUDY

 Some of the persons were not so responsive. Respondents may not be prepared to contribute
to the research due to lack of time and resources required.
 Sample size is limited to 45 customers and 27 employees.
 The research is confined only to the Dahisar area.
New Components:

Besides the 5 major ingredients, there are optional components (like a car with options like leather
seats, flashing light etc...) that can be added on to the Core Banking Systems to help the bank staff
uses them in a more efficient manner, these include:

Delivery Channels:

All the 5 major ingredients of a Core Banking system can be operated by a bank staff from any
location in the country simple by using their terminal at their workplace. Around the world as banks
started focusing on customer relationship management, they realized that customers interact with the
entire bank for banking transactions in many ways. Customer can go to the branch, go to an ATM,
call on the phone, and log on to the Internet to do their banking transactions. They can use one or
more of these delivery channels (Called customer touch paints) to conduct segment and decide on
further investment design specific products and services to promote such delivery channels.

The Core Banking Systems are production factories creating products and services and tracking them
and the delivery channels are distributors and retailers who ensure these products and services are
available to the customers whenever they are in the country. Hence, the add-on systems for Core
Banking System include;

* Branch Automation system

* ATM Switch and connected ATM
* Call centre system
* Internet Banking System

Any transaction done by the customers in any of the above systems goes and updates the Core
Banking System like deposit or loan at that in turn updates the Bank's G.L. in the Core.

1.4 IMPACT OF CORE BANKING:

The Core Banking Systems have to satisfy the requirements of all the entities that form part of the
eco-system of the Bank.

[1] Bank Employee: Head office, regional offices, branches etc: Using Core banking System. With
appropriate authority employee as given above can help customers do their financial transaction.
[2] Bank management: Executives / managers at respective locations, head office, regional offices,
branches etc. can obtain the financial position from Core Banking Systems related the respective
sphere of banking operations and thus help pinpoint potential problems so as to avoid crises.

[3] Bank Customers: Can operate any of their accounts from any branch or preferred delivery
channel and have access to his funds any time 24 hours a day.

[4] Bank Auditors: Ones accounts audited, they operate the same year on year thus enabling
auditors to focus more on systems and procedures at delivery channels like branches, call centre etc.

[5] Bank regulators: Core Banking Systems produce the required reports for regulatory bodies like
the central bank, financial statement, asset and liability reports, NPA reports large currency
transaction reports etc. are all produced by either the deposits, or the loan or a combination of
deposit, loan and G.L. System.
 CHAPTER 2

2.1REVIEW OF LITERATURE

Today, we cannot think about the success of a banking system without information technology and
communication. It has enlarged the role of banking sector in the economy. The financial transactions
and payment can now be processed quickly and easily. The banks with the latest technology and
techniques are more successful in the competitive financial market. They have been able to generate
more and more business resulting in their greater profitability. Various empirical and theoretical
studies have been undertaken at the national and international level to analyse the impact of e-
banking and information and communication technology (ICT) on banking sector, customers, and
service quality and payment system. The studies mainly focus upon e-banking impact on
productivity and profitability primarily due to core banking system, electronic fund transfer, real
time gross settlement system and electronic clearing services. From the customer angle the studies
primarily focus upon; why customers choose e-banking products and increase in their level of
satisfaction due to phone banking, mobile banking, internet banking, website services, ATMs, etc.
These services have not only improved the satisfaction level of customers, but also helped in
reduction of processing time and transaction time. The productivity of banks in terms of time saving
and attending the customers at the branches has also improved. The review of following studies
throws light upon different aspects of e-banking. To know the impact of e-banking on various
aspects, the research studies undertaken for the review have been classified into four categories, i.e.,
studies related to banks, studies related to customers, studies related to service quality and studies
related to technology.

Core Banking Service (CBS) is one of the recent developments in the field of banking and it has
proved to be very useful. Centralized Online Real-time Environment (CORE) banking enables
anywhere banking. Bank’s customers can operate their accounts from any branch of the bank. The
present scenario in banking industry is once a customer opens his/her account he/she becomes the
customer of the bank but not the branch alone. Core Banking Services provides for online banking
services everywhere to fulfil the needs of the customers. Previously all the operations such as
keeping a ledger of various transactions, maintaining customer information, interest calculations of
loans and deposits etc were done manually. With the advent of Information and Communication
Technology (ICT) all the above core operations are done through the computers. CBS has been
effective in bringing about a radical change in the field of banking. CBS from the customer’s
perspective simplify their banking operations by allowing them to conduct common frequently used
banking transactions without visiting bank's branches, thus saving a lot of time. On the other
handbank s have improved upon their operational efficiency after the introduction of CBS.CBS
provides for online banking, Mobile banking and ATM services on 24/7 basis to customers so that a
customer need not visit a bank for his banking needs.

Kamakodi (2008) discussed in their Article about the paradigm shift and implementation of “Core
Banking System in all the banks”. DR. Anurag.B.Singh; MS.PriyankaTandon (2012) in their Article
‘A study of Financial Performance: A Comparative Analysis of SB1 and ICICI Bank’ stated about
the efficient banking system. The purpose of the study is to examine the financial performances of
the banks after the introduction of the CBS. DR.kalagarsamy ; S.wilson (2013) in their Article ‘A
study on customer behaviour towards banking services with special reference to public sector banks’
started the customer satisfaction towards the recent banking technology towards the services given
by banks . Universal banking procedure can help the customer for the better transaction.
Garimachaudhary (2014) in their Article ‘Performance comparison of private sector banks with the
public sector banks in India’ stated about the context of customer satisfaction and the efficiency of
banks after the introduction of CBS.

Core Banking Solution (CBS) is networking of branches, which enables Customers to operate their
accounts, and avail banking services from any branch of the Bank on CBS network, regardless of
where he maintains his account. The customer is no more the customer of a Branch. He becomes the
Bank’s Customer. Thus CBS is a step towards enhancing customer convenience through anywhere
and anytime banking. Normal Core Banking functions will include transaction accounts, loans,
mortgages and payments. Banks make these services available across multiple channels like ATMs,
Internet banking, mobile banking and branches. The core banking services rely heavily on computer
and network technology to allow a bank to centralize its record keeping and allow access from any
location. It has been the development of banking software that has allowed core banking solutions to
be developed.

An IDC report, “China Banking Industry IT Solution 2007-2011 Forecast and Analysis”, June 2007,
evaluated all solution providers based on revenue and market share for 2006. IDC noted that TCS
Financial Solution has emerged as a major force in China’s banking IT solutions market after
winning major deals with Bank of China and Axis Bank.IDC s research estimates that the market for
core banking solution (excluding hardware) in China was RMB 1,036.6 million in 2006, an increase
of 23.8% over 2005. Core banking solutions accounted for 23.8% of the overall banking solutions
market and constituted the No. 1 category of bank IT solutions spending. According to the IDC
report, China’s banking IT expenditures are forecast to increase 15.1% or RMB 42.1 billion by 2007.

The system called IMAL is the first certified core banking system for Bank Dhofar s Islamic banking
operations. As per the deal, Bank Dhofar will collaborate with Path Solutions, to provide Sharia-
compliant products to Bank Dhofar customers and help it to enlarge this area of its business. Bank
Dhofar has selected Path Solutions as its Core Banking System provider, for its Islamic Banking
operations.

IBM announced the availability of FLEXCUBE(TM), — I-flex’s core banking suite on a J2EE
architecture using IBM Software. As part of a global partnership agreement, IBM and I-flex will
jointly market, sell and deliver FLEXCUBE for core banking. FLEXCUBE is an interoperable and
flexible core banking solution designed to easily interface with complex systems and enable banks to
quickly respond to the changing business and regulatory environment. The new version, of
FLEXCUBE for core banking runs on IBM’s J2EE-based Web Sphere integration and infrastructure
software.

Aite Group recognized DNA with its Alliance Award based on the platform’s open architecture,
which makes it easy for virtually any financial services vendor to integrate their solutions with DNA.
Banking Awards from Aite Group, a leading independent research and advisory firm focusedon the
financial services space. DNA won the most awards of any core platform mentioned in the report -
including systems from Fiserv, FIS, Jack Henry and Harland - demonstrating how DNA is a
dramatically different core banking platform.

On Oct. 21 MUMBAI, India — Tata Consultancy Services (TCS) on Thursday announced that it had
acquired Australian Financial Network Services (FNS), a core banking solutions vendor, for
approximately $26m. TCS has bought the stakes owned by Macquarie Bank and other promoters in
an all-cash deal. The acquisition of FNS will further strengthen TCS’ portfolio of banking and
financial services products by adding a strong, high- performance core banking solution with an
established global customer base. With its rich functionality, proven scalability and robustness.

In a new report, Celent compares a range of core banking solutions that have a sizable presence with
small global banks, specifically solutions with more than 80 per cent of their customer base having
less than $1 billion in assets. In Core Banking Solutions for Small Banks: A Global Perspective,
Celent covers solutions where more than 10 per cent of the banks are located in regions other than
North America.
Dannenberg and Kellner (1998), in their study, overviewed the opportunities for effective utilization
of the Internet with regard to the banking industry. The authors evaluated that appropriate application
of today’s cutting edge technology could ensure the success of banks in the competitive market.
They evaluated the services of banks via internet as websites provide sophisticated line of products
and services at low price. The authors analyzed that transactions via internet reduce the risk of data
loss to customers, chance to cut down expenses, higher flexibility for bank employees, re-shaping the
43 banks’ image into an innovative and technologically leading institutes, etc. The researchers found
that banks could move one step further by entering into a strategic alliance with internet service
provider. So, the bank of tomorrow stands to be feasible with today’s technology. Daniel (1999), in
his research paper, described e banking as the newest delivery channel offered by the retail banks in
many developing countries. The objective of the study was to analyse the current provision of
electronic services of major retail banking organizations in the UK. The researcher through a
questionnaire found that 25% banks in the UK were those already providing e-banking services, 50%
banks were testing or developing such services while 25% were not providing any e-banking
services. Electronic channels, PC, digital TV and all these provide greater accessibility and services
at lower price. To make services more adaptable, customers should be provided maximum choice
and convenience. Restriction and limitation within organization to operate the services and its market
share or strength were viewed as important to decide and operate the e-banking services. Sathye
(1999), in his research paper, explored the factors affecting the adoption of internet banking by
Australian customers. The author stated that internet and other virtual banking had significantly
lower the cost structure than traditional delivery channels. So, the banks should encourage customers
to use internet for banking transactions. The author also emphasized that for adoption of internet
banking, it was necessary that the banks offering this service made the consumers aware about the
availability of such a product and explain how it adds value to the other products. Theanalysis of the
study showed that security concerns and lack of awareness stand out as thereasons for non-adoption
of internet banking by Australian customers. However, internetshould be considered as a part of
overall customers’ service and distribution strategy. Thesemeasures could help in rapid migration of
customers to internet banking resulting inconsiderable saving of operating costs of banks.
 CHAPTER 3
CONCEPTUAL FRAMEWORK

3.1 NEED FOR CORE BANKING SOLUTION:

The need for such a study does not arise just because of one reason or the other but it requires a
combination of driving forces to income into existence.

Some of these forces being-

 To study the intense competition and changing market dynamics in an over banked
environment.
 To understand the demands of customers who are better informed, more demanding and less
loyal than ever.
 To enhance efficiency and effectiveness
 Increasing customer satisfaction and convenience
 Freeing up time for branch staff to focus on sales and marketing
 Simplifying process for employees
 Enhancing banks competitiveness in the market
 Improved process efficiency.

Shrinking margins, slow growth.... The challenges that confront today banker are as intense as they
are varied and about technology, the banker’s trusted friend in the past few decades has lately
become an obstacle in the quest for market leadership. Stakeholders’ expectations continue to be
overwhelmed by their positive experience in other industries like retail and travel, of how technology
can make a difference. Satisfying such expectations requires that banks make their vital systems
customer-centric,

Cross-channel capable and process- oriented. Majority of work in manual and duplication

 Cheque clearing is done in manual and locally

 No Global account number system
 No data protection and customer data
 Cash management function is inadequate resulting extra work
  No Management information systems facilities
 Issue of certificate in manual instead of Demat
 Poor record maintenance
 Inadequate audit functions
 Non agreement of balances
 Calculations of agents commission in manual
 Real Time Processing
 Multi channel88 support like ATMs/Mobile Banking
 Process simplification to reduce service response times.

3.2BENEFITS OF CORE BANKING SOLUTION

Economic Benefits:

The cost savings from a project of this magnitude are typically visible over a period of a couple of
years from implementation. The ROI compounds as new lines of business and geographic areas
move on to the new platform. The return of investment typically slow in the first few years till such
time the real benefits of the system start accruing to the bank. Research reports indicate that large
core banking replacement projects enter a positive NPV as late as the 5th year. Cost benefits in the
long run may accrue to the bank due to all of the performance benefits mentioned above (as most of
them have an indirect linkage to cost) as well as from other areas such as:

1. Lower transaction processing costs within the branch and through other delivery channels.

2. Reduction in license fees towards other software, which gets replaced by the core banking system.
This can constitute as savings for the bank almost immediately.

3. Reduced maintenance costs in terms less complicated code to maintain, easy for the bank to build
its own customization, lesser time required for testing etc.

4. Reduced staffing as lesser number of systems now needs to be managed.

5. Cheaper and faster hardware and Database — Hardware and Database costs have dropped
significantly in recent times that enable the bank to leverage on this to deliver faster transaction
processing speed etc.
Performance Benefits:

1. Flexibility: -

Lack of flexibility more often tends to create an impediment in building new functionality, eliciting
data for newer regulations like the BASEL 2, accessing better information on customer so as to
enable cross selling, addition of newer business lines, offering new products in the existing business
lines and so on. New generation core systems provide flexibility — in terms of being modular in
nature and supporting an integration layer, which can be used very effectively to hook on to third
party applications.

2. Customer Centric:-

New solutions tend to give a complete 360 degree view of the customer transaction the objective
being to try and give a complete perspective of the customer's relationship with the bank so as to
enable cross selling opportunities. Some of the core systems use data mining tools to cull out
relevant data from customer transactions and try to get a meaningful message out of this.

3. Real Time Capabilities:-

Most transactions done in the newer core banking solutions arc on-line real time not only within the
package but across all delivery channels. This tends to create a lot of efficiency within the system on
one hand as well as reduced risk on the other.

4. Straight through Processing:-

This is a new concept, which enables the system to process transactions end-to-end almost without
any human intervention. E.g. a successful implementation of STP functionality for an inward funds
transfer (MT 103) message itself could save the bank significant costs in terms of reduced staffing
requirement. A feature like this also ensures almost 24 X 7 processing of such transactions which
only leads to better customer service and good-will.

5. Lesser Down-time, smaller or no EOD / EOM cycles.

6. All of this eventually results in addition of new customers, retention of existing customers
and an over-all better customer service.
3.3 THE EIGHT STAGES OF CORE BANKING TRANSFORMATIONS
Commonalities in core banking transformations are what 1 look for. The common issues, mistakes,
and roadblocks that I have seen across a number of large banking transformations are the things I
like to solve for. Recently while speaking with a client they asked me if they were any different than
other banks going through the same type of transformation.Sadly I had to say no. In fact I had to tell
them that they were going through almost an identical process as other banks. What are the stages
that most banks undertaking a core banking transformation will go through? For simplicity sake i
have distilled my view on the common processes down to a list of eight stages of core banking
transformations.

The Excitement of Something New

Most banks go through an extremely detailed, time consuming, and costly RFP process when
assessing core banking solutions, integrators, and other peripherals required for their transformation
project. The elation at the end of the RFP process with the selection of a solution (Vendor),
integration partner (Integrator), and the other required hardware components normally generates an
amazing amount of excitement. The bank is over optimistic at this point and the new project kicks
off, all parties land on the ground... it’s the excitement of taking on the new!

Why is this so hard? It’s the integrator!

The excitement only last so long until the bank realizes that this is harder then they assumed. Gaining
traction and momentum on the implementation takes longer than expected. All of the parties don’t
seem to play well together. The bank assumes that the problem has to be the integrator they hired to
help them implement the system. They rethink the strategy, they look back at the contract the bank
and the Integrator descend into a renegotiation, the Bank looks for alternatives, and time and money
are wasted sorting out the blame game. In the end there is normally a replacement of the integrators
senior management on the project some sort of concessions made and the project continues.

The Vendor’s product is defective and full of gaps!

Ill-defined processes start to come out of the woodwork. The capabilities and standards of the
purchased solution start to be understood by the bank. Enhancements, extensions, and configurations
start to be identified; effort and duration start to increase. “The solution was oversold, “says the
Bank! “ You have asked for non-standard processes or functionality that was identified to you in the
RFP” responds the vendor. This creates noise and uncertainty within the project as suddenly scope is
in question, the Bank and Vendor relationship is in question. Again the Bank looks for alternatives,
time and money are wasted sorting out the blame game. In the end there is normally a replacement of
the Vendors senior management on the project some sort of concessions made and the project
continues maybe we should cancel the project and sue! The Bank is still upset! They feel cheated and
betrayed. Pride takes over and leads a Bank right to the edge of cancelling the project and letting the
lawyers sort it out. Thankfully extreme actions normally also lead to extreme introspection. The
healthy self-inspection normally takes the bank back to the strategic decisions made related to the
selection of the solution, the understanding that the need to transform is still in front of them. This
normally pulls them back from the edge and the project continues. Maybe we don’t know our
processes? Stage four’s introspection normally leads the Bank to question their own understanding of
their processes. The understanding that a complete view of processes is missing within the
organization allows them to question their status quo and opens their process up to true
transformation.

Maybe it’s our organization?

The natural progression to question the status quo of the processes normally leads to an epiphany
related to the banks overall organization structure and questioning theirmanagement by silo
mentality. Internally a power struggle over the definition and ownershipof the business processes
starts as the business realizes this isn’t an IT project it is a dramatictransformation of the business
with the core banking transformation acting as a catalyst.

All Hands on Deck!

The organization wakes up. The executive sponsor realizes that they actually need to do something
other than sitting in status meetings. An all hands on deck mentality manifests as the Bank realizes
internal infighting will not solve their problems. Normally there are some drastic changes in the
Bank's senior management structure at this point.

Successful go live all is forgiven

Two or three years have passed, with multiple releases, and the final transformation is ready to go
live. There will always be issues to resolve but for the most part the go-lives are successful. The
core-banking platform has been replaced, processes redesigned, and the organization transformed for
the better. The Bank has forgotten the trials and tribulations and normally becomes a supporter of the
Vendor and their solution, and considers the Integrator a trusted business partner going forward.

Banks concerned with saving time and money in transformations will do the work required early on
to address their own processes and organization issues (moving steps five and six ahead of step
number one). They will also diligently work to remove steps two through four from their
transformational journey. 1 would be interested to hear from others that have seen this pattern.

Architecture of Core Banking Solution:

High database security system

 Real time functionality with offline capability

 Use of graphical user interface
 Smart card
 Screen verification of signatures
 Cash account on accrual basis
 One uniform ledger for all modules of all post offices
 Auto generation of daily balance sheet

DEPOSITS:

For investment of surplus funds or to create a fund for future needs like children’s’ education and
marriage, construction of house, business, etc. one can find plenty of opportunities to deposit money
banks under various deposit schemes. Now a day’s almost all banks are computerized, core banking/
network banking system is introduced which helps the people to deposit money at their own
convenient locations.

3.4 TYPES OF DEPOSITS:

The following are some of the deposit schemes available in banks:
1. Current Account
2. Saving Account
3. Term Deposit/Fixed Deposit/ Recurring Deposit Account
4. Multi Option Deposit Account
Current Deposit Account:

Big businessmen, companies and institutions such as schools, colleges, and hospitals have to make
payment through their bank accounts. Since there are restrictions on number of withdrawals from
savings bank account, that type of account is not suitable for them. They need to have an account
from which withdrawal can be made any number of times. Banks open current account for then,like
savings bank account, this account also retires certain minimum amount of deposit while opening the
account. On this deposit bank does not pay any interest on the balances. Rather the accountholder
pays certain amount each year as operational charge.

Savings Account:
A deposit account held at a bank or other financial institution that provides principal security and a
modest interest rate. Depending on the specific type of savings account, the account holder may not
be able to write checks from the account (without incurring extra fees or expenses) and the account is
likely to have a limited number of free transfers/transactions. Savings account funds are considered
one of the most liquid investments outside of demand accounts and cash. Savings accounts are
generally for money that you don't intend to use for daily expenses.

Recurring deposit account:

This type of account is suitable for those who can save regularly and expect to earn a fair return on
the deposits over a period of time. While opening the account a person has to agree to deposit a fixed
amount once in a month for a certain period. The total deposit along with the interest therein is
payable on maturity. However, the depositor can also be allowed to close the account before its
maturity and get back the money along with the interest till that period. The account can be opened
by a person individually or jointly with another, or by the guardian in the name of a minor.The rate
of interest allowed on the deposits is higher than that on a savings bank deposit but lower than the
rate allowed on a fixed deposit for the same period.

Multi Option Deposit Account:

Multi Option Deposit Scheme is a term deposit which is not fixed at all and comes with a unique
break-up facility which provides full liquidity as well as benefit of higher rate of interest, through the
savings bank account. One can also keep that deposit intact by advantage an overdraft facility, to
meet irregularly temporary funds requirements. Individual banks have their own deposit schemes to
suit the current as well as future needs of the people. You may visit nearby branches of the banks and
collect information about different types of deposit accounts to ascertain the comparative advantages
and limitations of the different types of deposit schemes.

TYPES OF LOANS:
Following are some of the popular loan schemes offered by banks:

1. Housing Loans:

Finance is provided for purchase of a new House. Loan is also given for the purchase of land
and constructions of house on the same. The rates of interest to be charged depends on two
factors firstly the amount of loan and secondly the time period for which the loan is required.
The rate of interest may be fixed or fluctuating. In case, fixed rate interest rate remain the
fixed throughout the period of loan inspire of the fact that the current rate of interest may be
different the rate at which the loan was obtained.
2. Personal Loan:

Finance is provided to meet out all personal needs like renovating the house, purchasing a
computer, marriage or medical expenses etc.

3. Travel Loan:

Finance is provided to meet out the travel cost of the customers either domestic or for
international visits.

4. Car Loan/Vehicle Loan:

Finance is provided for purchase of car or other vehicles either for personal or business
purposes.
 5. Education Loan:
Finance is provided to meet out the education cost of children of the customers.

6. Festival Loans:
Finance is also given to meet out the festival expenses.

INVESTMENTS:

Now a day’s bank also participates in the activities of investment at national or international level of
investment banks. They help companies and government to raise money by issuing and selling
securities in the capital markets. They provide necessary financial guidance to its customers for
effective investments in Stock and Mutual Funds. Some banks also have specialized offices for this
purpose.

CARDS:

Banks provide free ATM cum Debit Card to its customers who have deposit account with them. This
Card provides online access to savings or current account. They can have access to the widest
network of ATMs across the country to withdraw cash, enquire about the account balance etc. Banks
also involves two parties sharing arrangement with other banks under this scheme Transactions limit
varies from bank to bank. The limit for withdrawal of money from State Bank of India Card
₹20,000/- per day. Banks provide International ATM-cum-Debit Card which can be used within as
well as outside India, at a nominal fee. ATM cards enables the customer to shop at a large number of
Merchant Establishment in India.

INSURANCE:

Insurance is a kind of investment and is getting popular among the customers of banks. Insurance
can be for life or for fixed assets. Banks do services for life insurance. In earlier days people used to
go for life insurance with Life Insurance Corporation of India. But now, banks also have entering
into the insurance business. ICICI Prudential Life Insurance is one such example. Life Insurance is a
unique investment that helps customers to meet their dual needs- saving for life’s important goals.
And coverage of riskit helps one’s family remain protected from circumstances such as retirement
and even after the death of the policyholder. Property insurance help in protecting at the assets.
DEMAT SERVICES:
Banks have come forward to offer Demat services to its customer. Demat account is opened for the
purpose of buying and selling stocks/shares of companies. Under this, the following facilities are
provided to the customers.

(1) E-Instructions:
One can transfer securities 24 hours a day, 7 days a week through Internet & Interactive Voice
Response (IVR) at a lower cost. Now with “Speak to transfer”, one can also transfer or pledge
instruction through customer care officer of the concerned bank.

(2) Make-physical strong:

Under this one can Dematerialize the physical shares in various holding patterns and consolidate all
such scattered holdings into primary demat account at reduced cost.

(3) Digitally Signed Statement:

One can receive account statement and bill by email.

(4) Mobile Request:

Access one’s Demat account by sending SMS to enquire about Holdings, Transactions, and Bill &
ISIN details.

(5) Mobile Alerts:

Receive SMS alerts for all debits/credits as well as for any request which cannot be processed.

Banks forms a mutual benefit with Securities Limited Organisations introduce a State of-the Art
online trading platform to cater to every trading need and offer a truly world class experience of
online investing- anyplace, anytime. This service provides with a 3-in- l account which is a
combined platform of Bank Account, Demat Account and an Online Trading Account to give
customers a convenient and paper free trading experience under one roof. This will help the customer
to trade from the comfort of home or office through the Internet. Buying and selling of shares is now
just a click away distance.

ONLINE SERVICES:
Transaction at the convenience of customers, saving times and cost through Computers is popularly
known as Online Banking. It is also known as E-Banking or Net Banking or internet Banking. It is
done through a computer with internet facilities. Customers can monitor and control their funds
through Internet Banking. They can check account balance, view their account,Get summary
statement, make bill payments and utility payments,
request for Cheque book, drafts, Bankers Cheques, stop cheque payment transfer funds, request for
third party transfers, invest and renew deposits, issue standing instructions, register mobile number
for SMS alerts and many more attractive features. User-Id and Password are given by the banks to
the customer for operation of account after they successfully register with the bank.

NRI BANKING:
A Non Resident Indian(NRI) as per FEMA(foreign enchantment act) 1999 is an Indian citizen or
Foreign National of Indian Origin resident outside India for purpose of employment, carrying on
business or suitability in circumstances as would indicate an intention to stay outside India for an
Indefinite period. An Individual will also be considered as NRI if his/ her stay in India is less than
182 days during the preceding financial year.
Banks allow NRI’s to open an NRI account when they complete the account opening formalities. A
customer for this purchase a form has to be filled up in which the information sought the bank is
provided. . They can open a NRI Saving Bank Account, Current Account, Fixed Deposits in Indian
Rupees, Fixed Deposits in Foreign Currency, NRO account (Rupee accounts for crediting income in
India).

CORPORATE BANKING:
Banks provide facilities to corporate houses for different purposes. Banks are offering financial
services to new projects as well as expansion, and modernization of existing projects in infrastructure
and non-infrastructure sectors for economic development of our country. Infrastructure sector
includes Road & Urban Infrastructure, Power and Utilities, Oil & Gas and other natural resources,
Ports and Air [ports and Telecommunications. Non-infrastructure sector includes Manufacturing i.e.
cement, steel, engineering, textiles, chemical & Pharmaceuticals etc; Servicei.e. Tourism
&Hospitality, Educational Institutions, and Health Industry etc.

CORPORATE NET BANKING:

Most banks such as SBI and other banks offer Internet banking for corporate too. Corporate can
empower officers identified by them to operate online one or more of their accounts at one or more
networked branches of the Bank. The company appoints a ‘regulator’ or ‘super bosses for corporate
Internet banking. The powers are defined and their limits are specified for transaction.

CASH MANAGEMENT:
Cash Management is managing a company’s short term resources to sustain its ongoing activities,
mobilize funds and optimize liquidity. Cash Management comprises of accelerating and efficiently
collecting cash inflows concentrating collected funds; Controlling the timing of cash outflows;
forecasting the position; securing adequate sources of short-term funds; optimizing use of any
temporary cash surpluses; gathering timely information; implementing the system and services
necessary to monitor, manage, and control the cash position; ensuring the internal and external
transfer of financial data.

TRADE SERVICES:

Banks continued to play a key role in International Trade also. Banks provide trade services through
their expert’s teams by advanced technology, global network distribution and comprehensive range
of import and export products and services. One of the examples is HSBC Trade Service. They offer
a broad range of trailer-made technology-based solutions that bring enormous benefits to both
importers and exporters in improving the management of the total supply chain.

FOREX ONLINE:

Forex means Foreign Exchange. Forex market is very large and growing. Trading is conduct mostly
elite through telephones or through electronic trading networks. Banks, Insurance companies and
other financial institutions use the forex market to manage the risks associated with fluctuations in
currency rates. Foxes trading involve high level of risk and may not be suitable for untrained
investors. It requires and to understand the relationship between the currencies and their rates. Before
start trading one has to open an account with a forex dealer. The investor should have constant touch
with currency exchange rates since there will be lot of fluctuations in the exchange rates. If one is not
cautious he/she may lose money. If one is using Internet based or other electronic system for trading,
in the event of system failure, one, maylose orders or order priority and result in loss of investments
too. The investor should also know about the foreign currency scam to avoid losses.

SME SERVICES:

SME means Small and Medium Enterprises. The Bank finances for Small Business activities which
are of special significance to a large number of people as many of these activities can be started with
relatively lower investment and with no special skills on the part of the entrepreneurs. This includes
loan to traders to meet normal business requirements. Large numbers of small and medium
enterprises are working in our country. These enterprises are a source of employment to the local
people. Such enterprises mainly adopt labour intensive techniques even than finances are required by
them to meet long term as well as short-term credit requirements. Banks provide a variety.

Internet Banking Application Server (1BAS):

The internet Banking Application is hosted in the Internet Banking Application server (IBAS). All
internet banking service requests are received by the IBAS from the web server. Internet Banking
Application Server works with the support of IBDS, middleware and central database server to
process the internet banking services requests. Internet BankingApplication Server is placed inside
the de-militarized zone. Location: IBAS is placed inside the de-militarized zone in a separate VLAN
that contains the Proxy server, mail server, web server and IBDS.

MIDDLEWARE:

Middleware is software that formats the data to make it compatible with different application. Thus,
a middleware is required when more than one application with different data requirement processes a
common database.

NETWORK CONNECTIVITY:

In a core banking set-up all the systems o the bank are connected in a network. The branches will not
be able to access the core banking application if the network connectivity is lost. Thus, there must be
secondary line connectivity to the data centrefrom the branches that can take over in case the primary
line is down. The bank should also ensure adequate bandwidth capacity to transfer all transactions
and data across the network.

Routers & Switches should be strategically placed to transfer data seamlessly. In a CBS setup there
are routers in all the branches. The entirecomputer in the branches is connected to a switch which in
turn is connected to the branch router. The branch routers are in turn connected to a central router
which is at the data centre.

Function of Routers:

Routers facilitate data transmission over different networks. Routers make intelligent decisions to
route data across the network by choosing the best path.

OPERATIONS FROM THE BRANCH:

In a core banking set up, all the system in the branches are connected to the data centre. Usually, In a
CBS set-up, there will not be any servers in the branch (there are a few Implementations the core
banking solution with branch level servers which are used for performance enhancements, storing of
balance etc.). A lower end version of the core banking application is installed in the client machines
that merely collect transaction data from the users and performs basic validation function. These data
are then transferred to application servers at the data centre where the actual transaction processing
and posting in the accounts happens. Thus, even the data is not stored in the branches. The inches
cannot run any reports as they can be run only front the application server/report. After the banking
operation are over, all the branches log out. After this process, the branches are a closed for that date
and no further transactions will be accepted for that date. Day end operation is run from a centralized
location from the CPPD. During day-end operation, the pre-programmed activities in the application
in the nature of interest.

AUTOMATED TELLER MACHINE (ATM) OPERATIONS:

Automated Teller Machine (ATM) kiosks are connected to the bank’s ATM switch which in turn is
conned to other bank’s ATM switches and its own ATM server at the data centre. ATM switch and
the kiosk have a Hardware Security Module (HSM) that stores its encryption key. All data
transferred between the ATM kiosk and the switch is encrypted. The ATM switch performs the
authentication function when a customer inserts his ATM card and enters the PIN at the ATM kiosk.
To perform any banking transaction, the ATM switch requests the central database servers which is
accessed through a firewall, middleware and an ATM server.

Scalability Issues:

The system is unable to provide the same service levels with the estimated growth in business, which
could be either through acquisitions or developed organically. A slow response time is one of the
most common causes for a drop in customer service in a bank. It is crucial to ensure that the system
in use is scalable enough to support the projected growth in business volumes without affecting the
response time.

Cost of maintaining the system rises, without any noticed benefit of some money to the bank

Cost of maintaining an existing system could raise because of various reason from the system
becoming resource hungry, non-availability of resources especially the human talent with certain
skill sets, product gathering a large code-base which is primarily unstructured thereby taking an
unreasonably large time even for some simple improvement in quality etc.

Large Scale Manual Handling of Transactions’ resulting in longer turn-around times:

Related to the first point, if the bank does not want to let-go of an opportunity, then the new products
would tend to get, processed procedurally in the system lending to over-all inefficiency. This in most
cases also leads in improper MIS on the customer business; profitability affects the 360 degree view
etc.

Increasing the regulatoryburden and inability of the system to handle new regulations. Newer
regulation like OFAC (office to foreign assets control, Basel – 2, Anti money laundering if not
adhered to not only put the bank at a risk, but also might attract a higher capital requirement.

Strict Interfacing issues:

When banks add business lines; quite rarely would they wait for their existing system to scale up to
the functionality required for the new area of business. This requires interfacing, on-line interfaces
are complicated to build and batch interfaces do not give a correct picture real time. As more and
more of satellite products add up, interfacing becomes a nightmare. More time tends to get spent on
reconciling information from one system to another rendering the system inefficient. Old systems
using old technologies do not interface easily with third party applications.

Viability- of the Vendor supplying the Core System:

Hard economic times have seen many vendors either scale down the size of operations, work in a
Maintenance Mode’ or are either eventually taken over by other companies. If any of this were to
happen, the system is bound to suffer due to the reduced attention and importance it would get, from
the vendor. Quite clearly, no bank can prosper if the platform on which it is on tends to get shaky.
Though most banks go in for escrow arrangements, these often tend to be theoretical fall back as in
practice it extremely difficult for the bank to take over and maintain the code.

CORE BANKING IMPLEMENTATION STATUS IN THE INDIAN BANKING INDUSTRY:

The trend of computerization in banking which was initiated in the late eighties can now be said to
have more or less completed its first phase. Core banking application implementation are today
supposed to have all private sector and MNC banks have been followed by the large PSU (Public
Sector Undertaking) banks as well as the IT-savvy co-operative banks down this route. Experts agree
that barring a few large banks which would go on-line in the next 12-15 months most others have
already jumped the core banking bandwagon and are coming to grips with technology. A large
number of PSU banks are undertaking large scale IT initiatives not just to implement the core
banking solution but also to streamline their operations. One of the key of the key area focused on is
centralization of trade finance operations, retail loans processing and credit approval processing. It is
important that the core banking solution selected enables the bank to take up such initiatives in the
bank. This is expected to help drive up volumes and speed for these banks.

CREDIT FACILITIES & RISK MANAGEMENT:

The ICS BANKS® Credit Facilities and Risk Management module has the capability todistribute
funds between the branch and the head office. Risk Management is maintained onfive levels to
utilize and monitor groups and subgroups limits in real time. Whereas, theCredit Facility can include
up to four, unique transaction process control groups.

Functionality:

 Customer facility maintenance

 Guarantor and parallel maintenance
 Facility detail maintenance
 Dynamic facility system
 Revolving facilities

PROMISSORY NOTES:

The ICS BANKS® Promissory Note module handles both the front-and-back office functions of a
branch, which supports the details operation of a bank comprised of:

DiscountedPersonal and Commercial Bills including Personal and Loan Systems.

Functionality:

 Alternative accounts
 Inquiry and reports
  Settlement and classification of bills
 Prepares repayment schedule with various interest and repayment methodology

RETAIL AND CORPORATE LENDING:

The ICS BANKS® Retail and Corporate Lending modules are designed to operate in dynamic
environments, which offer competitive flexibility that meets customer and market demands.

ICS BANKS® is based on product concept, where our customers can easily define any new product
needed by setting the parameters for this product and automatically the system will check each
product parameters when adding a loan. The product concept gives the facility for the bank to put the
restrictions needed, i.e. loan amount, interest rate, loan period, loan method; which can also be
defined as exception on the customer level.

The system provides full control over the schedule of repayment, including
instalment amount, dynamic commission definition.

TRADE FINANCE:

The ICS BANKS® Trade Finance module manages letters of credit and guarantee as well as
Documentary Bills for Collection. The solution efficiently directs transfers, maintenance, preparation
and multi-currency entries posts with customer-friendly control – all integrated with SWIFT message
generation.

Trade Finance system is a complete STP (Sewage Treatment Plan) system with a powerful workflow
layer that automates the application handling. The system can be with a put initiate the booking from
the branch or can be compatible with a centralized processing centre.

FINANCE LEASE:

The ICS BANKS® Lease Financing module provides contractual services between the customer and
bank. This particular module lends to sectors including: Real estate, services transportation, industry,
medical, tourism and agriculture.

Functionality:
Settles payments on respective maturity dates automatically. Provides option to buy assets or transfer
ownership.
Creates equal payments schedule or calculates the interest rate with the NPV formula.

ASSET MANAGEMENT:

The ICS BANKS® Asset Management module provides a wide range of functionality for high, net-
worth customers. This end-to-end solution can be deployed in several languages globally. ICSFS can
provide a variety of modules for those involved in the acquisition, implementation and
administration of assets including: purchase support staff; IT engineers, technical support and
consultants.

Functionality:

Procurement
Deployment
System administration
Analysis
Compliance

MANAGEMENT INFORMATION SYSTEM -

The ICS BANKS® Management Information System module has great no of functions spread over
the entire system, providing the management information. All systems generate and maintain
operational data and its history. This data is available on the customer account, branch and bank
level.

Functionality:

Producesfinancial accounting including: Accountstatements, central bank reporting, cost accounting

and customer and cash positions Managesfinancial planning including: Budgeting, interest gap
control, performance andprofitability and assets liability provides planning and control software
through reports, maps and graphs for information updates.

WORKFLOW AND BUSINESS PROCESS MANAGEMENT:

The ICS BANKS® Workflow Management STP module with Business Process Management
(BPM), powered by W4, optimizes the internal process, document and flow management among
various bank departments as well as enhances customer service through the internet. ICS BANKS®
BPM integrates the processes, systems and people into one solution to achieve effectiveness and
enhance customer service.

This system can be extended to achieve the full automation once implemented with our content
management system that handles physical and cold archives in addition to many ready to use
processes such as the dailyjacket.

PROFITABILITY MANAGEMENT:

The ICS BANKS® Profitability Management module produces monthly profitability reports (MPR),
which are prepared and submitted to the bank’s management on a monthly basis to evaluate the
bank’ s performance. This capability can also be manipulated to view performance by groupsub-
group and business unit as well as assess annual, fiscal account and customer profitability.

CRM

ICS BANKS® Customer Relationship Management module provides a single view of the
customerthat can be maintainedpresented and update acrossmyriad solution to increasebusiness
performance. The solution ensures cost savings, Curtails risk and increases customer interactions and
rate of acquisition. This enables integrated business processes and technological infrastructure to
effectivelymanage relevant client in.

INTERNET BANKING:
The ICS BANKS® Internet Banking System (DBS) module brings together a suite of front office
functionality delivered by the same core platform and database that has, traditionally, been offered to
only supporting back-office activity. ICS BANKS ® online solution uses the latest web
programming technologies and computing concepts in the system’s development, ensuring an open
and portable access for various hardware and operating systems platforms.

The ICS BANKS® online banking solution consist of the internet banking service provider (IBSP)
and IBS, two capabilities that allow banks’ to provide customers multi-functional services that can
be accessed globally, Our multi-lingual system’s functionality supports the needs of retail, corporate
and universal banking as well as private wealth management-areas of ICS BANKS® previous
success and continued growth.
 CHAPTER 4
RESEARCH METHODOLOGY

4.1 INTRODUCTION

Research Methodology is a way to find out the result of a given problem on a specific matter or
problem that is also referred as research problem. In Methodology, researcher uses different criteria
for solving/searching the given research problem. Different sources use different type of methods for
solving the problem. If we think about the word “Methodology”, it is the way of searching or solving
the research problem. The process used to collect information and data for the purpose of making
business decisions. The methodology may include publication research, interviews, surveys and
other research techniques, and could include both present and historical information.

MEANING OF RESEARCH

Research in common parlance refers to a search for knowledge. Once can also define research as a
scientific and systematic search for pertinent information on a specific topic. In fact, research is an
art of scientific investigation. The Advanced Learner’s Dictionary of Current English lays down the
meaning of research as “a careful investigation or inquiry especially through search for new facts in
any branch of knowledge.”! Redman and Mory define research as a “systematized effort to gain new
knowledge.” 2 Some people consider research as a movement, a movement from the known to the
unknown. It is actually a voyage of discovery. We all possess the vital instinct of inquisitiveness for,
when the unknown confronts us, we wonder and our inquisitiveness makes us probe and attain full
and fuller understanding of the unknown. This inquisitiveness is the mother of all knowledge and the
method, which man employs for obtaining the knowledge of whatever the unknown, can be termed
as research.

SURVEY

Survey involves collecting information, usually from fairly large groups of people, by means of
questionnaires but other techniques such as interviews or telephoning may also be used. There are
different types of survey. The most straightforward type (the “one shot survey”) is administered to a
sample of people at a set point in time. Another type is the “before and after survey”which people
complete before a major event or experience and then again afterwards.

QUESTIONNAIRES

Questionnaires are a good way to obtain information from a large number of people and/or people
who may not have the time to attend an interview or take part in experiments. They enable people to
take their time, think about it and come back to the questionnaire later. Participants can state their
views or feelings privately without worrying about the possible reaction of the researcher.
Unfortunately, some people may still be inclined to try to give socially acceptable answers. People
should be encouraged to answer the questions as honestly as possible so as to avoid the researchers
drawing false conclusions from their study.

Questionnaires typically contain multiple choice questions, attitude scales, closed questions and
open-ended questions. The drawback for researchers is that they usually have a fairly low response
rate and people do not always answer all the questions and/or do not answer them correctly.
Questionnaires can be administered in a number of different ways (e.g. sent by post or as email
attachments, posted on Internet sites, handed out personally or administered to captive audience
(such as people attending conferences). Researchers may even decide to administer the questionnaire
in person which has the advantage of including people who have difficulties reading and writing. In
this case, the participant may feel that she is taking part in an interview rather than completing a
questionnaire as the researcher will be noting down the responses on his/her behalf.

SAMPLING

The selection of construction companies for the survey was based on probability sampling, using the
simple random sampling technique. In this technique, every unit had an equal chance of selection
(Silver, 1997). The limitation of this sampling method was that members of a subgroup of interest
may not be included in appropriate proportions (Silver, 1997). In probability sampling, it is
important to distinguish between three groups: the population, the sampling frame and the sample.
The population refers to the 129 group from which the sample was drawn and to which the findings
were to be generalized. The sampling frame is a listing or operational definition of all of the
population elements. The sample referred to the
subset of the population that was selected as respondents. The analysed data was then generalized to
the population. The target sample size was set at 200 for the main contractors in order to obtain an
adequate number of responses so that the findings are generalizable. The research plan was also to
survey 200 subcontractors. However, only 100 subcontractors could be contacted because the
addresses of some of the registered subcontractors and the database maintained by the Singapore
Contractors Association Limited (SCAL) of the Singapore List of Trade Subcontractors (SLOTS)
were out of date.

METHODS USED TO COLLECT SAMPLES:-

Non probability sampling

1) Non probability sampling is any sampling method where some elements of the population
have no chance of selection (these are sometimes referred to as 'out of coverage under
covered') or where the probability of selection can’t be accurately determined. It involves the
selection of elements based on assumptions regarding the population
Of interest, which forms the criteria for selection? Hence, because the selection of elements is
non-random, non-probability sampling does not allow the estimation of sampling errors these
conditions give rise to exclusion bias, placing limits on how much information a sample can
provide about the population. Information about the relationship between sample and
population is limited, making it difficult to extrapolate from the sample to the population.
Non probability sampling methods include convenience sampling, quota sampling and
purposive sampling. In addition, non-response effects may turn any probability design into
anon-probability design if the characteristics of non-response are not well understood, since
no response effectively modifies each element's probability of being sampled.

2) Probability sampling

Probability sampling is also known as sampling. The criterion in this sampling is that each unit
should have to know chance of being selected in tine population or universe; the researcher is
going to sample. However known chance does not means equal chance. This sampling allows the
researcher to perform statistical projection of characteristics on the population sample.

Probability sampling tends to be composite, time consuming and costly too. Now-a-days, the
researcher is using computers as the apparatus for generating this random number to perform
sampling. This procedure also ensures that each unit should have equal chance to be selected
 while performing probability sampling.

DATA COLLECTION

The primary data collection method was a set of questionnaires or survey forms that were
provided in both paper and electronic formats. One or more senior executives at each
organization on the potential participant list were mailed a personalized survey invitation, a letter
from ViceChairman of the Federal Reserve Board, Donald Kohn. And a data contact form with
instructions to specify the type of transactions handled by the organization... Reminder calls were
made to non-responding organizations. As this survey topic is very important to most of the
organizations surveyed, incentives or gratuities were not needed to obtain participation. It was
anticipated that gratuities would not provide meaningful incentive for organizations to participate
in this survey: rather, participants were offered access to the information at the earliest occasion
permitted by the Federal Reserve.

Methods of data collection

Primary data:

Primary data are those which are collected for the first time and are always given in the form of raw'
materials and originals in character. These types of data need the application of statistics methods for
the purpose of analysis and interpretation. While secondary data are those which have already been
collected by someone and have gone thought the statistical machines. They are usually refined of the
raw materials when statistical methods are applied on primary their shape and become secondary
data. Methods of Collection of Primary Data:

There are primary data are collected by the following methods.

 Customers were allowed to carry out the information and documentation related to the
payment option survey.
 Customer gave the detailed information about the payment options related to the survey.
There were total of 62 respondents.
 Samples were collected from many people to different areas of the globe.
 Email surveys and telephone surveys were also done to find out the data required.
SECONDARY DATA:

The secondary data are those which have already been collected by someone other than the
investigator himself, and as such the problems associated with the original collection of data do not
arise here. The secondary data can be collected directly either form published or unpublished
sources. The following are the sources of published at from which secondary data can be collected.

1. Official publications, i.e. the publication of the central statistical office, Karachi , Ministry of
Finance , Ministry of Food, Agriculture, Lahore, Industry, etc.The Provincial Statistical Bureau, etc.

2. Semi-Official publications , etc., the publication issued by the state Bank of Pakistan Railway
Board , Board of Economic Enquiry , District councils, Municipalities, Central Cotton Committee,
etc.

3. Publication of trade-association, chambers of commerce, co-operative societies, and unions.

4. Research publication, submitted by research workers, economists, University bureaus, and other
institutions.

5. Technical or trade journals. Sources of Unpublished Data: The secondary data are also available
from the unpublished data. Type of material can be obtained from the chamber of commerce, (rode
associations, labour bureaus and research workers. Scrutiny of Secondary Data: Thus the data
collected by some other person should not be fully depended as they might have pitfalls. Thus it
becomes necessary to find out the inconsistencies probable errors and omissions in the data. This
necessities the scrutiny of secondary data because it is just possible that the data might be inaccurate,
inadequate or even unsuitable for the purposes of investigation. Hence the secondary data should
possess the following qualities:

1. Reliability

2. Suitability

STATISTICAL TOOLS AND TECHNIQUES

Analysis of data is a process of inspecting, cleaning, transforming, and modelling data with the goal
of discovering useful information, suggesting conclusions, and supporting decision making. Data
analysis has multiple facets and approaches, encompassing diverse techniques under a variety of
names, in different business, science, and social science domains.

Data mining is a particular data analysis technique that focuses on modelling and knowledge
discovery for predictive rather than purely descriptive purposes. Business intelligence covers data
analysis that relies heavily on aggregation, focusing on business information. In statistical
applications, some people divide data analysis into descriptive statistics exploratory data analysis
(EDA), and confirmatory data analysis (CDA).

EDA focuses on discovering new features in the data and CDA on confirming or falsifying existing
hypotheses. Predictive analytics focuses on application of statistical models for predictive forecasting
or classification, while text analytics applies statistical, linguistic, and structural techniques to extract
and classify information from textual sources, a species of unstructured data. All are varieties of data
analysis.
 CHAPTER 5
DATA INTERPRETATION

5.1 TECHNIQUES USED TO INTERPRET DATA

I here are various techniques which we can used to interpret that data. Interpretation means the data
which has been collected from the general public such as primary data. This data is analysed and the
converted into the diagram form such as bar diagram, pie chart, histogram, and percentage bar
diagram. Mostly techniques used in this project is the bar diagram, pie chart. There are 10 questions
some are demographic question and rest are based on the survey of the topic the survey is based on
financial futures.
 EXPLANATION ACCORDANCE WITH QUESTIONNAIRE

For Customer

1) You have account in nationalized/co-operative bank?

TABLE 5.1

ACCOUNT OWNED BY CUSTOMERS

Nationalized Co-operative

Number of respondent 26 19

% 57.8% 42.2%

GRAPH- 5.1

ACCOUNT OWNED BY CUSTOMERS

42%
Nationalized
Co-operative
58%

The following graph tell us that whether customer have account in nationalized/co-operative bank.

With the above graph it can be seen that 58% of the customer have account in nationalized bank and
42% of the customer have account in co-operative bank.

2) What kind of account do you maintain in the bank?

 TABLE 5.2

AWARENESS LEVEL OF CORE BANKING

Current A/c Saving A/c Loan A/c Others

Number of 10 34 1 0
respondent
% 22.2% 75.6% 2.2% 0%

GRAPH- 5.2

AWARENESS LEVEL OF CORE BANKING

2.20% 0%

22%

Current A/c
Saving A/c
Loan A/c
Others

76%

The following graph tell us about how many people are aware about the core banking service like
Current A/c, Saving A/c, Loan A/c and Demat& Credit Card.

Conclusion:

With the research work it can be concluded that most of the customers have used the savings
account. From above chart we research that 76% customers you are using savings account and none
of the customer is preferred the loan account.

3) Which of the following facilities is given more importance in your bank?

 TABLE 5.3

FACILITIES GIVEN BY BANK

Loan facilities ATM facilities Overdraft All of the above

Number of 3 16 1 25
respondent
% 6.7% 35.6% 2.2% 55.6%

GRAPH- 5.3

FACILITIES GIVEN BY BANK

7%

Loan facilities
ATM facilities
36%
Overdraft
56%
All of the above

2.20%

The following diagram say about the areas of core banking like loan facilities, ATM facilities.

Conclusion:

From the above chart it can be conclude that as a customer point of view the most of the banks are
gave more importance to providing ATM facilities rather than Loan facility, overdraft facility. 35%
customers say that banks give more importance to ATM facility.

4) What are the services provided by staff member of your bank?

 TABLE 5.4

SERVICES PROVIDED BY THE STAFF MEMBERS

For any enquiry Listening to your Guidelines for Others

problem various deposit
schemes, their
advantages
Number of 12 12 21 2
respondent
% 26.7% 26.7% 46.7% 2%

GRAPH- 5.4

SERVICES PROVIDED BY STAFF MEMBERS

50% 46.70%
40%
27% 27%
30%
20%
10%
0% 2%
For any
enquiry Listening to
your problem Guideline for Others
various
deposit
schemes, their
advantages

The following diagram say that what are the services of staff members provided to the customers like
for any enquiry, listening to the problems, Guidelines for the various deposit scheme

Conclusion: Fromthe abovediagram says that customers are satisfied with the services provided by
the member & few customers are not satisfied.

5) What time does your bank take for the Delivery of Demand Drafts/Pay Orders?
 TABLE 5.5

Availability of services of staff members to the customer

Within 20 minutes 20-30 minutes More than 30 minutes

Number of respondent 16 19 11

% 34.8% 41.3% 23.9%

GRAPH- 5.5

AVAILABILITY OF SERVICES OF STAFF

MEMBERS TO THE CUSTOMER

35% Within 20 minutes

20-30 minutes
More than 30 minutes

41%

The following diagrams tell us about what time are taken by the bank for the Delivery of the demand
drafts, pay order.

Conclusion:

With the research work it can be conclude that most of banks are given within 20 minutes for the
delivery of the demand draft, pay order, and 24% customers are says that banks take more than 30
minutes for the delivery of demand draft & pay order.

6) How frequently do you use telephone banking services per month (for example, balance
enquiry. Fund transfer between accounts)?
 TABLE 5.6

Telephone Banking Services per Month Used By Customers

Less than 1 time 1-3 times 3-8 times 8-12 times

Number of 5 24 11 6
respondent
% 10.9% 52.2% 23.9% 13%

GRAPH- 5.6

TELEPHONE BANKING SERVICES PER

MONTH USED BY CUSTOMERS
100%
80%
60%
11% 52%
40%
20%
0%
Less than 1
1-3 times
time 3-8 times
8-12 times

The following diagram is about the how many time customers using the Telephone banking service.

Conclusion:

With the research work it can be conclude that around 52% of customer are using the telephone
banking services for the 1 to 3 times...

7) What are the most important reasons you opened an internet bank account?
 TABLE 5.7

REASONS TO OPEN AN INTERNET BANK ACCOUNT

Convenience (24 Curiosity Better Safe Low Easy to maintain Others

hours service, rates and service my banking
anywhere secure charge transaction
connectivity activity
Number of 14 1 2 3 12 14 0
respondent
% 30.4% 2.2% 4.3% 6.5% 26.1% 30.4% 0%
GRAPH- 5.7

REASONS TO OPEN AN INTERNET BANK

ACCOUNT
0.00% Convenience (24 hours service,
anywhere connectivity
Curiosity
30%
30.40%
Better rates

Safe and secure

2%
26.10% 4.30% Low service charge

6.50%
Easy to maintain my banking
transaction activity

The following diagrams tell the most important reasons to open an internet bank account according
the customer. The reasons are Convenience (24 hours service, anywhere connectivity), Curiosity,
Better rates, Safe and secure, Low service charge and Easy to maintain banking transaction activity

Conclusion:

The above diagrams say that 30% customer is open with internet bank account for the easy to
maintain banking transaction activity and it’s given more safe& secure. Only 2% customers are open
for the better rate.

8) What do you feel about overall service quality of your bank?

 TABLE 5.8

SERVICE QUALITY OF YOUR BANK

Excellent Very good Good Average Poor

Number of 10 18 11 6 1
respondent
% 21.7% 39.1% 23.9% 13% 2.2%

GRAPH- 5.8

SERVICE QUALITY OF YOUR BANK

2.20%

13.00% 22%
Excellent
Very Good
23.90% Good
Average
Poor
39%

The following diagram is about what the customer feel about overall service quality of the bank.

Conclusion:

With the research work it can be conclude that 39% of customer are says that overall service quality
of bank is very good. And 24% of customers are that overall service quality of bank is good.

For Employees

9) Does your banks have core banking facility for the customers?
 TABLE 5.9

BANKS HAS CORE BANKING FACILITY FOR THE CUSTOMERS

Yes No

Number of respondent 17 10
% 63% 37%

GRAPH- 5.9

BANKS HAS CORE BANKING FACILITY FOR THE

CUSTOMERS

37%
Yes
No
63%

The following chart tell us about the core banking facility for the customers

Conclusion:

With the research work it can be concluded that 63% of customers agree that they have core banking
facilities for the customers.

10) Do they charge unnecessarily for not maintaining minimum balance in your account?
 TABLE 5.10

UNNECESSARY CHARGES

Yes No

Number of respondent 14 13
% 51.9% 48.1%

GRAPH- 5.10

UNNECESSARY CHARGES
53%

52%

51%

50%

49% 52%

48%

47% 48%

46%
Yes No

The following chart tell us about what the customer agree for the unnecessarily charges in their
account.

Conclusion:

The above diagram says that 52% of customers think that it charges unnecessarily for not
maintaining minimum balance in their account.

10) Would you recommend this bank to your friends, relatives, associates?
 TABLE 5.11

RECOMMENDATION OF THE BANK

Yes No

Number of respondent 17 10
% 63% 37%

GRAPH- 5.11

RECOMMENDATION OF THE BANK

70%
63%
60%
50%
40%
37%
30%
20%
10%
0%
Yes No

The following chart tells us about the recommendation of the customers to their friends, relatives,
associates.

Conclusion:

The above diagram says that 63% of the employees would like to recommend their friend, relatives
and associates.
 FINDINGS

1) From the above question 1 we have found that most of the customer that is 58% have account
m nationalized bank and 42% of the customer have account in co-operative bank.
2) From the above question 2 we have found that most of the customers have used the saving
account. Whereas other customer have been using loan A/C, current A/C, and Demat A/C.
3) The above question 3 tells us that there are most of the banks who gave more importance
ATM facility rather than Loan facility, overdraft facility.
4) From the above question 4 we have found that customers are satisfied with the services
provided by the staff member and few of the customers are not satisfied.
5) The above question 5 tells us that there that most of banks are given within 20 min for the
delivery of the demand draft, pay order, and other banks gives less delivery time.
6) From the above question 6 we have found that around most of the customer
7) The above question 7 tells us that most of the banks give convenience of 24 hours services
and anywhere connectivity. Whereas other customer look for the bank that have less interest
rates and better services.
8) From the above question 8 we have found that, most of customer are says that, overall service
quality of bank is very good. And the rest, customer says that overall service quality of bank
is good.
9) The above question 9 tells us that most of customers agree that they have core banking
facilities for the customers.
10) From the above question 10 we have found that most of customers think that it charges
unnecessarily for not maintaining minimum balance in their account.
11) The above question 11 tells us that most of the employees would like to recommend their
friend, relatives and associates.
 CONCLUSION

This project that is mainly used to manage the spread-based income of a bank. The fact that the fee
income of a bank is a key different in terms of profitability only increases its importance in the
current scenario.

This project developed, incorporated all the activities involved in the browsing centre. It provides all
necessary information to the management as well as the customer with the use of this system; the
user can simply sit in front of the system and monitor all the activities without any physical
movement of the file. Management can service the customer’s request best in time. The system
provides quickly and valuable information. These modules have been integrated for effective use of
the management for future forecasting and for the current need of the customer.

Core banking is all about knowing our customer need and provide them with the right service at the
right time through right channel 24*7 day a week. Being “electronic”, it not only provides its
customers with faster and better facilities, it even reduces the manual overhead of accounts
maintenance.
 SUGGESTIONS

From the study of core banking services, I would like to propose the following suggestion.

1. Core banking services offered by the various commercials as well as public sector banks
needs to be properly publicized so that the common people would be able to make optimum
use of these services

2. The banks should introduce some attractive schemes to promote these services to some of the
traditionally inclined customer of the bank.

3. Further research and development needs to be carried out to enhance the core banking
services for introducing new and more customer friendly services.
 BIBLIOGRAPHY

BOOK:

1) Core banking solution

-M. Revathy Sriram

2) Banking Theory Law N Practice

-Mr. Rajesh
-Ref. Page.268

Web:

1) http://en.wikipedia.org/wiki/Core_banking
2) http://srichidsirvice.com/core%20Banking%20Solutions_%20An%Assessment.
 QUESTIONNAIRES

Q.1) You have account in nationalized/co-operative bank?

o Nationalized
o Co-operative

Q.2) What kind of account do you maintain in the bank?

o Current
o Saving
o Loan
o Demat
o Credit card

Q.3) Which of the following facilities is given more importance in your bank?

o Loan facilities
o ATM facilities
o O/D facilities
o All of above

Q.4) What are the services provided by staff members of your bank

a) For any enquiry

o Very good
o Good
o Average
o Poor

b) Listening to your problems

 o Very good
o Good
o Average
o Poor

c) Guideline for various deposit schemes, their advantages

o Very good
o Good
o Average
o Poor

Q.5) What time does your bank take for the delivery of demand drafts/pay orders?

o Within 20 minutes
o 20-30 minutes
o More than 30 minutes

Q.6) How frequently do you use telephone banking service per month (for example, balance inquiry,
fund transfer between accounts?

o Less than 1
o 1 to 3 times
o 3 to 8 times
o 8 to 12 times

Q.7) What are the most important reason you opened an Internet bank account?

o Convenience (24 hours service, anywhere connectivity)

o Curiosity
o Better rates
o Safe and secure
o Low service charge

Q.8) What do you feel about overall service quality of your bank?

o Excellent
o Very good
o Good
 o Average
o Poor

Q.9) How many third parties are there that interfaces a core banking system?

o ATM & ABM

o Replay
o Cheju Clearing
o Point of Sale (POS)
o Loan Insurance

Q.10) What type of network is used in core banking solution?

o Data related to transactions, customer data (such as name, profession, income, family
members, etc.) are stored and are available to all networked branches for access.

o It helps online transaction processing, making it easier and faster.

o Have made banking more efficient by cutting down time in data access and has made
database maintenance easier.

Q.11) What are most important software modules of a core banking system?

o If it is a Retail Bank services offered are customer Accounts, Financial Accounting, Teller
(Cash), Payments for Funds Transfer, Deposits and Loans would be the basic modules banks
might require.

o If it was a Private Bank they would require the Securities Trading, Corporate Actions and
Asset Management modules in addition to customer, Customer Account, Accounting,
Deposits and Payments.

o SimilarlyCorporate Bank would require Bills, Guarantees and Letter of Credit modules.